samchain/econo-pairs-v1 huggingface dataset:
The monetary base has risen by unprecedented proportions as we tried to prevent a collapse of broad money and credit as happened in the US during the Great Depression and today in Greece. And central bank balance sheets have risen across the industrialised world, as shown in Table 2. That expansion has reflected both money creation through asset purchases and lending against collateral. All major central banks have created new ways to lend against collateral.5 Far from their image as conservative creatures, are central banks at risk of throwing their traditional caution to the wind and ignoring the limits on monetary policy? Two limits are relevant in current circumstances. First, no matter how much liquidity is thrown at the banking system, lending and the economy will not recover if the banking system is inadequately capitalised and suffering from excessive leverage. That is why the Bank of England’s Financial Policy Committee has placed weight on the need for the weaker UK banks to raise capital. It is not surprising that the more strongly capitalised banks in the UK are expanding lending and the poorly capitalised banks are contracting lending. Second, there are limits on the ability of domestic monetary policy to expand real demand in the face of the need for changes in the real equilibrium of the economy. I do not believe that the present problems in the United Kingdom stem only from a large negative shock to aggregate demand.

But it has got harder. 4  BIS central bankers’ speeches  Chart 1: UK inflation and output gap variances 3  Inflation variance  1958-1992  2  1  1993-2007 0 0  1  2  3  Output gap variance  Chart 2: The UK’s pre-crisis trade-off? 3  Inflation variance  Stylised ‘Taylor frontier’  1958-1992  2  1  1993-2007 0 0  1  2  3  Output gap variance  BIS central bankers’ speeches  5  Chart 3: The ‘Great Stability’ and crisis periods 3  Inflation variance  1958-1992  2  1 2008-2012  1993-2007 0 0  1  2  3  Output gap variance  Chart 4: The true trade-off for the UK over 20 years? 3  Inflation variance  1958-1992  2  1 1993-2012  2008-2012  1993-2007 0 0  1  2  3  Output gap variance  6  BIS central bankers’ speeches  Chart 5: A preferable outcome? 3  Inflation variance  1958-1992  2  1  P  1993-2012  2008-2012  1993-2007 0 0  1  2  3  Output gap variance  Table 1: Monetary base  Data are month averages for UK, US, Japan and end month for the euro area. Sources: Bank of England, Federal Reserve, Bank of Japan, ECB.
We heard a lot of talk in the foreign exchange markets in 1996 about the “end of volatility.” As the market performance of the last few weeks has demonstrated, such commentary was a bit exaggerated. However, even with the spike in volatility we’ve seen in recent weeks, there is no question that we have witnessed a remarkable period of relative stability in foreign exchange rates over the past six quarters or so. What accounts for this relative stability in the foreign exchange markets since late 1995? Economic fundamentals are certainly one factor -- we have had a period of relative price stability in the major world economies, and a general absence of severe market shocks. However, I would argue that what we’ve been observing is also, in part, a by-product of continuously greater transparency that has characterized the foreign exchange market over the past several years. Moreover, I am convinced that the increased transparency in the foreign exchange markets is beneficial: for the foreign exchange community, for financial markets in general, and for the global economy as a whole. Before explaining what I mean by greater transparency and why I believe it is so beneficial, I would like to take a quick look at the record itself. Is the talk about declining volatility reflected in hard evidence? Yes, it largely is.

The result, again, is a more efficient allocation of global capital than would otherwise be possible. To the extent, therefore, that reduced volatility in the foreign exchange market stems from improved transparency, I would view this result as a beneficial by-product -- one that also contributes to the ultimate goal of economic and monetary policy: namely, sustained growth and a stable price environment. The move toward increased transparency in global markets and the accompanying relative decline in foreign exchange market volatility and trading ranges that we have observed in the last year and a half have posed considerable challenges to market makers, spot traders, and brokers, on both an institutional and a personal level. There is an axiom in these markets that volatility is good for market makers. I believe that this is a short-sighted view. On the contrary, I  BIS Review 60/1997  -6-  would submit that excessive volatility not only frightens investors, but also potentially undermines growth and, in so doing, benefits none of us. As a result, I cannot help but conclude that stable -- and not volatile -- markets are in the best interests of both central banks and the financial community. Stability in foreign exchange and other financial markets, along with price stability, is vital to the promotion of sustainable economic growth and rising living standards for everyone.
However, after several years of strong growth, resources are now in short supply. With the substantial number of businesses now facing capacity constraints, we can expect inflation to pick up. It is uncertain whether inflation will then rise quickly or only gradually near target. Strong export growth, high oil investment and after a period higher growth in general government demand have contributed to the upswing in production and employment. But the low level of interest rates has also been a prominent driving force. This reflects the dynamics inherent in interest-rate setting. Low interest rates have stimulated demand and production and should lead to higher inflation, to which we are now reacting by raising interest rates. Under inflation targeting, it is important to be mindful of the effects of higher interest rates on the krone exchange rate when inflation is low. Interest rate developments in other countries are thus of importance to interest rates in Norway. BIS Review 15/2007  5  Unemployment has declined sharply in recent quarters. The pace of decline and the level of unemployment are reminiscent of two earlier cyclical peaks, one in the mid-1980s and the one that began at the end of the 1990s and continued into the present decade. Both booms culminated in sharply accelerating cost and wage inflation. Some of the driving forces that have boosted the growth potential of the Norwegian economy and restrained inflation may diminish. Prices for imported goods are no longer decelerating at the same pace. Labour market conditions are tightening in Sweden and Poland.

Durmuş Yılmaz: Green shoots – how vigorous and how sustainable? Speech by Mr Durmuş Yilmaz, Governor of the Central Bank of the Republic of Turkey, at the Conference on “Green shoots – how vigorous and how sustainable”, IMF-World Bank Annual Meetings 2009, Istanbul, 5 October 2009. *  *  *  Ladies and gentlemen, First of all, I would like to welcome everyone to Istanbul. It is a great pleasure for me to be here addressing such a distinguished audience as we convene for the 2009 Annual Meetings. “Green shoots” has been a popular metaphor to describe the recovery process. And today, I will try to elaborate on our path to build a career as a prudent gardener. I want to begin with discussing the path that brought us to this crisis. Then, I will talk about the recovery signals in both global and Turkish economy. I will conclude my speech with my thoughts on the solidity and sustainability of these signals. As is well known, financial strains originated in advanced economies abruptly mutated into a full-blown crisis and had a devastating effect on international capital markets. As the crisis intensified, measures of perceived risk escalated to record levels and major financial institutions suffered massive losses. At the same time, liquidity shortages, tighter credit conditions, and heightened uncertainty were associated with a sharp decline in both private consumption and investment spending. In fact, many economies fell into recession or have seen their growth rates decline sharply.
One of the tasks of this board, which will be located at the ECB, will be to gather and analyse information that may be of significance to the stability of the financial system in the EU. If the work of the council is to be effective, it is important that it will be able to be forthright about the risks it sees and that the message it delivers is not obscured by political considerations. In order to strengthen the coordination of financial supervision in the EU, the existing committees for collaboration on the supervision of banking, securities and insurance operations are now being converted into authorities. This will give these bodies greater powers to intervene. Concluding thoughts So, it is clear that financial crises are nothing new. What distinguishes this crisis from earlier ones is its global extent and extreme complexity. Basically, it is about the fact that the flows in the financial system have increased dramatically at the same time as the system has become increasingly complex and difficult to oversee. The mutual dependence of the various markets has increased. This means that crises can more quickly and more forcefully hit an increasing number of economies at the same time. The current crisis has demonstrated this in no uncertain terms. This crisis has probably already passed its peak. Extensive efforts are now underway around the world to design a regulatory and supervisory system that will reduce the risks of a new major financial crisis. We need a better insight into the build-up of global risks.

One reassuring point is that the major UK banks and building societies were tested against precisely this scenario by the Bank of England in 2015 and demonstrated they had the resilience to weather such a shock and carry on lending to the UK economy. Conclusion Looking back over the last two years, I think that the slow healing story can still explain where we are and provide a guide to our future prospects. But the story has to be adapted in the face of more UK and world weakness than I had expected and this weakness might be signalling that there are deeper structural factors at work. Nonetheless, my central projection remains that the UK economy will continue to grow solidly and that inflation will return to target over the next few years. But, as always, policymakers need to be alive to the possible meaning of disappointments, to be very sensitive to the possibility of changing temperatures around them, and to the risk of unfortunate events. We have a range of tools at our disposal and should be ready to use them whichever risk materialises. BIS central bankers’ speeches  7
They too are predominantly retail, not wholesale banks, operating a very traditional business model, one that has largely shielded them from the problems of the international financial turmoil of these last years. They take deposits from (mainly) small local savers and make loans to (mainly) small or medium-sized local businesses and help people buy their houses by providing mortgages. Their officers, like those of the cooperative banks elsewhere, belong to the community in which they operate and generally know their customers and the local environment. In addition, one of them is involved in the European Investment Fund’s Jeremie programme, a programme designed specifically to help small and medium sized enterprises. The bank in question has committed over EUR 5 million over a period of three years to some 280 local SME beneficiaries under the programme. Indeed, one could say that it is mainly in their ownership structure that the local commercial banks, which are joint stock (or “shareholder value”) banks, differ from cooperative banks. In all other respects they are not very different. So that leaves us with the question: is there or is there not scope for setting up a cooperative bank in Malta? Is there or isn’t there space for such an institution? Or is the local market too small, while our community is being adequately served by the banks already operating here? I think it is not for me to answer these questions.

Cooperative banks also have a significant presence in South Korea, Japan, Canada, Morocco, Mexico and Brazil. So the question immediately arises: how come that no such institution has ever been set up in Malta? After all one would have thought that the idea of cooperation and solidarity, and the spirit of the Seven Basic Principles of the International Cooperative Alliance (ICA) would have a strong appeal in Malta. These seven principles consist of: voluntary and open membership; democratic member control; member economic participation; autonomy and independence; education, training and information of members and employees; cooperation with other cooperatives; and, especially, concern for the community. Moreover, we do have cooperatives in other spheres of activity here, and these have been around for some time. Indeed, the start of the cooperative movement in Malta dates back to the later years of the 19th century (around 1884), and the first form of legislation regulating cooperatives here – the Cooperative Societies Ordinance 1946 – came into effect on 12th December of that year. Initially the movement took root in the agriculture and fisheries sector, which in those times employed a significant part of the population. But later, as Malta developed socially and economically, the movement continued to flourish and to expand, and new cooperatives were set up in practically every sector of the economy. Indeed, there are currently some 60 cooperatives in Malta, with over 5000 members, spread over a wide range of activities.
The fact is that there is often not much resource slack in the economy also makes it hard to discern a clear empirical relationship. Unfortunately, in this episode, we don't need a precise estimate of slack to be highly confident that the level of slack in the labor market is at or above the record of the post-World War II period. Although the headline unemployment rate of 9.8 percent is about one percentage point below its level at the end of the 1981-82 recession, other, more indicative measures paint a bleaker picture. For example, the prime age male unemployment rate is at a record high, by a significant margin. The labor market data released last Friday showed the September value at 10.4 percent, an increase of 6.5 percentage points from the start of the recession. In contrast, in the 1981-82 recession the prime age male unemployment rate peaked at 9.3 percent, rising by 4.2 percentage points from the start of that recession. Over the post-World War II period as a whole, it was only in the wake of the 1981-82 and 1990-91 recessions that the prime age male unemployment rate remained above 6 percent for more than just a few months. In addition, during all post-war expansions, the prime age male unemployment rate has fallen below 5 percent, even during the short expansion of 1980-81. Currently, even under very optimistic forecasts for the economy, it appears very unlikely that the prime age male unemployment rate will dip below 6 percent before 2011.

I am happy to report that this experience has been a successful one, particularly from the point of view of monetary autonomy. Indeed, the Basic Law has, since 1 July 1997, provided Hong Kong with far greater autonomy in its monetary and financial affairs, and this autonomy has been confirmed in practice by the clear confidence that the Central Government has placed in our ability to manage things on our own. I make this point, not because Macau needs any reassurance from Hong Kong, but because it is a striking illustration of how some of the deepest forebodings about future events can often be the product of the most dismal misjudgements. Two years ago, gloomy scenarios were being painted - not about an Asian financial crisis - but about the impending demise of Hong Kong’s monetary autonomy under Chinese rule: about the breaking of the link between the Hong Kong dollar and the U.S. dollar, the absorption of Hong Kong’s substantial foreign reserves by the Mainland, and so on. Of course, nothing of the kind has happened, and there may well be lessons here to apply to some of the more lurid scenarios that are being drawn up for the first of January 2000. Our topic this morning, however, is not the Year 2000 problem, but the perennial question of how to devise sustainable and realistic monetary and exchange rate policies in an uncertain global financial environment.
When international investors lost confidence in the ability of governments to defend the fixed exchange rate, the countries encountered difficulties. Sharp currency depreciations and major readjustments followed in many countries. Even though economies in this region have fared well in recent years, the experience may have left its mark. A number of Asian countries, China in particular, have chosen to keep their currencies pegged to the US dollar. As long as the Chinese authorities are successful in keeping the exchange rate fairly fixed, competitiveness and a trade surplus will be maintained. However,  3  2  US Bureau of Labor Statistics. International Labor Comparisons. Manufacturing in China. http://www.bls.gov/fls/china.htm  BIS central bankers’ speeches  such a policy is at the expense of deficit countries, which would have preferred to see an adjustment in the yuan exchange rate. China’s exchange rate policy is therefore under strong pressure, especially from the US. But China’s economic strategy is based on its own experience and the experience of others. First, China has chosen to focus on the export of finished manufactured goods rather than domestic consumption as the basis for growth. So far, this has resulted in dynamic developments where growth has been kept high owing to increasing opportunities for people in rural areas to move to new jobs in towns and cities. A stable exchange rate has contributed to predictable operating parameters for a rapidly growing export industry and has held up competitiveness.

Since the global financial crisis (GFC) giant steps have been taken at the G20 to strengthen international policy coordination and cooperation. Overall there are two opposing  2  BIS central bankers’ speeches  developments affecting the IMS. On the one hand, the significant reforms since the GFC have strengthened the IMS. But on the other hand, growing interconnectedness especially through increased international investment positions together with unconventional monetary policies pose challenges to the IMS. In these global circumstances, having faced the deterioration in inflation and its outlook reflecting the pass-through from the TL depreciation and domestic factors and elevated volatility in capital flows together with tightening global financial conditions the Central Bank of Turkey has been following a tight monetary policy to fight inflation, taking liquidity stabilizing measures for the foreign currency market and ensuring the stability of the financial system. This policy framework was announced as a “road map” document back in August 2015 outlining monetary policy, foreign currency liquidity and financial stability related measures and aimed at alleviating policy tradeoffs. The key idea is to provide market making facilities to the local banks when they face financial stresses in the global markets. They are then allowed to borrow in foreign currencies from the central bank and use their all liquid assets irrespective of their denominations i.e., local currency and foreign currency denominated assets as collateral when they borrow from the central bank in any currency. BIS central bankers’ speeches  3
Similar decrease in reallocation was found in the United Kingdom by the Bank of England 6. Financing constraints also hit more particularly R&D financing: according to a Banque de France study 7, R&D investment share becomes procyclical when credit constraints bites and does not increase proportionally in upturns. As the Great Recession was global, years of R&D efforts lost cannot be recovered by the purchase of technology from abroad, as all countries have been hit. In the medium term, this will weigh on productivity growth, which is partly fed by technical innovation. Financing constraints may contribute to a depressed investment, especially in industries with heavier reliance on external finance or lower asset tangibility 8, which can slowdown capital stock and hence potential growth, but also lead to its aging and weigh on its productivity through the use of older equipment vintages. As we can see on this graph from a Banque de France study 9, both the great Depression and the great Recession led to a significant ageing of the equipment stock. The Governing Council of the ECB has been particularly conscious of the acute strains in the financial system over recent years and the impairment of the credit channel. In particular, it has been concerned that bank deleveraging could reduce the supply of credit and undermine the supportive effects of lower interest rates on firms’ balance sheets. This could have been a significant “headwind” for monetary policy and has reinforced the case for decisive action.

In particular, I would like to mention: •  The historical links with the public sector, such as in India where public banks still dominate the banking sector and  •  Banking sector expertise both in a rural environment, especially relevant for India, and in large industrial groups, as indeed Indian industrial groups are active internationally. In this respect, I am very pleased to participate with the RBI in the launching of the first French-Indian Financial Forum on May 16, in Mumbai. Thank you for your attention. 4  BIS Review 64/2007