samchain/econo-pairs-v1 huggingface dataset:
One can, however, answer a slightly different and more straightforward question, namely what impact the accommodative policy stance had on asset prices and credit growth. Bernanke goes on to provide time-series and crosscountry evidence, which suggests that monetary policy played a relatively modest role in the boom in house prices in the United States and a number of other countries. Chart 1 shows that both UK and euro-area policy rates were less noticeably out of line with their respective Taylor benchmarks. That too is striking. Indeed, in the United Kingdom, they were actually above the benchmark for much of the relevant period, even though the United Kingdom saw one of the larger run-ups in debt and house prices during this period. And, in the euro area, countries such as Spain experienced substantial house price booms, while countries such as Germany did not. That need not imply that monetary policy was innocent in the run-up to the crisis, as the equilibrium real interest rate could have been higher in the United Kingdom than in the calibrated Taylor rule. And differences in equilibrium real interest rates across countries can in principle explain the heterogeneity in the euro area. But this is hardly compelling evidence for assigning the central role to monetary policy, suggesting that other factors were more important. To complement Bernanke’s analysis, we provide some further evidence on the impact of policy on credit and asset prices, obtained from estimated vector auto-regressions for the United States and the United Kingdom.

In the absence of other instruments, the case for “leaning against the wind” by setting policy rates higher during the boom phase seems stronger than before. But, at least most of the time, monetary policy does not seem like the most appropriate instrument to call on – it is not targeted at the key friction and involves too much collateral damage to activity. The deployment of macro-prudential instruments, focussed more directly on the source of the excessive exuberance seems more appropriate. But we still have much to learn about how such instruments work in practice and how they interface with monetary policy. 7. The relationship between price stability and financial stability. It is now pretty clear that price stability is not a sufficient condition for financial stability. Indeed, the empirical results of Section 2 suggest that the reduction in volatility associated with the Great Moderation may have contributed to excessively optimistic assessments of risk, the compression of risk premia and the expansion in leverage. That does not imply central banks should retreat from the pursuit of price stability, and macroeconomic stability more generally. But it does suggest that policy makers need both to be aware that long periods of benign conditions may foster excessive private-sector risk-taking, and to be ready to take the necessary action when that happens. 24  BIS Review 111/2010  Appendix: The model of Section 5 The model is a slimmed down version of Gertler and Karadi (2009). The economy is populated by two types of agents: producer/consumer households and bankers.
Table 3 Household debt  (real annual change, percent) 20022008 2007 (1) IV  2009 IV  2010 I  II  III  2011 I  IV  Contribution to growth (2)  Share in debt  Mortgage Bank Non-bank (3)  14.1 15.3 8.2  12.9 13.1 11.7  7.3 8.6 -0.5  7.7 9.2 -1.6  8.6 10.0 -1.0  9.0 10.4 -0.5  7.0 9.0 -6.0  7.6 9.3 -4.3  4.2 4.5 -0.3  55.8 49.3 6.3  Consumer Bank Non-bank Retail stores CCAF (4) Cooperatives Other (5)  17.9 16.0 20.7 27.6 19.9 25.2 13.5  3.9 -0.3 9.1 9.3 9.6 11.6 7.6  1.8 2.2 1.4 -7.9 8.3 5.6 6.7  2.3 2.7 1.9 -6.4 7.5 3.3 7.6  4.7 5.1 4.3 -1.2 6.9 9.5 6.8  5.8 7.5 3.8 3.6 1.3 5.2 5.2  8.1 8.6 7.6 11.9 2.9 1.9 8.8  9.5 11.8 6.8 10.4 6.2 0.8 6.1  4.2 2.8 1.4 0.7 0.3 0.0 0.4  44.5 24.3 20.2 7.0 4.4 2.6 6.3  Total  15.8  8.7  4.8  5.3  6.8  7.6  7.5  8.4  8.4  100.0  (1) Average. (2) Percentage points. (3) Includes securitized mortgage debt. (4) Clearance houses (family). (5) Includes new car loans, college debt and insurance companies. Sources: Central Bank of Chile based on information from SBIF, SuSeSo and SVS.

The dollar has depreciated further and emerging currencies have appreciated accordingly. The peso/dollar parity has not escaped this trend, although in its case it has been milder. The real exchange rate has posted a marginal increase (figure 5). This increase in the exchange rate is somewhat bigger if compared with its level before the CBC began its foreign currency purchase program. The persistently weak dollar at the global level has resulted in the real exchange rates of various economies hitting or approaching the record lows of the last decade (figure 6). Hence, Chile’s real exchange rate is in levels consistent with its long-term fundamentals. The baseline scenario uses as a working assumption that it will remain flat over the coming quarters. In recent months, inflation has continued to be dominated by increases in the prices of foodstuffs and fuels. Around two thirds of inflation accumulated between March and May owes to these two factors combined (figure 7). Core inflation, particularly the CPIX1 variation, is still limited, showing no unusual propagation of these shocks. The baseline scenario assumes that headline inflation will rise somewhat less than forecast in March. CPI inflation will end the year at four percent, to remain fairly constant for some months. In 2012, it should converge to three percent and stay near the target until the end of the projection horizon, this time the second quarter of 2013. Core inflation is expected to rise further and gradually converge to three percent.
The inflation target has had considerable benefits... Apart from this criticism, there is also a line of reasoning that states more clearly that the target definition should be different. It is above all this part of the debate that I will concentrate on in my discussion going forward. I would like to go deeper into two specific areas: wage formation and the exchange rate. It was failures in these two areas in particular that caused, or rather forced, Sweden to  9 It is, for example, worth noting that the terms of reference for the recently presented Riksbank inquiry made it  clear that the baseline should be that “the objective of price stability shall remain central” (Swedish Ministry of Finance, 2016, p. 1). 8 [17]  switch over to the monetary policy regime we have today with a floating exchange rate and inflation target. To provide some background to my continued discussion, allow me to describe the situation prior to inflation targeting. Since the early 1970s, Sweden had been stuck in what could be called a devaluation cycle. Pegging the exchange rate, at least in theory, is the same as setting a target for domestic inflation. The idea is that the domestic rate cannot exceed (or fall below) inflation in the countries to which the domestic currency is pegged, at least not for any longer periods of time. But in order to make the commitment of maintaining a fixed exchange rate credible, it must be supported by other policies.

There were several reasons why I did not think it was a good idea. First, our forecast was that inflation would remain below the target in the near term, and was not expected to stabilise at 2 per cent until late 2022. Of importance here was also the fact that I could not see any appreciable upside risks for the inflation forecast either. Second, as I saw it, an increase in the interest rate in the near future could hardly be expected to lead to a greater probability of the downward trend in inflation expectations reversing. This worried me quite considerably as it can affect the inflation rate on which the labour market organisations base their forthcoming wage negotiations. Third, I felt there was reason to worry about the consequences of both the Federal Reserve and the ECB increasing their monetary policy stimuli while in Sweden, if the announced rate rise were to be implemented, we would be going in the opposite direction. Many analysts also interpreted the signals from the meeting in October as the Riksbank viewing the abolition of negative rates as an end in itself. This applies not only to analysts in Sweden but also internationally. A couple of examples are articles from Bloomberg and in the Financial Times, in which the authors argue that the Riksbank has now realised the problems of negative interest rates and is therefore keen to get away from them.
Firstly, it should be said that it is not possible to point to any individual variable that will alone be a determining factor in an interest rate decision. Prior to each interest rate decision we weigh together all of the new information received since the previous decision. But employment is of course an important element; when, for example, we said in February that economic activity was now on firmer ground one of the things we were referring to was the stronger labour market. It was a contributing factor to the marginal adjustment in the repo rate path we made then; with a first repo rate increase coming slightly sooner than implied in the repo rate path from December. Our most recent repo rate decision entails both the repo rate and the repo rate path being held unchanged. A weaker GDP outcome for the fourth quarter could on its own have been a negative signal and made us more doubtful about the timing of the coming interest rate increase. But we also had surprisingly positive information on the labour market, which provided support for the assumption that the economy is moving in the right direction. Our forecasts are based on employment only increasing at a slow rate in the future and on resource utilisation being lower than normal for the greater part of the forecast period. But the situation is that the crisis has hit the export industry particularly hard, while the services sector has escaped relatively lightly.

At present a higher level of economic growth is thus required to change the level of unemployment compared to the average historical relationship since 1980. The time lag between GDP and unemployment also appears to have increased during the 2000s. Thus, it now takes longer before the full impact of a change in growth has an effect on unemployment in Sweden. What is different this time? Part of the explanation for unemployment not having risen as much as one might have expected given the historical relationship could be that not all of the economy has suffered. The main fall in employment has been in the manufacturing industry, while the services sector, which is more labour intensive, has fared better. Last year exports fell by a good 13 per cent, while retail sales, for instance, only slowed down slightly. This is probably because the Swedish export industry was hard hit by the large fall in world trade, while the large economic policy stimulation helped hold up consumption. Industrial production fell by around 25 per cent between the peak in November 2007 and the trough in May 2009. However, the fall in the production of services was just over 10 per cent between the peak in December 2007 and the trough in June 2009. In recent months production in both sectors has stabilised. This has also had an effect on employment, which fell much more in the manufacturing industry than in the services sector.
Prosperity of our nations rests on the hard work of the corporations, for what really matters in the long run is your productivity. Corporates must strive to improve their competitiveness, increase their economic value added, move up the technological ladders, and stay innovative. All of these cannot be achieved without true corporate reform. For those of you who love to play soccer, good government policies are like good players in the backfield. We can help defend the goalie – the stability of the country; send the ball up to you who are in the front field. But, if you do not try hard to score on the behalf of our countries, then who will? So, I wish to congratulate those who win the award today. They have set the examples of what the Netherlands and Thailand need in order to prosper in the new millennium. Thank you for your attention..  BIS Review 41/2001  3

We are well aware that crises that incorporate a significant financial downturn are usually deeper and longerlasting. The health crisis will directly affect the profitability of the European banking sector. Such profitability was already low before the crisis broke, and events have highlighted the need to tackle even more urgently certain challenges, such as those associated with digitalisation, the management of cybersecurity risks, reputational risks and those relating to climate change. This underscores the importance of making further headway in improving banking efficiency. Given the extraordinarily prevalent role played by this sector in the Spanish and European economy, how successfully these challenges are resolved will notably influence the intensity and sustainability of economic growth in the coming years. The importance of an extension and selective adaptation of national stimulus measures In the national economic policy arena, achieving the dual aim of supporting the recovery and smoothing the adjustment of the economy to the post-pandemic scenario calls for two actions. First, the authorities must extend and regularly recalibrate some of the 6  measures already applied, which will have to be more closely focused now on the groups of firms, sectors and individuals most affected. And further, their design should enable the structural adjustments needed ahead of the new post-pandemic environment to be brought about. Allow me to illustrate this idea in relation to two measures that have been particularly important in recent months: the policies on guarantees and on ERTEs.
It is unlikely to make sense to have 15 (and certainly not 25) teams of economists analysing the causes of changes in the velocity of euroM4. But I do not wish to give the impression that EMU, even if it comes about on something roughly approaching the current timetable, will be the ‘end of history’ as far as European central banking is concerned. I suspect that central banks in Europe will continue to display great diversity, and will continue to evolve in different directions, and at different speeds, in response to the characteristics of their local habitat. What is important is that they should be responsive, learning and self-critical organisations, ready to react quickly to changing circumstances. They must also, in my view, display their accountability, perhaps more so than in the past. With the greater responsibilities which European central banks, East and West, have assumed in recent years, comes a greater need to explain the basis on which decisions are made, and to account for the resources deployed in making those decisions. That accountability runs partly to the Treasury, who exercise financial discipline over us, partly to Parliament - whose growing interest in our affairs we welcome - and partly to the broader community. I see this series of lectures fitting within that context, and have been pleased this evening to have the opportunity to set out some more recent reflections, from within the Bank, on the way we exercise our functions on the people’s behalf.

For this period of time, it is particularly helpful to consider monetary factors. For the monetary analysis, I shall deal with the development of the money stock M3. When interest rates were last cut on 6 March 2003, short-term interest rates in Switzerland fell to a very low level. Since the opportunity costs for holding money were consequently reduced to practically zero, the demand for liquidity increased markedly. Immediately following the interest rate reduction, annualised monthly growth rates of more than 15% were observed for M3. Once the demand for liquidity by companies and households has reached the desired higher level, liquidity should only increase in line with nominal gross domestic product and should not pose a threat to price stability. In actual fact, the growth rates of M3 have fallen recently, but nevertheless the economy has more liquidity at its disposal than is compatible with price stability in the medium term. According to our last forecast published in March, given an unchanged monetary policy and a threemonth Libor of 0.25%, inflation could have climbed to 3% in the fourth quarter of 2006. The current forecast shows that - on the assumption that the three-month Libor will remain stable at 0.5% in the next three years - inflation will only rise to 2.7% by the end of 2006. At the end of the new forecasting horizon in the first quarter of 2007, inflation would slightly exceed 3%.
Zeti Akhtar Aziz: Growth and stability – implications and priorities for Asia Keynote speech by Dr Zeti Akhtar Aziz, Governor of the Central Bank of Malaysia, at the IIF Annual Membership Meeting 2012: “Growth and Stability – Implications and Priorities for Asia”, Tokyo, 12 October 2012. *  *  *  Introduction It is my honour and great pleasure to speak at this 2012 Annual Membership Meeting of the IIF here in Tokyo. These continue to be times of great uncertainty, with financial institutions being very much at the centre of the global efforts to restore stability and growth. Confidence in financial institutions however continues to remain fragile in several parts of the world. This is a time when strong and responsible leadership in the financial industry has never been more important. The IIF is well-positioned to lead this charge through its role in advocating the industry standards and best practices, drawing on the collective experience of its broad membership. Indeed, it has performed this role most commendably. The common theme during the meetings throughout this week has been centred on growth and stability. I appreciate this opportunity to speak on the global economic and financial developments from the perspective of Asia. My remarks will also include a view of Asia’s development priorities to firmly anchor our future growth and stability prospects.

In my view—and I really cannot say this strongly enough—ensuring that the largest and most systemically important banks do robust capital and liquidity planning, have strong internal controls, do good risk identification and have very healthy amounts of capital (especially common equity) and liquidity resources is fundamental to fostering a stable banking system that can perform its critical financial intermediation role in both calm and stressed economic environments. What I hoped to do today is simply to point out that one of the key objectives of the original SCAP stress program—leaning into the wind during a severe economic downturn— might be getting less emphasis as the time since the financial crisis grows, the economic expansion continues, and the supervisory stress testing regime evolves. Thanks for your attention this morning. I hope that you enjoy the rest of the conference. 1  See, for example, Viral Acharya, Irvind Gujral, Nirupama Kulkarni and Hyun Song Shin. 2012. “Dividends and Bank Capital in the Financial Crisis of 2007 2009.” CEPR Discussion Paper No. 8801. February 2012; Beverly Hirtle. “Bank Holding Company Dividends and Repurchases during the Financial Crisis.” Federal Reserve Bank of New York Staff Report No. 666. March 2014; and David S. Scharfstein and Jeremy C. Stein. 2008. “This Bailout Doesn’t Pay Dividends.” New York Times. October 21, A29. 2 Beverly Hirtle, Til Schuermann and Kevin Stiroh. Macroprudential Supervision of Financial Institutions: Lessons  from the SCAP, Federal Reserve Bank of New York Staff Report no. 409. November 2009. 3 Randal K. Quarles.
In other words, banks with a large share of their deposits in a country with high coverage may have different incentives and access to deposit finance compared to banks in lower coverage countries. A related point could be made about the different types of deposits that are covered by the respective schemes. A second important parameter of a deposit insurance scheme is the funding structure. In the EU some schemes are pre-funded, i.e. they collect the means for being able to pay out in case of a bank failure beforehand, others are only funded ex post, i.e. in case of a bank failure the necessary amounts are collected from other banks, and again other schemes use a combination of the two. For the pre-funded schemes the premium structure is of relevance. Some schemes use flat rates in proportion to banks’ deposits and others take some aspects of bank risk in the pricing into account. All this leads to greatly varying “coverage ratios” across the EU, defined as the size of funds divided by the total amount of deposits covered. The differences in funding structures can lead to differences in the costs of deposit insurance for banks headquartered in different countries. As the views of stakeholders tend to be divided, an important issue for further analysis and research is whether differences in coverage and funding structures have a significant impact on the competition among banks originating from different countries.

Indeed the repercussions from their impending exit from these measures may be even more significant. Therein lies the importance for emerging and developing economies to strengthen our economic and financial foundations, reduce our risks and vulnerabilities and spur a balanced and inclusive growth. The events since the eruption of the global financial crisis have also altered our view of the world in a number of other fundamental ways. Global reforms in the financial system are re-shaping the regulatory landscape. The lines that define financial intermediation activities, and which connect the financial system to other parts of the economy and other parts of the world, are also being re-drawn. In this environment, emerging and developing economies need to be engaged to ensure that unintended consequences on our financial systems and consequently on our economies are minimised. A key concern in this environment is thus the strengthening of the protection of segments of society, in particular, small businesses and households, from being marginalised by market forces, and from the disproportionate impact of instability, crises and reforms. Related to this is the need to reinforce socially responsible finance, and to ensure that financial systems serves the real economy and to address the new and growing risks of financial exclusion which can result in part of our community to be disenfranchised, particularly, but certainly not only, during periods of financial crises. In this environment, financial inclusion has gained greater prominence as a key priority for the reform and development agenda.