samchain/econo-pairs-v1 huggingface dataset:
It should be noted at the outset that the challenges addressed in the paper do not solely apply to a new currency area. A case in point is my own institution, the Swiss National Bank (SNB). The SNB will celebrate its 100th anniversary next year. The Swiss franc can therefore hardly be seen as a new currency. Nonetheless, in the late 1990s, the SNB encountered very similar challenges to those faced by the ECB and described in the paper. It had to cope with increasing instability in the demand for its targeted money aggregates. In light of these parallels, allow me to complement my comments on the presented paper by drawing on the SNB’s experience with money and monetary policy. But before I do so, let me briefly highlight the two aspects of the paper that strike me as particularly relevant. 2. Money and monetary policy: the ECB experience 1999-2006  First, and arguably most importantly, the empirical results presented in the paper suggest that the information content of monetary aggregates improve the quality of inflation forecasts derived from other models. In light of these results, research efforts directed at combining forecasts based on different models and accounting for the additional information provided by monetary aggregates are clearly worth pursuing. Second, the paper documents the thorough analysis done at the ECB to take money demand shifts into account when tracking M3. The result of this work is M3 adjusted by portfolio shifts, a new monetary aggregate. It accounts for changes in financial market conditions.

Countries such as Australia, Hong Kong, the UAE, the UK, Singapore, and Malaysia have issued discussion papers, introducing a sandbox approach which allows fintech solutions to be tested in a controlled environment, with appropriate risk mitigation in place. BIS central bankers’ speeches  3  Dedicated resources have been allocated to collaborate with private sector innovators and assess the feasibility of technology. Jointly, these efforts serve to build public-private consensus on how to deploy financial technology, by: a.  Conveying national-level support for fintech innovations that place the customer firmly at the centre;  b. Providing clarity to the public on the applicability of regulations to fintech solutions; and  c.  Supporting regulators and supervisors in understanding technologies function, as well as the benefits and risks. how  underlying  Third, it is important to address the role of Governments in national financial inclusion strategies. This is particularly relevant in encouraging e-payments as a key lever to expand the outreach of formal financial services. A clear commitment by Governments can secure the political capital needed to create the infrastructure and policies to accelerate financial inclusion such as unique identifiers and mandatory electronic G2P payments. Policymakers should also seek opportunities to promote the interoperability of supporting infrastructure for new financial innovations. This will preserve healthy competition and strong incentives for providers to continue innovating value-add solutions that meet the real needs of consumers.
If the economic agents are aware that the central bank applies this strategy when the interest rate is at its lower bound, and they regard it as credible, then long interest rates should adapt in roughly the same way as if the lower bound did not comprise any limit. 10 If one uses the reasonable assumption that demand in the economy is not solely dependent on the current level of the policy rate but also depends on interest rates with longer maturities, this should give the central bank the possibility to stimulate the economy even in times when the policy rate is at the lower bound. One advantage of the makeup strategy is that it can be applied within the framework of the current inflation-targeting policy. However, a condition for it to work is that it is a predictable element of the central bank’s policy. If one wishes to apply such a strategy, it would therefore be a good idea to formalise it in advance by means of a strategy document describing how the central bank will act in a situation where the interest rate is at its lower bound. 11 In a moment I will discuss a specific application of the makeup strategy. Moderately strict Odyssean forward guidance? When the central bank tries to give economic agents an idea of how the policy rate will develop, this is known as “forward guidance”. In Sweden the Riksbank publishes quantitative forecasts for the repo rate.

25 The figure is taken from Andersson and Claussen (2017), who review different alternatives to inflation targeting. 12 [24]  negative supply shock may already have affected production and employment negatively and as monetary policy must also be tightened, the effect can be noticeable. This can make it difficult for the central bank to credibly commit itself to such a strategy. However, in the variation proposed by Bernanke, the central bank would not always have a price level target, but only when the interest rate has been cut so low that the lower bound is binding – it will thus be a temporary price level target. 26 In normal cases the central bank will have an ordinary inflation target of 2 per cent, just like today. The central bank’s communication can in this way continue to focus on the inflation target. At the lower bound the temporary transition to a price level target can be explained and communicated in terms of keeping the policy rate at the lower bound until the average inflation since the date at which the policy rate first hit zero be at least 2 percent. 27 One advantage with a price level target that is only applied at the lower bound is that one avoids the problem of needing to compensate for supply shocks that temporarily push up inflation, which one would need to do if the price level target always applied.
2  BIS Review 109/2010  “There is hardly a trace of the multitude of unnatural industrial plants that it wanted to promote. That is how powerless we are when we seek to determine the law of nature rather than follow its prescriptions.” 4 The ideals of free competition and a passive state predominated up to World War I, even though not everyone shared this view. The radical German economist and philosopher Karl Marx believed that competition and big industry led to falling profit rates and predicted that it would lead to the collapse of capitalism. 5 In pace with stock market crashes and deep depressions in the 1920s and 1930s, confidence in free market forces waned. The British economist John Maynard Keynes’ theories of economic management set a new standard for post-war economic thinking. Keynes argued that a decentralised market economy alone would not be stable. He advocated in particular that government should stimulate the economy in adverse periods by increasing government spending. Such a countercyclical policy was necessary in order to ensure that the market economy could again function effectively. Keynes’ theories gave support to an era of more state planning and control. Some countries went farther than others. In Norway, the first Nobel laureate in economics Ragnar Frisch was an important agenda-setter. Frisch, who worked here in this department, wanted to make the subject more scientific by using mathematics and statistics. According to Frisch, economic theory should be expressed by mathematical models and supported by quantified relationships.

In the same vein, in order to contain household debt at prudent levels to prevent financial imbalances, a maximum credit-to-income ratio was imposed on credit card and personal loans. Let me now turn to the current financial crisis and discuss some lessons that are relevant to the issue of supervisory arrangement. If we look at the wide range of counties afflicted by the current turmoil, we immediately notice that financial sector problems happened in countries with either supervisory model. Notably, the US is well-known for its multiple agencies, whereas the UK has an integrated one. Yet both countries are currently faced with similar financial sector problems. One cannot help but think that there must be certain common supervisory weaknesses that led to the crisis, regardless of the supervisory arrangements. So perhaps the key question is not about the institutional form but rather about how to strength the regulatory framework to ensure financial stability. Of course, this is not an easy task, given the scale and the complexity of the problems that we are in right now. Several committees and working groups of various organizations, including the BIS, are working on a number of issues that have been identified as contributing to the crisis, such as the procyclical nature of supervisory and accounting rules and the inadequate focus on liquidity risk. I do not know whether there are efforts to try to identify common weaknesses of different institutional setup of supervision. But no doubt this is an area that more work will be needed.
The importance of central clearing for central banks and their monetary policy mandate So precautions have to be taken to ensure that CCPs do not become a weak point for monetary policy and the currencies issued by central banks. CCPs can pose significant risks to the smooth operation of payment systems and to monetary policy transmission in times of market stress. Let me give you some examples. Market volatility or failures in CCPs’ risk management may affect liquidity within the financial system and that of CCP users, who are typically monetary policy counterparties and key 1/5  BIS central bankers' speeches  participants in payment systems. In extreme situations, liquidity shortfalls could foster contagion and lead to CCPs and banks becoming distressed. This could mean the ECB needs to provide liquidity to systemic CCPs or to their members to ensure that payment systems continue to function smoothly and that monetary policy can be transmitted effectively. It is clear that, in such cases, liability and control need to be well aligned: the ECB must be able to monitor and control the risks posed by CCPs. CCPs are also directly relevant for payment systems. Cleared markets represent a significant share of financial markets as a whole, meaning that CCPs are settling large payment volumes. In order to ensure that payment systems continue to function smoothly, the ECB must ensure that CCPs have appropriate arrangements in place for liquidity management and settlement in euro.

I welcome the proposal to strengthen the role of CBIs. It would reinforce coordinated supervision, while reflecting the responsibilities of the ECB – as a CBI – within the supervisory framework. The role of the central bank of issue Background and rationale for the ECB recommendation However, although EU legislators can incorporate a role for CBIs into the processes for supervising CCPs, the regulation cannot go so far as to confer on the ECB the sort of binding instruments this enhanced role requires, which the ECB thought it had until challenged in court by the United Kingdom. In 2015, the General Court held that the ECB does not have the competence to regulate the activity of securities clearing systems, including CCPs. Moreover, the Court stated that the ECB would need to request an amendment to Article 22 of the Statute of the ESCB and of the ECB, which already enables the ECB to make regulations for clearing and payment systems, if it considers this necessary for the proper performance of its tasks under the Treaties2. 2/5  BIS central bankers' speeches  The ECB’s Governing Council therefore unanimously adopted a recommendation to amend Article 223 to extend it to cover derivatives, give legal effect to the ECB’s role under EMIR, and give the ECB the flexibility and autonomy to act outside EMIR where clearing would pose a severe threat to the stability of the euro. Amending Article 22 of the Statute – procedure Let me briefly explain the procedure for amending the Statute.
2  See for instance Már Guðmundsson and Thorsteinn Thorgeirsson, “The Fault Lines in Cross-Border Banking: Lessons from the Icelandic Case” SUERF Studies 05/2010, European Money and Finance Forum (2010); Már Guðmundsson, Keynote address at the Eighth High-Level Meeting for the Middle East & North Africa Region: Recent Policy Developments for Strengthening the Resilience of the Financial Sector, Abu Dhabi, 28 November 2012. www.cb.is; and Már Guðmundsson‘s speech at the IIEA conference in Dublin, Ireland, “Iceland‘s crisis and recovery: facts, comparisons, and the lessons learned”, 27 April 2015. www.cb.is. BIS central bankers’ speeches  3  Let me conclude by telling you what we are contemplating in Iceland in this regard, as this issue is very much on the agenda as we prepare to lift the comprehensive controls on capital outflows that were introduced at the peak of the crisis. We will work through all of the avenues that I have just mentioned, and many of the reforms have already been implemented. What I call IT-plus – or plus-plus – will replace IT of the precrisis type. A managed float has already taken the place of the free float. Foreign exchange intervention is thus used to reduce excess volatility in the FX market and lean against capital flow cycles. The financial stability framework has been strengthened, and macroprudential tools are being developed that should mitigate adverse interactions between capital flows, on the one hand, and domestic credit growth and asset prices, on the other. Foreign currency borrowing by unhedged domestic agents will be very much restricted.

That is, not to introduce large changes in the aggregate amount of capital currently held in the banking system while at the same time to provide tangible incentives for banks to adopt the most advanced and sophisticated approaches to capital adequacy. As we near completion of the New Accord, I am reminded that the tremendous progress we have made is a reflection of the steadfast commitment that so many have put forth to see the revision process through to its completion. The success of the New Accord will be directly attributable to the enormous support and assistance provided by both bankers and supervisors. Yet a Chinese proverb reminds us that, "On a journey of one hundred miles, ninety is but halfway." I suppose the last miles of any marathon are the toughest to finish. The wisdom of that proverb is borne out by the critical nature of the tasks ahead of us to complete, and then to implement, the new capital framework. Adopting the New Accord will be a challenging but also an exciting undertaking for us all. The potential benefits are many - including improving the management of risk, enhancing transparency and promoting greater financial stability. In short, this new framework will make all of us - bankers, supervisors and others - better at what we do. Thank you very much.
BIS central bankers’ speeches  5  The National Institute of Economic Research’s Economic Tendency Surveys, which summarise companies’ and households’ views of the Swedish economy, rose in July, see Figure 11. This is the third month in a row that the indicator exceeds the historical average and thus points to a somewhat stronger growth than normal in the Swedish economy. Households’ confidence in the economy as a whole slowed down further in July, although the view of their own economy is still more positive than normal. Inflation expectations according to money market participants in Prospera’s survey 1, 2, and 5 years ahead have remained broadly unchanged during the summer. Long-run inflation expectations 5 years ahead remain at around 1.8 per cent. CPIF inflation was measured at 0.6 per cent in June and at 0.9 per cent in July, see Figure 12. The outcome in June was lower than our forecast. It is difficult to point to any individual component that contributed to the forecasting error – goods prices services prices and food prices all increased somewhat slower than expected. The outcome in July, on the other hand, was higher than our forecast. It was in particular the volatile air travel and package holidays that were higher than anticipated, although food and clothing prices were higher than expected. All in all, the outcomes over the summer have been in line with our forecasts.

Developments during the summer Focus on Greece As you know, at the beginning of July the Greek people voted no to the proposed measures presented by the country’s creditors in a general referendum. However, shortly thereafter the Greek parliament nevertheless decided to make extensive reforms and savings. They have thus been able to reach an agreement of principle regarding a third loan programme and negotiations are currently under way regarding the details of this programme. However, it will be some time before we can fully understand what effects the summer’s discussion on the future of Greece will have on the monetary union and the development of the euro area. On the one hand, it was a relief that the euro area succeeded in reaching a new agreement with Greece. On the other hand, confidence in the euro area and in Greece may have been damaged further, which creates uncertainty and may further delay the growth that the area so needs. There is still the question of whether Greece will succeed in recovering without needing to write off some of its debts. Here, for instance, the IMF has been very clear that such writedowns are necessary to create reasonable conditions for a recovery. So far, the crisis has not led to any major turbulence on the financial markets, or to any other significantly negative effects in other countries. This means that developments as a whole can be said to be in line with our assessments.
We also have a complementary interest in enabling innovation and encouraging competition – including in the fast-moving payments landscape. To deliver against these objectives, we must embrace diversity in the broadest possible sense. As the Bank of England Governor Mark Carney recently stated, ‘a public institution should reflect the public it serves.’2 If we want to respond to the needs of the public, we need to understand what matters to them – and what better way of doing that than having a diverse range of staff reflecting the population? Diverse teams can reduce group-think and excessively optimistic views, and ultimately reduce the likelihood of poor decisions. And research has shown that companies with more diverse leadership teams tend to outperform their peers in terms of profitability and that diversity in companies is positively correlated with innovation. 3 4  Payments is an area which is responding well to an increasingly vocal and diverse range of preferences and demands across the world. Different people want - and may need - different ways to pay. They want genuine choice in how, when and where they make payments: they want a new finance.5 Back in the 17th century, the Amsterdam stock exchange would have been relying on exchanging coins and printed stocks and bonds. The world of payments has grown significantly – banknotes, cheques, credit/debit cards, and now a plethora of mobile payments, e-wallets and even the ability to pay using a watch.

This will bring significant and long term benefits for a wide range of firms. In particular, the Bank and Pay.UK will introduce a Common Credit Message across CHAPS, Bacs and FPS which will bring message harmonisation for the UK’s main interbank payment systems and compatibility with the emerging international consensus. We will provide improved user functionality in the new RTGS service and build a flexible infrastructure capable of adapting easily to new and changing requirements, enabling us to respond to continued innovation from new fintech firms as well as established players. Improved functionality will include read and write APIs and richer payment and liquidity data. In 2017 we brought the operation of CHAPS into the Bank to strengthen end-to-end risk management and to enhance the safety and security of the £ of payments that flow through CHAPS on an average day. We are increasingly able to draw on the diverse set of tools and expertise available within the Bank, e.g. cyber security skills, to support CHAPS. We are starting to reshape the requirements that apply to CHAPS direct participants, reflecting the expanding range of participants: up from 14 in 1987 to 34 today. CHAPS access criteria and requirements already accommodate a wider range of participants than five years ago – including three Financial Market Infrastructures and one non-bank payment service provider.
Emerging markets in Asia and Latin America are now showing fairly good growth, while growth in the industrial nations in Europe and North America remains low. The fact that different parts of the world economy are developing fairly differently creates problems that have significance for monetary policy. The low short-term interest rates and good access to liquidity in Europe and North America make it attractive to borrow in the short term to invest in assets with a high expected yield. There have been reports of large capital inflows to several of the emerging markets. These inflows tend to push up asset prices – for instance, house prices and share prices – in several Asian countries. At the same time, the experiences gained from the financial crisis over the past year and during the Asian crisis of the 1990s indicate that these flows can change direction abruptly, which creates a risk of substantial falls in asset prices in the future. It is difficult to say what the consequences of the capital flows we are now seeing will be for the development of the world economy in the period ahead, but there is a risk that imbalances will be generated. Development in the economies that are now growing fairly quickly may be affected in the future either by tendencies towards asset bubbles or appreciating currencies, which would have a negative impact on their competitiveness.

For them, one of the major advantages of joining a monetary union is stronger economic growth thanks to lower transaction costs and reduced exchange rate risk. Moreover, for countries that have historically experienced high and volatile inflation and thus high interest rates, adopting the euro brings a fall in nominal and real interest rates, thereby reducing government and private debt burdens. Given these positive effects, why has Switzerland not embraced the euro or, at least, pegged the franc to the euro? To my mind, there are four main reasons for this. •  The first is that retaining our own currency, within the framework of flexible exchange rates, gives us the freedom to choose the level of domestic inflation. •  Secondly, monetary independence allows a better reaction to country-specific shocks. •  Thirdly, monetary integration would lead to higher interest rates in our capital market. •  And finally, any tentative move to peg the franc to the euro, as long as Switzerland is not at least in the process of becoming an EU member, would destabilise rather than stabilise our currency. Let me review these points in detail. 2  BIS Review 46/2006  Choice of monetary policy goal The European Central Bank's main task is to guarantee price stability in the euro area. The ECB achieves this by, in its own wording, "aim[ing] at maintaining [consumer price] inflation below, but close to, 2% over the medium term". The National Bank Act defines the SNB's main task, too, as the achievement of price stability.