samchain/econo-pairs-v1 huggingface dataset:
However, the fall in home equity combined with a pro-cyclical tightening of refinancing standards and fees means that many borrowers who would like to refinance cannot do so. Problems in housing By many measures – including affordability ratios and price-to-rent ratios – home prices have fallen back to or below their pre-boom levels. Indeed, housing no longer appears overvalued. In many former boom localities, the price of existing homes has fallen below the cost of building a new home.6 Also, after several years of depressed construction the national stock of housing no longer looks excessive relative to the nation’s population. Nevertheless, housing currently remains in excess supply, in part, because household formation rates remain depressed. Normally, when there is excess supply, markets self-correct fairly efficiently. Prices fall until they reach a level at which supply and demand are balanced. Unfortunately, the housing market has a number of specific features that complicate this adjustment process and mean it could undershoot – and remain weaker for longer than is necessary. Housing is a very long-lived asset. Once new building ceases in stressed markets, further reductions in demand cannot be matched by further supply reductions.7 This means that the market clearing price for housing is highly sensitive to those factors that influence demand. Moreover, there is a feedback loop from prices to demand, with weaker prices leading to weaker demand. If house prices are anticipated to increase, then the expected capital gain helps to offset the financing cost of owning a home.

For instance, when I look at the negative growth of the last quarter – minus 1.2 per cent in France – one comforting aspect was that three-quarters of the decline was due to a reduction in  4  BIS Review 29/2009  inventories. So that was of course much better for the future because it means that once the inventories are back to the required level, to the level that corporates want to have, production starts up. So it is difficult to comment without seeing all the explanations. For the time being I have the feeling that our situation will be relatively, slightly better than that of some of our neighbour countries. What was one of our weaknesses in the past – that is a strong reliance on domestic demand and domestic consumption for growth, and certain weakness in net exports – has become a strength in the downturn. Exports have fallen, like in Germany, but their weight in GDP is much lower, so that it has hit the economy less. The consumer spending trend has remained positive. Compared to countries like Spain or the UK the average indebtedness of households was lower, so that the effect of the turmoil on consumer spending has been also relatively lower than in other countries. For all these reasons we felt that we had some slightly better resilience, but we must remain prudent. FT: Should Germany do more in terms of fiscal stimulus? CN: I think that they have decided on a second package that is sizable.
Broad money also includes physical cash circulating outside the banking system but this is only a fraction (4%) of the total: the vast majority is accounted for by sterling deposits in commercial banks (the precise definition of M4 is here). Traditionally, narrow money has been defined as physical cash plus reserves (the deposits of commercial banks at the central bank). However, the nature of these reserves changed significantly in 2006, when the Bank of England began remunerating them, at Bank Rate (this was done to ensure short-term rates in interbank markets stayed close to the official interest rate – Clews (2005)). see and). It no longer made sense to group them with (non-interest-bearing) cash and at that point the Bank ceased publishing a combined series for “narrow money” (Janssen and Andrews (2005) ). This change explains the initial, pre-QE jump in reserves around that time (evident in Chart 1). As I try and explain in the body of the talk I think it also has some bearing on the impact of QE. 2. I’ll say a little more about this process later on, when discussing the contrasting patterns of “narrow” and “broad” money growth over the past. 3. Reflecting this point commercial bank deposits are sometimes referred to as “inside” money – they’re assets within the (private-sector) financial system, not for the system as a whole. By distinction, central bank reserves are sometimes called “outside” money. 4. Even a “helicopter drop” may not add to net wealth.

QT and the MPC’s forecasts I want to turn now to the second question I posed at the beginning: should the MPC not recognise in its forecasts some particular and additional drag on demand and on inflation, on top of that induced by higher Bank Rate, from the ongoing “quantitative tightening” (or “QT”)? This began over a year ago, initially by failing to replace maturing gilts in the APF. In September, the MPC commenced outright sales of assets and said that, by both means, it would reduce the size its size by £ over the following year. Page 28  Readers who’ve come this far will be glad to hear that this section will be pretty brief because I’ve actually gone through the main points already. There are two. First, because the impact of QE has been variable I don’t think it would be right to pretend there’s some fixed, unchanging effect on the economy – to translate, for example, a given quantity of asset purchases (or sales) into some notional equivalent in terms of Bank Rate. It’s partly because of this, and the fact that we can only be less sure of its impact than that of conventional policy, that the MPC views Bank Rate is its “primary” policy instrument. By design, the Committee did not embark on QT until the official interest rate reached a certain threshold – a level from which (were the need to arise) it could then be cut.
“The EU’s Open Strategic Auto no my fro m a central banking perspective. Challenges to the mo netary po licy landscape fro m a changing geo political enviro nment”. Occas ional Document, IRC Wo rkstream o n EU’s Open Strategic Auto no my. 2  Baldwin, R., Freeman, R., and Theo do rakopoulos, A. (2022). Ho rses fo r co urses: Measuring fo reign supply chain expo sure. NBER No . w30525. 3  M. Khalil and M.-D. Weber (2021). “Chinese supply chain sho cks”. MPRA Paper No 110356. 4  Ciani, A. and M. Nardo (2022). “The position of the EU in the semiconductor value chain : Evidence o n trade, fo reign acquisitio ns, and o wnership”. Wo rking Paper in Eco nomics and Finance 2022/3, April, Jo int Research Centre. 2  Trade in energy goods is a prime example of concentration. In 2020, the EU imported 60% of its energy, with four countries providing 70% of gas imports, of which 40% came from Russia. The consequences of a highly concentrated supply of a key raw material are readily visible today. Last year’s surge in gas prices (which was much sharper in the EU than in the United States), the drastic reduction in supply from Russia and the difficulties in replacing gas with other energy sources have all exerted strong inflationary pressures and have created one of the main risks for the European economy in the short and medium term.

Four, the impact of this process on prices and productivity will depend crucially on the type of economic policies that are adopted. 22  Kataryniuk, I., Pérez, J. J., and Viani, F. (2021) . (De-) Glo balisation o f trade and regio nalisation: a survey o f the facts and arguments. Occasio nal Paper - Banco de España , 2124. 23  See Mio n, G., and Zhu, L. (2013). Import co mpetition fro m and offshoring to China: A curse o r blessing fo r firms?. Jo urnal o f Internatio nal Eco nomics, 89(1), 202-215, or Carluccio , J., Cunat, A., Fadinger, H., and Fo ns-Rosen, C. (2019). Offsho ring and skill-upgrading in French manufacturing. Jo urnal o f International Eco nomics, 118, 138-159. 9  Protectionist measures can lead to no-win situations for all agents involved, in particular in less developed countries that rely on trade and financial openness to access new technology and external financing. Moreover, evidence suggests that the growing use of subsidies by major economies has important distorting effects on the allocation of resources, highlighting that their use sho uld be limited to securing the specific inputs and raw materials needed for the development of key technologies. The same can be said for policies that aim to shorten the supply chain, or “friend -shoring”. In general, the literature points out that participation in global value chains allows companies to better manage unexpected demand shocks compared to a world in which production is predominantly national or regional.
It’s the result of enhancing our own – and the banks’ – operational resilience and business continuity plans. It’s the result of communicating effectively with stakeholders to maintain confidence in the financial system. 16. So this quality of resilience is the product of a long term investment in the many factors that make our system strong. Abundance of opportunities 17. The second quality of an international financial centre that I want to talk about is its ability to generate opportunities for investors. Advanced financial centres like Hong Kong compete fiercely with each other. We succeed by offering investors opportunities so that they can succeed. That means we need to keep innovating, exploring new frontiers and developing our value proposition. 18. Hong Kong’s advantages in offering opportunities to global investors is mainly down to three macro trends. I believe these will provide the impetus for us to continue growing and outperforming. 19. First of all, financial liberalisation on the Mainland creates enormous opportunities for Hong Kong. We have always been the dominant financial gateway between the Mainland and the rest of the world. Today, more than half of international investors’ stock and bond investments on the Mainland are made through Hong Kong. We have also announced a pilot scheme for Wealth Management Connect and have other initiatives under development in the Greater Bay Area. 20.

In both dimensions, I believe this kind of long-term approach is the hallmark of a high-quality financial system. Concluding remarks 27. I hope these reflections have shed some light on Hong Kong’s distinctive qualities as an international financial centre. It is resilient – our institutions and markets remain safe and sound in good times and bad. And it offers huge opportunities to local and global participants, driven by the Mainland’s continued financial liberalisation, as well as developments in fintech and green finance. 28. My team and I are committed to upholding these qualities. We will continue to reinforce Hong Kong’s position as an international financial centre of the highest quality. This journey has no end – and we will rely as always on strong support from everyone that we work with, including many of you. I am confident that, by working together, we can continue to build on Hong Kong’s unique foundation – and enhance our position as one of the world’s pre3/4  BIS central bankers' speeches  eminent financial centres. 29. It only remains for me to thank the Hong Kong Management Association for having me here tonight; to thank you all for your attention; and to congratulate the winners of the Quality Award – your achievements are rightly honoured today. 4/4  BIS central bankers' speeches
the real interest rate consistent with inflation stability and output at its natural level) is now at historically low, possibly negative, levels. Some possible explanatory factors are of a transitory nature (such as the still-ongoing deleveraging processes), while others are more structural ( i.e. low productivity growth and demographic factors). We have to deepen our analysis further in order to have a full grasp of this “new normal” reality. Implications for monetary policy:  New conventional? The question that arises is whether the “new normal” should lead to a “new conventional” for monetary policy. Indeed, inflation and real interest rates are likely to persist at a low level in the future, and therefore nominal interest rates will also be lower and hence closer to their effective lower bound, limiting their effectiveness as a monetary policy instrument, which will possibly lead to balance sheet management as a permanent policy. There are still no conclusive debates about balance sheet management, including on its marginal effectiveness, the optimal size of the balance sheet and the repercussions it could involve in terms of financial stability. Again, in this area, we need further analysis. 4/6   Once the conditions for it are met, the exit strategy from the accommodative policies will require gradualism and predictability. As the recovery gathers speed, and as long as this translates into a sustained adjustment in inflation towards its objective, the need for monetary policy support will tend to diminish.

Financial markets experienced a sudden stop in the fall of 2008. The decline in global banking activity has been particularly pronounced in cross-border positions vis-à-vis advanced economies, which declined by 20% between 2008 and 2017, whereas cross-border lending to emerging market economies increased by 44% during the same period (primarily driven by very strong lending to China).  Global Financial Crisis. During the years of expansion of the so-called Great Moderation, from the mid-80s until the crisis, the global economy was progressively accumulating high levels of debt and leverage, assisted by easy financing conditions and the underpricing of risk. This led to increased vulnerability of the global economy and to the accumulation of bubbles, mainly in the financial and real estate sectors in advanced economies. What took us all by surprise was the intense depth and global nature of the crisis that exploded in 2008. In a context of high integration and complex interconnections between financial institutions, instability spread rapidly across markets and economies, leading to the most serious global financial crisis of the last 80 years. In the European Union, the crisis was exacerbated by a double-dip recession, which hindered our recovery period and revealed as well the weakness of the institutional framework of the euro area.  Technological change. In the 21st century we have seen an explosion of technological changes that are reshaping the global economy: internet, e-commerce, mobile phones, artificial intelligence and big data.
In recognition of the crucial role that CLS serves in the foreign exchange market, CLS was designated as a systemically important financial market utility by the U.S. Financial Stability Oversight Council on July 18, 2012. In my words, we can’t imagine the foreign exchange market without CLS. Let me turn to the future and what it holds for CLS and for us. As is true for all us, the path of the future is determined in part by the momentum of our history and in part by the unknowable that lies ahead. Let me talk to the history. First, it seems clear that CLS has much more runway ahead in furthering its core mission – the reduction of FX settlement risk – by expanding its settlement service to include additional currencies and settlement sessions, and to increase participation in the system. •  Today, CLS settles 17 currencies. But there are many more currencies to go, some in regions that are just coming fully onstream in the global financial system. 2  BIS central bankers’ speeches  •  Today, “same day” foreign exchange activity is not settled in CLS. Can CLS find solutions to help reduce settlement risk in this segment of the market? •  Today, CLS has one discrete settlement session that occurs at a defined time during the day. Is it feasible to imagine a world where CLS is truly Continuous in Linking Settlements on a payment-versus-payment basis at most, if not all times during the global business day?

Unemployment is unlikely to rise much more, and the production gap should gradually disappear in the course of the coming year. I shall now describe the development of inflation over the past few months and explain our new inflation forecast in more detail. The dotted green curve in the graph shows our inflation forecast of December 2001. At that time, we assumed that the three-month Libor rate would remain stable at 1.75% and accordingly expected a slight general rise in inflation to approximately 1.5% by the end of 2004. The fluctuations in inflation predicted for 2002 reflect basis effects. Last December's forecast was based on the assumption that the US economy and the European economy would stagnate until mid-2002 and would then gradually return to their potential growth path. Our forecast of December 2001 slightly overestimated the development of inflation for the first quarter 2002 and at the same time slightly underestimated inflation for the second quarter 2002. The deviation from the forecasting path is due mainly to the development of oil prices and the changed time of collecting data on clearance sales prices for clothing and shoes. Year-on-year inflation, as measured by the national consumer price index, rose to 0.6% in the first quarter 2002 from 0.4% in the fourth quarter 2001. In April, inflation increased to 1.1%, while declining again in May to 0.6%. The distinct rise in April was largely due to yet again higher oil prices and higher prices for clothing and shoes.
These stones could be as large as 12 feet in diameter and represented a value determined by both by the stone’s size, the quality of its craftsmanship and the history associated it. 5 See for example, ‘Money: the unauthorised biography’ by Felix Martin. 3  All speeches are available online at www.bankofengland.co.uk/speeches  3  Societies do not need to have such social technology – there are examples in history of quite advanced 6  societies that have not used it. But modern economies and the changes to living standards to which we have become accustomed would almost certainly be impossible without it. This social technology is of course supported by other technologies - physical, legal and institutional. But these can be very different in different societies and they evolve and change over time. The claims we hold on each other and exchange can be expressed in physical form, like coins or as records in a paper or an electronic ledger. They can be issued or authorised by the state and governed by law - but they do not have to be. In the end, what counts is that the social convention that is money continues to hold. When it fails, when it gets ‘out of order’, the damage to society can be very great. And though money can exist without them and although they can vary, what I have called the supporting technologies matter hugely.

Finally, the ultra-accommodative monetary policy stances of advanced economies have contributed towards greater global asset price co-movements and increased cross-border financial spillovers. In the context of a highly globalized financial system, extreme monetary easing has ‘pushed’ capital to other parts of the world, particularly emerging market economies where yields are higher, and boosted asset prices globally. The exceptionally long period of zero interest rates has also led to a buildup of financial positions that are attractive or justified only if yields remain low. As a result, global bond yields and exchange rates have become acutely sensitive to shifting expectations about monetary policy 5  changes in advanced economies. Such excessive sensitivity has put global markets on a knife edge with frequent bouts of volatility. These developments have critical implications for the transmission mechanism of monetary policy and its conduct. On the one hand, the greater influence of global factors and structural growth headwinds may have made inflation and output less responsive to monetary policy. On the other hand, financial markets and asset prices globally have become more sensitive to monetary policy actions and communication. This raises a dilemma. With inflation and output below targets, monetary policy is eased. Against the tide of global factors and growth headwinds, inflation and output fail to respond, and the temptation is to do more and more. In the meantime, financial markets respond vigorously to low interest rates and the search for yield accumulates in the form of greater financial fragility over time. Something will eventually have to give.
Few would disagree with the following: The bad behavior that contributed to the Financial Crisis was evidence of a culture that was not strongly ethical. Let me also pose a challenge to those who are skeptical about the benefits of a strong ethical culture: If this is not a suitable method to prevent bad behavior by bankers, what alternative proposal do you advocate? The status quo is not acceptable. As a wise man once said, “Plan beats no plan.” The components of a strong ethical culture So what are the key components of a strong ethical culture? It is said that lawyers love a metaphor, and this lawyer is no exception. I like to think about ethical culture as if it were a package. The culture that we will have is derivative of what we put into the package, and there are clear choices to be made. The contents depend upon the type of organization, the kinds of people, and the nature of the skills needed to conduct the organization’s activities. Time will not permit me to cover this thoroughly, so let me cover a few items with a very broad brush. What goes in For starters, the conduct of the people in any organization will be strongly influenced by incentives. Let me mention the “big three.” Bankers, like lawyers, want to do [1] quality work, [2] with people they like and respect, and [3] receive fair recognition in return.

8  The Archbishop offered these comments at an October 12, 2014 panel discussion that was part of the International Monetary Fund 2014 Annual Meetings. A video of that discussion is available at http://www.archbishopofcanterbury.org/articles.php/5426/archbishop‐to‐take‐part‐in‐imfworld‐bank‐panel‐ onethics‐and‐finance. Notably, the Archbishop described his role at the conference as a “lion in a den of Daniels.”  9  Even the skeptics of cultural reform concede that there is “almost universal accord that remuneration structures contributed to excessive risk‐taking in financial institutions and that excessive bonuses paid on anticipated accounting profit at the time of deal origination distorted decision‐making and resulted in asymmetric riskholding.” Paradigm Risk Consulting, To boldly supervise . . . , February 2014. 10  See Dudley, Enhancing Financial Stability by Improving Culture in the Financial Services Industry, supra n.4. 4  BIS central bankers’ speeches