samchain/econo-pairs-v1 huggingface dataset:
Thus, if it were to leave its decision until the uncertainty is resolved, and it discovers the outcome of the event, the firm would go ahead with the project only if the news was good. The probabilities of these outcomes, conditional on the event occurring, are 1-λ and λ respectively. As for the event itself, this has a per-period chance q of being realised. This means the expected duration of the uncertainty E[T] is equal to 1/q. If the firm expects to have to wait a long time for things to become clear this equates to a low value of q – there isn’t much of a chance, in any given period, of the uncertainty being resolved. A high value of q corresponds to an expectation that the resolution is imminent. 4  There is a direct parallel between the nature of this extra margin required for real investment decisions and the value of an option in financial markets. A financial “call” option gives its owner the right to buy an underlying security for a pre-set price, known as the “strike”. If the price of the security in the spot market rises above that level the owner can “exercise” the option and buy it for less than it’s now worth. In that sense he or she enjoys the same exposure to good news – to upside moves in the spot price – as the owner of the underlying security itself. The big difference is what happens when there’s bad news (i.e.

The blue line in Chart 10 measures profits of UK-quoted firms (including some that have operations outside the country) and, as the denominator, the market value of their capital (debt plus equity). Chart 11 subtracts the gilt yield from a national accounts measure of profitability: profits of firms located in the UK relative to the book value of their capital. But they’ve behaved in a similar fashion and convey very much the same message. 11  All speeches are available online at www.bankofengland.co.uk/publications/Pages/speeches/default.aspx  11  Chart 10: The required rate of return for UK firms  Chart 11: The combination of rising profit  has risen even as risk-free yields have fallen  margins, falling investment growth suggests significant increase in risk premium  Sources: Bank of England, Eikon from Refinitiv, TradeWeb, Bloomberg Finance L.P and Bank calculations. * Adjusted for changes in leverage. Sources: Bank of England, ONS and Bank calculations. UKCS are UK continental shelf companies. Before the crisis, rises in profitability (relative to interest rates) would lead to faster investment growth. That’s not been true in the past few years. Profits have been very healthy, relative to the existing stock of capital. The spread between the rate of return and the risk-free interest rate has risen significantly, from around 10% in the middle of the last decade to close to 15% today, a proportionate rise of 50%. On the face of it the financial incentive to expand capacity is very strong.
Turning first to the economic analysis, according to Eurostat’s first estimate, the quarter-on-quarter growth rate of real GDP in the euro area for the fourth quarter of 2006 was 0.9%, which was above previous expectations. Our current assessment is that the quarterly profile of real GDP growth is likely to be somewhat smoother in response to the impact of indirect tax changes in one large euro area country than had originally been anticipated. The strength of real GDP growth in the fourth quarter is thus indicative of ongoing robust growth in the euro area. Both domestic demand and exports made significant contributions to real GDP growth, confirming the sustained and broad-based nature of the current expansion. The information on economic activity from various confidence surveys and indicator-based estimates supports the assessment that robust economic growth has continued into 2007. Looking ahead, the medium-term outlook for economic activity remains favourable. The conditions are in place for the euro area economy to grow solidly. As regards the external environment, global economic growth has become more balanced across regions and, while moderating somewhat, remains robust, supported in part by lower oil prices. External conditions thus provide support for euro area exports. Domestic demand in the euro area is also expected to maintain its relatively strong momentum. Investment should remain dynamic, benefiting from an extended period of very favourable financing conditions, balance sheet restructuring, accumulated and ongoing strong corporate earnings, and gains in business efficiency.

Overall, this will provide solutions that reduce the use of resources and increase efficiency in the payment system. Cost coverage through high interest margins and float implies hidden costs for customers and makes it difficult to choose correctly on the basis of product costs and features. Therefore, there should be as much direct pricing as possible. The customer who chooses among various payment instruments should bear the cost of this choice. The production of payment services is characterised by economies of scale. Development costs are high and the requirements as to operating reliability and back-up solutions for the computer systems are stringent, while the cost of producing one extra unit is low. This applies in particular to the electronic payment services. We then face a classic pricing problem that is described in economic theory. If the price is set equivalent to the cost of producing the last unit (marginal cost), which in a certain sense is "correct" pricing with regard to efficiency, the manufacturer will not fully cover his costs. The manufacturer must then cover the remaining costs with the profits from other services. Innovation and development of new products are important driving forces behind increased efficiency in the payment system. In order to finance development activities, banks and producers of payment services must have a certain profit. Both direct pricing of payment services and other income may generate this profit. If the profit is to come from direct pricing, the income must cover more than the production costs.
Given that wage costs make up a large portion of the food sector’s costs, this difference in itself could explain the difference in prices. Detailed studies show that taxes, labour costs and other economic factors (e.g. GDP per capita and population density) may account for around half of the differences in food prices in Sweden and the EU.6 The other half appears to be largely attributable to lower competition pressures in Sweden than in other countries. That the price differences in relation to EU countries are due in large measure to the relative price competition is reinforced by the fact that there are also large price differences within Sweden, where the differences in wages and other costs between regions are small and the taxes the same. Studies7 show that the prices in the south-east and west of Sweden are around 8 and 5 per cent lower, respectively, than in the eastern part of the country. The prices in Greater Stockholm are some 6 per cent higher than those in the Greater Gothenburg area. This reflects the differences in shop structure in various parts of the country, with a much larger market share for low-price chains and other chain stores than for the three major players in southern and western Sweden than in eastern Sweden.

Ongoing price squeeze in the non-durables sector So far we can say that the retail food sector is seeing a price squeeze following the arrival of new foreign players, and the current operators have begun to compete through low-price subsidiaries or jointly owned companies. This price squeeze appears to have been made possible by shrinking profit margins and low unit labour costs. The potential for price reductions is difficult to estimate, but comparisons with other countries as well as between different regions in Sweden indicate that there is scope for lower food prices in Sweden. For some time now the price squeeze has become increasingly noticeable to people in general in so far as we have more low-price shops to choose between and there is a wider range of cheap products in the traditional shops, but also through greater downward pressure on the prices of “ordinary” goods. It is difficult, however, to ascertain how long the price squeeze will continue and when it will have reached its full impact on the recorded CPI. Concluding remarks Globalisation and tougher competition have entailed effects both on price developments and on the labour market in Sweden and requires much in terms of the ability to adapt in the economy and in society on the whole. If the structural changes do not generate new employment quickly enough, the competition risks driving companies out of business and reducing the number of employees without  5  Source: International Tax Comparisons 2004, the Swedish Taxpayers Association.
The quality of credit portfolio improved substantially. ii. In the seven-year period from 1997 to 2003, the average share of nonperforming credits in the total credits equaled 19.2%, and in the period from 2004 to 2010 it reduced to 10.8%. At the end of 2010, it equaled 9%, which is an improvement of more than twice. iii. The average share of credits in the three riskiest categories (C, D and E) in the banks’ own funds reduced from 54% (1997–2003) to 22% (2004–2010), which is an improvement of 2.4 times. These achievements result from the improved bank governance and the advanced NBRM supervision based on the improving regulation. iv. In the 1997 to 2003 period, the credit interest rate, on average for all maturities, equaled 18.6%, and 10.8% in the last seven years (2004–2010). Presently, the average interest rate on new credits equals 8.1% (for Denar credits), which is a decrease of more than twice. 2  BIS central bankers’ speeches  (6) Back in 2004, we started analyzing the financial system stability, six years before it became our second objective, defined by the new NBRM Law. This is the fifth subsequent year that we develop and publish an annual financial stability report. (7) We significantly advanced the Bank’s institutional capacity. We adopted new models, methodologies, analytical techniques, econometric analyses. The number of training courses for the staff, especially abroad, increases year after year. We dramatically improved the staff educational structure. In 2004, 44% of the total staff number were university graduates.

The IMF’s Chief of Mission at that time asked me to meet “in six eyes”: mine two and their four. He suggested a devaluation of at least 20%. I told him that I will answer tomorrow. The next day I told him that we will discuss again in autumn during his next visit. The situation calmed during the summer. We started purchasing foreign currency, and the favorable situation continued. Nobody ever opened this issue again. They gave up. The second moment was the closing of Makedonska Banka and forcing few other shareholders to abandon the banking business. It was a very erratic experience. They played extremely unfairly. They were developing and managed to develop dirty plots. They also threatened. They made a mistake. The decisions we believed in were unchangeable. We cleaned the banking sector from shareholders who were not eligible, on any ground. We fixed several weak points in the system thanks to our decisiveness and integrity. And, as to the organizers of dirty campaigns, you know the information. The third, extremely dramatic moment was the end of 2008 and the first half of 2009: the global recession. In that period we spent 500 millions of Euros defending the exchange rate – one third of their total level. We had to try our hardest, otherwise we were about to face an economic disaster. We were criticized for undertaking measures contrary to those undertaken by developed economies. They failed to see that such comparisons will not wash.
Replicating this success in the bilateral and syndicated loan markets – where LIBOR remains the norm – is a different challenge, for at least three reasons:  -  First, these markets involve a much wider range of lenders and borrowers, from the most complex global banking groups and largest multinational corporates, to the smallest regional lenders and businesses – many of whom have been distant from earlier stages of the transition effort;  -  Second, they rely on a deeply-embedded and relatively fixed infrastructure of pricing conventions, legal agreements and systems; and  -  Third, they are largely private markets, making it harder to observe progress using public data and demonstrate change. Acknowledging these challenges, in 2018 the Working Group broadened its membership to include key participants on all sides of the loan markets. Since then, the Group has undertaken a range of initiatives to explore ways to standardise conventions both domestically and cross-border, meet with loan and treasury systems providers to develop the infrastructure to support SONIA, and standardise documentation. In turn, this work helped support the early examples of sterling SONIA linked loans we saw last year to household names including National Express, South West Water and Associated British Ports. So, as with wholesale markets, it can be done. But to meet the Q3 target will require a substantial scaling up of what has so far been a cottage industry. Much of the onus for that lies with individual lenders, and many already have pilot loans in the pipeline.

However, many firms and households have taken on more debt during the pandemic. A deterioration in the economic outlook could threaten their financial health. This, in turn, would worsen the quality of banks’ balance sheets. Policy support remains essential to prevent balance sheet strains and tightening financing conditions from reinforcing each other. Conclusion Summing up, the euro area economy is clearly rebounding. However, the speed of the recovery continues to depend on the course of the pandemic and progress with vaccinations. The current rise in inflation is expected to be largely temporary and underlying price pressures will build up only gradually. The slight improvement in the medium-term inflation outlook and the current level of financing conditions allow favourable financing conditions to be maintained with a moderately lower pace of net asset purchases under the PEPP. Our policy measures, including our revised forward guidance on the key ECB interest rates, are key to helping the economy shift to a sustained recovery and, ultimately, to bringing inflation to our two per cent target. We are now ready to take your questions. 3/3  BIS central bankers' speeches
The dotted line below, in Chart 6, seeks to get the point across. It’s the outcome of a simulation in which the monetary authority periodically publishes a plan for future interest rates. People believe the plan but the monetary authority only gets to change it intermittently. In the meantime, and no matter what crops up in the economy, it’s obliged to follow the most recently published path. The idea is to convey the flavour of what happens when the central bank is (or feels) obliged routinely to “pre-announce” a path for interest rates but can only update that path now and then. Remember that this is a model in which forward interest rates have a powerful impact on current demand and economic activity. So living with the “wrong” forward rate – one that fails to respond to incoming news – can be pretty costly. In reality the economy is almost certainly less sensitive to expected future interest rates than assumed here, and the dotted line wouldn’t be so far above the others. But qualitatively, at least, it gets the problem across. Sought for its own sake, greater stability and predictability of interest rates can come at the cost of less stability in demand and inflation (i.e. the central bank’s ultimate objectives). Chart 6.

Similarly, Bank Rate may be increased more rapidly than anticipated if economic developments raise the outlook for inflation significantly.” Later on, in the summer of 2015, we described guidance about future interest rates, more succinctly, as “an expectation, not a promise”. The time inconsistency of optimal policy: why “low-for-long” guidance may not be as powerful as simple models predict So why, in view of the power of the policy apparent in Chart 4, hasn’t this committed form of guidance been used more often? In their 2015 paper, Del Negro and co-authors claimed that, while it had helped ease monetary conditions, the Fed’s post-crisis guidance had had significantly less impact on demand and inflation than predicted by theory. Their explanation was that, in the real world, demand is less sensitive to forward interest rates than the theory presumes. That’s probably true. Certainly the very simplest models, in which a drop in forward rates five years ahead (say) does almost as much to stimulate spending as a same-sized cut in the current rate, surely exaggerate the impact. But there may also be a more fundamental problem with the policy. It’s intrinsically “time inconsistent” (to use the technical term). From today’s perspective, in the face of a risk of deflation, it would be better if you could persuade people that you will keep policy loose for an extended period, even in the event that inflation rises above target.
Annual Financial Lunch of the French Chamber of Great Britain London, 23 November 2017  Speech by François Villeroy de Galhau, Governor of the Banque de France  “Europe, France and the United Kingdom: facing our common economic challenges”  Press contact: Clémence Choutet (+ 33 1 42 97 74 51; clemence.choutet@banque-france.fr). Page 1 sur 5  Ladies and Gentlemen, It is a pleasure to be in London today and I wish to thank you for inviting me to speak at your Annual Financial Lunch. The destiny of France and the United Kingdom has indeed been linked for a very long time; the existence of the French Chamber of Commerce in Great Britain, which was established 143 years ago, is a good illustration of these firm and lasting ties. In this regard, I would like to express our full solidarity for the series of terrorist attacks that hit London recently. King Georges VI declared in 1940, and his words still apply to this day, that: “It is not the walls that make the city, but the people who live within them. The walls of London may be battered, but the spirit of the Londoner stands resolute and undismayed.” I believe that the spirit of resilience that is so characteristic of Londoners is what we need the most in times of crisis. We are and will always remain close friends and partners, even if we will no longer – unfortunately – be in the same European Club when Brexit is completed.

An area in which the quantum leap forward can be made, particularly by emerging economies, that will substantially increase the level of efficiency and thus reduce costs, is through the adoption of a more expedient and efficient means of payment. This will be the subject of my remarks today. While the Central Bank supplies currency notes and coins, we are also concerned with payments in its broader context. An important function and responsibility of the Central Bank is to promote the development of safe and efficient payment systems. Any inability to make payments in an economy would have a far reaching and widespread impact on society. Our task is therefore to ensure that the public and businesses can make payments in a safe and efficient manner. The task also involves taking advantage of the technology and innovation wave and to move towards more efficient payment modes. The economic benefits from this can be immense. Studies have shown that shifting from paper based to a more electronic based payment systems can generate an annual savings up to 1% of GDP. Further research has also shown that it becomes a catalyst that promotes increased consumption spending. Moreover, it can also enhance financial inclusion by extending financial services to the unbanked communities. In so doing, such communities would be brought into the formal financial system and into the economic mainstream.
Taking into account the key rate decisions and other assumptions of our baseline forecast, we expect inflation to range within 3.5–4.0% by the end of 2020. Moving forward, the monetary policy pursued will keep annual inflation close to 4%. Second. Household inflation expectations decline but stay above the lows registered in April 2018. However, the perception of inflation by households is gradually changing. We see that inflation expectations are forming now at the level that is lower than the one observed amid comparable price dynamics in late 2017 – early 2018. This is largely associated with the recent trend for average inflation to be much lower than before. The inflation volatility range has also 1/3  BIS central bankers' speeches  narrowed. However, inflation expectations remain sensitive to changing prices of individual goods and to one-off events. In our policy, we take into account the fact that we need more time to fully anchor inflation expectations. Business price expectations decreased in the first half of the year and have remained generally stable during the last few months. Mid-term inflation expectations of analysts and professional market participants are close to 4%. Third. Monetary conditions are easing and this process will continue mainly due to the earlier key rate decisions. OFZ yields stay at their lowest levels for the last few years after the October key rate decision. Interest rates in the deposit and credit market are going down.

We will then have detailed data on GDP for the third quarter, preliminary data on the balance of payments for the entire 2019, as well as current economic statistics for December and first data on inflation in January. We will adjust our mid-term forecast based on this information. Winding up, I would like to get back to the signal of our future actions. We have said today that we will consider the necessity of a further key rate reduction in the first half of 2020. Noting that, after similar signals in the past, it was twice that we cut the key rate already at the next meeting, namely in October and today, and anticipating your clarifying questions, I would like to point out the following. This wording means that we still see room for a slight decrease in the key rate. But both in February and at the next meetings we will comprehensively assess the reasonableness and relevance of such a decision taking into account the entire range of new data that will be available by that time. Our signal does not imply that we will necessarily lower the key rate in February or in the first half of 2020. A further key rate cut will become possible only if our analysis confirms that this is needed to bring inflation back to the Bank of Russia’s 4% target. 3/3  BIS central bankers' speeches