samchain/econo-pairs-v1 huggingface dataset:
Although one must give the banks time to adjust, and allow the legislation process to run its course, one may nevertheless consider the phase-in period to be longer than necessary. A lot can happen in ten years or more. Over the past ten years, for instance, the financial market and the world economy have been subjected to a number of shocks: the bursting of the dotcom bubble, the subprime crisis and not least the debt crisis currently being experienced by some countries. There is nothing to say that we will not experience similar – and just as earth-shaking – events in the coming ten years. Postponing the implementation of the new regulations may be doing ourselves – and others – a disservice. But at the same time, I should mention that a number of countries have signalled that they will set tougher requirements than the minimum stated. Some countries are also talking about introducing the regulations sooner. One step in the right direction – more are needed! Now that the requirements regarding capital and liquidity are increasing, the allocation of risk between the bank’s owners and society as a whole is changed. The banks should themselves bear the consequences of high risk taking to a greater degree. One might therefore expect that the banks will actually take smaller risks in future. This, together with the strengthening of the banks’ resilience, reduces the risk of the banks experiencing problems. But it does not make them immune to trouble.

The relatively better growth prospects have meant that many investors have chosen to invest their capital in the United States, where the expected return is higher than in, for example, Europe. This has led to a capital flow that has strengthened the dollar, which has contributed to reducing net exports and thereby increasing the current account deficit. Expectations of increased income have also contributed to subduing saving by US households. Another explanation is that the deficit is a result of the domestic policy in the United States. The expansionary economic policy has contributed to reducing saving both among households and in the public sector, which has stimulated consumption and growth. A third explanation points out Asia’s structural saving surplus as the driving force behind the imbalances. Private saving is generally at a high level in Asia. This applies in particular to the emerging economies, but Japan also has substantial private saving. Following the financial crisis in Asia in 1997, there was a correction of the earlier investment bubble, and the investment ratio fell from very high levels. The exception is China, where both saving and investment have increased substantially. The increased saving has to a great extent been invested in US bonds, which has pushed down longterm interest rates in the United States an further stimulated US household consumption. Approximately two thirds of saving in the world is currently channelled to the United States.
It was also the insight that there exists a political temptation to use monetary policy in the short term, which risks creating unnecessary fluctuations in the economy. Despite this division, there is always a certain implicit interaction between fiscal and monetary policies. 14 When the policy rate is cut, central government interest payments are reduced, which tends to improve the fiscal balance. When the Riksbank purchases government bonds, this leads to reduced costs for new borrowing for longer maturities. And the opposite is also true: when fiscal policy becomes more expansionary, there is increased activity in the economy and, ultimately, inflationary pressures, which thereby influences monetary policy. However, the last two major crises, combined with the low level of interest rates, raise a few difficult questions. Firstly, if normal monetary policy is not enough, is it conceivable that fiscal policy could ‘help out’ more explicitly when necessary, not just with automatic stabilisers (which can be more significant than monetary policy)? In other words, more discretionary measures that require active decisions could be used. 15 Depending on the circumstances, such a ‘coordination’ between fiscal and monetary policy would, of course, be more or less complicated. In a severe economic downturn with very weak resource utilisation, it is natural for the automatic stabilisers to start by themselves and for the discretionary part of fiscal policy, which naturally strives for normal resource utilisation, to become expansionary. The question, however, is whether this takes place to a sufficient extent, given the fiscal policy framework.

This is, of course, partly due to the central banks conducting a monetary policy that has succeeded in bringing down the average level of inflation from the high levels of the 1980s, which has been good. But it is also due to a global development towards lower real interest rates (see Figure 3), something that most say has not had anything to do with monetary policy, but instead is explained by real economic factors. 6 Holston, Laubach and Williams (2017) have carried out empirical research into how the ‘equilibrium real interest rate’ has developed in some leading economies, and they find a clear downturn after the financial crisis 2008-2009. Three of the several attempts to explain why real interest rates are now much lower than before are particularly worth mentioning. The first explanation is based on fundamental economic theory, according to which the real interest rate, at least in a closed economy, will be in proportion to growth in the economy, and the latter has slowed down in recent years. The second concerns the ‘global savings glut’, that is that (primarily) the major economies in Asia and the Middle East have generated large trade surpluses and thereby increased demand for savings, which tended to push down interest rates as the supply of safe assets is limited. The third explanation highlights demographic developments. The idea is that an ageing population needs to save for its pension, which once again leads to an increased tendency to save, which in turn pushes down the real interest rate.
D’un point de vue technique, le passage à l’euro au cours du dernier week-end de 1998 a été une réussite Au cours du week-end de passage à l’euro , le SEBC a suivi le déroulement des opérations de conversion à la BCE, dans les banques centrales nationales participantes et dans les principaux établissements. Des échanges réguliers d’informations ont eu lieu par l’intermédiaire d’un réseau de points de communication entre la BCE et les BCN. Il n’a été signalé aucun incident susceptible d’entraver le démarrage sans heurt du système, qui a ainsi pu débuter normalement ses activités le 4 janvier, à l’ouverture des marchés. Ces résultats témoignent de la qualité des préparatifs auxquels se sont livrés la communauté des banques centrales et les opérateurs privés des marchés de capitaux, ces derniers mois et années. Pour ce qui concerne la communauté bancaire et financière française, la fin de l’année dernière a été consacrée à la planification et aux phases de tests en vue d’organiser le basculement des marchés financiers au cours du dernier week-end de 1998. C’est grâce à ces préparatifs que le processus de conversion a été un grand succès. 2. Ces préparatifs ont permis une introduction réussie de l’euro sur les marchés de capitaux Le 4 janvier, l’introduction de l’euro s’est effectuée avec succès.

En complément de ces données fondamentales saines, qui sont d’une importance décisive, nous devons préserver le processus de la coopération internationale et nous devons renforcer cette coopération . Elle s’est avérée utile au cours de ces quinze dernières années. En se fondant sur l’expérience et les enseignements de ces dernières années, on peut probablement encore améliorer cette coopération internationale, et le fait que trois devises de pays du G7 se soient actuellement fondues dans l’euro pourrait et devrait rendre plus facile et de plus en plus efficace cette coopération. Dans cette perspective, j’aimerais attirer votre attention sur quatre principes, qui sont essentiels pour l’efficacité de la coopération internationale. - Le premier principe dont nous ne devons pas nous écarter est le respect du fait que ce sont les données fondamentales qui commandent l’évolution des taux de change dans le moyen et le long termes ; - le deuxième principe est la nécessité de rechercher un consensus approprié entre les représentants du pouvoir exécutif et les autorités monétaires d’une part, entre les différents pays concernés d’autre part ; - le troisième principe est le respect de ce que j’appellerais la discipline verbale. Les marchés peuvent être troublés par des déclarations hétérogènes et contradictoires. Au contraire, ils sont impressionnés par la cohésion et par la cohérence de déclarations s’en tenant au plus près des “ termes de référence ” agréés d’un commun accord ; - le quatrième principe est la nécessaire préservation de la crédibilité des autorités dans toutes les circonstances.
For a 14-second period during the Flash Crash, algorithmic interactions caused 27,000 contracts of the S&P 500 E-mini futures contracts to change hands. Yet, in net terms, only 200 contracts were purchased. HFT algorithms were automatically offloading contracts in a frenetic, and in net terms fruitless, game of pass-the-parcel. The result was a magnification of the fat tail in stock prices due to fire-sale forced machine selling. 22 These algorithmic interactions, and the uncertainty they create, will magnify the effect on spreads of a market event. Pricing becomes near-impossible and with it the making of markets. During the Flash Crash, Accenture shares traded at 1 cent, and Sotheby’s at $ because these were the lowest and highest quotes admissible by HFT marketmakers consistent with fulfilling their obligations. Bid-ask spreads did not just widen, they ballooned. Liquidity entered a void. That trades were executed at these “stub quotes” demonstrated algorithms were running on autopilot with liquidity spent. Prices were not just information inefficient; they were dislocated to the point where they had no information content whatsoever. (b)  Behaviour of low frequency traders  If the story stopped here the ending would be an unhappy, but perhaps not critical, one. After all, the Flash Crash was done and dusted within an hour. But the framework developed suggests these effects need not, in general will not, be transient. To the contrary, these effects might actually magnify. To see why, consider now the behaviour of low frequency traders (LFT).

30 It is interesting to assess those proposals using the framework developed here. 29  European Commission (2010), CFTC-SEC (2011). 30  CFTC-SEC (2011). 12  BIS central bankers’ speeches  (i) Market-making guidelines: In principle, a commitment by market-makers to provide liquidity, whatever the state of the market, would go to the heart of potential price discontinuity problems. Market-making commitments would not forestall the arms race. But they would lessen the chances of liquidity droughts and associated fat tails and persistence in prices. They would, in effect, lower the impact of H. Perhaps for that reason, there have been proposals in both the US and Europe for such a set of market-making commitments. 31 The difficulty appears, first, in specifying these commitments in a precise enough fashion; and, relatedly and just as importantly, enforcing them. In a sense, even the market-makers offering their stub quotes on 6 May were fulfilling a market-making commitment, albeit a paper-thin one. If hard law commitments are too difficult to define or enforce, an alternative may be a set of soft law guidelines. A number of electronic broking platforms, notably in foreign exchange markets, have codes or rules of conduct – for example, around pricemaking and price-taking which control the extent to which any one firm can steal a technological march on others. If these codes were extended across trading platforms and assets, perhaps in time market-making behaviour might adapt. (ii) Circuit-breakers: Circuit-breakers already exist on US and Europe exchanges.
The idea is that greater credibility reduces borrowing costs and thus the need for cuts. The UK has basically followed up these recommendations by establishing the Office for Budget Responsibility (see http://www.hm-treasury.gov.uk/data_obr_index.htm). In the Eurosystem, there is now a tendency to give the  BIS central bankers’ speeches  7  area is a tightening of the Maastricht Treaty, precisely to prevent the simple rules from being broken. We should be less concerned about what is completely right and correct according to the prevailing truths, and more concerned about avoiding major mistakes, irrespective of what the truth might be.21 And this is the line of thinking behind our inflation target for monetary policy and the fiscal rule for oil revenue spending. We must be humble and constantly search for new knowledge. But as I have shown, there is a tendency for this humility to vary with the business cycle. Marc Flandreau and Mike Bordo tell me that during upturns, the colossal blunders of yesterday are forgotten by politicians, journalists and central bank governors, but not by economic historians. And right now, their profession is enjoying its golden age.22 Simple economic rules can perhaps prevent countries from getting into difficulties, but once the rules have been broken and the crisis is a fact, the solution is anything other than simple. Real problems must be solved by real measures. That takes time and is painful, as we are witnessing in Europe today.

13  Swings of the pendulum are a frequently used metaphor in studies of financial crises. See, for example, Michael D. Bordo (2003), “Market Discipline and Financial Crisis Policy: a Historical Perspective”, in Market Discipline in Banking: Theory and Evidence. Research in Financial Services: Private and Public Policy, Volume 15, 157–182, Edited by George G. Kaufman, Elsevier Publishers. According to Bordo, the pendulum swings between measures to prevent crises, manage crises and resolve crises. Erik F. Gerding (2006), “The Next Epidemic: Bubbles and the Growth and Decay of Securities Regulation”, Connecticut Law Review, shows how economic upswings are often periods of deregulation and overoptimism in securities markets, while the downturns that follow are marked by austerity and calls for stricter regulation. Moreover, regulations become less effective as time passes, and market participants forget the previous crisis. Gerding provides examples of such cyclical pendulum movements going as far back as the 1600s. BIS central bankers’ speeches  5  extremes. Keynesian policy is often appropriate in a contractionary period, but it also involves saving in times of growth – a component that had been widely forgotten.14 The economists Carmen Reinhart and Kenneth Rogoff have summarised the experience of financial crises all over the world over the past 800 years. They show that history repeats itself. The “truth” most often proclaimed in boom periods just before the bubble bursts is the belief that “this time is different”, which is also the ironic title of the book.
We are still dealing with the complications that this entails, as can be seen in our overblown and unbalanced IIP and the controls on capital outflows. Before the collapse, the banking system had expanded very rapidly, growing in just five years from a combined balance sheet of less than 2 times GDP (at the end of 2003) to almost 10 times GDP (in mid-2008). Most of this expansion was cross-border, and a significant part of it was really off-border, having very little to do with Iceland, as both financing and investment took place abroad. In the panic that gripped global financial markets after the collapse of Lehman Brothers, these banks were faced with a wholesale run on their foreign currency liabilities and were therefore heading towards a default on those liabilities in the absence of LOLR assistance in foreign currency. However, given the size of the balance sheets, it was impossible for the Icelandic authorities to provide such assistance on their own, and it could have been catastrophic for the credit of the sovereign if they had made a full-scale attempt to do so. The Icelandic authorities’ actions were based on the assumption that the banks were solvent, which in turn was based on published financial accounts and the analysis of the supervisor. On that premise, the authorities tried to build defences against potential foreign currency liquidity problems at the banks by negotiating swap lines and tapping foreign capital markets, in both cases with limited success.

The same applies to the FX income stream facing foreign investors, and then there are risks such as the possible introduction of capital controls, which will not count as defaults as long as debt is serviced on time in the domestic currency of the sovereign without discrimination between domestic and foreign investors. Although it is important to bear all this in mind, it is nothing new. Furthermore, it does not constitute a major problem for the functioning of capital markets as long as the default probabilities of sovereigns seen to be providing so-called risk-free assets are perceived to be so low at the relevant maturities that they can largely be ignored. The question we are faced with is whether this is still the case and what the future will bring in this regard, given that both the market and the rating agencies perceive an increase in sovereign risk. The jury is still out, but my current prediction is that, in the foreseeable future, the supply of risk-free assets according to this definition will be very significantly greater than zero. Advanced countries with grade-A ratings are and will be issuing a lot of debt in the near term, and the high price that the best-perceived sovereign debt is carrying is a reflection of strong demand rather than weak supply. In spite of everything we have gone through, there has been no sovereign default of any advanced country apart from Greece since the interwar period.
Krzysztof Rybiński: Globalisation and its implications for monetary policy Address by Mr Krzysztof Rybiński, Deputy President of the National Bank of Poland, at a series of seminars by the Centre for European Regional and Local Studies and the UNESCO Chair, Warsaw University, Warsaw, 6 April 2006. *  *  *  Ladies and Gentlemen, Globalisation is a term used frequently in the economic debate nowadays, and it would be difficult to find an area of economic research that is “globalisation-free”. However, its meaning is so broad, that when globalisation is referred to in a discussion, various people understand various things. For this very reason, a discussion on globalisation and the monetary policy should commence with an attempt to define the term. One of the definitions of globalisation is provided by the International Monetary Fund (IMF) 1 , where it is construed as “the growing interdependence (integration) of national economies, in particular as a result of the growing international trade and financial flows”. Moreover, an element of globalisation that is worth mentioning is the fast flow of information and knowledge, which is the driving force behind globalisation processes. One should keep in mind that globalisation is not a completely new phenomenon 2 . In view of the existence of political barriers to international trade, the flow of capital and goods was equally as possible one hundred years ago as it is today.

In the past, the major part of the chain of manufacturing and services used to be located in a given country, which meant that, from the monetary policy perspective, the domestic demand was of great importance, and in particular - the size of output in relation to its potential level i.e. the so-called output gap. The impact of the global economy, on the other hand, was observed mainly due to changes in the terms-of-trade i.e. the ratio of export to import prices, which in turn was affected by, among others, commodity prices and changes in external demand. Nowadays, inter alia as a result of globalisation of production and services, the role of the domestic output gap in explaining inflation has decreased significantly, as shown by the BIS research 6 . As in the case of the model applied by the NBP in forecasting inflation, the role of the output gap as a factor that determines inflation is much smaller than it used to be. In old books on macroeconomics inflation is treated largely as a local development, i.e. dependent in a great measure on domestic factors (such as the domestic output gap and inflation expectations). Today, inflation is becoming increasingly less local, and in turn, becomes more and more dependent on global factors, i.e. the relationship between global demand to global supply. Research that analysed the course of inflation in 22 OECD countries between 1960 and 2003 has shown that 70% of inflation volatility may be explained by a common factor 7 .
* = Assumes the 2016Q3 growth rate is achieved through the average contributions to growth made by consumption and non-consumption (“other”) expenditure components over 1955-2007. 2016Q1  2015Q2  2014Q3  2013Q4  2013Q1  2012Q2  2011Q3  2010Q4  2010Q1  2009Q2  2008Q3  2007Q4  0 2007Q1  2013Q1 2013Q2 2013Q3 2013Q4 2014Q1 2014Q2 2014Q3 2014Q4 2015Q1 2015Q2 2015Q3 2015Q4 2016Q1 2016Q2 2016Q3 1955-2007*  -0.5  Source: ONS and Bank calculations. Ultimately, the tension between consumer strength on the one hand and the more pessimistic expectations of markets on the other will be resolved. In the MPC’s November projections, this resolution is expected to occur as imported inflation begins to weigh on people’s real incomes, slowing consumption growth. This moderation in household spending reinforces the cumulative effects of a pick-up in uncertainty on investment. As a consequence, growth is expected to remain below past averages for the next few years. One corroborating sign of this potential deceleration is that the UK expansion is increasingly consumption-led (Chart 17). The saving rate has fallen towards historic lows (Chart 18), and borrowing has resumed. Evidence from the past quarter century across a range of countries suggests episodes of consumption-led growth tends to be both slower and less durable. xxxi  This is because consumption growth eventually  outpaces earnings growth, increasing debt and making demand more sensitive to changes in employment and income.

Under this initiative, four member economies of APEC - China, Thailand, Mexico and the Philippines - have volunteered to receive expert advice through visits from panels of experts. The objective of these visits is to assist the economies in question in identifying potential impediments in their markets and in removing these impediments through specific, achievable and monitored action plans tailored to the individual economy. The programmes under this initiative are making good progress, and, in addition to the panel visits, two policy dialogues have been held to promote understanding and experience-sharing. A second cluster of initiatives, under the ASEAN+3 forum, involves a variety of studies known as the Asian Bond Market Initiative (ABMI) on issues such as new securitised debt instruments, issuance of debt by international financial institutions, regional credit guarantees and enhancement facilities, and the establishment of local and regional credit rating and credit enhancement agencies. The third set of initiatives falls under EMEAP - the Executives’ Meeting of East Asia-Pacific Central Banks - and takes the form of bond funds aimed at channelling a small portion of the very large official reserves held by the Asian economies into the region. The first of these funds - Asian Bond Fund I (ABF1) - was launched in June 2003 and is now fully invested in US dollar-denominated bonds issued by sovereign and quasi-sovereign issuers in the EMEAP economies. The EMEAP Central Banks are currently working on ABF2, which will invest in local currency-denominated Asian bonds.