samchain/econo-pairs-v1 huggingface dataset:
There may still be loan losses that may damage trust and confidence in the market when they come to light. This applies to both the United States and Europe. Figure 1. House prices Annual percentage change  35  35  25  25  15  15  5  5  -5  -5  -15  -15 95  96  97  98  99  00  Danmark  4  01  02  Irland  03  04  Spanien  05  06  07  08  USA  BIS Review 60/2008  Figure 2. Property price index (FPI) and CPI in Sweden Index 1995=100  280 260 240 220 200 180 160 140 120 100  280 260 240 220 200 180 160 140 120 100 dec- dec- dec- dec- dec- dec- dec- dec- dec- dec- dec- dec- dec- dec94 95 96 97 98 99 00 01 02 03 04 05 06 07 FPI  KPI  Figure 3. Household debt and interest ratios Per cent  200  20 Skuldkvot (höger skala) Räntekvot (vänster skala)  16  160  12  120  8  80  4  40  0  0 1982  BIS Review 60/2008  1986  1990  1994  1998  2002  2006  2010  5  Figure 4.

The U.S. economy is currently expanding at a moderate pace, and strains in global financial markets, although having eased recently, continue to pose significant downside risks to the economic outlook. Because developments in Europe will have an important bearing on the prospects for growth and jobs here in the U.S., the Federal Reserve is monitoring the situation there closely. This is also why we have taken special steps in recent months, together with other central banks, to support the flow of credit to households and businesses. Europe The economic situation in Europe has been unsettled for the better part of two years, with pressure on sovereign debt markets and local banking systems. High debts, large deficits and slow growth in several European countries have called into question the sustainability of the entire euro area. The resulting strains in European markets have affected the U.S. economy. The euro area has the capacity, including the fiscal capacity, to overcome its challenges. However, the politics are very difficult, both because the problem has many dimensions, and because many different countries and institutions in the euro area have to coordinate their actions in order to achieve a coherent and effective policy response. Europe’s leadership has affirmed its commitment to the European Union and its single currency union on numerous occasions. And the leadership is working harder than ever to achieve greater coordination in areas such as fiscal policy. A more robust and resilient European Union would be a welcome development for the United States.
Interpreted broadly, this can include relatively simple indicators, such as interest rates, interest rate spreads, and returns. They include other measures related to the value of financial or tangible assets like bonds, stocks, housing, and gold. And of course they also include more sophisticated, data-intensive estimates of risk, which we hope to discuss today. For central banks, one of the main questions that arises is whether financial market indicators are useful in setting monetary policy. And if so, which ones are most useful for central banks, and for what purpose? In general, financial market indicators are used by central banks to: (1) gauge market sentiment with regards to expected changes to policy variables; (2) identify types and sources of shocks to the economy; and (3) predict future developments in economic activity and inflation. Such predictions of longer-term inflation are also useful in checking how markets view the credibility of the authorities’ commitments to their final price target. So financial indicators can be used to double check econometric and judgmental predictions as well as flag a problem of asset price misalignment, which may need to be addressed by policy. In addition, financial market indicators have the potential to reflect developments at critical stages of the transmission process. This is due to the fact that financial markets in general adjust faster than goods markets, and their prices are timelier and less prone to measurement error. Today’s workshop will give us the chance to discuss these and many other issues.

I am that sure my colleagues around the table would like to share their practical experiences so that we could have a better understanding of the financial market indicators suitable for emerging markets and how we as policy makers can best make use of them. Let me now pass the chair to Mr. Eli Remolona, Head of Economics for Asia and Pacific, BIS. BIS Review 64/2007  1
Chart 25: Projection for wage growth and inflation, assuming inflation expectations put downward pressure on wages Wages - lower inflation expectations Wages - February IR projections Inflation - February IR projections Inflation - lower inflation expectations  14  6 4 2 0 -2 -4  Monetary policy If there is evidence that risks to inflation, globally and in the UK, may be skewed to the downside, the obvious next  Percentage change oya  Source: ONS and Bank calculations. BIS central bankers’ speeches  question is what, if any, monetary policy response might be appropriate as insurance against those downside risks. One insurance device comes from the specification of the inflation target itself. Even if the risks to inflation are asymmetric, central banks’ inflation targets typically are not. This reduces the risk of monetary policy imparting a “deflationary bias”. The MPC’s own mandate is crystal clear: deviations above and below the 2% inflation target are to be treated symmetrically. In its Open Letter to the Chancellor earlier this year, the MPC made clear it would act symmetrically to meet the inflation target.15 A second insurance policy against downside inflation risk comes from clearly specifying the horizon over which inflation is expected to return to target following a deviation. Provided that horizon is credible, this reduces the risk of inflationary expectations becoming dislodged from the target on a persistent basis.

Almost 900 businesses responded to our last poll, some of which were from this area. If you, as a representative of a small business, would like to participate in our current poll, please pass your card to my colleagues, who are in the audience, or see me after the speech and we will be glad to add you as a respondent. Results from our prior polls stressed the problem of access to capital. In response we held two workshops at the Bank in December. In the first workshop, senior officers from the Export-Import Bank, the Small Business Administration and the Department of Commerce described the various loan programs available to small businesses from their agencies, as well as programs to help identify markets. The second workshop reviewed the business plans of 40 small businesses and matched them with potential lenders. We plan to hold a similar workshop in Upstate New York this year. As you know, even states that are wealthier, such as New York, have large pockets of poverty. So, we target some of our work specifically to low- and moderate-income groups. We have worked hard to help neighborhoods that face high foreclosure rates, although much remains to be done. We have provided housing advocates with the latest information on mortgage conditions, via mortgage briefs, roundtables, presentations and newsletters. We have developed an interactive online tool that shows monthly delinquency and foreclosure conditions, which we believe will aid the work of housing counselors and other parties seeking to help these communities.
Over the past five years, for example, PCE inflation has averaged 1.2 percent per year. The FOMC’s announced long-term inflation objective is 2.0 percent. Over a single year, the difference between 1.2 percent and 2.0 percent inflation is inconsequential. Over five years, though, that small difference cumulates to a 4.26 percentage point difference in the price level, which is not insignificant, perhaps, if back in 2008 you took out a mortgage with a fiveyear balloon. Alternatively, nominal GDP growth over the past five years has averaged 2.4 percent per year, when ordinarily one might have expected 4.5 percent average annual growth (2.5 percent real growth plus 2.0 percent inflation). Again, the difference is inconsequential in any given year. Accumulated over five years, though, the level of nominal income today is fully 12 percent below what might reasonably have been expected when mortgage and auto loan agreements were made back in 2008. Kindly note that I am not advocating any change to the FOMC’s 2 percent inflation target. My point is simply to highlight the longer-term consequences of what might appear to be smallish, shorter-term deviations from the norm. Business operators plan capital expenditure and payrolls not in one- or two- or even three-year increments; they plan and budget over longer-term horizons. The nominal stability that people need if they are going to negotiate  7  See “A Defense of Moderation in Monetary Policy,” by John C. Williams, Federal Reserve Bank of San Francisco Working Paper no. 2013-15, July 2013.

This will strengthen its position as a global leader in wealth management. BIS Review 110/2008  1
Concluding remarks  Let me conclude with a few reflections on the general issue of this talk, namely monetary policy and Basel II. I have tried to highlight those distinctive features of the revised capital framework which, in my opinion, are more likely to exert some influence on the terrain in which central bankers design and implement their monetary policies. Only the passage of time will reveal the consequences of the most ambitious bank-capital regulatory framework ever envisaged at a multinational level for the conduct of monetary policy. Still, I feel we can lay hands on some basic, but valuable, equipment for performing this jump into the future by looking at the past. So far, I have drawn on some important lessons imparted by past monetary and financial episodes and experiences. Let me now draw on one further lesson. The enormous success of monetary policy in bringing us the benefits of low and stable inflation could have hardly been possible without a preliminary diagnosis of the causes of high inflation and its effects on welfare, including an assessment of what the objectives of monetary policy should be, their relative importance over different horizons, and a comprehensive analysis of the best institutional framework and the instruments required.

For example, the ECB was able to take the unconventional monetary policy measures it saw fit to address unprecedented economic developments – and thus to achieve its primary objective of maintaining price stability in the euro area. This flexibility and autonomy is a clear expression of the principle of central bank independence, and of the Eurosystem’s exclusive competence to define and implement monetary policy. The simplified amendment procedure does not give us carte blanche to rewrite the Treaties and the principles that underpin the ECB and the Eurosystem. Rather, it allows us to make targeted adjustments to our monetary policy toolkit. I have three things in mind here. First, Article 22 should not be changed to contain an inflexible and exhaustive list of measures the ECB can take. This would constrain monetary policy. The ECB needs broad discretion to take the necessary measures and address risks to monetary policy and the smooth operation of payment systems. Extreme market events are impossible to predict and central banks have the unique expertise and exclusive competence to assess and address the risks they pose to monetary policy. Second, Article 22 cannot subordinate ECB measures to the level of secondary Union law, for example by requiring them to be consistent with secondary legislation. This would create a 3/5  BIS central bankers' speeches  hierarchy of internal market legislation over monetary policy measures. This cannot happen. We cannot open a Pandora’s box and end up in a situation where monetary policy is no longer shielded against political influence.
That is what happened in 2007–08. As the IMF have pointed out differences in capital ratios failed to predict which financial institutions would be vulnerable in the crisis (IMF, 2009). Only very much higher levels of capital – levels that would be seen by the industry as wildly excessive most of the time – would prevent such a crisis. Second, the Basel approach calculates the amount of capital required by using a measure of “risk-weighted” assets. Those risk weights are computed from past experience. Yet the circumstances in which capital needs to be available to absorb potential losses are precisely those when earlier judgements about the risk of different assets and their correlation are shown to be wrong. One might well say that a financial crisis occurs when the Basel risk weights turn out to be poor estimates of underlying risk. And that is not because investors, banks or regulators are incompetent. It is because the relevant risks are often impossible to assess in terms of fixed probabilities. Events can take place that we could not have envisaged, let alone to which we could attach probabilities. If only banks were playing in a casino then we probably could calculate appropriate risk weights. Unfortunately, the world is more complicated. So the regulatory framework needs to contain elements that are robust  6  BIS Review 140/2010  with respect to changes in the appropriate risk weights, and that is why the Bank of England advocated a simple leverage ratio as a key backstop to capital requirements.

Moreover, the size of the balance sheet is no longer limited by the scale of opportunities to lend to companies or individuals in the real economy. So-called “financial engineering” allows banks to manufacture additional assets without limit. And in the run-up to the crisis, they were aided and abetted in this endeavour by a host of vehicles and funds in the so-called shadow banking system, which in the US grew in gross terms to be larger than the traditional banking sector. This shadow banking system, as well as holding securitised debt and a host of manufactured – or “synthetic” – exposures was also a significant source of funding for the conventional banking system. Money market funds and other similar entities had call liabilities totalling over $ trillion. And they on lent very significant amounts to banks, both directly and indirectly via chains of transactions. This has had two consequences. First, the financial system has become enormously more interconnected. This means that promoting stability of the system as a whole using a regime of regulation of individual institutions is much less likely to be successful than hitherto. Maturity mismatch can grow through chains of transactions – without any significant amount being located in any one institution – a risk described many years ago by Martin Hellwig (Hellwig, 1995).
2 -6 -5 -4 Output gap (%)  -3  -2  -1  0  1  Such circumstances have characterised the period in  1  the UK since the global financial crisis (Chart 2), 0  which entailed a large adjustment to the supply side of the economy, meaning a lower exchange rate,  -1  lower growth, and higher inflation. Source: Bank calculations. Chart 4: … as has the euro area  Chart 3: US has continued to experience predominantly demand shocks, not trade-off shocks, since the global financial crisis…  Great moderation  Inflation (%)  Great moderation  6  Inflation (%)  Financial crisis and after  Financial crisis and after  4.5 4  5  3.5 4  3 2.5  3  8 2 -4  2 -8  -6  -4  -2  0 1  -2  0  4  1.5  Output gap (%)  1  2  0  2  4 Output gap (%)  0.5 0  -1 -2 Source: Bureau of Economic Analysis, CBO and Bank calculations. The measure of inflation is the four-quarter change in the personal consumption expenditures (PCE) deflator. The output gap is calculated using the CBO estimate of potential output from its August 2016 Update to the Budget and Economic Outlook. -0.5 -1 Source: Eurostat, IMF and Bank calculations. The measure of inflation is the four-quarter change in the harmonised index of consumer prices (HICP).

Mr Ardian Fullani: Towards a solid, sound and efficient banking system in Albania Greeting address by Mr Ardian Fullani, Governor of the Bank of Albania, at the 5th anniversary ceremony of the privatisation of the National Commercial Bank, Tirana, 18 October 2005. *  *  *  Ladies and Gentlemen, Today I am honoured to see in this jubilee meeting how the National Commercial Bank has grown and consolidated and together with it the whole banking system in Albania. I am delighted to consider that after a long restructuring period the banking system is now taking its proper role in the economy, that of the provision of free funds to the growing needs of the Albanian business and consumer, improving at the same time the number and quality of services. For this reason, I am honoured to have the opportunity of taking the floor in this meeting, to address and discuss jointly with you some present and future issues, which, I estimate, are important for the further enhancement of the banking system contribution to the country’s economic development. Allow me to start discussing first about the work we are doing as Bank of Albania to create a favourable climate for the business and economy development. Monetary policy followed during the recent years in succession has targeted to further reduce money price in order to give aspiration to the economy, while we have been successful in keeping inflation under control.
A comprehensive assessment of our current policy package should not only look at the intended consequences and side effects that can be observed, but also weigh them up against what would have happened in the absence of our exceptional policy [SLIDE 3]. How profitable would our banking system now be had we not eliminated the 2014–15 deflation risk? The landscape for our banking system would have been somewhat dire. In a deflationary environment – and we have avoided this lethal danger thanks to our monetary policy –, the debt-servicing cost for borrowers is heavier in real terms. Defaults are more frequent, and less sustainable debts result in higher credit spreads. The risk of a debt deflation spiral then increases further. But this has been avoided in the euro area and if the price of this is a temporary reduction in bank interest margins, then it is worth incurring such a secondary side effect. 2. – Let me turn now to the price of assets and the financial cycle At the level of the euro area, we consider the financial stability situation to be overall under control. The solvency ratios of significant euro area institutions have improved continuously since 2014, reaching 15% on average in Q2 2017. Overall private debt in the euro zone diminished as a share of GDP: 128% in 2011, 122% today. Non-performing loan ratios have also declined, especially for small and medium sized enterprises. I support the recent SSM initiative for provision rules for new flows of NPL, despite all the criticisms.

François Villeroy de Galhau: Monitoring financial stability, with active monetary policies Speech by Mr François Villeroy de Galhau, Governor of the Bank of France, at a conference at the London Business School, London, 23 November 2017. * * * Accompanying slides Ladies and Gentlemen, Price stability and the prevention of financial imbalances are often two sides of the same coin. Indeed, price stability and financial stability are supposed to be complementary and mutually beneficial. During the recent crisis in the euro area, the transmission mechanism of monetary policy was hampered by a fragmented interbank market, as borrowing conditions deteriorated in stressed countries. The resulting deterioration in the economy in turn contributed to a further worsening of the financial stress, in what we call a real-financial feedback loop. To cope with this difficult situation, the policy response in the euro area was twofold. First, we adopted an active monetary policy and launched unconventional measures that included the credit easing package. Second, we set up a Banking Union and assigned new macroprudential powers and tasks both at the European level (the ECB, the ESRB) as well as at the national level. In France, the Haut Conseil de stabilité financière (HCSF or High Council for Financial Stability) was created in July 2013 as the French authority with the legal ability to impose binding macroprudential measures. The economy is now recovering, so the medicine seems to have worked. However, our attention is now turning to the potential side effects of our treatment.
19  All speeches are available online at www.bankofengland.co.uk/speeches  19  ANNEX  Table A1: Weighted average bilateral tariffs Tariffs imposed by:  US  China  US  EU  On imports from:  China  the US  the EU  the US  Prior to recent escalation  2.6  9.1  3.3  3.0  Current measures(a)  8.4  17.8  3.7  3.3  With contemplated measures(b)  13.7  22.4  6.7  7.7  (a) US tariffs on steel and aluminium, the reciprocated tariffs of 25% on $ of US imports from China, and 10% tariffs on an additional $ of US imports from China, matched by 10% tariffs on $ US exports to China. (b) The contemplated hike in the tariff on $ of US imports from China from 10% to 25%, reciprocation by China on US exports of $ and the potential US tariffs on EU motor vehicles and parts. Notes: Bank calculations. 20  All speeches are available online at www.bankofengland.co.uk/speeches  20

Monetary policy that is oriented towards low and stable inflation will contribute to a stable krone exchange rate over time. If we take steps to counteract an appreciation of the krone when there are pressures in the economy, we reduce the possibility of curbing inflation and increase the risk of fluctuations in the economy. Maintaining stability in the internal value of the krone must thus take precedence. The implementation of monetary policy has been delegated to Norges Bank. Norges Bank sets the interest rate on the basis of our understanding of the regulation. Our interpretation places emphasis on the Government’s rationale behind the regulation, on the objective as formulated in the first paragraph and on our knowledge about the relationships between the interest rate, the krone exchange rate, output, employment and inflation. The interest rate influences price inflation indirectly via domestic demand and via its effect on the exchange rate. When interest rates rise, it is more profitable to save and more costly to borrow. This has a dampening impact on consumption and investment. Lower demand in turn curbs the rise in prices and wages. Higher interest rates make it more attractive to take krone positions and borrow in foreign currency. As a result, higher interest rates normally lead to an appreciation of the krone. This reduces prices for imported goods. In addition, a strong krone curbs activity, profitability and the capacity to cover labour costs in the internationally exposed sector. It is important to be aware of the relationships between employment, output and inflation.