samchain/econo-pairs-v1 huggingface dataset:
As a consequence, the MPC began to remove some of the policy stimulus, raising Bank Rate from ¼% to ½% in November 2017 and then to ¾% in August 2018 where it has remained since. 20  This comprised: a 25 basis point reduction in Bank Rate to 0.25%; a Term Funding Scheme to reinforce the pass-through of that cut to the borrowing rates faced by households and companies; £ billion of gilt purchases; and £ billion of corporate bond purchases. 21 The FPC cut the counter-cyclical capital buffer rate to zero, increasing credit availability by up to £ billion; emphasised that banks’ liquidity reserves are usable; and amended the leverage ratio framework for UK banks by excluding central bank reserves. The PRA Board used regulatory flexibilities to smooth insurers’ transition to new regulatory standards in a very low interest rate environment. 22 This estimate is based on the approach to construct a “synthetic” measure of UK GDP described in ‘The Economic Outlook: Fading global tailwinds, intensifying Brexit headwinds’, speech given by Gertjan Vlieghe at the Resolution Foundation, 14 February 2019. 23 Figures are for whole economy average wages excluding bonuses (“regular pay”).

But achieving a forward looking scenario analysis implies bringing together three “bricks”: -  A handful of severe enough but realistic transition path scenarios all the way to 2050. The NGFS is working on those and plan to publish some technical papers soon. -  Macroeconomic assumptions to capture the impact of climate change on macroeconomic variables (productivity, inflation, unemployment, etc.) -  The direct and indirect exposures of the financial system to climate risks. Here of course, disclosure can help. We are not there yet, climate risk analysis needs to rely on new methodological tools in order to deal with challenges related to long-run impacts, accounting for technological change and shifts in political priorities and social behaviour for  instance, non-homogeneity and non-linearity of impacts, and irreversibility of effects. We need to look beyond the standard one-year horizon for default probabilities that does not fit the climate agenda. c. The green economy is still in its infancy and needs to mature As time goes by and our ability to achieve a 1.5 to 2°C scenario is seriously challenged, the amount needed to finance the transition is increasing steadily. The demand for green assets is high, but the supply of green assets fails to keep up. This quantitative challenge to match demand is linked to the massive investment required to promote further development of technologies and to accompany shifts in social behaviour.
And it is this – the chance of avoiding the downside outcomes – that gives the option in [1] its value. Ben Bernanke, who did much to bring these issues to the attention of economists in a ground-breaking paper in 1983, called this the “Bad News principle”. 4 What I want to do now is construct a very simple example that makes this point a little more precisely. And I’ll do so in a way that allows us to think too about the effects of the perceived duration of uncertainty: does it make a difference if the firm expects things to be resolved soon or instead to endure for a long time? Though the example is highly stylised I think it can help shed some light on the impact of the ongoing uncertainty about Brexit. We want to keep things as simple as possible, so in this example the only uncertainty surrounds a discrete event, at some point in the future, that has a lasting effect on the profitability of a particular investment project. Until the uncertainty is resolved (i.e. until the event occurs) the project yields a fixed rate of return R and can be financed at a known rate ρ. When the event does occur the outcome is either good, in which case the project makes a proportionate gain of G (in expected-present-value terms), or a bad one, resulting in a present-value loss on the project of L > 0.

BIS central bankers’ speeches  5  Chart 1  © Globe Cartoon  Chart 2 Switzerland’s foreign trade, 2000−2015  Source: Swiss Customs Administration  6  BIS central bankers’ speeches  Chart 3 Interest and exchange rates, 2008−2011  Chart 4 Monetary base from 2008 to the present day  BIS central bankers’ speeches  7  Chart 5 Interest and exchange rates from 2012 to the present day  8  BIS central bankers’ speeches
Turning to the second main theme I would like to discuss, resolution is being offered up by some as not only a necessary element of the solution to the too big to fail problem (a proposition I agree with), but also as an entirely sufficient solution that eliminates the need for heightened prudential standards to reduce the probability of failure in the first place. The argument is based on the view that, in resolution, shareholders’ equity will be wiped out and that some portion of the long-term debt will be converted to equity. The prospect of this outcome will, it is argued, lead to a disciplining effect by the parent company’s long-term debt holders, who will demand higher yields now that the prospect of failure is credible. This, in turn, will help to eliminate the implicit subsidy of too big to fail. Under this theory, Title II would also limit the incentives for firms to become larger and more complex in order to gain this funding subsidy. By itself, however, Title II does not entirely eliminate the advantages of being large and complex. That is because large, complex firms are more likely to go through Title II than smaller, less complex bank holding companies, who will generally go through a Chapter 11 bankruptcy proceeding. Also, only large firms will benefit from Title II’s one-day stay on qualified financial contracts.

However, it is important to note that pragmatism is not synonymous with unbounded discretion and a lack of discipline in policy-making. This brings me to the second principle: consistency. Consistency While decision-making should be pragmatic, it should be consistent over time. Policy decisions must be based on a firm commitment to the objective of price stability. They cannot be based on a period-by-period optimisation of short-term gains in terms of output stabilisation or, more generally, on political opportunism. If we are to reach consistent decisions, we must make sure that all available information is used systematically. This is especially important during prolonged periods of largerthan-usual forecast errors. In such situations, additional data and information can help assess the likelihood that the forecast errors are not just due to unpredictable shocks, but to underlying structural changes in the economy. 2/4  BIS - Central bankers' speeches  The SNB is currently investing in such alternative data and information. This helps us to improve our understanding of inflationary pressures and assess the possibility of a change in the underlying inflation regime. For example, we are monitoring disaggregated CPI data more closely. We are also experimenting with machine-learning models that are trained using a large set of economic and alternative indicators. Furthermore, we collect additional data from our network of regional representatives who conduct one-on-one discussions about the current economic situation in Switzerland with around 250 company managers throughout the country every quarter.
With the final tranche on July 14, the disbursement of the proceeds from the gold sales will have been completed, representing the largest financial transaction in the history of the Swiss National Bank. In my view, the most important lesson to be drawn from the SNB’s gold sales is that the decision to sell official gold holdings should be made separately from any consideration on how to use the proceeds. The history of the SNB sales shows that notwithstanding the constitutional and legal complexities I referred to earlier, the time between the expert opinion about the SNB’s excess reserve capital and the first sales was two and a half years. Switzerland’s politicians, on the other hand, failed to reach a consensus on what to do with the proceeds. After eight years of relentless debates and a squarely rejected referendum on the Swiss Foundation for Solidarity in 2002, the funds will be disbursed according to the constitutional distribution key for the SNB’s regular profits. I don’t want to burden you with the intricacies of the Swiss political debate around the gold proceeds. Let me simply say that it was not for lack of creative ideas that a consensus failed to emerge. This lesson strikes me as relevant with regard to potential renewed discussions about IMF gold sales. Such discussions should exclusively be conducted on the basis of a thorough examination of the solidity of the IMF’s financial position and not become entangled with proposals on how to allocate any expected proceeds.

Philipp M Hildebrand: SNB gold sales - lessons and experiences Speech by Dr Philipp M Hildebrand, Member of the Governing Board of the Swiss National Bank, at the Institute for International Economics, Washington, DC, 5 May 2005. * I. *  *  Introduction  I am pleased to be in Washington today and would like to thank Fred Bergsten and his colleagues at the Institute for International Economics for providing me with this opportunity to talk about the recently completed gold sales of the Swiss National Bank (SNB). In June 1999, the Governing Board of the SNB decided that half of its then gold reserves of 2590 tonnes were no longer required for monetary purposes and that it would inform the market and the public accordingly. This decision contributed to the process that eventually led to the first central bank agreement on gold sales. This so called Washington Agreement provided the framework for the subsequent gold sales of the Swiss National Bank, the ECB and thirteen European national central banks. Under this agreement, the SNB’s realized sales of 1170 tonnes which represented the bulk of the total sales of 2000 tonnes for all participating central banks. The SNB completed its gold selling program on March 30, 2005 after selling a residual 130 tonnes under the second central bank agreement on gold sales.
From a regulator’s perspective the point is not that a reassessment of values is inherently unwelcome. It is not. Capital should be allocated to reflect fundamentals, including externalities. But a wholesale reassessment of prospects, especially if it were to occur suddenly, could potentially destabilise markets, spark a pro-cyclical crystallisation of losses and a persistent tightening of financial conditions. In other words, an abrupt resolution of the tragedy of horizons is in itself a financial stability risk. The more we invest with foresight; the less we will regret in hindsight. And there are ways to make that more likely. Financial policy implications Financial policymakers will not drive the transition to a low-carbon economy. It is not for a central banker to advocate for one policy response over another. That is for governments to decide. But the risks that I have outlined mean financial policymakers do, however, have a clear interest in ensuring the financial system is resilient to any transition hastened by those decisions, and that it can finance the transition efficiently. Some have suggested we ought to accelerate the financing of a low carbon economy by adjusting the capital regime for banks and insurers. That is flawed. History shows the danger  25  The IPCC makes clear that, without this critical technology, the cost of meeting the two degree goal more than doubles – if it can be achieved at all. Canada is home to the world’s first commercial-scale CCS plant at Boundary Dam. Other projects rely on government subsidies which can prove unreliable.

Modern catastrophe cover was born with your decision to stand by policyholders after the San Francisco earthquake. And Lloyd’s pioneered aviation insurance. 1 With eyes constantly on the horizon, Lloyd’s has remained at the forefront of global insurance. Today, you are insuring new classes of risk in new parts of the world – from cyber to climate, from space to specie, from Curitiba to Chengdu. And you are doing so in market conditions as challenging as any in the last 20 years. The need to manage emerging, mega risks is as important as ever. Alongside major technological, demographic and political shifts, our very world is changing. Shifts in our climate bring potentially profound implications for insurers, financial stability and the economy. I will focus on those risks from climate change this evening. 1  The first aviation policy was written in 1911, followed in 1919 by the founding of the British Aviation Insurance Association. That venture closed in 1921, with underwriters concluding that “there seems to be no immediate future in aviation insurance…” www.lloyds.com/lloyds/about-us/history/innovation-and-unusual-risks/pioneersof-travel. BIS central bankers’ speeches  1  The tragedy of the horizon There is a growing international consensus that climate change is unequivocal. 2 Many of the changes in our world since the 1950s are without precedent: not merely over decades but over millennia.
Speech  Embargo 1 November 2017, 6.15 pm  Credit, debt and growth Collegium generale, University of Berne  Fritz Zurbrügg Vice Chairman of the Governing Board * Swiss National Bank Berne, 1 November 2017 © Swiss National Bank, Berne 2017 (speech given in German)  *  The speaker would like to thank Till Ebner, Rita Fleer and Adriel Jost for their support in drafting this speech. He is also indebted to Robert Bichsel for his valuable comments and the SNB Language Services for their assistance. Page 1/16  Ladies and Gentlemen Returning to one’s alma mater is always a special occasion. It was 28 years ago that I completed my doctorate here at the University of Berne. Since then, my professional career has taken me to a variety of places, but there has always been one topic accompanying me on the way: the topic of debt. In my first job at the Federal Finance Administration at the end of the 1980s, I was charged with analysing the Latin American debt crisis. Then, at the end of the 1990s, working for the International Monetary Fund (IMF) in Washington D.C., the emphasis was on resolving the debt crisis in Asia. Back in Switzerland, my efforts went into implementing the debt brake at federal level. And even switching to the Swiss National Bank (SNB) in 2012 was no escape. The European debt crisis had a major impact on the Swiss franc exchange rate and on our monetary policy.

But we also collect and analyze enormous amounts of other information, both in the form of data and reports from members of the communities we serve, to help us assess the state of the economy and inform our decision-making. The Economic Outlook I’ll start off with the most common measure of the overall economy: gross domestic product, or GDP. I expect inflation-adjusted, or real, GDP to rebound sharply this year. Indeed, with strong 1/4  BIS central bankers' speeches  federal fiscal support and continued progress on vaccination, GDP growth this year could be the strongest we’ve seen in decades. Such a robust rebound would be very welcome after the toughest period for the economy in living memory and a winter where the pandemic has been particularly severe. The resurgence of COVID-19 over the past few months caused consumers to pull back on spending, resulting in significant job losses in some sectors—especially in leisure and hospitality. In past recessions, we have typically seen a decline in manufacturing jobs, while the service sector—establishments like hotels, bars, and restaurants—was not affected to the same extent. But the pandemic has flipped the script in that regard. Indeed, this time, both the manufacturing and housing sectors have rebounded sharply since last spring, while much of the service sector remains depressed. The pandemic has had a truly devastating effect on employment.
Early work has estimated that, for example, an initial shock of 60bps to corporate bond spreads could be amplified by a further 30% and increase GDPat-risk (proxied by the 5th percentile of the forecast distribution of GDP) by 0.2pp. Estimating the costs and benefits will also require simulating into the future to take account of the larger size of funds. The impact of the FPC’s principles on the central forecast for GDP is harder to quantify as it depends on (unpredictable) investor behaviour. Under current fund structures, funds with longer notice periods or discounted redemption pricing are not as attractive to investors as the apparently “costless” funds with daily liquidity. Those structures that may look unattractive today are the very structures needed to finance investment in productive finance, such as infrastructure, the transition to a net zero economy and the financing of SMEs. Such investments simply are poorly suited to structures offering short-notice redemption. It follows that investors could respond to reform of fund structures by increasing investments in productive finance. The prospect of productive finance increasing after applying the FPC’s principles would be the macroprudential equivalent of ‘Divine Coincidence’ that promotes financial stability while increasing the rate of trend growth. Global co-ordination of potential reforms will be vital. That is why the Bank and FCA are engaging with the FSB, IOSCO and other competent authorities on the financial stability risks of asset management activity. Breaking the Tragedy of the Horizon to address the Climate Crisis The climate crisis is a Tragedy of the Horizon.

33  All speeches are available online at www.bankofengland.co.uk/news/speeches  33  Chart 23: 2019 Bank of England stress test  Chart 24: 2019 Bank of England stress test scenario  scenario overall more severe than the financial  overall more severe than the financial crisis  crisis Latest four-quarter growth (%)  Latest four-quarter growth (%)  2019 stress test start-to-trough fall (%)  2019 stress test start-to-trough fall (%)  UK Residential -33.0 -4.7  UK  UK CRE -40.9  -3.7  2.3  US -4.0  0.9  4.1  Euro area CRE -25.7  6.6  US residential -22.3  -2.8  -34.1  Hong Kong  -1.2  -44.9  5.9 China  -2.6  -10  -3.3  Euro area residential -19.6  EA -7.9  1.6  1.1  World (PPP)  -5  -55.0  2.9  0  -64.0 5  10  -70  3.5  China residential  -50  -30  GDP outturn  2.6 3.4  HK residential HK CRE  11.5  US CRE  -10.4 -10  10 30 Property prices (%)  Our major banks have passed this taxing stress test, just as they did a range of others in recent years. Their resilience contributes to a high degree of financial sector preparedness for the current crystallisation of what had previously been an unknown unknown risk. We haven’t built this strength for its own sake. It’s there to be used when needed. This is prudence with a purpose.
The fact that many people have entered the stock market in a short time is not entirely a good thing. Besides the losses they may incur and thereby run into financial difficulties, there is a risk of the stock market functioning less well because prices bolt from more fundamental levels. An example of this is the IT bubble in recent years. The ease with which firms attract capital in an over-valued market leads to misinvestment which, if it becomes too prevalent, can be harmful for society in general when the economy and the stock market both turn downwards. The behaviour of inexperienced investors is thus a general economic issue. The American study argues that firms, banks and analysts had incentives to talk inexperienced people into investing in new enterprises on grounds that were not entirely sound. Many new technology companies were not generating a profit and had to rely instead on paying for wages and equipment by issuing shares. For this to be feasible, stock markets need to be high. In this sense there were incentives for managements to trim reports and statements about their firm’s future profits. At the same time, analysts and investment banks, with potential earnings from launching share issues, lacked incentives to take a critical look at these reports and statements. Inexperienced investors did not get the assistance and support they needed. As a sign of this, the paper mentioned that in summer 2000 professional analysts were summoned to Washington for a congressional hearing on their market recommendations.

This definition is more passive in terms of implying how one should act under normal circumstances, but has the advantage of focusing on the situations we attempt to avoid. The latter definition is related to the high costs of financial instability in the last few decades. Costs in terms of loss of GDP can be substantial. A study of the economic costs of banking crises concluded that even though such crises have been less frequent in high-income countries than in low-income  1  See for example Schinasi, Garry J. (2004). ”Defining Financial Stability”. IMF Working Paper No. 04/187  BIS Review 34/2005  1  countries, they have persisted over a longer period and average total output losses have thus been higher.2 The preferred definition of financial stability varies across countries. Recognising the need for a relevant operational definition regardless of the current situation in the financial system, the Central Bank of Norway has chosen to adopt the broad definition of financial stability. How do the authorities analyse financial stability? Given an understanding of what financial stability should imply, the authorities can analyse potential threats to financial stability. There are two complementary approaches: In the first approach, we need to focus on risk factors originating within the financial system. Institutions, markets and infrastructures are continuously faced with risk factors such as credit, liquidity and market risks. Analyses have become even more challenging in recent years as the financial system has become more complex and interwoven both across industries and borders.