samchain/econo-pairs-v1 huggingface dataset:
The FOMC's decision to start the process of reducing monetary support for the economy reflected the strength and resilience the economy has displayed early this year, as well as the very high inflation readings of the past several months. In addition to the decision to raise the target range for the federal funds rate, the FOMC communicated two important messages about the likely future course of monetary policy. First, the FOMC indicated that it expects that ongoing increases in the target range will be appropriate.4 Although the FOMC did not make any decisions about future policy actions, its Summary of Economic Projections is informative regarding the thinking on the Committee at the time of the March meeting. The median assessment of the appropriate level of the federal funds rate at the end of next year is expected to be somewhat above the median assessment of its longer-run level.5 Of course, these are only forecasts. Uncertainty about the economic outlook remains extraordinarily high, and risks to the inflation outlook are particularly acute. One of the things we've learned from the pandemic is to expect the unexpected. The actual path for policy will depend on the evolution of economic conditions, the outlook, and risks to the achievement of our price stability and maximum employment goals. 3/5  BIS - Central bankers' speeches  Second, the FOMC indicated that it expects to decide at a coming meeting when to begin reducing its holdings of securities.

By the way, for those of you who are not familiar with Professor Goodhart, he is a renowned British economist with an economic law named after him, the “Goodhart’s Law”. He had had special ties with Hong Kong, as he served on the Exchange Fund Advisory Committee of the HKMA in the 1990’s. Professor Goodhart was also a long-time advisor to Bank of England, and a member of its Monetary Policy Committee from 1997 to 2000. In his recent article “Has regulatory reform been misdirected?”1, he points out that it is individuals in banks, rather than banks as institutions, that take decisions and exhibit bad behaviour. Following this logic, he advocates that financial regulation challenges should be addressed through governance reforms, rather than a focus on just capital and liquidity management. Regulators should apply fines to the people responsible at the time of an offence, whether or not they have subsequently left the bank. In Professor Goodhart’s words, “if a bank CEO knew his own family’s fortune would remain at risk throughout his subsequent lifetime…, it would do more to improve banking ‘culture’ than any set of sermons and required oaths of good behaviour.” Harsh as it may seem, I do see considerable merit in his argument as that would help tackle the root cause of problems, i.e. the lack of accountability for individuals incentivised by short-term objectives.
ASIFMA has supported that journey over the past ten years by improving transparency through market surveys, advocating innovative solutions through white papers and roadmaps, and building consensus on best practices through events like these and collaboration with other industry bodies. 28 The economic opportunities in Asia are immense, and despite the cyclical slowdown, the region’s financing needs will continue to grow. Asia needs to continue strengthening its capital markets, especially its bond markets. Singapore will support Asia’s bond market by introducing a new Asian Bond Grant scheme, encouraging rated issuances, and supporting secondary market liquidity. 29  Please enjoy the rest of the conference. Thank you.

To ameliorate the impact of bank balance sheets shrinking, companies are using technology to experiment with bringing buy-side liquidity into secondary markets. The challenge, as many have observed, is how these solutions can help to maintain liquidity in times of market volatility. 15 Second, companies are staying private for longer. According to McKinsey, in the US which drove the dot-com boom and is driving the “unicorn” and “decacorn” phenomenon, the average age of technology companies going public in 2014 was 11 years, up from 4 years in 1999 13. This has been enabled by the prolonged period of low yields, which has driven institutional investors to seek higher returns from liquidity and credit risk in private markets. McKinsey also found that 150 software companies were able to reach USD 10 billion in value through private financing in 2015, compared to just 10 in 2011. In Singapore, private equity assets under management grew 24% per annum on average for the last five years to over USD 100 billion in 2015. This creates a role for industry bodies like ASIFMA, which are set up around public markets like credit and equity, to support companies on their longer journey in private markets, and introduce the benefits of market transparency and market discipline while the companies remain private. 16 Third, underlying macro trends are supportive of investment continuing to flow from Developed Markets to Emerging Markets. On the one hand, accommodative monetary policies in developed economies will drive an ongoing search for relative yield in emerging markets, including in Asia.
GDP growth per head of population averaged less than 0.1% per year. Just try and imagine those rates of growth. They meant it took more than a millennium for living standards to double. 1  Stiglitz, Sen and Fitoussi (2009). For example, Coyle (2014). 3 Two recent excellent books (Pinker (2018), Rosling (2018)) chart this and other dramatic improvements in societal well-being over time. 4 De Long (1998). 2  2  All speeches are available online at www.bankofengland.co.uk/speeches  2  This growth experience is likely to have had an important psychological, as well as financial, impact. The average person would not see any improvement in living standards over their lifetime. Their lived experience was imperceptibly different than their parents, grandparents or indeed great, great grandparents. People’s lives were lived on a travellator. Rising living standards was not a social norm. Secular stagnation was. You could argue, with some justification, that measures of GDP at this time might have been missing a trick. We did not have any formal, statistical means of measuring incomes and outputs in the economy until well th  into the 20 century, with the development of the National Accounts. And GDP anyway underplays important factors shaping people’s well-being, such as levels of nutrition, infant mortality and longevity. 5  6  Yet, as best we can tell, alternative well-being metrics tell broadly the same story. Rates of infant mortality were unchanged over this period. Life expectancy flat-lined at 30 to 40 years. Levels of calorific intake stood still.

We know that linking compensation to productivity is efficient, but the devil is in the details. Second, the regulation-making process, as very well discussed in Dr. Reddy’s lecture, was also distorted by comprehensive capture by the financial industry. As he explains, this was not only capture of the regulators, but also capture of public policy relating to the financial system. With a little bit of moral hazard, which is exacerbated by regulatory and policy capture, the result was the creation of a very vulnerable financial system. Finally, there was indifference in policy circles. None of us saw it coming, at least not with the intensity with which it arrived, which still persists. Indeed, it was difficult for those of us from emerging markets to think that this could happen in the advanced world. Whenever we had raised a concern we had been told that “these are developed countries,” as an argument that “this time is different”. There were, of course, calls for prudence, in particular from this institution, but we never thought that the consequences would be so dramatic. Markets should provide enough discipline to balance risk and return, but that was not exactly the case. The market functioned poorly. In addition, we had a sense of security given the “decoupling” that took place in the 2000s, in part due to good macroeconomic management, and which became a recoupling by mid-2008 (Dooley and Hutchison, 2009; Korinek et al., 2010).
It is not a theological issue and not solely a political one either. It is a very concrete tool to achieve the full economic potential of the euro area. We must strive to reach such an agreement for the good of the citizens of Europe. It has to be grounded in candid economic analysis and empirical evidence. This discussion is not about “more Brussels”, it is about more growth and jobs in Europe. Clearly, monetary policy cannot be a substitute for economic policy coordination or the lack of reforms. The ECB has worked extremely hard to fulfil its mandate. Yet, there are economic and even political risks to overburdening monetary policy: these are risks to financial stability, to the proper functioning of credit channels, and to central bank independence, as enshrined in the treaties. For that reason alone central bankers need to take part in this debate. The way we have handled the crisis has shown how unprepared and uncoordinated we were. Not only did this episode affect our credibility, it also revealed the economic costs of non-coordination in terms of prevention and management of crises, both at the national and collective level. At the national level, Member States have been lacking the capacity to mitigate large shocks in the EMU context. The non-binding nature of economic policy coordination, as set out in the Lisbon Strategy or the Agenda 2020, is partly to blame.

Zeti Akhtar Aziz: Beyond the global crisis – implications for Asia’s future Welcoming remarks by Dr Zeti Akhtar Aziz, Governor of the Central Bank of Malaysia, at the ADB-BNM-EC Joint Conference: "Beyond the Global Crisis: A New Asian Growth Model? ", Kuala Lumpur, 19 October 2009. *  *  *  Bank Negara Malaysia is pleased to co-organise this conference together with the European Commission and the Asian Development Bank to discuss “beyond the global crisis and its implications for the future of Asia”. It is my honour and great pleasure to welcome you to this conference. This current global economic and financial crisis presents us with a time to reflect on strategies that will promote sustainable long-term solutions in a future where the economic and financial environment is going to be fundamentally different. Although the global economy has since begun to stabilize with signs of recovery, and indeed while an apocalypse has been averted, the road to a full global economic recovery will likely be long and arduous. The re-thinking by the global community on the wide ranging issues that are now confronting the world is taking place on several fronts.
The Committee's statement that ratings should not be 'point in time' but 'must represent a conservative view of a long run average probability of default for the borrower grades' attempts to introduce such a balance. Such ratings ought to be reasonably robust to the normal ups and downs of economic activity. The Committee has backed this up with requirements for minimum lengths of data histories to underlie the internal ratings, so helping to ensure that they incorporate some experience of economic low points. Over-optimism by banks in allocating ratings could also induce procyclicality. The Committee proposes several checks on this. In particular, supervisors will look at the ratings allocated to some individual loans, and also compare the distribution of loans across rating bands with those of different banks. Ultimately, of course, we will have to rely on those charged with daily supervision of banks, backed up by the Pillar 3 disclosure requirements, to ensure that ratings are not set in a way which risks undue procyclicality. Impact of the Basel Accord on SMEs Leaving aside the issue of how the risk sensitive capital requirements will behave over an economic cycle, I would also like to touch on the question of how they may affect the supply and pricing of finance to certain types of borrower. If risk sensitivity means a greater distinction between different types of borrower, we need to consider carefully whether the right outcome has been achieved.

Corporate bankruptcy rates, bank provisioning and write off experience, bond yields and default experience, together with data from any banks that are on internal ratings, could all be used to help the authorities form a view of typical or average credit risk for bank portfolios in their countries. This sort of overall, aggregate monitoring of the adequacy of the standard risk weights will be particularly important for developing countries who may initially face some resource constraints in implementing Pillar 2. It should result in an overall adjustment of the weight on unrated exposures, if risks appear to be higher than the capital set aside to back them. This would need to be reinforced by supervisors assessing for all their standard-approach banks individually whether their write-off rate is compatible with the 'standard' 100% capital weight, or whether a higher figure is needed. Credit risk mitigation So there may be elements in the new Accord that achieve too little risk sensitivity but I think this was unavoidable and, with Pillars 2 and 3 of the Accord, supervisors have the scope to see that they do not give rise to problems. However, I do not want to leave this question before touching on one more issue. This is the extent of the recognition of credit risk mitigation techniques. The new risk sensitive framework goes much further than the introduction of internal ratings - another area of greatly increased risk sensitivity is the new regime for credit risk mitigation. Again, the Committee's proposals here represent a considered and careful balance.
Of course, the principles and continued testing are part of prudent planning, and do not imply that normalization will necessarily begin soon. As always, the views I express are mine alone and do not necessarily reflect those of the Federal Reserve Bank of New York or the Federal Reserve System. The Committee’s normalization principles and plans Let me start by briefly reviewing the statement on normalization principles and plans that the FOMC published following its September meeting. Importantly, this statement is intended to provide the public with information about the eventual normalization process and does not signal a change in the current or future stance of policy. As the Committee indicated in its September post-meeting policy statement, it continues to anticipate that it likely will be appropriate to maintain the current target range for the federal funds rate for a considerable time after the asset purchase program ends, especially if projected inflation continues to run below the Committee’s 2 percent longer-run goal, and provided that longer-term inflation expectations remain well anchored. Many elements of the normalization principles and plans are similar to the principles adopted by the Committee in June 2011, while others have been revised in light of the changes since then in the size and composition of the System Open Market Account (SOMA), the Fed’s securities portfolio, as well as enhancements in the tools the Committee will have available to implement policy during normalization.

If, however, ON RRPs are offered above the level of money market rates that would be produced by IOER alone given prevailing frictions, ON RRPs should become attractive and help to form a floor for money market rates, either directly through increased take-up that reduces reserves or indirectly through the competitive pressure I described. Since money funds – the majority of the Fed’s ON RRP counterparties – don’t face the same balance sheets costs as banks, the floor formed by ON RRPs should be relatively firm. While ON RRPs are a potentially useful tool for monetary policy control with large amounts of excess reserves, FOMC and market participants have noted the potential for very large regular usage to alter patterns of financial intermediation. Further, a fixed-rate structure with no usage limits could exacerbate liquidity pressures during times of stress. 11 The FOMC recently authorized testing of a cap on the total daily usage of the ON RRPs that could help mitigate these risks. I’ll return to these risks and some ways that they may be mitigated in a bit. In sum, arbitrage activities by banks, complemented as needed by ON RRP operations, should cause a higher IOER rate to lead to higher levels of market rates. However, if the pressure on market rates from the Fed’s administered rates turns out to be insufficient, the Committee has a range of other tools – including term deposits, term RRPs, and asset sales – that could be used to help tighten the stance of policy.
Since US banks are increasingly engaged in securities areas, their functions are also subject to the Securities and Exchange Commission (SEC) and consumer lobbies. Regulation may be based on product types such that each regulatory authority specialises in one financial product. Under this framework, a securities regulator will concentrate in the oversight of securities activities, irrespective of the type of financial institutions that are carrying out this business. Functional regulation is generally conducted by two separate regulatory bodies, an investor protection arm and a systemic stability arm. The investor protection arm deals with retail depositors and small investors to ensure fair conduct, equitable competition and customer protection. The systemic stability agency, on the other hand, looks at the larger players and wholesale activities. It would also be responsible for the safety, structure and functioning of all payment systems and financial markets. Preventive measures include capital adequacy requirements; constraints on connected lending and other rules aimed at preventing insolvency; and an official safety net such as lender of last resort or deposit insurance. This approach follows the Goodhart (1995) model, which suggests that the difference in focus and function of investor protection and systemic stability is large enough to justify two separate regulatory bodies in each country to share the regulatory responsibilities. According to Goodhart, the formulation of rules for the safety of the system should be the responsibility of the systemic stability arm.

Stefan Ingves: Monetary policy and financial stability – some future challenges Speech by Mr Stefan Ingves, Governor of the Sveriges Riksbank, to the Swedish Economics Association, Stockholm, 17 May 2010. *  *  *  Every once in a while, developments take a course that turns old truths on their heads and forces new solutions. This is what happened in Sweden in conjunction with the economic crisis at the start of the 1990s, when the policy of a fixed exchange rate reached the end of the road. At that point, we were lucky enough to be able to change track and become one of the very first countries to start to apply an innovation in the field of monetary policy – inflation targeting. In much the same way, the financial crisis, not yet a completely closed chapter, has come to function as a catalyst for reassessment and renewal – not just at home this time, but also on an international level. The spotlight has primarily been focused on the work of maintaining financial stability – but the crisis has also raised the issue of whether there may be lessons to be learned for monetary policy too. Today, I plan to discuss some of the challenges that I believe central banks will face in the future. These challenges exist both in the work on financial stability and in the field of monetary policy – and in the borderland between the two.
The US central bank’s mandate, on the other hand, envisions two goals: maintaining price stability and guaranteeing sustainable growth. No quantitative definition of price stability has been adopted. Another principle guiding the ECB’s monetary policy is the notion whereby, if monetary policy pursues a more stable and less volatile course, that fact will boost its effectiveness, thus increasing the central bank’s long-term ability to influence interest rates throughout the yield curve. This characteristic is particularly important in the context of relatively inert economies such as the euro area economy. On the other hand, a monetary policy that tends to react strongly to new data and to short-term economic developments is less effective in controlling inflation expectations, with the risk that inflation takes longer to return to price stability after a shock. Empirical analysis based on estimating a central bank’s “response function”, typically in the shape of the so-called “Taylor Rule”, proves that monetary policy’s degree of persistence is greater in the euro area than in the United States, even taking into account the 11 different trends in the business cycle. 9  A  stylised  neo-Keynesian  Phillips  curve  can  be  represented  as  follows:  where is the inflation rate, is the expectation factor, denotes the basic process that drives inflation (in other words the output gap), and ut is a shock that puts pressure on costs.

As I have already noted, this is a difficult issue which is likely to keep researchers busy for many years to come. Second, even if one were interested in the rather narrower issue of the impact of Quantitative Easing on the public finances, whether the Treasury ends up with a profit or a loss from the Asset Purchase Facility represents only a small part of the picture. Gilt yields will be lower than they would otherwise have been during the period that they are held in the Asset Purchase Facility, so reducing the cost of financing a given budget deficit. This needs to be factored into any calculation of the implications for the public finances. Rather more significantly, Quantitative Easing is intended to boost spending and activity. In the process, it should raise tax revenues and reduce benefit payments. And, unless Quantitative Easing proves to be largely ineffective, this effect is likely to dominate the other elements of the calculation. Finally, it is worth noting that normal monetary policy, conducted by varying Bank Rate, also generally affects both gilt yields and activity. Consequently, it too has an influence on the public finances, including through the Bank’s balance sheet. Yet we usually do not try to conduct such an exercise. The success of policy is instead judged by whether the macroeconomic objectives are met.