samchain/econo-pairs-v1 huggingface dataset:
The broad strength of private spending also testified to inherently sound economic fundamentals, including rising income, low unemployment, and robust private sector confidence. At the same time, additional support from accommodative macroeconomic policy, both fiscal and monetary, helped maintain economic momentum throughout last year. Notwithstanding a somewhat lackluster economic performance in the first quarter of this year, many of the supportive factors are expected to remain in place. Forward-looking indicators suggest both businesses and consumers continue to hold positive outlook on the economy. Fiscal stimulus related to the large-scale public investment in infrastructure should begin to phase in from the latter part of this year, potentially generating positive crowding-in effects on private spending. Financial conditions also continue to be supportive of growth, with policy interest rate staying low and private sector credit growth expanding at a doubledigit rate. Longer-term interest rates and borrowing costs have been low and stable, affording both businesses and households relatively easy access to finance. In fact, if anything, a high pace of credit growth may have raised risks of overheating in some sectors, with potential implications for financial stability. The Monetary Policy Committee (MPC) has flagged this risk several times since last year, and will continue to monitor the situation closely. On the other hand, there remains an important drag to growth, largely stemming from a protracted global recovery. In some parts of Asia, the first quarter growth has turned out to be lower than expected, as a result of slowing global trade.

Presentation of the Annual Report of the Autorité de contrôle prudentiel et de résolution (ACPR) for 2022 Press conference, Wednesday 31 May 2023  Speech by François Villeroy de Galhau, Governor of the Banque de France Chairman of the ACPR  Page 1 of 9 Ladies and Gentlemen, I am pleased to welcome you to our yearly presentation of the Annual Report of the Autorité de contrôle prudentiel et de résolution (ACPR – Prudential Supervision and Resolution Authority), in the company of Jean-Paul Faugère, Vice-Chairman of the ACPR, Alain Ménéménis, President of the Sanctions Committee, and Nathalie Aufauvre, Secretary General of the ACPR since January 2023. The events of 2022 and the beginning of 2023 have raised significant challenges, but also two valuable confirmations: that of the soundness of the French banking and insurance sector (I), and that of the European model of regulation and supervision (II). We nevertheless need to take reinforcement actions in the short and medium term (III). I. Major challenges that confirm the robustness of our financial system... 2022 will naturally remain the year when Russia invaded Ukraine. Geopolitical uncertainty spread to the financial sector, notably with the sharp rise in commodity prices and margin calls on their derivatives. This was compounded by other sources of volatility, in particular on the UK's sovereign debt, and the collapse of a number of crypto-assets.
For instance, in February we considered that the new information received since our previous monetary policy meetings in October and December did not justify the relatively large upward adjustments in the interest rate forecasts made by some other market analysts. The fact that other agents make their own assessments of how the interest rate will develop is essentially very positive. One of the arguments put forward against a central bank presenting its own forecast for the interest rate path was that the agents in the financial market would then stop making their own analyses of interest rate developments. However, these misgivings have proved unjustified. Opinions on the interest rate and future economic developments still differ, which is a natural consequence of the uncertainty regarding the future development of the economy. In particular those who operate in the financial markets know that we live in an uncertain world and for this reason the assessments of interest rate developments will continue to differ. Another argument against a central bank presenting its own forecast for the interest rate is that the central bank would lose credibility if the forecast proved to be wrong. It has also been speculated in various market comments that it would entail a loss of prestige for the central bank to revise its forecasts and that the central bank should therefore by wary of doing so.

Economies of scale and scope may have been changing in different areas of banking and even taking different directions. For example, the rapid development of information technology has made the collection and processing of information considerably cheaper, but at the same time technological investments are taking a larger share of banks’ resources. Therefore, economies of scale in some aspects of the collection of information may have been reduced, but at the same the time investments in more sophisticated technology have increased economies of scale and scope in some areas of banking. While I do not wish to go into detail on this matter, the general picture that emerges is that the banking industry has to be in a position to adjust to a new situation and take these factors into consideration. Indeed, in the course of the last few months, a number of bank mergers in the euro area, including mergers between relatively large institutions, have been announced or are being contemplated. Such “high-profile” mergers are likely to contribute to an acceleration of the pace of both the consolidation and integration of the banking systems of the euro area. However, it should be remembered that the recent pattern of consolidation represents part of a longer-term trend in the European banking industry, as is highlighted by the large decline in the number of credit institutions in the euro area countries over the past decade or so. In the mid1980s there were more than 11,000 credit institutions in the euro area countries; today they number around 8,000.
First Estonia, Latvia, Lithuania and Hungary and now most recently Poland, have implemented fundamental pension reforms similar to the Swedish reform with a partly funded system. In addition, Estonia has had a very consistent free trade policy, which has benefited the country during the transition to a market economy. The country has been so free trade friendly that it is now unfortunately forced to raise the customs duties on certain goods against some countries in preparation for EU membership. It is in areas such as this that the EU can learn something from the candidate countries (and countries like Ireland) rather than the other way round. The new candidate countries can enrich the EU in this way and many others, not merely in a pecuniary sense, but also institutionally and in a cultural and humane sense. The enlargement eastwards will send new stimuli to the EU, not merely for trade and economic integration, but also with regard to the EU's institutions and the current member countries, just as the candidate countries have received stimuli from the EU during the process. This means not only that a reunited Europe can become richer, but also that the EU can, hopefully, become even more successful and function even better.

Digitalisation is an ambivalent process in that it also offers banks tools to control these risks. For example, artificial intelligence is a valuable tool in the prevention of money laundering and terrorist financing, as it can be used to analyse large volumes of data quickly in order to spot unusual transactions more swiftly. 1.2 Vulnerabilities in relation to the transition to a sustainable economy [SLIDE 3]  The other structural challenge, namely the green transition, exposes banks to a number of vulnerabilities. The exposure of banks to climate-related risks is now well established, in part thanks to work by the Network of Central Banks and Supervisors for Greening the Financial System, or NGFS. In particular, banks may be exposed to physical risks and transition risks. Physical risks stem from the rise of extreme weather events such as droughts, flooding and storms. These events can weaken the businesses and households to which banks are exposed, potentially generating losses. Transition risks are related to the measures that are taken by public authorities or the private sector to support the move to a low-carbon production model, which oblige economic participants to restructure their activities and cause some assets to become impaired. Coal mines, for instance, are destined to become stranded assets. Since transition risks materialise over a longer time horizon and are less visible, they are challenging to identify and model. In addition to climate risk, the financial system is also affected by the risks linked to ecosystem disruption, such as biodiversity loss.
And within that the notional amount of credit derivatives traded in London multiplied by more than 100 between 1997 and 2006. While the US remains the main centre of the hedge fund sector, at the latest count twelve of the world’s largest 50 hedge funds were based in London, as against only three in 2002. London has a share of nearly 80% of the European based hedge fund market, up from around 70% in 2002. The UK private equity market has been another prominent area of growth recently. UK private equity funds raised in 2005 were over £ billion, around twice the size of the previous peak in 2001, with the UK private equity industry accounting for over 50% of the total European market. The drivers of the City’s recent growth In part the City’s recent growth reflects – as it did a century ago – a rapid growth in international trade and financial liberalisation. Globalisation has brought an expansion of world imports by 180% since 1990 compared with an 80% increase in world GDP. Progressive upgradings of a number of emerging economies have broadened and deepened international links. Higher savings in the emerging Asian economies, in particular, have combined with demographic change in the West to increase demand for long-term savings instruments and a fall in their yields. 10 All these trends taken together have led to a period since 2002 of unusually high returns for holders of many financial assets and the explosive growth in new products and markets.

To the extent that the UK’s industry may be relatively efficient and competitive, we may even have fewer people engaged at this end of the business than some other countries. While in 2003 the share of Gross Value Added from financial intermediation was a little higher for the UK than for France, Japan or Germany (5%, 7% and 4% respectively) there was not that big a gap and the figures for the US were about the same as the UK (8.5%). It is London’s position in the wholesale and international markets that is special and it is harder to get a handle on that. A recent estimate put the total number employed in “City” jobs at around 320,000. 4 There are other significant European centres in Paris and Frankfurt and, within the UK, in Edinburgh for instance. But London is estimated to have 75% of UK's wholesale financial jobs and to be the largest European centre for wholesale finance with 35% of the jobs (up from 30% in 2000). So by this measure those working in “City” represent a little more than 1% of the UK workforce. While this is estimated to be twice the equivalent proportion for Germany and three times that of France, we should not get it out of perspective. The economic geography of financial centres Geographical concentrations, clusters, are common in many industries. In some cases they reflect the availability of raw materials or power sources. Elsewhere the underlying reasons are not so obvious.
Svensson, “Inflation targeting”, in B. M. Friedman and M. Woodford, (eds. ), Handbook of Monetary Economics, vol. 3, pp. 1237–1302, Elsevier, 2010. BIS central bankers’ speeches  3  account the mean value for the forecast: the uncertainty over future shocks does not affect the optimal monetary policy (in technical terms one says that certainty equivalence holds). The uncertainty then does not affect the decision on the repo rate, but it does affect target fulfilment. However, there are several aspects that mean that one cannot rely on the results obtained in this type of model. The Riksbank reports a main forecast that is not merely a model forecast; it is based on both models and judgement. It is not easy to explicitly report all of the assessments and deliberations behind the overall results. However, it is possible to do this within the framework of a formalised model like the Riksbank’s macro model Ramses.11 But of course, this is not a perfect description of reality. There is uncertainty over both the structure of the model and its parameters. Other models would probably reach other results with regard to the most appropriate monetary policy. Another question concerns the nature of the forecasts. The forecasts the Riksbank now reports are in principle intended to be unbiased forecasts. But as Goodhart and Rochet pointed out in their evaluation of the Riksbank’s work, these assumptions do not hold in reality.12 In practice, longer-term forecasts are rarely unbiased. They can rather be regarded as possible scenarios contingent on certain external conditions.

For instance, we now have a far more stringent and more harmonized definition of regulatory capital. The need for common and internationally harmonized capital and liquidity requirements has been broadly recognized and will be made operational in the near term. Basel 3 represents therefore an ambitious goal. At the same time, it has been set in a cautious way in order not to impact the financing of the economy and the global growth. Those latter points are the reasons for the rather long phasing in, that has been put in place by the Basel Committee. This phasing in period should also enable countries that did not move to Basel 2 – namely the US –, to implement Basel 3 at the same pace than European banks. As a matter of fact, I consider it essential that implementation of this new framework both in Europe and in the US be concomitant – and exhaustive and I am far from being the only one. As a matter of fact, experience shows that if a reform is not implemented globally, weaknesses remain. The American administration is very positive and determined about it, so I trust that can be done. Failure to implement Basel 3 in a globally consistent way would lead to a competitive race to the bottom and may thus plant the seeds for another crisis. 1.3 Last but not least, another area in which significant progress has been made since the crisis is the accounting framework.
Figure 3: UK 5 year five year inflation swap rates have historically been stable…  5  A number of investors use the underlying swap products to meet regulatory hedging requirements, and shifts in their demand can have a material impact on pricing. 11  All speeches are available online at www.bankofengland.co.uk/news/speeches and @BoE_PressOffice  11  Figure 4: … including during the Covid pandemic  Looking ahead As I’ve already stressed, the MPC’s November forward guidance said that we did not intend to tighten monetary policy at least until there was clear evidence that significant progress was being made in eliminating spare capacity and achieving the 2% inflation target sustainably. That guidance still applies today: we have repeated it in the Minutes of each subsequent meeting, including our most recent one in June. I have thought since we first introduced it in November that our guidance would become more salient as the economy recovered, and that is being borne out by current developments. Inflation is already overshooting the target, and it is less clear, at least to me, that there remains a degree of spare capacity. But as the MPC’s guidance makes clear what matters is whether we expect inflation to return to target sustainably. At the same time, when we launched our ongoing £ QE programme in November it was explicitly for risk management reasons.

There is nothing to suggest that the rate of and pressure from these changes will ease off in the years ahead. On the contrary, international integration seems to be becoming more intense. The establishment of EMU means that this trend will accelerate. EMU affects the financial system The introduction of the single currency will affect the financial system in various ways. The most obvious change is the end to exchange transactions between the national currencies in the euro area. This also means an end to forwards and swaps in these currencies. By itself, this will leave its mark on the earnings of European banks. The coming of the euro will also affect financial activities in Europe more profoundly and may necessitate a number of changes. The euro area will constitute a larger and more uniform market with a population of about two hundred million. This market, moreover, is likely to attract investors from other European countries and other parts of the world. Via growing competition, a larger market normally leads to lower costs and increased liquidity. With more investors and the elimination of exchange risks, it will cost less to diversify savings by placing them in more countries. In other words, savers in one country will transfer some of their assets to other countries. This process has, in fact, already begun. Briefly, then, all at once there will be a much larger and much more liquid European capital market that in time may resemble the US market in size and nature.
In this context, an expanded asset purchase programme was then launched. On March 9th, the Eurosystem began purchasing public sector securities in the secondary market along the curve from 2 to 30 years, being mindful of being market neutral. Purchases of securities at negative yield are permissible, as long as the yield is above the deposit facility rate. Marketable securities purchased under this program will be made available for securities lending. This programme is intended to stimulate the economy through different channels. The first one is the portfolio rebalancing channel, in which the fall in yields on safe government bonds induces investors to buy riskier assets, thereby stimulating the economy. Since the launch of the programme yields have dropped not only for the assets purchased but also for bank and corporate bonds and equity prices have continued to rise. A second channel works through lowering and flattening the yield curve. The purchase programme will continue until the end of September 2016 and beyond if we do not see a sustained adjustment in the path of inflation. This reinforces the guidance that interest rates will remain low for an extended period of time. A third channel is related to increasing credit supply. If the Euro-system buys assets from non-banks or institutions, then these funds will reappear as deposits in the banking system. 6  Andrade and Le Bihan, 2013, Inattentive professional forecasters, Journal of Monetary Economics, volume 60, p. 967–982.

This came as a surprise because realized GDP growth rates in 2013 and 2014 were about 0.5 percentage points lower than forecasts made in 2012.3 Our analysis suggests that this economic slack contributed substantially to low inflation. For example, in the fourth quarter of 2014, if we assume no economic slack, HICP inflation would have been higher by around 0.8 percentage points. Such a counterfactual exercise is however surrounded by a large uncertainty. First, potential output is hard to estimate. That said, if potential output and domestic slack were lower than assumed, the weakness of inflation would be all the more puzzling. Second, some observers argue that the Phillips curve of the euro area is steeper than before,4 partly explaining the low level of inflation. Although we do not share this diagnosis for the recent past,5 a stronger sensitivity of prices to slack might be observed in the future as a result of labor market reforms and lower unemployment in several countries. Third, downward nominal wage rigidity may blur the relationship between inflation and domestic slack. Nominal wage inflation, which remained persistent during the crisis, is likely to stay subdued during the recovery, thus leading to a lower inflation. One caveat specific to the euro area is the asymmetric adjustment process currently at work among jurisdictions. Member countries that experienced large capital inflows in the years preceding the financial crisis experienced significant reductions in price competitiveness.
Lucas Papademos: Globalisation and central bank policies Speech by Mr Lucas Papademos, Vice President of the European Central Bank, at the Bridge Forum Dialogue, Luxembourg, 22 January 2008. * I. *  *  Introduction  For years now, globalisation has been, and continues to be, a buzzword in the public debate. Its persistent significance is certainly also due to the fact that it is such a multi-faceted phenomenon which has yet to be fully understood and assessed. Globalisation encompasses a broad range of aspects – economic, social, political, cultural and intellectual – and many of these are of relevance to public policy. Even though public discourse often focuses on the economic consequences of globalisation – the integration of markets and its associated distributional effects – globalisation is about more than the free exchange of goods, services and capital on global markets. It is also about an unprecedented opportunity to exchange knowledge and ideas across the globe. And the Bridge Forum Dialogue here in Luxembourg provides an excellent platform to see this intellectual facet of globalisation in action. I should like to thank Governor Mersch, the President of the Forum, for having invited me, and I am looking forward to an enriching debate with my fellow panellists and the audience on the theme of this year’s event: “Globalisation: how to manage it?” Exploiting my professional comparative advantage, I will elaborate on the central bank perspective.

With the arrival of the nine-person Monetary Policy Committee (MPC) in 1997, the number of published speeches increased further from around 13 per year in the nineties to around 34 in the noughties. Accompanying these speeches were published minutes of MPC meetings. 14 15 16  See Brunner (1981) and Goodfriend (1986). As described by King (2000). Capie (2010). 5  All speeches are available online at www.bankofengland.co.uk/speeches  5  In 2013, the Bank began issuing so-called “forward guidance” on its policy actions. 17  In 2014, following a  review by David Stockton, the Bank began publishing forecasts for a wider set of variables. 18  And from  2015, following a review by Kevin Warsh, the Bank agreed to publish full transcripts of MPC policy meetings (Table 1). 19  These publications do not capture the entirety of the Bank’s engagement strategy. In 2016 alone, the Bank appeared before Parliament on 22 separate occasions. Senior Bank officials made around 60 visits to the Bank’s regional agencies across the UK. Bank officials visited nearly 5,000 companies and charities. The Bank ran a schools competition, involving over 250 schools. And it hosted a Future Forum, at which it engaged openly with a broad cross-section of the public on a wide range of issues. These step changes in transparency have been broadly mirrored across a range of other central banks.