samchain/econo-pairs-v1 huggingface dataset:
Option-adjusted spread on index of high-yield bonds issued in the US and spread to maturity on index of leveraged loans issued in the US measured relative to the spot Treasury curve. 9  Graham and Leary (2011), Harris and Raviv (1991). Atkinson (1967), Bernanke et al. (1996), Greenwood and Hanson (2013). 11 The characteristic feature of cov-lite loans is not that they have fewer covenants, but that the requirements bind less often, and in particular only in response to particular events (such as additional financing). More traditional, “cov-heavy” contracts require firms to meet such requirements continually (Becker and Ivashina (2016)). 10  15  All speeches are available online at www.bankofengland.co.uk/speeches  15  If you think there are parallels here with the subprime mortgage boom in the U.S., ahead of the last crisis, then you’d be right. Those too were grouped together and sold to investors as packages of loans, diluting the ability and incentive to monitor individual risks; they grew extremely rapidly, particularly in the last year or two of the boom – and, as it happens, they accounted at the peak for a similar share of their underlying market (13% of total U.S mortgage debt). We should recognise that, in aggregate, corporate leverage in the UK has fallen since the crisis (Chart 17, which includes bonds as well as bank loans).12 As with mortgages, interest payments on those debts remain well below average and, if bond markets are anything to go by, will remain so for quite a while yet.

Hayo, B and Neuenkirch M (2018), “Central Banks’ Predictability: An Assessment by Financial Market Participants”, International Journal of Central Banking, Vol. 14(4), pp 163–185. Hubert, P and Labondance, F (2018), “The Effect of ECB Forward Guidance on the Term Structure of Interest Rates”, International Journal of Central Banking, Vol. 14(5), pp 193–222. Kahnemann, D (2003), “Maps of Bounded Rationality: Psychology for Behavioral Economics”, Amercian Economic Review, Vol. 93(5), pp. 1449–1475. Kohn, D L, and Sack, B (2003), “Central Bank Talk: Does It Matter and Why?”, Finance and Economics Discussion Series, Working Paper No. 2003–55. 4/5  BIS central bankers' speeches  Lange, J, Sack B, and Whitesell, W (2003), “Anticipations of Monetary Policy in Financial Markets”, Journal of Money, Credit, and Banking, Vol. 35(6), pp. 889–909. Mishkin, F (2004), “Can Central Bank Transparency Go Too Far”, NBER Working Paper No. 10829. Moessner, R (2013), “Effects of Explicit FOMC Policy Rate Guidance on Interest Rate Expectations”, Economics Letters, Vol. 121(2), pp. 170–173. Morris, S and Shin, H S (2018), “Central Bank Forward Guidance and the Signal Value of Market Prices”, AEA Papers and Proceedings, Vol. 108, pp. 572–577. Samuelson, P (1994), Panel remarks, Federal Reserve Bank of Boston Conference, Conference Series 38, Jeffrey C Fuhrer (ed) “Goals, Guidelines and Constraints Facing Monetary Policymakers”. 1 Bernanke (2007) 2 Blinder et al. (2008) 3 Lange et al.
A key challenge of the Covid-19 crisis for us has been isolating the signal – the increased risk to insurers and their policyholders – from the noise caused by markets finding their way with very sharp but temporary overreactions. 1  https://www.bankofengland.co.uk/-/media/boe/files/speech/2019/insurance-risk-management-in-a-changing-world-speech-by-charlottegerken 2 Category 1 & 2 life and non-life insurers regulated by the PRA 2  All speeches are available online at www.bankofengland.co.uk/news/speeches  2  Solvency II contains several measures that were intended to or have otherwise leant against the pitching and rolling of financial markets. These include the Matching Adjustment (MA) and the transitional measure on technical provisions (TMTP); also the Standard Formula Symmetric Adjustment of the Equity Capital Charge (the symmetric adjustment), the Volatility Adjustment (VA), and the Ladder of Intervention. In addition to benefiting financial stability, these measures have helped to filter out the noise in financial markets, supporting the PRA in assessing that insurers are adequately capitalised for fundamental risks in their business and protecting policyholders. The MA is, for UK life insurers, the most material Solvency II long-term guarantees measure, and has been the most significant in the current crisis. The MA is intended to enable insurers to hold assets to maturity and avoid changes in spread from impacting their solvency. When appropriately cash-flow matched, their locked-in funding means that annuity writers are unlikely to have to sell assets prior to maturity, even in a severe stress.

Spain has been one of the first European countries to have incorporated a balanced budget requirement into its constitution, with broad Parliamentary backing. A more recent example is labour-market reform. This is of great importance, because Spain had not taken such a significant step in this area since the 1984 reform. If the 1984 reform allowed Spain to create millions of jobs and to increase the welfare of Spaniards during upswings, the reform approved this year should put an end to a situation in which dismissal and an increase in unemployment are the only way of adjusting the economy. This reform leaves workers and employers free to agree to increase competitiveness by increasing productivity and/or adjusting wages, with the only obstacles or impediments being those laid down by law. It is sometimes said that all this has been done too late. Should labour-market reform have been carried out five years ago? It certainly should have. Or ten years ago in 2002, when we were enjoying the long upswing? It would certainly have been better for Spain. The same can be said about financial reform. Why were savings banks not reformed during the good times? Why were bank resolution schemes, such as the FROB, not drawn up ready to resolve the banking problems created by the upswing? These questions merely lead to gloominess and, moreover, ignore the fact that, not only in Spain, but almost worldwide, key reforms are introduced at the worst times.
Fernando Restoy: Remarks on banking union Remarks by Mr Fernando Restoy, Deputy Governor of the Bank of Spain, at the round table “Systemic risk and securities markets”, II International Conference on Securities Markets, held by the Comisión Nacional del Mercado de Valores (CNMV), Madrid, 14 September 2012. *  *  *  Let me first thank the organisers for their kind invitation to participate in this event held by the CNMV, of which I was Vice-Chairman from 2008 until my recent appointment in the Banco de España. I also had the privilege to participate in the highly successful conference organised in 2011. A glance at the quality of the papers and speakers in the programme of this conference is sufficient to confirm that the organisers have succeeded in maintaining the high standards achieved last year. Our Chairman today, Oscar Arce, deserves much credit for that. I am sure that the CNMV’s new top management – who will be taking over in a few weeks – will continue to support this event, as the President Julio Segura and myself did the first two editions. The current financial crisis has shown up numerous deficiencies in the functioning of the global economic and financial system. Many of those deficiencies are the consequence of imperfect rules, policy mistakes and inappropriate conduct by private agents. Some of those deficiencies are the subject of an on-going policy debate and of regulatory reform which, with varying degrees of ambition, is taking place in different jurisdictions.

I am informed that one of the objectives of the Association is to utilise the acquired scholarly knowledge and experience to add value to society through leadership in various projects and initiatives. I know that alumni associations world over have existed for centuries and most of them have one basic principle, that of benefiting members wherever they may be and for free. However I am told that your association other than just carryout activities for the benefit of members will go a step further to do benevolent activities for the benefit of society at large. This is commendable and I am looking forward to see what initiatives you have outlined to advance welfare in our society. Mr President, the theme for this launch this evening “Innovation for Leadership Excellency” is indeed very timely and appropriate to the norms and beliefs that I am told your association espouses. It is innovations such as yours that gives us the comfort that you are indeed giving back to society following the huge resources that were invested in making it possible for you to acquire this very important qualification the Masters in Business Administration from ESAMI. You have been schooled as business managers and therefore it is inevitable that what is expected of you is nothing short of leadership excellence. We shall all be looking up to you to offer solutions to the business and economic challenges that your institutions and the economy as a whole are faced with.
11,12  10  My own  experience is that the Bank is believed by many to be either an arm of government or a high-street bank. If we turn from understanding to trust, much the same picture emerges. A survey of trust in the professions earlier this year ranked economists second bottom, with only politicians lower. 13  Doctors and nurses ranked  3  Quoted in Thompson (2016). YouGov / Post Crash Economics Society Survey (2015). 5 Bank of England / TNS Inflation Attitudes Survey (2017). 6 Financial Conduct Authority (2017). 7 Money Advice Service (2015). 8 FLY Project (2015). 9 For example, see OECD/INFE International Survey of Adult Financial Literacy Competencies. 10 Bank of England / TNS Inflation Attitudes Survey (2017). It is worth noting that 29% cite the Bank of England in their response to this question, so appear aware of the institution responsible for setting monetary policy. 11 YouGov / Post Crash Economics Society Survey (2015). 12 Bank of England (2014). 13 YouGov (2017). 4  3  All speeches are available online at www.bankofengland.co.uk/speeches  3  top. In surveys of the public, slightly more people tend to mistrust than trust the opinions of economists, even on economic matters. 14  In other words, there is a trust deficit to match the understanding deficit. That trust deficit also affects those setting economic policy, including central banks. Measured trust or satisfaction in the European Central Bank, the Federal Reserve and the Bank of England fell after the global financial crisis.

I ran through my material – why the economy mattered to them, what the Bank did for a living, what I did for a living etc. It was going about as well as I could have expected. There were plenty of attentive eyes and alert expressions. No-one walked out. “This is working”, I told myself. 59 minutes into the one hour talk, I took a final question from a girl on the far-right in the front row. It is seared on my soul. “Two questions”, she said. “Who are you? And why are you here?” At that point, those questions seemed all too appropriate. Why exactly was I there? Several hours of introspection (and therapy) later, I now have an answer. The key comes in how you keep score. If in a classroom of 50 kids you reach only 1, what is your score? Have you lost 49-1? No. You have won 1-0. This is very important when it comes to judging the success of outreach initiatives, including the Bank’s. Not engaging everyone is no reason not to try to engage someone. One is a good start. It increases the chances of two tomorrow and three the day after. The power of social networks, popular narratives and epidemics in expectations means you may be only one click from critical mass. The Bank will not reach everyone, every day of their lives. Nor does it need to, given what we do for a living.
The forecast for the next few quarters is revised because new data has been taken into account. The new forecast for 2011 is slightly above that published in September because the oil price has increased. The increase in inflation in the third quarter of 2011 is attributable to a base effect, because inflation in the third quarter of 2010 was comparatively low. Compared to the forecast published in September, inflation in 2012 and 2013 rises less steeply, particularly due to the fact that the economic outlook for Europe is less favourable than in the previous quarter. Towards the end of the forecast horizon, inflation rises briskly and exceeds the upper bound of 2%, assuming that the three-month Libor remains at the current level. This shows that the current expansionary monetary policy cannot be pursued for the entire forecast horizon without compromising long-term price stability. Due to the risks mentioned previously, this forecast is associated with a very high level of uncertainty. BIS Review 173/2010  3  4  BIS Review 173/2010

BIS Review 17/2005  3  In order to establish a common data set on which to base this review, the Committee has decided to begin a recalibration exercise in autumn this year. In addition, national field tests are already underway in some jurisdictions, while there will be a period of time during which banks will calculate their capital requirements in parallel under the 1988 Accord and under Basel II. We recognise that these tests and reviews will demand resources from both banks and supervisors. Yet I must emphasise that neither banks nor supervisors will be able to evaluate the calibration of the new framework – and hence its effectiveness – if banks do not participate fully and seriously in these initiatives. Only you can provide the data that all of us will need to ensure that Basel II functions as we intend and that it does not create unintended side effects. Consistent and co-ordinated implementation Second, supervisors are working to avoid unexpected outcomes by developing, in advance, a better understanding of how various jurisdictions will apply Basel II. This is also helpful to developing a more consistent set of expectations across countries. In a world where the business of banking is increasingly international, the need for supervisors to cooperate and to strive for more consistent principles would exist even if Basel II did not.
The correction of this imbalance is particularly pressing in that the reliance on external saving has become a major factor of vulnerability of the Spanish economy during the crisis. The increased dependence on external financing in the pre-crisis period is the consequence of the sizeable accumulation of debt by households and firms, which also led to the Spanish banking system becoming oversized. The need to correct these imbalances poses an added difficulty to recovery in the economy, given that it restricts the headroom available to raise investment and consumption through resort to external financing. It is also crucial to continue with the restructuring of the banking system. Hence, when solvent demand recovers, it may be serviced by a normal flow of financing which, both in Spain and in the rest of continental Europe, is routed essentially through credit institutions. But households and firms still have a relatively lengthy process of debt reduction ahead of them. Accordingly, in the short term, the recovery in growth cannot be credit-led as in the past. Along these lines, credit to the non-financial private sector in 2011 fell by around 4%, although there were significant differences from sector to sector. In the case of households the pace of debt reduction was somewhat slower, whereas in that of firms the reduction in credit was more marked in those sectors, such as construction and real estate development, that had become oversized to a greater extent before the crisis.

These were geared to confirming the expansionary stance of monetary policy, to restoring the functioning of its transmission mechanism and to breaking the feedback loop between banking system risks and sovereign risk. In addition, significant non-conventional measures were approved. These included most notably the lengthening of the horizon for liquidity loans to a term of three years, in two special auctions held in December 2011 and February 2012. The three-pronged measures adopted – spanning domestic economic policies, European governance reform and, most notably, ECB action – proved essential in containing the heightening tensions, which might have led to a systemic crisis of unforeseeable  BIS central bankers’ speeches  1  consequences. That said, these measures were not a conclusive solution; they simply helped gain valuable time so that governments could continue moving to resolve the challenges outstanding and so that the measures adopted might begin to bear fruit. To definitively resolve the European sovereign crisis will require major progress in various fields. In the short term, the ongoing reform of governance must be completed and put into practice, including the full start-up of the European Stability Mechanism. A suitable balance must also be struck between two complementary objectives: fiscal consolidation and economic growth. Here, the “fiscal package” agreed at the end of 2011 must be supplemented with a new “growth package”. Looking more into the medium term, profound reflection is needed on the euro area we want in 10 years’ time.
But the dramatic and ongoing changes give investors hope and confidence that these problems will in time be overcome, making them feel that they cannot afford not to be in China. A second reason for Southeast Asia’s under-performance is the regional political and security situation. The Asian Crisis precipitated major social and political changes in many countries, deterring MNCs from committing to new investments in an uncertain climate. These overriding political concerns also distracted the governments from tackling urgent economic problems and implementing painful structural reforms to remedy weaknesses uncovered by the crisis. In contrast, South Korea’s aggressive post-crisis restructuring of its corporate sector has spurred a more rapid recovery. Most crucially, the Asian Crisis brought down the Suharto Government in Indonesia, and launched Indonesia on a new and uncharted path. For thirty years, a stable Indonesia, with a strong government focused on economic development, had provided a critical basis for confidence and peaceful cooperation in the whole of Southeast Asia. Suharto’s fall changed this. The subsequent Indonesian government abandoned Suharto’s longstanding policy of restraining political Islam, thus opening Pandora’s box. Islamic groups, including the militant ones, now wield considerable influence in Indonesia’s body politic. Indonesia’s political and social landscape has altered drastically and permanently, affecting the whole region. More recently, Southeast Asia has faced security problems from extremist Islamic terrorist groups linked to Al Qaeda. After September 11, such groups were discovered in Malaysia, the Philippines, Singapore and Indonesia.

William C Dudley: The US economic outlook and the implications for monetary policy Remarks by Mr William C Dudley, President and Chief Executive Officer of the Federal Reserve Bank of New York, at the ABNY (Association for a Better New York) Breakfast, New York City, 5 December 2016. * * * Jason Bram, Andrew Haughwout, Joseph Tracy and Luis Uranga assisted in preparing these remarks. It is a great pleasure to be here and have the opportunity to talk about the U.S. economic outlook. I want to thank the Association for a Better New York (ABNY) for sponsoring today’s event. This is an excellent venue to speak about what we can do to improve our country’s economic performance. As always, what I have to say reflects my own views and not necessarily those of the Federal Open Market Committee (FOMC) or the Federal Reserve System. The U.S. economy—supported by solid gains in household spending—has expanded at a moderate rate in 2016. Job gains have been sturdy, and we have seen some firming in wage growth as the labor market has continued to tighten. Moreover, as the effects of earlier declines in energy prices have dissipated, the overall inflation rate has begun to move up closer to our 2 percent objective. As a consequence, economic conditions are not far from the Federal Reserve’s dual mandate of maximum sustainable employment and price stability. And, I expect that we will make further progress toward these goals in 2017.
They too cause large losses of income by a large number of people at the same time. In other words, they have all the hallmarks of a dread event, albeit one associated with economic, rather than physical, insecurity. The Great Depression was the most prominent example of an economic dread event in the 20th century. Historical accounts point clearly to it having generated an exaggerated sense of insecurity (Galbraith (1954)). One way this manifest was a surge in demand for safe assets. In Friedman and Schwartz’s words: “Expectations of great instability enhanced the importance attached to accumulating money and other liquid assets”. In the 1930s, this search for safety resulted in a rise in the demand for, and price of, government securities, lowering their yield. The yields on US and UK government bonds fell significantly and persistently during the 1930s (Chart 6). Insecurities revealed themselves in securities. The Great Depression also widened the gap between the return on safe and risky assets such as equities. This wedge – the equity premium – appears to have risen sharply after the Great Depression. It remained elevated for several decades thereafter. In finance circles, this is known as the “equity premium puzzle” (Mehra and Prescott (1985)). Recent academic evidence has argued, persuasively, that this puzzle can be solved by recognising that the Great Depression, and other catastrophic output losses, are dread events which exaggerate and prolong risk perceptions. Catastrophe risk then explains the size and persistence of the equity premium (Cogley and Sargent (2005), Barro (2005)).

The significance of having as our own the world’s second most important currency is not lost upon a central banker. For, beyond its proven economic benefits, the euro signifies the virtual elimination of the potential risk of an exchange rate crisis to which the currencies of small, open economies are exposed on a daily basis in a world characterized by the free movement of capital. We have now traded in this vulnerability for the greater security and credibility afforded by a major international currency. The euro has indeed been a success story in many respects. The disciplines of Economic and Monetary Union (EMU) were intended to promote the creation of a macroeconomic environment in which countries could thrive in an increasingly competitive market place. The euro area’s track record in terms of price stability, trade expansion and employment creation suggest that these expectations have been largely fulfilled. The Central Bank of Malta is, therefore, proud to have become a member of the Eurosystem. From an institution charged with the preservation of price stability in Malta and with safeguarding the integrity of our national currency, the Bank now shares responsibility with the other members of the Eurosystem for shaping monetary policy in the best interest of 320 million people in fifteen countries. This is a task which my colleagues at the Bank and I approach with confidence and enthusiasm. From a national perspective, the challenge now is to maximize the benefits of participation in monetary union by making further progress on the path of reform.