samchain/econo-pairs-v1 huggingface dataset:
Government policy on public health, in the face of the most extreme pandemic for at least a century, led to deliberate lockdowns. Much of economic activity simply ceased. The important question we faced as monetary policymakers was what would happen when the restrictions were lifted as Covid abated. Would a synchronous and equivalent fall in demand and supply simply be followed by a synchronous and equivalent rise? At the time, I remember being asked quite often if the pandemic would leave scars on the economy: would there be any lasting damage to the economy? Bank of England  Page 14  As put, the question was about whether firms would be able to survive the prolonged economic impact of the pandemic, let alone continue to invest in the future – or whether millions would be driven into unemployment as the Government furlough scheme, which remunerated those whose jobs were in effect suspended, was set to end at the end of September 2021. This was by no means clear at the time. The furlough scheme was unprecedented and had been operating for 1½ years, and even firms were unsure of what the effects on recruitment would be, as they reported to the Bank’s Agents at the time. A key consideration for policy, therefore, was to ensure that supply would come back on stream, and for monetary policy in particular to ensure that there was sufficient demand in the economy to pick it up. What actually happened was quite different from what we had feared.

It is primarily for this reason that we expect to see a sharp fall in inflation during the course of this year, starting probably in a couple of months or so from now. Bank of England  Page 15  Growth in the economy has suffered too, as a consequence of the sheer scale of the hit to the terms of trade. There has been a very large impact on national real income, from which I am afraid there is no hiding. But there is better news on that front, the economy has been more resilient of late, helped by the sharp fall in energy prices. The same is true for the world economy more broadly. What does this mean for monetary policy looking forwards? The remit is clear. The adjustment and response to the shocks we have experienced must return CPI inflation to the 2% target sustainably. We must avoid these very large shocks leading to persistent inflation, and that is why we have raised the official interest rate eleven times, to 4.25%. Recently, the evidence has pointed to more resilient activity in the economy, and likewise employment; signs that nominal wage growth has been rather weaker than expected; and two months in which there was first some downside news on inflation relative to our expectation and then a bit more upside news. This reminds us that the path of inflation will not be entirely smooth and cost and price pressures remain elevated.
In this regard, the euro area is seriously lagging behind: equity capital amounted to only 68% of GDP at end-2016, compared with 128% in the United States. And yet, resources are abundant: the excess of savings relative to investment is around EUR 350 billion per year, which is more than 3% of GDP. It is therefore crucial for the euro area’s economy to better steer these savings towards productive investment across borders, notably by shoring up equity which is the key to an innovation economy. Start ups are well aware of this, but our European scale-ups, midcaps and SMEs also need greater access to equity leverage. The insurance sector has a key role to play since it is the largest institutional investor in the euro area, with total assets of close to EUR 7,800 billion in the second quarter of 2017. In practice, what is the way forward? A large part of the solution lies at the European level. The efforts so far are going in the right direction, but work should now be accelerated with what I call a “Financing Union for Investment and Innovation”. This Financing Union is the microeconomic accelerator that we need to make concrete progress towards a genuine Economic Union in the euro area.

Insurance supervision at the PRA Speech given by Sam Woods, Deputy Governor, Prudential Regulation and Chief Executive Officer, Prudential Regulation Authority  London Business School 20 March 2017  I am grateful to Dan Curtis for his help in preparing this speech. 1  All speeches are available online at www.bankofengland.co.uk/speeches  Good morning. The UK has a world-leading insurance sector which provides a wide range of vital services to the real economy and society. It promotes growth and employment, has proved its mettle in turbulent times and the country can be proud of it. A necessary precondition to such success is world-class insurance supervision. That is what we aim to deliver at the PRA. Like insurers, our job is to be forward-looking and prudent about risk. Where we differ from private firms is that we do this motivated solely by the public interest. The recent debate about insurance regulation – while timely and important – must seem to some like a cacophony of acronyms, statistics, models and assumptions. But strip this back and you’ll see there is an essential, irreducible human core to it all. Some of the oldest and most vulnerable in our society have invested their life savings into long-term annuity contracts. By pooling and transferring many kinds of risks – from cyber to marine – insurers provide cover which is essential for economic activity. And by protecting for critical illness or personal accident, insurers commit to being there when you need them most.
As always, what I will say here today represents my own views and not necessarily those of the Federal Open Market Committee (FOMC, Committee) or the Federal Reserve System. 1  Krishna Guha, Paolo Pesenti, Simon Potter, Jamie McAndrews, Jonathan McCarthy, Lorie Logan, John Clark, Eben Lazarus and others on my staff helped with the preparation of these remarks. BIS central bankers’ speeches  1  Review of the experience in Japan and the United States Let me start by briefly reviewing the experience of Japan and the United States. As you all know, Japan’s rapid economic ascent and investment boom came to an abrupt halt in the early 1990s with the bursting of a gigantic bubble in equities and real estate. Asset price deflation resulted in a huge decline in wealth. This led to a sharp fall in demand, a balance sheet squeeze for both businesses and households, and a large increase in problem loans for Japanese financial intermediaries. By some measures – such as the loss of wealth relative to the size of the economy – this was a bigger shock than the U.S. experienced in 2008. Growth slowed sharply and inflation fell.

We intend to collaborate closely, sharing perspectives on policy issues and technical designs. And we look forward to leveraging advancements arising from Benoît’s new role leading the BIS Innovation Hub. 7  All speeches are available online at www.bankofengland.co.uk/news/speeches  7  Innovation is best achieved by empowering competition. For the Bank, this means levelling the playing field between old and new by allowing new entrants access to the same resources as incumbents, while holding similar risks to similar standards. It also means updating our public infrastructure to enable state-of-the-art private sector solutions to emerge which will lower costs, increase speed and improve customer experience of domestic and international payments. Any new payments system must be efficient, resilient and secure. A safe payment system is only useful if people use it, which means it must deliver fast, user-friendly and inclusive services. This in turn requires that payment systems are open to innovation and competition, and are built around the comparative advantages of central banks and the private sector. Addressing the Climate Crisis My final challenge facing central banks is the most fundamental. Indeed, it is existential. Four years since the Paris Agreement, a more sustainable financial system is being built. It’s funding private sector innovation, it has the potential to amplify the effectiveness of government climate policies, and it could accelerate the transition to a net zero economy. But we must go much further if the world is to reach net zero carbon emissions. Disclosure must become comprehensive. Risk management must be transformed.
Other market participants are likewise supportive of our efforts to develop an Accord that remains robust, relevant, and responsive to the demands and innovations of modern banking. Work on the proposal is continuing, and the Committee is currently addressing several important issues, including how the revised Accord may affect loans made to small and medium-sized enterprises. Changes since the Second Consultative Paper In countries around the world, and especially in Germany, much has been written about the effects the new Accord may have on the cost of credit for small businesses. I believe that, over the past year, we’ve made substantial progress in finding solutions that should alleviate those concerns for small business owners, regardless of whether they run a small high-tech consulting firm or a “BMW” (“Bäcker, Metzger und Winzer”)-firm. I’d like to focus on changes to the internal ratings-based (“IRB”) proposals that are relevant to small and medium-sized businesses. Changes concerning the treatment of loans to small and medium-sized enterprises include (a) modifications to the capital requirements so that they better reflect the underlying risk; (b) greater recognition of collateral provided by small and medium-sized enterprises; and (c) an adjustment to the capital charges based on a borrowing firm’s size. I will also discuss proposals related to banks’ equity – or venture capital – investments in other firms.

William J McDonough: Bank supervision and credit standards under Basel II – perspectives for SMEs Remarks by Mr William J McDonough, President and Chief Executive Officer of the Federal Reserve Bank of New York and Chairman of the Basel Committee on Banking Supervision, at the Gürzenich Köln, Cologne, Germany, 25 April 2002. *  *  *  Introduction Graf von Hohenthal, Herr Dr. Breuer, members of the panel, “meine Damen und Herren…” It is an honor to join your discussion on the efforts of the Basel Committee on Banking Supervision to ensure that the international rules on capital adequacy serve the needs of twenty-first century banking effectively. What makes this a special privilege for me is the opportunity to meet so many entrepreneurs, owners of small and medium-sized businesses, and others who make up the real engines of the economy. Your interest in the work of the Basel Committee reminds us all that we must look beyond the banking sector to ensure that the foundation we lay provides for the stability and growth of the entire economy. I have long emphasized that the role of supervisors is not to hinder growth or profit, but rather to promote the responsible pursuit of opportunity and innovation. As we improve the rules for bank capital, we must certainly keep this mandate in mind and consider the effects that changes to those rules may have on the economy.
To seize the opportunities and address the risks stemming from highly evolving financial technologies, initiatives often start at the national level. The case of crowdfunding is a good example. In 2014 France was a pioneer in issuing a new bespoke regime for crowdfunding and marketplace lending platforms. This new regime opened a playing field for new players while limiting the regulatory burden and strengthening the protection of consumers and investors. As a result, although crowdfunding will not replace traditional lending in the near future, the French market is today the biggest market in continental Europe for alternative financing for the fourth consecutive year. 1 The latest figures for 2018, released by KPMG and Financement Participatif France (FPF),2 show that more than 33,000 projects, for a total amount of EUR 402 million, were financed by crowdfunding platforms. Compared to 2016, the total amount financed has increased by 20%. In the last three years, it has been multiplied by 2.4. Further to national initiatives, European convergence is always the ultimate goal. National initiatives are beneficial because they can be swiftly implemented and tested. By contrast, the European decision-making process is not known for its rapidity. But the size of the European market is critical for allowing our Fintech start ups to reach an appropriate scale for their activities. That is why the Banque de France advocates a European regulation of crowdfunding platforms based on the French model.

William C Dudley: “Remarks at the New York Fed’s Economic Press Briefing on the Regional Economy” Opening remarks by Mr William C Dudley, President and Chief Executive Officer of the Federal Reserve Bank of New York, at the Economic Press Briefing on the Regional Economy, Federal Reserve Bank of New York, New York City, 18 August 2016. *  *  *  Jaison Abel, Jason Bram, Hunter Clark, Giacomo De Giorgi, Richard Deitz, Jack Gutt, Andrew Haughwout and Joseph Tracy assisted in preparing these remarks. Good morning and welcome to the New York Fed’s Economic Press Briefing. I am pleased to have this opportunity to speak with the journalists covering our region. You are an important communication channel to the people in our District. This morning I want to focus on economic conditions in our region, giving particular attention to job growth. I also want to discuss our ongoing work on Puerto Rico. As always, what I have to say reflects my own views and not necessarily those of the Federal Open Market Committee or the Federal Reserve System. The New York Fed is deeply committed to serving our region. This commitment manifests itself in several ways. We produce business surveys and local economic indexes to help our constituents track regional economic conditions. My staff writes papers and blog posts on economic issues important to our region. We meet with a number of advisory boards comprised of community and business leaders.
Needless to say, I am talking about client data, which is the basic commodity of this fourth industrial revolution. Importantly, client data is currently controlled by banks, though some recent developments, such as the PSD2 in the EU, might alter this situation. Accordingly, institutions should strive to make the best out of their current dominant position. Banks should be capable of extracting, exploiting and analysing their customers’ data. Management must fully consider this information to take decisions. Otherwise, reevaluation and transformation of the business model will not be possible. Therefore, a clear conclusion would be that the business criticality of IT and cyber resilience has also soared, compared to the situation 20 years ago. This makes the investments and controls in this area a key element of the future. Let me refer briefly to business conduct. The crisis has reminded us, rather painfully, that conduct is another key factor to consider in any sustainable business model. I would like to point out that conduct change is the only means of responding to the challenge the sector faces to restore its image and reputation. Society has changed in terms of its demands of the financial sector, including also higher standards for AML-CFT. The rules governing customer-bank relations have likewise changed. Banks should, therefore, move to respond to the new social and regulatory reality. It is worth recalling that a very positive consequence of this policy is that it increases legal certainty, significantly reducing potential litigation costs. In many cases, implementing these policies involves a top-down cultural change.

The banks we allow to access our markets need to meet the high standards we expect and be capable of being effectively supervised. What does responsible openness mean? Sam Woods set out the three pillars of responsible openness in 2019 (and, also built upon this in his Mansion House speech3 last November). 1. First that we should engage strongly in international standard-setting processes and make sure that we are at the forefront of implementing those rules in a thorough way; 2. Second that we adopt practices and structures which promote strong collaboration with colleagues in other jurisdictions; and 3. Third, that we are open to hosting cross-border business in the UK – but only if it is resilient and appropriately controlled and governed, and if we have sufficient visibility of and influence over the necessary supervisory outcomes. My policy colleagues take the lead on our work in international standard setting. As we have reinforced many times now4, we have absolutely no intention of weakening prudential regulation in the UK. The changes that we introduced post 2008, have stood the banking sector in very good stead, for example in enabling it to withstand the stresses posed by the Covid pandemic in 2020. This statement sets out our expectations on the second and third of these pillars.
To achieve this objective, we have made it mandatory for the conventional banks to establish a dedicated Islamic banking division within the bank, create and observe a minimum Islamic banking fund, opening separate clearing account with the Central Bank to facilitate effective separation in the payments system as well as to have a separate accounting disclosure. Having these policies and infrastructure in place, we have been able to operate the dual banking system in a structured and systematic manner. Ladies and Gentlemen, Although the regulations are in place, close oversight and updated statistical reporting, supported by close monitoring through the early warning system, are necessary as measures to avoid banking failures. The global experience has shown that not all banking failures are due to economic and financial crises. The global experiences has shown that banking failures can be caused by the lack of good corporate governance in the banking institutions. Lack of transparency, lack of oversight, weak internal controls, lack of checks and balances, incompetent directors and abuse of power are among the elements of poor corporate governance. Hence, even the best regulations and supervision and the best financial safety nets cannot prevent such banking failures. The regulation of banking institutions therefore needs to be complemented and reinforced with good corporate governance.

But since 1995, the gap has started to widen again as ICT investment has boosted productivity growth in the United States. The empirical evidence suggests that one of the most successful ways to speed up convergence in productivity is to promote international trade and investment, and openness more generally. Within manufacturing, the rate at which the productivity gap between Britain and the US closed during the 1980s and early 1990s was greater in the more open than the less open sectors. Against that background, let me suggest three areas for questions: First, why is the gap in the level of productivity between the US and the UK so persistent? And what are the obstacles that prevent the gap from narrowing - are they in the fields of trade, technology transfer, or flows of investment? What are the respective roles of business and government in removing them? Second, can the UK benefit as much as the US from the IT revolution? Is it a question of the speed with which business adapts? Or is it the need to fund our research-based universities on the scale of the best elsewhere in order to exploit our comparative advantage in the English language and regain Britain’s place at the frontiers of knowledge? Or is it a matter of raising standards of education in schools to enable the workforce as a whole to use the new technology?
Simon Potter: Gradual and predictable - reducing the size of the Federal Reserve's balance sheet Remarks by Mr Simon M Potter, Executive Vice President of the Markets Group of the Federal Reserve Bank of New York, at the SUERF - The European Money and Finance Forum Conference "Globalisation Dynamics - EU and US perspectives", New York City, 11 October 2017. * * * Thank you very much.1 I appreciate the invitation to speak to you as part of today’s SUERF conference on “Globalization Dynamics: EU and US Perspectives.” With events like these, the SUERF aims to foster an active network between professional economists, financial practitioners, central bankers and supervisors.2 Ongoing dialogue between these groups is important to the efficient and effective implementation of monetary policy, and I am glad to have the opportunity to make a small contribution to that dialogue. Just a few weeks ago, the Federal Open Market Committee (FOMC) announced that it would begin to passively reduce the size of its securities portfolio. This announcement marks the beginning of a multiyear effort to bring the Federal Reserve’s balance sheet to its longer-run size. In my remarks today, I’d like to offer my views on this policy from a financial markets perspective. The message I’d like to leave you with today is one of confidence. I am confident that the FOMC’s plan will reduce the size of the portfolio in a gradual and predictable, “no surprises” manner.

Recall that FOMC statements around the time of the taper tantrum stated that asset purchases would continue “until the outlook for the labor market has improved substantially in the context of price stability,” and it is possible that many market participants took the signal from an impending taper that the FOMC was less committed to the goal of a substantial improvement in the labor market than they had thought. Not only could this have affected some investors’ expectations for the balance sheet going forward, but it could have also affected views on the FOMC’s other policy tool: the overnight interest rate.23 A related possibility is that in the current situation expectations for a very gradual program of increases in the federal funds rate are relatively well entrenched, with liftoff more than a year and a half behind us. In 2013 market participants were focused on policies that would add more 9 / 15  BIS central bankers' speeches  accommodation. Under the “recruitment effect” proposed by former Governor Jeremy Stein and Sam Hanson of Harvard Business School, yield-oriented investors react to lower short-term rates by “reaching for yield” into longer-dated maturities, and reverse this effect when short-term rates rise. These effects can be even larger when balance sheet policies are in active use.24 As a result, a shock to expectations of the central bank’s reaction function can lead to outsized movements in longer-term rates.