samchain/econo-pairs-v1 huggingface dataset:
The FOMC also indicated that it anticipates that these caps will remain in place once they reach their respective maximums. Let me spend a few minutes discussing the importance of gradualism and predictability, and how the FOMC’s plan achieves these things. Gradualism To examine the importance of gradualism, we will need to open, once again, the theoretical debate about “stock” and “flow” effects of central bank asset purchases and sales.15 Under the “stock view,” transitions in the pace of central banks’ asset flows should have little direct effect on asset prices. Instead, what matters to asset prices is the present and expected future stock of assets the central bank holds, or is anticipated to hold. The “flow view” suggests instead that the effect on asset prices relates to the pace at which assets are being added or removed from the balance sheet at that time. Many speeches have been given, and journal articles published, about the relative importance of these effects with respect to their impact on financial conditions and the broader economy, a topic that I do not intend to wade into today. 16 Instead, I think it’s important to make a few points on “flow effects” relevant to policy implementation, and in particular related to possible “flow effects” associated with an overly rapid pace. Overly fast flows of securities into private hands can be disruptive to market functioning.

First, I’ll provide an in-a-nutshell summary of the structure of the Federal Reserve’s balance sheet. Then, I will discuss why it is important that the decline in the balance sheet be gradual and predictable, and explain how the FOMC’s plan provides this gradualism and predictability. I will then talk briefly about how the Federal Reserve is ensuring it is operationally prepared for unexpected developments. And then I’ll conclude on a slightly different note: I’ll offer my thoughts on why financial markets seem to have reacted much more calmly to balance sheet news this year than they did during the 2013 “taper tantrum” period. As always, these views are mine alone and do not necessarily reflect those of the New York Fed or the Federal Reserve System. The Fed’s balance sheet, in a nutshell Let’s begin by reviewing, at a high level, where the Fed’s balance sheet is today, and where it is likely to go in the coming years. Although many things about monetary policy are very complex, the basic structure of the balance sheet is actually fairly simple, as is the program of balance sheet normalization. Panel 1 shows a summary of the Fed’s assets and liabilities, as they are today. Substantially all of the $ trillion of assets consist of Treasuries and agency MBS. 3 On the other side of the balance sheet, the Federal Reserve has three main categories of liabilities: $ trillion of bank reserves and other deposits, $ trillion of paper currency, and about $ billion of reverse repos.
First, and most importantly, unlike in the US, allowing inflation to overshoot our price stability definition for the sole purpose of bringing more people back into employment would not be consistent with our primary mandate. The “divine coincidence” applies only insofar as employment developments are consistent with our definition of price stability. Beyond that there is no room for trade-offs. Second, there are doubts as to the likely efficacy of such a policy. We have seen some evidence in the United States that the participation rate can become partially endogenous to demand, as discouraged workers return to job-seeking in a strengthening labour market. But we have seen no such evidence in the euro area. Our participation rate has continued to increase over time. So the question in the euro area is much more whether, or not, long-term unemployment is likely to be amenable to continued policy accommodation. The evidence raises at least doubts. For example, although many claim that monetary policy was too accommodative during the boom years of 2005 and 2006 – as also evidenced by policy rates often being lower than what standard Taylor rules would have predicted – the share of long-term unemployed in the euro area has remained fairly constant over this period. So, even if the desired effects of accommodative policy lead to more investment and employment, it remains questionable whether employers will respond by taking on chronically unemployed or whether they would instead rely on “insiders” whose pay has been stagnant or, alternatively, on fresh university graduates.

For example, on the third slide you can see that in 2013 the European Commission estimated that structural unemployment for 5 2/9  BIS central bankers' speeches  the euro area as a whole was likely to increase from pre-crisis levels of around 8.5% to 11.6%.5 Today, Commission staff believe that structural unemployment in the euro area is closer to 9% – compared with an actual unemployment rate of 9.5% in March 2017. In other words, without the significant downward revisions of recent years, we would currently face a negative unemployment gap in the euro area. And even according to the Commission’s latest estimates, policy-relevant labour market slack would have vanished, by and large. You can see what I’m getting at. If structural unemployment had indeed risen during the crisis to the extent suggested, then we would have expected inflationary pressures to emerge much more rapidly, since the unemployment gap would have been closing faster than otherwise. But this is not what we see in the euro area – or, in fact, in many other economies. Despite a rapid fall in the unemployment rate, wages have remained stubbornly low. Annual growth in compensation per employee hovered around 1.2% since mid-2014 and only increased to 1.5% at the end of last year – substantially below its historical average of 2.1%.6 And measures of core inflation – in its simplest form headline inflation excluding volatile items such as food and energy – have also remained at depressed levels of below 1% for most of the past three years.
I applaud the efforts of state and local governments and community leaders to bolster the recovery in Bridgeport, Stamford and elsewhere in the district. I also met with Joan Carty from the Connecticut Housing Development Fund. We discussed innovative approaches for addressing the foreclosure crisis here and across the state. Housing has been a major impediment to a more rapid economic recovery and we at the Fed have been working hard to help homeowners and the overall housing market recover. Afterwards, I spoke with small business leaders about the opportunities and challenges they are facing today. I traveled to Sikorsky Aircraft Corporation with several goals in mind. I wanted to learn how sequestration was affecting ground-level operations, to understand the local and regional economic impact of Sikorsky, and to view state-of-the-art manufacturing at work. After this program, I will be meeting with Joseph Carbone of The Workplace to discuss best practices and emerging approaches to workforce development, particularly his innovative program for the long-term unemployed which I understand he is piloting in five different cities  BIS central bankers’ speeches  1  across the nation. At the end of the day I will be meeting with University of Connecticut (UConn) Stamford campus staff, your own executive director Chris Bruhl and other officials to learn about the ecosystem that is being created to spur further economic development locally. I’ll end the day with a meeting with Governor Malloy to better understand the complex issues and opportunities facing the state.

The agenda for these visits is always packed, but that’s part of the point – to meet with a diverse array of representatives in order to get a comprehensive picture of what’s happening on Main Street and its interaction with state and national developments. At the end of my talk I will be happy to answer any questions you have about the economic outlook from my perspective. As always, what I have to say reflects my own views and not necessarily those of the Federal Reserve System or the Federal Open Market Committee, also known as the FOMC. National economic conditions I would like to begin by taking stock of where we are at the moment. Then I will address my expectations for the performance of the economy over the remainder of 2013 and into 2014. Since the end of the Great Recession in mid-2009, we have had 15 consecutive quarters of positive growth of real GDP. However, the average annual growth rate over that period has been just 2.1 percent. Although the unemployment rate has declined by 2.5 percentage points from its peak of 10 percent in October of 2009, much of this decline is due to the fact that the labor force participation rate has fallen by 1.5 percentage points over this period. Recall that discouraged workers who do not actively look for work are regarded as not participating in the labor force and so are not counted as unemployed even though they are without jobs.
Our interpretation places emphasis on the Government’s rationale behind the regulation, on the objective as formulated in the first paragraph and on our knowledge about the relationships between the interest rate, the krone exchange rate, output, employment and inflation. The first sentence in the monetary policy mandate refers to the value of the krone. Stability in the internal value of the krone implies that inflation must be low and stable. The regulation also states that monetary policy shall be aimed at stability in the external value of the krone. The krone exchange rate fluctuates from day to day, from week to week, and from month to month. We have free international trade and free capital movements. We do not have the instruments for fine-tuning the exchange rate. But when monetary policy is oriented towards low and stable inflation, this will contribute to a stable krone exchange rate over time. The first paragraph of the mandate sets forth its intentions. The last paragraph specifies what Norges Bank is required to do. The inflation target is set at 2½ per cent. If we take steps to counteract an appreciation of the krone when there are pressures in the economy, we reduce the possibility of keeping inflation at bay and increase the risk of fluctuations in the economy. Maintaining stability in the internal value of the krone must thus take precedence. There are high costs associated with high inflation. It increases uncertainty about future income and expenses among households and enterprises.

Interest rates are changed more gradually with less impact on output than under a strict inflation target, and inflation is allowed to deviate from the target over a somewhat longer period. This is called flexible inflation targeting. (See for example Svensson (2000).) Flexible inflation targeting both provides the economy with a nominal anchor and contributes to smoothing fluctuations in output and employment. In the countries that normally figure in our comparisons, the responsibility for monetary policy has now been delegated to a central bank. The first and most widely known examples of independent central banks are the Bundesbank and the Federal Reserve. The delegation of monetary policy decisions to an independent central bank also finds support in economic theory. It contributes to securing credibility, confidence and consistency because an independent central bank must adhere to its mandate. This increases the scope for monetary policy to contribute to stability. For a discussion of central bank independence, see Hylland (2000). The benefits of autonomy are related to the way in which it induces economic agents to look ahead when making decisions. They take into account economic policy as they expect it will be tomorrow and the day after. It is thus important that the authorities do not sow doubt, but on the contrary act in a predictable manner within a long-term framework. The authorities must be credible and inspire confidence. There must be consistency between the stated objectives of economic policy and what is actually done to achieve them.
In the long run, when inflation is on target and resource utilisation is at its long-term sustainable level, the Taylor rule can be described as follows, 𝑅𝑅𝑡𝑡 = 𝑅𝑅� = 𝒓𝒓∗ + 2,  where 𝑅𝑅� refers to the long-term level of the policy rate and 2 is as before the central bank's inflation target. The long-term policy rate is thus equal to 𝒓𝒓∗ plus the inflation target. If the inflation target is constant, the long-term policy rate, in practice the average policy rate, is determined by 𝒓𝒓∗ . For instance, if 𝒓𝒓∗ declines it means that the policy rate’s long-term (average) level declines at the same pace. We have seen a trend decline in international 𝒓𝒓∗ over a longer period of time, which is an important factor behind the low interest rates in Sweden. I will return to this later. Resource utilisation's long-term sustainable level also plays an important role for monetary policy, but in a slightly different way. The long-term level of the policy rate is namely not affected by 𝒚𝒚∗ , on the other hand, the variations around the long-term level of the policy rate are affected. A simple example can explain why this is the case. Let us assume that resource utilisation is equal to 𝒚𝒚∗ initially and that 𝒚𝒚∗ then rises to a higher level. Resource utilisation is then lower than its long-term level, that is, resource utilisation can be said to be lower than “normal” and we have “an economic downturn”.

This means that we will assess the effects of these measures and adapt them, if necessary: (1) to confirm that they continue to fulfil their monetary policy objectives; (2) to ensure – within our mandate – that the relevant measures continue to support the decarbonisation path to reach the goals of the Paris Agreement and the EU climate neutrality objectives; (3) to respond to future improvements in climate data and climate risk modelling or changes in regulation; and (4) to look beyond climate and address additional environmental challenges, within our mandate. While I understand it is not a specific topic covered in today's conference, a similar commitment to fully incorporate climate-related and environmental risks applies to our banking supervision tasks and responsibilities. In addition to the climate stress test that was concluded by ECB Banking Supervision earlier this year, we will soon publish the results of our thematic review. As part of this exercise, our core banking supervision teams – Joint Supervisory Teams – thoroughly assessed to what extent banks' risk management practices for climate-related and environmental risks live up to the supervisory expectations we published in 2020. We conducted this exercise to assess where banks stand with regard to our expectations and to highlight any gaps they urgently need to close. We will also take the opportunity to identify and share best practices to help banks close any gaps identified.
Svein Gjedrem: The management of petroleum wealth Lecture by Mr Svein Gjedrem, Governor of the Central Bank of Norway, at the Polytechnic Association, Norway, 8 November 2005. The charts can be found on the Central Bank of Norway’s website The lecture does not contain assessments of the economic situation or the monetary stance. *  *  *  The oil age in Norway has spanned 30 years and it appears that it will continue for many years ahead. In this lecture, I will attempt to take stock of how we have managed petroleum wealth thus far. Moreover, I will look at the challenges that still lie ahead. On some scores, our management of petroleum wealth has been very successful. We have managed to define it as national wealth, and have ensured that the bulk of this wealth benefits society as a whole. Both the state’s ownership interests through the State’s Direct Financial Interest in petroleum activities (SDFI) and the tax system have contributed to this. The companies that extract oil earn a reasonable return on their investments and have incentives to invest, but the economic rent has essentially accrued to the general public. My theme today concerns the economic challenges linked to petroleum wealth and certain aspects of government wealth management. The most important economic challenges we would be facing were widely recognised early on. As early as in 1974, in Report no. 25 to the Storting “The role of petroleum activities in Norwegian society”, was discussed in depth.

Economic policy reaction came promptly. In Chile, and other Latin American countries, we implemented a combination of fiscal and monetary policies to stimulate the economy. More important was the fact that probably for the first time, a crisis of the magnitude that affected – and still affects – developed countries, did not cause Latin American economies to enter into a balance of payments crisis or a profound recession. Suffice it to remember what happened in the early 1980s, when our own weaknesses and the shortcomings of economic policies, coupled with a significant rise in interest rates worldwide, dragged us into a deep recession. This is of utmost importance as it shows that we have matured in economic policy framework and that we face the challenge not only of maintaining but also of improving it. After some quarters, the world economy began to recover gradually. This process took place at two speeds. Emerging economies recovered at a fast pace, while developed countries experienced a slower rebound. The causes and consequences of the Great Recession continue to affect economic performance of the developed world. This is so because the fundamental problem, high indebtedness of households, companies and governments, is still present. The fact that the higher the level of debt the more costly the solutions and greater the side-effects, poses a problem. We have been seeing this clearly during recent quarters.
The political complexion of Northern Iraq led to the assumption that the currency used there would have value once regime change had occurred. In other words, the value of the Swiss dinar had everything to do with politics and nothing to do with the economic policies of the government issuing the Swiss dinar because no such government existed. As someone might have said, “it’s the political economy, stupid!” Another illustration of this is shown in Chart 5 which plots the Swiss dinar/dollar exchange rate against the values of futures contracts showing how expectations about the political order in Iraq were evolving.

Luis M Linde: Key issues on today’s banking industry Closing speech by Mr Luis M Linde, Governor of the Bank of Spain, at the 6th Santander International Banking Conference, Madrid, 5 November 2013. *  *  *  I would like first to give my thanks to Banco de Santander for inviting me to take part in this final session of your 6th International Banking Conference, an excellent opportunity to review and assess key issues on today’s banking industry, which has to face, in the next few years, important regulatory and operational changes. I will comment on several elements of the new Basel III capital framework that remain contentious or are still open to discussion. Among those, the leverage ratio, the liquidity ratio and the very important issue of consistency in implementation. Then, I will move on to the Financial Stability Board’s work on resolution strategies and, finally, I will comment on the European Union Bank Recovery and Resolution Directive (BRRD), and one of the most important elements it contains, the bail-in tool. First, the leverage ratio, the ratio between Tier 1 capital and total balance-sheet and offbalance-sheet exposures not deducted from the calculation of Tier 1. This ratio is set, in principle, at a minimum of 3%. Its entry into force as an obligatory Pillar 1 ratio is foreseen to be in 2018. This new tool has been designed as a simple, transparent measure, not linked to risk, complementing and acting as a floor with respect to the risk-based minimum capital ratio.
However, given that vulnerabilities on these markets are still high, the resilience of the banking system remains crucial. In January 2022, the Federal Council approved the SNB’s proposal to reactivate the countercyclical capital buffer. This buffer will come into effect at the end of September and will contribute to maintaining banking system resilience. Page 1/1

Liviu Voinea: Europe - managing the upswing in uncertain times Speech by Mr Liviu Voinea, Deputy Governor of the National Bank of Romania, at the Conference CEPS-IMF Spring 2018 Regional Economic Outlook, Brussels, 15 May 2018. * * * Dear Governor Smets, Dear Director of the IMF’s European Department Thomsen, Dear CEPS Director Gros, Thank you for having me here. It is an honor for me to speak at the launch of the IMF Regional Economic Outlook for Europe. This report is remarkable in many respects: it is comprehensive, well-documented and clearly written, with strong messages and judicious policy recommendations. It comes in times of uncertainty, when the European economy is rebounding, but challenges remain; in particular, the business and financial cycles of advanced economies are so dissimilar to those of the new member states that a distinct analysis is warranted. The first chapter of the report is entitled “Managing the upswing in uncertain times”. The report shows that growth has recovered in advanced European economies and even picked up in the new member states, some of which are now having large positive output gaps. Moreover, growth forecasts are strong in 2018, but growth is not taken advantage of to advance with fiscal consolidation and structural reforms. This recovery has created more than 12 million jobs in the EU since 2013, exceeding pre-crisis peaks. Consequently, unemployment fell by a total of 5 percentage points in NMS and 3 percentage points in EU-15 over the same period.