samchain/econo-pairs-v1 huggingface dataset:
2 The scenario for the 2019 test includes a deep recession in the UK with GDP falling by 4.7 % from peak to trough, house price falls of 33%, falls in commercial real estate prices of 41%, recessions in the Euro Area, the US, and China and market stresses including a 41% fall in equity prices and a nearly 400bps widening of investment grade spreads 3  All speeches are available online at www.bankofengland.co.uk/speeches  3  In the event of a no deal, no transition Brexit, markets would be likely to be very volatile – as they were after the referendum - as prices adjust to that outcome. The banking system has the ability to withstand the losses that would accompany a serious downturn – but one would still expect there to be losses. And, of course, while we have addressed all of the risks we can foresee, stress events can evolve and combine with other events in unpredictable ways. Second, to return to my opening point, the reason we have focused on the risks from a disorderly no deal, no transition Brexit is not because that is what we expect to happen but because the financial system needs to be able to withstand what could happen. The crisis taught us the costs to the economy and to society of a breakdown in the financial system. Third, we have been fully transparent in our assessment of the risks and the actions necessary to address them.

The responsible authority or authorities vary across countries. In some countries it is the central bank, in other countries there is a separate financial supervisory authority, sometimes the responsibility is shared between different institutions. In Sweden, the Financial Supervisory Authority is responsible for supervision and regulation, the Riksbank is responsible for lending of last resort to solvent banks and for promoting a safe and efficient payment system, while the National Debt Office is responsible for the resolution of failed banks. During times of crisis, these authorities cooperate closely with the Ministry of Finance. My point here is that financial-stability policy and monetary policy are quite different, with different objectives, instruments and responsible authorities, the latter with considerable differences across countries. This does not mean that there is no inter-action between them. Financial stability directly affects the financial markets, and financial conditions affect the transmission mechanism of monetary policy. Problems in financial markets may have a drastic effect on the real economy, as the current financial crisis has shown. Monetary policy affects asset prices and balance sheets and can thereby affect financial stability. But the fact that financial-stability policy and monetary policy are conceptually distinct, with distinct objectives and distinct suitable instruments, has to be taken into account when considering the lessons of the financial crisis for monetary policy. In particular, it makes little sense to extend the mandate of monetary policy to include financial stability. 15 What are the specific conclusions for flexible inflation targeting?
During previous periods of accelerating growth and firming business confidence, the MPC had always tightened policy significantly. Indeed, on the basis of this past behaviour in the great moderation, the MPC would have raised interest rates by 2 to 3 percentage points between August 2013 and the end of 2014 (Charts 3 and 4).6  See Carney M (2018), ‘Guidance, Contingencies and Brexit’. For anyone who might suggest the MPC should have followed that reaction function, note that, even on unchanged policy, CPI inflation by the summer of 2016 was running at only about ½% and core CPI inflation around 1¼%. 6  7  All speeches are available online at www.bankofengland.co.uk/publications/Pages/speeches/default.aspx  7  Chart 3: Close correlation between output and monetary policy pre-crisis 3 month moving average, balance 65  3 month moving average, bps 50 Combined CIPS output survey (LHS) 25  60 55  0  50  -25  45  -50  40  -75 Average MPC vote, including QE (RHS)  35 30 1998  -100 -125  2000  2002  2004  2006  2008  2010  2012  2014  2016  2018  Sources: IHS Markit, ONS and Bank calculations. Notes: Combined CIPS output survey is a weighted average of the Markit/CIPS PMIs for services, manufacturing and construction.

Our monetary strategy ensures a continuity from the monetary policies previously conducted by the national central banks, which now belong to the Eurosystem. This strategy has been well received by financial markets and the general public. In particular, the relatively low yields on long-term euro-denominated bonds confirm that the Eurosystem has retained the credibility store it inherited. d)  Lastly, the credibility of the euro also results from the Eurosystem's constant efforts in terms of transparency and communication. I must stress here that the Eurosystem is one of the most transparent central banks in the world. Once a month, immediately after the ECB Governing Council meeting, the President of the ECB holds a press conference which starts with a precise report of the assessment of the Governing Council, and which is made available in real time on the ECB website. The Eurosystem was the first central bank in the world to introduce, on 1 January 1999, the concept of regular, frequent, real-time communication in the domain of monetary policy. Other major central banks have since decided to follow us. Being accountable, for an independent institution in a modern democracy – or, as it is the case for the Eurosystem, in a subtle constellation of democracies like the European Union – means being accountable to public opinion.
William A Ryback: Macro prudential policy – a new name for some old ways of thinking? Speech by Mr William A Ryback, Deputy Chief Executive of the Hong Kong Monetary Authority, at the Macro Prudential Supervision Conference: Challenges for Financial Supervisors, organised by the Korea Financial Supervisory Commission / Financial Supervisory Service and the International Monetary Fund, Seoul, 7 November 2006. *  *  *  Ladies and Gentlemen, I am pleased to be here today to add my thoughts to this important discussion on emerging insights into the macro prudential end of the supervision business. I also am pleased to be back in Seoul one of the most dynamic cities in Asia and to be hosted by my friends in the Korean Bank supervisory community - many of whom I have known for a number of years. It is almost ten years from the financial crises that affected many parts of Asia. This conference then is being held at an opportune time to allow us to reflect on the lessons learned. There has been considerable change over the last decade. Risk management in the regions banking systems’ have become more robust. There has also been a step-change in the standards of supervision. Risk-based supervision has replaced compliance checking. There are also now moves under way to improve regional cooperation on issues like Basel II implementation, in which EMEAP will continue to play a leading role.

However, the second half of the twentieth century saw many central banks also taking on the responsibility for statute-based micro prudential supervision. In many parts of the world banking laws were passed for the first time and the central bank often became the bank supervisor. In this process the distinction between the micro- and macro- perspectives became blurred. What has changed in the past ten to fifteen years is that central banks have started to give much more explicit emphasis than in the past on their macro prudential responsibilities and have distinguished it more clearly from the micro-supervision perspective. This renewed emphasis has several different sources. One of them was undoubtedly the financial crises that hit Asia in 1997. This experience showed that even if the individual banks in a financial system appear to be sound, the system itself can still be overwhelmed by financial shocks. For example, the system can be exposed to a common risk that isn’t obvious from looking at each bank individually. In the Asian crisis countries the exposures of banks to foreign exchange risks didn’t show up on bank balance sheets. The risks were instead in the balance sheets of their major borrowers, who had borrowed heavily in foreign currencies even though they had domestic currency cash-flows. And this also points to another feature of macro prudential concern – it cannot stop at the traditional boundary of the banking system, but must look at the risks in the nonbank financial sector and at the structure of household and corporate balance sheets.
The underlying point here is that the bodies providing such central infrastructure have a clear interest in effective system-wide risk management and stability, and can be monitored by the authorities. For the authorities internationally, the moral of the story is that they must take an interest, from a systemic perspective, in the regimes which govern, and drive changes in, the structure and behaviour of the financial system. That means maintaining that interest during peacetime, not just a necessary rush of activity after crises occur. In setting the rules of the game, the authorities need to strike a trade off between risk and efficiency. We could reduce the risk in the system by stifling innovation. But in order to choose to tilt the balance towards innovation and efficiency, the authorities need to be confident that they have regimes that, amongst other things, (i) are effective in mopping up the mess, and (ii) do not create bad long-term incentives. Orthodoxy is to cut off incipient systemic stress at the pass: intervene early, and decisively, but leaving losses with the private sector and afterwards rejigging the structure of the system to contain the implications for future behaviour. For that, tools are needed. In very broad terms, this is precisely what the Special Resolution Regime for banks and improved deposit insurance proposed by the UK authorities are about. They are tools the authorities need to contain the disruption caused when bank failures occur and so to make such individual firm failures tolerable.

In this respect, it should be kept in mind that the crisis has not demonstrated the superiority of any specific model and that, by contrast, it has witnessed the collapse of all manner of institutions, whether they be specialised in traditional business, in investment banking or in a combination of the two. Moreover, given that the introduction of restrictions on banking activity means forgoing the potential benefits of diversification, it is essential to ensure that these are smaller than the risk of combining traditional banking and own-account investment activities, even after the entry into force of solvency regulations which strengthen and step up prudential controls. Finally, it is necessary to assess as precisely as possible the impact structural measures may have on the location of risk outside the regulated sector and on the liquidity and efficiency of securities markets. More generally, we still lack an overall analysis of the diverse regulatory changes envisaged in the three areas in question, of their internal consistency and of their combined impact on the financial system and on the economy in general. For example, at the limit it could be argued that structural measures (perhaps those having the greatest impact on the business strategy of the main banks) are the least necessary if we are confident that the combination of the new solvency requirements and the reform of resolution regimes will really minimise the government support required to protect deposits.
This is necessary for assessing, determining and calibrating the appropriate policy measures, as those taken by the Eurosystem to address the market turbulence. All in all, the turmoil has confirmed a number of strengths in our information-exchange and statistical arrangements. At the same time, it has revealed some information gaps and weaknesses that will need to be addressed once we draw the main lessons of the current  4  BIS Review 143/2007  turmoil. Indeed, it has been suggested that insufficient information has been the main reason why problems originating from the relatively small sub-prime segment of the US mortgage market have had such widespread consequences. 3 For instance, the turmoil has revealed information gaps related to the valuation of illiquid complex structured products or the assessment of the concentrations among various types of collateral – including sub-prime – within structured finance securities. Besides, the turmoil has shown that there is a need for credit rating agencies to provide also information on the liquidity risks associated with structured investment products. In addition, the turmoil has confirmed that the significant lags in the release of some statistics, for instance those on integrated accounts, reduce our ability to use them in real time. Challenges for communication under stress As I mentioned earlier, implementing monetary policy under stress poses special challenges for communication. Indeed, following deviations from the standard practices and the setting in motion of a learning process, central banks must re-establish a “reputational equilibrium” with their counterparts.

In addition, if central banks are perceived to assign higher priority to supporting asset prices than to safeguarding price stability, inflation expectations may be adversely affected and even become disanchored. Let me say clearly that I consider a situation in which the central bank would reduce its interest rate with a view to strengthening asset prices and banks’ balance sheets as purely hypothetical and, in the case of the Eurosystem, simply unthinkable. This is a situation that would obviously open up issues of moral hazard and that no central bank committed to price stability would ever contemplate. This discussion reminds me of a famous article by Alan Blinder, the former Fed ViceChairman. 4 He notes that academic economists are always concerned about the inflationary bias problem, that is the fear that central bankers may be constantly tempted to engineer inflation surprises in order to achieve sustained short-term employment gains, without realising that in the long run they would simply create higher inflation. Blinder reassures these concerns by observing that “during my brief career as a central banker, I never once witnessed nor experienced this temptation”. Let me then borrow Blinder’s words and use them to reassure the concerns of those who believe that we might be tempted to temporarily forgo our commitment to price stability out of worries about financial market developments: this is a temptation that neither I nor my colleagues at the ECB’s Governing Council have ever experienced.
As the graph shows, inflation in the first quarter developed as predicted by us (blue curve). The dashed red curve represents the new forecast. This is based on a steady three-month Libor of 0.5%. The forecast begins in the second quarter of the current year and ends in the first quarter of 2007. In order to analyse the inflation prospects, it is useful to differentiate three phases. I shall begin with the short-term inflation prospects. In particular, I shall discuss the role of oil prices. Then I will present our outlook for the economy, which affects the medium-term inflation forecast. Finally, I shall talk about the long-term inflation prospects. For this, an analysis of monetary developments is helpful. The development of oil prices In the short term, i.e. for a period of approximately one year, monetary policy can hardly steer price developments. Price levels are largely determined by monetary policy decisions made in the past. Inflation may, however, be temporarily influenced by events that are not attributable to monetary policy. We are currently experiencing such an event in the form of higher oil prices. Price increases for oil products have contributed significantly to the rise in annual inflation measured by the national consumer price index (CPI) from 0.5% in April to 0.9% in May. The increase in the oil price is also the main reason why our inflation forecast exceeds the March forecast until the first quarter of 2005 despite the higher interest rate level.

This change has been prompted notably by the new information and communication technologies and by the realisation that the spread in Europe of pre-inflationary bottlenecks is, in itself, an obstacle to growth that is robust and sustainable because it is non-inflationary. To entrench this change in attitude, our strategy should move in three directions to:  5  BIS Review 115/2000  •  ease the constraints on labour. Some 53% of companies currently report that they are facing serious recruitment difficulties, notwithstanding the 9.4% unemployment rate. It is therefore necessary to step up the education, training and integration of people hitherto excluded from the workforce. Companies in particular must increase their efforts. As the Monetary Policy Council has been recommending for the past three years, a more extensive use of overtime should be accepted, especially in sectors where there is a labour shortage. More generally, the increase in Europe’s employment rate from the current 61% to 70% in ten years’ time, an objective which was confirmed by the European Council meeting in Nice and which aims at expanding the available workforce, is particularly timely and reveals a profound change in attitude;  •  invest massively and loosen the constraints on capital. Investment is essential in our economy in which the capacity utilisation rate is currently at a historic high, and where an increasing proportion of companies—41% today, as opposed to 30% at the end of 1999—are experiencing production bottlenecks.
Leading the Change: Climate Action in the Financial Sector Speech given by Sarah Breeden, Executive Director, UK Deposit Takers Supervision Executive Sponsor for Climate change  UK Finance Webinar held during London Climate Action Week 1 July 2020  I am grateful to Zane Jamal and Theresa Löber for their assistance in drafting these remarks 1  All speeches are available online at www.bankofengland.co.uk/news/speeches  Good afternoon everyone. I would like to thank UK Finance for inviting me to speak today during London Climate Action Week on what I consider to be the defining issue of our time – climate change. I realise that this may seem an odd claim for a central banker to make in the middle of a global pandemic that has already led to the largest fall in UK growth in over three hundred years.1 But our economy and financial system, with the right support, should eventually recover from Covid-19. In contrast, climate change, left unchecked, will lead to irreversible harm for generations to come. That demands our continued attention even as we deal with the current crisis. We are at the start of a critical decade for climate action where the decisions we take today will shape the future of our planet for decades to come. ‘Action’ being the key word. If the previous decade was marked by a ‘call to action’, then this coming decade must answer it. That means an economy-wide orderly transition to net-zero emissions. We all have a role to play in that.

Since banks are highly leveraged institutions, they also face different types of risks which other businesses do not normally face. These risks are numerous and usually range from operational risks to fraud risks to liquidity risks to reputation risks and so on. These risks, unless properly managed, are often fatal to a bank. It is, therefore, necessary that a bank should be adequately prepared to successfully mitigate or avoid these risks. The failure to do so will lead the bank to closure of business. A bank which operates well by any standard may soon find itself boggled with a serious liquidity issue arising from some external shock. If it is unable to raise funds quickly to meet liquidity, it will face a general bank-run forcing it to plead for assistance from other banks, authorities etc. The recent liquidity crunch due to the sub-prime issue is a case in point. It had been reported that one such bank that had faced this liquidity crunch severely had boasted of itself in August that it was indeed a well-run robust bank. To its much embarrassment, just one month later, it had to swallow its pride when it had to plead with authorities for assistance. This points to the fact that the internal auditor has to develop risk assessment and mitigation systems in a bank and take effective measures to give advance warning in the event of an impending risk crisis.
17  Table 2 Domestic scenario (annual change, percent)  GDP Domestic demand Domestic demand (w/o inventory change) Gross fixed capital formation Total consumption Goods and services exports Goods and services imports Current account (% of GDP) Gross national saving (% of GDP) Nominal gross fixed capital formation (% of GDP)  2016  2017 (f)  Sep.17 Report  Jun.17 Report  Sept.17 Report  1.0-1.75 2.5 1.8 -0.9 2.6 0.7 4.3 -1.0 20.2 22.1  1.25-1.75 2.6 1.7 -1.6 2.7 0.1 4.6 -1.2 19.8 21.7  1.6 1.1 2.0 -0.8 2.8 -0.1 -1.6 -1.4 20.2 23.2  2018 (f) Jun.17 Report  Sept.17 Report  2.5-3.5 3.9 2.9 3.0 2.9 3.9 6.6 -1.9 20.3 22.2  2.5-3.5 3.9 2.9 3.2 2.8 4.5 7.4 -1.8 20.2 21.8  (f) Forecast. Source: Central Bank of Chile. Figure 10  CPI inflation (*)  CPIEFE inflation (*)  (annual change, percent)  (annual change, percent)  6  6  6  6  5  5  5  5  4  4  4  4  3  3  3  3  2  2  2  2  1  1  1  1  0  0  0 11 12 13 14 15 16 17 18 19  0 11 12 13 14 15 16 17 18 19  Sept.17 Report  Jun.17 Report  (*) Gray area shows forecast as from the third quarter of 2017.

On the one hand, it further strengthens the accountability of the decision-makers and increases transparency for the public. On the other, it will also contribute to the study of the country's economic history and a better understanding of the decisions made from a historical perspective. The publication of this material will be made in March of each year. The measure will have retroactive effect, so that the publication of March 2018 will cover the meetings of the years 2000 to 2007. Finally, we will also make changes to the publication periods of both our Monetary Policy Report and our Financial Stability Report. The Monetary Policy Report, which will keep its quarterly frequency, will be released first thing in the morning after the meetings of March, June, September and December, and will be complemented by a press conference of the CBC Governor at the Bank's premises. By publishing this Report the day after the Meeting, the Board will have the chance to reinforce the communication of the grounds that justify the policy decisions. In general, the vast majority of central banks publish their Reports or similar documents on the same day that monetary policy decisions are announced. The Monetary Policy Report will continue to be submitted to the Senate immediately after its publication, in dates that will be agreed upon with the respective instances. The Financial Stability Report, for its part, will continue to be published twice a year, but will now be made separately from the Monetary Policy Report, in May and November (table 4).