samchain/econo-pairs-v1 huggingface dataset:
But when the reaction function is well understood, market interest rates will instead respond earlier as the economic data unfolds. Although there are benefits to the market more accurately anticipating a given policy decision, because the data are likely to evolve in an imperfectly predictable fashion, so will market interest rates and asset prices. In sum, then, exit will be challenging, both for the central banks in the countries withdrawing stimulus and those in other countries that will be affected by the international spillovers. But we do have the luxury of knowing that it will come eventually and can plan for it appropriately. And when it does come, it should be against the background of a markedly better economic outlook in the advanced economies. That itself would be a most welcome change. Thank you! References Committee on International Economic Policy and Reform (2011). Rethinking Central Banking, Brookings Institute, Washington DC. Fratzscher, Marcel, Marco Lo Duca and Roland Straub (2013). “On the International Spillovers of US Quantitative Easing”, European Central Bank Working Paper #1557. King, Mervyn (2009). Speech to Confederation of British Industry, Nottingham, 20 January. He, Dong and Robert McCauley (2013). “Transmitting Global Liquidity to East Asia: Policy Rates, Bond Yields, Currencies and Dollar Credit”, mimeo, Bank for International Settlements. Moore, Jeffrey, Sunwoo Nam, Myeongguk Suh, and Alexander Tepper, (2013). “Estimating the Impacts of the U.S. LSAPs on Emerging Market Economies’ Local Currency Bond Markets”, Federal Reserve Bank of New York Staff Report #595. 4  BIS central bankers’ speeches  Neely, Christopher (2010).

The only differences are that just banks can hold reserves and reserves can be turned straight into cash at the central bank, whereas Treasury bills would have to be sold or repo’d out first. Under Ricardian equivalence, quantitative easing of the sort undertaken by the Bank of England and the Federal Reserve should then be irrelevant because private agents internalise the tax implications of the associated changes in the consolidated public sector balance sheet. I think the empirical evidence from the growing number of event studies and the like strongly suggests that this is not the case and that market imperfections give the policy traction by reducing term premia. This, I believe, was particularly true during the worst of the post-crisis recession, though it may have become less so as markets have returned towards normality. That is reinforced by recent market movements in response to heightened anticipation that the Federal Reserve will shortly begin to taper its purchases. A more serious objection is that they are simply the wrong policy to deal with the problem at hand. Low policy rates and quantitative and credit easing all seek to encourage the intertemporal switching of spending from the future to the present. But, according to the critics, that just leads to further debt accumulation and is inimical to the adjustment necessary to unwind the excesses of the pre-crisis period (see Rajan, 2013, for a lucid exposition of this view).
Around 60% of persistent movements in sterling tend to be passed through into import prices and those changes in import prices are fully – if gradually – passed through into consumer prices. The total import content of final consumer goods and services is close to 30%, of which around half is due to the use of imported intermediates in production. A 10% change in the exchange rate would therefore be expected to increase import prices by 6% and the level of consumer prices by 1.6% eventually. About half of the increase in import prices is passed through within the first year, with full pass-through taking around four years to complete. In other words, in the UK, large exchange rate moves create price dynamics that are relevant to the policy horizon. 55  Post Brexit, sterling will reflect changes in the UK’s terms of trade, supply capacity and relative income. The market has already anticipated some of these effects. Whether it ultimately appreciates or depreciates upon Brexit will depend on the terms of the final deal relative to market expectations at the time. -----------------------------------------  53  See Feyrer (2009), ‘Trade and Income -- Exploiting Time Series in Geography’, NBER Working Paper No. 14910. See Gopinath, G (2016), ‘The International Price System,’ Jackson Hole Symposium Proceedings. Gopinath finds that international prices measured in the currency of invoicing are not very sensitive to changes in exchange rates.

11 Headline CPI inflation averaged 1.9% over this period. 6  All speeches are available online at www.bankofengland.co.uk/speeches  6  Chart 5: Sustained, cumulative relative price shock in goods accommodated through higher services price inflation  Notes: Six-month average of the log-difference between core goods prices (excludes food and energy) and services prices (series indexed; 2005 = 100). The US series uses PCE price indices. Sources: Thomson Reuters Datastream, national sources and Bank calculation. Globalisation has also led to a dramatic increase in the use of imported intermediates in domestic production. The ICT revolution has made a great unbundling of production into global value chains possible, and large wage differentials have made doing so profitable. Intermediate goods trade has represented 80% of the increase in total trade over the past two decades (Chart 6), driving up the value added of imports as a share from 10% of exports in 1990 to around 20% in 2015. 12  12  See Auer, R, Borio, C and Filardo, A (2017), ‘The globalisation of inflation: the growing importance of global value chains’, BIS Working Paper No. 602. 7  All speeches are available online at www.bankofengland.co.uk/speeches  7  Chart 6: The development of global value chains has boosted trade in intermediates  Notes: Imports and GDP are in current US dollars. Sources: Johnson and Noguera (forthcoming), Powell (2016), World Input-Output Database (2016 release) and BIS. This expansion in global value chains has led to greater synchronisation of producer price inflation across countries.
BIS Review 37/2004  1  Spain’s relationship - and that of the Banco de España - to the International Monetary Fund is certainly today very different from what it was in 1958, when our country joined the Bretton Woods institutions. In the early years of its participation in the Fund, Spain received financial and, most importantly, technical assistance from this institution, as part of the process of external openness and liberalisation that allowed its economic take-off in that period. The Fund’s excellent technical guidance in this process supported those economic sectors in favor of liberalization, who nevertheless met notable resistance in pushing through their programme of reforms. I believe that Spain, since then, has a considerable debt of gratitude with the International Monetary Fund. Currently, the framework for our relationship to the Fund is very different. As part of the euro area, monetary policy discussions take place in a broader context spanning the whole of the euro area. As a member of the Eurosystem however, the Banco de España remains deeply involved in such discussions. In other realms, relations with the Spanish authorities remain on a bilateral footing, as is notably the case with the close contact each year on the occasion of the analysis of the Spanish economy via the Article IV report. That said, the European dimension is becoming increasingly important.

Some of the results of these analyses have been presented today at this conference. We also plan to regularly update these results to take into account the changing economic environment and outlook. In this regard, let me also stress the relevance of firm surveys as a very useful tool for monitoring real time developments in the corporate sector, especially bearing in mind the long time lags of hard data at the micro level. In this regard, last November the Banco de España launched a new Business Activity Survey to compile first-hand information on a quarterly basis about companies’ activity in the current quarter and about the immediate outlook. The survey compiles qualitative information about firms’ perceptions as to the course of turnover, employment and prices. Given the current economic environment, additional questions were included on the impact of the pandemic, the use of different policy measures and the strategies that businesses intend to adopt in the near term. This new survey is a valuable source of information on how business activity evolves by sector and on other corporate characteristics that will help outline short-term economic developments, but also identify more long-term patterns. As an example, initial results show that the impact of the COVID-19 shock was larger for small, young and less productive firms located in urban areas. Moreover, these firms resorted relatively more to public-guaranteed loans, tax deferrals and ERTEs (furlough schemes).
[Go to slide 3] Silicon Valley Bank (SVB), which was virtually unknown to the general public before its collapse last March, was a - if not THE - tech bank and as such had a specific business model, based on two pillars: - its sources of funding were heavily dependent on uninsured deposits, stemming from a highly concentrated customer base of entrepreneurs and venture capitalists in the tech and digital world. - a very high share of these deposits was invested in long-term government bonds, issued by the US federal government or federal agencies, at fixed rates, since these securities are intended to be held for the long term. In 2022, the change in the US economic and financial environment transformed SVB's business model into a source of vulnerability to liquidity and interest rate risk. This vulnerability, combined with major failures in the bank's management and governance system, proved fatal. Indeed, in this new environment marked by rising interest rates and slowing growth, the cash flow needs of tech companies led them to withdraw a portion of their deposits, causing a liquidity problem for SVB, which forced it to sell part of its government bond portfolios. These forced sales, which were not anticipated by the bank, resulted in the crystallisation of unrealised losses, real losses in other words, as the securities sold shed value with the increase in key interest rates decided by the US central bank (the FED).

ESIGELEC - Rouen 25 May 2023 Digital transformations and financial system turbulence: What lessons for regulators and supervisors? Speech by Denis Beau, First Deputy Governor Introduction [Go to slide 2] Dear Professors, dear students. I am very pleased to have the opportunity of sharing with you some of the lessons that we at the Banque de France and the ACPR, under our financial stability mandate, have learned from the recent turbulence that has affected the international financial system. This turbulence, which has impacted both traditional financial players in the wake of the SVB bankruptcy and players in the "new digital finance" ecosystem in the wake of the FTX bankruptcy, results from the realisation of risks, whose impact has been amplified or whose spread throughout the financial system has been sped up, by digital innovations that are transforming at high speed, or even shaking up, the way in which finance works. While the effect of this turbulence on the financial system as a whole and the real economy seems to be contained for the time being, the impact of digital innovations raises questions as to the regulation and supervision practices of both traditional finance and the emerging digital finance. I propose presenting these questions to you one after the other, together with the answers that I believe to be appropriate. 1  1. Traditional finance put to the test by the digital world: what lessons can be learned from recent bank failures?
William C Dudley: The global implications of diverging monetary policy settings in advanced economies Panel remarks by Mr William C Dudley, President and Chief Executive Officer of the Federal Reserve Bank of New York, at the Sixth High Level Conference on the International Monetary System: Monetary Policy Challenges in a Changing World, Zurich, Switzerland, 12 May 2015. *  *  *  It is a pleasure to have the opportunity to participate in today’s conference. In keeping with this session’s mandate, I will focus my remarks on the global implications of U.S. monetary policy normalization – paying particular attention to the potential implications for emerging market economies (EMEs). I put the focus here because these economies were greatly affected in 2013 during the so-called “taper tantrum” and many of these economies have been under stress from the weakness in global commodity prices. As always, what I have to say today reflects my own views and not necessarily those of the Federal Open Market Committee (FOMC) or the Federal Reserve. But before I get to the implications for EMEs and what the Fed should do or not do to mitigate the impact, a few words on the timing of normalization. To be as direct as possible: I don’t know when this will occur. The timing of lift-off will depend on how the economic outlook evolves. Since the economic outlook is uncertain, this means the timing of liftoff must also be uncertain.

For many other countries with less economic policy discipline, traditional fixed exchange rate regimes have proved fatal. Internationally, there is a tendency of a shift away from the traditional fixed exchange rate regime. Countries that place overriding emphasis on exchange rate stability must bind themselves more firmly to the mast either by establishing a currency board or by abandoning their national currency. Other countries allow their currency to float and establish a nominal anchor such as an inflation target. 4. The growing importance of securities markets  Let me now turn to an important structural development in the financial sector: the growing importance of securities markets. 1  Japan in the late 1980s has been mentioned as one example. Cf. Bernanke, Ben and Mark Gertler: Monetary policy and asset price volatility, and Yamaguchi, Yutaka: Asset price and monetary policy: Japan’s experience, in New challenges for monetary policy, Federal Reserve Bank of Kansas City (1999). 5  BIS Review 78/2000  Chart 5 Swedish households’ gross financial assets by instrument. Per cent  In most developed countries, securities markets are growing at the expense of financial intermediation. In the Nordic countries, this trend is most obvious in the savings market. Sweden is an example. Deposit savings have been reduced, whereas savings directly or indirectly in securities markets have increased. This affects banks’ earnings and funding structure. The trend is similar in Norway. In the euro area, there has been a sharp growth in issues of private securities after the introduction of the single currency.
Meanwhile, the amount of money that households need to service their debt (for mortgages, cars, credit cards) has fallen sharply to levels that prevailed during the mid-1990s. Debt service has been pushed lower by a combination of debt repayment, refinancing at lower interest rates and debt write-offs. Financial institutions have strengthened their balance sheets by retaining earnings and by issuing equity. Bank lending standards, while still tight, have begun to ease somewhat. As a result, some measures of bank credit are beginning to expand again. Second, monetary policy and fiscal policy have provided support to the recovery. On the monetary policy side, we at the Fed have maintained unusually low levels of short-term interest rates and engaged in large-scale asset purchases. These measures have fostered a sharp improvement in financial market conditions. On the fiscal side (that is, government spending and taxation), the economy has been supported by the shift in policy to help support growth. In particular, the temporary reduction in payroll taxes could have a strong impact on growth during the first part of this year. Third – and very much linked to the topic of this meeting – is growth abroad. Much of the rest of the world – especially the emerging market economies – have been growing strongly. This growth has led to an increase in the demand for U.S.-made goods and services. Over the four quarters of 2010, real, or inflation-adjusted, exports rose 9.2 percent. All told, real exports accounted for about 40 percent real GDP growth in 2010.

On one hand, the unemployment rate has fallen sharply over the past four months, dropping to 8.8 percent from 9.8 percent in November. On the other hand, payroll employment gains have been relatively modest. The good news is that the data on payroll employment for the past two months was better than for the prior months. The economy added a notable 216,000 jobs in March. Particularly encouraging is the growth of manufacturing jobs. Over the past year we have added factory  2  BIS central bankers’ speeches  jobs at the fastest pace since the 1990s. Other labor market indicators, such as initial claims for unemployment insurance benefits and the employment components of both manufacturing and nonmanufacturing business surveys have also shown improvement recently. Although there is still uncertainty over the timing and speed of the labor market recovery, I am hopeful that job growth will increase more rapidly in the coming months. We would welcome this. A substantial pickup is sorely needed. Even if we were to generate growth of 300,000 jobs per month, we would still likely have considerable slack in the labor market at the end of 2012. So, why is the economy finally showing more signs of life? In my view, the improvement reflects three developments. First, household and financial institution balance sheets continue to improve. On the household side, the 2008–09 rise in the saving rate appears to have stabilized in the 5 percent to 6 percent range.
Challenge 3 - The effect of balance sheet adjustments In the wake of the fall in share prices, we have thus far seen the effects on housing finance in the form of low interest rates, which have enabled households to increase their indebtedness at a slowly rising interest ratio. As the interest ratio has risen marginally, this in turn has led to a continued increase in residential property prices in several countries, including Sweden. The lower expectations of future earnings that have resulted from the stock market decline has so far not markedly reduced housing finance demand in Sweden. Thus far, the effect of the low interest rates appears to be the dominant factor. As the balance sheet adjustments come to an end, the geopolitical uncertainty abates and the economy continues to recover, risk aversion will decrease, which in turn will lead to a normalisation of market rates. Consequently, this will dampen household demand for housing finance. On the other hand, expected earnings flows will rise in tandem with the rise in economic activity. The ability of mortgage institutions to find "cheap" financing will also be affected by the normalisation of interest rates. Investors will return to riskier investments as risk aversion declines. Furthermore, rises in long-term interest rates will reduce the value of the bond holdings that were acquired by investors during the current risk aversion period. Consequently, mortgage institutions will face challenges in the time to come on both the demand and supply sides.

Lorenzo Bini Smaghi: Monetary and financial stability in the euro area Speech by Mr Lorenzo Bini Smaghi, Member of the Executive Board of the European Central Bank, at the Europe Festival Conference on “The state of the Union”, Florence, 10 May 2011. *  *  *  Introduction It is a great pleasure for me to contribute to this Europe Festival Conference on “The state of the Union”. Before turning to my assigned topics, which concern the euro and the monetary policy of the Union, I would like to start with a few general comments. There can be no doubt that these are challenging times for Europe. But the current crisis does not just affect Europe, it affects the whole of the West. Problems such as the sustainability of public finances and the role of the state in the economy, immigration and burgeoning income inequality, concern not only Europe and the euro area, but the whole of the industrialised world. Moreover, this is not a cyclical crisis but a structural one, resulting from the profound changes now sweeping the world. Hundreds of millions of people have risen over the survival threshold, over two-thirds of the world’s population has opted for the market economy model, and there is a perception of a lack of progress in economic and social development and also in civil rights in a large part of the world. There is probably no historical precedent for the speed at which these changes are taking place.
While increases could be discussed, I believe it may not be advisable – for the reasons already outlined above – to place the entire burden of extra loss-absorption on CCPs. For the sake of completeness, I would also like to mention alternative recovery tools such as the proposal by a consortium of insurers to provide coverage for extreme tail losses, or the idea that CCPs should issue bail-in-able debt instruments. Such solutions deserve consideration as they can enhance market discipline, but they require further analysis before being truly considered as viable options by authorities. For example, it is unclear whether there would be a deep enough market for CCP bail-in-able debt, given the tail nature of the risk being priced, and the risk that demand will be exhausted once the total loss-absorbing capacity proposal for banks is calibrated and implemented. You will note that I have not made any mention of emergency liquidity provision to CCPs by central banks. A fundamental principle is that it is up to the CCP to maintain adequate and robust liquidity arrangements, both in normal and crisis times. If a clearing house believed that it could easily and readily access central bank liquidity, this would weaken its incentives to make the necessary arrangements. Of course, there can be cases where all the necessary arrangements have been made but the CCP is facing losses beyond what was predicted and needs temporary liquidity support while remaining solvent.

In particular, I would like to recognise the pivotal role played by the Asian Institute of Finance, the Asian Institute of Chartered Bankers, and the heads of the affiliate institutions, for their commitment and dedication in taking this ACE project forward as part of key infrastructure in skills and professional development and standards in the financial services industry. It is a significant milestone in transforming the financial education landscape for the financial services industry. 2  BIS central bankers’ speeches