samchain/econo-pairs-v1 huggingface dataset:
The task is to make the best forecast we can of how the economy and inflation pressures will evolve and to adjust policy to ensure the outcome is consistent with monetary stability. Financial stability by contrast is more about the tail of the probability distribution than the central probability – about what could happen rather than what is likely to happen. Our task is to ensure the financial system avoids very bad outcomes. Or, if they cannot be avoided, that the system can weather them without breaking down and without acting as an amplifier of stress. Though infrequent and unlikely, the events we lived through 10 years ago demonstrated that such breakdowns not only can happen but are also extremely costly when they do happen. So although it may appear gloomy, we are always looking for the downside risk, always asking what risks could the financial system generate, what risks could it withstand, what risks could it amplify? And, by extension, whether it is worth insuring against those risks crystallising. The past of course gives us some guide. We know many of the things that have caused financial crises in the past that we need to prevent causing problems in the future. But our job is not just about preventing the last war; it is also about anticipating and assessing new risks as the financial system grows and evolves. And, where justified, taking action to address them.

But I would like to point out that these are preliminary views. I am happy to listen to arguments against them. The Riksbank’s assets can be roughly divided into two parts. We have a portfolio of Swedish securities (almost SEK 400 billion), that has been built up through quantitative easing for monetary policy purposes. And we have foreign exchange reserves (just over SEK 500 billion) that we hold for contingency purposes. 9 The Swedish portfolio consists solely of government bonds. This is partly to hold down financial risks, and partly because monetary policy, apart from determining the general interest-rate level, should disturb pricing on the financial markets as little as possible. The state is the Riksbank's principal. It would therefore seem inappropriate to me if the Riksbank chose government bonds to attempt to give the government incentive to work towards a more sustainable development. I therefore do not think that the Riksbank should treat green Swedish government bonds any differently from other Swedish government bonds. 10 The conditions for active climate consideration are slightly better in our work with the foreign exchange reserves. To ensure that the foreign exchange reserves fulfil their purpose, they need to consist of assets that can be rapidly converted to money even when the markets are not functioning properly. Our assessment is that the foreign exchange reserves best correspond to this need if they consist of 75 per cent US government bonds, 20 per cent German and 5 per cent British, Danish and Norwegian government bonds.
In our opinion, this indicates that there is a need for the gradual ending of the anti-crisis program and the development of more targeted preferential programmes. Consumer lending during the pandemic grew at a weaker rate than before that. However, it has now accelerated again and is growing faster than the recovery of households’ income. Thus, we consider it important to monitor risks in order to prevent overheating and dangerous levels of households’ debt burden. The situation with funding is generally calm. The total inflow of customer funds in 2020 was higher than in 2019. But it is obvious that as far as retail and retail liabilities are concerned, the situation is beneficial for the banks. The growth of household deposits in the past year nearly halved compared to 2019. This is the result of an outflow in the spring months, when people, due to the uncertainty of the situation, withdrew and transferred money into cash. It was also due to a steady growth in demand for alternative investments (such as real estate, stock assets) on the back of decreasing deposit rates. In this regard, people can count, and they are right: the weighted average interest rate on ruble deposits dropped at the beginning of last year from 5.5% to 4.2% at the end of the year and remained at this level. We have only just seen a slight rise in rates. The maximum interest rate on deposits at the 10 largest banks is now somewhere close to 5% (4.93%).

As I mentioned before, experience has shown, that in the long run, it is very difficult to maintain soft exchange rate pegs with the free movement of capital across borders. Iceland shares this experience with many other countries during the post-liberalisation face. The response to this has been the observed tendency to adopt hard pegs in the form of monetary unions or currency boards or to go in the direction of floating. As so many other countries, Iceland adopted the second route. This was done in March 2001 by a joint declaration by the government and the Central Bank. The principal objective as stated in the declaration, is to keep inflation as close as possible to 2½ per cent. Should inflation deviate from this target by more than 1½ percentage points in either direction, the Bank is to provide the government with a written public account explaining what caused this deviation, how the Bank intends to respond and how long it expects that it will take for inflation to return to within the targeted inflation limits. In the wake of this declaration, the Icelandic Parliament adopted a new legislation on the Central Bank, giving it one overriding goal, i.e. price stability, and full independence to use its instruments to achieve it. The new framework was immediately subjected to a baptism of fire. Overheating in the economy and the fall of the króna had rekindled inflation.
In pursuing our policy responsibilities, we seek to conduct policy transparently and based on clear principles. We are mindful of the global effects of Fed policy. Promoting growth and stability in the U.S., I believe, is the most important contribution we can make to growth and stability worldwide. 2  BIS central bankers’ speeches  There is, of course, the argument that Fed policy has been too accommodative for too long, creating risks for financial stability worldwide. Here, I think it’s important to consider carefully the counterfactual. Would countries beyond our borders really have been better off with a weaker U.S. economy? The fundamental issue is whether U.S. monetary policy has helped support our dual objectives of stable prices and maximum sustainable growth, and whether this support is consistent with a healthy global economy. Moreover, it is far from clear that explicitly coordinated policy would produce better outcomes for the global economy generally, or the EMEs specifically. Central banks have challenges enough in tailoring policies to their own domestic circumstances. I believe that it would be taking on too much to attempt to collectively fashion policy in reference to global conditions. Monetary policy meant to suit everybody is likely in the end to suit nobody. Similar considerations underlie the widespread move in the emerging world away from fixed exchange rate regimes. Policymakers worldwide have learned that a framework capable of responding in a disciplined but flexible manner to changing domestic conditions works best over the long run.

While explicit coordination looks neither feasible nor desirable, there is more that central banks in general, and the Fed in particular, could do to be better global stewards. As an example, recent events demonstrate the importance of effective Fed communication. It is clear in retrospect that our attempts in the spring of 2013 to provide guidance about the potential timing and pace of tapering confused market participants. In particular, markets seemed to conflate tapering with monetary policy tightening and raised their expected paths for policy rates. Lately, we seem to have done better: markets now seem to understand that policy rates will likely remain exceptionally low for a considerable period of time even now that the asset purchase program has been completed. As you know, we’ve taken a number of steps in recent years to increase transparency and improve our communications. This includes regular press conferences following Federal Open Market Committee (FOMC) meetings by the Fed chair; the publishing of growth and inflation forecasts of FOMC participants; and a concerted attempt to lay out the guideposts that the FOMC will look at to assess progress toward our mandate. We are, though, still learning how to more effectively communicate, especially given our new and expanded set of policy instruments. A second area in which we can and must do better is safeguarding financial stability. Simply put, we failed to act both early enough and decisively enough to stem the credit excesses that spawned the financial crisis and the Great Recession.
11  In the evaluation of different forecast strategies, it has been shown that it is difficult to outperform what is known as a naïve forecast – that is, using the current actual value as a forecast. See, for example, Meese and Rogoff (1983). However, a number of other studies show more positive results for the possibilities of making forecasts, for example Mark (1995) and Gourinchas and Rey (2007). 12  See Sellin (2007) and Lagerwall and Nessén (2009). 13  It may be noted that, as the rate of inflation in Sweden tends to be about the same as it is among most of Sweden’s trading partners, there is a high degree of similarity in the forecasts for the nominal and real exchange rates. 8  BIS central bankers’ speeches  As I mentioned earlier, the main scenario in the Riksbank’s most recent Monetary Policy Reports is based on a forecast that, in my opinion, expects excessively high policy rates abroad. One of the most important reasons that I expect lower policy rates is the public finance situation prevailing in parts of the world. In the United States, the United Kingdom and large parts of the euro area, there is little to no scope for using fiscal policy to give an extra boost to the recovery. All that remains, therefore, is relatively expansionary monetary policy. Moreover, I see a risk that the desire to avoid stronger exchange rates will lead to lower interest rates in general abroad.

The Federal Reserve’s Pandemic Response - FEDERAL RESERVE BANK of NEW YORK  SPEECH  The Federal Reserve’s Pandemic Response June 25, 2020 Michael Held, Executive Vice President and General Counsel Remarks at Union of Arab Banks Webinar: Global Banking in Light of COVID-19 and Geopolitical Development (delivered via videoconference) As prepared for delivery  Thank you. It's an honor to join you. And, as a central banker, it is a special privilege to speak alongside the Governors of the Central Bank of Egypt and the Central Bank of Tunisia. My topics today are the Federal Reserve's response to the COVID-19 pandemic and the challenges that lie ahead. As always, the views I express are my own, not necessarily those of the Federal Reserve Bank of New York or the Federal Reserve System.1 Pandemic Work of the Federal Reserve The challenges of the COVID-19 pandemic are daunting. On a personal level, we fear for the health and livelihoods of ourselves and our loved ones. On a professional level, our organizations face existential challenges largely beyond our creation or control. On a societal level, we see how injustice and inequality have reduced confidence in public institutions and increased polarization— right when we most need to come together. To do its part, the Federal Reserve has committed to "us[e] its full range of tools to support households, businesses, and the U.S. economy overall in this challenging time.
10  20  25  Figure 9 Net capital flows (percentage of GDP, average for each period) 9 8 7 6 5 4 3 2 1 0 -1  Brazil  Chile  1996-1997  Colombia 2007-2008  Mexico 2009  Peru 2010 (f)  (f) Forecast. Considers actual data through second quarter 2010 and estimates for second half 2010, based on the share in net capital flows to Latin America in 2009 and forecast for 2010 from WEO, October 2010. Source: Central Bank of Chile based on IMF figures. Figure 10 Monetary policy interest rate (*) (percentage) 12  10,8  10 7,3  8  3,0  3,2  3,4  Advanced commodity exp. Emerging Asia  4,8  5,3  Brazil  BRIC  Latin America  1,0 Emerging Europe  0,5  Eurozone  0,3  U.K.  0  0,1  U.S.  2  Japan  4  Chile  6  (*) Simple averages by region. Emerging Asia includes: China, the Philippines, Hong Kong, Indonesia, India, Malaysia, South Korea, Thailand and Taiwan. Emerging Europe includes: Hungary, Poland, the Czech Rep. Romania and Russia. Advanced commodity exporters includes: Australia, Canada, Norway, New Zealand, and South Africa. Source: Bloomberg. 11  Figure 11 Financial accounts' flows (millions of dollars) 12.000  12.000  8.000  8.000  4.000  4.000 0  0 -4.000  -4.000  -8.000  -8.000  -12.000  06  07 Liabilities  Source: Central Bank of Chile.

It therefore stands to lose money if there is a realised loss that is not absorbed by more junior creditors. Any such loss is later recouped by the Deposit Insurer via a levy on the surviving insured banks. It is important to underline that for banks funded by insured deposits, some of the costs of failure will fall on their peers. Over time, I suspect that that will increase pressure for a funded deposit-guarantee scheme with risk-based levies. That avoids defaulting banks getting off scott free, and has banks contributing to the deposit insurance system when times are good rather than only when under pressure. I realise that I am telling this conference of deposit insurance agency experts things you already know! I am doing so because they are highly relevant to where I am going on the development of resolution strategies for coping with the failure of the world’s largest and most complex banks, and how Deposit Insurance might fit into that endeavour. Resolution regimes for systemically important firms The objective is, of course, to get to a position where public money is never used to provide solvency support for a failing bank, however large or complex. To be clear, this is emphatically not just about preserving payments and transactions-deposit services.
And the third, the program design will have greater likelihood to be adopted since it has utilized the best expertise available and has the highest degree of perceived legitimacy, since the governance of the Resolution Board better reflects the interest of all stakeholders, be they borrowers, creditors and private markets. The challenge to IMF reform on crisis prevention and crisis resolution has many dimensions, and recommendations that have been made to address this challenge are wide-ranging. Given the limited time that we have, I hope my contributions today have been useful. In closing, I would like to stress that the IMF has responded well to the needs for reform with new important initiatives and measures that are now showing positive results. I am confident that, going forward, the IMF will be able to come up with a credible reform agenda that will lead to greater improvements in our capabilities to maintain the stable economic and financial environment which is essential for the well-being of the global economy. Thank you. 4  BIS Review 24/2006

Challenges stemming from integration Two major challenges for authorities in charge of financial stability emerge from the common wholesale banking system: vulnerability to common shocks and potential contagion of major problems across many countries, should such problems arise. Let me take the issue of common shocks first. Clearly, integration opens up a wide range of opportunities for growth and contributes to increasing the resilience of the system. It brings along a wider range of funding sources and – on the asset side – the degree of diversification of exposures increases. But integration also renders financial institutions more exposed to common shocks. For the largest banks, area-wide risks affecting specific lines of business increasingly matter more than the home country-related risks. One way of illustrating this point is to take a look at banks' share price development. Since the beginning of the year, the share prices of almost all major European banks have declined. The 30 largest banks have lost, on average, around 25% of their value. The overall deterioration in global macroeconomic conditions and financial market volumes has affected all institutions, as banks' profit outlook has deteriorated following the likely increase in provisioning needs and reductions in income from market-related activities. However, the stock market changes for these 30 banks range widely from a small plus to very significant minuses of over 50%. In line with the notion that the home-country risks have lost in importance, banks' nationality is no longer a very relevant determinant of the size of the stock market reaction.
Summers, L (2013), speech at IMF Fourteenth Annual Research Conference in Honor of Stanley Fischer. Susskind, R and Susskind, D (2015), The Future of the Professions: How Technology Will Transform the Work of Human Experts, Oxford University Press. Swinney, P (2018), ‘The wrong tail’, Centre for Cities. Universities UK (2017), ‘Patterns and Trends In UK Higher Education’, Universities UK. Van Reenen, J, Bloom, N, Draca, M, Kretschmer, T, Sadun, R, Overman, H and Schankerman, M (2010), ‘The Economic Impact of ICT’, SMART N. 2007/0020. Willetts, D (2017), A University Education, Oxford University Press. 26  All speeches are available online at www.bankofengland.co.uk/speeches  26  Annex Chart 1: World GDP per head since 1000 AD 1990 International Dollars  7000 6000 5000 4000 3000 2000 1000 0  1000  1100  1200  1300  1400  1500  1600  1700  1800  1900  2000  Year Sources: De Long (1998). Chart 2: UK productivity, real wages and GDP per head Index, 1760 = 100 1800 1600 1400 1200 1000 800 600 400 200 0 1760  1810  1860  Productivity  1910 Real wages  1960  2010  GDP per head  Sources: Bank of England, ‘A millennium of macroeconomic data’, available online. Notes: Labour productivity per head uses GDP at factor cost. Real wages defined as nominal wage divided by GDP deflator at factor cost.

Because I am certain all of you have committed to memory everything I said then, I’ll keep my remarks on LIBOR today short and to the point: We have only 459 days until the availability of LIBOR can no longer be assured, and everyone needs to put their nose to the grindstone in their efforts to prepare for the move off LIBOR. In the immortal words of Captain Jean Luc Picard—make it so! Before I continue on to today’s topic or quote other favorite Star Trek characters, I need to give the standard Fed disclaimer that the views I express today are mine alone and do not necessarily reflect those of the Federal Open Market Committee or others in the Federal Reserve System. The Heart of the Economy The markets that are the center of attention today—the Treasury market, the repo market, and the mortgage-backed securities market—represent the heart of the circulatory system of our financial system and our economy, and indeed the global economy. When they are working smoothly, all the other parts of the system can perform as they should. But, the opposite is true as well. If these critical markets break down, credit stops flowing, and people can’t finance the purchase of a car or a home, businesses can’t invest, and the economy suffers, resulting in lost jobs and income.1 Financial markets aren’t static—they evolve over time in response to changes in technology, regulation, and business models. The Treasury market is not immune to this process of change.
They are now used by most car buyers, including (one presumes) those who are overall savers. According to the government the majority of student loans will not be fully repaid (the ONS has recently decided that most of it should therefore be re-allocated to the government, an accounting change planned for later this year.) Taken together, car finance and student loans account for almost all the rise in households’ unsecured gearing in recent years, as currently measured. The remainder – comprising the more conventional credit card balances, consumer loans and overdrafts – is plotted in blue in Chart 5. It hasn’t grown much and is pretty much the same as it was, relative to income, in the mid-1990s. 2  You might, however, expect to see them in first differences (i.e. in the growth rate of debt), as these could help cleanse the data of enduring country-specific differences in the sustainable level of debt.

What did a little better as an advance warning signal was the prior growth rate of mortgage debt (Chart 2). The ordering, at least, is in line with post-crisis defaults in the three countries. Chart 1: Level of mortgage debt a poor guide to subsequent distress Per cent  Per cent of outstanding loans 12  8  Per cent of outstanding loans  250 12  Maximum post-crisis default rate (LHS) Debt to income ratio, 2007 Q2 (RHS)  10  Chart 2: Pre-crisis growth rate does better  200 10 150  8  Per cent 16  Maximum post-crisis default rate (LHS) Average debt growth in the three years to 2007 Q2 (RHS)  14 12  6  6 100  4 2 0 NL  UK  50  2  0  0  US  Sources: Bank stats, Office for National Statistics (ONS), DataStream from Refinitiv, Stanga et al. (2017), CBS Netherlands, US Flow of Funds and Bank calculations. Figures are for mortgage loans; default rate defined as non-performing exposures over three months in arrears. 10  4  8 6 NL  UK  US  Sources: Bank stats, ONS, DataStream from Refinitiv, Stanga et al. (2017), CBS Netherlands, US Flow of Funds and Bank calculations. Figures are for mortgage loans; default rate defined as non-performing exposures over three months in arrears. This is obviously a very limited comparison.