samchain/econo-pairs-v1 huggingface dataset:
Traditional regulation and supervision have also found it hard to handle the tendency to rollercoaster behaviour of the financial sectors. In good times, there is almost always a tendency to expand lending and to ignore the risks this entails. However, when the downturn comes, the same players tend to run for the exits at the same time, which serves only to  8  According to the analysis, a monetary policy designed such that housing prices continued to rise in accordance with the trend in the period 2000-2004 would have entailed a repo rate around 8.5 per cent, an inflation rate of –4.3 per cent and a level of GDP growth of –0.6 per cent in 2007, that is in the year before Sweden was hit by the global financial crisis (see Claussen et al., 2011). 9  Monetary policy is also ineffectual if one wants to counteract contagion risks due to the size and complexity of the banks and their exposures to each other. 4  BIS central bankers’ speeches  make the downturn worse. A vicious circle arises when a credit crunch leads to lower production and lower employment, which in turn feed back into in the financial sector by making loan losses even higher. This type of feedback effect between the financial system and the macro economy is not the province of traditional financial supervision either. This is where the concept of macroprudential policy comes in. Quite simply, financial supervision must be complemented by a much broader approach.

Bernanke, Ben (2010): Monetary Policy and the Housing Bubble, speech held on 3 January, 2010. Claussen, Carl Andreas, Jonsson, Magnus and Lagerwall, Björn (2011): A macroeconomic analysis of housing prices in Sweden, The Riksbank’s commission of inquiry into risks on the Swedish housing market. EBA (2011): EBA recommendation on the creation and supervisory oversight of temporary capital buffers to restore market confidence (EBA/REC/2011/1). Dokko, Jane, Doyle, Brian, Kiley, Michael, Kim, Jinill, Sherlund, Shane, Sim, Jae and Van der Heuvel, Skander (2009): Monetary Policy and the Housing Bubble, Finance and Economics Discussion Series 2009–49, Federal Reserve Board. Ekholm, Karolina (2009): Some lessons for monetary policy from the financial crisis, speech held on 4 December 2009. Hallvarsson & Halvarsson (2010): The communication of the major banks and the authorities during the financial crisis 2007–1 July 2009, report for FSPOS. Ingves & Lind (1996): The management of the bank crisis – in retrospect, Sveriges Riksbank Economic Review 1996:1. BIS central bankers’ speeches  9
The development of systems capable of delivering the quality-assured statistics necessary for the successful participation in EMU has understandably been a priority of the reform process. But the challenge of EMU extends beyond the Bank’s operational framework. For example, while we aim to participate effectively in the operational structures and decision-making bodies of the ESCB alongside much larger central banks, we only have some 250 people to perform the tasks involved. We are, therefore, undertaking a critical analysis of each of the Bank’s areas of operation in order to devise ways of coping with the increased workload. The development of new skills in work areas that will become key to the Bank’s operations as a member of the ESCB is another objective. The Bank’s management structure, too, is being reviewed. The policy-making process has been reinforced in order to respond to the growing need to analyse issues and take decisions in a more timely fashion. Line management has been strengthened and authority delegated more extensively to allow the managerial and technical staff to dedicate more time to ESCB-related activities. It has additionally been felt necessary to introduce a more efficient and rapid exchange of information across the Bank, particularly information acquired through participation in ESCB committees and working groups. While it is helping the Bank to become a more focused and efficient institution, effective participation in the ESCB undoubtedly represents a heavy claim on its limited human and financial resources.

One key consequence was that the EFSF itself was downgraded, since the EFSF ultimately derives its rating from the countries that fund it. Global safety nets may well be necessary as a complement in situations like these. 16. Second, Asian countries will play an increasingly prominent role in international financial institutions like the IMF as the centre of economic gravity moves eastwards. Asia will over time make contributions to the IMF commensurate with its larger role in the global economy. It is therefore in the interest of Asian countries to have the IMF continuing to play  2  BIS central bankers’ speeches  an active role in the region, and to effectively complement regional financing arrangements like the CMIM. 17. Indeed, in today’s precarious situation, it is in Asia’s interest that the resources of the IMF are enhanced. Asia will not be immune to an escalation of the sovereign debt crisis and any ensuing protracted slowdown in Europe. In such a scenario, a well-resourced IMF will reassure markets, by helping to dampen any spillover effects and mitigating the risk of an excessive contraction in economic activity. 18. In short, a robust response to crisis can entail three concentric layers of defence:    a first layer of credible economic policies backed by national resources;    a middle layer of regional mechanisms to provide added credibility, minimise spillovers, and foster regional stability; and    a third layer of multilateral support through the IMF. 19.
The scope for flexibility in inflation targeting depends on how well inflation expectations are anchored at the target. Norges Bank’s experience, based on close to 20 years of inflation targeting, suggests that a small open economy must expect inflation to deviate fairly widely from the target at times, rising above target or falling below. But at the same time, inflation has remained within a range around the target where deviations from the target cannot be said to have entailed material economic costs. This has provided leeway to give weight to other considerations in the Bank’s monetary policy trade-offs. Other countries have come to other conclusions and have chosen to stretch the limits of monetary policy further to bring inflation back to target. If we some time in the future were to experience falling demand and a risk of deflation, we will use the instruments at our disposal to address this situation. Our job will be less difficult if fiscal policy also contributes. The primary responsibility of monetary policy, however, is to provide the economy with a nominal anchor, quantified by the inflation target assigned to Norges Bank. Our instruments will always be geared towards this objective. References Borio, C. and A. Zabai (2016) “Unconventional monetary policies: a re-appraisal”. BIS Working Papers 570 Dell’Ariccia, G., P. Rabanal and D. Sandri (2018) “ Unconventional monetary policies in the euro area, Japan, and the United Kingdom”.

As I have mentioned, there is probably less to gain from lower long-term rates in Norway than in countries that have used unconventional instruments to reduce rates. And the effects of such instruments are now also being called into question internationally. The costs are particularly related to financial stability. Persistently low interest rates can induce investors to take on greater risk in the search for yield, bidding up the price of risky investments and pushing down yields to the level of risk-free interest rates. Prices for securities and other assets can be pushed up higher than future income and risk would suggest. High debt ratios create vulnerabilities, increasing the risk of new crises and future losses. Persistently lower interest rates can also hamper necessary structural changes and reduce the economy’s growth capacity. Debt becomes easy to service, even for unprofitable enterprises. Projects that generate low returns can be debt-financed. Chart: Fiscal impulses The strategy pursued by other countries of stretching the limits of monetary policy must be viewed in the light of monetary policy being practically the only instrument applied. Fiscal policy has made a scant contribution or pulled in the opposite direction. There are probably a number of reasons why this is the case. For some countries with high government debt, the risk of rising interest expenses restricted fiscal room for manoeuvre. At the same time, fiscal policy is managed at national government level.
In August 2011, in a first step to counter the excessively tight monetary conditions, we announced, almost on a weekly basis, an expansion of the monetary base, initially from CHF 30 billion to CHF 80 billion, then to CHF 120 billion and finally to CHF 200 billion. Even when the monetary base reached close to 40% of GDP, this was ultimately insufficient to halt the appreciation of the franc. As a consequence of these developments, on September 6, 2011, the SNB announced that it was introducing a minimum exchange rate of 1.20 against the euro. Since the announcement, the franc has never traded below this minimum. At the zero lower bound, the minimum exchange rate has become an important monetary policy tool for us. Yet despite the introduction of the minimum exchange rate, Switzerland has experienced almost two years of negative inflation. I just received the latest inflation data this morning: After having been at zero for two months, inflation turned negative again in September. In this context, it is also crucial to note that the introduction of the minimum exchange rate is not a beggar-thy-neighbor policy. It must be remembered that Switzerland has always had a negative goods trade balance with the euro area. The trade balance was negative before the implementation of the minimum exchange rate, and continues to be negative today. Swiss exports in goods have not gained market share in the euro area at the expense of others. Allow me to perform a simple thought experiment with you.

Between early July and early August alone, the Swiss franc appreciated by roughly 20%.1 With interest rates close to zero and inflation forecasts signaling deflationary risks, the minimum exchange rate helped us avoid a dangerous tightening of monetary conditions, in a situation where we had exhausted the options available under conventional monetary policy. It also provided the foreign exchange market with clear guidance at a time of enormous uncertainty. The rationale for the introduction of the minimum exchange rate is internationally acknowledged. As I have seen over the last two years, particularly central banks and the IMF understand the difficult situation facing Switzerland in 2011. They also recognize that we set the minimum exchange rate at a level where the Swiss franc remains highly valued even today. Over the last few years, exchange rate tensions between the major economies have flared up. In this context, some observers have criticized central banks for influencing exchange rates, either directly through foreign currency purchases, or indirectly through additional monetary easing measures such as the purchase of securities. It is claimed that these types of asset purchases generate spillover effects or constitute a beggar-thy-neighbor policy.2 In recent weeks, it has been suggested that capital flows have again become highly volatile  1  Based on daily data. 2  There are several event studies which show that asset purchases by the Federal Reserve and the Bank of England weakened their domestic currencies.
And firms are strongly encouraged to maintain contingency plans to wind themselves down – as I have already said today, the Bank would like there to be consideration of whether that could be a requirement for operating in the UK. And, as I also made clear earlier, we do realise that all of that will be formidable, best approached with an international consensus. Similarly demanding is the requirement in the Principles that countries “strive” to find internationally co-ordinated solutions, sharing information as freely as practicable. That is not something which one could say has always been apparent over the past two years, although it worked well on market operations. As the Principles recognise, the drive for greater openness between authorities should not be permitted to jeopardise effective resolution through leaks or pre-emptive action to ring-fence local interests. I am reporting this because the FSB Principles have not got as much coverage as they warrant. Yet it is very important that the banking world appreciates that, alongside other issues and initiatives I have outlined this morning, they have the potential – indeed, are intended – to bring about material changes in the way you structure your businesses, in how you interact with the authorities, and in the wider environment in which you operate.

The most prominent challenges are the high cost of capital as a result of high interest rates compared to large enterprises (LEs), the difficulty of obtaining proper finance due to shortage of guarantees and modest credit record, inability to compete and affect the market’s powers and making advantage of economies of scale as is the case with LEs, weak capacity to face and facilitate governmental procedures to expand their work, and low spending on development research works. Dear audience, Business enterprises in the Kingdom of Saudi Arabia have witnessed notable growth over the last years. The enterprises subscribing to the Social Insurance system have increased from 121.5 thousand in 1426AH to 218.4 thousand in 1430AH, with an average annual growth of 16 percent. Individual enterprises represent 93.1 percent, limited partnership enterprises 4.7 percent, and joint enterprises 0.6 percent of the total number. These enterprises’ economic activity is concentrated in three areas, namely, commerce with 34.3 percent, construction and building with 32.3 percent, and manufacturing industries with 14.6 percent. Small enterprises employing less than five persons have accounted for the bulk share, representing 45.5 percent of total enterprises at the end of 1430AH, enterprises with  2  BIS Review 171/2010  5–59 employees constitute 42 percent, while the remaining 3.8 percent has been accounted for by enterprises with more than 60 employees. These data show that most enterprises in Saudi Arabia are small ones, based on the number of employees. The SME’s contribution to total GDP is low.
Compared with June, this projection assumes a faster convergence of output and demand during the  4  BIS central bankers’ speeches  second half of the year. July’s output figure, although influenced by specific developments in the mining sector, reflects this trend. The biggest impact of the change in external conditions will be visible in GDP growth of 2012. For then, the baseline scenario assumes that GDP will grow in the 4.25% to 5.25% range (table 3). The slowdown from this year responds to a number of factors. First there is the convergence to expansion figures consistent with trend growth, which the Board continues to estimate around 5 percent. Such convergence reflects the normalization of both the durable components of aggregate demand and the MPR. Moreover, the effects of the low basis of comparison associated to the earthquake and tsunami of 2010 – that influenced first-half growth figures – will disappear. There is also the reduced impulse from abroad we will see in the coming quarters, which I have already mentioned. We also assume that the fiscal balance will converge to a structural deficit of 1 percent of GDP towards the end of the current Administration, as announced by the authorities and in conformity with the Fiscal Accountability Law. This change in external conditions has also triggered significant changes in the inflation outlook, especially in the short run.

But as we have said time and again in the past, we are not and cannot be immune to what happens outside our borders. We can mitigate its effects, but we cannot avoid them altogether. Therefore, the external situation is likely to have repercussions on our economy and, consequently, on our monetary policy conduct. As I just mentioned, at the August meeting the Board withdrew the tightening bias on the MPR it had communicated in previous minutes, which has reflected in the behavior of market interest rates. The baseline scenario I will be presenting in a moment assumes that the world economy will grow less than we anticipated just three months ago. First-half output figures were pretty  BIS central bankers’ speeches  1  weak in the developed world. Recent financial turmoil could aggravate in the second half of the year. Developed economies’ households continue to tighten their belts in order to reduce their massive debts, but, in turn, this deleveraging process is restraining growth in domestic demand and employment, prolonging balance sheet vulnerability. In addition, the fiscal position of these economies has deteriorated after several years of fiscal deficit. Remedying this situation will call for substantial adjustments in their public finances. Some of them could be done in the medium term, for instance in the United States, while others need immediate action, as is the case in some emerging European economies. In moments of weak private demand, these adjustments could postpone the much expected recovery even further.
Viner, J (1927), “Adam Smith and Laissez Faire”, Journal of Political Economy, 35 No.2, 198-232. 20  McLean (2006). 21  Viner, J. 1927, p232. BIS Review 102/2006  7

Once a month, immediately after the meeting of the Governing Council, the President of the ECB holds a press conference- which starts with a precise exposition of the diagnosis of the Governing Council which is immediately made available in real time on the ECB website. This was the case when we met last Thursday in Frankfurt. st  It is extremely important to stress that the Eurosystem was the first in the world to introduce, on the 1 January 1999, the concept of regular, frequent, real-time transparency in the domain of monetary policy. This illustrates the extent to which some criticisms are profoundly unjust ! It is especially noteworthy, in this regard, that soon after we had embarked upon this new concept of real-time transparency, other important central banks decided to go along the same path. Being accountable for an independent institution in a modern democracy or, as it is the case for the Eurosystem, in a subtle set of democracies like the European Union, means being accountable to public opinion at large. In this respect, the public speeches and testimonies of the President of the ECB for the benefit of both European institutions and public opinion, the public speeches and testimonies of the Governors of the National Central Banks to national institutions and public opinion, are crucial. Explaining tirelessly the reasons and the reasoning that underpin the decisions of the Governing Council is a key part of our collective duty.
The MPC is  2  BIS Review 71/2004  emphatically in the first group; we agree with Sherlock Holmes, “It is a capital mistake to theorise before one has data”. Indeed, as Lord Peston, Chairman of the House of Lords Select Committee on Economic Affairs, recently observed, referring to our foot high data pack: “Statistics seem to be [the MPCs] life blood”. Why should this be so? The MPC sets interest rates in response to its assessment of the outlook for economic activity: the key question is whether the level of aggregate demand is above or below the economy’s capacity to supply. The difficulty - and it is a fundamental one - is that we cannot observe the true values of many key macroeconomic variables, such as aggregate demand. Of course, the Office for National Statistics (ONS) produces estimates of such variables. These are derived from comprehensive surveys of firms and households, and provide the most authoritative available guide to macroeconomic developments. But measuring economic activity across the whole of the UK is a hugely complex and difficult task, and 100% accuracy is simply not feasible. And producing reliable estimates takes time. If the ONS waited two or three years before publishing their first estimates, they would have reasonably complete information. But it would be of rather limited value for policy purposes. We need more timely indicators of economic activity, even though these will tend to be less accurate than later estimates.

The MPC regularly monitors more than 1,500 data series, of which around 1,000 are for the UK. The point of doing this is that often there are puzzles and questions about the behaviour of the economy to which no single piece of data can provide a complete answer. But we may build up a convincing picture by piecing together a range of indicators. The housing market provides a classic example of this approach. There is an enormous array of indicators of housing market activity - data on mortgage approvals and lending, house price indices from the main lenders (the Halifax and the Nationwide), the Office of the Deputy Prime Minister and the Land Registry, and various surveys of estate agents and house builders. One approach would be to pick out a single indicator, and monitor that. But experience shows that none of these indicators individually has consistently given a plausible indication of developments in the housing market; the indicators provide a better guide when taken together. So we monitor a full set of housing market indicators, and we have found that the clearest signals come when all of the indicators are pointing in the same direction. In economic assessment, there is safety in numbers. Awareness of data quality But looking at a large array of indicators can be bewildering without some way of narrowing the focus. So the second element of our approach is to recognise explicitly that data vary widely in their quality, and hence in their usefulness for policy assessment.
Both the risk-averse moneyseeking investors and the leveraged risk-seeking investors on either side of the dealers’ balance sheets questioned the liquidity and solvency of many of those dealers. Maturities shortened dramatically until most transactions were at overnight maturities, rolling daily (Gorton et al, 2014). Some dealers experienced “runs”. Financing terms for leveraged investors tightened sharply, causing some to fire sale assets and adding to market instability. In the US, the market infrastructure was flawed, with the daily unwind of tri-party repo transactions relying on massive intra-day financing from private sector clearing banks. 3  8.5% is the sum of the 6% minimum Tier 1 to risk-weighted assets ratio plus the 2.5% capital conservation buffer under Basel III. BIS central bankers’ speeches  3  Since the crisis, regulators have addressed many of the underlying problems of excessive leverage and maturity transformation: a. Securities financing transactions are included in the internationally-agreed leverage exposure measure adopted by the Basel Committee 4. Leverage ratio requirements will put prudent limits on the size of dealers’ matched books. b. They are also included in the Basel Committee’s measures to address liquidity risks. The recently-announced Net Stable Funding Ratio 5 will require short-term secured loans to financial and non-financial borrowers to be backed by at least 10% stable funding. And supervisors can use the Liquidity Coverage Ratio 6, as we have been doing for some time in the UK, to require dealers to hold liquid assets against prime brokerage risks such as withdrawal of cash margin by hedge fund clients.

But in a broader context too, it will be a natural step towards strengthening the global financial system. Thank you. 4  BIS Review 134/2009