samchain/econo-pairs-v1 huggingface dataset:
The precise details of the model are not important for tonight. Many of the mechanisms and channels that I will discuss are embodied within standard pricing models. 1 More importantly, my experience of speaking to businesses since the financial crisis began suggests that this type of framework captures the key factors that have been important in determining their pricing decisions. In particular, this type of pricing model emphasises the role of four types of factors. First, the marginal cost of producing an additional unit of output, which is likely to depend on the degree of spare capacity. Spare capacity within firms – since it tends to be cheaper for a company to increase output if some of its employees and capital are not fully utilised. And spare capacity in the wider economy – as slack in the labour market will tend to limit wage growth and thus the cost pressures faced by companies. But many companies face other cost pressures that are not related to their own capacity constraints or the ease with which they can hire staff. These “other” costs are the second factor. Some of these costs relate to inputs that are imported, such as energy and other commodities, and so depend on movements in world prices and in the sterling exchange rate. Others stem from domestic factors, including – importantly in the current context – changes in indirect taxes.

For a MPE strategy, the successful implementation will require effective coordination of the different resolution actions undertaken by home and host authorities. Each key host authority needs to be open about its plans. The home authority needs to reciprocate, ensuring a joined-up, collaborative approach with no surprises. For both SPE and MPE resolutions, the FSB has stipulated that firm-specific cooperation agreements (COAGs) must be agreed amongst home and host authorities. The FDIC/Bank of England joint paper last year is by no means the only example of intensified co-operation preparing the way for those COAGs. Over recent months there has been marked convergence in how the world’s key authorities plan to approach resolution. This will become more apparent as more jurisdictions, including crucially the member states of the EU, legislate the KAs into their local statutory regimes.14 Preferred paths, and fall backs My exposition of how the resolution work programme will be taken forward has made it clear that, as I at least envisage it, for each SIFI there will be a preferred path. There are two points to make about this. First, I favour the term ‘preferred path’ over ‘presumptive path’ because I am concerned that too many people – perhaps particularly amongst asset managers – slip into thinking, and even demanding, that a ‘presumptive’ path should offer certainty, with no room for the RA to exercise any discretion in the public interest. I think that that is unrealistic.
According to the latest IMF projections output will fall this year in no fewer than 10 European economies. And the IMF recently lowered its forecast for growth in the advanced economies next year. Ours may be a sceptred isle, with its own currency and control of monetary policy, but we cannot insulate ourselves from these events. So this precious stone set in the silver sea seems more like a storm-tossed vessel. Despite the probable rise in output in the third quarter, the big picture is that GDP is barely higher than two years ago, and remains some 15% below where steady growth since 2007 would have taken us. Total exports have risen sharply in the wake of sterling’s depreciation, but manufactured exports to Europe are falling. Recovery and rebalancing of our economy remain the main challenges for economic policy. Here in Wales, despite impressive improvements to the infrastructure – not least the remarkable regeneration of Cardiff Bay and the magnificent monument to Welsh culture in this Millennium Centre – your economy too is suffering with total production well below its peak in 2007. In combating the downturn, monetary policy has played its part. Bank Rate has been cut to its lowest level ever and the Bank has purchased £ billion of assets in order to inject money into the economy. Although this unprecedented degree of monetary loosening has prevented a depression, it has caused pain to those dependent on interest income. And we have not been able to avoid a sharp rise in youth unemployment.

So the Bank of England, together with the Government, has set up the Funding for Lending Scheme (FLS) which provides banks with access to finance for up to four years at below prevailing market rates for term funding. Crucially, the more banks lend to UK households and businesses, the more they can borrow from the Scheme and the cheaper is that funding. That provides a powerful financial incentive for banks to supply more credit. More than 20 banking groups, including the five largest lenders to the UK real economy and covering nearly 80% of all such lending, have so far signed up. Since the Scheme was announced bank funding costs have fallen by around 100 basis points (see Chart 1). Not all of this is attributable to the FLS – the announcement by the ECB of Outright Monetary Transactions has also played an important role. But it is noteworthy that UK bank funding costs have fallen by more since June than have European bank funding costs (see Chart 2). The effect of the FLS will be seen in the lending data only after some months because of the time it takes for banks to change their lending strategies and for data to be collected and published. The FLS can be only a temporary scheme. The window of opportunity which it provides must be used to restore the capital position of the UK banking system.
Joshua Rosenberg: Thrive in any environment - strengthening resilience through risk management Remarks by Mr Joshua Rosenberg, Executive Vice President and Chief Risk Officer of the Federal Reserve Bank of New York, at the GARP Global Risk Forum, Federal Reserve Bank of New York, New York City, 7 November 2019. * * * As prepared for delivery Good morning and thank you for the opportunity to speak to you today. Let me begin by saying that the views I express are my own and do not necessarily represent those of the Federal Reserve Bank of New York or the Federal Reserve System. The ability to thrive in any environment, in both normal and chaotic conditions, is an organizational imperative. We can strengthen organizational resilience—“the ability to prepare and plan for, absorb, recover from, and more successfully adapt to adverse events”—through risk management.1 That’s because the tools of risk management help us make plans and take action today in the face of an uncertain tomorrow. In fact, we can deliver even more value to our organizations by defining resilience as a goal of risk management. Today, I will talk about some of the challenges to achieving resilience and how risk management can be part of the solution. While there are many aspects of resilience, I’m going to choose two challenges and their connection to risk management: organizational silos and the complexity of control. Organizational Silos The first challenge is organizational silos.2 Threats do not respect organizational boundaries. Some, like cyber threats, actually exploit them.

A primary focus of the new Prudential Regulation Authority will be on determining whether the business models, governance and systems and controls of firms will enable them to satisfy the public interest in financial stability in future states of the world. That requires both a macro and micro prudential view, and for the two to come together to reach forward-looking judgements on whether financial stability is likely to be preserved in a range of plausible future outcomes. This range of outcomes is important, and it also underlines the need to build up the role of stress testing. Such testing is an important mechanism for describing the forward-looking view though it should continue to evolve from a binary pass-fail world into one where it is a toolkit to test a range of possible future states of the world and thereby judge the wider resilience of firms. The PRA will exercise judgement in the supervisory actions it takes, so that firms are likely to be able to meet its objectives, policies and rules over the medium term horizon. Firms will need to demonstrate to the PRA that they are robust to a variety of states of the world, including unanticipated stress scenarios. However, since it is not possible for any forecast to cover all possible outcomes, there will always be some probability of firms failing.
We may not be entirely comfortable with the thought that every purchase we make is recorded. It may be too reminiscent of the society described in George Orwell’s 70-year-old novel 1984. Fourth, Ola no longer has access to money directly backed by Norwegian authorities. We no longer have functional legal tender. The monetary system has been turned over to private entities. Alternatively, Ola has to use another country’s currency – in our hypothetical case, the euro. We have to ask ourselves: should we allow private solutions to compete freely in developing means of payment, or must the authorities play a role? The crucial factor is whether solutions based on private money deliver the characteristics the payment system should have. The system must be able to channel payments swiftly, safely, at low cost and in a user-friendly manner. The means of payment itself – our money – must be universal, because money is only useful if it is widely used. This requires trust. Deposit guarantee schemes and banking regulation promote trust. The objective of monetary policy is to maintain stability in the value of the currency. Norges Bank assists private operators in implementing faster and safer payments. We cooperate with other authorities to oversee and supervise the payment infrastructure to ensure robustness and efficiency. Privacy rules prevent unauthorised access to payment information. But there are some characteristics deposit money lacks. It cannot offer anonymous payments. The system is vulnerable to advanced attacks. Having more money on deposit than is covered by the deposit guarantee scheme involves risk.

Real convergence encompasses factors such as labor mobility, price and wage flexibility, exposure towards external shocks, industrial structures, and so on. Judged by these factors, convergence among future members of the EMU still has a long BIS Review 102/1997  -3-  way to go. This is important because to be successful a European monetary policy depends exactly on these factors. Without a high degree of real convergence, monetary policy is bound to have different effects in different parts of the monetary union. The very idea of a single European monetary policy would thus become unrealistic. The ECB would come under political pressure to accommodate mutually incompatible wishes from different parts of the monetary union. The result could only be a less than optimal monetary policy and rising inflation and interest rates. For EMU to be successful the member states of the EU should therefore make determined efforts to further real convergence. The convergence criteria as laid down in the Maastricht Treaty require member states of the EU to achieve certain goals by spring 1998. Convergence, properly understood, can however never be something that can be pinpointed to a certain point in time, but must be an ongoing process. It does not make sense to require countries to get their fiscal situation under control by a certain date, just to let them go unpunished on a public spending spree shortly afterwards. Prudent fiscal policies should not only be a requirement for becoming, but also for remaining part of the EMU.
In 2013, Sabana also launched a corporate sukuk programme in Singapore to help finance its purchase of industrial properties; and  •  Islamic capital market activities have also taken off, with 31 sukuk issuances over the last five years. We have more sukuk issuances than other conventional jurisdictions, with total outstanding issuance reaching a high of $ billion in 2014, compared to $ million in 2009. 2  BIS central bankers’ speeches  11. To support the development of Islamic finance in Singapore, MAS established a Sukuk Facility in 2009 to provide SGD Islamic regulatory assets for banks undertaking Islamic finance activities here. We remain the only conventional central bank to have done so. There have been 8 issuances to-date totalling $ million, supported by robust demand, with the latest issuance in November 2014 being our largest yet. Our sukuk programme has facilitated the growth of banks’ Islamic finance assets in Singapore, and also encouraged corporates to issue sukuk to meet demand from financial institutions and investors. 12. Going forward, we will continue to strengthen our Islamic finance regime and capabilities to enable us to support opportunities from deepening trade and investment linkages between Asia and the Middle East, as well as infrastructure projects within the Asian region. In infrastructure for example, an estimated $ billion will be needed annually until 2022 to meet the basic infrastructure needs in ASEAN alone 3.

The “this-time-is-different-syndrome” is a powerful reminder of the dangers of complacency. One key observation is that financial crises are followed by unusually prolonged recessions in economic activity. Another valuable insight is that the fiscal and financial dimensions are closely interconnected. Fiscal imbalances can undermine the financial sector; financial sector imbalances can weigh down on the credibility of the sovereign; both can spillover into the real sector, and vice versa. The book foresaw that the massive implicit liabilities towards the financial sector accumulated by governments could result in unsustainable levels of sovereign debt. Despite the important theoretical and empirical advances to which Professor Rogoff has contributed substantially, there is still much to be learnt about the root causes, the triggers and the propagation mechanisms of crises. The major challenges for policymakers posed by the existing knowledge gaps are reflected in the very controversial debates about the optimal responses to mitigate and resolve the current crisis and to prevent future crises. In this context, since his time at the IMF, Professor Rogoff has featured prominently in global policy debates, producing analyses and making recommendations on how to contain the current crisis and restore overall macroeconomic stability in the euro area. On that very subject, as we all know, conditions in financial markets have taken a turn for the worse since the second half of July and early August.
4157 (Sep), pp 1124–1131. BIS central bankers’ speeches  21  Kirman, A (2010), “Complex Economics: Individual and Collective Rationality”, Routledge, London. Knight, F H (1921), “Risk, Uncertainty and Profit”, Houghton Mifflin Company, Boston. Laeven, L and Valencia, F (2010), “Resolution of Banking Crises: The Good, the Bad and the Ugly”, IMF working paper, 10/146. Laeven, L and Levine, R (2007), “Is there a diversification discount in financial conglomerates,” Journal of Financial Economics, 85(2), pp 331–367. Lamoureux, C G and Lastrapes, W D (1990), “Persistence-in-variance, structural change and the GARCH model”, Journal of Business and Economic Statistics, Vol 8, No 2 (April), pp 225–234. Le Leslé, V and Avramova, S (2012), “Revisting Risk-Weighted Assets”, IMF working paper 12/90. Markowitz, H M (1952), “Portfolio Selection.” Journal of Finance, 7 (1), pp 77–91. McCammon, I and Hägeli, P (2007), “Comparing avalanche decision frameworks using accident data from the United States”, Cold Regions Science and Technology (47), pp 193–206. Merton, R C (1969), “Lifetime Portfolio Selection under Uncertainty: The Continuous-Time Case”, Review of Economics and Statistics, 51 (3), August, pp 247–57. Molitor, J S and Philips, C (2012), “The case for index fund investing in the UK”, Vanguard research, February. Morris, S and Shin, H S (2008), “Financial Regulation in a System Context”, Brookings Papers on Economic Activity, pp 229–274. Muth, J F (1961), “Rational Expectations and the Theory of Price Movements”, Econometrica, Vol. 29, No. 3 (July). Perrow, C (1984), “Normal accidents: living with high-risk technologies”, New York.

One metric for that would be the number of human resources devoted to financial regulation. In the UK up until the late-1970s, bank supervision was performed by the Bank of England on an informal basis, with a team of around 30 employees. Even when the Bank was given statutory responsibility in 1979, fewer than 80 people were engaged in the supervision of financial firms. In the period since, the number of UK financial supervisors has increased dramatically, rising almost forty-fold (Chart 1). In response to the current crisis, regulatory numbers are set to rise further. Over the same period, the number of people employed in the UK financial services sector has risen fractionally. In 1980, there was one UK regulator for roughly every 11,000 people employed in the UK financial sector. By 2011, there was one regulator for every 300 people employed in finance. The pattern in the US, looked at over a longer historical sweep, is broadly similar. The FDIC and SEC were set up as part of the regulatory response to the Great Depression. In 1935, together with the OCC and supervisors housed in the Federal Reserve banks, they had combined regulatory resources of around 4,500 people. There was one regulator for every three banks in the US (Chart 2). Today, the combined regulatory resources of the FDIC, OCC, Federal Reserve banks and SEC is closer to 18,500 people. That is three regulators for every US bank. As numbers of regulators have risen, so too have regulatory reporting requirements.
The need for mandatory disclosures will certainly continue, but firms should also be encouraged - and in some cases required to make otherwise non-mandatory disclosures if accounting statements are misleading or incomplete. I would further argue that it is simply not enough for companies to disclose information. Investors also have to pay attention to the information disclosed. A lot of information underlying the proposed governance reforms is already disclosed. For example, by reading proxy statements, investors can make up their own minds about such issues as whether the audit committee members have sufficient financial expertise and how many stock options executives have received. What is clear is that the outstanding performance of the U.S. economy over the past decade lulled investors into a false sense of security. Recent events may, therefore, serve as a wake-up call - not only to management that the market is watching them, but also to investors and analysts to pay attention to the information already disclosed. While there have been many major improvements in disclosure practices over the past several years, with hindsight, I think that less progress was made than initially hoped and more could have been done. In short, I believe that there is a public policy need to rethink the entire disclosure framework. In my remarks this evening, I have underscored a number of issues that I believe merit immediate attention. Not one of these issues presents obstacles that cannot be addressed through the cooperative efforts of private and public sector participants.

From my perspective, a more neutral tax policy toward executive compensation would reduce the reliance on stock options and not penalize firms if they opted instead to use other forms of contingentpay mechanisms. A reconsideration of stock options is already under way. Clearly, there is room for  4  BIS Review 57/2002  changing the incentives that have been driven by tax policy. For me, what is key is that firms have the flexibility to structure new types of incentive compensation and that public policy be responsive to these initiatives. A deeper issue, in my view, relates to dividends. It is true that dividend payout ratios - dividends divided by earnings - have fallen over time and have been replaced by share repurchases, so that overall payout ratios have remained remarkably flat. The periodic payment of dividends to shareholders represents a formal corporate policy that is more precise and more visible than share repurchase programs. The ability to make dividend payouts is a barometer of cash flow. Dividend payments and the consequent need for external finance subject firms to market discipline. Currently, however, share repurchases offer certain advantages over cash dividends from a tax perspective. For one, capital gains taxes on share repurchases are lower than income taxes on dividends. Second, with share repurchases, investors can time their capital gains or losses, whereas with dividends, investors cannot choose when they will receive their taxable cash inflow.
24. See Fornaro, L. and Wolf, M. (2021), “The Scars of Supply Shocks”, Barcelona School of Economics Working Paper, April. 25. This argument does not deny historical examples of central banks over-estimating potential and setting policy inappropriately. There is strong evidence to suggest that part of the reason the Federal Reserve lost control of inflation in the 1970s is that it missed a slowdown in productivity growth and did not realise that the economy was overheating. However, the lessons learned from that period indicate that when uncertainty is high, it is safest not to base policy around large, real-time revisions in potential output or any other unobservable variable. Indeed, those central banks that best navigated the 1970s energy shock – such as the Deutsche Bundesbank – reacted to changes in the output gap rather than estimates of levels. This was a more robust strategy because changes are less subject to mismeasurement and are therefore revised less ex post. Current output gap estimates by major institutions point to the output gap in the euro area becoming more negative in 2023 and only partly recovering in 2024 (see Chart 8). In other words, historical experience supports the case for waiting for stronger evidence on potential output and proceeding prudently. 8). See Orphanides, A. (2003), “The Quest for Prosperity without Inflation”, Journal of Monetary Economics, Vol. 50, No 3, pp. 633-663, Orphanides, A. and Williams, J.C. (2002), “Robust Monetary Policy Rules with Unknown Natural Rates”, Brookings Papers on Economic Activity, Vol.

It is naturally difficult to establish the point at which price movements of this kind need to be considered as excesses. In the past, long periods of rising prices were always followed by corrections. The hefty reaction of risk markets to the tapering debate can be read as a sign of the instability of certain asset prices. In Switzerland, for instance, the low interest rates have stimulated activity in the mortgage and real estate markets, where, for a number of years now, we have seen considerable momentum which can only be partially explained by movements in fundamental factors. As a result, imbalances have built up. For example, mortgage volumes have grown significantly faster than GDP for many years, as can be seen in chart 9. The SNB has issued repeated warnings about the risks for financial stability associated with these developments. This is the background to the Federal Council’s activation of the countercyclical capital buffer (CCB) at the beginning of this year, upon the proposal of the SNB. The CCB has been in force since the end of September and its primary aim is to increase the resilience of the banking system against these risks and to combat excessive credit growth. Since low interest rates can be expected to persist in Switzerland for some time yet, we are keeping a very close watch on developments in the mortgage and real estate markets. Waning motivation for reform measures: Lower interest rates mean more favourable refinancing costs for banks, companies and governments.