samchain/econo-pairs-v1 huggingface dataset:
Nevertheless, this does look to be a case where rapid growth has gone hand-in-hand with loosening supply and rising risk. In the concluding section I’ll make some brief points about policy. The superior predictive power of debt growth What we saw in Charts 3 and 4 was that, at least in that 17-country sample, prior growth rates of debt were better predictors than levels of a country’s economic performance after the last financial crisis. Even if they went into the crisis with relatively high levels of gearing, countries with below average growth rates of debt had a less severe experience after the event. A much more complete study by economists at the Bank, based on the experience of 26 advanced economies over many economic cycles, dating back 50 years, found very similar results.3 Charts 7 and 8 are one way of expressing those. They show what you might expect of a country’s relative economic performance during a recession if, based on these results, you knew only that aggregate debt: income ratios beforehand were 10% points higher than the average and then if the growth in that ratio was 10% points higher. The second has proved much more informative than the first. 3  Bridges et al. (2017).

Chart 13: The near-term indicators of house price growth have weakened  Chart 14: Interest cost of mortgages will probably remain below average for a while  Balance 80 60 40 20 0 -20 -40 -60 -80 2000  Per cent 12  Per cent 8 6 4 2  8  0  6  -2 -4 -6 2005 2010 2015 RICS price expectations balance (LHS) House price growth (RHS)  Sources: Royal Institution of Chartered Surveyors (RICS) Residential Market Survey, ONS, Land Registry and Bank calculations. RICS price expectations are three month ahead net balances. 10  4 2  Average 1993-2007Q2  0 1987 1992 1997 2002 2007 2012 2017 2022 Sources: ONS, Thomas and Dimsdale (2017) sheet M12, Bank of England, Barclays Live and Bank calculations. The fan is calculated using probability distributions implied by options on sterling interest rate swaps. For further information on how option-implied distributions are derived, see Clews, Panigirtzoglou and Proudman (2000). I can now (finally) get to the point I wanted to make about interest payments. Even if low bond yields don’t presage rapid growth of house prices, one thing they do suggest is that interest payments on mortgage debt will also remain relatively low. Chart 14 plots those payments over the past, as a share of household income. It also includes a range for the future. This assumes that mortgage debt continues to grow in line with household income (whatever that turns out to be).
The first of these is the launch of the code of conduct for FX dealers by the end of this quarter. On behalf of the Bank, I would like to thank everyone involved, especially the ACI, for your considerations and suggestions that have made this long-term project a feasible one. I hope that the code of conduct will help guide fair and ethical market practices and increase confidence among the market participants for many years to come. 10. Another development is in the area of market reference rate reform. The transaction-based valuations to the benchmark calculations for the Thai Baht implied interest rates (THBFIX) will be introduced in the second half of this year, in place of the current survey-based model. The change is in line with the approach adopted by many other countries to reduce the risk of rate manipulation that has become the subject of vast discussions over the past few years. With these reform efforts underway, I hope the Thai financial markets will continue to inspire confidence among the market participants and allow us to move through these uncertain times with minimum disruptions. 11. Ladies and gentlemen, without further delay, let me conclude by congratulating the winners of the FX awards once again. I would also like to reiterate my thanks to Thomson Reuters for the invitation as well as for your continuing support as an important facilitator and information provider in the Thai financial markets.

The Bank was left with egg on its face, but neither the City nor the economy were scrambled. That was probably as much by good luck as design. At the time, the macro-monetary and financial stability arms of the Bank rarely crossed or co-ordinated. The monetary policy side dealt with the economy, at a macro level. The financial stability side dealt with financial firms, at a micro level. One had a bird’s eye view, 11 12  Bailey (2020). See King and Plosser (1985), and Leeper (1991). 9  All speeches are available online at www.bankofengland.co.uk/news/speeches and @BoE_PressOffice  9  the other a worm’s eye view. But the bird and the worm rarely socialised. The Bank’s macro-economic brain was largely detached from its micro-supervisory hands. You needed only to visit the Bank’s restaurant building in the early 1990s to spot this difference. On the ground floor was both a wine bar and a pub. If you visited the pub on a Friday you would spot the economists, probably in knitwear. If you visited the wine bar you would see the bank supervisors, probably in tweed. Beer and wine do not mix and nor did the beer and wine-drinkers. It was probably just as well there were no systemic crises at the time requiring these two tribes to co-ordinate their analysis and actions. The bank failures of the 1980s and 1990s contributed to the decision to strip the Bank of responsibility for supervising financial firms, soon after monetary policy independence. The two decisions were linked.
It is usually considered desirable to have not only stable prices, but also as stable an economy as possible. One important question is therefore how monetary policy can contribute to this. The preliminary work to the new Sveriges Riksbank Act considered it natural that monetary policy could not be formulated merely in relation to price stability. The working group that produced the new act considered that the Riksbank should, without neglecting the long-term price stability objective, support the economic policy objectives of sustainable growth and high employment. However, the group also saw this as a natural consequence of the Riksbank being a public authority under the Riksdag. It was thus unnecessary to confirm by law any objectives other than price stability. The group also considered that it would be inappropriate to have several statutory objectives, as monetary policy is a blunt instrument and cannot affect, for instance, how growth and employment develop in the long term. In other words, the question has never been whether monetary policy should consider the real economy, but rather how this can best be done without neglecting the price stability objective. In practice, monetary policy takes the real economy into account in that we do not aim to bring inflation back on target as quickly as possible in every situation. When there is a deviation from target – which happens most of the time – our ambition is normally to return inflation to target within a time period of two years.

When economic developments are instead mainly driven by changes in demand, the conflict between the price stability target and the ambition to subdue fluctuations in the economy is not as clear. If, for instance, demand falls, the result will normally be that inflationary pressures also decline. An expansionary monetary policy can in this situation contribute to stabilising both inflation and activity in the real economy. There may then be justification for aiming to attain the inflation target within a shorter period than two years. Of course, in practice it is not always easy to distinguish what shocks the economy has suffered and with an active monetary policy there is always a risk to reinforce, rather than subdue, fluctuations in the real economy. The fact that it also takes time before the full effects of monetary policy have become visible and that it is uncertain how much scope there is for monetary policy stimulation also makes it more difficult to implement the policy. One therefore should not expect monetary policy to be able to fine tune economic activity to any great extent. This description of what monetary policy can and cannot achieve is currently an accepted view that is well documented in the research field of flexible inflation targeting 1 . However, it is not possible to justify theoretically that the central bank should aim to bring inflation on target within a particular set  1  See, for instance, Svensson, Lars E.O.
For instance, a review can be performed of the way the banks calculate borrowing capacity using discretionary income calculations, and the scenarios a borrower can withstand. As part of their credit assessment procedures, banks should also ensure that all mortgage customers can cope with amortising their mortgages at a certain rate. One way of influencing amortisation behaviour could also be to clearly inform customers about the long-term consequences of different rates of amortisation. The government has commissioned Finansinspektionen to investigate the conditions for placing requirements on banks to provide mortgage customers with tailored advice about suitable rates of amortisation, which is a step in the right direction. In terms of the possibilities of macroprudential policy, we can, with different types of capital requirements, increase the banks’ buffers and, with various supplementary measures, increase the buffers of borrowers (households in this case). The higher buffer requirements will affect the costs of borrowing, and could thus also contribute to curbing credit growth. Because all of these measures ultimately affect the cost of borrowing in one way or another, it might be appropriate to use a little of several tools rather than a lot of one, since different tools affect various groups in society slightly differently. Also, the use of several tools can reduce the possibilities of regulation arbitrage.

The discussion will specifically focus on aspects of central bank boards as well as lessons and conclusions drawn from the February Seminar. Ladies and Gentlemen, I have no doubt that deliberations of this Seminar will be of great benefit to all of us. I also hope your journey to Sri Lanka will give you a chance to see a little of our country and meet our people. We have arranged for you to see some places of interest in Sri Lanka. Let me conclude by wishing you a productive Seminar and pleasant stay in Sri Lanka. Thank you. 2/2
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Term structure models show that, over the past year, a rise in the term premium accounted for a significant portion of the increase in the ten-year OIS rate (Slide 11, left-hand side). The ten-year OIS term premium currently stands at its highest level since 2013 (Slide 11, right-hand side). The rise in the term premium reflects two interrelated developments. One is the fundamental change in the euro area’s inflation environment (the “nominal” term premium). The ten-year inflation risk premium increased sharply after a long period of persistently low inflation (Slide 12, left-hand side). About a year ago, it turned positive for the first time in almost ten years. The other development relates to the uncertainty about the future path of short-term interest rates (the “real” term premium). The increase in inflation uncertainty, together with the retirement of forward guidance on policy rates, has raised uncertainty about future policy rates and hence market volatility (Slide 12, righthand side). As it turns out, the changes in the ten-year OIS term premium can largely explain the gap that has emerged between euro area sovereign yields and the expected future path of short-term interest rates. [20] In other words, changes in the risk-free rate have been the prime market driver, so that the spread of the euro area ten-year GDP-weighted yield over the equivalent OIS rate has remained broadly stable over the past two years (Slide 13, left-hand side).
Zeti Akhtar Aziz: Malaysia - encouraging savings in a dynamic economy Opening remarks by Dr Zeti Akhtar Aziz, Governor of the Central Bank of Malaysia, at the launching of the Merdeka Savings Bond, Kuala Lumpur, 2 January 2004. *  *  *  Ladies and Gentlemen, It is my honour and pleasure to welcome you to the launch ceremony for the Merdeka Savings Bond. The launching of this bond marks another step forward in our efforts to enhance the diversity of financial products for Malaysian consumers. In this more dynamic environment, the Malaysian economy has continued to expand with per capita income rising to exceed levels prior to the Asian financial crisis. This growth has been supported by comprehensive pro-growth policies and the development of a much stronger banking sector that is able to better manage new risks and challenges. As a trade-oriented economy, external developments will continue to be important in affecting our growth prospects. In order to reduce our vulnerability to adverse external developments, increased attention has been given to promoting domestic demand. Policy strategies have therefore been directed at promoting domestic consumption and investment. Low interest rates, together with policies to increase disposable incomes, have led to higher consumption and a recovery in private investment. These trends have been important in sustaining growth. As a high savings country, Malaysia has the potential to promote a higher level of consumption without undermining the prospect for financing of private investment from domestic sources.

Secondly, in order to make it easier for investors to purchase the bonds, all commercial and Islamic banks, as well as Bank Kerjasama Rakyat, have been appointed as agent banks. The public may start applying for the bond beginning 5 January until 30 January 2004. Thirdly, profits will be paid to investors on a quarterly basis. Through the quarterly payment of profits, investors will receive a steady stream of income to support their expenditure needs. For the first issuance, the Merdeka Savings Bond offers a profit margin of 5% per annum. At 5% per annum, the return is higher than interest rates paid for 12-month fixed deposits by the commercial banks. The income earned from the bonds will also be exempted from tax. The Merdeka Savings Bond also provides investors with the benefit of early redemption without any penalty in terms of forgone profits. Investors can redeem the full amount of their initial investments at any time after the first profit payment. Profit payments will then be based on the number of days the bond is held. This feature gives investors the option and flexibility to withdraw their savings at any time to meet unanticipated expenses. There will be a dedicated hotline and website to attend to public queries regarding the bonds. The launch of the Merdeka Savings Bond marks a further step forward in creating new investment instruments for a specific target group of savers who have retired. Moving forward, further savings products should be developed by the financial services industry.
First, banks play a crucial part in the transmission of monetary policy. There are various channels through which monetary policy is transmitted to the economy, but the primary channel is via changes to the short-term nominal interest rate, in other words, via the cost of borrowing and the return on savings. Monetary policy thereby affects investment and consumption decisions throughout the entire economy, thus influencing business level activity and price dynamics. In its implementation of monetary policy, the SNB provides short-term liquidity to the banking system, and not directly to firms and households. Banks, as financial intermediaries, in turn transmit these monetary policy decisions to the real economy. The extent, however, to which the banks respond to these decisions – by changing their interest rates on deposits, loans and their credit supply – depends on a number of factors, such as the degree of competition, but also the banks’ balance sheets. The effects of monetary policy can thus be impaired if banks have poor balance sheets. Thus, the banks’ function as financial intermediaries is a welcome and influential channel through which the SNB’s monetary policy decisions affect the economy. There is, however, a downside to this role. The banking sector can also propagate large financial shocks to the rest of the economy. In other words: the financial industry itself can have a large impact on the economy. In Switzerland, the propagation of financial shocks to the real economy is potentially large in magnitude.

The Swiss National Bank (SNB) has also faced a number of challenges since the onset of the global financial crisis in 2007. We have repeatedly been forced to counteract the adverse effects of enormous shocks to the Swiss economy, in line with our mandate to ensure price stability, while taking due account of economic developments in Switzerland. At the current juncture, the economic uncertainty in the euro area, in particular, is of great concern to Switzerland and the SNB. While we cannot influence the developments in the euro area, we can act in a resolute and timely manner to dampen the negative implications for our country. The most visible measure we have taken is undoubtedly the introduction, almost exactly one year ago, of the minimum exchange rate. In the current situation, a further appreciation of the Swiss franc would constitute a very substantial threat to the Swiss economy, and would carry with it the risk of deflationary developments. With this in mind, we will continue to enforce the minimum exchange rate with the utmost determination, in line with our mandate. Today, however, I do not want to talk primarily about monetary policy, but about the Swiss financial industry. Allow me to start by explaining why the financial industry, in general, and a healthy and stable banking sector, in particular, are of vital interest to the SNB. There are two main reasons. First, the banking system fulfils a key financial intermediary role in the economy.
The only differences are that just banks can hold reserves and reserves can be turned straight into cash at the central bank, whereas Treasury bills would have to be sold or repo’d out first. Under Ricardian equivalence, quantitative easing of the sort undertaken by the Bank of England and the Federal Reserve should then be irrelevant because private agents internalise the tax implications of the associated changes in the consolidated public sector balance sheet. I think the empirical evidence from the growing number of event studies and the like strongly suggests that this is not the case and that market imperfections give the policy traction by reducing term premia. This, I believe, was particularly true during the worst of the post-crisis recession, though it may have become less so as markets have returned towards normality. That is reinforced by recent market movements in response to heightened anticipation that the Federal Reserve will shortly begin to taper its purchases. A more serious objection is that they are simply the wrong policy to deal with the problem at hand. Low policy rates and quantitative and credit easing all seek to encourage the intertemporal switching of spending from the future to the present. But, according to the critics, that just leads to further debt accumulation and is inimical to the adjustment necessary to unwind the excesses of the pre-crisis period (see Rajan, 2013, for a lucid exposition of this view).

And a long period with underutilised resources may cause durable damage to the supply capacity of the economy through a variety of hysteretic mechanisms, such as skill atrophy on the part of the unemployed and foregone opportunities for learning by doing. In any case, to me this sets up a false dichotomy. There are both Keynesian and Hayekian dimensions to the post-crisis environment. A “two-handed” approach is called for, in which supportive aggregate demand policies on the one hand are complemented by policies that facilitate the necessary restructuring, particularly of the banking sector, on the other. So rigorous evaluation of the assets on banks’ balance sheets, followed by recapitalisation, should be the order of the day (see Tucker, 2013, for a similar perspective). The United States has been a model in this regard. In Europe, we have lagged a little, but are now catching up. In the United Kingdom, the Prudential Regulation Authority, at the instigation of the Bank’s Financial Policy Committee, has required several of our major banks to strengthen their capital buffers against potential losses. And, in the euro area, the European Central Bank is about to undertake an in-depth health check of banks’ balance sheets. Of course, there are some risks attached to pursuing such accommodative monetary policies. Quantitative easing can threaten future financial stability if it leads investors into excessively leveraged positions in the search for higher yields.
Overall, however, both from the point of view of how policy is determined, as well as how it is communicated, it is the broad distribution that matters. 8. Conclusions  Self-confidence is infectious. It can also be dangerous. How often have we drawn false comfort from the apparent confidence of a professional advisor promising certain success only to be disappointed by subsequent performance? Uncertainty pervades almost all public policy questions. Economics and many other disciplines are united by a common need to grapple with complex systems. As the crisis of the autumn of 2008 showed, such systems can sometimes be subject to abrupt changes, the precise timing of which cannot easily be identified in advance. But policy-makers are often expected to anticipate the unpredictable. How can they retain the trust of the public while being open about the true degree of uncertainty? Or, to put it another way, what is the appropriate bedside manner for policymakers when dealing with complex uncertain problems in a public debate? We have explained how the Bank of England tries to deal with some of those challenges in the context of monetary policy. We are sure we have much to learn, and our efforts to improve communication will continue for a long time to come. References Anderson, R and May, R (1991), “Infectious diseases of humans: dynamics and control.” Oxford University Press. Arrow, K (1995), Interview with “The Region” magazine, available http://www.minneapolisfed.org/publications_papers/pub_display.cfm?id=3675. at  Asch, S E (1951), “Effects of group pressure upon the modification and distortion of judgment”.

The fan charts are useful because they contain information relevant to the likely distribution of Bank Rate. To explain its current policy setting, and to provide  BIS Review 36/2010  9  information on the likely path of policy, the MPC needs to communicate its judgement of the outlook as a whole. Most other central banks also try to illustrate uncertainty around their projections, albeit in slightly different ways. The European Central Bank, for example, presents its forecasts as a range defined as twice the mean absolute forecast error over the past [Slide 7]. The Federal Reserve produces projections that show the range of individual [most likely] forecasts – as viewed by each Federal Reserve Bank President and Governor. This is shown by the spread of the whiskers [Slide 8]. They also produce a measure of “central tendency” which truncates that distribution by excluding the three highest and three lowest forecasts, here represented by the boxes. This representation of the differences of view within the Federal Reserve is very different from a probability distribution of future outcomes. In our experience, communication of the uncertainty about future inflation is important in explaining monetary policy. The Swedish Riksbank adopts a similar approach to ours and use fan charts as their key tool for communicating views on the outlook. [Slide 9]. Looking back, we can see how our communication strategy has evolved in the light of experience over the past 17 years.