samchain/econo-pairs-v1 huggingface dataset:
Employees who speak up should be recognized. The courage it takes to speak up, despite the perceived costs, should be counted as a very positive factor in evaluations. And, where raising one’s hand has saved the firm’s money and reputation by avoiding or keeping a problem small, that action should be rewarded. It’s only natural for an economist like me to consider the issue of unintended consequences. One that comes to mind is creating a culture of distrust and suspicion, where everyone looking over his or her shoulder. That would be unfortunate and costly. But, I think it is more likely that a different culture will result. Instead, talented and conscientious people will be happy to remain at a firm or in the industry because their personal and professional values are well aligned. Such employees will feel relief that they can speak up without fear of reprisal, and they can enjoy a clear conscience for having done the right thing. There is significant value in being able to sleep well at night. Moreover, being receptive to diverse and dissenting views will likely yield better results. It is in the industry’s self-interest to deter silence, not only because money will be saved on fines not incurred for misconduct, but also because better ideas will be brought to the table. I believe that business performance will benefit from having a culture in which people feel empowered to speak up. Let me give you a few examples from my own experience at the New York Fed.

One such factor is how a new measure conforms to the current state of the economy and interplays with monetary policy. The suitably-large steps should preferably be taken in the right order. From this point of view I note that two proposed measures, longer fixed-rate periods and reduced tax deductions for interest payments, have opposite effects on how the repo rate affects household finances. Longer fixed-rate periods would weaken the impact of the repo rate while reduced deductions would strengthen its impact. If one worries that the households are myopic in their planning and that they will find it difficult to manage a return to normal interest-rate levels, it is probably appropriate to try to enforce longer fixed-rate periods now that interest rates are still low. If, on the other hand, one worries that the households have too easy access to inexpensive credit and in the near term wishes to see a greater gap between household and corporate interest rates, it is probably more appropriate to reduce the tax deductions. How to take the suitably-large steps in the right order is thus not self-evident, but my assessment is that it is now appropriate to strive for both longer fixed-rate periods and a phasing-out of the right to make tax deductions for the largest interest payments. However, most welcome from my monetary-policy perspective would be measures that lead to a more effective housing market, and in particular to increased housing construction.
For instance, this could be called a European Budget Office or “EBO”, which could potentially form the nucleus of what might become over time, and in a gradual manner, a European Ministry of Finance. Strong and independent institutions at the euro area and national levels serve to enhance transparency. They bring the necessary pressure to bear to ensure the conduct of sound policies and effectively counteract possible tendencies towards a lenient implementation of fiscal rules at the level of individual member states. In addition to the “Six-pack” adopted in March 2011 the Heads of State or Government of the euro area also agreed on a “Euro Plus Pact” to strengthen policy coordination with the aim of improving competitiveness and convergence. Under this agreement euro area governments commit to use a set of common indicators to regularly monitor each others progress in areas such as labour-market reforms, reforms to wage-setting arrangements and reforms aimed at improving the sustainability of pension, health care and social benefit systems. Governments who signed the Euro Plus Pact also committed to translate the rules set out in the Stability and Growth Pact into their national legislations. The reform of article 135 of the Spanish constitution in August 2011, which for the first time introduced the principle of budgetary stability into the fundamental law of the country, is a positive example of recent progress made in this area. As a final remark, let me emphasise once again that mastering the current crisis situation requires that all parties involved honour their previous commitments.

Indeed, their continuation would have entailed an increase in the vulnerability of the Spanish economy and the eventual correction would have been even more severe. Cyclical upswings followed by downswings are a normal feature of all economies, although the fact that Spain has recorded high growth rates without interruption for fourteen years may have led agents to forget the existence of this type of cyclical disturbance. Before addressing the central theme of my speech, it would be useful to answer the question why the industrialised countries have suddenly found themselves in such a complicated situation. Part of the answer (the other part being the regulation and supervision failures in many countries) relates to the strong increase in corporate and household debt in numerous countries in recent years, which led, in the presence of highly favourable financial conditions,  BIS Review 117/2008  1  to a significant appreciation in the value of financial and real assets. Some economists and institutions have argued that monetary policy was too lax and that central banks should in future pay attention not only to inflation, but also to other financial developments, such as credit, when taking their decisions. In some cases, these favourable financial conditions were harnessed to expand residential and productive investment (as in Spain), while in others consumption was also boosted by the ready availability of financing, leading to a spectacular reduction in household saving ratios, as in the United States.
Second, the turbulent environment handicapped the money market and led to a widening of the spread, i.e. by means of an unwelcome interest rate hike. The SNB responded immediately by relaxing its lending conditions for banks. Contrary to certain suggestions, this measure was not intended as a means of increasing the amount of liquidity in circulation on a permanent basis. After all, inflationary pressure would potentially rise given such a scenario. Instead, we acted in a flexible way and adjusted our maturities in accordance with the demands in the lending market so as to provide this market with the buffer it needed. We have consequently introduced three-month loans, whereas the terms we offered previously were never longer than 30 days. We also took joint action with other central banks and provided US dollar liquidity to our counterparties – the first time we have ever taken such a step. 2  BIS Review 50/2008  The gradual tightening of lending conditions within our domestic market is a third factor, albeit one which is still to fully materialise. Indeed, the fear that the liquidity requirements of the two big banks may be having a detrimental impact on credit volumes in Switzerland cannot be excluded. However, the rest of the Swiss banking sector – which accounts for almost two-thirds of Switzerland’s domestic credit supply – posted excellent results in 2007, thereby helping to limit the burden of risk. Furthermore, our figures show that there has so far been no impact on lending growth.

Nevertheless, a gradual revision of banks’ credit risk evaluations appears the likely scenario, simply given the economic uncertainty of recent months. Banks may consequently raise their interest rates for commercial loans or ask their customers to provide additional collateral. The sharp increase in premiums seen on the bond market in recent months would seem to back up such a trend, at least as far as the major corporates are concerned. Such a development might then have a knock-on effect on lending conditions for SMEs. At present, the SNB is carrying out a survey among banks in order to gain a better idea of the direction in which lending conditions are heading. Lessons from these turbulences We can learn a lot from the period of turbulence we are currently experiencing with regard to banking supervision and the stability of the financial system. The Financial Stability Forum (FSF) submitted a number of measures to the G7 countries aimed at enhancing the resilience of financial markets. The SNB was an active partner in drafting this report. Allow me to elaborate on this topic. First, it is astounding that a problem which appears to be confined to one single segment of the mortgage market in one single country could have resulted in crisis of global proportions.
Of paramount importance in making the financial system more robust is the need for a viable resolution mechanism for large, complex financial firms. The Dodd-Frank Act does this for the nonbank operations of systemically important U.S. financial firms by authorizing the Federal Deposit Insurance Corporation (FDIC), under certain conditions, to establish a “bridge” bank to liquidate the troubled firm’s operations in an orderly manner. Any net outlays incurred by the FDIC in this process must be recovered by assessing levies on the financial industry. This resolution process is beneficial because an orderly resolution prevents the type of catastrophic collapse that leads to widespread market disruption. And it does so in a way that taxpayer funds are not at risk. However, much work needs to be done so that market participants can understand how such resolutions would work in practice. In particular, there will be some uncertainty about the precise conditions that will trigger a resolution under Title II of DFA. Even after DFA, the alternative of a normal Bankruptcy Code filing remains. In fact, DFA requires an evaluation as to why a filing under the Bankruptcy Code is not appropriate. In addition, the Dodd-Frank resolution process is complex, requiring multiple steps. Moreover, the resolution regime in Title II of Dodd Frank could be very difficult to implement for complex, globally active firms. These banks operate in diverse legal regimes worldwide and it is very doubtful that DFA will apply to these banks’ operations outside the United States.

By shadow banks, I mean the largely unregulated financial entities that take credit risk and/or engage in maturity transformation without access to explicit governmental backstops such as the Federal Reserve’s discount window and or deposit insurance. As we saw in the crisis, without such support, these institutions are vulnerable to runs. When this occurred, the shadow banking sector imploded in a way that imposed significant costs on the regulated sector. The risk is that tighter capital and liquidity requirements for the large financial institutions could push much of the business of credit intermediation and maturity transformation from the regulated sector to the unregulated sector. However, this risk is mitigated by the fact that shadow banks heavily rely on credit support and liquidity lines from the regulated sector. The costs of such facilities will be affected by the new capital and liquidity standards for banks. Thus, the economics of the shadow-banking sector are likely to change in a way that makes such activities less attractive. In addition, by increasing transparency and requiring some risk retention by issuers, Dodd-Frank should make the securitization markets in which shadow banks operate less likely to support poorly underwritten credit. Taken together, these changes mean it is less likely that there will be widespread movement of credit and maturity transformation from the regulated sector to the unregulated sector.
In addition to lobbying and advising the HKSAR Government on the abovementioned measures that are crucial to Hong Kong’s development as a wealth and asset management centre, the HKMA has seconded staff to provide technical support to the Financial Services Branch during the policy formulation as well as the legislative process. 8. Ladies and gentlemen, while we have done a lot in the past few years to build and reinforce Hong Kong’s platform as the wealth and asset management hub, we fully appreciate that such work is a never ending task as most financial centres in the region, including those in Mainland China, all harbour the understandable aspirations to become an international financial centre. Outreaching to supplement platform building 9. Now let me turn to the second “building block” of soft powers, which is “reaching out”. I am sure most of you would agree with me that the platform building work must be supplemented by appropriate “outreaching” efforts. This is similar to the situation in which a company, having created a very superior and competitive product, needs to do a lot of marketing and advertising in order to increase customer awareness and market share. For this reason, the HKMA has over the past few years undertaken a series of outreaching and marketing programmes with special emphasis on Hong Kong as the Asian hub for wealth and asset management businesses. 10. Hong Kong is already a hub for private wealth and asset management. Nearly 80 of the top 100 global money managers are in Hong Kong.

The system switches to a low-liquidity equilibrium. These liquidity droughts were perhaps the defining feature of the financial crisis during 2007 and 2008. In the model, the likelihood of such systemic liquidity crises depends critically on two key structural characteristics of the financial system – the two c’s: concentration and complexity. The greater the concentration within the financial system, the greater the potential for systemic collapse as larger banks spread a disproportionate amount of financial pain around a densely networked financial system. A greater degree of system complexity has a similar effect, creating more channels for contagion and heightening banks’ incentives to hoard liquidity when the weather worsens. The two c’s are very much features of today’s financial system. On the face of it, that bodes ill for future systemic crises. So what role might policy play in avoiding those crises? The model provides a test-bed to consider a range of policy options, including for haircuts policy. An illustrative policy experiment, based on a simulation of the model in which haircuts spike sharply, is shown in Chart 1. Up the vertical axis is a measure of the probability of a systemic liquidity crisis. Along the horizontal axis is the initial size of the haircut on secured financing transactions. The three lines trace three policy options. Consider first the “baseline” path without policy intervention. Provided haircuts remain high come rain or shine – in the example, above around 20% – the probability of a liquidity crisis remains very low.
Joseph Yam: Financial stability issues, dollarisation and price dynamics Opening remarks by Mr Joseph Yam, Chief Executive of the Hong Kong Monetary Authority, at HKIMR Summer Workshop 2003, Hong Kong, 27 August 2003. *  *  *  Ladies and Gentlemen, I am delighted to welcome you to this first “HKIMR Summer Workshop in Money and Finance”. This is an event that we hope from now on will take place annually. The organisers have put together an interesting programme with three papers dealing with issues that are of current or potential importance for Hong Kong. The first paper, to be presented by Professor Charles Goodhart, focuses on financial stability issues. These issues are of particular interest to an international financial centre, as the success or otherwise in the maintenance of financial stability, and therefore the efficiency of financial intermediation, not only has an impact upon the domestic economy but also on the economy of the region that centre serves. The second paper, to be presented by Professor Genberg, deals with the subject of dollarisation. Dollarisation, in the traditional sense of the US dollar replacing or displacing the Hong Kong dollar as a medium of transaction in respect of domestic economic activity, is in my opinion unlikely to occur here in Hong Kong. This is notwithstanding the operation of a currency board system with the US dollar as the anchor currency. But, from another perspective, we are seeing continuing economic integration between Hong Kong and Mainland China.

But what some of you may know is that he has had a very long involvement in, and influence on, monetary issues here in Hong Kong. This began almost exactly twenty years ago when Hong Kong, suffering from a crisis of confidence in its political future, and without any effective form of monetary control, was on the brink of a financial meltdown. The exchange rate was depreciating sharply and Charles was brought in from the Bank of England to advise us on how Hong Kong could be rescued. He gave valuable advice on a proposal to return to a fixed exchange rate system through the currency board arrangement of linking the Hong Kong dollar to the US dollar. As you all know, that exchange rate link was subsequently established, in October 1983, and it is still in operation now. It commands a high degree of confidence and credibility. It has served Hong Kong extremely well in the past twenty years. In his advice, Charles also covered other strategic issues of central banking for Hong Kong. As the only remaining person in the public sector continuously involved in this area of work from then until now, I can say with some authority that the views of Charles have exerted much influence on the development of the monetary system of Hong Kong. I do not know whether you remember, Charles, your piece of advice to the then Financial Secretary, the late Sir John Bremridge, written on 6 October 1983.
In the realistic case when the state variable affecting the probability of a financial crisis is a vector that includes not only leverage but, for instance, maturity mismatch and liquidity mismatch, it is even more the case that additional financial-stability instruments such as restrictions on maturity and liquidity mismatches are superior to the policy rate in achieving and maintaining financial stability. BIS central bankers’ speeches  5  for many years for several reasons, including global imbalances, fiscal policy, and shocks to aggregate demand and supply. This confusion means that the conclusions from this work for monetary policy are not clear. Monetary-policy instruments The standard monetary-policy instruments are the policy rate and communication, including statements and the publication of forecasts of inflation, the real economy and (by some central banks) the policy rate. During the financial crises, in particular when the policy rate is at or close to the zero lower bound, we have seen other more unconventional instruments being used to implement more expansionary policy, as noted above. There is a lively debate and a considerable body of research on the effects of the LSAPs undertaken by the Federal Reserve. Estimates based on a number of recent studies, as well as Federal Reserve estimates, suggest that, all else equal, the Federal Reserve’s QE2 program launched in November 2010 lowered longer-term interest rates by 10 to 30 basis points.

This means that from a monetary-policy perspective the Federal Reserve can unwind the LSAPs at any pace that it deems appropriate when they are no longer needed. Forward guidance about the future policy rate in the form of a policy-rate forecast was adopted by the Reserve Bank of New Zealand in 1997, Norges Bank in 2005, the Riksbank in 2007, and the Czech National Bank in 2008. It has become a standard part of monetarypolicy communication in these central banks. Forward guidance in the form of statements about the future policy rate was introduced by the Bank of Canada in 2009 and the Bank of Japan in 2010. The Federal Reserve introduced language in the March 2009 statement that it anticipated rates to remain at low levels for an “extended period” and in the August 2011 statement that it anticipated rates would remain low “at least through mid-2013.” I have long been in favour of the publication of a policy-rate forecast on a regular basis (Svensson 2003). This is based on both the existing practical experience of publishing such forecasts and the fact that what matters for the economy and private-sector decisions is not what the policy rate is during the one or few months until the next policy meeting but what the longer interest rates are that result from market expectations of future policy rates and term premiums.
William C Dudley: The national and regional economic outlook Remarks by Mr William C Dudley, President and Chief Executive Officer of the Federal Reserve Bank of New York, at the Long Island Association, Melville, New York, 19 March 2012. *  *  *  Good morning. I am pleased to be here on Long Island. It is always a pleasure to speak with the business community because of the leadership role you play in your communities and in shaping the economic landscape in the region. So, I thank you all for coming today. Over the past few years, I have been engaged in a series of outreach meetings all across my Federal Reserve District. For example, in 2010 I visited several upstate cities. Early last year I made visits to various parts of the city – Brooklyn, the Bronx, Queens – and to Puerto Rico. In August, I met with community and business leaders and elected officials in Newark, Patterson and Jersey City. In November, I went to West Point and the Capital region. I consider these visits just as important as my trips to Washington, D.C., to help formulate monetary policy or to Switzerland to help shape international bank regulation. Each visit within the region helps me to deepen the relationships with the people I represent. I believe that the understanding of issues and concerns that I gain today will help ensure that the Fed’s policy decisions reflect the public interest in the broadest sense.

It has been well understood by the market, so I see no reason to change it while it works. Mario Draghi, the ECB President, has flagged that the reinvestment of maturing bonds could be the next important policy step for the ECB. Will this become a way for the ECB to provide a little easing? It is an important part of a package of measures that delivers monetary accommodation, sustained monetary accommodation beyond the end of net asset purchases, that is, after December 2018. There are two aspects: we have the enhanced rate guidance and we have the reinvestment policy. So it is clearly part of the package. It will ensure that the ECB keeps a very significant market presence beyond the end of the net asset purchases and for an extended period of time after the end of the asset purchases. That said, we haven’t discussed any details, so any details related to the maturity of our reinvestment, that’s a technical discussion. That’s not something the Governing Council or even our committees have discussed. Is it going to be done before the end of this year? We’ll certainly have to discuss it. I see it as a technical discussion; I don’t see it as a major aspect of our monetary policy when it comes to the maturities. But the commitment to reinvest is important because it will ensure a continued market presence, which is important to maintain the degree of monetary accommodation.