samchain/econo-pairs-v1 huggingface dataset:
Simon M Potter: The implementation of current asset purchases Remarks by Mr Simon M Potter, Executive Vice President of the Markets Group of the Federal Reserve Bank of New York, at the Forecasters Club of New York, New York City, 27 March 2013. *  *  *  I would like to thank Katherine Femia and Linsey Molloy for help in preparing these remarks along with members of the Markets Group Staff for their comments and suggestions, including James Egelhof, Joshua Frost, Lorie Logan, Julie Remache, Roman Shimonov, and Nathaniel Wuerffel. These remarks are an expanded version of those given to the Annual Primary Dealers meeting on March 1. Thank you very much. It’s a pleasure to be here today to talk with you all about the Federal Reserve’s ongoing policy actions and the role of the Trading Desk (the Desk) at the Federal Reserve Bank of New York in implementing those policies on behalf of the Federal Open Market Committee (FOMC). As always, the views expressed here are my own and do not necessarily reflect those of the Federal Reserve Bank of New York or the Federal Reserve System. Outcome-based purchases At the September 2012 FOMC meeting, the Committee decided to increase policy accommodation by purchasing an additional $ billion per month of agency mortgagebacked securities (MBS) and to continue the Maturity Extension Program (MEP). Then at its December meeting, the Committee decided to continue buying $ billion per month in longer-term Treasury securities following the completion of the MEP.

Of course, buyers in a TBA transaction understand that sellers will look to exercise their option of delivering these relatively less valuable pools, and the price of the TBA contract will reflect the expected value of these securities. Market participants who wish to trade in MBS with more favorable prepayment characteristics do so in the “specified pool” market, where specific agency MBS are traded at prices quoted as a spread above the corresponding TBA. In other words, TBA prices serve as a benchmark for pricing all agency MBS. The standardized nature of TBA contracts helps make a large segment of the agency MBS market effectively homogeneous and thus highly liquid – an important characteristic for implementing large-scale purchases of agency MBS.8 Within the TBA market, the “production coupons” are the contracts in which the bulk of newly issued agency MBS are delivered and most trading occurs. The coupon rates on the production TBA contracts are linked to the primary mortgage rate. As a highly stylized example, say a mortgage originator plans to securitize a group of mortgages with an average primary mortgage rate of 4 percent. The originator pays a fee of about 50 basis points to Fannie Mae, Freddie Mac or Ginnie Mae, in return for a guarantee on the principal and interest payments of the underlying loans. The originator is also required to retain at least 25 basis points to cover costs associated with servicing the loan.
From a portfolio theory point of view it could be argued that the optimum result is achieved through using a combination of all three approaches, and that this combination is far better than any of the individual options alone. Rules constitute a very direct approach and one that offers the greatest clarity to institutions on what supervisors expect from banks, thereby leading to a higher level of transparency from both the perspective of the banks and the supervisors, and promoting comparability between institutions. However, adopting a rules-based option alone, even if they are market friendly, entails certain disadvantages. It tends to be inflexible and therefore might preclude innovation. It could also fail to take account of bank or business line specificities. This is why the Committee decided to complement the minimum capital requirements with the second pillar, known as supervisory review. This allows a discretionary approach according to the situation of specific banks or types of business - very much like the principles-based policy approach. The benefits of such an approach are flexibility and adaptability to specific needs, both now and over time as situations and responses change. 2  BIS Review 47/2003  But this approach alone would also have its shortcomings. Market participants could find it difficult to compare banks. The lack of a common standard across institutions might actually reduce transparency, since markets might not know or understand why supervisors established particular requirements for certain banks but not for others.

While he has moved on to new challenges as head of the Public Company Accounting Oversight Board in Washington, the U.S. delegation to the Basel Committee remains in excellent hands. The hard work of leaders such as Roger Ferguson, the Vice Chairman of the Federal Reserve, and Jerry Hawke, the U.S. Comptroller of the Currency, and of other U.S. supervisors in the negotiations, has strengthened the quality of the capital rules. They have helped ensure that the New Accord will be flexible, forward-looking, and fit for the service of twenty-first century banking. Basel II: a blend of reinforcing policy approaches The long-term objective of fostering greater financial stability led to our decision to supplement the revised minimum capital requirements, which constitute the first pillar of the New Accord, with two equally important pillars. Although this may be an oversimplification, one could argue that each of the three pillars can be viewed as representing a different policy approach for a regulatory/supervisory framework. The first pillar emphasises the adoption of uniform rules. The second pillar relies more on the use of discretion in setting requirements for individual banks. And the third pillar can be expressive of a market-based approach. Each of these choices individually considered has its merits, but also certain downsides. The point I want to make is that the risk/reward features of each of the three options - rules, discretion and market discipline - have their own particularities and are not totally correlated.
I believe that we have to deal  5  with three main challenges: structural reforms, financial stability and the accession to the EU of new Member States. *  *  *  The challenges ahead Structural reforms The first challenge is beyond dispute to implement structural reforms in the euro area’s economies. Structural reforms were crystallised at the European level in what is called the Lisbon strategy. The first objective of this strategy is to substantially raise our potential output growth. The second is to make our economies more competitive. Implementing the reforms: the Lisbon strategy The European Council meeting held in Luxembourg in December 1997 explicitly mentioned structural policies among the items selected for strengthened co-ordination. The Lisbon European Council, held in March 2000, further enhanced the medium-term strategy to introduce structural reforms in the Union. This strategy aims at making the European Union the world’s most dynamic knowledge economy by 2010. It has since been rounded out to include social issues (at the Council of Nice) and environmental issues (at the Council of Gothenburg). Work to date in the field of structural reforms is quite encouraging. Noticeable successes have already been registered with regard to certain policies, such as new rules in telecommunications, electricity and gas markets. Before reviewing the priority areas where fresh impetus is required, I wish to briefly make two remarks: First, the responsibility for structural reforms in the European Union rests with the individual Member States.

In short, it allows them to create a fiscal buffer during normal economic periods that can be drawn on to counter economic divergences or asymmetric shocks The last set of criticisms, as mentioned, focuses on presumed economic divergences between economies within the euro area. To answer this last objection, I would like to put forward a few ideas: -  Firstly, monetary union does not necessarily imply that, at any given point in time, all participating countries will have the same rate of inflation or growth, even though the creation of the euro was based on the successful completion of a convergence process. For example, inflation divergences across countries or regions may be accommodated in a monetary union as part of the process of convergence of productivity and living standards. -  Secondly, I would like to quote Professor Mundell in support of EMU, who made, at the beginning of 1998, an interesting clarification of the Optimal Currency Area theory, and demonstrated that in the event of a shift in demand from one member country to another, creating unemployment in the first and inflationary pressure in the second, flexible exchange rates would not be able to solve the problem. I quote: “If the argument for devaluation were valid, it could be applied to every state or sub-region in any country, with a proliferation of new currencies, so they could be devalued!”. The co-ordination between economic policies is on the authorities’ initiative.
For the year 2009, a GDP loss of about 4 percent was recorded for the OECD countries. There is possibly also a permanent depressing effect on medium-term potential output.3 Governments and central banks took unprecedented action globally in response to the perils originating from the financial market turmoil. Euro area governments, for instance, increased their deficits on average by more than 5 percentage points of GDP in 2010. This was a joint consequence of rescue packages for financial institutions, cyclical stimulus packages and operations of automatic stabilizers. In 2010, Ireland recorded a deficit of over 30 percent, resulting from a one-off support for its banking sector. Debt-to-GDP ratios in advanced economies have increased on average by about 25 percentage points since 2007. Central banks around the world expanded their balance sheets, though to different extents and with different asset-liability structures. It is clear that in our democracies, such measures taken by fiscal and monetary authorities can only be an exception. They are not at all repeatable, neither in nature nor in scale. The disasters that we witnessed in the financial system must not repeat themselves. It all leads to one conclusion: Reforms are urgent! The Basel III framework means some progress on the way towards a more sound and resilient financial system and in my view it is at the core of financial regulation. Nonetheless, to complete the G20 Action Plan, further policy actions need to be taken.

As a case in point, the ongoing sovereign debt crisis has put into question the treatment of sovereign debt risk on banks’ balance sheets. When the financial crisis started, few would have suspected how prevalent a risk some of these allegedly safe and liquid assets could become for banks. Now, however, it has to be seriously reflected whether debt should no longer be assigned a zero risk weight under the EU’s Capital Requirements Directive and rather be subjected to a regulatory capital charge. Government bonds are not risk-free anymore. Looking forward, a system that serves its role of serving the real economy requires a safer and more narrowly focused banking system, equipped with sufficiently high capital. Indeed, the fact that a sound and role-focused financial system has to be smaller than the status quo ante is apparently becoming recognized on a broad basis. Recently, Peter Fisher, senior managing director of Fixed Income Portfolio Management at BlackRock, was reported to have claimed “I understand we want to make individual firms stronger but our banking system is too large”, and he asserted that the financial sector in Western Europe and North America has to shrink by 25%. I daresay that this is a rather unsuspicious voice supporting the call for a smaller, more stable and re-focused financial system.13 Others go even further, arguing that the financial sector should shrink by one third. 4. Conclusion  Let me conclude.
A recent paper by Michael Woodford 13 concluded that information from money and credit quantities could not add anything to spreads; and, what is more, that they were not as useful as spreads because the quantity effects of a tightening become apparent only with lags. The set up in Woodford’s paper does not, however, involve quantity rationing. When such rationing occurs, data on the quantity of lending and money may be more useful, even with a lag, than the shadow prices that cannot be observed! Of course, I absolutely do not want a reversion to oversimplified Monetary Conditions Indices, which set a trap for policymakers by ignoring the nature of the shocks that shift credit supply and other financial variables. But we do need to have a better quantitive understanding of how the equilibrium real rate (r star) shifts with shocks to the financial parts of the economy. For UK policymakers, overall, the sharp slowing in corporate and household credit and money growth signals that monetary conditions are quite tight. Tighter bank lending conditions will make it harder for households to maintain their spending during this testing period – when the rise in energy and food prices has squeezed disposable incomes; and when the savings rate was already low. Similarly, with less easy access to credit, it will be harder for firms to bridge to the expected recovery without cutting costs. On the whole, the corporate sector probably entered this episode with stronger balance sheets, leveraged buyouts aside, than the household sector.

Ravi Menon: Economic possibilities of blockchain technology Keynote address by Mr Ravi Menon, Managing Director of the Monetary Authority of Singapore, at the Global Blockchain Business Conference, Singapore, 9 October 2017. * * * Honourable Chief Minister Chandrababu Naidu Distinguished guests, ladies and gentlemen, good morning. Andhra Pradesh and Singapore I am delighted to be here in Andhra Pradesh – the land of the Tiruppati temple, Carnatic music, Kuchipudi dance, and of course, the charming sea town of Vishakapatnam. I am grateful to Chief Minister Chandrababu Naidu for his kind invitation to speak at this conference. Andhra Pradesh and Singapore share in common a modern outlook. We both believe in the value of innovation for economic growth and harnessing the power of technology for the common good. That Andhra Pradesh is organising a global conference on the topic of blockchains shows its progressive nature. It is also a tribute to the vision of Chief Minister Chandrababu Naidu, who has inspired an IT revolution in Andhra Pradesh. Little wonder that Andhra Pradesh and Singapore have forged good relations and have been working closely together. The Andhra Pradesh government has appointed a Singapore consortium to develop the new capital city of Amaravati. The Andhra Pradesh government and the Monetary Authority of Singapore (MAS) signed a FinTech cooperation agreement in October last year. A delegation of more than 10 FinTech startups from Singapore attended the FinTech Valley Vizag Spring Conference in March this year. Establishing trust in a decentralised way Trust underpins all economic transactions.
And yet, we have just emerged from a successful experience: let us recall that it was collectively considered that we Europeans were in a very bad position in March 2020 at the onset of the Covid crisis. But together we have managed to weather this crisis very well, thanks for instance to the joint purchase of vaccines and the SURE1 and Next Generation EU programmes, backed primarily by Germany and France. I will therefore venture to outline here, in the field of economics, where we will succeed together, what we differ on today, and - lastly and perhaps most importantly, what both our countries are in danger of forgetting. I. Where we will succeed together: monetary policy This shock further increased inflation, which had already reappeared during the strong post-Covid recovery. Thus, after a decade of too low inflation, and even a risk of deflation during the Covid crisis, inflation now stands at 10.7% in the euro area as a whole (7.1% in France, and 11.6% in Germany). Exogenous factors, especially energy prices (up 42%) and certain food prices, still account for half of total European inflation. Nevertheless, inflation has become more "domestic" and broad-based: core inflation excluding energy and food - has gradually increased and reached 5.0% in October, and this is precisely where monetary policy has a more direct impact. The ECB Governing Council therefore decided at the end of October to raise its key rates by a further 75 basis points, bringing the deposit facility rate to 1.5%.

The European Commission is actively working on this, and I will simply express three wishes: 1. there needs to be a rapid decision; companies' worst enemy today is uncertainty about their energy bills – according to our latest monthly business survey conducted in early November among 8,500 French companies, 36% of them fear that this situation might have a small or large impact on their activity in the next three months, and 52% on their margins;2 2. a support mechanism for gas and fossil fuels, in whatever form it may take, can only facilitate the transition towards a new energy mix for companies, and cannot decouple tariffs from real prices in the long term. 2/4  BIS - Central bankers' speeches  3. Lastly, intermediate solutions are no doubt needed: I do not believe in regulated prices, nor in the obsession with "marginal prices" reflecting all the extreme fluctuations in market prices. Neither do I believe that it is desirable for states to compete in domestic spending on large-scale fiscal budgetary shields for companies. This would go against the single market, and against the sustainability of our public finances. We will not beat inflation in the long term with fiscal spending, but with monetary policy and - I will now come to this - with structural reforms. III. What both our countries are in danger of forgetting: structural reforms Although crises require firefighters, we must not become prisoners of emergencies.
Nor can we forget that the 2009 recession also disclosed a series of weaknesses in the institutional arrangements for the euro. Membership of the Economic and Monetary Union provides for extra stability and resilience. Unsurprisingly, then, at the height of the crisis when the very survival of the monetary union and the euro were in doubt, the wave of mistrust affected us most forcefully. That said, strictly domestic factors played a substantial role in the source and development of the crisis in our economy. This was because unsustainable imbalances built up, even in the absence of an international crisis, and our vulnerability to external shocks thereby increased. BIS central bankers’ speeches  1  I shall now briefly review some of these imbalances. During the prolonged expansionary phase before the crisis broke, heavy losses in competitiveness built up as a result of the growing divergence of our prices and costs relative to those of the euro area countries, with which the exchange rate had been set at the onset of monetary union. This was the outcome of the continuous pressure exerted by domestic spending on plant capacity, driven by very loose financial conditions, whose expansionary effects were not countered by a more restrictive economic policy stance, most specifically in respect of budgetary policy or supply-side policies. The financial counterpart of this excess spending was the accumulation by Spanish households and firms of excessive debt.

Since 2007, the level of Spanish GDP has fallen by seven percentage points; that said, perhaps the most representative measure of the severity of the crisis has been the labour market, with unemployment falling by 19% and a major increase in the unemployment rate, which affected 26% of the labour force at the close of 2013. The crisis has moreover entailed a substantial readjustment in the composition of GDP, with a strong decline in national demand, broadly across all its different components, but a fall of even greater depth in investment in construction. Late last year, the cumulative decline in investment in construction was 50% compared with its level in the pre-crisis years. Adding to the collapse in residential investment from 2010, following the onset of the public spending adjustment plans, was the decline in non-residential construction, where civil engineering is to be found. Naturally, the external environment has played a major role in the origins and unfolding of our crisis. The contraction in world trade during the 2009 recession strongly affected our exports. However, as from 2011, net external demand has been markedly buoyant, mitigating the contractionary effect of the fall in domestic demand on activity, and it has provided for the correction of some of the macroeconomic imbalances I shall refer to. Further, the climate of uncertainty which took hold on international financial markets and the subsequent fall-off in financing flows had a more marked impact on those economies, such as Spain, which are more reliant on external saving.
In fact, real gross domestic product (GDP) grew just 1.7 percent in 2012, below the 2.2 percent rate of the preceding two years. This lackluster and disappointing performance masks the fact that the underlying conditions that support growth have been gradually improving. However, in the near-term, this improvement in fundamentals is being offset by federal tax increases and spending cuts, which economists call “fiscal drag.” The most obvious example of this is the end of the partial payroll tax holiday at the beginning of this year. This reduced the take-home pay for all those that pay into the Social Security system. In a recent speech to the Economic Club of New York, I discussed a number of areas where economic fundamentals have improved. Here, let me concentrate instead on some areas of the economy where the impact of this improvement in fundamentals has been most evident: consumer spending, the housing market, and investment in equipment and software. Despite the increase in payroll taxes and in high-income tax rates, real – that is, inflationadjusted – personal consumption expenditures rose solidly in January and February. As has been the case for some time, the growth of consumer spending has been led by purchases of durable goods. Car and light truck sales in the first quarter were at the highest pace since the fourth quarter of 2007. This growth in consumer spending probably is due, in part, to improvements in labor market conditions, household balance sheets and household access to credit.

The Federal Reserve is independent from politics and the national government but is subject to oversight by Congress, which has set our dual mandate to promote maximum sustainable employment and price stability. The Federal Reserve is structured to ensure that the economic needs of people and businesses in every part of our country are fully considered in our policy deliberations. What I learn in my visit to Staten Island today is an important input to our policymaking process. As New York Fed president I try to get out of my New York City office as much as I can to get a sense of regional economic conditions across what is known as the second Federal Reserve District. I’ve traveled throughout New York, New Jersey and Puerto Rico in recent years and plan to visit Fairfield County, upstate New York and Queens later this year. These visits give me the opportunity to explain what the Federal Reserve is doing and to get your thoughts about the state of our economy and the challenges that you face. Today, I will focus on the economic outlook regionally and nationally. After that, I’ll be happy to answer any questions you have about what the Fed does, and about the economic outlook. As always, my views are my own and do not necessarily reflect those of the FOMC or the Federal Reserve System.