samchain/econo-pairs-v1 huggingface dataset:
In general terms, the CCyB would be activated and increased by authorities whenever aggregate credit growth was judged to be excessive and associated with a build-up of system-wide risk. The buffer can be reduced during a downturn to help ensure that banks maintain the flow of credit in the economy. Considering that this is a new macroprudential tool, the evidence of implementations is still limited. Notwithstanding that, the number of countries that have developed a policy framework is increasing and the number of jurisdictions that have set a positive buffer level increased significantly over recent years. Until now, around forty countries have been using the CCyB, with heterogeneous effects depending on their local conditions and vulnerabilities. Furthermore, during the Covid-19 crisis, many countries released their countercyclical capital buffers, marking the first time that the CCyB was used widely in a downturn. Among them we can mention France, Germany, Sweden, Switzerland and United Kingdom (BIS, October 2022). These countries lowered the CCyB either completely or partially. Recent reports from the Basel Committee are also focused on providing empirical evidence regarding buffer usability and cyclicality of the framework. So far, the evidence gathered suggests that although the countercyclical capital buffer may be less effective to contain the build- up phase of the credit cycle. However, it may help to strengthen  1/3  BIS - Central bankers' speeches  banks' solvency and mitigate the risk that banks' lending standards amplify an economic downturn as well as all the spillovers implied.

In this sense, it reduces the impact of risk materialization on the banking sector and, therefore, on financial stability, avoiding restricting essential services, such as the supply of credit, and protecting the overall economy. The Countercyclical Capital Requirement should be activated or increased before an episode of financial stress materializes, i.e., during periods in which it is assessed that vulnerabilities are incubating in the banking sector that generate systemic impact. This also prevents and mitigates abrupt reductions in credit in the future, thus mitigating the potential amplification of shocks to the rest of the economy. The activation of the Countercyclical Capital Requirement depends on an overall assessment of the outlook for financial stability and not on a specific indicator. All in all, it is a macroprudential instrument that must consider its impact on the financial system, recognizing differentiated spaces for other micro prudential actions and measures. The standardized background set defined by the Central Bank to decide the activation of the Countercyclical Capital Requirement is divided into four steps that feed into each other. First, the regulatory context which is a summary of new regulation or international standards that need to be taken into consideration in the setting of the CCyB. Second, an exhaustive analysis of the current stage of the credit and its drivers. Third, a heatmap reviewing multiple variables that includes indicators for vulnerabilities, risks, and financial and macroeconomic conditions.
Employment has been under-estimated in both cases, that is, the outcomes have on average been higher than in the forecasts. Productivity has also been under-estimated both one and two years ahead. Productivity has a bias of around one tenth one year ahead and just under seven tenths two years ahead. We have thus made a relatively large under-estimation of productivity growth two years ahead.8 With regard to the annual change in inflation measured as the CPIX, the forecasts have on average been almost three tenths lower than the outcomes one year ahead. However, the forecasts two years ahead have on average been two tenths higher than the outcomes, which can be regarded as a minor deviation. What conclusions can we draw from this? The bias is relatively small for most of the variables. There are no clear signs of any systematic errors in the forecasts, with the possible exception of productivity. The rate of increase in productivity has been systematically under-estimated during the period. However, it should be added that none of the variables has any statistically significant bias. Comparison with other forecasters The study has also compared the Riksbank’s forecasting errors with the National Institute of Economic Research (NIER) and Consensus Forecasts panel, a compilation of forecasts from a number of different forecasters. It is clear from the study that the Riksbank’s forecasts for GDP growth have been among the best compared with other participants in the Consensus panel (Figure 11).

The uncertainty bands are constructed so they are symmetrical around our main scenario and for GDP growth and the inflation rate the breadth of the bands is calculated with the aid of our earlier forecasting errors. This gives an incentive to make good forecasts, as large forecasting errors bear the penalty of broad uncertainty bands and the risk of reduced credibility in the forecasts. The uncertainty band for the repo rate cannot be calculated in the same way, as we have only begun to make our own forecasts for the repo rate this year. There are quite simply insufficient historical forecasts to use as a base. The uncertainty band for the repo rate has instead been constructed with the aid of forecasting errors among the so-called implied forward rates (Figure 14). The implied forward rates reflect market expectations of the repo rate. One problem with this method is that the implied forward rates have systematically over-estimated the future repo rate path for a number of years. However, the over-estimation has been removed from the forecasting errors, with reference to the fact that the forward rates also consist of a risk premium that should not be included when using them for forecasts. Different central banks have chosen different methods of illustrating the uncertainty in the forecasts and we regularly compare notes with one another. We are continuing to develop our forecasts The conclusion from this review is that the Riksbank’s forecasts on the whole are rather good, particularly one year ahead.
Therefore, we must make use of all the tools available to us to bring it back to 3%, without adding unnecessary costs, of course. I want to be particularly emphatic in saying it: there are no easy solutions to this problem. Bringing inflation back to levels that do not affect the population severely, especially the most vulnerable, necessarily involves restoring the macroeconomic balances and, in this case, what is required is a reduction in the level of activity and demand. Monetary policy will continue to contribute to this necessary adjustment in an efficient and orderly manner. The coordination of macroeconomic policies is essential for this purpose, and in this sense the contribution of fiscal policy has been paramount. With yesterday's monetary policy meeting decision to raise the MPR we have brought it to a level that is near the maximum considered in this Report's central scenario. It is very high, but it is in line with the levels that inflation has reached and with the challenges we face in solving the problem. During the last few months, not only has inflation been high, but its expectations two-years ahead continue to be above the 3% target. This misalignment is a cause for concern because, as the inflationary phenomenon becomes more persistent, it makes stabilizing the price level more difficult and costly. Hence the need to move forward resolutely in order to prevent this problem from intensifying because, as we well know, it imposes great costs on the population.

Jessica Chew Cheng Lian: The insurance broking sector – threshold of an exciting but challenging future? Keynote address by Ms Jessica Chew Cheng Lian, Assistant Governor of the Central Bank of Malaysia (Bank Negara Malaysia), at the 3rd Asia Insurance Brokers’ Summit, Kuala Lumpur, 3 March 2015. *  *  *  It is my great pleasure to be a part of this 3rd Asia Insurance Brokers’ Summit which is being held for the first time in Malaysia. I would also like to take this opportunity to congratulate MITBA as they celebrate 40 years in service of insurance and takaful brokers in Malaysia. In that time, the domestic insurance industry has seen significant change – beginning with an overhaul of the legal and regulatory framework when the industry was brought under the regulatory oversight of Bank Negara Malaysia, followed by a series of successive reforms that have served to strengthen the industry and promote its healthy development to first and foremost meet the needs of individuals and businesses. This continues to be a journey that the Bank and industry are committed to taking forward, mindful that as the Malaysian economy is progressively transformed, so too will demands of the industry evolve. Throughout this journey, associations like MITBA have played an important role in helping members adjust to the changing environment, by providing a platform to examine issues, make representations, communicate with stakeholders, and implement collective responses.
In such cases, we could not avoid reacting by surprising markets rather than being behind the curve. This is what a sound risk-management approach calls for: weighting seriously the long-term risks to price stability in the case of persistently higher inflation. xi We rightly had to give priority to risk management on inflation, over expectations management on interest rates. It is paramount, nevertheless, that financial markets and economic actors understand our reaction function in order to avoid unwarranted volatility: if inflation—and especially core inflation—is higher than what we expected, we are likely to raise rates more quickly, although never following a mechanical rule. And we should preserve some short-term signaling—or guidance—in our new “meeting-by- meeting” approach: this is somewhat new territory for us, where as much as possible (i) guidance if any should come from explicit statements from the top rather than from unsourced leaks, (ii) multiple and somewhat disorderly expressions of personal wishes should be more restrained, and the silent period should obviously be respected. II.D. R* remains useful to delineate normalization and tightening To be sure, R* is unobservable and its estimation remains surrounded by uncertainty. But I believe it remains a helpful concept in the current normalization. Page 7 sur 8 According to me, for the euro area, until we are around R*, the neutral rate— which possibly lies between 1 and 2% in nominal terms—the road ahead is clear and we can go in a sustained and determined way, including through some guidance.

Against this background, the Riksbank has contacted the CPI Enquiry, set up by the Government, to obtain assistance in specifying an indicator of underlying inflation that is likely to be widely accepted and can be published regularly by Statistics Sweden. In the future, such an indicator might be able to have a more direct function in monetary policy, either by replacing the CPI as the target variable or by serving as an operational target or aid in the continuous work of constructing policy. The Riksbank has also asked Statistics Sweden to publish, for the time being, one or more indicators of underlying inflation together with the CPI. Perhaps I should emphasise that in no way do these initiatives alter monetary policy’s fundamental commitment to price stability. The current situation for monetary policy The question of transitory effects leads me on to current monetary policy. Transitory effects are playing a major part in the CPI’s present development. As a result of tax changes, lower interest rates and a lower oil price, since December the Riksbank has had to revise the 1998 CPI prediction downwards by about 1.2 percentage points. In 1999, too, transitory effects mean that CPI inflation will be lower than we envisaged earlier. Thus far, however, the altered picture of inflation need not have any sizeable consequences for monetary policy. It is now too late to influence this year’s path for inflation more than marginally.
And the Federal Reserve has begun to reduce its sizable holdings of securities, built up through large-scale asset purchase programs (LSAPs) over the past decade. My comments today will focus on the role that asset purchases may play in a central bank’s toolkit for implementing monetary policy. I will briefly review how the Federal Reserve successfully adapted its operating framework to be able to achieve interest rate control with a large balance sheet and began its gradual and predictable balance sheet normalization program. Then, in thinking about the prospective use of asset purchases in providing additional monetary policy accommodation at the zero lower bound in the future, I will reflect on some lessons from the Fed’s experience. Among other lessons, we have learned that asset purchases have clear benefits at the zero lower bound, perhaps with more limited costs than initially raised; that we had greater-than-expected capacity to conduct large purchases without harming market functioning; and that credible communications about use of the balance sheet and expectations for short-term interest rates support adjustments in market pricing and smooth monetary policy transmission. As always, the views presented here are my own and do not necessarily reflect those of the Federal Reserve Bank of New York or the Federal Reserve System. The Federal Reserve’s asset purchases and operating regime The severity of the global financial crisis that began in 2007 challenged central banks to use both conventional and unconventional measures to address the economic effects of the crisis and the sluggish recovery that followed.

The effective federal funds rate (EFFR) has been within the FOMC’s prevailing target range on all but one day, and changes in the federal funds rate continue to transmit in a predictable and effective way to other money market rates.7  Balance sheet normalization commences… With normalization of the level of the federal funds rate well underway and interest rate control effectively established, the FOMC has now begun the process of normalizing the Fed’s balance sheet, using a program described this past June in an addendum to its Policy Normalization Principles and Plans.8 Specifically, as of last month, the FOMC is gradually reducing the Fed’s securities holdings by decreasing its reinvestment of principal payments received from those securities, with payments being reinvested only to the extent that they exceed gradually rising caps.9 This process for reducing the balance sheet will run in the background, while changes in the target range for the federal funds rate are the FOMC’s primary means of adjusting the stance of monetary policy.
The Committee expects to cease or commence phasing out reinvestments after it begins increasing the target range for the fed funds rate; the timing will depend on how economic and financial conditions and the economic outlook evolve. The Committee currently does not anticipate selling agency mortgage-backed securities as part of the normalization process, although limited sales might be warranted in the longer run to reduce or eliminate residual holdings. In the longer run, the Committee intends to hold no more securities than it will need to implement monetary policy efficiently and effectively, and that the SOMA will consist primarily of Treasury securities. Given the $ trillion in large-scale asset purchases (LSAPs) conducted since September 2012, the level of reserve balances in the system will be significantly higher during normalization than was envisioned when the 2011 principles were adopted. In light of this, as I just outlined, the FOMC has judged it appropriate to operate with a framework for interest rate control that is based primarily on administered rates rather than reserve draining tools. Given the unprecedented nature of this framework, the Committee has made clear that it is prepared to adjust the details of its approach in light of economic and financial developments. The FOMC has consistently adapted its policies as needed in recent years and will no doubt continue to do so as necessary throughout the normalization process in order to foster conditions consistent with its dual mandate.

The FR 2420 data is used to support the implementation of monetary policy and the analysis of money market conditions. 5  The Board of Governors of the Federal Reserve System is responsible for setting the rate of interest on reserves. Since December 16, 2008, the interest rates on required reserve balances and excess reserve balances have both been ¼ percent, but the rates need not be the same. More information can be found in Regulation D. See http://federalreserve.gov/bankinforeg/reglisting.htm#D. BIS central bankers’ speeches  3  transaction I just described is not riskless. As a result, many lenders limit their risk exposure to any individual bank, reducing the force of competition in the market for funds. 6 In addition, while banks do not need economic capital to conduct this arbitrage, they do face regulatory balance sheet costs from expanding their assets, even in the form of excess reserves, that is, cash. Some of these costs are direct, such as the FDIC fees paid by domestic banks on their liabilities less capital and transactions costs in brokered markets, while others relate to the costs associated with regulatory requirements on capital and liquidity ratios. Even if the market for funds were perfectly competitive, these costs should drive a wedge between IOER and other money market rates. As a result, the IOER rate does not directly establish a firm floor under money market rates, but instead can be thought of as a magnet, with the strength of its pull determined by these balance sheet and competitive frictions.
That put excess upward pressure 4 BCBS report on “Early lessons from the Covid-19 pandemic on the Basel reforms”. 5 FSB report on “Lessons learnt from the Covid-19 pandemic from a financial stability perspective: Interim report”. 6 See statements made by the PRA, FPC, European Central Bank (ECB) and BCBS early on during the Covid-19 pandemic. 7 See October 2020 speech by Randal Quarles: “Lessons from Covid-19 stress on the financial system”. 4  All speeches are available online at www.bankofengland.co.uk/news/speeches and @BoE_PressOffice  4  on requirements. And firms’ liquidity positions were initially worsening, including as they fulfilled debt buyback requests whilst supporting an increase in credit facility drawdowns. We were worried that the combined effect of these concerns would mean that banks either did not have enough resources to support the economy through the Covid period and the recovery from it; and/or that, even if banks did have enough resources, they would nevertheless act in a procyclical way by hoarding liquidity and restricting lending for precautionary reasons, amplifying the standard cyclical effects of the shock. This underpins the prudential actions I noted earlier. Recap on buffers As indicated earlier, an important feature here is the presence of various regulatory buffers in the framework that the Basel Committee introduced after the financial crisis. These are intended to absorb the effects of stress and ensure that banks can continue to lend to support households and businesses: it is our expectation that they will be used as necessary to support the economy.

The crisis also left some lessons for the profession and the way we use our highly stylized models in policy-making. The narrow view is to think they are a precise description of how the world works, when in truth it is much more complicated. However, the other extreme view – and a very bad one for policy-making – is disregarding all that we have learned from academic work. We need to be humble about the extent of our knowledge, but we also have to be rigorous and serious about policies. 6  BIS central bankers’ speeches  References Acharya V. and H. Naqvi (2010), “The Seeds of a Crisis: A Theory on Ban Liquidity and RiskTaking over the Business Cycle,” mimeo, NYU. Bernanke, B. (2011), “The Effects of the Great Recession on Central Bank Doctrine and Practice,” speech at the Federal Reserve of Boston 56th Economic Conference. Bernanke, B. and M. Woodford (1997), “Inflation Forecast and Monetary Policy,” Journal of Money, Credit, and Banking, Vol. 29, No. 4, part 2, pp. 653–684. Davies, H. and D. Green (2010), Banking on the Future. The Fall and Rise of Central Banking, Princeton University Press. De Gregorio, J. (2007), “Defining Inflation Targets, the Policy Horizon and the OutputInflation Tradeoff,” Working Paper N° 415, Central Bank of Chile. De Gregorio, J. (2008), “La Gran Moderación y el Riesgo Inflacionario: Una Mirada desde las Economías Emergentes,” Estudios Públicos, N° 110, pp. 5–20, otoño. Galí, J. and L. Gambetti (2009), “On the Sources of the Great Moderation,” American Economic Journal: Macroeconomics, Vol.
The first is that Hungary has managed major breakthroughs in the recent past which were just as difficult as these future challenges: over the past five years, real privatisation accompanied by a fundamental shift in the structure of industry and services; and, more recently, the handling of a macroeconomic crisis situation. The second is that most of these challenges are akin to those encountered by modern Western societies. For these challenges Hungary is in good company. THE MONETARY POLICY ENVIRONMENT Two recent changes have occurred regarding the institutional environment in which the National Bank of Hungary is operating. I welcome both of them. 1. The possibility of the direct financing of the budget deficit by the NBH has been eliminated. This is in conformity with the provisions of the Maastricht Treaty, and is a measure which has already been implemented by all fifteen member countries of the European Union and which the EMI closely monitors. To remind you, this provision of the Treaty applies to the member countries at this stage, prior to effectively entering EMU. It would seem to me impossible for Hungary to join the European Union without this change in the law governing the operations of the NBH, even if Hungary’s participation in the euro area were to come at a later stage. But this is only an institutional or political argument. There is more to it. Maastricht or no Maastricht, eliminating the direct monetary financing of budget deficits is simply economic common sense.

Some of this deficit was covered by direct foreign investment, but the greater part of it was financed by borrowing, as a result of which by the end of 1994 the net external debt had reached 46% of GDP and the exceptionally high level of more than 160% of exports of goods and services and unrequited transfers. 2. I have not yet seen the full 1996 figures, but estimates based on the first eleven months suggest a current account deficit of around (or even less than) $ billion. This looks much more reasonable, not only because it was more than covered by foreign direct investment but also because of what lies behind this improvement. The $ billion drop in the current BIS Review 16/1997  -2-  account deficit between 1994 and 1996 was made possible (a) by a 35% increase in exports, accompanied by a modest increase in imports of about 14%, and (b) by the steady and rapid increase in services income, mainly (but not exclusively) derived from tourism. 3. Since there was also a sizable inflow of foreign direct investment in 1995 and 1996, the country’s net external debt dropped from $ billion at end-1994 to about $ billion at end-1996. Net external debt declined to 31.2 expressed as a percentage of GDP, and to 71.6 as a percentage of exports of goods, services and unrequited transfers.