samchain/econo-pairs-v1 huggingface dataset:
In other words, if our prices become misaligned against foreign prices because of some movement in exchange rates (such as by the US dollar moving against other major currencies and pulling the Hong Kong dollar with it), Hong Kong prices are quick to adjust in order to restore competitive equilibrium. At the same time, it appears that prices in the Mainland are, by international standards, also quite flexible. Two conclusions can be drawn from these observations. One is that prices between Hong Kong and the Mainland are well able to adjust relative to one another without any assistance from the exchange rate. The other is that, if the exchange rate were to move around and create disequilibria between prices, domestic prices would adjust to offset that disequilibrating tendency. In other words, it seems unlikely that shifts in relative price competitiveness would be greatly different under conditions of exchange rate variability than without it – there would simply be a different mix between shifts in relative domestic prices and the exchange rate effect. It is evident anyway that the Hong Kong economy complements the Mainland's more than it competes with it. Hong Kong benefits from a buoyant Mainland economy. If this buoyancy is judged to be best sustained by some increased flexibility in the renminbi exchange rate – and I make no judgement here as to whether that would or would not be the case – then Hong Kong would be likely to benefit.

Tony Latter: Who or what determines monetary policy in Hong Kong? Speech by Mr Tony Latter, Deputy Chief Executive of the Hong Kong Monetary Authority, to the Hong Kong seminar on Financial Services in Asia, organised by Lovells and the Pacific Rim Advisory Council, 13 May 2002. *  *  *  You may think this a rather naive question, to which the answer is obvious, but my experience is otherwise. Who is responsible? Let's start with the "who" question. I have encountered people who variously believe the answer to be the Beijing government; the People's Bank of China; the US Federal Reserve Board; some combination of HSBC, Standard Chartered Bank and the Bank of China (which are the note-issuing banks in Hong Kong); the Hong Kong Legislative Council; the Hong Kong Government; or the Hong Kong Monetary Authority. Article 110 of the Basic Law – often referred to as Hong Kong's constitution – includes the statement that "The Government of Hong Kong shall, on its own, formulate monetary and fiscal policies". This makes it clear that neither the Mainland government nor the PBoC has any powers in relation to our monetary policy, and that the policy responsibility lies firmly with Hong Kong's own government. Since China resumed sovereignty over Hong Kong some five years ago, there has been absolutely no 1 erosion of this principle.
We are now looking at ways of making it available on a monthly basis, alongside the minutes of the MPC meeting. MPC members regularly take their own eyes and ears on visits to individual businesses, making around 60 visits to the regions a year. As well as acting as a reality check on economic statistics, talking to businesses around the country improves our understanding of longer-term changes in economic environment. These visits are a good opportunity to discuss issues as varied as the impact of migrant labour on skill shortages; or outsourcing to China; or the growth of buy to let housing; or the changing structure of the retailing sector; or even the impact of weather and public holidays on the pattern of consumer spending. And in unusual economic circumstances, the Agents’ network of contacts can give us information that is not available from any other source. The outbreak of Foot and Mouth Disease in 2001 is a case in point. Our Agents helped us to identify in real time the wider effects on the non agricultural sectors of the economy, notably of course tourism - and that gave us a better picture of the underlying development of the economy. We support measures to improve the quality of official statistics Finally, and most important, our longer-term strategy for mitigating data uncertainty is to support the ONS in improving the quality of the national statistics. Bank staff maintain very close links with their ONS counterparts both on a day-to-day basis, and in developing their ambitious modernisation programme.

BIS Review 71/2004  5  This was already in hand when the Chancellor of the Exchequer commissioned Chris Allsopp, a former member of the MPC, to assess how well the ONS’s provision of statistics matched the needs of policymakers. The Allsopp Report, published earlier this year, has recommended some fundamental changes to the way that key economic data are put together. These concern regional and service sector data; and the ONS’s capacity to respond to changes in the structure of the economy. First, Allsopp recommends that the national statistical system should be reoriented to produce better quality regional data. This is likely to involve, for example, establishing an ONS office in every English region – not dissimilar to the Bank’s Agency network. The ONS’s main business surveys are also to be expanded to obtain greater regional coverage. For example, the Annual Business Inquiry - a major workhorse of economic statistics, which provides detailed information on, for example, employment, production and investment – is likely to be trebled in size. Monetary policy operates at the level of the whole economy, and cannot target particular regions or countries of the UK. But to the extent that better measurement and understanding of regional activity leads to improvements in the quality of UK national statistics, as the Allsopp Report expects, this development will improve the information base on which monetary policy is founded.
Also, according to this exercise, the Spanish banking sector could absorb the impact of the increase in costs of productive sectors that would be generated by an ambitious climate transition policy, without significant impairment of its solvency. At the same time, as I have already said, we are working to measure the costs of failing to act on climate change. In this respect, certain episodes have already been observed that enable this cost to be approximated to some extent. One of these episodes – the degradation of the Mar Menor – has been analysed by our economists.18 Using econometric exercises, they estimated that the ecological deterioration has already had a significant negative impact on the value of housing in the areas affected; in cumulative terms, house prices have risen by approximately 40% less than in comparable areas that have not suffered a similar impact. For the banking sector, the loss of value of residential housing obviously entails a lower value of the available collateral and increased risk in the event of impairment of the loan portfolio, and especially of mortgage loans. More generally, this exercise shows that the materialisation of climate change may have a significant impact on the economy as a whole. Conclusions To conclude. I have referred today to various initiatives that show that we financial regulators and supervisors, within our mandates to guarantee financial stability, can (and should) actively contribute to international action to combat climate change.

The MPC helps to determine monetary conditions in the UK, with a view to hitting a 2% inflation target on a sustainable basis. Monetary conditions in the UK remain highly accommodative by any historical metric. Bank Rate currently stands at 0.5%, as it has stood for much of the past decade. That is, by some margin, lower than at any time in the Bank’s 324-year history, which it celebrates next month. With headline inflation running at around 2.4%, this means inflation-adjusted interest rates in the UK are currently significantly negative. The MPC has also undertaken asset purchases amounting to almost £ trillion since 2009. This has provided additional monetary stimulus to the UK economy, at its peak equivalent to a further reduction in interest rates of up to around 2.5 percentage points. 52  Taking account of that would put inflation-adjusted  interest rates into even more deeply negative territory. 50  As discussed, for example, in Carney (2017). For example, Ramsden (2018) and Tenreyro (2018). 52 Estimated based on simple ready-reckoners. There is a high degree of uncertainty around these estimates. In the May 2014 Inflation Report, the MPC judged that QE had a peak effect on GDP of around 2.5% in 2013. The range of QE estimates in Joyce et al (2011) would suggest that would have a percentage point impact on annual inflation of roughly half that amount. Joyce et al (2011) also suggest as a ready reckoner than a 100bp cut in interest rates would boost inflation by 0.5pp.
The significance of climate risks to financial stability may change over time. The SNB therefore considers it a priority to continuously monitor developments and review its assessment. Completion of the ninth banknote series To finish, let me turn to a very different topic – the issuance of the ninth banknote series. The development of the new banknotes was a complex, long-term project with exacting design and production requirements. The 100-franc note, which entered circulation on 12 September 2019, was the sixth and final denomination of the SNB’s new banknote series. Since the issuance of the first of the new banknotes, the 50-franc note in April 2016, feedback on the new banknotes has been very positive. The new series has been well received by the public. The new substrate Durasafe® has also proven a success. Preliminary evaluations suggest that this substrate should ensure a longer lifespan for the banknotes. The issuance of modern and forgery-proof banknotes is a central task of the SNB. It is important to us that we are able to meet the expectations of the Swiss population. The new banknotes use state-of-the-art technology, and are robust and easy to handle. The entire logistical processes, including the modification of ATMs to accommodate the new notes, also proceeded without significant problems. The eighth banknote series will continue to be legal tender until further notice. The SNB plans to announce the recall date for the eighth-series notes in the course of 2020.

The role of supervisors – in-house initiatives As well as these initiatives, which may be considered external, we are also working in the Banco de España to adapt to this new reality. Firstly, we have created an internal function entrusted with assessing the impact we as an institution have on the environment. The aim is to articulate and coordinate the necessary measures to reduce that impact. Secondly, as a macroprudential supervisor, we clearly need to be able to assess and quantify the risks that the transition towards a more sustainable economy poses, both for individual banks and the financial sector as a whole. Among other functions, we need to be able to assess the level of financial institutions’ exposure to high-carbon emission activities, perform stress tests for the financial system overall and define scenarios and methodologies to be applied by banks individually. In consequence, we are designing internal governance structures and methodologies, actively participating in the cultural shift in the SSM supervisory model. Naturally, we are also evaluating the information and data requirements needed to address this challenge. Nor should we forget that central banks are also important investors in the debt markets, both in the area of monetary policy and reserve management. Although we have not yet included environmental risk assessment in our credit analysis, we are working to remedy this. 5  ESG - Environmental, Social and Governance.
Prices of owner-occupied apartments also fell during the autumn, but have since stabilised. Employment and household incomes are of the utmost importance when it comes to movements in the property market. According to the Riksbank’s most recent forecast, employment is expected to continue rising this year, albeit at a slower pace than last year. Following a strong rise last year, around 4 per cent, households’ real disposable incomes are expected to increase by a good 2 per cent over the coming years. Given this outcome, there is little risk of a fall in house prices to the same extent as is happening in the United States, for example. In Sweden savings are also high to start with, unlike the United States where they have fallen to historically low levels. There is always a risk that house prices, and also other asset prices such as shares, which have been pushed up by exaggerated optimism or speculation, could plummet. It would appear that Swedish price movements can be explained by fundamentals, and that the speculative element has happily been conspicuous by its absence. As property often functions as collateral for loans, a large fall in prices would affect the banks. In addition, developments in the property market affect demand in the economy. Rising house prices mean that households can take on new loans to increase their consumption. Correspondingly, falling house prices can contribute to subduing demand in the economy.

Unlike the 1980s, the build up of debt in recent years has been in an environment of low inflation and low interest rates. The interest ratio, that is, interest expenditure as a share of disposable incomes, is much lower now than it was then. Although the level of households' debt ratios is not necessarily worrying, it is nevertheless the case that a borrowing level rising by more than 10 per cent a year is not sustainable in the long term. In the long term it needs to come down and be more in line with nominal disposable incomes. The Riksbank is assuming that household borrowing will continue to increase, but at a slower rate than before. The fact that interest rates have been raised contributes to this, as does the fact that economic activity is entering a calmer phase. The interest ratio has recently begun to rise but is still at an historically low level. The expected  BIS Review 60/2008  1  slowdown in household borrowing will mean that the interest ratio also increases at a slower rate in future (see figure 3). The chances are good that household borrowing and house prices will have a soft landing. Although borrowing is still increasing at a rapid rate, there has nevertheless been some slackening and this is expected to continue. House prices fell slightly in the first quarter of this year compared with the final quarter of last year. However, on an annual basis the increase was just over seven per cent.
Among UK companies, debt as a fraction of companies’ total financial liabilities has risen from around 20% in 1988 to around 34% today. In certain sectors, the run-up in debt has been more dramatic – for example, among US and UK commercial property companies whose leverage has more than doubled in the past decade. It is also true of some companies subject to leveraged buy-outs including, of course, Liverpool Football Club. Finally among sovereigns, the picture up until recently has been benign with public debt flat relative to GDP. But the crisis means that picture is set to change dramatically. Among the G7 countries, the IMF forecast that public debt ratios will rise from around 80% of GDP in 2007 to around 125% by 2014. In the UK and US, public debt ratios are forecast by the IMF to double, mirroring the pattern following past financial crises. 6 Taking together the debt position of the financial sector, households, companies and sovereigns paints a sobering picture. Total debt ratios relative to GDP rose significantly in all ten countries studied by McKinsey’s, from an average of around 200% in 1990 to over 330% by 2008. 7 Over the same period, UK debt ratios more than doubled, from just over 200% to around 450% of GDP. To date, servicing these debts has been cushioned by policymakers’ actions.

Liquidity ratios among global banks have also risen, with sterling liquid assets relative to total asset holdings more than trebling among UK banks. On the back of this positive news, the authorities in some countries have begun withdrawing extraordinary levels of support. More than half of the capital provided to the US banking 2  BIS Review 10/2010  system was repaid in 2009. The US authorities have also announced their intention to wind down several special liquidity facilities, as has the European Central Bank. This exit is far sooner than might have been expected six months ago. Stability, if not normality, is beginning to return. Debt overhangs and debt hangovers If that were the end of the story, it would be a happy ending. But there are good reasons for believing this story has some way to run. For while the flow of news over the past year has been positive, some of the stock problems which were the root cause of the crisis remain intact. The lasting legacy of this crisis is too much debt held by too many sectors against too little capital. Economists have a special word for this type of problem – a debt overhang. Its economic effects are fairly well understood. Debt operates rather like a tax. Debt servicing costs, like a tax, reduce the disposable income of the borrower. Too much debt means a higher debt “tax” and a greater drag on activity – lower lending by banks and spending by households and companies.
As a central banker, I would date the outbreak of the financial market crisis to the beginning of August, when overnight interbank rates increased sharply. The first central banks to react were the ECB and the SNB on 9 August, when both banks conducted extraordinary finetuning operations. Soon afterwards, other central banks followed suit, also injecting additional liquidity. 4  For a discussion of the transmission of monetary policy to financial markets see Ph. Hildebrand (2006), “Monetary Policy and Financial Markets”, speech given to the Annual Conference of the Swiss Society for Financial Market Research, 7 April 2006, or Th. J. Jordan (2007), “Globalisierung und Finanzmärkte: Herausforderungen und Chancen”, speech given at the ETH Zurich, 13 November 2007. 5  Of course, to retain credibility, the central bank must refrain from deceiving the markets, i.e. from announcing future action without actually intending to act. 6  As measured by the Case Shiller Composite Index. BIS Review 71/2008  3  So far, there have been three waves of money market strains. After subsiding somewhat in late September, the strains increased again in November, exacerbated by year-end pressures. The third wave started in March. The worst peak of the financial market crisis so far was attained in mid-March, when Bear Stearns was taken over by JPMorgan. The takeover, which was facilitated by the Federal Reserve, resulted in a calming of markets. Since mid-March, financial markets have improved somewhat, with the exception of money markets, which are still rather tense. 4.

But I am also very clear that really  2  BIS central bankers’ speeches  achieving the objective of avoiding a no failure regime requires a fundamental change of mindset both inside the PRA and in society more broadly. Fear of failure is an important conditioner of behaviour in a financial regulator, and achieving a change on this front depends on establishing a wide acceptance of our approach that orderly failure that does not compromise our public policy objectives is an acceptable outcome. To be clear, we should be criticised where failure compromises those objectives and we could have taken steps to avoid it, and we will be required to report on such failures. But if failure is orderly, and does not compromise our public policy objectives, the responsibility should rest with the board and management for failing to serve the private interest of their shareholders and creditors. Last on the theme of failure, having firms that are either too big or too important to fail is bad for competition in the industries that we regulate. An industry where exit is too difficult is one where entry is likewise inhibited. Put simply, if we don’t know how to deal with a failed firm, we will inevitably set a higher barrier to entry. This is what we see in the banking industry.
15  Among many other changes, the Dodd-Frank Act allowed banks to pay interest on corporate deposits, and those depositors, because they deposit large amounts, are likely more interest-sensitive, than individual depositors. Furthermore, the wholesale money market is intensely competitive, and, as evidence that reserves are distributed across banks in a way that reflects competitive considerations, note that currently, reserves are held in disproportionately large amounts by Foreign Banking Organizations. The reason I think this happens is that those FBOs do not have to pay the FDIC assessment fee on their liabilities (as they hold no U.S. deposits). That suggests that all banks face competition in attracting liabilities to match their reserve holdings, and that the FBOs, because they face a lower cost in doing so, have managed to attract those deposits at a faster clip than domestic banks. This is the sort of competition that I expect to see that will result in the interest on reserves being passed through by banks to their customers and to the broader economy. BIS central bankers’ speeches  7  Moreover, even if we were to put any weight on this consideration, the incentives go the other way – our enlarged balance sheet creates an additional reason to tighten monetary policy in a timely way. If the Fed were to delay in raising short-term rates to protect its current earnings, inflation would rise and this would push long-term rates higher. This would just necessitate a bigger rise in short-term interest rates and a greater loss of earnings later.

Since September we have seen considerable strength in the interest-sensitive sectors of the economy, including housing, autos and durable goods, in spite of the uncertainty and drag from fiscal policy. Improvement in these sectors suggests that monetary policy may be gaining additional traction. This is important because it suggests that the benefit from a given amount of asset purchases has increased. On the cost side, I conclude that costs specific to balance sheet expansion have turned out to be no greater than I had anticipated and, because we have less uncertainty about those costs, they are lower than I would have expected in a risk-adjusted sense. Let me start with three commonly cited potential costs – impairment of market functioning, the unanchoring of inflation expectations, and threats to financial stability. We carefully monitor financial markets for signs that market functioning has been impaired, looking at metrics such as trading volumes, bid-offer spreads, failures to deliver securities and our own ability to execute transactions. On some of these metrics, market functioning has actually improved in recent months. Of course, we will need to continue to monitor this, particularly if a rise in interest rates leads to less MBS issuance. But so far, so good. In terms of inflation expectations, a wide range of measures remain well anchored. For example, the 5-year, 5-year forward measure of inflation expectations calculated from Treasury TIPs versus nominal yields is well within the historical range of recent years (Exhibit 12).