samchain/econo-pairs-v1 huggingface dataset:
Several inflation-targeting central banks (including the Bank of England, Norges Bank and the Riksbank) have for other reasons already extended their forecast horizon from the previously common two years to three years. There is nothing that in principle prevents an inflation targeter from considering forecasts beyond a three-year horizon, but in practice there is usually little information about anything at longer horizons except the tendency to revert to the long-term average. What about “leaning against the wind” (as advocated by, for instance, Borio and White, 2003, and Cecchetti, Genberg and Wadhwani, 2002), the idea that central banks should raise the interest rate more than what appears to be warranted by inflation and resource utilization to counter rapid credit growth and rising asset prices? It has sometimes not been quite clear whether advocates of leaning against the wind mean that credit growth and asset prices should be considered targets and enter the explicit or implicit loss functions alongside inflation and resource utilization, or whether they mean that credit growth and asset prices should still be considered just indicators and are emphasized only because credit growth and asset prices may have potential negative effects on inflation and resource utilization at a longer horizon. In the latter case, leaning against the wind is a way to improve the stability of inflation and resource utilization in the longer run. Then it is completely consistent with flexible inflation targeting.

Strong cooperation will not be a panacea, however, as legal and other restrictions on data sharing differ from one jurisdiction to the next, and it is unlikely that all such restrictions can be overcome. But cooperation and legislation to facilitate sharing with foreign authorities appears to be the best available strategy. Significant practical barriers also exist that can, at times, limit the quality of data collection and analysis available to support effective supervision and regulation, which include barriers to sharing data that arise from policies designed to protect privacy. For example, some private-sector databases and bank’s loan books include firms’ tax identification (ID) numbers as identifiers. Mapping those ID numbers into various characteristics, such as broad geographic location or taxable income measures, can be important for effective analysis and can be done in a way that does not threaten privacy. However, as a practical matter, a firm may have multiple ID numbers or they may have changed, but the Internal Revenue Service usually cannot share the information needed to validate a match between the firm and the ID number, even under arrangements designed to protect the confidentiality of the taxpayer information obtained. In addition, a significant amount of financial information is collected by private-sector vendors seeking to profit from the sale of data. These vendors have invested in expertise and in the quality of data in order to meet the needs of their customers, and the Federal Reserve is a purchaser of some of these data.
To enhance risk management of banks, the HKMA has just issued a set of guidelines to banks, requiring them to tighten the underwriting criteria for mortgages where borrowers already have one or more properties under mortgage. 4. Under these new measures, when handling new applications for mortgage loans for residential, industrial or commercial properties from borrowers who already have one or more properties under mortgage, banks must adopt the following three requirements: First: for mortgage loans assessed based on the debt servicing ability of a mortgage applicant, the maximum debt servicing ratio (DSR) shall be lowered from the current 50% by 10 percentage points to 40%. Accordingly, the maximum stressed DSR shall also be lowered correspondingly from the current 60% by 10 percentage points to 50%. However, an applicant with just one property with outstanding mortgage loan will not be affected by this new measure if the new mortgage loan is for self-occupied purpose, or for the replacement of an existing property. Second: for mortgage loans assessed based on the net worth of a mortgage applicant, the maximum loan-to-value (LTV) ratio shall be lowered from the current 40% by 10 percentage points to 30%. Third: for mortgage applicants whose principal income is derived from outside Hong Kong, the applicable maximum LTV ratio shall be lowered by 20 percentage points, instead of the current 10 percentage points. 5. Based on the experience in Hong Kong, borrowers with multiple outstanding mortgage loans have higher level of indebtedness and leverage.

9. When introducing measures to tighten the underwriting criteria for mortgage loans, the HKMA has always strived to strike a balance to minimise the impact on end-users, particularly first-time homebuyers. Although we have already introduced five rounds of prudential measures on mortgage lending, we have sought to ensure that purchasers of residential properties at a value of $ million or below for self-occupied purpose would still be eligible for a maximum LTV ratio of 70%. In addition, purchasers who meet the eligibility requirements will be able to apply for mortgage loans of up to 90% LTV ratio under the mortgage insurance arrangements. According to figures provided by the Hong Kong Mortgage Corporation Limited, the value of properties involving mortgage loans with a 90% LTV ratio averages at around $ million. Therefore, I believe that the measures of the HKMA will have minimal impact on first-time homebuyers. 10. Changes in the property market cycle are affected by a host of internal and external factors, including land supply, interest rate movements, changes in household income as well as economic and financial market developments in Europe and the US. In view of the highly uncertain internal and external environments, the HKMA will continue to monitor the market situation closely and introduce appropriate measures in response to changes in the property market cycle to safeguard banking stability. 2  BIS central bankers’ speeches
Moreover, commentators have noted that exporters have responded to the depreciation by expanding their profit margins rather than cutting their foreign currency prices in order to boost market share. Does this mean that the depreciation will prove ineffective at boosting demand? I do not think that would be the right conclusion. Experience after previous large depreciations, such as following sterling’s exit from the Exchange Rate Mechanism in 1992, suggests that it is normal for the initial impact to be seen mainly in expanded profit margins and only after some while does one see an impact on market shares. One reason for that may be that expansion in overseas markets requires some investment and businesses are likely to be cautious about making that expenditure until they are sure the improvement in profitability will be maintained. For that reason, I expect to see the contribution from net exports gradually building as the global recovery proceeds. The path of the recovery will be determined by the balance between these two sets of forces. Our central expectation, as laid out in our February Inflation Report, is for four-quarter GDP growth to gradually strengthen as the year proceeds (Chart 6). But the quarterly path is sure to be uneven and there remains a risk of setbacks. And even if things turn out well, it is likely to be a considerable time before the substantial margin of underutilised resources in the economy developed in the downturn is whittled away (Chart 7).

With output some 10% lower than it would have been if pre-crisis growth rates had been maintained, it would appear that the margin of spare capacity ought to be large. But the evidence from past sharp downturns after banking crises is that they can have a significant impact on the economy’s supply potential (Chart 8). Downturns typically lead to less investment, more capital scrapping, fewer business start-ups and more business closures and a restriction in the availability of credit is likely to aggravate these effects. Moreover, lower employment can lead to skills atrophying and the long-term unemployed becoming disconnected from the labour market. Business investment has fallen sharply in this recession – down more than a quarter from its peak – though only part of that is likely to reflect a restriction in the availability of credit. Heightened uncertainty is also likely to have played a part. But against that, both business closures and, as noted earlier, unemployment have risen less than feared. So the overall impact of the downturn on the present and future supply potential of the economy is rather uncertain. In addition, in present circumstances the extent of the downward pressure on inflation from spare capacity is also uncertain. Once one allows for the effect of transient factors such as the restoration of the VAT rate, oil price movements and the likely impact of sterling’s depreciation, underlying inflation has been surprisingly resilient. That could be because the impairment of effective supply as a result of the credit crunch is large.
When high rates of inflation are anticipated, people wisely avoid holding paper money. As I said in my Ely lecture in 2004, “the demand for money today depends upon expectations of our collective decisions about the supply of money tomorrow.” In the twentieth century Germans saw their savings wiped out by hyperinflation. And as recently as 1990, Argentina experienced hyperinflation. I have been told that when people gave up using paper money in Argentina, they resorted to IOUs which were taken to the local Catholic priest for endorsement. Those IOUs were trusted because to renege on a promise endorsed by the priest would have very serious consequences, whether in this life or the next. It is sometimes tempting – as the examples of the Jacobins, Germany and Argentina show – for issuers of money to issue too much of it: cheap money and plenty of it, as the saying goes. 18 A public monopoly of paper money raises the question of how can we prevent the institution managing that money from abusing its issuing power. We cannot commit future generations – or even ourselves – to a particular policy. So how can we design an institution to create the reasonable expectation that money will retain its value? In 1997 a new institution – the Monetary Policy Committee of an independent Bank of England – was set up. And for the past decade inflation has been low and stable and economic growth more stable than at any time in living memory.

As Islamic financial activities are increasingly crossing national boundaries, it is critical for more such dialogues to take place at an international level, in order to gain wider perspectives that can contribute to the development of a legal framework for Islamic finance that is internationally facilitative. Islamic finance today has become a major industry worldwide with over 300 institutions and an estimated asset size of more than USD1 trillion. Its continuing advances in the international financial landscape have recently been accompanied by several major efforts aimed at strengthening its international financial infrastructure. A key structural enhancement achieved recently was the establishment of the Islamic Financial Services Forum (IFSF) that serves as a platform for cross-border engagement among regulators to achieve financial stability in the Islamic financial system. Another important development achieved more recently was the establishment of the International Islamic Liquidity Management Corporation (IILM) as a mechanism for more efficient management of liquidity across borders for Islamic financial institutions. These continuing efforts to strengthen the foundations of Islamic finance have served to ensure its preparedness in meeting the challenges on the path of internationalisation. As we open a new chapter of global growth and development with the unfolding of a new decade, Islamic finance is in a position of strength to play a greater role in the global financial landscape. Today, many jurisdictions are interested in Islamic finance and have taken initiatives to develop the industry.
This is the kind of “convexity” that Chart 8c was trying to get across. Chart 9: Dispersion in CPI inflation has risen  Chart 10: Some evidence of convexity  Sources: ONS and Bank calculations. Sources: ONS and Bank calculations. It’s also true that, so far at least, the huge drops in output in the first half of 2020 have not produced the declines in underlying inflation that forecasters expected in the spring. Chart 11 plots an estimate of “core” CPI inflation in the UK, stripping out the more volatile food and energy components but adding back in what we think were the direct effects of the policies designed to assist the hospitality sector (the “Eat Out to Help  8 9  Broadbent (2012). Supply shocks would tend to move output and prices in opposite directions. 13  All speeches are available online at www.bankofengland.co.uk/news/speeches and @BoE_PressOffice  13  Out” scheme and the cut in VAT). In November, this measure of prices was 1.4% higher than a year earlier, close to where it was at the end of 2019. I wouldn’t describe this as anything more than  Chart 11: Drop in core inflation moderate so far  suggestive. The international evidence is more mixed (as in the UK, core inflation has been relatively stable in the United States, but it’s fallen notably in the Euro area).

The same is true if a rise in infection rates is expected to be permanent. If the future looks exactly like the present there’s no reason for saving – or therefore total consumption – to change. These conditions are obviously unrealistic. Some things are good substitutes for risky activities during the pandemic. Perhaps it’s not much harder to buy things online than in a shop. At a stretch, watching a film on a screen at home can replace a trip to the cinema. But going out with family or friends to a pub or a restaurant, listening to live music or watching a play – for many of the things we’ve been denied for much of the past year, there is no good proxy. As for the dynamics of the pandemic, one thing they’re not is permanent or even slow-moving. Infection rates went up very rapidly in the spring and, once lockdown was in place, they fell almost as rapidly in the early summer. With the promise of looser restrictions as that happened, it would make sense for people to hold off on some spending until the day itself arrived. Nevertheless, it’s clear that a fair degree of expenditure switching took place: some areas of consumption fared unusually well last year, even as others declined extremely sharply. Because it’s hard for economic resources to respond to large and rapid shifts in demand this may have softened somewhat the immediate impact of the downturn, enormous as it was, on inflation.
But at the same time as these changes were reported, the Bank announced the Board of Governors’ decision to raise the policy interest rate by 1.25 percentage points – to 15% – the largest single increase to date. That decision was the tangible manifestation of the  4  BIS Review 36/2008  serious message that the Bank considered it appropriate and necessary to communicate under the current conditions. The Board of Governors supported this decision by showing that the four-month-old inflation forecasts assuming an unchanged policy rate until the latter half of 2008 were not delivering the intended results. Inflation was higher than forecasts had projected, and inflation expectations were rising as well. In the same manner, demand was greater despite the more difficult operating environment faced by the banking system and the announcement that the credit supply was on the wane. The króna also depreciated more than was assumed in the forecasts in the November issue of Monetary Bulletin. That forecast assumed that such a development would be met with a policy rate hike, and though such forecasts are in no way binding for the Board of Governors, the Board’s message can be interpreted as implying a similar message. It pointed out that the real exchange rate of the króna was close to the lowest it has been in several decades. Such a low real exchange rate has never persisted for any length of time.

It is panic or fear that drives depositors en masse to the door of the banking house to demand their money back. In such a case, even an institution that is fundamentally solvent – i.e., whose assets (mostly longer-term loans) are worth more than its liabilities – may find that it does not have enough cash on hand – that is, enough liquidity – to satisfy its customers. The function of a lender of last resort in such a case is to lend to the institution that is facing heightened customer demand for repayment in an amount sufficient to satisfy customer demands, while taking assets of the institution as security for the lending. If the lender of last resort does not act to fulfill this role, the institution facing heightened customer demands for repayment may be forced to begin a “fire sale” of its assets, the distressed and hurried nature of which will cause them to be sold at less than their true long-run value, which may quickly lead to the insolvency of the institution. The insolvency may precipitate further downward pressure on the market value of such assets magnifying the risk to other financial institutions. Over the past 30 years, we have moved from a bank-dominated financial system to a system in which credit is increasingly extended, securitized and actively traded in a combination of centralized and decentralized markets.
This network - which has already achieved a lot regarding the supervision of banks and insurance companies – now counts more than 80 members, including the US Federal Reserve since 15 December 2020. i Since 2019, the Banque de France has also been the first Eurosystem central bank to publish a full report on its responsibleii investment policy; we are committed to completely exiting coal by 2024. Our European Central Bank, for its part, has been, under the leadership of Christine Lagarde, the first central bank to include the fight against climate change in its strategic review. Today supervision, responsible investment, support to green finance, which Bruno Le Maire has just forcefully stressed... and tomorrow the greening of monetary policy itself: this morning, I would like to explore together with you this new frontier that lies before us. It is perhaps the least obvious one, but one of the most important. The journey will sometimes be a little technical – I agree – but the roadmap will be all the more precise. I will first come back to the meaning of our monetary action in the face of climate change (I). I will then present three concrete levers for acceleration (II). Page 2 sur 8 *** I. Why must the Eurosystem act on climate change? Should monetary policy be "greened"?

Paris – Banque de France, 11 February 2021 The role of central banks in the greening of the economy  Speech by François Villeroy de Galhau, Governor of the Banque de France  Press contact: Mark Deen (mark.deen@banque-france.fr), Déborah Guedj (deborah.guedj@banquefrance.fr  Page 1 sur 8 I would like to welcome you to the Banque de France for this 5th edition of the Rencontres on "Climate Change and Sustainable Finance", organised jointly with Option Finance. Central banks’ commitment to the climate cause may seem obvious today, and this despite the urgency of addressing the Covid pandemic. But it was not the case five years ago, and few issues have seen such a rapid and massive change in mindset and initiative. At the Banque de France and increasingly within the Eurosystem, we are driven by a simple but tenacious ambition: to do our utmost to support and add to the collective action in the fight against global warming. We cannot do everything – nothing will replace an appropriate carbon price and therefore, let me be clear, a carbon tax in one form or another. But we can do a lot. The Banque de France spearheaded the creation of the Network for Greening the Financial System (NGFS), which was launched in Paris in December 2017 and is chaired by our Dutch colleague Frank Elderson.
By improving the quality of banks’ public reporting of their risks and the measures they take to control them, we intend to strengthen the ability of other market participants to understand a bank’s risk profile. When investors, customers, and even other banks have access to better information on how well a bank is managing its risks, they are better able to make business and investing decisions relevant to that bank, which can create a powerful incentive for bank management to improve their handling of those risks. Together, the three pillars of minimum requirements, supervisory review, and market discipline are intended to ensure that banks understand their risks and take adequate precautions to protect themselves against those risks through their control structures and their holdings of capital. But most importantly, banks will have incentives to find better ways to identify, measure, and manage their exposures. Current status of New Accord This past summer, we concluded our third round of public consultations on the proposals, and I’d like now to give you a sense of the current status of the New Accord, which is the second topic I will address today. By now you may have read that the Basel Committee reached an agreement last month to address the final issues raised in public consultations over the summer and to complete the new rules by mid-year 2004. This was no easy task, as the Committee received over 200 comment letters on the Third Consultative Paper, or “CP3”.

It seems to me that we all recognize the importance of a sound banking system to our economic well-being. In recent years, central bankers and supervisors around the world have been working hard on the new requirements for bank capital. I think you are familiar with the idea that, “he who asks is a fool for five minutes, but he who does not ask remains a fool forever.” For the last five years, we in the Basel Committee have asked for comments and ideas from the industry, from academia, and from the community of supervisors on how to improve the international capital standards. The wealth of ideas and views that so many shared with us has made the process longer than we expected, but the benefit of this open and honest dialogue is that we are better able to achieve a sound and balanced accord. I think that we are very close to meeting our objective. Today I would like to emphasise, perhaps even over-emphasize, three words that have guided our work on the New Accord, namely balance, consistency and cooperation. We seek a balanced approach so that the new capital guidelines can be applied around the world. A balanced approach that can be both meaningful to global organisations and yet flexible enough to be applied to smaller, more regionally focused banks.