samchain/econo-pairs-v1 huggingface dataset:
As I will set out, the regulatory measures put in place have clearly strengthened the resilience of our banking system, and we therefore have reasons to be optimistic in this regard as well. That said, if we are to sustainably safeguard the stability of the financial system, it is imperative that we implement in full the regulatory measures that have already been agreed. We must also continually review them to ensure they are fit for purpose. Let me begin with some comments on the current economic situation and monetary policy. The economic situation and the SNB’s monetary policy Economic situation  The Swiss economy improved continuously last year. Capacity utilisation increased and unemployment declined. Real GDP in the fourth quarter of 2017 was up 1.9% year-on-year, while inflation also returned to positive territory last year for the first time since 2011. The improved economic situation is not only attributable to the upturn in the global economy. There have also been favourable developments on the foreign exchange markets, as the Swiss franc has weakened since the second half of 2017, against the euro in particular. This has boosted the price competitiveness of export-oriented industries and provided welcome relief for the Swiss economy. The Swiss franc’s trade-weighted real external value is currently around the same level as prior to the discontinuation of the minimum exchange rate in January 2015. There has thus been a reduction in the significant overvaluation, but our currency nevertheless remains highly valued.

Difficulties in generating sufficient tax revenues are considered to be an important explanation for the high inflation in countries such as Germany, Austria, Hungary, Poland and Russia after the First World War and also for the highest rate of hyperinflation in the modern age, that in Hungary in 19451946.6 According to some estimates, prices at their fastest then doubled in fifteen hours.7  Inflation often also rises in the rest of the world The factors I have mentioned so far are those that can contribute to higher inflation in countries that are, or have recently been, directly involved in a war. But war can also cause higher inflation in the rest of the world. The war itself can generate increased demand on the world market for various products such as oil and certain metals. The warring countries can also be important exporters of some commodity or product which they can no longer produce or export as a result of the war. The latter results in lower supply and higher prices on the world market. Examples include the increases in oil prices that arose in connection with, for example, the Yom Kippur War, when the oil-exporting countries in the Arab world decided to cut their exports, and the war between Iraq and Iran.
This eventuality transpired in the market tensions that emerged in late September, following the then-Government’s mini-budget announcement.13 A number of my colleagues have already described the events surrounding the decision to postpone the scheduled start of QT gilt sales in early October, as the Bank implemented financial stability operations in the form of additional gilt purchases, including purchases of indexed gilts.14 I won’t repeat that detailed description here, other than to flag that these operations were intended to restore market functioning in long-dated government bonds and reduce risks from contagion to credit conditions for UK households and businesses. Rather I will conclude with some more general observations about the relationship between monetary policy decisions taken by the MPC and financial stability operations conducted by the Bank. Not much of this is new – indeed, I have written about these issues in the past,15 colleagues at the Bank have published an overview of their research into asset purchases in a recent Quarterly Bulletin article,16 and the Bank has taken a leading role in international forums such as the Bank for International Settlements where  Bank of England  Page 9  the role asset purchases can play in promoting monetary and financial stability.17 So I simply offer a few general high-level remarks to frame our discussion this evening.

The FCI is an average of two alternative FCIs, one in which the weights are derived from the impulse response of HICP inflation to a shock in each of the four financial variables from an estimated value at risk (VAR) model, and the other where the weights are derived from the elasticities drawn from a set of projection models used in the (broad) macroeconomic projection exercise. The latest observations are for 14 May 2020. Chart 9 External financing conditions of euro area NFCs (percentages per annum)  Sources: Refinitiv, Merrill Lynch and ECB calculations. Notes: Monthly data. The blue dots refer to the nowcasts for April 2020 (left dot) and May 2020 (right dot) for the overall cost of financing, assuming that bank lending rates remain unchanged at their March 2020 levels. The latest observations are for May 2020 for the costs of equity and debt, and March 2020 for the costs of lending. Chart 10 Financial and non-financial equity prices  https://www.ecb.europa.eu/press/key/date/2020/html/ecb.sp200519~e5203d3520.en.html  7/14  5/19/2020  Pandemic central banking: the monetary stance, market stabilisation and liquidity  (1 January 2019 = 100)  Sources: Bloomberg, Datastream, Refinitiv and ECB calculations. Notes: Daily data. The indices used are the Datastream indices for non-financial and financial corporations. The latest observations are for 14 May 2020. Chart 11 Euro area corporate bond spreads (basis points)  Sources: iBoxx, Bank of America Merrill Lynch and ECB calculations. Notes: Daily data. The latest observations are for 14 May 2020.
The global recovery, in a context of ongoing logistical problems for production, has led to a widespread increase in costs. For now, this is expected to be a transitory phenomenon, as the increasing openness of economies and greater adaptation will normalize the supply of many goods and services. In any case, considering also the high domestic demand, local inflation may be somewhat higher than expected in the short term. The temporary nature of such an event does not require a monetary policy reaction. However, the scenario would be different if these global inflationary pressures were to have a more persistent impact on local inflation. In that case, an earlier withdrawal of the monetary stimulus would be necessary. In addition to the sensitivity tests, risk scenarios are analyzed in which the changes in the economy would be more significant and which would call for a more intense monetary policy reaction. At home, the risks associated with an evolution of public finances that is not clear about their long-term stabilization stand out, which could affect domestic financial conditions, investment, and the perception of country risk. Externally, the main risk continues to be an abrupt change in international financial conditions, an event that has become more prevalent due to doubts about the evolution of inflation in the United States. The intensity of these scenarios may jeopardize the convergence of inflation within the policy horizon, push activity below the expected ranges, and/or compromise the proper functioning of financial markets. VI.

Rather, she is impressively balanced and fully aware, at least in my opinion, that her legacy will be whether she can successfully complete Act V by realizing the Fed’s mandate to maintain price stability while providing the monetary means to achieve full employment. All of which means that despite the mighty efforts of Captains Bernanke and Yellen and their officers and crew, present company included, we do not know how “The Grand Experiment” drama will end. We certainly all hope it proves an inspiring history, not a tragedy. But, we will not know for some time. We will not know until the curtain drops on Act V. R.I.P? Betsy Duke had it right: Only when we have normalized monetary policy – only when the play is done – will we know if QE3 rests in peace or comes back to haunt us. Only when it is done will we know if “The Grand Experiment in Modern Monetarism” is a smash hit or a bomb or something in between. As Yogi Berra said and Lenny Kravitz sang: “It ain’t over till it’s over.” But one thing I know for sure: This speech is over. Thank you for listening. And now, Mickey, time and patience permitting, I would be happy to avoid answering any questions you and your colleagues might have.
Term deposits are likewise similar to IOR; TDF offers a somewhat higher rate to banks that are willing to lock up their funds for a time. 22  The FOMC’s decision to use a target range for the federal funds rate, instead of a point target as was used prior to December 2008, further supported the use of this operating framework. The FOMC’s use of a range supports this framework by underscoring the fact that variation of the effective rate within that range is expected and is consistent with the level of interest rate control it desires. 23  Frost, Logan, Martin, McCabe, Natalucci, and Remache, “Overnight RRP Operations as a Monetary Policy Tool: Some Design Considerations,” February 2015. 24  It seems particularly appropriate to pay close attention to the integration of money markets in light of the increase in bank and dealer balance sheet costs that has ensued from post-crisis changes in financial regulations and other factors. 25  See Chair Yellen’s September 17, 2014, press conference. “To begin normalization, the Committee will raise its target range for the federal funds rate. The Committee expects that the effective federal funds rate may vary within the target range, and could even move outside of that range on occasion, but such movements should have no material effect on financial conditions or the broader economy.”  26  See the September 2014 Policy Normalization Principles and Plans.

One tentative indication that high capacity may be playing an important role is that unsecured rates appear to have settled in about the same position relative to IOR as before liftoff, even though one might have expected the widening in the IORON RRP spread and the lower support from the ZLB to result in some downward shift. The ON RRP also has a per-counterparty cap, which was, and is, $ billion. It seems that the current level of the per-counterparty cap was also adequately large for perceived individual “headroom,” thereby supporting lender bargaining power. Figure 14 shows summary data on how frequently we receive large bids in our operations at the ON RRP and term RRP facilities. As you can see, we rarely see bids of more than $ billion, and combined individual counterparty usage across overnight and term operations has never exceeded $ billion. Recently, we learned a bit about the term RRP operations. We have been conducting these over quarter-ends as a way of providing additional RRP capacity. Additional capacity is available because term RRP operations are subject to a separate overall size limit, and because there is no per-counterparty cap in those operations. Counterparties appear to regard these as close substitutes for ON RRPs, and as shown in Figure 15, we’ve typically seen that overall RRP take-up, across overnight and term RRP, has been fairly stable across quarterends. At this past year-end, there was essentially no take-up at the term RRP operations.
This means an increase in provisions and a decline in bank profits during expansionary periods, just when credit risk expands the most. When the downturn arrived and expected losses turn into real losses, the impact of provisions on profits would be lower since a significant amount of the expected loss had been previously acknowledged. To the extent that the extra volatility of bank profits is the result of an insufficient recognition of expected losses, dynamic provisioning only restores part of the distortion created. From a prudential point of view, it is clear that dynamic provisioning limits dangerous capital erosions in times of plenty, requiring banks to provision expected losses and avoid paying out dividends (remember the insurance case). Some observers mention that there is no need for ex ante provisioning since future margin income is enough to cover expected losses. For supervisors, however, to rely on future margin income might be an overly adventurous stance. 6  BIS Review 35/2002  Let me expand more on this. First of all, experience has painfully shown us that the pricing of a loan is not always properly adjusted to the risk involved in the operation (even taking into account fees and future customer relationships). I have already talked about strong competition for market share or over-optimism. Secondly, even if the risk is properly priced, the proceeds from a high margin could have been paid out to shareholders by the time the impairment appears.

However, in a slowdown, as the impaired assets rise, the specific provision requirements increase and the statistical provision becomes negative. This means that the statistical fund (accumulated in previous years) starts being used, its proceeds (the difference between the latent risk and the specific provision) being credited to the profit and loss account. Therefore, thanks to the mechanism of the statistical provision, the burden of credit risk on the profits of banking institutions is better spread over the cycle and more in accordance with the evolution of expected losses. The new scheme offers banks two options. First, to use their own internal measurements of the statistical credit risk and second, to use a standard method. The Bank of Spain expects that in the future an increasing number of institutions will be able to show robust computations, in the framework of an integrated credit risk management system. However, probably in the next year or two, most banks will use the standard method. In the standard system the supervisor sets the parameters. The portfolio is distributed in six blocks, according to the relative riskiness of the different assets, or off-balance sheet items with credit risk. A vector of coefficients (ranging from 0 to 1.5%) is applied to the exposures contained in the six blocks. The resulting figure is the estimated expected loss for the bank portfolio. The computation produces an aggregate annual gross burden (i.e.
At this point, it is customary to wheel out the following, now rather over-used, Paul Krugman quote: “productivity isn’t everything, but in the long run it is almost everything.” Despite its over-use, this quote does have one important virtue, something not to be taken lightly in this post-fact, post-truth world: it is empirically verifiable and appears to be factually accurate. Let me illustrate that with a simple example. Since 1850 UK living standards, as measured by GDP per head, have risen roughly 20-fold, a huge gain. How much of that gain can be attributed to higher productivity? Well, if productivity had flat-lined over the period, UK living standards would only have only doubled. Or, put differently, in the absence of productivity growth, UK living standards would be an order of magnitude lower today, stuck at late-Victorian levels. A more refined way of reaching the same conclusion is to decompose growth into the contribution from inputs into the production process – labour and capital – and the contribution from improvements in the efficiency with which these inputs are used – so-called Total Factor Productivity (TFP). Chart 1 does that for the UK since the Industrial Revolution. This suggests movements in TFP have accounted for the lion’s share th  of both the growth and variation in living standards since at least the mid-18 century. Saying that productivity matters is not the same as saying we understand its determinants. The past few years have served to underscore just how partial economists’ understanding of productivity remains.

It means these assets are often not valued fully by investors and lenders. This raises the cost of capital for these firms to sub-optimally high levels – a market failure. Remedying that market failure, by ensuring intangible assets are consistently and coherently valued, is important if these companies are to grow to reach their full potential. 61  57  For example, Song et al (2015) find that virtually all the rise in earnings dispersion between workers is accounted for by increasing dispersion across the average wages paid by different firms. 58 Andrews et al (2015) and Dabla-Norris et al (2015). 59 HM Government (2013). 60 Aghion et al (2017). 61 Big Innovation Centre (2017b). 18  All speeches are available online at www.bankofengland.co.uk/speeches  18  More broadly, it is possible that current UK corporate governance practices may act as a brake on innovative companies. A recent report by the Big Innovation Centre makes important proposals for re-purposing UK companies to support long-term investment and productivity. 62  The government recently initiated a Patient  Capital Review to explore how best to support the financing of innovative companies as they scale-up. 63  A third category of policy measure focusses on the fortunes, not of innovative frontier companies, but the long tail of low-productivity non-frontier firms. These companies have tended to be focussed on somewhat less historically. Indeed, their large numbers and disparate characteristics may be one reason why this is the case.
Today, this percentage is 63%, which is by 81 persons more, with the total staff number being increased by roughly twenty, and the workload being significantly enhanced. In 2004, there were only 20 masters of science and one philosophy doctor, and presently, there are 46 masters of science and 7 philosophy doctors. Distinguished, When you summarize a stage which is over, you either ask yourself or other ask you what were the most exciting or most critical moments? First, the economy is a permanent intrigue, a constant unknown variable in an open equation for which you constantly seek for a solution. From this viewpoint, each single day and year is a real excitement for the professional analysts and a field that you never stop plowing. However, on this occasion, I would highlight three moments: The first one happened at the beginning of my term. Stories were told about the devaluation of Denar, the abandonment of the stable exchange rate policy, on the usefulness of higher inflation. Professors were making statements that inflation ranging from 8 to 10% would be useful. Even, in the Macedonian Academy of Science and Arts (MANU) there was a debate on this issue, making points that very high percentages of inflation would, allegedly, be very useful. The trade deficit was high as usual, the current account deficit was also high. We intervened with foreign reserves to calm down the market, and consequently, their level went down.

(3) In 2004, the foreign reserves stood at Euro 717 million, and in 2011 (April) they climbed to Euro 1 872 million, which is by 2.6 times more, and always ample to respond to the occasional imbalances in the foreign exchange market. (4) The crucial question would be: Was the banking system making enough credits i.e. was the National Bank disabling the “smooth” lending to the private sector, or was it the opposite? The figures speak for themselves! In the seven-year period from 1997 to 2003, the average annual credit growth equaled 11.6% and in the seven-year period from 2004 to 2010, it equaled 23.1%, which is by two times faster. The comparison between the credit growth and the GDP growth shows that in the 2004–2010 period, the nominal credit growth was by 3.12 times faster relative to the nominal GDP growth, while the credit real growth was by 5.7 times higher relative to the real GDP growth. Should this difference be even greater? (5) The banking system also improved substantially. It remained undamaged even during the Great Recession. i. The solvency remained high. The capital adequacy ratio was preserved to a very good level of 16.4%. The liquidity, after the worrying downward trend (2007, 2008 and early 2009), was reestablished, thanks to the undertaken measures, to a very solid level. In March 2009, the liquid assets constituted 20.2% of the total assets, and in December 2010 it made up 30.7%. The household deposit-liquid asset coverage ratio increased from 44.6% to 61.9%.
The basic idea behind monetary theory is that money is essential because the economy is so large that we cannot rely on everyone always keeping their promises. Another way of expressing this is that there is no easy way of writing perfect contracts with everyone else in the economy. On a small scale we could explain it with an example. Pelle works as a teacher and he wants food. Anna works as a farmer and wants her children to go to school. If Anna could promise Pelle that he could have food when she harvests in the autumn, Pelle could teach the children all year and then receive food when Anna harvests. But if Anna’s children have already received their schooling, there is no incentive for her to give Pelle food afterwards. Anna and Pelle could, however, sign a contract that ensures they each keep their side of the agreement. If we imagine that this type of contract were to be signed with everyone from whom we want goods and services, we soon realise that it would become very complicated 2 Money is a broader concept than just cash. Most of the money in Sweden today is electronic money issued by  the banks. 3 See, for instance, Williamson and Wright (2010) or Lagos et al. (2,017). 3 [35]  to write all of these contracts, and that some form of further guarantee was needed to ensure the contracts were complied with.

GDP is calculated as the total of the current quarter and the three previous quarters. For any quarter(s) that GDP has not yet been published, the most recently-published GDP statistics are used. Sources: Bank of England, Federal Reserve, Macrobond and the Riksbank  Figure 12. Government bonds, municipal bonds, mortgage bonds and corporate bonds over time Nominal amounts, SEK billion 7 000 6 000 5 000 4 000 3 000 2 000 1 000 0  13  14  15  16  17  18  Central government  MFI, covered  Municipality and Kommuninvest  Non-financial corporations  19  20  Note. Securities debt in different sectors. MFIs (monetary financial institutions) include banks, mortgage institutions and finance companies. The series for municipalities’ securities debt refers to individual municipalities’ and regions’ borrowing and the borrowing through Kommuninvest i Sverige AB. The statistics refer to securities debt in SEK and foreign currencies. Sources: Statistics Sweden and the Riksbank  34 [35]  Figure 13. Central banks’ government bond purchases in relation to GDP in Sweden, the euro area, USA, UK and Japan Per cent of GDP 100 80 60 40 20 0  The Riksbank  ECB  Federal Reserve  Bank of England  Bank of Japan  Note. Nominal holdings as of 31 March 2021. Striped bars represent the Riksbank’s purchases of municipal bonds. Sources: Macrobond and national central banks  Figure 14.
1986:1 -1999.12 ( ex 1990:9) :  17.9 [18.0]  3.60  2000:1 -2004:07  27.7 [27.4]  4.51  O IL  04  Figure 3 Correlation between oil price and GDP R e v e r s e d c a u s a lit y : O il is d e m a n d d r iv e n s in c e 1 9 9 5 40  .0 5  35  .0 4  30  .0 3  25  .0 2  20  .0 1  15  .0 0  10  -.0 1 1985  1990  O IL _ O E F  1995  2000  G DPW O RLD_YY  Correlation: World-GDP (yoy) and Oilprice  6  1980 -1994.4  -0.389  1995.1 -2004.4  +0.330  BIS Review 69/2004  Figure 4 US oil inventories  60  360 340  50  mn barrels  320 40  300  30  280 260  20  240 10  220 200  0 1  4  7  10 13 16 19 22 25 28 31 34 37 40 43 46 49 52 W eek  W eekly Min and Max since 1994  Crude Oil Inventory 2004 (4wk avg.)

The discussion will specifically focus on aspects of central bank boards as well as lessons and conclusions drawn from the February Seminar. Ladies and Gentlemen, I have no doubt that deliberations of this Seminar will be of great benefit to all of us. I also hope your journey to Sri Lanka will give you a chance to see a little of our country and meet our people. We have arranged for you to see some places of interest in Sri Lanka. Let me conclude by wishing you a productive Seminar and pleasant stay in Sri Lanka. Thank you. 2/2