samchain/econo-pairs-v1 huggingface dataset:
This might prove to be beneficial in terms of efficiency gain in the medium term. Inflation may temporarily go under the corridor of the Bank of Albania, but is expected to be within the corridor for most of the year. Monetary policy will make sure that proper incentives  BIS Review 43/2009  3  to hold local currency denominated assets are maintained and that inflation expectations are kept anchored at the target of Bank of Albania. This is expected to also be important in maintaining adequate financial intermediation capacity in the medium term. The profitability of the banking sector is expected to be lower this year, due to lower volume of the profitmaking activities (lower credit supply/demand), potentially higher financing costs and increasing provisions for non-performing loans. But this is not expected to have a substantial effect on capital adequacy and liquidity indicators. More than sufficient capitalization and liquidity parameter of the banking activity will protect the stability of the banking sector and of the financial system going forward. While the international crisis is impacting every country, the magnitude of the impact will depend on length of the international crisis and the state of that country’s economy. Expectations for the recovery of the world economy, somewhere between end of this year – beginning of next year, if materialized, will remove the uncertainty and the psychological boost will likely support the sense of earlier and stronger economic benefits.

In spite of the difficulties ahead, it is deemed that the position of the Albanian economy and of our financial system is balanced and capable of withstanding the impact of this international crisis. In this effort, our economy will find support in factors related with the flexibility of the real sectors and of businesses, the appropriate level of some macroeconomic indicators related with fiscal and monetary areas, the stability of the banking sector and the very limited exposure to nonresident’s assets and liabilities, the ability of the public authorities to maintain fiscal and monetary discipline and to act in a decisive and harmonized way to support economic growth. Thank you! 4  BIS Review 43/2009
The Joint Staff Report presented data showing that primary dealers now account for less than half of trading volumes in the interdealer broker market, but it is important to remember that this is only a portion of the secondary market for Treasuries. As a forthcoming Liberty Street Economics blog post will show, when these data on the interdealer broker market are combined with the dealer-to-customer market data from the New York Fed’s Primary Dealer Statistics, we can see that primary dealers accounted for roughly two-thirds of overall Treasury market secondary trading volume in April 2014, and about 60 percent on the day of October 15, 2014.6 (see the table) So while the primary dealer share of daily interdealer broker volume has fallen below 50 percent, primary dealers still account for the majority of aggregate secondary market trading activity, owing to their important role in the dealer-to-customer market. 3  The best practice guidance and white paper on automated trading are available on the TMPG homepage. 4  Additional information about the conference is available here. 5  The Joint Staff Report is available here. 6  The forthcoming blog post will be published on the Liberty Street Economics website.

We will have many opportunities during the course of this work to discuss with the Committee on Finance how we can develop and improve our analyses. BIS central bankers’ speeches  3
In this respect, it views favourably the transparency exercise conducted by the Basel Committee on the comparability of asset risk weights. The results of this exercise allow an argument to be made for the need to lessen the differences between requirements obtained by applying the standard method and those calculated using internal models, so that the credibility of the solvency ratios should not be compromised. However, we believe they should not go so far as to abandon the use of internal models; rather, standardised models, based on parameters determined by the supervisors, should be used as a reference for internal models. 2  BIS central bankers’ speeches  I should also like to mention here the review of the treatment of the trading book, with the aim of reducing regulatory capital differences between this book and the banking book, thus avoiding regulatory arbitrage. At the Banco de España we broadly concur with these lines of work. However, concerning the review of sovereign risk and in order to avoid undesirable effects and consequences for financial stability, we believe a wholesale approach should be taken, not one that is independent or isolated in respect of each working group. As to the review of the current framework for the treatment of securitisations, I should like to underscore the importance of the calibration of capital requirements associated with securitisations not being excessively conservative, and that the reopening of these markets should not be hampered in an unwarranted fashion.

Are the 16 million unemployed people in the European Union merely an equilibrium, on the one hand, and a statistic, on the other? But for most people the labour market is the market where – for better or worse, in sickness or in health – they sell their time and their skills at a market price. That price determines, in large part, their opportunities and economic welfare. Wage rates have a much greater significance in influencing the distribution of real incomes than do the prices of almost anything else. As a result, the labour market cannot be divorced from broader social and political considerations. If their terminology and language are sometimes insensitive, what do economists have to offer by way of ideas about unemployment? The prize for the most important idea and most insensitive terminology surely goes to Milton Friedman for the concept of the natural rate of unemployment. I shall discuss shortly the significance of this idea for monetary policy. But for a more elegant advocacy of a similar position it is necessary to delve further back in history. This month sees the 75th anniversary of the publication of what Milton Friedman described as John Maynard Keynes’ best book: A Tract on Monetary Reform. It is undoubtedly one of the most persuasive polemics ever written on the subject of monetary policy. To coincide with publication in December 1923, Keynes gave a lecture to the National Liberal Club in which he talked about “the triple evils of modern society”.
But, for me, the case for independence is at least as strong as for monetary policy.23 If anything, decisions on withdrawing the punchbowl are harder, and even more important, during raucous credit parties. Thirty years on, the transformation in the policy-making structures and technologies for financial stability are every bit as great as those for monetary policy. An entirely new system of macro-prudential regulation is now in place, fusing together the micro and macro, the economic and the financial. Through the FPC and PRC, the Bank’s brain and hands are now synchronous. Beer and wine now mix just fine and the jumper-with-tweed-jacket combination is the height of policymaking fashion. In 2012, the Queen and Prince Philip visited the Bank. My colleague Sujit Kapadia used the opportunity to answer the Queen’s question soon after the crisis – “Why hadn’t anyone seen it coming?” Sujit set out the reform steps taken to avoid a repetition. The Royal couple took, I hope, a degree of reassurance. On the way out, the late Prince Philip turned and said: “Oh, just one last thing – don’t do it again”. I think the institutional framework now in place gives us a realistic hope of making good on his request. More than a decade on from the crisis, the financial system is a fundamentally different animal - leverage far lower, liquidity far higher.24 The UK’s largest banks’ activities are protected, additionally, by a ring-fence and systemic surcharges.

The Bank was left with egg on its face, but neither the City nor the economy were scrambled. That was probably as much by good luck as design. At the time, the macro-monetary and financial stability arms of the Bank rarely crossed or co-ordinated. The monetary policy side dealt with the economy, at a macro level. The financial stability side dealt with financial firms, at a micro level. One had a bird’s eye view, 11 12  Bailey (2020). See King and Plosser (1985), and Leeper (1991). 9  All speeches are available online at www.bankofengland.co.uk/news/speeches and @BoE_PressOffice  9  the other a worm’s eye view. But the bird and the worm rarely socialised. The Bank’s macro-economic brain was largely detached from its micro-supervisory hands. You needed only to visit the Bank’s restaurant building in the early 1990s to spot this difference. On the ground floor was both a wine bar and a pub. If you visited the pub on a Friday you would spot the economists, probably in knitwear. If you visited the wine bar you would see the bank supervisors, probably in tweed. Beer and wine do not mix and nor did the beer and wine-drinkers. It was probably just as well there were no systemic crises at the time requiring these two tribes to co-ordinate their analysis and actions. The bank failures of the 1980s and 1990s contributed to the decision to strip the Bank of responsibility for supervising financial firms, soon after monetary policy independence. The two decisions were linked.
And we don’t have much time to succeed, in the very next years. *** In conclusion, let me come back to the natural complement to the Banking Union: the Capital Markets Union. We all agree that we badly need it, even more so after Brexit: here in Eurofi, on 3/4  BIS central bankers' speeches  the Governing Council, and – in principle – around the Ecofin table. But almost nothing, or very little, has been done. One paramount reason for this failure is that our technical product has not so far engaged sufficient political ownership. We need a stronger purpose, a more visible “flag”. Let me suggest one: the implementation of the European Green Deal will require the reallocation of resources towards “green” activities, in a Financing Union for Sustainable Investment. To keep its leadership in the green transformation, Europe must act as a united block in its financing. Moving forward on the Banking Union requires effort, but the rewards will make it more than worthwhile. Thank you for your attention. 4/4  BIS central bankers' speeches

In the absence of a credible nominal anchor in the economy, e.g. in the form of an inflation target, demand increases further. This in turn leads to a tendency on the part of firms to raise their prices, particularly in a situation where production is constrained by bottlenecks. In addition, employees will demand higher wages, and the combined effect will be to create a spiral with rising inflationary pressure, such as we experienced, for example, in the 1980s. Adjustments towards a higher price level can occur over an extended period but will gradually set in motion processes that put a brake on growth. This is a manifestation of the established theory that it is not possible to raise the long-run productive capacity of the economy with short-term stimulation policies. What happens in this scenario if the central bank has an inflation target? When inflationary pressure in the economy increases, the central bank will tighten monetary policy so as to prevent the inflation target from being exceeded. Such a course of events would result in an unfavourable policy mix. The stimulation provided by fiscal policy would be counteracted by the monetary policy, which would mean that even the positive short-term effects of the stimulation would decrease or even become negative. Moreover, if the stimulation provided by fiscal policy is very powerful, this could lead to expectations of an increased risk that the inflation target cannot be upheld, which would then lead to rising inflation expectations and higher risk premiums on Swedish interest-bearing papers.
With this development comes the promise of greater consumer choice, improved access to credit for some borrowers, and greater efficiency and productivity in the traditional intermediary sector. There are also potential resilience benefits from increasing diversity in the provision of financial services (Carney (2017a)). While the sector is probably too small at present to pose a threat to financial stability, there is ample historical experience of risks emerging rapidly in fast-growing sectors if left unchecked. Such future risks might include: conventional vulnerabilities associated with excessive use of leverage and maturity, liquidity and credit transformation; the emergence of new highly-interconnected entities; and cyber and other operational risks. There is also the potential for these developments to make traditional universal banks less resilient, if they are forced to rely on less stable funding sources, for example. A challenge for policymakers is to ensure that the regulatory regime, and the wider policy framework – including the scope of central banks’ liquidity facilities – adapts to keep pace with these developments (Lagarde (2017)).

So the gain in leaning monetary policy against the wind is small in relation to the relatively large costs of such a policy in terms of inflation undershooting the target and negative effects on the real economy. Ultimately, the size of the gains and the costs is an empirical question, as is the question about the effectiveness of macroprudential policy. But judging by the debate in Sweden, both of these questions appear to have been decided already, and it would appear that the only correct point of view is a modified Jackson-Hole consensus, to return to Smets. My impression is that the debate in Sweden has to a large extent been coloured by the few existing quantifications of the costs of leaning against the wind and of the effects of monetary policy on the risks linked to household indebtedness. This is despite all of these quantifications being very uncertain. This uncertainty should also permeate the policy conclusions drawn from the quantifications. Take, for instance, the estimates of the effects of monetary policy on indebtedness.
In fact, to some extent, it has been replaced with a virtuous cycle. As financial markets have recovered, that has led to an improvement in business and consumer sentiment that, in turn, has helped to lift the economy, spurring further gains in financial asset prices. In the same way that the improvement in market conditions is helping to support a sustainable economic recovery, the fact that the recovery in economic activity is a world-wide phenomenon helps mitigate the risk of a so-called “double-dip.” The recovery in foreign demand should help to support the U.S. economy even if U.S. domestic demand grows more slowly than anticipated. Given these developments, the consensus forecast of about 3 percent annualized real GDP growth in the second half of the year appears reasonable. BIS Review 122/2009  1  However, I also suspect that the recovery will turn out to be moderate by historical standards. This is a disappointing outcome in that growth will likely not be strong enough to bring the unemployment rate – currently 9.8 percent – down quickly. I see three major forces restraining the pace of this recovery. First, households are unlikely to have fully adjusted to the net wealth shock that has been generated by the housing price decline and the weakness in share prices. Peak to trough, home prices nationwide have declined by 11.5 percent measured by the FHFA (Federal Housing Finance Agency) index and by 32 percent according to the 20-city Case-Shiller index.

Outright deflation, in turn, would be a dangerous development because it would drive up real debt burdens and make it much more difficult for households and businesses to deleverage. So what are the implications of all this for monetary policy? The first implication is that the federal funds rate target is likely to remain exceptionally low for “an extended period.” The desired policy outcome is a robust recovery in the context of price stability. The second implication is that the Federal Reserve needs to ensure that market participants and the public understand that the FOMC has the tools to exit smoothly from the very low federal funds rate, and that it stands ready to do so when the time comes. On this point, let me be perfectly clear: An enlarged balance sheet and the high level of excess reserves in the banking system will not delay or prevent a timely exit. The angst about the Fed’s ability to exit smoothly stems from the rapid growth of its balance sheet over the past year. In September 2008, on the eve of Lehman Brothers’ failure, the consolidated Federal Reserve balance sheet was about $ billion. Today it is about $ trillion, and it is likely to peak at around $ trillion early next year. Some observers are concerned that this expansion will ultimately prove to be inflationary. Proponents of this view say that the monetary base, the broad monetary aggregates, and total credit outstanding have historically tended to move together with inflation, at least over longer time periods.
Inflation would then admittedly fall back from 3 to around 2 per cent in the course of twelve months but that would be achieved at the expense of very weak growth and employment. GDP growth drops a couple of percentage points in the first year and between 30,000 and 40,000 jobs are lost. So when the year is over a dramatic interest rate cut is needed to restabilise the economy. This example shows that while an increase in inflation could be countered quickly and resolutely, doing so would lead to an appreciable destabilisation of the real economy. In that the Riksbank looks ahead instead and, in the event of deviations from the inflation target, directs monetary policy for a smoother adjustment, such abrupt shifts in the repo rate do not normally occur and real economic development can be more stable. 2  BIS Review 24/2002  The money supply It is a well-established fact that in the long run inflation is a monetary phenomenon. Sizeable, permanent changes in the rate of price increases can be explained by growth of the money supply having been excessively high or low. An alternative to basing policy on forecasts might therefore be to use the money supply as an intermediate target. This presupposes an acceptable correlation between the money supply and inflation in the medium run. Using the money supply as the guide has the advantage that monetary policy can be conducted systematically and predictably.

Other changes, for example a clearer long-term orientation of fiscal policy, with an appreciable reduction of budget deficits as a major component, can also explain the more stable picture. But it does seem reasonable to conclude that the stronger focus on price stability in a number of countries, accompanied by a delegation of monetary policy to independent central banks, has helped to reduce inflation in many industrialised countries. In Sweden the average rate of inflation (UND1X) dropped from around 8 per cent in the period 1970–90 to about 1.8 per cent in 1995–2000. It is also reasonable to believe that the transition to targeting inflation contributed to the reduction of fluctuations in growth and inflation in countries such as Sweden, the United Kingdom, Canada, Finland, Australia and New Zealand. Neither can it be denied that these regime shifts may have played a part in the somewhat higher growth that was achieved in the 1990s compared with the two preceding decades. Flexible rule of action I like to think that our inflation targeting policy and rule of action are flexible, by which I mean that monetary policy is characterised by a rule of action that is simple and clear, making our actions reasonably easy to follow and foresee, at the same time as we are sufficiently flexible to alter our behaviour if this is called for by unexpected economic shocks. The important thing then is to be explicit about the motives behind our actions.
However, I am willing to answer questions on both during the Q&A session. While these two stories are different, they interact in important ways. The unsustainable boom that Iceland experienced during the years 2005–2007 was fuelled by a combination of favourable external conditions, macroeconomic mismanagement, and aggressive domestic bank lending. It may well be that the banks’ international activities and the easy access to foreign credit that came with those activities fuelled stronger growth in domestic bank lending than would have occurred in a more traditional small-country banking system. But we cannot be sure about the magnitude of this effect, as we know that unsustainable domestic credit booms fuelled by capital inflows can very well take place in countries that are not home countries to international banks. As so often occurs in great tragedies, the two stories converged in a grand finale in early October 2008, when nearly nine-tenths of Iceland’s banking system collapsed when its three large cross-border banks – Glitnir, Landsbanki, and Kaupthing – were taken into special resolution regimes on the basis of the emergency legislation that had just been passed by Iceland’s Parliament. By that time, however, the Icelandic economy was already on its way into a recession as a result of the inevitable adjustment of the economy after its serious overheating in 2005–2007 and the currency crisis earlier in 2008. As a matter of fact, Iceland was struck by three negative shocks in 2008.

Finally, the low real exchange rate stimulated exports and other traded goods sector activity. Moreover, the composition of Iceland’s exports is such that they are somewhat less cyclically sensitive than, for example, exports of motor vehicles and consumer durables. The net result was that Iceland’s exports held up well in comparison to world trade overall, as can be seen in Graph 3. Some of these factors were temporary, however, and the price was paid this year. Contrary to earlier (probably unrealistic) expectations, Iceland did not recover from recession in the first of half 2010. That means that Iceland will emerge from recession later than most other countries, many of which began to recover in the second half of 2009. But given the huge imbalances in the Icelandic economy during the boom and the size of the shocks it sustained, this is not surprising when measured against the broader historical record of countries experiencing major financial crises. In both international and historical comparison, Iceland has gone through a deep and a somewhat drawn-out recession, as can be seen from the following graph. BIS Review 139/2010  5  Perhaps recovery has only just started, but the signs of stabilisation are all over the place. The huge current account deficit of the boom period has turned into a surplus if we exclude the accrued interest on the debt of the failed banks, interest that will probably never be paid.