samchain/econo-pairs-v1 huggingface dataset:
Engaging a broader set of perspectives across operations, legal, and compliance professionals – as well as individuals across buy-side, sell-side, and various market infrastructure firms – will help the Committee to apply this more comprehensive perspective to its work on best practices. It will take some time for these changes to be fully  11  See http://www.bis.org/review/r150213c.htm. 12  See http://www.newyorkfed.org/fxc/FXC_Charter_2015.pdf. 6  BIS central bankers’ speeches  implemented, but it is expected that the various steps that move us in this direction will also help us to engage even more effectively in the important work ahead. Global best practices efforts The FXC has been engaged in two global efforts with its counterparts abroad: development of the Global Preamble and work, now under way, to extend the Global Preamble into a single global code of best practices in the FX market. The Global Preamble (“Preamble”) is a document that was developed collaboratively by the eight central-bank-sponsored foreign exchange committees to provide a common basis from which our individual codes of conduct for the FX market follow. The Preamble lays out key, shared principles that underpin our respective codes. The publication of a revised Global Preamble earlier this year was an important development that built upon a tradition of increasing engagement across the committees. The initial Global Preamble was published in 2013 and marked the first time the committees had come together to provide a single voice around best practices.

The transactions that take place there are the lifeblood of a global economy that comprises many different national currencies. By enabling the transfer of funds and purchasing power from one currency to another, the foreign exchange market offers an important means for price discovery that facilitates international trade and investment activity. The relative value of a currency, expressed in exchange rates, both drives and is driven by the costs of goods, services, and investment opportunities in each economy. Understanding relative prices helps businesses make decisions about the competitiveness of their goods and services, which is important for consumption and production choices. For example, the current and future value of an exchange rate can be an important factor for a corporation when deciding where to locate a new factory or where to source parts, or even where they want to sell their finished products. These decisions ground the composition of activity within  BIS central bankers’ speeches  1  an economy, and have a bearing on the distribution of jobs, investment, and growth across the global economy. This is a particularly important function given trade’s increasing contribution to global growth. Indeed, between 2003 and 2013, the share of trade in global GDP increased by about 11 percentage points, to just over 59 percent. 1 The FX market is a large and growing market.
“Since the medium-term equilibrium unemployment rate depends on the composition of unemployment, it will change over time…That medium-term equilibrium unemployment rate is a different concept from the long-run equilibrium unemployment rate: the latter is the rate to which unemployment will trend towards in the long run once all of the short and medium-term effects have dissipated. That long-run equilibrium rate will reflect the institutional features of the labour market, such as the degree of labour market flexibility, and the extent to which potential employees are aligned with vacancies in terms of skills, location and occupation. Over time, the medium-term equilibrium unemployment rate should converge towards the long-run rate. Current estimates of the long-run equilibrium rate are significantly below estimates of the medium-term equilibrium rate.”  BIS central bankers’ speeches  5  This suggests that, even though unemployment is falling faster than expected, the recovery has some way to run before it would be appropriate to consider moving away from the emergency setting of monetary policy. It is widely recognised that our 7% threshold is not a trigger for raising Bank Rate. Last August, the MPC said that when the 7% unemployment threshold was reached, there should be no assumption of an immediate, automatic change to its policy stance. It would assess the prevailing economic conditions, including wider measures of slack and inflationary pressures, before deciding the appropriate stance for monetary policy.

Carbon Prices and Carbon Markets Climate change is the result of probably the biggest market failure in history. For the longest time, the world did not put a price on the carbon emissions that have steadily degraded our environment and now pose serious climate risks. A meaningful price on carbon is critical to create the right incentives to reduce emissions. The challenge is to arrive at the right price, one that does not unduly impede economic development and yet is sufficient to drive decarbonisation efforts that will enable the world to meet its climate targets. Carbon pricing is gaining momentum. Globally, there are 61 carbon pricing initiatives in place, half of them carbon taxes and the other half emissions trading systems. 1/5  BIS central bankers' speeches  Singapore introduced in 2019 a carbon tax of $ per tonne of greenhouse gas emissions, to establish the principle of a price on emissions. The original intention was to gradually raise the tax from 2023 onwards to between $ and $ per tonne of emissions by 2030. The government is now reviewing both the post-2023 trajectory and the level of the carbon tax to ensure that they provide sufficient impetus for emissions reduction and restructuring towards a greener economy. Asia’s priority, as is Singapore’s, must be to reduce carbon emissions through abatement efforts. But not all firms can turn off the emissions tap fast enough. It may be challenging for some sectors, such as steel and utilities, to significantly reduce emissions in the short to medium term.
The same applies to banks, rating agencies, specialist players such as bond insurers, hedge funds, and regulators. Mistakes brought down even highly sophisticated market makers and specialist players such as Lehman, Bear Sterns, and AIG. The CDOs and structured products were very complex, and their valuation and risk management required sophisticated quantitative skill. When mark-to-market failed, mark-tomodel becomes complicated by absence of in-house capacity. And, the option of turning to external expert valuer such as arrangers is very expensive, due to the lack of liquidity and captive nature of such market. Thus, the knowledge required to properly manage these risks goes well beyond the quantitative skill and the usual front-office ability to value, price, and trade in normal market period. During abnormal periods, the Board must understand the context of each market, especially its market structure, to be in a better position to gauge erratic market behaviour and liquidity. Board members need to have a clear view, for example, whether the market would likely become a captive one, and the degree of counterparty risk in such OTC derivatives market. In the crisis environment, the strength of capacity of mid-and back-office becomes critical for minimizing losses, such as by reducing counterparty risk, and dealing with settlement risks. 2  BIS Review 135/2008  As this crisis develops, financial markets have witnessed, in an unprecedented manner, the unwinding of many contracts, even those backed by standard agreements like ISDA.

At the same time, it is still too early to comprehensively assess the effectiveness of all bank support schemes in improving the longer-term funding of banks and in fostering bank lending to the private sector. The implementation of the bank support schemes has been gradual over the past few months and the evidence is relatively limited. But on one aspect, the facts already speak a clear language: namely that the use of guaranteed debt has been indispensable in providing banks with access to medium and longer-term financing: most –and in some countries even the totality – of the new bank debt issued since October last year has been government guaranteed. Banks should take advantage of the available government support and strengthen their capital buffers, not least with a view to the prospect that the current extraordinary liquidity provision by the ECB will not remain in place indefinitely. This issue relates to the exit strategy to which I will return shortly. The governments’ actions aimed at dealing with the crisis have not been limited to the support of the financial sector. Fiscal stimulus packages across the euro area amount to € billion (1.1% of euro area GDP) this year and a further € billion (0.8%) is planned for  6  BIS Review 65/2009  next year.
The removal of policy accommodation associated with the Fed’s securities portfolio reductions should over time be expected to put some upward pressure on longer-term interest rates.12 However, the relatively muted increase in term premiums seen so far may in part reflect the non-zero probability that market participants assign to the FOMC deploying the balance sheet again if future economic conditions were to warrant more monetary easing than could be achieved solely through reductions in the federal funds rate, consistent with the FOMC’s normalization plan guidance.13  … but where is it headed? The FOMC has started the process of normalizing the Fed’s balance sheet and has provided some general guideposts. The Policy Normalization Principles and Plans state that the Committee intends for the Federal Reserve, in the longer run, to hold no more securities than necessary to implement monetary policy “efficiently and effectively,” and that it will hold primarily Treasury securities.

I do not think that anybody would argue that the world as a whole today makes up an optimal currency area. Our planet is not yet ready for a single currency. We are therefore bound to live in a world with n, n greater than one, currencies. For the second half of the 20th century, we lived with one dominating  BIS Review 72/2004  3  currency, the U.S. dollar, and many, less important currencies, such as the British pound, the Japanese yen, the German mark, the Swiss franc, and so on. Moreover, the United States is a largely closed economy, so it could regard fluctuations in the external value of the dollar with benign neglect. Of course, most other countries, being rather small and quite open, were fully exposed to turbulences in foreign exchange markets, but there was not much they could do about it. There were several episodes when the internal stability of the dollar was threatened as well, with U.S. inflation rates in the double digits. The flight into more stable currencies put considerable pressure on these. Today, the arrival of the euro has changed the landscape in some important ways. First, as the new kid on the block, the euro commands attention and respect. In economic size, the eurozone nearly rivals the United States. There is now an obvious alternative to the dollar as an instrument of portfolio diversification.
Figure 14 Households’ debt as proportion of disposable income: the overall effect of an amortisation requirement, halved tax relief and debt-to-income limit of 400 per cent Per cent 220  220 Scenario without measures  210  210  Amortisation requirements, reduced tax relief (15%) and debt-to-income limit (400%)  200  200  Amortisation requirements, reduced tax relief (15%) and debt-to-income limit (400%, exemption 15% )  190  190  180  180  170  170  160  160  150  150  140  140  130  130 05  10  15  20  25  Note. Broken red line shows an estimate of developments over the next 10 years without further measures. Shaded area indicates a feasible lower limit for when the risks are elevated in the economy. Broken lines show an estimated total effect of several measures. “Debt-to-income limit (400%, exemption 15%)” means that 15 per cent of the volume of new loans may have a loan-to-income ratio exceeding 400 per cent. Sources: Statistics Sweden and the Riksbank. 21  In both cases, mortgages have been related to gross income instead of relating total loans to disposable income. In practice, this leads to the requirement being less binding (the mortgages are lower than total loans, and gross income is higher than disposable income). We have however, based the calculation on requirements for total loans in relation to disposable income.

Rajan, Raghuram (2005), Has Financial Development Made the World Riskier? NBER Working Paper No. 11728. National Bureau of Economic Research. Rawdanowicz, Lukasz, Bouis, Romain and Watanabe, Shingo (2013), The Benefits and Costs of Highly Expansionary Monetary Policy. OECD Economics Department Working Paper No. 1082. OECD. The Riksbank (2010), Monetary policy in Sweden. The Riksbank (2011), The Riksbank’s inquiry into the risks on the Swedish housing market. The Riksbank (2013a), The Riksbank and financial stability. The Riksbank (2013b), Repo rate unchanged at 1 per cent. Press release, 5 September 2013. The Riksbank (2013c), Financial imbalances in the monetary policy assessment. Article in Monetary Policy Report, July 2013. 10  BIS central bankers’ speeches  Svensson, Lars (2013a), Skuldhysteri I: Att bara titta på skulderna duger inte. [Debt hysteria I: just looking at debt isn’t enough.] Ekonomistas, 15 September 2013. [blogsite for economists, only in Swedish] Svensson, Lars (2013b), “Leaning Against the Wind” Leads to a Higher (Not Lower) Household Debt-to-GDP Ratio, manuscript, Stockholm University. BIS central bankers’ speeches  11
How payment services and user needs are evolving Technology continues to transform retail payments: the way we pay for goods and services has changed dramatically over the past decade or so. In many countries, you can now pay for your tea and cake with a smartwatch, or send your friends a ‘payment request’ with a few taps to split a bill at a restaurant. Many people’s wallets are now virtual rather than physical. Innovation has expanded the frontier of what is possible and provided many of us with access to faster and simpler payment services. It is not just the private sector that is innovating. The changing user demand for electronic payments is inspiring central banks to consider the future of payments. A topic of intense interest is Central Bank Digital Currencies (CBDCs). CBDCs (particularly retail CBDC) could create a new form of digital money, issued by the central bank, and available for households and businesses to use. Whether to issue a CBDC, for which use cases, in what form, and with what consequences are all major questions currently being considered by central banks and governments across the globe. No decisions have been made in the UK and we continue to work closely with a wide range of stakeholders to develop a clear understanding of the potential implications: positive and negative. The Bank of England and HM Treasury will consult later this year on the assessment of the case for a retail CBDC in the UK, including scope for further work.

Potential drawbacks of the new framework on a small open economy  But would the introduction of the euro be only good news for the Swiss economy? We know that a revolution is always associated with risks and uncertainties, thus it should not surprise you that we were very much concerned about possible negative developments. In the mid-1990s, as the European monetary construction was under way, we tried to imagine the potential negative effects of the euro introduction on the Swiss economy. Our goal was to be prepared to face difficult situations. We had identified three main challenges: a)  First, the major risk was that the new European currency would destabilize the Swiss franc. In the past, the Swiss franc, along with the German mark, played the role of a safe haven currency whenever monetary crises occurred. With the disappearance of the German currency, the Swiss franc would find itself first in line of fire in case of a dollar crisis, for example, or even worse, in case of doubts about the stability of the European currency. b)  Second, we risked seeing the euro being increasingly used as a means of payment in Switzerland. As the common currency was about to become the main unit of account for our exports, we feared that domestic firms might adopt the euro as well, so as to minimize exchange rate risks. Some were even considering wages being paid in euro.
Most importantly, many governments entered the crisis with high levels of public debt and, with the crisis already putting pressure on their budgets, they were reluctant to spend yet more. So even after having exhausted their conventional policy tools, central banks found that they were the only ones left to support weak recoveries. With many of them mandated to react to below-potential output, they turned to unconventional policies. 5 While their motives were somewhat different, all the major central banks resorted to either one or both of two measures: quantitative easing – the large-scale purchase of long-term securities, and forward guidance – the commitment to keep short-term interest rates low for a  2  Eichengreen and O’Rourke (2010). 3  Liquidity provision to distressed financial institutions typically occurred in the context of state intervention and state capital injections to ensure the solvency of these institutions. In Switzerland, the SNB acted as lender of last resort by providing liquidity assistance to UBS in October 2008, once the bank’s solvency was guaranteed by a capital injection from the Swiss government. 4  Friedman and Schwartz (1963) argue convincingly that it was the reduction in the money supply that caused the large drops in output and prices between 1929 and 1933, and that this drop in the money supply was amplified by the large-scale bank failures in that period, which the Fed did not prevent through lender of last resort action.

The countercyclical capital buffer, which is currently activated in Switzerland, is an example of such a tool. In short: we have learned that system-wide financial crises can be very costly, and that we should focus on preventing rather than managing them. There is also a broad consensus that we require macroprudential tools to address systemic risk directly. One last question remains: why should central banks play an important role in implementing these tools? There are four main reasons. First, as lenders of last resort, central banks are the ultimate providers of liquidity to the economy in times of financial stress, and thus play an important role in managing crises. But these operations are not without risks, so that central banks have a particular stake in preventing such situations. To do that, they need the appropriate tools. Second, financial stability is a critical precondition for central banks’ ability to fulfil their primary mandate of ensuring price stability. Financial instability can distort prices directly, and it can impair the proper functioning of monetary policy transmission mechanisms. Third, macroprudential and monetary policy tools interact, in the sense that the use of one may have an effect on the use of the other – for example when low policy interest rates not only stimulate economic activity (as they should), but also translate into an excessive reach for higher yields in financial markets, thereby contributing to the build-up of systemic risk, which in turn justifies the tightening of a macroprudential tool.
Before the crisis, Southeast Asian markets had more than twice the weight of Northeast Asian markets 1  Robert Templer of Strategic Intelligence, interviewed on Asia Business Report, BBC TV, 22 November 2000. BIS Review 111/2000  2  (excluding Japan) in Morgan Stanley’s MSCI Asia Free index. Now the position has been totally reversed. Lessons from the crisis ASEAN countries must not allow this situation to continue. They should strengthen themselves individually, and also work together to sustain their long-term prosperity. Then they can dispel the perception of a region in distress, restore confidence and get on the move again. Sound fundamentals What lessons should ASEAN countries draw from the crisis? First, that despite the upheaval, the transformation of East Asia over the last two decades was no mirage. The Asian miracle was real - the halving of poverty rates, the dramatic improvement in living standards, literacy and health standards, and the modernisation of the economies. Asia’s prolonged boom had been underpinned by sound economic fundamentals. These remain a vital positive factor, which can help ASEAN to prosper again. However, many economies had significant structural weaknesses. Financial regulation and supervision were weak, transparency was lacking, and there were serious shortcomings in governance and public administration. “KKN” - the Indonesian acronym for corruption, collusion, and nepotism - was often a problem. These weaknesses may or may not have caused the crisis, but they certainly contributed to its severity.

As the Manager of Public Debt, the Central Bank raises local and foreign debt to meet expenditures approved through the Consolidated Fund, maintains such loan records and service such loans out of funds at Government Account with the Central Bank. The popular criticism here is the monetization of the budget deficit through Central Bank funds. The Central Bank’s purchase of Treasury bills is the cause of this criticism. The Central Bank purchases Treasury bills in order to use them for regulation of the domestic market liquidity (Open Market Operations) as permitted in the MLA and not for lending to Government. Further, under the MLA, the Central Bank is authorized to provide provisional advances to the Government up to 10% of the estimated Government revenue of the current financial year, subject to recovery of each advance within 6 months, and such advances are only to meet the expenditures authorized under the Consolidated Fund. Managing public debt by the Central Bank is beneficial for the country since the Central Bank can raise public debt in line with interest rate structure envisaged in its monetary policy. If the debt management is undertaken by a separate Government office, it may attempt to raise debts without regard to market interest rates and monetary policy and that will cause immense conflicts with the current monetary policy. The opposite view is that as the Central Bank manages public debt, its monetary policy is constrained by the need to attempt to raise and maintain public debt at low cost.