samchain/econo-pairs-v1 huggingface dataset:
Interestingly, there is a small amount of trading in the repo market that takes place slightly below the ON RRP offered rate; this largely reflects lending by firms that are not New York Fed counterparties and therefore cannot participate in our operations. Second, within each market, I see periodic, transitory jumps in dispersion. In the unsecured market, these typically occur on month- and quarter-end dates.28 We don’t typically observe this pattern in the customer-to-dealer repo market, but did see a spike in dispersion on June 24, 2016, the day after voters in the United Kingdom chose to leave the European Union.29 This spike might reflect the pricing-in, for a brief moment, of a modest increase in counterparty-level risk related to this development. 7 / 13  BIS central bankers' speeches  These shifts in unsecured market activity around period-end dates are consistent with the incentive provided by the leverage ratio requirement. The frequency of the leverage exposure calculation differs by jurisdiction: the U.S. and UK require a daily or weekly average calculation for on-balance-sheet exposures for their supervised banks, while some other jurisdictions only require a quarter-end calculation or average of the three month ends within the quarter. As discussed earlier, the leverage ratio requirements in the U.S. apply to insured depository institutions, BHCs and IHCs operations of foreign banking organizations.

However, in the absence of acute financial stress,  the impact of counterparty risk on interest rates paid by well-capitalized financial firms is likely to be quite modest for overnight or short-term tenors. 34 In other jurisdictions there is also evidence that a restricted supply of good collateral is exacerbating the impact  of these factors. 35 12 / 13  BIS central bankers' speeches  35 A number of other factors have likely been relevant at the margin. For example, monetary policy divergence  across currency areas, and shortages of high-quality foreign collateral, may have put pressure on FX swap markets. See Nakaso, “Monetary Policy Divergence and Global Financial Stability: From the Perspective of Demand and Supply of Safe Assets,” January 20, 2017. 36 Much net borrowing in interdealer repo comes from smaller or less creditworthy dealers, and a large portion of  foreign exchange swap borrowing market appears to come from firms that have large dollar asset holdings and copious foreign-currency financing, but that lack a U.S. deposit base or direct wholesale dollar money market presence. To the extent that these firms had previously had access to financing from money market funds, in many cases this came from prime funds, which as I mentioned earlier have shrunk considerably. The apparently short-run inelastic demand for funds from these firms has supported higher intermediation spreads in these markets, particularly on period-end dates.
20/11/2020  COVID-19 and the liquidity crisis of non-banks: lessons for the future  SPEECH  COVID-19 and the liquidity crisis of non-banks: lessons for the future         Speech by Isabel Schnabel, Member of the Executive Board of the ECB, Financial Stability Conference on “Stress, Contagion, and Transmission” organised by the Federal Reserve Bank of Cleveland and the Office of Financial Research Frankfurt am Main, 19 November 2020 The reforms that followed the global financial crisis of 2008 have made our financial system safer and more resilient. Tighter regulation and higher capital ratios have been key factors enabling banks to act as shock absorbers rather than shock amplifiers during the coronavirus (COVID-19) pandemic. At the same time, the crisis has been a stark reminder that there are still considerable vulnerabilities in the financial sector. In particular, there has been a divergence between the comparatively lean regulation of the non-bank financial sector and its increasing role in financial intermediation across the globe. This divergence has measurably augmented the risks of perilous macro-financial feedback loops, which may also affect the conduct of monetary policy. In my remarks today, I will discuss how prevailing structural fault lines caused a liquidity crisis in the nonbank financial sector in the spring, which amplified market stress, including through forced asset sales, and how monetary policy had to respond to stabilise markets.

(1999), “  Do efficient financial markets mitigate financial crises?”, speech before the 1999 Financial Markets Conference of the Federal Reserve Bank of Atlanta, Sea Island, Georgia, 19 October. [4] The net asset value spread refers to the difference between the price at which exchange-traded fund shares trade and the net asset value of the underlying portfolio held by the fund per share. This may also suggest that exchange-traded fund prices provided more upto-date information, thereby supporting price discovery. See Financial Stability Board (2020),  Holistic Review of the March Market Turmoil, 17 November. [5] Duffie, D. (2020), “  Still the World’s Safe Haven? Redesigning the U.S. Treasury Market after the COVID-19 Crisis”, Hutchins Center Working Papers, No 62, June. [6] It is even conceivable that the market turmoil could have been worse without the more stringent regulatory requirements on dealers, which helped to ensure their resilience during the spring. [7] At the same time, higher cash holdings were associated with substantially weaker performance in 2018-19 compared with previous years, potentially reflecting the high costs of holding cash in a low interest rate environment. [8] Schrimpf, A. et al. (2020), “  Leverage and margin spirals in fixed income markets during the Covid-19 crisis”, BIS Bulletin, No 2, Bank for International Settlements, 2 April. [9] Vivar, L.M. et al. (2020), “  Burned by leverage? Flows and fragility in bond mutual funds”, Working Paper Series, No 2413, ECB, May. [10] Vassallo, D. et al.
But stability at the macroeconomic level does not mean stability for individual firms or industries. Indeed one of the virtues of macro stability is that it allows – indeed forces – firms to focus on the real long term business challenges and opportunities they face rather than how to survive or profit from the short-term cycle. It is not a paradox therefore that the Great Stability has also been a time of great change in industry in ownership, structure and technology. The Engineering Employers’ Federation has itself stated that ‘manufacturing prospers best in a stable macroeconomic environment with low inflation, low interest rates and stable exchange rates’. 3 That is not because they are a recipe for a quiet life but because they allow businesses to focus on what really matters – their products, their technology, their customers and their competition. In the last few years, macroeconomic stability has provided business with a platform for rapid changes in ownership, location and product mix, and for the transformation by IT of all business processes in the factory, the warehouse and the office. 1  Bean, C (1998), ‘The New U.K. Monetary Arrangements: a view from the literature’, Economic Journal, November. 2  ‘The Inflation Target Five Years On’, Quarterly Bulletin  3  ‘Manufacturing in the UK’, Engineering Employers Federation, May 2005.

BIS Review 70/2006  1  Globalisation and UK manufacturing Looking wider than the UK, one of the most striking changes of the last few years has been the integration of China, India and countries from the former Soviet Union into world markets and the sharper competition that is bringing first into goods markets and, increasingly, into services also. The EEF report, ‘Where now for manufacturing?’, published at the end of 2004, highlighted the ‘huge increase in the importance of lower-cost countries as competitors’. Just under half of companies surveyed by the EEF saw China as the biggest competitive threat to their activities and nearly 60% identified China as a major competitive threat over the next five years. That was sharply up on the equivalent figure of 18% in 2001, illustrating that the change was occurring faster than companies then foresaw. One of the consequences of the globalisation of production is that a reduced proportion of output in the developed economies is in manufacturing. This is true of the UK, where manufacturing accounts for less than 15% of GDP, but also of France, Spain, the Netherlands and US (Chart 2). 4 Some have felt the blunt end of this competition from Asia. But the emergence of China and others has also created opportunities. It has encouraged UK manufacturers to specialise in those products for which they have a comparative advantage over their competitors, prompting a change in structure and focus of the UK manufacturing sector.
RIX thus plays a very central role in the Swedish economy, as it is the economy's “circulatory system” through which the Riksbank acts when supplying liquidity to promote financial stability and also when conducting monetary policy. As a result of the increasing internationalisation, the rapid technological developments and the emergence of new regulations, RIX, like the central payment systems in many other countries, is currently facing strong pressure to change. One effect of these developments is that an increasing number of credit institutions and some other institutions want to be able to participate directly in the payment system, instead of through agents. With more participants in the RIX system, the concentration risks will decline, as there will be more institutions that have the possibility to borrow directly from the Riksbank, which is positive. But a larger number of institutions, and new types of institutions, becoming participants in RIX could also lead to the risks of other problems increasing, such as operational problems, money laundering, financial problems and cyber threats. It is therefore important that the Riksbank regularly oversees the participants in RIX and has the power of authority to make strong demands of them. Thus it is essential that the Sveriges Riksbank Act provides sufficient flexibility in this respect. Function as Lender of last resort – emergency liquidity assistance A third important part of the central banks’ responsibility for the efficiency and stability of the financial system is the task of providing emergency liquidity assistance.

SPEECH DATE: 29/01/2018 SPEAKER: First Deputy Governor Kerstin af Jochnick LOCALITY: Sveriges riksbank, Stockholm  SVER IG ES R IK SB AN K SE-103 37 Stockholm (Brunkebergst org 11) Tel +46 8 787 00 00 Fax +46 8 21 05 31 registratorn @ riks ban k.se www.riksb ank.s e  How the Riksbank contributes to financial stability* In Sweden we have a large financial system, which contributes positively to jobs and growth. But it also entails risks, not only for financial companies, but also for the entire Swedish economy. We have in modern times experienced two bank crises, which the responsible authorities have succeeded in managing in a good way, but which have in the long run lowered production levels and thus general welfare in Sweden. Discussing what central banks and other authorities do in the field of financial stability is therefore important. Right now it is particularly interesting to discuss what the Riksbank does, as the Riksbank Committee is in the process of reviewing the Sveriges Riksbank Act. One of the areas the Committee is to analyse is precisely the Riksbank's responsibility for financial stability, and it is good that this is clarified. The current act says that the Riksbank shall "promote a safe and efficient payments system”. The concrete meaning of this text is not self-evident, but the Riksbank has interpreted it as a task of promoting financial stability.
Given the key role that human capital plays in our nation’s growth, this is an important issue. We at the New York Fed will continue to monitor school finances and other education indicators in our region closely as this will, over time, affect our regional economy. Conclusion In summary, during the second half of 2011, growth slowed in New York, falling well short of the national rate, although New Jersey kept pace. It’s also important to note that the national labor market is showing more consistent signs of improvement, and the regional labor market has continued to make progress. However, at the national level, the pace of recovery remains sluggish by historical standards and is likely to slow somewhat in early 2012. Thus, unemployment, both nationally and locally, is likely to remain unacceptably high for some time. Also, inflation is likely to be below our objective for several years. Clearly, much work remains to achieve the Fed’s dual mandate of maximum sustainable employment in the context of price stability. The Great Recession has affected education financing in both New York and New Jersey, but New Jersey was hit harder. Through its impact on the education of the next generation, this situation could have troubling implications for the ability of the next generation to succeed in the demanding jobs of the future. I will now ask Jason Bram to provide additional details on the regional economy. 4  For more detail, see Chakrabarti, Rajashri and Elizabeth Setren. 2011.

At the micro-supervisory level, the PRA Board will need to explain some of its remedial measures using the published stress tests. This can make for a richer public discussion of prudential supervision, as well as encouraging firms to address latent vulnerabilities promptly. That brings me back to resolution. Occasionally a firm will be revealed to be so feeble that major surgery is needed. Sometimes recovery measures, overseen by the supervisors, will suffice. Sometimes they will not, with a firm having to go into resolution instead. A sensible stress-testing regime – indeed effective supervision in general – cannot work without a welldesigned resolution regime. That should not be a surprise, but is in fact one of the great lessons of the crisis. Conclusion Over past decades, banking, and banking supervision, somehow got detached from the most essential truth: that banks can fail. Thus, we have banks using brands that do not represent any legal entity, as if banks were simply trying to sell something, not running a business in borrowing and lending. We have an international regime that encourages but does not require adequate loss-absorbency in each and every entity within a banking group. We have had a regime that is focused on the capital needed in a going concern, but not on the organisational and capital structures that would help the authorities to contain disorder in the face of chronic distress. All those issues are now, I believe, in the open. There is a clear way forward on resolution.
At the Swedish Economics Associations’ proceedings in February 1996 he called for each debater to answer the following questions explicitly or implicitly: (i) Do you apply the same inflation target as the Riksbank, or another inflation target, or any other target? (ii) Do you make the same forecast as the Riksbank or do you make a different assessment? (iii) Do you know of a better way of attaining the target?13 These questions appear as relevant today as they were twenty years ago. Secondly, I have discussed how one should view a situation where it takes longer for inflation to attain the target, despite the Riksbank doing everything it can to avoid this happening. This is not a situation we expect to find ourselves in, but there is nevertheless reason to seriously consider and examine it. If such a situation were to arise, it would very important to clearly communicate that the inflation target has not been abandoned, to prevent long-term inflation expectations from falling excessively. As the central bank determines inflation in the long run – inflation is a monetary phenomenon – there are also good reasons for expectations of long-term inflation to remain in line with the target. This is important to maintain a smoothly-functioning price-setting and wage formation, but also for monetary policy to be able to counteract future economic downturns. Communicating this is a difficult but hopefully not impossible task.

In the long run, it is monetary policy that determine the rate of inflation in the economy and “rational” long-term inflation expectations should therefore still be in line with the central bank's target for price stability. If the public makes this presumption, the negative consequences of taking longer to attain the inflation target will be much less serious. 11 [20]  Concluding comments Let me round off. My purpose here has been to do two things. Firstly, I have tried to put the recent debate on monetary policy into perspective. I have discussed the criticism raised against our policy in general and against the negative repo rate in particular. As I hope I have made clear, there are some gaps in the criticism. I noted earlier that the main argument is often merely that monetary policy for various reasons is wrong. What I feel is often missing is a discussion of why the advantages of the inflation target should no longer apply and what the consequences would be if the Riksbank abandoned it. It is no new phenomenon that the debate fails to answer important questions. In the mid-1990s, when the inflation-targeting regime was relatively new, Lars E.O. Svensson, who was then scientific adviser to the Riksbank and later a member of the Executive Board, argued that the debate often lacked structure.
While we are developing it on centralised infrastructure, it will be able to interface with innovative payment systems and providers, including those based on Distributed Ledger Technology.6  2/6  BIS central bankers' speeches  How central banks can influence the outcomes of innovation The role of central banks in providing core payments infrastructure is crucial. Central bank money is a public utility that underpins our financial system and supports the key mission of central banking: monetary and financial stability. Economic history demonstrates that across many sectors reliable, modern and harmonised public infrastructure is essential for private innovation to thrive. Payment systems have often been described as the “plumbing” of the financial system: both a reflection of how essential they are and perhaps of how little most people think about them. Another comparator could be the road network. Efficient road networks underpin supply chains and move goods and services across borders. Governments develop the road network to fit the needs of businesses and consumers that use the roads. But they have a bigger social purpose too: they allow children to get to school, ambulances to pick up patients and friends and family to meet. At the same time, the design of the road network also affects the behaviour of users and businesses – the quality and directness of particular roads will impact on the routes chosen. And governments set the traffic laws and regulations to ensure everyone can travel efficiently, but safely, and use technology such as speed cameras to check compliance.

1 See for instance Hasan et al (2013)Opens in a new window 2 Pay.UK Monthly UK Payment Statistics December 2021Opens in a new window 3 BIS Quarterly Review, December 2019.Opens in a new window 4 KPMG ‘UK fintech investment soars to $ billion in 2021 – up sevenfold from 2020’Opens in a new window 5 McKinsey Global Payments Report 2021Opens in a new window 6 RTGS Renewal Programme Proof of Concept: Supporting DLT Settlement Models 7 A blueprint for a new RTGS service for the United Kingdom 8 Bank of England: RTGS Renewal 9 BIS Innovation Hub LondonOpens in a new window 10 Global Payments: The Interactive EditionOpens in a new window 11 FSB (2021) Targets for addressing the four challenges of cross-border payments: Final reportOpens in a new  window  6/6  BIS central bankers' speeches
[Slide 10] shows that even in the early days, we tried to get across uncertainty around our projections, illustrating this with a “trumpet” of uncertainty in the left hand panel. It was not until 1996 that we introduced the more sophisticated fan chart, on the right, as our main device for communicating about the outlook. As part of that evolutionary process, and to complement our projections for inflation, the MPC has also produced fan charts for activity in the economy – specifically GDP – since November 1997. Ordinarily, we have shown this as a projection for the four-quarter growth rate, which for most commentators, is the standard way of looking at GDP. [Slide 11] shows the recent data for GDP, portraying a sharp decline in output over the past two years. There are two points to highlight with this chart. First, there is a fan around the historical data [Slide 12]. That reflects the fact that economic data are frequently revised over time – sometimes heavily. CPI, in contrast, is rarely revised. The chart shows that there is quite a lot of uncertainty about the past data. The MPC believes it is more likely than not that the current vintage of data will be revised up slightly. But the big picture of a large decline in output is likely to remain even in the mature data. Uncertainty about the past is an important component of our uncertainty about the future, and is reflected in the forward-looking part of the GDP fan [Slide 13].

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