samchain/econo-pairs-v1 huggingface dataset:
I usually mention an example from the 1990s crisis when talking about this phenomenon; in 1989 the requirement for direct return on the commercial property market was around 4 per cent. A risk-free five-year government bond provided up to 12 per cent interest. But the  4  BIS Review 70/2010  market preferred to invest in an unsecured property asset to a covered bond with a return of 8 per cent more! It takes a lot to defeat that kind of optimism. But the exact size of the increases in the policy rate that are necessary would probably vary from situation to situation. Under certain circumstances it may even be enough to make very small increases. In the world of theory, everyone tries to stay well-informed with regard to for example the most probable development of the interest rate. But this does not mean that things always work out this way in reality. Smaller interest rate increases combined with successful communication can function as a clear signal that the central bank regards the current situation to be untenable. It can contribute to correcting or at least dampening irrational behaviour. If a central bank were to judge that developments in property prices and lending were beginning to give cause for concern, it would also be rather strange, in my opinion, if the governor or governors were to just sit there and not do anything on the grounds that the policy rate would probably need to be raised a lot.

My interpretation is that the advocates of “leaning against the wind” consider that the central issue is that something should be done – and this does not necessarily mean raising the policy rate. So it would  BIS Review 70/2010  5  appear that we are approaching some form of consensus. At least to the extent that most people now seem to consider it more dangerous to do nothing than to do something. Given the proportions the debate on monetary policy and asset prices has taken on, it would be easy to believe that there are a whole number of practical examples of “leaning against the wind”. However, this is not the case – with regard to either successes or failures. One of the few examples usually taken up is the policy conducted by the Reserve Bank of Australia (RBA) 2002–2004. The RBA adjusted its policy rate to try to dampen house price rises that were fairly clearly of a speculative nature. The fact is that this type of strategy is relatively untested. And we cannot refer to practical experiences where central banks have systematically and over a long period of time tried to apply the principle of “leaning against the wind”. Other and better weapons? Most people probably agree that the interest rate cannot do the whole job if we want to try to slow down developments in the property and credit markets that appear to be getting out of control.
In the assessment of the Executive Board, the sight deposit rate should lie in the interval 2-3 per cent in the period to the publication of the next Inflation Report in March 2006, conditional on economic developments that are broadly in line with the projections. In the press release following the Executive Board’s meeting on 2 November, the following factors of uncertainty were highlighted: •  Stronger trade shifts and increased labour market competition may result in lower price and wage inflation and weaker pressures in the economy. In isolation, this would imply less frequent interest rate changes. •  We have little experience of such low interest rates over a long period. There is a risk that an interest rate that is kept low for a longer period may lead to expectations of a persistently low interest rate. This might result in a higher-than-projected rise in output and inflation and would in isolation suggest a faster interest rate increase. •  Developments in the global economy are uncertain. Our projections are based on favourable growth prospects in other countries and continued high oil prices. Different developments in global growth and in oil prices would result in a different path for the Norwegian economy. Interest rate setting must also be assessed in the light of developments in property prices and credit. Wide fluctuations in these variables may constitute a source of instability in demand and output in the somewhat longer run.

8 In addition, in the performance of their statistical tasks, both the ECB and the NCBs adhere to the statistical principles and ethical and quality standards set out in their “Public commitment with respect to the ESCB’s statistical function”. 9 The independence granted to the ESCB by the Treaty means that there is no political interference in the  6  See “The introduction of harmonised competitiveness indicators for euro area countries” in the February 2007 issue of the ECB’s Monthly Bulletin, and http://www.ecb.europa.eu/stats/exchange/hci/html/hci_200801.en.html. 7  See “Review of statistics on payments and securities trading, clearing and settlement” in the January 2008 issue of the ECB’s Monthly Bulletin. 8  See http://www.ecb.europa.eu/pub/pdf/other/ecbstatisticsqualityframework200804en.pdf. 9  See http://www.ecb.europa.eu/stats/html/pcstats.en.html. Both this commitment and the framework governing the quality of ECB statistics take due account of the European Statistics Code of Practice for the national and Community statistical authorities, while also reflecting the specific governance structure of the ESCB. BIS Review 50/2008  3  compilation and dissemination of statistical information. Similarly, the Treaty states that compilers of statistics in the NSIs and Eurostat should also act in full scientific independence. In addition to these essential preconditions, statistics also need to be adequately explained. This applies, in particular, to one of the most important statistics for the ECB’s monetary policy making, namely the Harmonised Index of Consumer Prices (HICP).
Similarly, Chinese banks can use loan securitisation to recycle bank capital and re-channel the funds to real economic activities back home. •  ICBC’s opening of its Asia Pacific Shipping Finance Centre is a good example of this. •  The centre will help ICBC Singapore securitise its shipping and related loans originated in the Asia Pacific, by tapping the Singapore bond market. Risk management As Chinese corporates continue to venture abroad in Asia, they will confront a variety of risks. These risks need to be managed well. First, there are the usual foreign exchange and interest rate risks. •  As the largest FX market in the Asia Pacific, Singapore offers Chinese corporates effective FX hedging solutions to manage their risk exposures. •  The Singapore Exchange has a strong suite of FX futures contracts, including Asian currencies, and the take-up rate has been strong. •  Many corporate treasurers have chosen Singapore for their regional treasury centres covering Southeast Asia, and even the Greater China region. Second, some of the investments by Chinese corporates could be in locations that are vulnerable to natural disasters. •  Investors would need to take into account not only the immediate risk of loss due to a natural catastrophe but also the secondary impact on their supply chains and working capital. •  Singapore has a critical mass of specialty insurers who can provide appropriate cover against such natural catastrophe risk. Third, infrastructure projects typically expose investors to significant political and credit risks.

In view of the extent and risks of the current crisis, fiscal policy will need to consider and prepare the deployment of additional stabilisation measures alongside the automatic stabilisers. In addition to the increased focus on economic policy, business practitioners within the Swiss economy are also challenged. In the case of banks, it is essential that credit shortages for companies and private households be avoided. Moreover, interbank business needs to be strengthened in order to smooth out liquidity imbalances. Companies must enhance their innovativeness and use opportunities for opening up new markets. The Swiss economy has many structural strengths and this prompts confidence that Switzerland will overcome the crisis. BIS Review 5/2009  1
Second, a single framework for banking supervision. Third, a single mechanism for resolving banks, funded by levies on the sector itself. Fourth, a common backstop in case temporary fiscal support is needed. Fifth, a common system for deposit protection. 1  Harold James, Making the European Monetary Union, pp. 313–315. 2  Padoa-Schioppa, T., “EMU and banking supervision” Lecture in the London School of Economics, on 24 Feb 1999. BIS central bankers’ speeches  1  How would Banking Union have helped during the crisis? To illustrate why these elements are so important, it is helpful to think through how a genuine Banking Union in Europe could have helped both prevent and mitigate the crisis. Preventing the crisis Turning first to prevention, one of the key causes of the crisis was the unacknowledged buildup of large private financial imbalances in the period from 1999 to 2008. They were unacknowledged because the governance framework that existed in Europe was focused exclusively on fiscal policies via the Stability and Growth Pact. This reflected the prevailing belief at the time that the private sector was composed of fully rational agents and was essentially stable and self-correcting – hence only the public sector could create instability. This was of course a fiction: the private sector was where some of the largest imbalances were concentrated.

On this basis, it can decide to transfer to direct supervision any bank or group of banks that may be considered relevant or the origin of systemic risk. This incorporates the lesson of the crisis that not only big banks can be the source of general financial instability. The SSM’s micro-prudential role will also be complemented by extensive macro-prudential powers. Unifying micro- and macro-prudential powers within the central bank aligns practice in the euro area with that in most other advanced economies. The Bank of England, for instance, will have the Prudential Regulation Authority for micro- and the Financial Policy Committee for macro-prudential issues. And there are in fact additional reasons for doing this in a multi-country monetary union like the euro area, as the level of the main interest rate may not be appropriate for all countries at all times, meaning macro-prudential tools play an important role as a “counter-weight”. A final point to note about the SSM, according to its Regulation, is that its launch will be associated with a comprehensive review of participating banks’ balance sheets. The objective of this review is to identify legacy problems and start with a system that avoids reputational risks for the SSM down the line. This process may have financial implications if impaired assets have to be written down. And this is a further reason why having a Single Resolution Mechanism in place for participating countries is a matter of urgency.
The winning team develops skills – in analysis, presentations and teamwork – that will help them in their future studies and careers in the knowledge economy. BIS Review 18/2010  5  The New York Fed is also supporting the Office of the Commissioner of Financial Institutions in its two-week expo, where last year 20,000 people saw presentations and received financial counseling. We have also had a productive relationship with our good friends at the Puerto Rico Bankers Association. Each year during “Community Reinvestment Act Week,” our staff highlights new ideas and products especially suited to the Puerto Rican market. For example, this November we held a forum for Puerto Rican and U.S. Virgin Islands financial institutions, state and local governments, and nonprofit organizations to introduce “Bank On,” a financial product proven to attract under-banked people into the financial mainstream. Since then, several local banks have formed a group to explore how to best implement it here. Another example of collaboration is our work with the Bankers Association and local universities. During the fall, we held a “Financial Awareness Video Contest” for college students. This pilot project explores building peer-to-peer financial awareness among young adults by having contestants create a 90-second video. We look forward to hosting the first place winners during their trip to New York in the spring.

The U.S. government’s financing of Treasury’s actions required federal debt to rise sharply, and stabilizing the financial system temporarily boosted the size of the Fed’s balance sheet. 2  BIS Review 18/2010  The final numbers aren’t in yet, but it now appears that the downturn in real gross domestic product (GDP) in the United States lasted about a year and a half, much shorter than the typical banking crisis downturn. Peak to trough, output fell about 4 percent, less than half the typical decline seen in past financial crises. While there are still some significant downside risks to the economy, in general, the outlook is improving. Of particular note, the capital markets – except for certain securitization markets – are now generally open for business. In addition, the big banks in the United States have been able to raise a large amount of equity capital to put themselves in a stronger position. I believe that Federal Reserve actions over the last year and a half have contributed very substantially to this improvement. But there still is a lot of work to do. Smaller banks – especially those with large commercial real estate exposures – are under pressure, while households and smaller businesses find that their access to credit is still constrained. Moreover, regulatory reform is essential to prevent this type of financial crisis going forward.
In a context of persistent recession, this strategy would have important benefits, in the form of an increase in the economy’s potential growth, generated by the reforms, and an improvement in the credibility of the sustainability of public finances in the medium term, which would in turn expand the fiscal headroom available and boost the expansionary effects of the current fiscal actions. In short, to have the fiscal space necessary to be able to expand the support measures for the economy should the course of the pandemic make this necessary, the reform agenda needs to be implemented decisively, fiscal consolidation  5  See R. Blanco, S. Mayordomo, A. Menéndez and M. Mulino (2020), Spanish non-financial corporations liquidity needs and solvency after the COVID-19 shock, Occasional Paper No 2020, Banco de España. 17  needs to be planned and support instruments need to be reformed to make them more flexible and focused. In the case of structural reforms, the Annual Report, which I am presenting to you today is a veritable catalogue of the main challenges that, in the opinion of the Banco de España, the Spanish economy faces in order to raise aggregate well-being. These challenges are wide-ranging in type and require the following issues to be addressed: low productivity growth, labour market duality, high unemployment, population ageing, inequality, climate change action, changes in the globalisation model and the speed of digitalisation of the economy.

While these are welcome developments, they have to be accompanied with the necessary financial education to enable safe and effective participation in the financial sector. From the regulators perspective, it means ensuring the regulatory and supervisory system is robust enough to cater to the evolving needs of the financial system, whilst at the same time safeguarding financial and economic stability. Conclusion Allow me to conclude with an analogy of the nine-dot puzzle. The puzzle, which appeared as early as 1914, proposes an intellectual challenge of connecting nine dots by drawing four straight lines without lifting the pencil. As many may know, the solution is simple, but can only be found by drawing lines outside the imaginary box formed by the dots, thus popularising the term “thinking outside the box”. The heart of the challenge lies in overcoming the imaginary boundary or border we perceive. The potential for international banking remains vast, if utilised appropriately. As the world ponders on how best to connect our economies together and the role of international banking in this aspiration, let us not be afraid to consider new perspectives, to search beyond traditional borders – real or imaginary. Only then, can we truly realise the benefits of an international banking model that is sustainable, inclusive and without borders. 3/3  BIS central bankers' speeches
At first glance it would appear that card payments – which are 35 per cent cheaper for society to produce – should replace cash completely. But it is not quite so simple. There are major differences in how cards and cash are produced. Card payments require an extensive infrastructure of terminals, computers and lines of communication and have substantial fixed costs. But the cost of a card payment is always the same, regardless of whether one uses the card to pay for a purchase amounting to SEK 50 or SEK 50,000. For payments made in cash the variable costs are substantial. Cash payments require considerable physical management such as transport, counting, storage of banknotes, etc. The larger the transaction amount, the more expensive the actual cash payment will be, as it involves a larger share of this management. For payments of small amounts the cost of cash is therefore lower than the cost of a card payment. This means that from society’s point of view, cash may be preferable for making small payments. To obtain an idea of what the size of a transaction may mean, we estimated the costs to society of a cash payment and a card payment respectively as functions of the transaction amount. In this way we could also calculate when it was profitable to pay in cash. The results show that – at lease in 2002 – it was most cost-efficient to pay in cash for purchases amounting up to almost SEK 70. 7 Above this, card payments were always preferable.

Lars Nyberg: It costs to pay – do we use too much cash? Speech by Mr Lars Nyberg, Deputy Governor of the Sveriges Riksbank, at the Finansförbund congress, Bålsta, 28 May 2008. *  *  *  Who pays the price? When we pay for goods we have bought at the supermarket or for the hamburger we eat for lunch we rarely wonder what the actual payment costs. This applies both to when we pay by card and pay in cash. And why should we care what it costs to pay? This is not a cost we ever see. But of course it costs to pay. It uses resources in the economy. Why are there costs in cash? Well, ATMs cost money to fill. And banknotes and coins are transported around the country by cash-in-transit firms which naturally want remuneration for this. Moreover, the costs for the safety of their personnel have increased rapidly in recent years. Card payments also cost money. They require terminals in shops and other places that accept such payments. And card payments require complex computer systems, which must be maintained and developed. Credit cards also involve credit, and credit is never free of charge. If a shopkeeper pays a charge of 3 per cent to the credit card company, which is not unusual, this means an effective annual interest rate of 20 per cent in round figures, given a credit period of 30 days.
Coinciding with the stock market boom in the late 1990s and 2000, corporations in the euro area raised significant amounts of equity capital. New companies, often in the high-tech field, obtained listings at specialised “new markets” stock exchanges for high-growth companies. The amount of new capital raised on euro area stock markets increased from € billion in 1998 to € billion in 2000, when stock prices were at their peak. The growth of the euro area stock markets, in terms of the ratio between market capitalisation and nominal gross domestic product, has been staggering. Over a period of ten years, from 1990 to 2000 - when prices were at their highest level - this ratio increased about fourfold. With the benefit of hindsight, the belief in enormous potential profits stemming from investments in “new economy” corporations resulted in a stock market rally, which broke all previous records. Valuations of internet-related companies reached levels that were extraordinary by basically all standards. In March 2000, the monthly average price-earnings ratio of stocks in the technology, media and telecommunications sectors peaked at 70, compared with an average of around 13 over the previous 25 years. It seemed that the sky had finally become the limit indeed and that a new era had arrived. In parallel with the rise in stock prices, stock market volatility jumped: the historical volatility of the Nasdaq Composite Index almost doubled from 1999 to 2000.

This statement makes us wonder not only about the state of economic science in the 19th century but about the way of thinking of English gentlemen as well. Something I do not wonder about is how the increasing importance of new technologies and financial markets clearly presents new challenges for monetary policy. Underestimating these challenges can be costly. However, there are no easy solutions available for monetary policy to deal with asset price bubbles. With the benefit of hindsight, I can say that the ECB was right to have reacted relatively cautiously when the world discussed the “new economy”. I remember well the criticism we faced in late 1999 when we did not want to revise our assumptions for trend potential GDP growth for the euro area. Now these critics have become quiet. Some of them have even gone to the other extreme and, in my view, have now become excessively pessimistic about the prospects for the euro area. Recent years have shown that the economic cost of adjusting to a phase of over-optimism is high. We have now seen two years of rather sluggish economic growth. Many of the new businesses set up in the late 1990s no longer exist. But costs have also had to be reduced in other, more traditional sectors and structural adjustments needed to be made to correct the imbalances which arose in the “boom” period.