samchain/econo-pairs-v1 huggingface dataset:
Instead, the decision whether to act depends on whether appropriate tools can be deployed to limit the size of a bubble and whether the benefits of acting and deploying such tools are likely to exceed the costs.”12 On the other hand, there is a financial stability case for doing more purchases in the current context. To the extent that risky behaviors and incipient asset price bubbles are fueled by an expectation that interest rates will be “low for long,” asset purchases that strengthen the economic recovery and bring forward the date of liftoff should promote financial stability. Also, to the extent that asset purchases increase the likelihood of a sustainable recovery, this reduces the financial stability risks associated with a Japanese-style outcome of chronic deflation. Although the costs specific to the asset purchase program appear well-contained, it is also true that the costs increase as the program gets larger. In part, this is due to fact that as the balance sheet increases in size, the risk of a period of low or zero remittances to Treasury also increases. As we acquire more longer-dated assets funded with reserves, the Fed takes on more interest rate risk. This is how the policy works. A byproduct is that our net income and remittances will be unusually elevated for a while, then are likely to fall substantially for a period, before returning to more normal levels. This is because our interest expense will increase substantially when we begin normalizing rates.

Compared to those episodes, the risk of a spike in long-dated yields this time around may be somewhat lower for two reasons. First, this risk is receiving much attention. Big market moves are typically associated with surprises. For the market to reprice suddenly, I presume there would need to be some new information that led investors to significantly revise their view of the outlook or the Fed's reaction function. Second, the Fed's expansion of its own balance sheet may be a stabilizing influence. For example, the rise in interest rates during the prior episodes was amplified by convexityrelated hedging generated by the lengthening of expected mortgage duration. This should be a less powerful force this time around because the Fed holds a substantial portion of the agency MBS market. However, we should keep up our guard. The regulatory community must continue to take steps to mitigate the vulnerability of the economy to a sharp rise in long-term rates. This includes monitoring banks’ exposure to duration risk and the quality of their risk management and capital planning, while also looking outside of the banking system because some risks may reside elsewhere. In this regard, agency mortgage REITs and the risk of large outflows from bond mutual funds are issues that deserve ongoing attention. Conclusion The FOMC is committed to the dual objectives of maximum sustainable employment in the context of price stability. Currently we are falling well short of our employment objective and the restrictive stance of federal fiscal policy is a factor.
Since the crisis, it is clear that some banks have re-oriented their business model with an explicit eye to recreating personalised trust with their customers. For example, some banks have consciously expanded their branch network and extended opening hours to include evenings and weekends. For example, Handelsbanken has opened more than 140 branches – growing its UK network by nearly four times – since the height of the financial crisis. 45 Metro Bank now has over 40 ‘stores’, having arrived in the UK less than six years ago. 46 Other challenger banks are following hard on their heels. The aim here is to create, or re-create, the local bank. It is a back-to–the-future model of banking, one in which “knowing your customer” is a business prerogative, not a legal imperative. Some have argued this is a valiant but ill-fated attempt to hold back the tide, as other retail businesses retreat from the high street. And perhaps that is right. Or perhaps banking, or at least parts of it, is different. As a trust-based service, perhaps a banker is more like a high-street doctor or hairdresser than a clothes retailer. Time will tell. For what it is worth, early indications – including from the New City Agenda’s own research – offer some grounds for encouragement that some of the new entrants may be breaking the cultural mould of banking. 47 Some are certainly scoring highly in terms of customer satisfaction.

These measures consider not only sentence length but also the number of polysyllables (words of three syllables or more) and the average number of syllables per word. 14  BIS central bankers’ speeches  might be for banks in future to begin publishing self-assessments of their culture, so that customers could have some better sense of the progress being made. If these are important communications lessons for financial services serving society, they are no less important for public policymakers serving society. Let me take my home institution as a case study here. That is not because I believe it is an outlier – if anything, I think the Bank is at the frontier of central bank best practice on transparency and openness. It is simply the example I know best. The Bank has made considerable efforts to improve its openness and transparency over the past few decades, including through published reports of its analysis and decisions, published minutes of those decisions, speeches and Parliamentary appearances. To bring that point home, consider a simple measure of transparency as it applies to monetary policy: the number of words used to describe a policy decision. Back in 1989, when I first joined the Bank, monetary policy decisions were made by the Treasury. Their public communication typically took the form of a press release, usually comprising no more than a few hundred words. Ten years on, the monetary policy world had changed.
The reserves accumulation carried out by the Bank in the past few years, as well as management thereof – details are provided in an Appendix – should suffice to confront extreme episodes. Chile also has sovereign wealth funds that could help alleviate the financing needs in case of increased external tensions as well. The foreign funds of institutional investors can also act as stabilizing agents in this sense. On the other hand, we must always bear in mind that any intervention has associated costs. First, it can blur the objective of the Central Bank: inflation or exchange rate target. In our case, we have dealt with this problem by carrying out transparent, sterilized interventions, with a publicly known timetable that does not conflict with the formulation of monetary policy. In addition, our communication has been straightforward in stating that the objective of our monetary policy is price stability. Second, an intervention entails a significant financial cost for the Central Bank and the country. International reserves are invested in highly liquid assets abroad, whose yield is lower than the interest paid on the debt securities in pesos that are used to sterilize the purchase. In the current scenario, in which external-domestic interest rate differentials are significant and expected to remain so for some time, the financial cost of holding reserves is substantial and negatively affects the Bank’s balance sheet continually.

Actually, if this phenomenon occurs within a context of sudden drops in the copper price or costlier external financing, difficult adjustments could be necessary. The current macroeconomic scenario poses significant risks, demanding policy responses in different directions. On one hand, although so far its effects have been mild, the external situation is severe. Chile is a small economy, commercially and financially open,  6  BIS central bankers’ speeches  so it will not be immune to global developments. The probability of extreme events has not diminished, and their materialization could have very severe consequences on output around the world, including Chile. On the other hand, the strength of domestic demand and output, together with recent increases in some commodity prices, means that medium-term inflationary risks remain present. The MPR is within a range of values that are considered neutral, providing flexibility to wait for the concrete effects of such scenarios on the Chilean economy to become visible. The Board monitors closely the evolution of the external and internal macroeconomic scenario and its implications on inflation, and reiterates its commitment to conduct monetary policy so that projected inflation stands at 3% over the policy horizon. Allow me some final remarks. Final remarks Our latest presentations to the Senate have been marked by periods of high volatility or relative calm in international financial markets.
Empirical research in recent years has shown that both the average rate of inflation and its variability tend to decline in tandem with increased independence for central banks. This is why so many governments, including those among the emerging market economies, have been providing their central banks with increased autonomy. Of course, it is possible to have low inflation or price stability even with a limited degree of legal central bank independence, but the record clearly shows that a country is more likely to have low inflation if its central bank is independent. One important reason for this is that the fiscal authorities in many countries have not proven to be highly disciplined. Of course, some would argue that focusing on price stability as the primary goal of monetary policy means that central banks would no longer be concerned about output or job growth. I believe this view simply is wrong. A stable price and financial environment almost certainly enhances the capacity of monetary policy to fight occasions of cyclical weakness in the economy. A central bank’s commitment to price stability over the longer term does not mean that monetary policy can ignore the short-term impact of economic events. It is important to recognize that, even when an economy is set on the path to price stability, and price expectations are contained, it does not necessarily mean that all potential sources of inflationary shocks have been eliminated.

This is true even in countries with highly developed capital markets, especially when it is kept in mind that participants in the capital markets rely heavily on the banking system for their financing facilities. Banks cannot play an effective role in the financial intermediation process unless the public has the utmost confidence in the banking system. This confidence is a key reason why banking institutions and banking instruments are crucial to a country’s economic growth and development. The combination of functions typically provided by commercial banks, however, also carries with it the risk that a loss of confidence in an individual institution can spread to the system as a whole, the so-called systemic risk phenomenon. Instances in which a country experiences a loss of confidence in its financial institutions usually result in major damage to the economy. Given the indispensable role that financial institutions play in the success of a country’s economy, governments clearly have a responsibility to subject financial institutions to some form of regulation or oversight. But here again, there is need for balance. Restrictions placed on banks by the financial oversight apparatus cannot be allowed to discourage risk-taking per se, because risk-taking is an inherent part of banking and finance in market economies. To perform successfully, a commercial banking system requires a delicate balance between risk-taking and maintaining public confidence.
The disadvantageous levels of human capital compared with those in other developed economies are apparent in both workers and employers. On Eurostat data, in Spain 40.5% of the self-employed, 35.1% of employers and 32.6% of employees have a low educational level, compared with much smaller percentages (24.8%, 20.1% and 19.8%, respectively) in the euro area as a whole. 6  See, for example, D. Acemoglu and P. Restrepo (2018), “The Race between Man and Machine: Implications of Technology for Growth, Factor Shares, and Employment”, American Economic Review, vol. 108, pp. 1488-1542. 12/18  Spain also has a shortfall in terms of the proportion of the population with profiles related in some way to disciplines such as engineering or mathematics. For example, 9% of university graduates in Spain have qualifications in mathematics, science or IT, compared with 14% in Germany or 11% in the European Union as a whole. It is also foreseeable that the massive eruption of new technologies will result in greater importance being afforded to non-cognitive skills (such as a desire to innovate, self-control, ability to concentrate, or adaptability to a changing environment),7 in which Spain also performs poorly in the international comparison. It therefore seems advisable to rethink the institutional design of the educational system, the content of the curriculum and the learning system itself. In this respect, it is crucial to treat this project of improving human capital as a collective task.

Speech Central Bank of the Republic of Turkey  Prof. Şahap Kavcıoğlu, Governor CBRT 89th Ordinary Meeting of the General Assembly 30 March 2021, Ankara  2  Esteemed Shareholders, Distinguished Guests On the occasion of this meeting, I would like to express my pleasure to be here with you today as the Governor of the Central Bank. I believe that we will duly fulfill our responsibility with all my colleagues at the Central Bank in the period ahead, and I wish that the new period will be beneficial to our country, our nation and our Bank. Today, we are holding this meeting under safety measures due to the coronavirus pandemic going on for the past year, which has deeply affected both our daily lives and world economies. I salute all the stakeholders and audience attending our General Assembly meeting either in this hall or in front of their screens. The pandemic that has been going on for over a year has caused, among other things, economic challenges and uncertainties all over the world. As you know, the measures that have been put in place to curb the spread of the pandemic since the first quarter of 2020 have adversely affected growth performance of economies all over the world. For this reason, countries have tried to mitigate the potential impact of the pandemic on their economies through expansionary monetary and fiscal policies.
During the recession we have been trying very hard to stimulate the economy – but always with an eye on inflation returning to the 2% target in the medium run, as we are required to do. If QE has contributed to inflation still being somewhat over-target at around 2 ½% now, that seems to me a much better outcome than the alternative of a deeper recession and a greater risk of deflation. We have had our critics over the past few years and an open debate on monetary policy is to be welcomed. But I have not heard anyone suggest a more convincing or attractive policy stance for monetary policy than that which we have pursued. The question now is what we should do with monetary policy as these shocks work their way out of the system. It feels as if monetary policy has done well to underpin the economy and to stop recessionary forces from gaining the upper hand. But it hasn’t been sufficient to generate a return to trend growth yet, let alone any catch up. The reason may be in the real balance sheet adjustments that I have described. Low interest rates and increases in the money base make the economy very liquid. Those with excessive debt levels can take their time to adjust in an orderly fashion.

If the downward revision to income expectations proves to have been justified then the level of output is unlikely to return to its previous path. We don’t know yet – it will depend in part on how persistent these shocks turn out to be – but this is clearly important to the longer-term outlook for both growth and inflation. In the near term, whatever the source of the changes in perceptions of permanent income, it is likely that growth will continue to be below the previous trend until more of the real adjustments to balance sheets across the economy have been made. That includes households, the public sector, banks and other businesses. In my view we are maybe two thirds to three quarters of the way through in each case, varying both across and within sectors. There is nothing scientific or “official” in that assessment! It’s just a personal best guess on the back of how the economy is behaving plus some direct knowledge of the progress of the banks with their deleveraging plans. To be clear, we do not need to be 100% finished before growth strengthens at all, and we may be beginning to see some signs of a pick-up. And I think this prognosis is consistent with our Inflation Report central projection of  BIS central bankers’ speeches  3  a gentle, albeit sustained, recovery over the next three years. That is a somewhat sobering, but not calamitous, outlook for real growth.
If the differences are worth only a few basis points on the fed funds rate, then having a good indicator of financial conditions is not going to be a very important input in the formulation of monetary policy. In contrast, if a shift in financial conditions implies that the fed funds rate path was “off” by a hundred basis points relative to what actually occurred, then this obviously has big implications for monetary policy. The development of equilibrium models that incorporate financial conditions in a meaningful manner might prove helpful in answering these types of questions. 5 In addition, I would like to know how the various linkages have changed over time. Is the linkage between the fed funds rate and financial conditions as measured by the new FCI  4  See, for example, Tobias Adrian and Hyun Shin, manuscript in preparation for the forthcoming Handbook of Monetary Economics, volume 3, currently circulated as Federal Reserve Bank of New York Staff Reports, No. 398, October 2009. 5  The work of Vasco Curdia and Michael Woodford referenced above is one step in this direction. 4  BIS Review 23/2010  loosening over time or not? If so, why is this happening? Is it due to financial market innovation or the growth in share of the non-bank financial sector? I also would like to know how the linkage between financial conditions and the real economy is changing over time. If this is happening, what are the implications for macroeconomic stability and monetary policy?

Apart from monetary policy, the SNB has other ways of contributing to system stability. The law clearly specifies that the instrument of monetary policy is directed at ensuring price stability. In other words, using monetary policy to promote the stability of the banking system while accepting the possibility that the objective of price stability might not be fulfilled, would be inadmissible. What is more, any gain in the stability of the banking system at the cost of price stability would be temporary, at best. Experience has shown that, in the long term, the absence of inflation is a necessary pre-condition for stable banking systems. Finally, the paper points out that the SNB is already including system stability considerations in its monetary policy decision-making process, and is examining the possibility of utilising synergies between system stability and monetary policy more extensively. Naturally, there are many more challenges with respect to the relationships between system stability and monetary policy. One of these challenges is liquidity management at commercial banks. It is apparent that liquidity standards that are desirable in terms of the public interest may be more exacting than those pursued by banks in their own private interests. Like other central banks, the SNB is currently looking more closely at the examination of existing liquidity standards. In this area, it is working with the SFBC and engaging with the central banks and supervisory authorities of other important international financial centres in information-exchange and opinion-building activities. BIS Review 7/2006  1
In Sweden, these assets have increased from around SEK 6,000 billion to around SEK 14,000 billion over the past ten years, see Figure 5. Moreover, household saving in funds and pension companies, as a complement to ordinary bank savings, has increased. This development has meant that households have also become more sensitive to various shocks on the financial markets. Banks also rely to a large degree on market financing, see Figure 6 and it is not risk-free for them either. A large part of the short-term borrowing is moreover in foreign currency, particularly in US dollars. The fact that market financing is so large may be partly due to the Swedish pension system. If the collective pension savings contribute to household savings declining, it will reduce the banks’ opportunities to obtain financing in this way. They will then be forced to instead issue their own bonds on the market and that they also borrow abroad could depend on pension savings to some extent taking place in assets in foreign currency. 32 The development towards an increasingly sophisticated financial system, with more market financing, is essentially positive and actually reflects that “everyone has become richer”. When total global wealth increases, we need a larger and more developed financial system to administer it. The Swedish banking system only consists of a few actors who are closely interconnected with one another. This entails larger risks. If problems arise in one bank, they will easily spread to others.

Now it is time to think again and make a new attempt. 9  See also consultation responses from the Riksbank, ECB and IMF, which is to say Sveriges Riksbank (2020), ECB (2020) and IMF (2020), respectively. 9  7 [13]  Of course, principled regulation must be balanced by democratic control. Here, evaluation, transparency and insight into operations are key elements that ensure that monetary policy is being conducted efficiently and appropriately for the public good. New demands for analysis – both in theory and in practice The financial crisis entailed new demands being placed on the monetary policy analysis. The old models have been further developed over the last ten years and supplementary approaches have been given a more prominent role in central banks’ internal discussions. 10 One way of describing the implications of the new analysis is that it is more disaggregated. If focus, prior to the financial crisis, was on a single policy rate that was to carry the entire burden of monetary policy, as it were, the analysis is now more detailed. Partly this is because it places greater emphasis in how policy rate changes spread through the financial system, via various markets to other interest rates, all the way to the interest rates faced by companies and households. And partly it is because the analysis focuses on describing how measures other than policy rate adjustments, for example various types of asset purchase, affect the financial conditions, economic activity and inflation.