samchain/econo-pairs-v1 huggingface dataset:
The improved economic conditions are expected to gradually translate into higher inflation only in the course of 2018, especially in the euro area. The cautiously optimistic baseline scenario continues to be subject to considerable downside risks; this is due to political uncertainty and structural problems in a number of advanced economies. Swiss economic outlook  I shall now turn to the economic outlook for Switzerland. According to initial quarterly estimates of the national accounts, positive stimuli from abroad were again only partially transmitted to the Swiss economy in the first quarter. Although GDP growth firmed somewhat, it still remained subdued at an annualised 1.1%. What is our assessment of the current economic situation? Overall, available economic indicators suggest that the Swiss economy is on the road to recovery. Export figures and company surveys alike have pointed to an upturn in manufacturing activity since the beginning of the year. Positive developments are also in evidence in significant areas of the services sector and construction. We are gratified to see that the more favourable economic situation and improved business sentiment are reflected, too, by a greater willingness to invest. Page 2/4  Berne, 15 June 2017 Thomas Jordan  News conference  However, certain indicators suggest that the recovery has not yet taken hold in all areas of the economy. Utilisation of production capacity is unsatisfactory in a number of industries, and companies’ profit margins remain tight. These difficulties arise from a combination of economic and structural factors.

Given the likely circumstances in which it would be occurring the tearing up of derivative contracts and winding down of a major clearing service could be a significant shock to the system. In those circumstances, I see a number of reasons why a resolution regime is necessary to provide public sector authorities with the option to step in – if necessary before the CCP has come to the end of its preagreed recovery and wind down actions. In such circumstances, where the actions or inaction by the CCP run the risk of amplifying a systemic problem, it is appropriate that a public authority be capable of intervening to manage that systemic risk and to thereby protect public funds from needing to be used. In contrast to CCP management who will owe fiduciary duties first and foremost to their shareholders, a resolution authority will have powers and duties that require and enable it to act in the interests of financial stability. The benefits of stepping in to stabilise the situation could take a number of forms. 8  All speeches are available online at www.bankofengland.co.uk/speeches  8  For example, if ‘voluntary’ measures such as auctions were failing and there was a serious risk of financial contagion from margin gains haircutting, the resolution authority could decide it was better to intervene quickly to tear-up a subset of contracts earlier than would otherwise be permitted under the rulebook. Doing so would return the CCP to a matched book before losses escalated further and before the damage became irreparable.
It could usefully play a role in following up on the IMF’s financial sector assessment programmes, not perhaps in individual countries, but by drawing general conclusions about the strengths and weaknesses revealed by those assessments in the round, and about the overall effectiveness of national follow-up. There are signs that the Forum’s membership is beginning to favour a more proactive approach, but progress is slow. But that recommendation does rather beg the question of what these weaknesses are, which brings me to my third point. (iii)  Plugging the gaps  I believe we can identify some gaps in our defences against financial instability, which could be plugged, if the will were there. There is not time today for a comprehensive overview, so let me just identify a small number of issues which I believe do need to be resolved. One important lacuna is the absence of a global regulatory regime for reinsurance companies. In some countries, as in the UK, reinsurance firms are directly regulated. In others, they are regulated only indirectly, through insurers. In yet other countries they are not subject to any meaningful regulatory regime at all. It may be argued that we have lived with this uneven coverage for some time. But there is evidence to suggest that reinsurers have been taking on more credit risk than before, often transferred out of the banking system through derivatives such as credit default swaps.

Better monitoring of the vulnerability of domestic economy to shocks is needed. It requires availability of data and proper understanding of (1) vulnerabilities which can be accessed through the sectoral balance sheets and flow of funds data; (2) screening of markets, where the boom-bust cycle might arise from, such as the real estate markets; (3) proper following of the financial and real sector linkages within an economy and (4) better information on public finances. This list of general recommendations in fact hides a necessity for very large and energy consuming efforts in the area of statistics. Although there are many angles which should be noticed, I would stress those which I think can give us “the large picture” of what should be done. The first lesson of the crisis was that timely, more granular and more inclusive data is needed. And let me note here that probably monetary statistics is one of the most explored examples, where the granularity and inclusiveness of data becomes the next inevitable developmental step. The aggregate monetary data should capture all sub-sectors of the financial sector, including insurance companies, pension funds, investment funds, other financial intermediaries and the shadow banking system. Also, for the purpose of tackling the issue of cross-border financial flows, consolidated data for banking or insurance groups seems inevitable. This requires a serious reshaping of the monetary statistics. I think that the Eurosystem offers a good example of concrete steps being undertaken to translate the need for granular and more comprehensive set of data, into a reality.
While the said decline was mainly driven by the SCT (Special Consumption Tax) reduction on automobiles, white goods and electronic products to be effected for a limited period of three months from March onwards, automobile prices, by displaying sharp decline, were chief determinants in prices of this group. The favorable effect of these reductions started to be observed on the domestic sales of automobiles and household goods in March (Figure 6). Moreover, the temporary VAT cut on furniture and IT products for a three-month period will have a short-term restraining effect on annual inflation in durables. Nevertheless, the lagged effects of the exchange rate pass-through on the prices of durable goods are expected to be partially seen following the depletion of current inventories. Table 1. Prices of Durable Goods (Quarterly and Annual Percentage Change) 2008 I  2009 IV  Annual I  1.58 2.81 -1.80  0.61  3.19  -2.49  4.13 7.60 -1.27  -1.31  9.17  -3.17  Electric and nonelectric 1.16 0.68 0.12 appliances  6.04  8.13  Automobiles  1.04 2.44 -3.63  -2.30  -2.56  -1.36  Other  0.04 0.89 1.02  2.27  4.29  0.36  Durable Goods (excl. gold) Furniture  II  III  -4.26  Source: TURKSTAT. CBT.

In particular, it would be needed in the event that citizens become reluctant to use cash as they go digital. This is not the situation we face today: cash is still the most common way of making retail payments in the euro area. However, its role as a payment instrument is diminishing – in some countries rapidly so – as consumers are increasingly paying electronically:10 as a proportion of all physical retail payments, cash payments decreased from 79% in 2016 to 73% in 2019. This trend has accelerated during the pandemic – with a vast majority of consumers expecting to continue using digital payments as often as they do now, or even to use them more often in the future.11 And because of this trend, we may see a further increase in the uptake of international card schemes and solutions such as payment wallets and apps developed by large technology firms. A digital euro would ensure that even in a situation where there is rapid digitalisation in the world of payments, sovereign money remains at the core of the European payment system. This would contribute to financial inclusion. It would also shield us from the risk that a private or public digital means of payment issued and controlled from outside the euro area could largely displace existing domestic means of payment. Such a development would raise regulatory and financial stability concerns and could even put Europe’s monetary and financial sovereignty at risk. How could a digital euro be introduced?
Without the ability to mass print standardised notes, Mr Palmstruch and his followers would not have been able to revolutionise the payments market in the way they did. Similarly, the telegraph not only improved settlement of payments within the Fed system, but also transformed long-distance foreign exchange trading. Some of you may have heard the expression ‘trading the cable’. The phrase had its origin in the mid-19th century when the transatlantic telegraph service radically upgraded international communication. Obviously, this hugely impacted the quoting of exchange rates across the world. Since then, the FX rate between British Pound Sterling and the U.S. dollar has been referred to as ‘the cable’. The way that technological developments impact payments has been particular clear in recent years. The internet and improvements in telecommunications have brought new ways of purchasing goods and services in the form of e-commerce and mobile commerce. Along with this, we have seen large shifts in how consumers pay for their purchases and how we transfer money to one another. It is a bit of a platitude, but still worth highlighting that the speed of innovation has been greater than ever in recent years. A further driver of changes has been humanity’s ability to see needs and demonstrate entrepreneurism. The history of payments is full of examples where people with great ideas have solved problems or inefficiencies in the market. From time to time, this has even led to new types of financial business that we recognise today.

Also ‘clipping’, that is, shaving off part of the material, was fairly widespread. This led to a phenomenon that many years later became known as Gresham’s law. It says that in commerce ‘bad coins’ drive out ‘good coins’ as the latter are kept for saving purposes. Mistrust in the coin system, or even its entire breakdown, was often the unhappy consequence. Another issue was the plethora of mints that continued to grow in number as technology spread. Fast forward, and at the mid-medieval period it had become fashionable for every European kingdom and principality to issue its own coins. With production costs lower than the coins’ value, this was a useful source of income to finance the frequent wars at the time. But with multiple coins drifting around and uncertainty about their true value, it was essentially a mess. However, where there is chaos innovative minds see opportunities. During the 12th century, in the northern part of Italy, a new type of institution emerged. These specialised in exchanging foreign coins for local ones, not unlike present day foreign exchange dealers. This reduced the problem with the many coins causing much confusion. Even more advanced, some of the new institutions started to swap coins for bills of exchange that could be used in local trade. 3 [15]  The medieval coin-exchange providers brought banking to Europe, it is often said. Initially, they only handled deposits, as charging interest was viewed as usury by the powerful church.
And nominal regular pay growth (which strips out bonuses, but includes merit related increases in pay) has remained subdued over the past year, averaging around 2%. Assuming that the potential growth rate of the economy has not been damaged by the financial crisis (and there is no compelling evidence to suggest that it has), then this level of wage growth would be too low to be consistent with the inflation target in the medium term. Looking ahead, it is most likely that there will remain a reasonable margin of slack in the labour market, which should help contain any pressure on nominal wages and hence price inflation. But this is unlikely to persist indefinitely. Historical analysis of the UK labour market shows that the longer individuals are unemployed, the lower their chances of getting a job become. Hence, persistently high actual unemployment tends to be followed by an increase in the level of structural unemployment. Theory and empirical evidence predict that the structurally unemployed exert less downwards pressure on wage inflation. Major shifts in the pattern of employment – as we are likely to see from the shifts in growth from services to manufacturing, and from the public to private sector – tend to reinforce that effect. If structural unemployment rises sufficiently, then the downwards pressure on inflation from spare capacity will eventually start to dissipate. For now, contacts of the Bank’s Agents confirm that the margin of slack in the labour market should continue to restrain wage growth in the coming months.

And this is exactly the opposite of what should have been happening if a functioning banking and contingent fiscal union had been emerging. So we are risking creating a half-baked BU which will not necessarily be ready for future bad times. And it is also a partial answer to the question of potential participation of some non-euro countries in the SSM. Simply, it is too premature to judge whether the BU is going to be a good project worth participating, or not. Only after the whole project with all it “legs” is created can one seriously answer this question. 2  BIS central bankers’ speeches
This means that the number of hours worked will increase by 0.8 instead of 0.4 per cent a year. Public finances would then be improved by SEK 45 billion, which could be used for reforms - or for repayments on the central government debt and thus create increased scope for future borrowing. If immigrants participated in the working force to the same extent as Swedes, it would provide a further contribution to the number of hours worked of 0.1 percentage points a year. Monetary policy and wage formation The labour supply thus comprises a problem both in the long term and closer to hand. If this cannot be resolved through structural measures that increase the labour supply - e.g. through less sick leave being taken, increased working hours per employee or by labour force immigration - the Riksbank may  BIS Review 17/2003  3  be forced to subdue demand in the economy by raising the interest rate. The labour market’s ability to manage wage formation will be tested as early as next year, when actual growth is supposed to be in line with potential growth. Of course, we do not believe that resource utilisation will put any great pressure on prices and wages so soon, but as economic activity strengthens, greater demands will be made on social partners to show restraint. The Municipal Workers’ Union’s demand for relative wage changes could also entail a problem in terms of potential contagion effects.

Looking at these patterns over time paints a somewhat more optimistic picture (Chart 4). There is clear evidence of economics having become more cross-disciplinary during the course of this century. Once finance is taken out of these estimates, however, economics continues to lag. And alternative metrics, such as the degree of rigidity in hierarchies and gender diversity, paint economics in a less favourable light (Fourcade, Ollion and Algan (2015)). Despite progress, it is difficult to escape the conclusion that economics remains an insular, self-referential discipline. 9  All speeches are available online at www.bankofengland.co.uk/publications/Pages/speeches/default.aspx  9  The economics profession’s intellectual bloodline is purer than in most other disciplines. In some respects, it is a source of strength that the workhorse economic model is a thoroughbred. That quest for purity also contributed importantly, however, to this workhorse falling at the first meaningful fence put in its path. This suggests it is probably as good a time as any to consider mixing the intellectual bloodline, just as physics and other of the natural sciences have done. Agent-Based Models (ABMs)  Against this backdrop, what other disciplines and approaches might be productive alternative lines of enquiry? One potentially promising strand is so-called agent-based modelling. Agent-based models (ABMs) are interconnected systems of individual “agents” who follow well-defined behavioural rules of thumb. What makes these models interesting is that these agents are heterogeneous and interactive. In other words, these models relax one of the key assumptions of the standard model – a single, representative agent.
The need for this involvement is heightened by the entry into force in 2018 of the new standard (IFRS 9) under which banks will switch from using the concept of incurred loss to that of expected loss in order to calculate the credit portfolio provision. This standard is undoubtedly an improvement on the current situation, since it enhances the measurement of the risks of loans and receivables. At the same time, it significantly increases the complexity of calculating provisions and, thus, increases the risk of heterogeneous application across banks, which is something the supervisor should be aiming to mitigate. The work under way in the Basel Committee on this matter is therefore very timely. My comments so far imply that there are in practice significant obstacles to satisfying the legitimate expectations that a rigorous and granular supervision will help moderate the intensity of the regulatory changes needed to promote financial stability. BIS central bankers’ speeches  3  The regulatory frameworks in force and different supervisory cultures, along with the difficulty of becoming more involved in accounting practices, often place considerable limits on the intensity of supervision attainable. This explains why the actions of the authorities to prevent financial crises largely rest on the definition of clear and demanding prudential standards to underpin the work of supervisors.

Indeed that is why we took it upon ourselves to reform SONIA. We started collecting daily data on money market transactions in February 2016 from over 50 banks, building societies and investment firms. These data give us a much clearer picture than we have previously had of what is going on in sterling money markets. A subset of the data will be used for reformed SONIA. The reformed rate will be much more robust, with daily transaction volumes three to four times greater than current SONIA. Any change in SONIA’s properties will be minimal – so far the reformed rate has been around one basis point lower than on the current methodology. Another key reform is that the Bank has consulted on and will implement a changed definition for SONIA. The new definition will allow the methodology and input data of SONIA to evolve if material changes to market structure or functioning threaten to undermine the integrity of the rate. This unique feature will ensure the robustness of SONIA over the long term, giving users confidence that their contracts will not be disrupted. Let me emphasise that, from the perspective of a user of SONIA, implementing these reforms should be seamless. However, one operational consequence that users should be aware of and prepare for is that the publication time for SONIA will move from the evening of the day in question to the morning of the following day. The Bank is working with ISDA, LCH and others to ensure this change is implemented smoothly.
In addition, in order to ensure that there is enough recapitalisation capacity in resolution, one-third of the minimum TLAC requirement is expected to be covered with instruments other than CET1 (that is, debt). It is important to bear in mind that the TLAC establishes a common minimum global requirement and that national authorities have the right at any time to apply higher requirements in their jurisdictions. The TLAC is a new prudential requirement that has different objectives than the capital ratio. Regulatory capital is mainly to absorb losses in a going-concern situation, whereas TLAC is meant to ensure loss absorption in gone-concern situations (that is, beyond the point of nonviability). I should add that, in a resolution context, the location of loss absorbing resources becomes very important and, for this reason, the TLAC standard gives guidance on how these resources should be distributed within the banking group. This highlights another important difference between the capital framework and TLAC: the location of resources. While the former is required on a consolidated basis for the group as a whole, TLAC is required where resolution takes effect and where critical functions are performed. One of the most complex issues in the design of the TLAC was the need to ensure consistency between the two main banking resolution strategies: the Single Point of Entry and the Multiple Point of Entry.

In particular, the Financial Stability Board has claimed that the problems of misconduct in some financial institutions have the potential to create systemic risks, considering the scale of the associated fines and sanctions which could run into the millions and also the negative impact on confidence. This is a serious threat that must be properly addressed. The banking business is about trust; if confidence in the financial institutions and markets is lost, the potential for finance to serve the real economy and foster growth will be undermined. In response to this threat, a new area of FSB-coordinated work has been set up. An action plan has been launched which, among other measures, explores the pivotal role played by compensation structures and, more generally, corporate governance frameworks in preventing and mitigating bad practice. The FSB is examining whether the reforms already in place, mainly as a result of principles and standards issued by the OECD, the Basel Committee and the FSB itself, have proven effective or if, on the contrary, more preventive measures are required. 5. Closing remarks  Let me conclude. Back in 2009 the FSB and other standard-setting bodies (such as the Basel Committee) received a mandate from the G20 to restore the resilience of the financial markets and make future financial crises less frequent and costly. Most of the agreed postcrisis measures are now in place and have already begun to deliver benefits in terms of bank resilience and financial stability. The Basel Committee intends to finalise the Basel III framework in 2016.