samchain/econo-pairs-v1 huggingface dataset:
Monetary policy comes to mind since it is conceivable that we might use the interest rate instrument more aggressively in the face of mounting cyclical excesses in the credit and real estate markets. Raising interest rates in the case of a credit boom – leaning against the wind – is a natural response, as the higher market borrowing rates would exert a dampening effect on credit demand and – eventually – on real estate prices.7 Using the interest rate to contain asset price growth would, however, regularly lead to deviations from the interest rate path that would be optimally justified by the pursuit of the price stability mandate. This is an illustration of the well-known principle according to which the number of policy tools should equal the number of policy goals. At a more practical level, empirical evidence suggests that the interest rate may be an inefficient tool when used single-handedly for the purpose of dampening the financial cycle. That is, containing a boom may require very large interest rate movements, leading to commensurate output losses.8 In sum, while interest rate policy may at times be counted on to support efforts to contain financial stability risks, it is unlikely to suffice as the main, or sole, instrument in doing so. 5  Blinder and Reis (2005). 6  Haldane (2010); Calculations based on former banking crises suggest that, on average, about 10% of GDP is lost initially (peak-to-trough) and that the cumulated (longer-term) cost may have added up to 20–100% of pre-crisis GDP (BCBS (2010)).

The question should thus be rephrased as “How can we identify that the build-up of risk is approaching a critical stage?” International evidence suggests a palette of quantitative early warning indicators that are reliable with respect to predicting banking crises and financial instability. For instance, real estate boom-bust cycles are particularly damaging when associated with increased leverage in both the real and financial sectors. To obtain a more accurate picture of the intensity of systemic risk, a combination of indicators should be monitored simultaneously.13 In this spirit, the Swiss approach relies on a combination of indicators to assess whether, and to what extent, the activation, adjustment or deactivation of the CCB is warranted.14 These indicators have been chosen based on their past performance as early warning indicators both for Switzerland and internationally (slide 6). Still, a purely mechanical response to financial stability risk depicted by a set of indicators, while providing a certain degree of transparency, is risky. For instance, it would leave no room for considering the influence of developments not captured by these indicators. As a consequence, an element of discretion should be embedded in the decision to activate the CCB, or not, at a given point in time.15 The current situation provides a good example: The medium-term risks to financial stability remain high, with imbalances in certain segments persisting. Some recent data releases, however, indicate a possible slowdown in momentum in Swiss mortgage and real estate markets during the second quarter of 2012.
Let me simply mention that there are other potential challenges associated with SWFs, such as concerns that SWFs could pose a risk to financial stability. 17 A related concern is that asset allocation changes by some of the larger SWFs could result in disorderly market price adjustments. 18 While it is impossible to rule out such effects, these risks are clearly not unique to SWFs. Moreover, they strike me as being second-order problems, compared to the threat of the activities of SWFs unleashing a vicious cycle of financial protectionism. 14  SEC Chairman Christopher Cox, for example, points out possible conflicts of interest arising from foreign government ownership of businesses (Cox 2007). 15  Bernanke (2006) also points out that capital as a general rule has historically been flowing from core to periphery. See, for example, Jones and Obstfeld (2000) and Obstfeld and Taylor (2003) for historical evidence. 16  Lucas (1990). 17  See, for example, Lowery (2007) and Johnson (2007). 18  See for example IMF (2007). 4  BIS Review 150/2007  4. Policy response  Let me now turn to the question of how to respond to the risks associated with SWFs. As I said in my introduction, I would like to provide you with my own judgment on what kind of policy response will likely be required to address adequately the risks I have tried to outline. But before I do so, let me briefly touch upon four policy ideas that are currently being circulated.

Inflation expectations and the conduct of monetary policy, Speech at an event organised by the SAFE Policy center, 11 july 2019  6  Figure 3. Recent divergence between the evolution of household inflation expectations and market based-measures  Sources: ECB, European Commission  7
Chart 5: Six large falls in 100 years If we look at annual returns in global equity markets since 1900, the chart shows that negative real equity market returns of the same magnitude as during the financial crisis have occurred in five periods: the Great Depression 1929–31, two world wars, the rise in oil prices at the beginning of the 1970s and the repercussions after the dotcom crash.3 Both the owner and the manager of the GPFG must be prepared for new crises. Chart 6: The fund is larger A larger fund also means more pronounced fluctuations compared with the wider economy. Chart 6 shows the same percentage decline in the value of equities and fixed income instruments as in 2008, disregarding movements in the krone exchange rate. With today’s fund, the same decline would have resulted in a fall in the value of the GPFG of NOK 2700 billion. This is equivalent to more than 90 percent of annual mainland GDP, compared with just over 30 percent in 2008. In previous periods of falling equity prices, petroleum revenue transfers to the GPFG have been substantial relative to the fund’s size.

Dimson E., P. Marsh and M. Staunton (2002) Triumph of the Optimists: 101 Years of Global Investment Returns, Princeton University Press. 2 Dimson E., P. Marsh and M. Staunton “Long-Term Asset Returns” in Financial Market History, edited by D.  Chambers and E. Dimson. 3 The figures are annual figures and the percentage falls are therefore smaller than for measurements from the  peak to the trough on a monthly basis. 4 The Government Petroleum Fund, Annual Report 2002. Norges Bank. 5 See Discussion note 1/2017, International diversification for long-term investors, NBIM 6 Dimson E., P. Marsh and M. Staunton: Credit Suisse Global Investment Returns Yearbook 2018. Dimson E., P.  Marsh and M. Staunton. Triumph of the Optimists: 101 Years of Global Investment Returns, Princeton University Press, 2002. 7 ibid. 8 Estimated market value in the fund’s benchmark index if the companies had not been excluded. 6/6  BIS central bankers' speeches
28  As I said earlier, one of the ingredients of the economic policy response to the crisis has been the temporary suspension of fiscal discipline rules in Europe until the pandemic is over, which is projected to be in 2022. These rules require the structural deficit to be reduced by 0.5 pp each year, so closing the current deficit, which is estimated to be some 5 pp of GDP, would take approximately a decade of adjustment.8  According to the Banco de España’s simulations, using a model that describes the behaviour of the government debt ratio on the basis of certain assumptions regarding its determinants, in the absence of fiscal consolidation measures government debt will reach around 130% of GDP over the next 15 years. Conversely, a process of gradual fiscal consolidation, following the guidelines of the Stability and Growth Pact, as I have described, could significantly moderate the government debt dynamics. In particular, a fiscal policy that improves the primary structural balance by 0.5 pp of GDP per year, until budget balance is achieved, would result in a sustained reduction in the government debt ratio, such that by 2035 it would stand at around its end-2019 level. This consolidation process would be especially effective if it were combined with the implementation of ambitious structural reforms to increase the economy’s potential growth and therefore the size of the main tax bases.

This figure reflects both a most significant decline in revenue and a notable increase in expenditure, of which more than 70% is directly related to the pandemic. The latest data, which exclude local government budgetary developments, are along these same lines: they show a budget deficit to August of 7.8% of GDP in cumulative 12-month terms, 4.9 pp up on the end-2019 figure. Besides the highly significant impact the pandemic has exerted on the main aggregate indicators of activity, its influence, and that of the measures implemented to contain it, has been extraordinarily asymmetrical across sectors, firms and workers. For instance, some services sectors linked to the hospitality industry and to transport, where activity habitually requires relatively high levels of social interaction, have since the start of the pandemic shown much more marked declines than those seen in the other sectors (e.g. manufacturing) across a wide range of activity, confidence and employment indicators. The regional distribution of the declines in activity and employment has also been very uneven.1 The crisis has also had a very uneven impact among workers.
Caleb M Fundanga: A brief look at corporate governance in Zambia Speech by Dr Caleb M Fundanga, Governor of the Bank of Zambia, at the launch of corporate governance guidelines for banks and non-bank financial institutions, Lusaka, 28 November 2006. *  *  *  ♦ The Chairperson of the Bankers Association of Zambia; ♦ The Chairperson of the Institute of Directors; ♦ The Chief Executive Officers of banks and non-bank financial institutions; ♦ Deputy Governors, Bank of Zambia; ♦ Representatives of Professional Bodies; Media Colleagues; ♦ Distinguished Invited Guests; ♦ Ladies and Gentlemen. I wish to welcome you all to the launch of the corporate governance guidelines for banks and nonbank financial institutions, in particular, deposit taking non-bank financial institutions. As you all may be aware, the recent debacle of corporate scandals has resulted in the resurgence of interest in good corporate governance. These scandals have not been restricted to large businesses in the US or Europe, but have surfaced in emerging economies as well, with equally devastating effects. This, together with concern about our environment and globalisation, has played an important role in this resurgence of interest in how companies are managed, directed and controlled. Here in Zambia, the collapse of a number of banks in the mid-1990’s has largely been attributed to poor corporate governance. Some characteristics of this included dominant key shareholders, poor transparency and inadequate disclosure.

To this end, the Bank of Zambia will ensure that the Committee that has been spearheading the development of these guidelines become a permanent one and meet every so often to make the necessary changes in an inclusive manner. Accordingly, you are all urged to forward any contributions you wish to make on an ongoing basis. Ladies and gentlemen, allow me now to welcome and thank Mr Mervin King for graciously agreeing to officially launch the guidelines. Mr. King is internationally renowned for his work on corporate governance, and in particular for his work on the King Committee of South Africa which issued its first report in 1994. The King Report, along with the Cadbury Report of the United Kingdom and the Sarbanes-Oxley Act of the United States have become key references on the subject and it is for this reason that we feel both proud and honoured to have Mr. King with us today. BIS Review 119/2006  1  It is now my honour and privilege to call upon Mr. King to launch the Corporate Governance Guidelines. Mr. King!
What is important to underline, though, is that the paths we publish on the basis of implied forward rates should not be taken as a sign of our own judgement of the future path of the repo rate. Experience also shows that the situation often changes so that the actual repo rate path turns out to be a different one than that implied by forward rates. Allow me also to stress that we intend as usual to present a forecast on the assumption of an unchanged repo rate in order to maintain continuity and transparency in our analysis. Communication One advantage of using implied forward rates is, as I just mentioned, that it becomes more meaningful to produce forecasts over a longer time frame. It also makes it easier to estimate and present scenarios that can illustrate some of the problems that we face. Allow me to considerer two different issues, both of which have come to the fore in recent years, and thereby show how our developed methods can be used to improve primarily our communication but also our own understanding of the problems we have to address. The first relates to situations when there have been particular shocks to the inflation outlook that we have judged to be of a temporary nature. Perhaps the best example of this is 2002 to 2003, when electricity prices suddenly began to rise to record-highs as a result of lower water levels in Sweden and Norway as well as colder weather than usual.

One consolation for those who wish for an answer is that they can form an opinion of how the Executive Board develops its view of monetary policy through the Inflation Reports, speeches and the minutes of the monetary policy meetings published. 1. Different measures of inflation Annual percentage change  6  6  5  5 CPI UND1X  4  4  3  3  2  2  1  1  0  0  -1 1993  -1 1995  1997  1999  2001  2003  Sources: Statistics Sweden and the Riksbank  8  BIS Review 11/2005  2. Repo rate decisions and inflation forecasts, 1999-2004 Per cent  0,50 IR01:1 IR02:3 IR03:4 IR04:2  Repo rate change  0,25  0,50 IR00:4 IR02:1  IR99:2 IR00:2 IR01:3 IR04:3 IR04:4  IR01:4  0,25 IR99:4  IR03:3  0,00  0,00  -0,25  IR99:3 IR00:1 IR00:3 IR01:2 IR02:2  IR99:1 IR02:4 IR03:1  IR03:2  -0,25  IR04:1  -0,50 -0,6  -0,50 -0,4  -0,2  0,0  0,2  0,4  0,6  Forecast deviation from inflation target  Source: The Riksbank  3.
Climbing the Public Engagement Ladder Speech given by  Andrew G Haldane Chief Economist Bank of England  Royal Society for the encouragement of Arts, Manufactures and Commerce (RSA) 6 March 2018  The views expressed here are not necessarily those of the Bank of England or the Monetary Policy Committee. I would like to thank Shiv Chowla for his help in preparing the text. I would like to thank Michael Anson, Ben Broadbent, Mark Carney, Clare Macallan, Emma Murphy, Jennifer Nemeth, Mette Nielsen, Dave Ramsden and Ratidzo Starkey for their comments and contributions. 1  All speeches are available online at www.bankofengland.co.uk/speeches  I am delighted to be here to discuss the final report from the RSA Citizens’ Economic Council on “Building a Public Culture of Economics”. This is the culmination of a two-year project, working with around 250 citizens and a number of organisations from across the country, including the Bank of England. I would like to congratulate Matthew Taylor, Chief Executive of the RSA, and Reema Patel, Kayshani Gibbon and Tony Greenham from the RSA as leaders of the project, for their terrific work in pulling this together. It is an impressive, progressive and ambitious agenda for the economy and for economic policymakers like me. Of course, citizens do already have a crucial stake in the economy. As economists we often divide the world into neat institutional packages – companies, governments, trade unions, charities. While useful organisationally, these names are no more veils, part legal, part social.

As we move up the ladder, we increase the degree of citizen engagement in decisions that affect them. The RSA stop short of recommending the top rung, but do propose various initiatives to increase citizen involvement and collaboration. Armed with this framework, I have been thinking about how far the Bank of England has so far climbed the citizen engagement ladder. Truth be told, I suspect for the first 300 years of its life, the Bank of England scarcely had its foot on the first rung. It saw little need even to inform the wider public about the economy and policy. Trust among the public was anonymised, institutionalised and given. When tempted to step up a rung, the Bank quickly contracted an acute form of vertigo. Over the past 25 years the Bank has taken significant steps up the engagement ladder, in part in response to the public’s trust shift, in part reflecting the Bank’s wider policy responsibilities. These steps have 7  transformed how the Bank “informs” and “consults” the public on its views and policies. One simple diagnostic is the rise in the Bank’s publication count. Seventy years ago, the Bank published precisely one speech a year. Today, rarely a day passes without multiple publications. Then, the Bank uttered publically fewer than 5,000 words per year. Last year, it uttered in excess of 4 ½ million. Over the past two decades, it would not be an exaggeration to say there has been a genuine revolution in central bank communications.
And incredulity is Kryptonite for central banking Supermen (and the odd Superwoman), rendering ineffective their policies and unaccountable their actions. Building trust and legitimacy is among the most pressing issues facing central banks today. Tonight, I want to explore one avenue for doing so – rethinking how and with whom central banks engage. There has been a revolution in central bank communications over recent years, with much wider and deeper 6  engagement with society. That has been essential in building central bank trust and credibility during good times and protecting central bank legitimacy and independence during bad. But two recent developments mean that central banks’ engagement strategies may need to be widened and deepened. First, the global financial crisis has dealt a trust-busting blow to many institutions, including 1  The title of the Elvis song is, of course, A Little Less Conversation, A Little More Action (Please). Elvis was not a central banker. Mandelbrot and Hudson (2004). For example, Sentance (2015) and El-Erian (2015). See also Carney (2016). 4 In a recent CFM-CEPR survey of Europe-based macroeconomists, only 45% disagreed with the statement that “central bank independence in the Eurozone and the UK will decline over the next 48 months” (den Haan et al, 2017). 5 See House Bill 3189 (2015). 6 See Warsh (2014) and Blinder et al (2017). 2 3  2  All speeches are available online at www.bankofengland.co.uk/speeches  2  central banks. Second, the way trust is built has been fundamentally reconfigured.

Thus, now more-than-ever, macro-surveillance process, early warning models, stresstesting, ever more vigilant risk-based supervision, and strong internal risk management by financial institutions will be instruments crucial for safeguarding our financial stability. In closing this introduction, I am certain that this seminar will be extremely useful and provide an important opportunity for building a close network amongst supervisors in SEACEN, as well as for fostering a closer cooperation between regulators in our region and the US-OCC. So, without further ado, let me declare the second SEACEN-OCC Advanced Seminar on Quantitative Techniques for Macro Surveillance and Determining Resilience of the Banking Sector open, and wish you all every success in this seminar, as well as in your career, and have a pleasant stay in Thailand. Thank you. 2  BIS Review 98/2007
At present, we base our forecasts on the development of the repo rate expected by the financial markets. Professors Giavazzi and Mishkin give several reasons why they advocate that the Riksbank should present its own interest rate forecasts. Perhaps the most important reason is that this would show most clearly what the Riksbank’s own expectations of future monetary policy are. This would make it easier for companies and households to plan for the future. This point of view is easy to agree with, and I have expressed similar thoughts myself in various speeches. We are currently considering and working on how this might be achieved. Compensating for earlier deviations from target As I mentioned to begin with, there are a couple of points where I do not agree entirely with the authors’ conclusions. One such point is how the Riksbank should act if inflation has been below, or above, target for a long period of time. Professors Giavazzi and Mishkin suggest that if inflation has been below target for a long period of time, monetary policy should partly compensate for this by being extra expansionary in the future. As I understand it, the background to this is the developments in recent years, when inflation has been below the target. Here it is worth pointing out that when inflation has been below target level for a long period of time, there have been good explanations for this. The most recent episode has mainly been due to the fact that productivity growth has been surprisingly high.

However, I am not saying that changes in the monetary policy strategy, for instance in the way suggested by Giavazzi and Mishkin, will never be considered. But we do need further analysis and debate before this can be considered in Sweden. Monetary policy and house prices Another point where I have some doubts is whether house prices should be taken into account in monetary policy. The specific recommendation given in the evaluation is that the Riksbank should clarify that house prices, like other asset prices, are not independent targets for monetary policy. In my opinion, this is a message that we have tried hard to convey recently, which has also been noted in the evaluation. I and other members of the Executive Board have explained, for instance, in several speeches that if prices in the housing market have had an effect on our interest rate decisions, this has not been a reflection of the inflation target being downgraded in any way or that we now have a special target for house prices. The reason is that we believe this the best way to safeguard what we have been set to safeguard – stability in the real economy and inflation. It is claimed in the evaluation that the Riksbank was initially unclear with regard to the reasons for allowing house prices to affect interest rate decisions and that this meant some people had interpreted it to mean that we had introduced a further target in addition to our inflation target.