samchain/econo-pairs-v1 huggingface dataset:
The openness of capital accounts means that the world today is very different from that of the Bretton Woods era. Capital flows - both public and private – are very large. And, for many countries, private capital flows now dwarf official flows. Because domestic demand is no longer constrained by current national output, a current account deficit does not necessarily indicate any "fundamental disequilibrium" nor require any official help to finance. For example, New Zealand received the largest annual disbursement of any industrialised country as a share of GDP during the Bretton Woods era: 1.9% in 1967. That was associated with a current account deficit of 3.7% of GDP. Since 1990, New Zealand's current account deficit has averaged more than that, but it has had no need of an IMF  2  BIS Review 11/2006  programme to finance these deficits. Indeed, the need for official financing for industrialised countries has become redundant. 3 Many of the "imbalances" that reflect private decisions to save and invest are desirable because they improve the efficiency with which capital is allocated throughout the world. Since it is difficult to measure “equilibrium” flows of capital from one country to another, it is equally difficult to define meaningfully “fundamental equilibrium” exchange rates. As Alan Greenspan has pointed out, current account deficits and surpluses are now the norm rather than the exception.

He hoped that the Bretton Woods twins, Master Fund and Miss Bank, would receive three gifts from their fairy-godmothers: first, a many-coloured coat “as a perpetual reminder that they belong to the whole world”; second, a box of vitamins to encourage “energy and a fearless spirit, which does not shelve and avoid difficult issues, but welcomes them and is determined to solve them”; third, “a spirit of wisdom … so that their approach to every problem is absolutely objective”. Keynes warned the delegates that this was asking a great deal: “there is scarcely any enduringly successful experience yet of an international body which has fulfilled the hopes of its progenitors”. So he hoped that the malicious fairy would not bring its curse upon the twins: “you two brats shall grow up politicians; your every thought and act shall have an arrière-pensée; everything you determine shall not be for its own sake or on its own merits but because of something else". And if the IMF were to become politicised then, Keynes said, it would be best for the twins "to fall into an 2 eternal slumber, never to waken or be heard of again in the courts and markets of Mankind". Sixty years on, the wisdom of Keynes's position at Savannah is clear. In recent years, the critics have charged that all three of the virtues of universalism, energy and wisdom have been lacking in the IMF. And if not in a deep slumber, then the Fund has appeared drowsy.
Against the above-mentioned developments, monetary indicator analysis confirms controlled inflationary pressures originating from the domestic economy. Money supply annual growth was 12.2% in April, staying close to its historic trend. Monetary expansion reflected the accumulation of liquidity in the banking system, revealing the households’ preferential behaviour towards saving. Our assessments point out that monetary expansion is compliant with the private sector’s demand for real money, thus indicating controlled monetary-related inflationary pressures. The contained behaviour of the private sector about spending and investing is reflected also in a low demand for bank lending. Annual growth rates of lending to the private sector ranged 10%–12% in the four first months of the year, on average, only 2 percentage points higher than a year earlier. The business  2  BIS central bankers’ speeches  demand to cover liquidity needs was their main driver for loans, while lending to households increased by low rates. Developments in financial markets speak of low risk premiums and liquidity. Short-term interest rates in the inter-bank market stayed close to the key interest rate and demonstrated contained volatility. In the primary market, government securities yield surged in the last three months, in response to a higher demand of the public sector for funding. Nevertheless, their curb remains lower in comparison with a year earlier, pointing to more favourable financial conditions in the economy. Looking ahead, assessments and projections of the Bank of Albania suggest continuation of positive growth in the upcoming period.

But in a broader context too, it will be a natural step towards strengthening the global financial system. Thank you. 4  BIS Review 134/2009
Interestingly, these forms of housing debt have been paid down even more aggressively than first mortgages. So, the fluctuation in the level of mortgage rates also does not explain the change in household behavior. A final factor that may be reducing the demand for home equity extraction is a change in the distribution of housing equity in the population. Even though aggregate home equity is back to pre-crisis levels, the data indicate that the growth in equity since 2012 has gone disproportionately to older, wealthier households. Presumably, these households have less demand for credit to fund their consumption plans. In contrast, those who would like to convert housing wealth into retail purchases have not yet seen their housing equity restored to its earlier levels—reflecting, in part, slower rates of mortgage balance paydown. In addition, younger and less credit-worthy households also experienced higher relative declines in homeownership rates. While some of these demand-side factors seem to be playing a role in reducing home equity extraction, there is undoubtedly a strong supply-side effect in operation as well. Our consumer credit data indicate that lenders’ adoption of minimum credit scores for mortgage lending and their considerably more rigorous underwriting standards for HELOCs have played a very important role in limiting consumers’ ability to convert home equity into new consumption.

It is an important reason why the economic recovery and expansion have been weaker than we would like, despite the efforts of the Federal Reserve to stimulate economic activity. It also matters as we look forward. The good news is that, while the current expansion is quite old in chronological terms, it is still relatively young in terms of the health of household finances. Later in my remarks, I will talk a bit about the outlook for consumer spending in 2017 and beyond. It’s worth starting off with some background in order to develop the linkage between housing wealth and retail spending. Household incomes tend to increase as individuals grow older and become more skilled in their work and better matched to their employers. This tends to continue until they approach retirement age. This means that incomes are much higher later in life than when people first enter the workforce. Ideally, households would like to be able to even out their consumption based on their lifetime incomes, raising consumption in their early adulthood years. In general, this would mean that young people would consume a relatively high share of their incomes, while older people would save more. Indeed, young people might even wish to borrow against some of their future income so that they can enjoy some of those benefits earlier in their lifetimes. However, there are limits on the ability to shift consumption to earlier in life through borrowing. One problem is that lenders don’t have a reliable way to compel repayment of such debts.
But also from the supply side developments were, for a period at least, positive, partly because there was an increase in the working-age population. In recent years, however, it has become evident that many people have ended up outside the labour market, partly as a result of a rise in sick leave. As regards productivity growth, the trend in recent years has been more positive. At GDP level it has been approximately 2 per cent per year or slightly above. This differs from the situation in the 1970s and 1980s. It is likely that the changes in monetary and fiscal policy and increased transparency with stiffer competition have been important in this regard. So how should we feel about developments in the near future? When it comes to productivity, there is reason for optimism, even if the high figures seen in the 1990s partly reflect both rapid growth in the private sector compared to the public sector and robust growth in the ICT sector. Our economy is more open and has greater competition and downward price-pressure in many sectors. The cost pressures in the public sector also have a similar impact. The outlook is considerably gloomier for the labour supply. As I mentioned, developments are now on a downward trend. One cause of this is that economic policy in some respects has become less focused on raising labour force participation. In terms of both transfers and taxes, changes have been implemented that reduce the incentive to work.

So it is critical that we are able to devise a strategy that could continuously retain and develop talent. While the supply of talent is abundant, the supply of top talent is scarce. The so-called “Talent Paradox”, where we find ourselves with a large pool of talent in the market, but have difficulty in finding competent talent, particularly in the more specialised areas is a reality, requiring a solution. In the context of organisational learning and development, I wonder whether we have been effective in equipping our employees with the needed competencies or proficiencies in our learning interventions, where teaching approaches such as case studies, experiential learning and reflective practices are common pedagogies applied to strengthen our developmental curriculum. This I believe requires profound pondering. Most of the problems we face in the 21st century, would likely require unique and creative solutions, especially if we want to position ourselves in that elite position where possessing the competitive edge is an imperative. Matthew E May, the author of “In Pursuit of Elegance” wrote about “Design Thinking”, a concept that requires an approach to solving problems far beyond the traditional way of problem solving. Great design is a result of a clear and thorough understanding of the user, competing resolution of competing tensions, multidisciplinary collaboration, rapid experimentation via prototypes with continuous modification and enhancement of ideas and solutions. I thought it is quite apt to extract the idea from the book to describe the current and future challenges face by the financial services industry.
The subsequent path is somewhat uneven as the VAT cut is reversed next January, but the broad picture is for inflation to continue to run well below the target in the medium term, as the downward pressure from the substantial margin of spare capacity outweighs the waning impact on import and consumer prices of the lower level of sterling. So the Monetary Policy Committee will probably need to take further action to return inflation to the target in the medium term. That is a discussion we will no doubt have at future meetings. Before finishing, I want briefly to reflect on what this crisis means for the UK’s macroeconomic policy framework. For 16 years, the inflation targeting framework worked pretty well, delivering steady growth and low and stable inflation. In particular, the United Kingdom managed to come through the Asia/LTCM crisis of 1997-8 and the aftermath of the dot-com bust in 2001-3 relatively unscathed. But plainly it hasn’t prevented things coming unstuck now. What has gone wrong? This recession is rather different from its three large post-war predecessors, each of which was associated with policy actions to curtail an inflationary boom that had got out of hand. On this occasion, the boom was not in the market for goods and services, as the data on growth, unemployment and inflation bear witness. Rather it was associated with a debtdriven boom in asset prices, including property. But the bust has not been confined to asset markets and has instead infected the real economy of businesses and jobs.

Starting from 1994, the Treasury’s annual use of short-term advances is to be reduced gradually over five years from 15 to 3 percent of each year’s incremental budget appropriations. By 1998, the Treasury will be entitled to short-term advances totalling not more than 3 percent of that year’s incremental budget appropriations over the previous year. In addition to that, the Treasury and the Central Bank have signed a seven-point protocol to cooperate in fighting inflation. The official aim of this accord is also to give the Central Bank more independence. So, an important development towards the full independence of the Central Bank has been initiated, as required in the Maastricht Treaty. However, we have been in the process of preparing a new Central Bank law in parallel with the same institutions in the EU. The work has already been done and we are ready to submit it to the government if and when the political environment is appropriate. On the other hand, in addition to the already installed electronic payments clearing system, the CB has signed a contract to develop and install a modern national securities settlement system. The new system will allow the Bank to increase the efficiency with which government securities can be traded on the capital markets and ensure that the payments system will match the standards of those in the EU and other western nations. The new system will also be capable of being connected to the BIS Review 105/1997  -3TARGET network.
We have seen progress in this area over the past few years with some firms hiring outside experts, engaging in cultural diagnostic work and implementing programs that focus on improving ethics, behaviors and internal culture. We’ve also seen progress in our direct engagement with boards of directors – and we’ve seen this across institutions of all sizes. When we, as supervisors, first began requiring deeper engagement with directors and senior leaders, the reactions varied, with an initial wariness of the purpose. In fact, directors were often accompanied by a compliance or regulatory relations liaison during our early interactions with them. Over time, though, as senior leaders and board members recognized the advantages of this level of engagement, the process has been smoother and our exchanges are becoming more engaging and direct (and few if any “escorts” are present during our interactions now). While the level of  2  BIS central bankers’ speeches  engagement varies across firms, in general, we are seeing boards being more active in asking questions, providing oversight of management and engaging with supervisors. We, in turn, have deeper insight into decision making dynamics at the board and c-suite level, including the how and why of decision making on key strategic issues. Regular communications also encourage early and proactive surfacing of issues. In addition, we’ve seen good progress in recruiting additional directors to complement current skills on the board – better positioning the board to engage with the senior management team in a productive and appropriately challenging way.

According to a report from the U.S. Department of Labor’s Bureau of Labor Statistics, the median tenure of workers ages 25 to 34 is only three years – less than a third of the tenure among people aged 55 to 64 years old. 1 And, according a Future Workplace “Multiple Generations@Work” survey, 91 percent of “millennials” (that is, a person born between 1977 and 1997) expect to stay in a job for less than three years. Job-hopping can speed career advancement. Getting a promotion in the process of changing jobs allows employees to avoid the “dues paying” that can keep workers in a painfully slow rise up the corporate ladder. Job hopping can also lead to greater job fulfillment. A 2012 survey by Net Impact 2 found that 88 percent of all workers considered “positive culture” important or essential to their dream job, and 86 percent said the same for work they found “interesting.” The same survey found that millennials are the least satisfied in their careers. I also recognize that firms are no longer just competing with others in the financial sector for talent. With skills that can be adapted across multiple industries, the talent pool that was once specialized for financial firms is now spread thin. This puts pressure on the firms and gives talented workers the advantage of being selective in their roles. They demand more from hiring managers and sense other opportunities out there if they’re not satisfied.
In the UK, we have seen some signs, from the Bank’s Market Participants survey10 and the Decision Maker Panel survey of businesses, of expectations becoming more skewed to the right over 2022 relative to previous years, with a larger share of respondents expecting higher inflation in the medium term. There is a range of views among members of the MPC as to whether developments in inflation expectations and the potential for them to become de-anchored add to the other risks around the inflation outlook11. My concerns about the emergence and embedding of an inflationary mentality has been one of the factors contributing to my minority votes for a faster pace of tightening, first in February and again in September this year. 9  See The Burst of High Inflation 2021-22: How and Why Did we Get Here, Reis June 2022 and Losing the Inflation Anchor, Reis Oct 2021 10 See Market Participants Survey results – November 2022 | Bank of England 11 Inflation expectations, inflation persistence, and monetary policy strategy – speech by Catherine L. Mann | Bank of England  Bank of England  Page 10  Market reactions to UK monetary and fiscal policy  Global financial markets have been increasingly volatile over the last year, in particular as markets have responded to increased evidence of persistence in inflation and central banks’ policy actions and communications in reacting to it.

In addition, the local banks’ all-currency liquidity coverage ratio (LCR) are already above 100%, well ahead of Basel’s implementation timeline of 1 January 2019. 11. However, we should not be complacent. Banks should continue to improve risk management processes, and watch out for risks arising from new and emerging trends such as persistently low interest rates, increasing interconnectedness between financial institutions and markets, and the growing use of sophisticated technology. 2  BIS central bankers’ speeches  12. Stress tests will become an increasingly important and integral part of risk management in the financial sector. •  For individual participating banks, the results facilitate discussions with MAS on their resilience to plausible adverse scenarios, planned responses, and actions to mitigate risk management gaps identified from the exercise. •  For the banking sector, the stress test results help to identify common vulnerabilities across FIs, such as exposures to a particular sector or country. This helps banks enhance their risk mitigating responses. 13. To make the exercise more useful, MAS encourages banks to compare the IWST results against their internal stress tests and sensitivity analyses and to assess whether the differences in scenarios and corresponding results reflect particular risk exposures faced by the bank. 14. In addition to prescribed scenarios, MAS has also been working with participating banks to conduct reverse stress tests. This involves banks describing scenarios under which their solvency could come under threat, thereby providing further insights on the risks that could impair the financial system.
In the Basel I era, I remember that conversations with banks often began with them saying: “we are happy to discuss risk-based capital requirements as you the supervisors measure them, but that is not how we manage risk”. This statement would not have been bad had the Basel I approach acted as a restraint on how firms took risk, whether or not it was how they measured risk. Unfortunately, that was at best only partially true. Basel II is much criticised, and there is much to criticise, but one thing we should not forget is that it had barely been implemented when the financial crisis began, indeed Basel II was not implemented in the US at all. The excessive leverage and risk-taking had grown up in the Basel I world. Interestingly, in the US, unlike in Europe, banks were effectively constrained from balance sheet expansion by a regulatory leverage ratio. But their response to this constraint appears  BIS central bankers’ speeches  1  to have been to seek a higher return on equity through holding riskier assets drawn from, for instance, sub-prime and leveraged loans. When we look at the causes and types of bank failures in the crisis, the point is often made in this country that the problems appear to have been located in mortgage and commercial property lending as much as investment banking. That is true.

That has been responsible for  BIS central bankers’ speeches  1  an unusually weak recovery in consumer spending which, after falling initially by some 7%, is still more than 4% below its peak. The result is a large number of vacant retail premises – visible here in Belfast, as elsewhere. The second factor is the extent to which the balance sheets of the major UK banks had grown before the crisis hit, and had been financed primarily by borrowing. So the subsequent reduction in bank lending – the deleveraging – was greater here than in many other countries. That deleveraging has as its counterpart a reduction in the amount of (broad) money in the economy and a reduced willingness on the part of banks to expand lending to finance the recovery. And the third is the crisis in our main trading partner – the euro area – where the near term outlook is weak, and the longer term prospects for tackling the evident fault lines in the monetary union uncertain. The former means that our current account deficit has remained stubbornly high, and the latter is holding back corporate investment With a disappointingly slow recovery, and unemployment one million higher than before the crisis, the main aim of economic policy has been to generate both a recovery and a rebalancing of the economy, and bring unemployment down without putting at risk hard-won medium-term price stability. The Bank of England has played its part by administering a powerful combination of medicines.