samchain/econo-pairs-v1 huggingface dataset:
– flexible: we cannot guarantee 2.0% either all the time or straight away. – and, consequently, medium-term. This medium-term target needs to be viewed in two ways: it is forward-looking, to guide inflation expectations; but it cannot completely ignore the past either. Should we go as far as targeting an average level of inflation of close to 2%, and therefore explicitly compensate for any undershooting or overshooting of the target over time? This question remains open, and will be part of the “strategic review” of monetary policy that the ECB will pick up again in the next few months. One key question in this case would be the period over which the inflation average would be measured: I think the public health crisis could provide some justification for this sort of “averaging”, at least temporarily, starting as of the beginning of the crisis. In the American debate, this is called TAIT (Temporary Average Inflation Targeting). Independence in implementing the mandate The ECB is independent on two levels. First, its action in implementing the mandate entrusted to it democratically under European legislation is not subject to approval by national governments, nor to national legal interpretation. Second, in its action, the ECB never submits to pressure from the market or from trends in the media. In the current context of an unprecedented rise in public debt, this independence is more important than ever. France’s debt should exceed 115% of GDP by the end of this year.

While there is a risk that the effects of the crisis may in some cases be asymmetric, we will not allow adverse market dynamics to lead to unwarranted interest rate hikes in some countries, and a fragmentation that would compromise the effective transmission of our monetary policy. Therefore, for the PEPP, clinging to the capital keys to determine each country’s purchase amounts would be an uncalled-for constraint that would undermine the very effectiveness of our intervention efforts. It is not a question of targeting spreads or pre-determined interest rate levels: a “yield curve control” or a “spread control” would be complicated and even counter-productive in the euro area. However, depending on market dynamics and liquidity conditions – and where these exhibit unwarranted gaps or there are risks of excessive volatility – certain national central banks must be able to purchase significantly more, and others significantly less, while ensuring the risks remain unshared. Allow me to say a final word on another development under discussion: the possibility of “going direct” to finance businesses without going through the bank channel. The truth is that we do this already, and have done since 2016, by being among the first central banks to buy corporate bonds. Last March, we extended our purchases to include short-term commercial paper.
The reason why we emphasize the importance of competitiveness indicators is therefore not only that cost containment is a necessary condition for low inflation. It also, and primarily, lies in the fact that in the European economy of today, which is governed by complete freedom of choice for consumers and complete freedom for businesses to choose where to invest, jobs will be created preferentially in economies that manage to contain their unit production costs and offer an environment that is as favourable as possible to business competitiveness. BIS Review 62/1999  4

Instead, use of the pool has increased because over time the constraints imposed on customers’ ability to  BIS central bankers’ speeches  9  vary the size of their investments have been removed, the supply of balance sheet offered by the private sector to foreign central banks appears to have declined, and some central banks desire to maintain robust dollar liquidity buffers. Open questions Compared with the relative calm of the pre-crisis period, money markets have recently gone through a sustained period of substantial change. Some of these changes are the result of regulations to improve the safety and soundness of the financial system, others relate to business model enhancements, and, of course, some relate to Federal Reserve activity. The Federal Reserve continues to collect data on the structure of money markets to determine whether any changes are needed in its operating framework to ensure that its objectives continue to be met. We are continuing to watch developments as business models adapt to the numerous changes in bank regulation introduced over the past few years. We are interested in the extent to which these business model changes impact the structure of money markets and thereby affect the form of monetary policy implementation. For example, we are monitoring developments in bank behavior that could have implications for the transmission of monetary policy into market rates. Thus, we are paying close attention to the behavior of foreign banks on financial statement reporting dates.
Standard & Poor’s (2010), Potential $ Trillion Bank Contingent Capital-Style Issuance Faces Uncertain Investor Interest. BIS central bankers’ speeches  11  Annex Chart 1: Distribution of capital ratio for the retail mortgage book with model error 0.10 0.09 Model error  0.08  Original capital ratio  0.07 0.06 0.05 0.04 0.03 0.02 0.01 0.00 75  80  85  90  95  100  105  110  115  120  125  130  Sources: 2009 Pillar 3 disclosures of Lloyds Banking Group and Royal Bank of Scotland and Bank calculations (a) The model error takes the probability of default (PD) for each given risk bucket of mortgagees as the realisation of a uniformly-distributed random variable across the range of possible PDs within that risk bucket. This maps to a new risk-weighted assets number for the retail mortgage book, and a new capital ratio for this portion of the bank’s book (assuming the initial capital ratio is 100). This error is simulated 5,000 times for each of two banks and the chart shows the resulting distribution. Chart 2: Distribution of capital ratio for the retail mortgage book with model and mapping errors  Sources: 2009 Pillar 3 disclosures of Lloyds Banking Group and Royal Bank of Scotland and Bank calculations (a) The mapping error maps the PD for each mortgagee to the next higher risk bucket. It compounds with the model error described in Chart 1.

Rodrigo Vergara: Monetary policy through asset markets – lessons from unconventional measures and implications for an integrated world Opening remarks by Mr Rodrigo Vergara, Governor of the Central Bank of Chile, at the Central Bank of Chile’s Nineteenth Annual Conference, Santiago, 19 November 2015. *  *  *  Monetary policy has mostly been about setting the appropriate interest rates to stir the economy towards a path coherent with its fundamentals. In this sense, the developments in most central banks in the last 6 years have not been out of the box, so to speak. But we can probably say, with little risk of overstating reality, that the ways of achieving changes in the cost of credit through monetary policy has changed significantly since the global financial crisis. To fully appreciate the extent of these changes, it’s useful to do a quick recap of what traditional monetary policy was prior to 2008. In the vast majority of countries, the name of the game was setting the stance of the short term rates –indeed, the overnight rate at which banks lend to each other. The hope was that, by influencing this very short-term rate, monetary policy actions would feed into the broader economy by affecting longer term rates, as well as spreads of riskier forms of credit which in the end are the channels by which the policy stance affects the cost of borrowing of households and firms.
Nonetheless, analysis by my staff that looks at likely borrower behavior over an extended time horizon suggests that without a significant turnaround in home prices and employment, a substantial proportion of those loans that are deeply underwater will ultimately default – absent an earned principal reduction program. One option developed by my staff is for Fannie Mae and Freddie Mac to give underwater borrowers on loans that they have guaranteed the right to pay off the loan at below par in the future under certain circumstances, including that the borrowers have continued to make timely payments. For instance, the borrower could be given an open-ended option to pay off the loan at an LTV of 125 percent, and the right to pay off the loan at an LTV of 95 percent after three years of timely payments. The borrower would be protected from further declines in home prices, but in return would give up a portion of any upside from future capital gains on the home via a shared appreciation agreement. Note that under this arrangement some of the reduction in the loan amount would be paid by the borrower as the outstanding balance was amortized by continued monthly payments. REO portfolio Even with aggressive policies to minimize the flow of loans into foreclosure, my staff estimates that large volumes of properties would still flow into lenders’ REO over the next few years. This growing overhang could continue to depress prices.

This is important because residential mortgage lending terms tightened significantly during the crisis, and have not eased subsequently.12 Indeed, over 50 percent of all new loans – and 70 percent of new prime conforming loans – go to borrowers with FICO scores of 760 or above, compared with about 30 percent before the crisis. Borrowers with credit scores of 720 or less now make up less than 30 percent of new originations, although they represent 52 percent of the population with credit scores. Steps should be taken to improve households’ access to credit. Currently, lenders are discouraged from making new prime conforming loans due to excessively stringent put-back rules on these mortgages. Such rules give Fannie Mae and Freddie Mac broad scope to force the originator to repurchase at par loans that go delinquent if there are any errors in the mortgage loan paperwork – even if the error has no direct link to the delinquency. It is essential that lenders are accountable for the representations they make and are appropriately penalized for any misrepresentations. However, doing this via a blanket  10  “The National and Regional Economic Outlook,” October 24, 2011, and “Securing the Recovery” November 17, 2011. 11  Board of Governors of the Federal Reserve System. 2012. White Paper, “The U.S. Housing Market: Current Conditions and Policy Considerations,” January 4. 12  According to the Senior Loan Officer Opinion Survey.
7/15  The crisis has clearly shown that the fundamental consideration when granting a loan is not the value of the collateral, but the borrower’s ability to pay. There should be no need to mention that whenever a loan is granted it is necessary to consider the probability that the principal and agreed interest will be paid, not the supposed quality of the collateral. A property bubble, like the one seen in Spain, can only occur if sufficient financing is available. Hence the responsibility of the banking industry, and by extension the supervisor, to avoid another similar bubble in future. Clearly, if the analysis carried out prior to granting a loan is based excessively on the value of the collateral supplied, there is no effective practical limit to credit growth, at least as long as the value of collateral also continues to rise. Certainly, if the amount of financing granted is close to the value of the property or, worse still, based on expectations of future growth in the value of the dwelling, the consequences will be even more dire. In this respect, we can see in the chart how two ratios that are highly relevant from a supervisory viewpoint have changed since 2004. The blue line represents the median loan as a proportion of the appraisal value (the so-called “loan to value” - LTV), while the red line shows the median loan as a proportion of the transfer price, according to the transfer deed.

Strict inflation targeting of this type would thus have resulted in more pronounced fluctuations in the interest rate and in aggregate demand and production. BIS Review 66/2002  3
Between 1991 and 2001, annual targets were lowered by 1.5 percentage points per year on average. Inflation performance improved considerably during this period, achieving a reduction from 20%-30% annually to low single-digit rates. However, independence and effectiveness of the MP were hindered by conflicts between the exchange-rate-band, annual inflation targets, and capital controls. Transition to a full-fledged IT framework was implemented when inflation was converging to 3%, monetary policy was strengthened by attainment of inflation targets, the ER band was replaced by a floating ER regime, and capital controls were fully abolished. From 2000 to 2006, the target was defined for annual CPI inflation at a range of 2% to 4%, and the monetary policy horizon was defined as 12 to 24 months. Since 2007, the MP objective is to keep annual CPI inflation rate most of the time at around 3%, within a symmetric tolerance range of one percentage point, focused on a policy horizon of around two years. This target redefinition strengthens the 3% level as the nominal anchor of the economy, while recognizing that inflation can temporarily deviate from the 3+/-1% range to accommodate transitory shocks. In parallel, the horizon for monetary policy was extended to around two years. The latter changes were largely an explicit acknowledgment of how monetary policy had been conducted during preceding years. Transparency and communication In the last decade, central banks around the world have significantly improved their communication with the public and the markets. This provides institutional legitimacy and substantive accountability.

Mr Lopes’ speech before the Economic Affairs Commission of the Federal Senate Summary of a speech by the new President of the Central Bank of Brazil, Mr Francisco Lopes, before the Economic Affairs Commission of the Federal Senate in Brasilia on 26/1/99. Translated from Jornal do Brasil of 27/1/99. Inflation I am sure inflation will not come back. Of course, there will be some adjustment in relative prices but there is no possibility of resuming the old inflationary process. We will have to put in place tight monetary policy and prevent any forms of indexation, opportunism or speculation. As the Brazilian economy is relatively closed - imports correspond to 8% of GDP - a devaluation of 50%, (i.e. the exchange rate stabilising at the very depreciated level of $ 1.80), would add about 4 to 5% to the rate of inflation. Overvaluation of the real The use of the exchange rate anchor made an exchange rate overvaluation inevitable. Nevertheless we had imagined it would be possible to shift from the mini-band regime to the free floating regime in a rather gradual way, while the economy was still attracting foreign capital. But reality sometimes frustrates the best intentions. With the benefit of hindsight (after the Asian and Russian crises), the widening of the exchange rate band in April last year, which widened the amplitude of the exchange rate fluctuation by 1% per year, was a rather timid movement. But it is easy to be wise after the event.
We must use the opportunity before us and study the events in September and March to identify the root causes for the market stress and disruption.9 We need to understand how changes in the market ecosystem—whether due to regulation, technology, or other factors—have influenced market resilience. Like the post-financial-crisis reforms, this is an opportunity to think hard about what changes will help fortify the financial system against future shocks. 2/4  BIS central bankers' speeches  The Role of Central Banks Despite our best efforts, we should not fool ourselves that we can design a system that is bulletproof against every circumstance. The events of the past year have demonstrated the critical role central banks can and must play in extraordinary times when market stress and dysfunction threaten to spill over into the economy. No private institution has the ability to provide liquidity at the speed or scale that the Federal Reserve and other central banks have this year. Although we often talk about the Fed in terms of monetary policy and interest rates, the Federal Reserve System was originally created to ensure the stability of the financial system.10 That role is as relevant today as it was 107 years ago, and will continue to be in the future. Conclusion Let me conclude by returning to my analogy of these critical markets as the heart of our circulatory system. Recent events have reaffirmed what many already knew.

Table 5: UK Catapults vs. German Fraunhofer Dimension Age Number of centres Industry projects per year Annual budget Annual budget (% of nominal GDP) Employees  UK Catapults 7 years (from 2011) 10 600 £  German Fraunhofer 69 years (from 1949) 72 6,000 – 8,000 € billion  0.01%  0.07%  > 1,400  24,500  Sources: catapult.org.uk, Ernst and Young (2017), Comin, Trumbull and Yang (2011) and fraunhofer.de/en Notes: UK Catapults have delivered around 4,100 industry collaborations in total to date, which equates to around 600 per year. Their funding was £ over a five-year period, which equates to around £ per year. Table 6: UK and German bank lending to businesses Dimension % of total bank assets % of nominal GDP  UK 6% 23%  Germany 18% 49%  Sources: Bank of England, Deutsche Bundesbank, ONS, Thomson Reuters Datastream and Bank calculations. Note: UK data refer to lending to non-financial corporates by UK resident monetary financial institutions (MFIs) for 2018Q1. German data refer to lending to enterprises and the self-employed by Germany resident Banks in 2018Q1. Table 7: British Business Bank vs. KfW Dimension Age Total assets Assets as a share of annual nominal GDP Employees  British Business Bank 4 years (2014) £  KfW 70 years (from 1948) € billion  <0.1%  16%  144  6,284  Sources: British Business Bank, KfW Group, ONS, Eurostat and Bank calculations. 41  All speeches are available online at www.bankofengland.co.uk/speeches  41
As a result, inflation in Malta was lower than in the euro area for most of the last six months, partly compensating for the higher rates registered previously. In the context of an economic recession, Malta’s public finances performed relatively well in 2009, although the country is still subject to an Excessive Deficit Procedure. The deficit-toGDP ratio declined from 4.5% to 3.8% in spite of an outlay of some 0.7% of GDP by way of  BIS Review 73/2010  1  targeted assistance to manufacturing firms and other stimulus measures. 1 To a large extent, however, the fall in the deficit ratio is explained by the presence of one-off expenditure items in 2008. 2 The general government debt ratio rose by around five percentage points to end the year at 69.1% of GDP, still below the estimated 78.7% euro area average. These developments helped to underpin confidence in Maltese government bonds, which are primarily held by domestic residents. In fact, all the government and corporate bond issues launched in 2009 were oversubscribed, in spite of the fact that the issuance volume doubled compared with 2008. Credit rating agencies have confirmed Malta’s sovereign credit standing, with Moody’s giving an A1 rating with a stable outlook. Spreads over the German benchmark ten-year bond yield have remained stable over the past year at around 123 basis points. Sources of economic resilience The relative resilience of the Maltese economy is mainly attributable to four factors. The first is the adoption of the euro.

This is encouraging and suggests that the reforms implemented in recent years have made the economy more resilient to external shocks. There is, however, no room for complacency, particularly at this time of renewed financial market turmoil. It is clear that further difficult policy choices remain to be made. The lessons from the ongoing sovereign debt crisis should serve as a stark reminder that the benign neglect of accumulating imbalances, especially in the context of a monetary union, will have serious economic and social repercussions, sooner rather than later. Allowing short-term considerations to delay the timing of reforms, therefore, only serves to make the inevitable corrections more painful. This challenge should be faced with pragmatism. Rigorous fiscal consolidation and structural reforms may well cause some pain and even keep growth subdued, but this is a temporary phenomenon as the ensuing gains in efficiency and competitiveness should improve the economy’s ability to take fuller advantage of new export opportunities. On their part, businesses need to respond flexibly to changes in global demand, especially in a likely scenario in which foreign markets will be characterized by more efficient competitors and more cost conscious consumers. In these circumstances, innovation and the quality of human capital will be of paramount importance. Malta’s ability to compete internationally will depend increasingly on a more cost-effective use of human and physical resources and sustained efficiency gains in both the public and the private sectors.
Speech  Embargo 26 October 2020, 4.30 pm  The importance of good framework conditions for the Swiss financial centre Lugano Banking Day  Thomas J. Jordan∗ Chairman of the Governing Board Swiss National Bank Lugano, 26 October 2020 © Swiss National Bank, Zurich, 2020  ∗  The speaker would like to thank Christoph Hirter for his support in preparing this speech. He also thanks Simone Auer and Alexander Perruchoud, as well as SNB Language Services. Page 1/5  Ladies and gentlemen, I am pleased that this important event can go ahead at the second attempt, despite the continuing exceptional circumstances. Of course, I regret very much that the audience cannot be physically present. Despite all the digital possibilities available to us now, direct contact with the general public and with business remains very important for the Swiss National Bank. Coronavirus has not only impeded the holding of this centenary celebration, it has also had a far-reaching impact on the economy and our social interaction. I am therefore particularly pleased to have this opportunity to congratulate the Ticino Banking Association in person on its 100th anniversary. As Chairman of the SNB’s Governing Board, I visit Ticino often and have meetings with representatives of the Ticino Banking Association on an annual basis – under normal circumstances. The SNB has had good relations with your association for many years. This is not surprising, since the Ticino financial centre has a long history, as this centenary anniversary proves.

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.