samchain/econo-pairs-v1 huggingface dataset:
Such stability in the nominal exchange rate vis-à-vis the euro over the two-year period in ERM II would indicate that the economy has converged well and is flexible enough to absorb economic shocks without having to change the exchange rate. The signalling effects stem from the multilateral nature of ERM II. The joint announcement of a new member's central parity rate by all the parties involved sends a message to the markets that these various entities collectively consider that rate to be an appropriate exchange rate for the economy. Will participation in ERM II affect the status of the lira during this phase? During ERM II, the Central Bank will continue to play its current active role in the areas of monetary and exchange rate policy. The lira will continue to be the legal tender currency of Malta until the euro is adopted. Until then, and while Malta participates in ERM II, the euro will, to all intents and purposes, be treated as any other foreign currency. How will the central parity rate in ERM II be determined and what other decisions need to be taken with respect to Malta's participation in ERM II? The central parity rate will be jointly agreed by euro area ministers, known as the Eurogroup, Malta's Minister of Finance and the Governor of the Central Bank of Malta.

By law, however, exchange rate policy is a joint responsibility of the Bank and the ministry. Decisions on the exchange rate, therefore, cannot be taken, or announced, unilaterally by the Bank. ERM II is no exception. This does not, of course, preclude the Bank from expressing its independent views on aspects related to euro adoption. The Bank has indeed contributed actively to the debate by way of articles in its publications and official statements. I have also expressed the Bank's views through speeches and interviews - all of which can be accessed on the Bank's website - on what would seem an appropriate approach to take with respect to euro adoption and on the economic policy measures the country should take to make this goal realisable. These views were also conveyed very clearly in meetings with the government. Is there a deadline for the fulfilment of the relevant criteria for euro adoption? In particular, is there a deadline for entry in ERM II? The Treaty only makes it obligatory for all new Member States to participate fully in Economic and Monetary Union (EMU) at some point after EU accession. EMU is a process which foresees the eventual adoption of a single currency and of a single monetary policy and which is also characterised by fiscal discipline and economic policy coordination.
So far, however, there is simply not as much historical evidence availab le about the impact of QT, because we have observed more episodes of balance sheet expansion than of balance sheet contraction. A number of considerations support a prudent approach, since the response to QT could be stronger than the response to QE. First, the fiscal landscape has deteriorated in recent years. Public debt to output ratios have climbed sharply since the onset of the pandemic, because governments have run very large deficits over the course of the pandemic and because output has fallen. The current inflation surprise somewhat reduces the real value of this debt, but this effect is small compared with the strong increase in debt levels since the pandemic began. The greater the amount of debt that private markets must absorb, the lower the liquidity in sovereign debt markets and the higher the yields that markets will demand in order to equate supply with demand. Accordingly, this factor tends to magnify the impact of quantitative tightening on the term premium11. Second, the impact of balance sheet policies may also vary depending on liquidity conditions. In QE times, more liquidity injected into the system did not have a major impact since the market was saturated with excess cash and thus money market conditions were rather insensitive to additional liquidity injections.

Second, it seems reasonable to wait and observe potential ripple effects of TLTRO III repayments in bond markets before starting the bond portfolio run-off, as it will allow us to assess the effective impact of balance sheet reduction on financial conditions. After first allowing markets to absorb significant TLTRO III repayments, the normalisation of the ECB’s balance sheet could be followed by ending full reinvestment of the APP portfolio. As announced by President Lagarde last month, we will decide on the key principles of the reduction of our APP portfolio at our December monetary policy meeting. And why we should end APP reinvestments before PEPP reinvestments? In my opinion, a “first-in-first-out” staggered approach is preferable for at least two reasons. First, PEPP reinvestments remain an important line of defence against (pandemic-related) fragmentation episodes, so they are potentially pledged for reallocation across jurisdictions while the lasting vulnerabilities caused by the pandemic continue to pose a risk to the smooth transmission of our monetary policy. Second, we previously declared that PEPP reinvestments will not end up until at least the end of 2024, while our forward guidance on APP reinvestments was open-ended. We have clearly stated our intention to continue APP reinvestments for an extended period of time past the date when we started raising the key ECB interest rates. Moreover, our balance sheet policy will depend too on the operational framework that we adopt for the foreseeable future.
Yet, a fundamental policy objective should be that the recovery of activity and the repair of the financial system have to be achieved in a manner that will ensure a sustained growth performance and will prevent the recurrence of episodes of financial imbalances and market excesses that can threaten again financial stability and economic welfare. Put differently, it is important that the policies and reforms pursued today lay the foundations for sustained growth. Let me now elaborate on these issues by focusing on the role and contribution of central bank policy and of financial system reform. Central bank policy The ECB’s monetary policy and provision of liquidity have played a key role in containing the downside risks to price stability, supporting economic activity and stabilising the financial system. The extent of the monetary policy easing since last October has been unprecedented, with key ECB policy interest rates having been reduced by 275 basis points. At the same time, money market rates have declined even more from the peaks reached in October 2008 as a result of the reduction in the policy rates and the provision of unlimited liquidity to banks at a fixed interest rate (against an expanded range of eligible collateral) since last October. At present, Euribor rates of maturities up to three months are below or very close to the main refinancing rate (MRO) of the ECB and at historically low levels – ranging between 0.93% (overnight) and 1.56% (3 months).

The prompt implementation of the proposed financial reforms will not only foster sustainable growth and financial stability in the long run, but it should also contribute to boosting confidence in the financial system in the short run, thus promoting economic recovery. Fiscal policy Last, and definitely not least, it is also essential for sustainable growth and prosperity that confidence in the long-term soundness of public finances is maintained. Government deficits and public debts are rising substantially in most countries as a result of the economic downturn, discretionary measures to stimulate the economy, and the funding of the bank support schemes. This is partly inevitable – due to the downturn – and partly necessary – to help stabilise the economy and the financial system – in the short run. But it is also imperative that fiscal policies are designed and implemented in a manner that strikes the right balance between the need to support the economy’s recovery and the need to preserve the confidence in the soundness and sustainability of public finances which is key for the long-term performance of the economy. III. Conclusion  I have used the word “confidence” several times. The severity and duration of the current economic and financial crisis is partly a consequence of the reduced confidence in the prospects of the economy and the soundness of the financial system.
These are interest rates (OIS7) adjusted for inflation expectations (ILS8) and not for current inflation.9 It is real rates rather than nominal rates that reflect the true financing conditions faced by economic agents; they stem from our decisions, but also from the aforementioned expectations channel combining 7  Overnight interest swaps. Inflation linked swaps. 9 Adjusting for current inflation would equate to assuming that the inflation rate we have today is permanent, which is not the case. 8  7  Page 8 of 19  the rise in expected interest rates and the fall in expected inflation. Since the start of 2022, the real yield curve has risen significantly; we are pleased that it is now in slightly positive territory for all maturities. We also look at credit aggregates, which are much more meaningful than monetary aggregates.10 The credit channel is especially important in the euro area since, unlike in the United States, the majority of investment here is financed through bank credit. The cost of credit has risen markedly, from levels that were exceptionally accommodative. We are seeing a deceleration in volumes, although growth in outstanding credit remains strong [+6.3% in the euro area for business loans and +4.4% for loans for house purchases]. In both categories, credit is cheapest in France and is growing at above the average rate for Europe. 10  On this point, see Girotti (2021), “How monetary policy changes bank liability structure and funding cost”, Oxford Economic Papers, Vol. 73, Issue 1.

As the industry gears itself for the next phase of growth in the more challenging environment, our commitment and strategies to keep raising the bar to bring Islamic finance to a new level will enhance its prospect to contribute to achieving our shared vision of inclusive growth in an environment of financial stability. 2  BIS central bankers’ speeches
The calculations point that in the case that energy prices remain fixed at their level of the year 2002, the ratio of the current account deficit to national income will be 3.6 points lower in the third quarter of 2006 compared to its current level. As a result of the process of the structural change and the progress obtained in the macroeconomic conditions in recent years, the quality of financing for the current account deficit improved. Long-term capital has been the prevalent resource of capital inflows as of October 2006 with an annual level of 25.3 billion USD. This figure alone meets 3.4 percent of the current account deficit. Foreign direct investment inflow to our country for the same period was in record levels with 21.4 billion USD per annum. What is worth paying attention here is the lack of an interruption in the foreign direct investments flowing in our country even during the fluctuations experienced in the May-June period. This is an indicator of the improvements recorded in the macroeconomic stability and also the confidence for the future of our economy by the foreign investors. Long-term capital inflows and foreign direct investments finance a vast amount of our current account deficit currently. This financing structure is expected to continue parallel to the implementation of the current program decisively. While analyzing the sustainability of the high current account deficits in our country, it should be noted that the structure of our economy is different from the past.

Upon the emergence of the possibility of a permanent deterioration in expectations causing inflation to diverge from the targets in the medium term, the Monetary Policy Committee made effective use of the short-term interest rates as the basic policy instrument. Within this context, the Committee implemented a strong tightening policy and increased the policy rates by 425 bps to 17.5 percent in the June-July period in order to put an end to the deterioration in medium and long-term inflation expectations and also to render the inflation targets attainable in the medium term. Following this strong monetary tightening of the Monetary Policy Committee and the measures taken for financial stability, fluctuations in financial markets gradually decreased and medium and long-term inflation expectations partially improved. In this regard, inflation expectations of 12 and 24 months decreased to 7.1 percent and 5.6 percent respectively, as of the end-2006. The Monetary Policy Committee kept the policy rates unchanged in the period between AugustDecember in 2006 due to this improvement observed in inflation expectations, mild progress in international liquidity conditions and a gradually favorable outlook of the future course of inflation compared to the first half of the year. 2  BIS Review 28/2007  Dear Guests, I would like to draw your attention to two rather important factors about our decisions regarding shortterm policy rates. Firstly, the decisions that the Central Bank took regarding the short-term policy rates affect the economic activities with a certain lag, as is the case with the other economies.
Simplifying somewhat, the former view was that monetary policy operated effectively by surprising economic agents. Today, economic theory posits that monetary policy works best if it is predictable. I will come back to the economic theory, but allow me to start by some changes in society at large. Transparency of economic policy The economic crisis in the 1930s shattered confidence in free market forces. Markets had to be controlled. The British economist John Maynard Keynes was working on ways of regulating and improving markets. Prominent Norwegian economists, with Ragnar Frisch at the fore, went even further. They advocated that the market economy must be replaced by a planned economy. Ambitions were high. One could almost say that transparency, in carefully selected portions, was a tactical tool. 7 It reached a head in 1973 when a commission led by  4  Preben Munthe (1994): “Økonomen (The Economist)” in Jan. F Qvigstad, Sigbjørn Atle Berg and Kjell Storvik (eds. ): Stabilitet og langsiktighet: festskrift til Hermod Skånland (Stability and a long-term perspective: Festschrift for Hermod Skånland), Aschehoug, p. 73. 5  See for example Alan S. Blinder, Michael Ehrmann, Marcel Fratzscher, Jakob De Haan and David-Jan Jansen (2008): “Central Bank Communication and Monetary Policy: A Survey of Theory and Evidence”, in Journal of Economic Literature, 46, no. 4, pp. 910-945 and Petra M. Geraats (2002): “Central Bank Transparency”, in The Economic Journal, 112 (November), pp. F532-F556.

BIS Review 140/2009  13
Regulations typically require firms to set limits for recovery plan triggers at well above 100% LCR. [28] A 2019 survey of Basel Committee jurisdictions show that 13 of 23 members attributed their unwillingness to use HQLA to the potential regulatory response. Discussions with UK firms show that even after the regulatory communications issued during the Covid-19 stress, there is lack of clarity around how regulators will react to LCR levels below 100%. Suggestions were made to take inspiration from the capital side, for example to have clear regulatory minimums at times of stress. Second, there is the potential market reaction. Banks have to maintain a balance between utilising liquid assets in times of stress and maintaining market confidence. As such, market reaction or stigma can be an important factor behind the reluctance in using HQLA. The concern is two-fold. First, banks do not want to be seen as the first to draw on their liquidity reserves, for fear of being stigmatised as being in trouble. Second, this market stigma may then turn out to be self-fulfilling, triggering market reactions that lead to a loss of short-term funding, which may result in a bank’s failure even if it was otherwise solvent. [29] Third, there is the role of disclosures. Page 9  While disclosures increase transparency of banks’ liquidity positions and can enhance discipline and market pressure to maintain strong liquidity positions ahead of a shock, they can also lead to a range of knock-on impacts during periods of market stress.

For example, systemic firms subject to systemic leverage buffers in the UK can use their buffers with no distribution consequences. 7. The analysis suggests that in 2007, the UK CCyB rate would have needed to be set in the range of 3.5%–5% for the UK banking system to have had sufficiently large usable capital buffers to absorb losses that followed the credit boom without severely restricting lending to the real economy. A complementary analysis based on historical data on bank losses conditioned on elevated risks environment suggested a UK CCyB rate of around 5% could be warranted in these circumstances. See Bank of England Financial Stability Report ‘Financial Policy Committee Record and stress testing results’, December 2019 8. The last three shocks that hit the UK economy – the Brexit referendum, the Covid-19 pandemic and the RussianUkrainian war – did not originate in the financial system and were not related to the credit and financial cycle. 9. BCBS (2021), ‘Early lessons from the Covid-19 pandemic on the Basel reforms’  , Implementation report. 10. A bank with a preference for stable dividends is expected to be more concerned about a policy that reduces their control over those distributions and introduces volatility in pay-out profiles through the triggering of automatic restrictions. Such a bank would have incentives to reduce the likelihood of triggering these restrictions by building material voluntary capital surpluses over their regulatory buffers, potentially by constraining lending. 11.
Lifting the health restrictions has also resulted in some of the demand for services being released, prompting an acceleration in recreation, hospitality and tourism prices. In addition, changes in practices, such as the rise of working from home, have led to higher spending on household appliances, exerting further pressure on their prices. In the case of the euro area and Spain, analysing the disaggregated data reveals the following stylised facts: 1. The magnitude of the increase in inflation is unprecedented in recent times. In the euro area, August saw the harmonised index of consumer prices (HICP) reach 9.1%. In Spain, it has risen from slightly negative rates at end-2020 to 10.5% in August 2022. For context, to encounter a similar rise we need to go back to 1977. 2. This inflationary episode is characterised by its high persistence. In Spain, inflation has stood above 2% for 16 months. The last time this happened was in 2010-2011. You also have to go back to that period to find such a persistent episode of inflation above 2% in the euro area. 3. In terms of its components, the role of energy stands out. 40% of actual inflation in Spain in August was attributable to electricity (2.3 pp) and other energy (1.9 pp). The percentage is very similar in the euro area (43%). 1  4. The persistence and intensity of the rises in electricity and gas prices have been surprising.1 As a result, they lie behind a highly significant portion of the inflation forecasting errors in recent quarters.

All these initiatives, coordinated with other policies, have proven effective. Inflation remains subdued and in check, inflationary expectations are anchored, macroeconomic environment is steady and financial stability is consolidated. Looking ahead, the Bank of Albania holds that the Albanian economy will continue to face the above-cited concerns over 2013 and beyond. Although improving, economic activity is expected to remain below its potential, followed by low inflationary pressures, creating premises for maintaining stimulating monetary conditions in the future. Likewise, our  BIS central bankers’ speeches  1  projections suggest that external balances of the economy are expected to improve. On the other hand, slow economic growth rates may generate pressures on debt stability indicators, unless they are identified and taken into consideration in fiscal policy decisions. In Bank of Albania’s view, growth rate recovery will require combining the cyclical stimulus of the economy with structural measures that expand the growth potential. Regarding the cyclical aspect, the Bank of Albania holds that macroeconomic policies are rightfully stimulating. In the absence of space, fiscal policy should continue to be oriented towards long-term stability of debt indicators. The monetary stimulus is expected to be transmitted more completely in the upcoming period. We continue to underline our message that businesses and consumers should have a more realistic approach on sound perspectives for the country’s development as well as revise up their consumption and investment plans.
However, with debt maturity profiles spread out over time and much of the borrowing at fixed rates, these vulnerabilities remain contained. A third necessary differentiation is that each country stands in a different place. If I may take the example of the French financial sector, both banks and insurers have proven quite resilient, with strong capital and liquidity positions, suffering no contagion from the financial turmoil caused by the political crisis in the UK. In terms of profitability, orderly rising interest rates should also have a progressive and positive effect on banks net interest margin. All of these factors explain that CDS premiums of French banks, for example, have remained lower so far on average than that of the US, the UK, and the rest of Europe, which underlines market confidence in the solidity of the French financial system. We happen not to have pensions funds – which in this regard at least is an advantage –, and French insurance companies don’t make significant use of the same kind of derivatives that would imply margin calls. Page 7 sur 11  These thoughts about financial stability bring me to a general remark about macroprudential policy in the present and new context of tightening monetary policy. When rates were low, macroprudential policy was essential to contain financial risks, allowing monetary policy to focus on the inflation and to remain loose as long as necessary. But now, how to revise our stance in a high interest rates environment with inflation above target?

First, Europe has developed a consistent corpus of regulation on extra-financial disclosure (taxonomy, SFDR, CSDR) to tackle climate-related risks. We also took our part as central bank by carrying out a pilot climate stress test – followed by a recent ECB exercise completed this summer. Meanwhile, Europe is also adapting to the challenges arising from the digital revolution through a dedicated framework: the objective is, first, to enhance IT security requirements for the entire financial sector (DORA), and second, to establish a European harmonised regulation for crypto-asset issuers and crypto-asset service providers (MICA). Yet I hear repeatedly from the banking sector that prudential regulation is now excessive, and too much of a burden. Let me explain why these claims seem unfounded. In the past ten years, the regulatory framework has done nothing to hinder the sound financing of the European economy: in France for example, the distribution of loans to households and businesses by the French banks has even increased; since end-2010, the outstanding amount of credit grew almost three times faster than GDP (57% vs 21%). As time passes, we must be careful not to succumb to the “temptation to forget”. This very specific phenomenon has a nickname in economic theory: it is called “disaster myopia”. In order to prevent this today, we must absolutely implement the Basel III accord.