samchain/econo-pairs-v1 huggingface dataset:
8 Beyer, R. and Smets, F. (2015), “Labour market adjustments and migration in Europe and the United States:  how different?”, Economic Policy, Vol. 30, Issue 84. 9 Dolls, M., Fuest, C., Kock, J., Peichl, A., Wehrhöfer, N. and Wittneben, C. (2015), “Automatic Stabilizers in the  Eurozone: Analysis of their Effectiveness at the Member State and Euro Area Level and in International Comparison”, Centre for European Economic Research, Mannheim. 10 Beyer, R. and Smets, F. (2015), op. cit. 11 For a review of the development of this literature see Mongelli, F. (2002), “New views on optimum currency area  theory: what is EMU telling us?”, ECB Working Paper No. 138. 12 For a fuller explanation of financial risk-sharing within monetary unions, see ECB (2016), “Special Feature A:  Financial integration and risk sharing in a monetary union”, Financial Integration in Europe, May. 13 Asdrubali et al. find that financial risk-sharing in the United States increased monotonically each decade from  the 1960s to the 1990s. See Asdrubali, P., Sorensen, B. and Yosha, O., “Channels of Interstate Risk Sharing: United States 1963–1990”, The Quarterly Journal of Economics, Vol. 111, Issue 4, 1 November 1996. 14 See Hane, G. (1998), “The Banking Crises of the 1980s and Early 1990s: Summary and Implications”, in FDIC  Banking Review, Vol. 11, No 1. 15 ECB calculations based on FDIC data. The term “institution” refers to a separately chartered commercial bank  or savings institution.

Christian Noyer: Sovereign crisis, risk contagion and the response of the central bank Speech by Mr Christian Noyer, Governor of the Bank of France and Chairman of the Board of Directors of the Bank for International Settlements, at the Global Interdependence Centre (GIC) Conferences, Paris, 17 June 2010. *  *  *  Ladies and gentlemen, I am very much honored to open this second session of conferences in Paris and I would like to thank the Global Interdependence Centre for having Banque de France as a partner of this full week conference. I will give the point of view of a central banker on the recent events on sovereign markets, the major implied risks and challenges for financial stability and the recovery process. Finally, I will briefly touch on the latest actions of central banks and public authorities to contain those renewed tensions. I am confident that this opening address will give rise to valuable discussions in the panels where distinguished speakers will express views from different perspectives: central banks, rating agencies, investors and academia. Sovereign crisis: origins and dynamics The sovereign debt turmoil is the most recent episode of a crisis that started more than two years ago yet. Some European States are the latest actors of a protracted debt crisis after i) US subprime mortgage borrowers, ii) financial institutions with weak funding situation and iii) non financial companies and households unable to finance their capital needs.
In this regard, the Europe of payments should seize the  opportunity offered by the digital revolution to develop a pan European payment 3/4  BIS central bankers' speeches  solution. Our institutions are an integral component of this European ecosystem and intend to play their full part in it: the Banque de France Lab, the ACPR Fintech-Innovation unit, with its joint ACPR-AMF Fintech Forum, and all public authorities, are fully mobilised to support the expansion and growth of this ecosystem. Second, we also apply this injunction to innovate to ourselves: we can only achieve our objectives and truly support the market if we ourselves are innovative. In this respect, our projects are and must remain numerous. I have already mentioned MADRE, I would like to make a special mention of our analysis of “weak signals” by artificial intelligence, to detect fragile companies. This project is remarkable by the cooperation that it involves between a wide variety of public players: the Direction générale des entreprises (DGE), the Délégation générale à l’emploi et à la formation professionnelle (DGEFP), the Agence centrale des organismes de sécurité sociale (ACOSS) and the Direction interministérielle du numérique et du système d’information et de communication de l’État (DINSIC) and of course the Banque de France. Our search for innovation also means innovation in work methods and project implementation: intrapreneurship, which we have set up at the ACPR, is a good illustration of this.

The specificities of the changes brought about by the digital revolution and in particular the multinational scope of the resulting network effects also require us to advocate for a reinforcement of international cooperation between authorities in order to ensure a better coherence of the national regulatory frameworks and to propose changes that affect global governance. To illustrate this point, I will choose an example outside the financial sector: that of the general regulation on the protection of personal data (RGPD). By setting up a common framework for the protection and circulation of personal data, the European Union has not only harmonised its regulations and reaffirmed its own values, but has also defined a global 2/4  BIS central bankers' speeches  reference in this area, raising interest among many partners, in particular the United States, shaken by repeated scandals whose symbol remains Cambridge Analytica. In my view, our proposals and actions should be guided by two principles. First of all, we need to think in terms of an open system. We must take into account the development of interactions of all kinds between the participants in the various “ecosystems” on which the development of financial services is now based. It is a prerequisite for being able  to legitimately claim to regulate interconnections. It is also a prerequisite for ensuring an appropriate perimeter for the regulations to be adapted as well as the coordination and coherence at national, European and international level of these adaptations.
De facto, we are already seeing some progress in the integration of financial stability within economic governance through the European Financial Stability Facility and the future setting-up of the European Stability Mechanism. The use of these facilities to provide loans for banking sector recapitalisation reflects the recognition that crisis management for sovereigns and for financial institutions is increasingly intertwined. Perhaps over time this will provide the foundation for a more integrated European system of crisis prevention and management for the public and financial sectors. Ultimately, it is every euro area country’s interest that the collective governance arrangements reflects the reality of economic and financial integration. Following this path of necessary gradual reforms is essential for the efficiency and welfare of the whole euro area. BIS central bankers’ speeches  7

Such perspectives and occasionally voiced doubts about the reliability of pension promises adversely affect consumption and investors' willingness to take risks. Last but not least, the bearish stock markets directly affect the value added by our financial sector, which contributes over 10 percent to GDP. Risk management In Switzerland and abroad, banks have adopted a more cautious attitude. International institutions, in particular, manage their credit risks much more actively than they used to. They sell some of these risks to other financial intermediaries, including insurance companies and institutional asset managers. The available data do not allow any reliable conclusions to be drawn as to the risk distribution after the credit risk transfers. It can be concluded, though, that credit risks are borne by a larger number of market players than previously and that diversification possibilities are probably better utilised nowadays. In interbank business, too, more attention is being paid worldwide to default risks. A growing share of interbank business is hedged; this is also the case in Switzerland, where repo business has developed steadily. Unhedged transactions still clearly account for the bulk of interbank business, but with an average volume of approximately Sfr 20 billion, interbank repos, which were neglected for a long time,  BIS Review 73/2002  3  have grown to a respectable size. With respect to system stability, this development is favourable and should be further promoted. Continuous Linked Settlement (CLS) As regards credit risks in foreign exchange business, the launch of the CLS system this autumn is a milestone achievement.
Figure 4 Lending rates (weekly data, percent) Consumer loans, 3 or more years  Commercial loans, 30 to 89 days  Mortgage loans  40  40  20  20 6.5  6.5  35  35  16  16  6.0  6.0  5.5  5.5  30  30  12  12  5.0  5.0  25  25  8  8  4.5  4.5  20  4  20  Jan.08  May 08  Sept.08  Jan.09  May 09  Jan.08  May 08  Sept.08  Jan.09  May 09  4  4.0  Jan.08  May 08  Sept.08  Jan.09  May 09  4.0  Source: Central Bank of Chile.

A full normalization of credit demand and supply conditions will have to wait until the dust settles in the international financial scenario, to allow more clarity about global and domestic growth prospects. These risk factors have a direct incidence on credit risk premiums implicit in banking operations. We can see that the monetary policy action has more than offset the increase in risk premiums, resulting in a significant drop in credit costs, thus mitigating the effects that the global crisis has had on our economy. One important aspect of the access to credit, aside from its cost, draws from the effect of the environment of uncertainty and economic weakness on the credit approval conditions and credit demand. In these dimensions, we have recently seen signs of stabilization. Internationally, the various indicators of uncertainty and risk in global financial markets, while remain relatively high, have continued to fall. Domestically, the evidence at hand from the Banking Credit Survey for the second quarter of this year reveals that, on average, banking institutions have already stopped tightening their lending standards and perceive early signs of a recovery of the demand for credit. This is particularly evident in the mortgage segment, suggesting that the levels of the long-term interest rates on these loans are not necessarily holding back the demand for housing credit (figure 5).
Policy  BIS central bankers’ speeches  3  measures in the U.S., such as QE2, are trying to do just that. Beyond our professional assessment, a successful recovery in the U.S. is good for the world economy. By the same token, Chinese authorities have decided on a gradual path of adjustment to secure enough growth for all the social and economic needs they face. From a macroeconomic standpoint, their policy of exchange rate management is something many EMEs have tried several times, and although I am a firm believer that exchange rate flexibility is crucial for small open economies, it is of course not the general rule and is not be to be applied in all cases and under all circumstances, especially for large low-income economies. Overall, the world needs a sustained recovery in the U.S. and growth in China. The same is valid for EMEs. We need to contribute to the global adjustment, but our main concern must be the welfare of our citizens. Containing the current inflationary pressures is essential to allow for sustainable growth. Delaying monetary policy adjustment may result in more severe adjustments in the future. Also, rebuilding fiscal buffers is important in order to have a more balanced recovery and to be better prepared to conduct macroeconomic policies. Some days ago, the Chilean government announced a timely and relevant fiscal tightening that should contribute to the moderation of aggregate demand. The world is not going through a currency war; neither are EMEs being flooded by liquidity from advanced economies.

Global rebalancing of the world economy needs countries in a strong cyclical position to direct domestic demand to imports, while countries with insufficient domestic demand to increase exports. Exchange rate adjustment should facilitate this process. Therefore, a faster appreciation of the yuan would relieve some appreciatory pressures in other EMEs, making the adjustment more balanced. But, for this to be achieved on a sustained basis, it is not enough to let the exchange rate adjust. Structural reforms will also be required to achieve a sustainable and efficient reduction of China’s savings rate. On the other hand, a rise in advanced economies’ interest rates, in particular in the U.S., would also alleviate currency tensions. However, the main responsibility for policymakers is to secure sustainable growth in their home economies that favors their citizens, and we all have to deal with the repercussions of those actions. The response in emerging market economies Emerging market economies have been facing two challenges as a consequence of this global environment. First, exchange rate appreciation and a resumption of capital inflows, and second, inflationary pressures. Sometimes, these two challenges may lead to inconsistencies in macroeconomic management. However, it is important to highlight that in small open economies any attempt to persistently manage an exchange rate away from its fundamentals, in particular at an overvalued level, may end up leading to inflation. If the adjustment does not come from a change in the value of the currency, it will happen through inflation.
The trend real rate as we have seen is determined by slow-moving structural factors that determine the underlying balance of the supply of savings and the demand for investment. But the interest rate necessary to offset the impact of unexpected outcomes – shocks – hitting the economy can vary significantly around the trend real rate over an economic cycle. Over the economic cycle, the natural rate will lie below the trend real rate when the economy needs stimulus to offset a negative demand shock and above it when demand needs to be reined in. The actual monetary policy rate, Bank Rate in the UK, may well deviate from the natural rate – for example, if there are so-called ‘trade-off inducing shocks’. These are best thought of as shocks that would still move inflation away from target even if we were to perfectly match demand and supply. Such shocks include a 5  All speeches are available online at www.bankofengland.co.uk/publications/Pages/speeches/default.aspx  5  shock to the exchange rate or to competition and firms’ mark-ups. Nevertheless, the natural rate remains useful to policymakers as a reference point for assessing the tightness or looseness of the monetary policy stance. 5  The natural rate of interest cannot be observed directly any more than the trend real rate. It can be estimated through economic models though the estimates are sensitive to the models used. Bank of England estimates, using a variety of models, suggest that the natural rate fell very sharply below the trend real rate during the financial crisis.

Unlike the post crisis period when policy rates would have needed to be deeply negative to follow the natural rate, monetary policy is now more able to be close to the natural rate and so to keep demand and supply in balance. But it can only do so with very low interest rates or, in the case of some advanced economies, with slightly negative rates and QE. There is a simple cross check on the model estimates of the natural rate – the actual evolution of inflation, output and interest rates over the past few years. The natural rate as John H Williams observed in response to Keynes and with some despair, is:  5  See Figure 1 at the end of the speech for an illustrative breakdown of some of the factors affecting the appropriate real policy rate. 6  For example, see http://bankunderground.co.uk/2015/08/11/an-estimate-of-the-uks-natural-rate-of-interest/. 6  All speeches are available online at www.bankofengland.co.uk/publications/Pages/speeches/default.aspx  6  “an abstraction; like faith it can only be seen by its works. One can only say that if the Bank policy succeeds in stabilizing prices, the bank rate must have been brought into proper line with the natural rate, but if it does not it must not have been.”  7  In the period since the UK recovery gathered pace in 2013 and the August Inflation Report this year, Bank rate was at ½% and the stock of QE unchanged.
In any event, this business segment is not free from challenges, especially at present when some of the economies to which our banks are exposed, such as Turkey and Argentina, are undergoing significant difficulties. Against this background, the international business model of Spanish banks, based primarily on activities conducted through subsidiaries operating in a decentralised fashion, with financial independence and engaging in traditional banking activities, is a mitigating factor that should be borne in mind. That said, and despite the conjunctural difficulties facing some of the countries in which Spanish banks are present, I would like to underscore the undoubted importance of geographical diversification as a source of medium and long-term value added and stability for these banks. The low profitability of the banking business in Spain is attributable to a combination of factors, some cyclical and others more structural. First, the high level of non-performing assets ensuing from the effects of the crisis adversely affects banks’ income statements both through the decline in interest received and, especially, the increase in the attendant asset impairment losses. The volume of these losses for Spanish deposit institutions as a whole peaked in 2012 and has subsequently tended to fall, although these losses continue to consume a large portion of revenue, meaning that pre-crisis levels have not been restored. Specifically, in terms of assets, these losses were, between 2015 and 2017, double those recorded between 2003 and 2005.

François Villeroy de Galhau: The role of monetary policy Speech by Mr François Villeroy de Galhau, Governor of the Bank of France, at the Global Interdependence Center – Central Banking Series “Inflation expectations, implications and policy response in a new paradigm for commodities”, Session I “Central bankers outlook”, Paris, 21 March 2016. *  *  *  Since the financial crisis, central banks have been tested on several levels: their ability to keep the transmission channels of monetary policy active; their ability to deliver on price stability; their ability to support the economy. Central banks in many jurisdictions have done a lot to reach their objectives. And their role has largely been hailed as positive in exiting the crisis. But faced with inflation remaining below the target, commodity markets going persistently through bear territory and growth momentum losing steam, central banks’ action is now called into question: how effective is monetary policy and how effective can it be in the future? Aren’t central banks running out of ammo? Monetary policy faces challenges, that is true; but these challenges can be mitigated. Central banks have proven that they were ready to do their part; but my conviction is that they cannot remain the only game in town. Let me focus my remarks today on the case of the euro area. Jeffrey [Lacker, President of the Federal Reserve Bank of Richmond] will certainly give you more insight into the US situation.
I therefore welcome further views and ideas from the audience during this conference on your aspirations to achieve financial well-being of our future Malaysia. 2/4  BIS central bankers' speeches  Financial well-being is not about being rich. Rather, it is about the ability to live within means and making responsible financial decisions. The state of financial well-being of an individual is a reflection of two factors — firstly, his or her level of financial literacy, and secondly, a person’s economic background. Unfavourable personal and economic circumstances, for instance, like most of us – coming from low and middle income families living in a city, may be more dependent on external factors and are not easily changed. Financial literacy, on the other hand, resides within an individual where we have control. Given the right intervention, motivation and discipline, an individual’s level of financial literacy can be improved from within. More importantly, such interventions can also become an important element to uplift a person’s personal and economic circumstances. The reverse is also true – absence of financial literacy may reverse financial well-being. We have seen many situations where individuals with favourable circumstances, such as high income professionals, nevertheless, fall into financial problems due to poor personal financial management. On the other hand, we often hear of people with less favourable personal and economic circumstances living comfortably within their means by practicing a “prudent and modest lifestyle”.

Additionally, an important feature of development of the financial market is the gradual fall in significance of intermediation of the banking sector with a simultaneous increase of significance of the market intermediation 15 . As a consequence, the central bank’s channels of influence on the economy are changing. In the past the bank loan channel was deemed more important; it is now loosing its significance in relative terms. Until recently, the investment rate in the economy was to a large extent dependent on the domestic savings rate, which by the way was contradictory to one of the fundamental assumptions of some economic models of the full integration of capital markets. The economy was featured by the so-called home bias i.e. greater inclination of domestic investors to invest in domestic assets rather than in foreign assets 16 . The latest research 17 suggests that home bias over the past years could have dropped significantly, at least in the OECD countries. The decrease may be attributed to the very  11  Chen N., Imbs J., Scott A. “Competition, Globalization and the Decline of Inflation”, CEPR Discussion Paper No. 4695, 2004. 12  Melick W., Galati G. “The Evolving Inflation Process: an Overview”, BIS Working Paper No 196, 2006. 13  Hannoun H. “Internationalisation of financial services: implications and challenges for central banks”, Conference of the SEACEN Governors Bandar Seri Begawan, Brunei Darussalam, 4 March 2006. 14  McKinsey Global Institute, $ Trillion and Counting: Taking Stock of the World’s Capital Markets, February 2005.