samchain/econo-pairs-v1 huggingface dataset:
Greece’s problems Greece is the country that has lately been the main subject of speculation and discussion with regard to the sustainability of its public finances. Decades of substantial public-finance deficits have meant that Greece entered this recession with a gross public debt of over 100 per cent of GDP. The growth of the Greek economy has so far been less affected by the global economic downturn than the OECD average. This is partly explained by Greece’s relatively limited exposure to the world market but also by a considerable increase in public expenditure. This increase in expenditure, together with a slight fall in revenues, means that public sector indebtedness in Greece has increased to 115 per cent of GDP, and according to OECD forecasts from November it is expected to reach 130 per cent of GDP in 2011. (Slide: Gross public debt in Greece). The development of the central government debt in Greece, together with uncertainty about the country’s ability to actually carry out the far-reaching consolidation of its public finances, has caused Greek government bond rates to rocket. The market participants have seen an imminent risk that Greece will not be able to overcome its debt crisis without outside assistance. (Slide: Difference between Greece’s and Germany’s government bond rates). A couple of weeks ago, the euro countries reached an agreement, together with the IMF, on the design of a financial support package for Greece in order to safeguard financial stability in the euro area.

However, the aid measures promised so far have not succeeded in reassuring the markets. 3  See Reinhart and Rogoff (2010). BIS Review 56/2010  3  Several other countries also have serious problems with their public finances Other countries are also experiencing serious problems. Among the euro countries, apart from Greece, these are mainly Portugal, Italy, Ireland and Spain. Critical conditions for assessing how these countries shall attain a sustainable development of their public finances in the future are the current size of the public sector debt in relation to GDP, the credibility of their future fiscal policy and the conditions for growth in domestic and external demand. The larger a country’s debt in relation to its GDP, the greater its interest expenditure and the closer it is to an untenable situation. Among the countries I just mentioned, Italy has the largest burden of debt, with a gross public debt similar to that of Greece at just over 100 per cent of GDP. The other countries are not quite so vulnerable, but their debts are rising rapidly. (Slide: Gross public debt in Portugal, Ireland, Italy and Spain). The credibility of their future fiscal policy is a decisive factor, not least for the rate of interest they are forced to pay on their public debt. Here, earlier patterns of balance or deficit play an important role, as does, of course, the content of their fiscal policy consolidation programme.
The ACPR took a decisive step forward with the very first climate related stress tests, whose results were published in May 20211. A large number of major banks and insurance companies took part on a voluntary basis. The two key takeaways from this pilot exercise are that (i) financial risks are better contained in the context of an early and orderly transition to a greener economy, (ii) all main supervisors should now follow suit, as for instance the ECB and the Bank of England will in spring 2022. When it comes to climate stress tests, learning by doing is much better than waiting for the perfect solution before taking any action. On voluntary disclosure of risks, the TCFD increased its footprint; it now has more than 2,600 supporters (a number that has more than doubled since last year), including more than 50 central banks. The European Union is about to make a significant step forward, as it will implement mandatory disclosure for corporates through a new standard developed by the EFRAG with the Corporate Sustainability Reporting Directive (CSRD), which should hopefully be adopted by mid-2022. Some might always argue – passionately – that Europe and France never do enough. Yes we must do more but we should value the reality of action to rhetorical overbidding. We must avoid discouraging those who are doing the most while excusing those who do the least. I very much hope we will soon have this mandatory disclosure everywhere. I welcome the US endeavour here under the sponsorship of the SEC.

Our objective is now to propose a common set of plausible and differentiated futures, built with the best available science and anchored in the last available IPCC results. Each jurisdiction or region will use them as they want, for their own stress tests and economic simulations, but there is no reason to base 2/4  BIS central bankers' speeches  them on alternative set of scenarios. The purpose of the NGFS is to prepare and publish these common macro financial climate scenarios, just as the IPCC does for physical scenarios. Having this common language, instead of numerous local ones, will make our international discussion much easier. To this end, we are considering several significant steps forward. By next summer, the NGFS scenarios will not only be updated with the latest figures, but also upgraded to align with the new set of comprehensive scenarios to be released in March by the IPCC and to incorporate the more extreme ones. The NGFS should also work on understanding the impact of climate-related risks on various prices and ultimately on overall inflation. Scanning the horizon, we can already see that climate change is accelerating, and that some regions are likely to be affected sooner and on a larger scale. In addition, transition effects might be more front-loaded as they are increasingly anticipated by markets, producers and consumers, which would be good news.
Conclusion - lessons from the 1990s Allow me to set my concluding remarks in the contest of the specific question posed for this panel, namely "Fix versus float - what have we learned from the 1990s?" My answer falls into two parts. First, the 1990s served to confirm what had already become apparent from our experience with a currency board in the 1980s, namely that a currency board can be a viable and, arguably, optimal regime for certain types of economy, but not all. The necessary conditions for success include sufficiently flexible costs and prices, a sound banking system, adequate fiscal discipline and the requisite foreign exchange reserves to back the monetary base, preferably free of other encumbrance. Not all these desiderata were satisfied in one instance of a 1990s' currency board, which has since passed into history. The second lesson concerns the novel feature to emerge late in the 1990s and persist through to the current decade - namely deflation. Society globally has been re-learning how to live with this, after a gap of a lifetime. It seems perfectly possible to live with modest deflation, as our ancestors did, once you have adapted to it. We are reasonably confident that the US economy, to whose monetary stance we in Hong Kong are tied, will not develop in such a way as to make our problem - if that is indeed what it is - any worse.

While a floating regime plainly provides greater flexibility to attempt to influence the price level (although such attempts may not always succeed), Hong Kong sees no reason to abandon its monetary regime, which has served the economy well for almost twenty years. 4  BIS Review 38/2002  Source: International historical statistics: Europe 1750-1993 / B. R. Mitchell, London: Macmillan Reference; New York, N.Y.: Stockton Press, 1998  BIS Review 38/2002  5
Some of my findings – in the form of words, photos and cartoons – are available at https://www.bankofengland.co.uk/outreach#. I find that cartoons can be particularly effective, indeed much better than words, in capturing the sentiment and narrative in the room. For example, consider this one on what the local community saw as their key challenges and frustrations, taken from my visit to South Wales. Or this one, on the role of charities in the community from my visit to Leicester. 7  All speeches are available online at www.bankofengland.co.uk/speeches  7  Or this one, on housing and other issues facing young people from my recent visit to Blackpool. These pictorial narratives provide a simple visual summary which, unlike the written word, can be digested by anyone in less than a minute. They are also a very useful cross-check on my own understanding and a check on my own cognitive biases. Often, I find that the message my non-economist scribe, David, takes from these meetings is different than my own. 14  In these situations, I take David’s reading of the room as  probably the truer reflection of what citizens have really said. I call these visits my Townhall Tours, though this is a rubbish description as I have yet to visit a town hall. I am told that anthropologists would call what I am doing “deep hanging out”, after anthropologist Clifford Geertz. 15  Deep hanging out sounds more appealing than visiting town halls.

And also what new in this crisis is the implicit linkage through reputation risk as noted earlier, that is, banks became obligated to rescue failing SIVs even when there were no explicit contractual obligations to do so. Against this background, what then can regulators do to address the interactions and the feedback problems. This is not going to be an easy task, but let me try to frame the discussion into a context. First, it is clear that systemic risk is endogenous. Risk is first encouraged by procyclicality and once the tipping point is reached, the interactions within the system takes over, turning financial fragility into systemic risk. From the current crisis, it is clear that the scope and intensity of systemic risk are related closely to three factors: (1) the collective behaviour of market participants that contributes to the positive feedback loops; (2) the underlying structure of markets and market practices which dictate the manner through which the interactions of feedbacks are propagated throughout the financial system; and (3) the authorities’ own responses. Therefore, to address the problem, we need to focus our efforts on all of the three areas. First, on the collective behaviour of market participants, the key objective must be to tame or dampen the positive feedbacks through right incentives and better regulation. For example, regulation to disallow capital reduction for credit risk transfer off-balance sheet could have discouraged the originate-to-distribute model.
29.03.2021  The Spanish economy and the COVID-19 crisis: assessment, outlook and challenges Europa Press informative breakfast Pablo Hernández de Cos Governor  *English translation of the original speech in Spanish  Good morning, ladies and gentlemen. I would like to thank the organisers of this event for their kind invitation. I shall begin with a brief assessment of the period since the COVID-19 crisis broke. I shall then set out the Banco de España’s view on the outlook for the Spanish economy. Finally, I shall describe the medium-term economic policy challenges at the national and European level. Taking stock of a year of pandemic: an unprecedented, persistent and uneven impact COVID-19 has caused a global economic recession of an intensity which, in most geographical areas, is unprecedented. The crisis is, moreover, proving very persistent: as of today the pre-pandemic levels of activity have not yet resumed in most countries. Indeed, the successive waves of the pandemic have checked the recovery, particularly in the sectors most exposed to the restrictions. In Spain, this impact is particularly marked. GDP declined by 10.8% in 2020 as a whole, a slump appreciably greater than that in the euro area (-6.8%). At end-2020, Spanish GDP was still 8.9% below its pre-pandemic level, while this gap was 4.9 percentage points (pp) in the euro area. Several reasons account for this more pronounced impact in our country. One was the greater intensity of the pandemic initially, which led to harsher containment measures in spring last year.

The example of Japan in the 1980s suggests that consumer price stability may not be a sufficient condition for precluding bubbles in asset prices and financial instability. With trend inflation averaging two per cent a year, the situation in Japan in the 1980s was very close to what we now commonly mean by price stability. Yet the Japanese economy still moved towards a period of grave financial instability. Thus, the question practitioners have to consider is how to deal with a situation where asset price effects are taken into account with reference to consumer price inflation but where there may still be a risk of asset price bubbles that may lead to financial instability, a destabilisation of the real economy and a severe downward effect on consumer price inflation later on. One could argue that the effects of a large rise in asset prices on aggregate demand may be smaller than the effects of a large fall if such a fall increases general uncertainty and leads to more cautious spending behaviour. If the collapse of a bubble in asset prices has a much stronger effect than the preceding boom, it may be optimal to increase interest rates to raise the probability of bursting a bubble even though such a policy action may temporarily lead to lower consumer price inflation in the short term than otherwise would have been desired.
We, as a central bank, are also active data user, simultaneously producing and disseminating large portfolio of statistical data, which is why we have huge responsibility. First, to provide timely, quality and comprehensive data consistent with the highest international standards. The membership in SDDS plus standard – the IMF’s highest standard since the beginning of this year – is a proof for these commitments; Second, to put all available data into active use in our analytical work, in order to make appropriate decisions on the basis of data and information; Third, to provide a transparent, regular presentation of our statistical portfolio to the public. As a central bank, we understand very well the need for our statistics to be communicated to the public as clearly and frequently as possible. Although statistics is everywhere around us, the statistics itself consist exclusively of numbers. “And they are not enough to tell the story – in order to mean something, we must revive their intrinsic value.” That’s why we, over the last few years, have been making great efforts to bring the statistics closer to you and to the public through direct communication. We started to publish regular statistical press releases, trying to explain what the latest statistics on the economy show. We are trying to standardize these press releases so they can be easily followed by the public.

Switzerland, as an open economy with an important currency and a leading financial centre, has a vital national interest in participating actively in the reform debate. The IMF occupies a central role in the international monetary system. Therefore, it is natural that the Fund has also come under scrutiny, and its many activities are being reviewed. Judged by the recent proliferation of conferences about the international monetary system, one might conclude that the system is in need of a major overhaul. This is not necessarily the case. I share the Managing Director’s view, expressed recently in Nanjing, that the current system, despite many imperfections, also has good features. What is required are improvements, not revolutionary changes. In other words, the current system can be strengthened while preserving its core features. If progress is slow, it is because even small changes typically require difficult political decisions. Continuous dialogue and cooperation are therefore essential. Only through a regular and open exchange of views can we hope to forge a common understanding of the strengths and weaknesses of the current system and address any remaining shortcomings – step by step. Since our last conference, the international community has made progress on the reform agenda. The Fund has greatly increased its capacity to provide financial support to members and adapted its lending tools. It has modernised its surveillance activity, for example by introducing new tools to track spillovers. Furthermore, it has reopened the discussion on the management of capital flows, although admittedly this has been controversial.
These companies are quickly internalising new economic realities which call for a fundamental re-orientation of business and operating models. A clearly defined and wellexecuted strategy for capturing new growth opportunities in the region is more than likely at this critical juncture to reap significant payoffs over the next few decades. A third reason that this period is significant for the insurance broking sector is the intensity of focus that is now being directed at the effects of climate change. Globally, catastrophes are increasing in frequency and intensity. The cost of catastrophes is estimated to have risen by USD870 billion in real terms between 1980 and 2011. In 2013 alone, global economic losses due to natural catastrophes amounted to USD131 billion. Only about a quarter of this was insured. According to a report released last week by the United Nation Economic and Social Commission for Asia and Pacific, more than half of the world’s 226 natural catastrophes last year occurred in the Asia and Pacific region. Floods account for about 40% of the natural hazards affecting the region. Some 80 million people were affected by natural disasters, with economic losses tallying up to nearly USD60 billion. The region was found to be largely unprepared in its response to widespread floods and landslides. Despite the recurring nature of these events, only a fraction of properties and assets are fully protected against risks.

While this may be a legitimate view, technology will nevertheless have an important impact on the kind of services that brokers are offering their corporate clients and what clients are prepared to pay for such services. In many emerging markets, the technology revolution is starting to gain more traction in the delivery of financial services, including insurance, following greater stability in internet connections, advancements in security and payments infrastructure and strengthened data protection frameworks in these markets. Correspondingly, brokers need to strategically review the strength of their value propositions in this changing environment and actively seek to lift their own services by leveraging on technology. These four reasons are just a few that should prompt the insurance broking community to reevaluate their business and operating strategies going forward. All of them – the fallout from the global financial crisis, Asia’s growth trajectory, the focus on climate risk, and more entrenched technological revolution in the delivery of financial services – are converging to re-define expectations, possibilities and risks in the insurance broking sector in a profound way that will determine if a firm will thrive or be marginalised in the coming decade. Going forward, brokers will be expected to play a far more significant role in delivering innovation and choice by developing deep knowledge of the industries that their clients operate in, and working with insurance providers to bring new products into the market that are meeting the changing needs of businesses.
Growth in public spending from last year to this year is estimated at seven per cent. This is considerably stronger than the growth in value-added in the private sector of the mainland economy, which is estimated at around four per cent. The guideline for fiscal policy has been followed closely. Real growth in public consumption is estimated at 1½ per cent. In other words, growth in the production of public services will be moderate, even though public spending is rising sharply in nominal kroner terms because of the steep increase in the cost of producing public services. This reflects high wage growth in the public sector. There have also been substantial increases in transfers to the household sector in connection with our social security system. As a result, most of the strong growth in central government allocations translates into a sharp rise in household consumption, while growth in public service production remains moderate. This is only to be expected when there is steep increase in public sector allocations in an economy where there are no available resources. Employment and labour force participation rates are high. The labour market is tight. Unemployment remains low, with limited available resources. There will be slow growth in the labour force. Working hours have been reduced by increasing the number of vacation days. In addition, outflows from the labour market have risen over the last few years as a result of early retirement and the use of disability pensions.

A sharp rise in labour costs is currently fuelling brisk growth in the prices of goods and services produced in Norway. Inflation is being kept at bay because the rise in prices for imported goods is close to zero. A stronger krone exchange rate, increased trade with China and eastern European countries, a reduction in tariffs and the global downturn have kept import prices low. If the krone exchange rate remains at today’s level, imported price inflation will remain subdued. Wage growth has remained at between five and seven per cent every year since 1998. It appears that this year’s wage settlement will result in a similar outcome. Strong wage growth is the result of a tight labour market. The interest rate is higher in Norway than in most other OECD countries. This is a direct result of considerably higher nominal wage growth in Norway. The phasing in of petroleum revenues increases the demand for labour from the public sector and from enterprises selling goods and services to households. With little slack in the economy, employment in the internationally exposed sector must decline. As competitiveness has deteriorated, manufacturing employment has been scaled back in waves. Competitiveness deteriorated by around 10 per cent from 1994 to 2001. If wages in Norway relative to other countries develop along the same lines as last year and the krone exchange rate remains at the present level to the end of the year, competitiveness will deteriorate further by around seven per cent.