samchain/econo-pairs-v1 huggingface dataset:
There is in the marketplace a lingering fear that the Fed has already expanded its balance sheet to its stretching point and that an exit strategy, though articulated, remains theoretical and untested in practice. And there is a growing sense that we are unwittingly, or worse, deliberately, monetizing the wayward ways of Congress. I believe that were we to go down the path to further accommodation at this juncture, we would not simply be pushing on a string but would be viewed as an accomplice to the mischief that has become synonymous with Washington. Raeburn versus Munch There is no question that these are worrisome times: The world economy is slowing, joblessness is rampant in many countries, and in the United States, growth is anemic and unemployment remains unacceptably high. To me, this means that the Fed, and all central  BIS central bankers’ speeches  5  banks, must keep their heads about them and not give in to the convenient recommendations of those who are given to solving all problems with monetary policy. If only for your visual pleasure, I have chosen two paintings anybody in the vicinity of St. Andrews and Edinburgh would know, in order to illustrate alternative approaches to central banking at this juncture. The first is an icon of Scottish culture: Sir Henry Raeburn’s depiction of The Reverend Robert Walker Skating on Duddingston Loch, a seminal work in the permanent collection of the Scottish National Gallery and a favorite of mine since I first saw it some 30 years ago.

Comparing this set of conditions to that in 2010, the recent slowing of inflation has been less widespread across core goods and core services, and inflation expectations so far have declined less appreciably than they did in 2010. Thus, my best guess is that core goods prices will begin to firm in the months ahead as global demand begins to strengthen and inventories get into better alignment with sales. 1  2  CoreLogic Report Shows Home Prices Rise by 12.1 Percent Year Over Year in April. BIS central bankers’ speeches  As is always the case, there is substantial uncertainty surrounding this forecast. Moreover, there is always the possibility of some unforeseen shock. Thus, we will be monitoring U.S. and global economic conditions very carefully and will adjust our views on the likely path for growth, inflation and the unemployment rate accordingly in response to new information. At its meeting last week, the FOMC decided to continue its accommodative policy stance. It reaffirmed its expectation that the current low range for the federal funds rate target will be appropriate at least as long as the unemployment rate remains above 6.5 percent, so long as inflation and inflation expectations remain well-behaved. It is important to remember that these conditions are thresholds, not triggers. The FOMC also maintained its purchases of $ billion per month in agency MBS and $ billion per month in Treasury securities, with a stated goal of promoting a substantial improvement in the labor market outlook in a context of price stability.
Much of the post-crisis reform effort has been aimed at reducing the systemic risks that derivatives can create through the way they interconnect multiple actors in the system and can amplify market shocks. Mandatory margining, central counterparty clearing and trade reporting are all designed to create resilience and to simplify the network and make exposures more transparent. It may be however that widespread and increasing use of derivatives by market-based finance will over time make the opacity and complexity too difficult to manage. What is sensible for risk management at the fund level simply may be too difficult to manage risk at the system level. 18  Hedge funds and banks have different business models, which complicates comparisons of financial leverage. But, in aggregate, hedge funds’ non-derivative liabilities (made up primarily of borrowings through repo and prime brokerage) are roughly the same size as their total net asset value. Banks’ non-derivative exposures are over 15 times greater than their tier 1 capital. However, whilst the hedge funds industry’s financial leverage is lower than banks, some individual hedge funds make extensive use of financial leverage. 8  All speeches are available online at www.bankofengland.co.uk/speeches  8  Second, and more importantly, given the channel of interconnectedness created by funds’ use of derivatives, to what extent could the failure of a fund or a number of funds create systemic risk? Again, the post crisis reforms around margining and clearing reduce that risk.

All of this serves, I think, to demonstrate the wisdom of the Open University's approach, which is to provide formal education at the time in life when people are getting the most out of their practical, reallife experience. Alumni Link - and, I believe, occasions such as this - will help to further this approach. I thank the Open University for having invited me to give this talk, and I look forward very much to your questions and comments. 6  BIS Review 44/2003
The aim of these unconventional measures is to restore the functioning of market forces as quickly as possible and ultimately to restore market confidence in the financial system. Two main lessons can be learnt from the vigorous response by central banks. It showed that zero interest rates on no account mean that central banks have exhausted their set of monetary policy instruments. Through quantitative and credit easing measures, the central banks have effective instruments that can be used to reduce risk premia, alleviate liquidity bottlenecks and prevent deflation. Moreover, their role as lender of last resort has taken on a new dimension. Previously, this role was confined to providing funds to bridge temporary liquidity bottlenecks at a particular bank. At the height of the crisis, however, the priority was to secure the liquidity of entire markets. The central banks demonstrated that they can fulfil this function to a previously unforeseen extent. In short, they demonstrated their ability to respond to a systemic crisis. Nevertheless, we need to be cautious when considering whether such measures should be included in a central bank’s conventional set of instruments in the future. These unconventional measures proved useful for direct crisis management. However, so far we have little practical experience of monetary policy management at zero interest rates, especially over a prolonged period of time. It is clear that the instruments used come at a price. In the longer term, for instance, they could create new instabilities and distortions on the financial markets.

Since asset prices are typically far more volatile than real economic variables and general price levels, substantial changes in interest rates could be required to check financial imbalances, and this could have serious side-effects on the goal of maintaining price stability. BIS Review 121/2010  3  As you can see, there are many questions that have not yet been clarified. The problems I have mentioned make it clear that central banks would rapidly reach their limits if they were simply to add a further goal alongside price stability without new instruments to deal with it. The more objectives an instrument is expected to achieve, the greater the risk of wrong decisions and conflicting objectives. However, as I have already said, these problems do not mean that financial stability should be ignored completely in monetary policy decisions. Asset prices and other variables such as credit growth must be included as indicators when assessing the situation and the outlook for inflation. They are already included in the practical implementation of today’s monetary policy strategy. Yet care must be taken when interpreting such “instability variables” because they provide only limited information about future economic trends. To sum up, monetary policy can make an important contribution to financial stability. However, the set of monetary policy instruments is unsuitable for excluding all imbalances in all circumstances. Accordingly, instruments that have a direct effect are needed to counter the emergence of (global) financial instabilities.
It will then become easier and cheaper for companies to find new staff and the vacancies will be filled faster. But for those people entering the labour force, it will nevertheless take some time to seek and find a new job. Unemployment will therefore increase, at least initially. An increase in labour force participation will also increase competition for jobs. Employees’ wage demands will therefore be more subdued. When labour force participation increases, the covariation between unemployment and wages will become negative. But it is important to understand here that the negative covariation is due to the increase in labour force participation, that is, the causality goes from labour force participation to unemployment and wages. It is thus not rising unemployment in itself that causes lower wages. The covariation between unemployment and wages that is observed in the data is only a correlation, which does not say anything about which affects what. Figure 6a illustrates how exogenous changes in labour force participation affect wages and unemployment. The covariation is negative, as expected. Figure 6.

Taylor, John (1993), “Discretion versus policy rules in practice”, Carnegie-Rocheter Series on Public Policy, 39, 195–214. Tenreyro, Silvana (2019), “The elusive supply potential: monetary policy in times of uncertainty”, speech, Glasgow, 7 March 2019. 24 [24]
Expectations of a global recovery have boosted stock markets over the last year. The Norwegian stock market index, OBX, has increased more than US, German and Japanese stock market indexes. Oil prices and other commodity prices are also high. Normally, higher growth expectations are accompanied by higher interest rate expectations. This has not been the case lately. On the contrary, market expectations have fallen. The red line shows that in October last year, the market expected that the economic recovery would lead to higher interest rates. The green and yellow line shows the fall in expectations, and that the market now expects interest rates to remain low for a period ahead. The reason behind the change in expectations is the absence of inflationary pressures. In Norway, inflation is low. In February, annual core inflation fell to minus 0.1 per cent. It is particularly prices for imported consumer goods - the yellow line in the chart - that have fallen sharply. But prices for goods and services produced in Norway have also declined. Increased competition and productivity growth have probably contributed to low inflation. Higher productivity growth is a global trend and in particular in the US the phenomenon has been the subject of lively debate. The current economic recovery has in fact been labelled the “jobless recovery”, an indication that companies can increase production without new recruitment.

Monetary policy The operational target of monetary policy as defined by the Government is inflation of close to 2.5 per cent over time. It is just as important to avoid an inflation rate that is too low as it is to avoid an inflation rate that is too high. The inflation target provides economic agents with an anchor for their decisions concerning saving, investment, budgets and wages. The inflation target also provides a framework for monetary policy’s contribution to stabilising output and employment. The economy grows thanks to increases in the supply of labour and capital and technological progress. Average growth over time is referred to as trend growth. Owing to shocks to the economy, actual growth fluctuates around trend growth. The chart shows actual mainland GDP growth and trend GDP growth. BIS Review 16/2004  3  Normally, Norges Bank sets the interest rate with a view to achieving inflation of 2½ per cent two years ahead. A two-year horizon is applied because it takes approximately two years for an interest rate change to have a full impact. A flexible exchange rate Norway is a small open economy with a floating exchange rate. The Norwegian krone does not stand out as particularly volatile. On the contrary, in countries like Sweden, the UK, Switzerland, Australia, Canada and New Zealand, the exchange rate fluctuates just as much - or more - than the Norwegian krone. There is a cost involved for businesses in hedging against fluctuations in the krone.
David Carse: Bank consolidation in Hong Kong Speech by Mr David Carse, Deputy Chief Executive of the Hong Kong Monetary Authority, at the JP Morgan Asian Financial Institutions Strategy Conference, Hong Kong, 1 June 2001. *  *  *  Ladies and Gentlemen I am grateful to J P Morgan for giving me the opportunity to speak to you this morning on the subject of bank consolidation in Hong Kong. Consolidation of the banking industry has been a prominent feature of many of the world's leading financial centres during the last decade. Hong Kong has been something of an outlier in this respect. My speech today will explain some of the reasons for this and will describe how and why this situation is changing. I will also discuss the attitude of the Hong Kong Monetary Authority towards the process of consolidation and what we can do to assist. The G10 Report on Financial Consolidation The trend towards amalgamation among the world's financial institutions prompted the G10 Finance Ministers and Central Bank Governors in September 1999 to commission a study of financial consolidation and its potential effects. A Working Party was formed for this purpose, which reported in 1 January of this year. The Report is available in both summary and detailed form on the BIS website. The G10 Report notes that there was a high level of merger and acquisition activity in the 1990s among the financial firms in the 13 countries studied. Banks were the main participants in this.

Whatever the motivation, a series of transactions have recently taken place that show that the pace of consolidation is picking up in Hong Kong. Last year, for example, we saw the acquisition by Standard Chartered of the credit card and retail banking business of Chase Manhattan and the purchase by Bank of East Asia of First Pacific Bank. This year, Development Bank of Singapore is in the process of acquiring Dao Heng Bank with the intention of eventually combining it with its existing locally incorporated subsidiary. Two of the Mainland banks, Bank of China and ICBC, are also consolidating their Hong Kong operations. The Bank of China move is particularly significant since it will create the second largest banking group incorporated in Hong Kong. What we have not so far seen in Hong Kong is merger among indigenous banks that are more or less of equal footing. This is perhaps not surprising. Such mergers are generally more difficult to arrange than straightforward acquisitions of a smaller bank by a larger bank. In the latter case, the acquirer is in a position to decide what it wants to do as regards management and staff changes, harmonisation of systems and the introduction of new products. With a true merger, these matters have to be settled by consensus, which may not be easy. Who for example is going to be the chairman or chief executive? It is probably better to avoid the Japanese solution of sharing each of these responsibilities among more than one individual.
In other words, many countries re-positioned themselves to become “net commodity exporters” from being “net commodity importers”, in the face of rising prices. They were quick to understand that such a shift was vital for their future economic development and well being. As in the 1970’s, today too, there is a clear trend where countries are quickly attempting to boost their capacity to produce oil and agricultural commodities. If, as expected, this re-positioning and/or restructuring occurs, and occurs quickly, the current imbalances will be addressed sooner than later. In fact, if we look at the recent increases in bio-fuel production, it has clearly been a case of steady increases in the production of all varieties of oil substitutes, all over the world. In that sense, the current vibrant and challenging economic environment provides new and exciting opportunities to both developing and advanced countries, and many countries seem eager to seize opportunities and implement decisions quickly. Mr. Chairman, at the same time, we should also probably realize that in our constant search for sustainable growth, the more regular issues that confront emerging economies also need to be addressed appropriately through a series of fundamental policy actions. Let us therefore, for completeness sake, take a quick look at some of those policy actions as well. One, the sound management of risk.

My assessment was that there was a greater risk that the international slowdown would be deeper and more prolonged than the majority of the Board believed. The signals regarding developments in the US economy were mixed and the assessment hung in the balance between a rapid recovery and a more long-drawn out sequence of events. In my opinion, there was every reason to wait for clearer indications before changing the interest rate. Others were more concerned that the weaker exchange rate would have an impact on inflation. The role of the krona for an inflation target policy As the krona has long come under focus, I would like to briefly remind you of the role the exchange rate plays in monetary policy. We have an inflation target, and the development of the krona has an effect on inflation, partly through import prices, partly through influencing demand for Swedish goods and services. For instance, if the krona has a low value, demand and resource utilisation in the export industry increase. When we want to influence inflation, we do so primarily via the repo rate. Occasionally, but in my view very rarely, we can also try to influence the exchange rate and thereby the inflation rate, through currency interventions. It is important to remember that we can never have a target for the value of the krona while monetary policy is directed at an inflation target. The monetary policy decisions are based on forward-looking assessments of the inflation rate.
The IMF worked out a proposal for debt consolidation a few years ago, entitled Sovereign Debt Restructuring Mechanism (SDRM), but the proposal has not won general approval in this form and the problem of managing sovereign states’ payment problems remains. The example of Argentina showed clearly the need for a framework that could, for instance, solve the current problem of a risk of different borrower groups receiving different treatment, with various “clubs” for different types of loan. It is possible that we can get the ball rolling with a lucky name change to Framework for Orderly Restructuring of Debt (FORD). Ford owns Volvo and Volvo means “I roll”. 2  This example is taken from a lecture given by the World Bank’s chief economist Nicholas Stern (now at HM Treasury in the UK) at Munich University in November 2002. 3  Collective action clauses are a means of clarifying at the time the loan agreement is signed how the contract will be renegotiated if the borrower cannot pay according to the agreed amortisation and interest rate plan. 6  BIS Review 60/2004  Conclusion There is still a lot we do not know about the growth process, but fortunately the knowledge gaps appear to be dwindling as time goes by.

This ensures that governments continue to correct economic weaknesses while the ECB is active. The involvement of the IMF, with its unparalleled track record in monitoring adjustment programmes would be an additional safeguard. The consequences of the ECB’s actions So what are the likely consequences of the ECB’s actions? Before announcing the OMT programme, we considered very carefully the possible risks – and we designed our operations to minimise them. But I am aware that some observers in this country remain concerned about the potential impact of this policy. I would therefore like to use this opportunity to go through those concerns – one by one – and explain our views. First, OMTs will not lead to disguised financing of governments. We have specifically designed our interventions to avoid this. They will take place solely on secondary markets, where bonds that have already been issued are traded. If interventions take place, they will involve buying government debt from investors, not from governments. All this is fully consistent with the Treaty’s prohibition on monetary financing. Moreover, they will focus on shorter maturities and leave room for market discipline. Second, OMTs will not compromise the independence of the ECB. The ECB will continue to take all decisions related to OMTs in full independence. It will decide whether to intervene based on its own assessment of monetary policy transmission and with the aim of safeguarding price stability. The fact that governments have to comply with conditionality will actually protect our independence.
Pablo Hernández de Cos: Navigating through a storm - policy challenges in the current macro-economic environment Introductory address (via video) by Mr Pablo Hernández de Cos, Governor of the Bank of Spain, at the pannel "Navigating through a storm - policy challenges in the current macro-economic environment", during the Sixth European Systemic Risk Board annual conference "Addressing financial stability challenges", Frankfurt am Main, 8 December 2022. *** Good afternoon everybody and welcome to this first discussion panel of the Sixth Annual Conference of the European Systemic Risk Board. In this roundtable, we will be discussing and sharing views on identified challenges affecting the conduct of policies in the current turbulent times, which are having important repercussions for the economic and financial environment. As noted by President Lagarde, during her welcome address, in the course of this year we have witnessed an increase in financial stability risks. The appalling invasion of Ukraine by Russia, initiated as we were recovering the activity levels previous to the pandemic, has contributed to either fuel new or exacerbate existing systemic vulnerabilities in Europe and beyond. Spikes in energy and food prices, continued disruption of global supply chains and demand pressures have resulted in higher and more persistent inflation across the board. This has triggered a response of monetary policy, which is now normalising around the world, contributing to tighter global financial conditions and increased volatility and liquidity tensions.

Preserving or further building up macroprudential buffers would support credit institutions' resilience and enable the authorities to release these buffers, if and when risks materialise and negatively impact credit institutions' balance sheets. But, as ever, these decisions should be made considering each Member State's specific macrofinancial outlook and banking sector conditions, in order to limit the risk of procyclicality. - Financial stability risks beyond the banking sector should also be addressed. This requires tackling vulnerabilities and increasing the resilience of non-bank financial institutions and market-based finance. In this regard, the ESRB has  2/3  BIS - Central bankers' speeches  repeatedly noted that a lack of tools is hampering authorities' ability to address financial stability risks beyond the banking sector. It has called for authorities to be provided with such tools, for example, in the context of the review of the prudential rules governing investment funds and insurers. The current heightened risk environment makes this more urgent. Against this background, let me now turn to the four distinguished panelists that are together with me today: Claudio Borio, Alfred Kammer, Lucrezia Reichlin and Ricardo Reis, who are very well known to you in the audience and, therefore, need little presentation. Let me, anyway, briefly introduce them to you, by alphabetical order: Claudio Borio is the Head of the Monetary and Economic Department of the Bank for International Settlements.