samchain/econo-pairs-v1 huggingface dataset:
First, it sets out the evidence base on the benefits and costs of the current shareholder-centric model of companies. Second, it makes some tentative suggestions for reform which might tackle some of these costs. There are possible remedies on the table. Part of the solution to the shareholder shorttermism problem may come from mobilising and catalysing what is at present a dispersed, and too often disinterested, long-term investor base. The falling share of institutional investors in equity ownership, together with the rise of passive investment strategies, has exacerbated the trend towards “ownerless corporations”. This is a particular problem in the UK, given its relative lack of block shareholding. 55 Under the auspices of the Investment Association, an Investor Forum has been set up following the recommendations of John Kay’s review. 56 And, internationally, an initiative by asset managers called “Focussing Capital on the Long Term” is seeking some of the same objectives. 57 Ultimately, however, it is simply too soon to say whether any of these initiatives will mobilise and catalyse long-term investors sufficiently to exercise leverage over company management in ways which support long-term value creation. A second, complementary strand would be to seek to reinforce and broaden the “purpose” of companies, to better reflect their broader societal role – their role in serving stakeholders plural (employees, customers, clients) as well as shareholders. Some companies have been able to do so voluntarily by defining clearly their societal purpose and sticking with it.

This has been topical recently, with a number of highprofile cases of executives being paid amounts which do not obviously align well with their company’s performance. Some investors have expressed discontent at these pay packages and some have even gone so far as to vote against them. Investors have had their “Say on Pay”. 50 And, as is often the case at this time of year, as the pollen count has picked up there has been talk of a “shareholder spring”. Ultimately, however, these investor votes are binding on neither management nor boards. They are a “Say on Pay”, but not a “Stay on Pay”. With very few exceptions, no differences were made to executive compensation packages as a result of investor action. And the cases of investors actively voting against pay packages have in any case been rather rare. The “shareholder spring” may be as ephemeral as that pollen. Yet high executive pay-outs potentially have implications, adverse ones, for value-creation by companies and thus longer-term returns to investors. Monies paid out to executives are monies not being re-invested in the company, reducing investment in physical and human capital. They also drive a wedge between management and their employees – a wedge that has widened to over 150 times median wages in the UK and over 300 times in the US. 51 That, in turn, erodes social capital. A company, like a country, whose physical and social capital is being eroded is one whose wealth-creation capacity is being impaired.
Absorption is not only an issue at country level, linked to the traditional capacity to allocate the EU funds received, mostly by regional public sector entities. In this case, there is an added dimension. It should be taken into account that all countries are going to implement, over similar time frames, projects in specific, highly specialised areas, largely relating to digitalisation and preparing for and mitigating climate change. This could lead to countries (and different levels of government within countries) competing for suppliers with sufficient technological capacity to carry out the projects, and to some capitalisation of the European funds by technology firms outside the EU, which would, in part, limit their positive domestic effects. In this context, coordination between countries and levels of government within each country can give the projects to be implemented greater economic stimulus and coherence, harnessing economies of scale and spillover effects between regions. 6  See I. Kataryniuk, V. Mora-Bajén and J. J. Pérez (2020), EU deepening and sovereign debt spreads: how relevant is the “political space”? Occasional Paper, Banco de España, forthcoming. 7  See P. García-Perea, A. Millaruelo, V. Mora-Bajén and M. Sánchez Carretero (2020), “The 2020 European Semester and the specific recommendations for Spain”, Economic Notes, Economic Bulletin, Banco de España (forthcoming). 7  The second source of uncertainty concerns the schedule for project implementation.

But I am not so naive as to believe that good corporate culture alone is sufficient to ensure proper behaviour amongst all the staff. Good corporate culture and ethics must also be underpinned by the appropriate incentive or compensation system. A compensation system in which bonuses or promotion are determined by short term financial performance is a recipe for disaster. The unfortunate episode of the mis-selling of Payment Protection Insurance (PPI) products in the UK is a clear example. Banks involved in selling those PPI products have, between 2011 and May 2017, reached settlements with millions of affected customers totaling 27 billion pounds, and three of the largest banks involved have been fined by the UK authorities a total of 117 million pounds. There are also many instances in which bad outcomes ensued because the firms had put in place wrongly designed incentive systems to reward staff for new customers or businesses secured. According to a report by Boston Consulting Group, between 2009 and 2016, a total of about $ billion of financial penalties have been levied on banks, which is a clear demonstration of the 4/5  BIS central bankers' speeches  seriousness of misdeeds and misconduct of financial firms. 16. While talking about fines levied against financial firms, there is an interesting argument, by Professor Charles Goodhart of London School of Economics and Political Science, that imposing hefty fines on banks is actually not a good way of dealing with misbehaviour.
These focus both on “hard infrastructure”, including payment and settlement systems, and on “soft infrastructure”; standard-setting in areas like accounting, audit, prudential and legal standards. We also analyse key developments in the international arena, for example in relation to threats of failure of emerging market economies and response to this. 12. Public policy response - institutional  As to the second area - the institutional response - there are both national as well as international dimensions. On a national basis, countries increasingly recognise the distinction between supervision (looking at the individual institutions and markets) and the systemic factors involving concentrations, interrelationships and behaviour in relation to the system as a whole. Each is an essential element in the provision of financial stability oversight. In relation to supervision, in some jurisdictions - including the UK, Japan and Germany - all the supervisory functions are carried out within one institution. In others they are handled by different agencies. Certain countries have combined questions of the systemic issues with those of prudential oversight, and then put the investor and consumer protection aspects of regulation into separate agencies [the “twin peaks” approach adopted in Australia and France]. Yet others still survive with a multiplicity of agencies. The US is a case in point - and it is worth noting that, despite all its complexities and conflicts, the health of the US financial sector as well as its economy do not appear to have suffered unduly, despite episodes like the savings and loan crisis.

Implications of the new environment for financial stability oversight  It will be clear from the litany of issues I have just mentioned - new players, new products, new risk transfer techniques and interconnections - that the changes in today’s financial world are indeed quite profound in relation to financial stability oversight. But are they net benign or net negative? The world here is sometimes portrayed as being in two designated camps. This may be a bit of a parody, but I am sure the two protagonists would forgive my little sketch. The bullish view is led by Governor Greenspan. This holds that, in the new financial world, banks now possess the enhanced ability to disperse risk - to offload risk to others, be they investors, insurance companies or whatever. The banks have thereby been able to weather a variety of shocks, which in an earlier age might well have engendered financial instability. The Asian crisis, Russia, 9/11, Enron: I could go on. In each case the banks came through and the financial system has demonstrated greater resilience as derivatives and sophisticated risk transfer processes have dispersed risk to a wider audience. The bearish camp is led by Warren Buffett. This points out the opacity of today’s world: the difficulty of spotting risk concentrations; or judging the behavioural expectations in the face of given types of shock. My view would be that both schools of thought are right! I think in reality it depends on your vantage point. There has been improved capital formation.
Private investment and consumption are expected to continue growing at a sustained pace, whereas the impact of slower world economic growth is expected to weigh on exports, with also a transitory impact on inventories. Indeed, economic activity in the euro area is largely determined by domestic factors such as long-term financing costs and disposable income developments, which have remained favourable. Furthermore, the still high rates of capacity utilisation in the manufacturing sector, the ongoing growth in employment and continued declines in unemployment should help maintain positive growth in private investment and consumption. Employment in the euro area is estimated to have increased by 0.6% in the first quarter of 2001, compared with the previous quarter, confirming continued solid job growth creation over the recent months. Notwithstanding sustained reductions in the aggregate unemployment rate and relatively rapid employment growth, wage increases in the euro area have so far remained moderate. Per capita nominal compensation of employees grew by 2.0% in 1999 and by 2.4% in 2000, while unit labour costs increased by 1.3% and 0.9%, respectively. There are a number of factors that help to explain why the increases in oil prices and their impact on inflation have not influenced wage developments in a period of falling unemployment. They include the employers and the general public’s confidence in the capacity of the ECB to ensure price stability. It is crucial that social partners continue the process of wage moderation seen in the past.

Jean-Claude Trichet: Views on recent economic developments in the euro area and international financial architecture Address by Mr Jean-Claude Trichet, Governor of the Banque de France, at the Institute of International Finance Spring Membership Meeting held in Hong Kong on 1 June 2001. *  *  *  Ladies and Gentlemen, It’s a great pleasure for me to share some views with such a distinguished audience on two topics of great importance: the first one deals with recent economic developments in the euro area and the motivations of the last 25bps rate cut by the ECB on its 10 May’s meeting. The second point deals with the very important question of international financial architecture. Let me start with the first topic. The global outlook for 2001 continues to be characterised by sizeable uncertainties, amid the readjustments taking place in the American and Japanese economies, and their impact on the rest of the world. In the United States, however, while the GDP growth estimate for the first quarter of 2001 indicates that the slowdown has been substantial, the economy is still driven so far by firm consumer expenditure. Economic activity in the euro area in 2000 expanded at an annualised rate of 3.4%, the strongest growth since 1990, driven by buoyant domestic and foreign demand. The general outlook for this year and next one remains positive, even if, clearly, some impact of the American slowdown is already visible.
We also know that there are a variety of mechanisms associated with globalization that lower the trajectory of inflation in the short run. For example, as the potential growth rate of an economy rises, it may experience more growth with temporarily lower inflation. But none of globalization’s effects on inflation, not even the potential reduction in inflationary bias, diminish the importance of the principal objective of central banks: setting policy to achieve low and stable rates of inflation over time. Doing this well requires the central bank to be able to discern features of the economy that it cannot know with precision - like the potential growth rate or the equilibrium real interest rate. It also requires a central bank to define and measure inflation in a meaningful way. We live in a world where the prices of some goods and services move in different directions and at different rates. The challenge for monetary policy makers is to look at this complex and changing picture of price changes and try to gauge the forces that are operating on underlying inflation and so judge the likely future path of overall inflation. As economies become more integrated, and as the share of goods and services that are “tradable,” or are affected by trade, increases, the challenge of extracting some measure of underlying or trend inflation gets more interesting. External factors can have bigger effects on the movements of some prices. The nature and duration of the external impulse or “shock” to relative prices may be hard to discern.

Moreover, the situation had worsened as it added to the direct impact of weakened global demand. Although the spillover impacts to individual economies have been uneven, monetary policy in most emerging markets have faced a tradeoff between achieving domestic objectives and managing external spillovers. The limited and, in many cases, stretched monetary policy tools have been designed to mitigate financial imbalance and vulnerability, and to restore economic growth and maintain targeted inflation. Our experiences from various Quantitative Easing (QE) episodes remind us that the traditional monetary policy at hand may not be sufficient to address these multiple objectives. Alongside policy interest rate as a primary tool, central banks in emerging markets have additionally relied more on non-traditional, tools and measures. One is macro-prudential policies, mostly related to real estate and the banking sector, to help address pockets of vulnerability in the short-term. The other is a more market oriented approach by allowing greater exchange rate flexibility to counter large and volatile capital flows. Thus far, it is evident that emerging market economies have weathered such spillovers quite well, but new challenges keep coming our way. Despite signs of recovery in some Advanced Economies, their paths remain uneven. This called for the divergence of policy implementations with substantial uncertainty, especially to financial market participants. Next, the prolonged stagnation in some Advanced Economies has taken more tolls on emerging economies as reflected by softening growth and heightening vulnerabilities.
4  BIS Review 113/2009  To begin this discussion, I should emphasize that capital inflows to capital-scarce economies are a good thing. We know that capital flows to institutionally strong economies are beneficial (Prasad et al., 2002). Therefore, the role of policy is not to impede capital flows, but to avoid the creation of a bubble in domestic assets with consequences on resource allocation. 5 In this regard, to have in place sound prudential regulation during periods of abundance of capital is essential for financial stability, as we are reminded by the crisis in Chile in the early 1980s, the Mexican crisis of the mid-1990s, the Asian crisis, and more recently, the crisis in Eastern Europe. Even if one could accept that monetary tightening could be an appropriate response to combat an asset price bubble such as the recent housing price bubble, with all the caveats I discussed before, the problem is more acute in small open economies. Tightening monetary policy may have perverse effects, since it induces further capital inflows and strengthens the currency. In this case, the interest rate is not the most adequate instrument with which to burst the bubble.

In the context of monetary policy in an inflation targeting regime, those situations could be accommodated by escape clauses. But, more in general both objectives should be addressed with more than one instrument. The overall purpose of financial stability is to ensure the proper functioning of markets and to avoid having to arrive at the degrees of turbulence and dislocation we have witnessed in the past year. For this reason, financial regulation plays a major role in granting financial integrity. At the beginning, regulation focused on the strength of individual institutions. However, the tensions we have seen show how individual fragility may quickly evolve into systemic problems. The interrelationships among financial institutions and the proper operation of the markets where liquidity is traded are essential ingredients of a market economy, but these characteristics are also the channels of financial contagion, as recently seen. So it is crucial to have a systemic vision, not only from the perspective of how the different institutions relate to each other, but also on how the different types of financial and operating risks are intertwined, creating potential vulnerabilities. Regarding price stability, conducting monetary policy within an inflation targeting scheme is appropriate, and recent experience shows that it may provide ample room for expansionary policies when facing a global recession such as the current one. There will be a long debate and a number of research papers on the proper mechanism to secure financial stability and how it should be combined with monetary policy management.
My point is that, in addition to analysing vulnerabilities in individual countries and general macroeconomic linkages between countries, you also need to look in particular at the major cross-border financial groups and financial infrastructure. The good news is that these are not so many, after all. Of the approximately 8,300 credit institutions in the EU, only nine are defined as truly pan-European and less than fifty have cross-border establishments in more than two countries. When assessing preconditions, regulation and supervision you need to look not merely at individual countries but also at whether there are major differences or gaps in the application between countries or between financial sub-sectors and if this might lead to vulnerabilities, in particular in a crisis situation. As we all know, a common European approach to bank problem resolution has so far not been developed. In a potential or actual crisis situation, we may face “the prisoners’ dilemma” in which the optimal solution may not be achieved since each country would tend first to look to its self-interest. Hence, it is important for a regional FSAP to identify vulnerabilities stemming from potential conflicts between home and host countries in the resolution of a failed financial group, which for instance might have systemic importance in the host country but not in the home country. The common thread in all this is that an FSAP should focus on two things: The weak spots as well as the channels for contagion of weakness. This is what the IMF is doing in its single-country FSAPs.

Its successful realisation will enable our economy to grow at a fast and steady pace, and will mark a step forward in our journey towards EU integration. On behalf of the Bank of Albania, let me affirm our readiness to rise to the challenge. I am also confident that today’s conference will provide a significant contribution to finding optimal solutions. Hoping that you will find the Conference and your stay in Tirana both valuable and enjoyable, I wish the conference a great success! Thank you for your attention! 4/4  BIS central bankers' speeches
Unemployment in the EU and the euro area has reached historic levels, especially amongst the youth. Economic growth is weak and is mainly concentrated in central countries of the euro area. Our countries have been affected by this situation for objective reasons. Trade relations, movement of capital and workers, and the financial system are channels that pass these problems on to our economies. The form, size and extent of this impact have evolved over the past four years. At present, the situation is reflected in the decrease of domestic demand, decline of economic growth, reduction of available income, loss of confidence and deterioration of optimism; this is, in turn, reflected in higher savings. Consequently, these developments have placed the focus of economic policies towards economic activity and revitalisation of optimism in order to boost investments and consumption. On the other hand, maintaining financial stability becomes a necessity, creating thus a binomial of priorities that condition each other and require a simultaneous solution. The Albanian economy is increasingly facing the challenge of economic growth. Although the Albanian economy enjoys consolidated macroeconomic stability and sound financial foundations, aggregate demand has been weak during the first nine months of 2012. Both domestic and foreign demand suffer from high uncertainty, relatively tight lending standards, and limited space for discretionary and stimulating policies.

We have also underscored time and again that the rule only helps us part of the way. There may be reason to depart from it. The Riksbank’s clarification of monetary policy in 1999 explains when this may be the case. One reason is the occurrence of a shock that has caused inflation to deviate considerably from target. In such cases there may be a risk of undesirable fluctuations in the real economy if we were to try to bring inflation back to target within the normal time horizon. We have to be able to make allowances for such circumstances; otherwise they could have serious repercussions for the real economy. And our monetary policy framework provides scope for this. But no two situations are ever exactly the same. It is necessary to have a thorough analysis on which to base our standpoints and an explanation for our decisions. Another reason to deviate from the policy rule is if inflation is judged to be influenced by temporary effects, i.e. effects that will diminish without any monetary policy intervention. That, for example, is why we often focus our discussion on UND1X, the measure of underlying inflation that excludes the effects of indirect taxes and subsidies as well as interest rate changes. But it can also be a case of temporary supply shocks that are not expected to persist, such as the sharp rise in electricity prices at the turn of the year 2002/2003.