samchain/econo-pairs-v1 huggingface dataset:
The criticism lived on for quite a long time, but it was probably quite essential to demonstrate at that time that the inflation target was taken seriously. This was until now the only time I can remember that the Riksbank was urged not to do its best to maintain confidence in the inflation target. The criticism then was largely due to the inflation-targeting policy being so new – as I said, the inflation target had not yet even come into force. It is less easy today, after twenty years of positive economic developments, in which the inflation target has been a cornerstone, to see why the Riksbank is being urged to lower its ambitions. Perhaps it is because developments have been so positive for so long that one feels the existence of a credible nominal anchor is no longer as important. If so, I am convinced that this is a mistake. Difficult to see reasonable alternatives to the policy conducted But what about developments in household debt and housing prices? Don't they give a reason for changing monetary policy? The Riksbank has previously used the repo rate to try to subdue the upturn in debt and housing prices. But this was on a fairly modest scale and – above all – during a period when confidence in the inflation target appeared firmly rooted. 9 In recent years, on the other hand, there have been signs that this confidence has begun to be undermined, which has changed conditions rather drastically.

That is why today’s conference is conceived to bring together academic research and central bank practice. The conference structure reflects an understanding that the global financial cycle affects the euro area and its monetary policy, which in turn affects the financial cycle in Europe beyond the euro area. Therefore, the first session of the conference is on the current phase of the global financial cycle which is to a large extent driven by the US monetary policy. We recall from the 2007/2008 crisis how the financial disruptions originated and triggered a full-scale global crisis. The second session is focused on the euro area financial cycle, as influenced by the global financial cycle, and its implications for asset prices and financial stability. Since the ECB policies also shape the financial cycle in Europe outside the euro area through economic and financial channels, although divergences do exist, our third session is devoted to the financial cycle in the non-euro area EU member states. By way of example from Bulgaria, the BNB recent research and relevant estimates for the local financial cycle indeed show that we are currently in the upward phase of accumulation of cyclical risk. We have, correspondingly, decided to activate and then raised the rate of our countercyclical capital buffer. Turning to actual policy reactions in dealing with financial cycles, our conference ends with a panel where Governors will share with us their views. Dear colleagues and guests, In conclusion, let me sum up my main points.
2 Much earlier, Minsky had already stated the same type of acid test “...for an economic theory to be relevant, what happens in the world must be a possible event in the theory”. 3 Under the ideal imagined conditions of prevailing thinking before the crisis, the market mechanism operates smoothly and since financial frictions are disregarded, financial intermediaries were generally absent from macro models and without leveraged financial intermediaries, financial instability is not an issue. It is true that there some frictions linked to the credit channel had been included in macro models, basically related to the Financial Accelerator developed by Bernanke and Gertler and Gilchrist. 4 This is, however, only a  1  Caballero, R (2010) “Macroeconomics after the Crisis: Time to Deal with the Pretense-of-Knowledge Syndrome” NBER WP n. 16429. 2  Buiter, W. (2009) “The irrelevance of most ‘state of the art’ academic monetary policy”, available at www.voxeu.org. 3  Minsky, H. (1986) “Stabilizing and unstable economy” in Chapter 12 “Introduction to policy”, McGraw-Hill Professional, new edition, 2008. 4  Bernanke, Ben, Mark Gertler, and Simon Gilchrist, 1999, “The Financial Accelerator in a Quantitative Business Cycle Framework,” Handbook of Macroeconomics, John Taylor and Michael Woodford editors. 2  BIS central bankers’ speeches  mechanism that could aggravate an on-going crisis, but was not strong enough to trigger one. Recently, Adrian, Colla and Shin examined which frictions should, at a minimum, be included to be relevant.

Centralising decision-making would bypass many of the current obstacles to effective resolution such as the need for cooperation and coordination between multiple authorities. This would in turn lead to quicker decisions and reduce resolution costs, as early action would help to maintain the economic value of the bank in question. Second, an ERA would be more effective in minimising the cost for taxpayers of bank failures. A bank may be “too expensive”, “too complex”, or even “too well-connected” to resolve at the national level, making bail-out the preferred strategy. An ERA, on the other hand, would have the financial, legal and administrative capability as well as the necessary independence to carry out effective resolution. By imposing burden-sharing on shareholders and creditors and by financing residual costs through a European Resolution Fund financed ex ante by all the banks, the ERA could ensure that the private sector bears the primary burden of bank resolution costs. European resolution, similar to what the FDIC does in the US, is not about bail-out of banks by state recapitalisation efforts, but the use of wide bail-in powers to resolve banks with little use of tax-payers money. Third, an ERA is a necessary complement to the single supervisory mechanism. A system where supervision is European but resolution is national creates frictions. The single supervisor may assess that a bank needs to be resolved, but the relevant Member State may be unable to bear the resolution costs or unwilling to resolve a favoured national firm.
Thirdly, the financial and asset markets on the Mainland should be wide, deep and liquid enough to allow the Exchange Fund of Hong Kong – the backing for our Linked Exchange Rate System – to hold substantial amounts of RMB assets to support the Hong Kong dollar, preserve capital, grow in value and meet contingent needs. 36. Obviously these fundamental conditions are not met, and the Hong Kong dollar Link to the US dollar remains the most appropriate policy for Hong Kong. So, let me take this opportunity to reiterate that we have no plan to change the Linked Exchange Rate System. It has served Hong Kong well since 1983 and is the pillar for the monetary and financial stability in Hong Kong. 37. Thank you. BIS Review 153/2010  5

If that is indeed how things turn out, we will have weathered the international storm as well as anyone could reasonably have expected. 4  BIS Review 19/2002
François Villeroy de Galhau: The sustainability of European Monetary Union and institutional reform Speech by Mr François Villeroy de Galhau, Governor of the Bank of France, at The ECB and Its Watchers XIX Conference, organised by the Institute for Monetary and Financial Stability, Frankfurt am Main, 14 March 2018. * * * Accompanying slides. Ladies and Gentlemen, In order to make the European Monetary Union sustainable in the medium term, we have to make it more resilient to future crises. The current economic cycle is admittedly in a very robust phase today, but this will come to an end at some point. If we do not want to overburden monetary policy during the next recession, we need to strengthen our Economic Union. These objectives should be, including here in Germany, two sides of the same coin. To ensure monetary policy does not remain “the only game in town”, we have to arm ourselves with stronger economic instruments at the European level. There is a serious risk, however, of missed opportunities as the present debate over the future of the euro area seems to be getting bogged down in neverending arguments such as on the European Deposit Insurance Scheme (EDIS) or sovereign debt restructuring. We should rather focus our efforts on the many other proposals that are more consensual. In my remarks today, I will elaborate on the three old clichés that are paralysing the debate and that we must put behind us to move forward in the euro area.

To work well, our Union needs both: risk reduction mechanisms and risk sharing. As I just said, for crisis prevention to be credible, we should implement fiscal discipline – including the present rules of the Stability and Growth Pact – but we should also have the instruments needed to cushion the effects of asymmetric shocks that may arise suddenly, regardless of all the efforts a Member State can make. It is time to forget about ideological trench warfare. Let me share with you four areas where practical progress is needed: First, bolstering private risk sharing. The simple and obvious way to achieve this is to build the Capital Markets Union within the Financing Union that I mentioned earlier. We are still lagging far behind the United States where capital markets are capable of absorbing around 40% of a state-specific shock. What is more, a genuine Financing Union would further 2/3  BIS central bankers' speeches  increase the efficiency of monetary policy by ensuring better circulation of liquidity in the euro area. Second, EDIS. We have made significant strides with the first two pillars of the Banking Union, the Single Supervisory Mechanism (SSM) and the Single Resolution Mechanism (SRM). We still need – and it should be our priority – to strengthen the SRM with a sovereign backstop to the Single Resolution Fund and a simplified decision-making process tailored for emergency cases of resolution. Now, there needs to be some form of compromise to move forward on the third pillar, EDIS, as well.
I am pleased to note that private-sector jobs have continued to grow moderately across much of the region in the past few months, just as they have in the nation. Growth in private-sector jobs – which is not affected directly by hires and layoffs from the decennial census – signals that, on balance, firms are expanding their workforces to meet their business needs. While state and local government job cuts have also reduced total employment, the fact that the private sector is creating jobs is a good sign and necessary for a sustainable recovery. The number of private-sector jobs has increased in and around New York City, in northern New Jersey and in some parts of Upstate New York. The latest job market report for New York shows a continuation of the generally rising trend of employment in the state at a pace that roughly matches the nationwide growth rate. In New York City, employment has expanded at rates substantially above the nation. Since we last met, employment in New Jersey has expanded, and while that growth has been quite modest, it is an encouraging sign. In Puerto Rico, employment reports continue to give mixed signals, showing a see-saw pattern that has yet to add up to a strong rebound. Despite these employment gains, unemployment in the region remains painfully high. In August, New York City’s and New Jersey’s rates were very close to the national jobless rate of 9.6 percent.

The earlier spike in inflation largely reflects the effects of the rapid reopening of the economy, which pushed supply and demand in extreme ways. In fact, we are now seeing some of the pandemic-related spikes retrace, including prices for lumber, used vehicles, and rental cars. This process of adjustment may take another year or so to complete as the pandemic-related swings in supply and demand gradually recede. As the economy gets through these highly unusual dynamics, I expect inflation to come back down to around 2 percent next year. One reason I expect inflation to moderate is that measures of underlying inflation and longer-term inflation expectations have been relatively stable during this period of otherwise volatile inflation readings. There are two important aspects of longer-term inflation expectations: their level and their sensitivity to economic conditions and, in particular, to inflation. In terms of the level of inflation expectations, survey- and market-based measures of longer-term inflation expectations have reversed the declines of the past several years and are now around levels seen seven or eight years ago. They currently appear to be well aligned with our 2 percent long-run inflation goal. A second issue is how well anchored inflation expectations truly are, and whether there is a risk that they could drift higher in response to the elevated rates of inflation we have been experiencing. A group of economists at the New York Fed took a closer look at recent behavior of 2/4  BIS central bankers' speeches  inflation expectations from the Survey of Consumer Expectations.
So our duty, as policymakers, is to return their trust and to address the areas of our union that we all know are incomplete. 1 Figures include recapitalisation measures, guarantees, asset relief interventions, and liquidity measures other  than guarantees. See Financial Crisis Aid amounts for a more detailed breakdown. 2 This calculation assumes all exposures had been subject to fair valuation, and applies to bonds of Cyprus,  Greece, Ireland, Italy, Portugal, Slovenia and Spain. 3 Based on end-2010 Core Tier 1 capital. 4 A significant share of government bonds were held by banks at amortised cost. 5 In fact, internal ECB analysis finds that the relationship between sovereign and corporate CDSs in this period  was as strong as that between sovereign and bank CDSs. And banks that had larger sovereign exposures had a similar correlation with sovereign CDSs as banks with smaller exposures. 6 See Mundell, R. (1961), “A Theory of Optimum Currency Areas”, American Economic Review, 51 (4), pp. 657– 7/9  BIS central bankers' speeches  665; McKinnon, R. (1963), “Optimum Currency Areas,” American Economic Review, 53, pp. 717–724; Kenen, P. (1969), “The Theory of Optimum Currency Areas: An Eclectic View,” in Mundell, R.A. and Swoboda, A.K. (eds), Monetary Problems of the International Economy, Chicago University Press. 7 European Commission estimates. See Nikolov, P. (2016), “Cross-border risk sharing after asymmetric shocks:  evidence from the euro area and the United States”, Quarterly Report on the Euro Area, Vol. 15, No 2.

It is becoming increasingly evident, for example, that a proper analysis of the system’s robustness requires detailed statistics about entities for which data are currently either not available or are fragmented. This is particularly the case of the non-bank financial sector, and also of the corporate and household sectors, although in this latter area some progress is being made through the joint efforts of the Bank, the Authority and the National Statistics Office. BIS Review 50/2004  3  Another aspect warranting particular attention is that of financial crisis management. While the current institutional and regulatory framework has been successful in keeping at bay any major systemic disturbance, further progress is required, for example by defining the specific roles and responsibilities of the Bank, the Authority and the Government. In this respect, the Joint Contingency Plan for systemically important banks drawn-up by the Bank and the Authority already takes into account the involvement of the Ministry of Finance with respect to the possible use of public funds and the Bank’s lender of last resort function. This framework is currently in the process of being refined further.
Trends in consumption and the conditions in the labour market will provide signs of potential second round effects following rising costs and the extent to which a generalised price increases are occurring. In such an environment, SMEs need to consider repositioning of business strategies and to find new markets and avenues of growth. Reengineering of processes would also be required to better manage the higher cost conditions. The key is for the SMEs to use their inherent flexibility and agility to create new products and reorient the business. Given that the current inflationary pressures is a global phenomenon, with many of our trading partners and neighbors having similar or higher inflation rates, the inflation is unlikely to erode Malaysia's comparative advantage. In this more challenging economic environment, sustaining growth will also require concerted efforts by the public and private sectors to reduce costs and become more efficient and more productive. To assist SME businesses in this environment, the Government has recently established a Special Committee to recommend potential measures to reduce the impact of rising costs on SMEs. The measures to be announced later this month are aimed at enhancing efficiency and productivity of SMEs, reducing the cost of doing business and ensuring that SMEs have sustainable access to financing. The SME development agenda In view of the important role of SMEs in the economy, the Government has accorded significant emphasis on the development and strengthening the SME sector.

The Standing Facilities which had played this role were re-launched as the Operational Standing Facilities (OSFs), more clearly intended to cope with operational disruptions and short-term market volatility. More recently, in June 2010, the Bank replaced the temporary eLTRs with permanent Indexed Long-Term Repo (ILTRs) operations that regularly offer the system 3 and 6 month liquidity, against a wide pool of eligible collateral. In designing its permanent liquidity insurance operations, the Bank was very mindful of the need to balance the benefits to systemic stability, the incentives for banks to manage liquidity risk prudently, and the need to minimise the risk taken onto the Bank’s balance sheet. In particular, the aim of the Bank has been to leave the credit and market risks associated with collateral with the counterparty, so that we only provide the intended liquidity insurance and not any official underwriting of the underlying risks. Underpinning these objectives are some additional underlying principles: (a)  the Bank does not accept any collateral that it feels it cannot value and then riskmanage effectively;  (b)  the Bank’s prices for lending in its liquidity insurance operations can vary with the liquidity of the collateral delivered and the amount lent, so that use of these facilities only becomes attractive in stressed conditions. These principles ensure that the Bank can manage its own risks prudently and that counterparties are encouraged to manage their risks similarly. Eligibility The Bank’s risk preferences are very different from those in commercial financial institutions.
(b)  In-sample performance is measured by deviance and out-of-sample performance by the mean squared prediction error. For both statistics, a lower number implies better performance. (c)  The data set excludes outlier banks with very large risk-based capital and leverage ratios. Excluded observations account for approximately 0.5% of the entire sample. 30  BIS central bankers’ speeches  Chart 9: In- and out-of-sample performance of different models of bank risk (1000 (a)(b)(c) observations)  Source: FDIC and Bank calculations. (a)  Different models estimated using 10,000 random samples of 1,000 observations each. Samples are rejected if there are no observations of bank failure. The different models are used to predict bank failure for approximately 4,300 banks out-of-sample. (b)  In-sample performance is measured by deviance and out-of-sample performance by the mean squared prediction error. For both statistics, a lower number implies better performance. (c)  The data set excludes outlier banks with very large risk-based capital and leverage ratios. Excluded observations account for approximately 0.5% of the entire sample. BIS central bankers’ speeches  31  Chart 10: Summary of out-of-sample model (a)(b) performance  Chart 11: Distribution of daily stock price (a) returns, 1928–2012  Source: FDIC and Bank calculations. Source: Bloomberg and Bank calculations. (a)  Different models estimated using 10,000 random samples of different size. Samples are rejected if there are no observations of bank failure. The different models are used to predict bank failure for approximately 4,500 banks out-of-sample.

Financial reform needs to go beyond the banking sector on which so much attention has been focused. We also have to look very closely at non-bank financial institutions and at the set-up and functioning of financial markets. Leverage cycles, for example, have been a constant source of instability for centuries. If left to their own devices, their ultimate outcome has regularly been financial disruption, wealth destruction and economic hardship for our people. Let me start by elaborating first on risk before and after the crisis and then turn to monetary policy. I want to share with you the European Central Bank’s approach to dealing with the balancing act, in which we have sought a combination of bold action as regards nonstandard measures, while entirely preserving our clear focus on medium and long term price stability. Risk before and after the crisis Risk is inherent in economic activities because economic pay-offs are uncertain. Even the prototype model of finance – the competitive economy studied by Gérard Debreu and Ken Arrow – is subject to stochastic shocks. Therefore, economic returns are risky, because they are not known with precision ex ante. But the type of risk that we faced in the crisis was of a different nature. It was not triggered by stochastic variation in the real economy – by shocks to “endowments, technologies and tastes” as theory would predict. At source, it was financial risk.