samchain/econo-pairs-v1 huggingface dataset:
The solution is not a simple substitution. There are inherent differences between SOFR and LIBOR that will need to be adjusted for in the transition. For one thing, most contracts that reference LIBOR key off of three-month or six-month LIBOR. Mortgages often use one-year LIBOR. But SOFR is an overnight rate—there’s no such thing as three-month or six-month SOFR. One solution to this difference is to use the daily SOFR for each day during the term, either averaged or compounded each day until the end of the period. ISDA has indicated that derivatives will fall back to this kind of average, and the SOFR floating rate notes issued recently use a similar approach. To facilitate this method, the New York Fed is preparing to produce a backward-looking compounded average alongside the daily SOFR. Some market participants may need to use a forward-looking “term SOFR” created by constructing a yield curve off of trading in forward-looking SOFR derivatives, particularly for legacy contracts that already reference a term LIBOR rate. Creating a new rate like that is part of the ARRC’s transition plan, although it’s more concept than reality at this point. But under all of the cash product consultations put out to date, the first preferred fallback is to that kind of term rate, if such a rate were to be created that was up to IOSCO standards and endorsed by the ARRC.

12 See Reforming major interest rate benchmarks, FSB Progress Report, 14 November 2018 13 The future of LIBOR, speech by Andrew Bailey, Chief Executive of the FCA, 27 July 2017 14 Interest rate benchmark reform: transition to a world without LIBOR, speech by Andrew Bailey, Chief Executive of  the FCA, 12 July 2018 15 7/8  BIS central bankers' speeches  15 ARRC Guiding Principles for More Robust LIBOR Fallback Contract Language in Cash Products 16 ARRC Consultation Regarding More Robust LIBOR Fallback Contract Language for New Issuances of LIBOR  Floating Rate Notes, September 24, 2018 17 ARRC Consultation Regarding More Robust Fallback Contract Language for New Originations of LIBOR  Syndicated Business Loans, September 24, 2018 18 ARRC Consultation Regarding More Robust LIBOR Fallback Contract Language for New Originations of LIBOR  Bilateral Business Loans, December 7, 2018 19 ARRC Consultation, New Issuances of LIBOR Securitizations, December 7, 2018 20 See ISDA LIBOR Fallbacks, presentation by ISDA at the ARRC’s July 2018 roundtable 21 Source: Bloomberg data services, press releases and FRBNY staff calculations 22 See Dear CEO LIBOR Letter 23 LIBOR transition and contractual fallbacks, speech by Edward Schooling Latter, Director of Markets and  Wholesale Policy at the FCA, 28 January 2019  8/8  BIS central bankers' speeches
Generally, to the extent financial instability depends on specific distortions, good regulation should aim to attack these distortions as close to the source as possible. To counter the observed procyclicality of existing regulation, macro-prudential regulation that is contingent on the business cycle and financial indicators may need to be introduced to induce better financial stability. Possible macro-prudential regulation includes variable capital, margin, and equity/loan requirements. As expressed by Bean (2009), “the best approach is likely to involve a portfolio of instruments”. 14 More generally, what is the relation between financial stability and monetary policy? Financial stability is an important objective of economic policy. A possible definition of financial stability is a situation when the financial system can fulfil its main functions (of submitting payments, channelling saving into investment and providing risk sharing) without disturbances that have  12  Kohn (2008), after extensive discussion, concludes that there is insufficient evidence that low interest rates would have contributed much to the house-price boom and that higher interest rates would have had much dampening effect on it. 13  The relationship for the Euro area countries is less weak, but for reasons explained by Bernanke (2010) it is potentially overstated. 14  Nyberg (2010) provides more discussion of macroprudential regulation and regulation reform. 4  BIS Review 16/2010  significant social costs. I find it helpful to conceptually distinguish financial-stability policy from monetary policy.

It means measures to reduce disruption to financial markets if a bank is wound up. And crucially it means agreement between the authorities in the countries in which these global banks operate on how they should be resolved if they fail. We have made a lot of progress on too big to fail. But we are not yet there. I do not think we can say with confidence now that we could resolve a failing global giant. Getting agreement on international standards to end Too Big to Fail is perhaps the most important regulatory priority for the G20 Summit in Brisbane in November this year. When you stand back and look at the progress of this unprecedented programme of international financial reform, on the capital and liquidity framework, on inter-connectedness, on shadow banking and on too big to fail, a huge amount has been achieved. 4  BIS central bankers’ speeches  If we can get the progress that G20 leaders committed to this year by the Brisbane G20 summit in November we will have “completed the job” of agreeing most of the key international standards and rules. And, in many areas, we will have gone a substantial way to implementing them. And I am very pleased to say that the Bank of England has played a key role – and in many areas a leadership role – in moving this programme forward. And I hope we can continue to do this as, increasingly, we move into the implementation phase. IV. Have we succeeded?
Not only has an unusually wide divergence in cyclical positions opened up that creates immediate strains, but there are also important structural imbalances that have developed that must be addressed. I will close by turning my attention to what can be done to address these cyclical and secular challenges. Although I will discuss the role of U.S. monetary policy in this context, I will also discuss what other steps can be taken to strengthen the relationship and make it more sustainable. As always, what I have to say reflects my own views and not necessarily those of the Federal Open Market Committee or the Federal Reserve System. Over the past few decades, the most salient feature of the global economy has been the growing importance of the emerging market economies and the ever-deepening integration of these economies into the global economic system. A shift toward more market-based and outwardly oriented development on the part of the EMEs has enabled hundreds of millions of people across the emerging world to become integrated into the global economy for the first time. The outcome has been a rapid rise in living standards and a reduction in poverty on a scale that is without precedent in human history. These changes have been most evident in China, with a historic transformation that began with the economic reforms of Deng Xiaoping and continues to this day. But the EME story is much broader than China.

My goal today is not to play the blame game. We all share responsibility for addressing our current set of challenges. Rather, it is to lay out the reasons why it is imperative that the United States and the EMEs collectively move toward arrangements that put us on a mutually sustainable path. I hope I have been convincing. The United States must provide leadership in this global process. This is in our own national interest. The policy response we need combines fiscal and structural adjustments that would enable the United States to prosper in the next phase of global economic transformation. These issues cannot be addressed primarily thorough monetary policy. However, monetary policy has a role to play in supporting the necessary transitions, and it too needs to be conducted mindful of its global context. As we step up to our responsibilities, we should look to the leading nations of the EME world to provide leadership too, commensurate with their growing importance in the global system, in rebalancing demand and increasing currency flexibility. If we lead together, with mutually supportive actions, we can achieve better outcomes than any of us can achieve on our own. Thank you for your kind attention. 8  BIS central bankers’ speeches
Jean-Claude Trichet: Asset price bubbles and their implications for monetary policy and financial stability Keynote address by Mr Jean-Claude Trichet, Governor of the Bank of France, at the Asset Price Bubbles conference held at the Federal Reserve Bank of Chicago, Chicago, Illinois, 23 April 2002. *  *  *  Ladies and Gentlemen, It is a great honour and pleasure for me to talk today in Chicago at the invitation of the World Bank and the Federal Reserve Bank of Chicago in front of such a distinguished audience on the theme of asset price bubbles. As a central banker, my main focus will be on the implications of asset price developments and bubbles for both monetary policy and financial stability. The far-reaching changes observed over the last decade on financial markets, the growing role of these markets for the financing of the economy, and the evidence gathered over the recent period on the key role that financial factors may play in shaping and amplifying the business cycle, have drawn attention to the relative importance of asset prices and wealth effects on the real economy. There are at least two reasons why asset prices and wealth effects may have grown over the last decade: ·  first, changes in asset valuations, mainly driven by the rise in the new economy stock prices from the mid-1990s and their subsequent collapse in 2000, have been dramatic. This is well documented for the United States.

That is a nebulous concept, but one that central bankers have come to think of as intimately tied up with private sector credit creation (essentially bank lending) across borders.15 When cross-currency carry trades drive down risk premia, that pushes up foreign asset prices, and can fuel foreign credit growth, through a process that is akin to an  10  This channel is distinct from the standard channels working through the effect of a lower risk free rate on asset prices, and so on wealth and the availability of credit, eg the so-called “financial accelerator” of Bernanke, Gertler & Gilchrist. On the “risk channel” see, for example, Borio and Zhu (2008), “Capital regulation, risktaking and monetary policy ; a missing link in the transmission?”  11  See Annex 2  12  See “Money and the Economy: Issues in Monetary Analysis (Raffaele Mattiolo Lectures”, Brunner and Meltzer (1987). It was also discussed by Governor King in “Challenges for Monetary Policy: New and Old” (1999), discussing the operation of monetary policy when interest rates are low; and in “No money, no inflation – the role of money in the economy” (2002). 13  See “Quantitative Easing: An Inflation Report”, Bean (2009); and “The State of the Markets”, Tucker (2009). 14  See, for example, “Carry trades and risk”, Burnside (2011); Common Risk Factors in Currency Markets, Lustig et al (2011); Crash-neutral currency carry trades, Jurek (2009). 15  See CGFS (2009), “Global Liquidity – concept, measurement and policy implications”.
This action was taken with the best of intentions: to cushion the economy from the sharpest downturn in economic activity since the Great Depression. Monetary policy aimed to do so by lowering borrowing costs for debtors whose income and employment prospects were squeezed and by boosting risk-taking, and hence asset prices, otherwise held back by fearful investors. It is impossible to know for sure how the economy would have performed in the absence of this monetary action. But it seems near-certain the economy would have been materially smaller, and asset prices materially lower, had this action not been taken. On the Bank’s own estimates, the UK economy today would have been at least 6 percentage points smaller today without the combined effects of lower interest rates and large doses of QE. Or, in money terms, we as a nation would have been perhaps £ billion poorer. The income pie would have been materially smaller. It is harder still to gauge the impact of monetary policy measures on asset prices. But the facts are striking. Equity prices are almost 90% higher than in 2009 when QE commenced in the UK. Corporate bond prices are over 40% higher and government bond prices 15% higher. In the US, the numbers are 120%, 30% and 12% respectively. In other words the wealth, as well as the income, pie would most probably have been materially smaller absent extra-ordinary monetary stimulus. During this reflationary process, shares of the income and wealth pie have not remained constant.

6  BIS central bankers’ speeches
It should, as planned under the technical enhancement, prepare a “credit scoring” module which will indicate some sort of ranking of borrowers. This would enable the lending institutions to better assess whether the borrower is a willful defaulter from the beginning or whether he has defaulted only on a few instalments. This is how credit bureaux world over provide both positive and negative information of their borrowers. The CRIB would endeavour to accomplish and provide an equitable service through its business plan which will come into effect from the second half of 2006. Accordingly, it intends to engage in a horizontal expansion in collection of information from multiple sources, i.e. credit granters, utility service providers, insurers, public databases and lenders for SMEs and micro sector borrowers in its new database in a phased manner. I hope that the expansion of customer databases to include their payment schedules for other utility services might help the lending institutions to form a better opinion of the borrower. In addition, using the new technology, the CRIB intends to enable customers to have easy access to their own credit profile and apprise the CRIB of erroneous reporting. With the introduction of the new technology, the reporting institutions as well as the CRIB should work together  2  BIS Review 66/2006  to provide positive information of the borrowing clientele, so that their ability to stay in the formal market is made easier.

And my observation here is that we would be advised to give more thought to the underlying issues, risks, and mitigants which could be ingredients in liquidity problems. What are the drivers? What may cause liquidity to be withdrawn? To what extent could uncertainties, referred to a few moments ago, impact liquidity in  BIS Review 14/2003  3  unpredictable ways? What machinery/measures can best be devised to ensure that liquidity will continue to be available in times of stress? And, in the face of attempts to improve the resilience and efficiency of market infrastructure (for example, clearing and settlement), how will changing practices and perceptions affect the drivers of liquidity? This is, I feel, an area where standards and principles could be further developed which engender both the best practice understandings of the private participants on the one hand, and the interface with public policy imperatives on the other. Conclusion Basel II has been steered to this point of take-off for the hugely critical area of capital adequacy. I would identify four challenges for the next stage. First, to achieve the successful implementation of Basel II by banks and regulators across the globe. Second, to ensure that mechanisms exist to update it in the light of evolving best practice. Third, to give thought to whether analogous agreements would be appropriate in securities and insurance.
Four years later, employment in the United States has still not recovered more than approximately one third of the fall that occurred during the crisis. To refer back to what I said earlier, one could say that Europe’s debt crisis is a variation on the theme of excessive indebtedness, although primarily for the public sector in this case. Figure 10 shows how much unemployment has increased in several other countries that have suffered a downturn on the housing market. I have included Sweden and the OECD as a whole for the purposes of comparison. Figure 10. Large increase in unemployment in countries affected by a downturn on the housing market Unemployment, index 2007=100 350  350  OECD Ireland (-30.8 per cent) Spain (-14.8 per cent)  300  300  Denmark (-19.4 per cent) UK (-13 per cent) USA (-17.5 per cent)  250  250  Sweden (-0 per cent)  200  200  150  150  100  100  50  50  0  0 00  01  02  03  04  05  06  07  08  09  10  11  12  13  Note. The figures in brackets present the fall in real housing prices from the peak to the trough. The broken lines represent OECD forecasts.

The euro countries are marked by the debt crisis and growth prospects have deteriorated somewhat compared to the end of last year due to new consolidation measures and a tighter credit situation. There are, however, a number of bright spots in the US economy, where the labour market is improving and the housing market is showing early signs of a positive turnaround. With regard to the global economy as a whole, the Riksbank’s forecast is that growth will continue to increase at a relatively good rate in the years ahead, after having declined somewhat in 2012. This is shown in Figure 1. BIS central bankers’ speeches  1  Figure 1. GDP in various regions and countries Quarterly changes in per cent calculated as an annual rate, seasonally adjusted data 6  6  4  4  2  2  0  0  -2  -2 The world  -4  -4  USA Euro area  -6  -6 00  01  02  03  04  05  06  07  08  09  10  11  12  13  14  Sources: Bureau of Economic Analysis, Eurostat, the IMF and the Riksbank  For some time now, an important assumption in the Riksbank’s international forecast has been that the euro countries, by implementing various measures, will succeed in reducing the most acute anxiety about the debt problems in the euro area during the course of 2012.
The difference was that this house would last another 100 years, while the old house would have lasted only until the next earthquake. I see the current juncture in the transition away from LIBOR to a new reference rate regime in much the same way. We have seen the development of several reference rates that may meet various needs, including creditsensitive rates.4 Separately, the ARRC just announced the indicators that it will consider in recommending a forward-looking Secured Overnight Financing Rate (SOFR) term rate, which with continued market progress, it believes can be achieved relatively soon.5 These are valuable steps in the transition to the new post-LIBOR world—but in my house metaphor, these represent the rooms of the house. They're important, but more critical is that they be built on top of a robust foundation that will withstand any storm or earthquake. And the foundation must be built to the highest standards and with the very best materials.6 The reason is clear. If you build on a foundation that is not absolutely sound, you are risking trouble at some point in the future. Unfortunately, the cracks in the LIBOR foundation ran deep. The short-term bank funding markets that LIBOR is based on have withered away since the global financial crisis. Worse, they can dry up completely under stress, as we saw last spring.7 This means we need to have a strong and deep foundation of reference rates that we are confident will be rocksolid, holding up our financial system under all contingencies, foreseen or unforeseen.

We must take great care, because the decisions made today will determine reviewing our Privacy Statement. if the LIBOR transition is ultimately successful. The past decade has shown us that the problem with using LIBOR as a benchmark interest rate has been an extremely risky one to have—and to solve.3 It's important that we focus not only on making the transition, but also on getting the transition right. We've learned how challenging and costly it is to move away from a widely used unsound reference rate. It's essential that we move forward in a way that ensures that we do not have to go through such a transition again in our lifetimes. I know I wouldn't wish that on anyone. A Foundation for the Future This adage has many applications, but it's especially important to keep in mind when laying a foundation—because the foundation is everything. Back when I lived in California, we bought a Victorian house built in the 1890s. The attraction of the house was that it had lots of rooms and spaces for the family to live. But, the existing foundation was crumbling and not even attached to the house. In a major earthquake, the house would have quickly toppled over. We had a new foundation installed, and my mother asked to see before and after pictures. I responded that one picture would do since all the work was done underground and out of sight.
Real wage increases have been on average 3 per cent a year on average, compared with 0 per cent a year in the 1980s. Of course, one can discuss how much regulatory frameworks and institutional conditions surrounding wage negotiations have meant for this development in relation to the general conditions and the increased understanding of the inflation target and of the importance of low, stable inflation. My belief is that they improve the conditions for succeeding in monetary policy’s objective of maintaining price stability. Budget consolidation Following the change of government in October 1994, I returned to the Ministry of Finance after a couple of years as adviser at the International Monetary Fund in Washington to become UnderSecretary of State to Göran Persson. There was basically one task on the agenda; to eliminate the very large budget deficit. The deficit in public sector finances amounted to around 11 per cent of GDP in 1993. After a majority of the Swedish population had expressed their support for Sweden joining the European Union at a referendum held in autumn 1994, this became an additional task, as well as financing Sweden's membership of the EU, which cost in the order of SEK 20 billion a year. The timing for dealing with the deficit was ideal from both a political and an economic viewpoint.

Studies made by the OECD indicate that powerful budget consolidation processes have only been carried out in connection with serious crises, and the 1990s began with the most serious recession in Sweden since the Depression of the 1930s. GDP fell three years in a row, 1991-1993, and employment fell by more than 500,000 persons during these three years. At the same time, letting the krona float free in 1992 had led to a depreciation of the krona of around 20-25 per cent and a large increase in exports. There was thus a strong growth in demand from abroad that made it easier to constrict domestic demand. The budget consolidation succeeded beyond expectation. Public finances were improved from a deficit of around 11 per cent of GDP in 1993 to a surplus of around 2 per cent of GDP in 1998. The target had been aimed at achieving a balance in public finances in 1998. The major part of the budget consolidation was achieved by reducing the public expenditure as a percentage of GDP. There are considerable similarities between the problems at the beginning of the 1980s and the 1990s. In both cases, Sweden’s international competitiveness had deteriorated and we had large deficits in both the current account and public finances. However, the major difference between developments in the 1980s and developments in the 1990s was that fiscal policy was much stricter in the 1990s and inflation was brought down to a level comparable with other countries.