samchain/econo-pairs-v1 huggingface dataset:
i) Long-term sovereign bond yields have fallen sharply for several countries – in Spain for example, the 10-year yield has shed around 200 basis points since July – and have remained at very low levels for the “core” countries (slightly above 2% for France for instance);  •  ii) We are seeing US money market funds coming back to invest in the euro area; iii) We are seeing more unsecured issues and issues of corporate bonds. These are all positive signs – among others – that point to a gradual return of confidence in the euro area. I think I can say that the fundamental causes of the euro area crisis have now been fully taken on board by all of the players, so that everyone has a clear and fair view of their own responsibilities. Three causes for the crisis can be identified: •  A lack of fiscal discipline;  •  A loss of competitiveness;  •  Incomplete European integration. I would like to show you that the euro area is now moving decisively in the right direction to address each of these causes. Governments are consolidating their public finances and competitiveness and European integration is moving forward. First, the efforts already made on the fiscal front by euro area countries are already bearing fruit: the primary position of the euro area should be close to balance by the end of 2012, which is a remarkable achievement compared to the other major economic areas.

A reminder of the policies implemented by the ECB and their underpinning. You will remember that the first response to the financial turmoil in the summer of 2007 came from the Eurosystem, which injected liquidity of over EUR 90 billion into the European interbank system which was on the verge of seizing up completely. Since then, the Eurosystem has provided concrete and often crucial responses to the different manifestations of the euro area crisis. To do so, it has redesigned its policy measures both from a qualitative point of view – by creating new instruments – and a quantitative point of view (the size of its balance sheet has trebled since the start of the crisis). As regards instruments, we have used both: •  The “standard” instrument par excellence: interest rates. The ECB’s monetary policy has been very accommodative for several years, with key interest rates currently at historically low levels and negative real interest rates in large parts of the euro area. •  A broad range of “non-standard” instruments that can be grouped into two categories: i) liquidity-providing instruments (with the fixed rate full allotment policy, the expansion of eligible collateral, and the extension of maturities up to three years with the VLTROs) and ii) instruments making it possible to intervene directly on the most dysfunctional market segments (the CBPP and SMP). This diversification and broadening of the Eurosystem’s interventions has naturally raised questions about the ultimate goals pursued, the methods used and the possible risks incurred.
It would allow us to acknowledge that market failures may drive a wedge between market prices on the one hand and efficient asset values that internalise externalities on the other. Nevertheless, in line with the provisions of the Treaties, considering climate externalities under the market efficiency principle would need to be consistent with maintaining a functioning price discovery mechanism. Furthermore, monetary policy implementation in line with the market efficiency principle would need to remain without prejudice to our primary mandate of safeguarding price stability. One possible objection to the market efficiency principle is that efforts to mitigate environmental externalities could be counterproductive, as they might simply amplify other types of market failures. However, this objection cannot provide a justification for refraining from action altogether. A classic finding in the economic literature – the theory of second best – illustrates that, in the presence of many market failures, leaving one failure unaddressed is suboptimal. Conversely, addressing a particular market failure has the potential to improve the overall allocation of resources, even if it worsens some other market failure. [35] Nevertheless, transitioning from the market neutrality principle to the market efficiency principle would entail implementation challenges. Implementation considerations The application of the market neutrality principle implies that our corporate sector purchase programme (CSPP) currently exhibits an inherent bias towards large firms in carbon-intensive industries.

See de Guindos, L. (2021), “Shining a light on climate risks: the ECB’s economy-wide climate stress test”, The ECB Blog, 18 March. 11. See Allen, T., et al. (2020), “Climate-related scenarios for financial stability assessment: an application to France”, Working Paper Series, No 774, Banque de France. 12. See Lagarde, C. (2020), “Climate change and the financial sector”, 27 February. 13. While there is widespread consensus about central banks’ potential role in mitigating the consequences of climate risks, a number of concerns have also been raised. Some refer to the possible interference with the primary mandate, others to the politicisation of monetary policy and the danger of mission creep, with potential negative ramifications for central bank independence and monetary policy effectiveness. See, for example, Cochrane, J. (2020), “Challenges for central banks”, October. 14. This includes various members of the ECB’s Governing Council. See, for example, Knot, K. (2021), “Getting the Green Deal done: how to mobilize sustainable finance”, 11 February; Villeroy de Galhau, F. (2021), “The role of central banks in greening the economy”, 11 February; de Cos, P.H. (2021), “Economic and financial policy geared to climate goals”, 25 February; Weidmann, J. (2021), “Climate risks, financial markets and central banks’ risk management”, 2 June. 15. See NGFS (2021), “Adapting central bank operations to a hotter world: Reviewing some options”, March; Villeroy de Galhau, F. (2021), ibid. 16. See Hauser, A.
We have been intervening since the beginning of 1990 to develop the Hong Kong dollar debt market, again because the market was considered essential for effective financial intermediation, and, regrettably, the private sector was not able to develop one that is properly structured. The linked exchange rate system is also a product of the policy of positive non-interventionism. The Government intervened to fix the exchange rate because we found out in 1983, and since, that there is a need for a monetary anchor. In the absence of such an anchor, the value of our currency will be, in mathematical terms, an indeterminate. In other words, it is not something that the free market can determine in the best interest of the community without intervention. We have had four speculative attacks on our currency since the outbreak of financial turmoil in the region in the middle of last year. BIS Review 67/1998  -3It is very well known to almost everyone in the market that a handful of hedge funds have on each occasion conducted a double play in the stock futures market and the currency market. We have come to realise how this double play works, although it has only become apparent, at least to us, in the third and fourth attacks in June and August this year respectively. On each occasion, interbank interest rates were pushed higher, to varying degrees, with a view to engineering a sharp fall in the stock index futures.

While we are developing it on centralised infrastructure, it will be able to interface with innovative payment systems and providers, including those based on Distributed Ledger Technology.6  2/6  BIS central bankers' speeches  How central banks can influence the outcomes of innovation The role of central banks in providing core payments infrastructure is crucial. Central bank money is a public utility that underpins our financial system and supports the key mission of central banking: monetary and financial stability. Economic history demonstrates that across many sectors reliable, modern and harmonised public infrastructure is essential for private innovation to thrive. Payment systems have often been described as the “plumbing” of the financial system: both a reflection of how essential they are and perhaps of how little most people think about them. Another comparator could be the road network. Efficient road networks underpin supply chains and move goods and services across borders. Governments develop the road network to fit the needs of businesses and consumers that use the roads. But they have a bigger social purpose too: they allow children to get to school, ambulances to pick up patients and friends and family to meet. At the same time, the design of the road network also affects the behaviour of users and businesses – the quality and directness of particular roads will impact on the routes chosen. And governments set the traffic laws and regulations to ensure everyone can travel efficiently, but safely, and use technology such as speed cameras to check compliance.
However, as Beck and Gros stressed in an article from 2012, with the rise of macro-prudential regulation as an additional tool, it is not clear whether price and financial stability still conflict with each other. 4  BIS central bankers’ speeches  Another disadvantage is that the reputation and/or the independence of the central bank might be undermined: if its decisions and actions in the area of supervision and resolution are perceived as wrong or suboptimal, this may negatively affect the credibility of the monetary policy, as it is conducted by the same institution. Moreover, the temptation of politicians to capture the central bank may rise, as it has much more power than in the case when its only mission is to deliver price stability. The various arrangements on assigning banking supervision also have a bearing on the design of the national macroprudential authority. Depending mainly on who conducts the supervision of banks, different institutional solutions are adequate for this authority: it may be represented by a committee or board comprising representatives of the relevant institutions, by the central bank or by another authority tasked with financial market supervision. Boards are in place or envisaged in 13 EU countries, the central bank is – or is projected to be – the national macroprudential authority in 13 other EU countries, whereas two opted for – or are considering – entrusting this role to the national supervisory authority.

We have configured the activities and reporting lines in order to ensure full operational independence and to avoid conflicts of interest between the supervision and resolution functions. Of course, this takes place without prejudice to the exchange of information and cooperation obligations. To be more specific, supervisory decisions do not pose constrains to resolution-related ones. Moreover, the staff involved in performing the resolution function is structurally separated from the other NBR functions. 3. Romania: a short history of institutional changes for ensuring financial stability The global crisis has made obvious for all of us that price stability and financial stability are much more intertwined than we used to think. I believe this development has farther-reaching consequences when it comes to the future of central banking. As I pointed out in November last year at the World Policy Conference organised in Montreux, I cannot imagine a future where the explicit concern for financial stability and the macroprudential policy are not central banking fixtures. In Romania, the concern for ensuring and strengthening financial stability was visible in several significant changes of the institutional framework, operated already before the outbreak of the global economic and financial crisis. Specifically, the NBR’s Financial Stability Department was created as early as 2004, with the first edition of the annual Financial Stability Report – a report that will be published on a half-yearly basis starting this year – being released in 2006.
Surprisingly, in the light of the fall in G7 saving, UK long-term real interest rates as measured by the forward rates implied by the yields on index-linked gilts - are near their lowest levels for twenty years. US and euro-denominated rates are also low relative to past experience. There may be other factors that have offset the effect of fiscal policy on real interest rates, such as demographic developments and higher saving and more open capital markets outside the G7. But there remains a risk, as discussed in the Bank’s recent Financial Stability Review, of an unwinding of low long-term real interest rates as the stimulus from highly accommodative monetary policies across the G7 economies is gradually withdrawn. What do these arguments mean for monetary policy today? They imply, I believe, three main challenges for central banks. First, the factors that affect the level of real interest rates in capital markets around the world also determine whether a given official interest rate is an expansionary or restraining influence on demand. When driving a car we normally know whether our foot is on the accelerator or the brake. That is less obvious in the case of monetary policy - hence the debate among economists about the level of the so-called neutral interest rate. Uncertainty about the extent to which monetary policy is applying the accelerator or the brake justifies central bankers’ continued interest in the monetary and credit aggregates which contain information about the pace of nominal activity and hence future inflation.

Such concerns about the short run are indeed analysed carefully each month by the Monetary Policy Committee, and the results of that analysis feed into our monthly interest rate decisions. Visits like this give me the chance to listen to you and learn from you and other businesses about what is happening on the ground - not just in the retail sector but in manufacturing and services more broadly. And my visit is the tip of an iceberg because we have a permanent Agency in the North West - staffed by members of the Bank who live and work here. BIS Review 4/2005  1  But I want to step back from the immediate conjuncture and look further ahead. More relevant for our future prosperity is the question not of whether we might save too much but whether we are saving too little. The level of income that will sustain us in the future depends critically upon how much as a nation we set aside today. In other words, what is happening to the national saving rate - the proportion of the net national product that is not consumed by either the private or public sector? Since the late 1960s the national saving rate has been declining fairly steadily, from over 10% to around 5%. Although saving rates elsewhere in the G7 have also fallen, they were higher than in the UK for most of the post-war period.
Consequently, part of the debate about direct European recapitalisation and about the role of the SRM in delinking banks and sovereigns, was post-factum somewhat misplaced. The implications of this Directive are therefore far-reaching. Participant countries in the Banking Union are shedding considerable sovereign power. In fact, large countries with strong public finances are effectively renouncing their ability to provide domestic banks with the implicit subsidy of public support that would reinforce their advantages in increasing their market share. The strength of these banks when competing in the European market will be reduced as the new situation will be progressively reflected in their ratings and funding costs. Similarly, countries with vulnerable public finances and smaller banks will no longer be able to support and possibly not be able to keep their national champions. In accepting the transfer of supervision and resolution of banks to the European level, euro area countries are committing to a remarkable sharing of sovereignty which could be a positive sign of their willingness to deepen European integration in general. It is worth mentioning that the BRRD rules about bail-in enter into force only in January 2016. They will therefore not apply to the recapitalisations in the context of the Comprehensive Assessment that the ECB is conducting and to be implemented this year and the next.

But this disentangling is done, or is at least attempted in this paper, and the pieces of evidence that are provided in it point precisely to the importance of the financial reform. Let me give you some results that in my opinion are relevant: i) we find that banks with higher capital ratios suffered less in terms of, for example, increases in CDS spreads; ii) we also find that strongly capitalised banks showed greater increases in lending than other banks, and, iii) a third result is that the uptake of the public support measures was higher precisely in those banks that had higher capital ratios. The interesting thing about this evaluation is that at the same time there might be some lessons to learn. We are already highlighting some pieces of the regulatory reform that might not be working as intended and let me focus on one issue on which Claudio has also worked in depth in recent years, which is to understand whether capital and liquidity buffers are  2  usable as envisaged. We wanted banks to have higher levels of capital precisely to be used in a situation of crisis. So, if in the end we observe that this capital is not being used, there is a problem, and we might need to modify some parts of the legislation. The evidence is that banks might have been hesitant to use the regulatory capital buffers had it been deemed necessary in practice.
For one thing it reduces our significance for the payment system when cash is used less often, and for another thing it reduces our income from issuing cash. However, let me say that cash lacks importance with regard to the Riksbank's possibility to conduct monetary policy; the short-term rate is set through the conditions for the banks’ deposits with the Riksbank and we affect the longer interest rates through our market operations. Cash is thus not a monetary policy tool. So although the direct impact on the Riksbank raises a number of important questions, I consider it more important to survey what the significance is for society as a whole if cash disappears. The central question is thus whether the Swedish payment system will continue to be safe and efficient even without cash. Will all those who wish to make payments be able to do so smoothly and safely and at a reasonable cost? Even those who do not want to, may not or cannot have access to the banks’ services should be able to manage their payments. One cannot get away from the fact that cash has properties that electronic payment services lack. Will this mean that we lose a means of payment that cannot be directly replaced with something else? Cash can be handed over regardless of access to electricity or the internet. Cash payments are anonymous. A payment can be made in cash without involving the banks.

Ida Wolden Bache: Higher policy rate to bring inflation down to target Introductory statement by Ms Ida Wolden Bache, Governor of Norges Bank (Central Bank of Norway), at the press conference following Norway's announcement of the policy rate, Oslo, 23 March 2023. ***  Accompanying charts to the speech Chart 1: Policy rate raised from 2.75 to 3 percent Norges Bank's Monetary Policy and Financial Stability Committee has decided to raise the policy rate by 0.25 percentage point to 3 percent. Norges Bank's task is to keep inflation low and stable. The operational target is inflation of close to 2 percent over time. We are also mandated to keep employment as high as possible and to promote economic stability. Chart 2: Inflation markedly above target Inflation has moderated a little recently but is still too high. In February this year, consumer prices were 6.3 percent higher than one year earlier, which is markedly higher than the inflation target. Prices for many goods and services have risen more than normal. In recent months, energy prices have shown a pronounced fall. As a result, inflation has been slightly lower than expected. We have raised the policy rate substantially over the past year, and the effects of the past rate hikes are not yet fully evident. Growth in the Norwegian economy is slowing, but activity is still high and the labour market is tight. At the same time, wage growth is on the rise, and the krone exchange rate has depreciated considerably.
Indeed, at last year’s presentation of the Annual Report to the Council, I referred to budgetary policy as one of the main underpinnings of the Spanish economy in this phase of the cycle and I pointed out that the favourable fiscal position would allow the automatic stabilisers to operate to their full extent without jeopardising budgetary stability. One year on, the fiscal results for 2008 and the projections available – which point to a budget deficit approaching 10% of GDP in 2010 and to a public debt ratio that might exceed the threshold of 60% of GDP – augur a drastic change in outlook, with the possibilities of fiscal policy boosting spending having been exhausted. Fiscal measures that call into question the commitment to budgetary stability in the medium term should be categorically avoided, since that would adversely affect the cost of raising funds and confidence in the Spanish economy, and it could also generate expectations of future tax rises that might ultimately sterilise the expansionary effects of the measures adopted. Public-sector debt must be prevented from becoming an obstacle once the Spanish economy is better placed to grow. Accordingly, priority must be given to promptly defining a credible strategy to reduce the deficit to levels compatible with budgetary stability, once the exceptional circumstances that led to the rise in the deficit have disappeared. The demand-side expansionary fiscal and monetary impulses are proving very powerful and are contributing to the alleviation of the contractionary forces at play.

The outlook for the Spanish economy points to declines in GDP over the rest of the year that should lead to a significant fall in 2009, albeit slightly lower than is forecast for other European countries. It is highly likely that the worst of the contraction has already passed, and that the intensity of the restrictive impulses will begin to diminish in the second half of the year as the broad range of measures implemented progressively deploy their effects. As a result, the fall in activity in 2010 is expected to be less pronounced. The course of employment in this scenario, in any event, is a cause for concern; despite the somewhat more positive signals given by some recent indicators, linked in part to seasonal factors, job destruction may run for some time and the unemployment rate may continue further on its rising trend. The imbalances built up during the long expansionary phase, in the form of the inflation differential and the resort to external financing, are being swiftly reabsorbed, providing an unquestionable source of relief in the global outlook described. Yet this rapid correction is occurring on the back of an excessive brake on activity, entailing major costs in terms of job destruction, higher unemployment and the deterioration of the productive fabric.