samchain/econo-pairs-v1 huggingface dataset:
It has a distribution of returns which is highly sensitive to small changes in the correlations of underlying returns which we do not understand with any great precision. The risk of the entire return being wiped out can be much greater than on simpler instruments. Higher returns come at the expense of higher risk. Whether in banking, reinsurance or portfolio management, risk assessment is a matter of judgement as much as quantitative analysis. Ever more complex instruments are designed almost every day. Some of the important risks that could affect all instruments – from terrorist attacks, invasion of computer systems, or even the consequences of a flu pandemic – are almost impossible to quantify, and past experience offers little guide. Be cautious about how much you borrow is not a bad maxim for each and every one of us here tonight. Ignore the unsolicited emails that rain down on us offering unwanted credit. I received one last week that began, “We have the solution, Mervyn, for your bankruptcy”. The development of complex financial instruments and the spate of loan arrangements without traditional covenants suggest another maxim: be cautious about how much you lend, especially when you know rather little about the activities of the borrower. It may say champagne – AAA – on the label of an increasing number of structured credit instruments. But by the time investors get to what’s left in the bottle, it could taste rather flat.

It is clear that in order for the young population to be an advantage for us, a very well designed and planned education strategy is a must. Indeed, the education level of the overall population in Turkey is getting better and Turkey is catching up with several of the new EU members. In the 25-34 age group, 11 percent of population has high level of education, which corresponds to the same level with Slovakia and nearly the same level with the Czech Republic.21 Hence, as the older generation leaves the market for the younger generation and the educational reforms are put into practice during the accession process, the education level of the Turkish labour force will increase and both the EU and the Turkish economy will benefit from it. Ladies and Gentlemen, Having touched briefly on the advantages of the EU from Turkey s membership, what I d like to talk about next is the other side of the coin; that is the advantages of Turkey from the accession process and the ultimate membership. As I mentioned in the early part of my speech, the performance of the Turkish economy for the last four years clearly indicates that Turkey successfully continues the process of economic restructuring. However, in our view, all the achievements so far now belong to the past. Nowadays, we have to start viewing developments with a longer-term and broader perspective in the context of the adjustment process for the EU membership.
So, what does “substantial improvement in the outlook for the labor market” mean to me? A key point is that I will focus on the labor market outlook, not just its current state. Therefore, I will be looking at the growth momentum within the overall economy and a range of labor indicators, including the unemployment rate, payrolls, the participation rate, the employment to population ratio and job finding rates. Following the framework we set out in September, I will be assessing the employment and inflation outlook in order to determine whether we should continue Treasury purchases into 2013. We will continue to do our part to push the economy towards maximum sustainable employment in the context of price stability. Yet, it is important to recognize that our tools are not all-powerful – monetary policy is not a panacea for all that ails our economy. In particular, Congress and the administration must address the “fiscal cliff” in a manner that creates a credible framework for long- term fiscal sustainability. It is widely acknowledged that the large fiscal contraction associated with going “off the cliff” would drive the U.S. economy into recession. The contractionary impact is likely to be larger than normal when monetary policy is operating at the zero lower bound for interest rates, as is the case today. Thus, fiscal consolidation must be accomplished in a way that avoids derailing the economic recovery.

Indeed, economic studies of disasters in the U.S. and other advanced economies find that the longer-term effects on national economies have typically been negligible. Given the resilience of the U.S. economy, I expect the long-run effects of Sandy to be similarly small. Even before the storm, though, the pace of U.S. economic growth was disappointing – averaging only slightly above a 2 percent annualized growth since the recovery began in mid-2009. As a consequence, the national unemployment rate remains unacceptably high, and its decline during the recovery has been grudging. In addition, too many people are discouraged from looking for work. This has depressed the participation rate and held down the official unemployment rate. Moreover, 5 million workers have been unemployed for six months or more. While job growth has picked up some recently, its pace has been insufficient to materially change the labor market picture. In terms of activity, there are a few bright spots. For example, the growth rate of consumer spending was a bit firmer in the third quarter. Another area showing improvement is the housing market. Housing starts and sales of new and existing single-family homes are trending up gradually. Nationally, home prices have finally begun to rise. However, on a more negative note, business fixed investment spending fell some in the third quarter and new orders for nondefense capital goods suggest continued softness. Overall, manufacturing activity remains weak. This manufacturing slump stems from slower growth abroad and uncertainties about how the fiscal cliff in Washington will be resolved.
An overview to the experience of several economies suggests that the culprit of the current crisis was related more closely with the functioning of financial systems than with monetary policy. One issue that will have to be carefully examined in the future is the cause of the real estate boom and the housing crisis, and why it occurred in the United States. At this point it is clear that lending standards were excessively lowered. Ellis (2008) shows that in the U.S., households had strong motivation to increase their leverage through tax, legal and regulatory incentives. One key element of financial innovation was the creation of structured instruments. With them, banks could reduce their individual risk levels and expand their operations into formerly unexplored market segments. Recent evidence proves that the risk of these instruments was wrongly evaluated by rating agencies and by credit originators. Credit structuring also debilitated the central role of banks in the selection of their clients. 2 Securitization did not maintain the incentives for banks to properly screen their customers or for them to meet payments. The compensation structure was based on the number of operations rather than on their quality.

Another reason that has been put forward to not try to affect asset prices through monetary policy is simply that it is impossible to determine when prices are significantly misaligned with their fundamentals. Cecchetti et al. (2000) point out that asset price misalignment with their equilibrium level is what must be incorporated in the monetary policy rule. However, it is difficult to know with precision the precise level, so it may be impossible to manage the degree of uncertainty. Still, I believe it is possible to know when asset prices are fundamentally misaligned in specific episodes. This takes me to the role played by the exchange rate in monetary policy, something as important as or more important than asset prices in emerging economies. An inflation-targeting regime, where the policy instrument is the interest rate, must operate within a context of a flexible exchange rate. This solves efficiently and unambiguously the well-known impossible trinity problem and allows the control of interest rates at a level consistent with the inflationary objective. Adding an exchange rate objective weakens the capacity to manage the interest rate and affects the ability to meet the inflation target. This is no hindrance for the exchange rate to generally have a significant effect on monetary policy decisions, if persistent movements of this variable do affect inflation. In this case, the natural result is a leaning against the wind behavior.
They argue that successful decision-making under such uncertainty relies on collaborative processes, judgement, close attention to reliable data, and the use of narrative, rather than an overreliance on economic models. 1  Bank of England  Page 3  I want to frame my observations by going back twelve months. At that point the economy was recovering from the worst of the Covid pandemic and CPI inflation had started to rise. Market expectations showed a 50:50 chance that Bank rate would be increased from 0.1% to 0.25% at the upcoming December 2021 MPC meeting. Source: Bloomberg L.P., Tradeweb and Bank calculations Notes: Realised volatility is a 5-day moving average of the difference between the highest and lowest 2-year nominal UK government bond yield within a day. The MPC had recently published its November 2021 MPR, summarised in Table 1. The MPC forecast that GDP would continue to grow, though at a slowing rate, at 2.9% in the year to 2022Q4. CPI inflation would rise in the short term reaching a peak of 4.3% in 2021Q4, before falling back to 3.4% by 2022Q4 and be close to the 2 per cent target by  Bank of England  Page 4  2023Q4. Other forecasters were predicting a similar outlook for activity, although their average CPI inflation forecast for 2022Q4 was somewhat lower at 2.7%2 . In its November 2021 MPR, the MPC stressed that there was a high level of uncertainty around the outlook, including for energy prices.

In the UK, we have seen some signs, from the Bank’s Market Participants survey10 and the Decision Maker Panel survey of businesses, of expectations becoming more skewed to the right over 2022 relative to previous years, with a larger share of respondents expecting higher inflation in the medium term. There is a range of views among members of the MPC as to whether developments in inflation expectations and the potential for them to become de-anchored add to the other risks around the inflation outlook11. My concerns about the emergence and embedding of an inflationary mentality has been one of the factors contributing to my minority votes for a faster pace of tightening, first in February and again in September this year. 9  See The Burst of High Inflation 2021-22: How and Why Did we Get Here, Reis June 2022 and Losing the Inflation Anchor, Reis Oct 2021 10 See Market Participants Survey results – November 2022 | Bank of England 11 Inflation expectations, inflation persistence, and monetary policy strategy – speech by Catherine L. Mann | Bank of England  Bank of England  Page 10  Market reactions to UK monetary and fiscal policy  Global financial markets have been increasingly volatile over the last year, in particular as markets have responded to increased evidence of persistence in inflation and central banks’ policy actions and communications in reacting to it.
The MPC regularly monitors more than 1,500 data series, of which around 1,000 are for the UK. The point of doing this is that often there are puzzles and questions about the behaviour of the economy to which no single piece of data can provide a complete answer. But we may build up a convincing picture by piecing together a range of indicators. The housing market provides a classic example of this approach. There is an enormous array of indicators of housing market activity - data on mortgage approvals and lending, house price indices from the main lenders (the Halifax and the Nationwide), the Office of the Deputy Prime Minister and the Land Registry, and various surveys of estate agents and house builders. One approach would be to pick out a single indicator, and monitor that. But experience shows that none of these indicators individually has consistently given a plausible indication of developments in the housing market; the indicators provide a better guide when taken together. So we monitor a full set of housing market indicators, and we have found that the clearest signals come when all of the indicators are pointing in the same direction. In economic assessment, there is safety in numbers. Awareness of data quality But looking at a large array of indicators can be bewildering without some way of narrowing the focus. So the second element of our approach is to recognise explicitly that data vary widely in their quality, and hence in their usefulness for policy assessment.

Andrew G Haldane: The Commercial Property Forum twenty years on Remarks by Mr Andrew G Haldane, Executive Director, Financial Stability, Bank of England, at the Bank of England, London, 18 December 2013. *  *  *  I would like to thank Oliver Burrows, Iain de Weymarn, David Gregory, David Learmonth, Varun Paul, Rhys Phillips, Laura Piscitelli, Martin Taylor and Jack Worlidge for their help and comments. Tonight marks an important birthday. We are here to celebrate the 20th anniversary of the Bank’s Commercial Property Forum. I am delighted to welcome members, past and present, back to the Bank. The Forum met for the first time on 28th July 1993. It was hosted by my predecessor Pen Kent. Its aim, to use Pen’s words at the time, was “to bring all sides of industry together” – developers, investors, lenders, occupiers, surveyors, auctioneers, researchers and regulators – to discuss developments in the commercial property sector. Since then, the Forum has met around 80 times. It has done so under three external chairmen – Clive Lewis, Chris Bartram and Ian Marcus – and I am particularly grateful to them for their efforts over the past 20 years. The Forum has drawn on around 300 experts from across various sectors. By my reckoning, they have drunk over 1500 cups of tea or coffee and eaten over 2000 biscuits. I cannot think of a Bank committee whose caffeine and calorific intake could surpass the Forum’s.
In any event, the question of whether and when government support is to be provided should be unclear, and the conditions triggering support should be very strict. 6. Norges Bank’s liquidity support  Ultimately, it is only the central bank that can secure the liquidity in the financial system, which is why it is called the lender of last resort. The classic example of a liquidity crisis is a situation where there is a rupture of confidence in the banking system. Depositors panic and shift funds to more liquid assets, primarily cash. The conventional formulation of the role of lender of last resort is that the central bank shall supply ample liquidity during the crisis - at a penalty rate - to illiquid but solvent institutions. In the Norges Bank Act this role is anchored in our responsibility for effective payment systems and our duty to exercise the traditional functions of a central bank. 5  BIS Review 124/1999  This raises three questions: •  What instruments are available to Norges Bank? •  How does one determine whether an illiquid institution is solvent or not? •  When is financial stability in jeopardy? These questions are highly interdependent. Norges Bank can use several instruments in the event of a liquidity crisis. If a crisis affects the whole financial system, we can change interest rates and supply large volumes of liquidity to the banking system.

Interest rates have subsequently declined. The financial position of households is solid, and as a group they will be able to bear higher interest rates. If households reduce saving because house prices rise, their vulnerability may increase. Some indicators show that house prices are in real terms at the peak level recorded in the 1980s. Bank losses have been unusually low for several years. We expect losses to return to a normal level in the period ahead as a result of weaker cyclical trends. We have also seen an expansion in credit to “weak” enterprises. So far, we have not noted an increase in losses or non-performing loans. Nor have the banks increased loss provisions. The increase in long-term debt in high-risk enterprises would indicate, however, that loss provisions should be increased in the near future. Over the last few years, banks have accumulated substantial short-term external debt. Although this debt has gradually been converted into more long-term debt, there is a liquidity risk associated with the debt. When banks encountered problems with refinancing their foreign debt during the banking crisis, Norges Bank intervened with support. As Norges Bank has done on previous occasions, I would warn the banks against assuming that this will again be the case if similar problems should recur. There is some fear in financial markets that a liquidity shortage may occur around the year 2000 in connection with the Y2K problem. This is reflected in money market rates.
But I judged that removing some of the monetary stimulus was warranted. I would like to tell you that this judgement was driven by “nice” reasons. That I was confident that the recovery would continue apace. That the very low level of Bank rate reached at the depth of the recession was no longer needed. That we were in a position in which monetary policy could begin a gradual process of normalisation. But I’m afraid these nice reasons were not the factors driving my decision. In particular, I’m not at all confident about the strength of the recovery. My central view – similar to that in the February Inflation Report – is that growth is likely to be close to its average historical rate over the next few years. But that is a pretty disappointing outlook given the depth of the  Mumtaz (2007)) while others have argued this was due to better monetary policy (Batini and Nelson (2005), Nelson and Nikolov (2004)). BIS central bankers’ speeches  7  recession from which we are recovering. And there is considerable scope for growth to surprise to the downside, particularly if households retrench further. Rather, my vote to raise rates was driven by a concern that – despite a relatively weak outlook for growth – the risks to the inflation target in the medium-term were to the upside.

3  The relevant clause of the remit states “The framework is based on the recognition that the actual inflation rate will on occasions depart from its target as a result of shocks and disturbances. Attempts to keep inflation at the inflation target in these circumstances may cause undesirable volatility in output.” See http://www.hmtreasury.gov.uk/d/open_letter_from_chx_to_boe_22032011.pdf  2  BIS central bankers’ speeches  MPC’s initial judgement was that over the next few years less than half of the increase in import prices would feed into higher UK consumer prices, with the remainder being absorbed in margins or lower nominal wages. This judgement was based in part on a number of influential studies made in the years prior to sterling’s depreciation which suggested that the degree of exchange rate pass-through in many countries, including the UK, had fallen significantly during the period of Great Moderation. Indeed, a general view had emerged amongst many academics and commentators that pass-through in many major economies had fallen close to zero.4 The MPC’s initial judgement that around 40% or so of the increase in import prices would pass through into consumer prices was at the top end of this emerging view. However, that judgement now looks woefully optimistic compared to the degree of pass-through we think has occurred, which is closer to 100%.5 This error of judgement can more than account for the surprising strength of inflation through 2009 (Chart 2).
This requires a combination of financial support but with sufficient likelihood of success/ability to repay/for positive return. The low returns to some students’ experience with higher education, evidenced by high dropout and default rates, point to significant heterogeneity in outcomes for college students. An individual making the joint decision of whether to enter college and which college to enter faces a high degree of uncertainty regarding the future outcome of the educational experience. Tuition subsidies funded by state taxes and Pell grants funded by federal taxes work to distribute this risk over a wide pool of people. However, individuals with good college outcomes enjoy the private benefits that accrue to their higher-earning power. As a result, it is likely that the best type of financing arrangement would require at least some tuition payments from students. To overcome the liquidity constraint faced by families whose members are entering college, it makes sense to have a loan program. Importantly, the financial system, whether private or public, should direct scarce resources to highly-valued investments. Given the wide heterogeneity of educational outcomes by type of student and type of institution, any loan program should take careful account of the expected quality of the match between the prospective student and the educational institution. This is a type of underwriting that could be employed much more extensively in the federal student loan program, to the benefit of both borrower and lender.

Although economic developments are favourable, inflationary pressures remain low. Moreover, the Swiss franc remains highly valued and the situation on the foreign exchange market is still fragile. Against this backdrop, the contours of a ‘new normal’ are emerging for central banks. While there are still many significant unknowns in the political, geopolitical and economic arenas, one thing is certain: the environment in which the central banks operate has evolved considerably, mainly due to structural changes. Some of these changes had already begun well before the crisis, but they have accelerated in the intervening period. I am thinking here of the digitalisation of the economy, for example, as well as the emergence of new technologies on the financial markets. In this speech, I would like to outline how the SNB has had to adapt – and continues to adapt – to make sure it is always in a position to fulfil its mandate.