samchain/econo-pairs-v1 huggingface dataset:
In addition, those central banks that were not yet independent were given independence, while their duty of accountability was extended. This consensus with regard to the mandate and constitution of central banks led to a long period of low inflation for the global economy, and at the same time demonstrated that a focus on price stability did not result in greater cyclical fluctuations, as had been feared by some. On the contrary: The low inflation rates were accompanied by a very stable real economy, by historical standards. The focus on price stability remains essential, even against the background of the experiences of the financial and economic crisis. Central banks could not have implemented  4  Cf. speech by Fritz Zurbrügg, “Challenges posed by the growth in the SNB’s foreign exchange reserves”, SNB Money Market Event, Geneva, 8 November 2012. 4  BIS central bankers’ speeches  their unconventional measures for stabilising the economy in the crisis if they had not acquired a high level of credibility in the preceding years. Long-term interest rates can only be influenced by a central bank if market participants are convinced that price stability will prevail in the long term. For monetary policy, it remains essential that price stability be ensured, even – and most particularly – in difficult situations like the one we are experiencing at the moment. After the beginning of the financial and economic crisis, the question of what central banks could contribute to financial stability became more important.

Having said that, it is worth mentioning the results of empirical studies on the effects of the Federal Reserve’s first two QE programmes. Overall, they suggest that these programmes led to an economically significant reduction in long-term interest rates. However, the effects of the first QE programme appear to have been greater than the second. What can we say then about the risks associated with the accommodative monetary policy and unconventional measures? In public discussion, the focus is often on the risk of inflation. In many countries, the monetary base has grown very substantially. In the opinion of some observers, this will lead to a marked increase in inflation. I would therefore stress that inflation rates in the advanced economies have remained low against the background of capacity underutilisation. The same applies to inflationary expectations obtained from financial market data and surveys of households and companies. It is correct that the monetary base will need to be normalised when the crisis subsides. The challenge will be to determine this moment accurately. Yet this problem is not fundamentally different from the normal task of a central bank, which is to select the appropriate volume of liquidity. Apart from the risk of inflation in an accommodative monetary policy, another main area of public concern are the risks in central bank balance sheets. These risks have become greater with unconventional monetary policy and the associated lengthening of central bank  BIS central bankers’ speeches  3  balance sheets.
In a market economy, it is the task of the price system to communicate information about household preferences and, for instance, to provide signals as to where productivity is to be best developed. Besides the task of safeguarding price stability, the Riksbank is also responsible for the country’s payment system. It is a prerequisite for the functioning of a modern economy that payments can be carried out in a safe, efficient way. In order for payment systems to function, it is important that financial stability is maintained, which, for instance, means that bank crises shall be avoided. There are close connections between the responsibility of the central bank for price stability and its responsibility for financial stability. In order for the instrumental rate to have the desired effect on interest rate formation, it is, for instance, important that the payment system functions efficiently and securely, since monetary policy instruments operate via the payment systems. Price stability can further be threatened by financial imbalances and by financial instability. At the same time a monetary policy focused on price stability per se probably reduces the risk for financial instability. It is not meaningful to draw a sharp boundary between what is regarded as the central bank’s monetary policy tasks and what is included in the responsibility for a secure, efficient payment system. I confine myself here to stressing that price stability and financial stability are both required to create good growth conditions in an economy. And the central bank plays an important role in achieving both these goals.

Besides inflation forecasting, the Central Bank publishes a quarterly assessment of the economic and monetary situation and prospects, including a national economic forecast, and their probable impact  BIS Review 8/2003  1  on price developments. If inflation is heading beyond the Bank’s target on a longer-term scenario, the Bank raises its policy interest rate, but cuts it if inflation is heading below the target. In preparing its inflation forecasts and regular assessments of the economic situation and prospects, the Central Bank examines a wide range of indicators. These are both statistical data and information obtained from interviews with representatives of industry, organisations with vested interests, credit institutions and others. The Bank publishes the bulk of its statistical indicators and data on its website. Central Bank decisions are made after in-depth examinations of indicators about economic developments, its assessment of the situation and outlook, the assumptions behind the inflation forecast and the inflation forecast itself. Under the Central Bank Act, the Bank’s Board of Governors have set internal rules on the preparations of, arguments for and presentation of its monetary policy decisions. These rules were formally set in the beginning of 2002 and published in the quarterly Monetary Bulletin. Having said this, it is tempting to try to assess the success of monetary policy implementation after the framework was changed and the new Central Bank Act went into effect in spring 2001.
§  Progress in these areas, even if only incremental, will have important implications for what is possible and necessary in the future. For example, having stronger bank and corporate balance sheets, with lower leverage, expands the scope for using interest rates and asset price adjustments as stabilizing devices. Better liquidity management at both the micro and macro levels - - longer maturities, and greater reserve coverage and back-up financing - - will create margins to ride out financial shocks. And more  5  effective insolvency regimes would make decentralized workouts more feasible, particularly in cases where systemic stress is better contained. •  The approach to crisis management and resolution also needs to be creative. In part, this can be accomplished by relying as much as possible on the efforts of debtors and private creditors to work things out on their own. The perception in some circles that private creditors are not interested in resolving payment problems expeditiously is mistaken, and stands at odds with recent experience. If nothing else, investors are interested in restoring liquidity to debt instruments in order to move on to new opportunities. There is also scope for exploring creative market-based ways to lever in private participation and stretch the impact of public sector funds. G  •  The various experiences since the late 80s with buybacks, partial guarantees, and debt exchanges provide some hints for how targeted deployment of public moneys can spur tendencies in a direction consistent with public policy goals.

Also, in today’s environment, the fear of an event often is the event itself, because of the inherent tendency of markets to anticipate developments and overreact. BIS Review 61/2002  3  G  But on the positive side, financial recoveries can proceed more rapidly in today’s environment, particularly with the right policy responses from borrowers. In part, this reflects the fact that today’s market participants generally have the capacity - and many have little choice, under mark-to-market accounting - - to digest losses and move on. The broader sourcing of capital today also gives more scope to the possibility that, while some investors may withdraw, others may take their place. The caveat here is that the well not be poisoned through unnecessarily broad or heavy-handed approaches, a point I will return to later. •  What is the right way to deal with this changed and changing environment? In my view, the solution is neither a single piece of financial engineering nor a compact between the official lenders and private creditors. Rather, it is a process incorporating a number of elements. Essentially, I would suggest that our current case-by-case approach to crisis management needs to evolve in ways that are market-based and adaptive, yet strategic, creative, and principled. •  Being successful in today’s environment requires adapting to the particularities of the case at hand, as well as the global financial and economic context, and requires seeking, as far as possible, to work with the grain of a given situation.
The lack of structural reforms is, in my view, a major cause of the difference in the growth potential in Europe compared with the US and with some other advanced industrialized economies. The structural reforms identified in the Lisbon agenda have the potential to increase both labour productivity growth and labour utilisation, and therefore the long-term growth potential of the European economy. The experience of European countries which have undertaken some courageous and successful reforms show that it pays off. For instance, since the beginning of the EMU in 1999 the euro area has witnessed an increase of more than 12 million in the number of people employed, while from 1990 to 1998, the number of people employed only increased by around 3 millions. It is clear that major structural reforms are not easy to achieve, but pursuing resolutely such reforms is especially needed in the current environment, where the European economy is facing a number of important challenges, including rapid technological change, accelerating globalisation as well as ageing populations. According to the European Commission’s and  4  Source EUKLEMS. BIS Review 82/2007  3  ECB projections, the impact of ageing populations alone could reduce on average potential output growth in Europe by nearly half by 2040, if structural reforms are not carried out 5 . There is today a unique opportunity for European governments to take advantage of the present favourable growth developments to push ahead with the structural reforms that have been already agreed upon but are still far from being achieved.

We have the tool in our hands to address the challenges I mentioned: the Lisbon strategy, as refocused and reaffirmed by the European Council. If all European countries summon up their strength and reinforce their push forward with structural reform, the improvement in economic activity presently observed in Europe will be broadened and made sustainable in the long run. Thank you very much for your attention. 8  BIS Review 82/2007
In today’s markets, there is a large premium on ex ante clarity and certainty, as opposed to ex post negotiation amongst bankers who know and trust each other. The work required is detailed and largely out of the limelight. But getting clarity around things like “close out netting” may make all the difference when the music stops. 11 The official community therefore needs to maintain its encouragement and support for private sector initiatives to standardise and improve documentation. To take just a few examples from what could be a long list, this includes the work of New York’s Global Documentation Steering Group; of various market trade associations; and of London’s Securities Lending and Repo Committee, which helps co-ordinate the work of different parts of the collateral-financing markets. 12  Summary I have travelled from macro to micro. To maintain the two elements of monetary stability – price stability, and financial stability – we need credible and effective institutions. 11  Close-out netting is a process by which, following a default, open transactions between two parties are terminated, each transaction is valued and, together with any outstanding payments, these are reduced to a single net amount owed by one of the parties to the other. Obtaining legal certainty over recognition of netting across different products and, in particular, with different legal entities with a common group is very important.

SPV: Special purpose vehicle. A bankruptcy-remote company created for the sole purpose of acquiring assets or derivative exposures and issuing liabilities linked to these assets. Also known as a special purpose entity. Diagram 1: Interlinkages between financing vehicles  FINANCIAL ECONOMY  Commercial paper  Senior CDO tranches  CLO  Senior AAA  Mezzanine tranche Equity  Equity  CDO2 Senior Mezzanine Equity  CDO mezzanine tranches  8  CDO equity tranches  Leveraged loans  Leveraged loans  Mezz/secon d lien debt HY bonds  Corporate assets  Mezzanine Equity HY bonds  Mezz SF CDO  HEL ABS/CMBS  Senior Senior  CPPI on CDO equity Principal protected notes  LBO’d company  REAL ECONOMY  Commercial paper conduit (e.g. SIV)  Mezzanine  BBBrated HEL ABS/ CMBS or synthetic  Mezzanine (often BBB-)  NIM  Mortgages  Equity  Equity  BIS Review 44/2007
And they include weak productivity trends, emanating from the precrisis period and reflecting in part the misallocation of resources into construction and other low productivity sectors.5 In this environment, stabilisation policies become less effective in boosting demand and an increase in demand becomes less effective in stimulating economic activity. Fiscal space is squeezed by high public debt, and the impact of monetary policy on investment and consumption is blunted by high private debt. The positive impact of higher demand on jobs is constrained by the partially structural nature of unemployment, such as the skill mismatch between job seekers and vacancies, low mobility of workers and the priority given to insiders. Moreover, it is also constrained by capital market fragmentation, i.e. the inability to channel savings where investment is needed to create jobs. And absent other policies, stimulating demand may in fact only delay the necessary restructuring of the economy towards higher productivity sectors. This is where supply-side policies – by which I mean structural reforms – can help empower demand. By raising potential growth and hence future income, structural reforms create more space for governments, firms and households to spend today. By reactivating and reskilling the workforce, they allow employment respond faster to that higher demand. And by helping the economy to restructure, they ensure that higher demand is channelled towards the right sectors, and thus accelerates rather than retards the creative destruction process.

For several years, central banks, including the Bank of England, had warned that financial markets were underestimating risks. So why, you might ask, did the Bank of England not do more to prevent the disaster? We should have. But the power to regulate banks had been taken away from us in 1997. Our power was limited to that of publishing reports and preaching sermons. And we did preach sermons about the risks. But we didn’t imagine the scale of the disaster that would occur when the risks crystallised. With the benefit of hindsight, we should have shouted from the rooftops that a system had been built in which banks were too important to fail, that banks had grown too quickly and borrowed too much, and that so-called “light-touch” regulation hadn’t prevented any of this. And in the crisis, we tried, but should have tried harder, to persuade everyone of the need to recapitalise the banks sooner and by more. We should have preached that the lessons of history were being forgotten – because banking crises have happened before. In the 1930s, the Great Depression saw a collapse of the banking system in the United States. So severe was it that President Franklin Roosevelt, only a week after his inauguration in March 1933, announced a bank holiday shutting the banks to provide a breathing space so that confidence could be restored.
These include pre-emptive staging of loans to recognise higher credit risks among specific borrowers seeking repayment assistance, more conservative provisioning models, and increased application of management overlays to bolster model-determined provisions. 3. Finally, the ready presence of effective institutional arrangements has also helped us be prepared for managing an influx of distressed borrowers. Drawing on our experience from the Asian Financial Crisis, Malaysia has in place debt restructuring mechanisms for individuals and businesses alike. These include out-of-court platforms, namely the Corporate Debt Restructuring Committee (CDRC) for large corporates, Small Debt Resolution Scheme (SDRS) for SMEs, and Credit Counselling and Debt Management Agency (AKPK) for individuals. AKPK, in particular, has become a staple name in Malaysia due to its vast publicity campaign. Although we have not observed any spikes in the number of cases admitted into CDRC, SDRS and AKPK, in part due to banks’ enhanced capacity to carry out debt restructuring, we resolved not to leave anything to chance. Accordingly, the capacity of these out-of-court platforms was ramped up at the onset of crisis in anticipation of a potential deluge of distressed borrowers. To further enhance operational efficiency, the 2/3  BIS central bankers' speeches  SDRS was absorbed into AKPK, making AKPK now the one-stop platform for both individuals and SMEs to restructure debt and obtain financial advice.

The exclusively crafted marble container also belongs to the baptistery, as part of its internal decoration, which, on its part, includes the famous mosaics with depictions of peacocks. Those were the peacocks that the artist Biljana Unkovska used when designing the layout of the modern Macedonian banknotes of ten Denars. Speaking of the ancient town of Stobi, besides the fact that it is really a constant inspiration for artistic creation, in the past it was a center with emphasized monetary production that took place more than 18 centuries ago. This exhibition is even more significant because of the generous support of the US Embassy in the Republic of Macedonia, which throughout the past years has enabled professional protection of these invaluable paintings, thanks to which they can now be publicly exhibited. The National Bank is honored by the given trust to host this exhibition, which I hope that over the next month will be an intriguing cultural event for the general public. I also hope that with  BIS central bankers’ speeches  1  the support of the Ministry of Culture and of the other institutions of culture in Macedonia, also in the future we will have an opportunity to enrich the public life and the creative social pulse of the country’s cultural life.
The international financial architecture as it was before the crisis lacked appropriate tools to deal with volatility in global capital flows and to prevent crisis contagion. This was an incentive for emerging countries to self-insure against global liquidity  2  BIS Review 93/2010  shocks by accumulating international reserves or protect themselves through capital flows control, both distortive types of protection. Reserve accumulation is costly to emerging economies as they have to restrain consumption and forego profitable investment opportunities in order to buy the low-yield assets that usually constitute reserves. It also has global consequences. For those emerging market economies that ran a current account surplus to accumulate reserves, the process has contributed to current account imbalances. This is why finance has an important role to play to help these economies effectively deal with capital volatility. A lot has already been done by G20 countries and international institutions since the beginning of the crisis. Central banks of large advanced countries have set up swap arrangements with some emerging countries. The International Monetary Fund has created a precautionary lending facility: the Flexible Credit Line. A general SDR allocation of USD 250 bn has been agreed in the London summit of April 2009 and out in place. However, there is still scope for improvement and further work is currently being done to improve global financial safety nets.

So far, however, there is simply not as much historical evidence availab le about the impact of QT, because we have observed more episodes of balance sheet expansion than of balance sheet contraction. A number of considerations support a prudent approach, since the response to QT could be stronger than the response to QE. First, the fiscal landscape has deteriorated in recent years. Public debt to output ratios have climbed sharply since the onset of the pandemic, because governments have run very large deficits over the course of the pandemic and because output has fallen. The current inflation surprise somewhat reduces the real value of this debt, but this effect is small compared with the strong increase in debt levels since the pandemic began. The greater the amount of debt that private markets must absorb, the lower the liquidity in sovereign debt markets and the higher the yields that markets will demand in order to equate supply with demand. Accordingly, this factor tends to magnify the impact of quantitative tightening on the term premium11. Second, the impact of balance sheet policies may also vary depending on liquidity conditions. In QE times, more liquidity injected into the system did not have a major impact since the market was saturated with excess cash and thus money market conditions were rather insensitive to additional liquidity injections.