samchain/econo-pairs-v1 huggingface dataset:
In order to avoid more drastic changes in monetary policy at a later stage, we chose to adjust monetary policy in a somewhat less expansionary direction. The repo rate was raised in December from 4.10 to 4.35 per cent. (Diagram 6. Inflation Forecast December 1997)  BIS Review 14/1998  - 10 -  CPI an d Underlying In flation annual percen tage ch an ge 4.0  4.0  Underly ing infl ation  3.5  3.5  3.0  3.0  2.5  2.5  2.0  2.0  1.5  1.5  1.0  1.0  CPI  0.5  0.5  0.0  0.0  -0.5  -0.5  Jan-95  Jul-95  Jan-96  Jul-96  Jan-97  Jul-97  Jan-98  Sources: Statistics Sweden and the Riksbank  The current crisis in Asia was discussed chiefly in our risk scenarios. A small reduction in the growth of exports was made in the main forecast. But it was primarily a possible deepening of the crisis compared with the situation in December that, it was deemed, might have substantial effects on economic and price developments in Sweden. Thus the Asian crisis was taken into account in our risk assessment. Since then the crisis in Asia has worsened, both in terms of its effects on the financial markets and its likely consequences for real economic growth. For Sweden’s economy it means that the negative effects of the Asian crisis probably will be somewhat more extensive and prolonged than we expected in December.

As a result, we continue to expect real GDP to grow at a moderate but steady pace and euro area inflation to rise gradually over the coming months, in line with the path already implied in our June 2016 staff projections. The Governing Council will continue to monitor economic and financial market developments very closely. We will preserve the very substantial amount of monetary support that is embedded in our staff projections and that is necessary to secure a return of inflation to levels below, but close to, 2% over the medium term. If warranted, we will act by using all the instruments available within our mandate. Meanwhile, the Governing Council tasked the relevant committees to evaluate the options that ensure a smooth implementation of our purchase programme. Let me now explain our assessment in greater detail, starting with the economic analysis. Euro area real GDP increased by 0.3%, quarter on quarter, in the second quarter of 2016, after 0.5% in the first quarter. Incoming data point to ongoing growth in the third quarter of 2016, at around the same rate as in the second quarter. Looking ahead, we continue to expect the economic recovery to proceed at a moderate but steady pace. Domestic demand remains supported by the pass-through of our monetary policy measures to the real economy. Favourable financing conditions and improvements in the demand outlook and in corporate profitability continue to promote a recovery in investment.
Monetary Policy and Inequality”, Journal of Monetary Economics, Volume 88, June 2017. 4 [5]  • Deutsche Bundesbank (2016), “Distributional Effects of Monetary Policy”, Monthly Report, September 2016. • Frederiksen, A., O. Paulsen, (2010) “Increasing Income Inequality: Productivity, Bargaining and Skill-Upgrading”, IZA Discussion Paper Series No. 4791, February 2010. • Furceri D., P. Loungani, and A. Zdzienicka (2016), “The Effects of Monetary Policy Shocks on Equality”, IMF Working Paper, WP/16/245, December 2016. 5 [5]

Cross-border problems in resolving different subsidiaries or branches can also be sidestepped.6 Any reorganistion of the operating companies to address the underlying causes of the group’s failure can be made in an orderly fashion after the solvency position has been stabilised via the bailin. Multiple-Point-of-Entry Resolution Multiple-point-of-entry resolution is what it says on the tin. Rather than resolving the group as a single whole, it would be split up into its parts. That is quite probably appealing for those global groups comprising a bundle of regional, on-the-ground commercial and retail banks, operated as separate businesses financially in distinct legal structures but with shared operational and central services. 6  4  See FDIC and Bank of England (2012), Resolving Globally Active, Systemically Important Financial Institutions. BIS central bankers’ speeches  Of course, just saying ‘break up the group along regional lines’ does not amount to a resolution strategy. What happens to those regional parts? Healthy parts might be sold or be maintained as a residual group shorn of their distressed sister companies. Those distressed parts would need to be resolved, either via P&A or via bailin of the local subsidiary (if it had issued bonds to the market). I want to stress that last point because ‘bailin’ as a resolution tool should not become synonymous with top-down SPE resolutions: an MPE resolution could involve the bailin resolution-tool being applied to some parts of the group.
The increased international integration of both capital and goods markets has brought a huge increase in the scale of cross-border financial activity. The largest global financial institutions now play significant roles in a large number of financial systems outside of their home market. These changes are likely to affect the manner in which financial shocks in one region are propagated to other regions. Finally, we have witnessed an increase in the degree of concentration in some markets, a development that has the potential to make the system more vulnerable to the deterioration in conditions at one of the major bank or nonbank financial intermediaries. The degree of systemic risk presented by these changes depends importantly on two things. It depends on the robustness of the infrastructure that supports these markets. And it depends on the level of reserves, capital, margin and collateral that the major financial institutions hold against risk, which is in part a function of the strength of risk management systems. In both of these areas, market practice has made significant progress over the past decade, and further improvements are underway. A few quick points about two areas in which we believe further progress offers the highest possible return in terms of improving the overall resilience of the financial system. In the broad area of market infrastructure, we think the greatest near-term imperative is to strengthen the post-trade processing systems that underpin the rapidly growing over-the-counter derivatives market.

A credible stress-testing process has to try to account for not just the effects of a discrete change to some dimension of market risk or some constellation of asset prices, but the effects of those changes on, for example, the behavior of financial market participants and on the broader macroeconomic conditions that might affect credit. It is also critical that firms assess their concentrations not only under current conditions, but also determine how firmwide credit concentrations to names, sectors or counterparties could build up under more stressful economic and financial market conditions. Of course, what is important here is not just that firms do a better job of capturing and valuing potential exposures, but that this information is translated into appropriately conservative judgments about limits and terms. Where uncertainty and complexity is higher, we should see this translate into higher cushions against potential loss. And senior management needs to be willing to lean against the erosion in credit terms and margin practice typically induced by competitive pressure during periods of low credit losses and implied volatility. Overall capital is, of course, an important part of what makes financial systems stable. But the size of the margin above the regulatory minimum or the thresholds that might affect a financial rating is critical, as is the extent to which the initial margin is set at levels that are likely to be sustainable over  2  BIS Review 28/2006  the cycle.
I will not name the bank here, because the HKMA is currently a tenant in a building that bears its name. To avoid giving the impression that the HKMA is a subsidiary of that bank, we have always tried to pretend that the building is called something else, by refraining from mentioning the name on our stationery, or to deliverymen or taxi-drivers, or to anyone else. It is sufficient to say that the bank in question is this year celebrating its 100th anniversary in Hong Kong. Steve has gone to the opposite end of the two-corner solution by entering the floating world of academics and consultants. Since leaving the Reserve Bank of Australia six months ago, he has taken up an appointment as Adjunct Professor at the National Centre for Development Studies at the Australian National University. He also works as an economic consultant, mainly, I understand, on Asia-related topics. Whatever corner Stan and Steve have chosen, the important thing is that they will continue to give their expertise to the region through organisations which, though very different, have an important presence in Asia. They are also here to share that expertise with us today. So without further delay, let me welcome them both and call first upon our speaker, Dr Stanley Fischer, to deliver the Fifth HKMA Distinguished Lecture. Dr Fischer, please. 2  BIS Review 33/2002

Niklaus Blattner: Financial market infrastructures facing technological, economic and regulatory challenges Summary of a speech by Mr Niklaus Blattner, Deputy Chairman of the Governing Board of the Swiss National Bank, at the XI AWK Group Financial Services Lunch, Zurich, 20 September 2006. The complete speech can be found in German on the Swiss National Bank’s website (www.snb.ch). *  *  *  Smoothly and efficiently functioning financial market infrastructures form the backbone of the International Financial Centre of Switzerland. The future of these infrastructures will largely hinge on trends in Europe, which point to stronger consolidation. However, healthy competition is the prerequisite for investment and innovation incentives in a consolidated stock market and settlement environment. This would also contribute to reducing the existing inefficiencies, in particular with regard to the processing of cross-border transactions. Yet a competitive environment will develop only if market participants can choose freely among the different providers and if the infrastructures are interoperable, i.e. if the providers grant each other and their participants mutual non-discriminatory access. At present, competitive obstacles exist at the technological, economic and regulatory levels. For instance, costs for changing providers are high. Moreover, financial market infrastructures are often operated in “silo” mode – either explicitly or implicitly – with clearing and settlement being handled by only one provider. But silos impede competition. A suitable regulatory framework must therefore be created to strengthen competition.
In times of crisis, authorities may use instruments such as lending of last resort, variable-rate lending at longer maturities (credit policy, credit easing), special resolution regimes for financial firms in trouble, government lending guarantees, government capital injections, and so forth. 2  BIS central bankers’ speeches  My point here is that this has to be taken into account when considering the lessons of the financial crisis for monetary policy. The interest rate is a blunt and unsuitable instrument for achieving financial stability and it thus makes little sense to assign the objective of financial stability to monetary policy. However, it may make sense to assign the objective of financial stability to the central bank, if the central bank is given control of the appropriate supervisory and regulatory instruments. The fact that financial-stability policy and monetary policy are different does not mean that there is no interaction between them. This interaction need to be considered. Monetary policy affects asset prices and balance sheets and can thereby affect financial stability. Financialstability policy directly affects financial conditions, which affect the transmission mechanism of monetary policy. This means that monetary policy should normally be conducted taking financial-stability policy into account, and financial-stability policy should be conducted taking monetary policy into account. This is similar to how fiscal policy is conducted taking monetary policy into account, and monetary policy is conducted taking fiscal policy into account. Importantly, under normal conditions, financial stability is handled by financial-stability policy, not by monetary policy.

Diversification is a solid protection against failure, but not all mergers and acquisitions are motivated by diversification – they may by contrast be designed to gain greater market share in an existing business and thereby do nothing to increase diversification. Moreover, there is again the  4  BIS Review 43/2001  distinction between individual banks and the system – the system can be diversified by having lots of different specialised banks. This would not in all circumstances be a less robust system than one where individual banks have reasonably diversified portfolios which are all as a result vulnerable to common shocks, or one where a smaller number of large banks are all directly interconnected with each other. And finally, even if we were to conclude that consolidation makes banks safer in the long run, the short run effects could be very different as management tries to resolve inconsistencies in systems or clashes in cultures. Secondly, there is the issue that consolidation is perhaps likely to make bank failure more damaging in its impact, although again this can only be judged case by case. And thirdly, since larger banks tend to be organisationally more complex, there is the question that resolving large bank failures can turn out to be an infinitely more complex task.
Lars Heikensten: The IMF - mandate, means and governance in a changing world Speech by Mr Lars Heikensten, Governor of the Sveriges Riksbank, at the Joint IMF-Bundesbank Symposium “The IMF in a changing world”, Frankfurt, 8 June 2005. *  *  *  The question posed to this panel is "The IMF – a panacea for every illness?". That it is being asked at all indicates that confidence in the IMF is strong today. I agree with those that have great confidence in the IMF. Nevertheless, my answer to the question is no: The IMF is not – and should not be - a panacea for every illness. Allow me to raise a number of issues against this background. Focus on the core functions The IMF has a unique mandate – to promote global macroeconomic and financial stability. This is the fundamental basis of sound economic performance. The IMF’s mission is certainly not less significant today than it was before. It was no coincidence that when the IMF was founded, in Bretton Woods in 1944, it was accompanied by the creation of the World Bank and (later) the WTO – with explicit areas of responsibility. It is important to adhere to these in order for each of the organisations to be able to work effectively and efficiently. A stable economic development is the basis of other international organisations' work. So it is vital that the IMF continues to focus on its core functions – and to do it well.

Many countries do not seriously consider the recommendations given to them by the IMF and/or blame the Fund for its own problems. Other countries want to avoid that the consequences of their own policy actions, for the rest of the world, are discussed within the IMF or prefer to discuss them elsewhere. •  To increase the legitimacy of the IMF, there are reasons to consider the formal governance issues, (i.e. the QVR-issues). A consensus has to be built, step by step, on how to deal with this. However, to increase the efficiency of the Fund, a number of other reforms could be implemented that are as important as the QVR-issue. In these areas it is possible start moving forward at once. Thank you. BIS Review 43/2005  5
Sources: The National Institute of Economic Research and the Riksbank. 7  See Rawdanowicz, Bouis and Watanabe (2013). 8  This reasoning is based on Farhi and Tirole (2012). 6  BIS central bankers’ speeches  A more tangible source of concern is households’ expectations of future interest rates. Surveys show that households (and market agents, for that matter) are expecting much lower interest rates in the longer run than we at the Riksbank are expecting (see Figures 5 and 6).9 Figure 6 Expectations of the repo rate Per cent 5  5  4  4  3  3  2  2  Survey, Prospera average, 28 August 2013  1  Forward rate, 10 September 2013  1  The Riksbank's repo-rate path  0  0 13  14  15  16  17  18  Note. Repo-rate forecast from the September MPU. Repo-rate expectations among money market participants 1, 2 and 5 years ahead. The broken lines show an interval for the long-term level of the repo rate of 3.5 to 4.5 per cent. Sources: The National Institute of Economic Research, TNS SIFO Prospera and the Riksbank  One possible interpretation of these expectations is that households place too much emphasis on the low interest rates in recent years when they are looking ahead. In this case, further repo-rate cuts risk reinforcing the difference between households’ expectations and the Riksbank’s expectations of future interest rates.

Svensson (2013b) says on the other hand that a lower repo rate would entail a lower debt ratio. But in his model there is no real reason to be concerned over household indebtedness, regardless of how the repo rate affects the degree of household indebtedness. For example, he does not allow for households’ interestrate expectations becoming unjustifiably low if the repo rate is cut. BIS central bankers’ speeches  9  Supervisory measures can have direct effects on financial risks and imbalances by limiting the possibilities of particularly vulnerable households, companies or banks to take certain decisions. However, the measures may also have indirect effects on risks and imbalances, or side effects on the economy by affecting the cost of capital or the general demand situation. An example of a measure that probably first and foremost has direct effects is the mortgage cap. This affects primarily a small group of highly-indebted households and can be expected to contribute substantially to preventing financial imbalances arising. But the mortgage cap scarcely has any major effects on the general demand in the economy, or on the cost of capital for a typical household. An example of a measure that can affect the cost of capital is higher risk weights on mortgages. Such a measure would probably lead to an increase in mortgage rates in relation to other lending rates. And higher risk weights would probably also push up average lending rates at a given repo rate, at least in the short run.
Let me cite a few excerpts from Walter Bagehot’s “Lombard Street”:1 “Mercantile bills are an exceedingly difficult kind of security to understand …in years like 1871 many active men make so much money at the end of the year they are worthy of altogether greater credit than anyone would have dreamed of….On the other hand, in years like 1866 a contagious ruin destroys the trustworthiness of very many firms…Persons who buy and sell again soon are often liable for amounts altogether much greater than their own capital; and the power of obtaining those sums depends upon their “respectability,” their “standing,” and their “credit,”…and more simply upon the opinion which those who deal with them have formed of them.” Whilst not directly applicable to the present times and taken out of the historical context of the financial panic around the failure of Overend, Gurney and Co. in 1866, there are still a number of thought-provoking passages that sound so familiar in comparison with what we have been experiencing over the past four years of financial crisis. This is not only the case because the offices of Overend in Lombard Street were only a few miles away from where we are meeting today. So, let me dedicate my speech to the issue of contagion, and more specifically to the experiences with sovereign contagion during the European debt crisis and the related policy responses. I would like to start out by discussing why contagion needs to be addressed by policy and how.

A first characteristic of contagion is that the spread of instability would usually not happen without an initial trigger event – which often appears to be a relatively contained event. A second characteristic is that the transmission of instability is in some way abnormal, for example, in terms of its speed, strength or scope. Though spillovers are to be expected in an interconnected financial system, contagion is distinct in that it often reflects a market failure and a dangerously amplified transmission of instability. The underlying market failure consists of the fact that contagion often involves externalities.3 As a result, the private costs of the initial financial market failure, that is the costs to the actor triggering contagion, are lower than the social costs. In the specific case of the sovereign debt crisis in Europe, the trigger could, for example, be that a country in a precarious fiscal situation does not seriously implement the necessary fiscal consolidation measures. This could lead interest rates on this particular country’s government debt to rise and could in turn also constrain economic growth in that country. This is what I call the “private costs” of such behaviour. Although in this case the lack of fiscal discipline is something which is strictly related to one country, this circumstance may still lead volatile financial markets to also lower their expectations about fiscal consolidation efforts in other countries. As a result, those other countries also begin to face costs in terms of significantly increased interest rates on their government debt.