samchain/econo-pairs-v1 huggingface dataset:
As shown in Chart 3, the ten-year forward interest rate has fallen significantly in recent years, and has been less variable since inflation targeting, and especially the MPC, were introduced. What is the mechanism by which monetary policy contributes to a more stable economy? I would argue that monetary policy is now more systematic and predictable than before. Inflation expectations are anchored to the 2.5% target. Businesses and families expect that monetary policy will react to offset shocks that are likely to drive inflation away from target. In the jargon of economists, the “policy reaction function” of the Bank of England is more stable and predictable than was the case before 4 inflation targeting, and easier to understand. More simply, monetary policy is not adding to the volatility of the economy in a way that it did in earlier decades. 4  The behaviour of monetary policy in the United Kingdom after 1992 more closely resembles a “Taylor Rule” that has been shown to fit data in the United States than was the case before 1992. See the work of Ed Nelson of the Bank of England (Nelson 2000). BIS Review 68/2002  5  Chart 3 Ten year forward rates in the UK 1970-2002  Note: Implied forward nominal rates on conventional gilts ten years hence, calculated on the last business day of the month. Source: Bank of England. 3. The case for price stability: what have we learnt over the past 10 years?

The Swiss franc only weakened again recently with the prospect of a COVID-19 vaccine and hopes of a faster recovery of the global economy. On a trade-weighted basis, the Swiss franc is almost 1.5% stronger in nominal terms than at the end of June (cf. chart 3). It thus remains highly valued. As reported in our interim results, we carried out foreign exchange market interventions totalling CHF 90 billion in the first half of this year. On a trade-weighted basis, the Swiss franc has strengthened some 5% in real terms since the beginning of 2020. Had we not intervened, the franc would have appreciated significantly more, and this would have placed an additional burden on our economy in an already exceptionally challenging environment. Page 2/5  Zurich, 17 December 2020 Andréa M. Maechler  News conference  Final sprint in transition to SARON  Let me now say a few words about the changeover from Swiss franc Libor to SARON. The end of Swiss franc Libor is fast approaching. In November, the Libor administrator launched a consultation procedure on the discontinuation of Swiss franc Libor as per end-2021. Market participants in Switzerland may therefore only have around 12 months to complete the necessary work for a smooth transition to SARON. Only the heavily used tenors of US Libor are expected to be granted an extension until mid-2023. However, this will not affect the Swiss franc Libor I have been focusing on in my remarks.
I have highlighted this example because it provides a stark illustration of two critical shortcomings in our current regulatory system. The first is the fact that a large, systemically important institution like AIG was able to slip through the cracks in our regulatory structure and put our entire system at risk. The second is the lack of an effective resolution regime for large bank holding companies and nonbank financial institutions. Absent such a regime, a commitment to support a failing firm inevitably results in the loss of leverage in negotiating with counterparties and creditors. Turning now to another difficult issue, it is deeply offensive to Americans, including me, and runs counter to basic notions of justice and fairness, that some of the very same individuals and financial firms that precipitated this crisis have also benefited so directly from the response to the crisis. This has occurred at the same time that many Americans have lost  4  AIG was supervised by the Office of Thrift Supervision (OTS) and state insurance commissioners. Bear Stearns and Lehman Brothers were supervised by the Securities Exchange Commission (SEC), Fannie Mae and Freddie Mac were supervised by the Office of Federal Housing Enterprise Oversight (OFHEO), and Washington Mutual and Indy Mac were supervised by the OTS. The Fed's involvement with many of these firms came only through its lender of last resort role. BIS Review 161/2009  5  their jobs and hard-earned savings. The public outrage this situation has produced is understandable.

As a result, the excess reserves wouldn’t be lent out; instead, the excess reserves would stay parked at the Fed. That said, the Fed’s exit from its current monetary policy stance is going to be more complicated than normal. Normally, when we exit, we simply decide when we are going to raise the federal funds rate target. This time, we have a broader set of decisions to make. For example, do we drain reserves from the banking system? Is it better for the banking system to operate with $ billion of excess reserves or $ trillion? This is an issue we have to explore further. In the meantime, we are testing our ability to drain reserves through the use of reverse repurchase agreements. It is important that this option be available to us in the event we want to use it. Although it is going to be more complicated in the sense that we have more decisions to make about how to manage our exit, I believe the process is manageable. The fact we have  BIS Review 161/2009  7  more levers doesn’t mean that we will have trouble exiting when the time comes, it just means that we will have more choices to make. Turning to the issue of the Federal Reserve’s monetary policy independence, I believe this is a critical issue. As you know, the Paul amendment, which was inserted into the House Financial Services bill, would subject the Federal Reserve’s monetary policy decisions to audit by the General Accountability Office (GAO).
Current accounting and tax frameworks hamper the widespread adoption of dynamic provisioning by requiring that risks on specific loans be identified prior to provisioning. Discussions among accounting standard-setters, tax authorities and regulators are essential to encourage such a reform. •  Globalisation and the development of financial markets have created a real need for reliable information and harmonised accounting practices. We fully support such trends towards increased transparency. But, it is nonetheless vital to ensure that, when applied to banks, some of the new widespread accounting practices neither distort the presentation of banks' individual situations, nor disrupt their management practices. A “full fair value” approach assumes that a “fair value” can be determined for all financial instruments; but this does not necessarily apply to banking activities, since loans and deposits are essentially neither liquid nor tradable. Using the full fair value approach for the banking book might result in sharp swings in banks' earnings and prompt banks to curtail their lending activity. This approach might further amplify the credit cycle and could potentially affect financial stability. This is the reason why an increasing number of bank regulators are not in favour of this approach as regards banking book. Let us now focus on asset prices moves. Financial authorities might reflect on some ways to foster behavioural diversity in financial markets. As we have seen before, a series of factors, such as short-termism, mimetic behaviour or index management, have tended to make “contrarians” less pro-active on financial markets.

I have also pointed to a number of risks that could lead to a different development than the one we forecast in the Monetary Policy Update. We try to determine the probability of the risks on the basis of incoming statistics. This gives us a picture of what can be regarded as a main scenario and what can be regarded as an alternative scenario. How should a monetary policymaker weigh up new and often contradictory information about the economy that indicates different paths of development? I shall conclude with a few reflections on this. As an economic forecaster, one is confronted by a constant flow of new statistics that often point in different directions. Let me illustrate this by describing the circumstances of our most recent monetary policy decision in April. Statistics Sweden had scarcely published a GDP figure for the fourth quarter that was weaker than expected, when the National Institute of Economic Research published a very strong Economic Tendency Survey for March. Nor is it unusual for statistics to be revised in a way that changes history and throws new light on the initial situation in the economy. As I mentioned earlier, Statistics Sweden revised up the figures for the number of hours worked in connection with the publication of the GDP statistics for the fourth quarter of 2011. This revision entails lower productivity growth for 2010 and 2011 than was reported earlier, and thus a new outlook on the future productivity growth trend, which has significance for monetary policy.
This is an area where students exercise their own judgment. But let me tell you what my own experience is. Whether a teacher belongs to the economists driven by “social enthusiasm” (Pigou), by the wish to find out “how society functions” (Marshall) or by the “pursuit of the unknowable” (Solow), to teach is not only challenging but also most rewarding. First, one has to define the contents of a course and then how to present it. Then, one has to find out how to stimulate curiosity because this is the best motivation for learning. One has to understand how students react to complexity, and one has to be prepared to answer their questions as they arise. Ideally, a professor is able to take his students on a journey of learning that never ends. Once the course is over, a student should know more than before, have an interest in applying what he or she has learned and never forget the most important lesson: what she or he was taught is never a recipe, but only a first step in an ongoing sequence of learning, collecting experience and further learning. If you think this sounds too good to be true you may have a point. So let me end this section by painting a bleaker type of university economist: the university economist is a master of his profession who prefers not to apply his knowledge to the resolution of real-life problems, but to improve his knowledge further in order to impress his peers.

I wish to stress that this commitment was reaffirmed in Hamburg a few days ago by the whole G20, including the United States – and this is important as we need to preserve, in the words of the G20 Leaders’ Declaration, “an open and resilient financial system, grounded in agreed international standards”i . Regarding Basel III, I sincerely hope that we can reach a balanced agreement among Basel Committee members by next autumn. The vast majority of the Basel III framework has indeed already been agreed and is now largely implemented, notably in Europe since 2014 with the CRD IV package. The main outstanding point of discussion is, as you know, the so-called “output floor” which would apply to banks using internal models. The objective of Basel III is to lay the foundations for a strong, balanced and risk-sensitive international regulation, while reducing the undue variability of risk-weighted assets (RWAs). So we need a prudent but a  1  reasonable level of the output floor, combined with strengthened supervision of banks’ internal models – and Europeans made sensible proposals to achieve this. But should the output floor be set at too high a level, the consequences in terms of the reduction of risk sensitivity and the increase in capital requirements would be unacceptable: for example, a 75% output floor would affect half of international banks. It would de facto result in creating a “Basel IV” framework based on the standardised approach.
Because its remit requires it to support strong yet sustainable and balanced growth, in exceptional circumstances, and in consultation with the FPC, the MPC could have to optimise – subject as always to society’s risk preferences – over a longer time horizon in order to avoid inter-temporal disequilibrium, with the 26  E.g. Mian, A and Sufi, A (2014), House of debt, Chicago. See for example, Aikman, D, Haldane, A and Nelson, B, (2015) “Curbing the credit cycle”, Economic Journal, 125(585), June. Though not the only one. Others included the absence of a credible resolution regime for failing institutions, inadequate capital and liquidity standards, excessive complexity and opacity in the financial system, and cultural failings alongside other perverse incentives for excessive risk taking. 29 The full FPC remit can be found here: http://www.bankofengland.co.uk/financialstability/Documents/fpc/letters/chancellorletter160316.pdf 27 28  14  All speeches are available online at www.bankofengland.co.uk/publications/Pages/speeches  14  result that inflation could deviate below target temporarily in order to achieve a more sustainable return to the target and more stable growth beyond the conventional policy horizon. 6. The Current Trade-off How do these factors relate to the recent conduct of monetary policy? In May, the MPC said that the effects of a vote to leave the EU on inflation would depend on the balance of its effects on demand, supply and the exchange rate.

The remit recognises that inflation may deviate temporarily from the target on account of shocks, however. Since 2013, the remit has explicitly recognised that in these circumstances, bringing inflation back to target too rapidly could cause volatility in output and employment that is undesirable. The remit requires the MPC to consider, balance and explain such short-run monetary policy trade-offs. Specifically, in exceptional circumstances, “shocks to the economy may be particularly large or the effects of shocks may persist over an extended period or both”. When this is the case, the challenge facing the MPC can be more significant, and the remits directs that “[i]n forming and communicating its judgements, the Committee should promote understanding of the trade-offs inherent in setting monetary policy”, including, importantly “the horizon over which the Committee judges it is appropriate to return inflation to the target”. 2. Achieving price stability A simple framework for thinking about how to manage the monetary policy trade-off is shown in Figure 1. The red line in the figure illustrates a policymaker’s preferred trade-off: mapping the size of the shortfall of output below potential – the output gap – that the policymaker is prepared to tolerate for a given overshoot of inflation from target, and vice versa. The flatter the line the less the weight the policymaker places on output stabilisation and the more they are willing to tolerate large output gaps in order to eliminate small overshoots in inflation.
This positive outlook needs to be underpinned by responsible fiscal policy-making and by social partners reacting appropriately to the increase in oil prices. It is crucial that any loosening in fiscal policy be avoided. Similarly, continued wage moderation is important in order both to contribute to further decreases in the level of unemployment and to maintain a favourable outlook for price stability. It will be equally important for structural reform to be intensified further in order to allow current high growth rates of real GDP and employment to be sustained into 2001 and beyond, without generating inflationary pressure. Let me now give the floor to the Vice-President to inform you about two further issues decided by the Governing Council today. I should like to inform you that, in the course of next week, the ECB will release an update of the so-called Balance of Payments Book. This annual publication documents the statistical methodologies applied in EU Member States for the compilation of balance of payments statistics and, as such, improves the transparency of the compilation of euro area statistics. In addition to updated individual country chapters, this version includes two new chapters on the compilation and methodological standards for the euro area balance of payments and international investment position. The Book will be published on the ECB’s website and hard copies will be available at the ECB.

Notwithstanding some recent signs of improvement in the economic outlook, it is premature to declare the financial crisis over. From today’s perspective, the need for enhanced credit support remains. Therefore, for the time being central bank liquidity is likely to remain abundant. This does not mean, however, that the broader concept of liquidity in terms of monetary aggregates grows strongly. And it is this broader concept, not central bank liquidity itself, which is related to inflationary pressures over the medium term. Of course, central bank credit and broader monetary aggregates are linked over time. In a modern banking system, and in normal circumstances, central bank credit is largely used by banks – in the form of required reserves – to create bank credit, and expand deposits and broad money aggregates. So, an increased provision of central bank credit can lead – more or less automatically – to an increase in broad money. In current conditions, that link has been weakened, however. Today, banks – in the aggregate – tend to hold part of the central bank credit that they obtain in our refinancing operations not as a reserve against an expansion of loans and deposits, but in the form of  8  BIS Review 103/2009  excess reserves deposited with the Eurosystem. This attenuates the automatic link between the provision of central bank liquidity and broad money. And, as a consequence, it attenuates the inflationary potential of the Eurosystem’s outstanding credit to banks.
As only part of the effects of this have probably been transmitted to date by various mechanisms, allowance should still be made for some effects in the future. The Executive Board’s monetary policy discussion on 11 February will thus focus to a large extent on assessing global economic prospects and their consequences for Sweden’s economy. Other  BIS Review 14/1999  –5–  questions will be the durability of the positive trend for domestic sectors and how the relationship between demand and supply will affect the development of prices. Monetary policy’s focus on price stability is important in the context of economic stability. While the possibility of fine-tuning an economy should not be exaggerated, a policy for price stability should normally lead to a real economic development that is also balanced. The Riksbank’s representatives continuously talk about the prospects for inflation; however, the question we are trying to analyse could equally well be put like this: how should the Riksbank handle the repo rate so that the Swedish economy’s favourable path in recent years is maintained? *  *  *  BIS Review 14/1999

However, for a production increase brought about by adjustment in stocks to be durable, it must be supported by a lasting increase in demand. Household consumption continued to increase, but there was no upturn in investment. The imbalances in trade and industry in the USA were perhaps more tangible than many had anticipated. Bankruptcies and accounting scandals created further unease on the financial markets, which then fell at a rate reminiscent of the 1930s crisis. In Europe the signs of economic recovery mainly concerned more optimistic expectations; expectations which were not later realised. The largest euro economy, Germany, in particular proved to be in a poorer condition than anticipated. However, here it was not a question of imbalances like those in the USA, but structural problems, such as a high level of unemployment that had set in and weak public finances, which made it difficult to conduct an economic policy that would support the business climate. Furthermore, the expected supporting forces from the other side of the Atlantic for the export industry were weaker the expected. In Sweden, the slowdown during 2001 had a limited effect on unemployment. The Riksbank’s calculations at the beginning of 2002 indicated that resource utilisation was relatively strained. Economic policy had a stimulating effect on the economy, through lower taxes and higher transfers.
The ASEAN story is equally compelling as the region transforms into an economic powerhouse. With a combined GDP of USD 2.4 trillion in 2015, ASEAN was the third-largest economy in Asia and the sixth largest in the world13. ASEAN is the second-fastest growing economy in Asia after China, expanding by 300% since 200114. It is the 3rd largest market in the world with 622 million people in 2014 15 3/7  BIS central bankers' speeches  behind only China and India15 and has the third-largest labour force in the world. Mckinsey16 estimates that there are currently 67 million households in ASEAN which are part of the “consuming class17”. This number could grow to 125 million by 2025. This means that ASEAN will be a pivotal consumer market of the future. III. Seizing Synergies between Shanghai and Singapore 10 Against this backdrop, Singapore sees greater opportunities for collaboration with Shanghai. As international financial centres serving different but complementary parts of the Asian financial system, there is much scope for both sides to explore common interests for synergies. 11 Shanghai remains at the forefront of China’s financial reforms. Continuous strong pace of financial development and innovation is a hallmark of Shanghai’s success. To cite a few noteworthy initiatives: (i) a Shanghai Free Trade Zone (FTZ) bonds pilot scheme was recently announced18; (ii) the Shanghai Insurance Exchange was successfully launched in June 201619; and (iii) the China Internet Finance Association was established in Shanghai in March 2016 20.

Demand from the U.S. used to be the key driver for global oil prices. This is no longer the case. Research has shown that the Asia-Oceania region is now the world’s leading consumer of petroleum and other liquid fuels11. Recognising this, CSRC Vice Chairman Fang Xinghai accurately reflected in May 2016 that China is now “facing a chance of a lifetime to become a global pricing centre for commodities”12. 9 The emerging trend highlights that Shanghai and Singapore are facing an important crossroad ahead. As international financial centres in Asia, we can strategically position ourselves to play key roles in shaping the new Asian financial landscape. Both cities are the gateways to two of the most important economic regions in Asia – China and ASEAN:  The China story is a familiar and also fascinating one. By 2050, China could account for one-third of the world’s economy. China’s banking system could grow to become the largest in the world within 4 years by 20205. Today, global financial institutions are paying close attention to China’s increasing importance in global markets. As China’s financial markets progressively liberalise, their global influence will likely extend further. For a start, China’s 10 trillion stock market and 9 trillion interbank bond market, and this is in USD, will likely be included into global stock and bond indices over the next two years. Re-balancing of portfolios by global investors will lead to an upsurge of financial flows into China, enhancing the internationalisation of China’s financial markets.