samchain/econo-pairs-v1 huggingface dataset:
Thereafter, references fell off a bit until rising sharply again recently. Clearly, the recent financial crisis has underscored the importance of financial conditions. Today’s paper makes clear the importance of financial conditions. The paper’s analysis of the many financial conditions indexes that have been constructed as proxies for overall financial conditions finds that many of these indexes have done better than the fed funds rate or other single-variable financial indicators as predictors of real economic activity. However, as the paper also makes very clear, the indexes that have been developed are still very rudimentary. In particular, most financial conditions indexes are ad hoc and incomplete. In their review of the existing financial condition indexes, the authors find considerable differences across the indexes in the way that they are constructed and in terms of the variables included. In addition, there is another difficulty. As the financial system changes over time, both in terms of structure and in terms of financial products, the financial variables that we might determine to be important are also changing. For example, in the wake of the recent financial crisis, the variables that the paper’s authors call “neoclassical” – such as the yield curve and stock market prices – appear to have become less important relative to the variables that the authors term “non-neoclassical” – such as quantity and survey measures of credit availability. Variables that would work best 10 years ago as forecasting tools may no longer be very useful.

The progressive easing of underwriting standards that was needed to support housing demand could only persist as long as housing prices were rising rapidly. But for home prices to rise rapidly, underwriting standards had to be progressively relaxed in order to generate more buyers. When home prices began to slip beginning in 2006, the dynamic swung into reverse. The collateral values supporting borrowing and spending began to fall. As banks’ and other financial intermediaries’ credit losses began to mount, credit availability became impaired and this exacerbated the downward pressure on home prices and on borrowing and spending. Not only did households that had overextended themselves have to cut back; others also retrenched because they were also affected by declines in wealth and heightened uncertainty about the economic outlook and their job prospects. It is not surprising that the workout from the excesses of this type of boom would take a long time. Just as it took several years for the boom to begin and run its course, so it would take years, not months, for households and financial intermediaries to adjust their balance sheets and behavior to the new environment. Households had to raise their saving rates in order to rebuild their balance sheets. Financial intermediaries had to replenish their capital to replace losses via loan charge-offs and other credit impairments. Both adjustments would need to occur before the economy could grow rapidly.
In any event, and in line with the current recovery phase, wage settlements under collective bargaining agreements have risen from 0.6% in 2014 to the current level of 1.7%, on cumulative data to September. This improvement will foreseeably continue in the future, in line with the recommendations of the Employment and Collective Bargaining Agreement, signed by the social agents on 25 June and in force over the next three years, which promotes wage increases of 2%, plus a variable amount of 1% conditional upon different sector-based macroeconomic concepts. The variable elements in collective bargaining should be viewed favourably, insofar as their application caters for firms’ specific circumstances, such that wage developments are adjusted as much as possible to labour productivity. Main factors of risk in the short and medium term The outline I have offered on the foreseeable course of the Spanish economy is not free from risks. And should such risks materialise, they might adversely affect economic growth. On the external front, as earlier stated, are the uncertainties associated with the effects of monetary policy normalisation (in particular in the United States) on global financial conditions. Other factors of concern are the possible resurgence of geopolitical tensions or a potential escalation in the adoption of protectionist measures. Specifically, the outcome of Brexit and the situation in Italy are of particular significance for the Spanish economy.

Furthermore, in the light of the Commission’s proposals to strengthen the Directive, which have been supported by ECOFIN, it is clear that the resources available to the Maltese Depositor Compensation Scheme need to be significantly enhanced before the end of 2009. 4  BIS Review 155/2008  Looking beyond the crisis, we can already anticipate further changes at the international level. Major modifications are likely, for example, in the regulatory framework, covering liquidity, leverage and risk management. The role of credit rating agencies is also being reappraised. Clearly, the models used in the past to evaluate risk have proved inadequate. Entire types of financial institution, such as stand-alone investment banks, may cease to exist while certain categories of financial instruments, such as the more exotic derivatives, may never be traded again. As regards regulatory arrangements, the crisis has highlighted the importance of a close central bank involvement in prudential oversight. This stems from the fact that central banks need supervisory information to carry out their core functions, including the implementation of monetary policy. Information about the soundness of banks is important for them to be able to assess the health of their counterparties in the conduct of monetary operations. It is also valuable because central banks, including the Central Bank of Malta, are often responsible for the regulation and oversight of payment and settlement systems. Such information becomes essential when central banks are called upon to provide emergency liquidity in times of stress as lenders of last resort.
Ultimately, if risks materialise, could one of the options be a further extension of the programme into 2019? As our President, Mario Draghi, said last week, the asset purchase programme is now an integral part of our “toolbox". It is definitely an option, but, last week, we announced our anticipation of the end of net asset purchases, which reflects our confidence that inflation is on course to reach levels below, but close to, 2% over the medium term. Well, are you being vigilant? We are alert to the tail risks that may, for example, stem from protectionism and, potentially, from an associated sharp fall in confidence. Might another option be to increase the monthly pace of purchases for the last three months of the year, to purchase more than € billion, if the situation deteriorates? The asset purchase programme remains an integral part of our “toolbox". This being said, our monetary policy decisions altogether maintain the current ample degree of monetary accommodation that is still needed for inflation to converge towards our aim. This includes, first, our enhanced forward guidance on interest rates, which we expect will remain at their present levels at least through the summer of 2019 and in any case for as long as necessary, and, second, our very large stock of assets for which we intend to reinvest the principal payments from maturing securities. The reinvestment policy plays a very important role, as the amounts are sizeable. How long will the reinvestments last?

The GDP deflator would increase by 0.7%, whereby the rise in nominal GDP would be around 2.6% compared with the potentially meagre end-2014 figure of 1%. Overall, these forecasts coincide with those on which analysts concur, although the latter generally involve a somewhat lesser fiscal effort than envisaged in the Draft Budget. The macroeconomic setting accompanying the Draft Budget is subject to downside risks, owing to the uncertainty surrounding international and, in particular, European economic developments. It is against this macroeconomic and financial background that the Draft State and Social Security Budget for 2015 was unveiled in late September. Before continuing, I should point out that, along with the Draft Budget, the Budgetary Plan for 2015 was presented in October. The Banco de España considers that the preparation and publication of this Plan is a most valuable step forward for the control and transparency of our public finances. BIS central bankers’ speeches  3  The Budgetary Plan for 2015 includes information on the budgetary planning of the regional and local governments, and it thus offers a view of overall general government conduct. The Budgetary Plan is important because it fills a substantial information gap: the lack of integrated information relating to all general government activity at a time at which a new budgetary cycle is beginning. Given that its publication marks the main change since my appearance in Parliament in October, I shall now focus on its content. Budgetary programming foresees, firstly, fulfilment of the budget deficit target for 2014, at 5.5% of GDP.
The figure illustrates this pattern, showing a significant response of the Chilean 3  peso but a non-significant movement in long-term bond prices. The opposite results hold for Mexico.2 Similarly, the response at country-group level also indicates differences when an US MP shock hits other countries' MP rate decomposed into expected MP rate and term premium (see Table 1). Whereas in AEs the adjustment mechanism is mainly through expected MP rate, the transmission in EMEs is via the term premium. ER comes out as more reactive in AEs rather than EMEs, presumably because central banks in EMEs are less prone to conduct sterilized FX interventions, aiming to—partially—stabilize interest rates and the ER simultaneously. Table 1: US MP spillovers (†)  10-Year interest rate Expected interest rate Term premium FX depreciation  Advanced economies 2003-2016 Post Nov.08 0.335*** 0.429*** 0.331*** 0.234*** 0.005 0.196*** 7.50*** 10.920***  Emerging economies 2003-2016 Post Nov.08 0.293*** 0.557*** 0.054 0.136** 0.239*** 0.421*** 3.520*** 6.660**  (†) The country sample includes 12 EMEs and 12 AEs. The panel regressions use daily data from Jan-03 to Dec-16. The units represent effects in basis points (bp), for a US MP shock of 1 bp. (***) p<1%, (**) p<5%, (*) p<10%. Source: Central Bank of Chile. Of course, a flexible ER also facilitates the reallocation of economic activity between the tradable and non-tradable sectors by speeding up the adjustment of relative prices.

Still, this characterization is based on very crude generalizations; in reality, EMEs spread over a broad range of possibilities for each dimension and different combinations of them. The question is then to what extent does such variety of cases make a difference for the spillover from changes in global financial conditions and what role does the exchange rate (ER) play in it. How important are global financial and business cycles to EMEs compared to local ones? To address this issue from an EME’s perspective, a first question refers to the relative importance of externally-induced shocks as compared to purely domestic ones. Even if the Global Financial Cycle were a very powerful force, as long as countries can still get into troubles of their own, macro policy, including the ER regime, may make an important difference. A review of the last 40 years of economic history reveals many episodes during which cyclical turning points originated in domestic, rather than foreign, shocks. In Latin America in particular, many of the major shocks of the 1980s, 1990s, and early 2000s originated locally, usually from misconceived policies, private sector exuberance, or inadequate regulations. The fact that these shocks showed up as large current account deficits surely reflects the degree of dependence of governments and business on external funding, but that does not exempt local conditions from being the main source of the imbalances.
The balance between an economy’s capacity to supply goods and services and what is actually demanded is a fundamental driver of inflationary pressure in the medium term, and so central to the MPC’s task. The recent behaviour of productivity has been puzzling and worrying in equal measure. The level of measured productivity in the UK private sector today is lower than it was at the time of the financial crisis.1 We have had over three years of stagnant productivity. If private sector productivity had continued to grow at the average rate seen prior to the crisis of around two and half percent or so, the level of productivity today would be around 9% higher (Chart 1).2,3 What might account for the UK’s productivity shortfall? And what implications might it have for monetary policy? 1  The private sector has been approximated by excluding employment and output data for the public administration and defence, education and health sectors, reflecting that a significant proportion of these sectors are within the public sector. Workforce Jobs data on sectoral employment have been scaled to match aggregate employment levels indicated by the Labour Force Survey. Resulting calculations for the private sector are estimates only. Official ONS productivity estimates are for the whole economy and so differ slightly. 2  The productivity shortfall is measured in terms of output per head.

Despite a challenging environment, new issuance of sukuk in the global sukuk market rose by 43 percent to $ billion in 2009. However, developments in Europe resulted in a more cautious market and the global sukuk issuance declined by about 20 percent in the first half of this year. In the coming period, this trend is expected to improve as the Governments in Asia and the Middle East have already initiated the raising of funds for the implementation of infrastructure development and investment projects. This extensive interest in Islamic finance from different parts of the world is driving the international dimension of Islamic finance. This has contributed to the strengthening of financial and economic linkages between the more established financial centres of the Western world and the newly emerging financial centres in Asia and the Middle East. This has thus contributed to the more efficient allocation of funds across borders from centres with surplus funds to regions with investment opportunities. It has also allowed for more inclusive participation regardless of size and stage of development. Islamic finance now provides the range of financial products and services to multinational corporations, to micro enterprises and to households while at the same time, facilitates financing of international trade and cross border investment activities. This recent decade has also seen significant milestones being achieved in the area of international financial infrastructure that supports the development of Islamic finance.
The decisions taken on 12 March, which were said to have missed their target, have often been compared unfavourably with the successful “package” of 18 March. However, I want to stress that they are complementary. On 12 March, the ECB decided to make almost EUR 3,000 billion – ¼ of euro area GDP – available to banks through “TLTRO III” operations that provide refinancing at a negative interest rate (that can be as low -0.75% if banks at least maintain their stock of outstanding loans) for an amount of up to 50% of lending to the economy, essentially to ISEs and SMEs. On 18 March, we further decided to launch an exceptional asset purchase envelope of EUR 750 billion for those that obtain their financing through the markets, namely governments and large corporations. This totally unprecedented Pandemic Emergency Purchase Programme (PEPP) aims at avoiding a positive shock on long-term interest rates associated with the exceptional expense of the public health crisis. It also comes on top of the EUR 300 billion of asset purchases that had already been planned. Also unprecedented is that the ECB has thus accorded itself flexibility, where necessary, on three fronts: between public and private sector  Page 4 of 8 securities, between countries for public sector securities, and with regard to the issuer holdings limit of 33% on each public sector security. The Eurosystem also decided, quickly and forcefully, to activate its macro- and microprudential levers to help euro area financial institutions optimise their capacities to finance businesses.

Our arrangement – currently the most generous and costly in Europe – should avoid what has started to happen in the United States: ten million job losses in fifteen days and possibly a lot more tomorrow; it protects employees and their incomes and maintains production capacities for the future recovery. The measures also include state-guaranteed loans, up to a total of  Page 3 of 8 EUR 300 billion, repayable over one to five years and for an amount covering up to 25% of annual revenue. Overall, banks are playing their part, but the Credit Mediation Scheme’s services, under the aegis of the Banque de France, are involved and ready to assist any businesses experiencing difficulties. Already, each week we are receiving over ten times more cases than last year. I will now turn to the monetary measures of this cash shield. All over the world, the major central banks have taken bold measures to guarantee financing for businesses in the short term, through purchases of commercial paper, and in the medium term, through purchases of corporate bonds. In this respect, the ECB was among the first to lead the way. The ECB also stands out in that it has the capacity to provide banks with immediate and almost unlimited liquidity, so that the banks can in turn finance all the economic players: businesses, government and households. To do so, during the course of two successive meetings the ECB took some exceptional decisions.
NBFI has exhibited recently several vulnerabilities related to liquidity risk, such as liquidity mismatch issues in open-ended funds, or the excessive use of leverage, leading to liquidity strains notably in the event of unanticipated spikes in margin calls in times of stress. This is the common pattern of the three financial instability episodes we have experienced recently: the dash for cash of MMF in March 2020, the commodity market this year, and also pensions funds use of derivatives in the UK, resulting in fire sales of gilts. It is high time that we moved forward to enhance the regulatory framework for NBFI that will ensure better liquidity management on financial markets. Currently, the design, calibration and use of existing tools is the responsibility of market participants whose incentives are not always aligned with financial stability goals. Tackling systemic risks in NBFI may therefore require the  development of additional rules both for leverage and for liquidity management in case of systemic risk developments. Stricter requirements as well as a macroprudential approach would contribute to prevent ex ante moral hazard, and thus avoid ex post central bank interventions. Second, interest rates are going up at a time when the level of public and private debt are at historic highs in many countries – 97% of GDP at end 2020 vs 79%  Page 6 sur 11 of GDP in the aftermath of the GFC. In particular, nominal debt levels have increased by a total of almost $ trillion for all FSBii member jurisdictions in the post-GFC period.

Consider the earlier example of a disaster-myopic writer of deep out-of-the-money put options on UK equities, priced using distributions drawn from the Golden Decade. Let’s say that, in June 2007, a fiveyear put had been written on the FTSE-100 with a strike price 40% below the prevailing market price. Today, that put would be at-the-money. Hedging that position would crystallise a loss roughly 60 times the income received from having written the option in the first place. 10 This example is far from hypothetical. These are essentially the same trades undertaken by a number of insurance companies and other investors ahead of crisis. In the go-go years, the insurance premia from them yielded a steady income stream. But when risk shifted, many insurers have suffered large-scale losses as premia have adjusted and investors have scrambled to hedge. The large US insurer AIG has so far suffered gross losses totalling over  10  Roughly half of that loss represents under-estimation of the distribution of returns back in 2007. BIS Review 18/2009  7  $ on CDS contracts alone. Losses by the monoline insurers have also totalled in excess of $ Second, the breakdown of these models had the consequence of turning risk into uncertainty, in the Knightian sense. 11 Once the models broke down, how were assets to be priced? Practitioners have a devil of a job pricing assets in the face of such uncertainty. So too do academics, though some attempts have been made.
The relationship between the incumbents and insurgents has been sometimes competitive but often collaborative – and both have been good for the ecosystem. We adopted a multi-pronged strategy to build what is now regarded by many as one of the most vibrant FinTech ecosystems in the world. First, a conducive regulatory approach that facilitates innovation while managing risks: simplifying rules; selectively easing licensing criteria; providing guidance on new areas like cloud computing, robo-advisers, and digital tokens; adopting activity-based regulation right-sized to the risks posed, as in our Payment 1/5  BIS central bankers' speeches  Services Act; and allowing experimentation through regulatory sandboxes. Second, the digital infrastructure necessary for the adoption and proliferation of new technologies: a 24/7, real-time electronic payment system; a national digital identity and trusted data architecture that allows seamless online authentication and financial transactions; digital platforms to connect businesses, financial institutions, and FinTech firms: matching buyers and sellers through, for example, Business sans Borders; and matching problem statements and solutions through, for example, the API Exchange (or APIX); cross-border data and digital connectivity agreements and frameworks; and Project Ubin - a blockchain based prototype platform for cross-border payment and settlement in different currencies on the same network – faster and cheaper than conventional cross-border payment channels.

MAS has funded 23 AIDA projects and published 5 requests-for-proposals on topics such as Quantum Computing and Explainable AI. To promote the responsible use of AI and data analytics, MAS and the industry cocreated the FEAT principles – for fairness, ethics, accountability, and transparency. Perhaps the most visible payoff for the investment in technology is in how well the industry has responded the COVID-19 crisis and been able to continue serving customers. Imagine if there was no retail electronic payment system or infrastructure for digital banking or buying insurance online or trading from home …. how would we have coped with circuit breakers and lockdowns? If the financial industry had not built up its digital capabilities, it would not have been able to continue operating without disruption, let alone grow by more than 5% during the first half of this year when the overall economy contracted by 6.7%. But we are still only about half-way along our journey to becoming a Smart Financial Centre. COVID-19 has shown that the world is changing in ways we may have never 3/5  BIS central bankers' speeches  imagined. The pace of digital transformation will only accelerate. Our work is not done yet. We will announce at the Singapore FinTech Festival in December more of our plans and initiatives for the next stage of our journey. But let me share with you here what we are willing to commit by way of funding. Of the $ million committed in 2015 for FSTI, we have utilised half the amount.