samchain/econo-pairs-v1 huggingface dataset:
As a result, tradeoff situations will inevitably arise, and this will complicate the simultaneous pursuit of nominal and real convergence. One such case is that of public finances. Here the task is to achieve further convergence in economic structures and income levels without endangering fiscal sustainability. The recent experience of some existing Member States suggests an inherent incompatibility between these two objectives. On the one hand, the acceding countries must undertake the structural reforms necessary to create a congenial business environment and achieve an efficient allocation of resources, which would facilitate the implementation of the single monetary policy. On the other hand, they have to ensure that the expenditure associated with such reforms does not drive up fiscal imbalances beyond a level which is sustainable, or which in any case is considered excessive in terms of the Stability and Growth Pact (SGP). In Malta’s case another factor to be considered is the persistent weakness in our major export markets and its impact on the growth rate. Subdued growth does not only constrain the tax base, but through its negative effect on employment could generate opposition to the necessary structural reforms. The pursuit of fiscal balance is further burdened by the co-financing requirement built into most of the EU’s  2  BIS Review 16/2004  funding programmes; by demographic trends which are beyond the control of policy makers, especially population ageing; and by the implementation of acquis-related obligations.

First, its health-care system is competent in epidemiological management, more professional, and better equipped than that of most of its peers in the region. Proof of this is the high and growing volume of COVID-19 tests that have been applied, which make it possible to identify cases and isolate the sick or potentially infected. Second, Chile has accumulated economic buffers over the years thanks to financial and fiscal responsibility policies, and sound institutions to apply them. Thus, its space for fiscal, monetary, and financial policy making is also bigger than that of many countries. Third, its social protection system, despite imperfections, has the means to swiftly reach the lower-income households and workers risking their continuity in their jobs. At the same time, however, we must recognize our weaknesses, such as an important fraction of informal jobs, struggling productive sectors, and high uncertainty due to the social crisis that broke out last October. The risk that the institutional framework cannot bring new episodes of violence under control is a big concern in the country. The strength of our economic policy framework has been reflected in Chile’s rapid and forceful response to the spread of COVID-19 with measures to curtail and mitigate its economic impact. In the CBC, this has translated into more than ten measures adopted to boost the monetary stimulus, strengthen credit, and reduce financial volatility.
Notwithstanding the fact that people might derive utility from the pure fact of having in their wallets banknotes with Polish kings instead of European bridges, I have no idea how to measure this utility and how to compare it to the utility derived from more standard arguments of preference functions like consumption. For this reason I will speak in terms of standard macroeconomic variables, bearing in mind that this is certainly not the whole story. If economists speak about the advantages and disadvantages of joining a common currency area, they ultimately end up comparing the costs and benefits of accession. This is also the way I would like to proceed. However, bearing in mind that many issues have already been described in several voluminous reports (NBP 2004 for Poland, Csajbok, Csemerly 2002 for Hungary, HM Treasury 2003 for the UK), I will try to focus on issues which are less familiar to the general public or which are potential risk factors. The nature of these issues is that they are mainly concentrated on the cost side of the analysis. Thus, it might seem from my lecture, that I mainly care about the costs or that costs outweigh benefits. Let me, in the very beginning, stress that this is by no means the case.

To achieve the primary objective of price stability, as Christine Lagarde simply and clearly put it, “the (effective) transmission of monetary policy is just as important as monetary policy itself”. And this transmission applies towards all economic players, along all financing channels, and in all countries. 3/5  BIS central bankers' speeches  Thus, as early as the critical phase in March, it was already essential (i) regarding interest rates, to support favourable financing conditions and to contain the adverse effects of strains on the financial markets, (ii) regarding volumes, to guarantee sufficient liquidity for business and households through bank channels, and lastly (iii) to limit the risks of financial fragmentation within the euro area. When we need to meet several intermediate objectives at the same time, we need to expand our range of instruments and strengthen their intensity. Here, economists often refer to the “Tinbergen principle”, but it does not necessarily require strict specialisation with one single instrument assigned to each objective. Our choice at the ECB is more pragmatic: since March, we, like the Fed and the Bank of England, have greatly expanded and strengthened our armoury of instruments and in so doing refuted all those – and remember there were a lot of them only a few months ago – who feared that the central banks were “running out of ammunition”. However, some of our instruments deal with the long-lasting, underlying low-inflation environment that preexisted the crisis – and which has not gone away. It is our “baseline game”, if you will.
A consistently conservative monetary policy stance will enable us to curb both inflation risks and the response of inflation expectations. This will lay the groundwork for looser monetary policy by late 2019 – early 2020, if the situation unfolds consistent with our forecast. Before I proceed to answer your questions, let me also inform you about the changes we want to introduce beginning in March 2019 as regards our communications related to key rate decisions. First, a key rate press release in the follow-up to our policy Board meeting will include a reforecast. Second, a monetary policy report will be published in a week after a Board meeting. These arrangements will serve to better reflect the logic of the already made decision. 3/3  BIS central bankers' speeches

First, they demonstrate the Fed’s strong commitment to prevent lasting damage to the economy. Second, the scale and reach of the response is an indication of the gravity and unique nature of the situation we are facing. Although the facilities differ in important ways, reflecting the specifics of markets and sectors, they all share the goal of keeping credit flowing to households, businesses small and large, and other key segments of the economy. Since the announcements and rollouts of the various facilities, we have seen a significant improvement in the pricing and availability of credit.6 2/4  BIS central bankers' speeches  Somewhat paradoxically, despite the clear effect that these facilities have had on the availability of credit, actual take-up of the facilities has been relatively low. But this is in fact a measure of success—the existence of the facilities, even in a backstop role, has helped boost confidence to the point where borrowers are able to access credit from the private market at affordable rates. It’s worth noting that the Federal Reserve does not act alone. As my colleague Chair Powell says, “The Fed has lending powers, not spending powers. "7 Sound healthcare policy and the ability of fiscal authorities to put cash directly in the hands of Americans are both essential for the economy to endure this devastating episode.
Inflation targeting is thus much more demanding than a fixed exchange rate regime with regard to the central bank’s analytical work and its ability to communicate its policy. Whether this is something that should be regarded as a disadvantage or not is of course a question of judgement. For the Riksbank, the transition to inflation targeting heralded the start of a fairly comprehensive increase in competence in the field of economics. The number of PhD economists at the Riksbank has risen sharply in recent years and our research in areas related to monetary policy has expanded considerably. Financial stability Let me now move on to the other central component of an efficient payment system. This concerns the stability in the financial system; particularly in the financial institutions that supply payment services, i.e. primarily the banks. Financial stability is currently regarded, parallel to the price stability target, as the main task of a modern central bank. The financial system has essentially three main tasks: converting savings into financing, managing risk and providing efficient channels of payment. Let me give a basic example. A bank receives savings from households which it then lends to other households or to companies that need to invest. Banks are specialists at valuing, monitoring and managing credit risks in the households and companies to which they lend.

Thomas Jordan: Price and financial stability - a demanding year for the Swiss National Bank Speech by Mr Thomas Jordan, Chairman of the Governing Board of the Swiss National Bank, at the 115th Ordinary General Meeting of Shareholders of the Swiss National Bank, Berne, 28 April 2023. *** Madam President of the Bank Council Dear Shareholders Dear Guests It is a pleasure for me to welcome you to our General Meeting today. I see many familiar faces, but also a large number of new shareholders. A warm welcome to you all. I am delighted that so many of you have responded to our invitation. We are living in extremely turbulent times. Our last General Meeting was marked by Russia's invasion of Ukraine, and the General Meetings in the previous two years by the coronavirus pandemic. This year we have witnessed a shock to the Swiss financial sector, namely the crisis at Credit Suisse and the takeover of the bank by UBS. Today, I would like to give you some more detailed information about the role of the Swiss National Bank in managing this latest crisis. I will also set out how we have been combating inflation with our monetary policy since the last General Meeting. Let me start with the second topic. Tighter monetary policy to ensure price stability The SNB is obliged by Constitution and statute to pursue a monetary policy that serves the interests of the country as a whole.
Indeed, doing so has been my primary motivation in not voting for an increase in Bank Rate over my first 10 months on the MPC. But it seems to me most likely that: first, the factors currently pulling down on headline inflation will not do so permanently; second, the headwinds currently affecting demand in the economy will continue to gradually ease over  17  6  For more information on the Bank’s market intelligence http://www.bankofengland.co.uk/markets/Documents/marketintelligence/charter.pdf  programme,  see:  BIS central bankers’ speeches  the coming years (facilitated by accommodative monetary policy); and third, a return to productivity growth will facilitate potential output growth over the long term. So while we on the MPC should heed some of the warning implied by low yields, you should seek out the potential opportunities they offer. References Barro R (2006) Rare disasters and asset markets in the twentieth century, The Quarterly Journal of Economics 121 (3). Bernanke B (2005) The Global Saving Glut and the U.S. Current Account Deficit, Sandridge Lecture, Virginia Association of Economists, Richmond VA. Dynan KE, Skinner J and Zeldes, SP (2000) Do the rich save more? NBER working paper No. 7906. International Monetary Fund (2009) What is the damage? Medium term output dynamics after financial crises, World Economic Outlook, October, Chapter 4. King M and Low D (2014) Measuring the “world” real interest rate, NBER working paper No. 19887. Koo R (2014) Escape from balance sheet recession and the QE trap, Wiley.

6  Dynan et al (2000) find a strong positive relationship between savings rates and lifetime income. 7  As documented in King and Low (2014). 8  See Summers (2014) and Wolf (2014). 9  The hypothesis that weak post-Crisis growth represents a debt super-cycle which will ultimately come to an end is set out in Rogoff (2015). 10  IMF (2009). BIS central bankers’ speeches  3  but they do attach significantly more weight to the downside risks than they did prior to the crisis. 11 This would reduce long yields in two ways: by making firms less confident about the future payoff from their investment projects, thus requiring a lower level of interest rates to incentivise them to invest; and by making savers demand a higher credit premium to lend to the private sector, thus driving a wedge between risk free rates and other interest rates in the economy. 12 My own view is that most of the headwinds that have buffeted the global economy over the period since 2008-09 do bear the hallmarks of a balance sheet recession in which the impetus to reduce debt is the force driving agents behaviour: first by financial institutions who reduced the supply of credit to the real economy; then by the businesses and households who simultaneously became more pessimistic about the outlook and reassessed their need to maintain their own stock of liquidity.
As in the case of the financial market turbulence of May 2006, the latest correction on the stock market has been negotiated without any major difficulties. The positive underlying sentiment in the markets and the appetite for high-risk investments remained for the most part unabated. Not least, this is probably attributable to the extensive investment requirements worldwide and the associated high level of liquidity on the part of the investors. This large requirement for high-risk investments originates from the dynamic growth rate that has prevailed for some time now, a high savings ratio worldwide, the globalisation and liberalisation of the financial markets as well as the increasingly professionalised asset management by private, government and institutional investors. The durability of the valuation of high-risk investments is extremely difficult to assess, since valuations depend on subjective expectations of future earnings, discount rates and volatilities. The latest turbulence is a salutary reminder of the risks, however. In the past, risk premiums at levels lower than ever recorded before, rapidly rising prices for many high-risk investment categories and hectic activity in the area of company acquisitions have been signs of developments that were not sustainable in the long run. Therefore, market participants should not allow themselves to be distracted by the short-lived nature of financial market setbacks so far and simply extrapolate the favourable market trends of the past few years into the future.

And at a time that the central bank would normally need to loosen policy to stimulate the economy, it needs tighter policy to ward off inflation. I am not as concerned about cyclical adjustments as I am about structural impediments to long-run growth in Brazil. During this time of remarkable liquidity and cheap credit, and despite a decade of high commodity prices and booming exports, Brazil failed to advance further market reforms. Mexico, on the other hand, has continued to build on its earlier reforms such as its commitment to free trade through NAFTA and other trade agreements. Mexico has secured the openness of its economy and ensured the global competitiveness of its manufacturing sector. Exports plus imports as a share of Mexico GDP reached 64 percent in 2012 while Brazil’s trade share of GDP was just 21 percent. Mexico is now the No. 2 exporter of auto vehicles to the U.S. after Japan and has been the top exporter of auto parts since 2001. BIS central bankers’ speeches  5  Mexico reforms and the Texas shale oil boom Mexico in the last year has logged impressive structural change. Your government stands as an example for many other nations, including my own. A dozen reform bills passed Congress and were signed into law in 2013, five requiring constitutional amendments. To put this feat in perspective, this government has accomplished more in the last year than the three preceding administrations combined.
Unlike macro-prudential policy, micro-prudential supervision – the supervision of individual financial firms – is not at all new. But it has changed materially. I recall quite clearly from my time at the Treasury, in charge of financial regulation in the early years of this century, the underlying belief among the regulatory and supervisory authorities that the management and boards of firms had an even stronger reason than the supervisor to control risk and the safety and soundness of their firm – and that they had the capacity and capability to do so. The crisis revealed a very different picture in many institutions worldwide. We have learned from this experience. In the UK, the Prudential Regulation Authority’s new and more intensive supervisory approach reflects this. There is also a much more intensive focus on the firms that pose the greatest risks to financial stability than was the case before the crisis. This more intensive approach involves a higher reliance on judgment based supervision and a more forward looking and proactive stance. Supervisors are empowered to use their judgment. They no longer need to wait for a problem to occur to take action. An example is the UK stress test I referred to earlier which is carried out jointly by the FPC and PRA: firms who do not meet the standard will be required to take action.

But, given lower levels of leverage, it is unlikely that we will see, or want to see again, the returns on equity that we saw before the crisis. In the new world, paybills may well have further to adjust. A major element of the rethinking of business models in global banks has concerned their Fixed Income, Commodities and Currency business – charmingly known as FICC. A consequence of higher risk aversion and tougher capital and liquidity requirements have been a step reduction in FICC-related activity, especially proprietary trading and marketmaking. Inventory levels held in banks’ FICC areas have nearly halved since the boom years. A consequence has been falling income from FICC trading over the past five years. It is not yet clear how this very material element of banks’ business models will evolve. Many banks, reacting to both low profitability and regulatory pressure, are continuing to shrink these operations. And as the data suggest the average pay bill in banking is skewed very heavily towards the top earners, such as principal risk takers in investment banking and trading, this should both restore return-on-equity and reduce the pay bill. To sum up. The landscape has changed with key changes to the way the official sector approaches regulation and supervision. Those changes have generated changes in rules and in supervisory practice that have changed the world for banks. Banks are now wrestling with the changes they need to make to thrive both in the new economic environment and in this new landscape.
In my view, this initial exercise has confirmed that we are a long way from the desired situation in which large complex firms could be allowed to go bankrupt without major disruptions to the financial system and large costs to society. Significant changes in structure and organization will ultimately be required for this to be achieved. However, the “living will” exercise is an iterative process, and we have only taken the first step in a long journey. The second way to potentially minimize the negative externalities from a firm’s failure would be to avoid a bankruptcy proceeding altogether and instead resolve the firm under the Dodd-Frank Act’s Title II orderly liquidation authority.7,8 The “single point of entry” model has much promise, but much remains to be done before it could be implemented with confidence for a globally active firm. Title II authority is U.S. law. Subsidiaries and affiliates chartered in other countries could be wound down under the bankruptcy laws of those countries, if authorities there did not have full confidence that local interests would be protected. Certain Title II measures including the one-day stay provision with respect to OTC derivatives and other qualified financial contracts may not apply through the force of law outside the United States, making orderly resolution difficult. The other essential dimension of solving TBTF is to make the financial system more robust – addressing structural vulnerabilities that tend to amplify shocks rather than absorb them.

•  Policymakers allowed market structures, particularly in wholesale funding markets, to evolve in directions that were efficient from a private perspective in normal times, but amplified run dynamics and therefore externalities in times of stress. Examples include the growth in triparty repo activities and the reliance of many large financial institutions on funding from money market mutual funds, as well as many other elements of the shadow banking system. 3  Under Section 13(3) of the Federal Reserve Act, the Federal Reserve is authorized to lend to individuals, corporations and partnerships. But this may occur only if a super majority of the Board of Governors of the Federal Reserve System has determined that circumstances are “unusual and exigent”. Subsequently, the Dodd-Frank Act further constrained this authority by prohibiting its use to rescue an individual company from bankruptcy. BIS central bankers’ speeches  3  The TBTF problem was further aggravated by the financial crisis and the policy response. Faced with systemwide stress, the Federal Reserve, with the support of the U.S. Treasury, intervened to prevent the disorderly failure of Bear Stearns, a firm that would not have been high on the list of TBTF firms a few years earlier. Meanwhile, the failure of Lehman Brothers demonstrated that the cost to society of the uncontrolled failure of a TBTF firm in a period of generalized stress was considerably greater than anticipated.