samchain/econo-pairs-v1 huggingface dataset:
BIS Review 28/2004  3  this are the UK and Australia, two countries that have tightened monetary policy during the past half year, referring explicitly to price developments in the property markets. Monetary policy and asset prices I would like to round off with some reflections on an interesting discussion that has been going on for some time among researchers. The discussion is about whether central banks should attempt to influence asset prices. The generally low level of interest rates in many countries, and in particular historically low key interest rates, have together with the stock market bubble during the second half of the 1990s helped to raise a discussion about monetary policy and asset prices.3 At present, low inflationary pressures coupled with low interest rates have resulted in large volumes of liquidity in the world economy. There is quite simply a lot of money in circulation. This money has to be invested somewhere, and the major beneficiaries have been the world’s asset markets such as equity and bond markets as well as property markets. In combination with improved corporate earnings and increasing confidence that the economic upswing has taken root, this has led to steep rises in these markets in the past year, notably in equity markets. The discussion is about whether central banks can and should attempt to stabilise asset prices, which are not included in the CPI.

Monetary policy has also benefited from a better government finance situation now compared with 10-20 years ago when there was a trend rise in debt ratios, i.e. government debt as a percentage of GDP, in the majority of OECD countries. Healthier government finances are contributing to stronger macroeconomic performance. Lower borrowing requirements in the public sector contribute firstly to lower real interest rates, which stimulate investment and growth. Secondly, stable government finances boost the credibility of monetary policy. During periods of large deficits and burgeoning government debt there is always a risk from a lender’s point of view that the government will attempt to reduce the real burden of the debt by eroding its real value through increased inflation. The high interest rate levels that Sweden experienced in the wake of the crisis years 1991-93, when nominal long-term rates stood at 12 per cent, was a result of high risk premiums on Swedish bonds owing to lenders’ concerns after a period in which the government debt had risen dramatically. Thirdly, balanced government finances allow automatic stabilisers to have their full effect. This means that demand can be sustained in the economy thanks to unemployment benefit and other factors when economic activity slows if the government finances are in such shape that there is sufficient economic leeway to finance the automatic stabilisers. Generally speaking a more stable climate benefits the economy in many ways. Lower inflation brings with it lower volatility in inflation.
International financial assistance must surely be provided with conditionality; and the medicine may be strong and painful in order to minimise the moral hazard of bailing out reckless investors and imprudent lenders. A second kind of immediate response is the kind of tactical counter-measure that we took in Hong Kong in August last year. We have devoted a great deal of time and energy to explaining the necessity of this measure, and you have already heard the reasoning behind it. We stand by what we did, and we do not think that we could have reasonably predicted, and therefore prevented, such an unprecedented, sophisticated, and concerted manipulative attack. But we do not pretend that we enjoyed taking the decision to enter the markets: it was an unconventional, highly controversial measure, which carried many risks. The success of the operation showed that we could defend ourselves, and that our system was basically sound. We have also taken measures to reduce the likelihood that such attacks will recur. But it would have been far preferable to have had a world environment in which such defensive manoeuvres were unnecessary. A third immediate response has taken the form of exchange controls, most notably in Malaysia, and it is interesting that academics, including Professor Bhagwati and Professor Krugman, are increasingly attracted to them. These measures may well suit the needs of some economies, and a less extreme form of prudential regulation of capital flows has worked well in some places - in Chile, for example.

Although the interbank rates, that is, the rates banks pay when borrowing from one another, have fallen they are still much higher than the average rate in recent years. The TED spread in the United States and the euro area is for example three times higher than the average. The housing market in the United States has not yet bottomed out. If new large loan losses arise in the financial system again this may shake market confidence once again. Over the past few days a large amount of new information has been received regarding the situation in the US economy. Inflation in the United States remains high. This is largely due to the increasingly high food prices, as well as high energy prices. However, the rate of wage increase has slackened. Inflation in the euro area is also affected by the higher energy and food prices. However, growth appears to have been stronger than we had expected for the United States in the most recent quarter, as well as in the euro area, particularly Germany. At the same time, there are indicators for both the United States and the euro area pointing to a slowdown in the second quarter. International developments affect us all, both you as entrepreneurs and Sweden as a whole. We have assumed that foreign trade will slow down in the future, as world growth is expected to continue slackening. Orders from the export market have so far declined in 2008.
Fabio Panetta: Central clearing and the changing landscape Welcome address by Mr Fabio Panetta, Member of the Executive Board of the European Central Bank, at the Third Annual Joint Conference of the Deutsche Bundesbank, European Central Bank and Federal Reserve Bank of Chicago on CCP Risk Management, Frankfurt am Main, 3 March 2021. * * *  Introduction1 It is with great pleasure that I welcome you to the third conference on central counterparty (CCP) risk management, organised by the ECB together with the Deutsche Bundesbank and the Federal Reserve Bank of Chicago. This event has become an increasingly relevant international forum to discuss key challenges surrounding central clearing. In my remarks today, I will reflect on key developments since we met a year ago. The coronavirus (COVID-19) pandemic is naturally foremost in my mind – the turmoil that hit financial markets last spring has underlined the need for robust and resilient market infrastructures such as CCPs. The end of the transition period following the United Kingdom’s departure from the European Union is of course another crucial change, and I will discuss its implications for financial stability in the EU in relation to central clearing. I will then argue that these developments show the urgent need for the EU to develop a deep and integrated single capital market. The need for robust and resilient CCPs Since the G20 agreed to make central clearing mandatory for over-the-counter (OTC) derivatives at the 2009 Pittsburgh summit, CCPs have become central pieces of the global financial infrastructure.

At that time, the concept was inspired by the work of Knut Wicksell 30 years earlier. As early as in 1898, Wicksell argued that price stability should be the central bank’s objective.1  The conduct of monetary policy In Norway, the inflation target is set at 2½ per cent. Norges Bank operates a flexible inflation targeting regime, so that weight is given to both variability in inflation and variability in output and employment. In the long term, there is no conflict between low and stable inflation and stability in the real economy. On the contrary, price stability will be a precondition for high and stable output and employment over time. However, in some periods, there may be disturbances that create conflicts in the short term. The point of departure for the monetary policy strategy ahead is the very low level of inflation at present. It has been lower than the inflation target since the autumn of 2002. The aim of monetary policy is higher inflation. Therefore, the interest rate is low. Monetary policy influences the economy with long and variable lags. Norges Bank sets the interest rate with a view to stabilising inflation at the target within a reasonable time horizon, normally 1-3 years. The more precise horizon will depend on disturbances to which the economy is exposed and how they will affect the path for inflation and the real economy ahead. The economy grows over time.
Central banks have also fostered improvements in the payment system, which have reduced the costs of accessing and transferring money for businesses and households. The cash intensity of most African economies suggests, however, that there is still room for improvement in this area. A greater challenge for central banks lies in fostering growth and efficiency in the financial sector. The banking sector in many countries of the continent remains small and sadly displays a low level of efficiency and competition. I sincerely hope that this Forum will contribute to finding solutions to these and other challenges to emerging Africa. Let me close by wishing you a successful EMF here at the Study Center Gerzensee. 6  BIS Review 110/2007

And, as I have argued, the combination of a clear quantitative target and an open and transparent policy regime have been instrumental in shaping the response of monetary policy to the current crisis and will continue to be so. But recent events must serve as a wake up call for policymakers. The spectacle of bank runs, asset price falls and a sharp unwinding of economic imbalances testifies that inflation targeting as currently operated is not sufficient. How should the macroeconomic policy framework in the UK be strengthened to reduce the likelihood of such events reoccurring? One common suggestion is that the conduct of policy under inflation targeting should be modified to take greater account of movements in asset prices or economic imbalances that threaten the attainment of the inflation target, even if those risks may not materialise for several years. In principle, the remit given to the MPC provides the latitude for policy to respond to such medium-term risks. In particular, the Committee’s objective is timeless – it is tasked with keeping inflation close to target “at all times” in the future. Therefore, if the Committee judged that intentionally undershooting the inflation target in the near term would help to reduce the risk of a much larger deviation from target in the future, it has the scope to follow such a policy. But a policy of “leaning against the wind” is difficult to implement in practice. In part this reflects the difficulty of identifying changes in asset prices and economic flows which are unsustainable.
Banks and microfinance institutions are now obliged to disclose to borrowers the total loan cost to rule out situations where borrowers end up paying more than agreed under seemingly clear terms. 2/5  BIS central bankers' speeches  Running ahead, we think that there is a need for more stringent legislation in that area, considering that banks have adjusted and some of their ‘offerings’ circumvent the requirement of disclosing the total loan cost, that is the amount they are required to make clear to the borrower. Against the background of economic recovery, disbursements of unsecured loans have accelerated. As I have said, this is driven by high inflation expectations (when people expect higher inflation, they try to buy goods on credit) and fairly attractive interest rates. Banks like this situation, without doubt. They are looking for ways to circumvent our restrictions. For example, we have seen a rise in the share of consumer loans (I mean consumer loans, not mortgage loans) with more than five years’ maturity (from the pre-pandemic 11% to 21% in the second quarter of this year). On the one hand, by extending loan maturity, banks reduce monthly payments, making a loan seemingly more affordable to borrowers. Yet, the total amount of debt per borrower is increasing. This is normal for a mortgage that is issued for a long period (and with much lower rates), but those long periods for unsecured loans are unreasonable and are set to entail problems. We already see a deterioration in consumer lending standards.

Elvira Nabiullina: Current problems in the post-pandemic economic recovery Speech by Ms Elvira Nabiullina, Governor of the Bank of Russia, at the plenary session of the Federation Council meeting, 22 September 2021. * * * Good afternoon, Ms Speaker and colleagues. Thank you very much for inviting me to speak today, on the first day of the autumn session. In my speech, I would like to focus on current problems in the post-pandemic economic recovery. Undoubtedly, we are pleased about its rapid pace. Yet, the economic rebound is bringing some side effects that we must counter to ensure the stability of our economy, the financial system, and ultimately, the well-being of our people. The economy has now returned to the growth path it would have been on but for the pandemic. Certainly, central to the successful delivery of anti-pandemic measures have been the Government’s budget support measures alongside the prompt efforts of lawmakers to set up a legal framework for anti-crisis response measures. In turn, we at the Bank of Russia have granted regulatory relaxations to banks to support consumers and businesses, and to restructure and issue new loans in this challenging period. Our monetary policy has been accommodative. It was only after we made sure that the economic recovery was becoming sustainable that we started to raise the key rate. Certainly, I will explain why we are doing this as I know that there are many questions on this subject.
Meanwhile, in the words of the Socrates, the Greek philosopher, “all wars are fought for money”. We heard some good examples that illustrate this relation in last year’s conference. We heard from Prof. Picard about King Monunius, who is known thanks to the respective coin. He had it minted for the sole purpose of raising a strong army, convinced that his might rested with the army. From Prof. Egro, we learned that Mahmut Pashë Bushatlliu and Ali Pashë Tepelena tried to introduce their coins and banknotes, independently from the Ottoman Empire, not for financial purposes but as a token of rebellion or an attempt to break away from the Empire. Later on, in WW1, we see the banknotes of the Republic of Korça, which are a rare phenomenon not only in terms of numismatics, but also a materialisation of the early issues as a result of the war, after the formation of the Albanian state. During WW2, the Albanian currency underwent radical changes. On its obverse and reverse we no longer see King Zog. Instead, Victor Emanuel III is featured and the most significant change is that the Albanian franc was officially pegged to the fate of the Italian lira. We will have the opportunity to hear, during the day, other interesting and important examples in the monetary and economic history of Albania.

Dear Ladies and Gentlemen, This conference does not seek to analyse wars and the various factors triggering them; instead, it aims to show how the radical changes introduced by wars or conflicts on political systems and alliances, or the divisions between states have affected monetary developments. The history shows that conflict or war periods are particularly related to radical changes in monetary systems and policies. Over the centuries, we find various examples of such developments, materialised in changes in the monetary system or introduction of temporary fiscal policies, additional quantity of money 1/2  BIS central bankers' speeches  issued before the start and during a war, massive circulation of a monetary type in areas far away from their place of origin, higher number of hoards found in a conflict zone or massive usage of the currency of allied countries. Numerous phenomena testify to the constant presence of a relationship throughout epochs, between military conflicts on the one hand and the role of money in wartime on the other. To better reflect the relationship between conflicts or war and money, we have decided for the conference proceedings to follow a chronological order of presentations, starting from antiquity, to middle ages and the modern history of the XX century. Our guests are distinguished professors, scholars, historians, and representatives from central bank museums who responded to our invitation to research and lecture on this topic.
When the repo rate is negative, the banks pay interest to the Riksbank, as the banking system as a whole has a liquidity surplus that must be deposited in the Riksbank. The short-term interbank rates, that is interest on loans between the banks, and some government rates have followed the repo rate down below zero. However, the banks have not introduced negative deposit rates for households and most companies. Only a few economic agents, primarily other financial institutions, large companies and some municipalities, have experienced a negative deposit rate, and these can in some cases also borrow at a negative interest rate. Companies have been forced to expend a certain amount of resources on avoiding negative return on their funds, but they appear to have succeeded relatively well in this. Cutting the repo rate below zero has thus in total contributed to pushing down interest rates, but has not meant that interest rates have become negative for the general public. Good profitability among the banks and few signs of a decline in demand Another fear has been that negative interest rates reduce the banks’ profitability, which could lead to higher lending rates and a lower supply of credit. The reason for this is said to be that the banks’ deposit margin, that is, the difference between the interest on deposits and lending, would decline because it is difficult to cut the deposit rate below zero.

MAS therefore takes the view that thoughtful and purposeful use of technology to drive innovation have been and will continue to be important for the financial industry to progress. In our regulatory role, the MAS also proactively engages the industry both to understand and even to shape the technology-driven transformations in financial services. 11 Technology can bring about new or heightened risks when mis-used or abused. So while MAS is supportive of financial institutions to experiment with technology to harness potential new opportunities, or to innovate existing processes, we also require that they understand and can manage the associated risks. It is this philosophy that underpins the MAS to be among the first regulators in the world to adopt a regulatory sandbox regime. 12 MAS regulatory sandbox provides a constrained but more flexible space for players seeking to test new technology or approaches before a full launch. Such sandbox pilots are held within defined risk parameters and are time-bound. These restrictions help to limit the impact from unsuccessful applicants but equally important, they allow MAS to also understand the new model up close – how it is run, how the technology or its application is used, how the risks are managed and the value proposition to clients before mainstream use and scalability. This will also allow the MAS to calibrate our final rules that are appropriate to the new business model or start-up while addressing any level-playing field concerns.
This is supporting the monetary policy formulation process in a more proactive and forward-looking manner. The Central Bank will  10  continue to improve model-based projections through building sound technical infrastructure for inflation forecasting and macroeconomic analyses. Moreover, the monetary policy formulation process is also being upgraded by introducing a forecast calendar, which outlines schedules for projections and revisions of forecasts linked to the availability of important economic data and events. Accordingly, during each monetary policy round, two technical staff level meetings are conducted to obtain inputs and feedback for forecasting followed by a pre-Monetary Policy Committee (MPC) meeting attended by the members of the MPC and technical staff to discuss projections and sectoral developments. The formal MPC meeting takes place subsequently to make recommendations to the Monetary Board. The number of MPC meetings during a year were also reduced to 8, allowing sufficient time for technical staff to undertake more sophisticated macroeconomic analysis. In the new forward-looking framework, it is of utmost importance to monitor developments in both current and future economic conditions. In this regard, we will strengthen the existing surveys of expectations and economic conditions to gain forward-looking insights to improve accuracy of forecasts. With regard to monetary operations, the domestic money market is being actively managed through OMO to steer the Average Weighted Call Money Rate (AWCMR) in line with the monetary policy stance of the Central Bank.

12 We are working to build up the skills and competencies in needed in the new world of finance, starting with the curriculum in our tertiary educational institutions, work placement programmes, and extending through to mid-career retraining and life-long learning. 13 First, getting our students to be ready for FinTech. 14 MAS is working with the five local polytechnics to review and enhance their curricula, for example to develop skillsets in agile software development, mobile application development, cloud application deployment, and data analytics. 15 We are also working with the polytechnics to increase the number of FinTech internships and joint projects with the FinTech community so that students can apply their skills and gain hands-on experience. In October, we embarked on the “PolyFinTech 100” initiative to secure 100 FinTech mentors and 100 FinTech internships for 2017. I am pleased to announce that we have secured these targets in the short span of a month. More than 2,500 students in the banking and IT-related courses in the polytechnics each year are expected to benefit from these initiatives. 16 MAS is also partnering with the universities and polytechnics to expose students to perspectives from industry practitioners 2/4  BIS central bankers' speeches  Next year, we will launch the MAS Tech Talks, a series of talks by FinTech professionals to share about their experiences in the industry. This will give students to better understand job opportunities available in FinTech and define their career aspirations.