samchain/econo-pairs-v1 huggingface dataset:
As stated in a recent Bank for International Settlements report, “Financial regulation aims to influence the behavior of banks and other financial intermediaries to enhance their resilience and support financial stability. Given that those same intermediaries interact with central banks in the context of monetary policy implementation, changes to the regulatory environment are bound to have effects that central banks will need to take into account.”38 Economic and financial stability are closely interconnected; for example, monetary transmission was reliably effective in 2007, but in 2008 became quite impaired as a result of systemic financial stress. In navigating these issues, my colleagues and I are aided by the integration of policy analysis across disciplines at the Federal Reserve System, an arrangement which provides an ongoing breadth and depth of perspective. Thank you for your attention. 1 I would like to thank James Egelhof and Antoine Martin for their assistance in the preparation of these remarks,  Adam Biesenbach for his assistance with the calculation of the dispersion indices presented here, Logan Suba for his assistance with data, and colleagues in the Federal Reserve System for numerous insightful comments and suggestions. 2 See, for example: Bernanke, “Implementing Monetary Policy,” March 30, 2005; Ihrig, Meade and Weinbach  “Rewriting Monetary Policy 101: What's the Fed's Preferred Post-Crisis Approach to Raising Interest Rates?, ” Journal of Economic Perspectives, Fall 2015. 3 Conceptually, the federal funds rate is a measure of what banks pay to take out unsecured overnight loans from  other banks, government-sponsored entities, and certain other entities.

See Potter, “Money Markets and Monetary Policy Normalization,” April 15, 2015, and Frost, Logan, Martin, McCabe, Natalucci and Remache, “Overnight RRP Operations as a Monetary Policy 10 / 13  BIS central bankers' speeches  Tool: Some Design Considerations,” February 19, 2015. 6 Designated financial market utilities may be paid interest on balances maintained at the Federal Reserve as  well, as provided for in the Dodd-Frank Act and Regulation HH. The payment of interest to these entities does not appear to have had a measurable impact on money markets to date. 7 Recall that federal funds loans are unsecured. Like the vast majority of central banks, the Federal Reserve  conducts its open market operations in the secured market. 8 Although households and firms do not directly transact in the federal funds market, the effective federal funds  rate is used as a reference rate in the setting of a variety of private sector contracts, including in interest rate futures and swaps. Many bank loans are priced to The Wall Street Journal’s Prime Rate, which since the mid1990s has been set by convention to 300 basis points above the FOMC’s target rate or range. 9 See Dudley, “The Importance of Financial Conditions in the Conduct of Monetary Policy,” March 30, 2017.
Despite enormous support measures, the recovery has been slow in both Europe and the United States, and few people would dare to guess what the final bill for the crisis will be. In other words, we need to do all we can to avoid ending up in a similar situation again. This involves strengthening the resilience of the financial system and counteracting the development of risks. The latest crisis also clearly demonstrated that we live in a world with a highly-integrated financial system. The financial institutions have major exposures to each other, which means that problems at one institution can spread like wildfire throughout the financial system and even between countries. With hindsight, it is easy to see that we lacked institutions and regulatory frameworks with the ability to predict and manage a global financial crisis. This lesson has led to the emergence of an entirely new policy area – macroprudential policy. Focus on the financial system as a whole – and its link to the macroeconomy Macroprudential policy can be seen as a complement to both traditional supervision and monetary policy when it comes to promoting financial stability (see slide 6). The focus changes from supervising individual institutions to analysing systemic risks in the financial sector and the links between the different players in the financial system. Macroprudential policy also aims to analyse the links, between the financial system and the macroeconomy over time.

Sweden – a small, open economy The situation in Sweden in recent years reflects our great dependence on the outside world; exports make up approximately 50 per cent of our GDP.2 The global financial crisis of 2008–2009 thus had a dramatic impact on us and contributed to the largest fall in GDP in Sweden since World War II. When global economic activity recovered in 2010, growth was instead the highest for 40 years (see slide 2). But this is history now. Over the last 12 months in particular, the European debt crisis has had a considerable impact on economic development. And Sweden is a part of Europe – not just geographically but economically too. A majority of our goods exports go to Europe and over 35 per cent to the euro area (see slide 3). The weak development of the Swedish economy during the fourth quarter of last year also reflects a dramatic fall in exports. Let me therefore comment on the situation in Europe, as it has such a significant impact on the Swedish economy and, by extension, monetary policy. The debt crisis in Europe – a lot of work remains to be done but things are moving in the right direction One of the most important pieces of the puzzle with regard to economic development in the period ahead is how the debt problems in Europe are managed (see slide 4).
Unit-linked policies accounted for more than a quarter of gross inflows in September 2019, but only 7% of net inflows. This discussion is relevant for new subscriptions; for top-up payments into existing policies, the terms of the contract must of course continue to apply. With regard to new policies and new ad hoc inflows, these should not lead to the returns paid to existing policyholders being overly diluted. The duty of advice applies here: it has to be tailored to the individual client and to their particular situation, but it is rarely good advice to invest 100% in euro funds or 100% in unit-linked policies. So I am asking you to use your innovative capacity and promote offerings that, alongside eurocroissance and retirement savings, could make up a category of investments where the risk is contained, somewhere between euro products and unit-linked policies. At the ACPR, we are fully prepared to facilitate these initiatives, by supporting any demands for regulatory adjustments that might prove necessary, and without ruling out a recalibration of the tax rules applicable to different products. But more broadly, over the medium-term, it is life insurers’ business model that needs to be redesigned. We need to think about this together, and get ready to use all the levers that can help in this transformation. II. Our ambition for the Solvency II review  I would like to turn now to your second major concern: Solvency II.

We are therefore calling for a reduction in the shock applied to all equity categories, to make the standard easier to read and reduce insurers’ capital charge. “Insuring in the long term”, to come back to today’s topic, means providing our MTEs and SMEs with greater access to equity financing. Our economy, like that of our euro area neighbours, is seriously lagging behind in this field: in France, equity financing only amounted to 79% of GDP in 2019, compared with 122% in the United States. (iii)  The weight of the risk margin, which on average accounts for 30% of capital requirements at the European level, needs to be reduced. The current method of calculation is too prudent and penalises long-term insurance products such as savings, retirement and prudential products. (iv)  Last, we need to move towards greater simplification: “What is simple is always wrong. What is not is unusable”. i This irrefutable observation from Paul Valéry should be an incentive for us to push for concrete measures to simplify the standards and converge supervisory practices. I'm thinking about a reduction in the reporting burden and requirements for activities that are low risk. And on a more structural level, I'm thinking about the overcomplexity of the method for  Page 6 of 6  calculating mathematical reserves, which undermines the comparability of prudential balance sheets. With the upheaval currently underway in standards, it would be a mistake to roll out IFRS 17 too prematurely.
We want our monetary and financial systems to be stable, not only throughout the economic cycle, but also across cycles. And what we also share is that we are still very much uncertain about how to achieve this goal perfectly. One, rather harsh expression of this uncertainty of ours, is the adage popular among some policy-makers. As financial stability is hardly a quantified (or maybe even quantifiable) goal, some in the community grumble that central banks targeting inflation are delivering price stability, while central banks targeting financial stability are delivering just financial stability reports. Yes, this is really a bit too strong statement, as we all know, explicitly or implicitly, that the banking sector faces a trilemma – or an impossible trinity of a kind, if you will. Banks can never be simultaneously: 1.  perfectly safe,  2.  perfectly efficient and  3.  always free of moral hazard  It is like in the area of public health care. This complex system also cannot simultaneously achieve three goals perfectly and be: 1.  cheap,  2.  of the highest quality and  3.  universally accessible to all without entry barriers  In the banking sector – like in the area of health care – we can either abandon one principle in order to achieve the remaining two more or less perfectly, or we have to balance all the three principles somehow, but all of them will be achieved and maintained only partially, imperfectly (and sometimes deeply imperfectly).

That is the limitation we face and will always face in the banking sector, and that’s why no perfect and once-and-for-all accepted way of achieving the “ideal state of affairs of banks” will probably ever be established. All the more so as the reality makes achieving any ideal less likely in the future than it is now. Look, for instance, at the issue of resolvability of banks. Yes, we in the EU have the BRRD  BIS central bankers’ speeches  1  (Bank Recovery and Resolution Directive) as our European answer to the question of resolvability. Let’s put aside the fact that its practical implementation and the enforcement of its key principles have not always been convincing so far. And we are not sure that these principles (namely bail-in) will be applied in a dynamically consistent way across countries and banks in the future. But still many believe we have made banks more resolvable (and also resilient) since 2008. And I think there are underlying real-time processes that are actually making banks less resolvable now compared to the past. Why? What worries me is that over time many end-users (and also policy-makers) tend to look at standard commercial banks as utilities with all their typical features. One of those features is that the population is becoming more and more incrementally dependent on the services such utilities provide, quite often without the very same population even noticing it. A typical example is electricity.
Buiter, W H (1981), “Time Preference and International Lending and Borrowing in an Overlapping-generations Model” Journal of Political Economy, 89(4) pp 769–797. Feldstein, M and C Horioka (1980), “Domestic Saving and International Capital Flows” Economic Journal, XC, pp 314–29. Greenspan, A and J Kennedy (2008), “Sources and Uses of Equity Extracted from Homes” Oxford Review of Economic Policy, 24(1), pp 120–44. Haldane, A G (2010), “Patience and Finance” Remarks at the Oxford China Business Forum, Beijing, available at http://www.bankofengland.co.uk/publications/speeches/2010/speech445.pdf International Monetary Fund (2010), Global Financial Stability Report, October 2010. King, M (2010), speech to the University of Exeter Business Leaders’ Forum, available at http://www.bankofengland.co.uk/publications/speeches/2010/speech419.pdf Kuijs, L (2006), “How Will China’s Saving-investment Balance Evolve?” World Bank Policy Research Working Paper, No. 3958. Lane, P R and G M Milesi-Ferretti (2007), “The External Wealth of Nations Mark II: Revised and Extended Estimates of Foreign Assets and Liabilities, 1970–2004” Journal of International Economics, 73(2), pp 223–50. Lucas, R E, Jr. (1990), “Why Doesn’t Capital Flow from Rich to Poor Countries?”, American Economic Review 80(2), pp 92–96. Ma, G, and W Yi (2010), “China’s High Saving Rate: Myth and Reality” BIS Working Papers, No. 312. Mankiw, N G, Romer, D and D N Weil (1992), “A Contribution to the Empirics of Economic Growth”, The Quarterly Journal of Economics, (107)2, pp 407–437. McKelvey, E (2010), “Housing Holds the Key to the Consumer Conundrum”, Goldman Sachs US Economic Analyst, Issue No: 10/14.

Regardless of our status – decision-makers, policy makers, researchers, academia or journalists – the report provides abundant information for furthering our analyses and conclusions. I invite you all to read it, and rationally and responsibly materialise its conclusions in your analyses for the present and the outlook of the economy. Thank you! 2/2  BIS central bankers' speeches
Inflation for the euro area is shown measured using the HICP and for the United States and the United Kingdom measured using the CPI. Sources: The Bureau of Labor Statistics, Eurostat, national sources, Office for National Statistics and the Riksbank  BIS central bankers’ speeches  9  Figure 2. Policy rate abroad Per cent  Note. Refers to an aggregate of the USA, the euro area, the United Kingdom, and Norway. The euro area refers to EONIA. Sources: Bank of England, EURIBOR FBE, Federal Reserve Bank of New York, Norges Bank and the Riksbank  Figure 3. Consumer prices Annual percentage change 5  5  CPIF excluding energy CPIF  4  4  CPI  3  3  2  2  1  1  0  0  -1  -1  -2  -2  -3  -3 00  02  04  06  08  10  12  14  Note. The CPIF is the CPI with a fixed mortgage rate. Source: Statistics Sweden  10  BIS central bankers’ speeches  Figure 4. Inflation in 2013 in a number of countries with inflation targets Per cent 3  3 CPI Inflation target  2  2  1  1  0  0  -1  -1  Note. Euro area refers to HICP. Countries with an inflation target in the form of an interval have their mark in the middle of the interval.

In the coming  1  When these countries are weighed together in relation to their significance for Swedish foreign trade using the KIX index, the euro area accounts for almost 50 per cent. BIS central bankers’ speeches  1  period, domestic demand is expected to continue to strengthen, at the same time as the economic improvement abroad will help exports to gradually pick up. When growth in Sweden accelerates, unemployment is also expected to fall. All in all, we see a fairly clear improvement in economic activity ahead of us. …but inflation is too low The Swedish economy’s international dependence applies not only to the real economy, but also to inflation. It is clear that inflation in several of our important export regions has shown a downward trend in recent years (see Figure 1). Given this, central banks abroad have conducted a very expansionary monetary policy. In our most recent assessment in July we also revised down our forecasts for policy rates abroad (see Figure 2). The low inflationary pressures abroad are one explanation why inflation in Sweden has been low in recent years. When measured as the CPIF, where the effects of the Riksbank’s repo-rate changes on mortgage rates are excluded, inflation has been clearly below the target of 2 per cent since the start of 2012, and since the end of last year it has fallen further (see Figure 3).
(2) Daniel K. Tarullo, member of the FED Board of Governors finds the reasons in replacing the basic regulatory framework established after the Great Depression 1929–1933, which mostly limited the commercial banks to traditional lending activities, with the regulatory framework that in the 1970s started to install deep changes in the organization and  BIS Review 90/2010  1  regulation of the financial markets, culminating with the adoption of the Gramm-Leach-Bliley bill in 1999. He says that “with the innovations, the traditional commercial banking business model was put under strong pressure on both sides: on the liability side in the balance sheet of the banks in the form of more attractive savings instruments, such as the funds for investing on the money market, and on the assets side, with the growth of public companies and international competition”. Until the end of the century the restriction cluster on the commercial banks from the great depression era was replaced with a regulatory setting in which they could operate on a national level, to involve in a much broader set of activities and to practically join with every kind of financial companies. Tarullo says, that is how the highly complex financial holding companies were started... the independent investment banks grew in a group of big, complex and highly indebted companies... the financial engineering was quickly changing the character of the entire financial services sector. Securitization and accompanying instruments united the capital markets and traditional lending activities, fueling the growth of the so-called shadow banking system.

Everything was put in question: the current economic theories; monetary and fiscal policies; micro and macroprudential policies; the whole financial regulation. Suddenly, no one was satisfied with the global financial framework. A gallop was started for its reexamining. The fear from recurrence of the crisis and its possible deepening, for almost three years has been keeping the eyes of the creators of the economic and financial policies wide open. Why did this happen to us? A lot has been written in search for the causes of the crisis, and a lot more will be examined and written. One part of the relevant experts say: (1) The so-called “great moderation” period in the GDP and inflation fluctuations was the reason, for which a wrong sense of comfort and illusion was settled, that the crisis period is behind us. Some relevant economic minds convinced us in that. Paul Krugman, in “The Return of Depression Economics” (2008) reminds us of the statement of the Nobel Prize winner Robert Lucas that “the central problem of depression-prevention has been solved, for all practical purposes” and the statement of Ben Bernanke in his famous speech named as “The Great Moderation”, where he claims more than Lucas that the modern macroeconomic policy has solved the business cycle problem or more precisely it has reduced the problem to a point that it is a mere shade rather than the most important economic question.
HICP inflation, excluding energy and food, will remain very high until the end of 2022, but thereafter it is expected to decline as the upward pressures from the economic reopening subside and supply bottlenecks and energy input cost pressures ease. The ongoing economic recovery, tightening labour markets and some effects from compensation for higher inflation on wages – which are expected to grow at rates well above historical averages – imply high underlying inflation until the end of the projection horizon, although the baseline assumes that longer-term inflation expectations will remain well anchored. In any event, the risks to the inflation outlook remain on the upside and have intensified, particularly in the near term. In the medium term, these risks include a protracted worsening of production capacity in the economy, persistently high energy and food prices, inflation expectations being revised up above the target level and larger than anticipated wage increases. However, a decline in demand over the medium term would ease the inflationary pressures. Under the downside scenario that I mentioned earlier, reflecting the possibility of a severe disruption to European energy supplies, inflation averages 8.0% in 2022 and 6.4% in 2023, before dropping below the baseline projection to 1.9% in 2024.

However, since the beginning the annual excess return on equities has been close to ½ percentage point. We have  2  BIS Review 53/2009  established an equity management strategy that seems to be fairly robust to market fluctuations and that has, as we have seen, generated solid returns viewed over a longer period. Developments in the Fund’s fixed income portfolio have followed a different path. The annual return on the actual portfolio was ½ percentage point lower than the return on the benchmark portfolio. The results were not due to investment in high-risk fixed income instruments. At the end of 2008, as much as 64 per cent of the bonds in the Fund’s fixed income portfolio had the best credit rating, AAA, 20 per cent had the second best, AA, while ten per cent were rated A. Five per cent of bonds were rated BBB, which is the rating the credit rating agency Standard & Poor’s has assigned companies such as Telenor and Statkraft. Only one per cent of the fixed income portfolio has a lower credit rating. Realised losses as a result of bankruptcies have been low. The following table provides a static situation report. As the recession follows its course, and the credit rating agencies continue to respond positively to criticism, ratings will probably be adjusted to a certain extent. The emphasis will nevertheless be on high-quality paper. How then can an excess return become negative from one year to the next?