samchain/econo-pairs-v1 huggingface dataset:
However, there is also reason to consider how the regulations introduced could affect the impact of monetary policy. These regulations usually entail an increased cost for the banks which, to a certain extent, is passed along to customers in the form of an increased interest rate margin. This could be seen as a sort of “regulation premium”. This premium can also be seen as the price to be  BIS Review 68/2010  9  paid by households and companies for more stable real economic development as represented by the broken curve in Figure 5. This concept can be illustrated with the equation for the lending rate by adding a variable ( z ) designating regulations affecting the interest rate margin:  itlending  it   t ( z ) . I would like to emphasise that this equation is, of course, a simplification. However, as my focus today is on the correlation of interest rates and regulations, this description will be facilitated by viewing regulations as a kind of “shadow interest rate”, even if they can also be analysed in terms of the supply of credit. If regulations become more stringent, the interest rate margin and thus the lending rate both increase. New regulations will not be introduced until we have emerged completely from the crisis, and they will be introduced successively. The end result will probably be a higher interest rate margin than was the case prior to the introduction of the regulations.

It should be pointed out that the reason that a central bank may wish to lean against the wind does not have to be because it only wishes to safeguard financial stability. That may be the case, but it may also be a purely monetary policy decision. The bank may simply wish to attempt to avoid severe fluctuations in the real economy and inflation, even if these are not deemed to be associated with financial stability problems. Leaning against the wind is not a problem-free strategy. Three primary counterarguments have been put forth. 7 Firstly, the imbalance must be identified at a sufficiently early stage. Attempting to rectify the imbalance too late may be problematic as monetary policy acts with a time lag. If property prices fall steeply immediately following an increase of the policy rate by the central bank, the delayed effects of the interest rate increase will reinforce the negative effects on the economy of the falling property prices. Of course, one must also be sufficiently certain that an imbalance really is building up. If the upturn is being caused by fundamental factors, a higher interest rate would hinder growth unnecessarily. Secondly, one has to rely upon being able to deal with the property price increase through reasonable increases of the policy rate. One hypothesis is that the optimistic mood often prevailing during a boom in the property market means that significant increases of the policy rate are required to have an effect.
Doing so at any point in time reduces the SNB’s room for manoeuvre in the future, precisely because it sets the bar even higher for the next time it wants to use the balance sheet for monetary policy purposes. All in all, it is clear that an uncontrollable expansion of the balance sheet would have severely impaired the SNB’s ability to effectively conduct monetary policy and to fulfil its price stability mandate in the long term. The second reason why the risks associated with continuing the minimum exchange rate would have increased substantially is because the larger the balance sheet, the larger the corresponding financial risks for the SNB and for the country. Even at the current size of the balance sheet, situations of annual losses exceeding the SNB’s capital are already possible. An even larger stock of foreign reserves would further increase both the volatility of the income statement and the absolute size of potential losses. While in principle it is feasible for the SNB or any central bank to operate with negative equity, scenarios whereby expenses exceed income for a prolonged period of time are conceivable. Such extreme scenarios not only preclude any profit distribution to the Confederation and the cantons, but can also raise even more fundamental issues about the ability of a central bank to pursue a monetary policy oriented towards price stability. To summarise, large-scale central bank balance sheet expansions are associated with increasing risks.

A case in point is the SNB’s decision to introduce the minimum exchange rate of CHF 1.20 per euro in September 2011, and then discontinue it earlier this year. As mentioned, in enforcing the minimum exchange rate, the SNB intervened heavily in the foreign exchange markets, and did not refrain from taking on significant balance sheet risks, particularly in 2012. At the time, interventions were necessary to counteract upward pressure on the Swiss franc resulting from substantial capital inflows and a lack of outflows due to flare-ups in the European debt crisis. Towards the end of 2014, the minimum exchange rate again came under increasing market pressure, requiring renewed interventions by the SNB. This time, however, the international environment was very different. While expectations of an interest rate rise in the United States were mounting and the dollar was appreciating, from mid-year onwards there were signs in the euro area of further monetary policy easing, and the euro started to weaken across the board, pushing the EUR/CHF exchange rate close to the CHF 1.20 per euro floor. On the back of these developments – also reflecting the collapsing interest rate differential – Swiss franc investments again became relatively more attractive. Given these circumstances, and in view of quantitative easing in the euro area, the continuation of the minimum exchange rate policy would have meant a permanent, potentially uncontrollable expansion of the SNB balance sheet.
Nor can it be ruled out that the external scenario will see a reduction in global cost pressures and inflation easing in most 6  economies, including Chile. In this case, the Fed's monetary policy response would be less restrictive than in the central scenario, which would give way to better financial conditions, a less appreciated dollar globally, and lower external inflationary pressures (figure 14). The central scenario projects that the pace of price increases will decrease in the coming months and that annual inflation will begin to decline. However, the risk of a much more persistent inflationary phenomenon is a concern for the Board. If materialized, it could lead to further monetary tightening, outside the upper limit of the MPR corridor. This risk is especially important in a context where inflation has been unexpectedly high for several quarters and inflationary expectations remain above 3% in the two-year horizon. Quickly recovering macroeconomic balances will help reduce this risk, while allowing the Chilean economy to appropriately address a further deterioration of the external scenario. Final remarks Our country is facing many important challenges. One of the most relevant macroeconomically is to reduce inflation, a problem that is putting a heavy burden on all of us. For more than two decades, inflation was not a matter of public concern and there were generations to whom it may have seemed an unknown issue. But in recent quarters it has become a complex issue, which is at the heart of our responsibility as an institution.

The Maiden Lane II and Maiden Lane III assets continue to generate substantial proceeds, which are distributed monthly to pay down the New York Fed’s Senior Loans to the respective Maiden Lane LLCs. While the New York Fed may direct its investment manager to sell Maiden Lane II and Maiden Lane III assets into the market at any time, as a practical matter, the value maximizing strategy has been largely to hold the assets to maturity while collecting interest income, and principal repayments. Currently, the hold-to-maturity expected proceeds of each LLC’s portfolio are greater than the LLC’s debt to the New York Fed. As of May 20, 2010, the balance on the New York Fed’s Senior Loan to Maiden Lane II was $ billion (inclusive of accrued interest), while the total asset value was $ billion. The balance on the New York Fed’s Senior Loan to Maiden Lane III was $ billion (inclusive of accrued interest), while the total asset value was $ billion. In sum, the LLCs have repaid approximately $ billion of the loans made to them by the Federal Reserve. Based on the current performance of both portfolios, as well as our analysis of forecasts provided by our investment advisor, it is anticipated that the proceeds from both portfolios will exceed the principal and interest due on the New York Fed’s Senior Loans to both Maiden Lane II and Maiden Lane III. We expect to recover our principal and interest on the loans to the LLCs, and on the Fed Facility.
It provides them with a more stable environment than the former dollar-based regime. Today, the euro and the dollar act to some extent like mutual shock absorbers. As a result, small currencies are closer to their economic fundamentals than earlier, which gives third countries a real opportunity to implement independent monetary policies aiming at price stability. BIS Review 72/2004  5

Prasarn Trairatvorakul: Policy Forum marking the Bank of Thailand’s 70th anniversary Welcome remarks by Dr Prasarn Trairatvorakul, Governor of the Bank of Thailand, to the Bank of Thailand’s 70th Anniversary and 3rd Policy Forum, Bangkok, 12 December 2012. *  *  *  Governor Glenn Stevens, Distinguished Guests, Ladies and Gentlemen, 1. It gives me great pleasure to extend a warm welcome to all of you, our distinguished guests, to the Bank of Thailand’s Policy Forum. Today’s gathering marks the third such event organized by the Bank of Thailand. The policy forum serves as a platform for prominent academics, policy-makers and market participants to learn from the visions and insights of outstanding international leaders. More importantly, the discussion and knowledge-sharing arisen from this forum will further equip the Bank of Thailand with a broader and deeper pool of knowledge to pursue its mandate. On that note, let me add that this year marks the 70th anniversary of the Bank of Thailand, an institution that has always been committed to preserving economic and financial stability. This commitment would not be possible without continual upgrading of our knowledge base through forums such as the one today. 2. Today, the Bank of Thailand is truly honored to have Governor Glenn Stevens of the Reserve Bank of Australia with us to share his thoughts on “Challenges for Central Banking”. This talk is especially timely because the effects of the global crisis are spreading to our region.
As I said before, structural changes can affect the economy over a long period of time. Even afterwards it is difficult to know how much a specific factor has affected the labour market or inflation, for instance. We have seen in our own evaluations that lower price mark-ups as a result of, for instance, digitalisation, may have contributed to holding back inflation, particularly during the period 2014-2015. At the same time, the most important reason for the low inflation during this period appears to have been low domestic cost pressures.26 And as resource utilisation has increased, inflation has also risen towards the target. It is evidently possible to attain a quantified inflation target. When I follow the debate on monetary policy in Sweden, the argument keeps cropping up that the two-per cent target for inflation will be impossible to attain as the economy becomes increasingly digitalised. However, one should also look at events in other developed countries with similar targets. Because of course Sweden is not alone in being affected by digitalisation. There does not seem to be any clear relationship in these other countries between for instance the spread of e-commerce and inflation. However it is possible that the lack of simple correlations in data hides some causal relationship. Better indicators of the spread of digitalisation may give other  22 Cavallo (2017). 23 Cavallo (2018). 24 Gorodnichenko and Talavera (2017). 25  Swedish Trade Federation (2018). 26 Sveriges Riksbank (2018b). 9 [12]  results.

And if technological advances continue at a rapid pace, we must all be ready to update our knowledge. 5 [12]  The effects of digitalisation can also be much greater than the effects of earlier industrial revolutions. Online robots and AI have the potential to replace large sectors of the human workforce. Some analysts think that the whole labour market will change fundamentally, and that this will be fairly soon.13 In such a situation, it will not only be groups of employees with different skills that will be polarized. Here I am not even talking about the most dystopic forecast for the future – of an almost omniscient artificial intelligence with its own agenda that takes over the world. Instead I mean a changeover to where many tasks and jobs are no longer done by people. Such a development will create tension between those who own capital in the form of equity and funds and those who do not. This is because the capital owners will receive the productivity gains generated by the machines. Digitalisation can lead to concentrated product markets. There are other problems with digitalisation for market economies. We see already now social networks like Twitter, Facebook and Instagram dominate their respective markets. Few people use search engines other than Google. These companies are not only dominant in their respective fields; they also determine who may market themselves or express themselves on their platforms. In this way, they govern how other companies reach out to prospective customers.
A nimbler European Stability Mechanism, meanwhile, together with steps towards an area-wide stabilisation budget, could effectively complement the euro area’s institutional architecture. Reforms along these lines are needed to help us create a more stable and safer currency union. A stable, resilient and more integrated euro area is in everybody’s interest, including, and maybe especially so, Germany’s. That is why Germany for decades joined forces with its European partners to strengthen the European Union, including by establishing a monetary union. It is reassuring to see that the coalition agreement gives strong support to the European project. Indeed, governments and parliaments of Member States, together with the European Parliament, must be the driving force in this process. This is particularly important at a time when the multilateral order based on cooperation is being challenged, at a time when one of Germany’s long-standing partners, the United Kingdom, is about to leave the European Union, and at a time when anti-European forces, elected and unelected, in other parts of the Union are calling into question not just the EU’s four freedoms but also the values of an open, free and democratic society. In this environment, Germany, as one of the founding members of the Union, has a responsibility to promote and nurture a reform debate that is constructive and that will help to bridge differences of opinion. A strong Franco-German commitment is a necessary condition for moving forward, but all Member States have to be on board.

But the regeneration of urban communities, and the efforts of British Waterways, have reversed this decline. The number of miles is now increasing. Last year, 13 million people visited our canals and the number of boats is actually higher now than during the Industrial Revolution. Such examples are important because our economy faces the prospect of change again. After an unprecedented financial crisis and deep recession, the UK economy needs to rebalance. Tonight I want to talk about what those changes will entail and the role which the Bank of England can play in supporting them. The Bank of England’s key role has always been to ensure that the economy is supplied with the right quantity of money – neither too much nor too little. For fifty years, my predecessors struggled to prevent there being too much, so leading to inflation. I find myself in the opposite situation having to explain that there is too little money in the economy. But, in the wake of the financial crisis, and the sharp downturn that followed, the amount of money in the economy as a whole – broad money – is now barely growing at all. That is restraining activity and pushing down the outlook for inflation. So the Bank of England has taken extraordinary monetary policy measures – through our so-called “quantitative easing” programme of asset purchases – to ensure that the amount of money starts growing again in order to support a recovery and keep inflation on track to meet our target in the medium term.
Of importance, is ensuring that the implementation of the regulatory reforms does not impair the ongoing economic recovery process. Further, while major agreement has been reached on the key components concerning capital and liquidity, a number of other significant areas still remain largely work in progress. Against this backdrop, it is important that policy makers and the financial industry maintain a continued open and constructive dialogue on developments affecting the industry, in particular, to avoid any unintended consequences from these reforms. Economic outlook We are now entering the second year of global recovery. The rebound in 2010 has been largely led by the exceptional performance of the emerging economies, in particular, in Asia. Growth is expected to remain strong this year, although at a more moderate pace compared to 2010. Amid favourable growth prospects, Asia will however have to manage the impact of international developments given its high degree of economic and financial openness. The global attention is currently focused on the fiscal conditions of several of the advanced economies, the progress in the financial reforms and on the monetary and financial measures being implemented in the crisis affected economies. A major challenge for most emerging economies in 2011 will be the management of the highly volatile capital flows. The strong growth in Asia has and will continue to attract this massive increase in global liquidity in the form of capital inflows into the region. This calls for greater vigilance on the part of the policymakers in the region.

While individual jurisdictions may be confronted with specific challenges of implementation that may arise from differences in economic and market structures, there is also much in common, particularly among emerging economies, that can be shared among jurisdictions. The period of observation on some of the components of the reform package provided by the Basel Committee is welcomed. It will allow jurisdictions to consider appropriate actions needed to support the effective implementation of the reforms. At the same time, there is an expectation that there will be a willingness by the international standard setting community to adjust or otherwise supplement current prescriptions, frameworks or implementation strategies as more experience is gained under changing market conditions. The effective implementation would also require support for the implementation of the reforms, particularly in the area of capacity building, particularly in the emerging and developing world. Inclusive communication channels with the market and an inclusive process of global consultations will allow us to benefit from the experience of others and, more importantly, facilitate more coordinated policy responses and thus support the orderly adjustments to the new standards. While the evolution of financial stability policies over the recent two years has seen clearer mandates being established for the regulatory authorities, the framework for financial stability both at the national and international levels continue to be a subject of intense discussion.
Yet, for this Financing Union to be effective, progress is still needed in four key areas: first, providing incentives for cross-border investments – mainly in equity – through accounting, taxes and insolvency laws; second, developing pan-European long-term saving products – with a key role for the insurance sector – and investment vehicles like European venture capital funds; third, completing the Banking Union; fourth, controlling financial activities and risks that are of vital importance for the euro area, such as supersystemic CCPs. And so, we could reach significant gains for digitalisation, SME’s scaling up or energy transition. Today, I will focus on the third area: completing the Banking Union. The Banking Union is a major step forward for the euro area and is now operational, based on the single rulebook and already two pillars: the Single Supervisory Mechanism (SSM) since end2014; and the Single Resolution Mechanism (SRM), since the beginning of 2016. Those two pillars will have to be complemented by a third pillar about Deposit Insurance, where we could find practical and reasonable compromises. But in addition, I will elaborate on two challenges that are less often mentioned: consistency, and consolidations. The first challenge is to achieve better consistency between regulation, supervision and resolution, at three levels: First, in the concrete mechanisms: finalising and simplifying the resolution pillar should be a priority.

On the basis of theoretical analyses of what ought to determine a country’s use of a currency, together with information the Riksbank has obtained from interviews and surveys of Swedish firms and households, we have concluded that the introduction of the euro will not appreciably alter the role of the krona in the Swedish economy. The krona has important functions in Sweden’s economy, both as a means of payment and as a unit of account and a repository of value. The krona is already exposed to competition from other currencies. EMU can be seen as a continuation of this process. One indication of the competition is the very sharp increase in exchange market turnover. Since 1986 this turnover has grown by a factor of eight, whereas foreign trade and GDP have no more than doubled. Only 5 per cent of the exchange market turnover stems from transactions directly connected with foreign trade. In what respects, then, might the advent of the euro alter the position of the krona? What is the line of reasoning behind such a scenario? The discussion about a marginalisation of the krona has started from the view that Swedish export companies will choose to switch to euro in order to reduce the competitive disadvantage of being outside the euro area.