samchain/econo-pairs-v1 huggingface dataset:
So, as yet, we do not seem to be in a liquidity trap in which yields can be pushed down no further. What to my mind is a more open question, though, is the degree of traction these lower yields have on demand at the present juncture. Looser monetary policy works in large part by encouraging households and businesses to bring forward future spending to the present. It is plausible, however, that such intertemporal substitution will be weaker when uncertainty is elevated and when banks and some households are concentrating on repairing their balance sheets. For instance, a modest fall in the cost of capital may do little to boost investment spending when the environment is so dominated by uncertainty about the outlook for demand. To illustrate this, Chart 9 shows the results from CBI business surveys of the factors holding back investment spending at the current juncture. Uncertainty about the outlook for demand is far and away the dominant factor. That does not mean that quantitative easing is impotent, as demand will still be affected by the wealth effect from the higher asset prices, as well as by any related exchange rate depreciation. But I think there are reasons to believe the effect of lower yields may be weaker than usual at the current juncture (in old speak, the IS curve may be quite steep, even though the LM curve may not be absolutely flat).

Some analysts have suggested that, because of capital market integration, real interest rates will equalize around the world, thus reducing the ability of national Central Banks to control inflation. However, this need not be the case. Indeed, the classic Mundell-Fleming analysis concludes that monetary policy should be more effective, rather than less, in the case of international capital mobility, although it can operate through different channels of transmission including the exchange rate. Furthermore, in many emerging countries, strong capital inflows confront monetary policy with a dilemma between pursuing internal and external objectives, in a context of rising inflationary pressures. Taming capital inflows would call for a relaxation of monetary policy, at the risk however of compromising on the domestic objective of maintaining low inflation. Sterilisation cannot always be relied upon to resolve this dilemma as it is likely to be ineffective in the long term and fuel other imbalances such as excessive accumulation of foreign exchange reserves. A second question is the potential for global contagion. As a direct consequence of cross-border financial integration, local price or liquidity shocks are more likely to spread around the globe. Large-scale liquidity creation resulting from monetary (or exchange rate) policy in one country may fuel asset price bubbles elsewhere. One current example might be seen in carry trades, which have become a major driver of a number of currencies, including the yen. Therefore, distant events can have sharp impacts, even on local institutions or investors. New contagion channels have emerged.
A central element of the core model is that agents are forward-looking, reacting to expected economic developments. In recent years, a number of central banks have developed models of this type. However, it must be stressed that our core model and the models we develop only provide a very simplified description of reality. The Bank’s forecasts are based on a broad range of different sources of information, with judgment as a substantial component. Important elements in the assessment of what a good interest rate path is – and which underline the judgment component in this assessment – are reflected in six criteria that should be satisfied. 7 The criteria emphasise that if monetary policy is to anchor inflation expectations around the target, the interest rate must be set so that inflation moves towards the target. Inflation should be stabilised near the target within a reasonable time horizon, normally 1-3 years. Assuming that inflation expectations are anchored around the target, the inflation gap and the output gap should be in reasonable proportion to each other until they close. The inflation gap and the output gap should normally not be positive or negative at the same time further ahead. In addition, interest rate developments, particularly in the next few months, should result in acceptable developments in inflation and output also under alternative, albeit not unrealistic assumptions concerning economic developments and the functioning of the economy.

Reference is made in particular to Archer, D. (2005): “Central-bank communication and the publication of interest rate projections”, Faust, J. and E. Leeper (2005): “Forecasts and inflation reports: An evaluation”, Svensson, L.E.O. (2005): ”Further Developments of Inflation Targeting" and Woodford, M. (2005): “Central-Bank Communication and Policy Effectiveness". 3  This is further discussed by Woodford, M. (2005): “Central-Bank Communication and Policy Effectiveness", see footnote 2. BIS Review 6/2006  3  If the Bank’s interest rate forecast is different from market expectations, then this is useful information, not only for market participants, but also for the central bank. This may indicate that the central bank and market participants have a differing perception of future economic developments. It may also reflect differing views concerning the trade-offs in monetary policy. Market expectations, as reflected in forward rates, will be a way of cross-checking the Bank’s interest rate forecast. If Norges Bank’s interest rate forecast deviates from market expectations, the Bank should be able to explain this satisfactorily in order to influence interest rates in the money market. In Inflation Report 3/05, there were only minor differences between Norges Bank’s interest rate path and calculated forward rates up to 2007. Forward rates indicated that interest rates would then level off, while our forecast indicated a continued gradual rise up towards a more normal level. After the publication of the Report and up to end-January, market expectations have fallen. This shows that the interest rate path envisaged by the Bank and the path expected by the market can differ.
Chart 1: Regulatory-Supervisory Independence and central bank independence, 1999-2019 (a)  (a) The data on central bank independence is drawn from Bodea and Hicks (2015) and Garriga (2016). Weighted versions of the indices are used to aid comparison. The weighting is based on Cukierman et al (1992). The second step in the analysis was to examine whether there is an association between the Regulatory-Supervisory Independence index and financial stability. Defining an ex ante quantitative indicator of the success or otherwise of prudential regulation is hard, unlike with monetary policy where such measures are easier to arrive at. But fortunately, this is less of a problem for this analysis because we have ex post observations of distress in the banking system. The authors used rates of non-performing loans at banks as a measure of financial (in)stability.9  They analyse whether reforms that increased regulatory-supervisory independence were associated with subsequent a reduction in the rates of non-performing loans. Panel data regression show a 9  That is, non-performing loans as a proportion of total gross loans. I would like to thank Matthew Willison, Hugh Burns, Nicolo Fraccaroli and David Swallow for their assistance in preparing these remarks 9  negative and statistically significant association between independence-increasing reforms and rates of non-performing loans – see Table 3.

As the economies, markets and institutions are evolving, the pressure on statistics to “keep pace” is increasing. Hence, the occurrence of the so called “information gaps” is inevitable in a rapidly changing world. But, adverse shocks such as the recent crisis reinforce them and make them and their repercussions far more obvious and painful, than in normal times. In times of crisis, these gaps constrain our ability to recognize and react to existing vulnerabilities. Let me quote the IMF at this point of my speech: “Indeed, the recent crisis has reaffirmed an old lesson – good data and good analysis are the lifeblood of effective surveillance and policy responses at both the national and international levels”. I would like to focus the rest of my opening address on the main challenges in the area of statistics, and especially to the ones most relevant for successful fulfillment of the central banks’ mandate. In general terms, the crisis revealed the need for a richer and more streamlined statistics, a mix of statistics that will serve the monetary policy and the macroprudential policy concomitantly as the policies are intertwined. What are the main information gaps, on the backdrop of the crisis? I think the best starting point to discuss these issues are the 2009 recommendations of the IMF and the Financial Stability Board, under the G-20 Data Gaps initiative: 1. The statistics should be devised in a manner to better capture the build-up of risks in the financial sector.
3  In any event, given the scale of the shock, and even taking account of the economic policy measures most directly affecting non-financial corporations (such as furlough schemes and tax deferrals), different simulation exercises performed by the Banco de España3 suggest that the percentage of firms with liquidity needs in the Q2-Q4 period will rise by nearly 10 percentage points (pp), to stand at 70%, as a result of the pandemic. In terms of size, the percentage of firms with liquidity needs is higher among large corporations; by sector, it is higher in leisure and tourism activities. Nearly 90% of these needs are expected to derive from the maturity of past financial obligations, and close to 50% could be covered using liquid assets and undrawn amounts on the credit lines held before the crisis. The information on bank lending shows firms resorting to this source of financing to cover a large portion of these liquidity requirements. Specifically, after shrinking by 1.1% year-onyear in February, the outstanding balance of bank financing granted to Spanish non-financial corporations rose by 7.2% in July. Analyses by the Banco de España suggest that the ICO's guarantee facility is, in particular, facilitating the financing both of firms facing greater difficulty gaining access to credit and of small enterprises, which have generally been more affected by the impact of the health crisis and have a greater risk profile.

Ravi Menon: Introducing Zhou Xiaochuan Opening remarks by Mr Ravi Menon, Managing Director of the Monetary Authority of Singapore, at MAS Lecture 2019 by Zhou Xiaochuan, Singarpre, 19 September 2019. * * * Dr Zhou Xiaochuan, President, China Society for Finance and Banking, and former Governor, People’s Bank of China Mr Tharman Shanmugaratnam, Senior Minister and Chairman, MAS Mr Goh Chok Tong, Emeritus Senior Minister and Senior Advisor to MAS Distinguished guests, friends and colleagues, good morning. Welcome to the tenth MAS Lecture. Since its launch in 2000, the MAS Lecture has featured leading members of the international financial community to share their perspectives on the economic and financial issues of the day. I have been trying to get Dr Zhou to speak at the MAS Lecture almost since the time I became MD MAS eight years ago. On at least a couple of occasions, Dr Zhou actually agreed to deliver the Lecture, only to be prevented from doing so by pressing issues back home in China. And now, the stars have finally aligned to bring Dr Zhou to Singapore and to deliver the MAS Lecture. Perhaps, there is a deeper significance as to why the stars conspired to make Dr Zhou deliver the MAS Lecture in 2019 and not earlier. This year marks the 10th anniversary of China’s bold move to gradually internationalise the RMB. It was in 2009 that the People’s Bank of China launched a cross-border RMB trade settlement pilot scheme.
However, we are at least talking about a reasonably well-defined type of risk and one which is quantifiable in statistical terms. We are in much more difficult territory when it comes to operational risk. The term operational risk covers a wide range of types and sources of risk, and banks’ data bases of loss are generally patchy. There are numerous questions not only about the appropriate design of the charge, but also about the appropriate level. It is clear that some types of operational risk, such as fraud, can result in huge spikes of loss, as we saw in the case of Barings and Morgan Grenfell. Even though we are concerned with protecting the system, I feel it would be inappropriate to expect most banks to hold an additional cushion of capital to cover these sorts of very rare events: it would either be grossly excessive for most of the time, or alternatively seriously inadequate if a major problem arose. So the focus here must be on systems and controls, and on using variable target capital ratios under Pillar 2 to encourage improvements in these. Moreover, the appropriate level of capital will depend in part on how far we think operational losses are correlated with other types of loss which are already covered by capital. Probably there are some types of operational loss - processing errors, settlement delays - which do not exhibit a high correlation with either credit or market risk.

Ivan Iskrov: Association of Banks in Bulgaria – 20 years Congratulatory address by Mr Ivan Iskrov, Governor of the Bulgarian National Bank, to the Association of Banks in Bulgaria on the occasion of the 20th Anniversary of the Association’s Foundation, Sofia, 3 April 2012. *  *  *  Mr. President, Ladies and gentlemen, Dear colleagues and friends, It is a great honour and a pleasure for me to be here today commemorating with you the 20th Anniversary of the guild of the banking profession – the Association of Banks in Bulgaria. This is a perfect opportunity to congratulate the Association for the long way it successfully traversed, and along which it established itself as one of the most reputed trade associations in the Republic of Bulgaria. All these years the Association consistently assisted its members in pursuing their banking business and protecting their interests, all the while standing as a stable and constructive partner of the central bank, as the banking regulatory authority, of other government authorities, and of the representatives of the business. Therefore, we the members of the BNB Governing Council are all pleased to attend this occasion as a proof of the respect cherished by the central bank’s management for your work and professional achievements! Behind the ABB’s history stands the individual road of achievements, but also of challenges, of each one of the Association’s members.
Two features of the current situation strike me as most relevant in explaining this development: first, lower levels of public confidence in the banking system; and second, very low interest rates which thereby reduce the opportunity cost of holding banknotes (as a noninterest bearing asset). 2  BIS Review 162/2009  I should add two important points at this stage. First, my understanding is that this pattern over the last two years is reflected in other major currencies. Second, as I will come back to later, banknotes are central-bank money in a form that can be held by the public, in other words the retail equivalent of reserve accounts at the central bank, the latter being wholesale central-bank money. Banknotes are therefore a non-interest bearing store of value. In the current recession, the demand for banknotes has risen, and it is likely that this reflects demand for central-bank money as a store of value. We can add some further evidence to support this story by looking at the pattern of behaviour of the various denominations of Bank of England notes. We issue four denominations – £ £ £ and £ Chart 4 shows the growth rate of each denomination over the last nearly four years. The striking feature of this chart is the growth rate of the highest denomination note, the £ which had picked up from the onset of the financial crisis in the summer of 2007, and then rose further from last autumn, in the wake of the failure of Lehman.

First, modern ATMs can more safely dispense notes of a physical quality that as the issuing authority I would not wish to see in circulation (for example, heavily soiled notes). This is a mundane point, but the latest ATMs are harder to jam, unlike their predecessors. On the whole, financial institutions do not dispense what we regard as unfit notes, even though their ATMs might be able to do so, but as the issuing authority we now have to pay more attention to ensuring that this does not happen. The second development represents the connection between the physical quality of notes and denominational mix. We have most difficulty getting our low denomination note, the £ into circulation. The main reason for this problem is that few ATMs dispense £ The link to quality comes about because once our £ enter circulation, they stay in circulation and exchange hands more times before they return into the wholesale cash distribution system for fitness sorting, and thus can be taken out of circulation as unfit or re-circulated as a fit note. Put simply, since there are relatively few £ notes entering circulation they stay in circulation and are not banked and fitness sorted as regularly as they should be. Chart 9 illustrates this problem. It shows over the last nearly fifteen years the trend in how many times per year on average banknotes of each denomination are processed through the wholesale cash centre fitness sorting process.
In the past 20 years, inflation has been consistently low and stable. Economic growth has been just as high, if not higher, since inflation came down to a low level, compared with the years when inflation was high and at times at double-digit levels. For the model to be relevant it should build on long-term relationships that we believe to be valid and it should be consistent with data. For example, the model’s relationships should describe how the interest rate works, in line with relevant empirical observations of the Norwegian economy. It is also of considerable importance to us that the economic mechanisms in the model should be understandable and easy to communicate. The model apparatus is to function as a useful tool, both in the internal process ahead of the monetary policy meetings and in Norges Bank’s external communication. BIS central bankers’ speeches  5  A model will never be able to provide an exhaustive description of reality. In 1979, the British statistician George Box stated: “Essentially, all models are wrong, but some are useful”. Models can help to identify key driving forces and ensure a valid line of reasoning and consistency over time. This will enable the model to play an important role in the analytical basis for interest rate setting. At the same time, we must use common sense and experience when evaluating the model-based results and supplement these results with our own professional judgement. In this respect, the Bank has a pragmatic attitude regarding the use of models.

Reflecting the strength of the US dollar, the Sing dollar, along with most other major currencies, depreciated against the US dollar in the first half of this year. However, the Sing dollar appreciated against the euro, the Australian dollar, pound sterling and some of the regional currencies over the same period. The external environment has since strengthened. The industrial countries except Japan are enjoying strong economic growth. The regional economies have shown more vigour and resilience than was expected. Against these positive developments, Singapore’s GDP rose by 5.4% in 1999. The economy grew further by a robust 8.4% in H1 2000. Both external and domestic demand have expanded strongly. Real non-oil domestic exports grew by about 12% in the first six months of 2000, boosted by the continued strength of global electronics demand. The turnaround in the regional economies has underpinned strong service exports and boosted the commerce and transport and communications sectors. Domestic consumption has grown steadily in tandem with labour market conditions and overall sentiment, while investment spending has recovered strongly on the back of a surge in investment in machinery and equipment. Despite the robust economic recovery, inflationary pressures remain subdued. CPI inflation was 0% in 1999, rising moderately to average just 1% in the first six months of 2000. (Based on the old CPI basket before the revision introduced early this year, measured CPI inflation in 1999 would have been slightly higher at 0.4%.)
BIS Review 18/2009  1  2  3  4  5 Banks  6  7  8  9  Sources: Bloomberg and Bank calculations  13  Table 1: Distribution of UK Macroeconomic and Financial Time Series Golden Decade  Long-run (a)  (1998-2007) GDP Growth (%,  Mean  2.9  2.0  annualised)  Standard Deviation  0.6  2.7  Skew  0.2  -0.8  Kurtosis  -0.8  2.2  Retail Price Inflation  Mean  2.8  3.1  (%, annualised)  Standard Deviation  0.9  5.9  Skew  0.0  1.2  Kurtosis  -0.3  3.0  Unemployment rate  Mean  3.2  4.4  (%, annualised)  Standard Deviation  0.6  3.4  Skew  1.2  1.0  Kurtosis  0.4  0.3  Earnings Growth (%,  Mean  4.2  4.5  annualised)  Standard Deviation  0.5  6.4  Skew  0.2  1.1  Kurtosis  -0.1  3.8  House Price Inflation  Mean  11.6  8.8  (%, annualised)  Standard Deviation  5.8  9.2  Skew  0.7  1.1  Kurtosis  -0.4  2.0  Change in FTSE All-  Mean  0.2  0.2  Share Index (%,  Standard Deviation  4.1  4.1  monthly)  Skew  -0.8  2.6  Kurtosis  3.8  62.3  Change in UK 2.5%  Mean  -2.0  -0.1  coupon consol yield  Standard Deviation  18.5  18.4  (basis points,  Skew  0.0  0.5  monthly)  Kurtosis  3.1  32.2  (a) The long-run time series for GDP growth, retail price inflation, unemployment, and earnings growth begin in 1857.

Other objections raised were the absence of instruments to respond to any asymmetric shocks, and the European economies' lack of flexibility and real mobility in the labour force. The conclusion was that the euro would never exist ! The facts have disproved this conclusion. But the very same arguments are sometimes deployed to suggest that the euro-area economy contains some inconsistencies that could endanger its prosperity. What can we say, from an economic standpoint, on this very important question? Firstly, that monetary union per se, and wherever it takes place, does not necessarily imply that, at any given point in time, all the participating countries will experience the same rate of inflation or of growth, even though the move to the euro was based on the successful completion of a convergence process. Let us focus, for example, on inflation. Present differentials do not appear to be very large, in comparison with the experience of the United States, a long-established monetary union of comparable size. Data on major cities of the US shows that inflation differentials have been at times very substantial, with divergences of 7 percentage points being recorded in the early 1980s. In the euro area, long-term convergence to a common level of prices gives naturally rise to differences in inflation rates across EMU countries. The convergence of productivity and living standards creates a trend towards price convergence, as a consequence of the commonly known Balassa-Samuelson effect.