samchain/econo-pairs-v1 huggingface dataset:
As a matter of fact, we have switched from measures to prevent the inflation spiral from unwinding to the policy of persistent reduction of inflation and inflation expectations and we are sure that our consistent and smooth actions will help us reach the 4% inflation target in late 2017 without having an adverse impact on economic growth. The consistent and predictable monetary policy is a factor of reducing general uncertainty for business and, hence, the best environment for decision-making, i.e., the best conditions for growth in lending and investment activity. A desire to help the economy through premature cutting interest rates may have an opposite effect. We should stick to sound conservatism here. In order not to reproduce unstable imbalanced growth output and labour productivity should grow faster than income and demand. This will provide incentives for businesses to optimise costs and look for profitable segments. Our policy is spearheaded precisely at this. BIS central bankers’ speeches  3  It goes without saying that a more responsible fiscal policy (given the smaller budget deficit we will be able to cut rates faster) and competition development would be conducive to faster inflation reduction. Now, let me say a few words about current issues of monetary policy: they are more technical, but no less important, since they are related to the transition from the structural liquidity deficit to its structural surplus.

On this path, coordination between multilateral and regional institutions is also important, insofar as the latter may complement the support measures provided by international financial institutions. In this setting, the EU should play a leading role in seeking to attain reinforced and inclusive multilateralism, and an area of cooperation governed by international rules. The strengthening of the European project as a support for multilateralism Let me conclude these remarks by focusing on the European policy response to the crisis and on the tasks still pending on the European policy and institutional agenda. On this occasion, we have seen a genuinely common European response, in which the ECB’s monetary policy has not been the only game in town. The creation of the NGEU fund stands out as a decisive tool to support the recovery of European economies at the current juncture. This fund incorporates elements of solidarity and allows us to strengthen the possibilities for countries to transform their economies in light of the challenges ahead. Some of these elements, such as the issuance of large-scale European supra-national public debt to finance reforms and investments in the countries most affected by the pandemic, are unprecedented in the history of the EU. However, the NGEU fund is not – and therefore should not be seen as – the stabilisation mechanism that the euro zone needs as a necessary complement to the single monetary policy. A true macroeconomic stabilisation mechanism should be configured as a permanent institution, with sufficient size, authority in tax matters and financing capacity.
The positive developments in domestic production have been also evidenced by the increase of economic tendency indicator, derived from the business and consumer opinions, and by the increased number in employed persons. In annual terms, unemployment rate fell by 1.5 percent to 12.62 percent, being mainly triggered by the increase in the average number of employed persons in the private agricultural sector. Notwithstanding the inflationary pressures of early 2008 – mainly triggered by supply-side shocks – CPI annual inflation was brought back within the Bank of Albania’s target during the second half of 2008. In the second half of the same year annual inflation rates stood close to the central bank’s target – 3.0 and 2.5 percent, respectively, in both quarters. The performance of the inflation rate in the second half mirrored the global effect of the fall in basic commodity prices (mainly foodstuff and oil prices) as well as a more favourable price conjuncture of goods and services in the domestic market as a result of their demand coverage with an ever-growing supply. The return of inflation within the targeted band was not only conditioned by the relaxation of supply-side shocks but also by the adequate monetary conditions which provided room for the balancing of demand and supply-side factors. Monetary policy stance was neutral throughout 2008 and the key interest rate was kept unchanged at 6.25 percent.

The preservation of financial stability remains crucial for the long-term economic development and under constant consideration in the Bank of Albania decision-making process. In this context, confidence in the banking system and in its balance sheets would be the most rational behaviour of any individual, business or other agent in the Albanian economy. Global experience shows that the mutual interaction between the real economy and the banking system in terms of savings, use of payment infrastructure and expertise in the area of financial counselling and support with funds is a key feature of economies that have managed to progress and leave behind the transition countries’ level. BIS Review 29/2009  3  In conclusion, I would like to assure the public that the Bank of Albania remains committed to creating the proper premises which boost economic activity at home, without infringing the objective of price stability. In addition it will keep working on firming up financial stability in the country. The Bank of Albania decisions will be a direct contribution to smoothing out the negative effects deriving from the international crisis and they will help to ensure the further maintenance of economic and financial balances at home. 4  BIS Review 29/2009
The interest rate works through different channels, such as the house price channel. A lower key policy rate may lead to higher house prices via lower lending rates. This may, in turn, have a positive impact on consumption. If the ability to borrow against home equity is reduced, the house price channel will become weaker. Monetary policy, for its part, can be one of several factors that lead to a build-up of financial imbalances. History has shown that long periods of low interest rates can increase the risk that debt and asset prices reach unsustainable levels. Expectations of low interest rates may become entrenched among banks and borrowers when interest rates remain low for a long period. This may result in rapidly rising house prices. With low interest rates and rising house prices, banks may apply more lenient credit terms. We have also witnessed that low interest rates can prompt financial market participants to search for higher yields from alternative and often risky assets. Macroprudential regulation and monetary policy will often pull in the same direction. If the economy is booming, with rising inflation prospects and the risk of a build-up of financial imbalances, a tightening of monetary policy and capital requirements can underpin both objectives at the same time. Likewise, a pronounced downturn with increased banks losses can be addressed by lowering both the key policy rate and capital requirements. But in some situations, it may be appropriate to reduce the key policy rate at the same time as the capital requirements are tightened.

New regulations are being introduced in an increasing number of countries and new tools are being deployed. New institutions are being established to ensure coordination across countries, markets and instruments. A clearer macro dimension has been integrated into banking regulation, based on the recognition that the financial system as a whole can be vulnerable even if individual institutions seem to be solid. Systemic risk entails a risk that the entire financial system could become unstable or, at worst, collapse, with substantial negative consequences for the real economy. The aim of the new regulations is to guard against systemic risk. BIS central bankers’ speeches  1  As the new regulatory regime has been introduced, another dimension has been added to the discussion. The question being asked is whether the new instruments relieve monetary policy of taking financial stability into account. Experience of the new regulatory regime is still limited, and we have little knowledge about the effectiveness of the new tools. At the same time, a number of central banks are facing a demanding challenge with regard to the practical implementation of policy: how can the economy be brought back on track without laying the basis for new imbalances? My presentation today will focus on financial imbalances and systemic risk. I would like to offer you some insight into some of the issues and analyses in the interface between monetary policy and financial stability that we are now working on at Norges Bank.
BIS central bankers’ speeches  3  We do not need to run a counter-factual experiment to determine the macro-prudential responses to these emerging pressures. A number of countries have already taken preventative macro-prudential action to forestall excessive risk-taking (Table 2). These measures are intended to forestall too rapid an accumulation of credit. In short, macroprudential stringency is seeking to counteract any adverse risk-taking consequences of loose monetary policy. In the UK, the Bank of England’s Monetary Policy Committee (MPC) has been pursuing a policy of extra-ordinary monetary accommodation. Recently, there have been signs of renewed risk-taking in some asset markets, including the housing market. The MPC’s macroprudential sister committee, the Financial Policy Committee (FPC), has been tasked with countering these risks. Through this dual committee structure, the joint needs of the economy and financial system are hopefully being satisfied. Some have suggested that having monetary and macro-prudential policy act in opposite directions – one loose, the other tight – somehow puts the two in conflict [De Paoli and Paustian, 2013]. That is odd. The right mix of monetary and macro-prudential measures depends on the state of the economy and the financial system. In the current environment in many advanced economies – sluggish growth but advancing risk-taking – it seems like precisely the right mix. And, of course, it is a mix that is only possible if policy is ambidextrous. To underscore this point, Chart 12 plots a scatter of counter-factual Taylor and Minsky rules in the UK over the period 1964 to 2011.

It has also to do with CPI being affected by price changes in components that cannot be related to the state of demand. This has been taken into consideration in the design of the main rule and in clarifications and expansions. There has been an endeavour to design the rules in such a way as to avoid unnecessarily large fluctuations in employment and output. However, there must never be any doubt that monetary policy is always governed by the inflation target, although different strategies to achieve this objective in practice can produce different economic costs in the form of fluctuations in output and employment. The fact that the target horizon is normally stated as 1-2 years is justified by the major fluctuations in output that can result from attempts to influence inflation in a shorter time perspective. Interest rates affect inflation with a time lag through effects on demand or the output gap and attain their greatest effect after 1-2 years. In order to reduce inflation in the short term, the interest rate would therefore have to be greatly increased with major negative effects on growth. If CPI is affected by factors that are unrelated to the demand situation, a monetary policy that strictly complies with the main rule can also lead to unnecessary variations in output and employment.
I am rarely much the wiser about the parentage of a football referee for having listened to the collective chants of the crowd. This observation is not a new one; it has a long historical pedigree. In 1841, Charles Mackay published a now-famous book whose title stands in stark contrast to Surowiecki’s – Popular Delusions and the Madness of Crowds. 32  Many subsequent authors have provided examples of collective irrationality in crowd decision-making. Its causes have also been extensively studied by psychologists, sociologists and economists. 33  This originates  in the contagious spread of opinion through networks. The larger and more connected the network, and the less well-informed its participants, the greater the chances of irrational epidemics spreading. The behaviour underpinning this group psychology is as old as humankind. The desire to conform to group type has its roots in our hunter-gatherer past. It has been found, time and again, in studies of human 29  Page (2008) and Hong and Page (2004). Kahneman (2012). 31 Tetlock and Gardner (2015). 32 Mackay (1841). 33 For example, Janis (1972), Turner and Pratkanis (1998) 30  12  All speeches are available online at www.bankofengland.co.uk/speeches  12  behaviour from the South Sea Bubble to the dotcom bubble, from the Bay of Pigs to the space shuttle disasters. 34  This collective irrationality sometimes goes by the name “groupthink”. More recently, these psychological roots may have been fed and watered by technological advances, such as social media. This has increased our digital connectivity.

Cecilia Skingsley: Experience with macroprudential policies Summary of a speech by Ms Cecilia Skingsley, Deputy Governor of the Sveriges Riksbank, at a workshop arranged by the Committee on the Global Financial System, BIS, held at the Hong Kong Monetary Authority, Hong Kong, 10 August 2015. *  *  *  Since the global financial crisis, several countries have started implementing macroprudential policies. This workshop has provided us with the opportunity to deepen our knowledge regarding how different countries choose, calibrate and implement different kinds of macroprudential instrument. We have also gained a greater understanding of the efficiency of these instruments, as well as of how different countries incorporate macroprudential settings in the calibration of monetary policy. Although we have come a long way the past few years as regards setting up institutional frameworks and developing tools, macroprudential policy is still a relatively new policy field in many countries and there are many important issues that need to be addressed. I would like to elaborate on three of these issues. The first is the challenge of determining the proper mix of policy instruments and the right balance between them, and deciding how fast and resolute our actions should be when imbalances are building up. For example, on the one hand, we know from international experience that credit growth can be difficult to curb once it starts accelerating. This would speak in favour of prompt and strong measures.
This means that banks are able to lend through severe economic downturns, insurers can maintain underwriting capacity in the face of a wide range of severe shocks, and financial markets are able to function, as they adjust to shocks, including the infrastructures in markets that are at the heart of the financial system in the post-crisis reforms, notably clearing houses. Much of that functioning also relies on the second plank of resilience, namely structural measures which are not designed to vary in a counter-cyclical manner, but instead apply equally at all times. For banks, this means minimum capital and leverage ratios on top of which sit buffers which are there to be used counter-cyclically in times of stress. Consistent with the idea of resilience, there are two key questions to ask about the buffers: are they sized consistent with the financial stability objective; and are they in practice usable in times of stress? We have to keep both of these questions under almost continuous review. Post-Brexit, it is necessary that we review and, where appropriate, revise the regulatory system to make it consistent with our UK specific objectives. When I say UK, however, we must recognise – as TheCityUK does – that we are a leading global financial centre. So, our financial stability objective is a global public good, as the IMF has previously noted. We must therefore continue to be closely involved in shaping international standards, and then implement them properly. I can assure you that we are doing both of these.

In other words, shocks will be easier to absorb and manage if the fundamentals are sound beforehand. There is an important choice to be made on where to set the degree of resilience, in other words where in the bad tail of the distribution of outcomes. The answer depends on the objective, in this case the public policy objective, and in our work this is one of the key innovations of macro-prudential policy over the last decade. It is not just to prevent the failure of institutions, but rather to ensure for banks that at the chosen level of resilience they can support lending to the economy, to firms and households. Of course, there are points in the tail of the distribution beyond the chosen point and it is for those that we have resolution tools. There is a gross cost to resilience, for banks the cost of increased capital 1/3  BIS central bankers' speeches  and liquidity buffers. But that cost should be suitably offset by the benefits, to the economy and to firms themselves. Setting the chosen point of resilience must of course be consistent with the cost-benefit case1. Putting this notion of resilience into practice in the world of financial stability has been the work of the post global financial crisis years, and will never be done in the sense that we must allow for and respond to innovation. There are two central planks to this work: first, to provide a strong counter-cyclical capacity.
In this context, the SNB supports the recommendations by the group of experts headed by Professor Brunetti on the evaluation of the “too big to fail” regulatory framework. The report advocates a recalibration of capital requirements in order to ensure that Switzerland is in a leading position internationally in terms of the requirements for both risk-weighted capital ratios and leverage ratios. In particular, the report stresses that leverage ratio requirements for systemically important banks have been increased in several countries compared to the minimum proposed by the Basel Committee. In the SNB’s view, a possible recalibration of capital requirements must reflect the size and concentration of our banking sector. In fact, it is imperative that a lasting solution be found for the “too big to fail” issue in Switzerland. Increasing the credibility of model-based risk-weighted assets Beyond recalibrating capital requirements, increasing the credibility of the model-based riskweighted assets (RWA) is essential. This is all the more important as RWA remain a key element of banking regulation. The Brunetti group of experts, too, considers this to be a prime objective and the issue has also been recognised at international level. The Basel Committee has therefore announced the release of a set of measures for consultation. These measures mainly provide for the revision of the standardised approaches for RWA calculation, the introduction of an RWA floor based on the standardised approaches, as well as greater transparency. The floor is aimed at ensuring that the requirements for banks using the model-based approach remain sufficiently prudent.

Jean-Pierre Danthine: Swiss banks from a financial stability perspective Introductory remarks by Mr Jean-Pierre Danthine, Vice Chairman of the Governing Board of the Swiss National Bank, at the Media News Conference of the Swiss National Bank, Berne, 1 December 2014. *  *  *  In my remarks, I would like to look at the situation of the Swiss banks from a financial stability perspective, taking the big banks first and then moving on to a discussion of domestically focused banks. Strengthening the resilience of the big banks Since the last media news conference, the Swiss big banks have improved their capital situation once again. The Swiss National Bank recognises the considerable progress made in this area as regards both risk-weighted capital ratios and leverage ratios. It is also of the opinion that the strengthening of the big banks’ resilience must continue, for the following reasons. First, risks in the economic and financial environment remain high. In several of the adverse scenarios considered by the SNB, the estimated loss potential for the big banks continues to be substantial relative to their capitalisation. This is also the case when viewed in a historical perspective, as evidenced during the recent financial crisis. Second, while the big banks’ risk-weighted capital ratios are above the average for large globally active banks, the same still cannot be said for their leverage ratios.
In the same vein, allow me, on behalf of the Bank of Zambia and indeed on my own behalf, to wish the Government, and people of the Republic of Zambia a happy 50th birth year which we will be celebrating on 24th October 2014, and one which has been attained under a tranquil environment and economic progress. Fellow Staff and Invited Guests, I would most likely be in breach of all moral standing if I did not, at this stage, emphasize the Bank of Zambia’s deep commitment to the welfare and well-being of our employees. I implore all of us to aim at leaving a legacy of professionalism and excellence in all that we do. I further encourage all the sportsmen and women participating in today’s events not to despair should they not emerge victorious for one reason or another. Rather, I strongly urge you all to walk away after the games feeling immensely proud that you have been an integral part of a truly momentous and historic occasion. Remember, one can only turn 50 years of age once! Ladies and Gentlemen, allow me to further extend my sincere gratitude to the commercial banks that have sent their representatives to come and attend this event. The support we have received to date has been unflinching throughout the years. We shall continue to work together in order to ensure that the levels of service delivery to our customers is raised and maintained at high standards. Distinguished Guests, this really, is not an occasion for long-winded speeches.

The staff, past and present should be proud of the useful contribution, you have made towards the steady progress the Bank has made in its quest to attain its mission of “achieving and maintaining price and financial system stability for balanced macroeconomic development”. Ladies and Gentlemen, this progress, has however, not been with any challenges. Among the challenges was, the Global Economic and Financial Crisis during 2008/2009, which adversely affected most economies. It is, therefore, of utmost importance that we reposition ourselves to mitigate these types of challenges should they threaten to recur in the future. Colleagues, this 50th anniversary celebration therefore presents us with an opportunity to reflect on the achievements and challenges of the Bank since its inception. You will recall from my “Town Hall Speech” to members of staff in January 2014 that going forward we need to work harder and build on the successes we have scored in the past, by focusing on enhancing productivity and accountability under what I termed “The New Bank We Need”. In repositioning ourselves, I would like to remind you of some of the tenets we need as the New Bank which include the following: 1. Productivity and accountability;  2. Strong team work operating under set values and ethics;  3. Open and effective communication among staff; and  4. Meeting targets and providing workable solutions.