samchain/econo-pairs-v1 huggingface dataset:
On the other hand, the consequences of the coronavirus crisis could also impact on the soundness of money. Overall, state financing needs and thus government debt have increased considerably as a result, and this could undermine the third mainstay if countermeasures are not taken over the medium term. In addition to this, many central banks have themselves bought exceptionally high amounts of their country’s own sovereign debt. In a crisis, that may be the right thing to do in terms of monetary policy, but it must not be done for reasons of 9 Money supply and monetary aggregates can be represented as the product of the money multiplier and the monetary base. 10 For more information on the sovereign wealth fund issue, cf. inter alia Jordan, Thomas J. (2016), Comments on Swiss monetary policy, speech at the SNB AGM, Berne, 29 April. For more information on how the SNB contributes to a healthy pension system, cf. Jordan, Thomas J. (2019), Challenges confronting the pension system – options and limitations of monetary policy, speech at the PK-Netz conference, Berne, 31 October. Page 7/8  state financing. The challenge lies in safeguarding the clear separation of responsibility for monetary policy and fiscal policy even in this crisis situation, and thus ensuring that central banks remain independent in practice and not just on paper. It is particularly important to avoid scenarios where excessive government debt means that a central bank is de facto forced into making its decisions dependent on their impact on public finances.

This would result in monetary policy no longer being centred on price stability and thus on sound money. 11 Switzerland has been able to manage the additional debt well thus far thanks to the fact that its public finances were in good order when the crisis hit. That said, the coronavirus crisis has fuelled aspirations here, too. There have been mounting calls for the SNB to make massive additional profit distributions. However, there are two things to bear in mind here. On the one hand, the size of any distribution depends on the earnings potential of our investments. And on the other hand, a central bank’s equity must be sufficiently high to cover the risks in its balance sheet. 12 Ladies and gentlemen, a monetary system has to take account of the changing needs of the economy and society over time, and the evolving environment in which it exists. However, it is also important to note that it is an order that has developed over the course of history and any ill-considered interventions could entail serious consequences for our country and the population as a whole. Swiss monetary history has been characterised by a wide range of changes, but the desire for sound money has been a constant throughout. Today’s paper money system with central bank money and banks’ book money has stood the test of time.
The same can be said of fiscal policy, and I would now like to turn to the main aspects of the European fiscal policy response. First, the European financial safety net has been strengthened, with easily accessible funds that are subject to minimum requirements. These measures include the SURE instrument and the ESM credit line, which have two advantages: one, as a way of distributing the costs arising from the crisis, in an environment in which the EU as a whole can raise finance at much lower rates than those of many individual Member States, owing to its high credit rating and, two, they are a mechanism of last resort should financial conditions tighten. Second, the European response centres on the creation of Next Generation EU (NGEU), a temporary recovery fund additional to the EU's multiannual budget for 2021-2027. The fund introduces important elements with a view to sharing efforts towards economic recovery. Some of these are unprecedented, such as the large-scale issuance of supranational European debt to finance reform and investments in the Member States hardest hit by the pandemic.4 Let me refer to some of the features that make this fund a key step in European construction.5 Unlike the multiannual budget, which is funded through contributions by Member States and some common taxes, the new fund will be financed through debt issuance on capital markets by the European Commission.

However, a common European response should be considered a necessary but not sufficient condition for ensuring a swifter and stronger recovery of our economy and minimising the structural damage caused by this crisis. To attain these goals, not only must fiscal policy continue to provide adequate support for households and firms in the short term, but the European funds must be allocated to high added-value investment projects, accompanied by a structural reform programme designed to strengthen the economy’s long-term growth. Indeed, the European funds should also be used to finance the structural improvements required by the Spanish economy. Thank you very much for your attention. 11
They have also been the focus of testimony before a number of committees in Congress, including Secretary Geithner and Thomas Baxter’s January 27,  4  BIS Review 73/2010  2010 testimony before the House Oversight and Government Reform Committees. A summary of the salient facts, however, follows. As part of the November 2008 restructuring, Treasury invested $ billion in newly issued Senior Preferred Stock of AIG under its TARP authority. 2 In connection with that investment, the Federal Reserve modified the terms of the Fed Facility to be more sustainable: The maturity of the Fed Facility was extended to five years (due 2013), the maximum amount available was reduced from $ billion to $ billion, and the interest rate and commitment fees were reduced. The Fed Facility remained secured by substantially all of AIG’s assets, and the company continued to be required to apply proceeds of asset sales to permanently repay any outstanding balances under the facility. At the same time, the Board approved the establishment of an additional lending facility that would provide a permanent solution to the AIG securities lending program’s losses and liquidity drains, thus eliminating the need for the Securities Borrowing Facility. Under the new facility, the New York Fed extended approximately $ billion in secured, non-recourse credit to a special purpose limited liability company, Maiden Lane II, in which AIG would hold a $ billion first-loss position. Maiden Lane II then purchased, at market prices, RMBS with a par value of $ billion from certain AIG domestic insurance company subsidiaries.

Yet these uncertainties can be turned into opportunities and I would like to emphasise that. It is worth noting that EU Member States remained impressively united behind their negotiator, Michel Barnier, during the Brexit talks. This unity must now be directed towards achieving an ambition: completing and strengthening the economic and monetary union. This period of uncertainties actually reminds us that bilateral and multilateral cooperation are quite valuable, as they are a common wealth enhancer, especially when the issue at stake is financial regulation and financial stability. At the end of 2017, central bankers and supervisors reached a very important agreement on the Basel III post-crisis regulatory reforms. This agreement must now be implemented in various jurisdictions to further increase the soundness of the banking system. Since the great financial crisis, other issues have emerged. Cyber-risks have risen significantly over the last few years and the financial sector remains a primary target. The surge of crypto-assets is another challenge for regulators given the risks they pose for consumer protection and anti-money laundering. To address these risks adequately, the digital and global nature of crypto-assets calls for an international approach. ***  Cooperation is all the more necessary as the major financial centres, including Paris and Hong Kong, are highly interconnected. I believe that Paris today has all the attributes necessary to become the pre-eminent financial trading and financing hub for continental Europe.
We are setting out a roadmap for mandatory climate-related financial disclosures for all our financial institutions. Next year, we will conduct stress tests for the financial industry under a range of climate scenarios. We are supporting capacity-building among central banks and supervisors in addressing environmental risks, such as through the COP26 Climate Training Alliance initiative. A successful transition to net zero will require collective efforts across governments, businesses, and industry leaders globally. We must act now, and we must act together, to secure a cleaner and greener future. 1 Link  to “NGFS Glasgow Declaration Action”: www.ngfs.net/sites/default/files/ngfsglasgowdeclaration.pdf  2/2  Committed  to  BIS central bankers' speeches

This was thought to be possible if the aim was a more permanent reduction in unemployment and there was a willingness to accept higher inflation in return. But about ten years after the launch of the Phillips curve, Milton Friedman and Edmund Phelps, Nobel laureates in economics themselves, each lay the foundations for the so-called “expectations-augmented Phillips curve”. In brief, this implies that there is a short-term negative correlation between inflation and unemployment, but no long-term relationship. In other words, it is not possible to choose a certain combination of inflation and unemployment and then expect it to last. The reasoning behind this can be illustrated using Figure 2. 3 [16]  Inflation  Figure 2. The expectations-augmented Phillips curve Long run Phillips curve  D  B  E  C A  Unemployment  The short-term correlation basically depends on the fact that higher inflation is often unexpected inflation. An expansionary policy can lead to lower unemployment and higher inflation; we move from A to B. But gradually, agents in the economy realise that inflation has risen and demand higher wage increases as compensation. In other words, the higher inflation is incorporated in the expectations and becomes the norm, and the higher wage increases cause unemployment to rise. The short-term correlation shifts upwards and we move from B to C. We are then back to the same unemployment as when we started, but with higher inflation.
Indeed, what is worrisome is that the dimensions of the crisis that follow the Lehman collapse were no anticipated by the authorities. With the benefits of hindsight, it would have been better to avoid the collapse, and its effects should have been foreseen by policymakers. The consequences of the financial crisis will spread past the financial system, as is already perceived in recent discussions on privatization of earnings and socialization of losses. Hopefully this debate will soon focus on the important issues, but we must recognize that the excessive aggressiveness and ambition of some players in the international financial markets, the irresponsible behavior of operators unaware of what they were trading, and lax risk assessment and regulation, will penalize the innocent and the guilty alike. A sound, competitive financial system is essential for economic development. The incentive structure is key for its smooth operation. If no credit exists, only those owning the resources could invest or buy durables. The financial markets allow the anticipation of consumption and invest. But its stability must be safeguarded to ensure efficient credit allocation and proper risk management. One issue that has been discussed in monetary policy theory and practice is how to handle bubbles. The conventional view is that nothing can be done to prevent them; that they cannot be detected, that they must be a cause for concern only to the extent that they affect inflation, and that the only thing to do is to clean the mess after they burst.

Three decisions of the Central Bank of Chile to intervene the foreign exchange market during this decade can be interpreted as decisions under extreme circumstances. They were associated to severe stress in foreign exchange markets or to the need to strengthen the international liquidity position. To avoid conflicts with price stability, the intervention that was begun in April has been implemented mechanically and transparently in order to orient monetary policy in consistency with the required convergence of inflation to the target. It is hard to find a financial crisis as severe as this one since the Great Depression. Still, its real consequences are still much milder than those of other episodes, including of course the Great Depression and even the Great Inflation of the 1970s. We have learned two lessons from these occurrences and which are clearly present in the acts and statements from central bankers around the world. One is that central banks are the lenders of last resort and must supply the necessary liquidity so that financial markets can operate, even in critical times. The other is that inflation must be fought with determination and letting it settle down and stay in the economy is very costly. Different perceptions and assessments can alter the short-term course of monetary policy, so flexibility and realism are necessary to timely correct the route, and this has been happening around the world and in Chile in particular.
In my speech today, I want to look at these effects from two angles. In the first part, I shall attempt to explain how low interest rates have impacted the behaviour of issuers and investors on the Swiss franc capital market. In particular, I note that, despite much more favourable financing conditions, the Swiss franc bond market has not grown over the last few years. At the same time, the share of foreign investors has steadily declined. In the second part of my speech, I address the question of how investors build and hold Swiss franc positions resulting from the additional demand for Swiss francs. Available statistics  Seite 2/7  show that, for some time now, investors have increasingly been opting to build up Swiss franc positions using forward foreign exchange contracts (derivatives). No increase in capital market debt despite record low interest rates Despite the low interest rates, the Swiss franc bond market has contracted slightly due to special factors. Allow me to explain the context here in a little more detail. Against the backdrop of low interest rates worldwide, the cost of borrowing has steadily fallen in recent years – and the SNB’s policy of negative interest has further accentuated this trend in Switzerland. One would have expected issuers to have exploited this situation to take on more debt – and that this, in turn, would have resulted in higher issuance and a greater volume of outstanding bonds.

Despite very high demand for Swiss francs, the percentage fell from 21% to 15% between 2008 and 2014; since negative interest was introduced, it has fallen further and now stands at only about 11% (cf. chart 7). Conversely, the share of domestic investors has risen. This group often favours domestic bonds for their long-term investments, or is obliged to hold a given percentage of such bonds for regulatory reasons. Nonetheless, demand from foreign investors remains strong in some segments of the Swiss franc bond market, notably that for money market debt register claims. How do we explain this apparent paradox? One contributory factor is the distortions on the FX swap market mentioned before. While they make borrowing more expensive for foreign issuers, they have the opposite effect for foreign investors and offer special arbitrage opportunities. This allows investors from the US dollar or euro areas to achieve higher returns on a hedged basis. 5 The weekly auctions have been clearly oversubscribed, as can be seen from chart 8. Although the average yield to maturity is very low, bids have been significantly higher than actual allocation (blue), with some 60% of outstanding money market debt register claims currently in the hands of foreign investors. All in all, we can say that, despite strong demand for Swiss francs and low interest rates in Switzerland, the outstanding volume of the Swiss franc bond market has barely changed.
That way we will be able to calibrate our policy response and take swift appropriate action. This is especially important in view of the  BIS central bankers’ speeches  1  potential for a further deterioration in the European situation and how it might impact Hong Kong’s banking system. So please allow me to make a few brief points to address this: •  First, I would make clear that the Hong Kong banking sector’s exposure to the Eurozone’s peripheral countries is essentially immaterial. We do not expect to have any significant direct impact should there be an escalation of the crisis in those countries. •  Second, while there have been signs of European banks reducing their lending to Asia, so far the scale has been manageable, and this has not caused significant credit tightening in Asia. In Hong Kong, any slack left behind by European banks has been effectively picked up by Japanese, Australian and other Asia banks keen to expand in the region. •  Third, if we cannot predict the future, we can anticipate a range of possible futures. As a result, as you would expect, the HKMA has been diligent in developing proper contingency plans for a wide range of possible scenarios. This of course includes working with the banking sector in Hong Kong to ensure our banks are fully prepared for potential shocks. We have, for example, asked our banks to step up their contingent funding plans and to maintain sufficient high-quality, liqueﬁable assets to meet any unexpected developments.

An expanded cooperation can hopefully also contribute to harmonisation of the supervision that goes further than what can be achieved merely through joint regulations. The agreements that I have mentioned earlier are aimed at achieving this. But it is doubtful how well these voluntary agreements will function in an acute crisis situation. To ensure efficient supervision and crisis management the content of the agreements needs to be formalised. An important part in this is finding methods of resolving differences of opinion between authorities. Thirdly, we also need to work to reduce the introduction of national special regulations in the EU’s member states. Of course, there must still continue to be scope for countries to formulate regulations on the basis of their domestic conditions. However, this impairs the prospects of bringing about a true harmonisation. It is therefore important to constantly question the need for national solutions in the regulatory work within the EU. The aim should be to reduce national deviations as far as possible. In the long term, more in-depth structural changes will be necessary. This primarily concerns establishing joint institutions for supervision and crisis management at EU level. It may mean creating a supervisory authority for the 40 or so banks that currently conduct extensive operations in several European countries. It may also be a question of acting to create a joint European deposit guarantee scheme for cross-border banks. Such a system would have several advantages.
The increase in margins was particularly pronounced in 2008, but was lower in 2009, as illustrated by Chart 3. Besides the increase in margins, the non-interest terms and conditions of bank loans were also tightened considerably by banks. As examples, let me mention the increasing collateral requirements and loan covenants, as well as rises in noninterest charges. This is in line with evidence from a survey on the access to finance of SMEs in the euro area, which I will shortly discuss in more detail. However, I would like to mention at this point the results of the SME survey with respect to the development of the terms and conditions of bank loans in the first half of 2009. The bank lending survey and the survey on SMEs’ access to finance present an overall similar picture. For the first half of 2009, euro area SMEs point especially to a deterioration in the noninterest terms and conditions, such as charges, fees and commissions. In addition, a considerable net share of SMEs reported an increase in collateral requirements and other non-price terms and conditions, such as loan covenants and information requirements. This reported deterioration was, in net terms, much higher than that observed for interest rates. Italian SMEs also reported a tightening of non-interest terms and conditions, but – by contrast with average developments in the euro area as a whole – they reported a slight decline in interest rates.

That said, given the severity and duration of the recent crisis, this trend does not deviate particularly from the empirical regularities observed for previous economic cycles. Third, the survey on SMEs indicates that, despite having been less successful than large companies as regards their applications for bank loans in the first half of 2009, the majority of SMEs received some or all of the amount applied for. Fourth, it is probable that loans to non-financial corporations will remain modest over the coming months; this would be in line with past evidence, which suggests that the trend of such loans tends to lag developments in GDP by a few quarters. Fifth, the ECB has introduced numerous measures, both ordinary and extraordinary, to support the euro area economy in general and the banking sector in particular. It would be difficult to do more. It is now time for the banking sector to implement the necessary process of recapitalisation in order to restore confidence and support growth. The importance of SMEs in the euro area Let me start by pointing out the importance of SMEs in the euro area. SMEs – which are usually defined as firms with less than 250 employees – play a very important role: over 99% of firms are SMEs and, in the non-financial corporate sector, they produce 60% of total turnover and employ 70% of employees. Their activities are essential to fostering entrepreneurship, competition, innovation and growth.