samchain/econo-pairs-v1 huggingface dataset:
4  All speeches are available online at www.bankofengland.co.uk/speeches  4  Quantitative Easing (QE) involved buying gilts in exchange for newly-created reserves, via a specially created account called the Asset Purchase Facility (APF) which carries an indemnity from the Treasury. 7  The goal was to reduce the yield on gilts, and so to reduce yields – and therefore borrowing costs – on other financial assets, which would in turn feed through to support the economy. This created a large additional quantity of central bank reserves – currently £ worth – matched by an equally large loan to the APF on our balance sheet. 8  Importantly, QE also changed the quantity of reserves from being determined by the quantity demanded by financial institutions to being determined by the quantity supplied by the Bank on behalf of the MPC. To accommodate this change, and to deal with the volatility of money market rates which had emerged as liquidity patterns changed, we also changed our framework for controlling interest rates. In 2009 the Bank moved from a corridor system, in which banks’ reserve balances were remunerated at Bank Rate up to a limited amount, to a floor system, in which we remunerate all balances, no matter how large, at Bank Rate. As well as QE, the MPC has used the Bank’s balance sheet to lend directly to banks, via the Term Funding 9  Scheme (TFS) in 2016.

Ardian Fullani: Central banking in the time of integration Conclusions by Mr Ardian Fullani, Governor of the Bank of Albania, at the Fifth Conference of the Bank of Albania on “Central Banking in the Time of Integration”, Tirana, 25 March 2005. *  *  *  Dear friends! During two days of the Fifth Conference of the Bank of Albania on “Central Banking in time of integration”, having guests from the country and international institutions, personalities of academic and banking area, too many important ideas and suggestions emerged. The tight agenda did not allow detailed discussion on them; however, I hope that they will serve as starting points for further debates and analyses to sort out central bank challenges in the time of integration. It is somewhat difficult to make a concise summary of numerous papers presented in this conference. I would categorize the main conclusion into two large groups according to the main pillars of the central bank, that is the price stability and the financial sector stability. Concerning the first pillar, that of price stability, the discussions were focused mainly on the monetary policy effectiveness and central bank independence. To maintain stability is more difficult than to achieve it. Prof. Bolle indicated in a very excellent way that current price stability should be considered as fragile, which requires constant efforts, either by the BoA or by other institutions.
In addition, in view of fierce competition on the labour market and the changes referred to above, the risk of growing wage demands is limited, and so are the so-called second-round effects. Re 3) Over the past three decades, the financial sector has become highly international. Financial services, provided under strictly regulated, separate, domestic financial systems in the past, are now provided under ever more open, competitive and global system. One of the measures of globalisation in the financial services sector is the growing volume of cross-border capital flows. Cross-border transactions in the bonds and shares segment are now exceeding 90 trillion (thousand billion) US dollars per annum, which translates into USD 250 billion daily 13 . Moreover, the size of financial markets and their meaning to the global economy becomes ever greater. According to McKinsey Global Institute 14 , the total value of global financial assets is now USD 118 trillion, whilst as far back as in 1980 they were only 12 trillion. The increase in the volume of financial assets is progressing at a higher rate than that of output, and has now reached a threefold of the global GDP, whilst back in 1980 it was approximately equal to the world output. Additionally, the fastest growing segment of the financial market is the segment of private debt securities. What is more, international issues of these securities grow at a higher rate than domestic issues, which means that companies increasingly finance their activities from funds raised abroad.

But make no mistake – deleveraging is now a cold and hard fact of reality in many advanced countries. Let’s look more closely at the sectors involved: (1)  Households: Take the US as an example. We all know that the Americans are quite used to spending on credit. But we should note in particular that the growth in US household debts, which doubled between 2000 and 2007, had been driven mainly by more and more people looking to buy a house on mortgage. This trend has in turn caused house prices to double in a short period unseen before. Looking further back, the ratio of average debt to after-tax income of the US households had remained at 80% in the past 50 years. But it shot up to a peak of 130% in end-2007 and has been on a downward trend following the burst of the US property bubble, falling to the current level of 109%. Forced to cut debt but with rather subdued pay rises, many US households have no choice but to lessen their spending. It is still uncertain whether this process of deleveraging, i.e. increased savings and decreased spending combined, will continue. But the one thing we are certain about is that this will be a major factor affecting consumer demand in the US. Over in Europe, many countries are similarly beset with huge debts. Despite the prevailing low interest rates, efforts to cut debt have to be kept up, which can restrain consumption and impede short-term growth.
Andrew G Haldane: Small lessons from a big crisis Remarks by Mr Andrew G Haldane, Executive Director, Financial Stability, Bank of England, at the Federal Reserve Bank of Chicago 45th Annual Conference “Reforming Financial Regulation”, Chicago, 8 May 2009. I would like to thank Andrew Mason, Adrian Chiu, David Gregory and Nick Vause for comments and contributions. *  *  *  Macro-prudential policy is a new ideology and a big idea. That befits what is, without question, a big crisis. There are a great many unanswered questions before this ideology can be put into practice. These questions will shape the intellectual and public policy debate over the next several decades, just as the Great Depression shaped the macroeconomic policy debate from the 1940s to the early 1970s. But there are already some smaller lessons to be drawn from crisis events. That is the purpose of these comments. Seven issues arising from the crisis are discussed and their implications for policymakers and practitioners assessed. If there is a unifying theme, it is informational failure. This has been a crisis borne of, and prolonged by, lack of information. That fog of uncertainty remains dense 18 months on. Because financial markets are, first and foremost, a market in information, these informational failures have generated prolonged paralysis in financial markets. Tackling them is priority number one. Lesson 1: Finance is no golden goose Imagine having placed a hedged bet back in 1900.

Doing so will require an understanding of the network of connections between firms, which at present is lacking. Lesson 4: Banks cannot “pass” a stress test Over the past six months, stress-tests have moved from the back-offices of risk managers to the front offices of the world’s media. Assessments of the balance sheet consequences of tail macroeconomic risks are now in the bloodstream of financial policymakers. They also appear, belatedly, to be entering the bloodstream of financial firms. That is real progress. But as with all technical progress, there is some danger of an overshoot. While the inputs to, and outputs from, stress-testing are statistical, the inferences reached from them are necessarily subjective. Stress-tests are probabilistic and state-dependent judgements. Two of the key judgements are, first, what prescribed stress scenarios are appropriate inputs; and second, what thresholds for satisfying these stress-tests are set. Both are fiendishly difficult. On the first, a stress scenario is just one point in a probability distribution. Which point to choose – indeed, which distribution to choose – is a matter of judgement. Consider the two distributions for UK GDP growth shown in Chart 6, one taken from the ten years to 2007, the other across a longer 150-year sample. 2 The standard deviations of these two distributions differ by a factor of 4.5. For a financial firm that is 30-times leveraged, that can easily be the  2  See Haldane (2009a), “Why Banks Failed the Stress Test”.
To combat and address the consequences of climate change, we should all work together in supporting the transition to a low-carbon economy, and factoring in these climate-related risks in our business strategies and investment processes. On this, we are delighted to see that the momentum of sustainable finance has been gaining traction in the past few years, which has also brought about new opportunities in this fast-growing space. Green bond issuance 14. One of the HKMA’s priorities in recent years is to continue to strengthen Hong Kong’s position as a regional green and sustainable finance hub. With that in mind, we have put in substantial efforts and resources in this area, and actively reached out to potential green bond issuers to grow the market. On this front, we are pleased to note that the green and sustainable bond issuance amount in H1 2021 has already exceeded the whole year of 20201. More recently, the Shenzhen Municipal Government has successfully issued a total of RMB5.0 billion of offshore bonds in Hong Kong, RMB3.9 billion of which were green bonds. It was the first time for a Mainland local government to issue offshore bonds in Hong Kong. We hope that this would attract other Mainland local entities to follow suit and make use of Hong Kong’s platform to issue green bonds, thereby enhancing Hong Kong’s role as a major green finance hub for the Mainland, in particular the GBA. 15.

Edmond Lau: LIBOR transition and sustainable finance Keynote address by Mr Edmond Lau, Senior Executive Director of the Hong Kong Monetary Authority, at the 2021 International Swaps and Derivatives Association (ISDA) Asia-Pacific Conference, 19 October 2021. * * *  Opening 1. Good morning. I’m very glad to join you virtually today at this ISDA conference. The ISDA Asia-Pacific Conference has always served as an important forum, bringing together participants across the capital and derivatives markets to discuss key global issues with an Asia-Pacific focus, while at the same time contributing ideas and thoughts on areas where we share common interests. 2. In today’s conference, I would like to share my views on two hot topics: (1) LIBOR transition; and (2) sustainable finance. The development of these two subjects would bring changes to our financial landscapes and business practices, requiring our prompt action and swift transition. LIBOR Transition 3. First, let me begin by making a few remarks on LIBOR transition. Now, with less than 3 months to count down to end-2021, LIBOR cessation will soon turn into reality. At this critical point in time, it is important for us to further our efforts, and forge ahead with all the preparatory work necessary to get ourselves ready for this transition. International and Regional Coordination 4. Given the dynamic and evolving nature of this subject, it is also important for us to keep a close watch on ongoing developments, and play an active part in various international fora.
Chart 1: Signs of a nascent recovery by mid-2013 a) Swathe of survey indicators of quarterly UK GDP growth Percentage change on previous quarter 1.0 0.5 0.0 -0.5 -1.0 -1.5 -2.0 2009  2010  2011  2012  2013  Sources: IHS Markit/CIPS, BCC and CBI, Bank calculations. 3  In the US, the Federal Reserve is conducting a broad review of the strategy, tools, and communication practices it uses to pursue its monetary policy goals; the Bank of Canada is assessing a broad range of monetary policy frameworks ahead of its renewal in 2021 of the inflation-control agreement; and President Lagarde announced that the ECB will undertake a strategic review, which will include an assessment of monetary policy strategy and the operational framework. 4 Available at https://www.parliament.uk/documents/commons-committees/treasury/carney-pdf-TC-07-02-13.pdf. 4  All speeches are available online at www.bankofengland.co.uk/news/speeches  4  b) Unemployment rate Percent 9.0 8.5 8.0 7.5 7.0 6.5 6.0 5.5 5.0 2008  2009  2010  2011  2012  2013  With the wisdom of hindsight, there were three main drivers of the recovery: a marked reduction in extreme uncertainty (particularly as the euro area stabilised) and an associated modest pick-up in global activity; significant progress on repairing the core of the UK financial system; and a material improvement in household balance sheets as UK households worked hard to pay down their debts. In addition, the Bank’s Funding for Lending Scheme provided support to activity, by improving financial conditions.

There are a host of unanswered questions about the transition to the higher target, including the potential for it to destabilise inflation expectations. And it is necessary to consider whether the benefits from less frequent episodes at the ELB justify the costs of the additional inflation at the permanently higher target. As Ben Bernanke has recently argued, unconventional policy tools already achieve the equivalent of raising the inflation target in the US from 2% to 5%, without needing to incur any of these costs. Moreover, research by the Bank of Canada shows that it is those who are most vulnerable and on the lowest incomes who lose out the most from higher inflation.37 So even if the costs of a higher inflation target might be small in aggregate, the distributional consequences could be considerable. Such fundamentally political considerations are a reminder why it is best for governments to choose the definition of price stability and for central banks to work out how to achieve it with the tools are their disposal. Before closing I would like to acknowledge a set of broader political economy considerations that could arise in a low-for-long world. These could complicate the execution of current inflation targeting remits, and in the extreme overwhelm them. While all monetary policy tools have distributional effects, asset purchases have generated far greater attention than have changes in interest rates. For example, there is a perception that asset purchases increase inequality.
The progress brought about by this series of reforms approved with broad Parliamentary consensus does not mean that our financial sector does not face significant challenges ahead. During the last upturn households and firms rapidly incurred debt, a process matched by exceptionally high credit growth rates. This setting was conducive to an increase in the size of the banking sector, to the point of reaching a dimension which now, with a much less favourable outlook, will hardly be sustainable. The lower growth in demand compared with the previous stage, combined with the process of corporate and household deleveraging, will entail a fall in the volume of activity. To this can be added various factors which in the near future will act to squeeze unit margins, such as low interest rates, increased bad debts, higher capital requirements for both regulatory and market-related reasons, tighter financing conditions (risk premia are higher than before the crisis) and the increased importance of doubtful asset management. The management of doubtful assets in the real estate sector will be particularly important. In this respect, allow me some brief thoughts on the supervisory activity of the Banco de España. In the last few weeks some opinions have been aired on the lack of transparency of the Spanish banking system, as a consequence of a failure to duly record the excessive concentration of risk in the real estate sector, particularly that in property development companies.

As I have said on previous occasions, the greatest cause for concern at present should not be predicting exactly when positive quarter-on-quarter growth will resume, but rather determining to what extent the Spanish economy is ready – or not – to move into a long phase of robust growth. During the last upturn, the Spanish economy built up some significant imbalances, such as the excessive weight of real estate activities, a swollen external deficit, a relative loss of competitiveness, and high corporate and household debt. Over the course of the crisis, some of these imbalances have begun to be corrected, but others are still significantly holding back a pickup in growth. With the crisis, these pre-existing structural problems have been compounded by an increase in unemployment to levels far higher than those of any other developed countries and by the sharp deterioration in public finances. These are now undoubtedly the two main problems affecting our economy. To embark on a sustainable economic recovery, the imbalances built up by the Spanish economy before and during the crisis must be reversed. Job destruction must be halted and unemployment absorbed. And, further, an ambitious plan must be devised and set in place to cut the budget deficit, to redress the financial position of the private sector and, in sum, to mitigate all those structural shortcomings that are currently weighing on the recovery and contributing to reducing the growth potential with which our economy will face the new expansionary cycle.
GDP over 2020 held fixed at end-2019 level to prevent fall in output leading to denominator effect. Dotted line extends series to mid-2020, assuming completion of current asset purchase programme and further TFSME drawings. These figures reflect the June MPC minutes, which noted that lending under TFSME “was likely to exceed £ billion over the coming year.” For simplicity we assume the TFSME reaches £ at end-2020. 20  19  All speeches are available online at www.bankofengland.co.uk/speeches  19  Chart 17: Bank of England balance sheet relative to government net debt Per cent 60 Banknote convertibility to gold reinstated Banknote convertibility to gold suspended  South Sea bubble  Amalgamation of Treasury and Bank note issues  Covid-19 crisis  50 Failure of Lehman Brothers  40 WW1  WW2  30  20  10  0 1700  1750  1800  1850  1900  1950  2000  Sources: Bank of England (available here), OBR, ONS and Bank calculations. Note: Debt figures calculated on a fiscal year end basis. Red diamond shows end-2020 Bank of England balance sheet (consistent with Chart 14), relative to OBR projection for government net debt (excluding public sector banks) for FY 2020/21. These balance sheet actions by central banks globally have had their intended effect, improving financial and credit conditions to support households and businesses (Chart 18). Despite being tighter than at the start of the year, financial conditions have loosened significantly since mid-March.

At its meeting in June, the MPC voted to increase the stock of asset purchases by a further £ billion, to £ billion, with the programme expected to be completed around the turn of the year. 19  IMF (2020). 18  All speeches are available online at www.bankofengland.co.uk/speeches  18  Through these policies, the Bank of England’s balance sheet has so far expanded by close to £ billion, with a further £ billion expected during the remainder of this year due to additional asset purchases and TFSME drawings.20 This would take the Bank’s balance sheet to around 45% of (2019) UK GDP by the year-end, more than double its previous high-water mark (Chart 16). It would take the Bank’s balance sheet to almost double its highest-ever previous level relative to the Government’s net debt stock (Chart 17). Chart 16: Bank of England balance sheet relative to GDP Per cent 50 Banknote convertibility to gold reinstated Banknote convertibility to gold suspended  South Sea bubble  Amalgamation of Treasury and Bank note issues  Covid-19 crisis Failure of Lehman Brothers  45 40 35 30 25  WW1  WW2  20 15 10 5 0  1700  1750  1800  1850  1900  1950  2000  Sources: Bank of England (available here), ONS and Bank calculations. Notes: Chart from Hauser (2020) but updated to reflect most recent MPC announcement of further asset purchases and TFSME.
Developments since the onset of the financial crisis in 2008, however, have served as a reminder that monetary policy cannot always keep inflation and growth stable within a targeted range. This is true of both large and small currency areas. One reason is that the scale of the disruptions and distortions of recent years has been unusually large. Furthermore, the situation has been exacerbated by the fact that conventional interest rate policy has reached its limits. By introducing unconventional monetary policy measures, central banks have regained a certain room for manoeuvre. However, these unconventional measures cannot be deployed endlessly to achieve desirable monetary conditions. Interest rates, for example, cannot continue to be lowered into negative territory without at some point precipitating a flight to cash. Foreign exchange market interventions and quantitative easing programmes carry with them the increasing risk that a central bank’s ability to conduct monetary policy may be compromised in the long term. Furthermore, our practical experience of calibrating unconventional measures and of gauging their effects is still limited compared to that of the conventional interest rate instrument. In light of these reservations, unconventional measures must be used with caution, and their long-term consequences taken into consideration. They must also be continuously reassessed. Allow me now to illustrate how countries neighbouring the euro area have implemented their monetary policy since the onset of the financial crisis in 2008, using Switzerland, the Czech Republic, Denmark and Sweden as examples.

The primary goal of an independent monetary policy in the Czech Republic, Sweden and Switzerland is price stability. Denmark bases the maintenance of its price stability on ECB policy, as Danmarks Nationalbank keeps the krone in a narrow fluctuation band to the euro. The Danish experience of recent years, in particular, provides interesting insights into unconventional monetary policy measures. 2  BIS central bankers’ speeches  Three phases of monetary policy in Europe since 2008 The period between 2008 and today can be divided into three phases. The first phase, from 2008 to 2011, has the global slump in demand at its centre. During this period, primarily conventional monetary policy measures were deployed. The second phase, from 2011 to 2014, is shaped by growing fears about the future of the euro area and, in the event of its collapse, potential consequences for neighbouring countries. This period sees the introduction of unconventional measures. In the third phase, from mid-2014 to the present, the emphasis lies on quantitative easing in the euro area and its effects on neighbouring countries. During this period, unconventional measures are adjusted and their deployment is stepped up. For each phase, I will illustrate the most important economic developments and how central banks reacted to them, and provide a brief interim conclusion. Finally, I will place these observations on monetary policy in a broader context, before summing up.