samchain/econo-pairs-v1 huggingface dataset:
So, a drop in house prices probably would lead to a gradual cutback in spending, giving the Fed time to respond by lowering short-term interest rates and keeping the economy steady. Now let’s complicate things. Suppose house prices started falling because bond and mortgage interest rates started rising as the conundrum was resolved, say, because the risk premium in bonds rose due to concerns about federal budget deficits or other factors. Then we’d have the cutback in spending because of the wealth effect, plus there’d likely be further spending cutbacks, as borrowing costs for households rose. Furthermore, a rise in long-term rates would have effects beyond just households—it also would dampen business investment in capital goods through a higher cost of capital. How manageable would this scenario be? Like the wealth effect, these added interest-rate effects operate with a lag, so, again, there probably would be time for monetary policy to respond by lowering short-term interest rates. This obviously would not be a “slam dunk,” but in many circumstances it would seem manageable. A matter of more concern is whether this scenario would lead to financial disruptions that could cause spending to slow sharply and quickly. One issue that receives a lot of attention is the increasing use of potentially riskier types of loans, like variable rate and interest-only loans that may make borrowers and lenders vulnerable to a fall in house prices or increase in interest rates.

Companies are for now able to cover the rapidly rising labour costs from their profit buffers, but in the longer perspective this will inevitably cease to be possible. Reduced profits threaten the ability of companies to invest in higher productivity and in the human capital needed for more complex and highervalue work. I have often said, and it bears repeating again today, that the key challenge in the development of the Estonian economy is how more complex work than hitherto can be accomplished with a smaller workforce. The rapid rises in wage income and household consumption boosted tax revenues in 2014, which in turn improved the state finances and helped lift the state budget to a small surplus in 2014. Going forward it is important that the government stick to the target agreed in the budget strategy of maintaining a nominal budget balance and building up its reserves. •  Here I should note that the purchases of bonds by central banks and the resulting fall in interest rates have encouraged the belief or the conviction that there is a free lunch to be had and Estonia is denying itself a feed because the Estonian state does not issue bonds. We all know full well that there is no such thing as a free lunch. Even were the central bank to purchase one quarter of the bonds issued by the state, those bonds would still constitute a debt that would have to be paid back eventually.
One reflection one can make here is that the criticism really concerns the repo rate being too low, not specifically that it is negative. Low global interest rates are not due to monetary policy There are reasons to begin reflecting on why interest rates are so low. One important observation is that there has been a downward trend in real interest rates around the world for a couple of decades now (see Figure 6). It is not entirely clear why this has happened and why global real interest rates are currently so low, but in general terms it is due to the willingness to save long being greater than the willingness to invest. Another significant factor is that trend growth has deteriorated in many countries following the financial crisis. It is important to realise that global interest rates today are low because of factors that are unrelated to monetary policy. And global real interest rates are an important determinant for long-term real interest rates in individual countries. Monetary policy has to continuously relate to this long-term real interest rate. To put it simply, if monetary policy gives rise to interest rates below the long-term real interest rate, then the policy is expansionary. Correspondingly, monetary policy is tight if interest rates exceed the long-term real interest rate. However, monetary policy can neither influence nor deviate in the long run from the long-term real interest rate.

Bluntly I think we wouldn’t be doing our job if we didn’t do this – but at the same time the competition objective requires us to ride both horses at once. This is doable but it is tricky. It also raises an interesting question about the relative costs of supervising smaller firms versus higher FSCS levies to cover failures, which would merit further study. Fourth, how is technology going to affect all this? This is obviously a huge topic in its own right, and others here will touch on it so I will make only two brief comments. One, in my view the jury is still out on whether Open Banking and/or PSD2 are the gateway to a bigger change. Two, it is notable that some digital banks are making material inroads into the current account market – is this the leading edge of a bigger change, or not? Fifth, might Brexit create opportunities to move further on proportionality for smaller firms? I’ve already talked about the way in which we make the regime tougher for larger firms. This is entirely appropriate, but is not the same as saying we should have a weak prudential regime for smaller firms – indeed, I think that is the last thing we need both from a safety and soundness and a competition perspective. However, there may be a reasonable case that a simpler (simpler, not weaker) regime for small firms would advance both our safety and soundness and competition objectives.
I would like to focus in particular on the results from two different but complementary empirical approaches that sharpen the view on the existence and nature of contagion occurring in the euro area over the course of this year.6 The first approach exploits the possibility of a persistent ability of idiosyncratic events in Greek credit default swap premiums to predict developments in other euro area countries’  4  A previous account of this has been provided in a recent speech by my colleague Vítor Constâncio, who described inter alia how contagion spread the sovereign debt crisis beyond the countries under EU/IMF programmes over the summer (http://www.ecb.europa.eu/press/key/date/2011/html/sp111010.en.html). For further discussions of the links between banking instabilities and sovereign debt problems, see V. Acharya, I. Drechsler and P. Schnabl (2011), “A pyrrhic victory? – Bank bailouts and sovereign credit risk”, NBER Working Paper, no. 17,136, June, or A. Alter and Y. Schüler (2011), “Credit spread interdependencies of European states and banks during the financial crisis”, mimeo., University of Konstanz, June. 5  Like in previous episodes, such effects were not limited to sovereigns. The average CDS premium of a group of 17 large European banking groups – none of which is Greek – showed the largest one day increase of this year. Finally, also non-financial corporations were affected. The Eurostoxx 50 declined by 5.2% on the same day, the third largest one day drop of this year.

Concerning contagion, it is clear that both contagion across sovereign bond markets and contagion between sovereigns bonds and banks distort the working of all three channels on top of any idiosyncratic market malfunctioning. Faced with the risk of profound impairments of the transmission mechanism of monetary policy, the ECB has adopted several non-standard measures in order to maintain a stable relationship between its monetary policy stance and the conditions actually faced by households and firms. I will focus here on the Securities Markets Programme (SMP) adopted by the ECB in May 2010, given its direct relevance for addressing the malfunctioning of security markets. The programme was designed in the form of interventions in the euro area’s securities markets. The liquidity provided by the central bank via SMP interventions is fully re-absorbed by other liquidity operations. The liquidity neutrality of the SMP interventions is one feature making them distinct from “quantitative easing”, which has the very purpose of increasing the liquidity provided by the central bank.9 In addition, quantitative easing programmes have a numerical target for the amount to be purchased. This is not the case for the SMP. Finally, quantitative easing programmes have a much larger size, given their intended aim of “flooding” the market with liquidity. A better-fitting analogy may therefore be drawn between the SMP and sterilised exchange-rate interventions, which likewise do not necessarily have an announced target and aim to correct a misaligned asset price.
And they bring to the forefront French scientific expertise and technology: artificial intelligence, cryptography, distributed ledger technology, etc. Regardless of how they are integrated into the financial sector – via cooperation or direct competition with established players – they make the industry more dynamic. This is also true with regard to the entry into financial services of the Bigtechs, which are often less keen on competition. I’m not just saying this to please the Fintechs that are here with us today. It is a deeply-held belief and a commitment, on my part and on that of the entire ACPR. But what, I hear you ask, are you doing concretely to help the Fintechs in their development? Let me start by reminding you that the Banque de France is working with Fintechs on two levels: via its mission of providing services to the economy – to businesses and SMEs – and via its mission of safeguarding financial stability. Our role as a central bank and supervisor, is to reconcile confidence and innovation. If you would allow me to borrow a metaphor from the history of the railroads – which were originally a major innovation in the 19th century, but also one that was not without its risks – our role is to prevent the train from derailing and to make sure the passengers aren’t afraid to get on board. We therefore need to encourage innovation but also ensure that people trust innovations. At the Banque de France, we have taken various steps to promote innovation.

• In recognition of such trends, the Singapore Exchange (“SGX”) has introduced a “comply or explain” regime for sustainability reporting in 2017, where listed companies are required to disclose and explain their sustainability practices. • ASEAN governments have also imposed regulatory drivers, to assist companies with identifying gaps and areas for improvements in their sustainability eworts [7] . For example, in the mining and minerals sectors, companies are subject to commonly-agreed-upon regional guidelines for assessing and reporting on the awected environment. 15 Đ Đ We are heartened that the WFE has taken the lead in advancing the sustainability agenda in two particular areas: • First, the integration of sustainability with commodity derivatives. The WFE has published a white paper that explores how commodity derivatives exchanges could create new mitigation or investment tools that respond to environmental challenges, and incorporate sustainability elements into existing contracts; Đ • Second, the adoption of sustainable practices and principles. The WFE has partnered the United Nations Sustainable Stock Exchanges to set out a  blueprint to support exchanges in embedding sustainability in their operations. 16 Đ Đ Overall, these eworts will drive wider discussions on sustainability as well as provide guidelines on how WFE members could adopt relevant sustainable practices and principles in their strategies for growth and operations.
The case for monetary policy makers to focus on the persistent component of inflation is therefore clear. But implementing this approach in practice inevitably faces a number of practical problems. In real time, identifying the character and magnitude of the underlying shocks is difficult. The propagation of these shocks to consumer price inflation is uncertain and possibly changing through time, as is the transmission mechanism of monetary policy itself. The lags in monetary transmission are not just long and variable, but also not fully predictable. I address these issues in the remainder of this talk. Nevertheless, the MPC’s focus on the persistent element of CPI inflation is consistent with both its remit – which emphasises that the inflation target ‘holds at all times’ – and with the medium-term orientation of its policy strategy – which emphasises that the Committee seeks to reach the inflation target ‘sustainably in the medium term.’ Underlying these two elements of the framework is recognition that the lags in monetary policy transmission (and the uncertainties surrounding them) rule out controlling inflation on a short-term month-to-month basis. Attempts to control inflation at that higher frequency risk becoming a source of additional volatility, rather than a contribution to containing it. A well-designed policy will focus on the medium term and thereby emphasise the persistent components of inflation that threaten to cause deviations from the inflation target at that horizon.

I will therefore discuss in some detail why regulating banks’ capital is necessary and why it promotes financial stability. 2. High leverage as a main cause of financial fragility  The Swiss economy is far from the epicentre of the current financial crisis. Yet, the two big Swiss banks have been hit particularly hard by recent events. This is to a large extent the consequence of their extraordinarily high leverage. For some years now, we have argued that their high leverage makes them particularly vulnerable to extreme financial shocks. 1 Looking at risk-based capital measures, the two large Swiss banks were among the bestcapitalised large international banks in the world. Looking at simple leverage, however, these institutions were among the worst-capitalised banks. With the benefit of hindsight, we clearly should have put even greater emphasis on the risks of excessive leverage. Excessive leverage is by no means a problem uniquely associated with the two big Swiss banks. There is increasing international recognition that excessive leverage has been a crucial contributing factor to the current crisis.
I wish ING Public Takaful Ehsan every success in its endeavors and look forward to its meaningful contribution in driving the takaful industry and Islamic finance in Malaysia forward. BIS central bankers’ speeches  3

Let me end with a few reflections about European financial integration in my capacity as Governor of the Bank of Spain. European financial integration should also be further enhanced by taking further steps to cover the existing gaps in the Euro area financial architecture that still prevent the complete eradication of fragmentation risk among European countries. Completing these well-known gaps by finalizing the Banking Union should also come to the fore of EU financial policy priorities. While banking activity transcends national frontiers, and supervisory and resolution powers have been transferred to common institutions, the guarantee on deposits is still borne by Member States. Completing the third pillar of the Banking Union, namely a fully-fledged Deposit Guarantee Scheme, will not only provide a credible safety net for depositors in an integrated banking market, but also will provide the necessary legitimacy of any institutional arrangement. In sum, completing the Banking Union is a crucial ingredient in helping to create the appropriate institutional and regulatory conditions for banks, investors and other stakeholders to adapt to the profound challenges the financial sector is and will be facing in the future. Many thanks for your attention. 3/3
Chart: The real interest rate minus the neutral real interest rate However, both in 2004 and following the financial crisis in 2008, the real interest rate was almost 2 percentage points lower than the estimated normal interest rate, with a somewhat larger gap after the fall in oil prices in 2014. Looking back, we can safely say that the Norwegian economy fared relatively well through these downturns, with some help from other factors. After the financial crisis, high oil investment cushioned the downturn, and in 2014 a weaker krone gave the economy an extra boost. In addition, fiscal policy provided substantial support in both cases. A future severe downturn could have a greater impact, with more pronounced declines in both employment and inflation. We must therefore take into account that situations could arise that require measures other than cutting the policy rate towards zero. So we should examine the contents of the monetary policy toolkit in Norway and ask not only when the tools should be used, but also how far the limits of monetary policy should be stretched in such a situation. The policy rate The policy rate is the key monetary policy instrument. Monetary policy is effective when changes 2/9  BIS central bankers' speeches  in the policy rate pass through to market rates. Monetary policy is more effective when central banks successfully influence interest rate expectations. A downturn in the Norwegian economy should initially be countered by lowering the policy rate.

But an environment in which borrowing is free and the real interest rate is considerably lower than trend growth in the economy is unlikely to be sustainable over time. Chart: Estimates of the neutral interest rate The neutral interest rate cannot be observed and must be estimated. In the Bank’s Monetary Policy Report, the current neutral real interest rate in Norway is assumed to be around zero. The estimate is based on calculations from a range of different models. As we can see in the chart, these calculations show that the neutral interest rate has fallen to a historically low level close to zero over the past 20 years. With an inflation target of 2 percent, this means that setting the policy rate at zero would enable us to bring the real interest rate down to 2 percentage points below its equilibrium level.1 2 In Norges Bank’s assessment, monetary policy has sufficient room for manoeuvre with an inflation target of 2 percent. First, international experience has shown that the room for manoeuvre in monetary policy is not exhausted when the policy rate is close to zero. I will come back to this. Second, our calculations show that over the past 20 years, the real interest rate has normally remained less than 2 percentage points away from its estimated equilibrium level.3 This may suggest that a real interest rate that is 2 percentage points below equilibrium has in most cases provided sufficient economic stimulus.
It was also Rojo who, in the final stage of his mandate as governor of the Bank of Spain, designed and put into practice the prudential regulatory mechanism of dynamic provisioning. This has contributed to reinforcing the stability of the Spanish banking system and today commands wide recognition; but, when initially launched, it aroused understandable rejection by Spanish banks and was met with indifference on the part of the international community of banking regulators and supervisors. Let me give you the background to this prudential and countercyclical regulatory mechanism. The origins of Spanish dynamic provisioning must be sought in credit developments in the late 1990s. Having emerged from the 1993 recession, the worst for 40 years in Spain, the economy, and much more intensely so bank lending, began to expand at an increasingly brisk pace. The Bank of Spain was led to introduce dynamic provisioning, which came into force in mid2000, by a combination of factors. These included most notably: the mix of strong credit growth, with the dangers this entailed for the stability of the financial system; heightened competition, which acted to exacerbate these risks given that credit institutions applied increasingly lower risk premia to maintain their market share; the deterioration in the level of loan loss provisions and their extremely high correlation with current default rates; and, finally, the Bank of Spain’s past supervisory experience.

We are fortunate in having been able to grab him for a couple of hours today while he is briefly passing through Hong Kong. It is my pleasure to welcome him and to join with you all in the launch of this seminar, which will, I hope, be the first of many organised by the MPC over the coming months and years. 8. Finally, let me record my gratitude and congratulations to all the Committee members of the MPC for the excellent work they have put into the reconstruction of the Committee, and my thanks to everyone here for supporting this event today. 2  BIS Review 3/2001
And that means it will have less scope to respond to slowing demand – the risk posed by the current turmoil in financial markets. 6  BIS Review 22/2008  Annex: Charts2 Chart 1: CPI fanchart from February 2007 Inflation Report, and outturns Percentage increase in prices on a year earlier  Chart 2: GDP fanchart from February 2007 Inflation Report, and outturns Percentage change in output on a year earlier  4  CPI outturns  6 5  GDP outturns 3  4 3  2 2 1  1  0 0 02  03  04  05  06  07  08  09  10  Chart 3: CPI fanchart from February 2008 Inflation Report  2  -1 02  03  04  05  06  07  08  09  10  Chart 4: GDP fanchart from February 2008 Inflation Report  All fan charts and probability bar charts shown are conditioned on market interest rates.

The National Bank of Romania invites you to an anniversary concert performed by exceptional artists of the “George Enescu” Philharmonic Orchestra, conducted by the renowned conductor Horia Andreescu. We will also be delighted by the talent and virtuosity of a young pianist, Andrei Licareţ. All these artists will give us a great joy in this splendid hall of the Romanian Athenaeum with a programme comprising well-known musical compositions from the national and international repertoire, selected from the “Eastern flank” of the European Union: Enescu, Smetana, Chopin, Bela Bartok, Grigoraş Dinicu. I thank you once again and I invite to take the floor Mr Jean Claude Trichet, the President of the European Central Bank, a close friend of the National Bank of Romania. 2  BIS Review 114/2010