samchain/econo-pairs-v1 huggingface dataset:
An expanded cooperation can hopefully also contribute to harmonisation of the supervision that goes further than what can be achieved merely through joint regulations. The agreements that I have mentioned earlier are aimed at achieving this. But it is doubtful how well these voluntary agreements will function in an acute crisis situation. To ensure efficient supervision and crisis management the content of the agreements needs to be formalised. An important part in this is finding methods of resolving differences of opinion between authorities. Thirdly, we also need to work to reduce the introduction of national special regulations in the EU’s member states. Of course, there must still continue to be scope for countries to formulate regulations on the basis of their domestic conditions. However, this impairs the prospects of bringing about a true harmonisation. It is therefore important to constantly question the need for national solutions in the regulatory work within the EU. The aim should be to reduce national deviations as far as possible. In the long term, more in-depth structural changes will be necessary. This primarily concerns establishing joint institutions for supervision and crisis management at EU level. It may mean creating a supervisory authority for the 40 or so banks that currently conduct extensive operations in several European countries. It may also be a question of acting to create a joint European deposit guarantee scheme for cross-border banks. Such a system would have several advantages.

We in the Governing Council of the ECB discussed and debated at length the issue of what the European Central Bank should and had to do in such a situation in order to fulfil its tasks and responsibilities. Effective action The instrument being considered had to be effective, in order to eliminate the unfounded fears regarding the reversibility of Monetary Union and the resulting interference with our monetary policy mandate. In setting up the OMT programme, we learnt from our experience with the first bond buying programme from 2010 – the Securities Markets Programme (SMP) – and made the OMTs even more targeted. The OMT programme differs from the SMP in the following ways. First, there is strict conditionality because the OMTs are attached to a European Financial Stability Facility/European Stability Mechanism (EFSF/ESM) programme, thereby ensuring that the Member States concerned remain under considerable pressure to implement reforms and maintain fiscal discipline. The OMT programme seeks only to reduce unwarranted interest rate spikes. I would like to make it very clear at this point that the OMT programme was not aimed at harmonising the financing conditions of the Member States. The market mechanism will continue to operate. Another important point in this regard is that an EFSF/ESM programme is a necessary – but not a sufficient – condition for OMTs. There is no automatic follow-on. The Governing Council of the ECB will decide independently in each individual case, looking exclusively at the necessity of OMTs from a monetary policy perspective.
It is certainly true that financial sector productivity was probably over-stated in the run-up to the crisis. 44  Nonetheless, the subsequent sharp fall in  financial services productivity is plainly not the whole story. Of the 1.7 percentage point fall in the UK’s productivity growth since 2008, less than a third can be accounted for by financial services (Table 2). One sectoral story that could account for this generalised slowing is a reduced rate of factor reallocation between sectors. 45  Consistent with that hypothesis, the dispersion of productivity across industries has  increased significantly over the last 40 years. And the variance in sectoral productivity gaps, relative to pre-crisis trends, also increased sharply after the crisis (Chart 14). Nonetheless, this pickup in the dispersion of productivity across sectors is dwarfed by the increase in productivity dispersion within sectors (Chart 15). This suggests that any obstacles to the movement of resources within the economy have been more important within sectors than across them. With that in mind, it is firm-by-firm data to which we now turn. Firm-level productivity trends  A more granular lens still comes from looking at firm-by-firm productivity data. The OECD has recently undertaken extensive analysis using company-level data to assess global productivity patterns. 46  We draw  on two datasets for the UK that can prospectively shed light on firm-level trends. 43 44 45  See Billet and Schneider (2016) for an interactive tool for examining sectoral productivity trends. Haldane et al (2010).

At this point, it is customary to wheel out the following, now rather over-used, Paul Krugman quote: “productivity isn’t everything, but in the long run it is almost everything.” Despite its over-use, this quote does have one important virtue, something not to be taken lightly in this post-fact, post-truth world: it is empirically verifiable and appears to be factually accurate. Let me illustrate that with a simple example. Since 1850 UK living standards, as measured by GDP per head, have risen roughly 20-fold, a huge gain. How much of that gain can be attributed to higher productivity? Well, if productivity had flat-lined over the period, UK living standards would only have only doubled. Or, put differently, in the absence of productivity growth, UK living standards would be an order of magnitude lower today, stuck at late-Victorian levels. A more refined way of reaching the same conclusion is to decompose growth into the contribution from inputs into the production process – labour and capital – and the contribution from improvements in the efficiency with which these inputs are used – so-called Total Factor Productivity (TFP). Chart 1 does that for the UK since the Industrial Revolution. This suggests movements in TFP have accounted for the lion’s share th  of both the growth and variation in living standards since at least the mid-18 century. Saying that productivity matters is not the same as saying we understand its determinants. The past few years have served to underscore just how partial economists’ understanding of productivity remains.
It is important to have sufficiently developed domestic financial markets, sound macroeconomic conditions and sound institutions in place. Also important is a surveillance mechanism to monitor capital inflows and outflows. Of particular importance is the monitoring of the accumulation of external liabilities by the financial system and the private sector. Advance knowledge of imbalances and risks would facilitate early actions to manage emerging vulnerabilities. An appropriate exchange rate regime Finally, I would like to mention the significant value to national resilience of having an exchange rate regime that is aligned to the economic fundamentals. It is important to understand that the exchange rate is a means to an end and not an end in itself. Its purpose is to provide a fair rate of exchange between goods and services that are produced in the domestic economy with those that are produced abroad. Trade and investment is facilitated by an exchange rate that is stable and reflective of economic fundamentals, not by one that is volatile and unstable and subject to speculative capital flows. The exchange rate should also not be manipulated to cater to narrow sectoral interests. For every change in the exchange rate that benefits one sector, there would be another sector that is disadvantaged. Therefore, the exchange rate policy has to rise above sectoral interests and consider the overall economic implications in deciding on the appropriate exchange rate. It is also not prudent to respond to short-term trends or to focus solely on developments in bilateral exchange rates.

To increase confidence in the long term, however, we  2  This figure may vary somewhat depending on how it is calculated. 3  See also the article “The EMU and the debt crisis in Europe” in the Monetary Policy Report of February 2012. 2  BIS central bankers’ speeches  need real changes and the credible implementation of requirements for sustainable public finances. Nevertheless, the situation looks much better now than it did in the autumn. If we look outside Europe, we can see the beginnings of a turnaround in the US economy and China, for example, is still experiencing good growth. Despite this, however, we should probably expect the impetus to the Swedish economy from abroad to be limited over the next few years, mainly due to weak development in Europe. Inflation and growth prospects justify keeping the repo rate low Developments abroad, and above all in Europe, are thus highly important to the Swedish economy. But the development of domestic demand, for example household consumption, was also weak in the second half of 2011. Since then, however, we have received a number of somewhat more positive signals. Share prices have risen since the end of last year and confidence indicators are clearly pointing in the right direction, although from relatively low levels. There is thus potential for an eventual increase in household demand. Growth may gradually increase. The main objective of monetary policy is to keep inflation close to the target.
So far, the second round impact of food prices has been limited and confined to selected sub-components of the overall index such as restaurants and catering services. The potential second round impact of elevated food and energy prices, however, on overall economy should not be overlooked. Therefore, the CBRT will keep a close eye on the price setting behavior along with various core inflation measures. In the upcoming period, the Central Bank will tolerate the first-round impacts on inflation resulting from food, energy and one-off adjustments in administered prices, yet remain responsive to the second round effects such as possible deterioration in general pricing behavior. The Central Bank closely monitors the developments in global markets. The potential impact of ongoing difficulties in the US credit markets, on the financial markets and the real economy, continue to create uncertainty about the course of the global economy. Our baseline scenario assumes a soft landing in developed economies, with no major portfolio shock on the Turkish financial markets. However, the probability of a sharper than expected slowdown should not be ruled out. While the possibility of a sharper-than envisaged slowdown in global economic activity, through its potential impact on the exchange rates, may constitute an upside risk for the short term inflation outlook, it also poses downside risks for inflation in the medium term through a possible weakening in external demand and domestic credit.

This observation shows that inflation target, to a significant extent, continue to serve as an anchor and that economic agents expect the disinflation process to continue in the medium term. Nevertheless, the fact that currently medium-term inflation expectations are significantly above our medium term target of 4 percent necessitates a cautious policy stance 1 . Figure 10: Medium-Term Inflation Expectations* 9 12-Month  24-Month  8  7  6  5  0108  1107  0907  0707  0507  0307  0107  1106  0906  0706  0506  0306  0106  1105  0905  0705  0505  0305  0105  4  Expectations regarding the period after 24 months have been published since May 2006. Source: CBRT. 1  As of January, one-year and two-year ahead inflation expectations are 6.01 percent and 5.17 percent, respectively. BIS Review 20/2008  7  3. Inflation and monetary policy outlook  Distinguished Guests and Press Members, After summarizing inflation and monetary policy developments in 2007, in this part of my speech, I would like to share our evaluations on inflation and the monetary policy outlook. First of all, I would like to summarize several factors that might enable the disinflation process to continue in the upcoming period: Annual percentage change in CPI excluding food, energy and tobacco imply an inflation trend of 4.8 percent (Figure 11) 2 . In other words, underlying inflation in the past year was not far away from the medium-term targets.
They reflect diminished uncertainty about the expected path of monetary policy in the United States. And they imply that the imbalances in the global economy will be diffused smoothly. Of course, not much is certain in economics and finance. One cannot know with confidence whether future economic policies and outcomes will justify the confidence in the benign outlook now reflected in risk premia. What are the broader challenges and forces that will dominate the policy agenda and affect economic outcomes? I want to touch on four, though this is a selective list. First, all of the major economies face difficult fiscal sustainability issues, and these will be exacerbated by the approaching demographic cliff. Fiscal policy in most of the major economies is on a path that will lead to increasing, rather than stable or falling debt-to-GDP ratios. In virtually all the major economies, the cost of committed benefits substantially exceeds the stream of tax resources available under current policies. If one were to produce a ten year forecast of the U.S. fiscal position using the  fan charts to illustrate uncertainty that are a feature of the inflation reports of many central banks, the size of the fan would be very wide, indicating a substantial probability of deficits significantly worse than the already troubling central path for the deficit predicted given current policies.

Finally, it is important that the world’s major private financial institutions run themselves with a sufficiently strong financial cushion, a cushion calibrated not just against the risks they confront in this uncertain world, but to the much more central role they play in many markets. Particularly for those institutions whose size and scope make them systemically important, capital, liquidity, and the overall risk management and control architecture need to be exceptionally strong, stronger than would be necessary and appropriate for smaller institutions. The consequence of size is not just that failure or the perceived risk of failure at one of these institutions has larger negative implications for the financial system today than would be the case in a less consolidated world. It is also the case that their greater relative size limits their ability to take actions that would reduce their exposure in the event of a shock without creating the risk of magnifying the shock. Let me conclude by noting the overwhelming significance of the economic policy decisions we make here in the United States to the world’s capacity to deal with these broader challenges. Our impact on global economic activity and on international financial stability is greater than simple measures of our share of GDP. When we are strong economically, the world can more easily tolerate economic weakness outside the United States. When we are less strong, the impact on the world economy is powerful. This has been true for some time.
The economic consequences of adjustment  A comprehensive process of restructuring and reform such as we are seeing in the euro area naturally has economic consequences. Let me turn to those consequences in the second part of my remarks. As the public sector is consolidating, and the private sector is deleveraging and rebalancing towards exports, the external sector has to go into surplus for a period of time. The euro area current account surplus is expected to rise above 2% this year. There have been some claims recently that this constitutes a “beggar-thy-neighbour” approach as Europe is importing global demand. I find this quite contradictory. Observers cannot call on the one hand for Europe to avoid the mistakes of Japan, and then on the other hand criticise Europe for the inevitable consequences of doing so. It is also a very short-term view. Europe’s contribution to global demand in the years before the crisis came largely through governments, firms and households taking on too much debt. This had to change. The ongoing process of reform and restructuring will allow Europe to support global demand in the future – but in a sustainable and stable way. I would add that ensuring balanced growth between major economies would be greatly helped by efforts to accelerate regional free trade agreements, in particular the Transatlantic Trade and Investment Partnership (TTIP) between Europe and the US.

I am sure that the participants in the different sessions scheduled today will elaborate more on the best economic policies to ensure that globalisation and technological innovation will continue contributing to economic growth and prosperity in an increasing number of countries. Ladies and gentlemen, I leave the floor now to the President of the Executive Committee of the European Institute of the Mediterranean, Mr. Senén Florensa, thanking him for the cooperation in the organisation of this event and, of course, thanking you all for your presence here today. 4/4
However, this seems to reinforce their conviction that regional cooperation is necessary to achieve stable and non-inflationary growth and to overcome latent economic conflicts with their trading partners. As in the case of the regional process of integration in Europe, it may well be that the final objective of the Mercosur regional agreement goes beyond that of trade cooperation. The international community should support regional cooperation efforts among countries that have strong trade relationships and are willing to achieve progress in economic convergence. These efforts have significant positive externalities and could contribute to greater effectiveness of multilateral and bilateral surveillance. The exchange rate of the euro To complete the picture of the international role of the euro, let me finally refer to the exchange rate of the euro vis-à-vis other major currencies, namely the US dollar and the Japanese yen. I should like to take the opportunity to reaffirm that the ECB does not pursue any exchange rate target in its stability-oriented monetary policy strategy. Our objective is to maintain stable prices in the euro area and not a specific level of the euro’s exchange rate. According to our strategy, the exchange rate of the euro is the outcome of current and expected economic policies pursued in the euro area, and economic developments in both the euro area and abroad. Conclusions To summarise, the new institutional monetary setting in Europe has consequential implications for international capital markets and international policy cooperation.

Finally, if you look at the structure of financial markets on both sides of the Atlantic, you may note the difference between the “bank-based” system of finance on the European continent and the “market-based” system in the United States. Although there seems to be a trend away from banks towards non-bank financing in the euro area, reinforced by the introduction of the euro, banks still play a dominant role in providing financial services in the euro area. Domestic credit as a share of domestic output accounts for 130% in the euro area, compared with 80% in the United States. Correspondingly, stock and debt markets are much smaller in the euro area than in the United States. While the shares of euro area debt securities and stock market capitalisation relative to GDP remain clearly below 100% (91% and 63% respectively), the figures for the United States are in both cases well above 150% (155% and 172% respectively). This brings me to the use of the euro as an international currency in the global financial system. The role of the euro as an international currency Given the weight of the euro area in the world economy and the legacy of the former national currencies, which have been replaced by the euro, it is no surprise that the euro is the second most widely used currency behind the US dollar. A number of observers have argued that one of the main motivations behind Economic and Monetary Union (EMU) was the development of the euro as a major international currency.
I would like to end by raising a couple of questions about the future shape of financial markets. The first is the extent to which we should be integrating both our analysis of risk and our approach to regulation between the insurance industry on the one hand and capital markets on the other. Quite apart from the increasing institutional interlinkages, the extent of risk transfer now going on between different parts of the financial sector demands a consistent approach to capital requirements across the sector as a whole. A second issue is the need to reflect liquidity conditions in determining the appropriate level of capital. If an asset can be disposed of quickly - that is if there is a robust liquid market for the asset concerned - the capital needed to guard against unexpected price movements will be less than if the prospective holding period is long. Liquidity conditions can of course vary dramatically not just between different instruments but over time and understanding how and why they vary will, I think, be an important area of investigation for the future. Conclusion That concludes a quick summary of some of the financial stability issues relating to risk and capital levels that we at the Bank of England are working on at the moment. Central bankers are by their nature a worrying breed (in both senses of the word! ), and commentators often note the regularity with which the Monetary Policy Committee says that it finds the outlook 'more than usually uncertain'.

Loss absorbing capacity for CCP resolution Let me start by discussing the loss-absorbing capacity needed for CCP resolution. The use of a bail-in tool on a bank unlocks the loss absorbing capacity of the non-equity part of its balance sheet, the part that would otherwise only bear loss in insolvency or in a voluntary restructuring. Applying this concept of going and gone concern resources to CCPs is a less straightforward task. Unlike a bank, a CCP’s own loss absorbing resources sit both on its balance sheet as margin and default fund and off it in the form of contingent claims on its members. Consistent with the PFMIs, these arrangements are intended to be comprehensive at least insofar as they cover losses that could arise from clearing member default. That begs a question as to what additional loss absorbency the resolution of a CCP can currently unlock that recovery cannot unlock already. The question of loss absorbency is one that the FSB is looking at. Do we need additional resources in the waterfall beyond existing funded and unfunded resources? If additional resources are required, should the initial margin held by a CCP be made available if it would have suffered losses in insolvency? Or should CCPs hold other resolution resources instead? BIS central bankers’ speeches  3  I will not prejudge that debate here. However, I do think there is value in clarifying what is meant by the expression “TLAC for CCPs”. Total loss absorbing capacity is not simply shorthand for subordinated debt.