samchain/econo-pairs-v1 huggingface dataset:
3  See in particular Sahuc, J.-G. and F. Smets (2008): “Differences in Interest Rate Policy at the ECB and the Fed: an Investigation With a Medium Scale DSGE Model”, Journal of Money, Credit and Banking, Vol. 40, 2-3, pp. 505-521. 4  Indicators for the labour and goods and services markets are compiled by the OECD. The figures for individual countries in the euro area have been merged together. BIS Review 135/2008  3  their produce – is 13 months in the euro area, while it is under seven months in the United 5 States. These characteristics have a particular impact on the dynamic properties of inflation. Prices in the euro area are slower to reflect changes in economic conditions. This means that inflationary pressure has a slower impact on price dynamics. Adjustment to macroeconomic shocks initially tends to have an effect above all on employment and economic activity, only impacting on prices later. It follows that if inflation is allowed to grow, it is then far more costly and difficult for monetary policy to bring it back down to an acceptable level. In other words, the so-called ”sacrifice ratio”, or the cost of restoring price stability in terms of GDP and employment, appears to be higher in the euro area than in a more flexible economy such as the US economy.

In the euro area, by contrast, the adoption of active budget policies ought to have been discouraged by the greater frequency of supply shocks. 20  Akkoyunlu, S., I. Neustadt and P. Zweifel (2008), Why Does the Amount of Income Redistribution Differ Between United States and Europe? The Janus Face of Switzerland, Working Paper by Zurich University’s Socio-Economic Institute, No 810. 21  It measures the variation in the budget balance, as a percentage of GDP, for a 1% variation in GDP. 22  See Table 9 in Girouard and André (op. cit.). 23  OECD (2008), Economic Outlook, No 83. 8  BIS Review 135/2008  3.4  Structural factors  I shall now discuss structural factors, which are political-cum-institutional, as well as more strictly economic in nature. 3.4.1  Political and institutional factors  In general terms, factors of a political and institutional nature offer greater assistance in understanding the differences in fiscal policy compared with monetary policy. In particular, there is a strand of political economy literature suggesting that the principle of a majority system as implemented in the US political system, together with more marked fiscal centralisation, tends to prevent minority interest groups from achieving the political power needed to foster greater redistribution of revenue. 24 A deep-seated tradition of stringent safeguards for private property and the legal system itself have further curbed redistribution trends in the US. Even the United States’ federal structure may have helped to restrict the role played by central government in budget policy.
For example, I have been clear that, in the long run, the growth of derivative markets and the development of new players like hedge funds should help to price risks better and spread them more widely, and thus make the financial system more resilient. However, there is no denying that financial markets are liable to overshoot. And it is particularly important to stay alive to this risk when new records are being set for leveraged bids, returns on equity and City bonuses. Over-optimism in the financial system can have costs not just for the consenting counterparties but more broadly across the economy. By talking to you individually, drawing the threads together with our own analysis and feeding back a dispassionate but informed assessment of what your actions and plans add up to, we hope we can inform your decisions and thus help to head off instability. Low volatility One of the main vulnerabilities on our league table is low risk premia in financial markets – that is, the low level of compensation that investors are demanding to hold risk. In my remaining remarks I want to offer some observations on a closely related and interconnected topic: the low level of volatility in a number of asset classes. My colleague Paul Tucker has recently commented on low historic volatility. [Charts 2 to 4] show how the volatility of asset returns has come down for equities, bonds, and exchange rates to low levels by modern standards.

Not only because of the obligation arising from the Treaty of the European Union. Rather because euro area membership provides ultimate monetary and economic security for our nation that is already used to the “de facto membership”. Competitiveness in today’s world Ladies and Gentlemen let me now turn to the topic of today’s conference: competitiveness in today’s world. I would like to look at it from the perspective of a really small country. As we all know, globalization has changed the understanding of success factors for countries. Oldstyle economic policies and market protection are of no use any more, since today whole factories and industries are moved within a short time. How can a small country survive in this world at all? It is often said that real wages should be kept artificially low to attract investment and provide high returns on capital. I do not think this is the right way for a small country. We could never compete with major economies when it comes to mass production. Instead, we should make use of the fact that globalization creates also a huge spectrum of niche markets. Mass production cannot meet countless individual needs, as people all over the world demand more and more personalised products and services. This is the key to success for smaller economies. BIS Review 63/2007  1  The point of departure for a society to remain competitive is to get over the fear of globalization. The new world is after all an opportunity, not a cause for sorrow.
While  1/5  BIS - Central bankers' speeches  policy rates remain our main instrument for steering monetary policy, we have made clear that we are ready to adjust all our instruments to maintain the consistency we need in our monetary policy to achieve our primary objective of price stability. Datadependent, going meeting-by-meeting. Heute wie auch morgen und übermorgen bleibt die Geldpolitik auf der Hut und handlungsbereit. Banking supervision when macroeconomic tides are shiftingAs both an ECB Executive Board member and the Vice-Chair of the ECB's Supervisory Board, I am particularly interested in how banks adjust to the shifting macroeconomic tides. Higher interest rates as such are generally good news for banks because – after a decade of exceptionally low interest rates – they improve profitability. Indeed, euro area banks performed well in the first half of the year as their net interest income increased steadily, a trend that most analysts expect to continue in the near term as further monetary policy normalisation takes hold. Yet, even if the expectation of improved profitability for the median bank comes true in the near term, not all banks are expected to benefit equally from the increase in interest rates. More importantly, banks and we as supervisors need to be mindful that the increase in interest rates does not occur in isolation.

The Fed System is comprised of the Board of Governors in Washington, D.C. – a federal agency currently led by Chairman Ben Bernanke – plus 12 regional Reserve Banks that span the country. For example, the district overseen by the New York Fed includes all of New  1  See top winning videos of the New York Fed’s Financial Awareness Video Competition on YouTube: Think Twice Before You Swipe Debt Comedy Jam Credit Card Arrest  BIS central bankers’ speeches  1  York, the 12 northern counties of New Jersey; Fairfield County, Connecticut; Puerto Rico and the U.S. Virgin Islands. Each Reserve Bank is distinct, with its own charter and a board of directors drawn from its district, but overseen by the Board of Governors. The law that created the Federal Reserve made the central bank independent so that policymakers could make decisions about monetary policy in the national interest, somewhat insulated from political pressure. However, the Fed is accountable to Congress. Congress has set an explicit objective for monetary policy: To pursue the highest level of employment consistent with price stability. This objective is often referred to as our “dual mandate,” because it combines two goals: high employment, and low and stable inflation. In order to promote these objectives, we also pay close attention to financial stability, because without financial stability, it is very hard to achieve our goals for jobs and inflation.
With hindsight, one can wonder how so many people could be so sure that we had left the whole story behind us and entered a new world. However, we will probably make the same mistake again. Let me  BIS Review 79/2001  1  just remind you of the first “IT bubble” at the beginning of the last century, which concerned wireless telegraphy. 150 companies were introduced onto the New York stock exchange in 1901 and early 1902. In 1907, only one of these still showed a profit and paid dividends, and even that company had halved its market value since its introduction. Similar development in Sweden The development I have outlined applies first and foremost to the USA until the end of last year, but many parts of the description also fit the Swedish economy. Here, our GDP growth had exceeded 3.5 per cent for three years at the start of the year. The IT and telecom sectors’ large share of Swedish business contributed to a more rapid economic growth in Sweden than in many other European countries. Many people claimed that Sweden also had one foot in the “new economy”. However, the economic upturn here in Sweden started later than that in the USA, and from a situation with a higher level of financial saving in the private sector. The imbalances in saving and foreign trade that distinguished - and still distinguish - the USA thus had no counterpart in Sweden.

Let me be clear: I am not making a value judgement about these regulations. What I am saying is that, if we want banks to adapt successfully to the post-crisis world, we need to give them sufficient visibility about the future. Finally, regulation needs to be mutually consistent. In particular, if we want banks to be bigger players in a more market-based financing mix, we need to ensure that regulation supports that transition and does not unduly impact banks’ ability to transact in capital markets. We know that one side effect of the reform agenda so far has been banks retreating from, or scaling down, certain market making activities. 5  See for example Buch, C., and Esteben, P. (2014), “Do better capitalized banks lend less? Long-run panel evidence from Germany”, International Finance 17:1. 6  Härle, P., Lüders, E., Pepanides, T., Pfetsch, S., Poppensieker, T. and Stegemann, U. (2010), “Basel III and European banking: Its impact, how banks might respond, and the challenges of implementation”, McKinsey Working Papers on Risk, Number 26. 4  BIS central bankers’ speeches  This is a particular issue for less liquid markets, such as ABS, which depend on market makers that can absorb temporary supply-demand imbalances. It is also one reason why part of the CMU Action Plan is a call for evidence on the cumulative impact of financial services reforms.
In this way confidence in the financial institutions can be restored, and the vicious cycle of liquidity bottlenecks, forced fire sales and bank runs can be ultimately avoided. By providing emergency liquidity assistance, central banks aim primarily to stabilise the precarious liquidity situation faced by solvent institutions. Above and beyond this, the increasing importance of systemic risk has made the emergency liquidity provision to entire markets ever more imperative. Markets can also be faced with liquidity runs. This was only too evident from the high risk premia observed in the interbank market during the recent crisis. It is conceivable that central banks will take on the role of market maker of last resort in such situations in order to secure key market functions. Indeed, in certain situations it is essential. 9 In an acute crisis, the costs and probability of a system collapse can be reduced in this way. However, the assumption of a lender of last resort or market maker of last resort function is not without problems. First, it does not guarantee long-term stabilisation in every case. Second, these crisis measures are no substitute for tackling the root causes or for lack of robustness on the part of financial market participants. In particular, the presence of a market maker of last resort is associated with a variety of incentive problems. 10 It can, for instance, encourage market participants to enter into excessive risk exposure in the expectation that the central bank will step into the breach if necessary.

Moreover, any such subordination would imply that the objective of the Internal Market is superior to the objective of Economic and Monetary Union. This is not the case; these are equal and complementary objectives of the European Union. Moreover, as the ECJ made clear in the Pringle case, “[…] each institution of the Union is to act within the limits of the powers conferred on it in the Treaties, and in conformity with the procedures, conditions and objectives set out in them.”5 And third, there is a limitation: Article 22 cannot confer general regulatory competences on the ECB – it can only adjust the ECB’s monetary policy toolkit by clarifying that the competence for clearing and payments covers derivatives. The Treaty drafters made the ECB’s objectives and tasks very clear. As the European Court of Justice said, a measure falls under the responsibility of the ECB when it is intended to pursue an objective such as the consistency of monetary policy or the proper transmission of monetary policy. This objective, in turn, contributes to the primary monetary policy objective of maintaining price stability6. The reason why monetary policy needs to cover CCPs’ liquidity is that derivatives clearing has become a cornerstone of the financial system. We must not forget that ECB measures must also comply with the principle of proportionality. This means that any ECB actions in the field of clearing will have to be appropriate for attaining monetary policy objectives and cannot go beyond what is necessary to achieve those objectives.
Ex post transparency of aggregate amounts lent is provided immediately for market-wide liquidity provision, and with a lag for any usage of the bilateral Discount Window. The Bank also publishes an annual report on the operation of its published facilities 3. The Bank’s published facilities now provide a rich toolkit for responding to a wide range of sterling liquidity needs. But not every eventuality can be predicted in advance – and UK institutions might on occasion require assistance in larger size, against alternative collateral, or in currencies other than sterling. The terms and conditions for any bilateral lending done outside of the Bank’s published facilities – so-called “Emergency Liquidity Assistance (ELA)” – would use as a starting point those in the SMF, including pricing and collateral eligibility and haircuts. But, recognising the potential for discretionary deviation from these terms, and the large sums of money that such lending can involve, ELA is also subject to enhanced governance and accountability arrangements, published in a Memorandum of Understanding (MoU) 4 between the Bank and HM Treasury. These arrangements are somewhat shaped by history. In his autobiography 5, the then Chancellor of the Exchequer Nigel Lawson records his deep annoyance at being given only half an hour’s notice by the Bank in October 1984 to decide whether to provide a government guarantee to back a large loan to Johnson Matthey Bankers, “a bank of no great consequence”, which the Bank had been working for some time to save.

We depend on our ability to access it, analyse it, and draw conclusions from it to set policies. Effective management and use of data is how we meet our goals. 1  A foot as we now know it is 304.8mm 2  All speeches are available online at www.bankofengland.co.uk/news/speeches and @BoE_PressOffice  2  Of course, we are far from alone here – many organisations rely heavily on their use of data. But we are, perhaps, different to many in that the vast majority of the data we want is generated by others rather than ourselves. The data we care about is the sum of millions of financial and economic interactions, taking place every second. And much of that data2 is captured and stored by financial institutions, as they go about serving their customers. We need to get our hands on that data. We need data on the financial system in aggregate and also on specific markets within it, to help us understand where risks are emerging and to help us calibrate policies to maintain stability. And we need data about individual regulated firms, for our work as supervisor and as resolution authority. So we have built data collection processes to give us that data. We publish reporting instructions. Firms then go through various steps: they interpret our instructions, identify the right data within their systems, put in place processes to integrate, cleanse and check the data, and then sign it off and deliver it to us.
Whereas the interest rates were increased by 50 basis points in November 1999, on the past two occasions the main refinancing rate and the rates on the marginal lending facility and on the deposit facility were each increased by 25 basis points, so that they now stand at 3.50%, 4.50% and 2.50% respectively. All three decisions were taken in the context of the monetary policy strategy of the Eurosystem to address upside risks to future price stability in the euro area. Both pillars of the monetary policy strategy indicated that the balance of risks to price stability in the medium term had been shifting upward in late 1999 and early 2000. Starting with monetary developments in the context of the first pillar, the three-month average of annual M3 growth exceeded the reference value throughout 1999 and in January 2000. Together with the continued strong expansion, at annual rates of around 10%, of credit granted to the private sector, this signalled that liquidity in the euro area is ample, contributing to upside risks to price stability in the medium term. In the context of the first pillar, let me briefly take up the issue of the reference value for monetary growth. As you know, the reference value is an expression of the prominent role of money in the first pillar of the monetary policy strategy of the Eurosystem. Following its meeting on 2 December 1999, the Governing Council confirmed the reference value for the growth of the broad monetary aggregate M3 at 4½% per annum.

This decision was taken on the grounds that the main elements which entered the determination of the reference value, namely the definition of price stability, the estimate of the trend growth of real GDP and the trend decline in the income velocity of M3, had basically remained unchanged. The Governing Council will continue to monitor monetary developments against the reference value on the basis of three-month moving averages of the annual growth rate of M3 as monthly developments might be too volatile. In addition, we also noted that the generous liquidity situation in 1999 will have to be kept in mind when assessing the information content of monetary developments in the future. Considering the second pillar of the monetary policy strategy, namely the broadly based assessment of other indicators containing information about the outlook for price stability, most indicators and forecasts have been pointing to increasing upward pressure on consumer price inflation over the medium term. The strong increase in oil prices in 1999 and early 2000 and the depreciation of the exchange rate of the euro in recent months have contributed to upward pressures on import and producer prices. In addition to the direct effects of these pressures on consumer price inflation, there is 1  BIS Review 25/2000  the risk in the context of the strong cyclical upswing that these developments could, via second-round effects, have lasting effects on consumer price inflation.
Finally, we have to do our best to ensure that market discipline is exercised in a relatively benign and gradual way – graded differentiation of spreads on debt for example, rather than sudden refusal by the market to rollover debt at any price. This means we need to think hard about the frequency as well as detail of disclosures, and specifically the trade-off between the two. Too frequent disclosure might not only be too onerous but also add to the volatility of company ratings. Too long and the potential for large step changes in an institution's risk profile will increase market uncertainty and volatility. Of course, there may be times when this cannot be avoided – the sudden emergence of fraud for example – which is where crisis management by the bank concerned and by the authorities comes into play. But we should not overemphasise the relevance of these new disclosure initiatives in this particular sort of situation: publicly owned banks are after all already required to disclose any information which could significantly affect their share price. BIS Review 43/2001  3  Impact of the New Basel Accord Turning to the Basel proposals on minimum capital, their aim is to align regulatory capital much more closely with risk. This should have financial efficiency benefits, as I explained just now. To the extent that seriously undercapitalised risk taking by banks will in the future be more difficult, there are also clear financial stability benefits.

I said just now that I wanted to address two questions, the first of which was why the subject is so important. Well, in this murky and difficult area, there is perhaps one aspect which commands a fair consensus, which is that financial crises, specifically banking crises, produce real economic costs. There are the immediate direct costs to the public sector if crisis-hit banks require lender of last resort support or have to be bailed out, and longer term costs to growth. There is a lively debate on how to measure the latter, which I hope we can take further during this conference, as one of the papers is addressing this very subject, but I would describe the range of estimates in some countries as starting at large and ending at very large indeed. Interestingly, on some measures, the longer term output costs seem to end up higher in developed countries than in emerging market countries, in the main we think because crises in developed countries have typically dragged on for long er. On top of evidence about the impact of financial instability, there is also evidence that the incidence of banking crises has become more frequent over the past 20 years. In fact four out of the G-10 countries have suffered a banking crisis of one sort or another in the last ten years. It is thus clear that financial instability remains a hugely relevant topic to both developed and emerging market economies.