samchain/econo-pairs-v1 huggingface dataset:
3  See, for example, Joseph Gagnon, Matthew Raskin, Julie Remache, and Brian Sack, “Large-Scale Asset Purchases by the Federal Reserve: Did They Work?” Federal Reserve Bank of New York Staff Report no. 441, March 2010. Several private-sector firms have estimated yield effects of similar magnitude. In addition, a working paper by James Hamilton and Jing Wu, “The Effectiveness of Alternative Monetary Policy Tools in a Zero Lower Bound Environment,” finds that changes in the Federal Reserve’s asset holdings produce considerable yield effects. 2  BIS Review 128/2010  Under this view, the FOMC’s influence on financial conditions is associated with the size and composition of its securities portfolio. This perspective provides a clear rationale for the reinvestment decision made at the August FOMC meeting. The decline in the size of the Federal Reserve’s portfolio that would have occurred in the absence of the reinvestment program would have amounted to a passive tightening in the stance of monetary policy, as the portfolio balance effect would have gradually reversed. Moreover, the extent of this tightening was increasing in response to the weakening of the economy, as lower longerterm yields were leading to more rapid repayment of MBS. This perverse effect was seen by the FOMC as working against its efforts to reach its dual mandate. In effect, the policy approach that was implemented before the August meeting acted to mute the amplitude of movements in longer-term interest rates.

If changes in the balance sheet are now acting as a substitute for changes in the federal funds rate, then one might expect balance sheet decisions to also be governed to a large extent by the evolution of the FOMC’s economic forecasts. The earlier purchase program, in contrast, did not demonstrate much responsiveness to changes in economic or financial conditions. Indeed, the execution of the program largely involved confirming the expectations that were put in place by the two early announcements. Third, how persistent should movements in the balance sheet be? An important feature of traditional monetary policy is that movements in the federal funds rate are not quickly reversed, which makes them more influential on broader financial conditions. A change that was expected to be transitory would instead move conditions very little. For similar reasons, one could argue that movements in the balance sheet should have some persistence in order to be more effective. Fourth, to what extent should the FOMC communicate about the likely path of the balance sheet? The FOMC often communicates about the path of the federal funds rate or provides other forward-looking information that allows market participants to anticipate that path. This anticipation of policy actions is beneficial, as it brings forward their effects and thus helps to stabilize the economy. For the same reason, providing information about the likely course of the balance sheet could be desirable.
Most notably, as the SVC integrates several processes, it is fast, efficient and safe. In equity trading, “straight-through processing” has technically reduced “time to settlement” to as little as four seconds, though in market practice the settlement cycle for equities is three days. Domestically, the system is inexpensive and the price of trading has decreased significantly in recent years. “Straight-through processing” has also been applied to and strengthened the Swiss repo market, where not a single “fail”, i.e. a settlement that is one or more days late, has occurred in the interbank repo transactions since May 2009. In terms of automation, the integrated Swiss approach compares favourably to other systems of its kind. Despite the omnipresence of electronic systems worldwide, only one third of all repo transactions in Europe are in fact handled by automatic trading systems such as BrokerTec, Eurex Repo or MTS. In several national markets, most steps are still performed manually.8 As the Swiss value chain was built in the mid-1990s, it was a frontrunner in the move towards straight-through processing. It is still a “state-of-the-art” set-up, but this is no time to be complacent in view of the ever-increasing strengths of competing systems. Given its high level of performance, it is interesting to observe that the Swiss value chain is the result of a typically Swiss form of collaboration, known as “Gemeinschaftswerk”. The principle of “Gemeinschaftswerk” has been vital in shaping and maintaining Switzerland’s FMI.

The SIC payment system, whose technical and operational components are handled by a subsidiary of the SIX Group, is also a product of the “Gemeinschaftswerk”. In contrast to this successful public-private partnership, in other countries most large-value payment systems belong to the central banks. On an functional level, vertical integration thus appears to be more complete in Switzerland than in other European markets. In Germany and the United Kingdom, for example, the private firms which dominate the FMI (Deutsche Börse Group and London Stock Exchange Group, respectively) do not operate the national payment systems. Conversely, on an organisational level, in the 1990s and early 2000s demutualisation occurred in most European countries, shifting governance away from a “user-owned,” “usergoverned” model towards an investor-centric structure. The changing world of FMIs As I have inferred, the world of FMIs and their stakeholders is in a state of flux. It is hence crucial that we consider how such changes influence the Swiss market and how they will do so in years to come. A mere glance at the news headlines illustrates the extent to which established financial and economic entities are evolving as never before. There are several examples of shifts in the landscape of trading venues, which stem from various factors, such as regulatory changes, e.g. MIFID,10 the trend towards demutualisation and increased international competition.
Output will in some periods lie above and in others below the long-term trend.2 Stabilising output means seeking to maintain actual output near trend. There is one main monetary policy instrument: the interest rate. The interest rate is set with a view to achieving low and stable inflation, while at the same time seeking to avoid substantial variations in output and employment. In recent years, household income has shown solid growth, and household confidence has been high. High growth in labour costs over a number of years, the cyclical downturn in the world economy and a strong krone in periods resulted in deteriorating profitability in many companies. Employment and  1  Berg, Clas and Lars Jonung (1998): “Pioneering Price Level Targeting: the Swedish Experience 1931-37”, Conference on Monetary Policy Rules, Stockholm, 12-13 June 1998. 2  Trend growth has been used as a rough estimate of potential output. Potential output is the level of output that is consistent with stable inflation over time. BIS Review 47/2004  1  investment fell. The level of household borrowing is high, while enterprises have reduced debt. High debt growth increases the vulnerability of households to economic disturbances. Wage growth has slowed now and the krone has depreciated. A turnaround is taking place in corporate earnings and there are also signs of this in investment and credit demand. The interest rate can be used to reduce credit demand.

At present - with low interest rates abroad and a close relationship between domestic interest rates and the krone - a tighter monetary policy would curb credit demand primarily because a stronger krone would reduce job security. A flexible inflation targeting regime reduces the possibility of exposing households to a dual shock in the form of higher unemployment and higher interest rates, as was the case at the beginning of the 1990s. If the economy is exposed to disturbances that can lead to higher unemployment, inflation will normally decline and interest rates will be lowered. A flexible exchange rate An important channel for monetary policy in a small, open economy is the foreign exchange market and the exchange rate. The krone fluctuates. This is not surprising because other countries’ currencies also fluctuate. The krone exchange rate is the price of our currency measured in a foreign currency. Developments in other countries are just as important for the krone as developments in the Norwegian economy. Capital flows freely and flows can change rapidly. This can spill over to exchange rates and interest rates as well as output and employment. The chart shows the effective exchange rate for Norway and a number of other small countries with inflation targeting. Exchange rate fluctuations are approximately the same for Norway, Sweden and Canada, whereas the krone exchange rate fluctuates less than the exchange rate for Australia and New Zealand. Therefore, the krone does not stand out as particularly unstable compared with other countries’ currencies.
On top of this, the agency that would be operating the fund – presumably the European supervisory agency – would also have the power to reconstruct banks. Efficient supervision and crisis management may also warrant arrangements for prompt corrective action and structured early interventions. As far as I know, most EU countries lack the rules on how to handle large bank failures, which means it would also be very positive from a point of view of contingency planning and reducing moral hazard. With a strong legal framework, the EU would be able to let investors in even the largest banks take full financial responsibility. When it comes to crisis management, coordination of emergency liquidity assistance is also imperative. Today, there are some legal uncertainties remaining for national central banks considering providing cross-border liquidity support. One example of the effects of this is that differences in national lists of eligible collateral will probably lead to gaming situations. A more centralised lender-oflast-resort function is probably necessary. Here it can be noted that the Treaty does allow for a more prominent role for the ECB in this respect than it presently has. However, a number of problems remain to be solved first. Even in the presence of burden sharing arrangements for crisis resolution, one would have to come up with ways to avoid gaming of collateral. Merely extending the list of eligible collateral for emergency liquidity assistance will not do the trick.

In both cases, government debt increases. The ultimate cost of a major banking crisis is therefore likely to hit the taxpayers in one way or the other. So, any deposit guarantee scheme will in practice contain an element of a government guarantee, which could be either implicit or explicit. In the case of a cross-border bank with branches in other countries, the important question is, of course, how far the taxpayers in the home country would be willing to go in order to bail out the depositors in the host countries. This could entail substantial cross-border transfers, which is something that most politicians tend to view with considerable scepticism. There are also challenges in the potential reconstruction of a failing cross-border bank. A reconstruction of a cross-border bank will increasingly impact the financial system in the other countries where the bank has major activities. To achieve a successful reconstruction, coordination of the activities of the authorities in the different countries would therefore be essential. In addition, as banks merge cross-border, some banks tend to grow in size to the extent that it will be very difficult for a small country to save the entire group. Traditionally there has been a fear that banks are becoming “too big to fail” because of their critical importance for the stability of the financial system. For a small country, which is home to a large bank with an extensive network of foreign branches, there is a real risk that the bank will rather be “too big to save”.
Some shifts in demand may stick (if significant numbers of people continue to work from home, for example). Some re-allocations of supply may be harder than others. If the lasting shifts in demand are towards sectors and activities that need more digital skills, for example, the corresponding increase in labour supply would take time and expense. We can’t all become IT experts overnight. Nor could one easily dismantle an office or restaurant in a city centre and transplant it elsewhere. I exaggerate, of course. Market economies face re-allocative shocks all the time and can very often absorb them without any visible effect at the macro-economic level. But this shock has been bigger than most. And 14  The DMP was only set up in 2016. Chart 21 extends this backwards using annual company accounts. Excess reallocation is calculated as the sum across firms of the absolute value of changes in employment or sales, less net change in employment/sales, expressed as a percentage of total employment/sales. The historical data from annual company accounts are calculated based on changes in employment/sales over the previous three years. The DMP data are based on realised employment/sales growth over the last two years plus expected growth over the next year. Annual excess reallocation data from the DMP are averages of monthly data. Sales and employment growth are calculated using Davis, Haltiwanger and Schuh (DHS) growth rates. This is the change between two periods, divided by the average of those two periods.

18  All speeches are available online at www.bankofengland.co.uk/news/speeches and @BoE_PressOffice  18  what matters is not so much whether any necessary re-allocations do eventually happen but what extra cost they require and whether that cost has already been incurred and passed on to consumers. I don’t think we yet know the answers to those questions. One important place to look will be wage growth. That’s also the place where any “second-round” effects of the current inflation, via higher expectations for the future, would both appear and most matter. Unfortunately, the headline wage numbers are currently beset by a host of distortionary effects. The figures for annual growth in the second quarter are being still depressed somewhat by the inclusion of furloughed workers in the sample. But they’re also being boosted, to a much greater extent, by big base effects (average earnings fell sharply a year earlier) and also by compositional shifts (the fall in employment has been skewed towards lower paid jobs, mechanically raising the average pay of those still in work). My best guess is that, stripped of these things, underlying pay growth is firmer than can be explained by the rate of unemployment alone. Labour-market mismatch could help to explain the difference. But there is necessarily a significant degree of uncertainty both about these estimates and more fundamentally about how long these effects will last. Conclusion On the face of it the behaviour of inflation doesn’t say great things about the growth of underlying capacity over the past eighteen months.
However, concerns remain about the sustainability of unprecedented levels of mortgage-related leverage in those parts of the euro area where, ceteris paribus, housing valuations appear stretched, where the debt build-up has been pronounced, and where the majority of debt is financed at variable interest rates. While measures of leverage compared to income can provide a rough indication of the ability to service debt, it is also important to evaluate the sustainability vis-à-vis assets, as this can provide an indication of the capacity of households to repay their debts in full at an aggregate level. The value of household assets – which is much larger than that of their debt – has grown more than their liabilities, especially after 2002, as the stock market has recovered the losses from the bursting of the high-tech bubble and as house prices have also risen. As a result, as shown in the chart on the right of slide 9, households have seen a notable rise in their net wealth over this period, driven in particular by the housing wealth component, which accounted for about 60% of total household wealth in 2006. Euro area large and complex banking groups The financial soundness of large and complex banking groups (LCBGs) in the euro area strengthened further in the second half of 2006, consolidating on the steady and broad-based improvement from 2003 onwards. Profitability continued to rise, underpinned by favourable macroeconomic conditions and, for the most part, very low levels of financial market volatility.

At the same time, the degree of correlation between hedge fund returns across different strategies, shown in the chart on the right of slide 7, remained around the same relatively high level as in mid-2006. There are concerns about the implications for market dynamics if there was to be an event which would prompt many funds into “rushing towards the exit” at the same time due to the crowding of trades, i.e. that many funds are positioned similarly. 4. Euro area financial system  Euro area corporate sector Let me now focus on the euro area corporate sector. Against a background of strong economic conditions, low financing costs and abundant market liquidity, the rate of borrowing by the euro area corporate sector began to quicken after mid-2005. As a result, key indicators of the leverage of the sector had reached unprecedented heights. However, as analysed in Box 7, the recent re-leveraging in the euro area corporate sector has not been broad-based, but rather it has been concentrated among unlisted firms – including not only small and medium-sized enterprises, but also firms which have been de-listed through private equity deals. Data is obviously lacking on unlisted firms, but comparing trends in the debt-to-asset ratio for listed non-financial corporations and the debt-to-GDP ratio for the non-financial corporate sector suggests that a sharp rise has taken place in the debt-toasset ratio of unlisted firms in the period since 2004 (see chart on the left of slide 8).
In a globalized world, it is even more imperative for the Fund to focus on promoting stability as a global public commodity. We have enough experience to know how costly it can be if things go wrong. Saying that Switzerland treasures a stable international environment is in many respects an understatement. Given the openness of our economy and the fact that we host an important financial centre, international financial stability for us has all the connotations of a vital national interest. To put things into the right perspective, allow me to mention a few figures that show how interconnected our economic well-being is with global developments. In 2003, Swiss exports of goods and services amounted to 44 percent of GDP. The GDP contribution of our heavily internationally oriented financial sector reached 10 percent. This figure rises to 14 percent if we also include the insurance sector. Swiss banks occupy a leading international position, particularly in the area of wealth management. The value of total assets managed in domestic banks as at the end of 2003 amounted to $ 2.7 trillion. According to various estimates, this corresponds to about one-third of the world’s total private wealth managed abroad. Last, but not least, the banking and the insurance sectors combined employ approximately 185,000 people, the equivalent of 6 percent of total Swiss employment, whereas the fiscal contribution of the banking sector alone amounts to about 13 percent of total tax revenues.

  In 2017 we published our first effort to measure research and development as a productive asset in the National Accounts.   In addition, we recently began to explore new administrative data such as electronic invoices from the Tax Office, which will complement the country’s national and regional statistics. The results of these projects will be included in the release of the 2018 benchmark compilation, scheduled for 2021.   This year, we published a second effort to evaluate Chile’s value added in international trade, which identified the presence of heterogeneity among the various industries. This will allow improving the inputoutput estimates and the description of the productive interrelations of the Chilean economy. During this Conference we will consider the experiences of Germany and Portugal in having a microdata repository that gives access to third parties, for analysis and research, with due protection of confidential information. In a similar fashion, we are developing an institutional Data Warehouse, strengthening the technological architecture and infrastructure that will allow us to organize, integrate and analyze a large amount of information, enhancing the construction of indicators and applied research in an efficient and timely manner. The Third Conference on Statistics Spaces for reflection and dialogue such as the one that this day-and-a-half provides, are essential to deepen and improve our understanding of the phenomena described. Throughout the sessions, we hope learn about the progress made by international organizations, other central banks, statistical offices and researchers in these areas.
Prior to the introduction of the euro, the internal market came under pressure from exchange rate crises: national currencies sometimes fluctuated sharply in value. After the launch of the euro, the euro area enjoyed a number of calm years but, unfortunately, the member countries did not make use of this time to carry out the necessary reforms at national and European level nor, in particular, to put efficient crisis management arrangements in place. And the countries that experienced serious difficulties three or four years ago, such as Ireland, Portugal, Spain and Italy, are nonetheless beginning to recover, thanks in part to ECB policy. We also see that Germany, the strongest economy in Europe, is not experiencing any major disadvantage from that same ECB policy. Admittedly, it’s a continuous search for a policy that is as favourable as possible for everyone. What does one do with Greece, say, which has fundamental problems with its competitiveness? The Greek crisis would not have become so large if the European institutions had not been so weak and if more decisive action had been taken, with better crisis management. Are you surrounded by enough people who dare to contradict you? Do you speak to people who dare to question ECB policy? Oh yes, definitely. I listen to people who say that the ECB should take a different approach. I respect those opinions. We ourselves naturally reflect on whether our policy is correct.

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