samchain/econo-pairs-v1 huggingface dataset:
12 The theory of asset pricing under Knightian uncertainty throws up at least two striking results. First, in the face of such uncertainty, asset prices are not precisely determined but instead lie in a range. This indeterminacy in prices is larger the greater is uncertainty and the greater agents’ aversion to it. Second, asset prices exhibit a downward bias relative to fundamentals. Uncertainty gives the appearance of “pessimistic” expectations. Both of these theoretical predictions match pretty closely the moments of many asset prices in the world today. Many appear to lack a clear compass relative to fundamentals. Most are excessively volatile. Among investors, pessimism is the new optimism, with talk of a lost decade in succession to the Golden one. Risk models – or the failure thereof – have played their part in generating these foggy outcomes. That is the diagnosis. What of the prescription? In their recent consultation paper, the Financial Services Authority has outlined some very good proposals for improving stresstesting practices among financial institutions. 13 Based on my reading of the identified failures in stress-testing, let me put forward a complementary “five-point plan”. •  First, setting the stress scenario. The key elements here are devising a multifactor risk scenario that is sufficiently extreme to constitute a tail event. Arguably, designing such a scenario is better delegated to the authorities than to individual firms, in part because they ought to be more immune to disaster myopia. In its Financial Stability Report (FSR), the Bank describes such stress scenarios.

(vii)  In case of an excessive increase in the liquidity surplus or the emerge of extraordinary fluctuations in the market even at reasonable levels of excess liquidity, to enhance the effectiveness and flexibility of monetary policy and liquidity management strategy, in addition to YTL deposit buying auctions with standard maturities, reverse repo auctions and Central Bank liquidity bills with maturity up to 91 days may also be used actively. As a matter of fact, technical procedures regarding the issue of the said bills were completed by the Central  BIS Review 1/2007  9  Bank, by “the Communiqué on Liquidity Bills” published in the Official Gazette, number 26310, dated 5th of October 2006. (viii)  Currently, depending on liquidity conditions, whether there will be standard one week or two weeks YTL deposit buying auctions will be held or not, if there will be an auction, the maximum amount to be drained through the auction is announced at 10.00 at Reuter’s CBTY page. In 2007, the Central Bank may hold New Turkish Lira deposit buying auctions with standard maturities of 1, 2 and 4 weeks and continue to announce the maturity and the maximum amount to be bought in the auction(s) on Reuters’ CBTY page. Starting from 2007 onwards, no announcement will be made on the said page on days when no auction is deemed necessary according to liquidity conditions.
If one waits so long in raising the policy rate in an economic upturn, it is likely that inflation will then overshoot the target for a period of time. The way I see it, the Executive Board of the Riksbank has taken a step in the direction of this kind of conditioning by opening up for inflation overshooting the 2 per cent target before it is time to make monetary policy less expansionary. For this type of strategy to function well, it must have the support of a majority, and it will be particularly powerful if communicated by a unanimous Executive Board. Interesting change of strategy by the Federal Reserve Safeguarding the symmetry of the inflation target, and thereby the inflation target per se, appears to have been an important motive for the changes made by the US central bank, the Federal Reserve, just over a month ago with regard to its strategy and objectives.15 The changes were the first to be made since 2012, when the inflation target was introduced, and the review that preceded the changes was motivated by conditions since then having changed in three important respects:  13 For a detailed review of the Riksbank’s experiences of publishing repo-rate forecasts, see Sveriges Riksbank  (2017). 14 In academic literature this type of strategy is usually called conditional “forward guidance”. 15 For a description of these changes, see Federal Reserve (2020) and Powell (2020), Clarida (2020), Brainard (2020).

Another observation is that central banks’ inflation forecasts now tend to lie below their respective targets, not just in the short term, but also at the end of the forecast period. This is the case with the Riksbank's and the ECB's forecasts, but also the Federal Reserve’s forecasts are below the target for two years ahead, not reaching target level until 2023 (see Figure 2).1 It appears to be the case that central banks are increasingly making the assessment that they will have difficulty conducting a sufficiently expansionary policy to bring inflation back on target as quickly as usual. * I would like to thank Mikael Apel for helping prepare this speech, Elizabeth Nilsson for translating and Emma  Bylund, Charlotta Edler, Petra Frid, Jens Iversen, Åsa Olli Segendorf, Marianne Sterner, Ulf Söderström and Anders Vredin for valuable comments. 1 The ECB’s target is that inflation should be “below, but close to, 2 per cent”. However, the long-term forecast (5 years ahead) has gradually been revised down and is currently at 1.6 per cent, which is the lowest ever. 1 [15]  However, this is not so strange. It is explained primarily by two interacting factors. One is that the pandemic has resulted in an unusually rapid and large fall in demand. It is hardly surprising that this has the consequence that inflation is falling so far that it may be difficult to get it to rise quickly enough to reach the target level in a couple of years’ time.
Is EMU membership important for Sweden to gain influence? Finally, I intend to discuss what I personally consider to be the most important aspect of the EMU issue - how Sweden's opportunity to take responsibility and exercise influence in an international economic policy context will be affected by the result of the referendum. Here I am speaking not primarily as Riksbank governor of six months but on the basis of my experiences over almost 20 years, as civil servant in the Ministry of Finance under three finance ministers and later as deputy governor of the Riksbank, representing Sweden in numerous international forums. My first reflection concerns Sweden's influence now, compared with before. As I see it, Sweden's influence has declined considerably, which is not always made clear in the general debate. The most important reason for this erosion of Sweden's position is that we, as I mentioned earlier, have declined in economic strength in relation to almost all of the other industrial nations. In addition, there is a more positive aspect here, namely that a number of former developing countries have made considerable economic progress and are now important players in the international economic policy game. The result is that we now sit at fewer decision-making tables than at any other point during the post-war period and we carry less weight at those tables where we have retained a place. One expression of this is that an ever-declining number of Swedes now hold central positions in economic policy and financial contexts.

In some countries, where systemic risks have increased appreciably, it may also be appropriate to apply macroprudential policies that enhance the financial system's resilience. Their procyclicality, however, should be avoided. Vulnerabilities and risks in the non-bank financial sector have also increased and should be monitored closely. At the same time, headway needs to be made in improving this sector's regulatory framework, in particular to address leverage and liquidity mismatches. An incomes agreement As I was saying, on the information available, there is no evidence of second round effects occurring at present, at least not on a widespread basis. Euro area wages have remained subdued. In fact, real wages have declined significantly. However, wage growth is gaining pace, underpinned by strong labour markets and the effect of inflation on wage demands, both of which are expected to continue. Profit margins have also remained moderate overall, albeit with much heterogeneity across countries, firms and sectors. Nevertheless, the pass-through of costs to final prices has also been increasing and has been higher than in previous episodes. Moreover, as I said before, the longer the current high inflation persists, the more likely these second-round effects are. To avoid this, it is essential that economic agents accept as inevitable the loss of income caused by the rise in the cost of imported commodities.
In some sense this is quite natural: a sharp movement in market prices exceeding that justified by fundamentals should present a highly profitable investment opportunity for the timely investor. While it is reasonable to draw comfort from the resilience of fast markets and the lack of spill-overs so far, it is important we recognise the limits of our understanding. Having been heavily involved in the analysis of sterling flash episode I am confident that we are able to provide forensic ex-post explanations. The Bank for International Settlements (BIS) Markets Committee 14  study, which the Bank of England helped to author, demonstrates that ; as does the Joint Staff Report on the 2014 US Treasury flash rally. 15  But I doubt we can fully understand what conditions may trigger similar  future events or completely anticipate how they might unfold. 16  Specifically, in my view, we are not yet in a position to rule out that future flash episodes might interact with aspects of financial market infrastructure in a way that gives rise to longer-lasting disruption. Suppose, for example, that a future flash episode happened to coincide with benchmark fixings in foreign exchange markets, or a margin call related to equity or derivative markets. The resulting impact on the recorded values of a range of assets might risk mechanically prompting further sales and price falls.

ETFs clearly bring many businessas-usual benefits which market participants value – for example, the convenience of being able to transfer risk at high-frequency via standardised, exchange-traded securities in fast markets. There is a question, however, of how these interlinkages work in stress. During the turbulence of August 2015, for example, equity investors flocked to trade in exchange-traded funds, causing ETFs to appear to be priced at large discounts to the value of their – sometimes less liquid – underlying security (Chart 11). On this occasion, once again, the dislocation was short-lived. But if a future stress in fast markets – such as those for ETFs – were to persist for a longer period, it might spill over to cause stress in other linked markets, including for less liquid underlying instruments, including government or corporate bonds as well as equities, leading to wider implications for financial stability. 17 18  This also caused the firm to default at the CCP, creating a loss that was mutualised among the rest of the CCP’s members. See Greenwich Associates (2016), ‘Long-term investors embrace FX algos’. 7  All speeches are available online at www.bankofengland.co.uk/speeches  7  There is therefore a need to ensure that market participants’ risk management frameworks keep pace with the speed at which these markets are capable of moving, taking into account the speed of possible shocks and the potential for propagation, including to slower markets.
Investment has declined sharply in an international comparison, suggesting that the excess capacities created in the late nineties were particularly pronounced. The bursting of the equity market bubble had a severe impact on the financial sector and business in the once flourishing investment banking and asset management sectors has slumped, resulting in the need for radical structural reforms and consolidation. The Swiss National Bank has responded to the difficult economic situation with a rapid and massive easing of monetary policy. In the course of the last two years we have cut our reference interest rate the three-month Libor - by 325 basis points to practically zero. With the marked slowdown in economic activity and the appreciation of the Swiss franc, inflationary pressures were also easing. Indeed, since spring 2001 our inflation forecast has indicated that the risk of inflation is very limited in the years to come, which has enabled us to bring about a significant reduction in short-term interest rates. Our expansive policy has aimed at supporting demand and limiting the upward pressure on the franc. BIS Review 27/2003  1  So far we see no sign of a concrete recovery. We expect GDP to stagnate in 2003. Growth should accelerate again at the end of this year following a strengthening of the world economy. Basically, our business cycle closely follows the economic development of our neighbours: Germany, France and Italy, which absorb the bulk of our foreign trade. Let me now turn to Switzerland as partner of the EU. 3.

The current weakness of the dollar, although it had been expected for some time, is a cause for concern for us especially as it comes at an unfavourable time. We watch therefore the exchange rate development very closely. In the present economic situation it is not easy to identify positive factors. One of them is definitely the environment of price stability and strong competition which is keeping inflationary expectations at an historical low level. As a result, monetary policy can remain expansionary. This is clearly the case in Switzerland. A second positive element are the structural adjustments. In Switzerland, the private sector has adjusted courageously to the new low-growth environment in which the price/quality ratio becomes a key factor of success. I think that our economy is well positioned now to benefit fully from an upturn in international trade. Last but not least - and here we join Poland - our main source of hope lies in Europe. Since Switzerland is heavily dependent on exports, sluggish economic performance in Europe, and especially in Germany, is a major cause for concern. But there are now signs of hope : the German government is considering a reform programme which should increase potential growth, and manufacturing orders are improving; in France GDP growth is positive; in the UK industrial production is accelerating again. We can now expect a gradual improvement in the overall economic picture and a progressive strengthening of consumer and investor confidence.
The readiness to issue a CBDC can prove an important lever to that end. - In such a context, even if the jury is still out whether we will have to use it, it is essential that we show openness to change and to investigate ant test practical solutions, among central banks and with the private sector. 4/4  BIS central bankers' speeches

As a result, central banks today focus more than they used to on developments in the financial markets. The Swiss National Bank, too, has deepened its understanding of the markets, refined its analytical tools and strengthened its market contacts. I will say more about that later in my speech. First, I would like to talk about the expansion of the monetary policy toolkit and what that involves. In the final part of my speech, I will offer a few thoughts on the extent to which unconventional monetary policy measures have changed the interactions between monetary policy and the financial markets. Monetary policy transmission using only a single instrument In principle, monetary policy influences economic and price developments via the banking system and the financial markets, since a central bank conducts its monetary policy by using its monetary policy instruments to target certain prices on the financial markets. Monetary policy stimuli are thus transmitted via the financial markets to the economy. The choice of instrument is dictated by the monetary policy framework. In the pre-crisis era, so up to about 2007, central banks were in general agreement about what makes a good monetary policy framework. It should be simple, clear and straightforward; in practice, there was, in particular, a consensus that monetary policy should be implemented using only a single instrument. This was usually a short-term interest rate steered more or less directly by the central bank. Monetary policy had only an indirect influence on all other financial market prices, because they depended on the short-term rate.
We will not allow adverse market dynamics to lead to unjustified interest rate increases in some countries, which would put at risk the smooth transmission of our common monetary policy. To put it simply: yields and spreads do matter, even if we don’t target fixed levels. Hence, and consistent with the risk of still lower inflation, we announced on 18 March a EUR 750 billion Pandemic Emergency Purchase Programme (PEPP). In implementing the PEPP, we are and will remain flexible; the Eurosystem should be guided more by market dynamics and liquidity conditions than predetermined volumes of purchases. And Italy is reaping the benefits of European integration as it borrows at a far lower interest rate than before the euro. Page 3 sur 10  If Italy’s sovereign bond yield spreads were as wide as before joining the euro, – more than 3% higher than at present – it would incur an additional interest charge of several billion € on the new debt issued in 2020, which includes the costs of the Covid pandemic. If we apply this spread to Italy’s outstanding stock of debt, the additional interest cost would be several tens of billions of euro. At the same time, the ECB has dramatically expanded its targeted longer-term refinancing operations (TLTRO-3) in order to support bank credit for the real economy. Less noticed, these new conditions are historically favourable, with support by the ECB now increased to 50 bp under the Deposit Facility Rate.

I hope this report will inspire new ideas to help solve corporate KYC problems in the most cost-efficient way because this is a problem that needs to be solved. We tried, we failed, we will learn, and we will do better next time. Innovation is about experimenting and learning from setbacks. Just as we showcase our successes, let us also be open about our setbacks. This is the spirit of enterprise we need in the financial sector and in Singapore. And we will continue to explore other ways to alleviate KYC pain for FIs and their customers. MAS and the GovTech are now working with the industry to facilitate FIs’ credit assessment of SMEs using trusted government data. 4/9  BIS central bankers' speeches  Today, young SMEs that wish to obtain bank financing may face difficulties due to the lack of credit history. We will help pool trusted data from government sources on the business and key individuals associated with the SMEs to facilitate a more informed credit assessment. We will run a pilot with three banks in the first half of next year. Payments Next, payments. We have substantially completed Singapore’s national e-payment infrastructure. There is FAST, a 24x7 real-time funds transfer infrastructure. There is PayNow, which rides on FAST to enable instant money transfer to an individual or business, using their personal ID number, mobile phone number, or unique entity number.
At the meeting in July, for example, all of the Board members agreed to increase the interest rate. But three of us felt that the forecast for the repo rate path in the period ahead should be some-what lower. This disunity attracted a lot of attention in the media and also provided some clues that made it easier to forecast what the vote would be at the latest meeting. Previously, before we began publishing interest rate forecasts, there were also different opinions among the Board members about how the interest rate should develop in the future. But as no forecast for the repo rate was published and there was nothing concrete to enter a reservation against, any differences of opinion were not visible to the outside world. It is probably also the case that the future development of the repo rate was not discussed as much internally then as it is today. BIS Review 113/2008  1  Disagreement a healthy sign Another thing that I feel is worth pointing out is that disagreement among the members of the Board should not be seen as a sign of weakness. This would perhaps be a reasonable interpretation if you held the view that the Board members should be so wise that we can simply "calculate" which decision is the only possible correct one and agree on it. Unfortunately, the world is far too complicated for this to be possible.

The new figures thus confirm that there has been a sharp downturn in the growth rate and completely support the picture that could be discerned at our latest meeting. Increasing cost pressures have been an important factor behind the series of interest rate increases introduced by the Riksbank. The new figures from the National Accounts show that the figures for hours worked have been revised up-wards compared to the version available to us in September. Together with the marginal downward revision of the figures for growth, this means that productivity declined more than indicated by the preliminary figures. As the figures for labour costs per hour worked have also been adjusted upwards, the new figures show that unit labour costs increased by 5.3 per cent on a 12-month basis in the second quarter. This was almost a percentage point more than in the preliminary version of the National Accounts. The fact that productivity is weak may be because companies have not had time to adjust their workforce as the downturn in economic activity has been so sudden. We can now see that the number of vacancies is falling and that plans to recruit new personnel are being  BIS Review 113/2008  5  toned down. An adjustment is underway which will be followed by a recovery in productivity, in line with the Riksbank's forecast. Rising costs are of course a factor that the Riksbank has every reason to monitor and analyse carefully.