samchain/econo-pairs-v1 huggingface dataset:
In many instances, depending on the particular international profile of the business, they are continuing to suffer, as a result of the global economic developments that I have already described. The resulting agony continues in many cases notwithstanding the present pick-up in world demand, and is particularly acute for those businesses and sectors most exposed to the continuing weakness of the euro. They no doubt include some of your own businesses. I realise that to say that I sympathise with those of you in this situation - and I really do sympathise with you - is scant consolation. But I want to assure you that we do not ignore the exchange rate in either our inflation forecasts or in our monetary policy judgements. The strong exchange rate in itself has both a direct dampening effect on our domestic price level and an indirect effect through lowering net external demand - and both of these effects we take into account as best we can. Absent those effects of the strong exchange rate - other things equal - policy would have needed to be correspondingly tighter. But while we do - and will continue to - try to make full allowance for the strength of the exchange rate there are limits to just how far we can sensibly go.

Accordingly, the evolution of macroeconomic conditions makes it necessary to reduce the monetary stimulus, a process that will continue to be implemented gradually and cautiously, in a context where there is still high uncertainty coming from the external scenario. Recent economic developments As had been anticipated in a number of Monetary Policy Reports, in the third quarter GDP slowed down its annual growth rate with respect to the first half of the year. This is consistent with a scenario The Imacec (Índice Mensual de Actividad Económica) literally corresponds to the “Economic Activity Monthly Indicator”. 1  1  in which economic growth is closer to potential—estimated to lie in the 3% to 3.5% range—given the progress made in the process of closing capacity gaps, the end of specific factors that had favored growth in the first half and a more challenging comparison base in the second (Figure 1). In any case, the deceleration of the last quarter was sharper than expected, highlighting the worsened performance of mining and manufacturing. In the former, there were operational difficulties in some mines; in the latter a significant and greater than expected effect from a string of holidays in September. All of us who devote ourselves to analyzing the economy and its evolution should bear in mind how difficult it is to draw medium-term conclusions from the observation of high frequency data.
For example, we are seeing instances of customers who had funded themselves largely in the capital markets in recent years turning to the banking system for funding in the current, stressful environment. These observations and issues, which also have been made by others, most recently the Willard Group, have led us to add liquidity management to the near-term agenda of the Basle Committee. The third question involved the role that uncertainty as a result of structural change in the financial system may be playing in recent market developments. One lesson from this turmoil is how difficult it is to understand the linkages between markets and economies in light of the changing patterns of financial and economic flows. In the near term, this points to the need to incorporate more guidance on meaningful stress testing into our supervisory policies and devote more attention to it in our supervisory practice. For meaningful stress testing, a bank must have strong information systems that can both aggregate BIS Review 86/1998  -4-  information about the bank’s positions and facilitate analysis of the positions under different scenarios. Better management information systems is one of the primary benefits of the move toward greater modeling of market and credit risk management. Management information systems, however, are not enough. It also is necessary for management to assess the internal and external factors that create risk in relation to the bank’s positions in order to come up with revealing stress scenarios.

BIS Review 86/1998  -3-  The basic financial analysis that is the foundation of the credit process may be affected by changes in both customer and counterparty behavior. For example, a lesson we have learned from the current turmoil is how complex the concept of leverage is in today’s markets, where leverage roughly describes the ratio of risk to capital. Where leverage once could be measured directly from the balance sheet, we’ve become aware that leverage can be achieved in a number of ways. These include holding a high-risk portfolio of assets, engaging in extensive derivatives trading, especially if it involves options, funding domestic currency assets with foreign currency liabilities, investing in long-term assets with short-dated funding and pursuing a high-risk business strategy. All of these effectively can create leverage. A related lesson learned is that collateral can mitigate credit risk, but it cannot eliminate it. One reason is that posted collateral inevitably lags movements in market prices and recognition of credit issues. In trading agreements, for example, gaps between the amount owed by the customer and the amount of collateral pledged develop surprisingly quickly. One costly solution is to hold large amounts of excess collateral, but that is most often unacceptable to the counterparty. Similarly, when the collateral is real estate, equities or high-yield securities, a gap can open up between the amount owed and the value of the collateral whenever the price of the collateral declines. We have seen both problems in the current turmoil.
On 15 December 2020, the Federal Reserve Board announces it has formally joined the Network of Central Banks and Supervisors for Greening the Financial System, or NGFS. ii Responsible Investment Report of the Banque de France 2019, June 2020. iii Article 3 of the Treaty on European Union. iv Seppänen et al. (2006), « Room Temperature and Productivity in Office Work », LBNL-60952, Lawrence Berkeley National Laboratory, Berkeley, CA. ou Niemelä et al. (2002), « The effects of air temperature on labour productivity in call centres – a case study », Energy and Buildings 34(8), 759-64. v Weidmann, J. (2021), “What role should central banks play in combating climate change?”, Remarks at the ILF conference Green Banking and Green Central Banking: What are the right concepts?, Goethe University Frankfurt, 25 January. vi NGFS (2020), “Survey on monetary policy operations and climate change: key lessons for further analysis”. vii Bolton, P., Després, M., Pereira da Silva, L., Samama, F., Svartzman, R. (2020), “The green swan: central banking and financial stability in the age of climate change”, Bank for International Settlements and Banque de France. viii Objective defined in the Paris Agreement signed by 195 countries, of which the European Union. ix Schnabel, I.

In addition to transition risks, climate events are already having increasingly visible effects on activity and food prices. The price of wheat has currently reached a historic high, partly for climate reasons. In Europe itself, the drought in the summer of 2018 had caused the Rhine to drop to a historically low level and slowed growth in Germany by disrupting river transport. Page 3 sur 8 In the longer term, climate change will weigh on the potential growth of our economies. Numerous studies show that higher temperatures reduce labour productivity by about 2% for every degree above 25°C. iv According to simulations by the Banque de France, real GDP in Europe is expected to be 2 to 6% lower in 2050, in the event of a disorderly rather than orderly climate transition. 1.2 For the smooth implementation of monetary policy Climate risk is also a source of financial risk. It is therefore essential, as my colleague and friend Jens Weidmann, President of the Bundesbank, says, that "central banks […] practice what they preach" v for the banks they supervise, i.e. better factor climate risk into their own operations. Moreover, preserving financial stability is a prerequisite for ensuring the smooth transmission of monetary policy, as the NGFS also recently recalled. vi Let's face it: the ECB's balance sheet is "exposed" to climate risk through the securities it purchases and the assets pledged as collateral by banks, to an extent that is insufficiently taken into account.
the costs resulting from interest payable, amortisation and maintenance – do not exceed one-third of the borrower’s gross income. In the case of residential investment property, these costs should not exceed the rental return. The term ‘residential investment property’ comprises apartment buildings as well as privately owned apartments and single-family houses that are rented out. Slide 3 shows the share of new mortgage loans at various imputed interest rates that do not meet the conditions of this standard metric, i.e. where the loan-to-income (LTI) ratio is too high. The data illustrate that affordability risks have risen in all segments since 2014 and are currently at historically high levels. The sharpest increase has occurred in the residential investment property segment. Between 20% and 30% of newly granted mortgage loans for residential investment property would be deemed unaffordable if the mortgage interest were to rise to 3%. Should the interest rate climb to 4%, this proportion would amount to around 40%. In the owner-occupied residential property sector, these shares would come to roughly 20% and 30% respectively. These figures on affordability risk do not mean that, in the event of an interest rate rise, mortgage loan defaults of this magnitude would actually occur. After all, the calculation used here considers only borrowers’ income and not, for example, their general financial situation. Moreover, the figures are based solely on newly granted loans, not outstanding loans. Overall, however, the figures do show that the debt level of mortgage borrowers compared to their income has increased sharply in recent years.

However, we must take into account that in the long run the krone exchange rate cannot deviate substantially from the level implied by economic fundamentals. We must therefore to some extent expect a change in the krone exchange rate in response to major changes in our terms of trade. 11  BIS Review 20/1999  Norges Bank’s mandate has been formulated in the light of the experience of a fixed exchange rate policy earlier in the 1990s. This experience does not imply that the central bank is to conduct a traditional fixed exchange rate regime, with established fluctuation margins and the obligation to intervene, as reflected in the mandate. Norges Bank will orient monetary policy ‘towards maintaining a stable krone exchange rate against European currencies’. However, it is taken into account that the krone exchange rate will vary. The Exchange Rate Regulation therefore states that ‘in the event of significant changes in the exchange rate, monetary policy instruments shall be oriented with a view to returning the exchange rate over time to its initial range’. We must learn from the situation that arose in the autumn of 1996 and winter of 1997 when strong appreciation pressures prompted Norges Bank to reduce its key rates. Norges Bank’s first response to such appreciation pressures is to provide advice concerning changes in the budget. Norges Bank will orient its instruments towards maintaining a stable krone exchange rate. We must not allow ourselves to be blinded by daily exchange rate quotations.
The ECB’s entire range of instruments, characterised by a wide corridor between the interest rate on the marginal lending facility and the rate on the deposit facility, weekly repurchase agreements, the acceptance of a large number of counterparties and a wide range of collateral, is based on the money market functioning. If the money market doesn’t work, the mechanism for transmitting monetary policy doesn’t work. The only solution remaining for a central bank at this point is to stand in for the market and perform the role of the banks, even by lending directly to the private sector. Maybe this solution is the most preferable? I don’t believe so. In my opinion, the functioning of the market is a statutory objective for a central bank. It should therefore intervene to guarantee the liquidity of the market. It should be remembered that every injection of liquidity is guaranteed by the collateral deposited by the counterparty banks. This means that banks’ assets are made liquid. It’s obvious that without such a liquidity intervention, the market would collapse, taking the banking system with it. This is always true for last-resort interventions whose objective is to keep a solvent but illiquid system alive. It is at the heart of the role of central banking, particularly in times of systemic crisis. There can be no doubt that the ECB had to take on this role and I believe it has done so in an appropriate way.

Indeed, at that time, the ECB was subject above all to criticism contrary to that levelled by Franco Bruni. At least three European heads of state, and many ministries of finance, not to mention business people, trade unionists, journalists, politicians and commentators, exerted public pressure on the ECB to finally cut rates. And when, at the end of 2005, the ECB decided (rather late, in Bruni’s opinion) to increase them, many of those persons lined up, together with renowned international institutions, to severely censure the decision, because  1  2  La Stampa, 2 December 2005. BIS Review 82/2009  they felt it would have cut off the legs of the recovery. The ECB is independent, fortunately, and cannot dump on others the responsibilities of its own choices. But what we should not forget is the context in which it operates, largely influenced, also in the countries of continental Europe, by an “activist” vision of monetary policy with an Anglo-Saxon inspiration. It is also surprising how the teachings taken from that period of monetary policy are quickly put aside when you go from the historical analysis to that of the economic juncture, in particular the current economic situation.
This framework must set out the functions of each component and level of governance in a manner to ensure accountability of each respective jurisdiction with appropriate division of powers to avoid possible conflict of interests. In this context, consideration may be given to four main ingredients important to the governance framework for Islamic financial institutions. (i)  Firstly, to ensure that the guidance, standards and core principles are able to translate the values consistent with the injunctions of Shariah. The core values of honesty and integrity are key ingredients of the governance framework of the Islamic financial transactions with heavy reliance on the trust relationship. The significance of these core values is clearly highlighted in the Qur'an, Sunnah and the "fiqh". The banking institutions, as user of public funds must act in good faith for the benefit of all stakeholders. If the relationship between the financier and entrepreneur can be built on honesty, efficiency and equity, a durable equilibrium can be established that will serve the mutual interest of both parties. (ii)  Secondly, the governance framework needs to take into account the multi-faceted role performed by the Islamic financial institutions and treat all the relevant stakeholders fairly, including minority shareholders and the investment account holders. It is an embodiment of the concept of justice in Islam as stated in Qur'an, which is nearest to righteousness (taqwa) in the Islamic faith.

All this will make the next meeting of the MPC interesting, particularly since the February meeting will include our quarterly review of the two year MPC Inflation Forecast, in which we will try to calibrate the effects of the various changes I have mentioned. Proposed Revisions to the Basel Accord Compared to the last US recession in the early 1990s, a source of strength to the global financial system as the US economy slows is the much stronger capital position of most major international banks. The 1988 Basel Accord and its market risk amendment were intended both to set a floor to the capitalisation of the world's major banks, and to smooth out competitive inequalities between banks from different countries. Bank capital ratios have increased significantly in the last decade. Between 1988 and the end of the 1990s, the ratio of capital to risk-adjusted assets of major banks in the G-10 rose on average by around 3 percentage points. Of course, introduction of the Accord was not the only factor involved but studies agree it played a significant role in rising bank capital. However, by the second half of the 1990s, it became apparent that the Accord required a radical overhaul to take account of changes in the nature of banking business and risk management since 1988.
Third, the allocation of our purchases across market segments is also state-contingent. For example, the crisis revealed an unprecedented need for short-term liquidity by firms as lockdown measures dried up revenue streams. Firms started to heavily draw down bank credit lines, and year-to-date bond issuance activity by euro area firms is reaching new record levels. At the same time, traditional investors, such as money market funds, shifted their asset allocation to the shortest maturities only. In response to these developments, we decided to shift a significant share of our purchases to the commercial paper market, and to longer tenors, in particular. Today, we see clear evidence of the success of allocating purchases flexibly across market segments. Commercial paper rates for non-financial firms have started to stabilise and issuance at longer tenors is rising, thereby reducing rollover risks and hence uncertainty for firms (see Slide 10). Conclusion Let me conclude. COVID-19 constitutes an unprecedented shock to the global and euro area economy. By how much the crisis will permanently shift economic structures, both within and across countries, remains highly uncertain at the current juncture. But the nature and severity of the shock make it likely that these shifts will be significant. In this uncertain environment, monetary policy needs to play a proactive stabilising role. It needs to restore and preserve financial conditions that are consistent with a return of inflation to levels 6/7  BIS central bankers' speeches  closer to 2% over the medium term.

The Governing Council’s wide-ranging decisions of last week are geared towards this aim. They were based on the assessment that, in the current fragile market environment, the PEPP remains the best, and most effective, instrument to respond to the dual risks of a shortfall of inflation from our medium-term aim and of fragmentation in the euro area, which threatens the singleness of our monetary policy. The PEPP’s anatomy provides the flexibility – across time, jurisdictions and market segments – that is needed to effectively counter the specific challenges that COVID-19 poses. This flexibility is a key element of PEPP and will be maintained throughout its lifetime. Thank you. 1 See, for example, Autor, D. et al. (2017), “The Fall of the Labor Share and the Rise of Superstar Firms”, NBER  Working Paper Series, National Bureau of Economic Research, No 23396, May; and Gutiérrez, G. and Philippon, T. (2017), “Declining Competition and Investment in the U.S.”, NBER Working Paper Series, No 23583, National Bureau of Economic Research, July. 2 See Ari, A., Chen, S. and Ratnovski, L. (2020), “The dynamics of non-performing loans during banking crises: a  new database”, Working Paper Series, No. 2395, ECB. 3 See, for example, Vayanos, D. and J.-Luc Vila (2009), “A Preferred-Habitat Model of the Term Structure of Interest  Rates”, NBER Working Paper No. 15487. See also Krishnamurthy and Vissing-Jorgensen (2011, 2013) and D’Amico and King (2013). 4 Announcement effects are event-specific and may change over time.
A recent study by New York Fed economists shows that high inflation hits Black and Hispanic Americans particularly hard.2 I am resolutely focused on restoring price stability, which is the foundation for a vibrant and healthy economy. The Federal Reserve's Policy Actions While monetary policy actions won't directly reduce fuel or food costs, they will reduce overall inflationary pressures that arise in an economy where demand exceeds the available supply, like we are experiencing today. Higher interest rates reduce demand for goods and services. This is especially true for those sectors that are most sensitive to interest rates, such as durable goods and housing, where we have seen the greatest imbalances between demand and supply. Therefore, in support of our goals of achieving maximum employment and inflation at a rate of 2 percent over the longer run, the FOMC last month decided to raise the target range for the federal funds rate to 1‑1/2 to 1-3/4 percent and said it anticipates that ongoing increases in the target range will be appropriate.3 In addition, the Committee will continue reducing its holdings of Treasury securities and agency debt and agency mortgage-backed securities, as described in the Plans for Reducing the Size of the Federal Reserve's Balance Sheet that were issued in May.4 Raising the federal funds rate by 75 basis points was the largest single increase that the Federal Reserve has put forth since 1994.

I met with government officials to discuss the Commonwealth’s economic plan and pandemic recovery. I also heard from executives about how the banking sector is faring. And I met with leaders of cooperativas to hear about what they're doing to help residents improve their access to credit and financial services. I took a short flight here from San Juan after a full day of engagements yesterday, and I spent the earlier part of this morning at the Aeronautical and Aerospace Institute of Puerto Rico, where I learned about this growing industry. Needless to say, the views from the ground and the air have been delightful. The U.S. economy has experienced a tremendous rebound since the darkest days at the onset of the pandemic. But now, inflation is sky-high, and it is the number one danger to the overall health and stability of a well-functioning economy. The war in Ukraine and the recent lockdowns in China, on top of the ongoing supply challenges and demand shifts, have led to inflation rates we have not seen in four decades. The priority for monetary policy is clear. The Federal Reserve is strongly committed to bringing inflation back down to our 2 percent longer-run goal. Price stability is absolutely essential for the economy to achieve its potential and sustain maximum employment over the medium term. I want to be clear: this is not an easy task. We must be resolute, and we cannot fall short.