samchain/econo-pairs-v1 huggingface dataset:
If asset prices have been driven up to unsustainable levels that do not correspond to the underlying fundamentals, we are faced with a special kind of problem. We know from experience that speculative asset price bubbles eventually burst. When they do, collateral values will fall and balance sheets deteriorate, potentially threatening the stability of the banking system. To avoid this kind of development, the central bank needs to closely monitor the potential for excessive credit growth and the possibility of asset price bubbles building up. It seems that historically the forming of speculative price bubbles has been closely linked to an excessive expansion of credit. But we need to operationalise both the concept “excessive” and the difficult concept of an asset’s “fundamental value”. As history has shown us, judging to what extent rising asset prices reflect strong fundamentals, rather than the “irrational exuberance” of investors, is easier said than done. Nevertheless, certain important risks related to asset prices need careful watching in today’s world. The first risk is that imprudent lending could fuel unwarranted asset price increases - as so often in the past. Although there is little evidence to date of a general lowering of credit standards, credit growth has been very rapid and loans to finance equity purchases have risen sharply in some countries. BIS Review 65/2000  4  Ensuring that investors are not sheltered from the consequences of their sometimes misguided investments is important for maintaining prudent lending standards.

It is interesting to note that before the 1990s the predominant view was that a floating exchange rate regime was not suitable for a small open economy. Today, I believe that experience has been exceptionally good among those countries that are targeting inflation. In fact, even some emerging market countries are now building the same kind of regime. In recent years countries such as South Africa, Brazil, the Czech Republic, Poland and Thailand have been inspired to introduce a similar strategy. Consequently inflation targets are now introduced in quite a number of countries. Let me take this opportunity to commend the Governor of the Bank of Thailand and the bank’s staff for the first excellent Inflation Report that was presented in July. The report is very impressive and it has given me quite a few new ideas. The challenge during the 1990s for the inflation targeting countries has been to build a rigorous framework around the new regime. Questions like the choice of rate and index to be targeted, the usefulness of bands around the target and the degree of transparency all needed to be answered. It has also been important to formulate a monetary policy reaction function, that is, to define the balance between inflation variability and output variability. The reason why central banks do not aim for maximum short-term stability in either inflation or output is that attaining only one of the targets would be costly for the economy.
It is not possible to determine precisely where this lower bound lies, but we are confident that we still have some room for manoeuvre to lower interest rates further, if necessary. Second, the transmission of negative interest to the financial system and the economy has some peculiarities. In our experience, the transmission to the money and capital markets of an interest rate change in negative territory operates in the same way as one in positive territory. 8  9  For instance, a study by the International Monetary Fund shows that the unconventional measures taken by the Federal Reserve at the height of the financial crisis played a decisive role in calming the markets. Cf. Roache, S. K. and M. V. Rousset (2013), Unconventional monetary policy and asset price risk, IMF Working Paper, WP/13/190, August 2013. For the lessons learnt from the financial crisis and proposals for future monetary policy frameworks, cf. Bindseil, U. (2016), Evaluating monetary policy operational frameworks, paper presented at the Economic Symposium of the Kansas City Fed, Jackson Hole, August 2016. Page 5/8  An example of this is the continued efficient operation of the repo market. By contrast, the transmission of negative interest in the banking system is varied. As interest rates on bank deposits largely remain at zero, lending rates, particularly mortgage rates, have also fallen less sharply than money and capital market rates. From the SNB’s perspective, this imperfect transmission to lending rates is not entirely unwelcome in the current economic environment.

Needless to say, we have built up the relevant capacities and necessary know-how in this area. But the changes go much deeper. In simple terms, the growing importance of the exchange rate instrument has meant that the SNB has had to catch up rapidly with the structural changes that have taken place in the foreign exchange market in recent decades, especially in relation to the introduction of electronic trading. As you probably know, transactions on the spot and foreign exchange swap markets are now largely conducted on electronic platforms. Since 2010, we have been carrying out virtually all our foreign exchange transactions on such platforms. Electronic trading has made the foreign exchange market faster and more transparent. For instance, live streaming of prices enables market participants to precisely determine the price and the market conditions before a transaction is conducted. In order to take account of these changes, we use the latest techniques to carry out our transactions and implement our trading strategies. Electronic trading also brings advantages for the ex post analysis of transactions. For example, we are able to closely monitor individual foreign exchange transactions to gain insights into their effects and adapt our approach as necessary. Page 6/8  Overall, the foreign exchange market today is much more decentralised and the market participants far more heterogeneous than before. This means that the number and variety of market contacts required in order to understand the foreign exchange market and the demand for Swiss francs has also increased.
As wholesale investors started to exit, this set in motion a bad dynamic – a fire sale of assets that cut into earnings and capital. This increased the incentives of investors to run and for banks to hoard liquidity against the risk that they could themselves face a run. This downward spiral of fire sales and funding runs was a key feature of the financial crisis. The inherent fragility of short-term wholesale funding was greatly aggravated by certain institutional shortcomings in these markets, particularly in the structure of the tri-party repo system and the U.S. money market mutual fund business. Through the tri-party repo market, each day the two large clearing banks were providing a large amount of intraday credit to securities firms to facilitate the daily “unwind” of the prior day’s transactions. In the run-up to the crisis, the daily “unwind” helped make tri-party repo  2  BIS central bankers’ speeches  look like a very liquid investment while still being an apparently highly durable source of funding. This masked the underlying risks and contributed to weak risk management practices. As the concerns about the U.S. housing market escalated in 2007, participants in the tri-party repo market became increasingly concerned about the liquidity and credit risks that they faced. The clearing banks became uncomfortable with their large intraday exposures to their clients – broker-dealers, thrifts and others.

The world economy, including the euro area, is still undergoing a severe downturn, with the prospect of both external and domestic demand remaining very weak over 2009 before gradually recovering in the course of 2010. This assessment incorporates a number of adverse developments which are likely to materialise over the coming months, such as a further deterioration in labour markets. At the same time, available indicators of inflation expectations over the medium to longer term remain firmly anchored in line with the Governing Council’s aim of keeping inflation rates at levels below, but close to, 2% over the medium term. The outcome of the monetary analysis confirms that inflationary pressure has been diminishing, as money and credit growth have further decelerated in recent months. Against the background of these developments, after  BIS Review 56/2009  1  today’s decisions we expect price stability to be maintained over the medium term, thereby supporting the purchasing power of euro area households. Let me now explain our assessment in some more detail, starting with the economic analysis. Reflecting the impact of the financial market turmoil, economic activity continued to weaken in the euro area in the course of the first quarter of 2009, in parallel with the ongoing downturn in the world economy. This weakening in the first quarter appears to have been significantly more pronounced than projected in March. More recently, there have been some tentative signs in survey data of a stabilisation, albeit at very low levels.
In this type of situation, the bank may choose not to renew loans, which could have extremely negative consequences for the borrowers. The new rules thus risk reinforcing the sequence of events. However, there are many positive consequences; a more sound and individual risk assessment, which will better protect savings and reduce the risk that taxpayers, through the central government, will have to step in, opportunities for cheaper loans to borrowers who constitute a low risk but also increased interest rate costs for companies that are high risk. A fairer pricing of loans, in other words. Unlike shares, where it may be considered exciting to take risks and hope for a high return, boring loans are cheap loans for borrowers. By this I do not mean that loans for apartment blocks are boring, but they are normally considered stable and durable. Characteristic for loans is a small expected profit, but with the low risk of very large losses. Loans that cost a low interest rate are therefore slightly  4  BIS Review 2/2002  boring loans with stable cash flows that generate stable interest payments and regular repayments, in other words, low risk. So how will the new capital adequacy rules affect loans and credit granting to public utilities companies? A first reflection is that the banks will study credit objects and the companies concerned in a more individual manner than before.

Risk Management During the Pandemic Crisis Now, I'd like to share how our risk management practices and culture have helped us manage challenges throughout the pandemic crisis at the Federal Reserve Bank of New York. In mid-March of 2020, the health crisis was especially severe in the New York City area, where our main office is located and where most of our employees live. To protect the health and safety of all employees and to continue our critical activities, we had to adapt to a situation none of us had ever seen before. That started with changing how we worked. To reduce the health risks to our employees, we only allowed staff who had to be onsite to remain in the office, while everyone else worked remotely. For example, some open market operations, cash services, and technology support activities could only be conducted on location. To protect onsite staff, we implemented a range of protective measures including masking, social distancing, quarantine requirements, and staggered work schedules. Another priority was helping employees cope with added responsibilities like lack of childcare and elder care, so we provided as much flexibility as possible to staff to manage their time. On the technology side, we had an immediate need for teleconferencing bandwidth to support remote work. While not all technology worked perfectly right away, our technology providers quickly adjusted. With most staff working from home, a new risk we identified and addressed was the failure of home internet connectivity.
Credit has begun to present month-on-month increases, lending rates remain fairly low and the evaluation of both suppliers and demanders of credit show less restrictive lending standards despite the earthquake (figure 6). As highlighted in the IEF, it is important for the local banking industry to remain proactive in keeping and diversifying the sources of external credit and adequately manage credit risks within a context of economic recovery. Since mid-2008, household borrowing ratios and their financial burden have decreased. Consumer and firm expectations are still near or somewhat above their neutral values. This combines with the labor market recovering in aggregate terms, which overall was not affected by the earthquake and tsunami. Investment growth relies on both favorable macroeconomic conditions and the boost of reconstruction efforts. As for fiscal policy, the baseline scenario considers that the structural balance will be reached towards the end of the current Administration and that there will be tax changes, budget reallocations and new financing sources for the reconstruction, according to the government’s announcements. BIS Review 99/2010  3  The performance of output and demand will result in a current-account deficit of 1.2% of GDP this year. Measured at trend prices, this deficit is large by historical standards, but it responds partly to temporary reconstruction and replacement expenditures associated with the earthquake. Year-on-year CPI inflation has continued to rise in recent months, consolidating in positive figures. Core indicators for annual variations are still in negative territory but they steadily approach above-zero numbers.

8  BIS Review 99/2010  Table 1 Main international scenario assumptions (annual averages) 2009 (e)  2008  Mar.10  2010 (f)  Jun.10  Mar.10  2011 (f)  Jun.10  Mar.10  Jun.10  World GDP at PPP (annual change, %)  3.0  -0.6  -0.6  4.3  4.3  4.4  4.0  World GDP at MER (annual change, %)  1.8  -1.7  -2.0  3.5  3.2  3.5  3.0  Trading partners' GDP (annual change, %)  3.0  -0.8  -0.3  4.0  4.4  3.8  3.7  WTI oil price $  100  62  62  82  77  85  80  LME copper price $  316  234  234  310  300  290  270  Terms of trade (annual change, %)  -16.1  4.1  4.1  12.5  14.3  -5.6  -7.2  External prices, in $ (annual change, %)  12.2  -6.1  -6.2  3.7  3.4  3.0  3.3  (e) Estimate. (f) Forecast. Source: Central Bank of Chile.
40 Was the decision to build this stately residence a good one? Yes, given the outcome, it must be said to have been a very good decision indeed. Ever since Astrup’s time, Drammensveien 78 has been a venue for interdisciplinary discussions. The benefits of learning across disciplines are well illustrated by the success of Olympiatoppen. Olympiatoppen serves as a venue for different sports. Where coaches and leaders have traditionally focused on international developments in their own disciplines, Olympiatoppen also gives them an opportunity to learn from one another’s experiences, across disciplines. Many believe that this is part of the reason for Norway’s numerous Olympic medals in recent decades. 41  38  See Norges Bank Occasional Paper No. 39 (2009). 39  The lecture “On transparency”, the commentaries by Inge Lorange Backer, Andreas Føllesdal and Bernt Aardal and Aanund Hylland’s summary of the debate are published in Norges Bank Occasional Paper No. 41 (2010). 40  See Helsvig (2007), pp. 19–20. 41  See the article “Særnorsk oppskrift for OL-gull” [Uniquely Norwegian recipe for Olympic gold], 10 February 2010, available at (in Norwegian). 10  BIS Review 147/2010  For 150 years the Norwegian Academy of Science and Letters, by fostering contact across academic disciplines, has functioned as a kind of Olympiatoppen for science and scholarship. The Academy has always convened its members for discussions of topics that although may be rooted in a single field, are at the same time broader in scope and of common interest.

This is a line of ongoing research that allows us to better understand the evolution of the labor market and its implications for medium-term inflationary pressures. Domestic financial conditions, meanwhile, are still good in terms of interest rates. However, lending volumes have slowed compared to previous years, which the respondents to the Bank’s Business Perceptions Report and Bank Credit Survey interpret as the consequence of weak demand (figure 7). In our baseline scenario, we estimate that this year the economy will grow between 1% and 2%, down from the range we projected in December, 1.5% to 2.5%. Around 0.2 percentage points of this correction originate in the effects of the Escondida mine downtime. Because of the importance of this mine in the country’s copper production— 15% to 20% in 2016—, this downtime will have a substantial impact on first-quarter GDP, around 1 percentage point of reduced growth, taking the figure to near zero. Despite its economic impact, the Escondida deadlock, plus the effects of massive forest fires in January and February, are all one-time events that not only do not affect the long3  term trajectory, but neither do they influence the dynamic of the business cycle. Thus, we do not expect these events to have any material repercussion on the performance of other economic sectors or on inflation.
The third pillar is the revival of public investment: the use of public resources to push forward investment in infrastructure and human capital, research and innovation at national and European levels. (The proposed strengthening of the EIB and the reprogramming of Union structural funds in favour of less-developed areas go in this direction). Thus, a growth compact complements the fiscal compact, because there can be no sustainable growth without orderly public finances. In this regard I have noted on other occasions the extraordinary progress made by all governments of the euro area in terms of fiscal consolidation, but, once the emergency is overcome, they need to make improvements by cutting current spending and taxation. Let me now consider some issues more directly related to the ECB’s monetary policy and action. Objectives and instruments The first issue involves the relationship between objectives and instruments of economic policy in a macroeconomic reference model that changes over time. For Caffè, one of the first scholars of Frisch and Tinbergen, the optimal allocation of tools and objectives occurred in the reference model prevalent in the 1970s, in which the goal of economic policy was to make best use of the available resources, in particular full employment. In pursuit of this goal, monetary policy was subordinated to fiscal policy, with an ancillary role for the central bank vis-à-vis the Treasury. The reference macro-model was based on a static mechanism of elaborating expectations, which were formed by extrapolating from past observations to the future.

In Norway, credit and capital markets nevertheless feature some weaknesses, with thin securities markets and a narrow investor and ownership base compared with other countries. The reasons, and hence the solutions, can probably be found in the structure of the taxation of dwellings, property and financial assets, in a high level of state ownership of enterprises and in the organisation of pension saving in Norway. Investing even more government capital in Norway would reduce the return on investments in the Norwegian business sector and prompt other investors to invest elsewhere. Allocating even more capital to the Norwegian economy would probably lead to a rapid relocation of jobs to other countries, as the krone would tend to appreciate. Effects on industry structure The planned use of petroleum revenues will increase demand for public and private services. The guidelines imply an increase in the use of petroleum revenues over the central government budget of around 3½ per cent of mainland GDP by 2010. This may add 2½ -3 per cent of total employment in the service sector. As long as there are labour shortages in Norway, a comparable decline in manufacturing employment is likely to occur. Although the phasing in of petroleum revenues is a gradual process, the contest for labour resources will intensify. As a result, monetary policy is likely to remain fairly tight in the years ahead. A high interest rate level may in periods result in a strong krone. This may accelerate the scaling back of manufacturing industry.
As inflation expectations appear closely linked to the most recent inflation outcomes, there is thus a risk that the low inflation becomes a self-fulfilling prophecy. One consequence of this type of reasoning is that it is important that monetary policy reacts early on when inflation begins to fall. The later one tries to deal with the problems, the more expansionary monetary policy will need to be to bring inflation up to the target. Or to return to the rowing boat metaphor; when one finds oneself in a very strong current, one needs to row very hard to get back. Note that the two transmission channels I have focused on, the exchange rate channel and the expectations channel, do not necessarily have an effect through the real side of the economy. It is therefore fully possible that monetary policy has a substantial ability to influence the inflation rate even if real variables like unemployment and GDP growth are not so tangibly affected. Based on this reasoning, my view is that monetary policy in Sweden has good potential to bring inflation back to the target of two per cent. But I often come across arguments disputing this conclusion. Let me conclude by giving my interpretation of these arguments and explaining why I am not convinced by them. Misinterpreted: The impact of the repo rate on other interest rates has been weakened After the financial crisis the repo rate was cut by nearly five percentage points.

This applies regardless of whether one measures Swedish inflation in terms of the CPI, the CPIF or the internationally harmonised HICP.2 Inflation in several of the crisis-torn countries in Europe has been pushed up by the increases in indirect taxes implemented to improve public finances. And this explains some of the difference with regard to inflation in Sweden. But even taking this into account, it is clear that inflation has been more subdued in Sweden than in Europe in general since 2011 (see Figure 2). 2  2  The HICP is calculated in detail for the countries within the EU and at aggregate level also for a couple of countries outside of the EU. BIS central bankers’ speeches  The fall in inflation is broad A closer examination of developments in Sweden shows that the fall in inflation is broad and not caused by any individual component. We have already noted that inflation measured in terms of the CPI, the CPIF and the HICP is low, compared with both the inflation target and other countries. This also applies to measures of underlying inflation, that is, measures where one tries by various means to take into account that some prices vary a lot and may temporarily influence the CPI.3 Regardless of which measure one looks at, it is clear that underlying inflation has shown a falling trend since 2012 or earlier.