samchain/econo-pairs-v1 huggingface dataset:
This in turn biases upwards the expectations of future short-term rates and hence steepens the whole term structure. [14] Communicating about a decrease in the lower bound makes rates possible that were previously perceived to be infeasible and, ceteris paribus, decreases expected future rates. By this reasoning, the lower bound itself – that is, the extent to which the central bank is willing to go negative if needed – becomes a policy parameter. [15] Another potential way in which rate decreases in negative territory may have a more distinct effect is the accentuation of yield-seeking investor behaviour as in the Hanson-Stein setting that I described earlier. Those financial market participants that have a strong aversion to negative rates on short-term assets or an institutional need to avoid them altogether would seek to climb up the maturity ladder. This increased demand for longer-term debt would increase prices and decrease term premia. That is, the rate cut in negative territory would lead to a more accentuated search for yield that could amplify the yield curve reaction compared with what is observed on average in positive territory. Through a similar mechanism negative rate policy can also be seen as complementary to our bond purchase programme (whose impact on the yield curve I will discuss in more detail later on). [16] In particular, the negative deposit rate reinforces the incentive of banks to actively seek higher-return alternatives rather than passively absorbing the excess liquidity created by quantitative easing.

Second, as an immediate consequence of the induced tight link between the deposit facility rate and the € our forward guidance on the official ECB rate will effectively be mapped directly onto expectations of the market-relevant € And third, capital gains for bond-holding banks can free up balance sheet capacity that banks can redeploy to generate commercial loans under the TLTRO scheme. Summary of the yield curve effects of the ECB’s non-standard policies Putting several pieces of analysis together, ECB economists have come up with the following summary assessment of how the various non-standard policy measures since 2014 have affected the yield curve. Chart 10 Compression of euro area sovereign yield curve due to ECB’s non-standard measures (percentage points)  Sources: Based on Rostagno et al. (2019). Notes: The chart illustrates the contribution of individual measures. The results are based on a Bayesian vector autoregression. The impact of NIRP (negative interest rate policy) and FG (forward guidance) on sovereign yields works via the short-term rate and the OIS forward curve, and the impact of the APP operates via term premia. As we see in Chart 10, covering the annual averages from 2014 to 2018, the APP accounted for the bulk of the estimated yield compression at the long end of the curve. Negative interest rates and forward guidance, by contrast, account for the lion’s share at the short end of the curve.
Essentially, it is a question of making households and the financial system less sensitive to shocks. One measure that immediately comes to mind is a change in the amortisation culture. If households amortise their mortgages to a greater extent, the debt ratio will decline. If, moreover, this means that households adjust their savings and use some of what they save now to pay off their loans instead, we hopefully will not need such major changes in consumption. The real economic consequences could be limited, at the same time as indebtedness and the risks linked to it could be held in check. The most natural thing would be for the banks to require that customers amortise their first loans. As a direct effect, the stock of existing mortgages would then decline. This would, moreover, give households stronger incentives to borrow less. This type of requirement would be reasonable and something that is considered self-evident in many parts of the world. International coordination on stability issues So far I have talked about macroprudential policy and monetary policy and the potential effects of the measures taken from the perspective of an individual country. But there is also a world outside that each country needs to relate to. With regard to financial stability issues, there has long been extensive international cooperation. There are a number of forums in the central banking and financial supervision circles in which issues are discussed, and some of them draw up regulations and standards in the financial stability field.

In any case, I believe that the financial globalisation and the way it affects the conditions for monetary policy, including coordination with macroprudential policy, is a question that will continue to be discussed intensively in coming years. As an important problem is that exaggerated credit growth can arise in the countries to which capital flows, financial stability can hopefully be guaranteed by the frameworks for macroprudential policy that are now being built up.32 We will see how well these frameworks can resist the global forces in the “learning by doing” process we are facing in the macroprudential policy area. A more complicated world after the crisis Let me try to summarise. The fact that I have chosen cooperation as something of a theme is because, as I said initially, our world in the wake of the financial crisis appears more complicated than it was before – or at least more complicated than we thought it was. I think it has become more evident that monetary policy in individual countries is dependent on both what happens in other policy areas and on monetary policy in other countries. Of course, there has always been a need to get different policy areas to interact and support one another, and nor is it anything new that there are links between the monetary policies conducted in different countries. But my feeling is nevertheless that the financial crisis has in a way brought these relationships to a head.
In fact, the cost of maritime freight has tripled, and the prices of other inputs and commodities, such as construction materials, food and agricultural produce, have also risen considerably (Figure 11). All of this has been reflected in higher producer prices and increased short-term inflation expectations in several economies. Although global markets expect the effect on inflation to be mostly temporary, concern has increased in those economies where demand-boosting policies have been most significant. In the United States, inflation surprised to the upside in March and April, while a large fiscal stimulus package is being implemented and monetary policy remains highly expansionary. Measured inflation expectations have risen, while financial markets have experienced bouts of inflation-related volatility. In Chile, inflation has evolved as expected, as the CPI’s annual change rose to 3.6 percent in May. Expectations are in line with the two-year policy target. The annual variation of the CPI has continued to be mainly determined by the behavior of goods and energy prices. The former continues to be pressured by tight inventories in a context of high demand. The latter reflects the rise in oil prices and the low comparison base. Core CPI today stands at 3.4 percent (Figure 12). III. Projections  Expected growth for this year substantially increases in the central scenario, to a range between 8.5 and 9.5 percent.

These are the so-called “unobservable variables”, meaning that they cannot be measured directly (as can activity in a month or a year, for example) and thus must be estimated using different methodologies. The estimation of structural parameters is relevant for monetary policy decisions, as it provides a reference of where their values should stand over longer terms and therefore serves as a guide Page 5 of 27  for assessing the macroeconomy and calibrating monetary policy accordingly. In 2020, the Bank postponed the review of these parameters because the uncertainty surrounding the unusual nature of the shocks that were affecting the economy —the social crisis and the pandemic— made it more advisable to gather more information to assess the medium-term effects on the economy. The results of these estimates are detailed in three boxes of this Report. As for trend growth, its estimate is revised downward given the persistent slowdown in productivity growth over the last decade. Our estimate for non-mining trend GDP growth is reduced to a range between 2.4 and 3.4 percent for the 2021-2030 period, which compares to the range between 3.25 and 3.75 percent estimated for the 2019-2028 decade. This revision is mainly explained by a lower Total Factor Productivity (TFP) growth projection.1 This assumption is based on the consolidation of a downward trend since the early 1990s, which was only temporarily reversed during the commodity price boom of the second half of the 2000s (Figure 18).
The breakthrough in financial theories has contributed to this development and made it possible to create instruments for buying and selling risks. When writing history, we must not forget IT developments. Without these it would not have been possible to rapidly calculate and update the values of instruments, model parameters and risks in individual cases or in portfolios. The emergence and development of markets for risk management instruments and even institutions’ internal risk management would have been delayed. The combination of new financial instruments and markets has led to better conditions for risk distribution, where those who are best-equipped and most willing to take on risks can do so, while those who want lower risk can reduce their exposure. Sometimes, risk distribution is seen as a zero-sum game, but this is incorrect. A financial agent may take on further risk if this covaries with other risks in such a way as to reduce the total risk in the agent’s portfolio. This example can be stretched to cover society as a whole, where there were probably people and companies who had not achieved the risk portfolio that best reflected their willingness and ability to take on risk, but will now be better able to do so with the new instruments and markets. My overall assessment is that there is no doubt that this development has contributed to the financial system’s capacity to carry out its fundamental tasks, while its resistance to destabilising shocks has been reinforced.

3  Cf., for instance, Ricardo, David (1824), Plan for the Establishment of a National Bank; Hayek, Friedrich A. von (1971), Verfassung der Freiheit, pp 440–41, Tübingen, Mohr Siebeck (4th edition 2005); Barro, Robert J. and Gordon, David B. (1983), A Positive Theory of Monetary Policy in a Natural Rate Model, Journal of Political Economy, 91 (August), pp 589–610; Cukierman, Alex, Webb, Steven B. and Neyapti, Bilin (1992), Measuring the Independence of Central Banks and Its Effect on Policy Outcomes, World Bank Economic Review, 6 pp 353–398; Alesina, Alberto und Summers, Lawrence H. (1993), Central Bank Independence and Macroeconomic Performance: Some Comparative Evidence, Journal of Money, Credit and Banking, 25 (May), pp 151–162. 2  BIS central bankers’ speeches  authorities, in other words, the Swiss sovereign power. Our independence comprises several dimensions – function, institution, finances and staff.4 I make a point of repeating the fact that we must fulfil our mandate without seeking or accepting instructions either from the Federal Council or from the Federal Assembly or any other body. The SNB is institutionally independent because it is a legal entity in its own right. It has the legal status of a special-statute joint-stock company. The financial dimension of independence comprises, on the one hand, the prohibition on state financing. Under article 11 of the National Bank Act, we are not permitted to grant the Confederation any loans. Neither are we allowed to acquire government bonds from new issues. These provisions are a strong defence against fiscal policy being bankrolled by the central bank.
The Riksbank also has an internal preparation process with broad participation. Finally, we publish the minutes of Executive Board meetings in which the opinion of each member is evident. The latter issue has a different “charge” at European level since there is a risk that a genuinely single monetary policy would be undermined if individual positions were made public. Monetary union and financial stability in Sweden The Riksbank not only has the task of maintaining price stability but also that of promoting a safe and efficient payment system. In light of this, allow me also to say something about the potential implications of entry into monetary union from this perspective. The financial markets in Europe have developed rapidly over the past decade, partly as a result of the fact that the freedom to trade financial services is fundamental to the cooperation in the EU. Competition for the national banks has hardened. The single currency has contributed to the evolution of a far better capital market outside the banks, which has increased competition further. In several large European countries, a process of structural transformation in the banking systems is underway, much like that experienced in Sweden in connection with the banking crisis at the beginning of the 1990s. When competition grows stiffer, it can of course pose a threat to stability, especially if the banks are not accustomed to competition and are also weakly capitalised.

Zeti Akhtar Aziz: Developing a strong and dynamic SME sector Keynote address by Dr Zeti Akhtar Aziz, Governor of the Central Bank of Malaysia, at the Launch of SME Credit Bureau, Kuala Lumpur, 16 April 2009. *  *  *  Introduction It is my pleasure to be here this morning to speak at the launch of the SME Credit Bureau. The development of a strong and dynamic SME sector is a priority on our national agenda to promote a vibrant and active SME sector that will contribute towards generating a sustainable and balanced economic growth. Malaysia has therefore adopted an aggressive SME development programme to strengthen the viability and capacity of the SMEs to increase their contribution to high quality growth of the economy. Over the recent five years, the SMEs contribution to economic growth has increased. Indeed, the SME contribution to economic growth in the manufacturing sector has increased from 6% of real gross domestic product in 2001 to 8.4% in 2005. The overall SME contribution to the gross domestic product has increased to 32% while 19% of total exports are by SMEs. Experience has shown in several of the developed countries, that SMEs contribute to at least half of the gross domestic product. Benchmarked against this, there is clearly a significant potential for SMEs in Malaysia to increase their contribution to the economy. Economic outlook and policy response The year 2009 is likely to be a difficult year for businesses.
So the IMF has simply observed that France can’t afford to stand still when Germany began to reform some years ago, and given that the southern European countries are also moving to address the problems of cost competitiveness and rigidities. This is clearly why the  2  BIS central bankers’ speeches  economic reforms announced in France are so important. I’m delighted that the government has made this such a high priority. EUROWEEK: Let’s move on to France’s relationship with the financial markets and with the developments in its banking system. Are you concerned about what the ratings agencies have been saying about France? Or are ratings agencies irrelevant these days? They don’t seem to have had much of an impact on France’s borrowing costs. Noyer: No. I don’t worry about ratings agencies. The crisis led to a weakening in public finances in most countries, so in relative terms there have been few changes in their ratings. No agency is denying that France still has one of the strongest risk profiles in Europe. The second reason why I don’t worry is that worldwide authorities such as the G20 and the FASB have said very clearly that they want market players to rely less on credit ratings agencies and to make their own judgments. This can be done by banks’ internal models or other types of analysis by investment managers which are more sophisticated than they used to be a few years ago.

And in 2022 we launched the climate risk stress test and a thematic review of how banks incorporate C&E risks into their processes, a fully-fledged supervisory exercise, involving teams responsible for the day-to-day supervision of banks. At the same time, we are gradually integrating C&E risks into our regular supervisory methodology, and how banks manage these risks will ultimately impact their Pillar 2 capital requirements. The ECB’s supervisory actions on climate are part of broader international efforts to advance the 1/4  BIS central bankers' speeches  supervision and regulation of C&E risks. At global level, the Basel Committee on Banking Supervision recently concluded a public consultation on draft supervisory principles for the prudential treatment of climate-related risks, and the input they received is now being reviewed with the aim of finalising those supervisory principles. This is part of a broader workplan of the Committee to evaluate how to consider climate-related financial risks in all pillars of the Basel framework. Supervision, regulation and – the topic of the ECB report that is published this morning – disclosures. The importance of transparent disclosures There is growing international awareness of the great value of transparent disclosures. Disclosures that are clear and easy to understand tend to benefit any company, banks included. Generally, companies have strong incentives to publish frank and meaningful disclosures because transparency is usually rewarded by investors; it helps reduce uncertainty and allows all interested parties to feel they are making safe investments based on trustworthy data. This is particularly true for climate-related and environmental risks.
Thus in the period 19942006, the cumulative appreciation of the real effective exchange rate ranged from 8% in Slovenia to 105.9% in Lithuania. 8 Economic theory offers arguments that real exchange rate appreciation is not dangerous as long as it reflects changes in the equilibrium real exchange rate. However, policy makers in these countries, especially in the recent years, are not really comforted by these theoretical discussions which consider that real appreciation is only movement to equilibrium. What they are seeing in their countries are common signs of overheating of the economy and loss of competitiveness, which deepens the external imbalances. In the beginning of transition, current account deficits were understandable and not too much cause for concern, as these countries were importing technology and previously unavailable goods. However, the size of the deficits in the last several years exceeds the level that is usually deemed sustainable. Thus, the current account deficit in the new member states in the period 1996-2005 ranged from 5% to 7.7% of GDP, but in the last two years it has been reaching 10.1% and 11.3% of GDP. The average current account deficit in the SEEU countries in the same period is even higher, and it is estimated that in 2007 it will reach 16.3%. 9 Even though deficits are projected to fall in some of the countries, in general they remain a cause for concern in most of them. Besides the trade deficit which,  7  Source: IMF World Economic Outlook Database, April 2008. 8  Source: Eurostat.

The reports issued by the Counterparty Risk Management Policy Groups I and II both make the important observation that the financial system is likely to be more resilient under conditions of stress when counterparties set initial margins at levels that are likely to be sustainable in less benign conditions. When margin levels are set more conservatively, firms are likely to have more flexibility in responding to stress and are less likely to take action that might amplify the market shock and exacerbate the reduction in liquidity. When competitive pressure drives margins down, markets may be less resilient. Third, we believe the major financial institutions need to continue to improve their capacity to measure their exposure to risk in a less benign market and economic environment than we have experienced in recent years. The discipline of stress testing and scenario analysis that is designed to measure tail risk is at the frontier of this challenge. Senior management and the boards of directors need to understand the limitations of the tools we use to assess these risks, to try to better understand the potential scale of losses the firm may face, and to carefully examine how well risk exposures reflect the overall risk appetite of the firm, and the size of the capital and liquidity cushion maintained in relation to those exposures. BIS Review 54/2006  3  I want to conclude with the observation that the requirements of effective risk management and control regimes are likely to become more rather than less demanding over time.
Output gap Per cent of potential GDP 1.50  1.50 Constant repo rate  1.00  Implied forward rates  1.00  0.50  0.50  0.00  0.00  -0.50  -0.50  -1.00  -1.00  -1.50 2004  -1.50 2005  2006  2007 Source: The Riksbank  7. UND1X-inflation 2.5  Annual percentage change  2.5  Constant repo rate Implied forward rates  2.0  2.0  1.5  1.5  1.0  1.0  0.5  0.5  0.0 2004  0.0 2005  2006  2007 Source: The Riksbank  BIS Review 11/2005  11

As insurance regulators, these emerging trends place new demands on our skill sets, expertise and competencies. We have seen the need to become more agile, pragmatic and experimental. We also need to be more open to new ways of formulating developmental policies and regulation. In this respect, we can learn from each other the evolving practices, environment and developments that we face in our respective markets. As a group, I believe ASEAN regulators will continue to work closely towards achieving a consistent approach in driving the development of a holistic insurance ecosystem and infrastructure in the region. Regular dialogues and exchange of information among and between 3/4  BIS central bankers' speeches  regulators and the industry will continue with new areas for collaboration, particularly in the management of risks and developments brought about by innovation. These include consumer data protection issues, rise of cybercrime, potential job loss or disruption, and rapid and unexpected climate change and natural disasters. Closing This week’s ASEAN events continues our commitment towards promoting continued development in the insurance sector. The challenge herein lies with ensuring that the ASEAN insurance market has the capacity to reinforce the economic growth momentum and stand wellprepared against the evolving trends and risks. In doing so, we should never forget to uphold the highest standards of integrity, professionalism and ethics. 4/4  BIS central bankers' speeches