samchain/econo-pairs-v1 huggingface dataset:
This suggests that the probability of such an event occurring would be no more than once in 300 years under even the very conservative assumptions. But the event had occurred within five years of LTCM’s birth. 7. It is natural, and indeed probably inevitable, that, in seeking to predict the probability of an event occurring, we tend to look to past experience. However, as we all dutifully warn investors when selling investment products, “past performance is no guarantee of future performance” and so we must stand ready to admit that there are fundamental limitations in our existing risk management tools. That is, the predictive powers of models are inherently restricted by historical experience. Where we encounter something new, such as innovative products or business model changes resulting in different forms of connectedness and creating different and new transmission channels, the models face significant difficulty in accurately estimating risk. Furthermore, even if one could find better models, any models must inevitably assume market behaviour remains constant to some degree, yet we know too well that uncertainty and panic may and do engender irrational or herd-like behaviour which a model struggles to accommodate. So, if the model’s findings can be “misguided”, too great a reliance on them, or too limited an understanding of what the model actually tells us, may result in a significant misjudgement of risk. 8. All of this prompts the question of how far we should reflect on the efficacy of our methods for assessing, measuring and managing risks in the financial system.

Jean-Pierre Roth: Role of the central banks with respect to the financial market crisis Summary of a speech by Mr Jean-Pierre Roth, Chairman of the Governing Board of the Swiss National Bank and Chairman of the Board of Directors of the Bank for International Settlements, at the Forum Suisse de Politique internationale, Geneva, 23 May 2008. The complete speech can be found in French on the Swiss National Bank’s website (www.snb.ch). *  *  *  The central banks have been working extremely hard to respond appropriately to the turmoil that has beset the financial markets in recent months. Aimed at enhancing the resilience of the markets and safeguarding the stability of the financial system, the measures they have taken have been drastic and innovative at times. As this episode has also shown, a policy of preserving financial stability is not always easy to reconcile with monetary policy. The central banks must therefore tread carefully and avoid compromising their price stability objectives when intervening to defend financial stability. While money market conditions deteriorated over the past nine months, the Swiss National Bank put off interest rate hikes so as not to provoke a tightening of credit conditions in Switzerland. Effective action by banking supervisory authorities is key to ensuring long-term financial stability. However, the central banks also have a role to play in reinforcing the markets during times of need.
And they include restoring the functionality of the banking sector, so that it supports rather than hinders the domestic economy as it emerges from the crisis. 8  OECD Economic Surveys: Germany 2012 (February 2012). 9  Lusine Lusinyan and Dirk Muir, “Assessing the Macroeconomic Impact of Structural Reforms: The Case of Italy”, IMF Working Paper, January 2013. 10  Ramon Gomez-Salvador, Alberto Musso, Marc Stocker and Jarkko Turunen, “Labour Productivity Developments in the Euro Area”, ECB Occasional Paper, No. 53, October 2006. BIS central bankers’ speeches  5  Conclusion Let me conclude. The challenges the euro area is facing today to raise its growth potential are not new. Since the 1990s we have known that supply conditions in the euro area needed to be reformed. This was the aim of the failed Lisbon Agenda. And indeed, it was the context for a famous quote about the apparent inconsistency between reform and re-election. What is new today, however, is the urgency for action. We are facing the risk of a structural set back in growth. We can therefore no longer afford to delay, nor should we over-burden monetary policy. Structural reforms are a must. For this reason, the apparent contradiction between reforms and re-election may now be moot, simply because citizens want growth, and without reforms it will not materialise. There is no country in the euro area that has delayed reforms and achieved economic outcomes with which their citizens are content.

I see this as an important tool to help banks manage the credit risk associated with lending to SMEs. However, for it to recover it is critical that the regulatory treatment of asset-backed securities (ABS) is based on real data and not the legacy of the US sub-prime disaster. We have a very different experience with ABS here in Europe: between mid-2007 and the first quarter of 2013 the default rate on ABS in the EU was only around 1.4%, whereas it was 17.4% in the United States.6 Structural reforms While financial sector repair can help ensure that credit flows to the most productive firms, we also have to ask the question: where will those firms come from? The incentive for firms to exploit economies of scale, invest and innovate – that is, to be productive – depends critically on the business environment. We therefore need to ensure we have the economic framework conditions that encourage this. This brings me to the key topic of structural reforms. Put simply, there is no way we can achieve higher potential growth in the euro area without them. Structural reforms are essential to raise the trend components of the inputs to production (investment and labour) and the efficiency with which they are used (total factor productivity). Let me explain why. First, while investment in the euro area may pick up as the uncertainty caused by the crisis recedes, to raise trend investment there needs to be fresh opportunities for firms to develop new business models and grow.
In 2017, Per Scholas NY enrolled 502 students and 406 graduated, of which a substantial majority reported being placed with an employer with an average starting wage of more than $ an hour.2 Earlier this year, the New York Fed partnered with Per Scholas NY to support our own Diversity & Inclusion efforts focused on career paths in IT, cybersecurity, and data science in the financial services industry. I am proud to say that the New York Fed was recognized by Per Scholas as a Major Partner in its recent 2018 annual update report. I mention these two examples as they reflect the theme of today’s event and the book— workforce development is about investing in work, workers and systems leading to greater employment opportunities for all. Employer Engagement by Community Colleges in New York State Another important issue is the role of employer engagement with community colleges. By working directly with local employers, community colleges can more effectively prepare students for available jobs, and at the same time, help employers find and retain workers with the skills they need. In an effort to better understand the level and types of employer engagement activities taking place in our region, the Federal Reserve Bank of New York recently conducted a survey of all of the community colleges in New York State. Next Wednesday, we will be releasing a report that details our findings. Our report does show that employer engagement by community colleges in New York State has become the norm.

There is a tendency to try to re-invent the wheel and overlook past experience, but by taking a step back and learning from one another, we can have a much greater positive impact in our communities. Roadshow Workforce Experience Sustainable economic growth and thus broad-based prosperity is dependent on a healthy job market, one in which employers can find the skills they need and workers find jobs that allow them to grow and move up the economic ladder. The challenge is developing a system that encompasses both and is accessible to all those seeking a job. Our workforce development initiative aims to promote dialogue and a greater understanding of promising policies and programs that allow workers, especially those in low and moderate-income communities, to develop in-demand skills and connect them with employers. We can achieve this by connecting with workforce stakeholders through policy forums, roundtable discussion sessions, and examining areas through our research and outreach. One of the best aspects of my job is the opportunity to visit communities across our Second District. The skills gap and the uneven economic recovery among different communities are consistent themes I hear, not just in the Second District but also in my previous job on the West Coast. I also have heard about a variety of policies and programs that seem to be making an impact and could have broader potential that are worth sharing.
IFFO has organised 12 workshops and events in collaboration with top experts in the field such as the International Finance Corporation and the Multilateral Investment Guarantee Agency under the World Bank Group, Harvard Kennedy School, and key industry associations on risk mitigation and 1/3  BIS central bankers' speeches  capacity building. Two high level roundtables for debt and equity investors were held in March 2017 to discuss innovative ways of making projects more bankable and investible. A reference term sheet for infrastructure investments was also developed in the equity roundtable, listing out various factors to be considered in equity investment in infrastructure projects. The next high level roundtables will be held later this month. We also held a high level roundtable two months ago with 10 major Mainland China enterprises which have extensive investments in EMEs. The theme of that roundtable was the pivotal role that Hong Kong could play in facilitating the financing and management of infrastructure investments in the region. Separately, the HKMA is exploring the opportunity of co-investment in infrastructure projects with some like-minded investors. This is still work in progress and we hope we can say more on this later on. 5. Apart from the work of IFFO, I would like to say a few words on what the Hong Kong Mortgage Corporation (HKMC), which is fully owned by the HKMA, is doing in promoting infrastructure financing. The HKMC’s key mandate, as many of you are aware, is to develop commercially viable financial products that would facilitate market developments.

In our management of the Fund, we must do more than concentrate on relative return, or the difference between the return on the benchmark index and the return on the Fund. Investment strategy advice to the Ministry of Finance must be based on assessments of absolute returns. For the property investment portfolio, which is currently being built up, detailed knowledge of the value of the underlying assets is essential to be able to judge whether an investment will generate the desired real return over time. Knowledge about underlying values is also necessary in order to maintain an active approach to the benchmark indices – and to make adjustments as required. Conclusion Today, I have focused on changes in the world’s economic geography and the challenges they entail. Large imbalances will necessitate readjustment. The solution to the problems does not lie in restricting world trade. We should recall that the increase in trade and free capital markets has primarily resulted in substantial gains. Emerging economies have in a short space of time assumed a more prominent role in the global economy. Many people have been lifted out of poverty. These developments should be allowed to continue.
Since the middle of 2003, inflation has been below the target of 2 per cent, and periodically far below this (Figure 2). It is really only during the past six months that inflation has once again begun to approach levels reasonably in line with the target. At the same time, growth has been high. Since 2004, GDP has increased by slightly more than 3 per cent a year on average. This is a fairly remarkable figure, both in historical terms and in comparison with many other countries, in particular Europe. All in all, inflation has been remarkably low, while growth has, if anything, been higher than usual. Despite the good growth, employment has developed weakly. The high demand for goods and services does not appear to have resulted in any great demand for labour. However, the labour market situation recently appears to have begun to improve. So, how can inflation have become remarkably low and employment have developed as weakly as it has, despite economic activity chugging along nicely? The economy appears to have been affected by forces that have held back both inflation and employment. What can these forces be? To begin with, it is worth noting that it is not only in Sweden that inflation has been unexpectedly low in recent years (Figure 3). In Norway, for instance, inflation fell heavily a few years ago in a similar manner to Sweden. In Finland inflation has been even lower than in Sweden.

Those are the words of Sir Philip, the architect of that policy and someone who commanded and still commands a lot of respect. Indeed as Monetary Authority chief, I have no responsibility over that policy. It rests on the broad shoulders of Sir Donald Tsang who is carrying it bravely. Let us all make a little effort to give him the support that he needs, spiritual or otherwise, by trying to gain a better appreciation of what the policy of positive non-interventionism really means. BIS Review 67/1998  -4Whilst on the subject of intervention, may I reiterate that our intervention in the stock and futures market to deter currency manipulation does not imply any weakening of our resolve to adhere to the linked exchange rate system. This resolve has never been stronger. Indeed, as I have mentioned elsewhere, there simply is no better alternative for Hong Kong. The experience of many of our neighbouring economies in the past year or so underlines why. As the financial storm in this region spreads to almost everywhere now, and with increased intensity, the discipline of currency board arrangements of our linked exchange rate system is our best safeguard for our long-term prosperity and stability. BIS Review 67/1998
Indeed, economic studies of disasters in the U.S. and other advanced economies find that the longer-term effects on national economies have typically been negligible. Given the resilience of the U.S. economy, I expect the long-run effects of Sandy to be similarly small. Even before the storm, though, the pace of U.S. economic growth was disappointing – averaging only slightly above a 2 percent annualized growth since the recovery began in mid-2009. As a consequence, the national unemployment rate remains unacceptably high, and its decline during the recovery has been grudging. In addition, too many people are discouraged from looking for work. This has depressed the participation rate and held down the official unemployment rate. Moreover, 5 million workers have been unemployed for six months or more. While job growth has picked up some recently, its pace has been insufficient to materially change the labor market picture. In terms of activity, there are a few bright spots. For example, the growth rate of consumer spending was a bit firmer in the third quarter. Another area showing improvement is the housing market. Housing starts and sales of new and existing single-family homes are trending up gradually. Nationally, home prices have finally begun to rise. However, on a more negative note, business fixed investment spending fell some in the third quarter and new orders for nondefense capital goods suggest continued softness. Overall, manufacturing activity remains weak. This manufacturing slump stems from slower growth abroad and uncertainties about how the fiscal cliff in Washington will be resolved.

What the New York Fed does By way of introduction, I will briefly review what my colleagues and I do at the New York Fed. The New York Fed is one of 12 regional Federal Reserve Banks that, together with the Board of Governors in Washington D.C., make up the Federal Reserve System, our nation’s central bank. The Federal Reserve is independent within our government. By law, we are charged with managing the nation’s monetary policy – taking actions that raise or lower interest rates to promote full employment and price stability. The Federal Reserve is also charged with promoting financial stability, without which we cannot achieve our economic objectives. We play an important role in the nation’s payments and settlements system, which some people call the financial system’s “plumbing”. For example, we help ensure that banks’ ATMs have cash and that the checks you write move the money to the recipient. In addition, we have a specific mandate to promote economic development in each of our regions. BIS central bankers’ speeches  1  As president of the New York Fed, I serve as the vice chair of the FOMC, the Federal Reserve committee that meets eight times a year in Washington to set interest rates and make decisions about monetary policy. The members of this committee all strive to achieve our statutory mandate of full employment and price stability. Sometimes we have different views on the specific policy choices at hand, and our policy decisions reflect a full discussion of these differences.
This year will also be the year of the European elections on May 26, which are essential for Europe, and of the French Presidency of the G7, which may be an opportunity for furthering effective solutions at the international level. Tonight, however, I would like to focus on three wishes for the smooth financing of the economy: for the euro, for financial stability, and finally for inclusive finance. 1 - My first wish is for the euro, which has just celebrated its 20th anniversary The euro is an undeniable success. Average annual inflation has been brought down from 4.9% over the two decades preceding the euro to 1.7% over the past two decades. This has contributed to preserving the purchasing power of European citizens. Financing costs are significantly lower. Our currency is now supported by 75% of euro area citizens, and 72% of French citizens: it is the highest level ever achieved since 2003. In 2019, euro area growth – although down – is expected to remain above its potential. In this environment, the normalisation of our monetary policy, which started with the successful termination of our net asset purchases in December, remains desirable. It must be gradual – according to the sequencing that we specified – and pragmatic - in the implementation timeframe where we must keep our options open in the face of uncertainty. At the same time, we need to finally strengthen our Economic Union, particularly if we are to face a downturn.

The achievements of the December agreement must resolutely be built upon: regarding the Banking Union, a common backstop that would be available rapidly and remain in place for a sufficiently long period is an essential element, even more than the deposit insurance scheme, to ensure that the single resolution mechanism is solid and effective. The Capital Markets Union, on which everyone agrees in principle, must finally forge ahead to better channel our EUR 350 billion private savings surplus towards the concrete needs of our economy: digital innovation, the energy transition and SMEs’ capital. Finally, the progress achieved on the public solidarity mechanisms – preventive intervention of the European Stability Mechanism, fiscal capacity – is a promising prospect but it needs to be translated into action. 2 – My second wish is for financial stability 1/3  BIS central bankers' speeches  I would first like to acknowledge the soundness of our financial institutions. In June 2018, the Tier 1 capital ratio of the main French banks stood at 13.5%, i.e. 7.7% higher than in 2008. The liquidity situation has improved, with an average LCR of 127%. The share of non-performing loans has continued to decline to stand at 3.1% in June 2018, i.e. close to the pre-crisis level, compared with a European average of 3.6%. The same holds true for insurers. Their capitalisation is good, and their solvency has improved, with the average coverage ratio of the major insurers rising by 9 percentage points to reach 241%.
There is nothing to say this would be the case, neither in the Sveriges Riksbank Act or its preparatory works, nor in the booklet “Monetary policy in Sweden”. Instead, I believe that the repo rate should in all situations be set so that inflation and resource utilisation are stabilised as far as possible, regardless of whether this requires a high or a low repo rate and regardless of whether there is a crisis or not. A repo rate path way above market expectations The repo rate path is much higher than market expectations according to implied forward rates. The repo rate path corresponds to much higher market rates than the current ones. If the repo rate path were to become credible, it would lead to a significant increase in long interest rates and a large appreciation in the Swedish krona, which would risk strangling the recovery in exports and GDP, raising unemployment and lowering inflation. The reasoning can be explained with the aid of some figures. In Figure 7 the red curve shows the repo rate path in the main scenario, and the blue curve shows implied forward rates according to Swedish market rates. The curves gave been extrapolated beyond the usual three-year horizon, to a five-year horizon. 6 Figure 8 shows the yield curves corresponding to the curves in Figure 7. The yield curves show short and long interest rates, more precisely a zero coupon rate as a function of maturity according to the horizontal axis.

More specifically, the main scenario assumes a forecast for TCW-weighted interest rates abroad that are much higher than the current market expectations a couple of years from now. In Figure 7 the yellow curve shows the main scenario’s forecast for TCW-weighted interest rates abroad. The main scenario moreover assumes that all market agents in Sweden and abroad will not only believe in the repo rate path, but will also believe in the Riksbank’s forecast for interest rates abroad. The main scenario in the Riksbank’s report assumes that this belief is incorporated in market expectations of foreign interest rates and included in the pricing of foreign market rates. The yellow curve in Figure 8 shows the foreign yield curve that would then arise. The main scenario thus assumes that long-term interest rates abroad are much higher than prevailing market rates (which are represented by the grey curve in Figure 8). The difference between a Swedish and a foreign five-year interest rate is approximately 60 basis points, much less than the difference of around 160 basis points described above. According to the latter, greater difference, the main scenario will lead to a much stronger krona appreciation. It is important to understand that it is the actual difference between long-term Swedish and long-term foreign market rates that affects the prevailing exchange rate. This is the case regardless of whether or not these long-term interest rates correspond to market expectations of short-term rates.