samchain/econo-pairs-v1 huggingface dataset:
This improvement evidences their willingness and ability to respond to market demands and to future regulatory requirements, although additional adaptive efforts to raise higher-quality capital may be required of some banks. 4  BIS Review 51/2010  With regard to liquidity, Spanish banks have always been attentive to this risk, as evidenced by their bond issues and long-term securitisations, despite the fact that the cost of short-term funding was more attractive. This conservative funding term structure on the liabilities side is one of the factors explaining the strength of Spanish banks during the crisis. However, the financial markets are still far from being back to normal, so it is essential that institutions continue paying particular attention to liquidity and funding. In the medium term, and despite that strong starting point, the new regulations will require additional efforts, particularly with respect to the short-term liquidity buffers which banks must have in place. Hence, in addition to the uncertainty resulting from the depth and duration of the financial crisis, banks have to deal with the additional pressure put on them by the new regulations, still to be defined in many cases. Banks have to make a special effort to explain to the market how they will meet the challenges posed by the crisis and to convey their plans for successfully coping with the regulatory changes. This transparency drive will have to be stepped up in the immediate future.

With growth in money wages running at close to 3%, and with productivity growth running closer to zero, domestic cost growth in the UK is already running at, if not slightly above, rates consistent with the inflation target, even before any further (limited and gradual) build in wage pressures. A limited and gradual build in domestic cost pressures is one important factor underpinning the limited and gradual pace of further interest rates rises expected by financial markets and communicated by the MPC. At present, financial markets expect rate rises of around 25 basis points per year over the next three years. That is not dissimilar to the projected build in wage growth over the period. There are two-sided risks around this forecast, reflecting both cyclical and structural factors. On the cyclical side, there remains a significant degree of uncertainty around the amount of slack in the economy. It is possible the NAIRU could be below 4 ¼% or that under-employment is greater than assumed. Each ½ percentage point of extra slack lowers the projected level of wages at the policy horizon by around 1%. While wage growth was undershooting, it made sense for the Bank to lower its estimates of the NAIRU. But with wage growth now tracking, and with wage forecasts no longer under-shooting, it is no longer clear risks to the NAIRU, and hence wages, are skewed to the downside. With wage growth picking up for the first time in a lost decade, the risks to domestic costs are now broadly-balanced, though still significant.
As for the “money” created by QE – reserve deposits held by commercial banks at the central bank – there’s a very important difference between this and the “money” in simple textbook accounts of inflation: those reserves pay interest. If QE had been financed by the zero-interest money of the textbook, and if inflation subsequently went up, the real value of the public sector’s liabilities would decline, even if nominal interest rates and bond yields had risen in anticipation. Some portion of the public sector’s interest-bearing liabilities would’ve been replaced with a “money” that bears none. When reserves pay interest  Chart 1: Rapid inflations are often fiscal events  that’s no longer the case. This is why it’s not strictly correct to say that QE “monetises” the government’s debt. The policy is more accurately seen as a maturity swap, in which one (longerterm) interest-bearing liability of the state is replaced with another, shorter-term version of the same. As we’ll see, the shortening of their average  From “This Time Is Different: Eight Centuries of Financial Folly” by Carmen M. Reinhart and  maturity reduces the scope  Kenneth S. Rogoff. Copyright © 2009 by Princeton University Press. Reprinted by permission  for inflation to reduce the real  of the publisher. value of the public sector’s liabilities. Whatever the fiscal consequences of higher inflation today, and whatever they were in the past, it’s clear there are many examples in economic history of unsustainable fiscal positions leading to a wholesale loss of monetary control.

Particularly notable was the higher inflation in components relating to expenditure on transport, household equipment and maintenance and, especially in Spain, recreation, hospitality and tourism.4 The economic projections for the euro area have undergone significant revisions, with growth revised down and inflation revised up The recent escalation in the energy dispute with Russia has cast a shadow over the economic picture. This leads us to believe that the inflationary episode will be more intense and longer lasting, and that the economic growth outlook for the euro area will continue to soften. These circumstances have led to a significant revision of the economic outlook for the euro area in the ECB’s latest projections exercise. These forecasts include the surprises in terms of inflation and activity, and also the potential impact of the escalation of the energy dispute with Russia, as well as a revision of other technical assumptions, such as a greater depreciation of the euro. In this respect, one of the main changes in the ECB’s September projections exercise compared with that published in June are the assumptions relating to gas prices. First, the outlook for gas prices is revised up in accordance with gas futures prices. Second, and for the first time, a degree of gas rationing, albeit moderate, is assumed. This would be more significant in the countries that are most heavily dependent on Russian natural gas imports, which could even see some production cuts in the winter.
This means: sustained momentum relative to trend; domestic cost growth resuming a path consistent with headline inflation at 2%; and core inflation measures moving notably towards the target. It is clear to me that, since last summer, progress has been insufficient along these dimensions to warrant a tightening of monetary policy. The world is weaker and UK growth has slowed. Due to the oil price collapse, inflation has fallen further and will likely remain very low for longer. This may mean modestly weaker cost growth through this year, with the likely path for inflation, both headline and core, softer as a result. In short, recent developments suggest that the firming in inflationary pressure we had expected will take longer to materialise. 23  In economic parlance, they are elements of a reaction function. One can think of a reaction function as akin to guide or policy rule relating the policy instrument to a set of macroeconomic variables. These are usually evaluated with respect to an “objective function” containing the policymaker’s target variables. For example, a flexible inflation targeting regime would be consistent with an objective function containing the deviation of inflation from its target and the deviation of a measure or measures of real activity from their equilibrium levels, weighted according to the policymaker’s preferences for stabilising one at the cost of another.

Further downside risks to the global outlook remain, reflecting the ongoing challenges in China, fragilities in other major emerging market economies, and the potential for financial contagion. Chinese trade has been strikingly weak recently, possibly reflecting rebalancing there, as softer investment reduces demand for imported capital goods. This process has hit advanced economy exports to China, particularly those from the UK which dropped by one third in the year to November. Global difficulties are likely to continue to suppress world demand relative to our expectations in August. In addition, possible spillovers to domestic demand via wealth and cost of capital channels bear close monitoring. BIS central bankers’ speeches  9  As one consideration in setting monetary policy, the MPC must evaluate how much of the moderation in output growth reflects slower supply growth. Slack ultimately matters for inflationary pressures, though sizing it requires careful judgement, particularly after a supply shock.12 A simple read can be taken from the unemployment rate, which has continued its solid downward trend since the autumn of 2013, falling more rapidly than we had expected in August and its historical relationship with GDP growth would have suggested (Chart 8). Short-term unemployment is now below its pre-crisis average rate, though longer-term unemployment has further to go (Chart 9).13 In addition, the vacancy to unemployment ratio – a simple measure of labour market tightness – is at its highest observed level since August 2005.
High and volatile inflation causes lenders like banks and other financial institutions to demand a higher fixed interest rate on loans to compensate for the risk that inflation will move around, thus raising  2  the cost of finance for investment. At the same time, financial institutions need to offer higher nominal and real interest rates to encourage savers to deposit their money to mitigate the risk of high and volatile inflation eroding the real value of their savings. High and volatile inflation increases the margin between lending rates and deposits, and this high cost of financial intermediation penalises both savers and borrowers. High and volatile inflation encourages workers to bargain for higher wages. High and volatile inflation also prompts producers and sellers in the economy to add higher markups in pricing of goods and services. The combined result of this self-fulfilling cycle will be lower economic growth and higher current account deficits, depleting reserves and volatile exchange rates, and the country will end up with a commercial capitalist class of buyers and sellers of imported goods, or a class of middlemen! Then the question is, what is the appropriate level of low and stable inflation, which will result in more desirable outcomes? Most advanced economies set their inflation target in the low single digits around 2 per cent. For example, the United States and the United Kingdom desire to maintain inflation at around 2 per cent, while in the Eurozone it is below but close to 2 per cent.

At this point we see an improvement in the global growth outlook and an increase in international commodity prices on the back of positive developments in the vaccination process, in addition to expansionary policies. However, despite the ongoing vaccination efforts, the ongoing uncertainties regarding the vaccination process and the course of the pandemic keep the risks to the global economy alive. Distinguished Guests, At my first General Assembly meeting, let me briefly share with you some important issues regarding the monetary policy. Under the duties and powers set forth by law and in line with its main objective of achieving a permanent fall in inflation, the Central Bank of the Republic of Turkey will continue to use the monetary policy tools effectively. We are strictly committed to the medium-term inflation target of 5%, defined as price stability and set jointly with the Government. We are going to use the monetary policy tools appropriately to achieve this target. I would like to underline that we are determined to bring inflation down to 5% in 2023 and keep it there permanently, consistent with the medium-term framework we set out in the January Inflation Report. I am aware that the low inflation environment that we target is a prerequisite for sustainable economic growth as well as employment growth. We will remain determined and resolute to reach this target with our corporate capacity, strong analytical capability and sense of responsibility. The Central Bank will continue to use all available instruments independently and effectively in pursuit of its primary objective.
While a general set of rules for European banks was progressively established in successive capital requirements directives, substantial flexibility remained in how those rules was interpreted at the national level. The Lamfalussy process was launched in an effort to iron out these differences, but the process rested entirely on cooperation between national supervisors, with no possibilities for binding mediation or enforcement at the European level – and it was fiercely resisted by countries with financial centres. The divergence this permitted in the application of regulatory and supervisory standards allowed serious financial imbalances to build-up in some jurisdictions, which then of course created serious blowback for the euro area. But similar to fiscal policies, an inconsistent framework also undermined the value of prudential policy itself. As, for example, definitions of forbearance and non-performing exposures differed widely across countries, investors simply did not trust in banks’ stated asset values and provisions. In other words, the confidence effects that prudential policy is supposed to provide disappeared when they were most needed. For structural policies there were no binding European rules at all, as they were seen as having a primarily national significance. Inconsistency between policy areas These governance arrangements were not only internally inconsistent, however; they were inconsistent with each other.

Good governance underpins any successful business model and it is of utmost importance that DFIs follow best practices that promote integrity, transparency and accountability. To achieve this, DFIs should strive to strengthen behaviour and risk culture within the organisation. Strong governance entails crafting well-defined mandates that will insulate the organisation from undue external interference. Focus should also be given to foster a culture that welcomes active debates and critical thinking at all levels of the organisation to guard against groupthink. Last but not least, to sustain effective and high performance, continuous upskilling of the board, senior management and staff is crucial to be able to seize opportunities and overcome challenges as they arise. While the DFIs of today have grown in size and outreach, there remain opportunities for them to maximise their full potential. Innovation is lacking in developing diversified financial products that are tailored to meet the specific needs of targeted sectors. This is compounded by their limited capacity and capability to manage the potential risks arising from financing high risk sectors due to information asymmetries. DFIs should aim to become the centre of reference for new growth sectors and emerging markets and develop expertise in risk assessment and management of high risk projects in those sectors. Underlying the strategies for a good business model is the need for DFIs to strengthen research and analytical capabilities to address their lending capacity by developing innovative solutions.
Billi, R. and A. Vredin (2014), “Monetary policy and financial stability – a simple story,” Sveriges Riksbank Economic Review, 2014:2. Bernanke, B. (2013), “The economic outlook”, Testimony before the Joint Economic Committee, U.S. Congress, Washington, D.C. Board of Governors of the Federal Reserve System (2023), “Review of the Federal Reserve‘s Supervision and Regulation of Silicon Valley Bank”, 28 April 2023. Borio, C. and P. Lowe (2002), “Financial and monetary stability: Exploring the nexus”, BIS Working Paper No. 114. 25 [30]  Brandao-Marques, L., G. Gelos, M. Narita and E. Nier (2020), “Leaning against the wind: A cost-benefit analysis for an integrated policy framework”, IMF Working Paper, WP/20/123. Brunnermeier, M. (2023), “Rethinking monetary policy in a changing world”, Finance & Development, March 2023. Capie, F., S. Fischer, C. Goodhart, and N. Schnadt (eds) (1994), “The future of central banking: the tercentenary symposium of the Bank of England”, Cambridge University Press. Cochrane, J. (2023), “The fiscal theory of the price level”, Princeton University Press. Diamond, D. and P. Dybvig (1983), “Bank runs, deposit insurance, and liquidity”, Journal of Political Economy, Vol. 91. Eichengreen, B., et al. (2011), Rethinking Central Banking, Report, Committee on International Economic Policy and Reform, Brookings institution, Washington, DC. European Commission (2023), “Reform of bank crisis management and deposit insurance (CMDI) framework”, 18 April 2023. FDIC (2023), “FDIC’S supervision of Signature Bank”, 28 April 2023. Federal Reserve Bank of St. Louis (2022), “The Shifting Tides of Global Trade”, Annual Report 2022.

Sam Woods: Mutual interests Speech by Mr Sam Woods, Deputy Governor for Prudential Regulation of the Bank of England and Chief Executive of the Prudential Regulation Authority (PRA), at the Building Societies Annual Conference, 05 May 2021. * * *  Introduction It’s very good to be back at the Building Society Association’s Annual Conference. Last time I spoke at the conference we were all in the QEII conference centre and the BSA was celebrating its 150th birthday by listening to a speech from me, which illustrates the powers of endurance the industry possesses. Mike Regnier had also just been announced as the new Chair of the BSA, and celebrated this by peppering me with awkward questions, just like he used to do at the business school in France where I first met him in 1998. As today is his last day I’m worried he is going to ask me even more difficult questions, in which case I think he will find that the Woods household wifi is having a bad day. In the meantime, I will offer a few comments on some of our shared favourite prudential topics. Building a bridge As you all know, over the past year the UK economy has experienced one of the sharpest economic declines in modern history, with parts of the economy fully shut down or restricted for large parts of the year. Our strategy through this period has been simple: to build a bridge to help us all get to the other side of this crisis safely.
But if those rates of expansion continued, the share of employees on zero-hours contracts would reach around 7% within a decade. Trends in temporary and part-time work have been less striking, but have gone in the same direction. Between 1997 and 2008, temporary work declined as a share of employment. But since 2008 it has increased. There are currently around 200,000 more temporary workers than before the financial crisis. Prior to the crisis, around 25% of those in employment worked part-time. Since the crisis, that share has increased to around 26%, or around 8 ½ million workers. If we took together self-employment, part-time and temporary working and zero-hours contracts, their share 9  of the workforce has probably risen to around 43%, or around 13 ½ million workers. The corresponding figures back in 2000 would have been around 39% of the workforce, or around 10 ½ million workers. This is not a majority, but it is a significant and rising minority of workers. 8 9  For example, Blanchflower and Machin (2017). There needs to be caution when simply summing these categories as some of them probably overlap, generating double-counting. 6  All speeches are available online at www.bankofengland.co.uk/speeches  6  These trends in self-employment, temporary and part-time employment are based on survey data. Those broad trends are corroborated if we look at data on job vacancies rather than employment.

That membership rate has steadily declined over time, extending a broad trend apparent since at least the mid-1970s. In 2016, membership of trade unions stood at 23% (Chart 5). Today, around 6 million employees are members of trade unions, less than half the peak of around 13 million in the late-1970s. That fall in union membership rates has been broadly based. It has applied to both males and females, although the fall in membership has been greater among males with rates falling from 35% in 1995 to 21% today. It has occurred in both the public and private sectors, although public sector employees remain around four times more likely to be union members. And it has been true across all age groups, although rates of union membership tend to be lowest among younger cohorts, with rates among the 16-24 age cohort 8% compared with 30% for those aged 50 and over. 5  All speeches are available online at www.bankofengland.co.uk/speeches  5  The fact that unionisation rates have been falling within each age cohort over time, and are lowest among the young, suggests the downward trend in rates of unionisation may still have some distance to travel. For example, if unionisation rates were to continue to decline at the same average rate as over the past decade, then they are likely to fall to around 10% of employees, or 3 million people, within a generation. A more recent labour market trend is the increased importance of self-employment.
Sure enough, there are indeed a few cases of inadequate disclosure or mis-selling, which the financial institution concerned should remedy. But there are others where the customer has failed to exercise basic due diligence. These are the most painful letters to read:   of investors who were attracted by headline returns and purchased products without reading any of the product documentation;    of investors who willingly signed blank sheets of product assessment forms without realising what they were buying; and    of investors who insisted on buying risky products even though they were advised that the products were not suitable for them. It is very difficult to help in cases like these. MAS will continue to explore ways to equip investors with core financial capabilities. We are currently studying the feasibility of establishing a financial literacy institute to complement existing MoneySENSE initiatives through talks and workshops to reach a larger segment of the population. We are also reaching out more to students, through the schools. The objective is not so much to instill technical expertise in investment products, but to inculcate good money habits from a young age – being prudent, being alert to risks, being clear about the objectives of investing. BIS central bankers’ speeches  5  Dispute resolution Even with well-informed consumers, occasional disputes with those who sell investment products will be inevitable. Hence the final area of investor protection is to provide an affordable and accessible dispute resolution mechanism for aggrieved investors.

While several emerging economies have successfully relied on macro prudential measures to contain the formation of such asset bubbles, the foreign exchange market is not like any other market. With a daily transaction amounting to USD4 trillion, it is the most liquid and dynamic market in the world. The role of sentiment and expectations has resulted in a market that is frequently prone to excessive movements and overshooting. As highly open economies, disruptions and disequilibrium in the foreign exchange market have far reaching consequences in the real economy. Intervention operations to maintain orderly market conditions reinforced by sterilisation operations have aimed at ensuring liquidity in the market and at ensuring that the market conditions reflect the underlying economic fundamentals. Similar to the presence in other financial markets, this is to ensure the sustainability of the efficient functioning of the market. Central banks and crisis containment and management The world going forward is likely to continue to be affected by financial crisis. History has shown that there have been more than a hundred distinct banking crises in this recent two decades. The prospect of surviving such a crisis is not only about building resilience but also having the capacity to manage it. Central banks have a critical role in crisis containment and management, in particular, to provide liquidity, to restore the efficient functioning of financial markets, to lead resolution programmes and to restore confidence to the financial system.