samchain/econo-pairs-v1 huggingface dataset:
As a result the demand for (broad) money rose alongside its rising supply – “velocity” declined, if you prefer – and the rate of M4 growth consistent with on-target inflation was significantly higher than 2%. These were deposits accumulated not as a “medium of exchange” but as a “store of wealth”. What those years also demonstrate is that commercial banks can supply and create such deposits with any commensurate growth in the balance sheet of the central bank. QE is neither necessary nor sufficient for broad money to expand. To take a more recent example, it’s not clear that the jump in household deposits during the pandemic was the direct and inevitable result of the central bank’s asset purchases at that time. If that were true one would presumably have expected to see something similar after every other previous episode of asset purchases. That’s not the case. For me, the more plausible cause is the combined impact of severe restrictions on spending and, thanks in part to fiscal support (in the shape of the furlough scheme), continuing growth in household income. At least in the first instance the resulting jump in saving had nowhere to go but into household deposits. More generally I think it’s better to understand the impact of QE through the lens of asset prices – what it does to bond yields – than quantities (still less as “printing money”). As with commercial banks, the demand for central bank money can change (sometimes very abruptly).

On one view (the “buffer stock” approach) people are relatively tolerant of small variations in their money holdings and respond – whether by spending more on goods and services, buying other financial assets or paying down debt – only once deposits hit certain thresholds. If this is right it’s the level of money that matters and the fact that, on this measure, there still seem to be “excess” deposits will continue to support consumer spending for a while yet. If, on the other hand, you believe that people respond more rapidly to an increase in the supply of money, the large accumulation of deposits during the pandemic is increasingly irrelevant and what matters more are the more recent, negative trends. I’m not sure if this is the critical judgement when it comes to our forecasts (it’s certainly not the only thing affecting household behaviour). But it is, at least, illustrative of one point – that, as with just about every other economic indicator, changes in money holdings need some interpretation and their significance is not always 100% obvious or “inevitable”. Thank you. I’ve received many helpful comments from colleagues at the Bank of England. I’d like to thank Andrea Alati, Navreen Teja and Mo Wazzi for their help in preparing the speech. Particular thanks are due to Ryland Thomas, Huw Pill and, for his comments and excellent research assistance, Fabrizio Cadamagnani. Page 31 1.
Therefore, they are subject to many risks that are similar to those confronted by conventional banks. In addition, Shari'a compliant banking has its own risks. In principle, there is a range of various activities through which Islamic banks can work in different ways that enable them to provide funds. These activities are adapted to meet the principles governing Islamic banking business, the most important of which is the principle of risk sharing. Therefore, there is an urgent need to identify, measure, manage, monitor and control such potential risks and mitigate them within the capacity and capital adequacy of the relevant bank. The most important challenges confronting Islamic banks are risks arising from financing formulas and Shari'a compliant banking, especially investment risks, method of applying "Basel II" proposals, capital market and financial derivatives risks. In addition, Islamic banks may bear a wide range of risks that differ, in nature, from those borne by commercial banks. In this connection, it is necessary to emphasize that the role entrusted to the supervisory authorities is to pursue a comprehensive control method based on risk assessment process and not to make any discrimination in a way that may suggest that Shari'a compliant banks are being rated differently or confronting larger risks.

These declines have been even larger if measured from the release of the minutes of the previous FOMC meeting in August, after which market expectations of easing in September increased. This is solid evidence that our policy has been and continues to be effective – though it is certainly not allpowerful in current circumstances. However, the impact of monetary easing on the economy through housing and mortgage finance has been impeded to some degree by two factors. First, not enough people can take advantage of today’s low primary mortgage rates. Mortgage underwriting standards have tightened quite dramatically and the share of new mortgages going to households with better credit metrics has risen. While it is difficult to disentangle how much of this is due to supply versus demand factors, it appears likely that credit standards for home purchase loans have not just tightened since the housing bust but overcorrected. BIS central bankers’ speeches  1  In addition, many homeowners find it difficult to refinance their existing mortgage because they have little equity in their homes, or are outright “underwater” with mortgage balances that exceed the current appraised value of their property. In a speech earlier this year, I called for measures to ease refinancing and tackle other frictions and market failures that lead to economically inefficient outcomes in housing. Some useful steps have been taken. But, more could be done, and these issues warrant ongoing focus by policymakers.
However, towards the end of the upturn the economy was facing labour shortages, higher wage growth and a sharp increase in household consumption and debt. Interest rates had to be kept at a high level in Norway. Chart 9. Cyclical divergence Short-term interest rates in the US and Norway 10  10 8  Norway  8 6  6  4  4  US 2  2  0  0 1995  1996  1997  1998  1999  2000  2001  2002  2003  Source: EcoWin  The turnaround abroad took place two years ago, but the Norwegian economy continued to show a high level of activity. This led to a widening of the interest rate differential against other countries. The main explanation for the wide interest rate differential is not that interest rates are high in Norway, but that interest rates are at a historic low abroad. Interest rates in the US have not been at such a low level since the 1960s. 1  Measured by the monthly average of the import-weighted exchange rate against 44 countries, the krone was at its weakest level in May 2000 since May 1994. Measured by the monthly average of the trade-weighted exchange rate index, the krone was at its weakest level in May 2002 since the series was started in January 1971. Measured by both indices, there were a few days in autumn and winter 1998 when the krone was weaker than in May 2000.

Chart 18. Average return in the US Rolling 10-year periods. Per cent 25  25 20  Equities  20  15  15  10  10  5  5  0  0  Fixed income instruments  -5  -5 1935  1945  1955  1965  1975  1985  1995  2005  Sources: Ibbotson Associates and Datastream  Since short-term fluctuations in equity prices are difficult to predict, it may be a sound strategy to keep the share of equities constant over time. This means buying a relatively large volume of equities when prices are low, and buying a smaller volume - or selling - when prices are high. This is the strategy applied by the Petroleum Fund. Optimism and pessimism, confidence and doubt influence equity prices. In periods when markets are characterised by optimism and confidence in the future, equity prices tend to be high. When markets are marked by pessimism and fear, prices tend to be low. The actual income flow from equities - the dividend - depends more on developments in the global economy over time. This is a far more stable variable than equity prices. Investing a large share of the capital in bonds diversifies risk even further. We are nevertheless left with the question of whether we are now entering a long period of very low or negative returns on investment in global business.
As central clearing involves risk concentration in what we may see as “super systemically relevant” institutions, it is crucial that such institutions can recover from severe shocks or be resolved if necessary. Now there are several questions that are typically raised in this context:  2  BIS central bankers’ speeches  •  At what point in time does a CCP need to be resolved because it cannot recover? •  Given that CCPs provide critical services and are required to cover any losses or liquidity shortfalls that may arise, is resolution of a CCP a realistic concept at all? Is it ever needed or appropriate? •  What makes CCPs different from other financial institutions? Do these differences require different rules for their recovery and resolution? [slide 7] The CPSS-IOSCO Principles for financial market infrastructures (PFMIs) require CCPs to have a plan for allocating any losses and liquidity shortfalls that the regular “waterfall” – that is, a sequence of prefunded financial resources – does not cover. Alternatively, the respective CCP might have to be resolved. The CPSS-IOSCO and the Financial Stability Board (FSB) will provide guidance on the recovery and resolution of CCPs by mid-2014. 1 The question is: should resolution only be performed if and when recovery has failed? Or could there be circumstances in which the resolution of a CCP is preferable to its recovery, even if recovery was still feasible?

Let me first explore some features that make financial market infrastructures different from other financial institutions: •  Service continuation (“critical services”) is more important in the case of FMIs. They are utilities at the heart of the financial system. Their smooth operation is essential for all other types of financial service. •  In most cases, there are only a few, if any, substitutes or alternative providers. •  Unlike banks, FMIs have ex ante loss allocation rules that they can draw on for the purpose of recovery. •  Not all FMIs are exposed to credit risk (but they are still systemically important). •  The size and composition of their balance sheets (e.g. rarely subordinated debt instruments) is different, which makes bail-in as a recovery or resolution tool difficult. •  To the extent that the use of a CCP is mandatory, it is absolutely essential that the relevant clearing services are preserved regardless of the circumstances. In conclusion, the recovery of CCPs in order to maintain service continuation is much more important for CCPs than for other financial institutions. That’s why the PFMIs require CCPs to be able to allocate any losses that are not already covered by regular risk management. [slide 8] So if the recovery of CCPs is so vital, is there any scope for resolution at all? I think there is, for a number of reasons: First of all, the attempt to recover may simply fail: the ex-ante recovery plans may prove inadequate ex post.
Mr. Patrikis discusses the monetary policy and regulatory implications of banking on the Internet Address by the Vice-President of the Federal Reserve Bank of New York, Mr. Ernest T. Patrikis, at the Queen Mary & Westfield College University of London & UNISYS International Management Centre held in Saint Paul de Vence, France from 22-24/1/97. A. Introduction I want to share with you today some observations and speculations gathered this and last year about banking and the Internet. I will be speaking in my capacity as a central banker -- which includes monetary policy, banking services, bank supervision, and payments system oversight -- and as a surfer of the ’Net. Let me state, at the outset, that, while the Federal Reserve Bank of New York does not conduct “Internet banking” as such, we do have a home page (http://www.ny.frb.org) with much useful information about our institution, with over three million recorded hits to date. Finally, let me add that some of what I say here today could, very easily, be obsolete in two months’ or even two weeks’ time. But I will try to point out those areas in advance. The title of this portion of the program gives rise to two issues of definition. The first is “What is the Internet?” The second is “What is banking?” As I am sure you are well aware, in the United States we are a litigious sort. We even have a legal definition of the Internet.

If the Internet is used merely to facilitate existing banking and payment transactions, such as executing electronic bill payments or transferring funds from one bank account to another (which more or less describes what electronic bill payment really is anyway), the combination of banking and the Internet should have few, if any, implications for the conduct of United States monetary policy, or the measurement of the United States money supply. “Money,” as defined by M1, M2, or M3, would still be held in accounts at 1  Panavision Int’l, L.P. v. Toeppen, 938 F. Supp. 616, 617 (C.D. Cal. 1996). In Systems, Inc. v. Instruction Set, Inc., 937 F. Supp. 161, 164 (D. Conn. 1996). The most comprehensive judicial description of the Internet can be found in American Civil Liberties Union v. Reno, 929 F. Supp. 824, 830-48 (E.D.P.A. 1996). 2  BIS Review 17/1997  -2-  banks that would be reported to the Board of Governors of the Federal Reserve System through the existing mechanisms that such funds are reported today. If, however, Internet banking evolved to the point where digital “coins,” account-based cards and PCs, or other private-sector initiatives produced electronic representations of money that began to be used and circulated like currency, the potential implications for United States monetary policy are much greater.
Example of a card payment chain  A typical ‘payment chain’ (the set of activities necessary for a payment to be made) may now start with new non-bank entities using new technologies at the point of initiation – for example, the digital wallet provider that let me use my phone to pay with my debit card this morning. New entrants may also be adding an entirely new service – increasing the number of activities and players and thus lengthening the chain. One 3  All speeches are available online at www.bankofengland.co.uk/news/speeches  3  example is technology aggregators, who provide smaller banks with IT access to payment systems and clearing infrastructure. The current regulatory framework was designed in a world in which banks and a small number of systemic payment systems made up the entire payments chain. Under the current framework, systemically important payment systems (the core infrastructures that undertake the activities of authorisation, clearing and settlement), and some of their critical providers, are regulated by the Bank of England for financial stability purposes. For example, the Bank of England is supervising the development of the New Payments Architecture to ensure the opportunity is taken to enhance resilience. Combined with the separate financial stability focused regulation of banks, who provided initiation and access, this used to capture the entire payment chain. Example of ‘unbundling’  But today, the banks and payments systems covered by this regulation are only a subset of the entities involved in many payments chains.

There are increasing signs that the labour market is tightening and nominal wage growth is picking up: the Phillips curve is back to work, albeit a bit later than expected; and this should pass through to core inflation which has been lagging behind due to the temporary effects of the appreciating terms of trade and declining corporate margins. We at the Governing Council are thus increasingly confident in the sustained adjustment in inflation back to our objective, with our forecast for 1.7% in each of 2018, 2019 and 2020, vindicating our unanimous decisions in June. Alongside these positive developments, there are, however, growing uncertainties: protectionism – I will come back to this later; rising oil prices; the US policy-mix – a warranted monetary policy normalisation and a less warranted fiscal stimulus – with which many EMEs are struggling; and equity market valuations, that may appear more in line with economic fundamentals and corporates earnings after the latest correction, but remain volatile in part due to geopolitical risks as well. Within Europe, Italian fiscal policy is under investor scrutiny. And there is Brexit, although its direct effect on the euro area macroeconomy is likely to be small. How should we, as euro area central bankers, respond to this economic environment? By combining two apparently contradictory aims: clarity and flexibility. As regards clarity, our first duty as policymakers is to provide markers to help guide economic actors and financial markets in the increasing fog of uncertainties.
Jahn sent a telegram to Brofoss where he recommended that Norway devalue the krone to the same extent as the UK. By then the Ministry of Trade and Industry had already been informed of the UK decision through official channels. Then, without first consulting with the other members of the government, Brofoss decided that the Norwegian krone should be devalued by 30.5 per cent. After being instructed by Brofoss, Gunnar Jahn informed the IMF of the decision on behalf of the Norwegian government in a letter dated 17 September. See Gunhild J. Ecklund (2008): “Creating a new role for an old central bank: The Bank of Norway 1945–1954”, Series of Dissertations 2/2008, BI Norwegian School of Management, pp. 141–143 and William Jansen (1975): “Devalueringen i 1949” [The devaluation of 1949], History thesis, NTNU, Trondheim. 14  For more on the background for these decisions, see Gunnar Jahn, Alf Eriksen and Preben Munthe (1966): Norges Bank gjennom 150 år, [Norges Bank through 150 years] Norges Banks seddeltrykkeri, Oslo and Nicolai Rygg (1950): Norges Bank i mellomkrigstiden, [Norges Bank in the interwar period] Gyldendal Norsk Forlag, Oslo. 15  In 1965 the former director of Statistics Norway Odd Aukrust assessed the successes and mistakes in Norwegian economic policy since the Second World War. Concerning the devaluation decision in 1949 he writes: “This devaluation was probably the most important single economic decision made in this country since 1945, with a greater impact on prices and income distribution than any wage settlement.

Now there is also the worsening of geopolitical tensions surrounding Iran which could significantly affect the oil price, with negative effects on world growth and stronger pressures on inflation. In Chile, the persistence of strong domestic spending may alter the baseline scenario in two ways. On one hand, it may intensify the inflationary risks now perceived, and increase the propagation of supply-side shocks, like those in oil or fresh fruits & vegetables. It is also possible that the velocity at which core inflation has increased is associated with tighter output gaps than assumed in the baseline scenario. On the other hand, the sustained growth in domestic demand may trigger a widening of the current account deficit and amplify the effects of shocks from abroad on the Chilean economy, especially if accompanied by a falling copper price. Let me share with you some final thoughts. Final thoughts The macroeconomic environment just described has opposing effects, as there are significant risks from different fronts. As I said, the baseline scenario uses as a working assumption that the MPR will follow a path comparable to the one that can be derived from the prices of financial assets observed at the statistical cutoff of this Report. Any deviations away from this trajectory will depend on the implications of domestic and external macroeconomic developments on the inflation outlook. As I also said at the beginning, while risks for short-term inflation have increased, the risks from abroad are still important and may cause significant damage to the Chilean economy.
“The post-crisis fix: Regulatory or monetary policy remedies?” paper presented at the Reserve Bank of India’s First International Research Conference (February); P. De Grauwe and D. Gros (2009), “A new two-pillar strategy for the ECB”, CEPS policy brief no.191. 8  See: O. Blanchard, G. Dell’Ariccia and P. Mauro (2010). “Rethinking macroeconomic policy”, IMF staff position note no. 10/03 http://www.imf.org/external/pubs/ft/spn/2010/spn1003.pdf. 4  BIS Review 45/2010  by most leading central banks. At the ECB, we are fortunate that the primacy of price stability has been made explicit. With this in mind, it is difficult to attribute any pre-crisis “policy error” to the pursuit of the wrong monetary policy objective. Nonetheless, we are already witnessing the emergence of siren calls to change the objective – in particular, for monetary policy to target a higher steady-state inflation rate, difficult to reconcile with price stability. These calls must be resisted. Emphasising the primacy of price stability objective over the medium term does not imply central bankers should be, in the words of Mervyn King, “inflation nutters”. 9 Using Theil’s framework to characterise the monetary policy problem also helps to clarify its dynamic nature. Recognising the long and variable lags in the transmission of monetary policy and the inevitability of short-term shocks to price dynamics, policy-makers need to adopt a mediumterm orientation in their decisions. Attempts to fine-tune price developments on a short-term basis are doomed to failure.

BIS Review 45/2010  Central to a honest self-evaluation of the role played by monetary policy is our adoption of a “real-time” perspective. The benefits of hindsight are enormous – but also potentially misleading. If we had known ahead of time that Lehman Brothers would fail in September 2008, we would no doubt have taken different policy decisions in the preceding months. But such considerations are not a meaningful guide to future policy. By their nature, economic “shocks” cannot be foreseen. Taking these aspects into account, it would be a mistake to think that the way monetary policy was conducted did not play any role in the outbreak of the financial crisis. Monetary policy can actually be considered one of the factors that, in some countries, contributed to the crisis, at least to the extent that it was too accommodative to maintain price stability. The overly loose global monetary policy may have weakened the anchoring of price stability and at the same time unleashed a wave of euphoria and excessive risk-taking in the financial sector. It would be a waste if this financial crisis did not give us the opportunity to think deeply about the framework for monetary policy-making – the objective of policy; the models underpinning our analysis; and the indicators on which we focus when taking policy decisions. Even if excessively loose monetary policy is only partly to blame for the financial crisis, a case can be made that it fuelled the accumulation of financial imbalances that underlay the crisis.