samchain/econo-pairs-v1 huggingface dataset:
The success of the reforms will indeed hinge on perseverance – as no reform has a one-year pay-back – and on their overall consistency, as all reforms are in a close interaction. Let me start first with the interaction between the public debt, efficient public spending and the tax system. Although some progress has already been achieved, structural public finance reforms are still needed. Thanks to the strong economic growth in 2017, the headline deficit fell below the 3% threshold, reaching 2.6% of GDP, and finally complies with the Stability and Growth Pact deficit rule. A tax reform was voted last Fall, lowering the tax burden on companies and on capital: the corporate tax rate will gradually fall from 33% to 25% in 2022 and personal capital income will be taxed by a flat rate from 2018. And last week, the French government published its revised medium-term targets: the public deficit is projected to turn into a slight surplus by 2022, while the public debt-to-GDP ratio – which reached 97.0% of GDP in 2017 – would decline by almost 8 percentage points at the same 5-year horizon. This ambition is very welcome but the better-thanexpected results of 2017 should not make us complacent about the remaining challenges. Even with favourable cyclical conditions and persistently above-trend GDP growth forecasts, the success of the consolidation strategy will depend on capping public spending growth.

So, it should be no surprise that our focus is on three things: first, full, consistent and prompt implementation of the already agreed reforms across the financial system, and here I would note that the largest single activity for the PRA this year is to complete the implementation of Solvency 2 for insurers for the end of this year, something I believe we are on course to do; secondly, finalising the design of the remaining post-crisis reforms and thus providing the much needed clarity around the future regulatory system; and thirdly, scanning the horizon for new risks and vulnerabilities that appear on our landscape, ones such as the risk of cyber disruption. I think there is solid evidence of progress in all of these three areas. Internationally, there is plenty of evidence of shared objectives and effective co-operation among national authorities to solve common problems and “own” and thus implement the resulting reforms. An example  BIS central bankers’ speeches  1  over the last year has been the building of strong working relations between the PRA and our colleagues at the Single Supervisory Mechanism of the ECB. This can only be for the good, and represents the much needed close working of people who are on the front line supervising the system. We also want to encourage sound market-based finance and we are, for example, strong supporters of the EU initiative on simple, transparent and standardised securitisation.
As an example, it is more difficult to propose needed regulatory measures at the same time as promoting the growth of the financial market. To sum up: A country should be able to manage independence, accountability, transparency and efficiency satisfactorily in any kind of supervisory structure. For independence there might be some advantage with central bank supervision. But for cooperation leading to better efficiency there might be a slight advantage with a unified authority. Arguments for and against various supervisory structures After having discussed the conditions for good supervision let me now review some of the arguments for and against the various actual supervisory structures. I will first address the issues of having supervision inside or outside the ministries and the central banks. I will then turn to the arguments for and against unified authorities. Supervision inside ministries may provide some benefits in the form of insight and staff expertise, maybe also access to resources. But there is a strong disadvantage in the lack of independence plus the risk to the public’s confidence in the government if failures should occur in the supervised sector. There is also a serious governance issue in those countries where the government is the owner of financial institutions and also supervises them. Arguments for retaining supervision in the NCB What about supervision inside the NCB? First, banks have a special importance in the financial system. Their activities are often complex. Therefore, they need high quality, resource-intensive supervision. The NCB normally has independence and revenues.

Ensuring the safety and stability of banks and securities firms requires different regulations and skills from monitoring market conduct and taking enforcement actions. Ireland, France, Finland and others have retained bank supervision in an organisation closely related to the central bank but not in the central bank itself. In this way they benefit from the resources of the NCB and can make some cost savings, but avoid some of the arguments against locating supervision in the NCB itself. Other countries, among them Germany, have a stand-alone authority for financial regulation but the central bank maintains a role in the conduct of supervision by conducting most of the on-site inspections of banks. In this way the Bundesbank benefits from its vast network of regional branch offices and its knowledge of the local economy. Criteria for evaluating the organisation of supervision The choice of structure for supervision is not an end in itself but a means to achieve certain objectives. We should therefore analyse the conditions that must be in place to ensure good supervision. The first one is operational independence. There must be laws to prevent policy makers or financial market participants from trying to influence the operational decisions of the supervisor. Independence also implies sufficient and stable resources to attract skilled staff, to build good IT-systems, and to inspect supervised entities. The head of supervision should be independently appointed and should not be dismissed for other reasons than those provided in the law.
This in turn affects households’ and firms’ consumption and investment decisions.3  As regards the scale of the impact on economic activity and prices, the available estimates are subject to considerable uncertainty. For instance, last week the European Central Bank (ECB) published its latest macroeconomic forecasts. To endeavour to capture the impact of the war in Ukraine, the ECB envisages three scenarios based on different assumptions as to the severity and duration of the adverse effects of the conflict on financial markets, energy input prices and global value chains. As a result, euro area GDP growth for 2022 has been revised down, compared with the December 2021 projections, by between 0.5 pp (to 3.7%) and 1.9 pp (to 2.3%), while the average inflation rate for 2022 has been revised up, again compared with the December 2021 projections, by between 1.9 pp (to 5.1%) and 3.9 pp (to 7.1%). The economic policy response The scale of the effects of the conflict will also ultimately depend on the economic policy response. Allow me to now offer a few thoughts on that response. European economic policy Like the pandemic, the armed conflict in Ukraine represents a highly adverse, exogenous shock common to all European economies, but potentially one that will have asymmetric  3  The scale of the adverse effect of growing uncertainty on economic activity is per se very difficult to measure.

Petar Goshev: Brief overview of the financial crisis and its impact Opening speech by Mr Petar Goshev, Governor of the National Bank of the Republic of Macedonia, at the international economic forum “Faster towards the European Union”, organized by the Economic Chamber of the Republic of Macedonia, Ohrid, 2 November 2008. *  *  *  Honorable President Azevski, Dear presidents, business leaders, honorable excellencies, ladies and gentlemen. Let me thank Mr. Azevski for the given honor to speak in front of you this evening, in this exceptionally turbulent, exciting and at the same time challenging period in the economic and financial history of the world. From the invitation I can read that I have the honor to address representatives of ten countries in the region, primarily people who face all sorts of challenges in solving the puzzles from the real economic life, every day. From the statistics I looked through, I may conclude that I have the pleasure to speak in front of representatives of nearly 64 million citizens (63.89 in 2007), whose GDP was around 507 billion Euros altogether in 2007, as opposed to the GDP of 40,000 billion achieved by the world (i.e. 1.27% of those 40,000 billion), in front of the representatives of the 64 million citizens who during the same year exchanged goods and services with the rest of the world in the amount of 295 billion Euros, as opposed to the 20.4 thousand billion of realized foreign trade of the whole world, i.e. a share of 1.43%.
First, in a one person/one vote system, I very much doubt that a sufficiently stable majority could be relied upon to exist to vote, as a majority, for the entire future path of rates (and then to stick to it if conditions had not changed). And I am not convinced that communication would be aided by publishing a path made up of segments supported by majorities comprising different groups of members. In those circumstances, it would be hard to make sense of how individual statements related to the supposedly collective expected path. Second, any such statements would be conditional on a whole host of judgments about what was going on in the economy and about how the economy works. I doubt that, in the UK, our communication with the public and Parliament would be judged a success if we announced a path, only to have to explain that we had departed from it because conditioning assumptions A, B …. or X and Z had been invalidated by the passage of time. Getting across the conditionality might be hard, but also very important: there could be disquiet if the public felt that it had been misled. There is a premium, in our polity, of keeping the debate focused on the outlook for inflation. As I have said to the Select Committee, 28 I would not myself say “never”. I think we must learn from experience elsewhere. But that does not mean sitting on our hands.

Durmuş Yilmaz: Financial security and stability Speech by Mr Durmuş Yilmaz, Governor of the Central Bank of the Republic of Turkey, at the forum “Measuring and Fostering the Progress of Societies: The OECD World Forum on Statistics, Knowledge and Policy”, Istanbul, 28 June 2007. *  *  *  Dear guests, I would first like to welcome you all to Istanbul, the city where the two continents meet. And today it is so delightful to see that it is a meeting point for high level delegates from all the continents. In that regard, it is a great pleasure for me to be given the opportunity to share my views on financial stability and security with such a distinguished audience. Today, I would like to begin my speech by underlining the importance of financial stability, why and how we should keep an eye on the stability of the financial system, including the Turkish perspective. Finally, I will try to emphasize the interrelatedness between financial security and stability. Importance of financial stability… As a result of the liberalization and deregulation processes, financial markets became more integrated and underwent radical transformation, starting, in fact, with developed countries in the late 70’s and spreading to developing countries in the 80’s and 90’s. At the same period, capital movements were seen to have accelerated and reached to high levels. This, in turn, led to financial innovation and heavy use of sophisticated instruments.
12  BIS Review 10/2007  This picture, which is the same picture as the previous one but for a shorter time period, gives an impression that we place less weight on the output gap. The picture becomes even clearer if we travel forward yet another year in time to 2009. Inflation is now very near the target, while the output gap is still clearly positive. It may thus seem as if we are placing more weight on the output gap in the beginning of the period than at the end of the period. This suggests that the reference path in Inflation Report 3/06 is not consistent with a discretionary policy, where you make the best out of the situation in each period. Such a strategy would have involved a higher interest rate in order to provide a better balance between inflation and output towards the end of the projection period. Rather, it seems that the reference path has elements of commitment. Let us therefore assume that we follow the response pattern we have committed ourselves to earlier. In the literature, one such strategy is referred to as commitment under a timeless perspective.5 It is possible to calculate, within the confines of our models, an optimal interest rate path based on such a strategy. 5  See for example Woodford, M. (1999) “Commentary: How should monetary policy be conducted in an era of price stability?”, Paper presented at the Jackson Hole conference, see http://www.columbia.edu/%7Emw2230/jhole.pdf.

Higher potential growth can also influence real interest rates in the long term as households seek to smooth consumption over time. Higher potential growth generates expectations of higher future income. Households may then want to borrow against expected future income and thereby reduce saving already today. Lower saving implies higher real interest rates. The time preference rate can be looked upon as an expression of households’ impatience in consumption. The higher the degree of impatience, the more households will want to consume today at the expense of future consumption, and the higher the real interest rate has to be in order to provide sufficient savings to meet investment demand. It is important to stress the long-term perspective of this analysis. In the really long term, it is potential growth and saving preferences that determine the relationship between desired saving and desired investment and thereby also the real interest rate. In the short- and medium-term, however, the economy is regularly exposed to shocks that influence economic developments, and thereby also the interest rate. It is not unlikely that we might see sizeable deviations of actual rates from the theoretical rates over longer periods. Such deviations may be exactly what are needed to bring the economy back towards a new and sustainable equilibrium. Moreover, uncertainty and risk premia are often disregarded in the theoretical world. In the real world, different types of risk premia exist that can lead to deviations from these stylised theoretical considerations.
While not questioning the basic framework, they suggest 3 that inflation targeting central banks should aim to hit a rather higher inflation rate of around 4%, so as to give more room to cut official interest rates in the face of a collapse in demand before they hit their natural floor of zero. Thus, during the years leading up to the crisis, Bank Rate averaged around 4½%–5% and inflation averaged around 2%, so the real interest rate averaged 2½%–3%. If instead, inflation had been averaging 4% and Bank Rate 6½%–7%, i.e. the same real interest rate as before, then we would have been able to lower Bank Rate by another two percentage points before it approached its lower limit. The thinking behind this seems entirely reasonable. But, aside from ignoring the fact that monetary policy, in the shape of asset purchases 4 , can still be effective even when the policy rate reaches zero, it underplays the costs of higher inflation. Inflation at 2% or less is  3  Olivier Blanchard, Giovanni Dell’Ariccia and Paolo Mauro, “Rethinking Macroeconomic Policy”, International Monetary Fund, January 2010. 4  As well as more exotic options; see Willem Buiter, “Don’t Raise the Inflation Target, Remove the Zero Bound on Nominal Interest Rates Instead”, Citibank , 5 March 2010. BIS Review 31/2010  5  generally felt to be low enough that businesses and households do not have to consciously plan for rising prices – it is “close enough” to price stability, in other words.

Although regulators and supervisors conspicuously failed to address these issues during the run-up to the crisis, prudential regulation and supervision should surely be the first line of defence, as they can be focussed directly on the source of the problem. Regulatory policies have a comparative advantage in combating excesses in financial markets. By contrast, inflation is, in the long run, a monetary phenomenon, so it is more naturally suited to the pursuit of price stability. Beefing up the regulatory regime so it is better suited to preventing the re-emergence of financial excesses is very much work in progress. There are sound arguments for forcing banks to build up more capital and reserves during the good times, which they can then draw down if things turn bad, so improving the general robustness of the system – so-called “macro-prudential regulation”. Under instruction from the G20, the Financial Stability Board, together with the Basel Committee on Banking Supervision, is therefore developing an appropriate set of cyclically-varying regulatory requirements on financial institutions 5 , together with a range of other changes to improve the stability of the global financial system. Of course, no regulatory regime will be perfect, and financial institutions have an incentive to try to circumvent requirements that they perceive as onerous. So there may be times when monetary policy will need to work alongside regulatory policy in order to restrain excessive credit and asset price growth, even though the achievement of the inflation target may not immediately appear threatened.
Naturally, we wish to avoid this. But at the same time, I think it is important to begin to take action. In the long run, it is no sustainable for debts to continue increasing at the same pace as today. So why does the Riksbank care about household indebtedness? The Riksbank is concerned about household indebtedness partly because international confidence in the Swedish housing and mortgage markets are necessary conditions for our financial system to function smoothly. Financial developments in turn are linked to developments in the real economy. The indebtedness of Swedish households can thus affect the Riksbank’s conditions to carry out its statutory tasks, price stability and financial stability. It is therefore important that the Riksbank continues to follow developments, analyses and highlights risks linked to household indebtedness. 8  See Barclays 2012. (Over-promising? Encumbrance at European Banks, Barclays Capital Equity Research. 9  See Financial Stability Report 2013:2, Sveriges Riksbank. 8  BIS central bankers’ speeches

Furthermore, central banks should seriously consider the question of whether they need to intervene when risks in the financial system increase as a result of strong credit growth and an easing of lending conditions. Credit aggregates are part of the SNB’s monetary policy strategy, and the National Bank monitors their development closely. However, the SNB’s main aim is and will continue to be the maintenance of price stability. BIS Review 35/2010  1
The policy measure was intended to loosen liquidity for commercial banks to enable them increase their lending to productive  BIS central bankers’ speeches  1  sectors of the economy. The measure was also aimed at influencing the pricing of the loans especially in light of high lending rates prevailing in the economy; 2)  Increase in capital: a robust banking industry is indispensable for supporting investments in the economy. A lower capital base entails limited participation in the financing of investments in addition to increased vulnerability of the banking industry. From the last quarter of 2011, the banking sector saw significant regulatory reform as the capital thresholds for banks were increased. Local owned banks are now required to have a capital base of K104 billion whilst foreign owned banks are required to have a minimum capital base of K520 billion. The revised thresholds are aimed at ensuring that we have the best possible environment in which banks can carry out these key functions. As I stated earlier, banks are specialised institutions and they are fundamental to the working of the economy and linked to all parts of the financial system. But the consequence is that if banks fail, the external effects can have an adverse impact on the financial system and the economy. That is why banks are required to maintain a certain level of minimum capital. In this regard, the central bank provides oversight through prudential supervision.

We look forward to continuing working with the Association on many issues that still require attention and on-going dialogue. I Thank You. BIS central bankers’ speeches  3
Day:  Have we paid for the Battle of Waterloo? Cobbold:  I don’t think you can exactly say that. On this occasion, we should have little difficulty in evaluating when we have paid for the recapitalisation. There are, though, questions about the source of the funding and the level of borrowing by the country as a whole from overseas. For several years, the UK banking sector has been relying extensively on external capital flows, principally short-term wholesale funding, to finance its lending activities. Those external inflows have fallen sharply – a mild form of the reversal of capital inflows experienced by a number of emerging market economies in the 1990s. Unless they are replaced by other forms of external finance, the adjustments in the trade deficit and exchange rate will need to be larger and faster than would otherwise have occurred, implying a larger rise in domestic saving and weaker domestic spending in the short run. With the bank recapitalisation plan in place, we now face a long, slow haul to restore lending to the real economy, and hence growth of our economy, to more normal conditions. The past few weeks have been somewhat too exciting. The actions that were taken were not designed  4  BIS Review 128/2008  to save the banks as such, but to protect the rest of the economy from the banks.

Such lending can tide a bank over while it is taking steps to remove the cause of the concerns that generated a run or lack of confidence. But it can also serve to conceal the severity of the underlying problems, and put off the inevitable day of reckoning. I hope it is now understood that the provision of central bank liquidity, while essential to buy time, is not, and never could be, the solution to the banking crisis, nor to the problems of individual banks. Central bank liquidity is sticking plaster, useful and important, but not a substitute for proper treatment. Just as a fever is itself only a symptom of an underlying condition, so the freezing of interbank and money markets was the symptom of deeper structural problems in the banking sector. So let me explain why a major recapitalisation of the banking system was necessary, was the centrepiece of the UK plan (alongside a temporary guarantee of some wholesale funding instruments and provision of central bank liquidity), and was in turn followed by other European countries and the United States. Securitised mortgages – that is collections of mortgages bundled together and sold as securities, including the now infamous US sub-prime mortgages – had been marketed during a period of rising house prices and low interest rates which had masked the riskiness of the underlying loans. By securitising mortgages on such a scale, banks transformed the liquidity of their lending book. They also financed it by short-term wholesale borrowing.