samchain/econo-pairs-v1 huggingface dataset:
Second, all investments abroad are subject to an exchange rate risk, whether they be government bonds, shares, real estate, commodities or investments in infrastructure, and irrespective of whether they appear on the SNB balance sheet or on that of a separate sovereign wealth fund. Consequently, outsourcing the foreign currency investments would not reduce Switzerland’s exchange rate risk. Third, outsourcing the foreign exchange to a sovereign wealth fund would call into question the independence of monetary policy and the SNB, as well as the freedom of action for monetary policy. The size and composition of the SNB’s balance sheet are a reflection of monetary policy. The SNB must also be in a position to dispose of the assets it has purchased and determine the composition of its balance sheet as required. Only in this way can it conduct an independent and target-oriented monetary policy. 4  BIS central bankers’ speeches

In a situation where the proportion of public spending has reached a very high level (in 1999 it accounted for 49% of GDP in the euro area, compared with only 39% in Japan and 34% in the United States) and where government deficits are limited by the Treaty and can no longer be covered by inflation, the role of private savings in the future financing of retirement attains a crucial dimension. I should like to end this first part by saying that the positive effect of price stability on domestic savings naturally contributes, in the world capital market we live in, to guaranteeing the lasting attractiveness of the euro area for long-term financial investments by non-residents. This also requires that other economic policies contribute to a favourable environment, through structural measures aiming at increasing flexibility in the labour market and efficiency in the markets for goods, services and capital. I have emphasised the effects of the Eurosystem’s monetary policy on the volume of savings and its consolidation. The creation, with the euro, of a vast currency zone also contributes to a more efficient management of savings. BIS Review 6/2000  2  2. The creation of the euro is leading to larger and more integrated financial markets, improving the allocation of financial savings. The creation of the euro has accelerated the development and integration of the capital markets in Europe, which have been helped along in recent years by financial liberalisation and technological innovation.
I can’t think of a better way of recognizing his many contributions – and kicking off what I know will be an exciting and fulfilling next stage of his career – than this roundtable which brings us together here today. Let me begin by highlighting some of the key points I will be making. First, what we’ve seen recently is not new. Changes in Fed policy, and especially moves in the past to tighten monetary policy, have often created challenges for emerging market economies (EMEs). Second, these countries, as a group, are better equipped today to handle those challenges than at perhaps any time in the past. This reflects the fundamental improvements and stronger policy frameworks that many emerging market economies have put in place over the past 15 years. Third, given the role of the dollar as the global reserve currency, the Federal Reserve has a special responsibility to manage policy in a way that helps promote global financial stability. Fourth, I believe we need better international mechanisms to cushion the adjustment process for when capital flows abruptly change direction. Like other central banks, our monetary policy mandate is domestic. But, our actions often have global implications that feed back into the U.S. economy, and we need to always keep this in mind. We also need to be careful not to underestimate the consequences of our actions.

But, these efforts should help us to avoid repeating the mistakes of the recent past, and to take a more proactive stance toward mitigating potential future vulnerabilities. Of course, we at the Fed are not alone here. Since the recent financial crisis, central banks worldwide have been engaged in a broad rethinking of how better to fulfill their mandates. I also think there is another area we need to work on, an area where very little has been done to date. We need to collectively devise a better international mechanism for facilitating BIS central bankers’ speeches  3  adjustment when the direction of capital flows changes abruptly. The current regime strikes me as inefficient and often ineffective. Holding large cushions of foreign exchange reserves is expensive, drawing down those reserves is often unattractive because of the potential adverse signal that this sends, and EMEs are loath to turn to the International Monetary Fund for resources to cushion the adjustment process. It seems to me that we could design a better global solution of collective insurance – access to liquid resources in times of stress that were not stigmatized and that could and would be used to facilitate adjustment. This could help reduce market volatility and dampen the size of foreign exchange and other adjustments. This is a topic, in my opinion, that deserves greater attention from central bankers around the world. Let me close with a final thought. The largest problems that countries create for others often emanate from getting policy wrong domestically.
22 In addition to making asset purchases, these central banks also developed programs targeting bank lending  channels, given that their capital markets are smaller relative to the banking system compared to the United States. 23 For example, 5-year Fannie Mae debt securities, which had traded, on average, 42 basis points above similar-  maturity Treasury securities in 2007, traded as high as 159 basis points above Treasury securities in November 2008. Similarly, current coupon agency MBS spreads averaged 137 basis points above similar-maturity Treasury securities in 2007; that spread was as high as 288 basis points in November 2008. Both of these spread levels in November 2008 were at or near the highest spread levels in many decades of available data. 24 On November 25, 2008, the FOMC announced purchases of $ billion in agency debt and $ billion in  agency MBS. On March 18, 2009, this program was modified to include a total of $ billion in agency debt and $ billion in agency MBS, as well as $ billion in longer-term Treasury securities. 25 Federal Reserve Board of Governors press release, November 25, 2008. 26 See Hancock and Passmore (2011) 27 See Gagnon, Raskin, Remache and Sack (2010). 28 Note that at that time the Federal Reserve was already in the middle of the maturity extension program (MEP)  which was selling shorter-maturity Treasury securities and purchasing longer-maturity Treasury securities. When the MEP expired in December, purchases of $ billion per month in Treasury securities were added to the LSAP.

Lastly, when participating in non-sovereign markets for the first time, a central bank might need to learn more about the asset class and build or refine the internal systems needed to operate in that market.11 In all these cases, a central bank might choose to diversify across different asset classes to achieve its policy objective. With these considerations in mind, I now want to turn to a discussion of the large-scale asset purchase programs pursued by the Federal Reserve. My focus will be on the Fed’s agency MBS purchases—which provide the central bank with an additional policy transmission tool and significant additional capacity to provide policy accommodation. Although the purchase of U.S. Treasuries is not central to my remarks, it is important to note that the Federal Reserve is fortunate in having a sovereign debt market that is the deepest and most liquid in the world and is sufficiently large that there are no close capacity limits. The experience with the three LSAP programs and the Maturity Extension Program showed that the Federal Reserve was able to purchase Treasuries at a fast pace without affecting market functioning. Before continuing to the main part of my discussion, I would also note that my intention is to consider the practical and operational issues surrounding the implementation of LSAPs, rather than to debate the merits of LSAPs relative to other potential monetary policy tools. There are a number of important issues linked to the potential costs of LSAPs but unrelated to these implementation issues.
As we know from the work of Michael Woodford and Gauti Eggertsson, Ivan Werning, Paul Krugman6 and others, the optimal policy response to a liquidity trap may involve a commitment to keep policy rates quite low for a period of time after the real equilibrium rate has risen enough so that the zero lower bound is no longer binding. This is a strong form of forward guidance akin to Ulysses tying himself to the mast to avoid changing his mind upon hearing the siren’s seductive music. Of course, in the real world, we cannot observe the equilibrium real rate, and so we cannot directly implement such a policy. We can capture the spirit of these recommendations, however, by committing to keep policy rates exceptionally  6  4  Eggertsson and Woodford (2003), Werning (2011) and Krugman (1998). BIS central bankers’ speeches  low until certain observable economic triggers are met that would be consistent with the economy being well past the liquidity trap. At the same time, some worry that the output gap and overall resource slack is small. I don’t subscribe to this view. But what if it were true? What kind of new information might we learn that would change our views about the magnitude of resource slack? Well, in the 1970s, we learned the hard way that underestimating resource slack and running full out accommodative monetary policies will lead to unacceptably high inflation.

Although the time profile of the adjustment process is different, as is the degree of short-term pain involved, internal adjustment arguably leaves the economy leaner and fitter than it would if everyone could simply depend on depreciation to see them right. The second flawed perception was that the intervention by the authorities in the stock market in August 1998 represented a fundamental reversal of traditional non-interventionist policy. The mistake here was to fall into the trap of characterising Hong Kong as a place where the authorities never intervened. We have always made clear our preparedness to intervene for such purposes as promoting efficiency in the market economy, providing infrastructure, or providing necessary support for the most needy in society. But our emphasis has always been to keep intervention to the minimum. This may sound uncontroversial today; indeed, it is probably an attitude shared by most governments, including those here in Europe. But you should remember that when Hong Kong was first vigorously espousing this doctrine, perhaps 30 or 40 years ago, the vogue in most western countries was for the  1  BIS Review 23/2000  state to assume an expanding role in the economy. In keeping with Hong Kong’s principles, the stock market intervention in 1998 was specifically directed towards improving the operation of the market economy rather than perverting it: it was designed to frustrate market manipulation that would otherwise have led to serious market dislocation.
or above as soon as the deposit in the payer’s account allows this to be done. The system thereby transfers payment orders, which are above the minimum needed to qualify for the RTGS system, directly to or from participants’ current accounts with the Central Bank. The RTGS system has a triple function. Firstly, the Central Bank uses the system for the implementation of its monetary policy; secondly, it is used in transactions by credit institutions with the Central Bank; and thirdly, it is used for gross settlements between credit institutions. The security and functionality of this system are thereby preconditions for enabling the Central Bank to achieve its objectives for both price and financial stability. Consequently, operation of the RTGS system has been assigned to the Central Bank, a familiar arrangement from many other countries. The Bank’s duty is to strengthen the security, efficiency and independence of the system. At the end of 2002 agreements were made with all system participants specifying payment authorisations and collateral security for settlements. This represented a major step towards bringing arrangements for the credit institutions’ transactions with the Central Bank into harmony with best international practices. Automatic Central Bank guarantees for settlements in the RTGS system are thus a thing of the past. Work is still in progress on developing the system. This year it is expected that the rules governing it will be revised, its independence be enhanced, collateral security amounts for settlements be reviewed, handling times be shortened and settlement limits be lowered.

36 The inflation target was finally formalised in a new regulation on monetary policy in 2001, a good eleven years after New Zealand, nine years after the United Kingdom and eight years after Sweden. The mandate for Norges Bank states that monetary policy shall, in addition to securing price stability, contribute to stabilising output and employment. It is possible to give weight to cyclical fluctuations in interest rate setting, and to new information, as long as there is confidence that inflation remains near the target. The central bank’s announced interest rate strategy ahead will be adjusted as new information emerges. This stands in contrast to the parity system, which was more rigid. The authorities cannot systematically allow policy to be more expansionary than announced to bring down unemployment. As Kydland and Prescott demonstrated, this would lead to  33  Another difference is that under parity policy the authorities stabilised the price of gold and not the price of a basket of representative goods – the consumer price index. Today, stabilisation of the consumer price index would be described as price level targeting. Inflation targeting, on the other hand, implies stabilisation of changes in the consumer price index. There is also a difference in that there is no longer any redemption obligation. Confidence is not based on gold reserves, but more generally on responsible economic policy as a basis for achieving the inflation target through the active use of the interest rate.
The digital currency for a changing world Let me now turn to my second topic: the technological evolutions underway in the fields of finance and payments, which has led us, the Eurosystem, to have launched an investigation phase on a retail central bank digital currency (CBDC) under the sponsorship of President Christine Lagarde and my friend and colleague Fabio Panetta. Pending an approval by the Governing Council, a preparation phase will then start at the end of this year, before a potential and gradual launch from 2027 or 2028 onwards. I am aware I am entering here a less consensual ground, listening to banks’ doubts along two arguments (i) the CBDC would be a ‘solution in search of a problem’, the ‘why?’ question (ii) and the CBDC would be a competitor to commercial bank money. The purpose: a digital banknote About the ‘why?’, I can imagine that two centuries ago, there were many voices questioning the need for a paper banknote – at that time a huge technical innovation – to be issued along the good old gold and silver coins. Today, it all  Page 4 of 6 boils down to one simple question: as everything is becoming digital, why should central bank money be the only thing to remain in paper? As many of you know, central banks have also – and fortunately so – innovation in their DNA i, keeping pace with technological disruptions.

As said, it’s very probably our duty to issue a CBDC, but it’s our will to issue it with you, commercial banks, and not against you. Developing a scheme of shared benefits for all stakeholders More generally, I would like to insist that there can be benefits for every stakeholder along the chain. The ‘economic equation’ can be worked out so that each and every one – including banks and merchants – has a direct interest in being part of it, like for cash issuance today. We are well aware that, to quote the words of our host, payments have gone from being a simple convenience to a central element of banks’ relationships with their customers, and we strongly desire that this will continue to be the case. The European payment ecosystem as a whole will also benefit from the digital euro, rather than giving ground to so called ‘stablecoins’ probably issued by nonEuropean players. vii The scheme we are currently developing will enable the emergence of open acceptance standards on a pan-European scale, fostering convergence and enabling all players to build further innovations on common ground. In short, a digital euro will act as a ‘platform for innovation’ viii – including for solutions in commercial bank money, which will benefit from the acceptance  Page 6 of 6 standards of the digital euro.
On the other hand, whatever the underlying market’s  BIS Review 37/2004  5  dynamics, economic agents are convinced the central bank will ensure price stability: credibility matters. In such a context, misperception from both sides can generate aggregate instability, characterised by unsustainable market developments and the emergence of financial imbalances. This is one of the reasons why central banks have to make use of the widest possible set of information variables to cope with uncertainties. In such a context, asset prices, inflation - indexed bonds play an important role as information variables; but one has to bear in mind that they are endogenous to the monetary policy decisions via the expectations channel. Thank you for your attention. 6  BIS Review 37/2004

The stance of each central bank will respect local economic conditions, but the absence of a coordinated action on a global scale cannot be an excuse for a lenient stance on the domestic inflation front. More specifically, the Brazilian Central Bank has not waited and will not wait for other central banks to act in order to start fighting domestic inflationary pressures. Not acting promptly would enable initial specific price pressures to contaminate inflation dynamics permanently, due to deteriorated inflation expectations of both price and wage setters. BIS Review 108/2008  1  In the beginning of 2008, the Brazilian Central Bank stressed in its regular publications that inflation risks had mounted, a fact that could require an adjustment in its monetary stance. This assessment surprised many analysts that expected inflationary pressures to be contained by a spontaneous slowdown in economic activity, an expectation that did not materialize. Other analysts seemed to believe that increases in commodity prices were temporary and that the Central Bank should wait for the complete materialization of inflationary pressures to finally start acting. It is clear now that this complacent approach would have had deleterious and long-lasting consequences for the economy. As repeatedly stressed by the Central Bank, the balance of risks for inflation became less favorable, not only due to external factors, but also – and more importantly – due to domestic factors. On the external front, the contribution of imports to sustain a benign inflation scenario has become less effective.
Innovation in finance is not an end in itself. And competition in finance has to be more than a zero sum game - it has sometimes looked like that, as trading desks compete against each other to be a fraction of a second faster and to knock the other out. Competition and innovation has to be aimed at serving the needs of society and the economy better, here in Singapore and abroad. So it is worth reminding ourselves of these larger purposes and opportunities. I will highlight five: First, financing the growth of infrastructure in emerging Asia, and increasingly of climate-resilient, low-carbon investments. Both banking and capital markets should seek to meet what is still a huge financing gap in the region for critical and sustainable infrastructure. Second, financing growth enterprises and SMEs. SMEs are the backbone of all our economies. Besides finding new ways to meet their financing needs, banks can also help to raise their productivity by helping them adopt digital services. Third, reducing costs and improving convenience for consumers. We are already seeing major changes here, especially in cheaper, more convenient and seamless payments. Fourth, in helping people to plan early and achieve financial security in their later years. Singapore has recently come up top in the world for life expectancy. It is to be celebrated, but it also increases the need for good financial advice, and for those with savings outside their CPF accounts to be able to invest in products that will help them achieve greater retirement security.

This is in fact going to be a growing challenge in much of Asia too. Finally, creating good jobs. In Singapore, the financial industry employs close to 200,000 people, most of them in relatively well-paying jobs. Technology will replace many tasks and even whole jobs in finance. But with proactive upgrading of skills to keep pace with new technologies, and with the continuing growth of our financial centre, we must and will provide good jobs in finance for many years into the future. How finance is being transformed 14. The digitalisation of finance is picking up pace, and will transform banking. 15. There are essentially three key forces driving this transformation: pervasive mobile internet access, the rise of big data, and the growth of platform ecosystems as a major new business 2/6  BIS central bankers' speeches  model in finance. The three forces are also reinforcing each other, and together transforming banking in more fundamental ways than we have seen before. 16. Smartphones and tablets are ubiquitous. Pervasive broadband access has coupled mobility with connectivity – so interaction is real-time and unconstrained by where you are. The smartphone is now our grocery store, our restaurant, our bank, and much more. 17. Second, big data. We have unprecedented computing power, coupled with cloud technologies that allows us to store and retrieve large volumes of information at low cost and ondemand. Firms are also gathering a lot more data from a wide variety of sources, including social media and e-commerce platforms.