samchain/econo-pairs-v1 huggingface dataset:
In doing so, I will focus on two prime channels underlying the second stage of transmission: the exchange rate channel and the real interest rate channel. My remarks will therefore be neither exhaustive nor complete, given that monetary policy can affect the economy through many other channels as well, such as its impact on the valuation of equities and, hence, on firms’ cost of capital and investment decisions, Tobin’s q in short.3 Another channel of relevance is the bank lending channel as formalised by Bernanke and Gertler (1995). But by focusing on the exchange rate and interest rate channels, we can get a good understanding of how effective recent policy measures have been. In particular, I will show that monetary policy-induced exchange rate movements may have considerable impact on consumer prices, but that this relationship depends on the state of the economy and the shocks driving it, much in line with the recent literature in this field. And I will show that the New Keynesian Investment and Savings (IS) curve is alive and well in the euro area – that is, aggregate demand responds to changes in real ex ante interest rates, and can also be shown to have done so in recent times, provided it is measured properly. A state-dependent exchange rate pass-through Let me start with the exchange rate channel – a channel that has been heavily debated in recent months in the light of the large movements that we have observed in the foreign exchange market.

Even though the unemployment rate has declined by 2.7 percentage points from its peak of 10 percent in October of 2009, there are still many people that want jobs but are not counted as unemployed because they are not actively looking for work. An alternative measure of labor market conditions, the employment to population ratio, which is not influenced by changes in the number of these workers, has shown limited improvement. Job loss rates have fallen, but hiring rates remain depressed at low levels. Taken together, the labor market still cannot be regarded as healthy. Numerous indicators, including the behavior of labor compensation, are all consistent with the view that there remains a great deal of slack in labor markets. Nevertheless, as I have stated in earlier speeches, I see persuasive evidence of improving underlying fundamentals for much of the private sector of the U.S. economy. Key measures of household leverage have declined and are now near the lowest levels they have been in well over a decade. Household net worth, expressed as a percent of disposable income, has increased back to its average of the previous decade, reflecting rising equity and home prices and declining debt. Banks have eased credit standards somewhat recently after a prolonged period of tightness. As a result, we are now experiencing a fairly typical cyclical recovery of consumer spending on durable goods. For example, light-weight motor vehicles sold at a seasonally-adjusted annual rate of nearly 16.1 million in August, close to the number sold in 2007.
20.05.2019  The Need for Deepening Euro Area Integration City Week 2019: The International Financial Services Forum Pablo Hernández de Cos Governor  Ladies and gentlemen, Let me start by thanking Maurice Button and the Board of Patrons of City Week 2019 for their invitation to participate in City Week 2019. It is a pleasure to be here together with leading participants from the financial sector. 2019 marks the year in which we are celebrating the 20th anniversary of the launch of the euro. However, this celebration is taking place at quite a challenging point in time. The legacies of the crisis in terms of unemployment and debt, the rise of populism, the threat posed by protectionism and uncertainties stemming from Brexit all make for a complex situation. But to the surprise of many, this background has not reduced European citizens’ support for the European integration process. Quite the opposite I would say. Euro area citizens have declared the highest level of support for the euro ever recorded. The latest Eurobarometer survey shows that 74% of citizens across the euro area countries favour the Economic and Monetary Union (EMU), with a single currency, the euro. The survey also reveals strong support for more coordination and economic reforms to improve the performance of national economies. These figures provide solid grounds for European governments and institutions to combine efforts aimed at making the euro area architecture more robust and resilient to shocks, and at increasing its ability to respond when shocks occur.

Confidence may also improve more quickly, labour market deterioration may be less marked than currently expected and foreign demand may prove to be stronger than projected. On the downside, concerns remain relating to a stronger or more protracted negative feedback loop between the real economy and the still strained financial markets, renewed increases in oil and other commodity prices, the intensification of protectionist pressures and a disorderly correction of global imbalances. At the same time, the uncertainty surrounding this outlook remains higher than usual. With regard to price developments, annual HICP inflation was, according to Eurostat’s flash estimate, -0.2% in August , compared with -0.7% in July. This development is in line with previous expectations and reflects largely base effects resulting from the movements in global commodity prices a year ago. Owing to these base effects, annual inflation rates are projected to turn positive again within the coming months. Looking further ahead, inflation is expected to remain in positive territory, with overall price and cost developments staying subdued in the wake of ongoing sluggish demand in the euro area and elsewhere. In this context, it is important to re-emphasise that the indicators of inflation expectations over the medium to longer term remain firmly anchored in line with the Governing Council’s aim of keeping inflation rates below, but close to, 2% over the medium term. This outlook is consistent with the September 2009 ECB staff projections for euro area inflation.
But a prolonged continuation of the exchange rate arrangements that have given rise to the large increase in foreign official investments in U.S. financial assets is unlikely to be consistent with the domestic requirements of those economies, and for this reason many are already in the process of change. The impact of a reduction in the scale of official accumulation of dollar assets could potentially be fully offset by increases in purchases by private investors. But even in the context of a continued high degree of confidence in the relative return on claims on the United States, it is hard to know with confidence how the preferences of private savers will respond to the gradual evolution in their nation’s exchange rate regimes that is now underway. Some have drawn comfort from the adjustment process experienced by other economies with large external deficits. Industrial countries that have gone through a process of current account rebalancing have not generally experienced particularly damaging moves in interest rates or exchange rates. But the present circumstances seem sufficiently different from historical precedent that history may not be a particularly useful guide. And even in these past cases, the adjustment process did entail a slowdown in GDP growth, increasing unemployment, and a sharp fall in investment. Finally, there is the belief that the nature of U.S. external assets and liabilities mitigate the potential problems ahead.

How effective we are in meeting this political challenge is likely to depend significantly on how effective we are in improving educational opportunity and achievement in the United States, and perhaps also in improving the design of the temporary assistance we provide those individuals who bear the brunt of the adjustment costs that come with greater global economic integration. These policies by the United States would help improve the prospects of a more benign adjustment process. But they would not be sufficient to produce a more favorable adjustment path. A more favorable adjustment scenario would require policy changes in each of the major economic areas. For global growth to be sustained at a reasonably strong pace during this period of adjustment, the desirable increase in U.S. savings, and the necessary slowing in U.S. domestic demand growth relative to growth of U.S. output, would have to be complemented by stronger domestic demand growth outside the United States, absorbing a larger share of national savings. Exchange rate regimes, where they are currently closely tied to the dollar, will have to become more flexible, allowing exchange rates to adjust in response to changing fundamentals. Reforms to financial systems and to social safety nets over time would help reduce the need for exceptionally high levels of domestic saving we see in many countries. The global nature of these requirements does not imply that the United States can put the principal burden for adjustment on others.
BANCO DE ESPAÑA  1	 TESTIMONY BY THE GOVERNOR OF THE BANCO DE ESPAÑA BEFORE PARLIAMENT IN RELATION TO THE DRAFT STATE AND SOCIAL SECURITY BUDGET FOR 2019  FORECASTS FOR THE SPANISH ECONOMY: ASSUMPTIONS ON THE EXTERNAL ENVIRONMENT AND FINANCIAL CONDITIONS  TABLE 1  Annual rate of change (%) unless otherwise speciﬁed  2013  2014  2015  2016  2017  2018  2019  3.4  3.5  3.3  3.1  3.6  3.6  3.3  International environment World output Spain’s exports markets Oil price in dollars/barrel (level)  2.7  4.4  4.1  2.3  4.9  3.1  3.3  108.8  98.9  52.4  44.0  54.4  71.8  67.5  1.33  1.33  1.11  1.11  1.13  1.18  1.14  Monetary and ﬁnancial conditions Dollar/euro exchange rate (level) Spain’s nomial effective exchange rate vis-à-vis the world including the euro area (2000 = 100 and percentage differences)  112.3  113.8  110.6  113.2  114.6  117.9  118.0  Short-term interest rate (3-month EURIBOR)  0.2  0.2  0.0  -0.3  -0.3  -0.3  -0.3  Long-term interest rate (10-year bond yield)  4.6  2.7  1.7  1.4  1.6  1.4  1.8  SOURCES: ECB and Banco de España. Global financial conditions, which were exceptionally favourable in previous years, have begun to go into reversal.

However, it cannot be ruled out that the increase in political and trade uncertainty may ultimately constrain the growth of business investment plans. This is especially the case in certain economies, such as Italy, where some signs of a tightening in financial conditions are already discernible, in a setting in which Italian public debt yields have, since spring last year, held at relatively high levels. The lower rate of growth in the euro area has contributed to delaying the prospect of a pick-up in the core component of euro area inflation somewhat. And compounding this has been the effect of the recent decline in oil prices on overall inflation. In these circumstances, the ECB’s monetary policy maintains a markedly expansionary stance, BANCO DE ESPAÑA  2	 TESTIMONY BY THE GOVERNOR OF THE BANCO DE ESPAÑA BEFORE PARLIAMENT IN RELATION TO THE DRAFT STATE AND SOCIAL SECURITY BUDGET FOR 2019  FORECASTS FOR THE SPANISH ECONOMY: OVERVIEW  TABLE 2  Annual rate of change (%)  December 2018 projections 2017  2018  2019  GDP  3.0  2.5  2.2  Employment  2.9  2.5  1.6  HICP (inﬂation)  2.0  1.8  1.6  SOURCES: INE and Banco de España. Projections cut-off date: 28 November 2018.  aiming to prompt the convergence of inflation, in the medium term, towards rates of increase in prices that are below but close to 2%.
In the future, regulations will have to compel banks to hold sufficient assets which they can pledge or transfer at any time without restriction, and which they can thus deliver as collateral to existing liquidity facilities. This way, even in extreme situations, we would be able to provide the necessary liquidity via the LSFF or ELA without the need for emergency law. My second thought is also self-evident: UBS's takeover of Credit Suisse fundamentally changes the structure of the Swiss banking sector. It is important that Swiss households and businesses continue to benefit from a broad range of efficiently priced banking services. This requires competition and diversity. We are optimistic that our domestically focused banks, but also the foreign banks operating in Switzerland, will adjust their product ranges accordingly. We are also convinced that UBS will carry out its task of providing Swiss households and the wider economy with banking services responsibly. This brings me to my third point, on which I would like to close. Healthy competition in the banking sector is not only in the interest of Swiss households and businesses, but also very much in the interest of the SNB. For our monetary policy to transmit to the entire economy, interest rates on bank deposits and bank loans must respond swiftly, and strongly enough, to changes in our policy rate. The greater the competition among the banks, the more likely it is that this will occur.

These loans are also secured by preferential rights in bankruptcy proceedings and, in addition, by a federal guarantee - that is to say, they are guaranteed with taxpayers' money (hence 'public' in public liquidity backstop). The interest rate on both types of loan is higher than that charged on the established liquidity assistance facilities. 3/4  BIS - Central bankers' speeches  The dramatic situation and enormous time pressure required the use of emergency law. In granting ELA+, we are going to the limits of what is feasible for the SNB, because with this loan preferential rights in bankruptcy proceedings are the sole security. We provided this liquidity only because rapid action was critical to restoring counterparties' confidence in Credit Suisse and stopping the outflow of client funds. Without the SNB's willingness to provide further liquidity via ELA+, a global financial and economic crisis could easily have been set in motion. In our view, this would have been irresponsible. Thoughts for the future Since the dramatic days of mid-March, the situation has stabilised. Let me now look ahead and share three thoughts with you regarding the future. My first thought is self-evident: Banking regulation and supervision will have to be reviewed in light of recent events. This will require in-depth analysis. Quick fixes must be avoided. However, from the SNB's perspective, there is one important point that needs to be emphasised right now.
This political dimension is essential in order to understand how the momentum was maintained over an extended period of time so as to achieve gradual progress towards ever increasing integration: from industrial co-operation through a customs union and a single market to Economic and Monetary Union. Having recalled this institutional background, I will focus in my remarks today on the policy and operational requirements of exchange rate and monetary policy co-operation in Europe. 2. Policy requirements Consensus on the main policy objectives to be pursued over time has always been a key requirement for effective exchange rate and monetary policy co-operation in Europe. The objectives were, initially, exchange rate stability and, subsequently, the creation of a monetary union based on price stability. A need for exchange rate stability arose in the 1970s, in the wake of the collapse of the Bretton Woods system. Stability was needed in order to minimise the risk of trade tensions within the European customs union at the time. This led to the creation of the European Monetary System's Exchange Rate Mechanism (EMS/ERM) in 1979. The need for exchange rate stability became even more acute from 1986 onwards, with the move towards the creation of the single market for goods, services, capital and people. BIS Review 1/2001  1  The completion of the single market involved the full liberalisation of capital movements within the EU at the beginning of the 1990s.

Financial literacy, the Cyprus perspective and the role of the Central Bank of Cyprus In December 2020, an ad-hoc Committee was established in Cyprus with the aim of formulating a National Strategy for the promotion of financial literacy and financial education in the country. The CBC has coordinated the work of the ad-hoc Committee, which consists of members from the CBC, the Ministry of Finance, the Ministry of Education, Sport and Youth, the Cyprus Securities and Exchange Commission and two academic experts from the two public universities in Cyprus. The Committee was also supported by a Secretariat from the CBC and external scientific collaborators, all of whom are here with us today. The formulation of the National Strategy drew heavily from the results of the CBC survey on financial literacy. A key finding of the survey was that the average financial knowledge score in Cyprus is below the minimum level considered by the OECD as sufficient for someone to be counted as financially literate. The results of the survey also indicate specific population groups, which are in greater need for financial education such as the young, the unemployed, women, low income and lower  2/5  BIS - Central bankers' speeches  education citizens, and individuals who did not take economics courses during secondary education. They also indicate specific domains where lack of financial knowledge is evident, namely, interest compounding and diversification.
With great respect for the 6/8  BIS central bankers' speeches  principle of subsidiarity, the finance minister would need to be: first, institutionally strong, by being both the Economic Commissioner and the President of the Eurogroup; second, democratically legitimate, by being accountable to the European Parliament in an adequate format; third, technically supported, by relying on a European Treasury – which would be largely based on the expertise of European Commission staff – and on an independent advisory Economic Policy Council, and coordinating the European Stability Mechanism and the crisis management framework; and finally, internationally recognised as the economic spokesperson of the euro area, alongside the ECB President for monetary policy. In the longer term, as mutual trust between euro area countries increases, a last step will have to be considered to complete our common investment capacity: a genuine euro area budget, led by the finance minister. This would be a powerful tool. However in no way is this euro area budget to be confused with a one-way “transfer union” – and here I understand the German fears. It should potentially benefit all – not only the weaker – euro area countries, and would be rooted in increased economic convergence. The euro area budget would be used to finance certain “European public goods” such as digital technology, the energy transition or the integration of refugees. It could also include a European-wide unemployment insurance scheme.

An increase in the repo rate would in this case contribute both to counteracting incipient inflation tendencies and to reducing the risk of financial imbalances, through a dampening effect on demand for credit and on asset prices. 5  BIS Review 50/2000
The new scheme will further increase opportunities for the industry to meet cross-border demands for wealth management products. Like other Connect schemes, this new scheme will take an incremental approach, starting on a prudent footing. It is important that we have a smooth start, so that it will pave way for a more full fledged cross border private wealth management service in the future. 20. The three Connect schemes provide plenty of room for banks to broaden their services. The schemes help enhance Hong Kong’s role as an international financial centre as financial institutions expand their presence here to be closer to their clients. Green finance 21. Hong Kong has just experienced its hottest summer on record. Around the world there are reports of extreme weather events, widespread forest fires, and rising sea levels. Climate change knows no borders. It is a source of multiple risks — including transition risks and physical risks — that affect the entire financial sector. Addressing this challenge requires coordinated international efforts. At the same time, the rise of ESG3 investment and green banking offers opportunities for financial institutions to develop their business, including cross-border business. 22. Many jurisdictions in this part of the world have in place roadmaps for promoting green and sustainable finance. However, the level of adoption of green finance varies, and adoption is not without challenges. 23. Among the challenges we currently face is the difference in taxonomies that define green economic activities for the purpose of ESG investment.

But as expected, there are also challenges that come with fintech expansion: cyber-attacks, phishing emails and other scams are reportedly on the rise, a trend that needs to be addressed before it becomes alarming. Banks must continue to stay ahead of fraudsters through constant building and rebuilding of defences, rigorous stress testing, and educating customers about cyber safety. The enhanced Cybersecurity Fortification Initiative, soon to be launched, should provide banks with a robust framework for managing the risks. 11. Growing reliance on data analytics raises questions about data ownership and privacy. As we have seen in some other jurisdictions, AI and machine learning also introduce the risk of discrimination, sometimes in hidden forms. Banks have to guard against this by ensuring ethical, fair and transparent treatment of customers, and by correcting model aberrations using human intuition. 12. We realise that banks are at different stages in their adoption of AI technologies. For this reason, our risk management approach as a regulator is based on high-level principles rather than on detailed prescriptions that might stifle innovation or be disproportionate to the risks involved. 13. Technology is not just about banks and their customers – it is also an important part of banks’ relationship with the HKMA. As we are a key part of the technology ecosystem, our aim is to add value by facilitating the industry’s technology adoption through a range of initiatives, such as the AML/CFT Regtech Forum and the Regtech Watch newsletter.