samchain/econo-pairs-v1 huggingface dataset:
This concept of a reference value implies close monitoring of monetary developments, without implying a commitment to mechanistically correct the deviations that may appear in the short term. At its 2 December 1999 meeting, the Governing Council decided to keep the same 4.5% reference value for 2000;  –  concerning the second pillar, the ECB Governing Council monitors developments in a broad range of economic and financial indicators giving advanced warning of inflationary pressure. This group of indicators mainly covers different price and cost indices, wages, the exchange rate, various measures of real economic activity and surveys of business leaders and consumers. After observing monetary developments and changes in economic and financial indicators, the Governing Council, which had cut the euro area’s main refinancing rate from 3% to 2.5% on 8 April, put it back up to 3% on 4 November 1999. Monetary conditions thus changed in connection with the assessment of inflationary risks. The indications given by the two pillars became consistent with each other in the second half of the year, pointing towards a steady rise in the risks to future price stability. For the first pillar, the twelve-month rate of M3 growth for the period from October to December averaged 6.1%, which was 1.6 percentage points above the 4.5% reference value. An analysis of the factors behind this rapid expansion of M3, which especially concerned its most liquid components, reveals strong growth in credit to the private sector.

I would like to emphasise that the performance of the French economy was above the averages for the euro area as a whole, where 2.4% growth was recorded, and the large countries of the European Union. In parallel to this strong recovery in activity, the current account surplus remained high, with France having the second largest in the world. In 1999, as in 1998, the good competitiveness of the productive sector thus remained one of the main pillars supporting French economic growth. The acceleration in economic growth during 1999 enabled the creation of 375,000 dependent jobs in market services. The number of jobseekers fell by 11.4% and the unemployment rate decreased from 11.5% of the labour force in December 1998 to 10.6% at the end of 1999, the lowest level recorded since 1992. Inflation quickened somewhat, especially at the year-end, whilst remaining within limits compatible with the objective of stability (namely less than 2%) assigned to monetary policy. According to the Harmonised Index of Consumer Prices (HICP), which is the measure of inflation adopted for the countries of the European Union, the rise in prices in France reached a twelve-month rate of 1.4% in December 1999, as against 0.3% a year earlier. This increase can mainly be explained by the sharp 20.6% annual rise in oil product prices.
A motorcycle mechanic may likewise see the faulty part and conclude that the fault lies in that part. The deductive approach, on the other hand, requires the mechanic to theorise in his mind and come to conclusions based on empirical findings he would make to support his theory. In the previous black crow example, we may theorise that crows are black and then look for black crows in the real world. When we find one black crow, our theory is proved. A motorcycle mechanic becomes a scientist, if he follows the scientific method in the diagnosis of the fault and the subsequent repair of the motorcycle. It involves starting with an open mind. There are no previously made conclusions or prejudgments. The approach is simply classical, that is, guided by underlying principles and not by the immediate appearance. There are several steps which a scientist should follow when he adopts the scientific method. A good motorcycle mechanic would also follow the same steps. The steps involved in a scientific inquiry are as follows. First, the identified problem has to be stated in clear terms. In the case of a motorcycle, the problem may be that the engine does not start. Second, based on the problem, one hypothesis or several hypotheses as required regarding the cause of the problem should be made. The motorcycle engine does not start because there is no fuel in the tank. Or there is a blockage of the tube that distributes fuel to the engine. Or the electrical system may have failed.

Earlier today, we published criteria for money market mutual funds to become eligible to participate in reverse repo operations, which was a first and important step in that direction. We are currently working with other types of firms to assess their potential participation in the program, as well. Our expectation is to have arrangements in place and to be ready to transact with some non-dealer firms by the end of the second quarter. This expansion of counterparties is important for boosting the capacity of the program. 4  BIS Review 39/2010  The bottom line is that the preparation of both facilities is advancing very effectively. Looking across the two programs, we will have established the capacity to drain a significant portion of excess reserves by the second half of the year. Of course, achieving this capacity does not say anything about how and when the FOMC will decide to actually drain reserves. The actual timing and size of draining operations, and their relation to changes in the interest rate paid on reserves, will depend on how market and economic conditions evolve. Chairman Bernanke discussed one possible sequence in his February 10 testimony. He suggested that operations to drain reserves could be run on a limited basis well ahead of policy tightening, in order to give market participants time to become familiar with them, and then could be scaled up to more significant volume as we approach the time for policy tightening.
European Central Bank: Press conference - introductory statement Introductory statement by Mr Willem F Duisenberg, President of the European Central Bank and Mr Lucas Papademos, Vice-President of the European Central Bank, at the press conference held in Frankfurt, 5 December 2002. *  *  *  Ladies and gentlemen, the Vice-President and I will now report on the outcome of today's meeting of the Governing Council of the ECB. We continued our in-depth assessment of monetary, financial and economic developments and the discussions we had in early November on the appropriate stance of monetary policy, taking account of the new information. Overall, since our last meeting, the arguments in favour of a cut in the key ECB interest rates have strengthened. The evidence that inflationary pressures are easing has increased, owing in particular to the sluggish economic expansion. Furthermore, downside risks to economic growth have not vanished. As a result, the Governing Council has decided to lower the key ECB interest rates by 50 basis points. At today's meeting, we also reviewed the reference value for monetary growth, which has an important role under the first pillar of the ECB's monetary policy strategy. The Governing Council has decided to leave the current value unchanged at an annual growth rate of 4½% for the broad aggregate M3.

The assessment which guided today's monetary policy decision was that, overall, the prospect has strengthened for inflation to fall below 2% in the course of 2003 and to remain in line with price stability thereafter. Our decision should also help to improve the outlook for the euro area economy by providing a counterweight to some of the existing downside risks to economic growth, thereby supporting confidence. The most likely scenario is that economic growth will gradually recover in the course of 2003 towards rates more in line with potential. Falling inflation should support real disposable income and, together with a reduction in the gap between perceived and actual inflation rates, should underpin private consumption. Moreover, we expect an improvement in world demand. This, and the low level of interest rates, should benefit investment. Let me point out that, with today's decision, the key ECB interest rates have reached a very low level by historical standards. The Governing Council will continue to monitor closely all factors that may affect the prospects for inflation in the euro area. The outlook for the euro area economy will also very much depend on visible progress in other policy areas. Regarding fiscal policies in the euro area, I would like to reiterate that budgetary discipline strengthens the conditions for sustainable growth of GDP and employment. Therefore, sound fiscal positions, as enshrined in the Treaty and further developed in the Stability and Growth Pact, are in the interest of all the Member States.
Lars Heikensten: The Riksbank and risks in the financial system Speech by Mr Lars Heikensten, Governor of the Sveriges Riksbank, at the Risk Management conference, Stockholm, 16 November 2004. *  *  *  Thank you for the invitation to speak at this conference on corporate risk management. I founded listed in the programme for this two-day conference concepts such as confidence, risk evaluation and communication of existing risks. These are concepts that regularly come up in the Riksbank’s work on financial stability - work that has been given increasing focus in recent years. This is no surprise. Let me take you back in time twelve years, to autumn 1992. All of the Swedish banks had suffered substantial loan losses. The international credit market had almost no confidence in them as a group, regardless of how great the losses the individual banks had suffered. They were facing severe financing problems. The Government and the Riksdag (the Swedish parliament) therefore faced a choice - to make a very rapid decision to provide the banks with support without actually knowing how extensive this support would have to be or to suffer a financial crisis with unforeseeable consequences for the Swedish economy. The decision made was the only reasonable solution - to save the Swedish banks. However, the Riksdag was forced to make a decision, without the necessary information on the extent and causes of the crisis, which could have cost the central government budget SEK 100 billion or more.

Hopefully, the report can contribute to a well-informed debate on the stability of the Swedish financial system and influence those participating in the system. The Riksbank can also use the Financial Stability Report to show how we work to achieve the objectives the Riksdag has set us. The layout of the report provides a good insight into the way we work. It begins with a review of international events, describing growth and prices in the financial markets and on various assets. In this context, the analyses and assessments of developments outside the Swedish borders play an increasing role, in line with the ongoing internationalisation process. After describing the environment in which the banks and their borrowers operate, we devote a chapter to a survey of how the borrowers - households and firms - have been affected. What is the level of indebtedness and the ability to service debts? Are there any risks entailed in their actions? If things go well for the banks’ borrowers, they normally go well for the banks. Developments over the past five years, with the Swedish banks increasingly investing abroad, have meant that a substantial percentage of their borrowers are in other countries - mainly in the Baltic region. This means that our analyses cannot focus exclusively on Sweden; we must also take into account developments in, for instance, neighbouring Nordic countries. The banks own actions can also affect the stability of the payment system. What strategic choices do the banks make?
Such access was formally adopted as a requirement for multilateral netting systems, and I am convinced that the G-10 central banks would apply a similar standard when evaluating the start-up of any major multi-currency settlement service. In sum, the evolution toward more transparent foreign exchange markets that we’ve observed in the past several years is largely a product of both technological progress in the private sector and conscious policy decisions in the public sector. None of the policy decisions, I should stress, were taken with any explicit or implicit intention of reducing market volatility. On the contrary, the policy community has viewed moves toward increased transparency as desirable ends in and of themselves for a number of reasons. For one, transparency promotes a more level playing field for all market participants. In other words, transparent markets tend not to be dominated by just a few players. Rather, they are open to new entrants, large and small. In such markets, no one group of institutions or type of institution can develop a monopoly on information or competitive pricing. As in most industries, competition in the area of financial services spurs innovation, better service for customers, and a more efficient allocation of resources. Second, transparency in these markets also promotes investment. If money and investment fund managers or corporate CFOs can better understand the risks entailed in various investment alternatives, they are more likely to make the investment decisions best suited to their needs.

The Federal Reserve Bank of New York has also been deeply involved in efforts to reduce foreign exchange settlement risk -- efforts that should further serve to improve market efficiency and overall financial stability. In October 1994, the New York Fed-sponsored Foreign Exchange Committee issued a major report on “Reducing Foreign Exchange Settlement Risk.” The Bank has also been working actively in this area with other central banks through the G-10 central bank Committee on Payment and Settlement Systems, or CPSS, which I have had the pleasure to chair in recent years. Building upon the work of the New York Foreign Exchange Committee, the CPSS published a document in March of last year, often referred to as the Allsopp report, that contains a comprehensive strategy outlining how the public and private sectors can work together to reduce foreign exchange settlement risk. The strategy was endorsed by the G-10 central bank governors and calls for specific action on the part of individual banks and industry groups. A survey conducted by the CPSS last autumn indicates that individual banks are answering the G-10 governors’ call for action. Many banks have made a good start in improving their ability to measure, manage, control, and net their bilateral settlement exposures, and they plan to push these efforts even further over the next year. While this is a very encouraging beginning, we can’t ignore the fact that more work must be done by individual banks.
This has historically been the case for many of the emerging countries in which Spanish banks have international activity. Second, the characteristics of the banking markets in which they operate (much more concentrated, and with less banking penetration) are conducive to the existence of higher margins (see Chart 4). Returning to the profitability of the banking business in Spain, its comparatively low level is explained by a variety of factors. First, as I have already mentioned, the high volume of unproductive assets has a direct negative impact on banks’ income statements by reducing interest income and increasing impairment provisioning. Second, low profitability is also explained by the significant fall in income associated with banks’ deleveraging. In addition, the current levels of interest rates have squeezed banks’ 4/11  net interest income. That said, the ECB’s monetary policy has also had a positive effect on economic activity (thus reducing the losses from loan defaults) and on banks’ capital gains. In short, the ultimate net impact of low interest rates on bank profitability seems to have been smaller than that of the other factors I have mentioned. As regards operating expenses, they remain on the downward trend seen in recent years. This containment of expenses is taking place against a background of adjustment of the operating capacity of Spanish banks and has basically taken the form of a significant reduction in the numbers of staff and branches in their business in Spain.

The Network of Central Banks and Supervisors for Greening the Financial System (NGFS) has established a Blended Finance Initiative, that will identify best practices and lessons from past case studies and provide practical guidance on modalities to scale up blended finance. MAS and the De Nederlandsche Bank (DNB) will lead this Initiative.I will share more details in my remarks this afternoon before the NGFS discussion panels at this Pavilion. 2/4  BIS - Central bankers' speeches  The Glasgow Financial Alliance for Net Zero Asia-Pacific Network will launch an initiative to develop guidance for financial institutions on how they can facilitate the managed phase-out of coal power generation in the Asia Pacific. MAS and the Asian Development Bank will participate in this initiative. Second strategy - carbon markets to channel financing towards carbon abatement and removal projects. Many entities find it difficult to eliminate their emissions or to even reduce them as quickly as they would like. High quality carbon credits generated by emission reduction and removal projects allow such entities to offset the emissions they cannot get rid of while providing financing for these projects that would otherwise not get off the ground. A well-functioning carbon trading ecosystem is particularly relevant to Asia's transition effort. The market for voluntary carbon credits is huge. Unfortunately, differences in carbon accounting and credit recognition practices across jurisdictions have led to carbon credits being treated with a degree of skepticism.
First, it is important for policymakers to remain agile in their approach to policies. We should not be too rigid in our own ways that we neglect changes in the environment and fail to change with the times. The world as we know it will be transformed with the rapid advancements in technology and communication, big data and the list goes on. If we remain stagnant, we are doomed to fail. The willingness to renew and redirect policy is critical to successful policymaking. From the outside looking in, the redirection of policy is often perceived to be regressive. In reality, they reflect policies that aim to be more, rather than less, responsive to changing conditions. In the same way that businesses expect governments to relax and adapt policy to capture new 5/7  BIS central bankers' speeches  opportunities, authorities have a professional duty to redirect policy, however unpopular, to maintain stability and harness our collective growth potential when risks or unintended outcomes become apparent. This requires much more confidence, boldness and courage. Second, policymakers need to protect and value their autonomy in the conduct of policies and not be constrained by prevailing rules and consensus thinking established by the international community. International organisations have come up with various definitions and primers on how they feel an economy should be managed. Their need for standardisation is understandable because of the need to dispense consistent policy advice across many countries.

Being transparent also means that policy intents should be quantified, measured and disclosed. Finally, policymakers must not formulate public policy in isolation. We must promulgate policy with hard facts, backed by statistics and sound theoretical evidence. Foremost, we should not forget about the lives of people we are trying to help. A strong GDP growth figure will be less meaningful if they do not create good quality jobs, better distribution of incomes and higher standard of living for the people. Formulation of public policies must continue to be based on sound economics and have the ultimate goal of improving the welfare of society. While we remain cognisant of the broader distributional implications of our policies, issues that are more structural in nature such as low productivity, income inequality and quality jobs creation would also require specific policies that lie beyond the capacity of the central bank alone. It requires collaboration across many domains, with other policy makers, and with many stakeholders for the betterment of the standard of living and welfare of the general public. As we know it, the world is fast evolving and we must keep pace. The progress of information and communication technology, has been astounding and its assimilation into our economic and financial system structure will be the catalyst to propel finance as the great social equaliser. But for us to optimise the benefits for all, we need to strike the right balance between regulation and allowing technological innovations to take place in our financial system.
While the openness makes it easier to evaluate monetary policy, one can say that the evaluations are also an important part of the openness. Only a couple of decades ago central banks were fairly secretive. Very little of what was carried out became known to the general public. There have been considerable changes since then. The process of development from uncommunicativeness to increasing openness that has taken place at central banks around the world has probably contributed to the success of monetary policy. What I mean here is that they have succeeded in anchoring inflation expectations at a low and stable level. The Riksbank is one of the most open central banks of all. We began publishing our inflation forecasts in 1997 and since then we have gradually become more open in our view of economic developments. Other central banks are also moving towards greater openness. For instance, only a few days ago the Federal Reserve in the United States began publishing forecasts four times a year instead of twice. They have also extended the forecast horizon from two to three years, just as we at the Riksbank did a couple of years ago. It is thus essential that monetary policy is evaluated and discussed. This applies both to the principles behind monetary policy and to how well we succeed in meeting our objective. To make this possible there must be a clear basis for the decision.

The uncertainty bands are constructed so they are symmetrical around our main scenario and for GDP growth and the inflation rate the breadth of the bands is calculated with the aid of our earlier forecasting errors. This gives an incentive to make good forecasts, as large forecasting errors bear the penalty of broad uncertainty bands and the risk of reduced credibility in the forecasts. The uncertainty band for the repo rate cannot be calculated in the same way, as we have only begun to make our own forecasts for the repo rate this year. There are quite simply insufficient historical forecasts to use as a base. The uncertainty band for the repo rate has instead been constructed with the aid of forecasting errors among the so-called implied forward rates (Figure 14). The implied forward rates reflect market expectations of the repo rate. One problem with this method is that the implied forward rates have systematically over-estimated the future repo rate path for a number of years. However, the over-estimation has been removed from the forecasting errors, with reference to the fact that the forward rates also consist of a risk premium that should not be included when using them for forecasts. Different central banks have chosen different methods of illustrating the uncertainty in the forecasts and we regularly compare notes with one another. We are continuing to develop our forecasts The conclusion from this review is that the Riksbank’s forecasts on the whole are rather good, particularly one year ahead.