samchain/econo-pairs-v1 huggingface dataset:
Whatever the outcome, it will be important to maintain flexibility to respond to new data and events. The flexibility the MPC has had to pursue its target independently since 1997 has brought great benefits. The MPC has also shown flexibility in developing new instruments such as QE to achieve its goals. Similarly, as monetary policy begins to tighten, the MPC will be focussed on Bank Rate as the marginal tool of monetary policy, given it’s more flexible in nature than QE. And occasionally, we might also consider tyre tread depth, just to see if the post crisis economy reverts to pre-crisis patterns or whether we need to think about the future a bit differently. 6  BIS central bankers’ speeches  BIS central bankers’ speeches  7  8  BIS central bankers’ speeches  References Alesina, A. and Summers, L. (1993) “Central Bank Independence and Macroeconomic Performance: Some Comparative Evidence,” Journal of Money, Credit and Banking, Vol. 25, No. 2, pp. 151-162. Brainard, W. (1967), “Uncertainty and the effectiveness of policy”, American Economic Review 57, 411–425. Broadbent, B. (2015) “The MPC’s forecasts and the yield curve: predictions vs promises,” Speech given at Reuters. Dison, W. and Elliot, D “Mean and modal Bank Rate expectations,” blog available on http://bankunderground.co.uk/ Evans, C. Fisher, J. Gourio, F and Krane, S (2015) “Risk Management for Monetary Policy Near the Zero Lower Bound.” Brookings Papers on Economic Activity.

Let us instead develop a coherent and integrated system that relies upon the classical elements of defense, but none of them exclusively: perimeter security to keep the adversary outside of the environment; defense in depth to safeguard our most critical assets; sophisticated intelligence to understand the adversary’s tactics; robust surveillance to monitor for intrusion and ensure environmental integrity; rapid response to fend off attack; effective collaboration with allies to enhance information sharing and collective security; and a strategic reserve to respond deftly in the event of loss. Make no mistake: as it relates to the wholesale services of the Federal Reserve Banks, we aspire not merely to a commercial standard of resiliency, or even a supervisory standard, but something approaching national security grade. We proceed on this trajectory from a position of strength, reflecting a record of experience that has endured the most severe terror attack in our nation’s history, a financial crisis of historic proportion, and an array of extreme weather events. But in this sphere, either intentionally we are progressing, or inevitably we are regressing: there is no idleness. Thank you for your generous attention today. I’d be pleased to respond to a few questions. 5/5  BIS central bankers' speeches
We certainly have not closed our minds to the possibility that these developments might allow us to sustain for a time stronger growth consistently with meeting our inflation target. But we can’t afford to gamble on that outcome either. The truth is that the jury is still out. What we have to do is to monitor intensively all of the data as it becomes available to us, and draw what inferences we can as to how those data affect the balance of risks around the inflation target looking ahead. What is encouraging, Mr Chairman, is that for all these uncertainties and complications the broad prospect for the UK economy as a whole over the next couple of years is for continuing relatively strong growth - at or above trend - with continuing relatively high employment, and continuing relatively low inflation. The monetary policy debate in the UK is a narrow one, it is about just how strong the growth, just how high the employment and just how low the rate of inflation. Against that background, let me finally say a few words about UK membership of the euro. Let me make clear, from the outset, that monetary union is fundamentally a political rather than an economic issue. It necessarily involves the deliberate pooling of national sovereignty over important aspects of public policy, in the interest not just of collective economic advantage, but of a perceived wider political harmony within Europe.

In practice what that would be likely to mean in our present situation is substantially lower interest rates: the intended effect would be to stimulate external demand, but it would inevitably also involve further stimulus to domestic demand. In effect, it implies that we should acquiesce in increasing overall demand pressure leading inevitably to faster inflation. That might conceivably even provide some relief to the suffering sectors in the short term. But increasing demand pressure, including labour market pressure, and accelerating inflation would - as we’ve repeatedly seen in the past - ultimately need to be brought back under control, involving a more abrupt tightening of policy. That frankly would not do the suffering sectors themselves much good at least for very long - and it would have a potentially serious destabilising effect on the economy as a whole. That is precisely what we are trying to avoid. 3  BIS Review 33/2000  The more hopeful news is that we have recently seen strong signs of recovery - of both economic activity and exchange rates - in a number of emerging markets and transition economies. And we are seeing a strengthening of domestic demand and of output in the Eurozone, which may help the euro to appreciate. To the extent that these trends persist, it will help to ease the exceptional pressures on the most internationally-exposed sectors, and contribute to a better balance within the UK economy.
That would not only destabilise our domestic economy, it would also cause the intended euro-entry rate to appreciate in real terms, with adverse implications for our competitiveness within the Eurozone. These effects would clearly be difficult to contain given the constraints on both our interest rate and the exchange rate as we moved towards entry, and very difficult to reverse once we were inside the single currency area. This obstacle would diminish to the extent that the euro itself recovers against other currencies generally – as at some point it surely must. In that case sterling might weaken bilaterally against the euro, but it might be expected to strengthen against the dollar and other currencies, leaving our overall, effective, exchange rate closer to where it currently is. That would have less impact on our domestic rate of inflation. There's no question, my Lord Mayor, that what we would like to see, both in the context of our current monetary management and if we are to join the euro, is a combination of a pick-up in the global economy and a recovery in the euro exchange rate. That would be in all our interests. But it is not at all clear what we can do to bring it about. In the meantime, as we sail out from our island haven, through conflicting offshore currents and variable onshore winds, we may not find it easy to remain on the course set for us by Gordon the Navigator.

The big questions now are about the extent of the slowdown and how long it will last. On an optimistic view we may be largely through the sharp downward stock adjustment, and with consumption so far holding up better than generally expected, and with the possibility that investment will recover as the spread of ICT through the economy resumes, US activity may pick up as we move, say, into next year. But the pessimist can point to the weakness of private sector saving, which could induce more cautious consumer behaviour; he can point to a possible overhang of past investment excesses; and he can point to the US external deficit which will need to be corrected at some point. BIS Review 56/2001  1  These adjustments might take place gradually over time, implying a more protracted period of relatively slow growth in the US Or, if you are really pessimistic, you might anticipate more abrupt adjustment, implying a period of negative US growth and global financial instability. The recent somewhat erratic recovery of US financial markets from their earlier gloom suggests that they may have begun to side somewhat tentatively with the optimists; but some of the survey evidence of consumer and business confidence, on the other hand, supports a more pessimistic view. The truth is that none of us knows with any great confidence just how the US situation will evolve. For what it is worth I remain modestly optimistic, but I am very conscious of the downside risks.
Sources: Statistics Sweden and the Riksbank  Table 1. Resource utilisation, second quarter 2011 Gap as percentage and RU indicator in standard deviation  GDP gap, HP  0.4  GDP gap, PF  -0.4  Hours gap, HP  0.3  Hours gap, PF  -0.8  Capacity utilisation¹  -0.3  Employment rate²  0.3  RU indicator  0.2  Unemployment gap³  -1.0  Labour shortage¹  2.3  ¹ Deviation from mean value, percentage points, 1996–2008 ² Deviation from mean value, percentage points, 2000–2008 ³ Percentage points, reverse sign  BIS central bankers’ speeches  17

The focus has gradually shifted from strengthening intermediaries in the domestic Islamic financial industry to fortifying the regulatory, supervisory, Shariah and liquidity framework necessary for such a robust financial system. This has involved greater international cooperation and collaboration in this new environment. A further development has been the evolution of the domestic Islamic financial markets into international markets. This has manifested itself in the form of foreign participation in raising funds and in investment activities in these markets, thus generating increased cross border financial flows. This has drawn participation from both emerging and the developed world in Islamic and non-Islamic countries. Going forward, the Islamic financial system is envisaged to have an increasing important role in connecting the world economies – through the strengthening of financial linkages, it will in turn facilitate increased international trade and investment activities. This internationalisation of Islamic finance will require the intensification of international collective efforts to establish the international Islamic financial architecture, and the development of mechanisms for more effective cross-border liquidity management. Central to achieving this next thrust of development is to develop a high caliber and competent talent base to cultivate financial innovation. Therein lies the investment needed in human capital development to support the industry. While Malaysia’s own experience and aspirations is to evolve into an international Islamic financial centre, we also continue to promote a more inclusive financial system to support a more balanced growth. On the international front, the aim is to enhance our international connectivity and thus establish greater economic linkages with other economies.
Investors’ disagreement and uncertainty about the overall stance of monetary policy will reflect their views on the future evolution of both the federal funds rate and the SOMA  5  See, for example, Question 8 in the January 2013 Survey of Primary Dealers. 6  The measures of forecast uncertainty and disagreement discussed here are based on Rich and Tracy (2006) and Wallis (2004, 2005). BIS central bankers’ speeches  3  portfolio. One way to get a sense of the overall level of policy uncertainty is to convert the SOMA portfolio into “fed funds equivalents”.7 With this translation, it is possible to estimate the hypothetical level of the federal funds rate that would provide a similar amount of monetary policy accommodation as both the actual level of the federal funds rate and the size of the SOMA portfolio. Figure 2 shows the disagreement and uncertainty around this measure of policy uncertainty 12 months in the future. Disagreement about current policy is quite low relative to the past few years, which likely reflects the effect of forward guidance on expectations about the federal funds rate and the relatively low disagreement about the size of the portfolio that I mentioned earlier. Uncertainty, on the other hand, is relatively high and larger than the amount of disagreement. Since there is very little uncertainty about the level of the federal funds rate one year from now, most of this effect comes from uncertainty about the size of the portfolio.

Consequently, Switzerland – unlike other countries – was able to avoid introducing state-guaranteed bonds. With the drastic reduction in key rates and the subsequent decline in mortgage rates, the burden on households and companies was eased. In this way, the severity of the recession was somewhat alleviated and the risks of deflation reduced. However, the interest rate is now at a historic low and this means medium-term risks for the Swiss real estate market and financial stability. Experience shows that periods of low interest rates provide scope for excesses on the mortgage and real estate market. Consequently, in the current environment in particular, attention should be given to ensuring that past mistakes are not repeated. Caution must remain the watchword when granting loans. BIS Review 140/2009  1
A regime which inadequately evaluated trading book risks was, therefore, fundamental to RBS’s failure.” (FSA (2011)). I do not doubt that the reversal of this capital treatment of trading books has had an impact on dealer inventory levels by increasing the capital intensity. But I don’t accept that the fairly ephemeral position that emerged shortly before the crisis was fit for purpose or sustainable. What are we therefore doing about the fragility of market liquidity and the risks to both financial stability and the state of the real economy that arise from it? First, we are working hard to understand better these risks and how they could manifest themselves. As the Bank of England’s Financial Policy Committee stated at the end of March, our concern is that investment allocations and the pricing of some securities “may presume that asset sales can be performed in an environment of continuous market liquidity.” (FPC (2015)). We are: gathering better data and thus building a greater understanding of the channels through which market liquidity can affect financial stability and economic activity; establishing a better understanding of how asset managers form their strategies for managing liquidity in their funds in normal and stressed conditions (taking into account any increase that might  6  6  Fender and Lewrick (2015) note that “when market volatility rises, standard risk assessment models will signal a market-maker inventory has become riskier. That may prompt the market-maker to further trim its holdings.

That means that with very little spare capacity in the economy, even the unusually weak actual growth of around 1¾% over the forecast horizon – which you can see here in the MPC’s projection for GDP from the latest Inflation Report (Slide 7) – is still sufficient to generate excess demand. There are of course significant risks in both directions to the outlook for productivity. To the downside, there are at least two reasons to think that productivity won’t pick up to its pre-crisis rate. The first is that after such a long period of weak productivity growth it is reasonable to argue that we are in a new paradigm of lower productivity growth, and that is reinforced by the global nature of the weakness. The second is that that the dampening effect of Brexit on productivity growth – both through the effect of uncertainty on business investment in the short run and through the need to anticipate and respond to post-Brexit trading relationships – is likely to continue for some time. To the upside, productivity, although volatile, has tended to grow by around 2% on average for many decades, if not centuries. Productivity could ultimately pick up by more than expected globally and if there is a global upswing in trade and investment that benefits the United Kingdom. Additionally, if there is clarity around the transition and future trading arrangements post-Brexit, this could continue to reduce uncertainty, support business investment and lead to a stronger-than-expected pickup in productivity growth.
Let me therefore comment one at a time on what I regard as the four major causes of concern with regard to the credit derivatives market. 1. Operational and legal risks  The most concrete source of concern is how the trade is conducted in practice. The existing infrastructure in the market has not managed to keep up with the rapid development. Because of the explosive increase in the number of contracts, routines and handling procedures have lagged behind. The back-office functions at the largest counterparties have not been able to confirm all of the deals in time. This has entailed a risk of problems if "large” credit events were to suddenly occur. In these situations there could be confusion as to which deals have been completed and which positions are actually held, and these paves the way for legal disputes. The large number of outstanding contracts also makes the settlement process particularly sensitive. If many contracts have to be settled at the same time, there may be disruptions. The credit risk in one and the same bond may have been resold through a large number of derivative contracts. Problems can arise in this type of chain, particularly if the underlying bonds need to be delivered physically. But much has already been done to reduce the problems in this area. The market participants have themselves made large investments to reduce the number of confirmations ending up in a queue. Today there are automatic systems for confirmations and these now process most contracts.

BIS Review 24/2007  1  The premium that is to cover the risk of a credit event corresponds to the premium the corporate bond commands over a government bond without credit risk. The prices of the credit derivatives are therefore strongly related to the prices of the bonds issued by the company. In actual fact, the market for credit derivatives is often more liquid than the market for the underlying bonds. In this case the prices of the company risks are determined in the credit derivatives market rather than the market for the underlying corporate bonds. The most common credit derivatives are called Credit Default Swaps, abbreviated as CDS. A swap is usually an exchange of payment flows and one might wonder what is being exchanged in this case. It concerns what happens if the insurance needs to be used, that is, if a credit event occurs. Then the bank (the insurance policy owner) would have to sell a bond corresponding to the credit amount to the insurer at a nominal value. This is despite the fact that the bond has become worth much less or even worthless as a result of the credit event. The bank thus swaps the bond for a cash payment. 2 This is no stranger than a house-owner swapping his burnt down house for cash if he has paid his insurance. Why are credit derivatives so popular? The example using TeliaSonera illustrates some of the properties that have made credit derivatives so popular.
Paul Tucker: Financial crisis and G20 financial regulatory reform – an overview Remarks by Mr Paul Tucker, Deputy Governor of the Bank of England, at the Financial Stability Board (FSB) and Korean G20 Presidential Committee Conference, Seoul, 3 September 2010. *  *  *  Being a Western financial official, one comes to Asia with some humility in truth. This has been a financial crisis born and bred in the Western world, but inflicted throughout the world. That makes it all the more important that Korea and the other countries in Asia and elsewhere in the emerging market world are involved in the reform efforts. The reforms are not simply going to be cooked up in the West where the problems were bred. In Korea, you have to play a really important leadership role, especially in steering us through the next couple of months. Much of the work towards the Leaders summit is being handled in the Financial Stability Board. And here is a very brief overview of what is going on in the FSB contribution to the G20 effort, under the following headings: 1) surveillance; 2) bank capital and liquidity; 3) too big to fail; 4) capital markets; 5) incentives; and finally the regulatory perimeter. 1. Surveillance of the system  Very obviously this was a crisis that was not spotted – in the most important sense of being prevented – ahead of time. People did issue warnings about developing leverage in the system and accumulating macroeconomic imbalances.

But no one acted to make the financial system more resilient to those vulnerabilities. This was not just an intellectual failure, as is widely discussed and recognized now. It was also partly a failure of machinery. The FSB has been encouraging new machinery to survey and head off risks. The FSB itself has created a vulnerabilities group. It is probably the least prominent part of the Financial Stability Board’s effort to date, but it could have enduring significance over the years and decades. It is paralleled in various regions. Europe is setting up a Systemic Risk Board, which will be supported by the ECB but involve all of the EU. The USA is setting up a Systemic Oversight Council; and in the UK, the government is establishing a macroprudential Financial Policy Committee in the Bank of England. Maybe something is needed in Asia, too. Martin [Wolf] talked about complacency; for the machinery I have described to make any difference, people will have to stick to it year in and year out. 2. Supervision of individual firms  One of the things that should not be neglected is that the severity of this crisis was as great as it was partly because a large handful of individual massive firms failed due to poor management and weak balance sheets. Part of the solution lies, therefore, in much better microprudential supervision and regulation of individual firms. The Basel Committee has had Core Principles for Effective Banking Supervision for some considerable time now.