samchain/econo-pairs-v1 huggingface dataset:
Banks sharply curtailed their lending. A full fledged panic had started and was spreading rapidly; the financial system was facing the threat of collapse. In light of the circumstances at the time, a bankruptcy filing by AIG would have had disastrous consequences. Federal Reserve Chairman Bernanke has stated that it could well have “resulted in a 1930’s-style global financial and economic meltdown, with catastrophic implications for production, income, and jobs.” Because of the decisions made that morning, we can never really know. Let us be clear, though, about the risks that the policymakers did know. Policymakers knew that AIG’s largest creditors were other financial firms and that those firms clearly would have been directly impacted by an AIG bankruptcy filing. But the gravest risks were not the direct exposure of other financial firms to AIG. The gravest risks related to the indirect consequences of a bankruptcy of AIG, indirect consequences that would impact millions of Americans. AIG’s role as one of the world’s largest and storied insurance companies meant that its failure likely would have had a contagion effect, causing damage as it spread throughout the insurance industry. Policy holders would be hurt. Municipalities, who were already reeling from a lack of financing options for their building projects, would have seen their financial protection disappear. Workers whose 401(k) plans had purchased $ billion of insurance from AIG against the risk that their stable value funds would decline in value would see that insurance disappear.

Pension plans that had placed funds in AIG guaranteed investment contracts, or GICs, which function much like deposits in a bank, would have experienced significant losses, losses that would be passed along to retirees or to others whose aspirations to be retirees would surely have been changed. BIS Review 73/2010  1  And these indirect consequences of an AIG bankruptcy would not have stopped at the U.S. border. AIG was global in scope. It conducted its operations in more than 130 countries, and across various parts of the financial industry, insurance as well as banking. The damage from an AIG filing would have been felt from the farms of Iowa to the streets of San Francisco to the far off corners of the world. The unplanned and chaotic bankruptcy of this trillion dollar financial conglomerate (especially a day after Lehman’s filing) would have been a global catastrophe. That catastrophe did not happen. More than a year and a half later, it is easy to forget the level of panic and fear that gripped the world during the week of September 16, 2008. A bankruptcy of AIG would have fueled the fear, much as gasoline fuels a fire. And let us not forget what Federal Reserve and Treasury officials have said many times in testimony – we did not have the necessary tools, such as legal authority for a special resolution regime, with which to limit the damage of an AIG collapse. We also did not have the luxury of time.
To deal with systemic risks, there is a lot of merit in investigating more what I would call “market options”. Financial innovation can bring an essential contribution to growth and prosperity. It can also create significant instability. To reap the benefits of innovation and reduce its risks, we need robust and resilient financial systems and infrastructures. In this respect, concentrating systemic risks in central clearing counterparties for the most important markets (interbank, derivatives) may bring us a long way in reducing them. Even in CCPs, counterparty risk never disappears. Clearing houses concentrate the risks and remain vulnerable to a default by a major participant. They should operate under appropriate  BIS Review 35/2010  3  oversight in order to ensure that they are properly capitalized; maintain robust risk management practices; and meet high standards of governance. They must also not be dependent on liquidity provision by other financial intermediaries, which means they should have access, at any time, to Central Bank liquidity. Credit Default Swaps (CDS) are a case in point. The market is very opaque and increasingly concentrated between a small numbers of institutions. Worldwide, five banks – one of which is based in Europe – account for half of the CDS market. Besides, leading CDS players trade primarily among themselves and the actual transfer of risk through CDS has become more limited. Concentration and interconnectedness have increased with financial crisis. They are sources of vulnerability, a risk for the liquidity of the market and a threat to efficient pricing.

That said, in practice, developing a well-articulated macroprudential policy framework raises some challenges. I trust the benefits of addressing them are worth the impressive hard work currently underway. Thank you for you for your attention. 4  BIS Review 35/2010
We must use regulatory power to guide innovations - the example of the General Regulation on Data Protection (GDPR) , have the courage to develop an industrial policy with public-private partnerships, as in the case of artificial intelligence and batteries, and make progress, for example, on Franco-German business law. Climate change and carbon tax Lastly, the ecological transition is clearly one of our common structural priorities and carbon tax is generally considered to be the most effective instrument to fight global warming. The European agreement of 21 July provides for the Commission proposing in the first half of 2021 a "carbon border adjustment mechanism", accompanied by a "revised emissions trading system, possibly extending it to the aviation and maritime sectors." The advantage of this solution is that it provides the European Union with a resource of its own and restores fair competition between European products and imported products that have a higher carbon footprint. The success of this instrument will depend on our negotiations at the WTO, and on its more extensive integration into European policies (transport, industrial policy, etc.). ** Earlier I mentioned the difference in terminology between French and German: the French use "couple", while the Germans speak of "engine".

Let me now turn to the second topic which is the medium-term issue of financial sector reform. Although the Thai financial sector has proven resilient amidst the global crisis, reform of our financial sector needs to continue to ensure that the sector is well positioned to fully support the economy, in terms of efficiency and diversity of products. In addition, the current crisis will definitely bring about important changes in the global financial landscape, as well as in the regulatory approach to bank regulation and supervision. This means the reform process must help position the financial sector to adapt to the emerging financial landscape, while contributing to increasing efficiency and the robustness of the financial system. On this issue, key trends that we can expect to see in the emerging financial landscape will include, on the demand side, consumers becoming more risk averse and having preference  2  BIS Review 76/2009  for local institutions and for simplicity of transactions and instruments, while demanding greater accountability and transparency. On the banking side, business models of banks will become more conservative, relying less on wholesale funding and on the use of leverage, while giving greater importance to risk management and higher liquidity buffer. And on the regulatory front, more emphasis will definitely be on surveillance with focus on systemic stability, and the roles of systemically important financial institutions including the non-bank. These changes are the key essentials that will define the emerging financial landscape to which we will need to adjust.
I don’t have the time to survey that literature here today.7 But I will summarise a few points that I think are relevant both to my own remarks, and to the current conjuncture. Much of the analytical discussion has taken place with a framework that casts monetary policy strategy in the form of a control problem.8 Within a system that defines the behaviour of the economy, policymakers seek to minimise the social costs arising from the departure of inflation, employment and economic activity from their efficient levels, using the short-term interest rate (and potentially other monetary policy instruments) as a control variable. This is monetary policy as engineering. That cannot be an adequate or complete characterisation of the challenges the MPC faces. But it can help clarify and codify how to think about some of the important conceptual issues surrounding monetary policy decisions in the face of uncertainty. Characterising monetary policy as a control problem has a long history. It achieved renewed prominence as the academic literature sought to formalise and evaluate inflation targeting strategies, once they were introduced by central banks from the early 1990s.9 Since the UK was in the vanguard of these developments, unsurprisingly the Bank of England – in part, through the efforts of many attendees of today’s conference – contributed richly to that research programme.10  A common starting point was the standard new Keynesian macroeconomic model.

 While it is helpful to ask what might be the most adverse consequences of any decision taken, possible tail outcomes need to be balanced in a judicious and pragmatic way against more likely outcomes. 8  All speeches are available online at www.bankofengland.co.uk/news/speeches  8  I see these elements as being embodied in the so-called risk management approach to the formulation of monetary policy, which has been embraced by many central bank policymakers.17  At a practical level, in recent years this approach has acknowledged the need for monetary policy to be cognisant of uncertainties and risks stemming from (say) the lower bound on policy rates or the threat of a liquidity trap, while at the same time recognising that policy considerations cannot ignore the implications of decisions should the trap be avoided and inflation rise over the medium term. 18  The former aspect of risk management has justified a more aggressive response to downside shocks to price stability as the lower bound drew closer. Our discussions in the MPC now also address the latter aspect of the risk management approach: how policy should evolve as inflation rises and those asymmetric risks stemming from the lower bound recede. In undertaking this discussions, the risk management approach entails judgement and pragmatism. Engineering is not enough. The inevitable subjectivity of these judgements re-introduces some art into the science of monetary policy.
Andrew G Haldane: Stuck Speech by Mr Andrew G Haldane, Executive Director and Chief Economist of the Bank of England, to the Open University, London, 30 June 2015. *  *  *  Accompanying charts can be found on the Bank England’s website. The views are not necessarily those of the Bank of England or the Monetary Policy Committee. I would like to thank Will Abel, Charlotte Adams, Gareth Anderson, Daniel Beale, Will Dison, Ronnie Driver, David Elliot, Jeremy Franklin, Rich Harrison, Robert Hills, Chris Jackson, Phil King, David Latto, Clare Macallan, Holly-Ann Mansford, Jack McKeown, Rebecca Maule, Francesca Monti, Ben Nelson, Tom Pattie, Lukasz Rachel, Gareth Ramsay, Jon Relleen, Martin Seneca, Minouche Shafik, Scott Simmons, Thomas Smith, Matt Waldron, Dan Wales for their comments and contributions. Oliver Jeffers is an author and illustrator of children’s books. In Stuck, he tells the story of a boy whose kite becomes lodged in a tree. The boy makes vigorous attempts to dislodge the kite by throwing up objects, including a cat, a gorilla and an ocean-liner. (The story is fictional.) Yet the kite remains stuck. Central banks today can sympathise with the boy’s dilemma. Official interest rates in the major economies remain stuck at unprecedentedly low levels. Central banks have made vigorous attempts to dislodge them, including through special liquidity schemes, asset purchases and forward guidance. (This story is factual.) Yet interest rates remain stuck. This stickiness in interest rates has surprised both policymakers and financial markets.

Therefore, in the long run, real economic variables are determined mainly by underlying factors such as natural resource utilisation, labour force quality, productivity, and the propensity to save. It follows from what I have just said that it is of little use to set long-term goals for monetary policy other than price stability or exchange rate stability. Although this is so, monetary policy can also attempt to mitigate volatility in real variables such as GDP and employment and counteract deviations in the exchange rate from equilibrium, particularly when such volatility and deviations originate on the demand-side of the economy. It also follows from what I have said that monetary policy must be forward-looking, as it takes effect with a time lag. Based on the findings from a number of studies, the rule of thumb is that the full effect of interest rate changes on inflation emerges in 2-3 years, while the bulk of the effect emerges within about a year. The short-term impact on real variables tapers off within the same time frame. And it follows from this that in order to pursue forward-looking monetary policy with any degree of success, it is necessary to make forecasts. These call for economic analysis and modelling. In order to understand the problems associated with monetary policy implementation, one must bear in mind that statistics relating to the recent past often contain significant measurement errors, that we do not know what the “right” economic model is, and that the future is always in some sense unknowable.
8 The further countries are located from one another, the less likely it is that their banks will be active in one another’s markets. Many of the banks operating in Central and Eastern Europe originate in Western Europe. Right after the fall of the Soviet Union and the opening up of strictly regulated markets, the presence of foreign banks from Western Europe exploded. Today, many of the countries in the region report foreign ownership in excess of 80 per cent of total banking assets. Also here we see a strong geographical component. A large share of the foreign banking assets in  3  By the end of 2009 these countries accounted for nearly half of the global banking system measured in terms of gross global cross-border banking assets. 4  Other advanced economies include the US, Canada, Japan, Australia, New Zealand, and Switzerland. 5  See Table 1 in Barba Navaretti et al. 2010. 6  Inside the euro zone, cross-border loans have more than doubled from € 152 billion in 1999 to € 361 billion in 2006, while cross-border deposits have increased from € 221 billion to € 316 billion, respectively (see Heuchemer, Kleimeier and Sander (2008)). 7  The regional dimension of cross border banking activities was also emphasised in a speech given by José Manuel González-Páramo (24 February 2006).

Williams B. (2002), “The Defensive Expansion Approach to Multinational: Evidence to date”, Financial Markets, Institutions and Instruments, Vol. 11, pp. 127–203. 24  BIS Review 82/2010
On August 2006 the ownership transfer of 11.25 percent of the ProCredit Bank’s stake, from EBRD to ProCredit Holding AG (existing shareholder) was approved. On October 2006, the 71.97 percent transfer of the stake of Emporiki Bank S.A. of Greece to Credit Agricol S.A., France shareholder was approved. This transfer influenced also the indirect participation of Credit Agricol S.A. to the Emporiki Bank of Albania’s equity, to the same extent. During 2006, the banks’ network was extended also by 62 new branches and agencies, in the whole territory of Albania and abroad, having the highest share in Tirana, with the establishment of 30 new branches and agencies. Also, the opening of two branches outside the territory of Albania was approved and the opening of two other new branches is under the process of approval. 10. New activities of the Bank of Albania  Payment system From the regulatory and operational point of view, the payment system in Albania has already created the physiognomy of a modern system. The number of transactions processed during 2006 has increased by 13 percent, compared to 2005. In the meantime the value of transactions has increased by 21 percent during 2006, amounting to ALL 2,664.43 billion. Compared to 2005, the daily average number of payments (in both systems) has increased from 312, to 352 or 40 more transactions per day. In 2006, a new bank was added to the payment system, leading the number of participants to 17 banks. On March 2006 the e-payment settlement by VISA cards started.

José De Gregorio: Monetary policy and commodity prices in turbulent times Keynote address by Mr José De Gregorio, Governor of the Central Bank of Chile, at the 2008 Annual Meeting of Latin American Chief Executives of the Institute of International Finance (IIF), hosted by Corpbanca, Santiago, 2 April 2008. I am very grateful to Igal Magendzo for his great contribution during the preparation of these notes. *  *  *  The global economy is in turmoil. In this scenario, monetary policies around the world face strong challenges. Sailing through quiet waters has been pleasant. As we know, the stable and prosperous performance of the world economy in recent years has partly been the result of sound monetary policies. Now, during difficult times, monetary policy should contribute to make the adjustment less costly and lay the foundations for a sound, persistent recovery. Macroeconomic management in emerging market economies have improved significantly in the past several years, owing part of this to the large increase in commodity prices, but also to fiscal consolidation and the commitment to price stability. This has increased the resilience of emerging economies to global economic turbulences. In this presentation I will address three issues. First, the troublesome inflationary effects of the high commodity prices cycle we have experienced. Then, I will argue that, in this juncture, reinforcing the commitment to control inflation and reverse deviations from the target is a first order task.
For example, the outlook for world growth is based on the Consensus Forecast and the International Monetary Fund’s projections published in its World Economic Outlook. The outlook for commodity prices generally follows the futures market prices. Of course, these projections are imperfect – all projections are inherently uncertain – and the Board places particular emphasis on the risks and threats that may cause deviation from the baseline scenario. Thus, while making the baseline scenario as realistic as possible, the important discussion centers on analysis of the deviations from it and, above all, what are the implications for monetary policy that are coherent with our inflation target. To make this most likely scenario more useful, we need to consider not only the external economy but also discuss the outlook for the key variables of our own economy, particularly exchange rate and interest rate. 1 To project the path of exchange rates, we use the interest rates parity, that is, the exchange rate varies according to interest rate differentials. If the domestic interest rate is lower than the international interest rate (adjusted for risk premiums), the exchange rate can be expected to depreciate. Furthermore, we have to make some assumption about where the exchange rate will be in the long run. For this purpose, we assume that if at the moment of making the forecast the real exchange rate is consistent, within a reasonable margin, with its long-term fundamentals, it will remain at the current levels in the long run.

I would like to describe in more detail our communication strategy for monetary policy. The information provided in our Monetary Policy Report is only part of that communication. The preparation that leads up to its publication is a vital component of our work, demanding great dedication, discussion, interaction and reflection on the current state of the economy and the outlook for inflation. The Board and staff meet at least six times in the course of five weeks and there are presentations of special topics, a great many bilateral meetings and draft reports are revised and discussed at length prior to publication. Therefore in this process the board members form their opinion on the determinants of inflation and how monetary policy should evolve. This kind of reporting was introduced by the Bank of England in 1993 and is a common practice among central banks that have inflation target regimes. Today a great number of banks publish inflation reports and in a survey carried out by Fracasso et al. (2003) our Monetary Policy Report was classified in 5th place out of a sample of twenty such reports, the Bank of England’s being judged the best. To provide a basis for discussions on monetary policy, the Board decides which are the key variables of the most likely economic scenario. The projections for these variables derive from sources considered to be the most realistic and widely accepted.
The success of the euro in its relatively early stage of life has led, in many places outside the EU, to suggestions that domestic monetary policy should be more closely linked to that of the Eurosystem. Suggestions range from pegging the exchange rate to the euro to the introduction of the euro as a parallel currency or even as a replacement currency. In principle, the ECB maintains a totally neutral position with regard to such developments. We will neither endeavour to strengthen the international role of the euro nor to prevent such developments from taking place. In this respect, I should like to emphasise that when formulating monetary policy the Governing Council of the ECB is bound by the mandate to ensure price stability in the euro area set out in the Maastricht Treaty. This means that developments in neighbouring European countries are taken into account to the extent that the outlook for these countries influences price developments in the euro area. However, the ECB cannot and may not assume any obligations with regard to monetary or general economic policies in other countries, irrespective of the role the euro plays in those countries or of the size of the economies concerned. I should like to point out that the Maastricht Treaty envisages a clear and transparent procedure which lays down the conditions for countries wishing to join the euro area. There are three stages. The basic prerequisite is that the country is a member of the EU which is linked to specific criteria.

This caused the average interest rate level in those countries of the future euro area to be lowered considerably before the beginning of Monetary Union. The close cooperation which had always existed between the European central banks was increasingly stepped up in the final months of 1998 between those countries participating in Stage Three of Monetary Union. The coordinated reduction of central bank rates in December 1998 to 3% made it perfectly clear that, de facto, Monetary Union had already begun before the start of Stage Three. Looking at economic developments, in the first few months of this year there have been an increasing number of indications that the negative effects of the crises in Asia and Russia on growth and employment in the euro area could be more serious than was first expected. With the apparent slowdown in economic growth in the euro area, the risks that the 2% threshold for the tolerable rate of inflation would be exceeded in the foreseeable future evaporated. This forecast was also reflected in the revisions to the inflation forecasts of international organisations. At the beginning of April 1999, the Governing Council of the ECB therefore decided to reduce the interest rates on the main refinancing operations by 50 basis points to 2.5%, as well as the rates on the standing facilities to 1.5% and 3.5% respectively. The M3 monetary aggregate did expand such that it was slightly above the reference value at the beginning of 1999.