samchain/econo-pairs-v1 huggingface dataset:
So we would act as the point of contact on operational and liquidity issues which might affect participants. Meanwhile, the role of the FSA is naturally to monitor the health of the institutions which fall within its supervisory remit, and consequently any concerns or questions in this area will naturally be addressed to them. And the Treasury will ensure that Ministers are kept up to date so that government is able to act promptly. It also undertakes to ensure coherence between the financial sector and the operation of public sector continuity arrangements more generally. A current example of such co-operation between the three authorities and the private sector is the Taskforce, on Major Operational Disruptions, of which I am the Chair. The Taskforce was asked by Treasury Ministers to assess whether we need more statutory powers in this field, and it so what they should be. Our findings will be published in the next few weeks: so please watch this space! I thought in closing that you might also be interested in a few observations on several issues which confront us today. These range from very high level issues such as leverage, to much more specific questions such as complex financial instruments. So firstly, leverage. Leverage is not itself a threat to financial stability: indeed banking practice relies on leverage. But leverage can become a vulnerability once it ceases to be sustainable. And here we need to assess the global picture at several levels: not just that of the UK.

Basis for the interest rate forecast In forecasting economic variables, Norges Bank uses an approach that captures and juxtaposes many different elements. The chart provides an illustration of the structure of forecasting. One important source of information on the current situation is current statistics. In addition to official statistics, information from our regional network plays an important role. In the course of a year, around 1400 interviews are held with leaders from various parts of the corporate and public sectors about economic developments in their enterprises and institutions. In our forecasting, we seek to build a bridge between our assessments of the current situation and the knowledge we have about long-term relationships in the economy. As a tool in this work, the Bank uses several macroeconomic models: one core model and a number of smaller models. Central to this process is the use of judgment. The macroeconomic models provide a very simplified description of the economy and only serve as a forecasting tool. The forecasts for inflation, output, the interest rate and other variables in the economy must be perceived as a result of the Bank’s best judgment. There is no mechanical relationship between the models the Bank uses and its forecasts. Nevertheless, the models are a very useful tool in the conduct of monetary policy. In the process of arriving at an interest rate forecast that in the Bank’s opinion provides a reasonable balance, a model system is needed where the interest rate and other variables in the economy are interdependent.
Finally, a rapidly aging population in many parts of the world could mean growing demand for goods and services that a shrinking workforce will struggle to meet. Third, the energy transition is likely to mean energy prices remaining on a steady upward trajectory. The imperatives of energy security and environmental sustainability are driving in the same direction – to reduce dependence on imported fossil fuels and switch to renewable energy. In the short to medium term, this transition to cleaner energy is likely to be inflationary. The Bank of England estimates that inflation will increase by nearly 0.6 percentage points in the 2020s in an orderly transition scenario and by as much as 2 percentage points by the early 2030s in a disorderly scenario. With the ongoing energy crisis. we are probably seeing a preview of a disorderly transition. And it is not just energy prices. Demand will surge for minerals such as copper, aluminium, cobalt, lithium, nickel, and rare earths, which are critical to various clean energy technologies, including wind turbines and electric vehicles. This could lead to what some analysts have referred to as greenflation, or rising prices for those metals and minerals that are essential to renewable energy and technology. Fourth, climate change could disrupt agriculture, driving food prices higher. Extreme weather conditions are becoming more frequent worldwide. Just this year, China and Europe have experienced one of their worst droughts on record, and Pakistan and India have seen devastating floods.

ix DE PASTOR R., “SMEs and VSEs in France: an improved financial situation and easier access to credit”, Bulletin de la Banque de France No. 226, December 2019. x INSEE xi ALTAVILLA C.; BOUCINHA M; PEYDRÓ J., “Monetary policy and bank profitability in a low interest rate environment”, Economic Policy, Volume 33, Issue 96, October 2018, pp. 531–586.
For example, the mandate could include demands that the body must take action, or publicly explain why it refrains from taking action, when certain predetermined levels for key variables are passed. Accountability would also be facilitated by demands for far-reaching transparency and reporting, for example to the Riksdag. Macroprudential policy is only a complement I have now expressed my heartfelt support for the need to make it possible to conduct effective macroprudential policy in Sweden. However, I would like to conclude by referring back to what I said initially about having realistic expectations of what macroprudential policy can achieve. We can ask ourselves, for example, if we would have avoided the stress on the financial markets that we have seen recently if an effective macroprudential policy had been conducted in the euro area. No, we probably wouldn’t have, because the problems essentially relate to the fact that monetary policy and fiscal policy have not been appropriate given the economic development in a number of euro countries. Macroprudential policy cannot take the place of well-designed monetary and fiscal policies. But it can act as a wellneeded complement, as well-designed monetary and fiscal policies provide no guarantees against being hit by financial crises. Thank you! References Assenmacher-Wesche, Katrin and Gerlach, Stefan (2010): Credit and Bubbles, Economic Policy, July 2010, 437–482. BIS (2012): European bank funding and deleveraging, BIS Quarterly Review, March 2012. Bank of England (2011): Instruments of Macroprudential Policy: A Discussion Paper prepared by Bank of England and Financial Services Authority staff, December 2011.

3  EBA (2011): EBA recommendation on the creation and supervisory oversight of temporary capital buffers to restore market confidence (EBA/REC/2011/1)  4  Ekholm (2009): Some lessons for monetary policy from the financial crisis, speech held on 4 December 2009. 5  See for example Bernanke (2010): Monetary Policy and the Housing Bubble, speech held on 3 January, 2010, and Dokko, Doyle, Kiley, Kim, Sherlund, Sim and Van der Heuvel (2009): Monetary Policy and the Housing Bubble, Finance and Economics Discussion Series 2009-49, Federal Reserve Board. 2  BIS central bankers’ speeches  Figure 1 Policy rates minus actual inflation (CPI change), 1998–, per cent  Sources: Central banks and statistics agencies in the respective countries  Countries such as Ireland and Spain have also seen a bubble-like development of their housing markets: first a situation with gradually rising prices over a long period of time which was then followed by a rapid fall. Would it have been possible to avoid this if the ECB had conducted a tighter monetary policy and what would this tighter policy have cost in terms of unemployment and possible deflation in countries such as Germany, where the economy was developing quite differently? 6 I have no clear answers to these questions. But even though it is possible that an expansionary monetary policy contributed to the development of housing-price bubbles in some countries, it is still the case that other factors were the prime causes of the global financial crisis.
They include the quest for efficiency and greater effectiveness; the lessons learned from crises; political pressure - and its converse political opportunity; and what has from time to time been referred to as “fashion” but which I think can be more generously described as best practice. We have heard many times these last few days the familiar disclaimer that there is no “one model that fits all”. Many of you have stressed the uniqueness of your governance arrangements only to be reminded subsequently that these are arrangements familiar to one, two or even several other central banks. The modesty and diffidence with which experiences have been described is, of course, to be expected among central bankers. But there is, I think, a very pleasing mismatch between this and the enthusiasm with which all of us have been drinking up information about each other. This demonstrates that the BIS network is far more than an academic exercise. It also reflects an important truth: that, although our economic and political environments may differ widely, although we may pursue different policies and follow different legal structures, we all face a number of constants. Finance, money and banking behave in very similar ways no matter where we find ourselves, the more so with globalisation and liberalisation of markets. Politicians and the media the world over have the same qualities and the same vices. And so for that matter do central bankers. The human factor, which is at the root of all of our discussion on governance, is universal.

The Scheme has covered over 9m jobs and is estimated to cost £ 1 2  See Portes (2020): The lasting scars of the Covid-19 crisis: Channels and impacts See May 2020 interim Financial Stability Report 2  All speeches are available online at www.bankofengland.co.uk/news/speeches and @BoE_PressOffice  2  VAT and other tax deferrals amounting to £ have eased immediate corporate cash flow pressures. And other business support measures costing up to £ have been put in place.3  Nevertheless, the scale of disruption means that, even after these powerful measures, we estimated in May that the 85,000 biggest businesses could have faced a cash-flow deficit of up to around £ this year if they were to preserve employment and productive capacity. And in addition, businesses will face the challenge of rolling over some £ of outstanding debts that are due to mature over the next year. These businesses have buffers of cash amounting to around £ that can be drawn on to help meet their needs during the disruption. In the face of uncertainty they will be unwilling to draw them down completely. So the preservation of economic muscle is reliant on raising external finance. [See slide 2 of accompanying deck]  The monetary and fiscal policy responses have therefore been complemented with a financial response. That aims to support the financing of cash-flow deficits. It has centred on getting funding markets functioning and bank lending flowing. And as a result, progress has been made to protect economic muscle.
This was important, because it meant that, in principle, a country could have lower productivity across the board, in the production of every good, and still end up as a net exporter of some of them. But the basic points survive: there’s no reason to suppose that commerce across an international border is any less mutually beneficial than that within a single country; nor is there any reason to view imports as intrinsically bad. Of course, you might feel differently if you happen to be in one of the sectors at a comparative disadvantage. In the mid-1970s, just as the post-war boom in global trade was getting started, the UK’s clothing and textile industry employed over 800,000 people. That’s one in every 30 jobs. As markets opened up international prices fell steeply and, over the following thirty years or so, the domestic industry all but collapsed. Output fell 65%, employment by 90%. It now accounts for one in every 370 jobs. Not all of this reflects the effects of greater trade. Part of the post-war decline in textile employment – employment in manufacturing in general, in fact – reflected relatively rapid productivity growth, not cheaper imports. If it takes progressively fewer people to make the same amount of stuff you might expect employment to fall. Over time the share of jobs in manufacturing has fallen in every developed country, including in those regarded as industrial powerhouses, such as Germany and Japan.

Marzunisham Omar: Risk and opportunity – managing risk for development Welcoming remarks by Mr Marzunisham Omar, Assistant Governor of the Central Bank of Malaysia, at the WB-BNM Seminar on the World Development Report 2014 “Risk and Opportunity: Managing Risk for Development”, Kuala Lumpur, 29 April 2014. *  *  *  It is my pleasure to welcome you to Sasana Kijang this morning to the seminar on the World Development Report 2014, with the theme “Risk and Opportunity: Managing Risk for Development”. Reading through the Report, I’m struck by two observations: •  first, in the past 50 years, middle-income countries have been in recession 14 to 16 per cent of the time and low income countries, a staggering 27 per cent of the time. •  second, from 1970 to 2011, there were 147 banking crises in 116 countries. So, while the world has, in the last 50 years, made significant progress in terms of economic development, poverty eradication and overall standard of living, the above observation begs the question of whether the global economy is also more prone to crises, highlighting the fragility of the economic system that is currently in place. This reinforces the need to have a proper framework to identify and manage risks, towards achieving a common shared goal of sustaining long-term development. Almost six years after the collapse of Lehman Brothers, the world economy is still coping with the aftermath of the Global Financial Crisis, notably the worst financial crisis in the last 70 years.
Inflation forecast I shall now turn to the course of inflation and our new inflation forecast. Our inflation forecast of June 2002 (the green dash-dotted curve in the graph) shows that at that time we assumed, based on a stable three-month Libor rate of 1.25%, that inflation would gradually rise to 1.9% in the first quarter 2005. Year-on-year inflation, as measured by the national consumer price index, dropped to 0.3% in the third quarter 2002 from 0.7% in the second quarter. In October and November it rose to approximately 1%. These fluctuations are due mainly to changes in the exact points in time when data on clearance sales prices are collected. This is also the main reason why our forecast of June 2002 over-estimated the development of inflation in the third quarter 2002. Our new inflation forecast (red dashed curve) is based on the assumption that growth in the US will pick up again from the second quarter 2003 onward. The US economy is likely to achieve its growth potential stepwise until the beginning of 2004. In the EU, the upswing will take a little longer. We are not expecting a significant acceleration of growth before the end of 2003. We assume that the  BIS Review 73/2002  1  dollar/euro rate will remain at about the current level and that the oil price will be around $ per barrel.

Cumulative exemption thresholds come to some CHF 300 billion. When negative interest came into effect in January, thresholds were 88% exhausted. Since then, this percentage has steadily increased and is now just over 98%. There are two principle reasons for this. First, a redistribution of sight deposits between banks has taken place. Institutions whose sight deposits exceeded the exemption threshold have transferred money from their SNB accounts to banks which had not exhausted their threshold and were prepared to accept these funds at somewhat less negative interest than –0.75%. This redistribution of sight deposits can be observed, for instance, on the Swiss franc repo market. Chart 3 shows how, on that market, turnover was considerably higher than that recorded for the whole of 2014. Most of the turnover was accounted for by transactions with very short terms. This is likely to include many transactions aimed at exhausting remaining thresholds. The second reason for the higher exhaustion of the exemption thresholds is that banks’ sight deposits at the SNB have increased overall. Since negative interest came into effect in January, sight deposits have risen from approximately CHF 440 billion to some CHF 470 billion at present. The interest burden increases overall when the SNB feeds more liquidity into the system, in particular in the event of further foreign exchange market interventions. This, in its turn, makes it even less attractive to hold Swiss francs. Now that almost all exemption thresholds are exhausted, every newly-created Swiss franc is subject to negative interest.
Present: What implications do the lessons of the past twenty years imply for our assessment of the current situation and the challenges facing monetary policy today? We are not without advice on this dimension. Some monetarists expressed concern that the expansion of central bank balance sheets via QE during the financial crisis would trigger inflation. This fear proved mis-founded. More recently, other monetarists have attributed the current strength of inflation to the expansion of bank deposits associated with monetary easing and QE at the onset of the pandemic. Different diagnoses reflect the existence of different sects within the overall monetarist doctrine, often associated with varying focus on either narrow measures of ‘outside’ money (the monetary base, M0) or broad measures of inside money (such as M4 in the UK or M3 in the euro area). Interestingly, having been critical of the failure to tighten UK monetary policy in the face of strength in broad money growth through the pandemic, one stream of British monetarist thinking now advocates a gradual tightening of policy, despite the current elevated level of inflation. This preference for gradualism stems from the view that monetary growth has eased of late and strong policy action now risks tightening too much, inducing unnecessary macroeconomic volatility. [8] This contrasts with the advice of others who advocate stronger immediate policy action in the face of elevated spot inflation.

Third, substantial progress has been made on the large adjustment of financial positions in the household and financial institution sectors necessary after the substantial leveraging of households and financial institutions that occurred in the run-up to the financial crisis. Confidence is increasing that conditions are now in place to support sustained abovepotential growth, when it occurs.   Aided by the second installment of Large-Scale Asset Purchases (LSAPs), financial conditions have improved. After equity prices, interest rates and inflation expectations fell with the apparent slowing of the economic recovery in the summer, they began to move up again shortly after Chairman Bernanke’s speech laying out potential responses to the slowdown in late August in Jackson Hole, Wyoming (Charts 17–20).   The personal saving rate has risen to a level that is consistent with the historical relationship between that rate and household net worth relative to disposable income, reflecting the very large drop in household net worth from the combined impact of financial crisis and severe housing downturn (Charts 21–22).   The household financial obligation ratio has declined to the level that prevailed in the mid 1990s, reflecting a combination of debt repayment, debt charge-offs and lower interest rates (Chart 23). Households in all credit-quality quintiles are continuing to reduce their overall debt (Chart 24).   Banks tightened lending standards during the financial crisis and recession. Bank lending standards, while tight in level terms, have begun to ease (Chart 25).
Elements of all this can be found in classic books such as Kindleberger’s “Manias, Panics and Crashes”12 but one would be hard pressed to predict from reading such “classics” the importance of novations of a derivative trade or additional collateral calls from a clearing bank to an investment bank for its tri-party book. Yet these were just the kinds of detailed market developments, often associated with the plumbing of financial systems that economists at the New York Fed were hearing at the afternoon meetings from New York Fed staff interacting with market participants in real time as the crisis progressed. However, since financial crises are almost impossible to fit into the standard framework of efficient markets, it was only after the near failure of Bear Stearns that we as economists were more able to piece a more accurate story together. One can find a clear and comprehensive description of these issues in Darrell Duffie’s book, “How Big Banks Fail.”13  9  See Tobias Adrian, Paolo Colla, and Hyun Song Shin (2011), “Which Financial Frictions? Parsing the Evidence from the Financial Crisis of 2007–09” Federal Reserve Bank of New York Staff Reports No. 528 (New York: Federal Reserve Bank of New York, December). 10  For example, see Alp Simsek (forthcoming), “Belief Disagreements and Collateral Constraints” Econometrica. 11  For example, see Fischer Black (1986), “Noise” Journal of Finance, vol. 41 (July), pp. 529–543. 12  Charles P. Kindleberger (1978), Manias, Panics, and Crashes: A History of Financial Crises, (New York: Basic Books, Inc.).

As noted above, many of the emergency liquidity facilities rolled out in the crisis were developed in a very short period of time by experts with years of experience in these various markets. All of the new facilities were designed to price the emergency liquidity such that as market stresses eased, their use would decline. This is exactly what happened. Furthermore, the most convincing evidence that the facilities correctly addressed market failures related to liquidity is the fact that none of them lost any money.19 Conclusion The past few years have seen important changes in the role of central bank interactions with financial markets. Some of the main lessons I take away are: published statistics and market prices only tell part of the story of developments in financial markets, at best; beliefs of market participants and the distribution across markets matter, and information on them needs to be collected and analyzed on a frequent basis; active operations in financial markets allow central banks to flexibly respond to unexpected events and understand market functioning issues and changes in market infrastructure. Most importantly, the global financial  18  The Federal Reserve established swap arrangements with the Reserve Bank of Australia, the Banco Central do Brasil, the Bank of Canada, the Danmarks Nationalbank, the Bank of England, the European Central Bank, the Bank of Japan, the Bank of Korea, the Banco de Mexico, the Reserve Bank of New Zealand, the Norges Bank, the Monetary Authority of Singapore, the Sveriges Riksbank, and the Swiss National Bank.