samchain/econo-pairs-v1 huggingface dataset:
From that perspective, stablecoins of potential large size and reach may pose additional challenges of system-wide importance, to competition policy, financial and monetary stability. II- Public policy challenges, in particular for central banks, and how to address them. 1- In that context, various courses of action are available to the public authorities. The first would be to ignore crypto-assets. But even if the volumes in play remain small and do not represent a threat to financial stability, the risks that I mentioned earlier must be addressed. This is all the more true for stablecoins which raise the most serious issues and deserve attention and responses before they possibly meet a significant market demand. The second course of action would be to ban crypto-assets outright because of these same risks. Several countries have already gone down this route, including China in 2013 and Russia in 2017. A third option, and the one that has so far been the preferred response in Europe and France to innovations with the potential to change the payment services market, is to establish appropriate regulations that make it possible to reconcile two key imperatives: - First, address the risks that I mentioned - Second, preserve the potential for technological innovation offered by cryptoassets To that end, should we reconsider or reaffirm the two current core features of our payment systems (see: the role of central bank money in payment systems-CPSS 2003)?

Looking at the short to medium end of the risk-free curve in more detail, our measures (including the pandemic emergency purchase programme, or PEPP) have contributed to a lowering of the medium and long segments of the yield curve compared to the pre-crisis path (Chart 7). Chart 7 EONIA forward curve estimated from overnight index swaps  https://www.ecb.europa.eu/press/key/date/2020/html/ecb.sp200519~e5203d3520.en.html  5/14  5/19/2020  Pandemic central banking: the monetary stance, market stabilisation and liquidity  (percentages per annum)  Sources: Bloomberg, Refinitiv and ECB calculations. Note: The latest observations are for 14 May 2020 (for realised EONIA). At the long end of the curve, the combined effect of our asset purchase programmes – comprising the asset purchase programme (APP) and the PEPP – is estimated to compress the term premium significantly by around 80 basis points at the ten-year tenor. Looking just at the decisions we have taken since March, the additional € billion APP purchase envelope for 2020 and the PEPP contribute to a further easing of ten-year rates by lowering the term premium by more than 10 basis points. The total effect of these decisions on longer-term interest rates is likely to be even more substantial, given that the PEPP not only works through the well-known channels of duration extraction and portfolio rebalancing, but also addresses risks to transmission in the euro area. To the extent that this lowers risk premia, interest rates in the euro area have declined even more strongly as a result of our decisions compared with plausible counterfactual scenarios.
As I see it, expected corporate profits and access to reasonable investment financing are vital for a process of transformation. Wage formation Let us now take a look at a period when wage formation was one factor behind a less successful transformation of the Swedish economy. When the industrialised economies began to recover after World War Two and international competition increased, partly because trade barriers were dismantled, it became increasingly necessary for Swedish firms to adjust their product range. The requirements resembled those that now seem to lie in the not too distant future. For much of that period the level of Swedish wage costs rose rapidly. This meant that corporate profitability was under pressure both from the increased international competition and for rising wage costs. To cope with this pressure, firms tried to cut production costs by means of rationalisation rather than by investing in new products. With diminishing profits, they lacked the new investment stimulus and the rapid renewal of the capital stock that the pressure for change called for. During a period of transformation, rationalisation is not enough; new developments are equally important. At first, most things still went well. The 1960s was a fantastic decade for growth. In time, however, the strategy proved to be defensive and stagnation set in in the 1970s. There are limits to growth through rationalisation. Without renewal, growth normally slows sooner or later. Compared with other countries, the trend rate of growth in Sweden did indeed turn downwards.

As the Swedish krona is judged to be undervalued at present, we also assume that the exchange rate follows a path that represents a gradual appreciation. The technical assumption of an unchanged repo rate and the presumed path for the exchange rate are then incorporated in the main scenario for inflation. As inflation’s future course is not a straightforward matter, we also include assessments of uncertainties. The overall picture of inflation prospects amounts in practice to an estimate of probabilities. The assessments in the main scenario imply favourable economic fundamentals: a growth rate between 2.5 and 3 per cent between 1998 and 2000, low inflation and a rising government surplus. Domestic demand in the main scenario is expected to generate a relatively limited increase in inflation’s underlying rate, from 1.1 per cent at present to 1.6 per cent at the end of next year and 2 per cent in the autumn of 2000. The 12-month change in CPI inflation is expected to be somewhat below the inflation target in one to two years time but the figure at the end of the period is judged to be approximately 2 per cent. All this means that at the end of the period under review, inflation is relatively well in line with the Riksbank’s target. It should be underscored, however, that the assessment of inflation prospects is more difficult than usual on account of the financial turbulence.
In very brief terms, these measures must, first, be conducive to maintaining market order, second, aim to tackle the structural causes of systemic crises wherever possible, third, contribute to the robustness of the regulatory setup and fourth, be consistent with international regulatory principles while, at the same time, not fail to take account of national circumstances. This list of criteria must be  9  Cf. Buiter/Sibert (2007): The Central Bank as Market Maker of Last Resort. 10  Cf. Nikolaou (2009): Liquidity (risk) concepts. Definitions and interactions. 11  Cf. Tucker (2010): The Crisis Management Menu. In: Ayadi et al. (ed. ): Crisis Management at Cross-Roads, pp. 13–25. 6  BIS Review 146/2010  interpreted as a systematic and pragmatic set of procedural instructions – or, to use the term I used before, a roadmap. By observing these criteria, we can make a significant contribution to better managing the challenges that arise in connection with systemic risk in the financial system. To a large extent, ongoing international regulatory reform fulfils these criteria. For instance, the narrower definition of capital and the adjustment of risk weighting under Basel III removes a number of key weaknesses in the Basel II standard. The individual regulatory efforts undertaken in Switzerland are also in line with these criteria, in particular the TBTF package and the leverage ratio. However, the reforms have not yet been fully carried through. For example, work to contain the TBTF problem at international level has only just begun.

Amidst such challenges, there have been substantial reforms to pension systems in recent years to avoid systemic risks implications to financial stability and fiscal sustainability. Allow me to briefly outline the reforms undertaken by various jurisdictions. One of the most common features of reforms involves raising the age at which eligibility of benefits can occur. For some, especially in European countries, large tax increases were introduced as an alternative to address serious problems of financing pension benefits. In countries with severe demographic challenges, pension benefits were reduced by way of indexing benefits to wages and consumer price indices. Essentially, much of the pension reforms were focussed on reducing fiscal deficits. However, the impact of such reforms has achieved varying degrees of success and in some cases has been noted to have regressive effects. While it is not expected that all countries may make similar choices, striking a balance between maximising returns on pension fund investments and ensuring stable retirement incomes may result in trade-offs that could compromise other developmental needs. For example, poor investment returns on asset classes arising from funded pension schemes may require the Government to secure alternative funds to provide sufficient returns for the workers making such contributions. This could potentially stifle the development of other sectors in the economy. Moving forward, the challenge is to provide sufficient, affordable, sustainable and robust pension schemes.
The models being tested at present are simply too rough and ready. They tend to sound the alarm about events that never occur and miss those that actually happen. Although the picture looks bright, we know there are countries in the global economy that are vulnerable, with a situation that may deteriorate. Share prices, moreover, have climbed very high, not least in the United States. There are also imbalances in the US economy that may affect the future course of events. There is also the possibility, however, of demand growth in Sweden becoming even stronger. We do not know how other components of economic policy will be constructed in detail. I am thinking in particular of the current discussion about the direction of tax policy. The Riksbank is in no way opposed to tax cuts. On the contrary, strategic tax reductions could make the Swedish economy function better and thereby lead to higher growth. But we have a duty to issue a warning about a tax policy that would give additional force to a growth of consumption that is already rapid and thereby lead to economic overheating in Sweden. At the same time, I believe that decision-makers are aware of these risks. Taken together, all these factors make it difficult to assess the future development of demand. So there is reason to monitor developments closely. Conclusion At present I do not for my part see any direct, immediate threat to price stability in the Swedish economy.

Demand growth can then be brought into line with the growth of production capacity and result in a more stable path. By acting in good time in a manner that is predictable, it is hopefully possible to avoid interest rate adjustments that are more drastic. Meanwhile, economic agents can continue to count on stable, low inflation. An example of the good results that can be achieved with a forward-looking monetary policy is the US economy. With a judicious and timely tightening of the monetary stance, the Federal Reserve has contributed to a long period of sustainable growth. Since the gradual increase from 3% between 1993 and 1994, the fed funds rate has fluctuated between around 4.5 and 6%. This has accompanied a notably good economic development, with the longest postwar period of unbroken growth. The latent inflationary pressure has been held in check without arresting growth. Similar reasoning lay behind last week’s interest rate increase. The positive trend has been aided by the consolidation of federal finances. On the other hand, if inflation has already risen to a high level that is expected to last, the central bank may have to resort instead to larger interest rate increases to signal its determination to fulfil the inflation target. That weakens economic activity and risks a renewed increase in unemployment. Thus far the argument – and the question of which alternative is most advantageous – seems fairly simple. But that is where the difficulties begin.
Today I want to explain why, despite recent events, I believe that inflation targeting should remain a mainstay of macroeconomic policymaking in the UK. But we have to learn from the crisis, and I will discuss my views on the way in which the policy framework needs to be strengthened. I will conclude with a brief review of our asset purchase programme and, in particular, respond to some of the comments made about the programme. 1. Inflation targeting in action  Over the past year, the Monetary Policy Committee (MPC) has responded to the dramatic deterioration in the economic outlook with an equally dramatic easing in monetary policy. Bank Rate was cut by 4.5 percentage points in just six months and by 1.5 percentage points in November last year alone. That was the largest cut for 25 years and is twice the size of any reduction made by another G7 central bank in the past eighteen months. The MPC also voted to purchase £ of assets financed by the issuance of central bank money – equivalent to around 9% of annual UK GDP. The scale of the easing took many by surprise and some of the decisions may, at first blush, look rather courageous. Those of you who remember “Yes Minister” may recall that Jim Hacker, the hapless minister, became very nervous whenever Sir Humphrey suggested his decision was “courageous”. Central bankers can have similar instincts.

Although the unemployment rate has declined by 2.5 percentage points from its peak of 10 percent in October of 2009, much of this decline is due to the fact that the labor force participation rate has fallen by 1.5 percentage points over this period. Recall that discouraged workers who do not actively look for work are regarded as not participating in the labor force and so are not counted as unemployed even though they are without jobs. Using an alternative measure, the employment to population ratio, which is not influenced by changes in the number of discouraged workers, there has been limited improvement in labor market conditions. Job loss rates have fallen, but hiring rates remain depressed at low levels. Taken together, the labor market still cannot be regarded as healthy. Numerous indicators, including the behavior of labor compensation and household assessments of labor market conditions, are all consistent with the view that there remains a great deal of slack in the economy. That being said, I see persuasive evidence of improved underlying fundamentals for much of the private sector of the U.S. economy. Key measures of household leverage have declined and are now at the lowest levels they have been in well over a decade. Household net worth, expressed as a percent of disposable income, has increased back to its average of the previous decade, reflecting rising equity and home prices and declining liabilities. Banks are beginning to ease credit standards somewhat after a prolonged period of tightness.
In any event, in order to assess the overall effect of interest rates on the profitability of banks, it is necessary to take into account that interest rates not only impact the net interest margin but they also impact other items in the income statement. In particular, lower interest rate levels help to lessen losses in the credit portfolio due to their favourable effect on borrowers’ repayment capacity associated with both the lower cost of credit, and higher income and lower unemployment tied to the macroeconomic impact of lower interest rates. These effects may be particularly important in countries like Spain where the banking system started out with a high level of non-performing loans and where short-term or variable rate lending was prevalent, since this results in movements in market returns passing through rapidly to the costs of outstanding debt2. Thus, part of the fall in the non-performing loans ratio in recent years can be explained by this effect. Furthermore, declines in interest rates contribute to increasing the prices of financial and real assets. This effect is immediate for fixed-income securities, particularly long-term ones since prices are more sensitive to changes in yields. Valuations of equities and real assets, such as housing, are also boosted by the fall in interest rates due to the effect on the discount factor, although the price of these other assets is influenced by other conditioning factors such as macroeconomic expectations.

But as the economy grows, the massive amount of money sitting on the sidelines will be activated; the “velocity” of money will accelerate. If it does so too quickly, we might create inflation or financial market instability or both. The 12 Federal Reserve Banks house the excess reserves of the depository institutions of America: If loan demand fails to grow at the same rate as banks accumulate reserves due to our hyperaccommodative monetary policy, the resultant excess reserves are deposited with us at a rate of return of 25 basis points (1/4 of 1 percent per annum). Here is some math confronting policymakers: Excess reserves are currently 65 percent of the monetary base and rising. The only other time excess reserves as a percentage of the base have come anywhere close to this level was at the close of the 1930s, when the ratio hit 41 percent. We are in uncharted territory. To prevent excess reserves from fueling a too-rapid expansion of bank lending in an expanding economy, the Fed will need to either drain reserves on a large scale by selling longer-term assets at a loss or provide inducements to banks to keep reserves idle, by offering interest on excess reserves at a rate competitive with what banks might earn on loans to businesses and consumers. Or we might employ more widely new techniques we are currently testing, such as “reverse repos”, complex transactions in which we, in effect, borrow cash overnight from market operators while posting securities as collateral.
I would first like to elaborate on the challenges we face as central bankers, then on our instruments and their effectiveness. I. Let me start with the challenges  a) As you all know, the Eurosystem’s primary objective is to maintain price stability, that is inflation rates below, but close to 2% over the medium term. However in the euro area, like in most advanced economies, inflation remains too low, despite the historically low interest rates: the harmonised index of consumer prices (HICP) indeed returned to negative territory, standing at –0.2% in February 2016, and underlying inflation, i.e. excluding energy and food, is only 0.7%. A certain number of factors are currently contributing to low inflation. Primarily, the euro area is faced with deflationary pressures associated with a series of economic shocks: firstly, the fall in oil prices, as well as the overall decline in commodity prices; secondly, the slowdown in growth in emerging economies and chiefly China; and, lastly, inadequate growth in the euro area with persistently high unemployment, which curbs wage rises and weakens demand and price growth. Moreover, structural factors, such as the ageing population, are also likely to exert downward pressure on the “natural” – or “Wicksellian” – interest rate. This rate can be defined as the interest rate consistent with the full employment of the factors of production. In this case, in order to achieve the right balance between savings and investment, markets rates must come down too.

In normal times, central banks cut their key rates, and this passes through to the yield curve. However, in order to deal with the financial crisis, the ECB like other central banks have brought their key interest rates to very low levels, around zero. This means that our traditional monetary policy tools had to be supplemented by other instruments, known as non-standard instruments, in order to reach our prices stability objective. I will return to this point later. b) What is more with regard to the challenges we currently face, these deflationary pressures create the risk of an unanchoring of expectations, which would make it harder for us to achieve our 2% target again. Indeed, if inflation stayed too low for too long, economic agents may revise downwards their inflation expectations, which would create second round effects. Lower inflation expectations influence economic agents’ price- and wage-setting behaviour, which in turn keeps inflation low. It can even raise the risk of deflation, defined as a cumulative process of falling prices, including those of assets, or even wages and production, as the world economy experienced in the 1930s or Japan partially underwent in the 1990s. Such deflationary dynamics are not at play today. But this risk is the BIS central bankers’ speeches  1  reason why our inflation target is symmetrical. We consider too low inflation to be just as costly as too high inflation. And, therefore, it is more risky for central banks to act too late than too early.
However, there are factors restricting the leeway on this front, since the policy interest rates of some Latin American economies stand at record lows, and in some cases the central banks themselves regard them as close to the effective lower bound. Admittedly, the financial asset purchase programmes implemented by some Latin American central banks have been effective so far; but the consequences of their prolonged continuation or future extension are uncertain, given that the use of such instruments in the region is in its infancy. Therefore, in the event of further adverse shocks, there is a vital role to be played by the global and regional safety net, such as the support of the credit facilities provided by the IMF,11 the World Bank, the Inter-American Development Bank and the Development Bank of Latin America, among others, along with the Federal Reserve's swap lines and FIMA Repo Facility. Third, as in the rest of the world, the pandemic may have permanent downside effects on potential growth. These stem, among other factors, from extensive job destruction (the  10  According to the Economic Commission for Latin America and the Caribbean (“The social challenge in times of COVID-19”, COVID-19 Special Report, No 3), the poverty rate may rise, setting it back to 2010 levels, together with a significant increase in the Gini coefficient. 11 To date, the IMF has provided countries in the region with close to $ billion in financial programmes.

Christine Lagarde: IMFC Statement Speech by Ms Christine Lagarde, President of the European Central Bank, at the forty-fourth meeting of the International Monetary and Financial Committee (IMFC), IMF Annual Meetings, 14 October 2021. * * * Global economic activity has continued to recover since our previous meeting in April this year, thanks to further progress in vaccination campaigns and supportive economic policies. However, the pace of the recovery remains uneven across sectors and countries, and the spread of the more contagious Delta variant of the coronavirus (COVID-19), coupled with supply bottlenecks, is casting a shadow over the near-term growth prospects for the global economy. The main challenge for policymakers continues to be steering the economy safely out of the crisis. It remains crucial that policy support is not withdrawn prematurely. On the fiscal side, support measures should be increasingly targeted. And on the monetary side, clear communication by major central banks is essential, also in view of the recent inflation developments. The policy mix should be accompanied by well-tailored structural reforms to enhance long-term growth and minimise scarring effects from the pandemic, along with action to accelerate the green and digital transitions. Euro area developments and outlook The rebound phase of the euro area economy is increasingly advanced, despite supply bottlenecks and continuing uncertainty about the pandemic.