samchain/econo-pairs-v1 huggingface dataset:
Before discussing the lessons learned from the financial crisis and the changes that ensued, I think it is important to recount the Fed’s efforts to support the U.S. economy during this recent period of severe economic and financial distress. As you may recall, the Federal  4  Paul Warburg, The Federal Reserve System: Its Origins and Growth, vol. 1, 1930. 5  The Federal Reserve Banks are funded through their respective operations. The Federal Reserve Board – and later, the Board of Governors – is funded through semiannual assessments on the Banks [Section 10(3) of the Federal Reserve Act]. The Board’s financial independence was strengthened in the 1933 Banking Act [Section 6(b)] which stipulated that these semiannual assessments “[…] shall not be construed to be Government funds or appropriated moneys.”  6  For example, see Alesina and Summers, “Central Bank Independence and Macroeconomic Performance.” Journal of Money, Credit and Banking, vol. 25, no. 2 pg. 157–62, 1993. 7  H. Parker Willis described this independence given to the Reserve Banks in the conduct of policy. “There is nothing, either in the Federal Reserve Act or in the regulations of the Federal Reserve Board, to indicate that the reserve banks are to be operated in groups or through communications with one another, resulting in the establishment of a single policy as to detail.” H. Parker Willis, The Federal Reserve, pg. 128, 1915. 8  This assumes no vacancies on the seven-member Board of Governors.

Pharmaceutical companies and merchanting For some time now, the Swiss current account surplus has primarily been driven by two industries: pharmaceuticals and merchanting. 8 It is notable that net exports for these two industries have increased strongly over the last ten years despite the appreciation of the Swiss franc. This stands in contrast to many industries (e.g. machinery and tourism), which are exchange rate-sensitive and have suffered noticeably as a result of the strong franc. The decline in net exports for these industries has been largely offset by the positive developments in pharmaceuticals and merchanting. Chart 7 presents the nominal change in net exports in selected manufacturing and services industries as well as merchanting from 2007 to 2016. The net exports of goods and of services are represented by the red bars at the bottom of the chart. Net exports of goods went up by CHF 23 billion from 2007 to 2016. As already stated, this increase can mainly be attributed to pharmaceuticals and merchanting. Despite the strong appreciation of the Swiss franc, net exports in both of these industries rose sharply during this period. Why is this? In recent years, the pharmaceutical industry has profited from a growing demand for healthcare products from all over the world. The demand for these products is only slightly impacted by the price and/or exchange rate. At the same time, Switzerland has developed into a leading hub in the global commodities trade. Merchanting is also much more dependent on global economic trends than on the exchange rate.
That endeavour – heading-off incipient stress, and keeping the “rules of the game” up to date and fit for purpose – requires high-quality surveillance of the system as a whole, bringing together analysis, experience and intelligence on markets, the macro environment, the infrastructure, firms. We have to identify and address faultlines. The system’s strengths and weak points “morph” over time. One era’s solution may be today’s or tomorrow’s faultline: Fannie Mae is an example of that. And, for when those efforts fail, we need to be clearer about how the authorities will intervene to preserve stability, and whether we can construct a “capital of last resort” policy that does not create perverse incentives during “peacetime”. Surveillance, building system resilience, crisis management. A macroprudential approach to stability has to do rather more than bring together a central bank’s macroeconomists and a micro regulator’s line supervisors. What lies in between matters hugely: markets, payment systems, the plumbing. I should like to think that, amongst others, central banks can bring something to this, drawing on our conjunctural expertise, but also on our operational presence in money and bond markets and at the heart of the payments and settlements system. Certainly the Bank will engage actively with the FSA, HMT, overseas central banks, and the industry in designing new “rules of the game” for the global financial system. 8  BIS Review 39/2009

And I would also like to urge you to take a little time off to visit some places of interest, while you are in this beautiful country, Sri Lanka. Thank you. BIS Review 50/2004  1
Worse, as regularly pointed out by the BIS, staying too low for too long may fuel the next financial crisis as liquidity addiction and excess risk taking eventually lead to bubbles and financial instability while macro-prudential policy may be too slow to help. Even if monetary and macro-prudential policies are two distinct instruments serving two distinct objectives, they impact each other; but it is hard to integrate one when formulating the other: e.g. to integrate a sustainable “output gap à la Borio” (BIS) into a monetary rule, insofar as the business and financial cycles do not often coincide. On the other hand, an ill-timed exit or its premature expectation may also put some financial institutions at risk, depending on their maturity mismatch. But as the major CBs will not all exit simultaneously, the impact should be mitigated. Thus, what is sometimes depicted as the “great divergence” between monetary policies on the contrary reflects, in my view, a “great wisdom”: as domestic cycles differ, exits will be spread over time. This moment of exit is obviously further away for the euro zone. Yet when it does come, we shall all be as innovative, as ready to learn from each other and as decisive when acting to exit as we have been when entering into non-conventional territory. BIS central bankers’ speeches  3  *** For the sake of time, I will not elaborate on whether ultra-low rates alter the monetary transmission channels and their interactions with financial stability.

This less frequent auction schedule will limit the opportunity of banks to “be liquid” based on distributing their treasury bill investment in such a way that liquidity is generated by maturing these government papers. Increasing the investment base of investors. In cooperation with the Ministry of Finance and the Financial Supervisory Authority, it is agreed upon increasing the investors’ base, eligible to directly invest in the auctions of government papers. The new agreement signed between the Bank of Albania and the Ministry of Finance provides the necessary regulative framework for giving an end to the monopoly that the banking system has had in investment in the primary market of government papers, leaving space to natural and legal persons, foreign and domestic individuals. I do not feel well to assert that this step became indispensable, under the conditions of high commissions applied by commercial banks in providing this service, making the clients reluctant to this kind of investment. Earnestly believing in the efficiency and development driven by competition, I am convinced that increasing the number of operators licensed to trade government papers has also become a necessity. Primary rate for favorable clients. Being convinced that the monetary policy efficiency is enhanced through transparency, the Bank of Albania aims at including even this rate to the entirety of orientation rates used by commercial banks. This package is designed to increase incentives for you to find new profit opportunities and secure the necessary liquidity at a fair price in the secondary security markets.
4  BIS Review 39/20086  The sudden discovery by Bear’s derivatives counterparties that important financial positions they had put in place to protect themselves from financial risk were no longer operative would have triggered substantial further dislocation in markets. This would have precipitated a rush by Bear’s counterparties to liquidate the collateral they held against those positions and to attempt to replicate those positions in already very fragile markets. In short, we judged that a sudden, disorderly failure of Bear would have brought with it unpredictable but severe consequences for the functioning of the broader financial system and the broader economy, with lower equity prices, further downward pressure on home values, and less access to credit for companies and households. Following that initial call with the SEC on March 13, my colleagues in New York and in Washington spent the night focusing on the implications of a large-scale default by Bear and how we might contain the consequential damage. Bear renewed conversations that began earlier that day with JPMorgan Chase, which is Bear’s clearing bank for its repo arrangements, to explore a range of possible financing options. The New York Fed dispatched a team of examiners to Bear Stearns to look at its books so that we could get a better handle on what could be done. We gathered the best information we could, evaluated the risks involved, and explored a range of possible actions.

The announcement of the agreement between Bear Stearns and JPMorgan Chase and the announcement of the Primary Dealer Credit Facility were finalized just before Asian markets opened on Sunday night, and the announcement of these actions helped avert the damage that would have accompanied default. On Monday morning, March 17, the $ billion back-to-back non-recourse loan through JPMorgan Chase to Bear was repaid to the Fed, with weekend interest of nearly $ million. The Primary Dealer Credit Facility was made available to the market. And at the request of and with the full cooperation of the SEC, examiners from the New York Fed were sent into the major investment banks to give the Federal Reserve the direct capacity to assess the financial condition of these institutions. Discussions were also continuing regarding the details of the Fed’s financial arrangement with JPMorgan Chase. Our legal teams engaged in the meticulous work of finalizing the legal structure of the lending arrangement that had been agreed to in principle, including defining the precise pool of collateral and related hedges that would secure the $ billion loan. At the same time, several infirmities became evident in the agreement between JPMorgan and Bear during the week of March 17th that needed to be cured. Negotiations between the two sets of counterparties proceeded almost immediately between the New York Fed and JPMorgan Chase on the one hand, and between JPMorgan Chase and Bear Stearns on the other. The New York Fed and JPMorgan discussed the details for the secured financing.
The possibility of taking out a loan expands this limit by adding anticipated future income to the resources available for spending. Why can this be a good idea? The somewhat banal answer is because making certain purchases or investments before having saved up the required amount can have a beneficial effect. Here are a few examples to show that this holds true from the point of view of companies, households and governments. Let’s start with the example of a start-up by a university of Berne graduate. This graduate has come up with a brilliant idea for a new product. To develop and produce it, she needs capital. She herself has no savings and it would take her decades to accumulate the required amount 1 2 3  Cf. Graeber (2011) and Grossman (2010) and the sources they cite. Cf. Grossman (2010) and Ferguson (2009). The focus hereby is on the monitoring of borrowers and on risk management. Page 3/16  on her own. Under these circumstances, she would probably give up on the idea. The possibility of obtaining credit radically changes the situation. A loan enables her to realise her idea within a short time and generate income with the sale of her product. 4 The example shows how loans make it possible even for firms with little capital to make investments that will generate income in future. In the best case scenario, such investments also drive technological progress.

In such cases, borrowers will of course do all they can to avoid a default and first of all try to lower other expenses. This may mean cutting back on non-essential consumer spending or postponing maintenance work or investments. A default, after all, has far-reaching 7 8  In this simplified example, no mention is made of the risk/return considerations that naturally need to be made in such a case. This is also what the empirical literature suggests. An advanced financial system and access to efficient credit provision are closely linked to growth and a high level of prosperity (cf. Beck (2011) and Levine (2005)). It should be kept in mind that a modern financial system comprises further key elements besides the credit mechanism, in particular payment systems, market places for trading shares and bonds, and insurance business. Page 5/16  consequences. In the case of the start-up, it could possibly lead to insolvency. The Miller family for their part might be forced to sell the house in an emergency sale. When borrowers face payment difficulties or default on their loan, this also causes problems for creditors. They will have to write off anticipated interest income and may even lose the money lent if the loan isn’t secured by collateral. And even if the loan is secured – for instance by real estate – getting a good price for the collateral could prove difficult, depending on the circumstances.
But to push this further – and perhaps too far – for the Financial Policy Committee’s role in relation to the financial system we need a rather different metaphor. The FPC is more like the safety authority for a race track. Its job is to see that the safety standards for the track and for the cars are high enough. That there are sufficient buffers on the bends if one of the cars comes off the track. And that, if there is a crash, the wreckage can be got off the road and does not cause a multiple pile up. But the track authority’s job is not just about ensuring the track is safe. If, when the race is running it starts to pour with rain and conditions become riskier, the track authority brings the “safety car” onto the track to slow the other cars down. Sometimes a race has to be interrupted because it has become too risky. The FPC sometimes has to do the same. BIS central bankers’ speeches  3  The safest approach of course might be to shut the track altogether. But the economy needs a healthy, thriving financial sector. It needs credit so that it can grow. Savers need to be able to invest. So the FPC needs to consider the impact of its actions on the economy. Adding more safety features or slowing the speed down can have an impact on the economy that has to be factored in to decisions.

Peter Pang: Hong Kong Mortgage Corporation retail bond issues Opening remarks by Mr Peter Pang, Deputy Chief Executive of the Hong Kong Monetary Authority and Executive Director of the Hong Kong Mortgage Corporation Limited, at the Signing Ceremony for the Retail Bond Issue under the HKMC's Retail Bond Issuance Programme, Hong Kong, 1 September 2006. *  *  *  Good afternoon ladies and gentlemen, On behalf of the Hong Kong Mortgage Corporation, I welcome you all to this signing ceremony for the new retail bond to be offered to the public next Monday. Five years ago, in October 2001, the HKMC introduced a mechanism to offer retail bonds through placing banks. This move received very warm welcome from both the banking sector and retail investors. So far, we have issued eight retail bonds for a total amount of $ billion. Two major factors are behind the success of the HKMC's retail bond issues. First it is our strong credit rating. In fact, our credit rating has recently been upgraded by S&P’s to AA with stable outlook and by Moody's to Aa3 with positive outlook. Secondly, the HKMC meets the needs of retail investors through continual product innovation. On this occasion, we again bring some new features to our retail bond issuance. Apart from issuing two-year notes in Hong Kong Dollar and in US Dollar, we are introducing a new 10-year Hong Kong Dollar Zero Coupon Bond.
As the cut-off date for the projection round was in early March, the forecasts do not incorporate the effects of the recent financial market tensions. Those tensions have added new downside risks and have made the risk assessment blurrier. More generally, many of the assumptions in the projections, such as those on fiscal policies and energy and food prices, are volatile. This implies additional uncertainty around the baseline for both growth and inflation. Some of this uncertainty will recede as the fallout from recent events in financial markets becomes clearer. But faced with overlapping shocks and shifting geopolitics, the level of uncertainty will most likely remain high. To confirm the outlook in our projections over time, we therefore also need to look at additional indicators that can be observed in real time. Underlying inflation To that end, the second input we will be drawing on is the dynamics of underlying inflation. Underlying inflation is not a policy target, but measures of underlying inflation can serve as a complementary cross-check of our forecasting process. Underlying inflation is typically quite inertial and therefore gives us an indication about the persistence of inflation into the medium term. We will be looking to see a sustained downward turn in underlying inflation measures to be confident that the inflation path will converge to our target in the medium term. So far, we do not see clear evidence that underlying inflation is trending downwards. In fact, we see two forces pushing underlying inflation in different directions.

We are also seeing a tightening of money, with annual M1 growth turning negative for the first time since the creation of the euro area − although this is also being driven by the shifting of funds from overnight to better-remunerated time deposits in the context of higher rates. For the second leg of the transmission process – from tighter financing and monetary conditions to demand – there is currently more uncertainty. We know that the full effect of monetary policy on demand will only reveal itself over time. But both the strength and speed of this process could have changed. Since the ECB last conducted a major hiking cycle, in the mid-2000s, the financial structure of the euro area has evolved. The share of variable-rate mortgages has fallen, slowing the transmission of interest rate increases into debt payments. Excess savings and the low pass-through to deposit rates might also weaken incentives for households to save more of their income in response to higher policy rates. These factors could mean a weaker pass-through to consumption. At the same time, we have seen a very sudden shift from low-for-long rates to considerably higher levels – and this is already having an impact on more interest-sensitive demand components like investment. Housing investment has been falling for the past three quarters and business investment also contracted at the end of last year. The greater role today played by sectors that rely on discounted future earnings, such as tech, could also make monetary transmission more powerful.
In addition, our room for manoeuvre puts us in an enviable position. Last, but not least, we have a business sector that has already proved its adaptability, which can now also build on the expertise gained in oil production and services. The Norwegian economy has fared well through the first phase of the structural shift away from an oil-driven economy. The sharpest downswing in oil activities may be behind us. The overall downward potential is smaller than a few years ago, and the business sector is less dependent on oil. But structural changes take time. Companies have to seek out new markets, new businesses need to be established and workers have to move into new jobs. As long as the transition to a less oil-dependent economy is gradual, the business sector will have the chance to adapt. The challenges will be much greater if there are abrupt changes in operating conditions or policies. Brofoss was mistaken about one point. The final phase would come many decades later than he anticipated, but is now drawing near. Central bank governors tend to get it right, sooner or later. Come what may! 19

There have also been difficult periods in the United States, for example, at the end of the 1980s when Europe was more upbeat and had greater faith in the future, in building something together. These are cyclical phenomena and we at the ECB, together with Lorenzo Bini Smaghi, and the Governor of the Banca d’Italia, Mario Draghi, and the entire Governing Council, try our best to ensure that Europe regains confidence in itself. Credibility is a key word for the ECB. BIS Review 87/2006  3
The normally more persistent services inflation will also fall, although considering the basis of comparison effect, the impact of lower inflation on indexed prices and its own inertia. All this in a context where, despite some widening, the output gaps are still bounded and the expected external impulse facing the Chilean economy over the next two years shows no big change from September. Still, beyond these changed projections, what merits the most attention is that the range of risks has increased. In this context, in our latest monetary policy meetings we have held the monetary policy interest rate (MPR) unchanged at 3.5%. At the same time, while acknowledging the effects that the changes in the macroeconomic scenario are having on the medium-term inflation outlook, in our last meeting we noted that, for us to meet our objective of placing inflation at 3% in two years, a higher monetary impulse might be necessary. Let me now present to you the details of our vision of the macroeconomic scenario and the projections contained in our Monetary Policy Report. The Monetary Policy Report As I said, in November the CPI posted an annual variation of 2.9%, almost half of a percentage point less than we had estimated in September. This sharper decline in inflation is mainly related to those goods most closely related with the exchange rate and some foodstuffs.

Still, we must be aware that accumulated trust does not suffice; in our present world such trust must be renewed every day, on the basis of the ability to respond to new demands and challenges. I will comment on some of these challenges towards the end of my presentation. On the recent evolution of the economy, the most noticeable event has been the drop in inflation. After several quarters in which the annual CPI variation was above 4%, in recent months it fell sharply to 3%, placing y-o-y CPI inflation at 2.9% in November. We had foreseen inflation declining at a slower pace. In the Monetary Policy Report we presented to the Senate last September, we projected that annual headline inflation would close this year at 3.5%. Today, private expectations—as well as our own—put it a little under 3%. In addition, in the baseline scenario I will be describing in a moment, we assume that this decline will continue, such that during most of 2017 annual CPI inflation will stand in the lower part of the tolerance range, to start converging back to the target by year’s end. Domestic activity has also shown some surprises. It grew in line with forecasts in the third quarter and even somewhat better in sectors not related with natural resources—what we call Other GDP. However, it began the fourth quarter quite poorly. The decline in mining activity weighed significantly, as has been the trend throughout the year, and so did some specific industry lines.