samchain/econo-pairs-v1 huggingface dataset:
His 2017 NIESR paper with Bill Allen examined the shift from the “old normal” of pre-financial crisis monetary policy to the “new normal” of QE and forward guidance, as well as engaging seriously with what a “future normal” for monetary policy might look like.5 That is a framing I will use for this lecture in setting out my own views of QE as a monetary policy tool, and then focusing on two other policy debates highlighted by the IEO review, the links between QE and government financing, an issue Peter also considered6, and the links between QE and climate change. The Bank of England and its balance sheet I’ll come on to the details of what exactly QE is and what uses it has as a policy tool, including over the last 11 months in response to the Covid pandemic. But I want to start by considering a more general question, which is the question of what central banks are actually for. That’s because I don’t think you can answer the question of how to use a tool without first knowing what you want the tool to do.

Further details including transcripts of the oral evidence sessions are available on the Committee’s website. As set out most recently by Andrew Bailey in his 2020 Jackson Hole speech and accompanying paper. The supporting paper for Andrew Bailey’s Jackson Hole speech, mentioned above, gives a good overview of the evidence for the UK, as does Box B of the IEO report, while the 2019 BIS Committee on the Global Financial System report on unconventional monetary policy tools summarises the cross country evidence, as does Ben Bernanke’s 2020 AEA Presidential Lecture. 18 The Bank has actively contributed to work on this topic, with a notable contribution, for example, by Bunn, P, Pugh, A and Yeates, C (2018) "The distributional impact of monetary policy easing in the UK between 2008 and 2014." 15 16 17  9  All speeches are available online at www.bankofengland.co.uk/news/speeches and @BoE_PressOffice  9  Figure 5: Stylised QE transmission mechanism  Taken from the supporting paper for Andrew Bailey’s Jackson Hole speech.
But this advantage diminished since the global financial crisis. Firms may consider moving up the value chain to differentiate products and enhance value. There are two possibilities that exist in Thailand depending on the industry. The industries that are behind need to catch up with the ongoing trend, and industries that have the opportunity, can leap ahead of the trend. In either case, Research and development investment is needed. To address the issues just mentioned, Thailand’s financial sector, which includes my esteemed guests for today and the Bank of Thailand, must set clear directions for our roles. To deal with the structural challenges, the private sectors need support from the financial sectors. They will require long term and low cost funding, from both domestic and international sources. Ladies and gentlemen, your operation of financial institutions with both caution and long term vision has so far contributed to financial stability in Thailand. We would like you to continue placing value in the long term, and providing liquidity for established customers who will definitely return to growth after Thailand’s rebound. Such support creates long term value for your international investors and helps both your future returns, and to usher the economy through the slump. For the Bank of Thailand’s part, we continue improving financial system strength and efficiency.

Looking at variables whose imbalances tended to be associated with crises in the past, we do not see these variables approaching crisis levels but rather staying at low risk levels. What we are observing is a mainly sentiment-led slump in demand and  BIS central bankers’ speeches  1  subsequently an opportunity for strong domestic rebound when sentiment improves. I would like to explore some key variables in more detail. Financial volatility is well contained amidst economic slowdown. Exchange rate has been relatively stable and international reserves have remained high, reflecting some degree of confidence among foreign investors and appropriate exchange rate management. Inflation expectations are firmly anchored, allowing monetary policy some room to address the downside. We benefit from this stability because consistent macroeconomic policy commands credibility from the public. It is worth mentioning a risk when it comes to volatility: that even with the Fed’s QE tapering already factored into the markets, the monetary policies of advanced economies continue to exhibit likelihood of change. These policy changes could cause Thailand to experience capital outflows or a volatile exchange rate. The Bank of Thailand closely monitors these risks and currently assesses them to be manageable given Thailand’s financial structure. Credit risk is also moderated by the wisdom of the private sector. Private companies have recently kept leverage in check at a cautionary debt-earnings ratio. Financial institutions are carefully managing loan quality, as household debt levels that have been decelerating since last year indicate.
Fritz Zurbrügg: After the minimum exchange rate – new monetary policy challenges Speech by Mr Fritz Zurbrügg, Member of the Governing Board of the Swiss National Bank, at the Money Market Event, Zurich, 26 March 2015. *  *  *  The speaker would like to thank Dirk Faltin for his valuable support in preparing this speech. He also thanks Marco Huwiler and Peter Kuster for helpful comments. Accompanying charts can be found at the end of the speech. Ladies and gentlemen A warm welcome to our traditional Money Market Event in Zurich. We are delighted that so many of you accepted our invitation to attend. A year ago at this gathering, I spoke to you about the Swiss National Bank’s (SNB) investment policy. At the time, I touched only peripherally on monetary policy and the minimum exchange rate of CHF 1.20 per euro. It will come as no surprise to you that this year I have decided to devote my talk exclusively to monetary policy. On 15 January of this year, the SNB discontinued the minimum exchange rate to the euro. This step attracted a good deal of attention around the globe and triggered dramatic price movements on the financial markets for a short time. It has significant implications for large sections of Switzerland’s economy. For the SNB, too, the decision to discontinue the minimum exchange rate was a momentous one. I would like to take this opportunity to explain our rationale for discontinuing the minimum exchange rate in more detail.

As regards economic developments, we are aware that the discontinuation of the minimum exchange rate means that there are difficult times ahead for Switzerland. We have every confidence that Switzerland’s economy and its economic agents will rise to the challenge and adjust to the strong Swiss franc. The last few years have provided an impressive illustration of just how exceptionally adaptable this country’s entrepreneurs are. The Swiss franc is significantly overvalued and while it is expected to weaken over time, until it does, this substantial – and above all abrupt – appreciation of the currency will present considerable challenges. I repeat: My colleagues on the Governing Board and I have great respect for the business community whose task it will be to make these difficult adjustments. BIS central bankers’ speeches  7  8  BIS central bankers’ speeches  BIS central bankers’ speeches  9  10  BIS central bankers’ speeches  BIS central bankers’ speeches  11
On the other hand, in volatile situations, policy makers need to be more agile to respond to new data and risks. Let me therefore turn back to the three practical issues I discussed earlier and try to draw three lessons for uncertain times: 1. The time horizon: even in normal times, forward guidance loses power over the longer term, as I said. But the greater the uncertainty, the shorter the forward guidance should be. Its reasonable horizon at present should be a matter of quarters rather than years. 2. The balance between calendar and state dependency: in the very short run, dates are more efficient to influence markets and economic agents’ expectations. But beyond the horizon of some months, state-contingent forward guidance is more preferable. And it should rely not only on forecasts – models are fragile in uncertain times – but also significantly on actual data. We should listen to the present and real world of price and wage setters – businesses and households –, who are at least as important as macromodelling or market expectations. 3. In the face of uncertainty, not being precommitted is an absolute imperative. The two most important words for Central Bankers recently are “agility” and “humility” – frankly, these are more than just words, they are the daily reality for us. Jay Powell rightly promises to be “humble and nimble”.

More generally, maintaining our high stock of assets until the third step of our sequence gives us through our reinvestments more leeway on the markets. Conclusion As of 2006, Olivier Blanchard said : “Monetary policy can pretend to be close to science if it can be conducted using simple and robust rules […] Monetary policy must be closer to art if it is frequently confronted to new, poorly anticipated and poorly understood, contingencies.” This mix of science and art is something I like in monetary policy. Therefore, I have cherished our discussions in the Governing Council, for my past seven years as Governor: if it wasn’t for discussion, why should we have meetings? But as I suggested in my remarks today, you can trust us around President Christine Lagarde to make pragmatically the right decisions in the right order and timing, in order to reach our course: bringing inflation back firmly and durably to around our 2% target. I thank you for your attention. 5/5  BIS central bankers' speeches
Therefore, alongside with the baseline forecast, we have worked out an alternative scenario  BIS central bankers’ speeches  3  which we consider to be unlikely to develop and which provides for oil price fall to $ per barrel from early 2015 and during the whole three-year period. In this case Russian economy will require more profound adjustment to the new conditions in 2015–2016. In this scenario, the current account surplus will amount to approximately $ billion in 2015. It will further increase due to the slight rise of non-oil and gas exports and decline of imports. Economic growth rates will depend on the pace of import substitution. Slow development of import-substituting production in 2015–2016 may result in “mild” recession. Nevertheless, output and employment decrease will be considerably less than in 2008–2009. In this scenario we expect economic recovery growth to over 5% in 2017. Under this scenario, in 2015, inflation acceleration may be higher than in the baseline scenario due to the lower ruble appreciation during the year which is also expected due to the compensation of the exchange rate overshoot. During the following two years, due to the deeper output gap inflation will decrease even faster than stipulated in the baseline scenario reaching the target of 4% before late 2017. Meanwhile, the monetary policy will be aimed at stabilisation of inflation expectations, prevention of inflation spiral and its gradual decrease due to the prospects of economic growth.

Important factors behind this development are the larger home-currency investor base and the better issuing conditions for international borrowers provided by the unified European money market, which is now more liquid and efficient than the markets in the individual countries before the introduction of the euro. Needless to say, European equity markets have also been affected by the disappearance of currency risk within the euro area. There appears to be a gradual shift from the domestic focus in the euro area countries to a euro area-wide, sector-related, view. Integration is likely to attract a broader range of potential investors and benefit the development of private equity and financing opportunities for new firms. In addition to these economic advantages, we must naturally also include what I consider to be the decisive political arguments in favour of Sweden participating fully in the political and economic cooperation with a view to attaining a position of influence in a strong and prosperous Europe. The fact that the Swedish krona has not been more negatively affected by the result of the referendum, despite the foregone advantages, could in turn be due to long-term factors that are independent of EMU. The political uncertainty ahead of the referendum should indeed have contributed to the somewhat weaker krona during the summer. However, the krona has been considered undervalued for a long time.
Uncertainty is feeding into prudential savings by households and firms, despite government transfers, debt rollovers and credit availability. The recent agreement between government and main opposition in Congress that broadened the horizon of fiscal support and enforced a medium-term budget constraint may help foster confidence. The expansion of Central Bank programs may operate in the same direction. 17. Summing up, while Chile has been hit hard by the Covid-19 pandemic, the economic policy response has been strong, consistent and sustainable over time. This may help the economy to avoid the worst and prepare the country for a stronger recovery. ***  Page 3 of 3

At this time, although monthly value of land transactions has risen back to the previous peak level in 1996 and bank credits extended to real estate developers has picked up, we feel that there is no sign of overheating in this sector yet. Latest land prices have increased only by 14 percent on average, while housing prices for low- and medium-income families rose by less than 10 percent over that of last year. Nonetheless, it is important to keep a watchful eye on developments in the real estate sector, by making sure that bank lending to this sector is prudent. And for our part, there is now greater willingness to use the necessary prudential measures to discourage or forestall any undesirable development. Financial institutions are now required to report all real estate loans exceeding 100 million baht. Any real estate lending that is deemed too risky would require immediate additional provisioning. This should help ensure that growth of the real sector is driven by quality growth with least amount of bubbles, and that policy is proactive enough to prevent a reoccurrence of the real estate bubble prior to the 1997 crisis. To improve our ability to monitor this sector, we have developed a housing price index in cooperation with a number of agencies including the Government Housing Bank. This housing price data will be important for assessing the underlying conditions in the housing market, and will allow us to monitor any concentrations of risk before they develop in this sector.
Let me share with you some thoughts about what I have perceived at the meetings I have held in recent months with monetary authorities around the world. The central bank governors of developed economies, plus some from emerging markets, get together once every two months to share our views on the global economic and financial situation. Two things have called my attention in the three meetings I have attended since I assumed as the governor of the CBC. On the one hand, the severity and gravity of the situation of some developed countries. Being so distant geographically from the main financial centers of the world, in Chile we often fail to grasp in full dimension the hardships facing some economies that interact with us. These meetings allow us to see firsthand these situations and feel their true magnitude. On the other, I am amazed by the high prestige that the Chilean economy enjoys in these same arenas. It is clearly set apart from others, because of its strength, its sound macroeconomic administration and the efficacy of its institutions. Of course this makes us confident as it gives us more and better tools to confront possible shocks coming from abroad. Our responsibility is twofold. On the one hand, is to keep inflation low and stable, to help in achieving sustainable growth. On the other hand, is to contribute with our powers to identify and address the risks threatening the normal functioning of our financial system.

In the introduction of accredited training courses, it is necessary to co-operate with leading and renowned educational institutions to provide quality training so as to achieve the objective of raising professional standard and gain wide recognition. I am happy to announce that the Chinese University of Hong Kong and the University of Science and Technology will offer certificate programmes on dealing, settlement and fixed income securities. Practitioners can take these courses to obtain a professional qualification to meet part of the membership requirement of the Association. In addition, the new regime recognises the rapid evolution in financial markets, and the need for continuous professional training in upgrading the skills and expertise of practitioners. A new requirement on continuous professional training is therefore introduced for the renewal of the membership. In strengthening the international financial centre status of Hong Kong, it is important to foster our advantage in having a professional workforce. We believe that the launch of the new membership regime of ACI - The Financial Markets Association of Hong Kong and educational programmes will help upgrade the technical skills and expertise of treasury market professionals and help them to catch  BIS Review 58/2004  1  up with the latest developments in the markets. This will work towards our ultimate goal in raising overall competitiveness of treasury markets in Hong Kong. Alongside the rapid growth of the Mainland economy and the gradual liberalisation of their markets, there is an increasing demand for treasury markets products and services from the Mainland.
While the 1988 Accord was a milestone achievement, its simple risk-weighting scheme has had difficulty incorporating innovations in the way banks today manage and mitigate credit risks. More fundamentally, the 1988 Accord does not adequately differentiate among degrees of credit risk. As a result, banks have had incentives to take on higher risk exposures within each of the Accord’s broad risk categories. Banks have also tended to engage in transactions that lower capital requirements without reducing economic risk. The effect of these developments has been to erode the significance of the Basel ratios as an indicator of a financial institution’s capital adequacy, particularly for the large, internationally active institutions which were the original targets of the Accord. To address these shortcomings in the 1988 Accord, the Basel Committee proposes two primary approaches: (1) a standardized approach that ties risk weightings to external credit assessments such as credit ratings, and (2) an internal ratings-based approach that would begin by mapping internal risk ratings into standardized risk weightings but might eventually evolve into something closer to the full use of credit risk models. Each approach treats the trade-off between simplicity versus accuracy somewhat differently and thus one or the other is likely to be relevant to banks with different levels of sophistication. Importantly, both proposed approaches attempt to introduce greater risk sensitivity into the minimum capital standards.

The Basel Committee’s report also showed that banks must develop approaches that better account for credit risk under distressed market conditions. A key lesson of the LTCM episode is that credit and market risk cannot be seen as completely distinct, but are liable to interact and reinforce each other under highly stressful conditions. The use of more rigorous stress testing, therefore, could have given banks better warning of the types of exposures they faced. Together with this January 1999 report, the Basel Committee issued a sound practices document setting forth guidance for banks and supervisors on these topics. For example, these sound practices called upon banks to: •  establish clear policies governing their involvement with highly leveraged institutions;  •  adopt credit standards addressing the specific risks associated with these institutions;  •  establish meaningful measures of potential future exposure as well as credit limits incorporating the results of stress testing; and  •  monitor exposure on a frequent basis. I am pleased to report that the Basel Committee’s recommendations on highly leveraged institutions have been reinforced by the recommendations of subsequent efforts, including reports by the President’s Working Group on Financial Markets and the Counterparty Risk Management Policy Group. There is clearly widespread agreement among both the private sector and the official community about the steps that firms need to take to address the weaknesses in risk management identified in the LTCM episode. The key remaining issue is the strength of the private sector’s resolve to implement these measures.
However, if we do not tackle this we will see the growth of national restrictions on the terms on which cross-border operations are permitted – in terms of capital, liquidity and legal structure – and that could have great economic costs. 3. Strengthening banks’ resilience  The financial crisis has revealed a number of gaps and flaws in the regulatory and accounting conventions especially for banks. We need to put those right quickly and on an international basis. The G20 Summit has asked the Financial Stability Forum to take that forward. For example the events have shown up the lack of any agreement on liquidity requirements on banks. The FSA is developing proposals for UK which will deliver tougher standards. But  4  BIS Review 145/2008  we are pressing also for international agreement in the Basel Committee. Events also brought home the need for a fundamental review of both the amount and the definition of capital requirements. 4. And developing macro-prudential tools  The last lesson I have drawn is that we need to bridge the gap between macroeconomic policy and the regulation of individual firms. We need a third club in our bag which can directly dampen the financial cycle. This is needed both for financial stability and for wider economic management. As we have been reminded over the past 15 months, it is primarily in the “bad times” that banks need to demonstrate that they have adequate financial resources.

Of course, the big question now is what roles could policymakers play to support this transition. I see SMEs capacity building as one key area where the government needs to be actively involved. This includes proactive consultation and coaching, providing incentives for productivity-enhancing investments, prohibiting abuse of market dominance power by large firms, promoting digital adoption, as well as eliminating outdated laws and regulations hindering SME’s competitiveness. Although enhancing SME competitiveness might not be a direct mandate of a central bank, the Bank of Thailand has stepped up our policy focus on SMEs and worked with the banks on a number of initiatives. New digital payment platforms have been developed to lower costs of payment services, enhance payment efficiency, and provide a foundation for information-based lending and supply chain financing. A new database on system-wide SME loans by contract was set up to improve understanding of SME financing behavior and analysis of SME credit risks. We have also expanded the range of foreign exchange hedging products for SMEs and, recently, taken steps to encourage preemptive rescheduling and restructuring of SME loans to help facilitate their transition during this challenging period. 2  Dealing with financial spillovers The second issue for emerging nations in this new global environment is the size and volatility of financial spillovers that result from unconventional monetary policy after the GFC. Capital flows, especially portfolio flows, now account for a much larger portion of crossborder flows than current account flows, and have a much larger effect on the exchange rates for EMs.