samchain/econo-pairs-v1 huggingface dataset:
This may be market discipline, but it does not operate in a way that makes the financial system more stable. The SEC is leading an effort to reform the money market mutual fund industry. Second, the Basel liquidity coverage ratio is under review to ensure that it accomplishes its goals without creating adverse unintended consequences. It will be implemented but in a somewhat altered form, since the proposal is not locked down to the same degree as the Basel III capital standards. Ensuring that financial market utilities (FMUs) are robust is another important workstream with a number of important elements. For example, the Dodd-Frank Act has provisions that enable the Financial Stability Oversight Council to designate particular FMUs as systemically important and, therefore subject to tougher prudential standards. Internationally, the Committee on Payments and Settlement Systems (CPSS), which I chair, and the International Organization of Security Commissions (IOSCO), have proposed a comprehensive set of operational standards for FMUs, which I expect will be finalized early next year. We expect that these principles will be endorsed and adopted by the G20 countries, establishing a minimum standard for important FMUs around the world. However, progress is slow and uneven. For example, it is unlikely that the G20 countries will meet the goal to clear all standardized over-the-counter derivative trades through central  1  In general, I think progress on liquidity is inherently more difficult than on capital because tougher liquidity standards conflict with one of the basic function of banks-maturity transformation.

This include RMB outflows through official aid, international loans by banks in China, foreign issuance of debt in Chinese markets, direct investment abroad, inter-company loans, repatriation of corporate profits, resident spending abroad and so on. Some of these are already happening. Offshore RMB balances in Hong Kong, Chinese Taipei and Singapore for example rose almost 40% between late 2013 and early 2014 to RMB1.4 trillion. These numbers are indeed encouraging, except for one thing. When the RMB is abroad, it gets homesick, terribly homesick. It yearns to return home to the land of its birth. When the legal avenues for it to do so are limited, it desperately seeks other ways to do so. And as the size of overseas RMB pool increases, the pressure of the homeward bound flows will also increase. Will the Qualified Investor Schemes, RMB clearing banks and the eventual introduction of the China International Payment System alleviate this situation of the offshore RMB? Yes, it would, but not entirely. In the current situation, despite the sharp increase in RMB related trade and investment transactions, the data I have seen suggests that the use of RMB remains rather lopsided and favours the flow of RMB into China rather than out of China. A significantly greater proportion of China’s exports were paid for in RMB, then its imports. Similarly, while 63% of the FDI into China was in RMB, only 16% of the direct investment out of China was in RMB.
John C Williams: Business more like usual Remarks (via videoconference) by Mr John C Williams, President and Chief Executive Officer of the Federal Reserve Bank of New York, at the Economic Club of New York, 27 September 2021. * * * As prepared for delivery Thank you for that kind introduction. It’s a great honor for me to be addressing members of the Economic Club of New York today, the first time I’m doing so since becoming the Club’s Chair. Today’s event was scheduled to take place in person, and we were really looking forward to the opportunity to come together. But predicting the future is nearly impossible, and here we are meeting virtually. I say it’s “nearly” impossible to predict the future because I plan to share my outlook for the U.S. economy with you all over the next few minutes! We’re not the only ones that expected business to be “more like usual” at this point in time. But the direct and indirect effects of the virus continue to shape the way we live our lives, do our work, and come together with others. On top of that, signs of the Delta variant’s impact are showing up in the incoming data, contributing to more uncertainty about the future. Business, in fact, is unusual in many ways, and continues to reflect the extraordinary nature of the pandemic. In my remarks today I’ll share more about how these effects relate to the economic outlook for the nation and right here in New York.

High indebtedness makes households more sensitive I have now talked at length about how the banks have been able to fund the large volume of mortgages and what stability risks this funding model entails. But in this context one must also take into account the reason for the increase in demand for mortgages and how this affects households. There are several factors that can explain why this demand has increased. Higher incomes, low interest rates and rising housing prices are usually mentioned in this context. But credit terms have also changed, which has also affected how much a household can afford to borrow. The banks can now determine the terms and purposes of their loans themselves. At the beginning of the 2000s, many of the banks gradually abolished the requirement that households should amortise their loans. For the banks this was a means of taking larger market shares, and for the households it was a means of borrowing more. The banks also accepted lower down payments than before. In some cases, a household could take on a loan that corresponded to the full value of the housing. As a result, the loan-to-value ratio of mortgages today is higher than before and more loans are interest-only loans. Households have also become more sensitive to changes, partly because they have larger debts than before, and partly because they have taken the loans at variable interest rates.
As I noted at the beginning of my intervention, my purpose today is not to describe Basel II, but rather to highlight those elements of the framework that set in motion dynamic processes that will enhance banks’ safety, efficiency and soundness, thereby strengthening the stability of the financial system as a whole and ensuring that it can better serve as a source for credit and growth for the economy. The comprehensive framework of Basel II provides four transmission channels for influencing financial stability: first, by setting more risk-sensitive minimum regulatory capital requirements, so that regulatory capital is both adequate and closer to economic capital; second, by providing incentives to encourage improvements in banks’ internal risk management processes; third, the enhanced mechanisms to encourage the marketplace to exert external discipline on banks and the banking sector; and fourth, the necessary greater co-operation among supervisors across jurisdictions. Through these channels, Basel II should remove distortions potentially hindering capital flows, improve the efficiency of the allocation process, and increase the stability and resilience of the financial system. The way I see this improved dynamic “risk-based efficiency”, as I would call it, is that, given the same situation of an economy in terms of risk appetite and risk absorption capacity, the financial system will be able to provide more and better allocated financing flows, something that may help to increase the potential growth of the economy, without reducing the safety and soundness of the system.

However, while regulatory capital is important and may represent an overall constraint, research and discussions with banks actually suggest that, when determining the price of a loan, banks consider all of the economic risks associated with a particular borrower. It seems that factors such as “economic capital” and the level of competition are much more influential in individual loan pricing than regulatory capital. That finding should be no surprise to any banker or supervisor – banks that are managing their risks appropriately are already considering the risks that they face when they lend to higher-risk borrowers, and thus lower credit quality is already priced into a loan, even under the existing less risk-sensitive capital rules today. Furthermore, there are additional elements in Basel II that can contribute to alleviating concerns about the impact on capital flows to emerging markets. Let me mention the reduction in capital charges for retail lending, residential mortgages, small and medium enterprises (exposures below € 1 million) and well-provisioned past-due loans. Also, the recognition of credit risk mitigants, such as collateral and guarantees, is significantly better in the new framework of Basel II. If we take a medium or longer-term perspective, the different channels that I mentioned before will ensure better access to financial flows for the same risk.
The role of inflation expectations The channels I have now pointed out operate in most cases through demand and the output gap. One channel that is probably very important and which does not operate through resource use in the economy is the effect of monetary policy on inflation expectations and its impact on price-setting conduct and how price changes are received in the economy. There is scarcely any doubt that inflation expectations played an independent role prior to the inflation target achieving credibility in the mid-1990s. Now that the inflation target appears to be well known and generally accepted and inflation expectations are well in line with the inflation target, the role of expectations in the transmission mechanism is not so self-evident. However, stable and low inflation expectations should affect businesses' pricing and wage formation. If the players in the economy are confident that inflation really will be held at a low level, this could also lead to companies not considering that they have to change  2  See Kerstin Hallsten, "Bank loans and the transmission mechanism of monetary policy", Sveriges Riksbank Working Paper Series no. 73-1998. BIS Review 40/2001  3  their prices so often, for instance, in the event of changes in costs that are perceived as temporary. If the expectations are not met, there is a risk that price changes will be large when they finally occur.

Presumably the relation between the output gap and inflation varies both with the level of the output gap, with the speed of the change in the output gap and with the expectations on central bank behaviour. The Riksbank's monetary policy strategy An important part of the Riksbank's monetary policy inflation target strategy is clarity and openness about the bases on which monetary policy decisions are made. The intention is to create support for the price stability target and understanding of what governs interest rate decisions. This clarity means that the Riksbank's interest rate decisions are often expected and this increases the ability of the Riksbank to affect the somewhat longer rates through its analysis. This openness should also contribute to stabilising inflation expectations. The monetary policy decisions are based on forward-looking inflation assessments of CPI and UND1X – a price index adjusted for certain temporary effects. These assessments are reported in the Riksbank's inflation reports which are published four times a year. The minutes of the monetary policy meetings which are held between six and eight times a year are published with a couple of weeks time-lag. Inflation assessments are made with a two-year time horizon while paying some attention to the potential developments in the third year. Important determining factors for inflation are the development of demand and the output gap. A number of inflation indicators are used, however, to make the assessments. The quantity of money has no special role in the analysis although it is used as one of many indicators.
It is only in recent decades that its focus has drifted toward its scientific dimension. In any case, I prefer to think of economics as being closer to medical sciences (Harberger, 1993), as it diagnoses, analyzes evidence and proposes treatments. It is different from physics because physics does not deliver prescriptions, at least not directly. Hence the importance of the interaction between science and practice. Economics has an additional complication, as it is a social science trying to explain human behavior. The emphasis put on rigor and solid theoretical fundamentals has been a positive development, because making policy recommendations requires a good and accurate diagnosis of reality. Like in the past, we could have extensive, complex models, with many sectoral interrelations, based on statistical estimations and calibrations. But if the models aren’t conceptually well-formulated and are based only on statistical patterns, their usefulness is limited. This was the great contribution to economics by the rational expectations revolution and, in the policy field, by the Lucas critique. Only preferences and technology are invariant to policies, while the resulting behavior of agents is not; therefore, policies will ideally be evaluated with models that specify both preferences and technologies. 1 Nonetheless, the current crisis has revealed that models are limited to deal with all complexities of the real world.

As the U.S. economy continues to grow and expand—as I expect it will—your personalized customer service, commitment to relationship banking, and adaptability to technological advances will serve you and your communities well. I will miss many aspects of my role at the New York Fed, particularly the opportunities I’ve had to interact with the community bankers in our district. Please enjoy today’s conference, and thank you for coming. 1 Sumeet Batra, Richard Ciccotelli, and Jacqueline Fenton assisted in preparing these remarks. 2 See William C. Dudley, The Importance of Incentives in Ensuring a Resilient and Robust Financial System,  March 26, 2018. 3 Keeton, William & Kahn, George A. & Schroeder, Linda & Weiner, Stuart E., 2003. “The role of community banks  in the U.S. economy,” Economic Review, Federal Reserve Bank of Kansas City, issue Q II, pages 15–43. 2/2  BIS central bankers' speeches
Ardian Fullani: Recent economic and financial developments in Albania Speech by Mr Ardian Fullani, Governor of the Bank of Albania, at the press conference on monetary policy decision of the Supervisory Council of the Bank of Albania, Tirana, 27 January 2010. *  *  *  The Supervisory Council of the Bank of Albania, in its meeting of January 27, 2010, dwelt with the Monetary Policy Statement for the second half of 2009, analysing in detail the performance of monetary and economic indicators for the second half of 2009, as well as the macroeconomic projections and the balance of risks that may associate them in the coming month. At the end of the analysis, the Supervisory Council of the Bank of Albania decided to keep unchanged the key interest rate of repurchase and reverse repurchase agreements, at 5.25 percent. The Supervisory Council assessed that this interest rate is in line with Bank of Albania’s goal to keep inflation close to the medium-term target. *** The Albanian economy has just left behind a difficult year. The deep global economic crisis was soon felt even in Albania, testing the foundations of the economy: the financial stability and the macroeconomic balances. However, the good initial state of our economy and the proper response of macroeconomic policies helped to successfully cope with this test.

Many countries have had to reallocate budgets, issue debt, or rely on foreign aid to finance immediate relief and reconstruction efforts. Most have yet to develop robust public disaster risk financing strategies using ex-ante risk financing solutions, which includes setting aside reserves, establishing contingent credit, and tapping on insurance and capital markets. 8. Several ASEAN countries, however, have made significant strides in the right direction. For instance, Philippines has put in place a disaster risk management strategy since 2010, and implemented a parametric insurance programme covering 25 provinces, which will provide rapid liquidity for the government to enable rebuilding and recovery efforts when disaster strikes. It is now working with the World Bank on a sovereign catastrophe bond to complement the insurance programme, which will provide cover for more extreme events. Over the years, Indonesia has consistently increased its budget allocation for disaster management. Most recently, Indonesia has adopted a new disaster risk financing and insurance strategy, which encompasses the government insuring government buildings from this year. A Coordinated approach to Disaster Risk Financing 9.
So what were the issues facing the MPC two weeks ago? Remember that the aim of the MPC is to hit an inflation target of 22. Sometimes inflation will be above the target, sometimes below. But over a run of years the outturn should be as close to 22 as possible. It is central to our remit that deviations of inflation from the target are regarded symmetrically. Inflation can be too low as well as too high. For over thirty years, central banks have not, until recently, had many opportunities to show that they understand this. I can assure you that the MPC does. When circumstances change, as they have over the past few months, then so will our policy. The recent turbulence in international financial markets brings a new set of problems and risks, over and above those that resulted from the Asian crisis which started in the second half of last year. It is important to distinguish between the crisis of the so-called “tiger” economies in Asia, which, although clearly impacting on world trade, was indeed largely restricted to Asia, and the  BIS Review 86/1998  -2-  more recent financial contagion which has afflicted almost all emerging markets and affected the financial system of the industrialised world. There are three aspects of the world economy which are relevant to our own position. First, private capital flows to emerging markets have in many cases come to an abrupt halt.

At the time of that Report the latest figure for earnings growth was 5.4%. Given historical levels of productivity growth of around 2%, this level of earnings growth was, on the face of it, incompatible in the long run with the inflation target of 22. That led to an extended discussion during the summer, both within the MPC and among commentators in the press and the City, about the extent to which those levels of earnings growth had been distorted by the impact of bonuses during the Spring of this year and so might be expected to fall in due course without the need for an easing of pressures in the labour market. Since August, the estimates of this key economic statistic have been revised - not once, but twice. The good news - somewhat ironic given the amount of attention it attracted earlier this year - is that as a result of these revisions the “great bonus debate” of the summer has become a non-issue. Bonuses, we are now told, if anything subtracted from, not added to, the growth of earnings in March and April of this year. The bad news, however, is that if before the revisions it was difficult to know how to interpret the impact of bonuses on earnings growth, it is, I think it is fair to say, now extremely difficult to know how to interpret any aspect of the earnings data. Statistics, official or otherwise, are neither right nor wrong.
As early as 1967, Brainard showed that central banks should respond more cautiously to economic disturbances when there is uncertainty as to how strongly the interest rate affects the economy, in other words when there is multiplicative uncertainty.15 On the other hand, according to theory, additive uncertainty, where uncertainty factors are assumed to be independent of the interest rate, shall not be taken into account when setting interest rates. Certainty equivalence implies that we make an unbiased projection for the uncertain factor and take the projection into account in the same way as if we knew with certainty that it would occur. Theory implies that the central bank should be more aggressive when setting interest rates when faced with certain types of multiplicative uncertainty, for example, uncertainty regarding the extent to which the deviation from the inflation target for a period has an effect on market participants’ expectations concerning future inflation.16 This is in line with previous statements from Norges Bank where we state that: The interest rate may be changed rapidly and markedly if there is a risk that inflation might deviate considerably from the target over an extended period so that inflation expectations might be influenced, or when heightened turbulence in financial markets or a rise in costs as a result of negotiated wage increases indicate that confidence in monetary policy is in jeopardy. The fact that academic research is devoting more attention to monetary policy under uncertainty is useful for us practitioners.

How does the central bank relate to the fact that we do not know precisely how the world is or how it will be in the future?13 Alan Blinder, former Vice Chairman of the Board of Governors of the Federal Reserve and currently a professor at Princeton University, touches on this when he formulate the recipe for a successful monetary policy: 14 •  Step 1: Estimate how much you need to tighten or loosen monetary policy to “get it right.” Then do less. •  Step 2: Watch developments. •  Step 3a: If things work out about as expected, increase your tightening or loosening, toward where you thought it should be in the first place. •  Step 3b: If the economy seems to be evolving differently from what you expected, adjust policy accordingly. I have not doubt that a number of central banks will sympathise with this recipe. Norges Bank normally takes a gradual approach to interest rate setting due to uncertainty concerning economic developments, including the effects of previous changes in the interest rate. 13  See Frøyland, E. and Lønning, I. (2000): “The significance of uncertainty in monetary policy”, Economic Bulletin no. 4/2000 for a more detailed description of different types of uncertainty. 14  Blinder, A. (1998) “Central Banking in Theory and Practice”, MIT Press  BIS Review 6/2004  7  This principle is also supported by economic theory.