samchain/econo-pairs-v1 huggingface dataset:
Now is the time to act in France, where stepping up reforms is a priority, with a focus on two main areas: on the one hand, sustainably consolidating our public finances, and on the other, aiming to achieve an overall transformation, with and a major simplification effort in both labour market and the goods and services market, and large-scale investment in education, vocational training and apprenticeships. Even though we must pursue this course, this is what the new government appears to be doing with the labour market reform underway since this summer, and efforts to bring the government deficit down to 2.6% in the 2018 budget, well below the threshold of 3% of GDP for the first time in 11 years. Now is the time to act in Europe, above all. We cannot both overburden monetary policy – our German friends are right in this respect – and refuse Economic Union which is the prerequisite for a sounder Monetary Union. So we must not let ourselves be slowed down by sterile debates or false suspicions: there is no question of implementing a “transfer union”, which would only benefit certain countries; we must not get bogged down by  Page 7 sur 8 considerations about methods either, between intergovernmental and community methods.

I believe that this is a critical component of the interest rate benchmark reform agenda. Structure of the group The Working Group we have initiated today is a private-sector group comprised of senior subject matter experts from major sterling swap dealers. Participation is at the invitation of the Bank of England, and we have convened this particular group because our experience of derivatives reform suggests that the swap dealer community can be most influential in catalysing a transition. BIS central bankers’ speeches  1  It will of course be necessary to reach out to a wide range of stakeholders – but the commitment to change must originate from this group, and this group is best placed to promote adoption amongst the swap user community. In particular, we expect that you will reach out to CCPs, exchanges, benchmark administrators, and end users – including institutional investors and corporate treasures. The Bank is prepared to facilitate this outreach process by hosting roundtable meetings at the request of the Working Group. The International Swaps and Derivatives Association will participate in a non-voting capacity and provide guidance on contract robustness and reference rate transition. Representatives from the Bank of England and the FCA will participate as ex-officio members. The Bank will also provide a secretariat, host meetings, and publish the terms of reference of the Group, meeting agendas and minutes on our website. 1 Aims of the group and timeline The rest is up to you.
Currencies of countries which, like Sweden, have a high foreign debt were most exposed. The currencies of Australia and Canada, which, like Sweden, target inflation with a flexible exchange rate, depreciated markedly last autumn; in the calmer situation since the turn of the year, these currencies have also strengthened and become more stable. Another factor in the krona’s case is that higher expectations of Sweden joining the euro area have helped push our currency closer to the value implied by economic fundamentals. In the run up to Stage Three there was also some apprehension about how the krona might be affected; after the event, this unrest tended to subside. The Riksbank’s forecast has thus proved to be on the cautious side to date. Nonetheless, I do not consider that developments warrant a revision of our long-term assessment last December, namely a gradual appreciation in terms of the TCW index to about 118 by the end of 2000. Since the publication of the December Inflation Report, interest rates in Sweden have fallen, by almost 0.15 percentage point in the case of the three-month rate and 0.4 percentage point for 10-year bonds. In that inflation expectations have not moved down as much as the nominal interest rates, the real level of interest rates has also fallen and is now historically low. The pronounced downward movement may turn out to have included some overshoot in the market, to be followed by an upward adjustment of market rates. Signs of this have been discernible in recent weeks.

BIS central bankers’ speeches  5  In short, the country is prepared to face a somewhat less favorable external scenario next year, which undoubtedly will have effects on the domestic economy. For years we have built solid macroeconomic balances, which yield their fruit when adverse situations hit. We are confident that, in such a scenario, this will be no exception. Our institutions, solid but flexible at the same time, distinguish us in the world. This allows us to look at the country’s future with calm and optimism. We as central bank will continue to contribute our own efforts to the stability of the currency and the normal functioning of the internal and external payment system, the development and welfare of the Chilean population. Thank you. 6  BIS central bankers’ speeches  Figure 1 Nominal exchange rate variation in 2013 (*) (percent) South Africa India Indonesia Australia Brazil Turkey Peru Colombia Malaysia Philippines Russia  Emerging Asia  Chile New Zealand  Latin America  Thailand  Other  South Korea Poland  Emerging Europe  Mexico Hungary Czech Rep. Bulgaria Slovakia China  -5  0  5  10  15  20  25  (*) An increase denotes a depreciation. Sources: Central Bank of Chile and Bloomberg.
So how do we create a better and more sustainable structure for the financial markets both nationally and globally? I do not have the perfect answers to all of these questions. I doubt that anyone has. But I shall spend the next 20 minutes trying to answer them to the best of my ability. And I hope this will provide a good basis for the coming hearing. Monetary policy and the economic situation The downturn in the world economy has been very rapid and severe – in this way the worst in many decades. Sweden is an export-dependent economy and has been hit hard partly because of this. It will take time before the economy is back at the same level as prior to the crisis. But now we have come so far that the recovery has begun. One important component to which I shall also return is that the conditions on the financial markets have improved. Several indicators are also showing that confidence in the future among both companies and  BIS Review 138/2009  1  households has become much stronger, an important factor in the economic recovery (Figure 1). Figure 1.

Stefan Ingves: Introduction on monetary policy and financial stability Speech by Mr Stefan Ingves, Governor of the Sveriges Riksbank, before the Riksdag Committee on Finance, Stockholm, 5 November 2009. *  *  *  A little more than a year has passed since the financial crisis swept over the Swedish economy with full force. A dramatic year, which, despite vigorous measures by central banks and other authorities around the world, has led to the worst economic recession for many decades. But now the economy is beginning to recover, although it will take time before we are on firm ground again. So where in the crisis cycle do we stand today? How should the Riksbank act to attain the inflation target and to provide support to the economic recovery in the best possible manner? It appears as though the Swedish economy will land on its feet on this occasion, but it is also necessary to keep our balance in the future. This is in many ways a global challenge and a process of change, in which Sweden should play an active role. When we met here at the Committee on Finance hearing about a year ago, the global financial crisis had quite recently had its major impact on Sweden. The problems mainly originated abroad – through the now cross-border financial markets and through the downswing in the world economy hitting an export-dependent economy like ours particularly hard.
I have ventured to outline three lessons that are hopefully are universally valid. But we can never be sure. I mentioned Ibsen’s “Enemy of the People”. Allow me to conclude with Doctor Stockmann’s comments:  Riksbank’s was not permitted to print banknotes when it was founded. In Norway, Jørgen Thormølen issued banknotes in September 1695. His venture lasted a year! See Anders Bjarne Fossen (1978), Jørgen Thormølen. Forretningsmann, storreder, finansgeni [Jørgen Thormølen. Businessman, shipping magnate, financial genius]. Eirnar Blaauw A.S, Bergen. 25  In Act I of Part II of Goethe’s Faust, published in 1832, the Emperor is in financial difficulties. Mephistopheles convinces him to print paper money backed by gold that has yet to be mined to boost economic activity. This works for a while, until soaring inflation destroys the economy. Jens Weidmann, the President of the Bundesbank, spoke of the dangers posed by overly unrestricted monetary policy, based on Faust, during the festival “Goethe und das Geld” in Frankfurt in September 2012: http://www.bundesbank.de/Redaktion/ EN/Reden/2012/2012_09_20_weidmann_money_creaktion_and_responsibility.html  10  BIS central bankers’ speeches  Yes, believe me or not, as you like; but truths are by no means as long-lived as Methuselah – as some folk imagine. A normally constituted truth lives, let us say, as a rule seventeen or eighteen, or at most twenty years –seldom longer.26 Ibsen’s play has been long-lived. It is still performed all over the world, 130 years after it was written. Not because the Norway of the 1880s never loses its appeal, nor because Doctor Stockmann found eternal truths.

Allow me to venture to select three lessons on the basis of what I have said so far. First: the simplest solution is often the best. Simple rules, whether for fiscal policy or banking regulation, will often prevent the worst errors. And when the yellow warning light starts flashing, action must be taken. Second: confidence is essential, also for economic policy. Confidence is easily eroded and difficult – and costly – to restore. Confidence must be earned. The resolution of today’s crisis will also follow a smoother path if there is confidence in institutions – banks, central banks and governments. Borrowing costs will then decrease more quickly, the need for government cuts will diminish accordingly, and the good times will return sooner. Third: we have no magic wand. If a country has real economic problems, real adjustments must be made to solve them.25 Central banks cannot solve the problems, but what they can do is lend money when there is none available elsewhere, giving countries more time to implement necessary reforms. Deficits must be reduced. Unrestrained printing of money has led to problems on many occasions through history. If printing money is not followed up by action – in euro area countries, in the UK and in the US – Mario Draghi, Mervyn King and Ben Bernanke run the risk of being recorded in history in the same chapter as the Scotsman John Law. The full title of my speech today is “Learning from history: truths and eternal truths”.
They all use an index of uncertainty developed by Bank economists, based on a range of variables, including 5  media references, options prices and the dispersion of economic forecasts . 5  The composition of this index is standard in the literature. But it’s always good to know more. To that end, and in collaboration with H M Treasury and a group of academic economists, the Bank is setting up new Decision Maker Panel of senior executives from a wide range of British companies. Each month the panel members will provide information on how business conditions are changing and, in particular, about the weight they attach to different possible outcomes for investment, sales, employment, costs, prices and margins. In this way we hope to monitor in a timely manner changes in the uncertainty business is facing and how they are reacting to it.

This flexibility has been accompanied by fundamental changes in the approach to supervision that has shifted from a predominantly compliance-based approach, to one that focuses on an assessment of the risk-taking activities of an institution and the effectiveness of the control functions that are in place within the institution to manage the risks. The supervisory tools have also been expanded to include more forward-looking assessments of the risks to financial stability, supported by more dynamic stress testing approaches and enhanced surveillance systems. To a large extent, the preconditions for the shift to principle-based approach to regulation have been strengthened through capacity building measures that have been pursued in the period immediately following the Asian financial crisis. The development of the Financial Sector Masterplan which was released in 2001 is a blueprint not only for comprehensive financial sector reforms, but also provided the framework and strategies for the modernisation of our financial system. The financial safety net was also strengthened with the introduction of a comprehensive deposit insurance system and the establishment of institutions to assist consumers in managing their debt and resolving disputes with financial institutions. These measures have contributed towards maintaining confidence in the financial system. The crisis: a defining moment for the bank In the 1990s, it became evident for emerging economies that new challenges to stability arising from the international dimensions of financial activity had emerged. In particular, highly volatile and potentially destabilising capital flows had become a dominant feature of the international financial environment.
Note that a precondition for receiving financing from the ESM is to have fully ratified the fiscal compact, which creates a link between crisis prevention and resolution schemes. The involvement of the IMF in the financing schemes is not strictly required but is still highly desirable, also in view of the Fund’s analytical expertise in crisis resolution. I would also like to emphasise that the range of tools available to the ESM compares favourably with those available to the International Monetary Fund (IMF). Hence with the ESM the euro area has equipped itself with a state of the art and permanent crisis resolution scheme, a key missing piece in the initial design of EMU. Conclusions  As Asia knows very well from its own crisis in 1997/1998, a crisis can be an opportunity for reform and renewed growth. This is embodied by the character ji, which in Classical Chinese means at the same time “danger/crisis” (weiji in today’s language), as well as “chance/opportunity” (jihui to use today’s term). In this sense the Asian crisis experience is a useful lesson for the euro area, which – I am convinced – will emerge more integrated and stronger from the current challenge. Perhaps the greatest challenge at this point in time is to keep up the reform momentum even if hopefully the most severe manifestations of the crisis abate and financial market conditions, including financial integration within the euro area, come back to more normal  8  BIS central bankers’ speeches  conditions.

How the crisis revealed institutional weaknesses in the euro area  As I already noted, the monetary policy response to the crisis has been mainly aimed to buy time for reforms that become effective with some time lag, but it cannot substitute for reforms as time goes by. In this respect, the crisis has unveiled the incompleteness of the euro area’s institutional design which currently policy makers are addressing both at the national level and at the euro area/EU level. Let me first outline these main weaknesses and then go through the progress that has been made so far and the road ahead. The euro area was missing an effective framework for (i) crisis prevention (ii) and crisis management and resolution, which are, as I will argue, essential ingredients for effective policy-making in a monetary union. Let me elaborate. The lack of effective crisis prevention framework before the crisis was indeed evident. First, too complacent regulatory policies in the financial sector still allowed excessive risk to build up. The establishment of the monetary union made is easier for deficit countries to finance macroeconomic imbalances through cross-border capital inflows for too long, resulting in the accumulation of risk. When these flows turned into outflows as the economic environment deteriorated after 2008, these imbalances not only led to problems for the countries concerned but also produced contagion to other parts of the euro area.
Chart 4: Pre-crisis euro-area output gaps(a) Per cent of potential GDP 7 Revisions between 2007 and 2013 Current estimate  6 5 4 3 2 1 0  France  Germany  Ireland  Italy  Portugal  Spain  Source: International Monetary Fund World Economic Outlook, April 2007 and April 2013. (a) Data sourced from April 2007 and April 2013 IMF estimates of the output gap for each country in 2007. 8  BIS central bankers’ speeches  Chart 5: Spreads of 10-year sovereign bonds over Bunds Percentage points 7 Euro launch  6 5  Italy  4  Spain  3 2 1 0 -1 1995  1997  1999  2001  2003  2005  2007  2009  2011  2013  Source: Bloomberg. Chart 6: Domestic demand and GDP Indices: 2000 = 100 140 Domestic demand  GDP  Germany  Germany  Spain  Spain  130 120 110 100 90 80 70  1991  1993  1995  1997  1999  2001  2003  2005  2007  2009  2011  Source: Eurostat. BIS central bankers’ speeches  9  Chart 7: Nominal unit labour costs Indices: 2000 = 100 160 Tradables(a) Germany  Non-tradables Germany Spain  150 140  Spain  130 120 110 100 90 80 70 60  2002  2000  2004  2006  2008  2010  2012  Sources: Thomson Reuters Datastream and Bank calculations.

In their article “Inflation forecasts and monetary policy”, Ben Bernanke and Michael Woodford discuss the case of the central bank fully relying on market forecasts for its decision-making. They conclude that relying only on the market inflation forecast the central bank cannot perfectly stabilise inflation on the target. In the economist’s technical jargon, it can be shown that the rational expectations equilibrium under such circumstances does not exist. Although such a statement looks suspicious, there is quite a simple intuition behind it. Let’s assume that the central bank can infer the current state of the economy only from the market forecasts. Then, following the market forecasts, the central bank will clearly settle monetary policy in order to achieve its target. Consequently, at the end of the day inflation will in fact be equal to the target. In the world of rational expectations, the market forecasters immediately accommodate this experience and their next forecasts will already be equal to the target. Facing market forecasts equal to the target, the central bank can infer nothing about the economy’s current state, which is of course inconsistent with the initial supposition that the central bank can infer the information about the economy’s current state from the market forecasts. Put differently, once we admit that expectations are formed rationally, market forecasts cannot be used as pure information about the economy’s current state. Understandably, we live in a world of information asymmetry and the rational expectations theory does not hold in its “strong” version.
There should be few additional side-effects on lending practices and on the cost of capital. Average return on equity is likely to decrease in proportion to the decline in the risks assumed by shareholders. References Admati, A. R., DeMarzo, P. M., Hellwig, M. F. and Pfleiderer, P. (2011) “Fallacies, irrelevant facts and myths in the discussion of capital regulation: why bank equity is not expensive”, Stanford GSB Research Paper No. 2063. Barras, L., Scaillet, O. and Wermers, R. (2010) “False Discoveries in Mutual Fund Performance: Measuring Luck in Estimated Alphas”, Journal of Finance, 65(1), 179–216. Fahlenbrach, R. and Stulz, R. M. (2011) “Bank CEO incentives and the credit crisis”, Journal of Financial Economics, 99(1), 11–26. Kotlikoff, L. J. (2010) “Jimmy Stewart is dead: ending the world’s ongoing financial plague with limited purpose banking”, John Wiley & Sons, Hoboken, New Jersey. Hellwig, M. (2008) “Systemic Risk in the Financial Sector: An Analysis of the SubprimeMortgage Financial Crisis”, Preprints of the Max Planck Institute for Research on Collective Goods, Bonn 2008/43. BIS central bankers’ speeches  9

Page 3/5  Our country has one of the most solid currencies in the world, namely the Swiss franc. No other currency has retained its value so well since the outbreak of the First World War. Nor has any other country kept average inflation lower than Switzerland. But there is another side to this coin. In times of high uncertainty, the Swiss franc tends to appreciate strongly, putting the economy under pressure and jeopardising price stability. We have witnessed this again recently. As a result, the SNB has been faced with the challenge of using its monetary policy to guarantee price stability in Switzerland. With the negative interest rate and our willingness to intervene in the foreign exchange market as necessary, we are able to counteract the attractiveness of Swiss franc investments. Our goal here is always to ensure appropriate monetary conditions in Switzerland. In general, an overvalued Swiss franc can pose a problem for the financial industry too. This is especially true for the important business of wealth management, where returns mainly accrue in foreign currencies, while costs are generally incurred in Swiss francs. We are, of course, also aware of the challenge that the negative interest rate poses to the financial sector. We have therefore reduced the burden it places on the Swiss banking system to the level necessary for the implementation of monetary policy. Once again, I must also stress that the low interest rate environment is a global phenomenon with structural causes. This is unfortunately not something that Switzerland can escape.