samchain/econo-pairs-v1 huggingface dataset:
It is important to stress the complex interdependence at the core of the entire mechanism, in which an individual investor’s strategy depends not only – as in the standard efficient markets’ paradigm – on the discrepancy between the market price and the fundamental price, but also, and crucially, on what other agents are doing. And as is well known, such interdependencies can give rise to markedly sub-optimal outcomes, with the Prisoner’s Dilemma being the simplest and best-known. A second rationale for the “mopping up” position was that even if the central bank were able to identify an asset price bubble in real time, monetary policy is simply too blunt an instrument to try to deflate it, especially because bubbles typically affect only a subset of asset markets, whereas monetary policy exerts its impact on the overall economy. This implies that a central bank that wanted to deflate a bubble in (for example) the housing market would risk pushing the economy into a recession. Further, it has been argued that such a risk of “overkilling” is especially serious because, given the very nature of asset bubble dynamics, and the sizeable capital gains typically accruing to those who are “riding” them, the standard interest rate increase of 25, or even 50 basis point would most likely just be shrugged off. To put it differently, a central bank that truly wanted to deflate a bubble should be willing to run the risk of inflicting serious damage on the economy, by hiking interest rates by significant amounts.

Even though I was a commercial banker for over 20 years of my career and fully share and understand the challenges facing this profession, I would not be able to witness the recovery and resilience of our banking system today if not for your remarkable efforts and hard work. Let me conclude by thanking the management of the “Banker” magazine for honoring me with this award and all of my colleagues at the BOT for their untiring support. The award is a great encouragement for me to continue dedicating myself to the cause of my work. Finally, let me leave you with a quote that has always been close to my heart. These were the words of one of my mentor, Dr. Puey Ungphakorn, one of the finest Governors we’ve ever had, who once said that: “If one is not concern about holding on to one’s position, then one can always make the right decisions.” So you can rest assured that I will continue to do what is right and in the best interest of our country. BIS Review 10/2006  1
The implementation of policies by institutions with clearly defined goals protected from short-term effects and able to communicate regularly, is crucial to creating the required confidence for economic units in their decision-making process. Central bank independence is a concept that can be defined in various ways. The main pillar of independence is not to allow a borrowing-lending relationship with the public sector. There are three more pillars of independence. The first is goal independence that means the ability to freely determine monetary policy targets. Second is target independence, which means the ability to determine targets at its own discretion when price stability is set as the goal. Finally, the third pillar is the power to freely choose and use monetary policy instruments with the aim of achieving the targets. It is again a widely accepted fact that the ability of the central bank to announce its opinion about the general course of economy and the risks using communication technologies is part of central bank independence. This means warning politicians, non-governmental organizations, financial circles, the real sector, in short all sections of the public. After thirty years of chronic inflation and successive economic crises, the Central Bank of Turkey finally obtained independence in 2001, which was quite close to world standards.

The increase in productivity and investments will contribute to sustain growth in the medium term. Hence, the increase in employment is also expected to continue in the coming periods. Graph 9: Employment (Index for those Employed in the Manufacturing Industry, 1997=100)  86,0 85,0 84,0 83,0 82,0 81,0 80,0 79,0 2001  2002  2003  2004  Source: SIS. 10  BIS Review 36/2005  A reflection of the high rate of growth recorded in 2004 was the increase in the current account deficit, as often discussed by the public. It is useful to point out before anything else that it is a natural outcome for economic growth above forecasts to widen the current account deficit. The realization of the rate of growth as 9.9 percent in 2004, which had been forecasted as 5 percent, led to a parallel increase in the current account deficit above forecasts. However, the rise in the current account deficit today should not be interpreted as resulting in crisis as in the past. The world trend also supports this assessment: Deepening of commercial and financial integration makes it possible for countries with macroeconomic stability to sustain higher current account deficits than before. Within this context, in order to have a clear understanding of the situation Turkey is in today, we need to reflect on what happened in the past. At this point, I would first like to give you a brief overview of what we experienced in the past.
Interest rates on credit spiked, and lending to households and businesses came to a standstill. Partly as a result, it gradually became apparent that the hit to demand had been accompanied by a large and permanent hit to the level of productivity – that is, the amount of output the economy was actually capable of producing – and a sustained slowing in its growth rate. GDP took many years to return to trend growth. And that trend was itself much weaker than what had become seen as normal in the pre-crisis decades. Having appeared to be among the most resilient economies in the G7, the UK revealed itself to be one of the least resilient. I take three key lessons from the financial crisis and what followed. The first lesson – which seems obvious in hindsight – is that the past is not necessarily a good guide to the future. The second is about what constitutes resilience. We had thought the UK economy was resilient, but we were looking at a narrow form of resilience – by focusing on resilience in terms of GDP growth and inflation, we had failed to realise how fragile the financial system had become, both in response to and as a source or amplifier of shocks. We should have been thinking about and tracking developments much more broadly. And, following on from the first two, the third lesson is that policy needs to be prepared for the unexpected.

Although there is a considerable stock of equity in owner-occupied housing, with banks tightening the supply of both secured and unsecured credit, consumers will find it more difficult to borrow to finance spending. So in 2008 it is likely that a less buoyant housing market will go hand in hand with slower growth of consumer spending. Tighter credit conditions mean that, as a nation, we are likely to save more of our income this year than in the recent past. In the short run, that will slow economic activity, possibly quite sharply. And there is a risk that weaker activity and lower asset prices could result in another round of losses for banks and a further tightening of credit conditions. The adjustment which not only the British but the world economy is experiencing is necessary as the imbalances, between spending and saving and between domestic demand and trade, unwind. As part of a longer-run rebalancing of the UK economy, an increase in our national saving rate, both private and public, is necessary. The low level of national saving is apparent from the current account deficit – our new net borrowing from overseas – which in  2  BIS Review 8/2008  the third quarter of last year was, relative to GDP, the biggest in the past fifty years and the largest in the G7. It is possible to run a current account deficit for a considerable period. Australia, for example, has done so in every year since 1974.
The Bank’s sermons on the storms ahead would have had more influence if at the same time a collection plate was passed round the congregation so that money was available in the event that the church roof had to be replaced. But a macro prudential regime also has a key role to play in the downswing phase of the cycle. Since 2008, credit conditions have tightened, jeopardising the recovery and, in turn, threatening renewed losses for banks. By allowing banks to draw on their macro prudential capital buffers, while credit conditions remain tight, the system is counter-cyclical. In other words, a credible macro prudential regime could help forestall both excessive exuberance and unnecessary caution. By altering the pressure on the financial brakes according to circumstances, regulation, far from being an inflexible foe, would become a flexible friend. This type of regulatory regime, and its objectives and tools, are largely untried and untested. But that is not a reason for not trying and not testing. The Financial Policy Committee will be a first. Over the next few years we will put in place a framework for financial stability to  BIS Review 84/2010  3  parallel that for monetary stability. We need both. As we have seen, one without the other is not enough.

This is something that has to be renounced to enable us to perform our tasks properly and both attract and retain the best university graduates. An open internal dialogue with management is needed to promote an informal exchange of ideas. Taking responsibility and meeting deadlines must also be rewarded. It is easy to say that some mistakes are acceptable provided things get done but that attitude is by no means customary in a central bank. Last but not least, we must have an open attitude to the outside world, accept impulses and explain what we are doing. So what have we done in recent years to make the Riksbank a more modern place to work in? Here are some examples: ·  We have aimed for a better organisation by making it flatter and delegating more to heads of department and division. That in turn means that general objectives and tasks must be formulated clearly for all concerned so that everyone is aware they are not just piling stones on top of each other but actually helping to build a cathedral. ·  We have accentuated the analytical and academic profile. Our advisers are world-class academics and members of the staff have access to further education in Sweden as well as abroad. We have also made the basic operations more efficient. ·  Another aim has been to give staff a more flexible working life.
This scenario represents both a short-term challenge, insofar as new competitors may enter specific areas, such as retail payment services, with the consequent drop in business and income for banks in this area, and, fundamentally, a major future challenge deriving from the risk that banks may be relegated to providing undifferentiated and low value-added basic services. Against this competitive background, banks have a number of initial advantages but are being forced to react in order to capitalise on the opportunities the new situation offers. The responses may range from specialisation to digital transformation, taking advantage of the possibilities offered by technology and the new regulations, with an emphasis on adequate data management. In any event, this transition will entail a short-term increase in costs in a context of low profitability. Issues such as cybersecurity also take on particular significance in the process of adaptation of institutions to new technologies as they can also lead to an increase in operational and reputational risk. I would also like to highlight the growing challenge BigTech firms are posing in the financial sector, not in their more prominent customer-facing facet, but as providers of a significant amount of financial-sector infrastructure in areas such as cloud-based services. These actors now constitute a critical component of the financial sector. In any event, new technologies offer banks fresh opportunities, both in terms of business and potential efficiency gains.

References  4/5  BIS central bankers' speeches  Brainard, W. (1967): “Uncertainty about the effectiveness of policy”, American Economic Review 57, 411–425 Constâncio, V. (2016): “The challenge of low real interest rates for monetary policy”, speech delivered on 15 June 2016 Hamilton, J. D., J. Hatzius, E. S. Harris and K. D. West (2015): “The equilibrium real funds rate: Past, present, and future”, Hutchins center on fiscal & monetary policy at Brookings, Working Paper 16 Hansen, F. and K. Torstensen (2016): “Does high debt growth in upturns lead to a more pronounced fall in consumption in downturns?”, Economic commentaries 8/16, Norges Bank Laubach, T. and J. C. Williams (2015): “Measuring the natural rate of interest redux”, Hutchins center on fiscal & monetary policy at Brookings, Working Paper 15 Lund, K., K., K. Tafjord and M. Øwre-Johnsen (2016): “What drives the risk premium in Nibor?”, Economic commentaries 10/2016, Norges Bank Rachel, L. and T. D. Smith (2015): “Secular drivers of the global real interest rate”, Staff Working Paper 571, Bank of England Zhu, F. (2016): “Understanding the changing equilibrium real interest rates in AsiaPacific”, BIS Working Papers 567 1 The spread between the money market rate and the expected key policy rate (the interest rate premium) can vary  somewhat over time (see Lund et al (2016) for a discussion of the premium in the Norwegian three-month money market rate). 5/5  BIS central bankers' speeches
Instead, it implies that the latest inflation data matter insofar as they contain information regarding medium-term inflationary pressures. By its very nature, the medium-term orientation requires projecting the future path of inflation. Surveys and financial market instruments provide us with a useful tool in this respect, as they give us evidence of how different agents (experts, households, firms, and financial market participants) see inflation evolving going forward. In addition, central banks rely on their staff’s forecasts for inflation and economic activity –which typically draw on a huge amount of economic and monetary analyses– as a key input in their decision-making process. Summing up, our task is not to respond to the latest inflation data point, a futile and – especially in the face of adverse supply shocks– counterproductive task, but to stabilise inflation over the medium run at the desired level, in our case 2%, while ensuring that longerrun inflation expectations remain anchored to the target. Returning inflation to 2 % over the medium run In the context of a steady increase in medium-term inflation expectations, as economies recovered from the worst phase of the pandemic crisis, at the end of 2021 we started at the ECB Governing Council a process of progressive normalisation of our monetary policy. The first step was to withdraw the extraordinary policy stimulus that we had launched at the onset of the pandemic. To this end, in March we stopped the net asset purchases under the PEPP.

Enhanced international coordination between monetary authorities is ensuring that their actions are part of a consistent overall strategy. These measures are highly exceptional with indeed unprecedented monetary easing leading key policy rates to historically low levels and the adoption, in certain cases, of unorthodox monetary policy actions. As such, they should greatly contribute to restoring confidence and a smooth functioning of money markets. Governments have moved aggressively to support banks' solvency and resilience. Since the Paris Declaration by euro area member-countries, Europe, under the leadership of France until year end, has been acting according to what I consider a sound and consistent action plan. I won’t enter into the details. Just bear in mind the three following elements. First, authorities are extending guarantees to banks’ refinancing so that they can, in turn, properly finance the economy. Second, significant reforms of accounting rules are now being implemented. Basically, these reforms allow banks to transfer instruments previously marked to market to portfolios where that will no longer be the case. They also provide for greater flexibility in methods used to value assets whose market has shut down. Third, and lastly, governments have confirmed their willingness, when warranted, to step in and support banks’ capital. What about France’s actions? Government and Parliament very quickly put meat on the bones of the European principles. A new bill has been passed, which provides for two things. First, it sets up a EUR 320 billion funding vehicle to guarantee banks’ medium-term refinancing (i.e. up to five years).
These data series R  sometimes are constructed using different base years, making comparisons of series even of the same variable problematic. Besides weak data series, there is also the problem of coping with lags in monetary data. The computation of the estimated supply of total reserves (OSR), on the day of OMO market often involves several days lag. This means that to be able to obtain OSR, where “t” is the OMO market day, the compiler must be able to project both the sources and uses of monetary base, several days prior to  2  BIS Review 45/2007  the OMO market day say OSR . The techniques for doing this are yet to be fully developed in all t-3  WAIFEM constituent countries. •  Determination of public sector borrowing requirement The primary target for OMO is the difference between the estimated supply and demand for money under equilibrium conditions. But in arriving at the ultimate target for OMO, the excess supply needs to be adjusted to accommodate public sector borrowing requirement in the period. Thus there would be need to make the problematic forecasts of government cash revenue and expenditure, including float items. In this regard some of our member countries, notably Ghana have taken considerable strides through the application of some appropriate software. •  Capacity for econometric forecasting Familiarity with the use of econometric techniques is a sine qua non for liquidity forecasting.

It erodes what some commentators call the “culture of compliance”, and it tends to foster an employee population that will be inclined to look for loopholes, to place toes on the edge of the permissible, or even to turn a blind eye to a black letter compliance rule. And, the organization’s compliance staff will also suffer from a stifled motivation and the absence of any meaningful authority – it relegates that staff to a bunch of box checkers, rather than people working toward a safer and better world. Is it a surprise then that foreign institutions have problems with sanctions compliance and U.S. institutions do not? I do not excuse this in any way, but I do understand it. Let us now turn to tax evasion. On May 19, Credit Suisse pled guilty to conspiring to help certain Americans evade their tax obligations to the Federal government. Credit Suisse agreed to pay a fine of $ billion. Like the criminal disposition concerning BNPP, this was headline news. Credit Suisse had well developed compliance rules addressing what relationship managers could and could not do when travelling into, and through, the United States. But those compliance rules, while cogent, were largely ignored by certain Credit Suisse personnel. Why is that? Here, again, I believe that the answer lies in the organizational value system. Credit Suisse was not alone in aiding customers to evade taxes. UBS had similar problems although it escaped without a plea to a Federal felony.
Since then, global debt has stabilized, growing by only 1% in total, relative to global GDP, over the past 5 years. The aggregate growth rate is not therefore signaling an impending correction. The level, however, may well represent a significant vulnerability given that high levels of debt are associated with deeper and more persistent recessions. Assessing the sustainability of this debt is more difficult. Whether debt is sustainable depends on the difference between the interest rate and the growth rate of the income stream that will be used to repay the debt. The future is not known – in assessing today whether a given level of debt is sustainable, we must rely on our best forecast of future interest rates and growth. The level of debt that is sustainable in an economy is not a constant. It can change over time and indeed has changed enormously over the last 150 years. The ratio of credit to GDP in the late Victorian British economy was under 20% (not including the financial sector). In the mid-twentieth century it was around 60% and by the early 1990s over 100%. It is influenced by many factors including, very importantly, the long run real rate of interest. There is strong evidence that the long run, or trend real rate has come down materially over the past 40 years as a result of slow moving, secular changes in the supply of savings and the demand for investment.

Jean-Pierre Roth: What to expect from monetary policy? Summary of a speech by Mr Jean-Pierre Roth, Chairman of the Governing Board of the Swiss National Bank, at the International Center for Monetary and Banking Studies (ICMB), Geneva, 25 November 2003. The complete speech can be found in French on the Swiss National Bank’s website (www.snb.ch). *  *  *  A number of current issues, such as the weakness of the economy and the new National Bank Law, raise the question as to what we can expect from monetary policy. With regard to the stability of consumer prices, the answer is relatively simple. The goal of price stability is at the very top of the Swiss National Bank’s priority list. Since both inflation and deflation are monetary phenomena over the long term, the SNB can and will guarantee price stability in future too. Expectations of monetary policy are considerably lower when it comes to regulating economic activity. Economic activity in Switzerland is strongly dependent on growth abroad. Inflation does not bring about long-term economic growth. Stable prices, however, are the best precondition for sustained growth. A goal of price stability automatically ensures a degree of stability in the economy. Because of uncertainty and time lags, however, fine-tuning the economy is an impossible task. Speculative bubbles in the real estate and equity markets have been an increasing source of macroeconomic instability during the past two decades.