samchain/econo-pairs-v1 huggingface dataset:
(2003) showed that T-Bill yields track movements in the fed funds rate more successfully since the  1990’s, while Kohn and Sack (2003) found that statements released by the FOMC significantly affect market interest rates. 4 Demiralp and Jorda (2002) found that a smaller quantity of open-market operations have been required for the  Fed to achieve its desired policy rate since 1994. 5 Hubert and Labondance (2018) found that the ECB’s forward guidance announcements persistently reduced  rates across the yield curve, with the strongest effects at the longest maturities. Moesser (2013) found greatest effects for the US at the three-year horizon. However, Chehal and Trehan (2009) found little evidence that the Bank of Canada’s forward guidance in April 2009 significantly affected market expectations of interest rates. 6 Kahnemann (2003) 7 Mishkin (2004) 8 Cruijsen et al (2010) 9 See Dincer and Eichengreen (2014). Cruijsen et al (2010) also found diminishing returns in reducing  dispersion of inflation expectations, with expectations dispersion declining initially as transparency rises but rising beyond a certain level of transparency. 10 Hayo and Neuenkirch (2018) 11 Samuelson (1994) famously likened this problem to a monkey looking at a mirror. The monkey reacts to its  mirror image, unaware that it is looking at its own reflection. 12 Morris and Shin (2018) 13 Gaballo (2018) 14 Goodhart and Lim (2011) 15 Free exchange: A little less conversation, “Can central bankers talk too much?”, The Economist, 26 Oct 2019. 5/5  BIS central bankers' speeches

Banknote character speech by Andrew Bailey i  Given at the unveil of the Alan Turing £ polymer Banknote  Banknote character ‐ speech by Andrew Bailey | Bank of England  Page 1  Published on 25 March 2021  Andrew Bailey reveals the design of our new polymer £ banknote. He talks about why Alan Turing was chosen to feature on it. Turing was a mathematician and a pioneer of early computers. His critical work on codebreaking saved the lives of many people in World War Two. He was also gay at a time when it was considered a crime. In 2017 a new law named after Turing pardoned all men, like him, who were convicted based on their sexuality. Our new note celebrates Turing as someone who embodies the spirit of our country and left a legacy for LGBTQ+ rights. The note will enter circulation on Wednesday 23 June, which is Alan Turing’s birthday. Speech It’s my great pleasure to unveil the new £ note, which will feature one of Britain’s most important scientists, Alan Turing. Turing is perhaps best known for his codebreaking work during World War II, which played a decisive role in bringing that conflict to an end. But he is also recognised as being a pioneer in computing and artificial intelligence, and someone whose work has had an enormous impact on how we all live today.
2  Corrigan (1987). BIS Review 53/2009  3  The second strategy was diversification of business lines. Firms migrated activity to where returns looked largest. As each new day dawned – leveraged loans yesterday, CDOs today, proprietary trading tomorrow – the whole sector was drawn to the new source of sunlight. Through competitive forces, finance engaged in a frantic game of follow-the-leader, played for real money. From an individual firm perspective, these strategies indeed looked like sensible attempts to purge risk through diversification: more eggs were being placed in the basket. Viewed across the system as a whole, however, it is clear now that these strategies generated the opposite result: the greater the number of eggs, the greater the fragility of the basket – and the greater the probability of bad eggs. Securitisation increased the dimensionality, and thus complexity, of the financial network. Nodes grew in size and interconnections between them multiplied. The financial cat’s-cradle became dense and opaque. As a result, the precise source and location of underlying claims became anyone’s guess. Follow-the-leader became blind-man’s buff. In short, diversification strategies by individual firms generated heightened uncertainty across the system as a whole. Meanwhile, a strategy of changing the way they had looked in the past led to many firms looking the same as each other in the present. Banks’ balance sheets, like Tolstoy’s happy families, grew all alike. So too did their risk management strategies. Financial firms looked alike and responded alike.

As we build our efforts to advance financial literacy, I would like to suggest three areas in which research will be particularly useful in the period ahead: (i) First, factors affecting the financial literacy and capability of consumers. This may include elements that correlate with consumer behaviours in financial management and how they choose and decide on financial products and services. (ii) Second, factors affecting consumers' financial resilience. This may include vulnerabilities and emerging risks from the changing in the financial landscape, for example, digitisation of financial products and services, or economic shocks. The research could also identify the challenges to make sure that the delivery of financial literacy is effective in supporting financial resilience. (iii) And third, intervention gaps and innovative ways to bridge the gaps. Findings from this area of research could add value to how we design and develop evidence-based interventions. One suggestion is to find out how we can take advantage of behaviourally-inspired features that can be easily embedded in digital tools such as reminders or apps for micro-savings or micro-investments, and potentially use these features for monitoring and evaluation of the financial literacy initiatives. I believe, that with the right digital tools and applications, we can amplify the impact of financial education by increasing reach and scaling up interventions in a cost-effective way. All of these should seek to help us better understand how we can help consumers make good choices and avoid bad ones.
GARP, for example, is exploring this and has recently surveyed its members to better understand professional needs for “sustainability, climate risk, and ESG integration.”4 I am interested to hear from all of you about how your institutions are developing tools and practices to integrate climate risk into your risk management frameworks. Innovation and Culture It is no surprise to this audience that technological innovation, big data, and advanced analytics are transforming financial services. We can debate where we are on the maturity curve and what innovations are most likely to be transformative, but the direction of travel seems clear. I expect the afternoon session on “Technology, Big Data, and the Practice of Risk Management” will address core issues such as new approaches for model risk management in a world of widespread artificial intelligence; the inherent challenge of “explainability” and potential bias in algorithms; the strategic risks from new entrants; and the impact on human capital strategies. 2/4  BIS central bankers' speeches  I want to highlight a complementary, but different issue and focus on how firms manage these changes. More broadly, what type of corporate culture is needed to support a successful digital transformation? Over the past five years, the New York Fed has emphasized the importance of a healthy culture to reduce misconduct risk. In addition, I think there is likely a link between a firm’s culture and its ability to adapt to a changing environment, whether it is technological innovation, demographic change, new business models, or climate change.

Ladies and Gentlemen, Since I have been given the floor I now wish to take this opportunity to briefly share with you the Zambian experience with regard to the microfinance market. Despite its land-based wealth, Zambia faces very significant development challenges. The rapid structural adjustment process that took place during the 1990s has had a harsh impact on our people, with the result that poverty is now widespread in our country. Currently, a significant number of the 10 million or so Zambians strive for survival on far less than one US dollar a day and like in many other African countries there are high HIV/AIDS rates and indebtedness which have contributed to persistent low economic performance. Thus, our government’s focus with assistance from cooperating partners has to increasingly be on poverty alleviation via income generation and micro enterprise stimulation, using small business development and microfinance as mechanisms to improve household standards. Following the structural adjustment period, particularly from the early 1990s, affordable and publicly funded rural financial services have collapsed. A private microfinance movement, though still in its infancy, has had to emerge offering modern microfinance services. Today in Zambia we have an interesting blend of microfinance institutions that are private sector, for-profit firms, and non-profit, non-governmental organizations (NGOs). Although expansion is much slower in rural areas, growth is evident along the line of rails and the peri-urban areas of our country.
Chart 3: Variability of default probability estimates(a)(b)(c)(d)(e)  Chart 4: Risk Weight variability in 2011(a)(b)(c)(d)  PD 2007  PD 2009  PD 2011 Mean PD = 100  7.1  Mean RW = 100 250  250 3.4  4.9  200  4.3  200  8.9  3.3  150 100  100  50  50  0 Sovereigns  Banks  Corporates  Source: FSA, and Bank calculations (a) Based on the results of the FSA’s hypothetical portfolio exercises for 2007, 2009 and 2011. (b) Results are based on portfolios comprising assets rated by all respondents in the sample (co-rated). (c) Portfolios differ between the exercises in 2007, 2009 and 2011. Results have been normalised by the mean. (d) Sample sizes differ: six to twelve in 2007 and seven to thirteen in 2009, depending on portfolio; and eight in 2011. (e) The bars show the maximum – minimum ranges. The values on top of the 2011 results indicate the maximum – minimum ratio. BIS central bankers’ speeches  150  0 Sovereigns  Banks  Corporates  Source: FSA, and Bank calculations (a) Based in the results of the FSA’s hypothetical portfolio exercise for 2011. (b) Results are based on portfolios comprising assets rated by all respondents in the sample (co-rated). (c) The sample includes six banks. (d) The bars show the maximum – minimum ranges. The values on top of the 2011 results indicate the maximum – minimum ratio.

That takes us to a third potential explanation for the downward trend in risk weights, one familiar from every other field of self-regulation – the system has been gamed or arbitraged (Blum (2008), Masera (2012)). Under a self-assessed standard, banks may have both the incentive and the ability to shade downwards risk weights, or to switch to lower risk-weighted asset categories, thereby boosting reported capital ratios. The aggregate evidence is consistent with this having occurred secularly and on a significant scale. Firm-specific evidence is also consistent with this hypothesis. A survey by McKinsey in 2012 found that 65% of firms were engaged in “RWA optimisation” of some form (Babel et al (2012)). And the recent US Senate investigation of the J P Morgan “whale” incident is the latest in a long line of identified misdemeanours sourced in model manipulation. In short, while one of the original aims of the Basel Accord was to prevent a race to the bottom, the move to risk-based capital adequacy standards may in fact have accelerated it. What, then, of the second objective of the original Basel Accord - levelling the international playing field? From an economic perspective, a level playing field would imply that banks with equivalent portfolios should hold a broadly equivalent amount of capital. The most compelling test of this hypothesis comes from the hypothetical portfolio exercises (HPE) recently conducted in the UK and internationally. These take a set of common portfolios and ask how much capital banks’ internal models would set against them.
I presume that the audience is conversant with the idea of Regtech. But it remains good to define upfront what we are dealing with. So, by Regtech, which is a subset of fintech, we are referring to a specific focus on technologies that can facilitate more effective or efficient regulatory compliance or risk management by financial firms. The benefits of Regtech 6. So, why do we need Regtech adoption? That’s because we believe that Regtech solutions offer clear benefits to banks, customers, and regulators alike. 7. For Banks, they can leverage on Regtech solutions to enhance risk management quality and reduce costs. For example, in the area of financial crime and transaction monitoring, some banks still have teams dedicated to the manual remediation of false positives. But others have already used Regtech solutions to put automation in place. In doing so, not only have their alert outputs become more accurate, the process also freed up precious resources to focus on higher value tasks, including in particular their interactions with customers. 8. For Customers, Regtech delivers improved customer experience and drives financial inclusion. Several years ago, opening a bank account in Hong Kong could be timeconsuming. You often had to take time off work in order to visit a branch and physically verify your identity. By contrast, with the help of Regtech, today I can open a bank account in the comfort of my home or office in a matter of just minutes. 9. There are also benefits to banking supervisors and regulators.

Christian Noyer: Evolution of the regulation in Europe and in the United States – convergence or divergence? Keynote address by Mr Christian Noyer, Governor of the Bank of France and Chairman of the Board of Directors of the Bank for International Settlements, to the Paris-Europlace Financial Forum, New York, 18 April 2011. *  *  *  Strengthening financial regulation has been high on the agenda of the G20 since Pittsburgh in October 2008. Much has already been achieved both at the international level especially through the Basel Committee for Banking Supervision but also on national level with the Dodd-Frank Act in the US and the pending regulation for market infrastructures in the European Union. It is fair to say that the evolution of the regulation in Europe and in the United States has not always followed the same path in the past. At a time when our regulations are completely revisited and when many restructurations are taking place in the finance industry, rigorous consistency on both sides of the Atlantic is clearly needed if we want to avoid regulatory arbitrages and uneven level playing field which would be the seeds for inefficiencies and future disappointments. In my remarks today, I will briefly discuss the achievements on reforms of financial regulation. Then I will highlight some existing discrepancies between European and US regulatory frameworks that should be addressed. I. Regarding achievements in financial regulation: What has been completed so far?
That means that the Bank has to supply excess reserves to the system in aggregate, such that no firm has any incentive to pay more than  7  4  And the OSF Deposit Facility rate was set to zero. BIS central bankers’ speeches  Bank Rate for the marginal unit of reserves. In that world, banks’ incentives to trade with one another in the overnight markets are largely diminished. A third model for implementing monetary policy is the “zero corridor” system. In this case there would be no reserves targets and banks could both lend to and borrow from the Bank in unlimited amounts at Bank Rate every day. Although short term market interest rates should always equal Bank Rate precisely, this system has several drawbacks. First, banks would never need to transact with each other; they simply transact with the central bank via the OSFs: there would be little or no commercial overnight interbank money market. That would be unwelcome. For example, the information the Bank deduces from movements in overnight market interest rates would be lost. It might also disrupt functioning of longer-term money markets, given implicit links to the overnight market. Second, if the Bank can always be relied upon to meet daily liquidity needs, then commercial banks have less incentive to actively manage their liquidity. And the Bank would be unable to distinguish between banks using the OSFs to manage their day-to-day liquidity buffers, and those facing more fundamental shocks.

The rise in oil prices in the early 1970s or German reunification are classic examples. So the risk of divergent monetary policy needs within the euro area is real. And if there were a material divergence of monetary policy needs, that could lead to serious tensions, because alternative adjustment mechanisms, such as labour migration or fiscal redistribution, that exist within individual countries, and which help to alleviate familiar regional disparities when they arise at the national level, are simply not well-developed at the pan-European level. The Maastricht Treaty, of course, recognised this risk. The famous convergence criteria were specifically designed as a means of reducing the risk to manageable proportions by requiring that, before joining the euro club, countries should have achieved at least a minimum degree of macro-economic convergence - thereby demonstrating their commitment to macro-economic discipline both through fiscal consolidation, and through monetary policy consistently directed at effective price, and exchange rate, stability. And all member countries of the European Union have certainly made great progress towards macro-economic stability over the past few years. This has, of course, been a matter of national economic self-interest. But there is no doubt that the goal of monetary union, and the Maastricht criteria, provided a very powerful external incentive for many countries - indeed it is barely conceivable that anything like so much progress would have been achieved across the Continent without this incentive.
In several countries a series of bold structural reforms have been implemented. In Portugal in particular, the reform agenda has been broad-based and far-reaching. It has included public administration, health and pension systems, education, judicial systems, competition frameworks, industrial relations, labour markets, energy markets, network industries, services sectors and regulated professions. Some concrete examples of structural reforms The overall approach to structural reforms in stressed countries has been to proceed in a comprehensive manner. This is not only because certain reforms are mutually  4  BIS central bankers’ speeches  complementary – for example, the competitiveness benefits of a labour market reform may not materialise without accompanying product market reforms, as wages adjust but prices do not – but also because an encompassing approach ensures that the burden of reform is spread more fairly across society. However, implementation obstacles to this approach have been significantly higher than initially expected. In general, it has been easier to change institutions and rules in the labour market than in product markets; it has been easier to change rules for “outsiders” than denting the vested interests of established “insiders”; and it has been easier to increase taxes rather than cutting expenditure. While these difficulties are in many cases gradually being overcome, the process is far for completed. Still, one should not underestimate the achievements so far. Let me give you a few examples: Looking at a well-established summary indicator of employment protection, the OECD index, Portugal, Spain and Greece have recorded notable improvements in 2013.

The first phase began with the bankruptcy filing of Lehman Brothers in September 2008. Here the euro area shared in a global liquidity crunch that was largely imported from abroad. The second phase began in May 2010 with a sovereign crisis that was localised in the euro area, and that was partially exported to the world economy. This second phase was arguably the more pernicious for monetary union. The re-pricing of sovereign risk in the euro area spread from Greece to other vulnerable economies, and from sovereign to private debt and vice versa. In the process, the liquidity crunch morphed into a systemic crisis for the banking sectors of a number of member countries, and for the integrity of monetary union as a whole. The traditional exposure of banks in vulnerable countries to their own sovereign issuers became a quick carrier of  BIS central bankers’ speeches  1  financial contagion as their sovereign bond holdings depreciated and eroded their capital in the eyes of creditors. This adverse sovereign-bank feedback loop interacted with existing vulnerabilities. Countries with persistent competitiveness losses and associated large current account deficits – as was the case of Portugal – were particularly sensitive to a reversal in external financing. This was exacerbated by capital flight to core economies which started to deplete banks’ deposits in the most vulnerable countries.
I am not saying that attention must not be paid to the exchange rate beyond its effects on inflation. Excessive deviation from its long-term fundamentals may create problems in terms of resource allocation and the business cycle. The exchange rate should be influenced through accumulating or reducing reserves. Some conditions must be met, however, in order for this to be effective and convenient. In the first place, it must be consistent with the inflation target, in order for the intervention not to threaten the credibility of the monetary policy. Secondly, to safeguard monetary policy independence, once the intervention is announced it must be implemented mechanically. All this shields the conduct of monetary policy, typically carried out in regular pre-established meetings, from the extraordinary decision of buying or not buying foreign currency. In particular, the sterilization of intervention decisions permits to preserve both the credibility and the independent management of monetary policy. Finally, and because of this sterilization requisite, the cost of intervention must be properly considered, because it entails a quasi-fiscal component that could be significant. In any case, to the extent that the decision to intervene is taken because of evident real exchange rate misalignments, the risk of suffering quasi-fiscal costs should be limited. Intervention would occur within the context of an extraordinary episode where the central bank would estimate that there are sufficient elements to evaluate that the current exchange rate dynamics are unsustainable and the market is not properly internalizing the long-term prospects of the real exchange rate.

José De Gregorio: Inflation targeting and financial crises Speech by Mr José De Gregorio, Governor of the Central Bank of Chile, at the seminar on financial crises Seminario Internacional de Crisis Financieras, organized by Banco de la República de Colombia and the Fondo de Garantías de Instituciones Financieras de Colombia, Bogota, 28 May 2009. I thank the valuable comments and insights of Luis Felipe Céspedes, Pablo García, Luis Opazo and Enrique Orellana. *  *  *  Thank you so much for this invitation. It is an honor to return after so many years to speak at a conference organized by Banco de la República and FOGAFIN. The subject this time around, Financial Crises, is particularly timely, with the world struggling through a crisis whose effects are still difficult to predict and that has propagated through the world with unprecedented strength and synchrony (Figure 1). Macroeconomic policies face major challenges in trying to cushion the effects of a crisis. Its origin, magnitude and degree of propagation make stabilizing the economy a particularly complex task. High uncertainty and, in some cases, poor functioning of key aspects such as credit markets, have affected the monetary policy transmission channels in a number of countries. The current crisis is providing a unique opportunity to continue fostering the design of economic policy frameworks that permit us to react to different shocks in the best way possible while at the same time reducing the vulnerability of our economies.