samchain/econo-pairs-v1 huggingface dataset:
“An Historical Analysis of Monetary Policy Rules,” in John B. Taylor (ed.) Monetary Policy Rules, University of Chicago Press. BIS central bankers’ speeches  3  modern treatments is due to John Taylor in an article published in Econometrica in 1979.3 This framework continues to be a mainstay of optimal policy analysis, as evidenced by a large literature that includes work by Michael Woodford in recent years.4 Taylor expresses the central bank’s dual-mandate objective as monetary policymakers attempting to minimize the weighted sum of squared deviations of inflation and the level of output from their goal values. That is, a central bank attempts to minimize a simple quadratic loss function like the following: L = (π – π*)2 + λ * (y – y*)2 Here π and y are inflation and the (natural) logarithm of output, and π* and y* are the policy goals for these variables. In most formulations, y* is the log of the level of potential output – the level of output at which resource slack has a neutral influence on the level of inflation. Thus, (given the properties of logarithms) y – y* is the usual output gap, the percentage difference between actual and potential output. And π – π* is the gap between the actual and desired rates of inflation. Ideally, we’d like both of these gaps to be zero, but this usually won’t be the case.

If we do so, perhaps others too, could replicate some of those efforts which  BIS Review 133/2008  1  have been proved to be successful. Hence, there is an urgent need for us to create the awareness. We also have to enact the necessary laws. Sri Lanka has already passed the necessary laws for this purpose: so have many other countries. That is very important. Because, without the legal framework and the legal backing, our efforts will not succeed. Then, we have to build our own capacities. We have to have people who are trained and competent to deal with these challenges. Because, unless you have the competence, and the ability to recognize certain disguised transactions, the ability to see through the clever facades, and the ability to anticipate the next move of the terror financiers or money launderers, we would not be able to progress. Therefore, we have to diligently follow rules and detection principles. That is why this kind of conference is very important. My dear friends, we have to realize that money launderers and terrorist financiers are also smart. Your Lordship, they may also be having conferences of this nature, in their own way, to see how best they can be a step ahead of all of us, to ensure that they will be able to perform their own dastardly deeds more successfully. They will take advantage of calamities. On many occasions we have seen how that has worked. Earthquakes, droughts, civil strife, tsunamis, etc.
As national supervisors will support us in our forward-looking critical assessment, we take the best of both worlds: the additional expertise of national authorities combined with an independent, strong horizontal view when it comes to the centralised decision-making of the Single Supervisory Mechanism at the European level. BIS central bankers’ speeches  1  How will you work with the ACPR? Like the other national supervisors, the ACPR will be actively involved, together with their counterparts at the ECB, in the supervision of the significant French banks. Our French colleagues will familiarise us with the characteristics specific to the French market and legal system. They will inform us of national developments that might influence banks’ activities, such as tax laws or laws on loans to enterprises. This expertise, combined with that of the ECB, will put us in the best position to assess banks’ risk profile and to judge whether the differences in banking practices between countries are justified or not. The SSM will supervise the 120 largest European banks, but the other 4,000 will remain under national supervision. Is this not a flaw in the system? The ECB will supervise the European banking system as a whole, the significant banks with a market share of 82% of total banking assets directly and the less significant ones indirectly. We will set the key principles according to which all of the European banks should be supervised, also at the national level. And we will check that these principles are being followed.

These rules establish that it will be the shareholders and investors who will bear, in the first instance, the losses of a bank. In 2016 additional rules will come into force, protecting member states and taxpayers from having to pay for systemically relevant banks by establishing a resolution fund paid for by banks. It will take eight years for the fund to reach its target level of 55 billion euro. Is this not too little, too late? It will be a quite significant amount, taking into account several other safety buffers. First, banks have considerably increased their own funds in recent years. Second, the resolution fund will only be used after contributions have been made from shareholders and creditors. These could reach up to 8% of liabilities, which is already a significant amount. Thus the overall loss-absorbing capacity of banks has increased considerably. The resolution fund comes on top of this. The third pillar of banking union, the creation of a European fund to guarantee savings deposits, has come to a standstill. Should we be worried? Not unduly, because deposits are already guaranteed up to 100,000 euro at the national level. But more importantly: if the first two pillars of the banking union work properly and secure the stability of individual banks and the banking system, the need for a joint fund significantly diminishes. The stress tests revealed worrying weaknesses in Italian banks. Is Italy the weak link in the euro area?
With respect to domestic demand, the persistently low confidence indicators and the downsized public investment plans for 2016 means lowering the growth forecast for gross fixed capital formation. Private consumption is also revised downward, in line with low household expectations and slower than expected non-durable consumption. The labor market has proved resilient, but we expect it to show some deterioration during 2016. All considered, consumption should grow in 2016 more than it did this year. The drop in the copper price and the worsened financing conditions would also discourage investment. About its construction component, the momentum coming from the upcoming entry into force of the VAT will fade gradually. Measured as a percentage of GDP, in both nominal and real terms, gross fixed capital formation will change little from 2015, at 21.9 and 23.5 percent, respectively. The worsening of the external scenario, as I will detail later, has a significant effect on the larger current account deficit of 2015 and 2016: 1.7 and 2.6 percent of GDP, respectively (0.7 2  BIS central bankers’ speeches  and 1.5 percent in September). This owes mainly to the decline in the terms of trade. Add a larger than expected increase in capital goods imports this year, particularly of transport equipment (table 1). This projection assumes that fiscal policy will continue to contribute to expenditure growth, although not so intensely as in 2015.

Although a large part of this increase results from the valuation effect deriving from the peso depreciation, its level is high from a historical perspective. Moreover, the increase accumulated in the past seven years is high by emerging economies’ standards (figure 9). On the other hand, although the financial indicators of SVS-listed firms have not changed much since our last Report, debt is high and profitability is low, historically (figure 10). Anyway, various indicators show that the balance sheet exposure of these firms to exchange rate risks has remained low. Turning to the real-estate sector, housing sales remain dynamic and prices are on an upward trend, albeit with some moderation lately (figure 11). Advance purchases associated with the upcoming tax reform explain the strength of the sector to an important extent. Actually, most of the properties sold are either off-plan or in construction phase. The low interest rates on mortgage loans also explain part of this dynamism. The growth in housing prices has been reflected in the dynamics of mortgage loans, which are rising nearly 10 percent annually in real terms, due mainly to an increase in the average debt and, to a lesser extent, to an increase in the number of debtors. Notably, although many lending indicators remain stable, such as the loan to value ratio and the debt to income ratio, the share of households with more than one mortgage has increased: from 20 to 25 percent in the last five years. As for office space, the vacancy rate continues to grow.
Although in many respects the crisis that unfolded in 2007 and 2008 can be seen as the direct result of vulnerabilities and imbalances which had been growing steadily and which had been identified fairly early-on, they combined in such ways that few would have anticipated their potential severity for the functioning of the financial system. This notwithstanding, we and other major central banks reacted swiftly to mitigate the stresses in the functioning of money and other affected markets. Against this background, to build a safer financial system it is of paramount importance that the responsible authorities enhance their financial sector surveillance while at the same time financial institutions play a decisive role by enhancing their risk management practices. A key challenge for policy-makers will be to design appropriate responses to enhance the stability of the financial system – including improving the detection and understanding of risks and vulnerabilities and translating these into concrete risk warnings and policy recommendations – without imposing restrictions that would unnecessarily hamper financial innovation and reduce the efficiency of the system. Many improvements, including the new Basel II Capital Accord, were already under way when the crisis erupted, and they address several of the weaknesses that have been identified. However, the ferocity of the financial turmoil and its fall-out which spread well beyond the financial sector call for more far-reaching reforms in the area of macro-prudential supervision.

Across various sectors, disruptive technologies are rapidly expanding the horizon of economic opportunities while challenging existing business models. In the case of banking for instance, we have already seen greater competition from new entrants amid the emergence of fintech. Rapid urbanisation, which is more pronounced in emerging markets, and demographic changes such as an ageing population are other key trends which have major implications on economic and socio-political conditions. At the same time, there is a growing appreciation for the far-reaching impact of climate change, giving rise to calls for more sustainable growth models and innovation. All these developments that are taking place in the banking industry today have created an environment much different from the one prior to the crisis. And together with the implementation of the post-crisis global regulatory reforms, which remains a key priority, their implications require careful and deep thinking as banks plan for the future. Domestic policy continuity and priorities Our banking industry is facing the current rapidly changing and challenging economic environment from a position of strength, following the successful reform measures that were implemented. Given the high degree of openness of the Malaysian economy and the increased integration with the international financial system, external developments have continuously affected our domestic economy. But the economy has been able to weather these challenges and have remained on a steady growth path of 4 to 6% over the past five years. In recent quarters, economic growth, however, has moderated.
I think part of the story was China, but I think part of the story was also worries about the slowdown in China leading to a big commodity bust, and that commodity bust then putting a lot of pressure on especially emerging market economies that were actually selling a lot of the products to China. China’s been on a much more sort of stable growth path this year. They’ve also clarified what their foreign exchange rate regime is. So I think people are a lot more comfortable in terms of how they’re managing the renminbi. I think there are still challenges in China and they’re still trying to reorient their economy from investment-led growth to consumption-led growth. They’re still an economy that I think that credit is growing quite rapidly and so you sort of worry about how sustainable that is over the long-run. 9 / 13  BIS central bankers' speeches  But I think it’s much less of a focus of the markets today than it was a year ago, and I think the anxiety about the emerging market economies is much more focused on individual countries rather than sort of broad like it was a year ago. I mean financial conditions really, if you look at the financial markets post-election, we’ve seen stocks up, we’ve seen the dollar a little bit firmer. We’ve seen credit spreads narrow quite a bit, and we’ve seen bond yields up a little bit. But net-net, financial conditions haven’t actually changed very much post-election.

I think it’ll be awhile before it gets to Fed presidents. But I know… President Dudley: Well, there are some people in Washington that would like to make us conduct monetary policy by a rule. Maureen O’Hara: And there you go, a robot can do it. President Dudley: We don’t think that’s such a good idea, by the way. Maureen O’Hara It’s an interesting challenging, and particularly here I saw some numbers the other day that the high school graduation rate in New York state is somewhere in the 70 percentage points. And again, as you think about the technology creating winners and losers, you know, obviously we’re in education, all of us are committed to education, you know. Is that kind of crucial to the technology solution? What do we do with the people who don’t? President Dudley: Well, I think – I mean look, I think education is absolutely essential. Giving people the skills they need to sort of navigate in the 21st century economy. And the second thing we need to do a better job is actually retraining people so that the only education you get shouldn’t just be when you’re 18 to 22 years old or 25 years old. We need to have a better system where people can sort of retool themselves. I think a third thing we can do is a better job of matching the skills that people get in universities to the business needs.
Mark Carney: Closing remarks to the Open Forum Closing remarks by Mr Mark Carney, Governor of the Bank of England and Chairman of the Financial Stability Board, to the Bank of England Open Forum, London, 11 November 2015. *  *  *  Let me begin by thanking the Lord Mayor and his team for their gracious hospitality once again. The Guildhall really is a fantastic venue, and I want to take this opportunity, as we approach the end of your term as Lord Mayor, to salute you for the emphasis that you have put on the broader role of finance in society, the broader role of the City of London in the UK economy and in the global economy, and your broader contributions to society. City Giving Day is but one example of that, and we are all very much in your debt for your enormous contribution. On behalf of my colleagues, I want to thank the Chancellor of the Exchequer and the President of the European Central Bank for their insightful comments. Let me also thank all of the panellists for their well-chosen, provocative, and effective contributions. I am also grateful to the moderators here today, in person or online from across the country, for helping drive our Open Forum. Most of all, let me thank our steering committee, those 20 people from all walks of life, who put a tremendous amount of time and thought into the sessions.

In the near future, Turkey will unquestionably attain an economic and social level it deserves by reaching a social consensus and by taking appropriate policy actions today. Thank you all for listening to me. 4  BIS Review 35/2001
This could be done by establishing an effective framework for macroprudential policy that is a policy that aims to counteract risks in the financial system as a whole. 17  See for example Kuttner, Kenneth (2012), “Low Interest Rates and Housing Bubbles: Still No Smoking Gun”, under publication in The Role of Central Banks in Financial Stability: How Has it Changed?, and Claussen, Carl Andreas, Magnus Jonsson and Björn Lagerwall (2011), “A macroeconomic analysis of housing prices in Sweden”, Chapter II.1 in The Riksbank’s inquiry into risks in the Swedish housing market. BIS central bankers’ speeches  13  A separate macroprudential policy In January 2013, the Financial Crisis Commission presented an interim report that discusses, among other things, how financial crises can be prevented in Sweden. The Commission proposes the setting up of a council for macroprudential policy. This would entail the existing council for cooperation on macroprudential policy between the Riksbank and Finansinspektionen being established by law and complemented by independent experts and an observer from the Ministry of Finance. The council should also work to develop macroprudential policy instruments, analyse risks and discuss appropriate measures. The intention is that responsibility for deciding whether or not to apply a macroprudential policy instrument would lie with either Finansinspektionen or the Riksbank. The Commission’s proposal is well-reasoned and wise, but, as I see it, has one flaw: it is unclear who is ultimately responsible for conducting macroprudential policy.

As a further precaution, reflecting the possibility that heightened uncertainty may last a while longer, today the Bank of England is announcing that it will continue to offer Indexed LongTerm Repo operations on a weekly basis until end-September 2016. This will provide additional flexibility in the Bank’s provision of liquidity insurance over the coming months. These facilities provide an effective way for banks to manage their liquidity, with a competitive auction process, designed to encourage usage, but where at times some bids will go unfilled. We expect institutions to draw on this funding if and when appropriate, just as we expect them to draw on their own resources as needed in order to provide credit, support markets, and generally supply financial services to the real economy. In order to have confidence and plan for the future, financial institutions, like the rest of us, desire certainty. That is why the Bank will continue to be very clear about their regulatory framework. Our liquidity framework is now established and effective. Over the past year, the FPC has finalised the overall capital framework. We are steadily implementing measures to develop ring-fenced banks and to end the scourge of too-big-to-fail. Nothing in financial regulation has changed as a result of last week’s referendum. It will not change until the process of the UK’s withdrawal from the European Union is complete, until the UK is no longer a member of the EU and until EU law ceases to have effect in the UK. The law is the law. Rules are rules.
Between 1989 and 2004 the turnover in the global spot FX market increased by nearly 100% (Chart 3). Chart 3: Average daily net turnover in the global spot FX market USD billion 700  621 568  600 494  500 394  400  387  317 300 200 100 0 1989  1992  1995  1998  2001  2004  Source: BIS  An increase in international capital flows and the development of information and communication technologies have triggered portfolio investments on international markets. On the other hand, enterprises and banks have increasingly frequently raised capital abroad. For instance, between 1989 and 2000, the value of cross-border investments in shares increased over twelve-fold, whereas between 1994 and 2005, the value of debt securities issued on foreign markets increased six-fold (Chart 4 and Chart 5). Non-bank financing of enterprises has also gained in significance. In 1980, enterprises raised USD 4.5 trillion on the capital market, whereas in 2004, the figure stood at over USD 60 trillion (Chart 6).

47  In Poland there has been no need so far to appoint a leading supervisor, as the links among financial entities do not indicate the existence of financial conglomerates under the said Act. 48  Simson B.A. “The future of central bank cooperation”, BIS Working Papers No 200, February 2006. 49  “Managing Payment Liquidity in Global Markets: Risk Issues and Solutions”, a report prepared by Cross-border Collateral Pool Task Force, New York, March 2003. BIS Review 60/2006  17  conducted in a manner that would enable to avoid the scenario of protectionism growth. After all, one of the greater threats which are difficult to evaluate is the risk of adjustment of global imbalances, especially where it results from market forces without support from adequate reforms. So far, globalization has served humanity well. I truly hope that the ever-greater knowledge of risk types related to globalization will make it possible for us to conduct economic policy that will facilitate benefiting from globalization to the future generations the homo sapiens globalus. Thank you very much for your attention. 18  BIS Review 60/2006
Christian Noyer: Central bankers’ dilemmas under uncertainty Speech by Mr Christian Noyer, Governor of the Bank of France, at a seminar in Buenos Aires, 5 June 2006. *  *  *  Ladies and gentlemen, •  Thank you for inviting me to this seminar. It is a great pleasure to address such a challenging theme, namely “Central Bankers’ dilemmas under uncertainty”. •  In the first part of my address, I will recall the nature of uncertainty and its importance for the central banker; in the second part, I will sum up proposals for addressing uncertainty. I  The nature of uncertainty  Uncertainty arises in many forms. It is crucial to central bankers in general (I/1) and maybe even more to the Eurosystem (I/2). 1)  The importance of uncertainty for the central banker  The relevance of risks and uncertainty for economic analysis was suggested in 1921, by Frank Knight (Risk, Uncertainty and Profit). “Risk” refers to situations where the decision-maker can assign probabilities to the randomness that he is faced with; “uncertainty” to situations where this randomness cannot be expressed in terms of probabilities. Uncertainty is crucial to central bankers: according to Alan Greenspan, “Uncertainty is not just an important feature of monetary policy; it is the defining characteristic of that landscape”. Thus, I will focus on monetary policy, although the topic is also relevant for financial stability, which is another important issue for central banks.

Debate on the difference of behavior between the Eurosystem and the Fed. •  Less aggressive interest rate cuts in the euro area than in the US after 2001 and prolonged period of stable policy rates between 2003 and 2005 raised the question: is the Eurosystem “too passive”? •  Activism and gradualism refer to the number and magnitude of changes in the policy rate over a given period. •  Research recently conducted on the basis of an estimated model for the euro area and the US over the last two decades has yielded three findings: 2 -  the monetary policy strategies pursued by the Eurosystem and the Fed do exhibit some differences;  -  the degree of interest rate smoothing, taken as an indicator of monetary policy gradualism, is quite similar in the euro area and the US;  -  the differences in patterns can be ascribed to differences in size and nature of shocks. Most of the differences are due to demand shocks, which were larger in the United States. 1  A. Blinder (1998)  2  Motto and Rostagno (2005) and Sahuc and Smets (2006)  2  BIS Review 63/2006  Monetary policy and asset prices. •  Caution is also an answer to the following question: should monetary policy systematically react to perceived asset prices misalignments?