samchain/econo-pairs-v1 huggingface dataset:
The total amount and pace at which the Desk could purchase in these TBA contracts would likely depend on the supply of securities that could be readily delivered and the willingness of investors to sell these securities from their portfolios.15 For these reasons, it can be useful to gauge our purchases both relative to gross issuance as well as the amount of outstanding stock that can likely be delivered into the Desk’s TBA purchases. Since the current purchase program began, the Desk’s purchases have accounted for about 50 percent of gross issuance on average, below the average monthly purchase rate of roughly two-thirds during the first round of large-scale MBS purchases in 2009. If refinancing activity declines, leading to a decrease in gross issuance, our purchases could exceed these levels. Such higher levels still seem unlikely to cause significant market functioning issues, given the considerable supply of existing stock that we believe could be delivered into the Desk’s TBA purchases over time. Nevertheless, not all new securities are issued in the TBA market, and it is difficult to estimate future gross issuance, so the Desk monitors the purchasable supply of MBS closely.16 Purchases of Treasury securities are more straightforward, reflecting the relative simplicity of the market and our long history of operating in it. Treasury purchases are distributed across securities with different maturities, with the intent of removing a specified amount of duration risk from the market without causing significant market disruption.

17  Of course, this maturity distribution could change as part of the Committee’s ongoing assessment of the economic outlook and the efficacy and costs of asset purchases. 6  BIS central bankers’ speeches  issuance of coupon securities.18 We have a larger presence in the market for longer-term securities, with SOMA holdings making up about 35 percent of securities with four or more years to maturity. The Committee carefully assesses the total amount, pace and composition of its purchases in part because it is aware of the potential for large-scale asset purchases to contribute to financial market dysfunction. Some on the Committee have listed financial market disruptions among the potential risks that they will consider as they evaluate the current purchase program. There is a finite supply of Treasury securities and agency MBS available to purchase, in terms of both total outstanding amount and how much is available for purchase in the market at any given time. If the Federal Reserve were to become too dominant a buyer or holder, it could reduce the tradable supply of these securities and discourage trading among market participants, leading to diminished liquidity and price discovery. A significant deterioration in liquidity could lead investors to demand a premium for transacting in these markets, ultimately raising borrowing costs and undermining the program’s policy goal.19 With this concern in mind, the Desk closely monitors how our implementation of asset purchases impacts financial market functioning.
First, including 44 variables may generate good results more because the additional variables add greater flexibility to soak up variability in real GDP, rather than providing a more solid theoretical underpinning. As the authors note, the variables were selected, in part, on the basis of what we know today about which variables are likely to be important. But this type of selection process – even if conducted on a pseudo real-time basis – introduces selection bias, which the authors do admit could be important. Second, despite the inclusion of a large number of variables, some important ones may still be missing. In particular, leverage variables – such as the leverage ratio of the major securities dealers – may be an important component of financial conditions. The work of Tobias Adrian and Hyun Shin suggests that the increase in leverage of the major securities was a major factor that fueled the asset bubble preceding the recent crisis. If this was indeed the case as seems likely, this type of variable should also be included in a financial conditions framework. 4 Third, as the authors note, the resulting FCI is complex; it is difficult to estimate, update and to communicate what the results mean. I think FCIs have value as heuristic devices in highlighting what is important. One loses that benefit when the number of variables becomes large and the indexes become complex. Fourth, it would be interesting to know how financial conditions indexes for other countries and regions would differ.

Finally, I would like to know about the dynamic properties of the new FCI. Are particularly high (expansive) readings dangerous and should they be taken as suggestive of asset bubbles? Should the Federal Reserve try to prevent such occurrences because loose financial conditions precede episodes of financial instability? In this respect, when financial conditions become unusually expansive, is the fed funds rate the right tool to use to constrain or counteract such expansiveness? Or would it be better to use macroprudential tools such as leverage limits or loan-to-value requirements on residential real estate to keep financial conditions from becoming unusually expansive in the first place? I could imagine circumstances in which macroprudential tools might be used to tighten up the relationship between the fed funds rate and financial conditions. Would the use of such tools be helpful in achieving greater macroeconomic stability? At this stage, there are many more questions than answers. I would strongly encourage the authors and others to continue their work on financial conditions and in exploring how developments in the financial sector influence both the real economy and monetary policy. The financial crisis has demonstrated that financial market developments matter greatly. The paper successfully makes the case that it would be useful to have a good set of summary statistics to serve as benchmarks to keep track of such developments. It also would be useful to have a better understanding of how shifts in financial conditions should be considered in the ongoing conduct of monetary policy.
We are a country that is, in terms of population and employment, quite significantly dependent on agriculture, about 30 percent of our labor forces is tied to agriculture. So obviously, higher temperatures and higher risk of droughts and floods will severely hit the agricultural sector. Thailand is also highly dependent on tourism, the beach tourism, and so substantial rises in sea levels will hit our country very hard. Therefore, as a country that is very vulnerable to climate change, I think it is beholden upon us to take much stronger initiatives on the climate change and the green front. Page 6 of 9  On Thailand’s development on the green front, I welcome a lot of initiatives that happened in Thailand, especially in the capital markets. We have seen the Stock Exchange of Thailand launching the Thailand Sustainability Index, which is an index composing of green and sustainable listed firms. We have seen our colleagues at the Security Exchange Commission undertaking welcomed initiatives with the Environmental, Social and Governance (ESG) bonds, which are seeing a significant growth in Thailand. I would also like to see that progress on the banking side catching up that of the capital market as the banking side, both in Thailand and globally, still lags in terms of green and climate initiatives that have already been undertaken by capital market participants. Thus, we, at the Bank of Thailand, will do our best to make sure that the banking sector catches up and does play its role as needed.

There are a lot of uncertainties in the world and it is difficult to see what is likely to happen in the future. Nonetheless, I think there are two things, at least, that we can comfortably say that will characterize the post-COVID world. We are likely to see the post-COVID world being “greener” than before, and also “more digital” than before. With those two things in mind, we, at the Bank of Thailand, are making sure that, at least from our side and the financial sector side, Thailand is better positioned to taking advantage of these opportunities in a greener and more digital role. What kinds of things are we doing? First, on green, the Intergovernmental Panel on Climate Change (IPCC) report that came out last week was a wake-up call, which highlights the need for a much more effective and rapid action. That sense of urgency that we have been talking about for a long time needs to be translated into much more concrete actions. On the global front, I welcome a lot of encouraging initiatives that have happened on the global front. The Net Zero Asset Managers Initiative is a very good example of things that need to happen both in terms of the scale and the extent of the involvement. Unfortunately, Thailand has been lagging in our response in terms of the climate crisis and as a country that is likely to be hit very hard by the climate crisis.
In other words, effective stress testing must be viewed not only as a tool for monitoring the risks a firm has taken, but for actually influencing and changing behavior. Supervisors should focus on concentrations of exposure to a range of different risk factors, not just on the concern of the particular moment or the most recent sources of shocks. Just as generals are often accused of preparing to fight the last war, practice tends to chase measures of direct exposure implicated in past crises, or what seem like the plausible candidates for future crises, whether to real estate, to hedge funds, to structured financial products, to emerging markets or to a particular industry. 6  BIS Review 85/2006  This may be necessary and desirable, but it is not the most challenging task in risk management, and we generally don’t put ourselves in the position of trying to substitute our judgment for the markets on what level of direct exposure to a particular company or industry is prudent relative to capital. The better approach is to look at what might happen to the firm’s losses in various alternative, more adverse states of the world, and then assess the direct and indirect effects of distress in different parts of the portfolio and the interactions among them. The major financial institutions, for example, typically take on very little direct current exposure to hedge funds as group. But, as you might expect, the scale of potential future exposure is more substantial.

It has clearly emerged from the discussion today that post-trade harmonisation is gaining momentum and achieving concrete results. The example we heard about in more detail is the progress made on the T2S harmonisation agenda. The T2S Community and the post-trade industry have engaged in the implementation of harmonised standards and market practice in areas such as cut-off times, ISO messages, corporate actions processing, account numbering and settlement finality. As Jean-Michel Godeffroy illustrated earlier today, there is an ambitious plan in place for the coming months and a sound record of achievement so far. I noted that the audience expressed moderate optimism that the “priority one harmonisation topics” would be achieved by the launch of T2S. However, there is still a lot of work to be done in order to complete all these projects. It was very interesting in this regard to hear about the experience of Professor Giovannini, whose very name is closely associated with harmonisation and market integration. In particular, he analysed the problems faced by the Giovannini Group in the early 2000s. These reflections are very important for us now to learn from past experiences and to be able to achieve concrete results going forward. The large participation at this conference today, with distinguished speakers and almost 250 participants from all over Europe, is testimony to the joint willingness of both the European and national institutions and market players to achieve post-trade harmonisation, and thus contribute to financial integration in Europe.
Third, the U.S. has an independent central bank – the Federal Reserve – which has been successful in keeping inflation low and stable. As a result, the dollar has been a reliable store of value in recent years. Another point in the United States’ favor is the considerable steps taken to shore up areas of weakness revealed by the financial crisis. In particular, the safety and soundness of our financial system has been enhanced. Capital and liquidity requirements for U.S. banks have been raised significantly. Stress tests have been imposed to enhance the viability of large systemic institutions even in very adverse economic and financial environments. Reforms have been enacted to facilitate the recovery and resolution of troubled institutions. This  2  BIS central bankers’ speeches  includes living will requirements for the major systemically-important financial institutions, and the development of an improved resolution regime to ensure that institutions that do get into difficulty can be resolved without disrupting the stability of the financial system. In conclusion, I welcome other countries’ progress toward achieving the preconditions necessary for their currencies to attain the stature of a reserve currency. However, we should not act as if this is sufficient to achieve a well-functioning global financial system. In particular, the current regime is inefficient in a number of important ways. Countries have found it necessary to self-insure against the risk of large capital flow reversals. This has led to a very sharp rise in aggregate foreign exchange reserve holdings.

Given the major implications that the structure and functioning of the financial sector may have for macroeconomic developments, a strengthening of the accession countries' financial markets, including the enhancement of legal frameworks and prudential supervision, is needed. The principal reasons for this are twofold. First, the weakness of the financial sector has been partly responsible for the relatively modest growth rates observed in some accession countries during the last decade. In spite of substantial structural reforms in the real sector of the economy, the as yet insufficient development of the financial sectors may have made the transition to a fully functioning market economy more costly in many accession countries. Financial sector development is, therefore, crucial if potential economic growth is to be increased and real incomes are to catch up with those of the euro area. Second, financial stability in the accession countries is of great relevance to the ECB, since it is a central aspect of ensuring the smooth conduct of monetary policy in an enlarged euro area. Financial sector vulnerabilities have to be avoided as they may complicate the efficient working of the monetary policy transmission mechanism. They may also pose great challenges for the conduct of monetary policy, for central banks' credibility and for the maintenance of price stability. Finally, accession countries have embarked on the process of developing a modern financial market infrastructure.
Such asset purchases involve taking more credit risk onto the public sector balance sheet. That is why the Bank will consider purchasing only high quality assets. Despite the existence of a range of unconventional instruments, monetary policy is likely to be more effective when the banking system is working normally. So the first priority for policy is to fix the banking system so that it can resume its normal lending function. The contraction of lending to ordinary viable businesses – your businesses – is threatening to drive the economy further into recession. The package of measures announced yesterday by the Chancellor are not designed to protect the banks as such. They are designed to protect the economy from the banks. In particular, the Asset Protection Scheme aims to remove a degree of uncertainty about the future losses banks will make. It also has the effect of reducing the amount of capital banks need to hold against their risky assets. Both effects will serve to strengthen and underpin banks' balance sheets and so support their lending to the real economy. To be clear, the scheme does not mean that the taxpayer will bear the full brunt of past lending mistakes by banks. Rather, there is sharing of losses between shareholders and the government – or coinsurance – with the government providing, at a price, insurance against only extreme outcomes for the banks.

In Japan, industrial production fell by 8.5% in just one month in November, and in Germany, the value of exports declined by over 10%. In the United States, over a million jobs were lost in the final two months of last year – the fastest rate of job losses in over 60 years. And in the United Kingdom, manufacturing output contracted at its fastest rate since 1980. Trade was badly affected – the Baltic Dry Index, an indicator of demand to ship materials around the world – fell at the fastest pace on record in October. For the world economy as a whole, consensus forecasts of growth in 2009 have been revised down from 3% to just 1% since September.1  1  See charts below. Sources: Chart 1: Composite indices from Global Financial Database, comprising of: East Indies share for 1693; Bank of England and East Indies shares from 1694 to August 1711; Bank of England, East Indies and South Sea shares from September 1711 to January 1811; Rostow's Total Index of Share Prices from 1811 to 1867; the London and Cambridge Economic Service Index from 1867 to 1906; The Banker's Magazine Index from 1907 to May 1933; the Actuaries General Index from June 1933 to April 1962; and the FTSE All-Share from April 1962 onwards. Data are monthly until 1965, then weekly until 1968, and daily afterwards.
Our ability to realise these benefits in future will largely depend on the investments and priorities that we make today. Our priorities should work to improve our ability to effectively manage financial stability in a more integrated financial system, and to build stronger, more resilient and dynamic institutions that will effectively serve the economic needs of the people in this region. On that note, let me conclude my remarks and wish all of you a productive and fruitful conference. 6  BIS central bankers’ speeches

José De Gregorio: Chile and the global recession of 2009 Speech by Mr José De Gregorio, Governor of the Central Bank of Chile, at the seminar Los temas del 2009 (Key Issues of 2009), organized by the Instituto de Políticas Públicas Expansiva – UDP and Libertad y Desarrollo, Santiago, 20 March 2009. I am grateful to Mariana García and Enrique Orellana for their valuable comments and contributions. *  *  *  The world is undergoing a major crisis and all economies, at different degrees, are being affected by the shrinking output in the developed world. What began as a crisis focused on the subprime mortgage market in the United States has swept over the rest of the financial systems of the developed countries and is significantly hurting global activity in a variety of ways. In fact, a surprising feature of this crisis is its high synchronicity throughout the world. Consequently, we are now facing a very complex outlook. It was only last September, when the crisis was still believed to be a problem which would chiefly affect developed financial markets, that consensus projections anticipated that the world (measured at market prices) would grow by 2.5% during this year. In March, consensus estimates foresee a 1.6% drop in global GDP. That is to say that, in six months, global growth projections for 2009 have dropped more than four percentage points (Table 1).
This relates to a different type of criticism that argues that the negative interest rate has not had any effect or even been counter-productive. The grounds for this criticism appear to be that inflation has not attained the target despite the repo rate being negative. This is of course true, but the question one should ask is how things would have looked if the Riksbank had not cut the rate as much as it did. Of course we can never know for certain, but it is difficult to see any convincing reasons why inflation would have been the same as it is now, or even higher, if the repo rate had stayed at zero. And in this context the risks of a very strong krona appreciation that needed to be dealt with during the spring of 2015 should be recalled. Unclear arguments regarding exchange rate and welfare Before I continue, I would like to say something about one type of criticism that has been common recently. It appears to be based on the idea that the exchange rate can be regarded as a measure of welfare and argues that “Swedes have become poorer” when the krona is weak, and vice versa. As the Riksbank's expansionary monetary policy is assumed to be an important explanation for the weak krona, the Riksbank is thus considered to contribute to this increased poverty. This is then taken as justification for saying that monetary policy is wrong. I have some difficulty in understanding this linking of the exchange rate to welfare.

There is an international discussion, mostly on an academic level, about monetary policy becoming more effective if the central banks’ policy rates were to be made very negative – that is, if the lower bound could in principle be eliminated entirely. 10 But personally I do not regard this as a practically implementable solution. Negative policy rates are already regarded with scepticism and it is easy to imagine how opinion would be if they were cut so far that the general public’s deposit rates also passed beyond the zero mark – or, even worse, if one with various electronic money solutions were to force people to “pay to save”. 11 I definitely believe that there is scope to cut the repo rate somewhat further if necessary. But one cannot ignore the fact that this scope is limited. It is of course also possible to make further purchases of securities, but even there it is reasonable to assume that the positive effects will wane sooner or later and the complications will gradually increase. I would like to emphasise, to avoid any misunderstanding, that I still count on inflation developing in line with the Riksbank's forecast and attaining 2 per cent safely within the current forecast period. But it is nevertheless important and necessary to seriously consider and evaluate alternative scenarios. It may take longer to attain the target...