samchain/econo-pairs-v1 huggingface dataset:
The BoE’s Asset Purchase Facility, through which its Monetary Policy Committee (MPC) purchased £ billion of longer-term assets between 2009 and 2012, was quite comparable in purpose and design to the Fed’s LSAP programs. Moreover, since March 2013, the BoE has reinvested the cash flows associated with maturing gilts in the facility in order to maintain the stock of securities at a steady level. In its February 2014 Inflation Report, the MPC provided guidance on its expected normalization framework, laying out an approach in which its Bank Rate – the deposit rate for central bank reserves in the U.K. – is the active marginal instrument for monetary policy while portfolio-related tools, including reinvestments and asset sales, receive less emphasis. Specifically, the MPC suggested that it intends to maintain its stock of purchased assets, including reinvesting the cash flows associated with maturing securities, at least until it raises its target short-term interest rate from its current level. Meanwhile, the BoJ is still purchasing assets under QQE, which it launched in April 2013. With a goal of increasing its Japanese government bond (JGB) holdings by ¥ trillion per year, it has not yet initiated a discussion of eventual normalization. When that time comes, however, the BoJ will be holding a large portfolio of longer-term JGBs. The BoJ’s balance sheet will therefore look markedly different than it did when the QEP ended in 2006, at which time the BoJ just allowed short-term funds-supplying operations to roll off.

Importantly, as the Chair noted during her post-meeting press conference, this statement is intended to provide information to the public about the eventual normalization process; it does not signal a change in the current or future stance of monetary policy. According to the principles, the Committee will adjust the level of monetary accommodation primarily by utilizing policy tools to influence the level of short-term interest rates – in the first instance, using tools with rates directly administered by the Fed. Tools that can immobilize or drain large levels of reserves to tighten control over the federal funds rate also remain available. However, the principles do not envision that active adjustments to the SOMA portfolio will play a featured role. Specifically, the FOMC indicated that the federal funds rate will continue to play a central role in the Fed’s operating framework and communications during normalization, and that it will raise the target range for the federal funds rate when economic conditions warrant a less accommodative monetary policy stance. Adjustments in the interest rate that the Fed pays to depository institutions on excess reserve balances – that is, the IOER rate – will be the primary tool to move the federal funds rate into the target range. Raising the IOER rate should put upward pressure on a range of market interest rates and influence overall financial conditions in a way that fosters the Federal Reserve’s macroeconomic objectives.
Case Study 5: The establishment of the Deposit Insurance Scheme Let me now illustrate yet another example of harmonization. This is in relation to the establishment of the Deposit Insurance Fund and Scheme. My colleagues at the Central Bank have told me that discussions in connection with the setting up of a Deposit Insurance Scheme had been taking place at various times, over the past two decades! However, there was no consensus reached on a suitable mechanism,  10  BIS central bankers’ speeches  particularly because the large initial capital that was required for the establishment of such a scheme, could not be allocated by the Government for many years due to the intense pressure upon the need to allocate funds for other more pressing needs of the state. Nevertheless, it was considered vital that such a fund and a scheme should be established, and hence an innovative method had to be structured, without placing an additional burden upon the Government coffers. In 2010 too, internal discussions were once again taking place with regard to the possible setting up of a Deposit Insurance Fund. At that time, we noted that the abandoned properties of the banks, which constituted the dormant account balances of over 10 years, had risen to a sizeable amount, and according to the law, those funds had to be placed by the banks with the Government for safe keeping.

Another benefit that this initiative entailed, was that it paved the way for several banks and corporates to also issue international bonds, thereby accessing savings from outside the country. By doing that, we had also been able to bridge the chronic savings/investment gap that has been regularly referred to by a never ending stream of experts since independence, as a major deficiency that was hampering growth in our economy. Case Study 3: Intervention to stabilize a systemically important bank The third case study that I would like to illustrate is the instance where the Central Bank and the Ministry of Finance teamed up to stabilize a systemically important bank that was facing a liquidity crisis in late 2008/early 2009. Mr. Chairman, If we take our minds back to that period, in late 2008, we would recollect that the external environment, internationally and locally, had become even more hostile and highly uncertain. Internationally, the global financial crisis had taken a major toll, with hundreds of banks collapsing across the world. Each day, we were hearing about the collapse or the imminent failure of many big names in the global financial landscape. In many countries, the Ministers of Finance and the Governors of the Central Banks were huddled in endless discussions as to what should be done to arrest the crises, or how to stop the bleeding. Businesses were going bankrupt by the thousands. Business confidence level was at rock bottom. People in all parts of the world were in panic.
In one case that didn’t happen: in November 2008 it was announced that the £ “Granite” master trust had failed a non-asset trigger12 which meant that Northern Rock would no longer provide new mortgages to the structure and it went into pass-through mode (early amortisation). Instead of owning bullet securities, the investors ended up holding potentially long-dated pass-through notes. Trading in the securities effectively ceased and, because of the maturity extension, the securities issued by “Granite” fell precipitously in price – even though there had been no material credit losses. The subordinated securities would only be paid off after enough cash had come in to first pay off the senior bonds. As Northern Rock had already been nationalised, the dynamic around the decision to run-off “Granite” was obviously quite different from what other banks were grappling with at the time. This event clearly “burnt” a number of investors, many of whom have indicated that they will not return to purchase any master trust structure in future. In pure economic terms, it might have paid other banks also to not call RMBS when funding pressures were at their highest. But this would have destroyed the market and damaged relations with investors, possibly beyond repair. Another example is the existence of break clauses in derivatives contracts. These clauses enable either counterparty to a derivatives trade to call for cash settlement of the mark-to-market of their contract at a particular future date. The main reason for this “break clause” is that it reduces the contingent credit exposure.

By addressing these issues, the stress tests implemented by the Federal Reserve in the United States, and by the European Banking Authority in Europe, could play a key role in re-establishing confidence in the banking system. Reputational risks in tail events The second category of contracts we want to examine can be put into more of a game theoretic framework, where the perceived pay-off in the tail event is offset by “unforeseen” costs. In this section, we are focusing on behaviour that, at first glance, may seem irrational, but is best understood as being driven by classic time inconsistency. In particular a market participant may voluntarily choose not to enforce a contract that is “in the money”, if the reputational repercussions are perceived to cause more damage than whatever could be gained financially by enforcement. During the crisis, banks moved a significant amount of their mortgage-based assets offbalance sheet into Structured Investment Vehicles (“SIVs”). Most of the funding for these SIVs came from publicly sold asset-backed commercial paper (“ABCP”) and other mediumterm notes (“MTN”). There was a small amount of equity in the form of a junior “capital note,” which split the excess return with the asset manager. From their invention by Citigroup in 1988 and until the crisis, there was sufficient spread between the assets and the funding to generate a reasonable return to attract investors to buy the capital notes. In addition, there was typically a partial liquidity back-stop facility provided by the originating bank.
I would therefore like to spend a little time going into these areas in detail  Responsible investment The work in the area of responsible investment has undergone substantial changes since the fund began investing in equities in 1998. From the start, the approach was that the fund should be invested in the world as it is. At that time, the fund was not supposed to exercise ownership rights. As the fund has grown, its size and international position have made such an approach virtually impossible. In 2004, on the basis of discussions in the Storting, the Ministry of Finance laid down ethically motivated guidelines for the observation and exclusion of companies from the fund. Today, the fund must not be invested in companies that produce certain types of weapons, base their operations on coal, or produce tobacco. Nor shall the fund be invested in companies whose activities otherwise contribute to violations of fundamental ethical norms. In 2004, the Ministry also established an independent Council on Ethics to make ethical assessments of companies. Following a change in 2015, the Council on Ethics sends its recommendations to Norges Bank. The decision is taken by Norges Bank’s Executive Board, which is tasked with assessing the policy tool that is most appropriate. At the end of 2019, 134 companies had been excluded from the fund’s investment universe. Chart: Responsible investment But the fund’s responsible investment involves more than merely questions of what we will not own. Our key policy tool is the exercise of our ownership rights in companies.

The Bank’s investment management organisation analyses these companies thoroughly, in order to identify long-term investment opportunities, reduce the Bank’s exposure to undesirable risk and the like. We use such analyses in order to safeguard the portfolio. There are companies 3/5  BIS central bankers' speeches  where we prefer not to be an owner. If we see that a company has a business model that we do not regard as sustainable, it may lead to divestment. But unlike the ethically justified divestments, these risk-based divestments are justified by purely commercial considerations. All together, the fund has made risk-based divestments of 282 companies since 2012. The first divestments were of palm oil companies, whose activities entail destruction of rainforests. Since then, the fund has divested of a number of other companies, where the common denominator has been that we have observed inadequate management of risks such as those related to the environment and climate change, corruption and human rights. Chart: Return effects of risk-based divestments Our experience from this work has been favourable. We exploit the fund’s characteristics, primarily its long-term horizon, to reduce risk and – in any case as it appears today – also to improve the fund’s return. Since 2012, risk-based divestments have contributed to increasing the return by an amount equivalent to around 0.27 percentage point of the value of the fund’s equity portfolio, measured against the benchmark index. This is the equivalent of around NOK 7 billion.
In a totally closed, national, economy I suspect that the most effective way of achieving this would be to aim to stabilise the rate of consumer price inflation – at some very low level representing effective price stability. We might, certainly, as an intermediate step aim to stabilise the rate of growth of the money supply, if we were confident that the demand for money was sufficiently stable and predictable, but the reason for targeting the growth of the money supply would ultimately be to stabilise the rate of inflation, so the distinction is operational rather than substantive. But it is important to understand that effective price stability would not be intended simply as an end in itself. In order to maintain price stability, what in fact we would need to do is to keep overall demand in the economy continuously broadly in line with supply-side capacity, so that the actual rate of inflation is really a measure, or barometer if you like, of our success in maintaining macro-economic stability in a much wider sense. If we succeed in maintaining such stability, that would also contribute, indirectly, to improving the supply side of the economy by reducing nominal uncertainty as a factor in spending or saving or investment decisions and thereby improving resource allocation. Macro-economic stability in this sense can of course be affected by either overall fiscal policy or by monetary policy.

Monetary Policy and Inequality”, Journal of Monetary Economics, Volume 88, June 2017. 4 [5]  • Deutsche Bundesbank (2016), “Distributional Effects of Monetary Policy”, Monthly Report, September 2016. • Frederiksen, A., O. Paulsen, (2010) “Increasing Income Inequality: Productivity, Bargaining and Skill-Upgrading”, IZA Discussion Paper Series No. 4791, February 2010. • Furceri D., P. Loungani, and A. Zdzienicka (2016), “The Effects of Monetary Policy Shocks on Equality”, IMF Working Paper, WP/16/245, December 2016. 5 [5]
With the seamless interfaces between the CMU and the Real Time Gross Settlement (RTGS) systems in Hong Kong for the Hong Kong dollar, US dollar and Euro, all transactions in debt instruments denominated in any of these three currencies and under the custodianship of the CMU can be settled in Hong Kong on a DvP basis in an efficient way. The recent IPO of the Bank of China Limited is probably a good example to demonstrate the efficiency and robustness of our HKD RTGS system: being a settlement system which typically handles an average turnover of $ to $ billion Hong Kong dollars a day, it saw a record high turnover of $ trillion on 1 June when the Bank of China was listed on that day. Notwithstanding such huge amount of settlement, the inter-bank payments were processed smoothly on that day. To further develop Hong Kong into a payment and settlement hub for the region, we will continue to explore opportunities for linking our RTGS systems and the CMU with similar systems in the region. For example, the HKMA has been working with Bank Negara Malaysia for the establishment of a link between the Ringgit RTGS system and the US dollar RTGS system in Hong Kong. This is aimed at reducing the settlement risk of Ringgit/US dollar foreign exchange transactions through PvP settlement in the Asian time zone. The link is expected to go live by the end of 2006. We are exploring similar linkages with other Asian central banks.

We expect that to weigh heavily on demand. We judge the appropriate degree of monetary tightening taking that into account. What I reject is the argument that in our response to Covid the Bank’s Monetary Policy Committee let demand get out of hand and thus stoked inflation. The facts simply do not support this. On the latest number, UK GDP in March was only 0.6% above its pre-Covid level, and it is substantially below the path it was expected to follow pre-Covid. What we do have is a very tight labour market. But that does not look like a story about rapid demand growth. The labour force has shrunk by around 1% since the onset of Covid. It looks much more like an impact from the supply of labour. The job of the Bank of England is to return inflation to target at a time when a very large headwind from external shocks, and an internal shock from a fall in the labour force, are reducing real incomes but risk leading to persistence in domestic wage and price setting, socalled second round effects. The Bank of England will, as always, take monetary policy decisions to ensure that the inflation target is met over the medium term. We have raised the official rate four times so far and have made clear that in order to bring inflation down to target we are prepared to do so again based on the assessment at each of our meetings.
Input-output data suggests that goods are between two and three times more import intensive than services. The implied contributions of import prices to inflation under these two assumptions are shown in Chart 8, with import prices contributing between 2 and 3 percentage points to inflation in late 2009/early 2010. Back in 2009, our central view, embodied in successive Inflation Report projections, was for inflation to oscillate around the 2% target over the next couple of years, with the upward pressure from sterling’s depreciation very broadly offset by the downward pressure from spare capacity and additional volatility induced by the restoration of the crisis-driven cut in VAT. That view was predicated on a considerable body of research, for this and other countries, which suggested that the pass-through of exchange rate movements into consumer prices had fallen in the past two decades 6 . That research pointed to better anchoring of inflation expectations as one possible cause, coupled with an increased tendency to “price to market”, meaning that more of exchange rate movements were absorbed in either profit margins or in other costs, rather than being passed on into prices. In the event, the pass-through seems to have been rather larger, and closer to that seen prior to the Great Moderation. In part, that may reflect the recognition by market participants and businesses that a substantial decline in the real value of sterling was necessary to re balance the economy and the fall was consequently likely to be permanent.

Philipp Hildebrand: In the focus of the Swiss National Bank - economic outlook and monetary policy Summary of a speech by Mr Philipp Hildebrand, Member of the Governing Board of the Swiss National Bank, at the WGZ-Bank, Luxemburg, 9 September 2005. The complete speech can be found in German on the Swiss National Bank’s website (www.snb.ch). *  *  *  The world economy expands at a robust pace but the growth rates of the important economic blocs diverge considerably. In spite of the accommodative monetary policy in most industrial countries, inflation and inflation expectations remain well contained which may, among other things, be due to the process of globalisation and the credibility of central banks. Switzerland, small and extremely open, benefits from a recovering global economy. The conditions for returning to a path of modest expansion look favourable. However, there are certain risks that may affect the global and the Swiss economy negatively. Most importantly, high oil prices and the devastating effect of the hurricane „Katrina”, as well as the possibility of increasing long-term interest rates have to be mentioned. A persistently high price of oil could act as a brake to demand dynamics and growth prospects could also be threatened by soaring long-term interest rates, an effect that could be amplified through the housing channel. In the foreign exchange markets, structural and cyclical factors continue to determine the value of the US-dollar. 1/1
Six long-term scenarios, that is to say with a 2050 horizon (and even the end of the century for some variables), have been developed and will continue to evolve under the aegis of the Network for Greening the Financial System (NGFS) iii [slide 3 for a focus on 3 scenarios], to whose 144 institutions the Banque de France provides its global secretariat. The current scenarios, which are consistent with the various physical scenarios of the IPCC, will soon be supplemented by a seventh scenario of “net zero 2050” achieved through greater energy sobriety; the publication of the updated NGFS scenarios is expected next autumn. In their current version, they are already used by a great number of supervisors – the majority of the 36 jurisdictions that  Page 4 sur 8 have conducted a climate stress test (for instance France, the EU, the UK and the US). Our pilot stress tests also pointed to a need for shorter-term scenarios with a five-year horizon as the transition is accelerating: the NGFS is currently elaborating on them by leveraging the work of its Members, including by Banque de France researchers iv. We at NGFS will publish a conceptual framework at end of this year, and are aiming to release a first vintage of these short-term scenarios by the end of 2024. In particular, they should display more adverse developments, and incorporate tougher shocks. They should also be tailored to explore the potential impacts of climate change, not just on activity but also on inflation.

This quadrant [slide 4] shows four categories of possible shocks linked to the transition. They can have a positive versus negative impact on supply, and a positive versus negative impact on demand respectively. They are not mutually exclusive, and may combine or succeed one another. Their stand-alone probability is hard to assess at this stage, but there are reasons to believe that the upper-left one (the negative supply shock) is slightly more probable than the  Page 5 sur 8 others. However, given the large range of shocks, their sources and macroeconomic effects – which could include a positive scenario of large green private capex v – [slide 5], we must continue our modelling, in line with our first commitment in relation to the ECB’s climate agenda: we committed in July 2022 to “assess the macroeconomic impact of climate change and mitigation policies on inflation and the real economy”. vi  But being uncertain about the combined macroeconomic effects does not mean being passive or inert on action now. What we can already derive from these scenarios is a set of four firm convictions and prescriptions. 1. A shock that is global and certain >>> an orderly transition - First, climate transition entails structural changes to the global economy that are both universal and certain, with an overall and possibly negative supply shock that will generate frictions and costs in terms of the necessary reallocation of production factors.