samchain/econo-pairs-v1 huggingface dataset:
Also, as an industry, there must be a willingness to listen to the critics when developing solutions. So the industry clearly has a way to go on this front. •  Employee base: There was much discussion around the population that makes up the majority of the workforce in the industry. As I said earlier when I spoke about resources, there needs to be a better understanding of this demographic. The current environment of high turnover can lead to a lack of loyalty to a firm, less concern about how behaviors will be perceived and a disproportionate focus on financial compensation. •  Measuring success: Clear metrics are needed to measure behavior if culture is to be included in performance assessments and discretionary compensation. All firms measure risk, but culture is a very different type of risk. Even if measured to a higher confidence interval than other risks (99+ %) it still means you have some bad apples. This problem doesn’t go away with fewer people, so, regardless of your size, you can’t ignore the importance of culture. So, as we move forward and the industry ramps up its efforts to address this issue, I see a number of considerations that must be incorporated into the solutions. They are in three main categories: management, operations and employees. Regarding management, we need leadership from top. Firms must have a clearly articulated statement of purpose that aligns with the firm’s business strategy and risk appetite.

Philipp M Hildebrand: Ten theories on the economic relationship Switzerland Europe Summary of a speech by Dr Philipp M Hildebrand, Member of the Governing Board of the Swiss National Bank, to the Arbeitgeberverband Basel, Basel, 8 September 2004. The complete speech can be found in German on the Swiss National Bank’s website (www.snb.ch). *  *  *  The relationship between Switzerland and the EU is close in so many ways that it appears almost stronger than that among many member states themselves. The debate on a possible integration into the EU as a logical consequence should be as broad-based as possible. Economically speaking, the issue has become more pressing since the introduction of the euro, as Switzerland is now surrounded by a single-currency area. Switzerland’s weaker economic growth is also frequently quoted as an argument in favour of integration, since the necessary domestic structural reforms would then be easier to realise. However, one tends to overlook the fact that the national authorities would continue to be responsible for implementing reforms and that, moreover, the absorption potential of autonomous monetary and fiscal policies would be forfeited. Even with an independent policy, Switzerland is in a position to outperform if it again focuses on its strengths of flexibility and openness. The independent monetary policy has helped to keep inflation in Switzerland at a low level for decades. This and the diversification properties of the Swiss franc make capital cheaper in Switzerland by approximately 1.5 percentage points (interest premium).
Financial turbulence puts a strain on the real economy and is a threat to price stability. Moreover, we are dependent on well-functioning banks and financial market infrastructures for the implementation of monetary policy operations. Second, we have an important role to play in times of financial instability, namely that of lender of last resort. As such, we provide liquidity to financial institutions in financial distress. This emergency action 1 2  Sources: Blick (6 July 2021), Finanz und Wirtschaft (21 July 2021), translated from the German. With a focus on Switzerland, cf. Birchler U.W., The National Bank’s closer focus on the stability of the system, in: The Swiss National Bank 1907–2007. Page 2/12  often comes with high risks for us and for the economy as a whole. These two points illustrate that it is in our interest to identify risks to financial stability as early as possible and to contain them through preventive measures. The SNB’s mandate regarding financial stability was explicitly defined in the comprehensive revision of the National Bank Act (NBA) in 2003. In accordance with art. 5 NBA, the SNB is obliged to ensure price stability and, as part of this mandate, also to make a contribution to the stability of the financial system. By choosing the word ‘contribution’, legislators expressed the fact that financial stability is subordinated to the goals of monetary policy and that it is promoted not only by the SNB, but also by other authorities.

We are, above all, interested in the question of whether banks are sufficiently capitalised in view of the aforementioned vulnerabilities, and are able to maintain their economically important functions such as lending despite incurring losses. Our stress tests confirm the relevance of the aforementioned vulnerabilities. They show that banks would suffer substantial losses in the event of an abrupt and steep interest rate rise combined with declining real estate prices. Affordability risks would materialise, meaning that numerous borrowers would no longer be able to pay their mortgage interest. Furthermore, many mortgages would be insufficiently covered, i.e. the mortgages concerned would no longer be fully secured by the value of the properties. In such a scenario, the capital ratios of numerous banks would drop below their target values and, in some cases, even below the regulatory minimum requirements. Equally, our stress tests underscore the importance of the capital buffers currently held by banks, which comprise voluntarily held buffers besides the capital required by statutory regulations. With these capital buffers, our assessments suggest that most banks would be capable of absorbing potential credit losses. In other words, we consider the resilience of most banks to be adequate. Current situation requires vigilance  Ladies and gentlemen, the fact that we consider banks’ capitalisation to be sufficient at present does not mean that we can relax with regard to the vulnerabilities on the mortgage and real estate markets. That the current situation is not more precarious is due not least to the measures taken in recent years (cf. slide 5).
Secondly, empirical evidence suggests that IT has also improved other macroeconomic variables (lower output sacrifice ratio, decreased influence of price shocks and output shocks on inflation, smaller inflation persistence 6 ). Thirdly, it has facilitated stabilisation of long-term inflation expectations 7 , thus reducing the cost of maintaining low inflation. Certainly, IT was not the only factor behind reduced inflation and good macroeconomic performance. There were other fundamental things at play, such as spreading central bank independence. But for sure, as the Governor of the Bank of England Mervyn King puts it, “inflation targeting made our job easier by reducing the cost of making the right decisions” 8 . If IT has proved so successful then is there anything left do improve or shall monetary economists and central bankers go on holidays? Surely, a good rest is always an attractive option, yet some questions about IT remain unresolved, so the holiday should not be too long. First, there is the question of flexible versus strict inflation targeting 9 , i.e. a way of incorporating output and employment fluctuations into monetary policy decisions. IT-guru Lars Svensson claims that in practice “all real-world inflation targeting is flexible inflation targeting” 10 . By that he means that considerations on output (and employment) are always present in the decision-making process. However, though most central bankers agree that limiting output and employment fluctuations should enter the policy equation, there’s no consensus about how to do it in practice.

This question basically relates to the Year-old discussion of “should the central bank prick bubbles or not?” Today asset price considerations are present in central banking practice in many countries – Norway, eurozone or Japan, to name just a few. Norgesbank speaks openly that when setting interest rates it does not ignore developments in asset and credit markets 17 and its inflation report contains an asset price forecast. The ECB’s president Trichet has in turn acknowledged that the monetary pillar of the ECB “contributes to assessing the extent to which excess creation of liquidity and over-extension of credit can be a driving force behind excessively valued assets […] and might reflect the inflating of an asset price bubble” 18 . Bank of Japan said in its “New Framework for Monetary Policy” that “risk factors include […] generating an asset price bubble” and that “in conducting monetary policy, the Bank needs to do its utmost to prevent the materialisation of such potential risks.” 19 A hot issue in today’s discussion about IT is transparency and communication. More and more economists realise that communication is the primary channel of central bank’s impact on the economy and monetary policy is increasingly becoming an art of managing expectations. Lars Svensson argues that current level of central bank interest rates matters very little for future inflation and economic activity, while Michael Woodford claims even that apart from expectations, little else matters 20 . For this reason inflation targeters put an ever larger weight to effective communication.
In particular, they would be able to respond appropriately to changes in interest rates and other variables in the rest of the world. If countries nevertheless choose a peg to the dollar, with capital inflows, bubbles, and other negative effects, they are themselves responsible for those effects. Consider the following thought experiment.6 Let the world consist of two large economies, called the domestic and foreign economy, respectively. Let the domestic economy be an emerging-market economy with flexible inflation targeting, a flexible exchange rate, and free capital flows. Suppose that the domestic economy is initially in an equilibrium with the inflation forecast on the inflation target, the resource-utilisation forecast at a sustainable level, a constant exchange-rate forecast, zero capital flows, and a given policy-rate path consistent with this. Suppose the foreign interest rate falls, due to more expansionary monetary policy in the foreign economy in order to increase demand and activity in the  5  Eichengreen, Rajan, and Prasad are members of the Committee on International Economic Policy and Reform, a non-partisan independent group of experts (academics and former government and central bank officials). In its September 2011 report (Eichengreen et al. 2011), the committee suggests that “[m]echanisms should (…) be developed to encourage large-country central banks to internalize the spillover effects of their policies.

The effects that are attributed to monetary policy should only be the effects the deviation between the short real rate and the neutral rate, not the effects of the whole level of the short real rate, the sum of the deviation and the level of the neutral real rate. The neutral real rate is affected by many things and can be low  4  Woodford (2011) sets up a model where the probability of a financial crisis is assumed to be an increasing function of a state-variable that may be identified with leverage. Furthermore, leverage is assumed to be increasing in lagged leverage and the current output gap and is also subject to shocks. From these assumptions obviously follow a case for tighter monetary policy, “leaning against the wind,” in order to, everything else equal, reduce the output gap and thereby leverage and the probability of a financial crisis. However, the introduction in Woodford’s model of financial-stability instruments such as capital requirements, possibly cyclical ones, would allow leverage to be controlled more directly than indirectly and bluntly by the policy rate via the output gap. Monetary policy would be free to focus on stabilising inflation and the output gap and need not lean against the wind.
22  The role of monetary policy At the European Central Bank (ECB) we have also acted emphatically in response to this crisis to mitigate its effects on the euro area economy. In this connection we have deployed a wide range of measures, which can be grouped into two major blocks. The first block relates to the bolstering of the asset purchase programmes, whose aim is to improve firms’ and general government funding conditions on securities markets. The second refers to the long-term refinancing operations aimed at making the ECB’s liquidityprovision facilities more accessible to banks, both in terms of cost and volume. The goal is to enable credit institutions to have, in turn, funds with which to lend at low interest rates to the agents most affected by the crisis, which include in particular SMEs and the selfemployed. These programmes fulfil a function that enhances credit financing conditions for households and firms, one analogous to that of the asset purchase programme in respect of the financing of non-financial corporations and general government through the issuance of securities. Both blocks of measures are, therefore, mutually complementary. Under the first group of measures, the ECB Governing Council announced on 18 March the launch of a new asset acquisition programme, the Pandemic Emergency Purchase Programme (PEPP), which will run to late 2020 and may be extended or see its volume increased if necessary. The programme provides for the purchase of all classes of assets eligible under the existing asset purchase programme (APP).

On the contrary, we should reinforce the multilateral economic policy coordination mechanisms already in place internationally. This need is particularly evident as regards the euro area members, since they share the same currency. For each and every member, joint action - beyond the common monetary policy response - is the most effective means to ensure that the economic effects of the pandemic are vanquished in a shorter time and at a lower cost. This coordinated action is also needed to shore up the solidarity of the European project: although the shock has been a common one, the effects across countries have not been even, and the starting position of each country in facing its effects also differed. The elements needed for an appropriate European response to this crisis largely coincide with those already deemed vital before COVID-19 to complete the institutional architecture of the euro area: the creation of a powerful, pooled budgetary resources mechanism that, in the context of the current crisis, smooths the financing of government spending that has arisen as a result of the pandemic and of those other needs that may arise during the 2  recovery; the completion of the banking union, with the launch of a European deposit guarantee scheme; and the full roll-out of the project to achieve a genuine European market for capital. In this specific field of joint European action there is clearly room to boost the response so far to the crisis.
Monetary policy shall also underpin fiscal policy by contributing to stable developments in output and employment. • Norges Bank is responsible for the implementation of monetary policy. Fafo og Makt- og demokratiutredningen 6. september 2002  Norges Bank’s mandate reads as follows: Monetary policy shall be aimed at stability in the Norwegian krone’s national and international value, contributing to stable expectations concerning exchange rate developments. At the same time, monetary policy shall underpin fiscal policy by contributing to stable developments in output and employment. 2  BIS Review 50/2002  Monetary Policy Regulation (2) • Norges Bank's implementation of monetary policy shall, in accordance with the first paragraph, be oriented towards low and stable inflation. The operational target of monetary policy shall be annual consumer price inflation of approximately 2.5 per cent over time. Fafo og Makt- og demokratiutredningen 6. september 2002  Norges Bank’s implementation of monetary policy shall, in accordance with the first paragraph, be oriented towards low and stable inflation. The operational target of monetary policy shall be annual consumer price inflation of approximately 2.5 per cent over time. The first paragraph of the mandate sets forth an objective. The last paragraph specifies what Norges Bank shall do. The first sentence in the mandate refers to the value of the krone. Stability in the national value of the krone implies that inflation must be low and stable. Low and stable inflation fosters economic growth and stability in financial and property markets.

We went through the crisis without properly functioning bank resolution regimes in many countries including the UK, with the consequence that the response was a combination of using public money and improvisation to create resolutions where possible. But now we are well on the way to having properly functioning resolution regimes in place. So, what is the argument for why they will be ineffective? This is a crucial piece of the story, because it is a fundamental principle of the big equity school of thought that they reject resolution as a usable solution. The argument seems often to come down to doubting the will of the authorities to enact resolution 5. True, in the past it was much harder to enact resolution in the absence of the means to do it, but that will not be so in the future. It is also true that resolution necessarily involves changing the property rights of investors which is a big thing. Will the authorities have the nerve? My view is that we must, because the alternative is much worse. We are making huge strides in resolution as a technical matter. Last year’s agreement on TLAC in the G20 was a landmark. But alongside that is a vast amount of work to get to grips with what it takes to resolve a major bank. If you are involved in that work, as I am, you can see that there is no lack of commitment and progress.
And also what new in this crisis is the implicit linkage through reputation risk as noted earlier, that is, banks became obligated to rescue failing SIVs even when there were no explicit contractual obligations to do so. Against this background, what then can regulators do to address the interactions and the feedback problems. This is not going to be an easy task, but let me try to frame the discussion into a context. First, it is clear that systemic risk is endogenous. Risk is first encouraged by procyclicality and once the tipping point is reached, the interactions within the system takes over, turning financial fragility into systemic risk. From the current crisis, it is clear that the scope and intensity of systemic risk are related closely to three factors: (1) the collective behaviour of market participants that contributes to the positive feedback loops; (2) the underlying structure of markets and market practices which dictate the manner through which the interactions of feedbacks are propagated throughout the financial system; and (3) the authorities’ own responses. Therefore, to address the problem, we need to focus our efforts on all of the three areas. First, on the collective behaviour of market participants, the key objective must be to tame or dampen the positive feedbacks through right incentives and better regulation. For example, regulation to disallow capital reduction for credit risk transfer off-balance sheet could have discouraged the originate-to-distribute model.

Based on these preconditions and building on the practical operation of cross-border stability groups, we should gradually move towards a stronger coordination of cross-border resolution, with the ultimate vision of a single EU resolution authority and an integrated EU resolution regime. Thank you for your attention. 6  BIS central bankers’ speeches
Paul Tucker: Financial crisis and G20 financial regulatory reform – an overview Remarks by Mr Paul Tucker, Deputy Governor of the Bank of England, at the Financial Stability Board (FSB) and Korean G20 Presidential Committee Conference, Seoul, 3 September 2010. *  *  *  Being a Western financial official, one comes to Asia with some humility in truth. This has been a financial crisis born and bred in the Western world, but inflicted throughout the world. That makes it all the more important that Korea and the other countries in Asia and elsewhere in the emerging market world are involved in the reform efforts. The reforms are not simply going to be cooked up in the West where the problems were bred. In Korea, you have to play a really important leadership role, especially in steering us through the next couple of months. Much of the work towards the Leaders summit is being handled in the Financial Stability Board. And here is a very brief overview of what is going on in the FSB contribution to the G20 effort, under the following headings: 1) surveillance; 2) bank capital and liquidity; 3) too big to fail; 4) capital markets; 5) incentives; and finally the regulatory perimeter. 1. Surveillance of the system  Very obviously this was a crisis that was not spotted – in the most important sense of being prevented – ahead of time. People did issue warnings about developing leverage in the system and accumulating macroeconomic imbalances.

Given these goals, my focus is to study and understand the wide range of developments that affect employment, unemployment, and inflation as they play out in real time. As we start a new year, it’s worth highlighting the key economic developments of last year, which were defined by a very strong recovery, both here and abroad. Although we don’t have all the data yet, I expect that U.S. inflation-adjusted, or real, gross domestic product (GDP) increased by 1/3  BIS central bankers' speeches  about 5-1/2 percent last year, which would be the strongest growth rate between fourth quarters in over 35 years. The economic snap-back here and abroad has led to global supply-chain bottlenecks and imbalances between supply and demand that have contributed to a sharp rise in inflation. Inflation in the United States, based on the personal consumption expenditures price index, will likely exceed 5 percent in 2021, and inflation rates are elevated in many other countries, too. Looking ahead, I expect the current Omicron wave to slow growth in the next few months as people once again pull back from contact-intensive activities. I also expect that the Omicron wave will temporarily prolong and intensify labor supply challenges and supply-chain bottlenecks that we have been experiencing. Current staffing challenges for essential service workers in the healthcare, transportation, and education sectors will likely have a ripple effect too. But, once the Omicron wave subsides, the economy should return to a solid growth trajectory and these supply constraints on the economy should ebb over time.