samchain/econo-pairs-v1 huggingface dataset:
Simon M Potter: The implementation of current asset purchases Remarks by Mr Simon M Potter, Executive Vice President of the Markets Group of the Federal Reserve Bank of New York, at the Forecasters Club of New York, New York City, 27 March 2013. *  *  *  I would like to thank Katherine Femia and Linsey Molloy for help in preparing these remarks along with members of the Markets Group Staff for their comments and suggestions, including James Egelhof, Joshua Frost, Lorie Logan, Julie Remache, Roman Shimonov, and Nathaniel Wuerffel. These remarks are an expanded version of those given to the Annual Primary Dealers meeting on March 1. Thank you very much. It’s a pleasure to be here today to talk with you all about the Federal Reserve’s ongoing policy actions and the role of the Trading Desk (the Desk) at the Federal Reserve Bank of New York in implementing those policies on behalf of the Federal Open Market Committee (FOMC). As always, the views expressed here are my own and do not necessarily reflect those of the Federal Reserve Bank of New York or the Federal Reserve System. Outcome-based purchases At the September 2012 FOMC meeting, the Committee decided to increase policy accommodation by purchasing an additional $ billion per month of agency mortgagebacked securities (MBS) and to continue the Maturity Extension Program (MEP). Then at its December meeting, the Committee decided to continue buying $ billion per month in longer-term Treasury securities following the completion of the MEP.

Update on the microfinance regulations •  The draft microfinance regulations, which are aimed at providing a legal framework for regulation and supervision of microfinance institutions, are currently being reviewed by the BoZ and are scheduled to be submitted to the Minister of Finance and National Planning during the second quarter of 2004. Polymer notes •  As most of you must have heard, through the media, there are public concerns about some features fading on the polymer banknotes of K500 and K1,000. While we have also noticed a number of them, we wish to inform you that fading is a definite and expected feature of these notes as they approach the end of their useful life. However, we also feel that being a new concept, the notes could still be subjected to undue stress testing due to public curiosity. However, we are also not ruling out premature wearing of the notes. We are therefore doing everything possible to ensure that subsequent consignments do not suffer similar setbacks. In the meantime, we wish to make an earnest appeal to all the banks to assist the Bank of Zambia in ensuring that faded notes are quickly taken out of circulation, in the same way as soiled banknotes have been handled in the past. The Bank of Zambia is also going to set up mechanisms for enhancing the process and pace of siphoning faded notes from circulation.
Haldane, A (2016), ‘The Great Divide’, speech at New City Agenda Annual Dinner, available at: www.bankofengland.co.uk/publications/Documents/speeches/2016/speech908.pdf Haldane, A and Radia, A (2016), ‘The need for discretion and rules: a commentary on John Taylor’s lecture’, Policy Stability and Economic Growth: Lessons from the Great Recession, Readings in Political Economy, Vol. 5. Halpern, D (2015), Inside the Nudge Unit: How small changes can make a big difference, WH Allen. Halpern, D (2016), ‘It’s time to bring more realistic models of human behaviour into economic policy and regulation’, Bank Underground, available at https://bankunderground.co.uk/2016/08/23/its-time-to-bringmore-realistic-models-of-human-behaviour-into-economic-policy-and-regulation/ Hansen, S and McMahon, M (2016), ‘The nature and effectiveness of central-bank communication’, article on VoxEU. Hansen S, McMahon, M and Prat, A (2014), ‘Transparency and deliberation within the FOMC: a computational linguistics approach’, CEPR, Discussion Paper 9994. Hayo, B, Kutan, A and Neuenkirch, M (2010), ‘The impact of U.S. central bank communication on European and pacific equity markets, Economic Letters, Vol. 108, No. 2, p. 172-174 Hendry, S and Madeley, A (2010), ‘Text Mining and the Information Content of Bank of Canada Communications’, Bank of Canada Staff Working Paper, No. 2010-31. Hubert, P (2015), ‘Do Central Bank Forecasts Influence Private Agents? Forecasting Performance versus Signals’, Journal of Money, Credit and Banking, Vol. 47, No. 4, p. 771–789. Joyce, M, Lildholdt, P and Sorensen, S (2010), ‘Extracting inflation expectations and inflation risk premia from the term structure: A joint model of UK nominal and real yield curves’, Journal of Banking & Finance, Vol. 34, No. 2, p. 281-294.

This successful launch, to the benefit of 305 million Europeans, represents the crowning achievement of the euro changeover, after the launch of the euro on the financial markets, on 1 January 1999. Both operations were a technical success because they had been meticulously well-prepared by the full body of the Eurosystem, the European Central Bank, and all the euro area national central banks, including Banque de France in France. However, aside from the technical success in itself, the warmth and enthusiasm with which French citizens and other Europeans welcomed the euro, their new currency, was proof that European construction enjoys real popular support that has all too often been underestimated. Let me now turn to the core of my subject today: first, the process for economic reform, second, the perspective of enlargement. *  1. *  *  Economic reforms  Before reviewing the priority topics which require a new impulse, I would like to make a remark on the also often underestimated link between reform and the changeover to the euro : indeed, the introduction of banknotes and coins in euro is a major structural reform in itself, as it constitutes a powerful drive towards restructuring the European economy, and a strong lever to facilitate the comparison of prices, taxes and incomes between the Member states.
What surprised us more on the negative side was the slow transmission of easier financial conditions on current and future inflation. 2  BIS central bankers’ speeches  So what have you learned so far? Our own experience with a negative deposit rate was more favourable than we initially thought. We then went to minus 0.20. Since then we also have the experience of smaller countries which cut the rates to even more negative levels. We also reopened the discussion on the zero lower bound. There is no decision which has been taken but it is true that, given the experience that we have seen, we thought in the Governing Council that there was the case to re-discuss the lower bound. Have you looked at what other central banks have done? Yes but one needs to be very careful when looking at the experience of other countries. Each central bank works in a different environment, what you see in a small open economy is not necessarily applicable in a larger zone. Could the euro area tolerate minus 0.75 percent, like, for example Switzerland? In terms of level, I wouldn’t have any judgement in terms of ‘they can do it so we can do it’, that would be too simplistic. You have to look at the specificities of each one. What’s your thinking on how to avoid the so-called ‘Cliff Effect’ if QE were to come to a sudden end? We are very well aware of that.

Initial and variation margins collected by four European central counterparties together increased by around € billion during the peak of the crisis (see left chart slide 9). Total variation margins posted by euro area investment funds rose more than fivefold over the same period and exceeded pre-pandemic cash positions for more than one-quarter of funds with derivative exposures. [12] To meet margin calls, some euro area insurers and pension funds that make extensive use of interest rate swaps and foreign exchange derivatives liquidated shares held in money market funds (MMFs). [13] There was a striking correlation between margin calls and MMF outflows over the entire period of market stress (see right chart slide 9). [14]  Systemic risks due to interdependencies Taken together, low liquidity buffers, pockets of leverage and rising margin calls gave rise to perilous price spirals and contagion that threatened to destabilise the entire financial sector through network effects. https://www.ecb.europa.eu/press/key/date/2020/html/ecb.sp201119_1~4a1ff0daf9.en.html  3/7  20/11/2020  COVID-19 and the liquidity crisis of non-banks: lessons for the future  Insurance corporations, for example, not only rely heavily on MMFs for their liquidity management, they also hold over 25% of their assets in investment fund shares. This meant that pressure on investment funds in March negatively affected insurers’ profitability. For the United States, Darrel Duffie and others have provided evidence that the dislocations in the US Treasury market can in part be accounted for by non-banks heavily relying on government bonds for their liquidity risk management.
And this is what European banking supervision is doing. Our main tool towards that end is the Supervisory Review and Evaluation Process, SREP for short. In this process, we conduct a risk assessment for each institution, not only evaluating its current and future risk levels, but also its risk controls. We review the internal processes followed by institutions in order to determine the appropriate capital and liquidity levels. And we consider the risk an institution poses to the financial system. Finally, we apply a method to quantify capital and liquidity needs, based on the results of our risk analysis. As a result, we might require institutions to hold capital and liquidity buffers over and above regulatory requirements. This institution-specific view is supplemented by a horizontal analysis of risks, which also considers system-wide risks, such as those arising from global imbalances, excessive risk concentrations in certain sectors or declining standards in business deals. The objective is to obtain a broader picture of the risk situation in the banking sector and to evaluate key market developments. Together, the institution-specific view and the horizontal analysis can provide us with a sound understanding of risks in the entire banking sector. So for risk managers as well as for banking supervisors, it is important to take a medium to long-term perspective, anticipate potential problems and act when necessary.

In addition, the euro area addressed risks in banks’ balance sheets with an unprecedented project in 2014 – the comprehensive assessment. Not only did that exercise lead to a common definition of non-performing loans for the first time, it also led to a significant increase in provisioning. Altogether, the banking system is much more resilient today than it was in 2008 – not least thanks to an improved regulatory and supervisory framework. Still, in more general terms, we cannot deny the existence of risks. This is particularly true for the financial market, whose core function is to allocate risks. Each and every financial institution must therefore cope with risks. Alas, this is more difficult than it sounds. BIS central bankers’ speeches  1  Acknowledging risks – there is no such thing as a free lunch For a start, there are those risks that cannot be foreseen, the famous black swans. Such risks cannot be managed in any meaningful way. In fact, the only option is to increase resilience. For banks, the universal buffer against all kinds of unexpected shocks is capital. And, on the capital front, much has been done over the past few years. As I already mentioned, banks around the world have increased their capital ratios since 2008. In terms of capital, banks in Europe are therefore much better prepared for those risks that cannot yet be foreseen. But then there are those risks that can be foreseen – they can be measured and managed.
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.

One of the standard assumptions behind the forecast is an unchanged exchange rate from the forecasting day, and it should be borne in mind that it did not take into account the interest rate cut which was announced on February 10. The impact of the cut will be a marginally higher rate of inflation than was assumed in the forecast. It should also be mentioned that Monetary Bulletin contains an announcement about pending changes to rules on required reserves aimed at harmonising the operating conditions of Icelandic credit institutions with those of comparable institutions in EMU. To be implemented in phases this year, the new rules involve a considerable reduction in the credit institutions’ required reserve from the present levels, thus entailing some easing of the monetary stance. Broadly speaking, the Central Bank’s assessment and forecasts entail a fairly moderate rate of economic growth this year, unemployment of around 3½% this year (excluding the effects of new government measures in this area) but falling somewhat next year, a minor current account deficit this year and next year – in particular caused by imports connected with the construction programmes in east Iceland – and a very moderate rate of inflation. Thus it can be said that the outlook is for good macroeconomic balance. As I mentioned earlier, Monetary Bulletin includes an in-depth assessment by the Bank of the proposed power-intensive industrial projects in east Iceland and conceivable economic policy responses to them.
In 2002 the Central Bank began building up its foreign reserves again, purchasing foreign currency for the equivalent of 4.5 b.kr. Last year the Bank stepped up these purchases to the equivalent of 43.2 b.kr. Nonetheless, the Bank’s purchases only amounted to 3.6%  2  BIS Review 18/2004  of total turnover in the FX market during the year. By mid-2003 the Central Bank had repaid its foreign short-term borrowing in full and at the end of the year the foreign reserves amounted to more than 58 b.kr. This year the Bank has continued to purchase currency in the market, but on a smaller scale than in 2003. It thereby aims to strengthen its foreign reserves even more this year. Ample foreign reserves are an obvious prudential measure and one of the factors that international ratings agencies consider when evaluating the creditworthiness of Iceland’s sovereign and corporate debt. However, a high level of reserves does leave the Central Bank’s operations much more exposed to changes in the exchange rate, as reflected in the minor operating loss reported for last year, which was described earlier at this meeting. Financial stability The Central Bank is obliged by law to promote price stability and also an efficient and safe financial system, including payment systems domestically and with foreign countries. In most countries these are he main objectives of central banks.

I would say that the delay in adopting reforms for public social protection systems reinforces the need to achieve healthier positions in the short term, providing for further cuts in the public debt ratio or, alternatively, for making appropriations to the pension reserve fund with greater speed and intensity. Moreover, this need increases in the absence of more ambitious reforms in the labour market to further promote the use of still-idle labour resources, despite the progress in increasing participation and reducing unemployment. I talked earlier of the advisability of having more efficient cost- and price-setting mechanisms to smooth the adjustments the economy has to make in the context of EMU. In this respect, the fact that issues relating to the structure of collective bargaining have been relegated on the agenda of potential labour market reforms is a cause for concern. The wage bargaining arrangements included in the Inter-Confederal Agreements for Collective Bargaining, habitually signed by social agents, restrict the capacity to adjust wage increases to industry- or firm-wide productivity developments, in addition to setting a floor for the increase in nominal wages. The indexation clauses included in a high proportion of agreements have particularly harmful effects when exogenous price-rise shocks occur, as with the current hike in oil prices, since they tend to reinforce the upward inertia of wages.
Despite the strong demand for Swiss francs and the low interest rates in Switzerland, we can see that, overall, volume on the Swiss franc bond market has barely changed. In contrast to the situation in other countries, the level of debt has not risen, even though financing conditions have been favourable. Swiss franc assets have become less attractive in the eyes of investors, especially those from abroad. This suggests that investors have placed only a modest portion of their newly acquired Swiss francs in Swiss franc securities. Thus, monetary policy measures have also been transmitted to the Swiss franc capital market. At the same time, we observe that the way in which investors hold their additional Swiss franc positions has changed. It appears that instead of holding Swiss franc deposits, they are increasingly making use of derivatives in order to hedge foreign currencies. The growing share of hedged foreign currency assets held by Swiss pension funds seems to confirm this picture. Given this situation, the SNB is maintaining its expansionary monetary policy, which continues to be based on two key elements: a negative interest rate (–0.75%) on sight deposits at the SNB and our willingness to intervene in the foreign exchange market as necessary. This policy aims to stabilise price developments and support economic activity. The weakening of the Swiss franc in recent months has helped to reduce, to some extent, the significant overvaluation of the Swiss franc in recent months. Nevertheless, the currency remains highly valued.

© Swiss National Bank
These facts oblige us to realize that challenging the status quo means in the end challenging mentalities, both those of policymakers and of citizens. It is a very complex process, but we see it as an opportunity as well. We can transform education and awareness in very effective policy tools, to everybody’s benefit. We can surpass the objective limits of our policy actions, by making people more aware of these very objective limits. Bridging the knowledge gap can lead to more financial inclusion, to more access to finance, which is good news for banks, companies, citizens and public authorities alike. Ladies and gentlemen, My conclusion and my message for you, distinguished participants to this conference, and I do not want to sound old fashioned, is that we need research and economic analysis that is practical and can fill the real deficits of our society. And if you really want to challenge the status quo, my advice is to have in mind also the way your research will be disseminated and materialized in real life. On the other hand, let’s not forget to preserve what is valuable in the current establishment. As an old word of wisdom is saying, we need courage to change the things which should be changed, serenity to accept the things that cannot be changed, and the wisdom to distinguish the one from the other. I wish you success with the debates! 2/2  BIS central bankers' speeches

I am pleased to point out that the doors of the SNB’s archives were opened unreservedly to these authors. The second part of the publication is more traditional. It is devoted to the last twenty-five years and deals with various aspects of the SNB’s activities and its nature, ranging from monetary policy to the governance of the bank and including the new emphasis placed on financial stability, changing international relations, the renewed statutory framework in which we operate, and the adoption of a modern approach to managing our currency reserves. This second section, divided into eight chapters, was penned entirely by bank staff. We did not want a purely descriptive text. On the contrary, we asked the authors to adopt an analytical, critical approach, concentrating on key issues. In order to recognise the authors and their contribution to the book – and this is a departure from the previous commemorative works – they have been personally named at the beginning of each article. Some forty in-house authors contributed to the work. For the third and last part of the book, which looks to the future, we took a step back. We called on the services of eight Swiss and foreign economists, all specialists of global renown, asking them to discuss those issues of greatest concern to today’s central banks. We asked Ernst Baltensperger of the University of Berne to provide a more academic assessment of the SNB’s monetary policy over the last twenty-five years.