samchain/econo-pairs-v1 huggingface dataset:
3/16  Among the emerging economies, China remains beset by the difficulties of managing in an orderly fashion its much-needed economic rebalancing and deleveraging process, despite the significant stimulus measures approved this year by its authorities. China is important for the global economy: it accounts for almost one-fifth of global GDP, in purchasing power parity terms, and it has contributed almost 1 percentage point to annual average global GDP growth since 2005. And clearly, an additional slowdown in its growth rate would have major global implications, through the trade and financial channels, and through the prices of commodities, for many of which it is the main source of demand.1 Some of the emerging economies with the greatest vulnerabilities, such as Argentina and Turkey, have been particularly affected by the financial tensions and continue to face significant challenges. In Argentina especially the situation has worsened considerably in recent weeks, against a backdrop of great political uncertainty. As mentioned, the slowdown in activity has been particularly acute as regards trade. Various factors are behind this downturn. They include most notably the impact of trade conflicts, especially between the United States and China, and the uncertainty associated with Brexit. The trade conflict has unfolded in various phases. In spring 2018, higher US tariffs on different products (mainly imports from China) came into force, with the countries affected retaliating accordingly. Moreover, the US government threatened to extend and step up tariff rises (including, in particular, those on vehicle imports, a sizeable portion of the bilateral trade with Europe).

In the event that the downwards risks I have mentioned weaken the inflation outlook over the medium term more fundamentally than we currently project, we would not hesitate to act. Should more monetary policy impulse become necessary. The ECB is determined to use all available instruments to achieve its mandate over the medium term. As for potential risks to financial stability, we do not see them materialising at present but we will naturally be monitoring them closely. Over the past two years, national authorities across Europe have been active in developing and implementing macroprudential policy measures but their effectiveness still has to be tested. Before addressing my second topic, let me mention Greece again. The comprehensive agreement that has been reached involved a long and complication discussion. But if, as we all hope, the new programme is completely  BIS central bankers’ speeches  1  implemented, it will put Greece in a strong position to grow again and to reap the full benefits of participating in our common currency. The negotiations over the summer once again confirmed that Europe’s institutional framework is not yet commensurate with the requirements of sharing a single currency. A more complete union is necessary. From the ECB’s perspective, two elements are of particular importance. First, despite the best efforts of everyone involved, the crisis has revealed the need for a political centre to economic and monetary union.
The relatively better growth prospects have meant that many investors have chosen to invest their capital in the United States, where the expected return is higher than in, for example, Europe. This has led to a capital flow that has strengthened the dollar, which has contributed to reducing net exports and thereby increasing the current account deficit. Expectations of increased income have also contributed to subduing saving by US households. Another explanation is that the deficit is a result of the domestic policy in the United States. The expansionary economic policy has contributed to reducing saving both among households and in the public sector, which has stimulated consumption and growth. A third explanation points out Asia’s structural saving surplus as the driving force behind the imbalances. Private saving is generally at a high level in Asia. This applies in particular to the emerging economies, but Japan also has substantial private saving. Following the financial crisis in Asia in 1997, there was a correction of the earlier investment bubble, and the investment ratio fell from very high levels. The exception is China, where both saving and investment have increased substantially. The increased saving has to a great extent been invested in US bonds, which has pushed down longterm interest rates in the United States an further stimulated US household consumption. Approximately two thirds of saving in the world is currently channelled to the United States.

It allows the intermediation process to proceed uninterrupted when the banks are temporarily in difficulty. But more importantly, it helps with liquidity management. In the case of Thailand, the government throughout the 1980’s had been very disciplined in their fiscal policy. They maintained balanced budgets in most years. As a result, no new government bond was issued, as old ones were being retired. Without a deep and liquid government bond market, growth of corporate bond was also slow. When the crisis erupted, financial institutions that could not seek liquidity from the inter bank market were stuck without liquid instruments in hand. Some of them might have survived had the bond market been more active. After the crisis, the government had to issue massive amount of bonds to cover losses in the financial system. Today, the Thai bond market is therefore much larger, at 38 % of the GDP. We have a much more active market. What does an active bond market mean to monetary policy? I will highlight three points. First is the implication on transmission mechanism. When the central bank wants to change stance in monetary policy, it changes interest rate up or down. But it does not directly change the interest rates along the whole spectrum of the yield curve. It only affects the key policy rate, which in the case of Thailand is the very short-term 14 day rate in the repurchase market.
Kołakowski, for his part, did not return to Poland when his visiting fellowship ended soon afterward, but defected and became a leading critic of Marxist theory and practice and one of the intellectual fathers of Solidarity and the fall of Communism. 9  Myhre, Jan Eivind (2012): “Norsk historie 1814–1905: Å byggje ein stat og skape ein nasjon” [Norwegian history 1814–1905: Building a state and creating a nation]. 10  The level of trust in a society is influenced by many conditions. It may be that the recent years’ large migration flows are eroding the trust that has prevailed in Norway earlier. However, immigrants have in fact adopted surprisingly rapidly the level of confidence in their new home country. See also Dag Wollebæk (2013): Truer innvandringen tilliten? [Does immigration undermine trust? ], Article in Aftenposten. Alexander Cappelen and Bertil Tungodden at the Norwegian School of Economics are also working on these issues (see e.g. http://paraplyen.nhh.no/paraplyen/arkiv/2012/juni/tillitstesten/). See also Algan and Cahuc (2010): “Inherited Trust and Growth”, American Economic Review 100 (5), pp. 2060–92, who document a strong causal relationship between trust and economic prosperity. 11  Johannes Steen (1827–1906) was born in Christiania (now Oslo). After completing a higher degree in philology at the University of Christiania in 1848, Steen held a number of positions in the school system and was for many years the headmaster of the Stavanger Latin School. Steen was also a member of the Storting and prime minister.

Jan F Qvigstad: On institutions – fundamentals of confidence and trust Speech by Mr Jan F Qvigstad, Deputy Governor of Norges Bank (Central Bank of Norway), at the Norwegian Academy of Science and Letters, Oslo, 12 November 2013. The text below may differ from the actual presentation. This speech does not contain assessments of the economic situation or current interest rate setting. *  *  *  I have received valuable assistance in drawing up this speech, in particular from Mike Bordo, Arne Jon Isachsen, John Llewllyn and Anders Vredin outside Norges Bank, and from Norges Bank staff; Øyvind Eitrheim, Amund Holmsen, Marie Norum Lerbak, Inka Rogne, Øystein Sjølie, Birger Vikøren and Jan Fredrik Øksendal. I would also like to thank Helle Snellingen for the translation into English. Institutions The concept institution has many meanings. For example, there is an important distinction between its meaning as an abstract concept and as a concrete one. The judicial system in Norway is an institution in an abstract sense, while the Supreme Court is concrete. The Norwegian Opera & Ballet is a concrete cultural institution within our more abstract cultural heritage. In my own field, the monetary system is abstract whereas Norges Bank is concrete.
He reports, and I quote: “Under the draft law, the Central Bank will be the principal monetary authority, but it is obvious that it cannot exercise its authority in the monetary field as in a water-tight compartment, from which the various ministries and other agencies of the Government, are excluded. There is no fine line separating monetary policy from other policies, such as fiscal and trade policies. The Minister of Finance through his fiscal policy, or the Minister of Commerce and Trade through his authority to control imports and exports, can exert a powerful influence upon monetary conditions in Ceylon. But it is the clear intent of the Bill to concentrate, in so far as it is considered practicable and constitutional to do, as much monetary authority and responsibility as possible in a single regulatory and operating agency – the Central Bank”. Third: The Monetary Law Act (Chapter 6) envisages the Central Bank acting as the Fiscal Agent, Banker and Financial Advisor to the Government. Sections 106, 113, and 114 set out clearly the Central Bank’s role in relation to the management of the public debt and the borrowings by the Government and any agencies of Government. Those Sections read as follows: “Section 106. (1) The Central Bank shall act as the fiscal agent and banker of the Government and of agencies or institutions acting on behalf of the Government, whether established by any written law or otherwise.” “Section 113.

Yet growth in new investment has been falling, and in the past year or so has turned negative. To me this suggests that even the rise in the profitability we’ve seen has not been enough to compensate for the increase in the risk premium that’s been occurring in the background. And if you take seriously the crude estimates we’ve just been through, you might expect that to have had a significant effect on productivity growth. A brief summary Let me try and sum up. Business investment fell in every quarter last year and surveys suggest the underlying trend is still negative. This is remarkable at a time when profits are high, when the economy’s not been in recession and when employment has been growing strongly. A plausible explanation is that rising uncertainty has acted like an extra hurdle on the required rate of return for new capital projects, deterring expansion in productive capacity and encouraging firms to meet new demand with labour instead. The economics tells us that, because such spending is costly to reverse, perceived downside risks to future profits can act as a powerful disincentive to  12  All speeches are available online at www.bankofengland.co.uk/publications/Pages/speeches/default.aspx  12  new investment projects. If something’s easier to get into than out of, you naturally worry about what might subsequently go wrong. Those perceptions may have been worsening for some time. The evidence suggests that we’ve been living with a high risk premium on new investment for several years.
Taking into consideration innovations in central bank legislation in other countries, this Act consolidated the new inflation targeting policy. The most significant change from the earlier legislation was to set a single, principal objective for the Central Bank, i.e. to promote price stability. The Bank was also granted the independence to apply its instruments in order to achieve this objective. Furthermore, it was assigned the task of maintaining Iceland’s foreign exchange reserve and fostering an efficient and reliable financial system, i.e. financial stability. The Act also stipulated that the treasury may not borrow from the Central Bank. Specific requirements were set out concerning transparency and accountability towards both the government and the public. For example, the Bank is now obliged to publicly account for its monetary policy and for monetary and exchange rate developments and its actions in these areas at least quarterly. The principal objective of current Central Bank monetary policy, as stated in the joint declaration issued by the Bank and the government in March 2001, is to keep inflation as close as possible to 2½%. Should inflation deviate from this target by more than 1½ percentage points in either direction, the Bank is to provide the government with a written public account explaining what has caused this deviation, how the Bank intends to respond and how long it expects that it will take for inflation to once again return to within the targeted inflation limits. The Central Bank has only one instrument at its disposal to achieve this objective: interest rates.

When this decision was announced, it was stated that the Bank intended to purchase the equivalent of ISK 20 billion of currency by the end of 2003. To start with the Bank purchased USD 1.5 million on Mondays and Wednesdays each week. This January the Bank also began to purchase this same amount on Fridays as well, and in February purchases were added on Tuesdays and Thursdays. Currently the Bank thus purchases USD 7.5 million each week, or the equivalent of USD 390 million on a yearly basis. Even though the impact of these purchases on the exchange rate will likely be slight in the long term, as is generally the case with such intervention on the foreign exchange market, the króna rate will be somewhat lower for a while than would have otherwise been the case. 1  Aluminium smelter and related power plants. As was previously pointed out, the Central Bank spent the equivalent of ISK 40 billion to try and shore up the falling króna in the years 2000 and 2001. As a result, the Bank’s net external position worsened significantly and since that time its currency reserves have to a considerable extent been maintained with foreign short-term loans. The Bank’s plans to purchase the equivalent of ISK 20 billion in foreign currency, announced last autumn, involved paying off at least a major portion of short-term debt. This was also the primary purpose of the purchases.
We decided instead to use top-down assessments of solvency based on market valuations. That pointed to a capital deficit for UK banks of around £ billion, well in excess of others’ estimates. When UK banks were finally recapitalised that Autumn, around £ billion was injected into them by the UK Government. Our calculations had been roughly right, good enough to save the ship. To this day, I believe that if greater amounts had been injected then – perhaps £ billion? - UK banks would have been more willing to lend and the recovery would have been less anaemic. It would have been better to be super-safe ex-ante than super-sorry ex-post. With the ship stabilised, in the UK and globally, the task now was to make it seaworthy. The Overton window of opportunity to affect radical regulatory reform was ajar. But what reform? Having helped explain the dynamics of a complex web during the financial crisis, complexity science could also help in its redesign. Although these regulatory reforms eventually fell short of my up-front ambitions in their scale and scope, they nonetheless moved the system to a decisively better place. The centrepiece of these banking reforms was so-called Basel 3, overseen by the Basel Committee on which I sat.21 The Basel 3 reforms eventually resulted in significant increases in the amounts of capital banks held; the introduction of an international regime for leverage and liquidity; a capital surcharge for the world’s “super-spreader” banks; and a system of counter-cyclical capital regulation to modulate credit cycles.

As best I can tell, no-one got the crisis completely right, despite a number of people subsequently exhibiting supernatural powers of hindsight. Rather, the crisis illustrated the limits of our collective knowledge, our collective lack of imagination. It demonstrated that, in a world of uncertainty as distinct from risk, it is better to be super-safe ex-ante than super-sorry ex-post, better to be roughly right than precisely wrong.20  18  A more developed version was published in Nature, written with the late Bob May (Haldane and May (2009)). Haldane (2009). 20 Kay and King (2021). 19  12  All speeches are available online at www.bankofengland.co.uk/news/speeches and @BoE_PressOffice  12  The latter comes to mind when reflecting on the initial rescue response to the crisis. For me, one of the decisive moments came early in 2008 when, led by Mervyn King, the Bank judged that the problems facing the UK and global banking systems were ones of solvency, not illiquidity. Righting the system meant restoring the solvency of banks through capital injections. This was a big call. But how much more capital was needed, given the degree of uncertainty (not risk) about the true value of UK banks’ assets? This was the problem Mervyn set for my Division. One approach to answering it was to assess capital shortfalls bottom-up, asset by asset. As UK banks had an asset base of £ trillion, much of which they themselves could not value, this was practically impossible. In even trying, we would probably have been precisely wrong.
I want to emphasize the word limited. Notwithstanding Adam Smith’s own reference to government intervention, the role of government must remain a limited one. If temporary market imperfections or difficult market adjustment periods give rise to the justification for relentlessly expanding the role of government, there will be a point when markets will no longer function effectively and when welfare creation will seize to advance. There is no better breeding ground for irresponsible behaviour than an environment of economic stagnation or worse, welfare decline. BIS Review 38/2005  1  There are times in history when the world economy undergoes fundamental structural change. With the rapid integration into the global economy of China and India, we are experiencing such historic change. Fundamental structural economic change invariably produces economic victims. The temptation for governments to interfere excessively with the free market is therefore particularly acute during periods when dramatic change occurs. Paradoxically, it is precisely then that the forces of the “invisible hand” are most needed to help bring about the welfare that can ultimately help absorb the negative externalities of change. If I am right that we are currently traversing such a period of historic change, it is more important than ever to ensure that government intervention in markets is limited and remains subject to continuous checks. Free markets under the rule of law, Ladies and Gentlemen, provide the optimal path to welfare creation and ultimately responsible behaviour by market participants.

Indeed, apart from assuring the rule of law, Smith saw two other functions for government: “the duty of protecting the society from the violence and invasion of other independent societies” and the “the duty of erecting and maintaining certain public works and certain public institutions, which it can never be for the interest of any individual, or small number of individuals, to erect and maintain”. Against the backdrop of these brief reflections on the great Adam Smith, let me turn back to the specific question put to us. I have no doubt that together with a functioning rule of law and limited government intervention, free markets in general and financial markets in particular are the optimal path to the promotion of wealth. I am equally convinced that responsible behaviour has the best chances of flourishing in an environment of economic opportunities and rising standards of living. Trust clearly enhances the rule of law as there will never be enough courts to permanently monitor all market transactions. Modern means of communication and transparency, in turn, are trust-enhancing. Think of seller and purchaser ratings on many internet auction sites. Now, let me conclude my remarks with a final and in my view crucial note of caution. As Charles Kindleberger demonstrated convincingly in his 1978 book Manias, Panics and Crashes, financial markets are prone to phases of irrationality and exaggeration. Such market disequilibria lend support to the need for the rule of law and the utility of limited government intervention in a number of areas.
Niveaux des ratios de solvabilité et de levier des principales banques européennes et américaines  Ratios Tier 1 des principales banques européennes  Ratios Tier 1 des principales banques américaines  Source : Rapports financiers des banques  Ratios core Tier 1 des principales banques européennes  Ratios common Tier 1 des principales banques américaines  Source : Rapports financiers des banques * Pour BNPP : common Tier 1 ratio ** Pour BBVA : core capital ratio  Si le Tier 1 est défini par la réglementation, le ratio de fonds propre « core » ne l’est pas. Selon les pays et même selon les banques, on parle de core Tier 1 ou de common Tier 1 ou encore de core capital ratio. Ces termes ne recouvrent pas toujours la même définition des fonds propres car il ne s’agit pas d’une mesure réglementaire mais d’un indicateur davantage destiné au marché, sur lequel les banques disposent de plus de liberté pour son calcul et sa communication. A noter que même le core Tier 1 et le common Tier 1 ne sont pas toujours définis de la même manière par les banques. 6  BIS central bankers’ speeches  Levier des principales banques européennes  Levier des principales banques américaines  Source : Rapports financiers des banques (calculs Banque de France - SEMASFI)  2.

It is therefore essential that, while staying abreast of innovations in the financial world and taking on the changes that are required to stay competitive and improve efficiency, the domestic banking sector must also continue to build upon the strengths of the traditional model. By contrast, the financial turmoil of recent years has had a negative effect across many countries, particularly on financial institutions that rely on wholesale funding sources. In response to the rapid drying up of the interbank markets and with liquidity abruptly disappearing in many key financial markets in the euro area, the Eurosystem has for the past three years been implementing a broad programme of enhanced credit support. In particular, the Eurosystem has been providing liquidity on a fixed rate and full allotment basis and has also extended the maturity of its re-financing operations. These non-standard measures have been instrumental in avoiding a credit crunch and supporting financial stability. These measures are designed to ensure an effective transmission of monetary policy – to maintain the flow of credit to the real economy, avoiding liquidity problems and supporting growth in productive activity. However, there may be instances where the availability of these funding sources may induce some credit institutions to embark on alternative business models where access to central bank funding becomes the primary source of funding. I would like to make it very clear that the Central Bank of Malta is not prepared to support such ventures. When the conditions are favourable a higher leverage ratio increases the return on capital.