samchain/econo-pairs-v1 huggingface dataset:
The proportion of households with debt-service ratios between 30% and 40% is now much smaller than it was in 2008. 6  BIS central bankers’ speeches  of their capital, funding and liquidity positions. But risky UK mortgage assets, along with UK commercial property, certainly damaged a number of UK institutions. One risk from an increase in household balance sheets due to house purchases being financed by ever increasing amounts of debt is that homeowners can’t repay the mortgage in times of stress. We saw this in the UK in the 1990s. But the main damage in the last crisis from high levels of UK households’ secured debt however did not come so much through bank losses or through the huge falls in house prices seen in other countries. Cushioned by the cuts in interest rates to effectively zero, QE, and stronger-than-expected employment levels12, UK households were largely able to maintain servicing their debt even though their real income was declining. Indeed they paid debt down to reduce the size of their balance sheets. But to do so, they cut back their consumption markedly, thus deepening and prolonging the recession. Real household consumption fell by 6% between end 2007 and 2009. This is an important if less well known risk from large household balance sheets. Even if they pay their mortgages households cut back consumption when house prices fall and uncertainty about future income increases.

So one very important lesson in this is that traditional indicators of the business cycle cannot be relied upon to flash warning lights about vulnerabilities building up in the financial system. Where did the money go? If the total amount of UK private credit in the economy rose sharply in the 10 years before the crisis without much impact on private sector demand or the economy as a whole, where did the money go? Some went to business – around a third, much of it to commercial real estate. But the bulk, around two-thirds of the credit, was to households (Chart 3). Bank lending to households made a particularly large contribution to credit growth in the first half of the 2000s. And while unsecured lending grew strongly over the period, it only comprised about 10–15% of lending to households. The much larger part was, of course, secured lending for housing. And it is fair to call it a boom. Secured household debt relative to annual household income was stable at around 70% for much of the 1990s, before rising rapidly to over 110% by 2007. The stock of household debt secured on housing went in real terms from around £ billion to £ billion. The main driver of course was the increase in house prices relative to earnings over the period – from about 2.5 times climbing to 5 times. Households have of course a house on their balance sheet – to set against the debt.
Chart 7 Banks capital and the break-even impact on probability of financial crises reduction in the probability of a financial crisis per year, %  Baseline  0.9  30% Modigliani-Miller Effect  0.8  Tax offset  0.7  More Substitutes to Bank Finance  0.6 Less Sensitive Investment 0.5 0.4 0.3 0.2 0.1 0 0  1  2  3  4  5  6  7  8  9  10  additional capital as % of banks’ risk-weighted assets  That said, initial increases in banks’ capital will probably have a much more pronounced impact on the likelihood of financial crises than successive increases. For example, a 5 percentage point increase in banks capital from 15% to 20% would likely have considerably less impact on the probability of banks’ failing than raising capital from 10% to 15%. So it is  10  BIS Review 100/2010  important to consider the rate at which the marginal benefits of banks holding more capital will diminish. The June 2010 Financial Stability Report provides illustrative estimates that indicate the benefits of additional capital fall to close to zero once a threshold of around 15% of risk-weighted assets is reached. It is difficult to predict the likely volatility of banks’ assets values and the probability of extreme events that could lead to a financial crisis. A natural starting point is to assume that the shocks hitting the economy and banks’ asset values follow a normal distribution.

About once every 20 years, on average, a shock came along which could be either very good or very bad; it either increased or decreased GDP by around 12%. Much less frequently there came a very much larger – and always negative – hit to GDP. On average this very bad shock came along about once a century; reducing GDP by over 30%. In this type of model first developed by Barro, the shocks to GDP are permanent and so could be expected to affect asset values by comparable magnitudes. So once we allow for rare – but very big – shocks that do not follow a normal distribution then there will be larger benefits from banks having much more capital. And without allowing for such shocks it is not possible to explain the historical variability of economic activity across countries. In summary, even taking a conservative view of the cost of extra bank capital the net benefits of stricter capital requirements are potentially large. But relaxing these conservative assumptions implies the costs of higher capital requirements are likely to be much lower. Furthermore, the benefits of capital requirements are likely to be considerable, especially if one does not assume that the shocks to economic output and banks’ asset values follow a normal distribution. 12  See for example “Rare Disasters and Asset Markets in the Twentieth Century” by Robert Barro, Quarterly Journal of Economics, 2006, 121, no. 3.
Because of this correction, unit labour costs in the stressed economies have plateaued and are now converging with those in the better performing countries (refer to Chart 4). While unit labour costs in Malta have been lower than in other euro area countries, it is crucial to ensure that higher productivity supports wage growth, thereby safeguarding the country’s competitiveness. Conclusion – Malta as a regional hub In the recent past, our economy was able to attract sectors and niche markets, such as financial and business services, and the aviation maintenance sector. Further investment promotion calls for continued efforts to identify new areas of growth, and to develop a labour force with the necessary skills and qualifications. The financial and other service sectors have been crucial for economic stability and growth. Recent expansion in the financial services sector can serve as a springboard for further development in view of new opportunities in the Mediterranean region. Further diversification of the range of financial and other services will provide opportunities for Malta to develop further as a regional hub for various activities. Proficiency in the English language, a sound legal system, the high standards of the legal and accounting professions and the mantle of EU membership offer fertile ground for those who want to do business here. Certainly, a growing financial sector needs to be supported and protected by appropriate legislative and supervisory frameworks to ensure that potential risks are minimized. Malta has managed to host a relatively large financial sector without exposing itself to excessive risks.

The financial stability analyses focus on macroeconomic stability factors and on the strength and soundness of the financial system as a whole. The Bank addresses both these principal areas with a strong professional ambition. Its two main fields of analysis reinforce each other and benefit from close cooperation among the staff. Both areas have forced us to put our analyses, projections and policies on a longer-term perspective which provides an opportunity for better overall economic and monetary policy management. Although much remains to be explained about the nature of the interaction of monetary and financial stability, I mentioned earlier that a sound financial system is a precondition for economic and monetary stability and the implementation of an effective monetary policy. In this respect, these areas support each other. Since financial liberalisation was introduced, we have not faced circumstances where financial stability concerns have directly affected or conflicted with monetary policy decisions. Our aim is to prevent such a situation from arising. The potential risks to financial stability at the end of the last upswing were defused by the swift achievement of monetary stability and the restoration of internal and external balance. In conclusion, I would like to repeat my warm welcome to all the participants in the seminar. I trust that both the seminar and your stay in Iceland will be interesting and rewarding, professionally and socially. BIS Review 34/2004  3
The main responsibility for counteracting financial imbalances cannot lie with monetary policy. If monetary policy seeks to pursue goals beyond its reach, the credibility of monetary policy will gradually weaken. Regulation and oversight of financial institutions must therefore continue to be the first line of defence against shocks to the financial system. The regulation of Norwegian banks largely follows EU rules, which in turn are governed by guidelines decided by the Basel Committee. Generally, we have been able to implement stricter regulation more rapidly than most other countries, partly because the economic downturn in Norway has been relatively mild. The Ministry of Finance has also introduced residential mortgage lending regulations to slow down the increase in house prices. Conclusion I believe both international and our own experiences with inflation targeting have been predominantly positive. While the exchange rate targeting regime that prevailed until the late 1990s tended to function procyclically, flexible inflation targeting has contributed to stabilising the economy when it has been exposed to shocks. In Norway, we can now look back on a quarter of a century of price stability. At the same time, employment has shown less variation since 2001 than in previous periods, in spite of the substantial disturbances that have hit the Norwegian economy. In the early years of inflation targeting, policymakers had high ambitions of fine-tuning inflation to meet the target and of achieving this goal within a clearly defined time horizon. But useful lessons have been learned.

Nordic Summit 2021 – 25 May 2021 Inflation and monetary policy in a post-Covid-19 world  Speech by François Villeroy de Galhau, Governor of the Banque de France  Press contact: Mark Deen (mark.deen@banque‐france.fr), Déborah Guedj (deborah.guedj@banque‐ france.fr)  Page 1 sur 9 Ladies and Gentlemen, I am delighted to be with you today. Denmark and the Nordics are among the most successful countries in Europe, and even worldwide: a unique mix of economic innovation, social cohesion, and environmental commitment. But today, in the country which is with its currency at the closest frontier of the euro area, you invite me to speak about “Inflation and monetary policy in a postCovid-19 world”. As of 2006, Olivier Blanchard said : “Monetary policy can pretend to be close to science if it can be conducted using simple and robust rules […] Monetary policy must be closer to art if it is frequently confronted to new, poorly anticipated and poorly understood, contingenciesi.” The current debate on monetary policy is a perfect illustration. While a few years and even a year ago everybody feared the disappearance of inflation, the world is now worried by its comeback. While a few months ago the emergency support in the face of the Covid crisis was the No.1 concern, we are now talking about exit and post-Covid world. This is precisely the title of the speech you invited me to give.
A rational domestic demand and import policies will be required (with a 5.3% rise in imports, given the oil price growth), in order to keep the current account deficit at about 6.5% of GDP (EUR 3 billion), the same as in the current year. Of course, this implies a continuation of heavy dependence on foreign sources of financing in 2010. (2)  Given stagnation in direct and portfolio investments (EUR 2.1 billion in 2009 vs. EUR 2.3 billion in 2010), this would mean that: −  the current account deficit will have to be financed by foreign borrowing;  −  the external debt-to-GDP ratio will increase from 83% last year and about 93% in 2009, to about 100%, which is feasible, but will certainly not improve the country’s credit rating, and the question is to what extent the global downward trend in interest rates can carry over to this country. This is all too important, as we know that in 2010:  (3)  −  total debt repayments (EUR 8.3 billion in principal and EUR 1.4 billion in interest) will amount to EUR 9.6 billion (EUR 10.8 billion in 2009); and  −  total utilisation of foreign sources of financing will stand at EUR 12.6 billion (13.5 billion in 2009). The anticipated fiscal deficit reduction, in terms of consolidated general government (including HAC), from HRK 15 billion to HRK 12.1 billion, i.e.

(X) “A million dollar question” has been asked at Forbes, about whether exchange rate stability can be maintained under such circumstances. The answer is: yes, given the current modalities, it can be maintained as long as we manage to repay our debts and as long as we can obtain new loans from abroad. In this respect, the current world situation is favourable, because free liquidity grows again and waits to be placed, credit supply goes up and buyers are sought for this money. A continuation of EU accession negotiations improves the political perception of Croatia as a debtor. Therefore, I have no doubts that the current search for a billion dollars, or euros or whatever, will be successful. This is a relief, but it also poses the most serious dangers to this country: the danger of inactivity, the danger of believing that we can go on functioning by following the established routine and the danger that we neither have learned, nor will learn enough from the crisis. It is often repeated that our problems are of a structural nature and that it takes time to carry out the necessary reforms. This statement is not unfounded. However, an old Chinese wisdom says: “Even the longest way starts with the first step.” The truth is that the first step is often the most difficult, and we have been putting it off for a long time. BIS Review 2/2010  3
Longer life expectancy – success story and challenge Ladies and gentlemen, the low interest rate environment is a challenging situation for pension funds. And I cannot even give you an idea of when Switzerland will be able to return to positive interest rates. All I can say is that the timing will greatly depend on developments in the global economy and the performance of the international financial markets. Another challenge that is sure to preoccupy you as pension fund managers is that of rising life expectancy – on the face of it a very gratifying development and, indeed, one of humanity’s success stories. Rising life expectancy is not only influencing the propensity to save but is also having a direct impact on the pension funds. Given an unchanged retirement age, it steadily lengthens the average duration of pension payments. This in turn results in higher payments and extra strain on the pension funds. The consequences of these developments are clear. Lower inflation and reduced real rates of interest are resulting in lower nominal interest rates and are thus diminishing the pension funds’ earnings prospects. On the benefits side, increased life expectancy means that pensions are being drawn for longer, thus increasing the volume of savings capital needed to finance these benefits. As a result, the system becomes unbalanced. Price stability – the SNB’s contribution to a healthy pension system What could be done to find a workable solution? Which measures would make sense and which would not?

Luis M Linde: Macro vulnerabilities, regulatory reforms and financial stability issues Speech by Mr Luis M Linde, Governor of the Bank of Spain, at the International Institute of Finance (IIF) Spring Membership Meeting, Madrid, 25 May 2016. *  *  *  I would like to thank Tim Adams, President and Chief Executive Officer of the International Institute of Finance, for his kind invitation to participate in your Annual Spring meeting. In my speech I will try to cover three topics: macro developments and challenges both in the international context and in the euro area; the stance of monetary policy in different areas; and regulatory changes. The international context Today, the recovery of the world economy remains disappointingly uneven and weak. Global GDP growth in 2015 was 3.1 %, the lowest figure since 2009, and projections by most of the international institutions have been revised downwards again. In spite of that, financial markets have experienced a favourable trend in recent months. The more accommodative tone of monetary policy in most of the world, some macroeconomic data that, although not too buoyant, moved away expectations of a new recession and, in a number of cases, corporate profits, better than expected, helped reverse the worrying trends that markets showed at the beginning of the year. However, serious risks remain. Many developed economies have recovered the level of activity prior to the crisis, but their growth rates have been low by historical standards.
Serious situation in spring 2015 Exchange rates  Unit labour costs 115 140  115  140  Germany USA Sweden  130 105  105  95  95  85  EURGBP  130  120  120  110  110  100  100  85  EURUSD EURSEK  75 Jan-14  75 Jul-14  Jan-15  Jul-15  Jan-16  Jul-16  90  90 05  07  09  11  13  15  Note. The ECB communicated its decision to purchase securities on 22 January 2015 and initiated purchases on 9 March 2015. Exchange rates, index, 1 January 2014 = 100. Unit labour costs in manufacturing industry, euro, index, 2011 = 100. The blue square indicates the effect of the krona appreciating by 30 per cent against the euro. Sources: The ECB, Macrobond and Conference Board Figure 9. Rising trend in housing prices and debts for 20 years despite varying repo rate Index 2000 Q1 = 100  Note. Housing prices have been converted from nominal to real terms by using the CPIF. Sources: Statistics Sweden and the Riksbank  18 [20]  Figure 10.

When the repo rate is negative, the banks pay interest to the Riksbank, as the banking system as a whole has a liquidity surplus that must be deposited in the Riksbank. The short-term interbank rates, that is interest on loans between the banks, and some government rates have followed the repo rate down below zero. However, the banks have not introduced negative deposit rates for households and most companies. Only a few economic agents, primarily other financial institutions, large companies and some municipalities, have experienced a negative deposit rate, and these can in some cases also borrow at a negative interest rate. Companies have been forced to expend a certain amount of resources on avoiding negative return on their funds, but they appear to have succeeded relatively well in this. Cutting the repo rate below zero has thus in total contributed to pushing down interest rates, but has not meant that interest rates have become negative for the general public. Good profitability among the banks and few signs of a decline in demand Another fear has been that negative interest rates reduce the banks’ profitability, which could lead to higher lending rates and a lower supply of credit. The reason for this is said to be that the banks’ deposit margin, that is, the difference between the interest on deposits and lending, would decline because it is difficult to cut the deposit rate below zero.
Advocators of a “wait-and-see” approach in the face of supply shocks are not clear on the question of when the supply shock ends and when demand-driven price increases take its place, in an environment where inflation keeps rising. If this issue is not clarified, any above-target inflation figure or any upward revision in inflation forecasts can easily be attributed to supply-side factors. Clear lines should be drawn as to which economic data would refute this discourse and what would constitute a limit to supply shocks from a central banker’s point of view. Dear Guests, In the last part of my speech, I would like to discuss recent developments in the Turkish economy and the monetary policy implemented in this period. In early 2008 the supply side shocks in food and energy prices started to exert significant inflationary pressures, as they reached unprecedented levels above and beyond expectations. For instance, October 2007 Inflation Report, based on forecasts of international agencies, had foreseen oil prices around USD 70 per barrel in 2008 and a gradual correction in food prices. In other words, it was assumed that supply side shocks would be temporary and that they would lose impact after a while. These forecasts were in line with pricing in  BIS Review 109/2008  3  forward and futures markets. However, these expectations did not materialize. Both crude oil prices and agricultural commodity prices continued to rise. The adverse impacts of supply shocks reached unprecedented levels during the first half of 2008.

In other words, we are facing a gap between food demand and food supply. Prices have to adjust to restore equilibrium. Since the price elasticity of food demand is low as compared to,  2  BIS Review 109/2008  say, durable goods, there needs to be a drastic rise in food prices, which is what we are facing today. Dear Guests, Until recently, the common view among central banks of developed countries was to give priority to problems in financial markets, ignoring the signs of inflationary pressures. Certainly, there are structural reasons behind the recent run-up in food and energy prices, as I have just briefly discussed. However, it is also undeniable that there are significant demand-driven pressures over commodities. Loose monetary policies adopted at the turn of the century certainly played a key role, together with excess liquidity in the financial system. Fast-forwarding to the recent period, the central banks of developed countries still keep real interest rates negative in the face of financial risks may hamper a correction in commodity prices. The commonly accepted practice in inflation targeting regime is that monetary policy should not react to supply-driven shocks that are temporary in nature and should allow temporary increases in inflation in the short-term, unless they create deterioration in inflation expectations. Otherwise, undesired fluctuations might arise in economic activity and relative prices. The increase in commodity prices would trigger a self-correcting mechanism. By changing the relative prices, it would provide valuable information on how the resources of the economy should be distributed.