samchain/econo-pairs-v1 huggingface dataset:
*** significantly higher/lower than zero at 1% level, ** 5% level, * 10% level (one-tailed tests) Libor measure: based on the change in implied 3-month Libor forward rate derived by linear interpolation of adjecent short sterling futures contracts. Changes in implied forward rates normally taken from: 11:30am to 12:30pm for interest rate announcements; 10:00am to 12:00pm for IR publication; and 9:00am to 10:30am for minutes publication. Reuters measure: difference between the actual repo rate change and the mean expectation of the economists  BIS Review 17/2005  11

Domestically, monetary policy will remain expansionary, which, together with less tight financial conditions, also backs this projection. It is worth saying that these projections use as a working assumption that the policy rate will be kept at its low of 0.50% until at least the second quarter of 2010 and that its normalization will occur at a similar pace to that in December’s Economic Expectations Survey (EES), which is more gradual than the one implied by financial asset prices in the two weeks before the statistical closing of this Monetary Policy Report (figure 15). The scenario outlined here is, as usual, subject to several risks. On one hand, doubts about how robust will the global economic recovery ultimately be still persist. The latest data have been better than predicted in several economies, but financial markets continue to react with volatility in the face of unexpected events while credit losses are still being absorbed by financial intermediaries. The labor market situation is still complex in several economies, which, combined with the de-leveraging process under way, adds doubts about the capacity of consumption and investment around the world to regain strength. Another substantial risk has to do with the way in which central banks and governments will withdraw their unconventional monetary policy measures and fiscal and financial packages, and how this could affect the functioning of financial markets.
So how will the FLS help? Let’s be clear on one thing. It is up to the banks whom they lend to. If a firm goes under, or simply can’t repay its loan, that bank loses money: under the FLS the credit risk stays with the banks. And it is not our intention that banks put themselves at risk by making imprudent loans. Although there are many good quality businesses seeking extra credit, not every one is as good a credit risk as they might make out to their local journalist or MP, so we need to be wary of judgement by anecdote. But the FLS will put the pressure on banks to lend where they profitably can. That may “turn the conversation around” as banks do more to seek out lending opportunities rather than businesses or home buyers struggling to find accommodating banks. If demand for credit turns out to be weak then that will add to the competitive pressures on the supply of credit. In summary, I am confident that the FLS will help the supply of credit. Before its introduction, it was more likely than not that the stock of credit would contract further over the next 18 months. Perhaps it still may. But any return to positive credit growth would be a better outcome than we could have previously hoped for. But I want to underline one thing about the expected outcome: I expect banks’ usage of the scheme to exceed their lending growth.

As is the case with any exchange rate strategy, the sustainability of the central rate and, with that, the fulfilment of the Maastricht criteria, will hinge on whether that rate is compatible with economic fundamentals. Fulfilling this criterion requires an unconditional willingness to defend the external value of the currency. For policy makers that means a commitment to abstain from practices that could be in conflict with the objectives of exchange rate policy. For participants in foreign exchange markets, including the central bank, it implies the need to intervene in the market without hesitation. Within this context, the importance which the acquis assigns to the independence of central banks is understandable. Whereas the Central Bank of Malta has been formulating monetary policy independently since 1994, there is no doubt that the recent amendments to the Central Bank of Malta Act have put the Bank in a better position to defend the peg. The amended Act, in fact, not only establishes price stability as the primary objective of the Bank, but it also protects the Bank from any external interference and provides it with the operating flexibility necessary for effective and prompt intervention in foreign exchange markets. With the coming into force of these amendments, Malta has achieved a high degree of compliance with Chapter 11 of the acquis on EMU. Another crucial precondition for maintaining the exchange rate peg and ensuring a smooth transition to the single currency is financial sector stability.
Furthermore, banks and Financial Institutions in Zambia have in the past lamented the low levels of banking and economic knowledge among graduates from tertiary institutions as well as the borrowing public in general. It is therefore gratifying to note that this evening, we celebrate and showcase the depth of the entrepreneurial talent that is flourishing in our schools of higher learning. It is also heartening to see these young men and women putting up high quality business proposals of a diverse range of projects. This speaks well for the inventiveness of our learning institutions and is a very welcome development indeed. Ladies and Gentlemen, this initiative represents a major milestone in developing linkages between the industry and tertiary institutions which is key in bridging the gap between expectations of employers and those of the labour force. It is also testimony that we have financial institutions and business entities that are willing and committed to promoting private entrepreneurship among young people in our country at the level of start-up businesses. Once again, I commend the sponsors and their partners for this important initiative. I am certain that your efforts will go a long way in contributing to the building of an entrepreneurial society in Zambia. This is a task not only for you but for everybody. I wish to urge in particular, the education system in Zambia to enhance their efforts in promoting positive attitudes towards entrepreneurship in the institutions of higher learning.

That cost is outweighed by the costs of financial instability to the economy, and the impact on the bank’s ability to meet its inflation objective, as was cruelly underlined in the years following the crisis. But it should be the last line of defence. Unlike my predecessors, and in contrast to many other jurisdictions, I and my successors can look to the FPC and quite a number of lines of defence before needing to deploy monetary policy against risks to financial stability. And finally there is the general, normative, argument that there is simply something wrong when real interest rates are below zero including in the medium and long term (Chart 9). There is a natural and deeply ingrained view that money should have a time value, a return that makes it worth saving and investing. I understand that view well. 22  Previous Deputy Governors for Financial Stability (David Clementi, Andrew Large, John Gieve, and Paul Tucker) voted to increase interest rates 26 times – 15 times as part of the majority while 11 times they were in the minority. 23 The countercyclical capital buffer (CCyB) increases banks’ ability to absorb losses in a stress. The FPC sets the UK CCyB at a rate to reflect the prevailing risk environment. It is currently set at 1% consistent with the FPC's published strategy that it expected to set a UK CCyB in the region of 1% in a standard risk environment.
However, I should also underline the progress in institutional and legal framework, such as the introduction of the Public Fiscal Management and Control Law, the Public Procurement Law and the multi-year budgeting framework. Three year inflation targets that are compatible with the three-year budgeting practice are also one of the good examples of coordination between fiscal and monetary policies. Another pillar of better economic governance is financial stability. A stable and healthy financial system is the key to sustainable growth through allocating savings to the real sector  BIS Review 38/2008  3  in a country. Law defines financial stability as the auxiliary objective of the Central Bank of Turkey. Establishment of the Banking Regulation and Supervision Agency, successful implementation of The Banking Sector Restructuring Program and the New Banking Law that brought the legal framework with best international practices were the milestones of legal and institutional reform in the financial sector. No need to say that the improved macroeconomic framework through successful monetary and fiscal policy implementations also contributed much to financial stability. Last but not least, I should say that there is also an effective cooperation among the Central Bank of Turkey, the Banking Regulation and Supervision Agency, the Undersecretariat of Treasury, the Capital Markets Board and other public authorities and also with private sector representatives. The fourth and the final set of actions that has been undertaken towards better economic governance is structural reforms.

As a result, they expect that, as the FOMC increases the federal funds rate over time, other interest rates might not rise one-forone with it. As one consequence of this, they express a concern that the Federal Reserve might see greater use of its ON RRP operations over time as monetary policy is tightened, because the rates offered on these operations—presumably rising one-for-one with changes in the target federal funds rate range—will become increasingly attractive relative to other market rates, which they expect to rise more slowly. To date, at least, this does not appear to be happening. I think this paper makes an important point about transmission: monetary control does not stop at the effective federal funds rate, and our framework must ensure that the stance of monetary policy is passed through into other money market rates. However, I am less persuaded that the data supports Darrell and Arvind’s concern about the present efficacy of the framework. First, I think the recent pickup in dispersion we see in money markets might not tell us much about what will happen going forward. A lot of what has happened in money markets in recent years may relate to one-off factors associated with money market fund reform and with liftoff from the zero lower bound.
If people came to believe  6  BIS Review 91/2010  that inflation was not going to be brought back to the 2% target, then Bank Rate would have to change by a potentially much larger amount in order to ensure that inflation is, in fact, returned to target. The recent high rate of CPI inflation can be largely attributed to a number of temporary factors, combined with weak downwards pressure on inflation from the subdued level of demand. Nevertheless, given the expected degree of spare capacity in the economy over the next few years, and that the temporary factors should wear off, the most likely outcome is that inflation falls back to below target over the next couple of years as shown in the May Inflation Report (Chart 12). On that basis it was sensible not to try and offset the recent rise in inflation by tightening policy. But let me be clear about the risks. Our central expectations could be wrong. Certainly the inflation data have tended to consistently surprise on the upside, month-by-month. What if spare capacity continues to exert much less restraint on inflation than anticipated? Or perhaps current data estimates have significantly underestimated demand and output growth? Or the exchange rate effect is bigger than incorporated in the projections? We could also be wrong in the other direction: downside pressures on UK output growth (Chart 13) could yet lead to an even bigger fall in inflation than the central case.

And, of course, there could be further shocks in either direction. So it is important to use whatever cross-checks on our projections that we can. One way to do that is to look for any nominal indicators that might signal risks of persistently above target inflation in the medium term, such as money or wage growth. Underlying money growth is currently just over 1% on an annual basis. And underlying wage growth is around 2%. There are some tentative signs that money and wage growth are rising, but neither of these figures are even close to being consistent with above-target inflation in the medium term. Taking these indicators together with the degree of slack in the economy – and given some of the factors likely to restrain growth in the UK and in Europe – the economics of the situation does suggest that inflation should fall back from its current high point. But there are risks on both sides. BIS Review 91/2010  7  On the one hand we need to be sensitive to the risk of tightening policy prematurely, stifling the nascent recovery. In that case, some of the flexible response to the recession could be swept away, delivering higher unemployment, more company failures and the risk of inflation significantly undershooting the target. The risk of deflation – which prompted the start of the MPC’s asset purchases in 2009 – may have faded, but it hasn’t gone away and would require greater efforts to deal with, if it materialised now.
In answering that question, we should take into account that the biggest problems occur when global factors – cross-border financial integration and associated capital flows – and domestic vulnerabilities interact negatively. In principle, solutions could be directed at any or all of these. Some are obvious in their design and relatively easy to implement, especially if they can be implemented unilaterally by individual countries. Others are more complex in their design or require global, regional, or big-country action that is not necessarily forthcoming. One potential solution is to enter a monetary union, thus eliminating the small country monetary policy problem. It would also reduce the financial risks emanating from currency mismatches and foreign currency maturity mismatches in the balance sheets of domestic banks. But as this is currently not on the agenda in my own country and recent developments have demonstrated that it is no panacea – with pros and cons that extend far beyond my topic her – I will not dwell on it further. There is no doubt that flaws in the international monetary and financial systems exacerbate the problems that I have mentioned. Reforms that would reduce the current asymmetries in the adjustment burdens of surplus and deficit countries, or would to a greater degree internalise the global externalities of the monetary policies of central banks issuing major reserve currencies, could reduce the volatility of capital flows. However, in spite of widespread unease about the current state of affairs, such reforms do not seem likely anytime soon.

Prudential limits on banks’ FX balance sheets, in the form of specific LCR and NSFR in FX, have been imposed. In practice, this will greatly limit the size of their FX balance sheets and the associated maturity mismatch that was the proximate cause of the demise of the old banks that failed during the crisis. Finally, a tax or other equivalent measure of the type I just mentioned is being contemplated. 3 Taken together, this will amount to a very different paradigm for economic management than the one prevailing before the crisis. History will tell whether it is sufficient to preserve monetary and financial stability in the rougher seas of freer capital movements that we intend to embark upon. In any case, we need to strike a balance between dynamism and freedoms, on the one hand, and stability, on the other. Thank you very much. 3  4  Further details on these proposals can be found in Central Bank of Iceland Special Publication no. 5: Monetary policy in Iceland after capital controls, December 2010, and no. 6: Prudential rules following capital controls, report of the Central Bank of Iceland to the Minister of Economic Affairs, August 2012. www.cb.is. BIS central bankers’ speeches
At the very least, it is not certain whether in such a scenario central banks will be able to remain independent and continue to concentrate on price stability. However, it should be clear that on a global level the future of price stability depends decisively on whether, and to what extent, the Federal Reserve and the European Central Bank will succeed in ensuring long-lasting purchasing power stability of the two major currencies. 2. Changes in concepts  The recent past has also brought about significant changes with respect to the implementation concept for monetary policy. Throughout the world implementation concepts have abandoned the use of money stock growth rates as political intermediate targets. This change of concept cannot hide the fact that monetarism was a practical concept and one that promised success. It explicitly made the interconnection, then almost forgotten, between excessive money supply growth and inflation the basis for steering monetary policy, thus making it possible to achieve major stability successes. Two additional aspects proved favourable in this respect. Steering the money supply facilitated communication and transparency. Monetary aggregates show rapidly and in the form of an objective figure whether the monetary authorities are actually implementing what they announced. Due to exceedingly long and variable time-lags between measures and ultimate targets, this applies to a much lesser extent to inflation targeting. Finally, money supply targeting also provides a measure of protection for central banks.

Such far-reaching ex ante transparency is, however, due to fail because of the uncertainty from which policymakers suffer just like any other market players. As the cornerstone of policy implementation, the interest rate path needs to be revised constantly and optimised conforming to updated information. When we fixed a target range for the first time in December 1999 we simply did not know that as soon as the first quarter of 2000 two interest rate increases would be necessary. The commitment to ex ante transparency must take account of the knowledge and the uncertainty of decisionmakers. Thus, as a rule, it is hardly meaningful to give information with regard to any other planned interest rate moves in addition to the announcement of the current interest rate target. In so doing, the central bank would lose essential room for manoeuvre, immobilise its internal decision-making process and give rise to counterproductive changes in market expectations. For this reason, I am also sceptical with respect to the somewhat softer practice of preparing the markets with a so-called bias statement for a probable interest rate move. Such signals cause expectations to be revised, which is of small avail in the best case, and ties the central bank’s hands, in the worst case. Once a concrete decision - eg to raise the 5  BIS Review 35/2000  interest rate - has been taken, it can be implemented without delay, ie without a prior announcement.
Comparing the level on nominal convergence among the present accession countries to the respective levels in some of the former accession countries five years prior to their EMU accession, it is evident that there should be no serious concerns as to most of the present accession countries' ability to fulfil the nominal criteria over the mid-term But Estonia's choice of a currency board based monetary regime holds some inherent advantages in this respect. Fiscal balance is a very important prerequisite for a smoothly operating and effective currency board arrangement, and that has had a strong impact on Estonian fiscal policies. The main goal of Estonian fiscal policy is balancing the budget over the cycle and absorbing the possible fluctuations in the private sector savings rate. We believe that a balanced fiscal stance together with strong financial system is also the most efficient way to avoid short-term speculative capital inflows within the context of EU accession. At this point, we expect no great difficulties in meeting the sovereign debt and budget deficit criteria. In that sense - Estonia, most likely, would be technically ready for joining the euro area even as early as 2006. The biggest challenge for the public sector, in that context, would be to avoid a lax macroeconomic policy mix that would over-stimulate domestic demand and result in significant real appreciation. And of course - there is really a huge amount of technical preparations that must be completed before joining the euro area.

Over the last 6 years the cumulative productivity growth in Estonia, relative to its main trading partners, has amounted to 25 per cent. The corresponding CPI-based real exchange rate appreciation amounts to 22 per cent. The share of current and future EU member states in Estonian exports is about 80%. By now, Estonian economy is strongly integrated into the European economic area. Can we say that the restructuring of our economy has been completed? III. On the way to Europe  What are the challenges ahead? For Estonia, like for all new member states, the only possible way to join the euro system is to do it in full compliance with the letter and spirit of the EU Treaty. Speaking about the present accession countries as a group, it can be said that the key challenge of the policy maker is similar everywhere - to foster real convergence and at the same time maintain macroeconomic stability. But although the underlying processes are the same for all, earlier national economic policy choices - and also the size of the country in question - play a very significant role. Thus, the optimal approach to euro area membership can in no case be a uniform one suitable for one and everybody. ERM II provides, in principle, a much-needed buffer zone before a country's EMU entry. However, there are obvious risks involved.