samchain/econo-pairs-v1 huggingface dataset:
It will open in July, with a staff of seven. The Singapore office will concern itself only with trading; settlement will continue to take place in Zurich. The branch office is completely subordinate to existing SNB oversight and control. Swiss franc money market and reference interest rates The continuing high level of Swiss franc liquidity has had the desired effect of keeping money market interest rates at close to zero. The three-month Libor has been at around two basis points since mid-January. Interest rate expectations, based on Libor future contracts, are also close to zero for the foreseeable future, but not negative, as was the case over much of last year. As a result of the very low money market interest rates and high liquidity in the banking sector, money market turnover has dropped substantially in recent years. This is illustrated in chart 2, which shows the total of banks’ sight deposits at the SNB, as well as turnover in the area of secured and unsecured call money. The small number of transactions on the money market is a problem for generating representative reference interest rates. In addition, the selection and setting of reference interest rates has come under the scrutiny of market participants and the public, as a consequence of the Libor manipulation. As regards the problems surrounding the Libor, efforts at reform are underway on an international level. To ensure the continuation of the Libor, a raft of measures have already been initiated.

This was due, on the one hand, to measures taken by the ECB, and on the other, to the fact that, in the US, the ‘fiscal cliff’ was averted. As recent weeks have shown, conditions on the financial markets can change again swiftly. In Japan, there has been a sharp correction on the stock market and the yen has again gained somewhat in value. Meanwhile, in the euro area, there is a discrepancy between the generally favourable trend on the financial markets and the disappointing economic data. Finally, in the US, a certain degree of uncertainty about the future monetary policy direction of the Federal Reserve (Fed) has gained ground. Overall, the market  BIS central bankers’ speeches  1  environment continues to be dominated by high levels of uncertainty, thereby remaining susceptible to sudden shifts in mood. Management of currency reserves The easing of tensions on the financial markets also affected the Swiss National Bank’s (SNB) currency reserves. These are mainly composed of foreign currency investments and gold. At the end of May, the SNB held foreign currency investments of just over CHF 440 billion (cf. chart 1). Due to our liquidity and security requirements, a large portion of our foreign exchange holdings are in government bonds and deposits with other central banks. This portion amounted to 78% at the end of the first quarter of 2013. To further diversify investment risk and increase investment in real assets, we raised our proportion of equities from 12% to 15% in the first quarter.
Although some similarities do exist between the two, the differences nevertheless outweigh them, and I will be coming back to these later. I will also be looking ahead and briefly discussing the driving forces behind price developments in the property market. Developments in the housing market In principle, there are two different methods to explain rapid price changes. The first approach is based on the fundamental driving forces that govern prices, and explains price changes through changes in these variables. Such fundamental factors include interest rate levels, household income and the production of new homes. The second approach assumes instead that prices are not governed by these fundamental driving forces, but rather are based on expectations of future price rises. Such a situation is usually referred to as a “bubble”. A recent example of this is the surge in prices seen in IT shares during the latter part of the 1990s. The rate of increase observed then proved gradually to be unrelated to fundamental driving forces but rather to unrealistic expectations of a trend that never materialised. When this eventually became evident, prices plummeted. So the price rises seen during a bubble do not mirror fundamental factors but simply reflect expectations of future price increases. Investors become involved in a process of speculation where  BIS Review 38/2003  1  estimates of future cash flow are no longer of importance and price rises are instead assumed to be the trend.

At that time, the credit expansion which was caused partly by the deregulation of the credit market resulted in a debt ratio of around 130 per cent, while the interest ratio increased rapidly over a couple of years from around 6 per cent to almost 10 per cent. However, there is no doubt that the recent rise in indebtedness has made households increasingly sensitive to changes in interest rates. Households tend to focus on their cash flow and are unperturbed as long as their debt-servicing costs can be accommodated in their monthly budget. But an interest rate rise of just a few percentage points would have a much bigger impact on cash flow today than when levels were around 15 per cent. An interest rate rise of four to six per cent would cause monthly costs to increase by 50 per cent. Higher mortgage rates could therefore prompt households to increase their saving and reduce their consumption more than expected or intended. Hopefully we will be able to avoid sharp, quick interest rate rises in our conduct of monetary policy, although mortgage rates are also influenced by events outside Sweden. To some extent though, the effect of any increases in rates could be alleviated by the fact that an increasing number of households have recently been switching over to fixed-rate loans. Developments in the commercial property market Prices in the commercial property market have been driven by somewhat different forces than in the housing market.
Benoît Cœuré: Interview with Bloomberg TV Interview with Mr Benoît Cœuré, Member of the Executive Board of the European Central Bank, and Bloomberg TV, conducted by Ms Caroline Connan and broadcast on 9 July 2018. * * *  Donald Trump has pulled the trigger on tariffs on China; China is retaliating. Could that complicate the ECB’s task going forward? What’s really important for us to gauge is the impact on business confidence, which so far has been limited. We see this escalation process: we start with skirmishes and then skirmishes may turn into clashes and then, at some point, clashes may turn into a fully-fledged war. That would be very bad for business confidence. So far, the backdrop is very strong growth in the Eurozone, resilient growth in the Eurozone, meaning that what we’ve seen so far doesn’t have the potential to derail the recovery. Can the ECB just sit back and watch this trade war happening? We are never sitting back and watching; we have to understand what’s going on. So far we believe that growth is strong enough to withstand the shock. Have you already seen some companies holding back investments because of these protectionist policies risks? Yes, that may happen. We are not complacent on the possible risks. A fully-fledged trade war would be extremely bad for the world economy – starting with the United States, by the way. The first victim would be American jobs, American workers. We very much hope that this doesn’t happen.

What could be the long-term impact? The long-term impact is about how the world is run. It’s about having an open, free market economy globally, with the rule of law and with instruments for nations to talk together. That’s how we’ve worked since World War II and we’ve been very well served by the system. We want it to continue. It has to be improved; it has to become fairer, it has to deliver fairer outcomes for workers and for households, but it has to remain open. It has to remain built on trust between nations. We’ve got this trade war going. We’ve got uncertainties around Brexit. We’ve got geopolitical risks, with new sanctions on Iran. What is the biggest risk you see throughout this summer? To start with, we see risk as coming mainly from outside the Eurozone. Primarily that’s about trade tensions, as we’ve just discussed. That’s about escalation of trade tensions denting business confidence globally, and that’s the main risk. Could the ECB have to rethink its path between supporting growth and fighting inflation because of these risks? These risks were discussed when the Governing Council met in Riga last month. We discussed risks thoroughly and we designed a path of sustained monetary accommodation, anticipating that net asset purchases end in December 2018, but with a continued degree of monetary accommodation being delivered by rate guidance – enhanced guidance on rates – and by reinvestment policy. That is the balance we struck in Riga and it already took account of the risks.
But there is good reason to believe that a mutually reinforcing combination of strong demand, weak supply and expectations of a rising market could lead to a period of sustained and very powerful pressure on house prices in the UK. The extent to which that will jeopardise financial stability depends on whether that pressure actually results in more transactions at higher prices, whether that in turn leads to an increase in household indebtedness and where that debt is concentrated. These are, of course, all linked. The laws of supply and demand must, in the end, apply also to housing even in the UK. House prices cannot grow faster than earnings indefinitely. While households may be prepared to spend an increasing amount of their income on housing, there is a level at which house prices are simply not affordable. Ultimately – given purchases are in the main financed by long term mortgage lending – it is the price and availability of mortgage credit, including maximum loan-to-value and loan-toincome ratios, offered by lenders that determines the point at which affordability constraints bite on house purchasers and so how far they can stretch to match rising prices. At present, affordability constraints do not seem to be having a braking effect on the rise in prices. But prices are still below their 2007 levels in most regions and the house-price-toearnings ratios a multiple below its pre-crisis peak. If prices continue to grow faster than earnings, affordability will increasingly be an issue for purchasers and for lenders.

However, uncoordinated insulation hinders free trade in financial services and flows of financial assets, effectively harming the common markets for them. I believe that the marginal benefits of focusing more on space for coordinated diversification of approaches to regulation are now much higher than those of trying to find “the ultimately and finally correct set of rules” and imposing them on all countries. As to the second difficulty, it seems to me that the much smaller size of the financial sector relative to the real economy in emerging or less developed economies has profound consequences for the optimal mix of regulatory rules – consequences that are neither acknowledged nor discussed. To develop this idea, let me stress that most measures dealing with the crises of financial institutions in the most developed economies were influenced by the fact that those institutions dwarfed the budget revenues of the relevant treasuries. Consequently, their wind-down – with government guarantees for most of their liabilities to agents in the real economy, such as household or corporate sector deposits – would have led immediately to a serious downgrade of the relevant sovereign debt. But this is not the  BIS central bankers’ speeches  1  case with most developing and emerging economies and their financial institutions, whose size relative to the real economy, forex reserves or budget revenues is much smaller. Consequently, the optimal mix of the pace of financial sector growth and the risk of financial sector crises differs significantly, allowing for faster growth even with higher risks.
Although the borrowing component in investment property financing tends to be lower than in owner-occupied real estate, domestically focused banks are exposed to this segment. One-third of new mortgages are issued for residential investment property, yet the affordability risk for such property owned by private individuals is roughly as high as for owner-occupied real estate. Moreover, a correction in this segment can affect other real estate market segments, via changes in market confidence and expectations (spillover effects). So we need to keep a close watch on the residential investment property segment. A second risk arises due to falling liability margins in an environment of low interest rates. To offset these, a bank essentially has two options – apart from increasing its lending interest rate. Both options are associated with higher interest rate risk, which in turn increases the risks to financial stability. First, it can grant a higher proportion of long-term loans at higher interest rates, as they generate higher interest revenue than short-term loans. However, this also increases the so-called maturity mismatch.6 The greater the maturity mismatch, the higher the interest rate risk, and thus the potential economic losses for the bank in the event of a sudden interest rate rise. This is because the larger the maturity mismatch, the quicker the rise in refinancing costs compared to long-term fixed interest income when interest rates go up. Second, a bank which has hitherto hedged against interest rate risk might be tempted to dispense with such hedging, and the associated costs.

I would like to emphasise that the question of if and when we should take action ultimately depends on the risk aversion we have and the subjective assessments we make. One can never know in advance when the time will be right to take measures. It is not possible, for instance, to “calculate” that at exactly this particular level of household debt or of housing prices it will be the time to take action. 2 Different countries have experience problems at rather different levels of debt, both higher and lower than the one we currently have in Sweden. This uncertainty is something we have to live with; we must nevertheless make the best possible assessments and make decisions on the basis of them. Given the uncertainty regarding whether or not the recent slowdown is a break in the trend, what measures do I think are needed? For the sake of clarity, I would like to distinguish here between three types of measure. The first type concerns remedying well-known problems and deficiencies. The second covers slightly more revolutionary changes in the longer run – measures that would improve our management of the type of problems caused by the mortgage market. The third type of measure involves strengthening the banking sector in general, regardless of whether future problems are caused by developments in the mortgage market or by some other market or phenomenon. I will now describe what I consider to be the most important priorities in these three areas.
Take the mobile application Swish that was introduced in 2012 as an example. In the beginning, few of us had Swish, and it did not provide much value. However, as more people adopted Swish, its value increased since the number of connections increased. Swish is also good example of the benefits of banks working together. By launching a joint service, the Swedish banks managed to benefit from network and scale effects. Moreover, sharing infrastructure and development costs is cost-effective and makes it easier to reach the critical mass needed to take advantage of economies of scale. It is also important to point out that the uniformity of money is closely related to network effects. In a situation with multiple currencies present, we would not be sure if the merchant or payee would accept the money held. That would mean  9 [15]  having to carry different kinds in our wallets, establishing exchange rates and so on, all very inefficient. It is then likely that some would limit themselves to a subset of currencies. It is then undoubtedly harder to achieve the benefits from network effects. While network and scale effects generate efficiency gains, they also create barriers to entry. Or put differently, together network and scale effects often result in a ‘winner takes all’ situation. These entry barriers, thus, manifest themselves in possible concerns about the level of competition. Therefore, the public sector needs to balance the perils of what is often called a natural monopoly with the gains from joint services or sole providers.

In my historical walkthrough, I gave you some cases of this: The foundation of the Riksbank on the ruins of Stockholms Banco; Postgirot, a rare example of the private sector failing to accommodate consumer needs; and Amsterdamsche Wisselbank was an example of the government trying to solve the problem of not having uniformity of money. Network and scale effects as important as ever My fourth and final lesson relates to network and scale effects, and the barriers to entry they pose. Providers of new payments solutions need to invest money for development, setting up the infrastructure and marketing. Hence, there is a high fixed cost associated with market entry. Furthermore, to have a successful payments method, you need to have both payers and payees on board, and you need to reach a critical mass to cover your costs. We say that payments are a scale business. However, reaching a critical mass can be difficult since the value of the payment method is determined by the number of users. In economics, we often use the term network effects to describe the situation where a user’s value from a product or service depends on the number of users. A classic example is that of the telephone: Two telephones enable only one link between participants. Adding a third telephone allows for two more connections, and adding a fourth telephone enables three new connections. Hence, each new participant grows the value of the network more than the last one did. The same holds in the payments market.
15  12  All speeches are available online at www.bankofengland.co.uk/speeches  12  While simple, these maps suggest there is important information on economies and societies to be found by peering through different lenses: lenses that operate at different resolutions, as the striking UK regional differences in income, wealth and health demonstrate;  and lenses that focus on different economic  attributes, as the striking differences between the UK’s regional income and well-being maps demonstrate. Chart 8: Cartogram of UK well-being  Sources: ONS Annual Population Survey (APS) and Bank calculations. Notes: Responses to the question, “overall, how satisfied are you with your life nowadays?” where 0 is ‘not at all satisfied’ and 10 is ‘completely satisfied’ for 2016/17. UK NUTS 1 regions re-sized and coloured by mean response. (b)  Differences within regions  Given these striking regional differences in health, wealth and happiness across the UK, an interesting supplementary question is how those differences compare within-regions. As we alter the resolution at which we view the economy, do these differences narrow? Do economic patterns look different when 13  All speeches are available online at www.bankofengland.co.uk/speeches  13  comparing them within and between regions? Or are these patterns self-similar at different resolutions, as when we use a microscope to study the shoreline? Chart 9 provides one visualisation of these patterns at different resolutions. These “violin” plots compare the distribution of income per head at the regional (NUTS 1) level with the distribution at NUTS 2 and NUTS 3 level.

10  All speeches are available online at www.bankofengland.co.uk/speeches  10  Chart 6: Cartogram of UK pay  Sources: ONS Annual Survey of Hours and Earnings (ASHE). Notes: UK NUTS 1 regions re-sized and coloured by median gross weekly earnings £ in 2018. 11  All speeches are available online at www.bankofengland.co.uk/speeches  11  Chart 7: Cartogram of UK life expectancy  Sources: ONS and Bank calculations. Notes: Life expectancy at birth by local area in the UK (years) for UK NUTS 1 regions, re-sized and coloured by mean life expectancy in 2010-12. If we turn to an alternative measure of health – psychological health – the picture changes dramatically. Chart 8 plots a subjective measure of well-being on a regional basis. 15 This is the mirror image of the income and wealth maps. Well-being is lowest in the richest region (London) and highest in a region where incomes are low (Northern Ireland). Income may buy you many things, but happiness is not one of them.16  This is based on answers to the question: “Overall, how satisfied are you with your life nowadays?” Other questions regarding wellbeing yield very similar conclusions. 16 Easterlin (1974) and Easterlin (2013), for example, point out that while wealthier people tend on average to be happier, happiness does not increase in line with GDP per head. Unemployment and debt arrears also have a large adverse psychological impact on individuals, above-and-beyond their direct impact on income and wealth (Wildman (2003) and Taylor et al (2007)).
I am confident that these issues I shared with you provide a summarised vision of some of the main directions of our work during this period. BIS central bankers’ speeches  3  Looking forward to a productive exchange during the proceedings of the conference, I thank You for your attention! 4  BIS central bankers’ speeches

Chairman, Your Excellencies, friends,  BIS Review 11/2007  1  Over the next few years, we are also very keen to deal with two key disparities prevailing in our country. These are: (a) regional disparity in economic development, and (b) significant income disparity between the poor and rich. Creating more opportunities within the regions outside the Western Province and encouraging village development and human resource development at all levels, hopefully the need to reduce poverty significantly, and address income inequality. These efforts therefore would need to be pursued with renewed enthusiasm, as already vowed in the Mahinda Chinthana, the President’s development plan for the nation. We are also deeply conscious that for the country to achieve its macro-economic goals, the monetary policy too should play a key role. Towards that end, the monetary policy framework adopted by the Central Bank has been made consistent with the government’s macroeconomic framework. Accordingly, the 2007 targets in the monetary programme of the Central Bank have been set, after taking into consideration the potential growth and liquidity needs of the economy to move along the projected growth path while keeping inflationary pressures in check. Your Excellency, In November 2006, the Government of your Excellency announced its medium-term macroeconomic framework within a 10-year development framework. This programme targets an 8 per cent growth for the next six years and 9-10 per cent thereafter. These are tough targets. But these are achievable. When striving towards such goals, we must remember that our development focus should always be clear.