samchain/econo-pairs-v1 huggingface dataset:
Further, the effect on forward rates is accounted for by changes in the real forward rate; there is no significant effect on forward inflation rates. At the ten-year point, the effect on the forward real rate is statistically significant with a 100bps increase in the short-rate increasing the 10-year forward rate by around 7 bps (Chart 1). To put that into context, Bank Rate has been cut by around 5pp since 2007. Taking these results at face value that kind of movement in short rates becomes enough to reduce 10-year forward rates by around 35bps. 18  BIS central bankers’ speeches  Looking across the full forward curve, there is a positive effect on very distant forward rates, with that effect significant up to around a 10-year horizon (Chart 2). Chart 1:  Chart 2:  Changes in short rates and 10-year forward real rates on MPC decision days  Changes in real forward rates on MPC decision days following a 100bps surprise change in short rates Average 95% confidence interval  Percentage points 0.30 0.25 0.20 0.15 0.10 0.05 0.00 -0.05 -0.10  5  10  15  20  It is not possible to distinguish from these exercises alone whether the identified movements in long-term real forward rates are driven by changes in long-term expectations or changes in term premia.

A report submitted by an Ad-hoc Group chaired by Jean-Pierre Landau. BIS central bankers’ speeches  5  increase in risk appetite. It is not far fetched to ask whether excess Global Liquidity can result.16 We thus have two broad stories of what kicked off a period of pronounced credit growth and asset price appreciation. First, a fall in the world safe real rate, due to excess savings in the East. Second, increasing Global Liquidity, transmitted through expansive cross-border lending, kicked off by prolonged accommodative monetary policy. These stories are not at all mutually exclusive.17 And, most probably, both contributed to exuberance. But it is not my purpose this evening to revisit how asset-price appreciations that are initially fundamentally warranted can get out of control through the “Minsky” mechanisms of extrapolation of past returns into future targets, herding and myopia18 – the last no doubt aided by exaggerated market beliefs of what monetary policy can achieve following years of uninterrupted growth. Rather, it is important to my purpose this evening that both stories involve shifts in risk premia driven by changes in the supply and demand for financial assets. Shifts in risk premia, gross capital flows, and balance sheet strains That story would hardly have interested most macroeconomists a few years ago. Financial asset prices were regarded as providing useful information because they are forward-looking and available at high frequencies, but no more; they were not seen as actors.
As the conditions are now very good with regard to the immediate economic trends that I mentioned to begin with, and as the structural changes in the Swedish business sector towards new advanced fields of production are moving quickly, it would be a national misfortune if wage formation were to get out of hand due to the parties not being able to deal with imbalances in relative wages. Consequences for monetary policy? What conclusions can be drawn regarding monetary policy? My intention with today’s speech is not to make new statements about current monetary policy. The intention is instead to create understanding for the balances that have to be struck and the risks that must be avoided in order for monetary policy to make a contribution to the positive development of the Swedish economy. The role of the interest rate for demand of goods and services and inflation can be described as follows in a highly simplified way. A real rate of interest, which neither stimulates nor dampens demand, may be said to be neutral. Demand then increases at the rate of capacity growth and inflation is stable. When capacity in the economy is not fully made use of and unemployment is high, the interest rate may - on condition that inflation expectations are in line with the target - need to be below its neutral position in order to stimulate demand so that it increases more quickly than capacity utilisation.

•  Most notably, the country would import the ECB’s credibility, which could possibly lead to a lower inflation rate. •  Euroisation would also eliminate exchange rate risk. In turn, the country in question may benefit from lower interest rates. •  On the micro-economic side, euroisation would lead to lower transaction costs, and might provide a boost to trade and financial integration. These benefits can, however, not be taken for granted. Most of these benefits can indeed only be reaped if they are supported by sound economic policies. •  For instance, inflation may still be running high in case of pro-cyclical fiscal and wage policies. Accordingly, euroisation cannot be a substitute for stability-oriented policies. •  Again, this underlines the importance of having in place a stability-oriented macroeconomic framework, such as the one established at EU level. What are the possible costs and risks of euroisation? •  First of all, the country in question may face an inappropriate monetary policy stance in case of diverging business cycles. The loss of an independent monetary policy and the exchange rate instrument may make it more difficult for the country in question to respond to idiosyncratic shocks, or to correct a loss of competitiveness. •  The country in question could also run into logistical difficulties, since it would exclusively depend upon private arrangements with credit institutions for a number of key services, such as banknote handling and the execution of high-value payments.
Social costs include costs incurred by banks, infrastructure providers, and merchants in using the payment systems, such as IT costs, manpower, etc., but do not include fees paid to other parties in the payments landscape. e.g. merchant acquiring fees paid by merchants to banks would be netted off when considering the entire payment landscape as a whole. BIS central bankers’ speeches  7

In addition financial market participants as well as regulators are facing the global challenge of the new economy and technological revolution. The new technological revolution is pushing for change everywhere in the world, and with no concern for those in need of time to heal the wounds inflicted by crisis. It has become an inevitable development which needs to be embraced with the right attitude, mindset and understanding. The new economy in itself poses challenges, not exclusively to financial service providers, but to regulators, business operators and the financial industry as a whole. The challenge, on this last aspect, is particularly crucial to the government sector; for they need to make sure that the legal, regulatory and supervisory framework are there to create the right competitive environment and operating conditions. This is to ensure that when their own private operators are ready for the technological challenges of E-banking, internet-broking and the electronic trading platform, then the appropriate legal and regulatory framework is there, rather than becoming an obstacle to development - by which time we may no longer be able to catch up with major global players. In the world of E-commerce and trading, banks have become important intermediaries as the operator of the payments system, to facilitate the payment for the goods and services which are being traded on-line. As regulator of the commercial banking business, the Bank of Thailand is working in earnest to support the development of the country’s payment system, by both the public and private sectors.
And for banks, whose short-term debts are the money used by the real economy, the effect is compounded. Depositors want a stable liquid store of value for a rainy day. They don’t want equity. So they understandably take some persuading to swap their rainy day fund into bank equity. 6 Regardless of its cause, the evidence that higher capital requirements can push up bank funding costs can’t be ignored. The costs will be borne by real borrowers – in higher cost of funds, and real savers – in lower returns. In theory, monetary policy may be able to offset the overall effect of that on inflation. But it can’t alter the fact that the costs will be higher of matching lenders with borrowers, capital providers with capital seekers, and risk takers with risk hedgers. 4  Miles et al (2012) presents a central estimate that the reduction in the volatility of equity returns and riskiness of debt offsets about half the increase in funding costs that would, other things equal, result from switching debt to more expensive equity funding. 5  Elliott (2013) sets out areas of disagreement in the debate about the economic costs of higher bank capital requirements. 6  The low risk anomaly, whereby lower risk stocks generate no lower and in some cases even higher stock returns than higher risk stocks, is documented for banks by Baker and Wurgler (2013). The impact of depositor liquidity preference is discussed in Kashyap et al (2010).

Alex Brazier: A macroprudential approach to bank capital – serving the real economy in good times and bad Speech by Mr Alex Brazier, Executive Director for Financial Stability Strategy and Risk of the Bank of England, at the 27th Annual Institute of International Bankers conference, Washington DC, 7 March 2016. *  *  *  I am grateful to Rob Edwards, Jas Ellis and Calum Mitchell for their assistance in preparing these remarks. Your industry has known better starts to a year. Bank stocks down, volatility up, earnings disappointing. All ghosts of crises past. But one ghost has not returned to haunt us. Questions about returns haven’t translated as they’ve done before into questions about resilience. Investors may have real questions about whether some banks can generate adequate return on equity in a difficult global economic and trading environment. They may also be more alert to the risks in and appropriate returns to contingent capital instruments. But when UK bank price-to-book ratios were this low in 2009, senior unsecured debt spreads were over 350bps. At the height of the euro crisis in 2011, they were 300bps. Today, they are just 73bps (chart 1). Underlying that is the transformation of bank capital. In the UK, major banks now have core tier 1 equity ratios averaging nearly 13%. Before the financial crisis they had – on Basel III definitions – just 4.5% (chart 2). Those new levels of resilience are seen in the results of stress tests.
After Bretton Woods, Germany realised that price stability was possible with a stable nominal anchor – a monetary target – that would prevent excessive accommodation of the supply shock. The Bundesbank’s success made history. If others did not follow Germany’s example, it was probably because they were not willing to put the same emphasis on reducing inflation. Simply, policy priorities were not the same in all countries. I would therefore side with those who think that inflation moderation is largely thanks to a change in attitudes at central banks. A number of central banks, notably the US Fed, had already changed their reaction functions in the 80’s, placing greater emphasis on minimising inflation deviations from an implicit target. And then, into the '90s, we saw a trend towards governments granting independence to central banks. Many central banks immediately adopted explicit inflation targets, thus making a clear commitment to price stability. If inflation is now lower and more stable than before, it is because central banks have decided to become less tolerant of it, and have been allowed to do so. But these central bank changes were not a historical accident. Different countries’ experience in a tackling inflation has helped prove the theory that there is no such thing as a long-term inflationunemployment trade-off. We now accept that persistent inflation – even if it is low – involves a misallocation of resources with potentially heavy medium and long-term costs.

Miguel Fernández Ordóñez: Immigration and the inflation moderation debate Speech by Mr Miguel Fernández Ordóñez, Governor of the Bank of Spain, at the Symposium “The Phillips curve and the natural rate hypothesis”, Kiel Institute for the World Economy, Kiel, 3 June 2007. *  *  *  Introduction It is a pleasure to be here today at this Symposium in such distinguished company. The organisers have put together an impressive programme on a key topic for policymakers and central bankers in particular. As you know, the relationship between inflation and economic activity has always been at the heart of the macroeconomics discipline. And theoretical developments in this field have had a significant and direct influence on actual monetary policymaking. We are currently in a unique situation. For an unusually long period, in the context of high global growth, inflation has remained low and stable. Many commentators – and not only central bankers – would agree that better-managed monetary policy has had a lot to do with this favourable inflation performance. And there is a lively debate about which specific aspects of monetary policymaking have been responsible for it. Let’s look at three questions this debate has raised. First, do central bankers now have better knowledge of the economy and of monetary policy transmission and, consequently, are adopting more effective decisions? Second, have monetary policy regimes shifted towards making price stability a more prominent target?
We have recently asked ourselves why it is that LIFFE has retained its position in the three-month euromark contract and the ten-year Bund contract - Europe’s most active longer-term interest rate contract. And for those of you who like to go home with a reading list, there is an interesting article on the subject of what makes for successful futures contacts in our latest Quarterly Bulletin. (I am sure the restaurants and the bars of the West End will be empty tonight as you sit in your hotel rooms poring over it.) Frankfurt has recently started making inroads into LIFFE’s share of Bund futures business - but the level of activity on LIFFE nonetheless continues to increase. Our assessment is that, in these markets, there is a considerable and long-term advantage inherent in being the first mover. That helped LIFFE to achieve a very broad and international membership, with only 27 per cent of members being UK-based. It has meant that London has an established skill base and good support functions in law and accountancy. Also a good telecommunications system - though fewer of those old telephone boxes, which may be a problem for me at super-SIB. London also has a strong clearing function and we should not forget the advantage of the English language, which is increasingly the lingua franca of the European Union, and I believe that even some Americans can now speak a kind of pidgin version which allows them to be understood. But EMU will create change. This raises three interesting questions.

Even if in the very near-term the energy crisis may cause an increase in non-gas fossil fuel being used, the likelihood of a timely and orderly transition towards a low-carbon economy consistent with the EU's commitment to the Paris Agreement has increased. That being said, another record-breaking summer has confirmed that physical risks of climate change and environmental degradation are materialising ever more frequently, which will add to the risk of increased macroeconomic volatility until the transition has been completed. When the boat we all share is rocked to such an extent by external forces, we need to be able to count on internal anchors of stability. The ECB provides one of those crucial internal anchors by pursuing its mandate of maintaining price stability in the euro area as laid down in the Treaty on the Functioning of the European Union. In line with that mandate, our primary concern is, as always, our primary objective: price stability. Inflation is currently far too high. The shocks that are hitting the euro area economy have not only led to a turning point in the outlook for economic activity but are also contributing to further upward price pressures that are much stronger and more persistent than we previously anticipated. This implies that inflation is likely to stay above our 2% target for an extended period. As a result, we accelerated the pace of monetary policy normalisation over the summer to ensure that monetary policy is consistent with inflation returning to our target in the medium term.
14.12.2018  Economic policy: the challenge of future crises Speech by the Governor of the Banco de España at the Barcelona Círculo de Economía to mark ten years since the Lehman Brothers collapse Pablo Hernández de Cos Governor  I wish to start by thanking the Barcelona Círculo de Economía for their kind invitation to be here with you today, to close this cycle of lectures organised to mark the tenth anniversary of the collapse of Lehman Brothers. The economic and financial crisis was attributable to a broad and complex range of factors, but there is no doubt that this event remains engraved on the collective memory as a moment of particular significance, marking in a way the symbolic start of the crisis. The past decade has provided us with numerous lessons for the future, in particular in the area of economic policy management. Today, in order to identify outstanding tasks, I am going to devote my speech to a review of the changes that have occurred during these years, both at international and national level, which determine our ability to prevent the emergence of new crises or to mitigate their effects should they materialise. I shall start with the reforms at international level, in particular in the global financial architecture, and the risks arising from protectionism, the intensification of which may have significant negative effects on world growth in the medium term.

Also, as the IMF has recently indicated, it would be desirable to assess the suitability of bail-in strategies in the event of systemic crises, given their potentially adverse effects on the financial system as a whole, which may ultimately raise social losses and the cost to the taxpayer. In order to make further progress in reducing the risk of financial fragmentation within the euro area, it is necessary to boost private-sector risk-sharing channels, such as the credit and capital market channels, so that they work alongside the public-sector risk-sharing mechanisms. This requires, first, removing obstacles to the creation in the medium term of genuine pan-European retail banks. In particular, a single deposit insurance fund needs to be created, the euro area needs to be treated as a single jurisdiction for regulatory purposes and, above all, market pressure needs to reach broad segments of the European banking system, such as public-sector banks, cooperative banks and savings banks. Second, progress needs to be made on the various Capital Markets Union initiatives. The implementation of this project should lead to more efficient and integrated capital markets, enabling European businesses to diversify and broaden their sources of funding and to reduce their excessive dependence on bank finance. However, this is a complex objective that requires action on various fronts, including the development of market infrastructures, the review and harmonisation of market regulation and supervision and of insolvency procedures, and the elimination of the bias in favour of debt financing in some countries’ tax systems.
Alongside the current unusually high degree of labor market slack, we have a situation in which core inflation levels are low by historical standards. Continuing the comparison with the recession of 1981-82, it is worth noting that the core inflation rate today is almost 5 percentage points lower than it was toward the end of that episode. In addition, historical experience shows that the slack generated during a recession typically pushes core inflation lower in the early stages of recovery. So far, this cycle looks little different. As the degree of slack in the economy has climbed over the past year, measures of core inflation, particularly of core services inflation, have moderated. The tendency for service price movements to be persistent, coupled with the current unusually large amount of slack in the economy, suggests that the core inflation rate is more likely to fall than it is to rise over the next 12 to 18 months. BIS Review 122/2009  3  In summary, I believe the current balance of risks around the inflation outlook lie to the downside due to the very low level of resource utilization and the fact that long-run inflation expectations remain stable. This balance of risks is problematic because the current level of inflation is already so low – the core PCE (personal consumption expenditures) deflator has increased only 1.3 percent over the past 12 months. Thus, we would not need much of a decline in inflation to run the risk of an outright deflation.

This means that the economy has significant excess slack and implies that we face meaningful downside risks to inflation over the next year or two. Also, there are those who express anxiety about whether the Fed has the tools and the will to raise the federal funds rate when the time is appropriate. I want to assure you that the Fed has the tools to tighten monetary policy regardless the size of its balance sheet. Moreover, we have the will to do so in order to keep inflation in check. Turning first to the developments in financial markets, there is little doubt that we have seen a vast improvement over the past six months. The major equity indices have risen sharply, credit spreads have narrowed and bank equity prices have generally shown a substantial recovery. Many large financial and nonfinancial firms have found it relatively easy again to tap the debt and equity markets. The recovery in financial asset prices has been mirrored – albeit with a lag – in the economy. Industrial production has begun to rebound as the pace of inventory liquidation has slowed. Housing prices and activity have recovered somewhat – aided by the improvement in housing affordability and the first-time homebuyer tax credit. Fiscal stimulus is providing support to consumption and to state and local infrastructure spending. The vicious cycle we had a year ago – in which the deterioration in financial markets led to economic weakness and that weakness reinforced the tightening of financial conditions – has been broken.