samchain/econo-pairs-v1 huggingface dataset:
Second, they can buy assets – which, in this hypothetical economy, means cars – increasing demand for them and hence their price. These actions lower the cost of borrowing and raise the price of assets in the two-car economy. Both support the production of cars by firms and the consumption of cars by households. In this way, aggregate activity in the economy is boosted, at least in the short run. By lowering interest rates and purchasing assets, a central bank can help meet its mandate of supporting the economy as a whole. If the aggregate impact of looser monetary policy on the economy is positive, what about its distributional impact across regions? In this simple setting, lower interest rates boost the incomes of net borrowers in Red Car region, while reducing the income of net savers in Blue Car region. As the income of Red Car consumers is lower than Blue Car consumers, this shrinks the distribution of incomes across the economy. The effect of asset purchases is to boost the wealth of all car owners, with the bigger boost felt by those whose car wealth is largest. So although both regions are better off in net wealth terms, Blue Car region benefits more than Red Car region. Put differently, the distribution of wealth across regions may widen as a result of asset purchases. Or that at least is what this simple, stylised economy would imply. 3  The Real Economy Now let’s return to planet earth, from the hypothetical to the real world.

The remuneration schemes in financial undertakings and the decisions made by credit rating agencies added fuel to the fire. Financial supervisors tended to focus on risk attached to individual financial institutions more than on system-wide risk. There was also a tendency to practise somewhat lax supervision in order to stimulate the development of financial centres. As a result of all of the above factors, the financial system became far too leveraged. At this writing, a variety of efforts are being made internationally towards correcting these flaws, as is described more fully in this report. The Central Bank of Iceland is following these developments closely, not least through its membership in the Bank for International Settlements in Basel, which is the venue for a number of the committees and institutions that assess risk in the global financial system and formulate the regulatory framework and standards that govern it. The experience of this financial crisis – both in Iceland and abroad – calls for a reassessment of the most effective architecture for financial supervision, with particular emphasis on the nature of the relationship with the central bank. For some time, the trend was towards separating central banks from financial supervision, particularly in countries with developed financial systems. But as is discussed in this Financial Stability report, banking supervision has remained within the central banks of a majority of European countries, and the pendulum might be swinging in that direction once again in countries with developed financial systems.
In order to dampen shocks in a country and mitigate the contagion effects on other countries, close collaboration between a financial corporation’s home country and the host country in which it operates is necessary. In its latest annual report, the BIS writes the following: “Close cooperation between home and host authorities will be inevitable. And some responsibility will have to shift to host authorities for deciding on the settings that apply to exposures in their jurisdictions and for advising home authorities of local financial conditions.” Norwegian banks are part of a common Nordic banking market. The rapid expansion of foreign banks in the Norwegian market in the growth period from 2004 to 2008 was trimmed back during and after the crisis. I am afraid it must be said that they have amplified fluctuations in Norway. However, we assume that the decline in their market share is due to the impact of the international crisis, which has generally been more severe for foreign banks than for Norwegian banks. BIS Review 113/2010  9  Under the Basel Committee proposal, the time-varying capital buffer requirement will apply to all banks operating in a country, including branches of foreign banks. Home country authorities will enforce the buffer requirement imposed by host country authorities. This means that Norwegian supervisory authorities, for example, can impose a supplementary capital requirement in periods of high credit growth in Norway. The requirement will apply to Norwegian, Swedish, Danish and other banks that provide loans to Norwegian households and businesses.

Starting in the autumn of 2008 and continuing into the early months of 2009, demand – in the UK and globally – weakened very sharply. Consumers and firms held back spending plans in the wake of the massive negative confidence shocks associated with the events surrounding the collapse of Lehman Brothers and the knock-on effects on the rest of the financial system. Along with the rest of the MPC, I strongly supported the decision to reduce interest rates from 5% to 0.5% between October 2008 and March 2009, and to inject extra money into the economy through Quantitative Easing. The bulk of this money injection £ of the total £ was agreed by the time of the August 2009 Inflation Report, which was published just under a year ago. Though that Report looked forward to a recovery in the economy, very little economic data available at that time pointed in that direction. Rather, the economic data last summer were telling us how sharply the economy had contracted in late 2008 and the first half of 2009 both at home and abroad, and how sharply unemployment had risen as a result. A strong theme underpinning the analysis of both the May and August Inflation Reports last year was that UK inflation was expected to be pushed significantly below target by a large margin of spare capacity.
GDP is calculated as the total of the current quarter and the three previous quarters. For any quarter(s) that GDP has not yet been published, the most recently-published GDP statistics are used. Sources: Bank of England, Federal Reserve, Macrobond and the Riksbank  Figure 12. Government bonds, municipal bonds, mortgage bonds and corporate bonds over time Nominal amounts, SEK billion 7 000 6 000 5 000 4 000 3 000 2 000 1 000 0  13  14  15  16  17  18  Central government  MFI, covered  Municipality and Kommuninvest  Non-financial corporations  19  20  Note. Securities debt in different sectors. MFIs (monetary financial institutions) include banks, mortgage institutions and finance companies. The series for municipalities’ securities debt refers to individual municipalities’ and regions’ borrowing and the borrowing through Kommuninvest i Sverige AB. The statistics refer to securities debt in SEK and foreign currencies. Sources: Statistics Sweden and the Riksbank  34 [35]  Figure 13. Central banks’ government bond purchases in relation to GDP in Sweden, the euro area, USA, UK and Japan Per cent of GDP 100 80 60 40 20 0  The Riksbank  ECB  Federal Reserve  Bank of England  Bank of Japan  Note. Nominal holdings as of 31 March 2021. Striped bars represent the Riksbank’s purchases of municipal bonds. Sources: Macrobond and national central banks  Figure 14.

One question that many nevertheless ask in the light of today's relatively large balance sheets, is whether we should expect them to be large in the future. 44 There are many indications that this is the case. A short-term policy rate will always be an important monetary policy tool, but my assessment is that bond purchases will play a bigger role than before. As I said, the balance sheet is very large at present. This means that even if we wanted to reduce it rapidly, it would take a long time before it is back at the levels that applied prior to the global financial crisis 2008-2009. But there are also a number of economic reasons why the central banks’ balance sheets should be large going forward. 45  General low level of interest rates in Sweden and abroad If interest rates continue to be as low as now, the policy rate will hit the lower bound more often. Monetary policy will thus automatically become more dependent on other instruments to be able to affect interest rates and access to credit. Extensive asset purchases will thereby become a more important instrument, but other measures, such as forward guidance, and interventions on the foreign exchange market, could also become relevant. The Riksbank has already been using a form of forward guidance since 2007, in that we have published a policy rate path.
As the MPC noted in the minutes of its December 2013 meeting, the changes to the FLS provided support to the MPC’s policy guidance by reducing the risk of triggering the financial stability knockout. Conclusion Yesterday, the Labour Force Survey headline unemployment rate for the three months to November was published at 7.1%, after another large fall. But even if the 7% unemployment rate threshold were to be reached in the near future, I see no immediate need for a tightening of policy. The MPC has been clear all along, that upon reaching the 7% threshold we will have to consider what the medium-term pressures on the economy are and make an appropriate judgement about the direction and pace of policy, and any further guidance that we may choose to issue in future. It is probably best to think about that in the context of our medium-term inflation projections published in the Inflation Report. Overall, the macroeconomic outlook is much more comfortable than it was – but we still have much to do and much to concern us. There is no room for complacency. Can the UK keep growing at the sort of rate consistent with recovery if our key European export markets remain so sluggish? How much more adjustment is needed in the financial sector and in the fiscal position? Have households sufficiently rebuilt their balance sheets to be able to withstand a normalisation of policy? Many of these considerations argue against being hasty in tightening monetary policy.

Even disastrously, the under-employment in agriculture in Sri Lanka is not only the highest but also on the increase. According to the Consumer Finances and Socio-economic Survey of the Central Bank, the underemployment in the agriculture sector in 1996/97 stood at 31 per cent of the employed and it rose to 36 per cent by 2003/04. In contrast, the underemployment in the services  2  BIS Review 116/2008  sector fell from 20 per cent to 18 per cent between the two reference periods and that in the industry remained unchanged at 20 per cent. This has to be seen as both a weakness and an opportunity. We know that food prices have recorded an unprecedented increase in recent times. Hence, there are immense opportunities arising from increased prices and resultant increase in production. At the same time, food security has to be ensured in order to avoid adverse consequences of increased food prices and also undue declines in stocks. Given these limitations, the obvious strategy is to increase productivity. Accordingly, attempts need to be made to concentrate on land, water, agricultural methods, seeds, harvesting, credit to agriculture, transport, harvesting storage, stable prices, value addition etc. to raise productivity in agriculture. If the growth is constrained by limited expansion in agriculture, can’t we focus more on the industry sector? Of course, we can. Unlike the agriculture, which is constrained with limited land availability, industry does not have capacity or demand limitations.
3  3  All speeches are available online at www.bankofengland.co.uk/news/speeches  3  And all these systems in the UK – whether card or bank payment – still depend on existing core infrastructure meaning they either carry the associated costs and limitations on speed or they require the right point of sale infrastructure for their full benefits to be realised. The scope for improving cross border payments is bigger still. These can cost up to 10 times their domestic equivalent.9 Anti-money laundering checks that are rightly required can be cumbersome, and settlement is slow with money taking up to a week to reach the recipient. Most fundamentally, the new payment system must end the inequity that the people with the least money pay the most for financial services. The revolution of payments may not be driven by the old bank-based systems but by a new architecture. Major changes are on the horizon, bringing enormous advantages but also more than a few new challenges. That’s why the Bank fully supports the Payments Strategy Review the Chancellor has launched this evening. To support private innovation and to empower competition, the Bank is levelling the playing field between old and new. This means allowing competitors access to the same resources as incumbents while holding the same risks to the same standards. The Bank is in the midst of an ambitious rebuild of its Real Time Gross Settlement (RTGS) system, which processes £ billion of payments on average every day.

These situations require robust governance at board level. 22  IDC: Wordlwide Semiannual AI Systems Spending Guide (March 2019). See: https://www.bis.org/review/r180727a.pdf and Finastra, FTI Consuting Survey 2019. 24 McKinsey & Company research for the Future of Finance review. 23  8  All speeches are available online at www.bankofengland.co.uk/news/speeches  8  To ensure that the benefits of cloud computing are realised and the associated risks are well managed, the PRA will issue a Supervisory Statement in the autumn that sets out its supervisory approach. The Bank, together with the FCA, will also establish a forum to discuss the results of a survey that it has conducted on AI use in finance and determine an appropriate supervisory approach. The Bank’s management and analysis of data is critical to our effectiveness as regulators and to the City’s competitiveness. The Bank now receives 65 billion data points each year of firm-related information. To put that into context, reviewing it all would be the equivalent of each supervisor reading the complete works of Shakespeare twice a week, every week of the year. For firms, while the Cloud and AI have reduced the costs of storage and analysis, producing regulatory submissions is still labour intensive and costs the industry an estimated £ billion per year.25 This is the new frontier of regulatory efficiency and effectiveness. The PRA is exploring how new technologies could streamline firms’ compliance and regulatory processes while improving our ability to analyse relevant data.
Accordingly, if banks incorporate climate-related risks into costs and capital, they indirectly become “facilitators” of change, by reducing the cost of financing of activities that contribute most to the sustainable transformation of the economy, while at the same time discouraging more contaminating activities. The role of investors I also wish to refer to the role that investors should likewise play as facilitators of this transition. Interestingly, the emergence of “green bonds”, which was not in response to any official initiative, came well before the Paris Agreement, which could be considered to mark the beginning of the involvement of the banking sector. In fact the history of green bonds began in 2007 with the first issue by the European Investment Bank. As you know, green bonds must be used to fund projects that are directly linked to sustainability, preservation of the natural environment and transition towards a lowcarbon economy. To achieve the green bond certificate, issues must satisfy certain principles, such as the Green Bond Principles (GBP) issued by the ICMA in 2014, to be verified by external appraisal. In general, green bonds are placed among investors with higher demand and lower costs than equivalent standard issues. The market has been particularly active in recent years, especially since the GBP were published in 2014. At June 2019, green bonds outstanding amounted to an estimated USD630 billion. I believe it is highly significant that this market has developed aside of official initiatives, based entirely on private standards such as the GBP.

If we eliminate the bias in these findings resulting from the inclusion of construction and real estate activity, which should not be included under either polluting (“brown”) or “green” activities, polluting activities continue to have a lower default rate, although the gap between the two is much narrower. In any event, I believe the findings are unsurprising. Many companies labelled as “brown” have high profit margins and their ability to generate profit is partly a result of their being regulated activities and having, in many cases, a dominant market position. Moreover, to date these companies have not had to assume the cost of the pollution they cause, so in an energy transition scenario their advantage in terms of profit margin could be affected. The banking sector as a facilitator of change in the production model I should like to refer briefly to the second point I mentioned above. As indicated in the 2015 Paris Agreement, the banking sector has an essential part to play to facilitate change in the production model. Indeed this second goal is related to the first, as correctly measuring environmental risk should assist in the transition towards a more sustainable model and would, therefore, be a logical consequence of the first goal. As I have said previously, one essential feature of any viable business model is that banks identify and quantify all the costs and risks involved and pass them through to prices and capital.
In today’s speech, I want to highlight some of the key features of this highly integrated economic system and discuss some of the challenges it may pose in the future. In particular, I will discuss how the changing shape of the world economy affects the task of national monetary authorities, such as the MPC. In other words, how can economic policy-makers maintain stability when we are constantly in danger of being buffeted by powerful global economic forces? The rise of Asia and the changing shape of the world economy A key feature of the new global economy we now inhabit is the increasing economic strength of the Asia-Pacific region. Chart 2 shows that the top ten economies in this region – led by China, Japan and India – have already overtaken both the European Union and the United States in their share of world economic activity. This compares with the situation thirty years ago when these economies were collectively just half the size of the European economy, and about two-thirds the size of the United States. 2  BIS central bankers’ speeches  Chart 2 – The rise of Asia Percentage share of world GDP, at current market prices and exchange rates US  EU-27  40%  Asia-pacific G10 *  35% 30% 25% 20% 15% 10% 5% 0% 1980  1990  2000  2010  *: Includes Australia, China, India, Indonesia, Japan, Malaysia, Singapore, South Korea, Taiwan Province of China and Thailand.

Source: ONS, IMF World Economic Outlook  BIS central bankers’ speeches  1  In the UK, the rate of growth which we have seen over the early stages of recovery has not been spectacular, but that is not unusual in the early period of a return to growth after a major economic downturn. It is also not surprising that there have been variations in growth across different sectors of the economy and that confidence still remains fragile in the business community and among consumers. It is normally only 2–3 years into the recovery phase of the economic cycle that perceptions of improving economic conditions begin to catch up with the reality of a return to growth. This strong correspondence between economic growth in the UK and elsewhere in the EU shown in Chart 1 should not be a great surprise. It reflects the close economic links which have grown up over the centuries and which have been reinforced by the development of the European Union and the Single European Market. But this close link between economic growth in the UK and elsewhere in Europe is an example of a much more general phenomenon. We now live in a highly integrated global economy. And economies which are very open to trade and investment – like the United Kingdom, and indeed Jersey – are strongly influenced by international economic trends. During my time on the MPC, the growth and inflation performance of the UK, and hence our monetary policy judgements, have been heavily driven by global developments.
The large numbers and high financial and social costs of the financial crises in many countries in the 1980s and 1990s convinced decision-makers that concerted measures had to be taken on an international level. Through the increasingly global character of the financial system, problems in one country tended to spill over to other countries exacerbating the problems and the costs. The measures taken included setting global norms and standards and increasing the surveillance of financial systems. Agreements were reached on various means of identifying and reducing vulnerabilities in financial systems. International standard-setting bodies such as the Basel Committee, the IOSCO , the CPSS and the IAIS were requested to establish frameworks of sound regulatory practices in their respective fields. These so called core principles are now broadly accepted as minimum standards, to be applied by all countries. But good standards are not enough. We must also ensure that they are applied in an environment of adequate preconditions, such as the rule of law and property rights, fair and competent accounting and auditing, and arrangements for predictable and fair resolution of the problem of failing institutions. There must also exist an adequate institutional framework, e.g. for an efficient division of roles and responsibilities between different public and private institutions. A crucial part of the financial institutional framework, whose importance is sometimes neglected, is the payment system and its infrastructure. A country’s financial system is also susceptible to the vagaries of economic and political developments.

For instance, while a fixed-exchange rate regime in certain circumstances tends to support financial stability in a country (or group of countries – to refer to the European context) there might be situations in which such a system could have the opposite effect. To underpin financial stability, economic developments should be sustainable, transparent and predictable. This also applies to political decisions, which affect the financial system directly or indirectly. Completing the circle and reverting to my first observations on the increased global linkages, most countries’ financial systems are influenced by developments outside the domestic economy. Linkages come through different channels: macro economic events having international repercussions, for instance through international markets, or “micro events” such as via banks’ cross-border affiliates. BIS Review 52/2006  1  The FSAP – an attempt to tie together the loose ends Given the various pieces needed to shape and maintain a stable and efficient financial system we need a bird’s-eye view to see that they are all in place and that they do not counteract one another. The approach should also identify weak spots from which the financial system potentially might be destabilised. This need for a bird’s-eye view resulted in the creation of the FSAP. The FSAP is intended to cover the pieces I just mentioned – standards, preconditions and institutional setting and the interplay of these factors in the context of the domestic economy.