samchain/econo-pairs-v1 huggingface dataset:
William C Dudley: Regional economy and trends in household debt Remarks by Mr William C Dudley, President and Chief Executive Officer of the Federal Reserve Bank of New York, at the quarterly regional economic press briefing, New York City, 14 February 2011. *  *  *  Good morning and welcome once again to the New York Fed’s Quarterly Regional Economic Press Briefing. I am pleased to have this opportunity to talk with the journalists covering our region – and through you, to the people in our District. This morning I will discuss national and regional economic conditions, with particular attention to household debt in the nation and especially in the Second Federal Reserve District, which covers New York; northern New Jersey; Fairfield County, Connecticut; Puerto Rico; and the U.S. Virgin Islands. Following my remarks, my colleagues will provide more detail. As always, what I have to say reflects my own views and not necessarily those of the Federal Open Market Committee or the Federal Reserve System. National economic conditions To provide context, let me first comment on national economic conditions. Since the Great Recession ended in 2009, the economy has grown at a modest pace. When we last met, in October, the available data showed that we hit a soft patch at mid-year. The recovery had slowed, extending the time before employment and inflation could be expected to return to levels consistent with the Federal Reserve’s dual mandate. And, with the loss of economic momentum, downside risks had increased.

This monitoring and research on household debt and credit conditions helps us better understand the connections between financial market developments, the broader economy and families’ well-being. We follow a variety of metrics, including lending activity, the level of interest rates and of interest rate spreads, survey data on lending standards, delinquency rates on loans, and home and other asset price changes. One new, key source of information on household debt and credit conditions is the New York Fed’s Consumer Credit Panel. As you heard a few moments ago, these data are now available for all of 2010. They come from a nationwide sample covering all households where at least one member has a credit report. The records tell us about five major categories of household debt – mortgages, home equity lines of credit, and credit card, auto and student loans. To set the stage, one can think about the recent path of household debt in three phases.   During the run-up to the recession – the years leading up the crisis – households borrowed a lot of money. They took on higher credit cards balances, auto loans, student loans and, especially, mortgages. BIS central bankers’ speeches  3    As the crisis unfolded in 2008, many families’ debt burdens proved unsustainable: delinquencies rose dramatically and household debt began to fall sharply.   Now, we appear to be entering a process of gradual convalescence, as delinquencies begin to subside and some households begin to expand their borrowing again.
And from a broader medium-to-long-term perspective, we also see encouraging potential that likewise merits a favourable judgment. However, in order to project ahead a positive growth differential relative to the prevailing pattern in the industrialised countries, we must not lapse into complacency and must keep reform firmly on the agenda. Evidently, reforms will have to be different from those adopted to date, but should be based on a similar philosophy: to maintain fiscal soundness against a background of macroeconomic and financial stability, to push ahead with liberalisation and market flexibility, and to give weight to education and training. If I had to opt for just one of these messages, highlighting what I consider to be the main task needed to anchor the dynamism of the Spanish economy in the long run, I would not hesitate to say that it is to improve the levels and quality of education. Thank you. BIS Review 32/2007  5

José De Gregorio: The international financial crisis and its impact on the Chilean economy Speech by Mr José De Gregorio, Governor of the Central Bank of Chile, presented before the Honorable Senate of the Republic, Santiago de Chile, 8 October 2008. *  *  *  Mr. President of the Senate, In response to your invitation to participate in this special session of the Honorable Senate, I would like to share with this audience our vision on the severe financial crisis the world economy is enduring, as well as its implications on our country. The world financial crisis and international growth The financial crisis being experienced by developed countries is the outcome of a period of stability, with abundant liquidity, fast economic growth and an asset price bubble. This combination of aggregate factors yields, as it frequently happens, to a cycle of high credit growth. The problem is that this occurred during an extremely accelerated process of financial innovation in market segments that were poorly or ambiguously regulated – mainly in the US. Low interest rates prompted an intense search for higher returns. Individuals with little or no ability to repay were lent for housing and, to reduce risks, credits were securitized and often taken out of the banks’ balance sheets (i.e. Structured Investment Vehicles and conduits). Money was lent on the assumption that housing prices would continue on the rise, so the mortgage was all that was needed to relax lending standards.
The forecasts in our main scenario are always based on a combination of model analyses and judgements that take into account factors which the models either cannot capture at all or are unable to capture in a way we consider reasonable. These “hands-on” adjustments become particularly important when the historical correlations on which the models are based appear to have changed. The judgements may be of different types and opinion may be divided as to which factors are most important to take into consideration at any given meeting. My view is that the judgements should as far as possible be reflected in the forecast figures for inflation, the real economy and the repo rate that a monetary policy decision is based on. But I believe that we must learn to live with the fact that it is impossible to quantify all of the factors we monetary policy decision-makers consider should be taken into account in the monetary policy decisions. As I see it, there is no point in trying to produce, at any cost, a quantified adjustment of the forecast just to make a judgement one considers relevant fit into the monetary policy discussion. There must be scope to put forward arguments that appear reasonable, without necessarily having to translate them into exact probabilities or quantifying their effects on inflation and the real economy. As I see it, there is nothing wrong with having “misgivings” about a particular development and allowing this to affect the decision, without being able to exactly quantify the risks it entails.

When wage formation is decentralised, monetary policy will instead influence wage growth via market mechanisms, by stabilising aggregate demand. The existing monetary policy guidelines will function effectively whether wage bargaining is at a centralised, local or individual level. There is a fine balance in the division of roles between fiscal policy, wage formation and monetary policy. This balance will be disturbed if the objective of monetary policy is changed or broadened. Should monetary policy give particular weight to asset prices? House prices in Norway have risen sharply and probably excessively. The level of house prices in Trondheim in central Norway was an eye-opener for the American Nobel Laureate Georg Akerlof, who happens to be of Swedish ancestry. At a family gathering, he was told that a distant relative had bought a house in Trondheim at a price equivalent to more than USD 1 million, providing a source of inspiration for his and Robert Schiller’s book “Animal Spirits: How Human Psychology Drives the Economy, and Why it Matters for Global Capitalism”. 5  4  OECD Interim Economic Outlook, (March) 2009. 5  Georg Akerlof and Robert Shiller (2009): “Animal Spirits: How Human Psychology Drives the Economy, and Why it Matters for Global Capitalism”, Princeton University Press. BIS Review 119/2009  5  Self-reinforcing mechanisms in financial markets, which lead to slower credit flows and falling asset prices in downturns and the inverse in upturns, pose a challenge to monetary policy.
And that’s probably because the UK economy has weathered the squalls of the past few years rather better than both the US and the euro area. Since 2000, we have grown more strongly than the euro area, and more steadily than the US; indeed we are alone among major industrial countries in not having experienced a single quarter of falling output for more than a decade. As a result the UK emerged from the slowdown in the world economy with less slack than other economies. That is the key reason why we were the first to start raising interest rates last November, when world activity started to pick up and demand at home accelerated. Since then, a number of other countries, including the US, have begun to raise their rates to more normal levels. When I joined the Monetary Policy Committee a year ago, both the Fed and the ECB had just cut their interest rates to exceptionally low levels, reflecting real concerns about the strength of the world recovery. Activity picked up sharply in the US last autumn, but the mood only changed decisively early this year, when a million new jobs were created in just three months. It is now clear that a broad based world recovery is well under way, led by the US and Asia, especially China, but spreading to other regions. The news from Japan is more encouraging than it has been for over a decade.

The UK’s major markets in Europe are benefiting from strong demand for their exports; and the latest news suggests that domestic demand in most of these countries is finally picking up, though consumers probably still remain a little wary. As the news from abroad has steadily improved, we have also seen a marked strengthening in demand at home. After a fairly weak first half, retail sales bounced back, the housing market took on a new lease of life and investment began to recover. It now looks as if the UK economy has been growing around or above trend since the middle of last year. It was against that background that the Monetary Policy Committee raised interest rates in three further stages to 4.5%. Meanwhile inflation remains low, well below the Chancellor’s target of 2%. This might seem to bear out the old taunt, that central bankers are the sort of people who want to close the bar as soon as the party starts to go with a swing. It would be fairer to say that we want to be sure that the party remains under control. We don’t want to encourage binge behaviour any more than you do, and for much the same reason; it makes life unpleasant for other people, and it leaves a nasty mess behind. That points to taking action at the first sign of trouble, and preferably before. In current circumstances, strengthening demand is beginning to put upward pressure on costs.
In addition, the electoral debates in several European countries and the United States reveal a higher probability of a shift to more protectionist policies. On the bright side, it is possible that the impulse policies, in the developed world and in China, will succeed more effectively in boosting global growth. Finally, the situation in Latin America is also an important source of risks that, if they come true, could have negative effects on both financial conditions and external demand facing Chile. One preoccupation is the increased exposure of the region to the Chinese economy and the need of several economies to make an additional adjustment. All this in a context where inflation has risen in several countries, inflation expectations are above the target and the room for further monetary stimulus and/or taxes has narrowed. Plus the increased political risk, in Brazil and Venezuela. Meanwhile, it is worth mentioning that in Argentina there have been adjustments and negotiations with creditors, which could open the door for them to international markets. At home, recent data show output and demand losing strength, a struggling labor market and still pessimistic expectations of consumers and firms. In this context, slower growth than was assumed in the baseline scenario cannot be ruled out, should any of these events intensify. Still, since our economy is well balanced from a macro standpoint, with virtually zero public debt, well-anchored inflation expectations and a stable, well regulated financial system, more favorable news may cause growth to recover faster than assumed in the baseline scenario.

11 This outcome would be undesirable for us, as we aim to steer secured short-term Swiss franc money market rates so that they remain close to the SNB policy rate. By reducing the stock of excess reserves, we also reduce the supply of reserves in the interbank money market. This lets us steer money market rates closer to our policy rate of 0.5%. That is precisely what the second element of our implementation approach accomplishes. To absorb excess reserves, we use open market operations. Specifically, we use term repos and SNB Bills, the latter being marketable debt claims on the SNB. 12 Term repos have a term of one week and are auctioned daily. SNB Bills, on the other hand, are auctioned on a weekly basis and with different terms from week to week. As Slide 8 shows, the effect of these operations is to replace the light-blue shaded rectangle with a light-green one. Our reserve-absorbing operations are offered with interest rates that are close to 0.5% on an overnight-equivalent basis. 13 This makes them particularly attractive to banks that hold excess reserves. By purchasing the instruments we offer, these banks can reduce the stock of excess reserves, which would otherwise be remunerated at 0%. It is important to emphasise that both interbank trading and the SNB’s reserve-absorbing operations are mechanisms for reducing the stock of excess reserves, possibly to the point where all excess reserves have been ‘soaked up’. How does the SNB’s approach determine money market rates?
Having worked with financial firms to improve their risk management and resilience over a quarter of a century, I remain, perhaps surprisingly, optimistic that we will be able to work through the differences, although I will be the first to acknowledge that there are no easy answers. The four Rs each prompt a more detailed question that take us to the main issues we need to resolve in the coming months in order to make sure regulatory reforms (reforms being a bonus R) are geared to enhancing the prospects for success: First, thinking about the governance and management needed for success: how do Boards take responsibility for the particularly long-term nature of BPA business? Second, what does effective risk management look like for BPA firms today, given the continuing evolution of MA asset portfolios and exposure to long-term economic uncertainty? Third, in aligning resilience to risk taking, what roles do balance sheet valuation and capital requirements each play in a going concern regime? And finally, in designing and maintaining a regulatory regime that has robust and risksensitive qualities, what package of Solvency II reforms will support the risks being taken now and for the long term? Responsibility of the Board Let me start with the inherent challenge of making decisions for the long-term. Imagine that instead of packing a suitcase for our 2022 summer holiday, we are instead asked to pack all of the suitcases we will need for every holiday over the next 30 years.

When evaluating possible packages of quantitative reform, an important validation point for the PRA is whether the resultant liability values, including the risk margin, are adequate relative to the transfer values implied by actual buy-out transactions. If current liability valuations were to be insufficient to fund these observable transfer costs, then the balance sheet would lack the resilience that it would be expected to have under Solvency II and a key safeguard of policyholder protection would be put at risk. In other words, we could no longer be confident enough that if an insurer failed in the future, its liabilities could be safely transferred to a third party. The long-term security of policyholder benefits would then be in question. The PRA is continuing its work to assess the extent to which different reform combinations lead to an adequate transfer value being achieved and see this as a key validation tool when assessing the merits of any package. Page 8  Regulation I now come to the final R – regulation – and want to focus remarks today specifically on the work to reform the existing regulatory framework for insurers – Solvency II. The interlinkages between the first three Rs I have covered help explain why such regulatory reform needs to be considered as a package: changes in one part of our regulatory and supervisory framework have consequences for others.
(2015) indices of capital controls policy for Chile and other EMEs (net easing)  Inflows  Outflows  4.0  12  4.0  3.5  10  3.5  3.0  8  3.0  2.5  6  2.5  2.0  4  2.0  1.5  2  1.5  1.0  0  1.0  0.5  -2  0.5  -4  0.0  Total number of policy actions: 1 Jan 2001 - 31 Dec 2015 (*) baseline models include the 11 most active countries  300  15 250 10  200 150  5 100  0  50  01 03 05 07 09 11 13 15  -5 01 03 05 07 09 11 13 15  EGY CZE MEX MAR POL IDN CHL HUN RUS COL BRA PHL TUR THA ZAF ARG KOR CHN MYS PER IND  0 0.0  (*) Blue bars are countries with fewer than 32 actions in sample. Red bars are those with at least 32 actions in sample. Red/blue shaded bars represent countries with more than 32 actions in sample but no inflow targeting actions. Sources: Pasricha et al. (2015) and BIS. Besides the Chilean approach to deal with FX risk at the banking level and the recent trend that has deepened financial liberalization, the possibility to activate capital controls under extreme circumstances is still part of our constitutional law.

International Capital Flows in the Post-crisis World, September 2019 CENTRAL BANK OF CHILE  Monetary policy framework and its effectiveness  Monetary policy is strongly supported by the free-floating FX regime 10Y interest rate and FX volatility (*)  Currency implied volatility 1-month EE  (sample: 2017-2018)  (percent) 30  FX Median  10-year interest rate (weekly change)  0.14  20  Brazil  Egypt  0.12  Nigeria  Turkey  10 0.10  Philippines  0.06 Indonesia 0.04 Vietnam  0.02 0.00  0 Jan.10  Romania  0.08  Bulgaria  Peru  Mexico  Croatia Hungary  Poland  10-y rate Median  Jan.14  Jan.16  Jan.18  (percent)  0.6 0.4  Russia  0.2  Chile  0.5 1.0 Exchange rate (weekly percentage change)  Jan.12  10Y rates volatility 1-month EE  South Africa  India  Thailand Malaysia China  0.0  Colombia  1.5  0.0 Jan.10  Jan.12  Jan.14  Jan.16  Jan.18  (*) Red points correspond to economies with free-floating FX regime according to IMF classification (Annual Report on Exchange Rate Arrangements and Exchange Restrictions, 2017). Source: IMF and Bloomberg. This framework has basically remained in place for almost two decades and its effectiveness has improved as markets, agents and institutions have adapted to it.
Despite the fact that we left interest rates on hold again last week, we have certainly not gone to sleep!

In fact, such an EU fund would be better diversified than the national funds are today, which all else equal would enable it to charge lower fees or hold a bigger risk-adjusted buffer. In the event of really large banks or several large banks failing, there could be an established system of committed drawing rights, where the EU fund has the right to raise funds through national governments’ ability to raise tax. Regarding liquidity support, the ECB would be given the role as lender of last resort. To convince national governments to commit such guarantees would of course demand very strict and well thought-out rules governing what actions the EU fund should be allowed to take in the case of a bank failure. These rules could be inspired by the US FDIC’s very strict mandate to always choose the least cost solution. Among other things, this would in some cases mean allowing shareholders as well as uninsured depositors and debt holders to lose their money. Since to my knowledge most EU countries lack the rules on how to handle large bank failures, it would also be very positive from a contingency planning and moral hazard point of view. With a strong legal framework, the EU would be able to let investors in even the biggest banks take full financial responsibility.
The ESRB has repeatedly noted8 that a lack of tools is hampering authorities’ ability to address financial stability risks beyond the banking sector. The ongoing review of the prudential rules governing investment funds and insurers provides opportunities for legislators to assign the power to operate such tools to the authorities. And the ongoing review of the rules governing central clearing offers an opportunity to enhance authorities’ monitoring capacity through better data quality. The ESRB has provided extensive input to the these legislative reviews, setting out what it believes is necessary.9 Hybrid risks The ESRB has devoted a substantial amount of efforts in recent years to advance our understanding, assessment and macroprudential policy response capacities to the so-called “hybrid” risks, in particular, cyber threats and climate risks.10 As regards cyber risk, at the ESRB we are concerned that a major, i.e. systemically relevant, cyber incident has the potential – in a worst-case scenario – to trigger financial contagion and erode public confidence in the financial system. If the financial system is not able to absorb such a shock, financial stability is very likely to be put at risk. This concern led the General Board of the ESRB to adopt in December 2021 a Recommendation to establish a pan-European systemic cyber incident coordination framework (EU-SCICF).11 The aim of this recommendation is to  8  See, for example, Macroprudential policy beyond banking: an ESRB strategy paper, ESRB, 2016.

Recent bank instability episodes outside the EU are a further reminder that we need to remain vigilant. The resilience of the financial system is essential. Only a resilient financial sector will be able to support the real economy during times of stress,14 and all financial authorities and institutions across the EU must contribute to this end. In this regard, regulatory actions and policies towards banks and NBFI intermediaries must aim to preserve shock absorption capacity in the form of capital and liquidity buffers. 14  See also Macroprudential policy in Europe: building resilience in a challenging environment, Welcome remarks by Christine Lagarde, President of the ECB and Chair of the European Systemic Risk Board, at the sixth annual conference of the ESRB, December 2022.