samchain/econo-pairs-v1 huggingface dataset:
Once again, it has combined conventional measures, cutting official interest rates and placing the deposit facility in negative territory, with other, unconventional measures, such as a new private-sector credit-linked lending programme and the launch of an ambitious plan to purchase private- and public-sector securities, which is expected to run until September 2016 and, in any event, until inflation resumes a path more in keeping with its medium-term objective, namely around 2% for the ECB. These expansionary monetary impulses, along with the expectations of a change in the US monetary policy stance and of an interest rate increase by the Federal Reserve, have depreciated the euro and reduced the Spanish economy’s financing costs. The market fragmentation caused by the crisis may be considered to have been reversed. Such fragmentation was hampering the full transmission of the expansionary monetary measures to our economy. The start-up of the Single Supervisory Mechanism (SSM), the first step of the Banking Union, has played an important role in this process of financial normalisation. The start-up of the Single Supervisory Mechanism In November last year the SSM commenced operating and, since then, with the participation and support of the national authorities, the ECB has taken control of banking supervision throughout the Monetary Union. As a prior step, an ambitious comprehensive assessment of European banks was undertaken in 2014, whose positive results contributed to increasing investor confidence in the European banking system.

Improved confidence has also benefited from the changes in certain external conditioning factors, such as those linked to the ECB’s monetary policy and to the progress in economic and monetary union, which have prompted an easing in financing conditions. On top of these are other more transitory effects, such as those linked to the low level of oil prices or to the depreciation of the euro. I shall continue with the analysis contained in the Annual Report, briefly reviewing the key factors behind the recovery. Budgetary consolidation Firstly, regarding public finances, the general government deficit met the objective set by the European Council (5.8% of GDP) for the third year running. In 2014, fiscal policy had a less restrictive impact than in the preceding years and was a less prominent conditioning factor of macroeconomic developments. The reduction in the deficit in 2014 came about as a result of the greater adjustment made at the central and local government levels, since most of the regional governments exceeded the targets set. The budgetary improvement was also the consequence of a similar-sized contribution by revenue and public spending (once the impact of the financial assistance to the banking system is stripped out of spending). The tax take progressively picked up during the year, in step with the cyclical improvement and the change in the composition of GDP.
The global economy has never before, in recent history, been through such a long period of interest rates as low as they are now. The interest rate level worldwide was already falling long before the financial crisis erupted. Behind the decline is a downward trend in real interest rates that can be attributed to a number of structural developments. Lowering policy rates is a response to these developments. For several decades towards the end of the twentieth century, growth in the labour force and higher levels of education boosted economic growth. Growth was accompanied by high returns and considerably higher real interest rates than observed in recent years. 10  Carstens, A. (2015): “Challenges for emerging economies in the face of unconventional policies in advanced economies” (speech given on 20 April 2015), Bank of Mexico. 11  Rajan, R. (2015): “Going Bust for Growth” (speech given 19 May 2015), Bank of India. 6  BIS central bankers’ speeches  Growth impulses have gradually become weaker. Productivity growth has declined. The labour force is growing more slowly in many countries. At the same time, other structural changes are providing the motivation to save more: population aging and rising income inequality. In sum, these factors have contributed to lower real interest rates, even when economies have been in balance. Following the financial crisis, interest rates have fallen even further. Economies had been completely thrown off balance. Nor was there much help to be obtained from other policy areas.

But even though the zero lower bound is not absolute, the effect of further cuts will diminish as rates approach or fall below zero. The most important limitation on how far down it makes sense to go is related to the existence of an alternative to bank deposits, i.e. cash. Negative bank deposit rates can always be avoided by holding cash instead. The disadvantage is that cash is more expensive to manage than electronic deposit money. Transport, storage and security all involve costs. For a bank participating in the settlement system, where large amounts are reinvested at frequent intervals across accounts and across banks, the costs involved in switching to cash will be considerable. Central bank deposit rates can therefore be below zero. How far below, is an open question. For many retail customers, exchanging bank deposits for cash will be fairly inexpensive. A safe deposit box can be rented for less than € a year. If bank customers choose to withdraw their deposits and hold cash, banks will lose an important part of their funding. This is probably an important reason why banks in countries with negative policy rates are reluctant to set negative deposit rates, particularly for households. If banks hold back on deposit rates, lending rates can only fall to a limited extent before banks’ earnings are reduced. A lower policy rate will probably have a less-than-normal effect on lending rates, weakening the impact of monetary policy via the demand channel.
Prior to the crisis, liquidity practices did not generally anticipate the possibility of severe drops in the prices of saleable assets. 3  See, e.g., 12 U.S.C. § 5365(a)(1). 4  See 12 U.S.C. § 5365(i). 5  Board of Governors of the Federal Reserve System, Press Release, October 23, 2014. 6  Daniel Tarullo, “Stress Testing after Five Years,” Remarks at the Federal Reserve Third Annual Stress Test Modeling Symposium, Boston, Massachusetts, June 25, 2014. 7  See Board of Governors of the Federal Reserve System, Comprehensive Capital Analysis and Review 2014: Assessment Framework and Results, March 2014, at 7–8. 8  See 12 C.F.R. §§ 225.8(c)(2) and (e)(2)(iv). 9  See Citigroup, Inc., “Citi Statement on 2014 CCAR Results,” March 26, 2014. 2  BIS central bankers’ speeches  Following the crisis, the Federal Reserve imposed new liquidity regulations, including the Basel III Liquidity Coverage Ratio. The objective of these new regulations is to require large firms to hold levels of liquid assets sufficient to protect against constraints on their funding during times of financial turmoil. We have also implemented liquidity stress test assessments for systemically important financial institutions. These assessments provide important insight into the adequacy of liquidity positions and bank preparedness for upcoming regulatory standards. Beyond capital and liquidity, the Federal Reserve has increased its focus on risk management practices at the largest and most systemically important financial institutions. We learned from the crisis that risk management in the financial services industry had not always kept pace with changing market practices.

RPI inflation has risen to 4.4%, the highest rate since December 1991. And RPIX inflation – the target which governed our decisions until December 2003 – has risen to 3.8%, which would have triggered a letter under the old target. In 1997, I suggested that “Given past experience of inflation volatility, it is likely, even allowing for the change in policy regime, that the MPC will have many opportunities to restore the lost art of letter writing to British life”. It is really very surprising that no opportunity has yet arisen. As I stressed back then, it is important to understand – and many commentators seem to misunderstand – that the inflation target is not a range of 1-3%, but a target of 2% at which the Monetary Policy Committee continually aims. So an inflation rate of 3.1% is simply a trigger for a public explanation of why inflation has risen above target and what the Committee proposes to do about it. Letter writing is a key part of the accountability provisions of the monetary policy framework created in 1997, and I would welcome the chance to demonstrate how the process is meant to work. The opportunity to write to the Chancellor did not arise last week. But since we are so close to the level that would trigger a letter, let me instead write a letter to you. Over the past year CPI inflation has risen by a percentage point, from around 2% to 3%.
Moreover, in the case of European banks, their return on equity is not only well below that seen prior to the crisis; their ROE is also lower than their cost of equity. Needless to say, this may have negative implications for financial stability. Put simply, low profitability limits banks’ capacity to generate capital buffers internally and therefore their ability to absorb negative shocks. At the same time, low returns may push entities towards risky search-for-yield strategies. My second message is that caution is required when drawing a simplistic and causal relationship between low profitability and monetary policy. Take for instance the case of Sweden, where the Riksbank has pursued a negative interest rate policy from 2015 until very recently; yet, banks’ profitability ratios in that country are relatively high. More broadly, low or even (mildly) negative interest rates tend to have counteracting effects on bank profitability: while they may exert downward pressure on unit intermediation margins, they 4  also promote loan demand, improve credit quality and produce capital gains in banks’ securities portfolios. We may well appreciate the different channels through which low (and even negative) interest rates help boost economic growth and repair banks’ balance sheets. But we cannot ignore the possibility that, if persistent enough, such a scenario may ultimately impair bank profitability and the bank-based transmission of monetary policy. Precisely for this reason, the ECB introduced last September a two-tier system for the remuneration of bank reserves.

This assessment derives from studies conducted by the Eurosystem but also from the reports published by “ECB Watchers”, with whom, incidentally, the ECB has regular contact, notably in the context of annual conferences. Research carried out by these “ECB Watchers” show for example that on average, the Eurosystem’s monetary policy decisions were very well anticipated by financial markets, whatever their orientation, at least two weeks in advance, and fully factored in at least a week before. A comparison with the Fed, moreover, does not reveal significant differences between the two institutions with regard to the ability of markets to anticipate the monetary policy decisions of the two institutions. That points to the transparency of the single monetary policy. In particular, the fact that the ECB has chosen channels other than the publication of  BIS Review 113/2007  7  minutes of the meetings of the Governing Council has not prevented it from reaching a high level of predictability. As regards the frequency, since the inception of the euro in 1999, the Eurosystem has changed its policy rates 25 times (8 cuts, 17 hikes), which is on average close to the usual average frequency of interest rate changes 1 . However, compared to the Federal Reserve, in particular since 2001, the frequency of the changes is by far lower. Does this necessarily imply that the Eurosystem does not move enough or too low?
As shown in Chart 3, there was also a clear build-up of financial vulnerability in Norway prior to the financial crisis.   The rise in both house prices and debt in Norway was on a par with countries that were much harder hit by the crisis.   In addition, Norwegian banks had also increasingly financed strong lending growth over a long period with market funding, of which a considerable share was shortterm funding. The Norwegian banking sector became increasingly dependent on well functioning international money and capital markets, enabling banks to roll over their funding. Nonetheless, the liquidity crisis never developed into a solvency crisis in Norway. Perhaps financial sector operators had learned from the previous banking crisis and engaged in more responsible banking during the upturn. Furthermore, they were subject to stricter banking regulation in some areas. But other factors also played a role.   Macroeconomic developments after the outbreak of the financial crisis were more favourable in Norway than in other countries. The decline in output and the rise in unemployment were far more limited. Because of particular features of the industry structure in Norway, it took time for the full impact of the international downturn to reach our economy. In the meantime, an expansionary monetary and fiscal policy had begun to take effect. Against the background of relatively favourable macroeconomic conditions, the vulnerability related to a high household debt burden and elevated house prices never translated into higher losses for banks.

May, R, Levin, S.A and Sugihara, G (2008), “Complex systems: Ecology for bankers”, Nature Vol. 451: 893-895. McKercher, B and Chon, K (2004), “The over-reaction to SARS and the collapse of Asian tourism”, Annals of Tourism Research 31(3): 716-719. Milgram, S (1967), “Small-world problem”, Psychology Today 1(1): 61-67. Newman, M (2003), “The structure and function of complex systems”, arXiv:condmat/0303516v1. Newman, M (2008), “The physics of networks”, Physics Today: 33-38. BIS Review 53/2009  19  Nier, E, Yang, J, Yorulmazer, T and Alentorn, A (2008), “Network Models and Financial Stability”, Bank of England Working Paper No.346. NYU Stern School of Business (2008), Repairing the US Financial Architecture: An Independent View. Pikitch, E.K, Santora, C , Babcock, E.A, Bakun, A, Bonfil, R, Conover, D.O, Dayton, P, Doukakis, P, Fluharty, D, Heneman, B, Houde, E.D, Link, J, Livingston, P.A, Mangel, M McAllister, M.K, Pope, J and Sainsbury, K.J (2004), “Ecosystem-Based Fishery Management”, Science Magazine, Vol. 305: 346-347. Porterie, B, Kaiss, A, Clerc, J-P and Zekri, L and Zekri, N (2008), “Universal scaling of forest fire propagation”, eprint arXiv:0805.3365. President’s Working Group (2008), Initiatives to strengthen OTC derivatives oversight and infrastructure, available at http://www.ustreas.gov/press/releases/hp1272.htm. Pröpper, M, van Lelyveld, I and Heijmans, R (2008), “Towards a network description of interbank payment flows”, DNB Working Paper No. 177. Simon, H (1962), “The architecture of complexity”, Proceedings of the American Philosophical Society, Vol. 106, No. 6: 467-482.
Although GDP growth will slacken and employment will increase more slowly this year, resource utilisation will nevertheless be higher than normal. On the other side there was an increased risk of weaker growth in the world economy. There is considerable uncertainty over which direction developments in the US economy will take and how this will affect the rest of the world. And the financial markets have continued to be marked by unease and turmoil. BIS Review 22/2008  1  When all of these factors were weighed together, the majority of us reached largely the same view regarding the repo rate as expressed in our December forecast, that is, that the interest rate needed to be raised in order for us to attain the inflation target. However, there is still considerable uncertainty regarding economic indicators and inflation prospects. It therefore appears particularly important to point out that the interest rate path is a forecast. It is not a promise! And the interest rate decisions that are made in the future will of course depend on how new information affects the prospects for inflation and economic activity in Sweden. Communication in connection with the interest rate decision It can hardly have escaped the notice of anyone here that the Riksbank received a good deal of criticism in connection with this interest rate increase. What has been criticised is, perhaps, not so much the increase as such, more that the interest rate decision took many by surprise.

It must be noted that the above-cited initiatives, formalised in the relevant national strategy, have been substantially supported by renowned international institutions such as the World Bank, the European Central Bank, and central banks from EU countries. Hence, let me now extend my sincere appreciation to these institutions for their support, and to their distinguished representatives who will share with you today their experience in the development of retail payment systems market. From the perspective of communication and cooperation, the regional cooperation and sharing of experiences is deemed as very important and fruitful. As a result of market development and cultural characteristics and financial education level in the countries of our region, experience sharing assumes particular importance, as it may contribute significantly to achieving the goals more effectively. Last but not least, another development is the joint initiative of the Bank of Albania, Ministry of Finance and Economy, and Minister of State for Diaspora for a higher attention related to attracting and effectively using remittances, as a component of retail payments. At the international level, remittances make a significant contribution to the economy and welfare of the people, and are considered as accelerators to financial inclusion. The Bank of Albania, therefore, in addition to the aimed developments in the national strategy for reforming the retail payment systems, is engaged in preparing an annual publication on remittances.
Stable, low inflation expectations based on the assumption that the central bank shall act to control the inflation rate can mean that inflation will not become too high, even if resource utilisation increases above its potential. Conversely, if the confidence is lower, high inflation expectations can mean that prices do not fall, even if resource utilisation declines. There are also a number of studies indicating the relationship between inflation and growth is not stable, but is due to the degree of resource utilisation and to what the general public thinks of the central bank’s actions. A central bank that has a high level of credibility as safeguarder of price stability can allow demand to be higher in relation to potential growth than a central bank with the opposite reputation. The fact that both wage setting and price setting behaviour are affected by inflation expectations means that it takes some time before a reduction in resource utilisation has an impact in terms of falling prices and lower wage hikes. In the same way as it takes time to change inflation expectations and pricing behaviour downwards, it is difficult to change them upwards. As I mentioned above, this is partly because the general public expects certain behaviour from central banks, and partly because raising prices involves costs for the companies. These are both purely administrative costs and also reputation costs.

The question is how much of the slowdown in the industrial activity will have time to spread to other parts of the economy before there is an upturn in industrial activity. For the future we see a very good development in disposable income, some recovery in household wealth and continuing low oil prices, which should provide a stronger growth in consumption both this year and next year. The situation on the labour market gives mixed signals. Open unemployment rose somewhat between December 2001 and January this year. Employment levelled off during the second half of last year, but the increase was still 80,000 persons, between 2000 and 2001. Wage rises were slightly higher than expected last year, despite weaker economic activity. However, developments on the labour market are divided in two parts. Employment in the manufacturing industry has fallen since the beginning of last year, while it is only now possible to detect a slowdown in the services sectors. Similarly, the number of redundancy notices has been highest in the manufacturing industry. In the public sector, healthcare and welfare, there have been no notices of redundancy and the number of new vacancies registered has increased. The fact that the weak growth in the manufacturing industry has not spread to the private and public services sectors is probably due to the expansive economic policy. Forward-looking economic indicators, such as confidence indicators for households and companies, imply that the downturn in activity is abating and that developments are beginning to stabilise.
Second, the country in which the gold is stored must be politically and economically very stable and guarantee the immunity protection of central bank investments. Unlike the other two demands of the gold initiative, the manner of storing the gold reserves has no immediate implications for monetary policy. In our opinion, however, the principles of risk diversification and the requirements of due diligence in the conduct of business still speak for decentralised storage in Switzerland and abroad. Concluding remarks Ladies and gentlemen, in order for the SNB to continue fulfilling its statutory mandate, it is important that it can maintain its capacity to act in the conduct of monetary policy. Given the challenging environment in which we will also be operating this year, we once again need broad support. In this spirit, I would like to thank our shareholders for their loyalty and great interest in the activities of the SNB. On behalf of the Governing Board, my thanks also go to our staff for its tireless efforts for our institution. Thank you all for your attention. BIS central bankers’ speeches  5

Capacity utilisation according to Statistics Sweden and the National Institute of Economic Research, is still at a high level but is moving downwards. The downswing in the  BIS Review 113/2008  3  Swedish economy has come sooner and been more pronounced than was expected only a few months ago. It covers the manufacturing industry as well as the retail and service industries. Households have clearly become more pessimistic, not least with regard to the national economy and the labour market. For example, the survey conducted by the National Institute of Economic Research at the end of 2007 showed that an excess amount of 40 per cent of the households believed that unemployment would be lower in a year's time. Now, however, an excess amount of 50 per cent of the households believes that unemployment will be higher one year ahead. This deterioration in general sentiment has been accompanied by a fall-off in private consumption. This applies mainly to capital goods, which is common at the beginning of an economic downswing. But it is not only private consumption that has declined; investments and exports have also weakened. GDP growth has been revised downwards for both 2008 and 2009, although the forecast predicts a recovery in 2009 in line with developments abroad and it is believed that Sweden's exports will be an import driving force in this context. However, I am far from sure that such an upswing in economic activity will actually take place.