samchain/econo-pairs-v1 huggingface dataset:
Sources: Statistics Bureaus of each country. 10  BIS Review 41/2009  Figure 4  Inflation and expectations  (annual change, percent) 12  12  9  9  6  6  3  3  0  0  -3  01  02  03  CPI  04  05  06  07  CPIX  08  09  -3  8  8  6  6  4  4  2  2  0  0 06  CPIX1  Jul. 07  Jul. 08  BI 1 in 1 (1) BI 3 In 2 (1) BI 5 In 5 (1)  Jul. 09  EES 1 year (2) EES 2 years (2)  (1) Breakeven inflation calculation based on swap contracts. (2) Economic Expectations Survey conducted by the Central Bank of Chile. Sources: Central Bank of Chile and National Bureau of Statistics (INE). Figure 5 Monetary policy rate, deposit rate, and forward rate (percent) 12  12  10  10  8  8  6  6  4  4  2  2  0 Jan. 08  0  May 08  180-day prime deposit rate  Sep. 08 MPR  Jan. 09  6-month forward rate  Source: Central Bank of Chile.

Although every month we carry out exercises in which we try to measure the impact of macroeconomic changes on our own baseline scenario, we do not yet have a final and complete revision of such scenario which may allow us to estimate, with a reasonable degree of certainty, the expected growth for 2009. However, it is not hard to guess that such growth shall be below the 2-3% range we estimated in January. The exact figure remains to be seen. Anyway, a useful background could be the change in the projections of the analysts who answered the Economic Expectations Survey carried out by the Bank or the last issue of Consensus Forecasts. In these projections, the expected growth for this year went, respectively, from 2% and 1.9% in December to 0.2% and 0.0% in March. Actions taken by the Central Bank during the crisis Since the beginning of the crisis, halfway through 2007, the actions taken by the Central Bank have been focused on three fields: •  Accumulation of reserves. •  Supply of peso and dollar liquidity. •  Monetary easing. In the first half of last year there was an unusual strengthening of the peso, within a context in which there were great risks of deterioration of the international financial environment, such as it actually happened. At the same time, inflationary pressures had been relatively limited during the first quarter. In this scenario, the Bank’s Board decided to strengthen our international liquidity position by accumulating 8 billion dollars over an eight-month period.
Josef Bonnici: Reflections on the financial and economic challenges in the euro area and beyond Address by Professor Josef Bonnici, Governor of the Central Bank of Malta, at the FinanceMalta’s 5th Annual Conference “Malta’s financial services industry – sustaining the momentum”, Mdina, 18 May 2012. *  *  *  Ladies and gentlemen, The euro area continues to face a number of unprecedented challenges. Bond and equity markets have been highly volatile and the degree of uncertainty in financial markets has increased. It can be said that Member States have largely recognised the gravity of the situation and have already implemented or are in the process of implementing various major reforms. These are generally directed at fiscal consolidation and the enhancement of competitiveness and growth, and include significant labour market reforms, as in Spain, and reform of the public administration, as in Italy. Ireland and Portugal are on track in the implementation of their EU-IMF programmes. But the tensions in the debt markets are clearly not over yet. Despite the efforts being made by policy makers across the European Union, the sovereign debt crisis continues and its ramifications are still uncertain. The recent rise in Spanish yields and the turbulence in Greece are evidence of this. The main problem is that fiscal consolidation has to be effected at a time of an economic slowdown. Recessionary conditions slow down GDP growth and compound the difficulties that are encountered in the reduction of the fiscal deficit and debt.

Given that the prices that determine inflation are partly rigid, the central bank may influence the real interest rate by adjusting nominal rates. Before the onset of the financial crisis, the central bankers’ manual prescribed that if the economy is overheating and prices and wages are under growing pressure, the central bank should raise nominal interest rates above inflation expectations, thus tightening real rates and cooling down the economy. And vice versa, in a downturn, with falling prices and rising unemployment, the central bank should cut nominal interest rates, thus reducing real rates and stimulating aggregate demand. 10  Conceptually, central bankers sought to maintain real interest rates at a level – known as the natural rate of interest – that would hold GDP at its potential level and would keep inflation stable around its target level.2 This natural rate of interest is not directly observable  2  The concept, determinants and monetary policy implications of the natural rate of interest are discussed in depth in Galesi, Nuño and Thomas (2017). 11  and may only be estimated, with some degree of uncertainty, using econometric techniques.3 In recent decades this natural rate of interest has gradually fallen in the advanced economies. This is attributed both to demographic factors (such as population ageing) and to technological factors (such as low productivity growth), which have changed the balance between the supply of savings and the demand for investment.
The combination of the Riksbank now publishing its own interest rate forecast and at the same time continuing to report how we think has the potential to change the discussion outside of the Bank. It could to a greater extent concern how new information should affect  2  BIS Review 111/2007  expectations of interest rate developments rather than exactly what formulations are used in for example speeches and press releases. Interest rates are by definition always uncertain Let me take up some issues that are important to keep in mind when formulating forecasts for the repo rate. Firstly, the interest rate path we present is a forecast and forecasts are, as we know, very uncertain. To illustrate this, the Riksbank publishes uncertainty intervals, known as fan charts, around its interest rate forecasts and also its inflation and GDP forecasts (Figure 8). As you see, the uncertainty interval increases considerably in relation to the length of the time horizon. Put simply, the probability of unexpected shocks arising in the economy that would lead to developments deviating from the forecasts increases when the time horizon is longer. In other words, it is not easy to make accurate forecasts of the development of the interest rate in the longer term. One means of illustrating this is to see how the implied forward rates have changed over time. Figure 9 shows implied forward rates measured on a quarterly rate. Expectations of the development of the repo rate have varied substantially over time when measured in this way.

If our analysis of the prospects for production and inflation shows that our repo rate path needs to be revised in a particular way so that monetary policy is well balanced, then we will do this. What lessons can we learn? So far we have only limited experience of the new system and it is difficult to draw any farreaching conclusions. But perhaps we can learn some lessons for the future already at this stage. To begin with, it is important to note that, apart from the differences between different market agents’ expectations, there may also be differences between market agents’ own forecasts for the repo rate and their forecasts for the interest rate path the Riksbank will publish. It will be important for us to analyse what these differences are due to and how they should be interpreted in order to be able to predict the reactions at the times of the interest rate decisions. It is also important that we should constantly strive to become clearer in our communication to avoid it being interpreted in a way we did not intend. The decision to begin publishing interest rate forecasts in connection with each monetary policy meeting should be regarded in this context. There are some indications that certain market analysts interpreted a couple of speeches by Executive Board members during the spring in a way that was not intended. They appear to have drawn the conclusion that the interest rate path would be revised upwards less than had been assumed previously.
Chart 3 shows that the slope of the short-run Phillips curve has moved around during the post-war period, apparently in response to changes in the monetary policy regime. In the 1970s labour market pressure was not offset by tighter monetary policy, leading to a spiral of wage and price inflation. The short-run Phillips curve steepened, with larger inflationary consequences of any deviation from the natural rate of unemployment. As monetary policy became more focused on controlling inflation, the Phillips curve flattened in the latter part of the 1980s and 1990s. Such changes in the monetary policy regime can also be detected in the behaviour of inflation over time. Table 2 shows that the persistence of inflation – measured by the estimated explanatory power of past inflation in predicting current inflation – has fallen quite markedly since the inflation target was introduced in 1992. Was this  4  BIS Review 36/2005  because the failure of monetary policy to react quickly to an inflationary shock in the 1970s meant that inflation remained high for some time? And has the prompt response of monetary policy meant that movements in inflation more recently have proved short-lived? The answers to these questions matter for monetary policy. But the economy is continually evolving, and we can never definitively conclude that one answer is right and the others wrong. So learning about changes in the structure of the economy lies at the heart of the daily work of central banks.

This process has, in the past five years, notably improved the sector’s position in terms of basic metrics such as asset quality and profitability and solvency levels. This has come about against the background of the correction of structural imbalances, built up on bank balance sheets during the pre-crisis upturn. Arguably, the cause and, largely, the effect of the formation of these imbalances was excess capacity in the development of Spanish deposit institutions’ business. 3/15  We can observe the scale of the adjustment that has come about, both in the volume of banking activity and in the total volume of lending to the resident private sector. From its June 2009 peak, when the stock of lending practically amounted to € trillion, to the present day there has been a reduction of almost 40% in volume, i.e. of over € billion. In terms of GDP we have moved into line with the European average. Also, the excessive dependence on external financing has been corrected; specifically, the Spanish economy’s net debtor position has declined from accounting for almost 100% of GDP in 2014 to 77.1% of GDP in 2018. The consolidation process, which began in 2009, has entailed a reduction of more than 30% in the number of institutions. The most striking impact has been on the former savings banks, of which only two have survived, although another seven have converted into banks.
This is something on which individual banks will have to take a view, but I would like to offer some general advice. First, banks should accept that profits for 2003 may not reach budgetted targets as a result of the outbreak; and they should not strain too much to make up the difference. When profitability comes under pressure, it is important to avoid the mistakes that might arise from over-aggressive business tactics. Keep the bank healthy from a capital and liquidity point of view in order to benefit from the business recovery when it comes, as it surely will. Banks should also monitor closely the financial position of their customers and adopt a supportive attitude to those experiencing financial difficulties as a result of the SARS outbreak. This means being prepared to offer temporary relief arrangements to borrowers who find that they cannot service their debts in the current environment. This should not be seen as soft option for customers since the banks will certainly not benefit if those customers go bankrupt. Nor do I suggest that relief should be offered indiscriminately. The long-term viability of the customer or his business, his track record and his willingness to cooperate with the bank are all factors to be taken into account in deciding whether to restructure debts. Each case thus needs to be looked at on its merits.

All this has taken place against the background of various upheavals in the global economic and political environment, the war in Iraq being just one manifestation of this. The defining characteristic of Hong Kong banks during this difficult period has been their resilience. Despite the ups and downs, banks’ balance sheets have remained strong. For the locally incorporated authorized institutions, the aggregate capital ratio remains around 16%, twice the minimum international standard. Many of the smaller banks have ratios well above this. Capital strength has not been impaired by losses during this period. The banks have continued to make money and earn a reasonable return on assets from their Hong Kong operations, averaging 1 around 1.25% (before tax) over the last three years. However, this has not been easy to come by. Growth in mortgage lending, the mainstay of profits in the 1990s, has stagnated, and the spread on new mortgage loans has fallen to 2.6% below prime barely enough to earn a decent return on capital employed. Other sources of loan demand have also dried up as corporates have deleveraged since the Asian Crisis. So the banks have had to change their focus in order to generate revenue. Attention has switched to the liabilities side of the balance sheet as the banks seek to make best use of the large amounts of surplus funds that have built up. Banks have been managing down the cost of their liabilities in order to improve deposit margins.
At the same time, central banks and financial regulators became increasingly vocal in stressing the overwhelming importance of a stable financial system, and took a more active role in strengthening their regulatory frameworks, both nationally and globally. Inevitably, these substantial, unprecedented shifts in the design and operation of a key field in economic policy have raised fundamental questions and cast doubt on deeply entrenched beliefs. Based on practical experience of making monetary policy in the last few years, I will try today to dispel four Swiss monetary policy “fictions” by contrasting them with established facts about Swiss monetary policy. These facts are not necessarily new, but rather took a back seat in more benign times; it took the crisis to amply demonstrate their considerable relevance. Fiction I: Negative interest rates can’t happen First, I would like to address the belief that, because of the so-called “zero lower bound”, nominal interest rates cannot become negative. This belief has clearly been proved a fiction by current developments, with the SNB lowering its policy target rate into negative territory. 1 Unsurprisingly, the measure has sparked intense debate in the public domain. This is partially due to fears that the costs incurred by banks holding sight deposits with the SNB will, at some point, be passed on to their clients. But there is a more fundamental issue here. At first glance, negative rates violate the intuition that savings must be remunerated. However, this intuition is misleading.

A case in point is the SNB’s decision to introduce the minimum exchange rate of CHF 1.20 per euro in September 2011, and then discontinue it earlier this year. As mentioned, in enforcing the minimum exchange rate, the SNB intervened heavily in the foreign exchange markets, and did not refrain from taking on significant balance sheet risks, particularly in 2012. At the time, interventions were necessary to counteract upward pressure on the Swiss franc resulting from substantial capital inflows and a lack of outflows due to flare-ups in the European debt crisis. Towards the end of 2014, the minimum exchange rate again came under increasing market pressure, requiring renewed interventions by the SNB. This time, however, the international environment was very different. While expectations of an interest rate rise in the United States were mounting and the dollar was appreciating, from mid-year onwards there were signs in the euro area of further monetary policy easing, and the euro started to weaken across the board, pushing the EUR/CHF exchange rate close to the CHF 1.20 per euro floor. On the back of these developments – also reflecting the collapsing interest rate differential – Swiss franc investments again became relatively more attractive. Given these circumstances, and in view of quantitative easing in the euro area, the continuation of the minimum exchange rate policy would have meant a permanent, potentially uncontrollable expansion of the SNB balance sheet.
Under the conditions when the temporary operation of pressures on supply direction is expected to be cancelled out, the non-inflationary pressures as a result of production negative gap from the demand side is estimated to set out the inflation volatility around the  2  BIS Review 77/2010  Bank of Albania target regarding inflation. The expectations of economic agents regarding inflation remain anchored over the medium term horizon. At the conclusion of discussion, the Supervisory Council decided to leave the key interest rate unchanged, at 5.25 percent. This decision is in line with the accomplishment of inflation target over the medium term period, and provides at the same time the needed monetary conditions to support the sound development of economy. Looking ahead, Bank of Albania shall continue to observe carefully the developments in inflation and in the other indicators of the economic progress, by analysing the need and time span in terms of a reaction from the monetary policy. BIS Review 77/2010  3

Each country can then choose whether or not to publish the results of the assessment. A summary of the assessment is included in the IMF's annual assessment of member countries' economies. Dependence and complexity are increasing While the markets have thus (hopefully, I should perhaps add) become more robust, our use of them has grown. Households and companies have become operators on the financial markets, mainly because these offer better and cheaper services than those traditionally offered via the banks. An increasing percentage of the investments made are financed on the market through shares and bonds in other countries than the USA. This has become possible because households' savings are to an increasing degree channelled into shares and mutual funds. We use the financial markets much more than we did just ten years ago. This means that we have good reason to be concerned over their functioning. It has also meant that questions regarding financial stability have acquired greater importance on the international political agenda. At the same time as use of the markets has grown, new instruments are being traded that are increasingly complicated in structure and their risk content has become more difficult to assess. Various forms of derivative have been developed, for instance, to spread risks more efficiently. This in itself creates conditions for reducing the vulnerability of the banks as well as the financing costs of the investments. Essentially, this development benefits long-term growth. In recent years, the use of credit risk derivatives and securitisation has increased, for instance.
Against this background, the capital situation at Credit Suisse and UBS has improved slightly since the first quarter. Looking ahead, the two globally active Swiss banks remain well placed to face the challenges posed by the difficult environment. An increase in provisions is likely in the coming quarters as a result of the expected deterioration in credit quality. Under the baseline scenario, however, the SNB estimates that the financial impact of the coronavirus pandemic on Credit Suisse and UBS will remain limited. Furthermore, the SNB’s scenario analysis shows that, thanks to their capital buffers, both banks could also cope with significantly worse developments in the economic environment than are assumed in the baseline scenario. At the same time, this analysis shows, however, that the estimated loss potential under stress scenarios at Credit Suisse and UBS continues to be substantial. Moreover, uncertainty about the future course of the pandemic and thus about the financial impact on the two globally active banks remains high. Both factors underline that the capital requirements under the current TBTF regulations are necessary to ensure adequate resilience at these two banks. Domestically focused banks  I shall now turn to the domestically focused banks. Here too, there has been little change in the situation since the Financial Stability Report was published in June. These banks’ financial figures and risk indicators are still showing scarcely any effects of the coronavirus pandemic.

Despite the series of shocks from the foreign and domestic environment which the Macedonian economy has faced in recent years, we maintain the average inflation rate at the level of 1.5%, which is very close to the average inflation of the Euro area countries and confirms the adequacy of the monetary setup in this period. The nominal exchange rate of the denar against the euro has been maintained at a stable level, contributing to stable expectations and maintaining the confidence of economic agents. We have maintained the foreign reserves at a comfortable level by guarantying currency stability and dealing with shocks. The banking system is set on a completely market basis, with the presence of renowned international banking groups – stable, liquid and capitalized. Our permanent investment in observing the international standards in the banking regulation and the modern supervisory standards has made a great contribution. 1/2  BIS central bankers' speeches  No central banking institution can be set on firm grounds without dedicated and responsible people who have a vision, follow the direction of the modern central banks and at the same time work very hard to follow that path. In recent years, we have been continuously investing in the human capital. The support that we receive from international financial institutions, along with our dedication enables us to have a high quality core of professionals.