samchain/econo-pairs-v1 huggingface dataset:
The news over the past several months has proved this forecast wrong. Gains in employment have slowed markedly, and the unemployment rate has edged back up over 9%. The earlier improvements in labor markets now appear to have reflected the lagged influence of previous output growth and not – as we had hoped – the start of a virtuous circle of hiring and spending. Furthermore, revised data now indicate that real GDP began to decelerate in late 2010 and then barely edged up in the first half of this year. Consumer spending was particularly sluggish. Importantly, the weakness in growth began before the bulk of the effects of higher energy prices hit the economy and before the disaster in Japan. This timing, and the continued softness of most economic indicators into the early summer, indicates that the headwinds facing consumers and businesses are even stronger than we thought. What are these headwinds? First, even though credit conditions overall have been improving, many households and small businesses still seem to be having trouble getting credit. In addition, the repair process in residential real estate markets is painstakingly slow, and households are still in the process of paring debt and adapting to the huge losses in real estate and financial wealth that they experienced during the recession. Of course, these forces are not new – indeed, they are important reasons why in this cycle forecasters never predicted rapid gains in output such as those that followed the deep recessions in the 1970s and 1980s.

As we meet today we welcome the various measures taken by the Bretton Woods institutions to reduce the impact of the devastating effects of the turbulences in the international monetary and financial markets and look forward to future reforms to help ease the burden on our economies. Another issue I will like to mention is the aspect of voice and representation which is critical for us to be fully represented in these institutions and we are happy that these issues are being addressed. For the next two days we will discuss issues relating to Africa in the context of global financial and economic crisis, lessons learnt and the way forward at the Miatta Conference Hall. This Dinner gives the opportunity to set the scene and get familiar with each other as there are a host of Bank Governors and Finance Ministers here coming from all over the continent, some, if not most, of us are meeting for the first time. I am certain it will not be hard for us to get to know each other because we share a lot in common, in terms of language, culture and socio-economic conditions. It is my belief that it is this common history and economic experience that brings us together and gives us a unique advantage in understanding our collective situations to help us reach consensus on all of the issues on the table for discussion.
It would be against their longer-term national economic interest; and countries behaving in this way should not be at all surprised if other European Union countries sought to protect themselves against disruptive behaviour. With or without monetary union, within it or outside, it is of overriding importance that we all continue to pursue stability-orientated macro-economic policies. On that BIS Review 14/1997  -3-  basis I can see no reason, and certainly no right under the Treaty of Rome, for distinctions to be made among the member states of the European Union whatever the outcome on monetary union. Indeed we would all suffer if they were, because it would reduce the potential benefits of the single market to Europe as a whole. Whatever the surrounding noise, we must surely be smart enough to avoid cutting off our nose to spite our face in that way. Our national and collective economic interests are too closely aligned for that to be allowed to happen. So I am not particularly impressed either by the fears sometimes expressed about the economic penalties that will be visited on countries outside monetary union, or by the occasional rattling of the cage to try to bully them into it.

But everything is relative and I believe it’s not difficult to spot black holes, mistaken notions and errors of understanding on both sides. While these Tertulias are usually an opportunity to overcome some of these problems, they most importantly allow us to understand our respective stances on current, important or pressing issues. And we also enjoy ourselves. Because, unlike other meetings, the Tertulias are, from my experience, a rather entertaining event. I still have fond memories of the meetings I attended and the discussions we had in the now distant 1990s in Santiago de Compostela, in Seville, in Santander and also in Oxford and in Edinburgh. The Tertulias were instituted at what was a key time in recent European history: the disappearance of the Berlin Wall, German reunification, the collapse of the Soviet Union and the start of the European Monetary Union project. Next came the great economic expansion at the onset of the 21st century, the international financial crisis and the serious economic problems that have affected all of us, Spain and the United Kingdom included. The European Union and the Monetary Union are today at a difficult crossroads. They face a problem which, when the Maastricht Treaty was negotiated, we knew might arise: that the Monetary Union without fiscal integration would be an edifice with weak foundations. And although attempts were made to head off the risk with public deficit and debt rules, it was known that these were merely shoring up the building and that they could not resolve its fundamental weakness.
As you may know, the membership has just agreed to an increase of 45 percent, equivalent to about $ billion, in IMF quotas. This will raise the capital base of the institution to some $ billion. In addition, the Fund has taken steps to augment its financial resources through the agreement on the New Arrangements to Borrow. Under these arrangements, participants would be prepared to lend up to the equivalent of some $ billion when additional resources are needed to forestall or cope with an impairment of the international monetary system, or deal with an exceptional situation that poses a threat to the stability of the system. We hope that participants who have not yet done so will complete the necessary legislative action so that these arrangements can enter into force soon. BIS Review 111/1997  -6-  Furthermore, in order to allow all members to participate on an equitable basis in the SDR system, agreement has been reached on a proposal to amend the Fund’s Articles of Agreement to authorize a special one-time allocation of SDRs of about $ billion that would equalize all members’ ratios of SDR allocations to quotas and would double the amount of SDRs allocated to date. These resources will supplement members’ reserves, giving them more flexibility in economic policies and a cushion against adverse developments. Last but not least, recent experience has demonstrated once again that early warnings cannot always prevent crisis from blowing up.

But regardless of the exchange rate arrangement chosen, appropriate macroeconomic policies are essential to ensure its success;  •  two, maintaining a proper policy mix -- among other reasons -- so that high domestic interest rates do not damage the domestic economy, attract excessive amounts of short-term capital, or preclude further monetary tightening if market conditions require; indeed, it is important to keep the option of using the interest rate instrument open, so that the authorities have some room for manoeuvre in times of international instability;  •  three, strengthening structural policies -- especially the policies and institutions such as better prudential supervision, needed to underpin a sound financial system;  •  and four, carrying out other supporting reforms -- what we call “second generation” reforms -- to promote domestic competition, increase transparency and accountability, improve governance, help ensure that the benefits of future growth are widely shared, and otherwise strengthen the foundations for future growth. BIS Review 111/1997  III. Restoring confidence As developments have shown, confidence, once lost, is hard to regain. Restoring confidence takes a strong commitment to economic adjustment and reform demonstrated by the implementation of often painful measures. It also requires a free flow of timely, accurate, and comprehensive information so that markets can assess the extent of underlying problems and the seriousness of efforts to correct them and uncertainty can be reduced. And, of course, restoring confidence takes time. This process is now under way in Southeast Asia.
Concluding remarks To conclude, the rapid structural change in global financial markets is providing considerable benefits to users of financial services, by lowering the costs of financial intermediation and improving the ability to manage and hedge financial risks and tailor financial products. But recent developments also provide new challenges and sources of vulnerability as financial markets become increasingly integrated, and as participants place increased reliance on sustained market liquidity to manage their risks. While financial institutions are in a strong financial position, risk taking has increased and the vulnerability of the financial system as a whole to a sharp change in conditions has risen. Against this background, and given the considerable uncertainty regarding how many new complex financial products would perform in more strained market conditions, it is important to improve the analysis and understanding of tail risks through systemic stress tests and thereby strengthen risk management, to ensure that financial institutions retain strong buffers of capital and liquidity, and that investment in the financial and legal infrastructure keeps pace with market developments and thus ensures that it remains robust and resilient. 8  BIS Review 77/2007  BIS Review 77/2007  9  10  BIS Review 77/2007

Second, I will assess how the negative interest rate as a policy instrument has been transmitted to different segments of the financial markets. Finally, I shall discuss the outlook for economic growth and inflation in Switzerland. Following my speech, my colleague Dewet Moser will take a closer look at the many operational aspects involved in the implementation of our monetary policy. Monetary policy environment: breaking new ground On 15 January, the SNB discontinued its minimum exchange rate of CHF 1.20 to the euro, and announced a further cut in the interest rate on sight deposits to –0.75%. These decisions were the response to international developments. Over the course of 2014, market participants began to expect that the US central bank, the Federal Reserve would start increasing its policy rates. Meanwhile, the ECB indicated that additional monetary stimulus would be required in the euro area. As a result, the euro weakened substantially against the US dollar. The euro/Swiss franc minimum exchange rate came under intense pressure, and by midJanuary 2015, it had become clear that it was no longer sustainable. Had the SNB not acted as it did in discontinuing the minimum exchange rate against the euro, it would have been forced to buy enormous amounts of foreign currency. The SNB’s balance sheet would have expanded rapidly, potentially to a size that would have severely impaired our ability to fulfil our constitutional mandate in the long term.
The principal sources of the deterioration lie overseas – from the squeeze on real incomes due to the rise in commodity prices and, more recently, weakening global demand due largely to the euro area crisis. Even if, as we all hope, a credible solution to the euro area’s problems can be put in place in the coming weeks, the traumas of the past few months will take a while to overcome. Confidence has been sucked out of financial markets. Pressured European banks are deleveraging by disposing of assets, or letting loans run off, elsewhere in the world. Trade finance is again becoming impaired. Capital raising by companies has declined. BIS central bankers’ speeches  1  And confidence has been drained out of the UK real economy too. Earlier in the year, we faced a tug of war between a resilient corporate sector looking to expand when demand picked up, and a fragile household sector worried about a rising cost of living, jobs and house prices, with some households therefore saving more in order to strengthen their balance sheets. In recent months, as confidence amongst businesses has flagged, they have been tugging on the same end of the rope, with the MPC at the other end, in effect tugging back. Part of that easing in monetary conditions has come through lower interest rates.

With the change in the MLA, the organizational structure of the Central Bank has undergone a major transformation on a function-oriented basis to support its objectives and functions. The Departments of the Bank were grouped into four major categories under the headings of price stability, financial system stability, agency services, and corporate and support services. The two Deputy Governors have been entrusted with the responsibility of overseeing the achievement of the two core functions. The vacancies to the posts of Assistant Governors (AGs) have been filled and they have been entrusted with line responsibilities with a view to building the 3rd and 4th layers of succession in the Bank’s managerial hierarchy. BIS Review 1/2005  1  Price Stability means maintaining a low inflation rate. Central banks are mandated to maintain price stability as their main objective in order to create a conducive environment for long-term sustainable economic growth by eliminating uncertainties, protecting the value of financial assets, enabling all economic agents to take a long-term view of the economy and ensuring the well being of the general public. Maintaining price stability during the course of 2005 will prove to be a very challenging task given the surging oil prices, which may continue for some time during the year, and the enhancement of demand pressure on the price level on account of wage increases in the government sector.
The Fund can provide a useful voice and a forum for advising the major economies to pursue policies that can contribute better to global economic expansion and financial stability. The Fund can play an important role in considering, from a global or systemic perspective, the exchange rate policies of its members. And the Fund plays a vital role in providing the macroeconomic policy framework that is the critical to sustaining better growth outcomes and the effectiveness of the global development assistance effort for the poorest, low-income countries. I think the Fund is reasonably close to the frontier, the sensible or achievable frontier, in these areas. Some may wish it were more effective in persuading the G-3 to avoid policies that create the risk of abrupt changes in financial market conditions or exchange rates, but it will never be decisive in this arena. And it might do more to further improve the design of macroeconomic policies and institutions in the poorest developing countries. But outside those areas, the challenges to sustained growth in per capita income lie largely in areas beyond the core competence of the IMF. In the emerging market context, in contrast, there is greater distance between the Fund of today and the achievable frontier. This is a timely and critical issue, because of the magnitude of the challenges that still confront many emerging market economies. Let me start with a broad review of the progress made over the past decade across emerging markets in reducing their vulnerability to financial crisis.

•  The published Allsopp analysis included a challenge from the major central banks to the major market participants to develop a new settlement mechanism. In short, find a solution or we will find one for you! I recount this history to highlight the magnitude of the achievement CLS represents. The establishment and growth of CLS is undoubtedly one of the most significant accomplishments in global financial markets in the post-war period and a major breakthrough in managing settlement risk in an over-the-counter market. BIS central bankers’ speeches  1  •  The largest part of the achievement, of course, is the difficult job of making it happen. CLS was actually the third major concept for FX settlement. It succeeded because the industry collectively got firmly behind CLS and because of the hard work of the many people in the CLS organization, whose commitment and efforts continue to this day. Let me highlight three dimensions of CLS’s success. First, its growth and its scope. When it went live in 2002, CLS began settling FX transactions in just seven currencies with 39 settlement members. Today it settles in 17 currencies with 63 settlement members and 16,000 third party users. Volumes and values of transactions settled via CLS have also expanded significantly. Today CLS is settling average daily values of nearly $ trillion and average daily volumes of 1 million transactions. On its peak settlement value day, March 19, 2008, CLS settled over 10 trillion U.S. dollars equivalent. Second, adaptation to a rapidly changing foreign exchange market.
8  Mar.09 General government Monetary authorities NIIP (2)  Mar.10  Figure 5 Real exchange rates by region (monthly data; index, 2001-2009=100) RER with respect to Asia  RER with respect to Latin America 150 140 130 120 110 100 90 80 70  150 140 130 120 110 100 90 80 70  150 140 130 120 110 100 90 80 70  01 02 03 04 05 06 07 08 09 10  RER with respect to the euro 150 140 130 120 110 100 90 80 70  150 140 130 120 110 100 90 80 70  01 02 03 04 05 06 07 08 09 10  RER with respect to the U.S. 150 140 130 120 110 100 90 80 70  150 140 130 120 110 100 90 80 70  01 02 03 04 05 06 07 08 09 10  Aggregate RER  150 140 130 120 110 100 90 80 70  01 02 03 04 05 06 07 08 09 10  Regional RER  Source: Central Bank of Chile. Figure 6 Real exchange rate by sector (index, 96-07=100) 250  250  200  200  150  150  100  100  50  50  0  96  98  Manufacturing Total exports  00  02  04  06  08  10  0  Agriculture, forestry & fishing Mining  (*) RER estimated using unit-value indexes. Latest date corresponds to third quarter 2010.

At the time, the real exchange rate was more appreciated than today, and it was only a few weeks before the financial crisis took a turn for the worse after the collapse of Bear Stearns, which warranted strengthening our international reserves position in the face of a very volatile global economic and financial scenario. The exchange rate depreciated in the first weeks after we announced the intervention, but the subsequent depreciation in the following months coincided with a widespread weakening of emerging currencies, increased risk aversion in global financial markets, a strengthened dollar and a fall in Treasury bonds’ interest rates. But it is also helpful to learn from other episodes, and an interesting one happened in 1997, when the real exchange rate hit its lowest since the crisis of the peg in 1982. That intervention amounted to around 4% of GDP, there were capital controls, net capital inflows were at 8.1% of GDP, the copper price was at $ per pound in dollars of today, and the net international position was more to the debt side, at 50% of GDP. Certainly, the floating regime, a monetary policy more aligned with international interest rates, and reduced capital inflows have been key in limiting the amplitude of exchange rate fluctuations. I want to highlight that net capital inflows to Chile are now less than the peaks we saw in the 1990s. Currently, capital inflows to the emerging world – particularly Latin America – have resumed pre-crisis levels but are still below those of the 1990s (figure 9).
But since 1995, the gap has started to widen again as ICT investment has boosted productivity growth in the United States. The empirical evidence suggests that one of the most successful ways to speed up convergence in productivity is to promote international trade and investment, and openness more generally. Within manufacturing, the rate at which the productivity gap between Britain and the US closed during the 1980s and early 1990s was greater in the more open than the less open sectors. Against that background, let me suggest three areas for questions: First, why is the gap in the level of productivity between the US and the UK so persistent? And what are the obstacles that prevent the gap from narrowing - are they in the fields of trade, technology transfer, or flows of investment? What are the respective roles of business and government in removing them? Second, can the UK benefit as much as the US from the IT revolution? Is it a question of the speed with which business adapts? Or is it the need to fund our research-based universities on the scale of the best elsewhere in order to exploit our comparative advantage in the English language and regain Britain’s place at the frontiers of knowledge? Or is it a matter of raising standards of education in schools to enable the workforce as a whole to use the new technology?

Figure 13: Real Interest Rate and Real Exchange Rate* 200  14  190  13  180  12  170  11  160  10  150  9 Real Exchange Rate (Left Axis) 2-year Real Interest Rates  140  8  1107  0907  0707  0507  0307  0107  1106  0906  0706  6 0506  120 0306  7  0106  130  *Real interest rates are computed by using the Expectations Survey and 2-year nominal rate estimated with Extended Nelson-Siegel method. Real exchange rate is CPI based (an increase means an appreciation). Source: CBRT. Credit data also confirm that monetary conditions are still non-accommodative. Annual growth rates in the automobile and housing loans are at much lower levels compared to the  BIS Review 20/2008  9  periods of vigorous domestic demand (Figure 14). Following the significant slowdown in the second half of 2006, consumer credits showed signs of recovery after the first quarter of 2007 (Table 3). However, we expect the cautious monetary policy stance and the tightening in global credit conditions are likely to restrain credit expansion in the forthcoming period.