samchain/econo-pairs-v1 huggingface dataset:
There is no other way to forecast future developments intelligently than to examine the indicators from the recent past, apply to them the metrics that the copious experience from Iceland and abroad has taught us to use, and to use both indicators and metrics as a guideline in projecting future developments. If we didn’t use this method, there would only be one left: to pour tea into a cup, turn it upside down, and read the tea leaves when the saucer is dry. The Central Bank has no comment to make on those who wish to pursue that course, but it isn’t likely to be terribly successful. When the Central Bank announced its interest rate decision, it stated that several factors that have made inflation harder to control could change over time. Sooner or later, higher mortgage interest rates will affect the real estate market. Global financial market conditions have changed for the worse. Those changes are already being felt, and sooner or later they will be felt in Iceland as well. In its forecasting, the Bank takes these factors into account, and it does not rule out the possibility that their actual impact will be greater than projected. Many people hoped that the unrest in the financial markets, which stems largely from the subprime mortgage market in the US, would blow over rather quickly. Some even seemed to believe that a modest drop in US interest rates would be sufficient to coax everything back into place once again.

BIS Review 3/1998  -2-  In the end we know that demand has to be brought back under control. The choice typically is not whether or not to tighten policy but whether to tighten sooner or later; and there is a strong presumption that by tightening sooner - before excess demand really takes hold - we will need to tighten less - to moderate the pace of growth of demand rather than bring it to a shuddering halt or even send it in reverse. Too often in the past the mistake has been to tighten policy too little and too late, contributing to an exaggerated, boom and bust, economic cycle and thereby encouraging an unduly short-term approach to both financial and physical investment. So in trying to maintain effective price stability, in trying consistently to achieve the Government’s inflation target, of 2½% for underlying retail price inflation, what we are really trying to do is to achieve economic stability in the much wider sense of ensuring that aggregate demand grows in line with our productive potential. If we are successful in that, then the financial and business communities will become more confident of making longer-term decisions, and in that way we can contribute indirectly to improving the underlying supply-side of the economy. This objective is now very widely understood and accepted. But it is, of course, much more easily said than done. Since the recession of the early 1990s we have in fact been reasonably successful in maintaining this broader economic stability in this country.
Between 2000 and 2008, Greece and Ireland posted cumulative labor productivity growth rates, as measured by the output per employee, of 14.7% and 10.2% respectively. Both significantly outpaced that of Germany (6.1%). This is exactly what you would expect in an integrated economic and monetary area and this process should continue in the future, provided that appropriate policies are implemented. Economic convergence will therefore boost growth and support the return to debt sustainability. It is true that, looking at nominal developments, a different picture emerges. During the same period, nominal wages grew by a total of 42% in Ireland and 52% in Greece, compared with only 7.4% in Germany. There has to be a regime change in the way in which nominal wages and prices are set in some parts of the euro area. As central bankers, we have been putting forward this argument for years. Strong reforms are now being pushed in labor market legislation as well as in wage determination in the public sector in many countries. What about banks? I would like to end with a few words about the banking sector. Revenues for the twelve biggest European banks grew, in aggregate terms, by 8.6% in 2010 (as compared to 2.5% for the main US banks). As a result, European banks’ Core Tier 1 ratios stood at between 8.5% and 15.3% at the end of 2010 (corresponding numbers for US  4  BIS central bankers’ speeches  banks were between 8.4% and 13.3%).

This is a very dramatic assumption and it matters a lot because, as we all know, debt dynamics are extremely sensitive to forecasts about future growth. Some of the implicit assumptions underlying current negative judgments seem to me to be seriously misguided. Recall what I pointed out at the start of my talk. We have recently been pleasantly surprised by growth dynamics in the euro area. Consumer confidence is almost back to pre-crisis levels; PMIs are at an all time high and GDP growth will almost certainly be above potential, on average, for the year 2011. These developments take place at a time when drastic fiscal consolidation programmes are being implemented in all countries. Positive confidence effects in the private sector are outweighing the negative impact of reductions in public expenditure. What about countries in the periphery? The Spanish growth rate swung from –3.7% in 2009 to –0.1% in 2010, despite the fact that a major austerity plan was being implemented. Spanish exports are booming, with an increase of 10% within the euro area and 19% outside the euro area in 2010. This compares very favourably with performances of other countries both inside and outside the euro area. Let me also remind you that real convergence is at play in the euro area. This process will continue and support growth in the future, contrary to over simplistic descriptions. One overlooked fact is the very fast productivity catch-up in the periphery of the euro area.
The answer is not necessarily a binary “yes” or “no” outcome each time but involves a review of whether there are sufficient safeguards and conflict-mitigants incorporated into the exchange’s governance, organisation structure and including its reward and recognition system in relation to the SRO function. 20. I will highlight our recent review in the three areas of listing, member supervision and market surveillance. Much work has been done to enhance the exchange’s role around listings. We believe that SGX – as the only securities exchange in Singapore – remains an appropriate listing authority. SGX has raised its admission criteria, and enhanced the governance process by setting up three new independent listings committees to complement SGX’s listing and disciplinary processes. The committees comprise a diverse mix of reputable, independent and experienced individuals to represent both investor and public interest. We believe these are  BIS central bankers’ speeches  3  positive developments and we should allow these committees to carry out their respective oversight functions. 21. However, we have also determined that there is scope to recalibrate the responsibilities of the exchange vis-à-vis the MAS in the areas of member supervision and market surveillance. The impetus for such a recalibration is not because we think that there is material or potential conflict-of-interest risk. Rather, as Singapore’s financial landscape features more than one exchange, it is not efficient to have each exchange carry out similar supervisory roles of common members. Member supervision 22.

Shortly afterwards, we decided to create the Securities Markets Programme (SMP) to start purchasing government bonds of several countries. That was an important moment. And, of course, at the same time, there was then the big loan to Greece, the creation of the European Financial Stability Fund, so those months of May, June 2010 were crucial. We were very active and it was the first big manifestation of the crisis. The peak of concern was more in the second half of 2011, first half of 2012, because that was when the markets, without any change in economic fundamentals, started to attack heavily the government debt of Spain and Italy. There was contagion and, at the end of 2011, I spoke about the ECB’s analysis of this, which showed it was already influencing, for instance, the price of French debt. So indeed, it was a development that was quite dangerous. We decided on a second round of the SMP, ended up with the OMT decision and injecting a big supply of liquidity, € trillion. It wasn’t particularly the French contagion that forced it, more the continuation of the pressure in the bond markets throughout the first months of 2012. We had to do something more significant than just a second round of the SMP. It clearly seemed that was not enough. These decisions, plus the decisions of the European summit of June 2012, ended the acute phase of the euro area’s existential crisis.
Broad money demand will fall if individuals or firms use the increased cash injected into the system to pay down bank debts, or simply seek to borrow less. Similarly the supply side of broad money can contract if banks consciously shrink their balance sheets. That would happen, for example, if the banks are short of capital or funding, or simply can’t earn sufficient return on their assets. All of these demand and supply factors have been at work in recent years. As a result, the balance of forces between the demand and supply of broad money against the injection of narrow money has meant that growth in the stock of broad money in the economy has remained weak. That does not mean that QE has been unsuccessful, as many commentators seem to conclude. Without QE, the amount of broad money in the economy would clearly have shrunk much further than it did – it actually held up reasonably well while the economy was contracting. Had broad money shrunk a lot further, the resulting deflation would have meant that the outcomes for output and employment in the UK would have been far, far worse than they have been.

I will say more on the causes of deflationary forces a bit later, but this analysis partly explains why the Bank of England has also been engaged on special operations to support the liquidity, funding and capital positions of the banks through,  8  See for example, FR Glahe, (1977) “Macroeconomics Theory and Policy”, 2nd edition, publ: Harcourt Brace Jovanovich. 9  The definition of M4 can be found here: http://www.bankofengland.co.uk/statistics/Pages/iadb/notesiadb/ m4.aspx  4  BIS central bankers’ speeches  respectively, the Special Liquidity Scheme, the Funding for Lending Scheme and the capital recommendations by the FPC. What of our ability to influence credit markets directly? I want to argue that it largely reflects how we go about changing the supply of money. On the one hand, to increase the quantity of money in scale, quickly and safely, it is quite clear that gilts are the best instrument to buy: there is a large market and there is no resultant private sector credit risk taken by the public sector. Many financial instruments tend to be priced by reference to the interest rates on sovereign debt and so changing gilt yields will have effects across sterling markets. In addition to buying gilts to inject money, we can consider two other ways to affect credit markets. First we can buy financial instruments outright. If particular markets have become dysfunctional so that general monetary expansion doesn’t help, relatively small amounts of direct purchases may unblock the relevant markets.
We are fortunate that - as I told the Treasury Committee of the House of Commons last week – we and the FCA are able to work closely together on these issues. And we are fortunate that the Bank of England’s wider programme of intelligence gathering allows us to explore these issues alongside market participants. For while only policymakers may end up going the final step to assess what all this could mean for the real economy, everyone has an interest in continuing to think about what collateral management means for the resilience of markets. The second possible iceberg is the liquidity mismatch in investment funds. The 2008 variant of this was egregious. Many of you will recall looking on in horror as $ of redemptions by their investors forced money market mutual funds into fire sales of their assets, including commercial paper. These funds had offered redemption of each $ share at par. They walked like a bank and quacked like a bank. They were shadow banks. So when the Reserve Primary Fund, which held $ of Lehman Brothers’ commercial paper, announced it would no longer be able to meet its offer and ‘broke the buck’, a run developed on these funds (slide 12). Corporate funding markets, particularly for banks, went into meltdown. The United States government stepped in to guarantee redemption at par from money market funds– effectively a form of deposit insurance. 10  All speeches are available online at www.bankofengland.co.uk/speeches  10  That iceberg has now melted.

Second, as doubts grew about AIG’s creditworthiness, questions were raised about who had bought the insurance and was therefore now exposed to uninsured losses on mortgage bonds. The confidence effect rippled through the system. Today, these problems have been dealt with. Complex networks of derivative exposures have been stripped back through increased use of central counterparties. No longer must doubts about one counterparty raise questions about many others.14 And derivative exposures must be collateralised properly every day.15 Over $ more collateral is now held against derivative exposures than it was before 2008. 12  Cunliffe, C. (2018), ‘Market-based finance: a macroprudential view’, Asset Management Derivatives Forum, Dana Point, California, February, available here. 13 McDonald, R. and Paulson, A. (2014), ‘AIG in Hindsight’, Federal Reserve Bank of Chicago Working Paper, no. 2014-07, October. 14 This is an example of how concentrating risk in a network can actually reduce aggregate risk. See Financial Stability Report, November 2017. 15 For centrally cleared derivatives that requirement is in place today. Requirements for margin on uncleared derivatives are currently being introduced and will be completed by 2020. 8  All speeches are available online at www.bankofengland.co.uk/speeches  8  No longer must questions about a counterparty’s creditworthiness lead to a sudden increase in its collateral requirements. It is not something that is called for suddenly in a stress.
In this section, I will explain why the Federal Reserve was able to lift rates off zero without requiring large-scale “reserve draining.”3 Next, what do the new data on money market trading say about how this new framework is affecting market conditions? As part of this discussion, I’ll walk through the enhanced data that, starting in March, the New York Fed will use to calculate the effective federal funds rate.4 Finally, what questions remain, and what can be done to learn more about the issues they raise? These include the level of capacity required in the Federal Reserve’s reverse repo operations and the consequences of changes in the regulatory rules for banks and money funds. BIS central bankers’ speeches  1  As always, these views are mine alone and do not necessarily reflect those of the New York Fed or the Federal Reserve System. A new approach for policy implementation Why are we following a new approach to implementing monetary policy? Before the financial crisis, the Federal Reserve followed a well-worn playbook for monetary policy implementation that was based on scarcity of reserves. Reserves left at the Federal Reserve earned zero percent interest.

Part of this plan is to relax regulations that hinder Thai residents from investing abroad, in order to foster more balanced capital flows. Secondly, the Bank of Thailand will encourage the use of appropriate financial hedging instruments, in order to strengthen the risk management capability of the private sector, especially the small and medium-sized businesses. Given the possibility of more volatility in the financial market looking ahead including the exchange rate, those businesses with sufficient hedging capacity will be able to absorb shocks better. In preparation for any extreme event with respect to capital flow’s volatility that may pose risks to the economic stability as a whole, the Bank of Thailand has prepared various options of regulating capital flows, with varying degrees of control. This constitutes the third plan. These three-pronged plans should ensure that the Thai economy has enough resilience and safeguard to meet challenges of capital flows. Financial institutions policy Effective implementation of monetary policy requires a strong system of financial intermediaries. An important characteristic of strong financial institutions is the ability to recognize and adapt swiftly to changes in the financial environment, domestic and abroad. For example, the ongoing process of economic and financial globalization will bring about ever closer interconnectedness and more volatility that will continue to challenge businesses and financial institutions. Meanwhile, the advent of modern financial tools, while enhancing the risk management capability for businesses, can also bring about closer and more complex integration between the capital market, the money market as well as the insurance industry.
There are two key points for me in the Vickers reforms. First, in the last ten years or more, the nature of investment banking has changed to include a much larger element of proprietary position taking. The incentives and risks of this activity are quite different from commercial banking, and I do not believe that the two should be mixed in the same legal entity. Regulators around the world have struggled to regulate this mixture, and will continue to do so even though we have raised the cost of doing investment banking business through changes to the regulatory regime. Second, in a world where we will not accept banks being too big or complicated to fail, it is sensible to be able to resolve commercial and investment banks separately, and to achieve this we need the ring-fence approach. This will support the continuity of provision of financial services. In conclusion, we have a very big programme of reforms under way, with the central objective that we must not let a financial crisis of this scale happen again. The reform programme is founded on very clear public policy objectives. We are absolutely committed to the reform programme and knitting together the various parts. We expect financial institutions to abide by the spirit of it too. There are big changes in what we are doing, and it is an exciting time to be putting these changes into effect.

The ASEAN story is equally compelling as the region transforms into an economic powerhouse. With a combined GDP of USD 2.4 trillion in 2015, ASEAN was the third-largest economy in Asia and the sixth largest in the world13. ASEAN is the second-fastest growing economy in Asia after China, expanding by 300% since 200114. It is the 3rd largest market in the world with 622 million people in 2014 15 3/7  BIS central bankers' speeches  behind only China and India15 and has the third-largest labour force in the world. Mckinsey16 estimates that there are currently 67 million households in ASEAN which are part of the “consuming class17”. This number could grow to 125 million by 2025. This means that ASEAN will be a pivotal consumer market of the future. III. Seizing Synergies between Shanghai and Singapore 10 Against this backdrop, Singapore sees greater opportunities for collaboration with Shanghai. As international financial centres serving different but complementary parts of the Asian financial system, there is much scope for both sides to explore common interests for synergies. 11 Shanghai remains at the forefront of China’s financial reforms. Continuous strong pace of financial development and innovation is a hallmark of Shanghai’s success. To cite a few noteworthy initiatives: (i) a Shanghai Free Trade Zone (FTZ) bonds pilot scheme was recently announced18; (ii) the Shanghai Insurance Exchange was successfully launched in June 201619; and (iii) the China Internet Finance Association was established in Shanghai in March 2016 20.
Greater consumer activism and  BIS central bankers’ speeches  3  demands for more consumer-focused corporate information reflects the increased demand by consumers for institutions to account for their behaviour and values. In terms of the demand for ethical and responsible finance, greater awareness among consumers and investors on the availability and viability of such positive finance is also needed, including among governments, corporates and the retail market. Education, engagement, incentives and the alignment of legal and regulatory frameworks on the utilisation of such finance will be important to achieve this. Finally, is the need to foster strong leadership at the global level that can have an advocacy and facilitative role in resolving barriers and bringing together different stakeholders to work together in a coordinated and cohesive manner. The Responsible Finance Institute, initiated as a think tank based in the United Kingdom, that brings together responsible finance experts from around the world and has a unique role for this endeavour. The focus on collaboration and convergence between the diverse fields of ethical and responsible finance has great potential to harness the best practices of positive finance in its various forms to collectively wield a powerful force in shaping future finance. Moving forward, stable and sustainable development can be best served by re-connecting the current gulf between finance and value creation that is reinforced by bringing benefit to society.

This experience of slow recovery and persistently low inflation is a symptom of a deeper problem afflicting advanced economies—the root cause of which is a combination of low neutral interest 1/4  BIS central bankers' speeches  rates and the lower bound on interest rates, a topic to which I now turn. What’s Past Is Prologue Underlying these events has been a sea change in the supply side of economies, owing to fundamental shifts in demographics and productivity growth. Two demographic trends are evident: People are generally living longer and population growth is slowing. Overall life expectancy in member countries of the Organisation for Economic Cooperation and Development (OECD) has increased from about 65 years in the 1950s to nearly 80 years today, and is projected to exceed 90 years by the end of this century (Figure 6). 1 Despite this increase in longevity, dwindling birth rates are bringing population growth to a standstill. In OECD countries, population growth averaged over 1 percent back in the 1950s and 1960s, but is now running at half a percent per year, and is expected to gradually fall before dipping into negative figures by 2070 (Figure 6).2 When it comes to productivity, the changes are no less dramatic. In OECD economies, growth in labor productivity—the amount produced per worker hour—has averaged a little over 1 percent per year since 1995, about half the pace seen over the prior decade (Figure 7).