samchain/econo-pairs-v1 huggingface dataset:
A model will never be able to provide an exhaustive description of reality, but a good macro model can and should be a framework for ratiocination. In this way, the model plays an important role in the analytical basis for interest rate setting. At the same time, there are many questions and conditions about which we are uncertain and where models cannot help us. For example, we do not know whether the high rate of growth in productivity is a permanent phenomenon or whether it will gradually fall back. We have little precise knowledge about what is driving productivity growth. It may be that we are seeing a period of equilibrium with higher employment, lower unemployment and lower wage shares than earlier. But we are uncertain how long this period will last. Even if we use different models and anecdotal information, we cannot escape the need for a healthy portion of qualified judgement when making forecasts and setting the interest rate. My experience from as far back as the 1970s is that in the event of major disturbances and structural changes in the economy, one essentially has to rely on general insights about the functioning of the economy. Models that rely heavily on regressions easily break down.

This symmetry means that both negative and positive deviations from the target are equally undesirable. The ECB too points out that the marked decline in the equilibrium real interest rate has meant that the effective lower bound for nominal interest rates is likely to limit monetary policy more often. It also emphasises that one consequence of this is that strong or sustained monetary policy measures are needed when the interest rate is close to the lower bound to avoid negative deviations from the inflation target becoming permanent. It also notes that the new strategy may mean that inflation periodically will be above the target, but, unlike the Federal Reserve, it has chosen not to introduce an average target.7  Mutual dependence We have thus seen that a prerequisite for fiscal policy and monetary policy to be effective is that they have a stable long-term foundation. For fiscal policy, there must be confidence that public debt is stable over the long term and, for monetary policy, there must be confidence that the central bank can keep inflation low and stable. In order for monetary policy to be able to use the policy rate to counteract economic downturns and increased unemployment, it is also necessary for average inflation not to be too low.
As this discussion illustrates, the literal-but-symmetric interpretation of the MINIMAX approach to robust monetary policy would imply very ‘activist’ policy responses in the face of uncertainty. In this framework, from having their foot to the floor with the monetary accelerator, policymakers might have to switch in short order to stamping on the monetary brake. Unsurprisingly, on my reading, that characterisation also finds little sympathy in policymaking circles. In the interests of avoiding tail outcomes, such activism threatens to induce volatility into monetary policy, financial markets, the economy and inflation in other circumstances, which is both costly and hard to communicate. But the research on monetary policy and uncertainty as a whole has influenced the discussion and conduct of policy in practice. I would pick out a number of lessons that have been drawn.  The magnitude and evolution of uncertainty and risk can, do and should influence monetary policy decisions.  Not all uncertainty is the same. The way uncertainty influences monetary policy decisions depends on the circumstances and the nature of the uncertainty – its source, its persistence, its magnitude – that is being faced  Monetary policy should not be paralysed in the face of uncertainty. If policymakers were to wait until all uncertainty is resolved before taking decisions, they would wait forever.  At the same time, there is no general rule that says policy responses should either be attenuated or more activist in the face of uncertainty.

16  All speeches are available online at www.bankofengland.co.uk/news/speeches  16  Charts Chart 1: The social loss associated with different monetary policy rules under different calibrations of lambda  Source: Bank calculations  Chart 2: The relative performance of level-based and difference-based rules under different relative importance of persistent vs temporary shocks  Source: Bank calculations 17  All speeches are available online at www.bankofengland.co.uk/news/speeches  17  Chart 3: Impact of a persistent risk premium shock that is misjudged to be temporary  Source: Bank calculation  Chart 4: Impact of simultaneous persistent and temporary risk premium shocks (relative weight 2.3 times)  Source: Bank calculations 18  All speeches are available online at www.bankofengland.co.uk/news/speeches  18  Annex: Model specification This model is based on a variant of a model developed by Harrison, Seneca and Waldron. It consists of 5 basic equations. IS curve: 𝑦̃𝑡 = 𝐴𝑦̃𝑡−1 + 𝐵𝔼𝑡 𝑦̃𝑡+1 − 𝐶(𝑖𝑡 − 𝔼𝑡 𝜋𝑡+1 − 𝑟𝑡∗ ) Phillips curve: ∗ 𝜋𝑡 = 𝐷𝜋𝑡−1 + 𝐹𝔼𝑡 𝜋𝑡+1 + 𝐺[𝐻(𝑦̃𝑡 + 𝑦𝑡∗ ) + 𝐽(𝑦̃𝑡−1 + 𝑦𝑡−1 ) − 𝐾𝑧𝑡 ] + 𝑢𝑡  Potential output 𝑦𝑡∗ : ∗ 𝑦𝑡∗ = 𝐿𝑧𝑡 + 𝑀𝑦𝑡−1  Natural rate 𝑟𝑡∗ : ∗ ∗ 𝑟𝑡∗ = 𝑁𝑦𝑡−1 + 𝑄𝑦𝑡∗ + 𝑆𝔼𝑡 𝑦𝑡+1 − 𝜈𝑡  where all capital letters denote functions of underlying parameters, 𝑦̃𝑡 is the output gap, and the risk premium 𝜈𝑡 , the cost-push disturbance 𝑢𝑡 and productivity 𝑧𝑡 follow exogenous autoregressive processes.
Among cryptoassets are what are generally known as cryptocurrencies, conceived for use as a means of payment, and those known as digital tokens, conceived for obtaining financing and which confer on the purchaser the right to receive remuneration, or to exercise certain rights. The Bitcoin is an example of the former. The so-called ICOs (Initial Coin Offerings) are an application of the latter. Both have been the subject of growing interest, and there are at present numerous and highly heterogeneous initiatives. While their impact so far on global financial stability is considered to be limited, they pose a series of risks, in areas such as consumer protection and the prevention of moneylaundering and the financing of terrorism, which the authorities monitor closely and on which they have issued warnings and statements. In this connection, it should be stressed that these are assets of a marked speculative nature, without the backing of supervisors and susceptible to fraud or price manipulation. They cannot be considered as money or as deposits, and they do not enjoy the protection of the regulations governing banking and investment products. It is worrying that, in a setting in which less than half the population understands the concept of compound interest rates, there is such demand for complex assets with these characteristics. Lastly, I wish to refer to the risk of authorising – owing to a lack of knowledge or of due care – access to personal information that would preferably have been kept private.

Without losing sight of the interest this seminar has in the challenge the new technologies pose, I would like to focus today on another major challenge that is not exclusive to the banking industry but applicable to everybody: financial education. Allow me first to set out, non-exhaustively, some of the results drawn from the Survey of Financial Competences presented by the Banco de España and the CNMV last month. I shall then refer to how important it is to continue dedicating efforts to financial education, especially in the current context of financial innovation. The Survey of Financial Competences The Survey of Financial Competences, which is included in the National Statistics Plan, adapts for Spain a questionnaire devised by the International Network for Financial Education, coordinated by the OECD. The aim is to measure, in an internationally comparable way, the financial competences of the population aged 18 to 79. The Survey measures these competences from different perspectives, and obtains information on: (i) financial literacy; and (ii) knowledge, holding, acquisition and use of financial products. To measure financial literacy, the Survey poses questions on three basic financial concepts: i) inflation; ii) compound interest rates; and iii) risk diversification.
Moreover, the study finds that measures such as attracting foreign workers and raising the retirement age from 60 to 65 have only small impact at boosting the economy’s long-term growth and that the key to maintaining high growth rate lies in enhancing productivity growth rather than trying to squeeze out more hours from the aging population. While improvement in educational and skill attainment of the labor force and de-bottlenecking of inefficient sectors such as improvement in the logistic system and water management for irrigation are most obvious policies, financial deepening must not be neglected. It is the efficiency of resource allocation which includes funds and capital that enhances economic productivity, hence, raising the economy’s long-term growth potential. This is the focus of the rest of my talk to which I now turn. Ladies and Gentlemen, As you know, the fundamental function of financial markets and intermediaries is to channel funds from those who have a surplus of savings to those who have a deficit. If financial markets are functioning efficiently, they contribute to an optimal allocation of resources, reduce the cost of capital, and allow for risk-sharing and risk-diversification. Well-developed and efficient financial markets contribute to higher productivity growth because they are better at channeling capital from sectors in decline to those with growth opportunities, in a  BIS Review 118/2008  3  process of Schumpeterian “creative destruction” that ultimately drives economic growth.

In pursuit of this we look at factors affecting the underlying robustness of the financial system, as well as potential “triggers” which, especially at times of structural weakness, could bring on a crisis. Our remit is of course in relation to the UK financial system – but this work has a substantial international dimension, given the openness of the UK economy, and the international character of much of the City. What does this mean in practice? The Bank’s financial stability work include such things as overseeing the UK payments systems; analysing broader developments in the banking, securities and insurance sectors, and the evolving strategies of London’s securities exchanges; looking at developments in emerging market economies; and contributing to the debate on the reform of the international financial system. In short, the Bank’s financial stability team has to analyse and respond to any developments – market or institutional; structural or temporary – that could threaten financial stability. Our second relevant core purpose is to promote the competitiveness of the UK financial services sector. This is not a lobbying function; we are concerned with the promotion of effectiveness and efficiency, not the acquisition of favours. Nor is it a responsibility exercised only in respect of UK owned firms. The UK financial services sector is more truly international than that in any other country in the world. The Bank, and the other authorities in the City, have an unwavering commitment to openness, and the provision of a level playing field to all firms regardless of nationality.
Under these circumstances the Riksbank has chosen to use currency interventions to underscore that the movements in the krona’s exchange rate have been unduly abrupt and exaggerated. BIS Review 80/1998

I’ll highlight two areas where markets have evolved in ways that raise questions about their resilience, even if all the intermediaries are safe. They might mean investors aren’t able to take the liquidity of markets for granted if they adjust. In both cases, there is no proven problem for markets or the economy. Inquiries are, as the police like to say, ongoing. Through our market intelligence gathering, I’m pleased to say that market participants are helping with those inquiries. And I look forward to the contributions of this Centre too. i) (Mis) use of volatility measures  Against a backdrop of relatively stable markets, some investors may have developed an appetite for betting that a range of markets, including bond markets, will remain stable. 10  All speeches are available online at www.bankofengland.co.uk/speeches  10  That means selling options – effectively insurance against moves in market prices. A put option, for example, is insurance against falling prices. An investor who buys this insurance is guaranteed a sale price for the asset insured, regardless of what happens to the market. If prices are currently higher but then fall below the guaranteed price, an investor that wants to sell will incur some loss – think of this as the insurance excess – but the insurer will pay for the rest. If markets stay stable, as the insurer is betting they will, no payout is made and the insurance collects a premium. While markets are stable, it’s a nice little earner for the insurer.
Housing transactions and mortgage approvals have started to show signs of life. House prices have picked up. A healthy housing market is good for our economy and will help to support the recovery. Most importantly, it will underpin further increases in house building, which has played an important role in driving the economic growth we’ve enjoyed this year and which, as a nation, we need to see. It will foster greater labour mobility by allowing people to move more easily to where new jobs are being created. It will help to support consumer confidence. But let’s not be naive. Anyone with more than a passing interest in British economic history is aware that the UK housing market has a sort of microwave type quality to it, with a tendency to turn from lukewarm to scalding hot in a matter of a few economic seconds. The Bank is fully aware of this risk. The good news, however, is that it’s far better equipped to respond to these types of risks than in the past. In particular, the new Financial Policy Committee (FPC) – the sister Committee to the MPC – has explicit responsibility for maintaining the resilience of the financial system. And, together with the other regulatory bodies, the FPC has the policy instruments which can address potential excesses in the housing market – and in other markets – which pose a threat to the stability of the financial system.

The global economic crisis, which deeply affected all countries of the region, was accompanied by slowed exports, reduced remittances and other foreign currency inflows, increased uncertainty and slowed credit growth. Although 2010 is expected to be accompanied by a gradual improvement in the world economic environment, many of the factors that negatively affected the Albanian economy will continue to be present even during this year. The stimulating fiscal and monetary policy helped supporting the economic activity during 2009. However, fiscal trajectories and the need for long-term stability suggest that the Albanian economy can not rely for a long time on fiscal stimulus. Against this background, in 2010 a more conservative fiscal policy is necessary and is welcomed by the Bank of Albania. In a medium- and long-term horizon, we are of the opinion that fiscal sustainability should be ensured through a clear and prudent fiscal rule. Under new circumstances, the economic growth should be based more on boosting the private sector of the economy and bank credit plays a key role in this regard. The good financial health of our banking system and the progressive improvement of liquidity conditions and risk premiums in domestic and foreign financial markets are encouraging developments. The easing of monetary conditions and the liquidity injections by the Bank of Albania have supported and will further support this process.
In concrete terms: •  the management structure of the Bank of Albania was completed;  •  the Audit Committee, composed of three Supervisory Council members, started its activity;  •  the Inspector General resumed reporting to the Supervisory Council;  •  the Medium-term Development Strategy and Medium-term Budget for 2016–18 were approved;  •  the new organisational structure was approved;  •  the head offices renovation and construction works were completed;  •  and the Museum of the Bank of Albania was launched. These highlights contributed to strengthening good governance, accountability and subsequently enhancing public confidence in the Bank of Albania. The monetary policy intensified the simulating stance during 2015. The Bank of Albania lowered the key rate twice, continued to inject the necessary liquidity in the financial markets and clearly communicated the future monetary policy stance. Our monetary policy was successful in easing the financing conditions in the economy and helped in the return of the Albanian economy to a positive development track. In particular, interest rates on new lek loans and servicing costs of existing credits fell. Lek credit increased, offsetting the continuous fall of the credit portfolio in foreign currency. Also, the share of lek credit in the total credit portfolio has been increasing, from around 28% in 2008 to 43% in 2015. These actions have played a vital role in accelerating the economic growth during the last two years. During 2015, the banking system continued to expand its activity.

Suitable arrangements will also be introduced to ensure that relevant or equivalent experience and expertise in the cybersecurity field will be appropriately recognized. Cyber intelligence sharing platform 8. Last but not least, the third pillar of the CFI is to develop a new piece of infrastructure for the purpose of sharing intelligence on cyber attacks. Just like any conventional warfare, intelligence is the key to success. While individual banks can develop their own intelligence network, the coverage of such intelligence and the timeliness of receiving cyber attack alerts may at times be limited. At the same time, the entry barriers for launching cyber attacks, in terms of costs and the hardware and techniques required, have become much lower. The speed in which hackers may launch cyber attacks, which may well be targeting at not just one bank but several banks at the same time, has greatly increased. So it will be of great help if the banks could collaborate by proactively sharing information and intelligence of cyber attacks or the imminent threats of such attacks. The timeliness of receiving alerts or warnings from a commonly shared intelligence platform will be of immense help for banks to prepare for cyber attacks even before they are launched. 9. I am pleased to announce that the HKMA, in collaboration with The Hong Kong Association of Banks (HKAB) and ASTRI, is going to launch a Cyber Intelligence Sharing Platform, with access open to all the licensed banks in Hong Kong.
One important one, which is implicitly being debated in some jurisdictions but not in a way noticed by anyone other than specialists, is whether clearing houses should adopt what is called Gross Margining rather than Net Margining. What this means is that a clearing member – ie a dealer – could not net off positions of their various customers and their own house position when the amount of margin they have to hold with the clearing house is determined. That would affect the incentives of clearing members to collect minimum margin amounts from their customers. And, more generally, it would probably reduce the amount of leverage in the system and simplify the chain of credit. Again, my point is not at all to advocate a position on this one way or another. It is to note that this is about more than investor protection through the segregation of client moneys, and so needs to be debated against the goal of preserving stability without impairing efficiency. Post-trade infrastructures: trade repositories Moving on from CCPs, a quick appeal – in fact, two if I may – to the securities regulator community on Trade Repositories. They are one of the most interesting innovations brought forth by the crisis. They are expected to house information, on a trade-by-trade basis, on the type of contract, notional value, currency, maturity, counterparties of derivative transactions. This needs somehow to extend to valuation(s) and collateral terms. My appeal to the US, EU and Asian authorities is twofold.

Those requirements were meant to be exacting if the securities were issued onto the public markets. In Europe, it seems most issuers of ABS and CDOs chose to list them in Ireland or Luxembourg. In many jurisdictions, including the USA, the requirements were deliberately less exacting if the securities were distributed solely via the “private markets” to wholesale or sophisticated investors. This prompts two thoughts. First, with hindsight, could Listing Authorities and securities regulators8 do more in the future to ensure that the disclosure around complex securities are comprehensible, coherent and, crucially, simple and short enough to be capable of being absorbed? And should Listing Authorities be more willing to step in and require changes to the structure of complex securities where they conclude that the disclosure is inadequate and just cannot realistically be made adequate? Have “risk factors” become so numerous, wordy and wide-ranging that they lose their impact? In their understandable desire to avoid validating products and securities, have securities regulators retreated too far towards simply checking that the required boxes have been ticked? Perhaps I am imagining it, but I recollect a period in which Listing Authorities were guardians of the integrity of primary markets. That over time came to rely upon disclosure. And that ended up meaning accepting documents that were comprehensive rather than comprehensible. Where something is incomprehensible, and has reached a scale where it could even jeopardise stability, the relevant authority should say so.
And add-ons to these capital and liquidity buffers for institutions posing the greatest systemic risk are being discussed to address the second. 9 In essence, this is a taxation solution to the systemic risk pollution problem. 10 There is a second approach. On 21 January 2010, US President Barack Obama proposed placing formal restrictions on the business activities and scale of US banks. Others have made complementary proposals for structural reform of banking. 11 Typically, these involve separation of bank activities, either across business lines or geographies. In essence, this is the prohibition solution to the systemic pollution problem. This sets the scene for a great debate. It is not a new one. The taxation versus prohibition question crops up repeatedly in public choice economics. For centuries it has been central to the international trade debate on the use of quotas versus subsidies. During this century, it has become central to the debate on appropriate policies to curtail carbon emissions. 12 In making these choices, economists have often drawn on Martin Weitzman’s classic public goods framework from the early 1970s. 13 Under this framework, the optimal amount of pollution control is found by equating the marginal social benefits of pollution-control and the marginal private costs of this control. With no uncertainty about either costs or benefits, a policymaker would be indifferent between taxation and restrictions when striking this cost/benefit balance. In the real world, there is considerable uncertainty about both costs and benefits. Weitzman’s framework tells us how to choose between pollution-control instruments in this setting.

Thank you very much for your attention. BIS Review 96/2010  5