samchain/econo-pairs-v1 huggingface dataset:
Foreseeably, the ongoing moderate rise in interest rates will ultimately emit a timely signal to companies to adjust their investment and business expansion projects to real future earnings possibilities. In that way the financial risks that might jeopardise the continuity of investment will be lessened. The financial institutions of all countries benefited from an exceptionally benign environment, in both macroeconomic and financial market terms. Specifically, the balance sheets and income statements of Spanish credit institutions were notably sound, with returns on equity not only greater than those of the previous year but also far above those relating to risk-free assets. Their ROE stood at around a level of 20%, 3 bp up on 2005, with a spread of 16% over long-term government bond yields. These trends are similar to those observed in major international institutions, which show sound levels of returns on equity along with wide spreads over government bond yields. Yet this situation should not lead to complacency. On the contrary, it is precisely the favourable circumstances of financial institutions, as reflected in their levels of profitability and solvency, that allows us to discuss more freely the risks and uncertainties they must face in the coming years. Financial innovation and the activity of new market agents should be viewed as positive developments.

On the other, in a climate of buoyant sales, the widening of business margins continued, albeit at a lesser rate than in previous years. All these factors, combined with the rise in oil prices in the first half of the year, meant that inflation rose in 2006 and that the inflation differential with the euro area stood at 1.4 pp. Inflation began to perform more favourably in the closing months of 2006, a trend that has run into 2007, with the related differential being cut to 0.5 pp. Foreseeably, these inflation dynamics will remain in place for several months. But it should not be forgotten that the improvement has a temporary component, linked to the path of oil prices, and that core inflation remains at 2.5%, despite the continuing restraint of import prices. Price and cost increases in 2006 once again outpaced those of our competitors, prolonging the deteriorating trend of the indices that measure relative prices and costs. Insofar as this difference is not warranted by quality improvements, the trend of these indices reflects a loss in competitiveness, whose adverse consequences for growth will become patent once domestic demand moves back onto a normal footing. The outlook for the Spanish economy points to the continuation of the main features recently observed, namely: the restructuring of spending, thanks to a gradual easing in domestic demand, particularly in consumption and residential investment, and an improvement in the contribution of net external demand.
Even if there’s no change in loan-to-value ratios for new lending, rising house prices mean that, as and when people move house, new and higher mortgages replace older, small loans. The counterpart is a largely matching flow into deposits as those trading down the market turn their capital gain into financial assets (Chart 9). Chart 9: Mortgage equity withdrawal got transferred across households, not spent  Chart 10: Mortgage growth determined mainly by prior growth in house prices  Per cent of disposable income 14  Per cent 25  10  20  6  15  2  10  -2 -6 1987  Mortgage equity withdrawal Net flow into household cash and deposits 1992  1997  2002  2007  2012  2017  Sources: Bank of England, ONS, and Bank calculations. Transactions x 15-year house price change / mortgage debt, scaled Growth in mortgage debt  5 0 1991  1996  2001  2006  2011  2016  Sources: HM Revenue and Customs (HMRC) Transactions, ONS, Land Registry, Bank of England, and Bank calculations. The blue line in Chart 10 plots a very crude proxy for this automatic, pre-determined part of mortgage growth. It’s just the change in the average house price over the previous fifteen years (a period designed broadly to match the average tenure of owner-occupiers) multiplied by the number of housing transactions and then divided by the existing stock of mortgage debt. This is a pretty good match for the real thing (the red line).

19 And since such goods and services typically command a price premium in the market, that would in turn lift the value of output, raise national income and secure and expand employment. 15  David Autor and David Dorn, The Growth of Low-Skill Service Jobs and the Polarization of the US Labor Market, American Economic Review, 2013, 103(5): 1553–1597. 16  See the article entitled, “What is behind the recent rebound in euro area employment?”, ECB Economic Bulletin, No. 8 (December 2015). 17  Ulf Lewrickb, Lukas Mohlera and Rolf Weder, When firms and industries matter: understanding the sources of productivity growth, BIS Working Papers No 469 (October 2014). 18  Among several other papers, see e.g. Krizan, C.J., Foster, L. and Haltiwanger, J.C. (2006), “Market selection, Reallocation, and Restructuring in the U.S. Retail Trade Sector in the 1990s”, The Review of Economics and Statistics, MIT Press, Vol. 88(4), pp. 748–758, November. 19  Valerie Jarvis and S.J. Prais, “The Quality of Manufactured Products in Britain and Germany,” International Review of Applied Economics, Vol. 11:3 (1997), 421–438. BIS central bankers’ speeches  5  Indeed, even with the technological advances at our disposal, advanced economies such as the euro area cannot afford to try to out-compete the lower cost producers on price – not if we want to maintain the benefits of our welfare states and less precarious patterns of employment.
Its purpose was to determine what should be done with prudential standards to safeguard recovery. This was no ordinary regulatory convention. Marriner S Eccles, Chairman of the Federal Reserve, called it “guerrilla warfare”. In one corner were the regulators, the Comptroller of the Currency and FDIC. Scarred by their regulatory experience, and fearing further bank failures, the Comptroller and FDIC pushed for high prudential standards, including preservation of fair values for banks’ assets. In the other corner was the Fed. Scarred by their monetary policy  2  Pacioli (1494). 3  Goethe (1796). 4  Simonsen and Hempel (1993) provide a fascinating account of this episode. 2  BIS Review 28/2010  experience, and fearing a further collapse in lending, the Fed argued for laxer prudential standards and the abandonment of fair values. Battle commenced. The tussle lasted two months, often played out in public through the New York Times. In the end, the Fed prevailed. On 26 June 1938, Franklin D Roosevelt announced (without so much as a hint of irony) the Uniform Agreement on Bank Supervisory Procedures. Banks’ investment grade assets were to be valued not at market values but at amortised cost. And banks’ sub-investment grade assets were to be valued at a long-run average of market prices. In the teeth of crisis, and in the interests of macroeconomic stability, the first phase of fair value had ended. This pattern was to be repeated half a century later – the second wave of fair value.

During the 19th century, the published accounts of Spanish banks became less frequent during episodes of crisis. Mussolini’s Italian government of 1931 went one step further, suspending publication of accounts by the banks to forestall panic. 14 It is unlikely Goethe and Mussolini would have agreed on the merits of double-entry. While less extreme, there is compelling evidence of British banks having massaged balance sheets from the late 19th century right up until the early 1970s, especially during crisis. Typically, this involved the systematic under-valuation of assets to allow hidden reserves to be carried on the balance sheet. The experience of UK banks in 1952 was typical. As the prices of government securities fell sharply, the basis for valuation by banks was shifted from “at or below market value” to “at or under cost”. This mirrored the Roosevelt and Bush forbearance announcements of 1938 and 1990. The motives for hidden reserves among UK banks were purportedly prudential, as protection against the “excessive dividend expectations” of shareholders and as a cushion against losses in crisis. 15 Although the Companies Act of 1947 prohibited the use of hidden reserves, the banks were exempt from its provisions. But the writing was on the wall. Non-disclosure by banks came under repeated fire during the 1960s. Sensing the inevitable, British banks “voluntarily” decided to pursue full disclosure in 1969, in the interests of shareholder transparency and protection, though there is evidence of hidden reserves persisting right up to the 1980s. 14  James (1992). 15  Billings and Capie (2009).
5  See Zamarro, G., C. Hitt and I. Mendez (2016) “When Students Don't Care: Reexamining International Differences in Achievement and Non-Cognitive Skills” EDRE Working Paper No. 2016-18. 14/18  The first papers to have evaluated this experience in Spain do not offer conclusive findings. And that underscores the challenge of adapting another country’s successful model to our circumstances.6 It is therefore important to conduct pilot programmes enabling us to determine which design is most suitable for us. Also, in addition to improving employee training, it is important that such training should be in an innovative environment. In this respect, investment in R+D activities in Spain is still very low in the public and private domains alike (0.8% and 1.4% of GDP, respectively, in 2016), which places Spain at levels 25% and 50% below the European average. As a result, the technological capital gap with the EU has continued to widen. Here several measures, among others, would be advisable: to evaluate the possibility of increasing the public funds allocated to the area of innovation; to change research promotion and career arrangements to facilitate the entry and development of new highpotential researchers; to restructure in their entirety public organisations that pursue innovation in order to harness synergies where they may be found; and to promote a sound evaluation system to determine the allocation of resources across centres.7 Business financing  6  See Bentolila, S., A. Cabrales and M. Jansen (2018): “Market insertion of youth: Evidence from Madrid”, Working Paper, forthcoming.

No one knew how large the losses would be and whether the reserve capital would suffice. Funding ran short. Because what financiers in the market would want to give loans to a bank that appears unsteady? And who would want money in an account in this bank? I am sure you will remember the pictures of the queues outside Northern Rock’s branches in the United Kingdom. To restore confidence, the state and the taxpayers in many countries had to inject capital and go in as owners of the banks. This would not have been necessary if the banks had held more capital when the dark storm clouds gathered in summer 2007. The Basel Committee has taken note of this. The current capital requirements are being raised substantially. If I may go into technical details, the new regulations require that the  BIS Review 159/2010  3  banks should have a Tier 1 capital corresponding to at least 6 per cent of their assets, or more correctly their risk-adjusted assets. The risk adjustment means that for each asset one recalculates the value, depending on whether the value of the asset can be regarded as certain. One sign of this might be, for instance, that the value of the asset has varied a lot. The higher risk an asset is believed to entail, the more capital needs to be allocated. At present, the minimum requirement for Tier 1 capital is only 4 per cent of the total riskweighted assets.
Research indicates that a fall on the stock market affects household confidence relatively quickly, that is already after two to four weeks.5 The indicator of Swedish consumer confidence in the economy published by the National Institute for Economic Research tends to fall when the Stockholm stock exchange falls (see Figure 6). There may therefore be good reasons for believing that the recent falls on the stock markets of the world are one of the reasons why the Swedish households have become more cautious and are expected to increasing their saving. Financial turbulence has also led the companies to lower their expectations regarding the period ahead and to begin to postpone investments. All in all this has a dampening effect on economic activity in Sweden. High sovereign debts abroad affect Sweden As we have noted, the level of debt is high in the euro area and the United States. Following many years of budget deficit, what were in many cases already weak public finances were further undermined in connection with the financial crisis of 2008–2009. In 2009, the average budget deficit in the euro area amounted to 6.4 per cent of GDP. This figure fell to 6 per cent  5  See for example Jansen and Nahuis, 2003; Kremer and Westerman, 2004; and Beckmann, Belke and Kuhl, 2011. BIS central bankers’ speeches  7  in 2010 and is expected to be 4.4 per cent in 2011.

We can expect the tightening measures to have a restraining effect on growth over the next few years.1 In a situation where it seems that growth is anyway slowing down this is of course unfortunate. Nevertheless, tightening measures are necessary to reduce concern and increase confidence on the financial markets. However, not everything is gloomy in the global economy. It is expected that growth in Asia and Latin America will remain high, even though it may be dampened by the slowdown in the United States and Europe. It is difficult to assess exactly how much the emerging economies in Asia and Latin America will be affected by the slowdown in the western world. This depends in part on to what extent they manage to reduce their dependence on exports to maintain a high rate of growth. A major challenge for many of these countries is to move from primarily export-driven growth to growth driven more by domestic consumption. How does this affect the Swedish economy? How do these economic developments affect resource utilisation and inflation in a small open economy like Sweden? Their impact will be through two main channels: through trade links with the rest of the world, that is via imports and exports of goods and services, and through the globally-integrated financial markets. Let me begin by discussing the role of the trade channel. 1  According to the theory of expansionary fiscal contractions, an extensive budget consolidation programme can have a positive effect on growth.
In the coming years, as the Shariah principles of using capital to build productive capacity gain wider recognition, Islamic Finance will assume a more prominent role. Estimates of global Islamic Finance assets today range from $ billion to $ 1 trillion and one consultancy firm estimates this could potentially grow to $ trillion by 2012. 4 Countries in Asia are using Islamic Finance to fund urban development and public infrastructure projects to meet the growing demands of their populations. The ADB estimates that Asian countries would need more than $ trillion of infrastructure investment between  3  Kawai and Wignaraja, “The Asian "Noodle Bowl": Is It Serious for Business?” Asian Development Bank Institute Working Paper Series No. 136, April 2009. 4  Oliver Wyman, “The Next Chapter in Islamic Finance - Higher Rewards but Higher Risks”, April 2009. 2  BIS Review 57/2009  2010 and 2020. 5 International financial institutions such as the Islamic Development Bank are active in funding worthwhile investment projects. The global sukuk market remains a relatively new asset class with much room to grow out. In 2007, Asian currency-denominated sukuk outstanding grew by almost 50% but the market contracted by only 1.5% to $ billion at end-2008. 6 Around $ billion in sovereign sukuk issuance will come from Malaysia, Indonesia and Singapore in the first half of 2009, and more private sector issuers are expected to tap the sukuk market and to attract new investors and clients.

2  The World Bank projected Developing East Asia (including China) to grow by 5.3% in 2009; South Asia by 3.7% and Middle East and North Africa by 3.0%. BIS Review 57/2009  1  force an acceleration of structural economic change in Asia. The drive towards greater domestic consumption, as well as greater Asia intra-regional trade, investment and consumption, will take on greater urgency. The growth of intra-Asia trade and investments will be driven by both bottom-up initiatives as businesses expand their ties, as well as top-down policy measures as governments enter into agreements on free trade and economic cooperation. A recent survey by the ADB Institute found that a higher than expected 22% of responding firms use preferences accorded by free trade agreement (FTA) and more are planning to do so. 3 China, Japan and Korea have implemented their FTAs with ASEAN. The ASEAN-Australia-New Zealand FTA was signed in February 2009. Singapore has signed FTAs with the GCC and Jordan, and we can expect more of such pacts within Asia in the future. Cross-border capital flows between the GCC and East Asia will grow significantly in the coming years. With this forced pace of global re-balancing, the relative economic weight of Asia will rise. This would be a positive development for the global economy, as more engines of growth provide greater resilience. Financial services and Islamic finance However, it is crucial that our optimism does not turn into hubris. Economies in our region face many important challenges.
Long-term interest rates (variation in basis points) May 2006(1) Argentina Australia Brazil Chile Eurozone Hungary Indonesia Japan Malaysia Mexico New Zealand Philippines Poland Russia South Africa South Korea Turkey United Kingdom USA  February 2007 (2) -4 15 25 11 108 118 -9 30 50 9 -72 -11 122 -679 4 8  --18 35 -7 -8 6 7 -4 -3 -6 -12 --5 0 20 -75 -9 -13  August 2007 (3) 382 Argentina -36 Australia 90 Brazil -8 Chile -26 Eurozone 53 Hungary 112 Indonesia -33 Japan 23 Malaysia 27 Mexico -60 New Zealand -- Philippines 12 Poland 26 Russia 3 South Africa -- South Korea 161 Turkey -34 United Kingdom -33 USA  (1) Shows variation between 10 May and 27 June. (2) Shows variation between 26 February and 5 March. (3) Shows variation between 19 July and 17 August. Source: Bloomberg. Something very simple reflects the proper functioning of our economy: in a moment where the world has seen a major retraction of credit operations, in Chile companies have continued to place long-term bonds in the private market. 8  BIS Review 97/2007  Conclusions It follows, then, that the Chilean economy has resumed a strong growth after the unexpected slowdown in the third quarter of last year. In parallel, due mainly to a different supply-side shocks, inflation has risen considerably. In this setting, monetary policy must, aside from anticipating the inflationary consequences of the business cycle, prevent second-round effects related to these shocks.

The sub-standard credit crisis in the US revealed that individuals in most cases did not manage to pass this test. Consequently, the debt load on individuals grew even heavier, while access to crediting became tighter, resulting in a big risk for their financial future. A similar analogy may be drawn for lending in foreign currency in some Eastern European countries. Secondly, financial education should be seen as a public good that brings about positive externalities to the society. It not only increases individuals’ financial welfare, but also affects directly economic policy efficiency undertaken by relevant authorities. The more-educated the public, the higher economic policy efficiency is. Maintaining inflation and economic activity under control is almost impossible in a society ailing from financial illiteracy. Macro-economic balances are achieved and maintained through monetary and fiscal policies instruments. The society needs to be aware of these instruments, understand them, evaluate stimuli and incentives, and properly respond to them. The important role of consumer behaviour for the policies success is clearly evidenced in the “rational expectations” theory. A simple intuition behind this theory is that rational individuals shape their expectations using the available information optimally. They respond to new information by adopting their behaviour to maximise welfare. In this case, individuals “equipped” with financial literacy read and understand developments in economic policies and respond to them rationally. This mutual understanding would drive the economy towards the desired direction.
To sum up, keeping domestic and external imbalances in check is the only way the CEE economies will be able to cope with any strong volatility headwinds. 3/3  BIS central bankers' speeches

Norges Bank is the source for figures from 1996. BIS Review 16/2009  Equity capital in investment banks in the US and Europe was very low, as low as 2-3 per cent of total assets. Many of these banks have now collapsed. The authorities in many countries are working to enhance financial market resilience. For Norway, it would not be appropriate to return to the regulatory regime of the postwar period. Interest rate regulation, credit budgets, a wide range of state banks, regulation of crossborder capital movements and a fixed exchange rate are not the answer. Instead, new and higher capital requirements must be imposed on banks. Banks calculate how much capital they need using their own risk models. The models capture losses and gains previously generated by lending. Equity capital requirements are determined by previous experience of the risk exposure of investments. One drawback is that the historical basis for the models, and hence for the risk assessments, is too limited. With losses now rising, as a result of the abrupt and pronounced turnaround, banks must increase equity capital. Thus the rules governing capital requirements amplify the economic cycle. Three changes are particularly relevant: First, for a given risk assessment, capital requirements must be higher. Second, banks must not be able to reduce capital below a minimum level even if they extend loans that, according to the models, seemingly involve low risk. Third, banks must build up strong capital buffers over and above the minimum requirement in normal times.