samchain/econo-pairs-v1 huggingface dataset:
7 If lenders had maintained minimum downpayment percentages and maximum debt-to-income ratios as the  4  These charts were created by Joseph Gyourko, Wharton Real Estate Group. 5  See Gary Gorton. 2008. “The Panic of 2007”. Prepared for the Federal Reserve Bank of Kansas City, Jackson Hole Conference, August. 6  Carmen Reinhart and Kenneth Rogoff. 2009. This Time is Different: Eight Centuries of Financial Folly. Princeton: Princeton University Press. 7  For speculators, the downpayment constraint is likely to be the more relevant since they do not intend to hold the mortgage for very long. 4  BIS Review 92/2010  housing boom began, then rising prices would have done a better job of rationing demand, thereby limiting the duration of the bubble and the extent of overvaluation in the markets. However, as Reinhart and Rogoff demonstrate repeatedly, “this time is different” so house prices were expected to continue to increase, which “justified” lenders’ decisions to lower the downpayment percentages and raise the allowable debt-to-income ratios. In 2001, at least half of new subprime mortgages had downpayments of 20 percent or less, and at least a quarter had downpayments of 11 percent or less. By 2006, at least half of new subprime mortgages had downpayments of 10 percent or less, and at least a quarter had no downpayment at all.

Using the earlier forest fire analogy, it was as if the Fed could not drop water directly on the burning section of the forest; rather, it had to drop the water on an adjacent section of forest and hope that somehow the water got to where it was needed. Several problems became apparent with this strategy. First, few discount loans were being taken out. There is a history of “stigma” associated with borrowing from the Fed’s discount window. Given the high degree of uncertainty in the financial markets in the autunm of 2007, this stigma effect likely became amplified. Second, given uncertainty about their own future liquidity needs, banks developed a strong “precautionary demand” for liquidity. This implied that they were less willing to lend out liquidity to other financial firms. Finally, it was becoming increasingly difficult to assess the credit risk associated with lending to other firms even if only for short terms. To use a medical analogy, the progression of a fever can be measured by a person’s temperature. The progression of problems in the interbank lending market can be measured by the spread between LIBOR and the overnight index swap (OIS) rates for a given term. Chart 7 shows the 3-month LIBOR/OIS spread. Prior to the onset of the financial crisis, this spread had been very narrow. Very soon after the BNP Paribus announcement, the “fever” shot up dramatically. The first new liquidity facility that was introduced to deal with these problems was the Term Auction Facility or TAF on December 12, 2007.
Stepping back, I have to recognise that we have predicted higher nominal wage growth in the past, and have been serially disappointed. Since the Referendum, downside news on nominal wages has been augmented by the inflationary effect of the fall in sterling, meaning real wage growth has been strikingly weak. Over the two years to 2018Q2 real wages fell by 0.5%, more than 4pp below the MPC’s May 2016 forecast of 3.8% cumulative growth. 26  But we are now forecasting both nominal and real wage growth to pick up from here. Given our forecasting history it would be foolish of me to rule out being disappointed on wage growth again – although developments over the past year have so far broadly matched our expectations, with private sector regular pay in particular now growing at 3%, a little stronger than our forecast of a year ago. One additional important factor to bear in mind here is that our past downside errors on wages have largely come from weaker productivity. But what matters for businesses’ costs and so for inflation is wages relative to productivity, that is to say, unit labour costs; and here our forecast errors have been somewhat smaller.

15  Today our toolkit  contains three specific liquidity insurance facilities offering money and/or high quality collateral for variable terms and prices as well as the liquidity insurance offered in the course of implementing monetary policy. 16  But there’s little point opening the door to our business more widely if only a narrow range of shapes fit through it. So as well as expanding the quantity of our tools at our disposal, over the years we have worked to extend the access to them by making our facilities cheaper and making them available against a wider set of collateral and to a larger number of counterparties. 10  An excellent description of how banks operate is given in McLeay, M. et al (2014), “Money creation in the modern economy”, Bank of England Quarterly Bulletin 2014Q1, available at https://www.bankofengland.co.uk/-/media/boe/files/quarterly-bulletin/2014/moneycreation-in-the-modern-economy.pdf. 11 Bagehot, W. (1873), “Lombard Street” 12 These were the ability to vary reserves demand both intra-day and day-to-day, and the Standing Facilities which provided overnight liquidity insurance, allowing banks to borrowing reserves in unlimited quantity, secured against very high quality collateral or deposit excess reserves directly with the Bank. 13 The Special Liquidity Scheme operated as a ‘collateral swap’, allowing banks to exchange their illiquid assets (principally packaged as an ABS or covered bonds) for liquid UK T bills. 14 Winters, B. (2012), “Review of the Bank of England’s framework for providing liquidity to the banking system”, available at https://www.bankofengland.co.uk/-/media/boe/files/news/2012/november/the-banks-framework-for-providing-liquidity-to-the-banking. 15 The Bank’s response to the Winters review can be found at https://www.bankofengland.co.uk//media/boe/files/news/2013/march/response-of-the-boe-to-the-three-cort-commissioned-reviews.
Grant Thornton Europe Regional Meeting  What monetary policy cannot do Address by Dr Mario Vella, Governor of the Central Bank of Malta 24 May 2017  Almost ten years have passed since the outbreak of the global financial crisis, triggered by the collapse of Lehman Brothers in the autumn of 2008. During this period, central banks have become, according to The Economist, “the most powerful financial actors on the planet”. Central banks have often been portrayed as the only institutional players with the knowledge and capability to prevent a global financial crisis from turning into a second Great Depression, on par with the one seen in the 1930s. And yet, despite this aura of power, central banks are both fallible and constrained. In this address, I would like to touch upon what monetary policy can do and, equally importantly, what monetary policy cannot do. As you know, Malta has formed part of the euro area since January 2008. Therefore, the Central Bank of Malta no longer formulates and executes a monetary policy of its own. Rather, as one of 19 members of the Governing Council of the European Central Bank, the Governor of the Central Bank of Malta takes part in the formulation of monetary policy for the euro area as a whole. At the same time, the Bank is responsible for implementing the Council’s monetary policy decisions in Malta. Monetary policy in the euro area aims at price stability. According to the Treaty this is the primary objective of the European Central Bank.

If such a downturn were to persist, the economy would risk suffering permanent damage as unemployed workers drop out of the labour force, for example, or as relevant skills are lost. In this sense, monetary policy can safeguard the economy from structural damage and help avoid permanent losses to potential output. In the euro area, since the onset of the financial crisis, monetary policy has been at the forefront of efforts to sustain a healthy rhythm of economic activity and ensure that the price stability objective is reached. The ECB has used a range of tools in its policy arsenal to support aggregate demand in the euro area and secure price stability. During this period, paradoxically, the greatest danger that the Governing Council had to confront was not the one that the founders of the single currency had feared. The ECB is institutionally hard-wired to combat inflation. This was the key preoccupation of the  architects of the euro, born out of the German experiences with hyperinflation, both during the inter-war years and in the aftermath of the Second World War. From this preoccupation stem essential features of the set-up of the single currency area: a fiercely independent central bank, with a clear mandate to pursue price stability and robust safeguards to stop the ECB from monetising budget deficits, historically the root of runaway inflation. During the financial crisis, however, the nature of the problem the ECB faced was entirely the opposite.
But the interest rate should also contribute to equilibrium in the market for real capital in the long run. To achieve this, the real interest rate must not over time deviate too much from the return on real capital. Substantial deviations can give rise to undesirable fluctuations in the markets for real capital that have no basis in economic fundamentals. In Norway, both short- and long-term real interest rates are at the moment at a low level, compared to the past few decades. This is also the case in many other countries. How large the deviations from the neutral and the equilibrium rates are, on the other hand, is less clear. Neither the neutral rate nor the equilibrium rate are variables that can be observed. Economic theory can contribute insight into the factors that determine the equilibrium rate, but attempts to quantify it based on theory yield an uncomfortably broad interval. An alternative is to use historical average interest rates on the basis of an assumption that actual real interest rates will vary around the equilibrium rate. This method also poses problems, however. 2  BIS Review 22/2006  Throughout the period 1870-2005, the average long-term real interest rate in Norway has remained close to the average in the UK and the US: Norway 2.2 per cent, the UK 2.0 per cent and the US 2.8 per cent. In all countries, fluctuations in real interest rates have been substantial in periods. The real interest rate has fallen markedly since the beginning of the 1990s.

Based on this, the SNB will continue to use the instruments we judge best suited and necessary for fulfilling our mandate in the interests of the country as a whole, to the best of our ability. The SNB must be able to continue exercising its independence without this being fundamentally questioned. Ladies and gentlemen, I have shown you that the SNB’s independence is limited to fulfilling the mandate with which it has been entrusted by the politicians, and that it is accountable for this mandate. The SNB is not powerful. With the precision of a Swiss watchmaker, it has been embedded in our democratic institutions, our constitutional state and the society of our nation.9 We are aware that a high level of responsibility is attached to our mandate-related independence. That is why we use the independence we have been granted with prudence. 9  One of my predecessors described the SNB as, “to some extent”, “the fourth power in the land”, while adding the comforting comment that “this additional element within the – generally speaking – highly developed balance of powers in Switzerland, has functioned well” (Lusser, Geldpolitik 1996). Cf. Lusser, Markus (1996), Geldpolitik, p. 100, Zurich: Verlag Neue Zürcher Zeitung. BIS central bankers’ speeches  5
But the economic lessons of the past remain relevant. Openness comes with challenges. And as the world grows increasingly interconnected, these challenges will not only be more numerous, but they will also be more varied. Today, the Thai economy again faces challenges from the external front. The main challenge comes in the form of global financial imbalances; another challenge is the threat of high and variable oil prices. By global financial imbalances, I refer to the pattern of savings and investment allocation across the world. At the present, the US economy saves very little relative to its investment needs. Asian and oilproducing economies save more than their domestic investment opportunities. The European Union saves just enough. As a result, the US economy has been borrowing a large sum from Asia and oil producers. The magnitude of capital flows from the rest of the world to the US economy is not sustainable; it is a matter of time before the flows eventually reverse. And, in the process, the US  2  BIS Review 64/2007  dollar will depreciate against various currencies, including the Thai baht. The issue here is not only when the correction will take place, but how fast and how disruptive. Thailand, like many emerging market economies with small and shallow financial markets, is particularly vulnerable to fast-moving international capital. Such rapid movements of capital flows, if vastly out of line with the underlying economic fundamentals, can have negative impacts on the export or import sectors depending on the direction of exchange rate movement.

The reserve requirement resulted in a wide-ranging effect on the market and the economy. In light of this, once the appreciation momentum was broken, we have been carefully modifying the coverage of the measure to allow greater flexibility for business operations. We have done this without compromising the needs to contain excessive volatility. That is, we have provided the option to fully hedge for loans and debt instruments. At the same time, we expect ongoing relaxations on capital outflow to bring about a better balance between inflows and outflows. The unwinding of global imbalances will remain with us for the foreseeable future. During the transition, monetary policy can and must play a vital role in supporting the economy in its adjustment. And should the balance of risk shifts from inflation to growth, monetary policy will continue to focus on stability while supporting long-term economic expansion. Ladies and Gentlemen, The second challenge comes in the form of high and variable oil prices. As the global economy grows, so does its thirst for energy. An importer of oil, Thailand continues to be vulnerable to a sharp oil price shock that could abruptly exacerbate our current account. More importantly, as one of the most oil-intensive economies in Asia, the high price of oil can create a substantial price pressure and the risk of persistent inflation. The continued expansion of China and India suggests that oil prices may rise yet again in tandem with the global economic cycle.
To date we have published a report on EMU’s conceivable importance for the Swedish krona; the conclusion was: not much, provided - and it is a major proviso - Sweden provides equal conditions in other respects for wealth formation and business enterprise. The krona’s part in the assessment of inflation has varied One of the topics in the discussion during the past six months has been how the Riksbank reacts to the exchange rate in the formation of monetary policy. We have been accused of being indistinct or dithery during the summer and autumn. First let me say that there is a pattern to this that I find familiar. Conducting and interpreting monetary policy is more difficult when the situation is appreciably affected by other factors than resource utilisation, for instance the exchange rate or inflation expectations. The assessments are then more complex and the Riksbank faces greater educational challenges. The decisions also tend to be more controversial because there is a clearer conflict between different goals, so that more criticism is only to be expected. Our forecasts are always based on a variety of factors. A traditional model for determining inflation in the context of a Phillips curve, for example, points to resource utilisation, inflation expectations and the exchange rate as central components. However, these variable’s relative importance for inflation changes over time.

Which of the two ratios binds first depends on the kind of risks that banks are running. The leverage ratio automatically places tighter limits on expansions in the balance sheet through supposedly low-risk assets. The international community has made progress on the leverage ratio. The definition guiding how it should be calculated was agreed at the start of this year. This will provide the basis for banks to disclose the ratio over the next 3 years in the light of which the international community will decide in 2017 on the calculation of a minimum standard. A number of authorities, including the US, the Netherlands, and the Swiss, have already introduced or are considering a leverage ratio in advance of the international standard. In the UK, the Prudential Regulation Authority has already asked the eight major UK banks and building societies to take steps to achieve a leverage ratio above 3%. The Financial Policy Committee has been asked by the Chancellor to review whether a leverage ratio framework should be introduced in advance of the international framework. This could include a power for the FPC to vary the ratio to counter macro-prudential risks. The FPC will consult on the review and expects to publish its conclusions towards the end of the year. There is also important work underway to ensure the risk-weighted framework is robust. Reviews are underway to build a credible standardised approach to calculating risk-weights for banks’ trading activities and their loan books; this too should help reduce the system’s exposure to model risk.
Mervyn King: Monetary policy developments Speech by Mr Mervyn King, Governor of the Bank of England, to CBI Wales/CBI CYMRU, Cardiff, 11 June 2007. *  *  *  Chairman, First Minister, Ladies and Gentlemen, Two years ago I spent a few days walking along Offa’s Dyke. Up on the ridge, between Hay and Pandy, there is a magnificent 360° view. The patchwork quilt of green fields in England lies to the east. But the eye is drawn to the rugged and spectacular scenery of the Black Mountains in “Wild Wales” to the west. The landscape, however, is not everything because as George Borrow wrote in 1862: “Wales has something beyond wonderful scenery, its eventful history, and its illustrious men of yore to interest the visitor. Wales has a population, and a remarkable one.” It is a population that has had to adapt to great changes in the world economy over the past century and continues to do so today. You need only look outside at the Cardiff Bay development to see the way the Welsh economy has changed. When you take a flight, the aircraft may well have wings made in Wales. Your car might have a Welsh engine and be insured in Cardiff. And when you holiday in France your morning croissant has probably been baked in an oven made in Swansea. What happens in Wales matters for the UK economy. That is why the Bank of England has a team who live and work in Wales.

Although the Western Mail and the South Wales Echo stopped running such competitions in 1992 – at the same moment that the  BIS Review 63/2007  1  inflation target was being introduced – I am sure many of you will remember that in those competitions the key piece of information, the location of the ball or, in our case, the outlook for inflation, is missing. You are shown the position of the players from which you have to deduce the position of the ball. That is no easy matter. To pinpoint the ball you need to ask: why is that player jumping? Or why is that player looking there? Only when you have identified the factors to which the players are responding can you try to spot the ball itself. And obviously in our case there is rather more than guesswork involved. In essence, each month the Monetary Policy Committee is trying to identify the changes in the driving forces to which the economic data are responding. Those changes are described, somewhat obscurely by economists, as “shocks”. That is not to say they are necessarily sudden, violent upheavals. “Shocks” are forces that stop the economy running with clockwork regularity. They are the answer to the question “why?” The Monetary Policy Committee is constantly engaged in an exercise of “spot the shock”. Without understanding why the economy is moving in the way that it is, we cannot gauge correctly where it might be going and hence set the right course for interest rates.
Consistency has several sides •  Consistency across jurisdictions: it is vital as most players on OTC derivatives are global actors: we need to minimize the incentives for regulatory arbitrage;  •  Consistency with respect to the localization of market infrastructures, which should remain coherent with respect to the currencies traded: infrastructures should be under the direct reach of the Central Bank concerned by the systemic risk attached to the clearing of large positions in a given currency;  •  Consistency regarding the different types of players/counterparties: in order to prevent the move from regulated spheres to unregulated ones, we need to set up a framework where financial innovation, a key factor for economic growth, continue to develop in regulated spheres, and benefit from appropriate risk regulation. 2  BIS central bankers’ speeches  I will not dwell further on these topical issues, which are about to give rise to a fascinating discussion. It is my hope that we can collectively contribute to enlighten the policy debate. Let me now give the floor to our panelists. BIS central bankers’ speeches  3

The country possesses all the necessary attributes for sustainable economic growth and development. Competitive production costs, incentives, and reforms have also enhanced the attractive investment climate for both local and foreign investors. Numerous investment opportunities exist in the agriculture, manufacturing, tourism and mining sectors across various regions of the country. Almost all provinces in Zambia remain potential areas of investment whose resources remain largely untapped. Its active participation in the SADC Trade protocol and the COMESA/FTA offers preferential tariff access to a market of nearly 380 million people. A key challenge in developing this economic potential and enhancing the wealth creation capability of Zambians to drive growth and development is the ability to access long term investment capital especially for economically viable projects at start-up level. Financial institutions are critical in this process of mobilising and channeling these investment resources. To do so successfully, the industry must identify the constraints to the provision of finance and credit and provide innovative solutions to address them. Such innovations may include venture capital funds, structured finance products, equity and other innovations that allow a more efficient management of risks during the initial stages of the business cycle. On its part, the Bank of Zambia needs to ensure that there is sustainable stable macroeconomic environment first. But we also need to have a good understanding of the financial innovations that may be needed to attract and disburse investment capital.