samchain/econo-pairs-v1 huggingface dataset:
Indeed, a price-level target may be an effective way of implementing the fully optimal monetary policy  BIS Review 111/2010  13  under commitment (Vestin, 2006). A considerable body of research expands on this idea; see e.g. Ambler (2009) and the references therein. Why might price-level targeting generate less variability of inflation and output than an inflation target, as it is tempting to think the opposite should be the case? Under price-level targeting, an adverse shock to demand, which pushes the price level below its target path, necessarily requires higher inflation in the future in order to return the price level to its target path. Assuming that private agents understand this, expected real interest rates fall, so boosting demand today. Inflation expectations therefore act as a more effective automatic stabilizer than they do under inflation targeting. By the same token, an adverse supply (markup) shock, which raises the price level above its target path and depresses output today, leads to lower expected future inflation. But, in the standard New Keynesian Phillips curve describing pricing behaviour, inflation is positively related to expected future inflation. Hence the lower expected future inflation acts to offset the impact of the supply shock by moderating the rise in today’s price level. A corollary of inflation expectations becoming an automatic stabiliser under price-level targeting is that it reduces the extent to which the nominal policy rate needs to fall to offset an adverse demand shock.

Mr Bäckström offers some thoughts on asset prices and their relevance to central banks  Speech given by Mr Urban Bäckström, Governor of the Sveriges Riksbank and Chairman of the Board of Directors and President of the Bank for International Settlements, to the Swedish Shareholders Association and the FöreningsSparbanken on 16 December 1999. *  *  *  First a word of thanks for the invitation to this meeting. The question I want to consider this evening is why stock market values are so high at present in relation to levels in the past. Are share prices being based on perceptions of the future that are unrealistic? In other words, are they developing a bubble? The mood that may lead to assets being valued in terms of expectations that are not realistic has been described by the Chairman of the US Federal Reserve as “irrational exuberance”. Could it be the case, on the other hand, that the high prices stem from a perception of some fundamental changes? After all, the future will not necessarily follow the same pattern as the past. Steep share price rise Share prices on the Stockholm Stock Exchange have risen strongly in recent years. In the course of 1999 the average level has moved up more than 50%. This autumn, moreover, the rise has accelerated. So everything points to 1999 being a very prosperous year for those who save in shares.
I remember that the last thing I did in this respect, before I went to the Bank for International Settlements in Basel to focus on other things, was to try to sell the system to a Russian audience that was considering pension reform in their own country. 2 On what was this view based? In order to answer that, I must first remind us of the attributes of a good pension system. Of course it is obvious that it must be a mechanism for saving for retirement. But in order to be an efficient such mechanism, it must take due account of the lifetime risks facing individuals, as well as the economic and financial risks facing society as a whole. These are, for instance, risks related to life expectancy, ability to work, demographics, the productivity of labour, and the rate of return on financial assets. Furthermore, some at least would make the demand that the system have a certain degree of income equalisation built into it, and most would accept that it should at least not be regressive. Then we would want the pension system to have some degree of flexibility and to provide scope for individual choice. Finally, we want the pension system to be designed so as to promote economic performance; that is, saving, growth, and financial sector development. This is a tall order, of course, and in practice there are bound to be trade-offs between these goals.

At that time, it was estimated that, at maturity, the funds would amount to 1½ times GDP. They came close to that just before the financial crisis, but this was not “real”, as I will come to later. It is noteworthy that the funds do not obey simple classifications. Some of the funds have an employment guarantee and would be characterised as defined-benefit funds, where the employer bears the investment risk, but in Iceland only the government, municipalities and banks can guarantee pension funds. But the rest are not pure defined contribution funds. The investment risk is borne collectively by the members, and there is some scope for smoothing changes in benefits and for some risk-sharing among generations. This can matter when you have a once-in-a-lifetime shock to returns, as we experienced during the international financial crisis. The third pillar of the pension system entered the stage rather late here in Iceland. It was only in 1998 that legislation on tax incentives for voluntary private pension saving was adopted, but these incentives were subsequently increased. Voluntary private pensions saving then increased by leaps and bounds, reaching 10% of GDP in 2002 and 15% of GDP in 2007. This saving has proven to be an important cushion during the current crisis, as early repayment was temporarily allowed. So far, these early repayments have amounted to 2½% of GDP. This is akin to a fiscal stimulus and has supported private consumption this year and last.
The forecast In conclusion I want to make some brief remarks about the future, using our latest Inflation Report as the chief starting point. The main scenario there is based on the prospect of what might be called a normal cyclical development, driven above all by an international recovery, good disposable incomes and a relatively weak exchange rate (Diagram 5). BIS Review 89/2001  5  5. GDP Sweden, percentage annual change before and after bottoming out of economy 1977 Q4 1981 Q1 1993 Q3 1997 Q1 2002 Q2 Forecast  6 5 4 3  6 5 4 3  2  2  1  1  0  0  -1  -1  -2  -2  -3  -3 -4  -4 -6  -5  -4  -3  -2  -1  0  1  2  3  4  5  6  Source: The Riksbank  Unchanged appraisal of the krona’s fundamental value Our assessment of the future exchange rate is somewhat less optimistic than before. This has to do not so much with new information as with the weak tendency in the past year. In the case of a variable that is so notoriously difficult to predict, the assumption about the future is always partly educational. A major aim on this occasion was to avoid an assessment of inflation that could be perceived as unrealistic.

We counted on GDP growth rates last year and this of 4 and 3.5 per cent, respectively. Since then our appraisal of resource utilisation has changed a good deal. We now know that last year’s growth stopped at 3.6 per cent and for this year we are counting on 1.3 per cent. This means that as a percentage of GDP, resource utilisation at the end of 2001 will be between 2 and 3 points lower, which is a marked downward revision. Another aspect is that the slowdown is connected with a weak tendency in the rest of the world. Consequently our assessment of international export prices has also been revised downwards and this, too, counters the inflationary impact of the weaker exchange rate. So although we continue to point to the weak krona as an inflation risk, this risk now seems to be smaller, mainly in view of the downward revisions of capacity utilisation. In June we had some additional factors to consider. The krona suddenly weakened dramatically in the absence of a general increase in financial unrest. This suggested that the causes were specific for Sweden. As inflation had moved up appreciably more than expected in the previous months, this was particularly troublesome. Although a large part of the increased inflation was presumably transitory, the Riksbank perceived a risk of higher inflation expectations. Rather than take that risk, we decided to raise the interest rate and intervene in the currency market.
When making any such adjustments, we will naturally continue to safeguard the foundations on which the Swiss Money Market Value Chain is built – most notably: the spirit of joint enterprise; close cooperation between SIX, the banks and the SNB; and the fact that interbank trades and monetary policy operations are conducted on the same platform and according to a common set of rules. We at the SNB look forward to continuing to play our part, and we remain committed to supporting the ongoing development of Switzerland’s money market infrastructure. Closing remarks Ladies and gentlemen, we hope we have succeeded in showing you how exciting and varied interest rate steering in the money markets can be. The SNB’s core task is to ensure price stability while taking due account of economic developments. Since the beginning of 2015, our main monetary policy instruments have been the negative interest rate on banks’ sight deposits and our willingness to intervene in the foreign exchange market as necessary. Both instruments remain essential in the current environment to ensure appropriate monetary conditions. This afternoon, we have also discussed some of the developments that occurred in the Swiss franc money market in response to several adjustments we have made over the past 17 Page 12/13  months. Specifically, in our monetary policy strategy we switched to the SNB policy rate and, in the calculation of the negative interest charges, we have twice raised the aggregate exemption thresholds and have thereby significantly reduced the interest rate burden on the banking system.

Speech  Embargo 5 November 2020, 4.00 pm  Monetary policy implementation: How to steer interest rates in negative territory Virtual Money Market Event  Andréa M. Maechler and Thomas Moser∗ Member of the Governing Board / Alternate Member of the Governing Board Swiss National Bank Webcast, 5 November 2020 © Swiss National Bank, Zurich, 2020  ∗  The speakers would like to thank Peter Kuster and Tanja Zehnder for their valuable support and astute insights when drafting this speech. They also thank Roman Baumann and Mico Loretan for their comments as well as SNB Language Services for the translations of the text. Page 1/13  Ladies and gentlemen Good afternoon to all of you. On behalf of my colleague Thomas Moser and myself, I would like to welcome you warmly to the Swiss National Bank’s first-ever virtual Money Market Event. I am delighted that we are all able to interact in this way, even though the circumstances which necessitate the virtual format are anything but pleasant. The coronavirus crisis has turned the lives of billions of people upside down. Many have contracted or even died from the disease, and many others have lost their jobs as a result of it. Given all of this, the fact that the SNB has been forced to break with an almost twenty-year tradition and refrain from holding a physical Money Market Event is little more than a side-note. But it is regrettable all the same.
A related problem is that it is extremely difficult for management to observe the risk being taken on by their traders, particularly when innovative financial instruments have unusual return distributions. Take, for example, a deeply out of the money option. This pays a steady income premium and has little variation in value when the underlying instrument is a long way from the strike price, but generates rapidly escalating losses in bad states of the world. In good times this looks like a high return, low risk instrument. Only in very bad states of the world do the true risks taken on become apparent. Information problems Information problems have also been central to the crisis. Most of the asset-backed securities that have proved toxic are far from simple. A plain vanilla Residential Mortgage Backed Security (RMBS) typically contains tens or hundreds of thousands of underlying mortgages and even the documentation on them can run to a couple of hundred pages. These instruments provide diversification, but unless the mortgages are fairly homogenous in nature, it will be difficult for an individual investor to monitor the evolution of the underlying risk exposures at all precisely. The problem is compounded when the pool of mortgages is continually topped up to replace maturing mortgages, as is the case with Master Trusts, as the characteristics of newer cohorts may differ from those of older cohorts. 8  BIS Review 101/2009  In addition, US RMBS contain embedded options that further complicates the evaluation of their worth.

But when market participants can claim, as David Viniar, the Chief Financial Officer of Goldman Sachs, did in August 2007 that they “were seeing things that were 25-standard deviation moves, several days in a row” it is a sign that something must be badly wrong 4 . Wrong, that is, not with the world, but rather with market participants’ estimation of risk. A particular feature of this underestimation of risk lay in the prevalent assumption that bad shocks were likely to be uncorrelated with each other. Thus the management of Northern Rock probably believed that if they were unable to roll over their short-term wholesale funding in the Asset-Backed Commercial Paper market, then they would always be able to find an alternative source of funds in the inter-bank market. But as it transpired, the same forces that led to a shutting down of the former in August 2007 also led to the closure of the latter at all but very short maturities. By the same token, many investors thought they had purchased relatively safe securities because there were insured against default by the monolines or through the purchase of CDS contracts. But that insurance proved worthless when large correlated losses occurred and the insurers proved to have insufficiently deep pockets. A systemic financial crisis is apt to generate dysfunctions in multiple markets simultaneously, making bad tail outcomes much more likely to occur than they appear when risks are treated as largely independent.
By not aiming to bring inflation back to the target as quickly as possible, the central bank would help to stabilise the real economy. How long it should take to return inflation to the target depends, among other things, on the type, magnitude and duration of the shock that has occurred and the importance that the central bank attaches to real economic stability. A difference between the outcome and the target for inflation may thus be deliberate. It may be part of an appropriate compromise between stabilising inflation and stabilising the real economy. It is, therefore, simply not good enough to just compare outcomes and targets for inflation in an evaluation of monetary policy. What does flexible inflation targeting entail? Before I begin to discuss what evaluations of monetary policy should focus on, let me go into a little more detail about what characterises flexible inflation targeting. As I have already said, flexible inflation targeting entails the central bank striving to stabilise inflation around the inflation target and at the same time to stabilise the real economy. Stabilising the real economy may be more precisely described as stabilising resource utilisation at a normal level. There is an asymmetry between the impact of monetary policy on inflation and its impact on the real economy that it is very important to understand. Monetary policy can affect both the average level and the variability of inflation. Monetary policy can not, on the other hand, affect the average level of real quantities such as production, employment and resource utilisation.

Our current approach to ensure firms are able to continue to operate core functions in a major operational disruption involves ensuring that firms have primary and secondary sites at a safe distance from each other and the capacity to switch operations between the two without any extended interruption in activity. But with cyber such common systems environments between primary and secondary sites and mirroring of data between the two could, in the event of a successful attack, result in a complete loss of systems, disrupting a firm’s capacity to operate and leaving the timeframe and route to recovery uncertain. Unlike most other forms of operational disruption, we know too with cyber that this is not a game against nature. There are groups out there that are motivated to attack the sector. For most, the motivation is economic; that accounts for the rise in fraud. But there are actors out there, sometimes state-sponsored, who may be motivated to bring systems down and cause harm to the sector. Their capabilities vary, but it is in the nature of cyber that attack types are constantly evolving and readily scalable. And the threat is international. Attacks can originate anywhere around the globe. This all implies a different disposition for cyber defence. We should not expect to build an impermeable perimeter that, through technology design, will withstand attack. Rather we should expect the cyber threat to be ever-present, ever-evolving and networks to be penetrated. The capability to identify where this has occurred and to respond is key.
Although Sweden has always contributed financially to the IMF when this was needed, we were not allowed to  2  See IEO (2011), “IMF Performance in the Run-Up to the Financial and Economic Crisis, IMF Surveillance 2004–2007”. 3  Swap lines entail two parties agreeing to exchange currencies with each other. One example from the crisis is the Riksbank’s agreement with the Federal Reserve, through which the Riksbank was able to exchange Swedish krona for USD 10 billion. The aim of this was to increase the Riksbank’s ability to offer dollar loans to borrowers in Sweden. 2  BIS central bankers’ speeches  participate and influence the decisions this time; they filtered down to us from the G20 through the EU. The decisions were thus made by a small circle even though they affected all of the IMF’s then 186 member countries. In order for decisions that concern the global economy to have an impact and be implemented effectively, the countries affected by the decisions must feel that they can participate and that they are able to influence the decisions. Legitimacy is thus a precondition for effectiveness. The world cannot and should not be governed by only the largest and strongest countries. The cooperation between the countries of the world that is required to safeguard global financial stability should take place in strong and effective global institutions with a broad membership. This is why an institution like the IMF is important to small countries like Sweden.

The volume and value of cheques returned unpaid on account of insufficiently funded accounts continued to decrease following the issuance of the directives on dishonoured cheques and direct debit instructions by the Bank of Zambia in the second quarter of 2010. The volume of unpaid cheques decreased by 15% to 4,202 (Quarter 2: 4,929). The public is advised to ensure that they have sufficient funds on their accounts whenever they issue cheques in order to avoid charges. Economic reform programme An IMF Mission was in Zambia from 2nd to 15th September, and 28th October to 3rd November 2010, to conduct the 5th Review under the Extended Credit Facility (ECF) arrangement. Overall, the mission was satisfied with the programme performance and reached agreement with the Zambian authorities on a set of macroeconomic policies and structural measures for the remainder of 2010 and for 2011. The policies and structural measures would pave the way for the completion of the Fifth Review of the ECF arrangement, subject to approval by the IMF’s Executive Board. 4  BIS Review 148/2010  Total disbursed poverty reduction budget support (PRBS) in the third quarter of 2010 amounted to US $ million from the World Bank. A total of US $ million mining tax revenue was received while the Bank of Zambia foreign exchange purchases from the market amounted to US $ million. Preliminary data indicate that the quantitative performance criteria under the Extended Credit Facility (ECF) arrangement were observed as at end-September 2010 and that all structural benchmarks were generally on track.
In what ways have banks been regarded as special? Let me begin then by discussing why, and in what senses, banks have been regarded as special. The term bank, historically and more than ever today, covers a multitude of sins. In practice it refers to a range of very different institutions which may, and do, within legal restraints, engage in a variety of different financial - and even some non-financial - activities whether on their own account or in an agency or advisory capacity. But banks have some key distinguishing characteristics in common. In particular they take unsecured deposits from the public at large. The particular characteristics of bank deposits are that they are capital certain and (more or less) immediately accessible to the depositor, so that they came to be used as the principal means of making payments. In short, because of their convenience, bank deposits became the predominant repository for the immediately liquid asset holdings of the rest of the economy, and the predominant form of money. The attraction of these deposit and payments services depends upon depositors generally having a high degree of confidence that their funds will in fact be available on demand and it depends upon the cost of the services. In providing the services, therefore, the banks need to strike a balance between deploying their deposits in low-yielding, high quality, liquid assets to meet cash withdrawals, and riskier investments to generate a higher return.

Central banks evolved in response to this vulnerability, which gave rise to a readiness to act as lender of last resort to the banking system in situations in which substantial systemic disturbance could otherwise occur and to an on-going concern for the macro-prudential characteristics of the banking system. And while this concern relates to the banking system as a whole, last resort assistance, when it is judged to be necessary, is extended to individual banks because problems of course arise in the first instance at the level of the individual bank. Now, the fact that central banks (in conjunction as necessary with governments) are prepared, in certain circumstances, to extend support in this way encourages bank intermediation; it represents in effect a form of subsidy, implicitly justified as being in the wider interest of the economy. It helps to preserve public confidence; and it enables the banks to take on more maturity transformation or risk than they could otherwise, so lowering the effective cost of their intermediation. But it has long been recognised that if central bank support is made available too liberally - in situations where there is no genuine systemic risk, so that it comes to be relied upon as a matter of course, then that would give rise to moral hazard. The extent of bank intermediation would be unjustifiably expanded.