samchain/econo-pairs-v1 huggingface dataset:
Although the growth rate of credit began to fall as from 2006, growing debt and the loss of competitiveness over the 12 years to 2008 led the external imbalance to an unsustainable position, with a current-account deficit of 10% of GDP and a strong increase in Spain’s external debt. But what counts is that Spain has since adjusted its current-account deficit at a spectacular pace. From almost 10% in 2008, the deficit fell at the end of last year to 3.7% – an adjustment of more than 6 pp of GDP in three years – and at the end of 2012 we might already be in balance. The climate of pessimism accompanying the crises leads some to underestimate the effort made by Spanish private-sector firms, suggesting that the external adjustment has been due exclusively to the fall in domestic demand. This decline naturally plays a part, but the improvement is also attributable to the relative gains in our export shares compared with other developed countries. During the years of crisis, Spain has seen its exports outgrow those of France, Italy and even Germany, and this situation should not worsen in the coming years. And not only has there been an improvement in exports, but the decline in imports has been greater than the fall in domestic demand, which also shows gains in the share of sales of Spanish products at home. Behind these improvements in the current-account balance is the significant progress recorded in the trade and services balance.

In the LTCM situation, the  1  The Fed Facility was (and remains) secured by a pledge of a substantial portion of AIG’s assets, including ownership interests in the company’s domestic and foreign insurance subsidiaries. As additional compensation for the Fed Facility, AIG agreed to issue to a trust for the benefit of the Treasury, preferred stock convertible into 79 percent of AIG’s outstanding common stock. 2  BIS Review 73/2010  Federal Reserve called together a private sector consortium made up of LTCM’s major counterparties, who agreed to rescue LTCM by investing about $ billion in new equity, in return for a 90 percent equity stake in LTCM’s portfolio along with operational control. The counterparties made this decision after the Federal Reserve encouraged them to recognize their self-interest in saving LTCM. The consortium invested in LTCM because its members came to believe that the Federal Reserve staff was right. Several years later, when the investors received back all of their capital with interest, they came to see that the Federal Reserve was right. The market conditions in September 2008 presented a very different situation to AIG’s counterparties who, in the aftermath of Lehman’s failure, found themselves facing liquidity concerns that compelled them to maintain cash on their balance sheets rather than lend to AIG. Moreover, the unprecedented size of AIG’s liquidity need – ultimately more than $ billion – could not have been met by the private sector. There is, however, one very important similarity.
An unwarrantedly tight monetary policy According to the Riksbank’s booklet “Monetary policy in Sweden” (2010a), and the Sveriges Riksbank Act and its preparatory works, monetary policy shall aim to stabilise inflation around the inflation target and resource utilisation around a normal level. But in practice the Riksbank appears to have conducted a tighter monetary policy than is justified, given our task, over several quarters. The arguments put forward for conducting this policy are that growth is good, interest rates are very low and need to be normalised, that we need to signal to house-buyers that interest rates will increase, that the rise in house prices and household debts needs to be limited, and that financial imbalances could build up if we do not conduct such a policy. At the same time, our forecast for inflation (measured as the CPIF inflation rate) has been low in relation to the inflation target, and our forecast for unemployment has been high in relation to a reasonable interval for equilibrium unemployment. Moreover, research and practical experiences indicate that the interest rate increases that have been made and are planned will probably have only minor effects on house prices and household debts – and if anything, negligible effects on financial stability. Several problems with Swedish monetary policy In my opinion, there are now several problems with monetary policy in Sweden:   Monetary policy appears to have been aimed at trying to limit the increase in house prices and in household indebtedness.

There are several measures that have a greater effect on house prices and household borrowing than the policy rate, and at the same time entail lower costs for the real economy. In general, the problem needs to be analysed and specified, for instance, in the form of which market failures or which externalities or which consumer protection inadequacies it entails, to determine what measures can be used to deal with the problem closest to its source and at the lowest cost. The most suitable measure is probably one that is currently under the jurisdiction of another government agency, and not the Riksbank. To avoid the current problems with large differences between the repo rate path and market expectations, the decision-making process should start with forecasts for inflation and resource utilisation conditional on market expectations of interest rates in Sweden and abroad, that is, forecasts for the repo rate and policy rates abroad that are in line with market expectations according to implied forward rates in Sweden and abroad. The Riksbank used to make such forecasts earlier, before forecasts conditional on an own repo rate path were introduced, and the Bank of England and the ECB make such forecasts now. The methods for producing these forecasts may need improvement. The forecasts can then be used as a starting point for assessing whether a repo rate path that deviates from market expectations is necessary to best stabilise inflation and resource utilisation.
The mandate, formulated in the regulation issued in the spring of 1994, states: “The monetary policy to be conducted by Norges Bank shall be aimed at maintaining a stable exchange rate against European currencies, based on the range of the exchange rate maintained since the krone was floated on 10 December 1992. In the event of significant changes in the exchange rate, policy instruments will be oriented with a view to returning the exchange rate over time to its initial range. No fluctuation margins are established, nor is there an appurtenant obligation on Norges Bank to intervene in the foreign exchange market” (my italics). The regulation is based on the fact that we have a floating exchange rate. The first sentence means that this is a managed float. Instruments are to be oriented towards maintaining a stable krone exchange rate against European currencies. Norges Bank chose to define the reference European currencies as the euro from 1 January 1999. The last sentence in the regulation distinguishes our system from a fixed exchange rate regime in that no fluctuation margins have been established around a central rate. To the extent this system calls forth associations with a fixed exchange rate regime, the concept initial range should be interpreted as a broad indication of a central rate around which the krone can fluctuate. The second sentence refers to significant changes in the exchange rate in relation to the initial range.

*  As used in the Norwegian debate, “parity policy” refers to the monetary policy of the 1920s, when the Norwegian krone was forced back to its former gold parity by means of highly deflationary policies. (Footnote not included in Norwegian text). 3  BIS Review 51/1999
This common transatlantic trend calls for a common vigilance from central banks, and a change from the very accommodative monetary policy rightly – and successfully – pursued in 2020 to face the Covid crisis. That said, let me stress some intercontinental differences. The US economy recovered faster and more strongly than that of the euro area, notably due to the very large fiscal stimulus after the Covid crisis. In December core inflation, excluding food and energy, was 5.5% in the United States and 2.6% in Europe, showing that the dramatic increase in energy prices in 2021 does not stand as the sole explanation for this recent surge in overall inflation. The labour market is also much tighter in the United States: the labour force participation remains lower than before the crisis, and there is a large decrease in unemployment, to 4.2% in November 2021 compared with 7.2% in the euro area. These differences explain why monetary policy accommodation is removed more quickly in the United States with the Fed seemingly contemplating three significant shifts in a row: tapering of purchases, lift off of interest rates, downsizing of the balance sheet. On the other side of the spectrum, Japan is little affected by rising inflation. Indeed, 2021 growth is lower than in Europe (1.8% vs 5.2%i), inflation returned to positive territory for the first time in a year in September but remains very low at 0.6% in November; and core inflation remains in negative territory at –0.6%.

These disruptions are also reflected in the monetary, financial and payments spheres – which we scrutinize as central banks and supervisors –, where digitalisation is bringing about a triple revolution – and it is far from over: (i) First, the arrival of new players: new actors born from the tech world – Fintechs and Bigtechs – are challenging historical players with radically new approaches to financial services and at present much less regulation; (ii) Second, the emergence of new assets: crypto-assets from the blockchain universe in the form of tokens: they will not be credible as “crypto-currencies”, but could be used as settlement means – think of stablecoins for instance; (iii) Lastly, the emergence of decentralised market infrastructures: new technologies tend to reduce the use of proven centralised settlement systems. 2/3  BIS central bankers' speeches  These revolutions offer the potential for increased market efficiency while reducing costs and time. But they entail several risks, and they could lead to significant concentration effects among a few dominant private networks: these would in practice “re-intermediate”, but without the trust and regulation associated with the architecture of the monetary and financial edifice that we – public and private players – have built together over a period of decades. In the face of this major challenge, we need to both innovate and regulate.
From Construction to Maintenance: Patrolling the ring-fence Speech given by James Proudman, Executive Director, UK Deposit Takers Supervision  Cass Business School, London 26 November 2018  I am grateful to Simon Debbage for preparing these remarks and to Michael Ainley, Sadia Arif, Charlotte Bull, David Eacott, Jeremy Leake, Duncan Mackinnon, Ben Martin, Alex Michie, Simon Morley, Rhys Phillips, Josh Sadler and Philip Sellar for their helpful contributions. 1  All speeches are available online at www.bankofengland.co.uk/publications/Pages/speeches/default.aspx  Introduction It is a great pleasure to be here again at the Cass Business School, and I am very grateful to the Associate Dean for inviting me. In fact, Andrew and I have quite a lot in common. We share a birthday, for a start, and a home county (Hampshire). For a while, we also used to share an office, back in the far off days before the financial crisis, when – as young(ish) economists – we used to debate the relevance of the ‘corporate veil’ for determining macroeconomic outcomes. Nowadays, we don’t discuss the corporate veil so much as the banking ring-fence, and that is the focus of my speech tonight. A decade on from the financial crisis, one of the largest ever reforms to the structure of the UK banking industry is coming into force. By 1 January 2019, the largest UK banking groups must have implemented the ‘ring-fencing’ – or separation – of their UK retail business from their international and investment banking operations.

As usual, this scenario reflects the events that are believed to be the most likely to occur with the information at hand at the Report’s statistical cutoff date. There are risks that, if materialized, will shape a different macroeconomic scenario than the one described here. On this occasion, after thorough evaluation of the alternative scenarios, the Board estimates that the risk balance is downward biased for output, and unbiased for inflation. As I mentioned first, the main risks have to do with the complex global economic situation. It cannot be ruled out that the recent episodes could happen again or intensify, affecting the financial system and confidence of economic agents. The little room for maneuvering of monetary and fiscal policies in the developed world complicates the response to such a scenario. Another part of external risks is associated to developed countries’ growth beyond the projection horizon. The forecast in the baseline scenario is less than market consensus, but an even stronger than foreseen impact cannot be ruled out. Doubts persist about the strength of the recovery of developed economies, and there is still the possibility of these economies’ potential growth having dropped as an aftereffect of the crisis. Such an occurrence could have consequences on the level of interest rates, the speed at which leverage problems will be resolved, and growth in emerging economies. In this scenario, the world economy will grow less than in the past.
This requires financial institutions to internalize the costs of their risk-taking activities up front and to hold capital and liquidity buffers sufficient to handle a plausible range of adverse outcomes. Finally, on occasions when these buffers prove inadequate and a financial firm does reach the brink of failure, the official sector needs the capacity to smoothly wind down such firms so that future taxpayer-funded rescues prove unnecessary. Regulatory and supervisory efforts to accomplish these goals are proceeding down several distinct but related paths:   Increase the capital and liquidity standards for all internationally active banks, measured by both quantity and quality of capital and liquidity, so that they are better able to absorb financial shocks without disrupting the flow of credit to the real economy.   Introduce a credible resolution mechanism for managing the failure of a large systemic bank or nonbank financial institution, to reduce the economywide costs of such failures and, by making them less disruptive, further reduce moral hazard by diminishing expectations of future public support.   Ensure that the largest and most interconnected financial institutions – whether or not they are chartered as banks – face even more stringent prudential standards, in order to reduce moral hazard for the largest firms and lower the probability of their failure to below that of smaller and less systemically important institutions.   Strengthen financial market infrastructures so that when failures inevitability occur, the shocks generated by these failures are dampened, not amplified as they propagate through the financial system.

A further consequence is disruption to the flow of money from savings to investment and disruption to the economic activities that are so important to the well being of our community. By contrast, we saw in the case of LTCM how, in well developed financial markets, financial flows can be effectively redirected to the banking and equity sectors in response to the failure of the debt market. Indeed, the banks themselves were called upon to rescue LTCM and ensure that, even with dislocation in the debt market caused by excessive leveraging, the financial system could continue to function. No matter whether we are responsible for the plumbing of the financial system or for making money work for the community, we in the financial community all have an interest in ensuring that money flows through these three channels freely, safely and efficiently. One important task for all of us has always been to develop a liquid debt market for Hong Kong. As you are aware, the Exchange Fund debt programme, which started in March 1990, is part of that effort, although the development of the debt market was not the only objective of the programme. Since then, we have brought to the market a total supply of paper amounting to about $ billion, with maturities ranging from three months to ten years. We have also developed a robust infrastructure for the debt market that is fully integrated with the real time payment system to achieve real time “Delivery versus payment” in the trading of Exchange Fund paper.
The monetary policy debate Allow me to say a few words in conclusion regarding the recent, lively debate on monetary policy. This is because I have received many questions on this subject in recent weeks. However, it is not always easy to get a subtle message across when the media debate is so intense. I therefore decided at an early stage of the discussion to take up this question in greater depth here at the Economics association, a suitable forum for a penetrating and relatively non-media discussion. Before I try to explain my views on some elements of the discussion, I cannot resist pointing out that I found the tone of the discussion somewhat surprising. Sweden has come through the recent economic slowdown better than many other countries. Personally, I also felt much greater concern over economic developments and monetary policy at the end of spring and beginning of summer 2003 than I have done in recent months. The reason is simple. At the end of last spring, the inflation rate was still high. Although we believed it would fall, there was a clear risk that it could become entrenched. Meanwhile, there was considerable uncertainty over international economic activity; would there be a turnaround and if so, when? This could mean we are forced to make difficult judgements. For instance, we might be forced to raise the interest rate even if economic activity weakened. Now the situation is fundamentally much better, with declining inflationary pressure combined with increasing growth. Nevertheless, the debate is much tougher.

We and the FCA[11] plan to consult later this year on the regulatory frameworks we will apply to stablecoins. The Bank of England’s regulatory framework, in line with the legislation, will cover the issuance of stablecoins which are used for payments at systemic scale, the systems for transferring the coins, and also extend to systemic service providers such as custody wallets that are an intrinsic part of the stablecoin arrangement. It will give effect to two expectations for systemic or likely to be systemic stablecoins that have been set by the Bank’s Financial Policy Committee. First, that payment systems that use stablecoins should be regulated to standards equivalent to those applied for traditional payments. And second that stablecoins used as money for payments should meet equivalent standards to those provided by commercial bank money. It will follow the guidance on the relevant international standards set last year[12], including the requirement that the coins should be redeemable from the stablecoin arrangement, in fiat money, at par value and on demand[13]. This matches the requirement for commercial bank money and is crucial both to ensure confidence in the coins and their uniformity with other sterling money. Systemic stablecoins will need to be backed with high quality and liquid assets to be able to meet these expectations and standards, as set out by the Financial Policy Committee. [14] These could include either deposits at the Bank of England or very highly liquid securities, or some combination of the two.
It can be estimated, but not observed. The Central Bank devotes much effort to estimating Malta’s potential output growth and its underlying determinants. Growth in potential output can be largely ascribed to structural reform measures that bring about changes in the factors of production, namely labour and capital, and the way they are combined, or productivity. We estimate that the potential growth rate of the Maltese economy has more than doubled from below 2% at the time of the global financial crisis to over 4% today. This partly reflects a steady increase in the labour supply, coming from higher female participation in the work force, measures to increase the effective retirement age and the influx of foreign workers, mainly from EU countries. Apart from the increase in labour  supply, the quality of human capital has also improved. At the same time, a pick-up in investment, partly driven by developments in the energy sector, has boosted the capital stock. However, there is ample scope for improvement of labour productivity in the coming years. Indeed it is critical that it must improve. A sound and stable financial system is an essential pre-condition for strong and sustainable economic performance. The performance of the domestic financial system, especially the core domestic banks, which have the strongest linkages to the domestic economy, remained sound with strong capital ratios, high liquidity and remained very profitable despite the challenges of a prolonged low interest rate environment.

This means that action needs to be taken in those policy domains where we do enjoy some freedom of manoeuvre, that is, fiscal policy, macro-prudential policy and structural reforms. Policy recommendations: On the fiscal front, the recent developments I have just highlighted are encouraging. I would stress the importance of meeting our fiscal targets in terms of structural adjustment and reduction in the debt ratio. Apart from compliance with domestic and European fiscal rules, it is important for Malta to build up sufficient fiscal buffers to allow us to counter eventual adverse economic shocks with fiscal policy if needed. In this regard, judicious control of government expenditure is  Page 6 of 8  essential, bearing in mind that some important government revenue streams may be past their peak and need to be replaced through new initiatives. Enhancing labour productivity is critical - forgive me for possibly boring you by repeating myself but I am sure you will agree with me that better bored than sorry. This requires ongoing investment in our labour force, in our people. In terms of the general business environment, it is important to ensure that Malta remains an attractive location for investment, especially foreign direct investment. We need to keep costs competitive, not only labour costs but also the costs of ancillary services including energy, transport and finance, as well as transaction costs generally. Permit me, at this point, to stress the importance of containing the asymmetries of knowledge facing investors, especially foreign direct investors.