samchain/econo-pairs-v1 huggingface dataset:
22 I am sure that the forum today will be a good occasion to exchange views and to gather new insights. 4/4  BIS central bankers' speeches

But, we will conduct purchases only to the extent this is necessary and proportionate to fulfil our mandate. In short, the PEPP is a targeted, proportionate and temporary measure in response to the crisis triggered by the COVID-19 pandemic. The legality of the PEPP is ensured for three reasons: First, and as I mentioned earlier, the PEPP falls within the ECB’s mandate in that it pursues monetary policy objectives. As in the Gauweiler case, the measures designed to preserve the monetary policy transmission mechanism may be regarded as seeking to maintain price stability. Let me add that the argument invoking the transmission mechanism cannot be used to ease credit risk premia which are due to the idiosyncratic economic and financial situation of a country. Second, in accordance with the PEPP Decision,“Purchases shall be carried out…to the extent deemed necessary and proportionate”.3 The proportionality assessment of the PEPP must be supported by economic analysis which shows that the measure: (i) is suitable for attaining the monetary policy objective in current and future environments; (ii) does not go beyond what is necessary in order to achieve this objective; and (iii) weighs up the various interests involved to prevent any disadvantages which are manifestly disproportionate to the objectives set.
Thus, the EU economy has already received a significant macroeconomic stimulus, which should lead the EU back to the growth track in 2010. This  BIS Review 89/2009  3  will create the conditions needed for economic restructuring, but every country has to take the necessary steps itself. What are the measures that should be taken to help Estonia out of the crisis? Estonia is part of the EU and the single market, so the framework agreed upon in the EU is also suitable to our economic policy. The general principle we would like to stress is that we must strengthen our ties with Europe and the EU single market even more. This is essential for ensuring the stability and development of the Estonian economy and the financial sector. In order to overcome the crisis, the stability and possibilities offered by the EU and the single market are vital to Estonia. The speed of overcoming the crisis depends on the flexibility of Estonia's enterprises and their success in reorganising production and activities, considering changes in the world and in the EU market. The task of the state is to create conditions supporting the reorganisation and investment. Estonia's economy has, in fact, already displayed a rather good ability to adjust. The main changes include labour market adjustments and decelerating wage growth. This is definitely a difficult, but highly necessary process, which requires state support in the form of both a well-functioning and efficient unemployment insurance system and retraining possibilities.

If we rely on strong macroeconomic policy, the principles of an open economy and future-looking investment, Estonia will continue to have all the possibilities for defeating the crisis. But what are the national economy level measures the government should take and how should they support the financial system? Here I start with a firm standpoint that the fixed exchange rate of the kroon to the euro is the pillar of Estonia's economic policy and the accession to the euro area as soon as possible is its logical continuation. The experience of the past half a year show that monetary policy that is based on the fixed exchange rate and the currency board supports economic stability also in more difficult times. But how does the fixed exchange rate help us overcome the crisis? First of all, it helps stabilise inflation expectations and stop price rises. Price corrections after the accession to the EU were sharper then we expected. The opening of the labour market and price rises of many goods in the global market had a strong impact on Estonia. This stage, which was, in a sense, unavoidable and paradoxically also the result of successful reforms at the start of the century, is now over. The price level is expected to decline somewhat both this and next year. Second of all, the currency board arrangement brought about a relatively fast correction in several sectors of the economy, which displayed clear signs of overheating after the accession to the EU.
The interest rate reflects the price of today’s  1  Negative interest rates have been implemented not just in Switzerland, but also in an increasing number of other advanced economies, such as Denmark and Sweden. BIS central bankers’ speeches  1  consumption in terms of consumption in the future. It is a relative price. There is nothing untenable in tomorrow’s consumption being more valuable than today’s. Of course, while not untenable, negative nominal rates are not representative of a normal state of affairs. Rather, they mirror the current exceptional circumstances of the global economy and of Switzerland. To understand why Switzerland is experiencing a period of negative interest rates, it is necessary to step back and recall three structural features that characterise the highly integrated Swiss economy: its “traditional” current account surplus, its globally traded, freely floating currency, which is commonly perceived as a “safe haven”, and – as a result – its persistently lower interest rates, especially relative to the euro area. 2 In “normal” times, Switzerland’s traditional current account surplus is compatible with a stable currency, as it is compensated by net capital outflows of similar magnitude, with the negative interest rate differential providing the proper incentive for capital exports. This “benign” equilibrium has been severely tested by recent financial market developments. The financial crisis has exacerbated the global appetite for Swiss franc investments because of their safe haven status.

At the current juncture, the longer-term risks associated with a massive, uncontrollable expansion of the SNB balance sheet would have been out of proportion to the benefits of continuing to enforce the minimum exchange rate. This does not mean that the SNB will refrain from expanding its balance sheet further, should it prove necessary. Rather, it clarifies that this policy option should be used only when the benefits clearly outweigh the costs. Fiction III: The SNB has unlimited power The drastic actions taken by central banks since the financial crisis – flooding financial markets with liquidity on an unprecedented scale, injecting billions to save banks from failing, or, in the case of Switzerland, intervening heavily in the foreign exchange markets – have led to the widespread perception that central banks have unlimited power. On the one hand, this perception is based on the fact that central banks are entrusted with the note-issuing privilege, i.e. they can “print money”. In view of the current difficult debates about austerity and deleveraging, the tendency to overrate the power associated with this privilege is probably natural. Yet this view overestimates its actual power, for printing money  4  BIS central bankers’ speeches  can only resolve short-term liquidity issues. In the long term, it creates no value and merely generates nominal price increases. On the other hand, the perception that central banks are all-powerful is also based on the fiction that their independence renders them immune to democratic controls.
Others have suggested that the event window on October 15 is a byproduct of regulatory changes that have reduced traditional dealers’ ability to serve as shock absorbers during periods of volatility by accommodating large net order flows. In particular, some market participants argue that recent regulatory changes have increased the cost that dealers face when expanding their balance sheets, leaving them less willing to do so for relatively lowmargin businesses, such as making markets in Treasury securities. If true, it may help explain how an unwinding of large positions, as may have been observed in the sixty minutes after retail sales on October 15, could have had such a large impact on yields. But it is far from clear that such changes, on their own, can explain the round-trip in prices during the event window itself. That said, it is possible that the dominance of electronic and automated trading and the changing composition of participants in the Treasury market have interacted with changes to dealer behavior – whether the result of regulatory incentives or other reasons – in a manner that makes unusual intraday price moves more probable. While it is precisely the intention of many recent regulatory initiatives to ensure that financial firms hold sufficient capital to support the size of their balance sheets and risk taking activities, there could be unintended consequences of these regulatory changes, including the possibility that sharp intraday price moves become more common.

Once the consultative period has concluded and the best practices are finalized, the TMPG calls for all participants in the Treasury, agency debt, and agency MBS markets to adopt these business practices. As primary dealers, you are, of course, also expected to implement these best practices. We also expect you to be good citizens of the Treasury market more broadly, and to be proactive in identifying worrying trends or suggesting further enhancements to these best practices as the market evolves further. You play a critical and central role in ensuring that the Treasury market remains a robust and efficient fixture of the global financial landscape. Thank you. BIS central bankers’ speeches  9
The same day the Swiss franc reached a record high, peaking close to parity, at 1.0073 per euro.1 These extreme movements on the foreign exchange market were also accompanied by high  1  Measured using the Electronic Broking Services (EBS) currency trading platform. BIS central bankers’ speeches  1  volatility in equities and bond markets. Between July and early August, the equity volatility index, VIX,2 abruptly doubled from less than 20% to over 40% and the broad bond volatility index, the MOVE Index,3 went from around 85 to almost 120 base points. This extreme level of volatility had a huge impact on front office operations. It also affected “post-trade” processes in the back office, where volumes increased at much the same pace. While the average EUR/CHF turnover on Electronic Broking Services (EBS) in August usually hovers around EUR 3.5 billion, the daily average in August of this year was closer to EUR 12.5 billion. These figures are symptomatic of the pressure the FMI is under. They also highlight the importance of ensuring that it can cope with such significant increases in trading volumes. After all, as trade volumes swell, so do operational risks. Thankfully, there have been few instances in which the FMI, or a lack of effective infrastructure services, were at the root of any market crashes. Let me, however, highlight three instances in which the system has been put to the test. The first case was referred to as the “Paperwork Crisis” of 1968 and 1969.

Our study shows that the unit cost for cheque processing by banks has increased from RM3 in 2011 to RM4 in 2016, and is estimated to be about RM6 by 2020. At around 120 million cheques currently, this translates into an enormous cost of around RM480 million, a sheer wastage to the economy. It is also costly for businesses to handle cheques. We estimate an average processing cost of about RM6.80 per cheque due to expenses incurred on delivering, depositing, reconciling and handling of returned cheques. On the contrary, the cost of processing an Interbank GIRO and Instant Transfer (IBFT) are around 30 sen per transaction. Such unit cost is likely to decline further due to economies of scale as e-payment adoption gains further traction. In Scandinavian countries, higher cost has been the one of the key factors that drove the cheque volume to a negligible level. Denmark, for example, turned off its interbank cheque clearing system on 1 January 2017 once cheque usage was widely displaced by electronic fund transfers and debit cards. In the case of Malaysia, we estimate that at the current rate of decline, it will take us about 27 years before cheques can be reduced to a negligible level of 0.1 per capita, with an estimated cost to the banking and business community of about RM12.9 billion. This is a huge amount of prodigality.
Ivan Iskrov: Association of Banks in Bulgaria – 20 years Congratulatory address by Mr Ivan Iskrov, Governor of the Bulgarian National Bank, to the Association of Banks in Bulgaria on the occasion of the 20th Anniversary of the Association’s Foundation, Sofia, 3 April 2012. *  *  *  Mr. President, Ladies and gentlemen, Dear colleagues and friends, It is a great honour and a pleasure for me to be here today commemorating with you the 20th Anniversary of the guild of the banking profession – the Association of Banks in Bulgaria. This is a perfect opportunity to congratulate the Association for the long way it successfully traversed, and along which it established itself as one of the most reputed trade associations in the Republic of Bulgaria. All these years the Association consistently assisted its members in pursuing their banking business and protecting their interests, all the while standing as a stable and constructive partner of the central bank, as the banking regulatory authority, of other government authorities, and of the representatives of the business. Therefore, we the members of the BNB Governing Council are all pleased to attend this occasion as a proof of the respect cherished by the central bank’s management for your work and professional achievements! Behind the ABB’s history stands the individual road of achievements, but also of challenges, of each one of the Association’s members.

This could refer, for instance, to households who now borrow money to buy a home. In the future the interest rates on these loans can be three or four times higher than the current mortgage rates. I began by discussing the major differences in time horizons in the financial decisions we all need to make. Some decisions apply only here and now. If we make the wrong decision it is not too difficult to put it right. In other cases, we make decisions today that have consequences far into the future. It is then important not to assume that the conditions applying today will apply for decades into the future. References Armelius, Bonomolo, Lindskog, Rådahl, Strid and Walentin (2014) “Lower neutral interest rate in Sweden?”, Economic Commentaries no. 8, Sveriges Riksbank. Ball, L. (2014) “The Case for a Long-Run Inflation Target of Four Percent”. IMF Working Paper WP/14/92, June. Bengtsson E & Waldenström D (2015) “Capital shares and income inequality: Evidence from the long run” CEPR Discussion Paper DP11022, December. IMF (2014) “Perspectives on Global Real Interest Rates”, World Economic Outlook, April. Karabarbounis, L & Neiman, B (2014) “The Global Decline of the Labor Share”, Quarterly Journal of Economics, 129(1), 61–103. King, M, Low, D, (2014) “Measuring the ‘world’ real interest rate”, NBER Working Paper No. 19887. Kryvtsov, O, Mendes, R (2015) “The Optimal Level of the Inflation Target: A Selective Review of the Literature and Outstanding Issues”, Bank of Canada, Discussion Paper 2015–8.
This comparison involves something of a straw man, however. As already noted, inflation targeting as practised, here and elsewhere, allows for an accommodating response to cost shocks, so long as it is consistent with inflation being stabilised in the medium term. Such flexible inflation targeting can thus look quite similar to targeting nominal income growth. This is illustrated by the red line in Chart 1, which shows the four-quarter rate of growth of nominal income over the lifetime of the MPC. The stability of nominal income growth is notable – it stays pretty close to 5% with the exception of two periods. First, the Great Recession of 2008–9, which saw four-quarter nominal GDP growth fall to minus, rather than plus, 5%. And, second, the past couple of years, when – at least according to the present vintage of data – nominal GDP growth was nearer 2%–3%. In neither case, however, was the shortfall by design. The MPC does not presently directly generate an agreed forecast for nominal income growth, but we can construct a proxy for such a forecast by combining the MPC’s central (mean) projection for GDP growth with its central (mean) projection for CPI inflation.5 The corresponding one and two year ahead  2  See Meade (1978). James Tobin, another Nobel prize-winner, also advocated adopting a target for nominal income around the same time (Tobin, 1980). I discuss the relationship between Meade’s ideas and inflation targeting in Bean (2009).

Moreover, it is worth noting that since the MPC’s mandate dictates that we should support growth and employment provided that it does not conflict with achieving the inflation target, we are in any case charged with seeking to eliminate that part of the shortfall in nominal demand that is associated with an output gap, or that can be eliminated without generating inflationary pressure. Second, hard-wiring in higher inflation for a while is not without risk. In many economic models – including the one I used earlier – it is only the real interest rate that matters: it is irrelevant whether a lower real interest rate comes about through a lower nominal interest rate or a higher inflation rate. In the real world, inflation erodes the real value of cash, nominal bonds and fixed-interest debts. In itself, that may reduce the impact on demand of the promise to keep policy loose for long. But it is also apt to breed suspicion of a deliberate attempt to inflate away debt burdens, and may thus lead to inflation expectations becoming de-anchored. This is a serious risk: we should not forget the high levels of unemployment in the 1970s and 1980s associated with bringing inflation expectations back under control. Third, maintaining low interest rates even after the economy has recovered carries financial stability risks. My baseline simulations suggest that the period of very loose policy is already quite extended.
BIS central bankers’ speeches  11  However, the effect of QE on the wealth channel cannot last forever. Monetary neutrality means real asset prices are not boosted indefinitely by such policies; their economic effects must ultimately unwind (Chart 11). Chart 11 QE wealth effect ultimately temporary  Source: Joyce, M, Tong, M, and Woods, R “The United Kingdom’s quantitative easing policy: design, operation and impact”, Bank of England Quarterly Bulletin, 2011, Q3. Said differently, unless an improvement in fundamentals boosts the underlying cash flows of these assets, real valuations will fall back. That structural policies have not boosted real growth sufficiently is a better justification for the re-pricing in risk markets than any loss of confidence in the power of central banks. Central bank innovation has now extended to negative rates, with around a quarter of global output produced in economies where policy rates are literally through the floor. 6 Conceptually the more that effective policy rates can be reduced below equilibrium rates, the better the prospects for demand to grow faster than potential supply, promoting global reflation. However, it is critical that stimulus measures are structured to boost domestic demand, particularly from sectors of the economy with healthy balance sheets. There are limits to the extent to which negative rates can achieve this. For example, banks might not pass negative policy rates fully through to their retail customers, shutting off the cash flow and credit channels and thereby limiting the boost to domestic demand.

At the Brisbane summit in 2014, the G20 leaders agreed an ambitious goal to lift the level of G20 GDP by at least two per cent by 2018. But only eighteen months on, the 2 in 5 commitments are starting to look more like the 5/2 diet. Less than half of the measures have been implemented, and only around one third of the promised impact on global GDP has been delivered. Moreover, whilst implementation has lagged, the need to boost growth has increased in size and urgency. The Bank of England projects the level of global GDP in 2018 to be over 3% below what the IMF expected at the time of the Brisbane summit. We need to live up to China’s G20 priorities. Structural reforms with a long-term focus but a short-term implementation horizon. Determined reform of the global architecture for sustainable capital flows. The development of our essential macroprudential frameworks and the implementation of our financial reform commitments to address new vulnerabilities. These will allow monetary policies to fully bridge to a better future. Conclusion That future needs the arms of macro policy to operate in close concert, domestically and internationally. Demand stimulus alone will not sustainably reflate the global economy. Moreover, sustained low rates could strain the capacities of macroprudential policies. At their roots, fiscal, monetary, financial and structural policies are deeply complementary, operating through many of the same channels. A stronger financial system can better channel savings to investment, building demand in the short run and productivity in the long run.