samchain/econo-pairs-v1 huggingface dataset:
The main way we achieve these goals is by controlling the federal funds rate, the rate at which banks lend each other money overnight in the form of unsecured loans. This rate in turn affects overall financial conditions and thereby the wider economy. At each of its meetings, the Federal Open Market Committee (FOMC) decides on the target range for the federal funds rate, which currently stands at 1-3/4 to 2 percent.2 But how does this work—that is, what keeps the federal funds rate within the target range? The Fed has an operational framework in place designed to keep interest rates where the FOMC wants them. We call this an “ample reserves” regime. Back in January of this year, the FOMC communicated its intention to continue to implement policy according to this regime.3 The key benefit of this approach is that it’s a simple, effective way of controlling the federal funds rate and thereby influencing other short-term interest rates. The ample reserves framework has three elements designed to maintain the federal funds rate within the target range. The first, not surprisingly, is supplying an amount of reserves that banks hold at the Federal Reserve that is “ample.” By that, we mean that the supply of reserves is adequate to efficiently and effectively implement monetary policy. Here, “efficient” means that the level of reserves is not excessive, relative to what’s needed to be effective.

4  BIS central bankers’ speeches  Glossary CESEE – Countries of Eastern and South-East Europe; SSM – Single Supervisory Mechanism (EU) ESRB – European Systemic Risk Board (EU) FSOC – Financial Supervision Oversight Council (USA) ECB – European Central Bank EBA – European Banking Authority FSB – Financial Stability Board PRA – Prudential Regulatory Authority (UK) FPC – Financial Policy Committee; BRRD – Banking Recovery and Resolution Directive (EU)  BIS central bankers’ speeches  5
Stefan Ingves: Introduction on monetary policy Speech by Mr Stefan Ingves, Governor of the Sveriges Riksbank, at the Riksdag Committee on Finance, Stockholm, 22 February 2007. *  *  *  Thank you for the invitation to come here! I came here for the first time one year ago, as newlyappointed Governor of the Riksbank. A year passes quickly, and now it is once again time for me to summarise the past year and at the same time report on how the Executive Board of the Riksbank views the prospects for the economy and inflation. Before I begin, I would like to welcome the fact that the Committee has decided to hold this hearing at a later date in relation to the publication of the Riksbank's report. Of course, this means I risk having to answer even sharper questions than usual, but it’s all in the line of duty. It is also important that these hearings are held under the best possible conditions. My most important message today is: •  We have now begun to publish our own forecast for the repo rate. This means that we have taken a further step towards increased clarity and openness in monetary policy. •  Inflation rose last year, but was still below the target. One of the main reasons is the substantial productivity growth. Understanding which mechanisms lie behind the strong productivity has been, and is, an important task for the Riksbank. •  The economic prospects are bright.

We also recognize the fact that the global business community of Islamic finance needs to grow in order for the broader global community to benefit from its value proposition, as only then can its growth potential be fully harnessed. With this in mind, Malaysia actively engages the global community to develop Islamic finance together by sharing our experience and providing the technical know-how on the industry. Deriving strength from our progress and achievement on the domestic front, Malaysia offers a workable model of development which can be deployed not only in other traditional Muslim countries, but also in other centres seeking to work together in developing a specific segment of the market. Indeed Islamic finance has now entered a new phase of development, where participants and businesses have become more internationalized. Another priority in facilitating global integration of the Islamic financial system which is high on our agenda is in ensuring Malaysia’s continued active and meaningful role in contributing to the development of supporting international Islamic financial infrastructure. Since Malaysia’s involvement in the pioneering group of countries that led to the formation of the Islamic Financial Services Board (IFSB), the international prudential standard-setting body which Malaysia has the honour of hosting, we have continued to support the important work of the IFSB including through our active participation in its various projects.
The effect is, however, expected to be more than offset by the prospects of very low inflation this year. In 2005 and 2006, wage growth is projected to increase as a result of a tighter labour market and higher inflation. There has been a tendency in recent years for a larger portion of pay increases to be agreed in the first year of the two-year period covered by the main agreement. If we consider these two-year periods together, the estimated relationship between wage growth and developments in the labour market are approximately in line with that observed since the mid-1990s. Developments in real economic variables are mirrored in credit markets. In recent years, household income has shown solid growth, and household confidence has been high. However, corporate earnings have been low, and until recently enterprises have primarily focused on enhancing efficiency. Credit developments are giving ambiguous signals to our interest-rate setting. Growth in household borrowing is high, but enterprises are reducing debt. The change in the breakdown of credit may have been amplified by banks’ increased eagerness to extend credit to households after a period of losses on loans to the business sector. Some reports from our regional network indicate that there are some restraints on credit for the business sector in some areas. Developments in credit to enterprises shadow developments in their investments. Low credit growth indicates that mainland business investment has not yet picked up. Total credit is expanding broadly in line with normal growth in nominal GDP.

Considering the dramatic price increases on the Swedish housing market in recent years, this is a completely reasonable claim. The higher housing prices are, the greater the loan required to finance the purchase of a house or flat. Finansinspektionen’s mortgage survey shows that the debt ratio for new mortgage borrowers averages 370 per cent, which is a higher debt ratio than for existing mortgage holders. On the other hand, I do not think that the difference between new mortgage borrowers and those who have owned their homes for some time is as big as I had perhaps expected. This is because people who have owned their homes for a while have had the opportunity to reduce their debts. The fact that the difference is not bigger could indicate that the households reduce their debts at a relatively slow rate. Let me return to this a little later. The debt ratio is highest among low and middle-income earners One conclusion of the government’s inquiry “Over-indebtedness in a credit society” is that the highest debt ratios are to be found among those with the highest incomes. This is the picture you get if you look at the population as a whole, that is if you also include individuals who have an income but no debts. This means that the inquiry really shows that low-income earners do not take loans to the same extent as high-income earners. If we instead look at debts in relation to incomes only for those individuals who have debts we get a different picture.
Hurst found that flooding exhibited a persistent pattern. Large floods were not only frequent, but came in clumps. They had a long memory. The Hurst coefficient summarises this behaviour in a single number. For example, a measured Hurst equal to 0.5 is consistent with the random walk model familiar from efficient markets theory. A Hurst coefficient above 0.5 implies fatter tails and longer memories. In his study, Smith finds that the Hurst coefficient among a selection of stocks has risen steadily above 0.5 since 2005. In other words, the advent of HFT has seen price dynamics mirror the fat-tailed persistence of the Nile flood plains. To illustrate, Chart 11 plots the path of three simulated price series with Hurst coefficients of 0.5, 0.7 and 0.9. A higher Hurst coefficient radically alters the probability of sharp dislocations in prices. It also prolongs these dislocations. Prices become de-anchored and drift; their variance grows over time and is unbounded. If this long-memory property of prices is emerging at ever-higher frequencies, it might provide an important clue to how HFT affects systemic risk. 4. A sketch model of market macrostructure  To see that, consider a sketch model of market-making. This builds on an analytical insight which is already more than 40 years old. It owes to the late Benoit Mandelbrot, FrenchAmerican mathematician and architect of fractal geometry. Mandelbrot found that a great many real-world topologies exhibited a fractal pattern. By this he meant that the basic pattern repeated itself, whatever the scale at which it was observed.

BIS central bankers’ speeches  19  Chart 13: Difference in maximum and minimum price of GE shares across different exchanges on 06 May 2010 Price difference $ 0.40 0.35 0.30 0.25 0.20 0.15 0.10 0.05 0.00 14:41  14:43  14:45 Time  14:47  14:49  Source: NANEX. Notes: Difference in bid prices across NASDAQ, NYSE and Pacific Exchange. Table 1: Round-trip latencies for selected exchanges, April 2010 Exchange  Average round-trip latency (microseconds)  Nasdaq OMX INET  250  Bats Europe  270  Chi-X Europe  400  NYSE Arca  900  LSE Tradelect  2000  TSE Assowhead  5000  Source: http://mondivisione.com via AFM 2010. 20  BIS central bankers’ speeches
Ladies and Gentlemen, Let me now turn to the last success factor: inclusiveness, which is probably the weakest achievement among the three success factors so far. However, inclusiveness is something that has increasingly gained attention from Thai policymakers in recent years, as it was part  4  IMD, 2010. BIS central bankers’ speeches  3  of the root cause of political unrest. I believe that inclusiveness will be one of the long-term solutions for Thailand political stability. Yet, I should stress that inclusiveness has a different concept from equality. It focuses on creating equal opportunity rather than equalizing income. Income equality ultimately means that the reward system is independent of performance which erodes efficiency. Inclusiveness, on the other hand, refers to having equal opportunity which still preserves efficiency through reward incentive system while allowing the rich and the poor to have the same economic opportunity. As such, inclusiveness refers to equal access to public infrastructure such as education, fair competition and equal treatments of law and regulation to all. In this way, inclusiveness will provide equal exposure to yield the benefits from economic prosperity. Improving inclusiveness in Thailand will be a long process but some initiatives have already been put in place. These include decentralization of public spending, better access to education, informal sector debt alleviation, and better credit access for low income group.

This morning, I would like to take the opportunity to briefly address some of the issues and priorities that are currently directing the Bank’s work in this area. We have substantially completed a review of the existing corporate governance frameworks for the banking and insurance industries and expect to be able to consult with industry on our specific proposals to update and harmonise the frameworks later this year. As part of this review, the insurance industry can expect that what is currently described as “best practice” in the prudential framework on corporate governance will be elevated to principles or minimum expectations to be met by all institutions. We do not expect this to substantially alter current practice in the industry given that for some time now, the Bank already holds insurers to higher standards that reflect the maturity of the industry and the more sophisticated nature of the business over time. But we also set out in the review to take a fresh and critical look at some key elements of the governance framework to ensure that our requirements remain fit for purpose in the context of the changing financial landscape. Independence, board size and composition, and expectations of subsidiary boards are among some themes addressed in our proposals. We have drawn extensively on our supervisory observations and thematic reviews of governance practices over the course of the past two years in informing our review. In many areas, positive changes can be observed in the governance practices of insurers.
Much of the increase in debt issuances here was by Asian issuers—mostly from China, Indonesia and India—raising debt capital in Singapore for the first time. Green bonds are also gaining traction, with local and foreign issuers issuing over $ billion of green bonds here. The life insurance industry is doing well, with net premiums growing by 16% p.a. over 2016 and 2017. Growth was boosted by Asian consumers demanding more savings and investment products in search of yield. Non-life insurance business is, however, facing structural challenges and weak growth. Net non-life premiums grew by just 2% p.a. over 2016 and 17. 7 / 11  BIS central bankers' speeches  Business conditions have been challenging globally, due to excess capacity and downward pressure on premiums. But Singapore remains attractive as the premier reinsurance hub in Asia. Global reinsurance players such as Swiss Re and Munich Re have recently set up their regional headquarters here. And we are making a push into alternative risk solutions such as risk pools and insurancelinked securities or ILS. Foreign exchange trading declined last year although we remain the third largest FX centre globally. Singapore’s average daily FX trading volume grew by 20.5% in 2016 but declined by 6.7% in 2017. This was mainly due to lower volatility in key currencies such as the Japanese Yen; and some temporary trading desk turnover which has since been filled.

And this was an important reason why the Riksbank began to publish its forecasts and other material on which decisions were based early on in the new inflation-targeting regime. Building up confidence in the price stability target as quickly as we actually did would probably have been very difficult if we had not been as open as we were with regard to our work and our decisions. Secondly, openness and clarity are nowadays an important part of monetary policy in itself. According to economic theory, there is a correlation between interest rates with different times to maturity. And expectations of short-term interest rates, which the central bank governs, are important to the longterm interest rates. By influencing expectations of short-term interest rates, a central bank can therefore also indirectly affect interest rates with longer maturities. Greater influence over interestsetting for all maturities – the yield curve – means that the impact of monetary policy is more effective. This is often called conducting monetary policy by “management-of-expectations”. And the best way to do this is to provide good information. A third reason for working to achieve greater openness and clarity “outwards” is that it can help us to work more efficiently within the Riksbank’s walls. And this is an argument I do not think should be underestimated. Openness quite simply increases the incentives for us to do a good job as it makes it easier for others to evaluate how well monetary policy functions. 3  Sveriges Riksbank Act (1983:1385), Chapter 3, Article 3.
Compared to our framework for things like capital, liquidity and accountability, the regulatory framework for operational resilience is thoroughly under-developed not only here in the UK but also internationally. This matters more than it used to for a number of reasons, but let me pick out two. First, the emergence of cyber-attacks is a clear and present danger to the financial system which our forebears simply did not have to worry about. And second, as more and more of us access banks and insurance companies digitally, with a major programme of bank branch closures in full swing, and in the age of social media where problems become very visible very quickly, operational failures hurt more than they used to. For the same reasons the Treasury Select Committee is rightly taking a strong interest in this topic. 1  £ as at year-end 2017 4  All speeches are available online at www.bankofengland.co.uk/speeches  4  We therefore published during the summer – jointly between the PRA, FCA and Bank as supervisor of market infrastructure – a discussion paper proposing a new framework for thinking about these issues. The central idea is a simple one: how much operational disruption to key business services should firms, the PRA, the FCA, and the wider Bank of England be prepared to tolerate? We call this ‘impact tolerance’. The focus of our future policy will be on the continuity of the business services that a firm’s customers and the wider economy rely upon.

By taking firm pre-emptive action, we have shown what the new judgement-led approach to supervision means in practice. It substitutes substance for process and judgement for box-ticking. We need not more but better regulation and, just as with monetary policy, we have changed the way regulatory decisions are made. The PRA announcement tomorrow is another step in dealing with the legacy of the past. It will make our banking system more resilient and better able to support recovery. But it is too soon to say that the job is done. Many of our major lenders will still be highly levered. The levels of capital required by the Vickers reforms, on the one hand, and the Basel standards for large international banks, on the other, mean that there is clearly some way to go before we can claim to have a really well-capitalised banking system. In future, the FPC and the PRA will work together to conduct regular stress tests of our banks, starting in 2014. Those stress tests will I am sure be made public, and banks will be expected to set out their plans for making up any identified shortfall in capital. Managing this process, and the transition to a higher level of capital, will be key tasks for the FPC and PRA in the coming years. Those who argue that requiring higher levels of capital will necessarily restrict lending are wrong. The reverse is true. It is insufficient capital that restricts lending.
Is it possible that the two are sufficiently close in their effects that they are in effect perfect substitutes? In that case, it is not clear that having the additional instrument is of much value; the two instruments need to have sufficiently differentiated effects to be useful. Second, to the extent that they are sufficiently independent, is there any danger of a “pushme, pull-you” outcome if the instruments are set by different authorities? To investigate these issues, we employ a standard, though stylised, sticky-price New Keynesian macroeconomic model, augmented to incorporate both physical capital and a simple banking sector. The model is a version of that of Gertler and Karadi (2009), stripped of features such as habit persistence that are inessential for our purposes. The key additional ingredients relative to the standard New Keynesian model are twofold. First, funds flowing from savers to borrowers must be intermediated through a banking system. Banks take in deposits, Dt, from households, on which they contract to pay a given nominal interest rate. Together with their stock of retained profits (bank capital, Bt), these funds are then lent out to finance the physical capital that firms carry through into the next period. The real (gross) return on this lending, Rkt+1, then includes the marginal product of that capital plus any associated capital gains or losses as the price of physical capital evolves, net of the inflation rate.

We consider two policy environments: in the first case, the policy maker uses only monetary policy; in the second case, the policy maker deploys both monetary and macro-prudential instruments. We focus on three sorts of shock: a total factor productivity (TFP) shock; a shock to the effort necessary to monitor borrowers, λt; and a mark-up shock in the inflation equation. These shocks are assumed to be temporary, though highly persistent. The TFP and mark-up shocks are familiar from standard New Keynesian models and affect households and firms in the usual way, though, by changing the return on capital, they also affect the equilibrium in the banking sector. The shock to the monitoring cost represents a simple way of altering the equilibrium leverage ratio and we think of it as a metaphor for changes in the willingness to take on risk. A fall in the cost of monitoring – an “exuberance” shock – relaxes the banks’ incentive compatibility constraint and is associated with an increase in the equilibrium 20  BIS Review 111/2010  leverage ratio, a fall in the loan-deposit spread and an increase in loans to firms; a “panic” shock does the opposite. Chart 8 shows the response of the economy to an adverse TFP shock, a financial “panic” shock and a mark-up shock, assuming in each case that policy responds optimally. When TFP falls (upper panel), it is efficient for the level of output to fall and the stock of physical capital to gradually fall back.