samchain/econo-pairs-v1 huggingface dataset:
Indeed, policymakers regularly used to attempt to manipulate the yield curve in the Sixties and Seventies, for instance the Federal Reserve’s “Operation Twist” (though in that case the impact of the purchases on the money supply was sterilised). But in practice it probably makes sense to rely on a short interest rate as the primary instrument of monetary policy for three reasons. First, while the evidence that asset purchases do have the effect expected on asset prices is compelling, there is a wealth of evidence regarding the monetary transmission mechanism from movements in short-term policy rates. Central banks, moreover, have considerable experience in the operation of policy through short interest rates. Given that the impact of changes in a short-term policy rate is both more certain and better understood, it makes more sense to put the most weight on that instrument rather than asset purchases (Brainard, 1967). Second, and related to the above argument concerning the relative uncertainty of a short interest rate and asset purchases as monetary policy instruments, there are reasons to think  7  There is a substantial related literature attempting to uncover the effects of changes in debt maturity structure on relative yields. These studies have generally struggled to identify well-defined effects from variations in the supplies of debt of different maturities. Though the variations in asset quantities may be quite substantial, they usually take place slowly, necessitating controlling for a wide range of other factors affecting relative yields.

One can, however, answer a slightly different and more straightforward question, namely what impact the accommodative policy stance had on asset prices and credit growth. Bernanke goes on to provide time-series and crosscountry evidence, which suggests that monetary policy played a relatively modest role in the boom in house prices in the United States and a number of other countries. Chart 1 shows that both UK and euro-area policy rates were less noticeably out of line with their respective Taylor benchmarks. That too is striking. Indeed, in the United Kingdom, they were actually above the benchmark for much of the relevant period, even though the United Kingdom saw one of the larger run-ups in debt and house prices during this period. And, in the euro area, countries such as Spain experienced substantial house price booms, while countries such as Germany did not. That need not imply that monetary policy was innocent in the run-up to the crisis, as the equilibrium real interest rate could have been higher in the United Kingdom than in the calibrated Taylor rule. And differences in equilibrium real interest rates across countries can in principle explain the heterogeneity in the euro area. But this is hardly compelling evidence for assigning the central role to monetary policy, suggesting that other factors were more important. To complement Bernanke’s analysis, we provide some further evidence on the impact of policy on credit and asset prices, obtained from estimated vector auto-regressions for the United States and the United Kingdom.
Ardian Fullani: Overview of recent economic developments in Albania Speech by Mr Ardian Fullani, Governor of the Bank of Albania, at the press conference on the Monetary Policy Decision of the Bank of Albania Supervisory Council, Tirana, 27 July 2011. *  *  *  Today, on 27 July 2011, the Supervisory Council of the Bank of Albania reviewed and approved the Monetary Policy Statement for 2011 H1. Based on the analysis of Albania’s latest economic and financial developments and following discussions on their performance outlook, the Supervisory Council of the Bank of Albania decided to leave the key interest rate unchanged at 5.25 %. The Supervisory Council holds that the actual monetary conditions are appropriate for meeting the inflation target and for continuing to stimulate the economic activity. Let me now proceed with an overview of economic developments and main issues discussed at today’s meeting of the Supervisory Council. *** The Albanian economy continued to grow during 2011 H1, although in the presence of added challenges generated by the internal and external economic developments. Tensions in global economies and financial markets, as well as increased prices of raw materials and foodstuff led to shrinkage of Albania’s economic activity. The first factor raised the uncertainty of economic agents as well as risk premiums in financial markets, while high inflation imported from world markets decelerated domestic demand and increased inflation expectations at home. Despite unfavourable factors, Gross Domestic Product posted growth and main macroeconomic balances and financial stability remained stable.

At the conclusion of discussions, the Supervisory Council concluded that the monetary conditions remain appropriate for meeting the medium-term inflation target and decided to leave the key interest rate unchanged at 5.25 %. 4  BIS central bankers’ speeches
51  Latterly, however, there are signs these foundations have started to subside. And institutions are being challenged, at least in part, because a different model is emerging in which trust is distributed rather than centralised, social rather than institutional, personal rather than anonymous. 47  Carvalho and Nechio (2014), using the University of Michigan Survey of Consumers. van der Cruijsen et al (2015). 49 For example, Govier (1997), Barber (1983) and Liisberg et al (2015). 50 For example, the work of Rachel Botsman. 51 Acemoglu and Robinson (2012). 48  12  All speeches are available online at www.bankofengland.co.uk/speeches  12  One example of that trend concerns a commodity many thousands of years old and one close to central banks’ hearts – money. Money, certainly fiat money, relies for its existence on trust. In many countries over many centuries, this trust was delivered in a centralised, institutionalised and, to a large degree, anonymised way, namely through central banks. Latterly, there are just the faintest signs that could be changing. The Blockchain or Distributed Ledger Technology (DLT) first came to prominence through Bitcoin, the crypto-currency. Since then, the range of applications of DLT has expanded massively, well beyond crypto-currencies. What differentiates DLT from earlier technologies is the ability to confer trust on a commodity or transaction without the need for a central institution for verification. Trust is distributed, personalised, socialised. It is too soon to tell whether DLT will revolutionise financial services in general and money in particular.

Despite a huge increase in the volume of central bank reporting, neither understanding of, nor trust in, central banks has improved. These trust and understanding problems are not unique to central banks – they are common across banks, business, government, the media. Nonetheless, what explains these trends? The financial crisis and the slow recovery from it are likely to have been one factor, but not the whole story. Let me highlight three other factors to have played a role, for central banks and more broadly. (a) The changing nature of trust  Trust has been studied extensively by philosophers, sociologists and anthropologists over many years. 49  These studies have shown that trust can take a variety of forms and can change shape quite fundamentally over time. Such a mini-metamorphosis appears to have taken place over recent years, in particular among trust in institutions. 50  The traditional model of trust was a fairly simple one. To a significant degree, it was anonymous, centralised and institutional. The actions of institutions, like the Fed and the Bank, were trusted by the general public, even when few of them understood what it is these institutions did and why. And having a trusted third-party, able to exercise a degree of control over monetary and financial affairs, was a source of comfort. This institutional structure, in the main, served society well. Not least, it lasted for several hundreds of years. Some have argued that a good chunk of society’s success over this period can be attributed to these institutional foundations.
Conversely, as the recovery became more firmly entrenched, Malaysia was the first in the region to normalise interest rates in March 2009 from the record-low level, well ahead of the regional counterparts. We shall continue to strive to make monetary policy decisions based on prevailing data and the assessment to the best of our ability, even if it might be against conventional wisdom or no matter how unpopular the decisions might be. In managing the exchange rate, a similar philosophy of pragmatism is applied. We should recognise that in today’s world of greater interconnectivity, we are all susceptible to the vagaries of the global financial markets. But to distance ourselves from the global financial markets is not an option. In this regard, despite the extreme volatility experienced in recent years, our thinking has 6/8  BIS Central Banker's Speeches  remained the same – market forces ought to determine the direction and level of the exchange rate. The central bank’s role should be to contain the degree of volatility, which we know has significant implications for an open economy like ours. As such, there will be times when the Bank’s presence is apparent in the market, to manage the degree of volatility, but there will be times when the ringgit movements will be more volatile than normal so that it will take its course in line with demand and supply in the market that reflects underlying trade transactions.

Advocates of the secular stagnation hypothesis argue that this is a result of underinvestment in capital; others point to declining business dynamism, excessive household debt that leads to the misallocation of resources, and some attribute it to measurement errors given the expansion of the digital economy. And then, there are those who question the productivityenhancing-value of recent technological innovations. What is the value of an Apple Watch as compared to the invention of the internet? It is indeed a challenge to comprehend this rapidly changing complex system that we operate in, let alone diagnose it. We need to humbly recognise the boundaries of our understanding for now, but at the same time relentlessly expand the frontier of thinking and conduct robust deliberation on the implication for public policy formulations. The last paradox, one that is familiar to many policymakers, a disquieting calmness. In the financial markets, the VIX – a standard indicator to measure volatility in the global financial markets – is at its lowest in the last two years. In fact, it is close to the all-time low of below 10, last seen just before the global financial crisis. Yet, a quick scan of financial news would reveal significant uncertainty in the global economy, amid an ongoing series of policy adjustments in major economies, volatile commodity price movements and geopolitical tensions. To a large extent, this paradox is an outcome of the combined policy efforts by central banks and governments worldwide to maintain stability since the global financial crisis.
With the fund’s current size and equity allocation, this would have resulted in a fall in the value of the equity portfolio of NOK 1700 billion. This is equivalent to 65 percent of GDP for mainland Norway. The financial crisis triggered a deep decline in equity markets, but was followed by a relatively rapid rebound. We cannot ignore the possibility that the return on the fund will be low for many years. In the 1970s, the real return on US government bonds was negative for five years in a row. In equity markets, a long period of high ERPs after the Second World War was followed by a long period of low ERPs in the 1970s. A good understanding and broad-based acceptance of the risk of substantial falls in the fund’s value are, as mentioned, essential to be able to maintain the investment strategy. Experience from the financial crisis suggests that the governance model for the fund is capable of coping with periods of large falls in value. We should, however, remember that the value of the fund in krone terms did not fall to any great extent during the financial crisis because of substantial transfers of petroleum revenues and a substantial depreciation of the krone. A future test of the governance model may prove more demanding. A FUTURE PERSPECTIVE ON WEALTH An assessment of the fund’s equity share should not be exclusively based on an analysis of expected financial market return and risk.

Egil Matsen: The equity share in the Government Pension Fund Global Introductory statement by Mr Egil Matsen, Governor of Norges Bank (Central Bank of Norway), Oslo, 1 December 2016. * * * Accompanying slides  INTRODUCTION The discovery of oil off the Norwegian coast has shaped the economy for almost two generations. Norway’s industry structure has undergone a fundamental change. Oil has lifted the level of prosperity and generated substantial government revenues. Chart: The Government Pension Fund Global Twenty years have passed since the government made the first capital transfer to the Government Petroleum Fund, which has since been renamed the Government Pension Fund Global (GPFG). Since then, Norway’s subsea oil wealth has to a large extent been transformed into foreign financial assets. The GPFG serves two main purposes: to insulate the central government budget from the effects of large annual fluctuations in petroleum revenues and to preserve a substantial share of the oil wealth and increase it for future generations. A milestone in the management of the nation’s oil wealth was the fiscal rule, adopted in 2001. The fiscal rule permits the government to spend the expected real return on the GPFG, then estimated at 4 percent. The rule was introduced to phase in oil revenues gradually into the economy in pace with the increase in the fund’s capital. The GPFG has grown rapidly over the past ten years. In line with the fiscal rule, the fund’s contribution to the central government budget has increased.
Recorded in John Osborne’s unpublished War history of the Bank, op cit. 5  All speeches are available online at www.bankofengland.co.uk/speeches  5  on ensuring ready access to currencies that are freely convertible and tradable in deep and liquid financial markets and widely used in goods and services trade, security issuance and reserves holdings. Using a range of such metrics, the dollar and sterling currently account for 42% and 8% respectively of the IMF SDR basket. Of course, central banks do not have to use their fellow central banks for such services: they can (and do) also use private sector providers (as they could in 1917). But confidence in those currencies is critically reliant on the knowledge that, subject to appropriate terms and conditions, central banks of issue stand ready to provide safe, confidential and reliable access to their currencies if asked to do so – whether by retail customers wishing to exchange notes, or by fellow central banks wishing to undertake wholesale transactions. -  Third, access to central banking services provides an important safety valve in conditions of financial instability. Although private sector cross-border banking and capital markets are highly developed, deep and liquid, they can still be subject to periods of dysfunction – as the financial crisis vividly illustrated. The network of central banking relationships provides the infrastructure, expertise, legal and personal contacts required to ensure the global system can continue to operate in such extreme tail events.

Yet despite all that change the three key benefits of financial co-operation identified by Strong and Norman remain at least as relevant today as they did a century ago:  -  First, more central banks than ever before value the safe, confidential, reliable access to overseas reserve currencies, assets and payments offered by their peers. Safe – because central banks are free from insolvency in their domestic currency, are rigorously focused on minimising operational risk, and settle all payments in central bank money. Confidential – because central banks treat the information they receive with the greatest discretion, and are not subject to commercial incentives or conflicts of interest. And reliable – because central banks understand the policy priorities of their peers, and stand ready to provide the highest level of continuity of service. Today the Bank of England provides banking services to over 150 central banks and international financial institutions around the world – ten times more than in 1917. Those services include sterling payments, call and term deposits, and custody of securities and gold. The Bank’s gold repository remains the most active central bank service in the world, reflecting the United Kingdom’s lasting role as the pre-eminent wholesale gold trading centre. -  Second, access to central banking services underpins the international monetary system. Although the major economies no longer maintain fixed exchange rates, the international trading system relies  6 7  A version of the original March memorandum is held in the Bank of England Archives.
I have therefore maintained that the lower repo-rate paths that I advocated between April 2009 and February 2010 would have stabilised both inflation and resource utilisation better than those adopted by the majority of the Executive Board. 3  2  Bill 1997/98:40. BIS Review 60/2010  The repo rate and the repo-rate path are means, not ends Are there other aspects of the repo-rate path to consider apart from the fact it should stabilise inflation and resource utilisation? It is important to realise that the repo rate and the repo-rate path are means and not ends in monetary policy. “A normal repo rate” is not a target for monetary policy. There is no support in the provisions or the preparatory work of the Sveriges Riksbank Act for using a too high or a too low repo rate as a reason to stabilise inflation and resource utilisation less effectively and in this sense set aside the objectives regarding price stability or the stability of resource utilisation. Consequently, I cannot see any situation when monetary policy should set aside price stability and the stability of resource utilisation so as to “normalise” the repo rate and the repo-rate path in order, for example, to get away from a “crisis rate”, or to attempt to influence credit volumes or house prices, or because the economy has bottomed out and economic activity has begun to pick up. The focus of monetary policy should always be on achieving the best stabilisation of both inflation and resource utilisation.

Less controversial seems to be the observation that downward spirals in prices can be magnified by the institutions involved in the selling wave of the crash, thereby generating contagion across markets  2  BIS Review 53/2003  and countries. In particular, the Russian and LTCM crises demonstrate the important role of market liquidity as a potential channel of crisis contagion, as market price falls due to liquidity withdrawals could cause losses for many market participants. To summarise the lessons learnt from past experiences, it seems that volatility is in itself not necessarily a threat to financial stability. Other elements are necessary before serious concerns arise over financial stability. One of the key elements is the risk faced by banks and other financial institutions, because this could be the channel through which the functioning of the financial system as a whole could be jeopardised. This view is supported by the recent episodes of market volatility in late 2002 and early 2003, when the sequence of substantial market readjustment was generally managed in an orderly manner by financial institutions across the globe. B.2  Progressing financial innovation  Let me turn to the second theme - the implications of progressing financial innovation. In fact, the reason why the latest episode of stock market adjustments did not cause systemic problems could be attributed to the contribution of financial innovation to the more even distribution of risks. However, some concerns have emerged regarding the securitisation and credit risk transfer markets, for instance.
The Banque de France’s approach to all these new trends in financial intermediation is to harness the Fintech opportunities while preserving the financial safety nets and a level playing field 3/6  BIS central bankers' speeches  (A) Managing the financial stability risks stemming from a more diversified intermediation model pleads for advancing sound principles and for tightening the links between financial and nonfinancial regulation. In that respect, the Banque de France’s stance is threefold: First, well-articulated and complementary regulation and supervision ranging from microprudential to macro-prudential, and from prudential to consumer protection, anti-money laundering, data protection and anti-trust laws; Secondly, a technology-neutral stance, which accommodates Fintech innovation while preserving financial stability. In this respect, finding the right balance implies an open-minded approach and an in-depth understanding of innovation. That is why in 2016 we created a specific Fintech-innovation hub at the ACPR to engage in a dialogue with innovators: around 400 of them contacted us through this dedicated channel; Thirdly, an activity-based regulation and supervision, to ensure a level playing field between all entities pursuing the same financial activity. The current multiplication of licensing categories to reflect the diversification of business models entails the risk of a loss of regulatory clarity and regulatory arbitrage which needs to be addressed. (B) Of course, the financial stability implications of the morphing of financial intermediation that is underway are not limited to France, and cross-border challenges need to be answered. Doing so requires the smooth articulation of national initiatives, European convergence and international cooperation.

BIS Review 124/2007  1