samchain/econo-pairs-v1 huggingface dataset:
Imagine a hypothetical financial asset which follows a well-defined stochastic process. Assume that the underlying asset price data are generated by a GARCH (3,3) process. It is well-known that asset prices in general, and stock prices in particular, can exhibit GARCH-like features (Bollerslev (1987), Lamoureux and Lastrapes (1990)). This particular specification describes, in broad terms, the historical distribution of daily stock prices returns in the US over the past 80 or so years, though it clearly under-estimates the fatness of the tails (Chart 11). The true model is known, but not to outside investors. To manage their assets, investors use a model to forecast return volatility. The success of these models is measured by their out-of-sample prediction errors. These errors can be further decomposed into two components: bias (deviations of estimated values from their “true” value) and variance (the degree of variation across the set of estimators). The second component captures model uncertainty. The models used by investors are assumed only to vary by their degree of parametric complexity. In particular, the models are assumed to range from the parsimony of a GARCH (1,1) to the complexity of a GARCH (5,5). Clearly, both simpler and more complex specifications are possible, as are different dimensions of complexity. By generating random samples from the underlying stochastic process, the out-of-sample performance of these different models can be compared. 18 Charts 12 to 17 show the estimated mean squared prediction errors (MSPE) from the different models, together with their breakdown into bias and variance.

Philipp Hildebrand: The Swiss National Bank’s ability to act in the crisis Summary of a speech by Mr Philipp Hildebrand, Vice-Chairman of the Governing Board of the Swiss National Bank, at the Executive MBA HSG, Universität St Gallen, St Gallen, 21 January 2009. The complete speech can be found in German on the Swiss National Bank’s website (www.snb.ch). *  *  *  The global financial system is in the midst of the biggest crisis of the postwar years. Above all, the crisis is the most complex of this period. Problems in the US sub-prime mortgage market led to the breakdown of both markets and general trust. In particular, the interbank market, the nerve centre of the financial markets, froze up for several months. Governments and central banks managed to prevent the financial system from collapsing. The interbank market has been revived and risk premia have come down from their former record levels. In the meantime, however, the financial crisis has worked its way through into the real economy, which is now moving into a sharp downturn. In order to fight the crisis, the central banks have lowered their key interest rates aggressively. The instrument of the Swiss National Bank (SNB), the repo rate, has practically reached zero. However, this certainly does not mean that the SNB is incapable of action. If needed, there are other options available. The National Bank can extend the terms of repo transactions or give consideration to the purchase of government and corporate bonds.
Early work has estimated that, for example, an initial shock of 60bps to corporate bond spreads could be amplified by a further 30% and increase GDPat-risk (proxied by the 5th percentile of the forecast distribution of GDP) by 0.2pp. Estimating the costs and benefits will also require simulating into the future to take account of the larger size of funds. The impact of the FPC’s principles on the central forecast for GDP is harder to quantify as it depends on (unpredictable) investor behaviour. Under current fund structures, funds with longer notice periods or discounted redemption pricing are not as attractive to investors as the apparently “costless” funds with daily liquidity. Those structures that may look unattractive today are the very structures needed to finance investment in productive finance, such as infrastructure, the transition to a net zero economy and the financing of SMEs. Such investments simply are poorly suited to structures offering short-notice redemption. It follows that investors could respond to reform of fund structures by increasing investments in productive finance. The prospect of productive finance increasing after applying the FPC’s principles would be the macroprudential equivalent of ‘Divine Coincidence’ that promotes financial stability while increasing the rate of trend growth. Global co-ordination of potential reforms will be vital. That is why the Bank and FCA are engaging with the FSB, IOSCO and other competent authorities on the financial stability risks of asset management activity. Breaking the Tragedy of the Horizon to address the Climate Crisis The climate crisis is a Tragedy of the Horizon.

Jaime Caruana: Basel II - a review of ongoing work Keynote address by Mr Jaime Caruana, Governor of the Bank of Spain and Chairman of the Basel Committee on Banking Supervision, at the 20th Annual General Meeting of the ISDA (International Swaps and Derivatives Association), Barcelona, 16 March 2005. *  *  *  Mr Moulds, Mr Pickel, Ms. Sebton, distinguished guests, It is an honour for me to be invited to join your meetings today and it is furthermore my pleasure to welcome you and the International Swaps and Derivatives Association to Spain. It appears to me that you have all of the ingredients for a stimulating and memorable conference. The agenda is ambitious and addresses the latest topics in the ever-evolving derivatives markets. The speakers are distinguished, deeply experienced, and represent a wide range of perspectives and institutions at the forefront of financial services. And, of course, I must commend you on your selection of a marvellous location for your annual meeting. Barcelona has undergone a fantastic transformation, is a gateway for the world and a city that celebrates the ancient and the innovative. I hope that you take some time outside of your sessions to explore its blending of the old and the new. A walk through the “Gothic” quarter serves as a window into our past. A visit to any of the creations of Antoni Gaudì – after whom this conference hall was named – offers a vision of Catalan modernism through architecture.
In January, volatility measures rose temporarily; since then, however, they have returned to a declining path. At present, they are at least one standard deviation below average in all markets – and only marginally above the lowest level. Apparently, expectations that the major central banks will continue their exceptionally accommodating monetary policy in the foreseeable future have firmed. The danger here is that risks will no longer be correctly priced, thereby making financial markets vulnerable to sudden mood swings on the part of investors. Despite the fundamentally positive investor sentiment, demand for secure investments remains high. Yields on sovereign bonds with high credit ratings have therefore declined significantly since the beginning of the year, particularly in the US, Germany and Switzerland, where ten-year yields are currently around 50 basis points lower than at the end of 2013. The BIS central bankers’ speeches  1  decline in yields was especially marked in January, when uncertainty in a number of emerging economies and surprisingly weak economic data from the US spurred demand. In April and May, yields decreased further. This time, demand was attributable less to the publication of economic data and more to investors who, having speculated on rising yields, had covered their short positions when yields declined. The cautious attitude of many investors was also reflected in the continued high value of the Swiss franc. Chart 2 shows how the Swiss franc has moved sideways against both the euro and the US dollar since the beginning of the year.

In this situation, most stock market indices have registered gains since the beginning of the year. Indeed, a number of indices, such as Switzerland’s SPI, the US S&P 500 and Germany’s DAX, have attained record levels in recent weeks. Meanwhile, demand for sovereign bonds issued by euro area peripheral countries was high. This was attributable, first to a gradual improvement in fundamental data, but also to the fact that investors were anticipating the monetary policy easing measures introduced by the European Central Bank at the beginning of June. Consequently, risk premia against German sovereign bonds declined again significantly. They are currently at levels last seen in 2010, before the onset of the sovereign debt crisis. Sovereign bonds issued by emerging economies also benefited from investors’ increasing risk appetite. Despite the uncertainty at the beginning of the year which I mentioned before, their risk premia are now lower than at the end of 2013, apart from a very few exceptions. Alongside sinking risk premia, volatility on financial markets has also decreased since the beginning of the year. Chart 1 shows the standard volatility measures for US equities (VIX), US government bonds (MOVE) and foreign exchange markets (Global FX), all of which are derived from option prices. To ensure comparability, the individual data series have been normalised. They show how many standard deviations above or below their long-term average the figures are situated. In addition, the troughs since 2000 have been indicated at the right-hand edge of the chart.
History has many examples of ineffective policy actions by weak institutions, and they don’t end well. Our credibility and institutional resilience were hard won. Next year marks the 25th anniversary of the MPC and the adoption of the objective of price stability. Memories of the instability of the previous approaches may be fading with the passage of time. I can assure you Lord Mayor that our focus will remain firmly on taking the actions that are required to maintain price stability over time. Thank you. I am grateful to Sandra Batten, Jamie Bell, Lucio D’Aguanno, Andy Haldane, Jonathan Haskel, Andrew Hauser, Karen Jude, Simon Kirby, Clare Macallan, Rebecca Maule, Nick McLaren, Michael Saunders, Fergal Shortall, Sophie Stone, Silvana Tenreyro, Jan Vlieghe and Carleton Webb for their assistance in helping me prepare these remarks. 1. Victoria Beckham cuts dress prices to ‘future-proof’ fashion brandOpens in a new window  5/5  BIS central bankers' speeches

The infrastructure of business laws, accounting rules and public disclosure requirements must also be conducive to prudent management and market transparency. Payments systems must be enhanced to reduce the risk of systemic instability. 29. These are all areas where progress is being made throughout the region. I detect few signs of complacency among my fellow regulators or of a tendency to rest on past successes. We all recognize that banking stability is something that requires constant attention to keep up with changes in the economic environment and with market developments. There is also, I believe, a strong appreciation of the need to work together to promote stability. This is shown by the regional initiatives, through groupings such as EMEAP, to promote cooperation in supervision and in other financial sector issues. International institutions such as the Asian Development Bank also have an important role to play in encouraging financial market development. I am sure that this Forum will be helpful in addressing some of the issues involved, and I am grateful to the ADB and the IIF for organizing the event and for giving me the opportunity to speak. BIS Review 55/1997
It is a knowledgeable squirrel, if not as knowledgeable as the squirrels in the remake of the film Charlie in the Chocolate Factory that were taught by film-producer Tim Burton to crack nuts on demand. Yet squirrels live identically to their ancient ancestors. They have evolved at a snail’s pace, as have snails. That is because squirrels and snails lack imagination. Squirrels cannot imagine a world where nuts are delivered courtesy of a complex international supply chain, much less set about creating that supply chain. Nor are they likely to write a Roald Dahl novel involving oompa loompas or become the next Tim Burton. 5  Tegmark (2017). What life means to Einstein, Saturday Evening Post October 26, 1929, http://www.saturdayeveningpost.com/wpcontent/uploads/satevepost/what_life_means_to_einstein.pdf. 6  5  All speeches are available online at www.bankofengland.co.uk/speeches  5  Imagination is a uniquely human attribute. And it is an attribute that moved humans from the evolutionary slow lane to the neurological superhighway. Human progress was no longer constrained by sinews but by synapses, no longer tethered by biology but neurology. As my namesake (but no relation), the evolutionary biologist J B S Haldane, put it: “the world shall not perish for lack of wonders, but for lack of wonder”.7 It is not just evolutionary biologists that have recognised the importance of imagination in powering societies. Economists have too.

The figures I have just mentioned suggest that, overall, structural reforms in the labour market still need to be high on the agenda. This appears even more urgent if we consider that in the past Europe’s growth performance has been, and will be in the future (all else equal), increasingly constrained by its low population growth rate and population ageing. Indeed, since the mid 1990’s, population in the euro area has been growing at a yearly rate of just 0.4% compared to 1.1% in the US. However, what is worrisome is that at the same time, the gap in population growth has been even larger with regard to growth in the working age population. The working age population grew on average by 0.3% per year in the euro area over the period 1995-2007 compared to 1.2% in the US (1.1% in Spain). Finally, turning to labour productivity, while during the 1980s and the first half of the 1990s, hourly labour productivity in the euro area grew on average by 2.3%, it slowed down to 1.3% between 1995 and 2007. Similarly, over the same period hourly labour productivity growth in Spain decelerated very significantly from 2.5% to 0.5%. By contrast, US hourly labour productivity growth rose from 1.4% to 1.8%. The positive labour supply shock, reflected by the increase of employment particularly in the unskilled segment of the labour market experienced in the euro area as well as in Spain has,  2  Average to 2007Q3. 3  Source Eurostat.
Let me briefly recall the benefits of the “managed floating plus” strategy, as described by Goldstein: the more currency mismatch is brought under control, the less should there be fear of floating; if the exchange rate is allowed to move, the greater will there be the awareness of currency risk and the incentive to hedge against it; the less necessary it is to see the exchange rate as a target, the more likely inflation targeting will be successful and, hence, the more willing will foreign investors be to lend in local currency; the greater the availability of domestic-currency denominated instruments, the better the prospects for reducing currency mismatch. Let me add two comments: first, monetary policy alone cannot ensure current account sustainability in the long run. It also takes good fiscal and structural policies. The best monetary policy can achieve is “buying time” for these policies to be implemented, without jeopardizing its own objectives. Second, managed floating faces a composition problem on the global scale. Attempts by many countries to keep their currencies at an undervalued rate may end up in a race to the bottom – akin to the “beggar-thy-neighbor” policy of the ’30s. Multilateral or global arrangements are perceived as the best solution to such problems (Flassbeck, 2004). As changes in the exchange rate, deviating from purchasing power parity, affect international trade the same way as changes in tariffs, they should be governed by multilateral regulations.

Nevertheless, it is worth noting that, when Romania gave up monetary targeting, Estonia was its only peer among Central and East European countries in terms of longevity of the  2  BIS central bankers’ speeches  monetary policy regime, with its currency board adopted in 1992. Shifts from one end to another of the spectrum of monetary and exchange rate arrangements were common in the region. Specifically, the Czech Republic, Poland and Hungary had various forms of exchange rate pegs during the nineties, before shifting to inflation targeting. As for Romania, the transition between the two regimes was smoother, since the monetary targeting framework included elements such as the disinflationary stance, exchange rate flexibility and, of course, the major role of monetary aggregates, which are also seen in the inflation targeting regime. Amid the never-ending, heated debates on rules versus discretion in monetary policy, which are so time- and energy-consuming in the academic world globally, inflation targeting may be viewed as an attempt to make both ends meet. This strategy has the merit of combining tight constraints in terms of the final objective (the inflation target) with a certain degree of discretion as regards the calibration of monetary policy instruments so as to provide an adequate response to shocks. While theoretical orthodoxy used to claim that inflation targeting needs a free floating currency, in practice, many inflation targeters opted for a light version of the strategy. So did many Marlboro smokers.
8  BIS central bankers’ speeches  Figure 6 GDP growth (percent) 8  8  6  6  4  4  2  2  0  0  -2  -2  -4  -4  -6  08  09 Annual change  10  11 (1)  -6  Quarter-on-quarter change (2)  (1) Dark blue shows growth range for GDP forecast for 2011 in Monetary Policy Report of March 2011. (2) Seasonally-adjusted series. Source: Central Bank of Chile. Table 2 Economic growth  (annual change, percent)  2009 GDP Domestic demand Domestic demand ((w/o inventory change) Gross fixed capital formation Total consumption Goods and services exports Goods and services imports Current account (% GDP)  -1.7 -5.9 -2.9 -15.9 1.9 -6.4 -14.6 1.6  2010 5.2 16.4 11.5 18.8 9.3 1.9 29.5 1.9  2011 (f) 5.5-6.5 7.6 8.7 13.9 7.0 6.8 9.6 1.2  (f) Forecast. Source: Central Bank of Chile. BIS central bankers’ speeches  9  Figure 7 MPR and expectations (percent) 9  9  8  8  7  7  6  6  5  5  4  4  3  3  2  2  1  1  0  0  07  08  09  10  EES Mar.11  11  FOS 2Q Mar.11  12  13  MPR  Source: Central Bank of Chile.

As we noted in the presentations we made before this Commission and the Senate in full last December, the world economy is undergoing a process of recovery in two speeds, generating significant foreign exchange tensions. In early January the Board announced a program of foreign-currency purchases to alleviate these tensions and increase Chile’s international reserves to match those of other emerging economies. Such program involves the purchase of 12 billion US dollars over a period that ends in December this year. Three months into the process, the Bank has bought a little over 3 billion dollars. The peso/dollar parity is now around 3 percent above the level that prevailed before the purchase announcement, fluctuating in the range of 465 to 500 pesos per dollar. The overall trends that have determined an appreciation of the currencies of most emerging economies – including the Chilean peso – are still present. We believe that without the intervention the peso would have appreciated even more. The resolution of growth imbalances around the world will probably take some time, but sooner or later the differences between emerging and developed economies will narrow, mitigating pressures on our currency. Beyond these fluctuations, the gains in competitiveness that our country needs in order to remain on the path to development will be achieved not with actions that artificially increase the level of the nominal exchange rate, but rather with structural reforms that will improve productivity and, therefore, the competitive stance of our exports.
The Governing Council consists of the Executive Board of the ECB and the governors of the central banks in the euro area. Monetary policy decisions are implemented by the Eurosystem, which comprises the ECB and the national central banks of the 11 participating EU Member States. The national central banks are, above all, entrusted with the decentralised implementation of the single monetary policy and the relevant activities in their countries. First, I should like to say that the launch and the first few months of the common currency have, in our view, gone well. The initial experiences with the euro and the single monetary policy have proved to be both positive and encouraging. We have currently achieved price stability and the prospects look good for this to remain the case in the years to come. The Governing Council of the ECB has become a truly supranational body. The members of the Governing Council clearly see themselves as committed to this joint cause. They take the whole euro area into consideration when discussing and taking decisions on monetary policy. The efforts made prior to and at the time of the changeover weekend at the beginning of this year are already part of history. Since the beginning of this year the euro has been quoted on the international financial markets and used for cashless payments.

This caused the average interest rate level in those countries of the future euro area to be lowered considerably before the beginning of Monetary Union. The close cooperation which had always existed between the European central banks was increasingly stepped up in the final months of 1998 between those countries participating in Stage Three of Monetary Union. The coordinated reduction of central bank rates in December 1998 to 3% made it perfectly clear that, de facto, Monetary Union had already begun before the start of Stage Three. Looking at economic developments, in the first few months of this year there have been an increasing number of indications that the negative effects of the crises in Asia and Russia on growth and employment in the euro area could be more serious than was first expected. With the apparent slowdown in economic growth in the euro area, the risks that the 2% threshold for the tolerable rate of inflation would be exceeded in the foreseeable future evaporated. This forecast was also reflected in the revisions to the inflation forecasts of international organisations. At the beginning of April 1999, the Governing Council of the ECB therefore decided to reduce the interest rates on the main refinancing operations by 50 basis points to 2.5%, as well as the rates on the standing facilities to 1.5% and 3.5% respectively. The M3 monetary aggregate did expand such that it was slightly above the reference value at the beginning of 1999.