samchain/econo-pairs-v1 huggingface dataset:
In the last 3 years, there has been significant progress in the identification of several instruments designed: •  to address the rapid expansion and concentration in lending activity;  •  to ensure that banks have sufficient liquidity to cope with different shocks;  •  and to discourage risky behavior by financial institutions by increasing demand for capital for such activities. These measures may have countercyclical nature and could apply to financial institutions based on their systemic importance. These standards require building an institutional framework with clear identification of the authority /authorities that will have macro-prudential powers, in accordance with the structure  BIS central bankers’ speeches  1  and level of market development. Central bank appears to be better positioned than other authorities to perform the macro-prudential role. In addition to its exclusive responsibility on formulating and implementing monetary policy, central bank has other advantages related with: •  its involvement in developing the payments systems infrastructure;  •  its access to wide market and financial system data;  •  and, many times, its role as a regulator and supervisor of banks. Nowadays it is widely accepted that there has been huge progress worldwide in ensuring legal and operational independence of the central bank and this is another important reason why it can be entrusted with macro-prudential policy. In order to correctly define the macro-prudential function of the central bank, it is important to establish the right relationship with monetary policy.

Chart 12:Risky assets have under-performed  Chart 13: Easier monetary policy supports prices of risky as well as risk-free assets  Note: * Equity yields have been adjusted for leverage. Source: Thomson Reuters Datastream  Source: Thomson Reuters Datastream  Concluding remarks  This talk has been all about rational responses to higher uncertainty: how it raises the bar for decisions that are costly to reverse and – particularly when skewed towards downside risks – how it widens the gap between yields on risky and risk-free securities, contributing to the decline in the neutral real rate of interest and worsening the accounting deficits of pension funds. 10  As Charlie explained, QE probably has acted to raise the absolute deficit of schemes that were under-funded to begin with. But the more important problem has been the under-performance of risky assets (see also footnote 9). 11  All speeches are available online at www.bankofengland.co.uk/publications/Pages/speeches/default.aspx  11  But human instinct in this area isn’t always so rational. We’re prone to over-interpret noisy events, seeing 11  structure and determination when, very often, there isn’t any . If this is a general weakness, it’s no less evident in the wake of the referendum. Every bit of economic data is scrutinised for the impact of the vote to leave the EU. If it’s more positive than expected immediately beforehand, this is said to confirm the wisdom of the decision; a negative surprise and we’re meant to conclude it was a bad idea.
Jean-Claude Trichet: I would say, again, that I rely very much upon the Fed’s analysis, which I have to say over the crisis has been wise and pertinent. There was a level of hype at certain moments, when we were getting out of the crisis, which perhaps did not fully reflect the situation of the real economy. And now there is a mood which seems to me too negative. That’s my own personal feeling. Financial Times: Let’s talk about the pace of financial reform, regulation. Why were the reforms as proposed under Basel III watered down? Jean-Claude Trichet: I do not want to prejudge in any respect the upcoming meeting we have on this issue. I will only say that we need the same rules at the global level, a level playing field globally. And now at the global level we have the full participation of the emerging world, which, by the way, is one of the major structural transformations of global governance over the last three years. The G20 has substituted for the G7 as the premier forum for international economic cooperation. We have also profoundly transformed the global governance of central bank cooperation with full ownership by the central banks from emerging economies. That is something which I would call a “silent revolution” in global governance.

Next January we will be 17, with Estonia joining. This highlights the challenge of permanently strengthening and deepening the governance of the euro area, with new economies coming in. Financial Times: Before we talk about governance, let me ask you some specific questions about the crisis management measures. How are you going to reduce the dependence of the likes of Greece, Portugal, Spain, Ireland on extra liquidity provided by the ECB? Jean-Claude Trichet: As you know, the European economy relies very much in terms of financing on commercial banks. So it’s not surprising that our own “non-standard measures” concentrate much more on bank refinancing than on intervening in markets, in comparison with the Fed. As markets gradually stabilise, our non-standard measures, which are fully consistent with our mandate and, by construction, temporary in nature, will continue to be  BIS Review 115/2010  1  progressively phased out. So we are accompanying the market as it progressively goes back to normal. But, as I said already, it is a process which takes time. Financial Times: Do you have in mind, though, a need to phase out “non-standard” refinancing and do you have a sort of time horizon for this? Jean-Claude Trichet: We of course have to consider all those measures as transitory. They are there to cope with a situation which is abnormal – to help correct those markets that are dysfunctional and thereby help restore a more normal transmission mechanism for our monetary policy.
In the chart, petroleum investment is shown by the blue line, while the red line shows the central government’s net cash flow from petroleum activities. Petroleum investment rose sharply in the 1970s and has subsequently varied between 4 and 8 per cent of GDP. Petroleum investment fluctuates considerably and has a substantial impact on cyclical developments in the Norwegian economy. The authorities can only regulate petroleum investment to a limited extent. It is therefore difficult to prevent the impulses to the Norwegian economy that are generated by these fluctuations. Consequently, it is all the more important to prevent fluctuations in the cash flow to the central government from these activities from having a direct impact on the economy. Allow me to illustrate the consequences this might have: Let us suppose that the oil price temporarily increased by NOK 20 per barrel, or a little less than USD 3 per barrel. This is a small change, well within normal variations from one year to the next. The central government’s net cash flow from petroleum activities would then increase by around NOK 16 billion the first year and NOK 20-22 billion the next. This corresponds to almost 2 per cent of Norway's annual GDP. If the increase in the cash flow is taken into the economy through higher expenditure or reduced taxes in the central government budget, aggregate domestic demand will be affected. Higher expenditure requires an increase in the public sector's use of real resources, primarily labour. Two per cent of GDP is then a substantial figure.

This data constraint could also become an issue for some developed markets, given a structural break in data due to the financial crisis and market dislocation. On top of these, there is the issue of level playing-field, as the structure of bank asset and liability in emerging and developed countries may be significantly different. We have found several policies that may have impact on level playing-field, between countries and business models of banks. An example is the application of a simple leverage ratio, which does not take into account inherent risk, because this would tend to penalise banks in developing countries that generally hold less risky assets compared to developed countries. In addition, macro-prudential measures, such as leverage ratio, could likely have a macroeconomic impact, possibly similar to use of liquidity reserve requirement as per classic monetary policy tool, and thus coordination with macroeconomic policy is vital. For central banks with dual role, this is less of a challenge, but for separated regulators, the issue of organisation structure once again comes into play. Turning to the Bank of Thailand’s involvement on these regulatory debates through various international forums – such as the bi-monthly BIS Governor Meetings, the Standard Implementation Group of BCBS, of which we are a member – we have proposed that developing countries be invited to participate in the formulation of new standards right at the beginning, rather than to be included at the later stage of implementation.
To give the general public insight into the decision-making process and to make it easier to assess our activities, we take minutes at the meeting which the bank then publishes. As of summer 2007, we also write the member’s names in the minutes. The minutes are published around two weeks after the monetary policy meeting. Interest rate decision announced on the day after the monetary policy meeting A press release is published the day after each monetary policy meeting. This contains the most important reasons for and considerations behind the majority decision. The press release also contains the Riksbank’s forecasts for economic activity and inflation and a description of what monetary policy is currently considered to be well balanced. In connection with the publication of the interest rate decision we also hold a press conference where journalists are given the opportunity to ask questions. In connection with three of the monetary policy meetings a Monetary Policy Report is published. On the other occasions a shorter Monetary Policy Update is published instead. This contains a more limited number of forecasts for the central macro variables. That is to say, it is the majority view that is reflected in the press releases and the reports. Any differences of opinion can be seen in the minutes of the monetary policy meetings. There it is stated in detail how each of the members has argued and voted.

The Executive Board discusses the forecast at the second large meeting The Monetary Policy Department then presents its forecast for the main scenario to the Executive Board at the second large monetary policy group meeting. This takes place in week five, that is, approximately three weeks prior to the monetary policy meeting. The organisation of this meeting differs from the first one. The meeting is divided into two parts. The first part of the meeting is open to the majority of the employees of the Monetary Policy Department. The civil servants then report their outlook on the economy over the coming years. They present the results from any in-depth reports ordered by the Executive Board. There is now an opportunity for us Executive Board members to ask questions about and express opinions on the forecasts to the different sector experts. The second part of the meeting is held in a smaller circle consisting of the Executive Board, senior staff at the Monetary Policy Department, a couple of advisers and representatives of the Communications Secretariat. It is now that the Executive Board discusses and expresses opinions on the main scenario on the basis of its assessments. This may sometimes mean giving different weight to alternative macroeconomic scenarios, that is, the risks. The main scenario is then adjusted in accordance with the views of the Executive Board.
In addition to tone from the top, staff members at the operational level must also be more vigilant of the cyber risks involved in their day-to-day tasks. Second, while in the past much efforts had been put on reinforcing protection and detection systems, we must now shift our focus towards improving response and recovery. Readiness in addressing cyber-attacks—preparing a response plan or a playbook—remains a common gap among financial institutions. Frequent cyber exercises are also crucial, as vulnerability of response plans are often discovered during these exercises which allow organizations to continually improve their response processes. Regular practice is the best practice. Not only should these exercises be done by individual firms, but also at an industry level. The financial sector, for example, has started these exercises within the banking sector and will soon expand to other parts of the financial sector. As time goes by, our society becomes more interconnected, and eventually these cyber resilience exercises need to be done at the inter-industry level. For instance, the banking sector needs to have joint exercise with telecommunication companies for scenarios involving mobile banking attacks, or with the utilities sector for power outage scenarios. Third, collaboration and information sharing are crucial in strengthening the overall cyber resilience. Cyber threats are becoming much more complex that an individual organization’s defensive technology may not be able to catch up.

This should include “an IMF standing liquidity facility.’’ The global financial safety net is the best insurance we can get against the risks created by economic divergence and it comes at a limited cost. ** So, in conclusion, we as central bankers should be predictable without being pre-committed. In other words, we should give clarity without pretending to certainty. Voltaire summed this up nicely in 1770: “Doubt is an uncomfortable condition, but certainty is a ridiculous one.”4 In these times of doubt, the Governing Council of the ECB is committed to give as much clarity as possible; clarity, not certainty, which is neither possible nor desirable. Thank you for your attention. 1 Brainard, W. (1967), « Uncertainty and the effectiveness of policy » the American Economic Review, Vol. 57, No. 2, Papers and Proceedings of the Seventy-ninth Annual Meeting of the American Economic Association, May, pp. 411–425. 2 Blinder, A. (1999), Central Banking in Theory and Practice, the Lionel Robbins lectures, MIT Press, Cambridge  Massachusetts. 3 Rey, H. (2013) “Dilemma not Trilemma: The global financial cycle and monetary policy independence”, Jackson  Hole conference proceedings, Kansas City Fed. 4 Letter to Frederick William, Prince of Prussia (28 November 1770). 3/3  BIS central bankers' speeches
This is to say central banks should always have room to act, especially in response to an unforeseen emergency situation. So, given the benefits that central banks can gain from greater transparency and the rationale for having some limits, the challenge is to find the right balance in disclosure policy that maximizes the economic benefits of transparency while, at the same time, limits the unnecessary risks and provides flexibility to act when needed. The second issue I want to speak on today is the challenge to central banks in designing disclosure policies. On this issue, I want to begin by saying there is no absolute level of appropriate transparency. This is to say appropriate level of transparency to a central bank is not firm or fixed but always changing, depending on the circumstances which include the capacities of the central bank to provide information, the demand for information from financial markets and stakeholders, and how much  BIS Review 10/2006  1  credibility does the central bank has. Such are the forces that eventually shape the extent to which the central bank should be transparent in the eyes of the public. Another point about disclosure policy is that disclosure policy cannot be separated from the central bank’s own communication policy. This is because data release by itself is mostly not sufficient. The central bank will need to communicate what those data mean and, on the basis of those data, what is the rationale for the central bank to pursue certain policies.

Bandid Nijathaworn: Are there limits to transparency? Remarks by Mr Bandid Nijathaworn, Deputy Governor of the Bank of Thailand, at the IMF Conference on Central Bank Communications, Mumbai, 23 January 2006. *  *  *  First, let me thank the IMF and the Reserve Bank of India for the invitation. It is a pleasure to be here in Mumbai. And I should also congratulate the IMF for putting up what seems to be another useful and successful seminar. My contribution today is to speak on limits to transparency. Given the limitations of time, I want to begin by looking at the needs of central banks for limiting transparency, especially in the context of central banks’ own operations. Then, I want to speak on the challenge facing central banks in designing appropriate disclosure policy. And finally, I want to share with you my thought on how to approach transparency in the context of monetary policy. Transparency has now become an important policy aspect of central banking. Not only is transparency linked directly to the governance issue, but greater transparency also imparts important benefits to the effectiveness of central bank policies. In broad terms, three benefits from greater transparency are often cited. First, greater information provided by the central banks allows market participants to accurately evaluate the behavior and the performance of central banks. This is most important for public organizations like central banks. Second, financial markets tend to work more efficiently with greater transparency.
Nor is direct and immediate settlement between two parties, without the involvement of a third party, possible without cash. In the future, new payment solutions may be able to offer these possibilities. Private digital currencies providing anonymity are already on the market. These currencies can also be used even if banks’ systems fail – as long as the Internet is still functioning. The same applies to platform currencies and e-money. However, there are other crucial characteristics missing from these solutions – they are not backed by any authority and the level of foreign exchange and credit risk can be high. One alternative currently being discussed is the introduction of electronic central bank money. There are several ways of achieving this: consumers can have an account either at the central bank itself or in a system controlled by the central bank. Another possible solution is for Norges Bank to issue a payment card or develop an app for consumers to use for anonymous 7/9  BIS central bankers' speeches  payments. Which brings us to another question: which means of payment should be the statutory form of legal tender in Norway if we introduce electronic central bank money? Should it be banknotes and coins, or Norges Bank’s electronic money, or both? We must also ask ourselves what the consequences will be for the banking system. For many consumers, electronic central bank money could provide an alternative to deposit money in a bank, as cash does today. Banks can attract deposits through the interest rates they offer.

Nonetheless, probably the most important factor is that the banking sector is one of the most highly regulated sectors in society and is subject to strict supervision. A bank cannot operate without a licence, and banks are required to satisfy a number of requirements relating to capital adequacy and liquidity management, all of which limit bank lending and money creation. Norwegian banks cannot behave as Stockholms Banco did in the 1600s. By ensuring that banks are solid and sufficiently liquid, regulation and supervision also underpin trust in the money we use. The financial crisis in autumn 2008 was triggered by the collapse of an under-regulated financial institution – the Lehman Brothers investment bank.10 In the years preceding the crisis, Lehman’s equity was less than two percent of its assets. With so little capital supporting loans, it does not take more than a puff of wind to bring down a house of cards. New forms of payment and new forms of money Trust is necessary, though not sufficient, for money to function as a universal means of payment. It must also be efficient and safe to use. When you make a payment in a shop using a bank card, one of the largest systems we have is set in motion. Payments move back and forth between banks. Banks settle the payments by transferring money between their accounts at Norges Bank. Your payment then becomes available in the recipient’s account, normally a few hours after the payment process was initiated.
4  4 CPI CPIX  3  3  2  2  1  1  0  0  -1  -1 00  01  02  03  04  05  06  07  08  09  10  11  Sources: Statistics Sweden and the  Unit labour costs for the economy as a whole Annual percentage change, seasonally adjusted data 8  8 Unit labour cost Hourly labour cost Productivity  7  7  6  6  5  5  4  4  3  3  2  2  1  1  0  0  -1  -1 94  96  98  00  02  04  06  Sources: Statistics Sweden and the Rik b k  6  BIS Review 22/2008  Weak GDP growth in the USA in 2008 Consensus and the Riksbank’s forecasts for GDP growth in the United States in 2008 at different points in time 4.0  4.0 The Riksbank  3.5  3.5  Consensus  3.0  3.0  2.5  2.5  2.0  2.0  1.5  1.5  1.0  1.0  0.5  0.5  0.0  0.0 Jan Feb M ar Apr M ay Jun 2007  Jul  Aug Sep Oct Nov Dec Jan 2008  Feb  Sources: Consensus Economics Inc. and the Riksbank  Monetary policy considerations  Financial turmoil High cost pressures – Inflation above the target Subdued growth in the United States  BIS Review 22/2008  7  The interest rate path is a forecast not a promise Per cent, quarterly average 7  7  90% 75% 50% Repo rate  6  6  5  5  4  4  3  3  2  2  1  1  0  0  Mar-03  M ar-04  Mar-05  Mar-06  Mar-07  M ar-08  Mar-09  Mar-10  Mar-11  Source: The Riksbank  What can monetary policy accomplish?

The policy was expected to contribute to inflation being below the target during a relatively long period, to then be around 2 per cent, measured in terms of the CPI, during 2007. Underlying inflation, the CPIX, was expected to be around 1.5 per cent. The inflation outcome was close to these forecasts – at 2.2 and 1.2 per cent respectively. As I just observed, one cannot rely too heavily on individual forecasts. But I cannot deny that it, psychologically at least, feels far more satisfying than if we had been further away. But, naturally, the actual assessment of how well we have managed is the responsibility of the Committee on Finance. And the Committee’s initiative to the independent material for assessment that we have now published will hopefully make it easier to examine our work. I hope it will contribute to a good discussion on monetary policy. Thank you! 4  BIS Review 22/2008  The goal for monetary policy  2 per cent ±1 percentage point  Why?   Create the best possible conditions for sustainable economic development! Monetary policy at present…  The repo rate was raised by 0,25  percentage points to 4,25 per cent  Repo rate around 4,25 per cent over the  coming year  The view of the future repo rate largely the  same as in December  BIS Review 22/2008  5  Inflation above target Annual percentage change. Broken lines refer to the Riksbank’s forecasts.