samchain/econo-pairs-v1 huggingface dataset:
There are also many indications that the covariance between Sweden and the euro area will increase further if we join the Eurosystem, as trade and integration with the euro countries would be strengthened. Increased trade and greater openness to the outside world have positive effects on the development of growth and incomes. In my opinion, the European integration of which EMU forms a part should not stop at the borders of the EU, but be the first step towards greater global openness. Conclusion I have today accounted for the current monetary policy situation in Sweden and the assessments that formed the basis for our decision last week to leave the repo rate unchanged. A low inflation rate (2%), which is the target for monetary policy, does not in itself create good growth and welfare; it should rather be seen as a fundamental condition to ensure that other parties - trade and industry, organisations, government and parliament - are successful in working to improve Sweden’s economy by various different means. In other words, it is an extensive and complicated interplay that will determine how well a country’s economic potential is realised. The Riksbank does its best to ensure that monetary policy provides a contribution here. Thank you for listening! 1  EMU commission of enquiry report SOU 1996:158. BIS Review 37/2002  7  1.

Last year Sweden had one of the largest surpluses in public savings in the EU, which enabled an expansionary fiscal policy. The slowdown in 2001 also differs from the problem periods during the 1970s and 1980s in that the manufacturing industry’s competitive situation was very strong from the start. The weakening of the krona began as soon as one year before industrial activity slowed down and contributed to a strong development in net exports during 2001. Nor was it lack of competitiveness or a decline in productivity that lay behind the depreciation of the krona - it was financial flows resulting from the decline on the  BIS Review 37/2002  5  stock market and portfolio investments connected with the AP pension funds being given the opportunity to invest some assets abroad. A recovery in the Swedish economy has now begun and the Swedish economy has a good foundation to stand on, with a surplus in both the central government finances and in Sweden’s trade abroad. Inflation is on the way down. At the same time, wage formation and pricing behaviour in general will comprise an uncertainty factor when economic activity gradually picks up speed. It may therefore be necessary to implement further interest rate hikes in future. However, the next monetary policy stage depends, as always, on what happens with regard to economic activity, inflation and in the world around us.
For large international groups, typically the most complex, the most important decision is whether resolution is going to be addressed at the group level, by the home resolution authority (Single Point of Entry – SPE) or whether each part of the group is looked at separately, usually by the host resolution authority (Multiple Point of Entry – MPE). The choice between SPE and MPE will have implications for resolution planning, including steps that the firm may need to take to be resolved under that strategy – for example in which entities the capital will be held. The BRRD requires that all banking firms should have recovery plans, and that resolution authorities should develop resolution plans for all firms, based on assessments of their resolvability. The resolution planning that the UK has already carried out has identified some  8  BIS central bankers’ speeches  common barriers to resolvability, such as a lack of loss-absorbing capacity in the right legal entities, that need to be addressed. The BRRD also establishes that resolution authorities should determine a minimum requirement for own funds and eligible liabilities (MREL) that will be available to absorb losses and form new capital, if the authorities need to carry out a bail-in. The BRRD demands that the MREL requirement will have to be met at all times. It is being introduced from January 2016, but will be phased in over four years (i.e. until 2020). The precise rules for setting MREL in the UK firm by firm are currently being formulated.

I should note that insurance represents a very large part of the PRA’s activities – at the end of the financial year 2014/15 the PRA had around 550 front-line supervisors and risk specialists working on various deposit taking firms compared with over 300 on insurance firms. Most of the regulatory reforms that the PRA are implementing have not actually originated in the PRA itself. Rather, they have arisen from a variety of external sources. Some are UK initiatives: for example, the new Senior Managers Regime and Senior Insurance Managers Regime implement the recommendations of the Parliamentary Commission on Banking Standards (PCBS) and the structural reform of the major banks (ring-fencing) emerged from the Independent Commission on Banking (ICB, also known as the “Vickers Commission”). A number of key reforms are European initiatives such as the Solvency II regime for insurers. The banking capital regime, CRDIV, is a European implementation of agreements made in the global Basel Committee on Banking Supervision (BCBS). The development of international insurance standards is being driven by the Financial Stability Board (FSB) via the International Association of Insurance Supervisors (IAIS). The UK authorities, including the Bank of England and PRA, play a full part in negotiating these reforms, so I wouldn’t claim that they are entirely external, even though there are usually aspects of the final agreements which represent the middle ground in negotiations.
Compared with the assumption of an unchanged repo rate, market expectations normally provide a much more realistic forecast. But the assumption that the policy rate will develop in accordance with market expectations also entails some difficulties. Examples of problems include how one should measure market expectations and the communication of the interest rate path. It feels natural to move on from this now and go on to publish our own view of what would be a reasonable development for the repo rate. Basing the forecasts on the policy rate development expected according to the pricing in the financial markets was a major step towards greater openness and clarity. Now we are taking a further, but slightly smaller, step. There are several good reasons why we are now choosing to publish our own forecast for the development of the repo rate. The main one may be that we will have an even better tool for anchoring expectations. It will be easier to explain to the general public and the financial markets how we reason when making monetary policy decisions and how we see future interest rate developments. We will also avoid the communication problems that may arise if the central bank’s and the financial markets’ expectations of interest rate developments differ. But of course there are also potential problems. The forecast for the policy rate that we will present in connection with the inflation forecasts, is one we Executive Board members will make an assessment of together.

To create greater clarity, monetary policy is guided by a principle that the Riksbank’s ambition is normally to bring inflation back on target within two years. One might say that this two-year horizon is a restriction that the Riksbank has placed upon itself to maintain confidence in the inflation target. 1  A description of the Riksbank’s objective and strategy for monetary policy can be found in the document “Monetary policy in Sweden”, which can be downloaded from the Riksbank’s website, www.riksbank.se, or ordered in printed form. 2  See Lars Heikensten’s speech at the Swedish Economics Association on 22 February 2005, “Thoughts on how to develop the Riksbank’s monetary policy work”. BIS Review8/2007  3  We have chosen a two-year horizon for monetary policy because this is considered to give sufficient scope in most cases to ensure acceptable developments in the real economy. However, the exact pace at which inflation should be brought back on target within this horizon will of course depend on what kind of shocks have affected the economy. 3 Sometimes the deviations from target can be so large that there is reason to allow inflation to return to target beyond the normal two-year horizon. In these cases, we shall explain this clearly in connection with our decisions. These thoughts on how to take into account developments in the real economy are not, of course, unique to the Riksbank.
Obeying this same imperative of serving together peace and development, I would also suggest that the G-7/G-8 warmly endorse Mr. Koffi Annan’s recommendation to the African governments to reduce purchases of arms and munitions to 1½ percent of GDP and maintain zero growth on defense budgets for the next decade. Industrial countries must play their full part in these efforts, and, here, I must share with you my anxiety. Today’s silence on the crisis in official development assistance is profound and distressing. It means that Africa, in particular, must rely chiefly for its economic progress on humanitarian compassion or the benefits of trade. This cannot suffice if human development is to be intensified and accelerated. Yet, at the present juncture, the macroeconomic and structural successes of recent years, precisely in the context of IMF-World Bank supported programs, are creating an opportunity that is too good to miss. Africa has found a way to advance from two decades of negative per capita growth to positive growth in more than forty of its countries. In 3  I hope I am not revealing a state secret in telling you that she inscribed this on her Christmas card! BIS Review 43/1998  -7-  many African countries, a new generation of leaders is seriously concerned about the need for democratization, protection of human rights, promotion of “good governance”, and human development.

We will now work with other relevant institutions that could be responsible for developing similar standards in areas such as accounting, auditing, disclosure, asset valuation, bankruptcy, and corporate governance. We will also consider how to disseminate such standards to member countries through our surveillance and encourage their adoption. Working with so many institutions, public and private, in addition to our 182 member countries, will be an ambitious undertaking, but we are ready - and enthusiastic - to play our full part in this new chapter in international cooperation. In the meantime, the IMF has been applying this standards approach to one of its traditional domains of expertise: fiscal policy. Last winter, following the suggestion of the Chancellor of Exchequer, the IMF developed a code of good practices on fiscal transparency to which members will be encouraged to adhere. Looking ahead, we plan to develop a similar code with respect to financial and monetary policies in cooperation with the appropriate institutions. this regard and suggested delaying the Fund’s reviews of member economies when deficiencies in disclosing relevant information to the IMF seriously impede our surveillance. Indeed, the G-7 countries have the opportunity this week to establish leadership by pledging to convey to the IMF and to publish comprehensive and timely data on both gross and net reserves, including reserve-related liabilities and central bank derivative transactions and positions, as well as external debt and data on banking and financial sector health.
Most of money in the economy is currently made of deposits that result from the maturity transformation—from short-term deposits into medium term loans—that banks perform. Banks meet their liquidity needs for disbursement and reserve requirements by borrowing from the central bank. Monetary policy is then operationalized by setting the rate at which commercial banks can store or withdraw money from the central bank. 2  Central Bank of Chile 29 June, 2017  Slide 2  Central bank functions and tools ▪ Monetary policy and macro regulations operate through the financial system, particularly banks ▪ Most of money in the economy is currently made of bank deposits ▪ Banks resolve their liquidity needs—emerging from disbursement and reserve requirements—by borrowing from the central bank ▪ Monetary policy is then operationalized by setting the rate at which commercial banks can store or withdraw money from the central bank  [SLIDE 3] Today money and financial operations are overwhelmingly composed of balance sheet records. For this reason, banks need to be strictly regulated and the central bank must manage monetary policy to ensure stability in the purchasing power of money. The transmission of monetary policy to the economy and, in the end, to inflation, depends on the smooth operation of commercial banks. At the same time, banks operate as a network and provide liquidity to all sorts of activities. Any disruption in the operation of a bank or in the transmission or provision of funds can have serious economic consequences.

However, a large part of these outflows have been official and they have not been in RMB. This in fact touches at the heart of what is known as the Triffin Dilemma. China has been sending USDs abroad because that is what it has been receiving through its current account surpluses and FDI inflows. Sometime in the future, China may develop a structural current account deficit, but I do not see that happening in the foreseeable future. Opening up the capital account and domestic financial system to non-resident investors could lead to even more foreign currency capital inflows. On both accounts, China will not only continue to export USD capital but could find itself confronted by persistent appreciating pressure on its exchange rate due to the high demand for RMB. Promoting RMB for trade settlement will only go so far in resolving this. If more of China’s trade is settled in RMB, less USD will flow in, and China would need to intervene less and would have less USD to send abroad. But the question remains, with more RMB flowing in through the current and capital account, how do you get more RMB out of China in the first place? There are in fact numerous possibilities for China to create a significant pool of RMB liquidity abroad without necessarily running a current account deficit.
In addition, lower long-term rates would reduce the cost of capital for businesses, thereby fostering higher levels of capital spending for any given economic outlook. In considering the limits to balance sheet expansion, there are two constraints – one major and one more minor. The first constraint is the risk that the balance sheet expansion might cause inflation expectations to become unanchored, leading to higher risk premia. This risk is presumably greater in a period in which budget deficits are high, as they are today. 6  BIS Review 127/2010  If exit concerns were to rise as purchases increased, then a rise in inflation risk premia would offset at least some of the expected fall in interest rates. In contrast, the more credible the ultimate exit strategy, the less likely it is that inflation risk premia would go up and the more effective purchases would be in lowering long-term rates. Also, the more credible the ultimate exit plan, the more confident investors would be about the Fed’s willingness to do what is needed to accomplish its objectives. This is important because it would help stabilize longerrun inflation expectations at levels consistent with the dual mandate. The FOMC should be able to assure investors that it has both the means and the will to exit when – but not before – the time is right. That is because the Federal Reserve has the tools to control financial conditions and credit creation even with an expanded balance sheet.

The bigger the balance sheet becomes, the more a future rise in interest rates will squeeze the Federal Reserve’s net interest margin. Some worry that this exposure to higher short-term rates could conceivably affect the Federal Reserve’s monetary policy credibility in the future. Some market participants might worry that the Federal Reserve could become reluctant to raise short-term rates in a timely way because this would constrain the amount of revenue that it would earn and remit to the Treasury. I am confident there is nothing to worry about on this score. Even if the Federal Reserve was not obliged to act in keeping with its dual mandate – which it is – with its assets skewed toward longer-duration securities, the Federal Reserve would have every incentive to ensure price stability over the long term. It is true that the larger the size of the balance sheet, the more likely it is that the Fed would ultimately sell assets back into the market, potentially at prices that could result in losses. Although some fear that such losses could compromise the Federal Reserve’s independence, there is no reason why this should be the case, providing we stick closely to our mandate at all times. To date, the Fed’s actions in responding to the crisis have resulted in abnormally large profits that might reasonably be set against any subsequent losses.
The risk-reducing benefits of these innovations, for individual institutions and for the system as a whole, are substantial, but these benefits are to some extent qualified by the limits of our knowledge of how they will perform in conditions of stress. The uncertainty and challenge posed by these developments are complicated by the confidence engendered by the stability and resilience of the U.S. economy over the past decade. Until very recently, we have seen an unusual dynamic in financial markets, in which low realized volatility in macroeconomic outcomes, low realized credit losses and low uncertainty about future inflation and interest rates have worked together to bring risk premia down across many asset prices. There is a self-reinforcing character to this pattern, with past stability seemingly increasing confidence in future stability, and this dynamic itself can magnify the risk of a more damaging reversal. These are all good reasons to pay careful attention to the strength of the financial system today. We have a strong interest in ensuring that the largest institutions in our financial system, and the system as a whole, are able to function reasonably effectively, even in the face of a more turbulent economic and financial environment. Capital is critical to this objective, and our current Basel I regulatory framework for capital is not up to the challenge. We have a very important global effort underway to improve the regulatory regime for capital, by tying it more closely to the actual risk profile of financial institutions.

Basel II provides a much better way of determining the appropriate level of capital to hold against risk. It does a better job of capturing default risk and the true extent of risk transfer in securitization, guarantees and credit derivatives. It provides explicit recognition of operational risk, which can be larger than exposure to market risk for some complex financial institutions, not just for processing or clearing banks. But Basel II is not the end of the process of designing a better regulatory framework for capital in financial institutions. As we move to refine and implement the Basel II framework for credit and operational risk, we need to strengthen the framework for market risk and encourage further improvements in how firms capture the possibility of extreme events. The current regulatory treatment of market risk does a good job of capturing directional risk from movements in interest rates, exchange rates and equity and commodity prices. It is less effective, however, in capturing the full range of risks associated with some newer products and trading strategies, where values can react sharply and discontinuously. In particular, the risks of trading strategies based on changes in the correlation between asset returns are not always captured under the current regulatory capital regime, nor are some of the risks associated with traded credit products. And given the relatively short history of some of these products, the current regulatory treatment of market risk may not capture the risks of these products going forward.
Headline CPI went from 1.5 percent annually in  BIS central bankers’ speeches  1  October 2013 to 4.7 percent in May 2014 (figure 1). We expected this rise in inflation to some degree, because it came from a low level and the peso depreciation we have been observing since mid-last year also had an impact. A look into inflation rates over the past six months shows that the biggest increase has concentrated in those components of core inflation of goods and services whose prices are connected – directly or indirectly – to the exchange rate (figure 2). We have also seen an acceleration of nominal wages in recent months. Inflation has behaved thus in a context of sharply decelerating output and demand. In the first quarter this year, output grew 2.6 percent annually, confirming the slowdown that began in the third quarter of 2013. Overall, this outcome was in line with forecasts, but composition shifted towards higher growth in those areas more closely linked to the external sector – like some branches of manufacturing and agriculture – and slower growth in those areas tied to domestic demand, especially services. Leaving out inventories, y-o-y growth in domestic demand picked up from end-of 2013, basically due to a milder drop in investment – especially its machinery & equipment component – and increased dynamism of public expenditure. Domestic spending is still weak, however. Investment has posted negative variation rates for three quarters in a row, while private consumption, mainly of durables, is slowing down (figure 3).

Rodrigo Vergara: The Monetary Policy Report and the Financial Stability Report Presentation by Mr Rodrigo Vergara, Governor of the Central Bank of Chile, before the Finance Commission of the Honorable Senate of the Republic, Santiago de Chile, 16 June 2014. *  *  *  The Monetary Policy Report of June 2014 and the Financial Stability Report of the first half of 2014 can be found at http://www.bcentral.cl/eng/index.asp. Introduction Mr. President of the Senate’s Finance Commission, Senator Ricardo Lagos, senators members of this Commission, ladies, gentlemen. Thank you for inviting me to present the vision of the Board of the Central Bank of Chile on recent financial and macroeconomic developments, their prospects and implications for monetary and financial policy. This vision is detailed in our Monetary Policy Report (IPoM) of June 2014 and in our Financial Stability Report (IEF) of the first half of 2014. Domestic output and demand have been slowing down for some months now. The drop in investment that began a few quarters ago has been compounded with weaker private consumption. As a matter of fact, in the forecast scenario I will be describing briefly we have revised downward our growth estimate for 2014, as a result from this behavior of private consumption and the larger than expected fall in investment. Abroad, the trends we have depicted in our latest Monetary Policy Reports have not varied much. The developed world is showing sustained recovery while at the same time the emerging world is decelerating.