samchain/econo-pairs-v1 huggingface dataset:
There is a summary of the results of the survey for the participating Spanish banks in Menéndez-Pujadas, Á. and M. Mulino (2020), “October 2020 Bank Lending Survey”, Analytical Articles, Economic Bulletin, 4/2020, Banco de España. 3  Secondly, the comprehensive nature of the monetary policy response has also been very important. It should be borne in mind that the COVID-19 outbreak in the euro area came about against a background of: low inflation and extensive monetary stimulus, with benchmark interest rates at a record low of -0.5%; net asset purchases under the asset purchase programme (APP); and a set timetable for the TLTROs. In this setting, the ECB measures have run along two main axes: the purchase of financial assets and the provision of liquidity to commercial banks, covering the euro area economy’s main financing channels. As regards asset purchases, I have already referred to the approval of the PEPP. The main aim of this programme is to ease financing conditions and ensure the smooth transmission of the common monetary policy to all euro area countries. As to liquidity provision, we should recall that, in the euro area, banks are the main source of financing for households, the self-employed and firms. It was therefore vital to head off a severe contraction in the flow of credit to the real economy.

Thirdly, the importance of the ECB’s flexibility as regards the recalibration and use of instruments should be highlighted. By way of illustration, the evolution of the economic crisis caused by the pandemic required an increase in the PEPP in June of € billion, and of € billion in December, up to a total of € trillion. The net purchase horizon was also extended until at least end-March 2022 and the maturing securities reinvestment horizon until at least end-2023. 4  In December we also decided to recalibrate the conditions of the TLTROs. We extended by 12 months, until June 2022, the period during which the reduced interest rate for banks meeting the lending target will be applicable, scheduling three additional quarterly operations between June and December 2021, and increasing the borrowing allowance of TLTRO funds each bank can obtain from 50% to 55% of its eligible loans. Another of our decisions was to extend until June 2022 the aforementioned collateral framework flexibility measures. But apart from this flexibility in the response over time, there is a key difference in the PEPP compared with the previous asset purchase programme (APP). Whereas the APP retains a relatively rigid structure regarding the distribution of asset purchases both over time and across jurisdictions, the PEPP afforded itself from the outset the possibility of concentrating these purchases in the most critical months of the crisis and in the countries which, at each point in time, have been subject to tighter financing conditions.
The third risk is induced rather by the effects of the global developments on the gradual deterioration of macroeconomic performances of the economies in the region, and resulted in impairment of the credit portfolio quality of the banking system, which has undoubtedly affected or will affect their future activities and performances. Let me summarize the first point – the region has successfully dealt with the euro area crisis so far, but the risks remain. Many issues are still open and accordingly, the alertness of policy makers has to remain high. What are the lessons learnt from the crisis? The financial crisis shifted many traditional views in the economy, including the role and the objectives of monetary authority, where besides the conduct of monetary policy and the concern for the price stability, there is an obvious need for more active engagement of the central banks in the maintenance of financial stability in the economy. The period of crisis worldwide is full of many successful examples, probably the most so far in the world history, of application of wide range of prudential measures, modifications in the standard set of instruments and implementation of nonstandard measures of monetary policy. The need of comprehensive risks monitoring in the economy and greater flexibility concerning the intensity and the type of measures, taking into account the ultimate monetary objectives, is probably one of the major lessons from the crisis.

The developments I have just described offer some insights into how the future steady state risk management framework might look. At the moment, I see four key features: First, while the temporary collateral framework has successfully eased potential collateral shortages, it could be argued that it should not become part of the regular framework. As liquidity demand declines, there will also be less need for an expanded set of eligible collateral. Whether some temporary measures might be transformed into a state-contingent framework, ready to be activated again in the future if circumstances so require, is an open question. As experience shows, each crisis needs a tailored response. Second, we will need to keep the flexibility to adjust the collateral framework to financial innovations, especially when it comes to complex new financial products. The new “simple, transparent and standardised” securitisation regulation is a case in point. It will allow us to better assess the collateral we accept. In a similar way, we will need to forcefully deal with new types of securities, such as conditional pass-through covered bonds, whose risks may not yet have been fully appreciated. 3/4  BIS central bankers' speeches  Third, we will have to retain the risk control frameworks for the asset purchase programmes beyond the horizon of our net asset purchases. As long as we keep outright portfolios on our balance sheet, the reasons behind the risk control measures, including eligibility criteria, purchase limits, benchmarks ensuring diversification and the different risk-sharing agreements, will continue to apply.
This was in view of a fresh impulse to inflation arising from shocks to global commodity prices and supply chains in the wake of the Russia-Ukraine war. And last week, in another off-cycle move, MAS again re-centred upwards the exchange rate policy band to lean against price pressures becoming more persistent. The appreciation of the exchange rate to-date has begun to restrain inflation. The trade-weighted exchange rate has appreciated by close to 4% compared with the beginning of October last year, acting as a filter against rising import prices. Domestic consumer prices have not risen by the same extent as that in the major advanced economies or global commodity prices. Year-to-date, the US and Eurozone have seen inflation rising to record highs of 8.2% and 6.8% respectively. Singapore’s headline inflation has been 5.0% year-to-date. The effects of MAS’ four monetary policy tightening moves are still working their way through the economy and will continue to dampen inflation over the next 12 months. The appreciation of the exchange rate is estimated to dampen core inflation by 0.9% points in H2 2022. Over 2022-23, the four tightening moves to-date is estimated to restrain core inflation by an average of 1.2% points each year. But monetary policy should be applied in a balanced and calibrated manner and not seek to completely offset inflation. Strengthening the exchange rate to try to fully offset the impact of global prices runs the risk of sharply curtailing growth and creating unemployment.

It is important to recognise the global nature of the price pressures we are facing. When there is a pick-up in global food and energy prices of the magnitude we are seeing today, it is not possible to completely insulate the domestic economy from these increases. This brings us to the second component of Singapore’s approach to inflation: fiscal support to help vulnerable groups cope with price increases. The government has stepped in forcefully to support vulnerable groups who are less able to bear the sharp price increases. Fiscal support has been proactive, beginning with the Budget Statement in February 2022 to the $ billion support package announced last month. Measures include cash grants and rebates on utility bills for lower-income households who have been disproportionately affected by higher prices. The government has been careful that fiscal support does not add stimulus to the economy that could exacerbate inflationary pressures. A period of inflation is not the time for expansionary fiscal injections that could add to tightness in labour, land, and product markets. Fiscal support has therefore been targeted at the more vulnerable groups and designed to avoid stoking inflation or distorting price signals. The government has given the assurance that if the inflation situation worsens significantly, it will be prepared to do more. The third component of an integrated approach to inflation control entails sound labour market adjustments to prevent inflation becoming entrenched. These include: relieving labour market tightness through a resumption of inflows of non-resident workers.
The tactic would have undercut our primary goal in providing AIG with necessary liquidity – enabling AIG to pay creditors, maintain consumer, regulator, and counterparty confidence, and avoid default. A default would have triggered AIG’s bankruptcy, with all of the systemic risk that bankruptcy would have entailed. While these tactics have been used in certain sovereign debt restructurings, they can be used there only because sovereigns cannot go bankrupt, and only with months of pre-planning. Any attempt to condition our lending would have created further uncertainty in a time of panic as to which of AIG’s counterparties would get paid and which would be forced to take substantial losses. One of our objectives was to calm market participants, and uncertainty (and the allegations of favoritism that surely would have followed) does not do that – it fuels fear. Would the conditions extend only to AIG’s Credit Default Swap (CDS) counterparties, or might the Federal government make value judgments as to other AIG contracts? Would senior unsecured debt holders be forced to take concessions? And most importantly, would a creditor who was pressed for a discount simply refuse and declare a default? Conditional lending would have heightened the risk of an AIG default, which is what we were trying to – and did – avoid. The default risk would have been exacerbated by the credit rating downgrade that almost certainly would have followed any effort by AIG to coerce creditor concessions.

The first is an internationally agreed standard on the total loss absorbing capacity (or TLAC) that globally systemic banks must hold. It will be based on clear principles. But it will be much more than a list of aspirations. It will include a detailed indicative term sheet that will cover the amount; the type, and the location of that loss absorbing capacity. It will establish a level playing field between global systemic banks, while taking into account differences in national resolution regimes. It will ensure globally systemic banks finally have the quantum of total loss absorbing capacity that extensive analysis show balances the benefit of greater resilience against the higher funding costs for the banks that results from the removal of public subsidies. It will set clear roles for home and host regulators in a resolution. It will give host nations the confidence that they won’t again be side-swiped by the failure of a large foreign bank. And, by removing the implicit subsidy that systemic banks have long enjoyed, it will reestablish market discipline. Once implemented, it will make our financial systems more resilient and our economies stronger. The proposal will be subject to a rigorous consultation and Quantitative Impact Study and market survey in 2015 and will take into account insights from the FSB’s ongoing Resolvability Assessment Process for every systemic bank’s resolution plan. The TLAC agreement will be complemented by another agreement just announced yesterday.
It is true that business investment excluding energy-intensive industry and ships and aircraft is strengthening and, according to the forecast, will grow by 8% this year, while total business investment as a share of GDP will rise over the forecast horizon, to about 11% in 2014. It will still be below the 30-year average of 12½%, however. On the other hand, exports of goods and services will grow by about 2½% this year and by an average of just under 2% per year in 2012 and 2013. This is not a very cheery prospect, given that the real exchange rate of the króna is currently over 20% below the historical average. It is important to bear in mind that low investment levels and weak export growth are related phenomena. A large share of Iceland’s exports (marine products and aluminium) are subject to capacity constraints, and in some instances, increased export levels would require substantial investment. Thus it is important to facilitate investment in export sectors. Those who believe that monetary policy has been a critical factor after the real policy rate fell to the current –1% are mistaken, however. Much more important are risk aversion in the markets, limited access to foreign credit, an uncertain operational environment, and impaired corporate balance sheets.

But the Taylor rule is a good test because, other things being equal, the policy rate should be reasonably well in line with it unless there are convincing reasons for a deviation. With this in mind, let us turn to the November interest rate decision. The Monetary Policy Committee decided to raise interest rates by 0.25 percentage points. That decision, of course, was based on the most recent statistics and the indications in the Bank’s forecast. First of all, inflation is far above target and is forecast to continue rising until early in 2012 before tapering off as the year progresses. Second, available measures of inflation expectations indicate that longer-term expectations are considerably above target. These measures of inflation expectations are flawed, of course – perhaps especially so at this time. Survey measures have a tendency to take excessive account of recent inflation, and bond market measures of inflation expectations are skewed by a variety of market imperfections at present. But flawed though they may be, these are the only measures we have, and it would be irresponsible simply to ignore them. Third, indicators suggest that domestic demand was strong in Q3 in spite of the global situation, and that the economic recovery is strong enough not to be derailed by resistance to inflationary pressures through modest rate interest hikes. Fourth, we have the global situation, which is mainly a risk factor at this juncture and has not yet had a measurable impact on domestic economic developments. But we did not merely raise interest rates.
One of the reasons for putting the PRA inside a central bank is to integrate the work of the two institutions more closely. In particular, the market intelligence team at the Bank will work closely with the supervisory body. I believe that we can operate prudential supervision at lower cost than hitherto by reducing the burden of routine data collection and focussing on the major risks to the system. It is vital that we collect and process data only where the supervisors have a need to know. Targeted and focussed regulation, allowing senior supervisors to exercise their judgement, does not require ever-increasing resources. For example, we will reduce the number of people subject to the intensive regulatory interview process before appointment by limiting such interviews to the most senior people. And one of the benefits will, I hope, be to make entry into UK banking easier and so promote competition. Let me return to the question of which aspect of financial regulation is most deserving of the adjective “tragic”. Is it light touch regulation? No – it is the mistaken belief that by compromising on unduly low capital requirements and inadequate limits on leverage, regulators can compensate by a detailed oversight of every aspect of a bank’s activities. It did not take complex reporting to see that the balance sheet of the banking system nearly trebled in five years, or that leverage ratios had reached levels of 50 or more. The obsession with detail was in fact a hindrance to seeing the big picture.

To force nominal wages below their already depressed level would have meant much higher unemployment, a greater erosion of living standards, a marked degree of “undesirable volatility in output” (contrary to our remit), and a risk of inflation falling well below the target in the medium term. With the freedom granted from having our own currency, the mix of tight fiscal and loose monetary policy is necessary for a rebalancing of the economy. Because of the measures taken to reduce the enormous fiscal deficit here at home, UK sovereign debt funding costs have actually fallen relative to those in Germany since the start of last year. Of course, there can always be differences of judgement about the overall stance of policy, but to change the broad policy mix would make little sense. Of course, at some point, Bank Rate will need to rise to more normal levels in order to ensure that inflation returns to its 2% target. There has been, as you know, a lively debate among the members of the MPC as to when that point will come. The Committee is watching extremely carefully for any signs of a pickup in domestically generated inflation and it will take action as soon as it is appropriate to do so. So far, subdued rates of increase in average earnings, as well as remarkably – some might say disturbingly – low growth rates of broad money have provided strong signals that inflation will fall back in due course. Banks are still contracting balance sheets and reducing leverage.
The current “crisis of trust” is often attributed to the Great Recession of 2008 and has been compounded by the adverse side effects of globalization and technology as well as numerous high profile examples of untrustworthy behavior by politicians, banks and various institutions. The response to this lack of trust in institutions has been to look elsewhere. “A person like yourself” is now as credible as an academic or technical expert, and far more credible than a CEO or a government official – reflecting a shift in trust toward family and friends that we have witnessed on social media. An agenda for rebuilding trustworthiness We need expertise more than ever to solve the world’s problems. But we are in a time where confidence in experts is at an all-time low. Many are trying to think of ways to restore trust in experts and institutions. In her very thoughtful Reith Lectures, Onora O’Neill was skeptical that requiring ever greater transparency (“it seems no information about an institution and profession is too boring or routine to remain unpublished”) and  22  Edelman Trust Barometer (2017). 7  All speeches are available online at www.bankofengland.co.uk/speeches  7  imposing ever more box ticking accountability would work. Transparency is not good enough if information is inaccessible and unassessible. Instead, we should focus more on increasing trustworthiness.

Prospects for both the euro area and the Japanese economy seem to have worsened, if anything, at least for the coming year. In the euro area it is manufacturing which has weakened in particular, while consumption still seems to be following a relatively favourable path. Developments in the United States are still fairly strong but some slowdown is still foreseen. The situation in Brazil in recent days has created some renewed unrest in international financial markets, with a limited flight to safe assets. This, too, may affect future international activity, though the turbulence in the wake of the falling real seems, if anything, to have been less than expected. The economic statistics for Sweden suggest that industrial activity may go on weakening. The picture of total resource utilisation is still difficult to assess but there is much to suggest that the proportion of unutilised resources is still comparatively large. Forward indicators, such as incoming orders, also point to a further deterioration. At the same time, households’ expectations of their own economic situation indicate that the development of private consumption will remain relatively good. Household optimism is supported by increased employment and a favourable development of disposable income. However, the sustainability of this development is uncertain, as it was last autumn, partly because households and firms differ in their assessments of the future. Negative news from the business community may make households more pessimistic, and so may renewed unrest in financial markets.
21 Taylor, J (1993), “Discretion versus policy rules in practice”, Carnegie Rochester Series on Public Policy, 39. 11  All speeches are available online at www.bankofengland.co.uk/publications/Pages/speeches  11  First, any lambda that can be estimated from simple scatter plots is actually an amalgam of several elements. Most fundamental is the policy remit itself, which frames the ‘true’, underlying preferences that the monetary authority must pursue, as I discussed earlier. As important, however, is that the actual trade-off struck will be influenced by individual MPC members’ views of both the nature of the shocks hitting the economy and the transmission mechanism of monetary policy – in other words, why the economy is behaving as it is, and how interest rates affect output and inflation. Put another way, if members have, for example, different views of kappa – the slope of the Phillips curve – their lambdas will appear to be different. Indeed, it is quite possible for the Phillips curve slope to vary over time, and some have argued that it may have flattened in recent years. 22  A close reading of the MPC’s minutes since its inception reveals the vast majority of differences of opinion regarding the path for monetary policy have originated in this second set of factors (the nature of the shocks, the structure of the economy and the monetary policy transmission mechanism). Disagreements about the desired path for policy have arisen because of different views of how the economy is acting.

For the post-crisis period alone, when the monetary policy trade-off was particularly stark, lambda is estimated to be around one-quarter, also on the basis of both outturns and forecasts. 18  In other words, the MPC tolerated a period of above-target inflation in order to  support the real economy. When combined with an average Phillips Curve slope, this implies deviations of the output gap from zero that are around half the size of those of inflation from the target. Chart 6: Data outturns are consistent with a value of lambda of between 0.1 and 0.2 for the inflation-targeting era as a whole, and around ¼ for the post-crisis period… Great moderation  Chart 7: … with similar values implied by MPC forecasts since independence  Inflation deviation from target (pp) 1.0  Inflation (%)  6  Financial crisis and after  Great moderation Financial crisis and after  0.5 4 0.0 -1 2 -6 -4 Output gap (%)  -2  0  2  -0.5  0  0.5  1  -0.5  1.5 2 Cumulative growth, relative to trend (%)  -1.0 0 -1.5  -2 Source: Bank calculations. -2.0 Notes: Chart shows inflation deviation from target at the 2-year forecast horizon against cumulative growth, relative to trend, as a proxy for the output gap. 16  Typically, these demand disturbances were well signalled by survey measures of activity, resulting in a high correlation of these and Bank Rate Ref Broadbent.