samchain/econo-pairs-v1 huggingface dataset:
In the case of the euro area, estimates even place the natural rate of interest at negative levels.9  7  The concept, determinants and implications for monetary policy of the natural interest rate are discussed in depth in Galesi et al. (2017). 8  For example, Holston et al. (2017) estimate that in 2016 the natural rate was positive, but very close to zero, in the United States. 9  See, for example, Fiorentini et al. (2018). 13  Consequently, to stabilise inflation, the real interest rates we currently observe in our economies need to be lower now than two or three decades ago. This would not be problematic if nominal rates could fall as far as necessary; for example, with expected inflation of 1%, to achieve a real interest rate of, let’s say, -2%, the nominal rate would have to be lowered to -1%. The problem is that nominal interest rates cannot drop as far into negative territory as is sometimes necessary. Were central banks to set interest rates of -5%, for example, commercial banks would endure negative returns on the bulk of their assets, which would adversely affect their profitability and, ultimately, their financial intermediation capacity. This would have an attendant negative impact on the supply of credit, economic activity and inflation. There is therefore a lower bound on nominal interest rates.

Fiscal policy has been, and remains, the most appropriate tool to act in this setting, since it has the instruments to achieve this objective with targeted actions that are suited to a shock whose duration is uncertain and heterogeneous. The response of European governments, mainly centred on measures to support the income of households and firms, has generally been very forceful and, on this occasion, was also backed by unprecedented joint action, especially following the approval of the European recovery programme Next Generation EU by the European Council. 1  For its part, monetary policy also needed to act, and has acted, very forcefully. Indeed, the pandemic-induced economic shock was initially accompanied by a sharp tightening of financing conditions in the euro area. As various governments announced plans to contain the virus, financial markets began to factor in heavy declines in economic activity and an increase in public and private debt. This pushed up interest rates in the sovereign and corporate debt markets, a situation which could have amplified the fall in aggregate demand and, therefore, in inflation had it not been addressed in time. Moreover, the initial phase of the COVID-19 crisis did not affect all euro area countries evenly, but asymmetrically. Some countries, such as Italy and Spain, which already had relatively high levels of public debt, were hit harder by the first wave of the virus, both epidemiologically and in terms of their reliance on more vulnerable industries (for example, tourism). As a result, borrowing costs rose much more markedly in these countries.
As the natural rate falls, so does the rate that stimulates the economy. With the natural rate now lower in the euro area, and the significant downward shock to output and inflation from the crisis, negative rates, and our other policy measures, have been necessary to stimulate demand and drive inflation towards our objective. There is a limit to how low short-term rates can go. Since the return on cash is zero, at some point the public will switch to using cash and disintermediate the banking sector. Of course, there are costs involved in holding large quantities in cash, so the crossover point lies a little way below zero. Given that there is a limit to how low interest rates can go, other unconventional measures have to come into play. There is not just one short-term interest rate that matters for saving and borrowing decisions. Our asset purchase and targeted long-term repo programmes seek to influence the entire constellation of rates that affect economic conditions. We have provided guidance that we will not withdraw stimulus until output and inflation are on sustainable paths. But let me emphasise once more, these measures were necessary given the size of the crisis and the already low natural rate. Effectiveness of the unconventional measures That brings me to my second question, have the unconventional measures been successful? The short answer is yes. The euro area economy is recovering steadily. Unemployment is falling, reaching 10% in the third quarter.

And despite all these imperfections, history has shown that, with the increasing freedom of international trade, the world is in many ways a better place to live in. I believe that the same sentiment can generally be applied to international finance. Indeed, in much the same spirit as in the promotion of free trade, a great deal of effort and commitment has been put into the promotion of the free flow of capital in recent decades. Financial liberalisation became very much the fashion, leading to domestic financial markets rapidly attaining a global dimension, welcoming and absorbing international capital. This created opportunities for international financial intermediation, channelling savings into productive investments across countries and across currencies, enhancing the efficiency in the use of global capital and contributing to promoting global economic growth and development. But, as in the case of international trade, there is also a need for institutions and mechanisms to deal with the undesirable aspects of international finance. We now have a situation in which individual financial institutions are in a position to mobilise financial resources larger than the Gross Domestic Product of an economy. They can take dominating positions in particular markets and dictate short-term market movements in their own interests. Small open markets have become increasingly vulnerable to international capital. Whilst many of them have benefited greatly from an abundance of international capital, both in the form of foreign direct investment and foreign portfolio investment, they have also become easily overwhelmed by such flows.
As part of ongoing measures to further strengthen the resilience of Islamic finance, the Islamic Development Bank (IDB) in collaboration with the Islamic Financial Services Board (IFSB) has formed a Task Force on Islamic Finance and Global Financial Stability in 2008 to analyse and propose specific recommendations on the role and contribution of Islamic finance in promoting global financial stability and to outline the areas for strengthening the Islamic financial infrastructure including for putting in place the building blocks for liquidity and crisis management in the Islamic financial system. In this recent decade, the increasing internationalisation of Islamic finance is being accompanied by new emerging global patterns of financial and economic interlinkages. This can be observed in the strengthening of ties in recent years between Asia and the Middle East in trade and investments in a wide range areas. Both Asia and the Middle East are increasingly recognised as dynamic growth regions in the global economy. The two regions have a history of strong trade ties that flourished on the old Silk Road, which served as a major global conduit between the ancient civilisations in the East and West until about the 14th century. Islamic finance today has revitalised these economic ties with the strengthening of the financial linkages between Asia and the Middle East, a trend that will generate mutually reinforcing growth prospects. The emergence of these new financial centres in Asia and the Middle East and their increased integration has paved the foundations for a New Silk Road.

The first, is the increasing significance of Asia in the global economy; second, the extensive international regulatory reforms that is being envisaged by the international community; and third, the rapid growth of Islamic finance and its integration into the international financial system. These trends are set to become significantly more pronounced in the aftermath of this global financial crisis. Asia and the global economy After one of the worst economic crises in modern history, the global economy is now on the path of recovery but with a pace that is set to be uneven. There is now a global shift taking place arising from an increasing growth divergence between the advanced and emerging economies resulting in a change in the configuration of the global economy. This is not only a consequence of the crisis related factors but also due to structural factors prevailing prior to the crisis. We have seen extraordinary and unprecedented measures been taken by the advanced economies to restore stability and the functioning of the financial systems, and to contain the effects of the financial crisis on the economy. While a catastrophe has been averted, the recovery in the advanced world continues to be reliant on policy support, with structural factors yet to be addressed. The IMF’s projection is for growth in the advanced economies for the period 2009 and 2014 to be 1.3% per annum, which is half of what was registered during the period 2000 to 2008.
GDP fell about 5 per cent and unemployment rocketed from levels around 2–3 per cent to two-digit figures. After a series of heavy attacks, the Swedish krona was left to float in 1992. The fixed exchange rate regime was replaced by a return to price stability as the policy objective, now in the form of a 2 per cent inflation target. Since 1999, price stability is enshrined in law and the Riksbank is more independent in the pursuit of this goal. While low inflation is admittedly not an ultimate goal for economic policy in general, it is an important prerequisite for generating growth that is stable and high. History clearly demonstrates that a high and fluctuating rate of inflation is incompatible with a permanent improvement in standards of living. A commitment to price stability is therefore one of the foundation stones of any economic policy that aims for rising prosperity and high employment. BIS Review 81/2001  3  The years since the policy realignment have been successful. But this is not only because stabilisation policy is now being conducted differently, with a clear focus on price stability and a balanced budget. It is also a result of all the measures that were introduced around the turn of the 1980s to improve the workings of the economy. These included the deregulation of capital markets, “the tax reform of the century”, a realignment of housing policy and so on.

Since the upturn in 1993, annual GDP growth has averaged 3–4 per cent, while inflation has stopped at 1 per cent. This is impressive, not least compared with the 1970s and 1980s, when growth averaged little more than 2 per cent and inflation over 8 per cent. Moreover, open unemployment has fallen in just four years from 9 to less than 4 per cent. Today, when Sweden again faces an economic downturn, the initial position is considerably better than earlier. Inflation is low. There is no sign of large financial imbalances. Foreign trade is generating surpluses. The government budget is also in surplus and government debt has been reduced from about 80 per cent of GDP to 50–55 per cent. An economic policy synthesis This brief review clearly illustrates the interaction of theory and practice over the years. New features in economic development raise new questions. New theories provide answers that are sometimes incorporated in practical politics. This influences developments and raises new questions. In view of this, there is every reason to be humble. We are no doubt as far from the end of history in this field as in others. Perhaps one can discern the outlines of a synthesis between the classical approaches and the ideas of Keynes. As I see it, such a synthesis can rest on three pillars: •  The basic condition for a good economic development is markets that function properly, with rules that are clear and firm.
A variation on this theme, in essence adopted by the European Central Bank, is to provide unlimited financing to the banking system at the policy rate at longer maturities than usual. The other option involves the outright purchases of assets, rather than the normal repurchase agreements (i.e. collateralised lending) undertaken by central banks. This may involve the purchase of either government debt or a range of corporate assets. And they may be financed by the issuance of extra central bank reserves, raising the monetary base. Or they may be financed by the sale of other assets in which case there will be no effect on the monetary base. The Federal Reserve and the Bank of England have bought both government and private assets, though with different emphases, in part reflecting the different financial market structures. In particular, the Federal Reserve has bought significant quantities of a variety of corporate assets, whereas the Bank’s purchases have been more heavily concentrated on purchases of government debt. The aim of purchases of corporate assets is to enhance market liquidity by having the central bank stand ready to act as a backstop buyer. In so doing, it should bring down spreads over government bond yields by reducing liquidity premia, encourage issuance and generally improve the functioning of capital markets. Importantly, the central bank may not need to make a large volume of purchases to make a difference. The mere fact of credibly standing ready to buy may be enough to have the desired impact.

Ravi Menon: Islamic finance – continued growth Remarks by Mr Ravi Menon, Managing Director of the Monetary Authority of Singapore, at the 5th World Islamic Banking Conference Asia Summit, Singapore, 3 June 2014. *  *  *  Distinguished guests, ladies and gentlemen, good morning. And to all our foreign guests, a warm welcome to Singapore. The sun is shining on Islamic finance. Let me highlight three promising global developments. First, Islamic finance continues to grow rapidly. The industry grew at double digits last year, as it has for the previous five years, despite global economic uncertainties and market volatility. Global Islamic financial assets are estimated to have reached $ trillion by the end of 2013, from $ trillion in 2012. Second, global regulatory standards and best practices are being established for Islamic finance. The Islamic Financial Services Board (IFSB), the Accounting and Auditing Organisation for Islamic Financial Institutions (AAOIFI), and the International Islamic Financial Markets (IIFM) have been at the forefront of this effort, helping to narrow differences in market practices and regulatory treatment. Common standards are good for facilitating cross border transactions. They help to address risks that are idiosyncratic to Islamic finance, such as Shariah non-compliance risk. In so doing, these standards serve to bolster confidence in the safety and soundness of the Islamic finance industry. Third, more countries are catering for Islamic finance. In Asia, Indonesia has set out to significantly grow its Islamic banking sector and develop its Islamic capital markets.
Speech  Embargo 16 November 2017, 6.30 pm  Developments on the Swiss franc capital market and the SNB’s monetary policy Money Market Event  Andréa M. Maechler Member of the Governing Board ∗ Swiss National Bank Geneva, 16 November 2017 © Swiss National Bank, Zurich, 2017 (speech to be held in French)  ∗ The speaker would like to thank Dirk Faltin and Martin Weder for their support in drafting this speech. She also thanks her colleagues at the SNB for their valuable comments and suggestions. Seite 1/7  Ladies and gentlemen Welcome to the annual Money Market Event of the Swiss National Bank (SNB) in Geneva. We are delighted that so many of you accepted our invitation to attend. The SNB attaches great importance to meeting representatives of Switzerland’s business and financial communities. Traditionally, we have held two speeches – and we are continuing this tradition today. In my remarks, I shall explore developments on the Swiss franc capital market. Then my colleague, Dewet Moser, will speak about the foreign exchange market and future changes in reference interest rates. As you know, the SNB’s monetary policy remains expansionary. It continues to be based on two key elements: the negative interest rate (–0.75%) on sight deposits at the SNB and our willingness to intervene in the foreign exchange market as necessary. Both are helping to ease upward pressure on the Swiss franc and thereby prevent an undesired tightening of monetary conditions in Switzerland.

As a general rule, the forward price of a currency comprises the spot price plus the interest rate differential between the two currencies. However, for some time now, this rule has only applied to a limited extent for most major currencies. There are several possible explanations for this distortion: on the one hand, a greater need on the part of investors to hedge currency risk; on the other, a decline in bank arbitrage options resulting from more stringent regulations. 3 As chart 6 shows, this has created a situation in which it has become more expensive for foreign issuers to raise Swiss franc capital on a hedged basis. 4  1 2  3 4  Excluding mortgage loans to corporations. If mortgages were included, bank loans would account for an even larger share of corporations’ external financing. Following the introduction of negative interest, capital market rates once again fell much more strongly than bank lending rates. Despite the fall in capital market rates, the banks did not lower – or only partially lowered – their deposit rates to prevent customers from withdrawing their deposits; customer deposits are a stable source of financing. Equally, banks could not simply cut their lending rates in an effort to head off a decline in their interest margin. Cf. Zurbrügg, Fritz (2016), ‘Negative interest rates: necessary from a monetary policy perspective – but with what risks for the banks?’, speech held at Volkswirtschaftliche Gesellschaft des Kantons Bern on 24 November 2016. Cf. Borio, Claudio et al.
The Rt Hon Sir Edward George GBE: Some thoughts on the coexistence of affluence and poverty in the United Kingdom  Text of the St Paul’s Cathedral Lecture by The Rt Hon Sir Edward George GBE, Governor of the Bank of England, held in London on 28 November 2000. *  *  *  I have to confess that for me, as a banker - even if I’m a central banker rather than a commercial banker - to be invited to address this audience in the magnificent setting of this cathedral is a somewhat daunting experience. But if it’s a daunting experience, I recognise that it is a great honour, which I very much appreciate; and I welcome the opportunity it gives me to share with you this evening some thoughts on the age-old question, which continues to trouble right-minded people everywhere - how can we explain, let alone justify or tolerate, the coexistence of obvious affluence and well-being cheek by jowl with equally obvious poverty and deprivation. It’s a question of very broad relevance, with personal, local, national and international dimensions. It’s a question to which great minds have applied themselves across the centuries.

I should like, more modestly, in my remarks to offer some reflections, based upon my nearly forty years experience of working at the Bank, on the relevance, first, of monetary and broader economic policy to that question; on the relevance, secondly, of the activity of the City financial institutions; and on the relevance, finally, of the work of the international financial institutions with which the Bank of England is involved. But let me at the outset identify a common theme that underlies my remarks on all three of these areas. Don’t think that the root of the problem is that people generally simply don’t care. The harsh reality is that, with the best will in the world, we do not have - personally as far as most of us are concerned but certainly, collectively - locally, nationally or internationally - sufficient resources to satisfy all our aspirations. And since those aspirations are continuously increasing as standards do in fact gradually rise, I don’t suppose we ever will have that capacity. So we are obliged to make choices: if we devote resources to this or that purpose we will not have resources to devote to this or that other purpose however desirable in itself that other purpose may be. An absolutely fundamental issue is, of course, how and by whom such collective decisions are taken.
It is, however, important for the Swedish krona's status as an independent and internationally viable currency that it is not perceived to be more complicated, expensive or unsafe to make payments in Swedish krona than in other currencies. 9  Denmark has not taken a stance on TIPS, but uses the Eurosystem's pan-European platform for securities settlement, T2S. 6 [8]  This means that the settlement services offered by the Riksbank to financial institutions must be at least as safe and efficient as those available abroad. From this perspective, too, it would appear a good idea to share a technical platform with the euro countries. How will RIX and TIPS co-exist? If the Riksbank begins using the TIPS platform to offer settlement of instant payments, RIX needs to change its form and function. It is not appropriate to go into all the details here and now, so let me just describe the arrangement on a general level. The current RIX system (hereafter referred to as RIXRTGS) will remain in place. When RIXRTGS closes for settlement at the end of the working day, the Riksbank will implement its monetary policy transactions, just as it does today. But RIXRTGS will additionally be equipped with some new features. For instance, a participant in RIXRTGS will have access to intraday credit almost 24 hours a day, compared with today when it is only available during RIX's normal opening hours. In addition to RIXRTGS, settlement will be available 24/365 via the TIPS platform (hereafter referred to as RIXINST).

•  There has perhaps been too much focus on the slowdown in China’s headline growth rate and not enough attention paid to the changes in the composition of that growth. •  More than China’s economic slowdown, its economic transition will have a bigger impact on the world, and Asia in particular. Let us consider first some of the near-term effects on Asia. First, the slowdown in China’s investment and associated imports will impact exports in the region. •  IMF data shows that China’s goods import volume contracted by 0.7% in 2015, the first shrinkage in at least 18 years and a large step-down from its 10-year average growth rate of 10.5% (2005–2014). •  In value terms, China’s nominal goods imports fell by a sharper 14.2%, which can be attributed to steep falls in global prices of commodities, delivering a harsh “negative terms of trade” blow on the affected countries. Second, China’s rebalancing away from investment and towards consumption will weigh on the exports of economies which are most exposed to Chinese demand for capital goods. •  Asian economies as a whole cater more to Chinese investment demand rather than its consumption demand. Therefore, at least in the short term, the impact of China’s rebalancing is skewed towards the downside for the region. •  The Asian NIEs which export manufactured capital equipment to China will be adversely affected.