samchain/econo-pairs-v1 huggingface dataset:
The Euro area economy has grown, above trend, with core inflation nevertheless remaining within the tolerance range of 0-2%, even though on the headline measure, influenced by rising oil prices and the weaker exchange rate, inflation has for the time being moved above the top of that range. The ECB would have put that internal stability of the Euro area as a who le at risk if it had attempted at the same time to use monetary policy to target the euro's exchange rate, which is what implicitly many of its critics were effectively suggesting that it should do. The more recent criticism has been that the ECB has been slow to respond to the weakening of the US economy. Implicit in that criticism is no doubt a judgement about the extent and duration of the US slowdown and its likely impact on the euro area. As I have said there is a great deal of uncertainty about that. But the ECB has to take account, too, of domestic demand pressures in the euro area, and of the fact that even on the core measure Euro area inflation has been moving up gradually towards the top of the ECB's 0-2% range. Frankly I don't see how anyone can be confident whether the ECB has it precisely right or wrong – it is perfectly normal for even the best-informed people to disagree on these judgements, as anyone who reads our own Monetary Policy Committee meeting minutes will tell you.

Our own exchange rate against the euro today, for example, is stronger than it was before our reductions in interest rates this year; and the dollar, too, is substantially stronger against the euro than it was before the much larger cuts in US interest rates. So, in setting interest rates, we can – and do – make allowance in our projections for what has happened, and, on a best guess, for what is likely to happen, to the exchange rate, and that may cause the exchange rate to soften or it may cause domestic demand growth to strengthen, thereby offsetting the exchange rate's dampening effect on the economy. But what we cannot do – any more than the ECB – is to target the exchange rate, without putting the stability of the economy as a whole at risk of re-emerging inflation. That would not be in the interests even of the internationally-exposed sectors of the economy except possibly in the short term. They operate in the same labour market as more domestically-oriented businesses; and what matters to them is the real, rather than the nominal exchange rate, and it is not at all clear how that would be affected. Mr Chairman, given the uncertainties, I am reluctant to speculate as to how, precisely, the present imbalances within and between the major industrial economies will work themselves out, as they necessarily will over time.
That reduces the weight given to those retail outlets where prices are rising the fastest, and allows the overall measure of inflation to take into account the way families are changing their shopping habits away from outlets where prices have been rising relatively rapidly, like traditional high street stores, towards those where they have been rising relatively slowly, like newer more heavily discounted stores. For that reason, the formula used to calculate CPI inflation is superior to the formula used in RPIX. Arcane though it may sound, the “formula” effect reduces estimated inflation in Britain by about half a percentage point a year. In this respect, the difference between RPIX and CPI inflation as a measure of the economic temperature of the economy is rather like the difference between Fahrenheit and Centigrade as a measure of physical temperature. In both cases moving from one measure to another changes the number without there having been any change in the temperature itself. Because the temperature whether physical or economic - is independent of the particular measure, then the implications for decisions which depend on temperature - whether of farmers deciding on when to harvest their crops and then how to price them or the Monetary Policy Committee deciding on when to change interest rates - are unaffected by the measure used, provided the conversion is calculated correctly. Hence the switch to a new CPI target has in itself no implications for monetary policy.

Here again, estimates vary from one study to the other, and all agree on the same finding: a huge potential is still there to exploit. This being said, risks in the financial sector are the most varied and most important, especially in terms of money laundering, financing terrorism, cyber security, as well as protecting customers and personal data. Such risks have become major concerns both at the national and international level. For us, central banks in particular, the changes brought by the Fintech challenge us in several aspects, namely in our core functions. Now, even the monopoly of issuing currency is exposed, leading some central banks to consider the option of issuing a digital currency, and therefore reduce the costs related to conventional banknotes’ production and use, and minimize the insecurity risks involved. 6  Among the other fields concerned is financial supervision. This area is now gradually expanding as new actors and financial products have emerged, which can certainly affect monetary policy transmission. Ladies and gentlemen, The digital transformation we are facing today is primarily driven by operators and private companies that continue to invest heavily in this area and seize the opportunities and the potential it offers. Considering the important economic, financial and social implications of such a revolution, public authorities are compelled to set an adequate legal framework and provide an environment  conducive  to  technological  innovations  and  Fintech  development.
That has been possible thanks to the recapitalisation operations performed by directly tapping the markets; to the capital injection financed through the Financial Assistance Programme agreed with the European authorities, for a final amount of € billion; to the conversion of hybrid instruments into capital instruments; and to the funds provided by the FROB and the Deposit Guarantee Fund. Currently, all Spanish banks meet the regulatory capital ratios required. As at the close of the first quarter this year, the solvency ratio of our banking system was 11.6%, compared with the current minimum of 8% required under the Basel Accord. It is worth stressing – as certain comments made seek to omit this or completely misinterpret it – that the fundamental intention and effect of the capital injections with public funds (whether from the European Stability Mechanism or from the Spanish Treasury) has been to prevent the winding-up of banks, thereby preserving customer deposits. BIS central bankers’ speeches  5  It would be remiss not to mention here the problem of the hybrid capital and subordinated debt instruments sold to retail customers by credit institutions which, following the detection of capital shortfalls in the stress tests completed last September, were unable to cover their capital needs with their own resources and received State aid.

That said, there are measures that should be studied to reactivate credit for the entire economy and, in particular, to SMEs and to the exporting sector. The European Investment  4  BIS central bankers’ speeches  Bank has the means to stimulate loans to SMEs through an increase in its funding to European public-sector banks operating in this area. New arrangements could also be studied for risk-sharing using European funds, for example structural funds, a possibility that is already under discussion. And specific schemes to boost export credit could be studied. Within the Eurosystem, the Banco de España has always been in favour of initiatives geared to supporting more and cheaper credit, through unconventional monetary policy measures that help restore the monetary policy transmission mechanisms. But we know that the normalisation of credit will not come about, or will be slower and difficult, if we do not complete the clean-up and reinforcement of the solvency of our banking system. This is why it is important to clearly understand what has been done in 2012 to overcome the crisis and to evaluate the current state of affairs. Clean-up, recapitalisation and restructuring of the banking system and financial reform I shall focus on the six issues that afford us an overview of the situation: the clean-up efforts in 2012, the strengthening of solvency, the improved liquidity position, developments in nonperforming loans, expectations for results in the current year, and, finally, regulatory changes approved in 2012. Clean-up Firstly, balance sheet write-downs.
Switzerland will only be able to preserve its economic competitiveness and prosperity if its companies continue to be highly flexible and innovative, and if our politicians succeed in maintaining our country’s particularly favourable economic conditions. Turning now to the second part of my speech, I would like to once again take a look back at the global financial crisis. Regulation ten years after the UBS incident Banking system weaknesses exposed by financial crisis  Almost ten years ago, the federal government, FINMA 1 and the SNB were forced to take steps to stabilise UBS and the Swiss financial system, with the state and taxpayers having to temporarily take on the big bank’s risks. Many other countries found themselves confronted with similar problems and also had to rescue banks. The financial crisis brought to light fundamental weaknesses in the international financial system. As regards the banking system and regulation, two aspects stand out in particular. First, at that time many banks’ resilience was inadequate. Relative to their risk exposure, their liquidity and equity buffers were insufficient to absorb major outflows of funds and losses. 1  At that time, Switzerland’s financial market supervisory authority went by the name of the Swiss Federal Banking Commission. Page 3/8  Second, certain banks were so large and interconnected that their collapse would have triggered a chain reaction, dragging down other – fundamentally healthy – financial institutions with them. This would have resulted in considerable costs to the economy.

The risk-sensitive management of a bank therefore needs to be matched by risksensitive regulation. The risk-weighted capital ratio requirements address this, ensuring that a bank engaging in transactions with higher returns – and hence higher risk – also has to hold more capital. Accordingly, the risk weight applied to a speculative foreign investment is markedly higher than that applied to a mortgage in Switzerland. That being said, it is often difficult to estimate and model risks precisely. For this reason, a simple, non-risk-based capital ratio has now also been introduced, stipulating that a bank’s 2  3 4  These banks thus had a de facto state guarantee – their creditors could assume that the government would cover large losses and indemnify them in the event of a bankruptcy. Accordingly, they were prepared to deposit money with the banks at comparatively favourable terms. This funding advantage in turn allowed the banks to take on large risks. Overall, such a constellation is not ideal from the perspective of society as a whole as it creates a ‘moral hazard’ issue. The short-term parameter is referred to as the Liquidity Coverage Ratio, while the longer-term requirement is known as the Net Stable Funding Ratio. The risk-weighted capital requirement is referred to as the Risk-Weighted Assets Ratio, or RWA Ratio for short. Banks are permitted to use their own models for calculating RWA. However, to prevent overly low RWA figures being reported and ensure comparability between banks, the framework stipulates an ‘output floor’ for the RWA calculated by the banks.
From barter to money In the beginning, there was nothing! Well, in fact there was, but that ‘nothing’ was pure barter. To acquire a good or service not produced by yourself, you needed to come up with a good or service that the seller wanted to have. When people started to specialise in what they produced, it was a great move forward for mankind - but to trade with each other was difficult. Barter, then, needed to develop. What happened is that one leg of the trade increasingly took the form of a money-like asset. By that I mean something which (i) is countable or measurable, (ii) has value as it is accepted by most people and (iii) can be stored by the seller for later purchases. Early on, various assets performed this role. In the end, however, precious metals like gold and silver came to dominate as means of payment. Paying for goods and services with gold or silver was not ideal, though, due to the process of weighing required. The solution to this was coins, as the people in Lydia discovered around 650 B.C. Coins smoothed the check-out, so to speak, and you can probably imagine how ancient retailers were quite happy with this invention. Yet, without an assigned and trusted issuer, they still required the coins to have intrinsic value, i.e., to be made of precious metals. There were other problems with coins. Firstly, they were often debased by mixing the gold or silver with less valuable metals.

Moreover, a detailed analysis should be made as to what extent banks with a combination of high interest rate risk exposure and high mortgage lending growth are able to bear those risks. This is mainly a microprudential task, which is performed by FINMA. Furthermore, a revision of the self-regulation guidelines for mortgage-backed loans by the Swiss Bankers Association might make a substantial contribution to preventing the development of significant imbalances in the real estate and mortgage markets. It might be worth considering the inclusion of quantitative “best practice” standards as a complement to the qualitative guidelines. Ideally, microprudential supervision and self-regulation will prevent the build-up of systemic risk. Should the growth momentum currently being observed in mortgage lending and real estate prices continue, or even accelerate, further measures would have to be considered. Such measures should be countercyclical, thereby making a preventive contribution to financial stability. At best, the SNB’s monetary policy can only make a minor contribution to financial stability in this respect. First, monetary policy’s primary objective is to ensure price stability. Second, monetary policy always affects the economy as a whole. Thus, its effect cannot be directed only at specific areas of the economy. However, additional macroprudential tools, which would be much better suited to targeted intervention are currently not at the disposal of the Swiss authorities. In the recent past, both the SNB1 and the International Monetary Fund (IMF)2 have emphasised that there is a need for action in this area.
If a private player were to run such a system, all participating banks  18 Swish is owned by Getswish AB but administrated by Bankgirot. 19 As of April 2018. Current statistics on payments can be found on the Riksbank’s website, www.riksbank.se/sv/finansiell-stabilitet/betalningssystemet-rix/statistik-over-betalningar-i-rix/2018/. 7 [15]  would have large claims on that player, just as they have on the Riksbank at present. If such a private player were to enter bankruptcy, this money would be lost. That risk does not exist when the central bank runs the system. In addition, the central bank can supply the necessary liquidity that allows payments to function without friction. The central bank can thus function as ‘the banks’ bank’. It is therefore common for the settlement system to be placed at the central bank. It is also a service demanded by the banks themselves. Settlement in the RIX system also involves finality, which is to say that the payment is legally executed when it arrives in our system. The payment market is changing The arrival of the Internet in the late 1990s and early 2000s boosted the digitalisation of society and the payment market. New participants entered the market and many digital services linked to payments are presently offered, such as mobile solutions, electronic identification and so on. Changed consumption patterns such as increased on-line shopping are also generating demand for digital payments.

More than the specific figures in the projections, what matters most is knowing the direction and intensity of the forces driving current dynamics, so we may better identify and gauge the pressing measures needed. The forecasts published by international institutions in recent weeks show that we face a severe global recession. Earlier this month, on 13 March, the International Monetary Fund published for the first time a negative growth rate for the world economy of between 0.5 and 1 pp for this year. A moderate recovery is estimated for 2010, but one still far below what we thought the growth potential trajectory was. Unfortunately, for several months now, each new projection has habitually entailed a notable downward correction on the projection immediately preceding it. It would therefore not be unusual, once the IMF updates its world macroeconomic outlook in a few weeks, that the resulting forecasts should have worsened on those published this month. The outlook for the euro area does not differ substantially from what the IMF anticipates for the developed economies. Early in the month the European Central Bank released what are still the latest projections for the area as a whole, placing growth at between -3.2% and -2.2% for the current year and between -0.7% and 0.7% for 2010. As for Spain, next Friday, repeating an initiative first launched two years back, we shall publish our projections for 2009 and 2010. I shall leave the specific figures for Friday’s release.
In the United States the real earnings trend since 1940 has been virtually constant between 2% and 3%, while - as I just mentioned - the real return on shares shows a trend break after 1982 (Fig. 3).2 Are present share prices fundamentally justifiable? I shall now use a simple model to examine whether the present level of share prices can be justified in fundamental terms.3 Simplifying somewhat, this model equates the value of a share with the present value of the future income the share is expected to generate. A valuation in P/E terms accordingly rests on the assumptions that are made about these future incomes - the future growth of the company’s earnings - and the factor by which these incomes are discounted - the stock market’s expected return. We can insert alternative values for these assumptions to find the combinations that might justify different P/E ratios (Fig. 4). It will be seen that a P/E ratio of 14 can be warranted if the expected real return is 6% and the real growth of earnings averages 2.5%. These figures are all approximately in line with the historical trends.

Also, the series of corporate failures in 2001-02 revealed weaknesses in corporate governance practices, including accounting and audit rules, which are currently being addressed by the US authorities. Latin America Over the last two years, growth in most Latin American countries has been weak. This year, however, there are signs of a modest upturn, with confidence slowly returning. This has been due, in part, to the direction of the structural reform agendas of many countries in the region. To strengthen the foundations for growth, policy-makers must remain committed to implementing structural reforms. Countries that have made the greatest strides in reform are already reaping the benefits. Both Mexico and Chile, which are at the most advanced stage of reform in the region, have proven remarkably resilient to turmoil in regional economies and have weathered the period of weak global growth well, considering their exposure to sluggish mature economies. Other countries in the region have embarked on reform agendas and should be encouraged by the international community to see them through as swiftly as conditions allow. East Asia As for the crisis-hit countries in Asia, economic performance has been positively correlated with progress in reforms. Stronger average growth potential in countries such as Korea and Malaysia reflects partly the authorities' determination in pushing through corporate reforms, reforming the financial sector and strengthening insolvency laws. In China, the authorities have repeatedly emphasised that banking reform, if coupled with the restructuring and privatisation of state-owned enterprises, is key to strong growth and financial stability in the medium term.
Communicating uncertainty through fan charts in the inflation reports was introduced by the Bank of England in 1997. While the fan charts for inflation illustrate that inflation cannot be controlled perfectly by the central bank, this argument does not apply for the policy interest rate. The fan chart for the interest rate serves a different purpose: It illustrates that the interest rate path is not a promise, but a forecast which is uncertain. Moreover, it reflects the central bank’s adjustment of the interest rate as a response to new economic developments, which are subject to uncertainty. Petra Geraats argues that central banks should not provide forecasts for the policy rate, since this could be confused with a commitment. She suggests that central banks instead could have forecasts for short-term market interest rates. Our experience is that market participants and the public understand that our forecast for the policy rate is indeed a forecast and not a promise. Due to the close relationship between the policy rate and short-term market rates, it should not, in my view, matter very much whether it is the policy rate or a short-term market rate that is projected. Let me now turn to the second ingredient; how Norges Bank responds to new developments (“shocks”). Monetary policy becomes more effective if market participants can react adequately to economic news. In order to convey a broader reaction pattern, Norges Bank indicates how the Bank would react should certain disturbances occur.

Jan F Qvigstad: Trends in monetary policy transparency – comments on Petra M Geraats' paper Speech by Mr Jan F Qvigstad, Deputy Governor of Norges Bank (Central Bank of Norway), at the conference "International Experience with the Conduct of Monetary Policy under Inflation Targeting", hosted by Bank of Canada, Ottawa, 24 July 2008. The Charts in PDF-format can be found on the Norges Bank’s website. *  *  *  The paper by Petra Geraats provides an up-to-date and thorough analysis of the trends in transparency during the last ten years. Her analysis confirms the general trend of improved transparency, but she also provides an interesting analysis of the differences across alternative monetary policy regimes. I am sure Petra’s paper will be a key reference in future research and policy discussions on transparency. 1 As discussed in the paper, transparency can be motivated both by accountability requirements for independent central banks, and by the purpose of enhancing the effectiveness of monetary policy. Both have been important factors behind the process in Norges Bank towards increased transparency. It is now widely accepted that monetary policy works mainly through private agents’ expectations. The widespread influence of the New Keynesian model in academic research on monetary policy and the trend towards using DSGE models in central banks have underpinned the focus on expectations. Michael Woodford puts it in a clear-cut way: 2 “For not only do expectations about policy matter, […] very little else matters”.