samchain/econo-pairs-v1 huggingface dataset:
I will then turn to the main issue I want to discuss – the implications of a ‘low for long’ world on financial stability and the interaction with monetary policy. My colleague, Ben Broadbent, has argued in an excellent speech for the separation of powers, with which I agree, between monetary and financial stability (or ‘macro-prudential’) authorities.2 But monetary and financial stability, to some extent, depend upon each other and I will look at the implications that ‘low for long’ has on those interdependencies. Chart 1. UK long-term nominal interest rates (a) Percent  18 16 14 12 10 8 6 4 2 0 1753  1778  1803  1828  1853  1878  1903  1928  1953  1978  2003  Source: A Millennium of Macroeconomic Data (available at https://www.bankofengland.co.uk/statistics/research-datasets) and Bank of England calculations (https://www.bankofengland.co.uk/statistics/yield-curves). The red line shows yields on new long-term issues of perpetuities and consols (a mixture of month-end and monthly averages). The last remaining consols were repaid in June 2015. The blue line shows the 30-year zero coupon spot rate (monthly average). The data are up to September 2019. 2  Broadbent (2018). 3  All speeches are available online at www.bankofengland.co.uk/news/speeches  3  Low for Long  What explains the current very low level of market interest rates in advanced economies?

I am not going to talk today about what banks must do, which is a lot. I will merely give some examples of the tasks outstanding for the authorities. With regard to cleaning up balance sheets and levels of capital, the latest reform has been a very important step, but nothing in life is final. If the Spanish economy eventually recovers, it will have been more than enough, but if the economy deteriorates by more than expected, then capital will have to continue to be increased and improved if banks are to remain solid. Also, new instruments to increase credit to SMEs will have to continue to be tested. Some of these were discussed at a workshop held by the Banco de España in February in collaboration with the Spanish National Securities Market Commission (CNMV). At some point political decisions will need to be taken in this area. Another area of work is to continue to reduce the size of savings bank governing bodies in order to avoid any duplication when they have transferred their financial business to banks they have set up, which must be stock-exchange listed when above a certain size. A more substantial alternative would be a law requiring savings banks to cease holding significant stakes in credit institutions, within a reasonable period, and to invest as they see fit, perhaps obtaining higher returns, in order to continue to pursue their welfare aims.
Zdeněk Tůma: Frontiers of monetary policy Speech by Mr Zdeněk Tůma, Governor of the Czech National Bank, at the Forecasting Dinner 2009, Czech National Bank, Prague, 12 February 2009. *  *  *  Ladies and gentlemen, dear colleagues, I had the opportunity to speak on the occasion of the Forecasting Dinner several times, but this year is rather special in one respect and that is the global economic crisis, in the midst of which we are right now. Severity of the crisis brings new challenges to central bankers which result in unconventional methods of the monetary policy conduct. Indeed, the policy interest rates in the United States reached effectively zero and the European Central Bank is expected to lower its policy interest rate to historically low level soon. Global economic outlook is worsening and the latest macroeconomic forecast of the Czech National Bank expects the economic growth to be around zero this year and only roughly one percent growth in the year 2010. Accordingly, we expect inflation to hit almost zero in summer this year but return close to the Czech National Bank inflation target of 2% in the first half of the year 2010. Challenges we face as central bankers lead me tonight to talk about frontiers of monetary policy, issues that have been heavily discussed among central bankers recently but are not completely resolved yet.

The first frontier, I would like to mention tonight, is the reaction of monetary policy to observed changes in asset prices, of course, in order to prevent creation of asset bubbles in equity or real estate markets. Many economists and economic journalists argued recently that if the central banks reacted to the sharply rising asset prices between years 2003 – 2007, the bubble in equity and real estate markets would not have developed and we would not be where we are today. It is not that the policy reaction to asset prices was not discussed among the central bankers during those years, but there is one crucial constraint on our side and that is that the reaction is in reality dramatically difficult. Donald Kohn, Vice Chairman of the Federal Reserve pointed out recently that in order to be successful in this respect three tough conditions must be met. First, policymakers must be able to identify bubbles in a timely fashion with reasonable confidence. Second, a somewhat tighter monetary policy must have a high probability that it will help to check at least some of the speculative activity. And third, the expected improvement in future economic performance that would result from the curtailment of the bubble must be sufficiently great.
For instance, wage negotiations and settlements are complicated by the necessity of establishing some form of indexing system with frequent revisions; interest rates incorporate a risk premium, which increases the cost of financing; the volume and the BIS Review 58/2000  4  direction of long-term saving and of investment are affected by unnecessary uncertainty with regard to the future level of prices. Finally, as high inflation is never well predicted, price increases will create undue wealth transfers between economic agents or sectors. This will bias the indicators of economic return, and divert time and resources for the purposes of either sheltering or taking profit from inflation. To summarise, price stability is a prerequisite for the efficient functioning of the system of relative prices. A well-functioning relative price mechanism reflects the demand for, and cost of, goods and services in a market economy and allows an optimal allocation of real and financial resources. The contribution made by price stability to sustainable growth also has a social aspect. In the long run, economic growth is likely to be affected by a situation in which undue and non-transparent wealth transfers occur, which give rise to social discontent and eventually undermine the stability of society. For instance, inflation creates a well-established fiscal bias, as tax bands may not be sufficiently updated or because interest incomes are taxed, whereas they incorporate a risk premium which does not constitute an effective income in itself, but rather compensates for the depreciation of financial capital.

In the case of the Eurosystem, this is an even more arduous task than usual, as the single monetary policy must cope with a new environment and be explained to a public from different cultural backgrounds on the basis of new indicators and data. Our choice is to base this communication on transparency. This means that our external presentation of monetary policy must fully reflect the internal analysis and discussions which take place within the Governing Council. I can personally assure you that this is the case. Our internal discussions are organised in such a way as to ensure a full and thorough assessment of the two pillars I have just described. Our external communications fully reflect this. In addition to a well-defined and informed strategy, the monetary policy of the Eurosystem must rely on an efficient operational framework, that is, on a set of instruments and procedures necessary for the implementation of monetary policy. Thus far, this framework has proved successful in clearly signalling the stance of monetary policy, in steering short-term market interest rates and in providing liquidity to the banking system in an efficient manner. At the heart of the framework are the weekly refinancing operations which were conducted at interest rates broadly in the middle of the interest rate corridor, which is set by the rates on the two standing facilities. A minimum reserve system ensures the existence of a liquidity deficit in the banking system, which is necessary for the conduct of these weekly open market operations.
Jarle Bergo: Best practice in structuring stabilization and commodity wealth funds Presentation by Mr Jarle Bergo, Deputy Governor of Norges Bank (Central Bank of Norway), at the European Institute's Sovereign Funds Roundtable, London, 8-9 May 2007. Please note that the text below may differ slightly from the actual presentation. *  *  *  Let me begin by thanking the organizers for this opportunity to share with you some of the most important features of our Government Pension Fund – Global, formerly known as the Government Petroleum Fund. Any discussion on how to invest funds must depart from an understanding of when, and for what purpose, the funds are to be used. That is how we can distinguish between relevant risk and less relevant risk. We need to be aware of the risks of not reaching the objectives of the fund. All funds have an objective, but not all objectives can be translated into precise and clear-cut solutions for how to invest the funds. Many commodity wealth funds belong to this category, where liabilities have to be thought of in a very broad sense. The Norwegian Pension Fund has always been more similar to an endowment than to a stabilization fund, but even more so in later years as the Fund has grown faster than expected and has become very large relative to the Norwegian economy. Today I would like to focus on some of the major structures and principles supporting the Norwegian model.

There is a clear investment philosophy behind risk taking in Norges Bank. First and foremost, it is important to have a clear separation between activities directed towards achieving beta-exposure and activities linked to active risk taking. In that way, a true assessment of realised returns as well as costs associated with active management is possible. Moreover, active risk taking is done with humility and with a strong belief in the effectiveness of markets. Hence, we mostly apply active bets when we think we, either internally or through our external managers, possess an informational advantage. Such an advantage is sought through a high degree of specialization. Another type of active position is based on collecting risk premiums where we as an investor have a comparative advantage to bear the risk. An example of this is liquidity premiums. It has been a challenge to us to establish a professional and vigilant business culture within the central bank. I think we have succeeded. An important instrument in this respect has been performancebased remuneration for the Bank's investment managers. The investment management wing of the bank now resembles a private investment manager rather than a typical central bank investment office. In particular, all investments are delegated to professionals in a clear line structure. But recruiting and keeping skilled human capital requires more than competitive wages. Whether we succeed will depend on our ability to create an environment where such capital can thrive and prosper.
While these period-end approaches may be less administratively burdensome to implement than daily or weekly averages, they can incentivize firms to temporarily adjust their balance sheets around quarterend to report higher ratios: balance sheet growth incurs no cost on most days, but incurs a significant capital cost on one or three days a quarter. Much activity in unsecured markets is lowmargin intermediation in which banks borrow funds from non-banks and deposit them at the Federal Reserve to earn IOR; this activity can be less economic for leverage-ratio-constrained foreign banks on the few days when the ratio is calculated. Third, since liftoff in December 2015, I see a modest and gradual uptick in dispersion in the index that combines both secured and unsecured markets. This increase seems to have occurred in two stages: once at liftoff, and again in autumn 2016. In contrast, there was nearly no change in dispersion following the FOMC’s two additional policy rate increases in December 2016 and March 2017. This rise in dispersion in the combined measure reflects the fact that the spread between unsecured and secured overnight rates rose around those times. Much of the fairly modest pick-up in that rate spread seems tied to individual, one-off factors. To begin with, the dispersion in money market rates was compressed to some extent by the zero lower bound, and as rates moved into positive territory, they were able to “unpack” to an extent.

11  Specifically, Level 1 assets are entirely taken into account in the LCR (no haircut) and thus benefit from a more beneficial treatment in the LCR than in the Eurosystem’s collateral framework, while level 2 assets generally enjoy lower haircuts in the Eurosystem’s collateral framework than in the LCR. These differences certainly reflect the different objectives of the LCR and the Eurosystem’s collateral framework. 12  Central bank refinancing always benefit from a 100% rollover rate no matter the quality of the assets used in the transaction. A 100% rollover rate ensures equal treatment between central banks implementing monetary policy through repo operations and central banks implementing monetary policy through outright purchases of  4  BIS central bankers’ speeches  depends on the opportunity cost of obtaining liquidity from the Eurosystem, there may be a number of LCR-constrained banks with large amounts of non-HQLA collateral that is eligible for monetary policy operations. Imagine a post-crisis monetary policy framework where the liquidity provision by the central bank would again be rationed and implemented through competitive auctions (instead of today’s fixed rate, full allotment). If some banks have no access to market repos using their assets as collateral (owing to concerns in the market place about country, counterparty or collateral risk), it will be likely that these counterparties will bid in the liquidity-providing monetary policy tender operations using this collateral in order to obtain cash to cover both their funding needs and their LCR.
Inward migration flows are lower than in the period to summer 2008, but have not come to a complete halt. In 2009, the loss of confidence among banks also affected household mortgage financing. Banks no longer provided bridging loans. Housing turnover fell, but has now picked up again. House prices are rising after a sharp fall in the second half of 2008. Last autumn it was important to restart the housing market, which will also gradually provide the basis for a potential recovery in residential construction. However, the revival in house prices is not a positive development. The level of house prices in Norway is very high and the additional rise that has now occurred will only increase the potential fall. Developments in Norway, and to an even greater extent in other countries, show that economic policy instruments are not perfect. The interplay between credit and property prices in particular poses challenges. Interest rate setting influences this interplay only indirectly. The interest rate rises in good times when inflation is expected to increase and falls when growth and inflation moderate. The interest rate is an approximate instrument, which can be used to keep inflation in check over time and thereby stabilise output and employment. In a small, open economy such as Norway’s, the exchange rate is important for inflation and the level of activity. There is therefore little leeway for setting the interest rate specifically with a view to influencing property markets and credit growth.

For us, the Taylor rule derives its appeal from three features. The first is its simplicity in describing the behaviour of different central banks by estimating the policy reaction to deviations from the inflation target and to the output gap. The second is its quality as a benchmark in assessing the current stance of monetary policy with respect to the historical average for a similar macroeconomic situation. And, thirdly, the Taylor rule is appealing because it sets the standard by which monetary policy is introduced in macroeconomic models for forecasting and simulation purposes. The SNB’s monetary policy focus is on maintaining price stability, and we do not follow any explicit rule for setting the short-term interest rate. However, the Taylor rule serves as an important indicator in our decision-making process that helps us to conduct a systematic policy. Having talked about John the researcher, I would like to turn now to John Taylor the policy advisor. Time and again, John has merged research with policy making. On this account, his record is long and outstanding as well. He served as a member of the President’s Council of Economic Advisors from 1989 to 1991. He was on the Panel of Economic Advisers of the Congressional Budget Office from 1995 to 2001. And from 2001 to 2005, he served as Under Secretary of Treasury for International Affairs. His responsibilities included setting up a new currency in Iraq and getting terrorist financing under control.
Those basing their arguments on past experiences in emerging economies fail to take into consideration the many differences in the case at hand: Greece is an advanced economy sharing a single currency with 16 other democracies which has signed up to a common set of rules, institutions and overriding objectives, notably macroeconomic and financial stability, together with the other countries of the European Union. Greece’s euro membership rules out debt-devaluation spirals and ensures price stability in the medium term. Its economy is highly integrated – via a number of channels, such as trade and financial flows – with other advanced economies both in Europe and around the world that can potentially act as contagion mechanisms. Greater economic integration has been accompanied by an increasing degree of institutional cooperation. At the same time, the country’s economy is affected by a number of structural weaknesses and rigidities that have resulted in the persistent accumulation of public and private sector imbalances. The thorough implementation of the comprehensive programme of structural reforms and fiscal consolidation negotiated with the international authorities is the only way forward which is fully consistent with the long-term interests of the people of Greece. To paraphrase the title of a study by IMF staff, 3 the debate on debt restructuring in a euro area country is unnecessary, undesirable and unhelpful.

BIS central bankers’ speeches  3  Moreover, fiscal governance in the euro area needs to be reinforced by means of the strengthening of the Stability and Growth Pact. This means establishing stricter and more binding rules for fiscal policy, backed up by stronger sanctions or mechanisms to ensure compliance with the rules. At the same time, the effectiveness of budgetary institutions needs to be improved at the national level. In this context, effective rules on expenditure should be regarded as a means of promoting fiscal discipline and limiting fiscal vulnerabilities in the event of adverse economic shocks occurring in the future. III. (b)  Promoting sustainable growth and job creation  Euro area countries also need to increase their efforts to strengthen their growth potential and their ability to create jobs in a sustainable manner. European countries have made reasonable progress over the past ten years in the area of employment. Indeed, over 14 million jobs were created in the euro zone since the introduction of the euro, far more than in the previous ten years (around 8 million). The employment increase in the euro area since 1999 was even significantly larger than in the United States (7.6 million). This is an important achievement, but it remains insufficient, especially against the background of the massive employment destruction observed in some euro area countries during the crisis. Unemployment rates have reached unacceptably high double-digit rates in some countries and segments of the population (i.e.
London has more foreign banking institutions than any other financial centre, and it is the largest financial centre for cross-border bank lending. London is the world’s leading centre for foreign exchange business, with average daily net turnover six times that of Frankfurt. More foreign exchange business in dollars, Deutsche Mark and French francs takes place in London than in each currency’s country of origin. London is the principal centre for the international bond markets, with 60% of primary international bond syndication and 75% of secondary market trading. The London Stock Exchange is the world’s largest centre for the listing and trading of foreign equities, and LIFFE is the largest financial futures exchange in the world outside Chicago. London is also one of the largest centres for the fund management of institutional equities, and one of the largest centres for insurance business. London’s position derives from the critical mass of markets and financial services available, and the concentration of the strongest financial businesses from all over the world. London’s strengths include a long track record of innovation and capitalising on new opportunities. The most well-known example is the creation of the Eurodollar markets, which US firms in London did so much to promote. London is the home of the English language. It is in a convenient time-zone between Asia in the morning and New York in the afternoon. It has an abundance of trading and other financial skills and professional support services - in law, accountancy, tax, property and communications.

In the two years to June 2015, UK PNFCs increased their level of borrowing from capital markets by £ and reduced their borrowing from banks by £ Overall, UK PNFC’s net debt is still some 30% below its 2009 peak. The stock of lending to SMEs, which had been declining for over five years, now seems to have stabilised, though it is some way from growing in line with the economy. The commercial real estate (CRE) component of credit growth in the UK has often been a source of vulnerability. UK banks have suffered large losses on CRE portfolios in most of our severe recessions and the post crisis recession was no exception. On the face of it the UK CRE market is simmering. Transactions reached a record high of £ billion in the 12 months to June this year. Prices have risen by 10% over the same period. As prices rise, average yields are deteriorating and are now around 2005 levels. The credit element of the story, however, which is most relevant from a macroprudential perspective, has been much less pronounced than in past episodes, CRE activity has been financed more with equity than debt; the share of equity financing of CRE investment increased from about a third pre crisis to three quarters in the years following the crisis. And particularly in London, much has been financed by foreign flows which reached £ billion last year.