samchain/econo-pairs-v1 huggingface dataset:
•  Fifthly, central bank independence is of the essence. It is an integral part of the acquis communautaire, which is laid down not only in national legislation but above all in the  8  BIS Review 71/2002  Maastricht Treaty. The effective implementation of the acquis communautaire is not only a legal prerequisite for accession to the EU. It also implies the effective transformation of accession countries’ economic framework, which should facilitate their integration into the EU and, later, the euro area. In this context, it should be ensured that there is no discrepancy between the central banks’ formal status in the legislation and the implementation of that legislation. It is of utmost importance that all present and future Member States respect this economic and institutional ground rule of the European framework. •  Sixthly, let us not forget the present and future contribution of Central and Eastern European countries to the economic prosperity of Europe at large. It seems that this contribution might be sometimes underestimated, while the relative influence of the US economy, for instance, might be sometimes overestimated. In fact, transition economies, as a whole, are as important as the US in terms of external demand addressed to the euro area: they both enjoy the same share, i.e. 13% of our exports. And, during the last two years, transition economies contributed for two-thirds to the overall growth of our total external demand, while the US contributed for less than 0.1%.

The TARGET system processes today around EUR 1500 billion per day, 50% more than the average in 1999 and an estimated three times the amount that all the large-value 11 payment systems in the 12 euro area countries processed together in 1990 . •  Thirdly, a large currency area means deeper and more liquid financial markets. This allows market participants to diversify their risks on a wider basis; moreover, as currency risk is eliminated, they can focus on the analysis of credit risk. A large currency area also provides more scope for specialised institutions to develop. All in all, market efficiency and liquidity 12 help to cushion external shocks . 2.3  Taking into account these benefits, one could question why financial stability issues are still important in the euro area. In my view financial stability issues need to be re-visited today against the backdrop of the farreaching changes observed on the financial markets in the last decade, and taking into account the succession of market instability episodes. Just to name a few, the Asian crisis, the Russian/LTCM crisis in 1998, the “Tech-bubble” as of 2000. These episodes were characterised by situations of liquidity stress, market volatility, and the late discovery of risks that had spread widely through complex hedging and financial innovation devices. In this respect the complex relationship between volatility, financial innovation and financial stability deserves attention. Clearly, volatility levels primarily reflects the degree of uncertainty of market participants.
Central banks are unlikely to come with anything as complex or potentially toxic as the CDO-squared or cubed! But as I have covered in some detail, central bank operations frequently pose complex risk issues of their own. Take the example of the collateral available to support our contingent lending for liquidity support, and how to estimate the central bank’s exposure to that. The closest this would get to in a commercial firm is a Potential Future Exposure (PFE) calculation. However most risk managers are used to considering PFE in the context of counterparty exposure through OTC derivatives instruments – which is challenging enough! But for us the underlying instrument is not a derivative product with a reasonable amount of pricing information available: it is a set of non-traded mortgage portfolios, which have to be marked to market today and at future points in time. So this is what we have to evaluate: a PFE where the underlying is a pool of marked-to-market mortgage portfolios lacking readily-available market pricing data. In response, we have had to develop robust valuation models linking observable macro-economic variables to potential exit prices, whilst being honest about the range of uncertainty around these estimates. And the Golden Rule applies in this case too – in the form of independent model validation by our own specialist risk supervisors. While central banks do not typically have a profit/risk tradeoff, they do have to trade off the risk taken against the policy objectives being pursued.

Applying these tools to central banking operations is both easier and harder than in the private sector. Easier, because there is no tension between profit and risk: central banking operations are always designed with risk in mind from the start. But harder, because the events in which central banks are called on to act often lie in the very tails of the distributions, making it hard – often impossible – to calibrate risk tolerance using historic data. And many of our operations are not discretionary, but reflect policy imperatives: so binding risk limits which, if applied, might cause a policy to be aborted mid-course, have little chance of success. At the Bank of England, we have responded to these challenges in three ways. First, we have adopted a risk tolerance that, though qualitative in nature, recognises the importance attached to the safeguarding of public resources and the priority placed on ensuring that policy decisions are always made in full knowledge of the financial risk implications. As I have described, maintaining monetary and financial stability – the Bank’s policy mission – can sometimes mean we have to take on material levels of risk ourselves. But where we do that, we should take on no more risk than is necessary, and we should do so with our eyes open, conscious too of the tradeoffs between financial and non-financial risk.
Averting an economic anxiety attack calls for a balanced and flexible approach to the words and actions of businesses and policymakers. Planning for the worst is important, but needs to be accompanied by hope for the best. Encouraging news about the present needs not to be drowned out by fears for the future. Now is not the time for the economics of Chicken Licken.8 That means balance in how the economic outlook is described, acknowledging good news as well as bad, contemplating upside as well as downside scenarios, taking positive signals (as well as some comfort) from the resilience shown so far. This is not boosterism; it is balance, at a time when behavioural biases and pessimistic popular narratives offer an unbalanced lens on the economy. The policy authorities, including the Bank, have a public responsibility to avoid economic catastrophizing. Policymakers, including the MPC, have already demonstrated a willingness to act at speed and scale to mitigate economic risks. They have put in place the UK’s largest-ever economic insurance policy. It is important this insurance policy continues to flex as new risks arise, to build damaged confidence among households and businesses. For its part, the MPC has committed to keeping borrowing costs at current extraordinarily low levels to support jobs and incomes for as long as necessary to return inflation to target. 8  The fictional fowl who, having been hit on the head by an acorn, declared the sky was falling in.

Additionally, within the National Committee for Macroprudential Oversight, the NBR has underlined the financial stability risks deriving from soft budget constraints in the economy. In order to strengthen the economy’s resilience to external shocks, particularly those related to credit risk, it is necessary to have in place a prudent and balanced mix of economic policies that should pursue the return to the medium-term objective (structural deficit narrowing) and the improvement of payment discipline economy-wide. 9  Charts  Figure 1. Public debt (2017) 180  Figure 2. Romania: Average residual maturity of public debt  percent of GDP  9  years  8  160  5.8  6  120  8.0  8.1  5.7  5.8  5.8  3.5  3.5  2016  Jul.17  7.2  7 140  7.8  6.2 5.3  5 4.0  4.1  4.4  4  100  3.8 3  80  2 60  3.0  3.0  2014  2015  2.4 1.6  1.7  2011  2012  1  40  0 2013  20  Source: AMECO  EU EA  GR IT PT BE CY ES FR UK AT HR SI IE HU DE FI NL MT PL SK LT RO SE LV DK CZ BG LU EE  0  average residual maturity – total debt average residual maturity – domestically issued debt average residual maturity – eurobonds Source: MPF 2  Figure 3.
Wide-ranging cuts have been announced in the affected countries, and international rescue packages have been put together, first for Greece and latterly also for Ireland, in order to prevent the situation from escalating. The markets will, however, be monitoring the effectiveness of the announced cuts and support measures very closely. The problem of sovereign indebtedness in Europe remains a source of considerable uncertainty. A high level of uncertainty also remains on the foreign exchange markets. The continuing high volatility is coupled with strongly divergent exchange rate developments. Over the last few years, a number of currencies have appreciated substantially against the two major world currencies: the euro and the US dollar (cf. chart 1). These currency shifts do not just negatively affect the export capability of the countries whose currencies have appreciated; they also have a heavy impact in monetary terms. This is because, in order to keep appreciation in check, some countries have intervened in the foreign exchange markets, with some others even resorting to restrictions on the movement of capital flows. The result has been a global rise in foreign exchange reserves. Indeed, they have almost doubled in the past four years (cf. chart 2). The high level of foreign exchange reserves ultimately reflects substantial global economic imbalances. As we know, the Swiss franc also appreciated substantially in the wake of the financial crisis. Looking at how the Swiss franc’s real and trade-weighted external value has changed over the long term (cf.

chart 3), we can see that, historically, periods of Swiss franc strength have alternated with periods of weakness. The fact that the current Swiss franc strength is proving particularly burdensome for the Swiss economy is due partly to the rapidity of the appreciation, but also to the uncertain economic climate. BIS Review 173/2010  1  Diversification of foreign exchange reserves As you will be aware, our foreign exchange interventions since March 2009 have resulted in the SNB’s foreign exchange reserves expanding to over CHF 200 billion. As we were primarily buying euros, euro holdings accounted for 70% of foreign exchange reserves at one point. In the meantime, we have reduced the euro’s share in the foreign exchange reserves substantially, to 55%. Moreover, we have diversified foreign currency risk further by investing for the first time in Australian and Singapore dollars, as well as Swedish kronor and Danish kroner. Together, these currencies make up 3% of the foreign exchange reserves. The majority of non-euro holdings continues to be in US dollars (25%), Japanese yen (10%), Canadian dollars and pounds sterling. Finally, we have increased the proportion of the foreign exchange reserves that is made up of equities, from 4% back to 10%. This comprehensive repositioning was carried out gradually, and the market had no problem in absorbing it. We were thus able to considerably reduce the risk concentrations in the foreign exchange holdings. An examination of further diversification measures forms part of our annual investment strategy formulation process.
Let me address the following issues: • • • •  Firstly, I will show you the importance of gold in the National Bank’s monetary reserves; Then I will outline why the revaluation of our gold holdings will necessarily lead to disposals: In a third part, I will describe the different political stages down the road, the uncertainties surrounding this process, and the timetable we can expect to adhere to. Finally, I will conclude by indicating in what spirit we plan to tackle the delicate task of disposing of an important part of our gold holdings. 1. Switzerland’s gold reserves The situation in Switzerland is completely transparent. With 2590 tonnes of gold in its reserves, Switzerland is one of the major holders of the yellow metal. Its holdings are comparable to those of Italy, slightly lower than those of France, and significantly higher than those of Great Britain (see graph 1). Graph 1 Gold Reserves of the G10 Countries as of December 1998 in Tonnes 8137  United States Germany  3700  France  3184  I taly  2593  Switzerland  2590 1052  Netherlands Japan  754  United Kingdom  715  Belgium  296  Sweden  147  Canada  77  source: I WF  In relative terms, however, Switzerland is the largest holder of gold reserves: per capita, per GDP unit, in proportion to imports or relative to currency in circulation (see graph 2).

Jean-Pierre Roth: The economic situation – la vie en rose? Summary of a speech by Mr Jean-Pierre Roth, Chairman of the Governing Board of the Swiss National Bank and Chairman of the Board of Directors of the Bank for International Settlements, at a meeting with representatives of Ticino industry, Centro di studi bancari, Vezia, 28 November 2006. The complete speech can be found in French on the Swiss National Bank’s website (www.snb.ch). *  *  *  It is true that our exports continue to benefit from a buoyant global economy, that areas of concern such as the volatility of oil prices or the possibility of a significant and lasting downturn in the US economy have partially receded, and that the current economic recovery has led to an improvement in the labour market without endangering price stability. Is this la vie en rose (living life through rosetinted spectacles)? A brief outline of the situation in the national and international economies is given, indicating that the overall perspective remains favourable. It concludes with a concise evaluation of the risks, showing that the current euphoria may conceal significant risks that we must not lose sight of. BIS Review 116/2006  1
But they were never so great before the development of a truly global, liberalised financial sector in a digital age. And they were never clearly identified but instead were wrapped up with many other risks in the historically opaque world of the central banker. One key outcome of the crisis was the recognition that in the modern global economy, there is a need for international standards to cover macroprudential as well as microprudential risk. These have been developed and coordinated by the Financial Stability Board, which was itself created in response to the crisis. And there is likewise a need for national public authorities that are clearly responsible for managing these risks. Macroprudential bodies, in various shapes and sizes, have been set up in around 40 jurisdictions. In the UK, the FPC of the Bank of England was formally established in 2013 having existed in an interim form since 2011. How well have we done? Seven years on from the crisis and four years from the establishment of the FPC in the UK it is fair to ask: how well have we done so far? Have we put in place the machinery – the institutions and the rules – to manage macroprudential risk? Have we, as some argue with increasing volume, gone too far and achieved stability at the expense of growth? The first area to look at is whether the framework of regulation has now been set to address systemic as well as firm specific risks.

3 In other words the massive increase in the stock of lending – an increase of £ trillion in absolute terms – did not lead to very much of an increase in productive investment at all. Of course there are benefits in enabling people to buy their homes. And much of the financing of financial markets almost certainly came back to productive investment in the form of market investments in business. But as we discovered in the crisis much of the lending appears to have financed the increase in house prices and a large part of the market investment was simply misallocated and lost. 4 Nor did this increase in lending drive a commensurate increase in economic growth in this particular credit cycle. Over the period 2000–2007 GDP growth averaged little more than its long-run average of around 2.8%. In fact, business investment over the period averaged just 1.3% a year and it appears that most of this was related to commercial real estate. Conclusion The financial system can be a powerful engine for growth and prosperity. But its ability to generate systemic crises means it can also be a powerful destroyer of those as well. This has been true throughout history but never more so than for today’s highly complex, globalised and digitalised financial system. We should not therefore see economic growth, or productivity as somehow opposed to effective financial regulation.
3  Reinhart, Carmen M. and Kenneth S. Rogoff, “This Time is Different: Eight Centuries of Financial Folly”, Princeton, New Jersey, Princeton University Press 2009. 2  BIS central bankers’ speeches  as described by Thomas Kuhn – do not come about because the defenders of old truths see the light, but rather because they eventually die. 4 If we take a closer look at the Basel III framework, there are still signs of innovation. Macroprudential policy is a new element of the framework, aimed at containing systemic risk in banks and financial institutions. For the first time, international banking regulation includes requirements grounded in the interplay between the banking sector and the rest of the economy. We must acknowledge that in the run-up to a financial crisis, the authorities, banks and other economic agents often confuse good times with normal times. Strong growth in real estate prices, credit and tax revenues are perceived as normal. Statistical filtering methods confirm that trend growth is high and that debt growth is sustainable. This time is different. We should know better – because we have fairly extensive knowledge about the economic background leading to financial crises. Analyses, including our own, show that a rapid accumulation of debt almost always precedes a financial crisis. Empirical studies document that high debt growth increases the probability of a crisis and results in a deeper crisis. 5 Debt is at the core of all financial crises. Real estate prices also rise rapidly ahead of a crisis.

Increased employment and a good development of real disposable income, not least as a consequence of low inflation, are grounds for households’ optimism. The duration of this trend is, however, uncertain, as it was last autumn. One question lies in the differences between households and firms in their assessments of the future. Negative news from the corporate sector could make households more pessimistic. Recently, moreover, there have been certain tendencies for households to become somewhat less optimistic about their own economic future. The picture of total resource utilisation suggests that the Swedish economy still has unutilised resources. This in turn acts as a damper on inflation. The weaker activity in manufacturing has led to a fall-off in net exports. If earlier cyclical patterns still hold, stockbuilding may be heading for a downturn. Moreover, if manufacturing remains weak, there could be some slackening of investment later this year. The rate of GDP growth this and next year will thus depend on the extent to which domestic demand makes up for the development of foreign trade and industrial activity. When assessing future inflationary pressure, however, a point to bear in mind is that the past year’s comparatively sharp fall in market interest rates is exerting a stimulatory effect on the Swedish economy. Since January last year the 10-year bond rate has moved down almost 2% and the shortterm interest rate has fallen more than 1%.
First, the Fed's commitment to achieve and sustain 2 percent inflation is a now bedrock principle. This was not always the case. It's only been 10 years since the FOMC defined 2 percent inflation as its longer-run goal. 7 This transparency about our objectives provides a "North Star" for policy decisions and communications. It likewise improves the public's understanding of our goals and actions. It has also served us well in keeping longer-term inflation expectations well anchored. For example, the most recent Survey of Consumer Expectations shows that consumers expect inflation to decline over the next three years. 8 And market-based measures of inflation expectations have also remained well anchored. This anchoring of longer-term expectations is critical to keeping high inflation from becoming embedded in the psychology of consumers and businesses, which we know from the past is costly to undo. Economic Outlook So, what does tighter monetary policy mean for the economy? We are already seeing some of the effects. Broad measures of financial conditions, including borrowing and  3/5  BIS - Central bankers' speeches  mortgage rates and equity prices, have become significantly less supportive of spending. This has led to a decline in activity in the housing market and signs of slowing in consumer and business investment spending. As this continues, I expect real GDP to be close to flat this year and to grow modestly in 2023.

To better understand how that happened and what it portends, it is useful to think of inflation in terms of three distinct layers of an onion. In this analogy, the onion's outer layer consists of prices of globally traded commoditiessuch as lumber, steel, grains, and oil. They have experienced a surge in demand as the global economy has rebounded from the pandemic downturn. In addition, Russia's war on Ukraine and the resulting actions have caused energy prices to soar. These higher costs get passed on as higher prices for consumers. I am sure everyone in this room has been forced to manage skyrocketing costs on important supplies over the past two years. The middle layer of the inflation onion is made up of products-especially durable goods like appliances, furniture, and autos-that have been affected by severe supply-chain disruptions. Many of you have also had first-hand experience with the impact of shutdowns and supply-chain bottlenecks. There haven't been enough inputs to produce products, and not enough products to sell-all at a time when demand has been skyhigh. Many of you have also had customers lining up at your doors-but not enough products in stock. This imbalance between supply and demand has contributed to large price increases. To give some examples, prices for furniture rose over 13 percent last year, new cars were up nearly 12 percent, and used vehicles skyrocketed an astounding 50 percent. The innermost layer of the onion consists of underlying inflation, which reflects the overall balance between supply and demand in the economy.