samchain/econo-pairs-v1 huggingface dataset:
One of the first means of paying tribute to him that occurred to us was to publish a book with a broad selection of these texts. On reading it you will see how many of the subjects he tackled over the course of his term of office, from 1992 to 2000, remain fully valid in today’s economic debate. Along with the publication of this book we decided to hold this Conference as a tribute, structuring it around a discussion of the pivotal areas of Ángel Rojo’s economic thought. We are joined by a select group of speakers whose common denominator, in addition to their professional standing, is to have shared concerns and experiences with him at different times in his life and in his various fields of academic, institutional, domestic and international activity. The Conference comprises four sessions that turn on subjects which largely reflect the main areas in which he developed his body of academic work and his best economic policy contributions. The first session addresses monetary and fiscal policy; the second, the challenges of European integration; and the third and fourth, the Spanish economy and the role Ángel Rojo played in the design of Spain’s economic policy. Ángel Rojo’s main achievement as Governor was his contribution to Spain joining the euro as a founding member.

A substantial portion of the capital inflows that finance our current account deficit has come from foreign central banks—which have been accumulating dollar reserves to preserve exchange rate arrangements that are unlikely to be sustainable and are already in the process of change. The impact of a reduction in the scale of official accumulation of dollar assets could be fully offset by increases in purchases by private investors. But even in the context of a continued high degree of confidence in the relative return on claims on the United States, it is hard to know with confidence how the preferences of private savers might respond to the process of gradual evolution in their nation’s exchange rate regimes now underway. And most importantly, perhaps, these imbalances matter because at some point they will have to reverse. Market forces will at some point induce an adjustment. And that inevitable process of adjustment will bring with it the risk of large movements in relative prices, greater volatility in asset prices and slower growth in the United States and in the rest of the world. The magnitude of this risk is difficult to measure with any confidence. Past episodes of external adjustment offer some reassurance, but the present circumstances seem sufficiently different from historical precedent that history may not be a particularly useful guide.
The ultimate impact of the crisis on the banking industry will indeed hinge on its scale and duration, but also on the effectiveness of economic policies in alleviating its effects on households and firms. In this respect, in the current situation of incomplete, uncertain and uneven economic recovery, retaining a large part of the exceptional measures to support the economy is warranted, in particular for certain sectors. In any event, projections suggest that there will be a significant increase in the ratio of nonperforming loans in the coming quarters, even under the most benign scenario. 2  Against this backdrop, I have three important considerations to make with a view to maintaining the sector’s resilience in the coming months, beyond keeping the extraordinary measures in place. Firstly, much of the downturn in banks’ results in the first three quarters of 2020 was due to greater provisioning in anticipation of future asset impairment, which has still not materialised but which will do so in the coming quarters. Specifically, Spanish banks have increased their provisioning by 75% in the first nine months of 2020 compared with the same period a year earlier. Sustaining this effort in the coming quarters would enable the bulk of provisioning needs anticipated by the stress tests under the most likely scenario for this and the coming year to be met. This has led to a significant decline in banks’ profitability, but it has also raised their loss absorption capacity, something which investors should particularly value in these circumstances.

The Basel reforms that were phased in over the last decade incorporated into regulations the lessons learned during the global financial crisis. The first stage of the Basel reforms began in 2010 and concluded with a second wave of reforms published in 2017. In the first phase, the aim was to boost the level and the quality of banks’ microprudential capital requirements. The intention was to reduce their risk-taking, by increasing their “skin in the game”, and to provide them with greater loss-absorbing capacity. In addition, the releasable macroprudential buffers I referred to earlier were also introduced. The second phase of the Basel reforms focused on a matter that came to light during the first phase, namely the calculation of risk-weighted assets (the denominator of the capital requirements under the Basel standards) and the need to standardise their treatment among institutions. Once again, the aim was to reinforce banks’ credibility with regard to their prudential ratios and the correct measurement of the risks they assume. A crucial aspect of this reform is the “output floor”, which limits the reductions that banks can obtain by using internal models to calculate minimum capital requirements instead of the standardised approach that does not require the use of models and is much less sensitive to new data inputs. 5  The impact analyses of the reform reveal that banks’ capital requirements would increase in some jurisdictions, although they would also be reduced by certain elements.
For example, in the latest Monetary Policy Report we stated that “in coming quarters, the monetary policy rate will move along a similar path to the one that can be inferred from the different measures of private sector expectations over the two weeks prior to the statistical closing of this Report.” and in the presentation to the Senate this was clarified in more detail by stating that by the end of the year the monetary policy rate could lie in the range of twenty-five basis points more or less than its current level. In practice, and only two months after that presentation to the Senate, we have increased the monetary policy rate by one hundred basis points. In the Board’s opinion, this is necessary to prevent the latest news on inflation – both internationally and its passthrough to some domestic prices – from delaying the adjustment of inflation to its target within the policy horizon. The anchor for these decisions was the baseline scenario on which the May Monetary Policy Report was drawn up. Publication of the Monetary Policy Report is reinforced by the statements released at the end of our monthly monetary policy meetings in which we generally refer explicitly to the baseline scenario. Additionally, three weeks after each meeting takes place we publish the minutes containing the board members’ discussions which again frequently refer to the most likely scenario.

The more transparent, the more cautious board members will be in pronouncing their judgments. That is why we have decided not to reveal board members’ names in the minutes, so as not to inhibit an open, technical and independent discussion. In the pursuit of monetary policy effectiveness and predictability, we feel that the discussion itself is more important than names. A recent study by Meade and Stasavage (2008) compared the Fed’s Federal Open Market Committee discussions before and after 1993, at which time it was decided to publish detailed records of deliberations of the meetings five years after they had been held. The study concluded that knowing the transcripts were to be made public had made members of a monetary policy committee more reluctant to offer dissenting opinions. In general, transparency and its limits depend chiefly on the characteristics of the Board. For example, at one extreme we have the European Central Bank which does not keep minutes and dissent is very limited; and at the other extreme we have the Bank of England where each board member has individual responsibility. 4 Chile, like the United States, takes an intermediate stance. That’s why Blinder (2004) says, there is no “one-size-fits-all” approach to communication and transparency. Communications policy The Central Bank website carries a document called “Communications Policy” which specifies the principles and norms governing the Bank’s communication with the public.
The manner in which the MPC optimises these trade-offs can be represented in “linear-quadratic” form – a set of linear constraints describing the behaviour of the economy, and quadratic preferences that penalise deviations of inflation from its target and output from its potential. The relative weight the policymaker places on output stabilisation, relative to inflation stabilisation, is often denoted 𝜆 – or ‘lambda’. The policymaker’s objective function can be described as the following “loss function”: 𝐻 ∗ )2 ]} min ℒ𝑡 ≡ 𝐸𝑡 {∑ 𝛽 𝑖 [(𝜋𝑡+𝑖 − 𝜋 ∗ )2 + λ(𝑦𝑡+𝑖 − 𝑦𝑡+𝑖  {𝑟𝑡+𝑖 }𝑇 𝑖=0  𝑖=𝑜  where 𝜋𝑡 is inflation, 𝜋 ∗ is the inflation target, 𝑦𝑡 is output and 𝑦𝑡∗ is ‘trend’ output, so that 𝑦𝑡 − 𝑦𝑡∗ is the output gap, 𝑟𝑡 is the nominal interest rate – the policy instrument, 𝛽 is the discount factor and 𝑡 subscripts denote time periods. 𝐻 is 3-5 years after which the monetary policy transmission mechanism fades. The policymaker’s objective is to minimise the discounted sum of losses over time. In this formulation, a lambda of zero would imply no weight on the stabilisation of real activity – so-called “inflation nutter” preferences. When lambda is positive, the policymaker is willing to strike some trade-off between output and inflation stabilisation, as directed by the MPC remit. This objective function is optimised subject to the constraints implied by the aggregate behaviour of the economy, including the relationship between interest rates and activity; and the relationship between activity and inflation – the Phillips curve.

On balance, the Bank’s analysis and empirical studies suggest there are no strong reasons to think that the housing tools have any significant negative long-run impact on the growth of supply capacity. The housing tools will bind more when housing activity is stronger and lenders are loosening underwriting standards, increasing both the gross benefits (i.e. reducing GDP-at-risk in a downturn) and gross costs (i.e. reducing demand by excluding some borrowers from the market). To test if net benefits are positive across different states of the world the FPC reviews central, upside and boom scenarios.20 In each scenario we first estimate the distribution of borrower indebtedness absent the tools (shown in blue shading, Chart 13, for the boom scenario). This includes an assumption about how lenders’ underwriting standards would have evolved without the tools in place. A second simulation then estimates how the distribution of indebtedness evolves differently with the tools in place (shown in pink shading, Chart 13, for the boom scenario). The gross benefits of the tools arise from a reduction in GDP-at-risk associated with the less risky debt distribution with the tools in place, compared to the risker scenario without the tools. To weigh these benefits off against the costs (the temporary reduction in housing activity) requires assumptions about the persistence of each, society’s discount rate, the probability of a downturn occurring – as the benefits are only realised in a downturn, and the preferences of the policymaker (as encapsulated in parameter 𝜙).
In the recent past the velocity has been declining, while multiplier has hovered between 5.0-5.2. In 2007, this trend is expected to continue. 8  BIS Review 8/2007  Table 1 Quarterly targets for reserve money Rs. billion Dec. 2006  Reserve Money Point to Point Change %  2007 Targets  Target  Actual  Mar  Jun  Sep  Dec  227.6  239.8  254.6  250.4  257.8  267.6  15.0  21.2  17.3  17.9  16.1  11.6  Table 2 Indicative targets for broad money (M2b) Rs. billion Dec. 2006  Broad Money (M2b) Point to Point Change %  2007 Targets  Target  Estimates  Mar  Jun  Sep  Dec  1,175.6  1,221.6  1,274.9  1,291.4  1,315.9  1,383.2  15.0  19.5  19.2  19.0  17.9  13.2  The programme also allows for a Broad money growth of 17.6 per cent from the targeted level of Broad money at end 2006. This will reflect an increase in Net Foreign Assets of the banking system of US dollars 200 million, and increase in private sector credit by Rs 147.3 billion (15.5 per cent) and net credit to Government by Rs 16.7 billion. To maintain the overall increase in net credit to the Government at Rs 16.7 billion, net credit to the Government from commercial banks would need to be maintained at Rs 5.2 billion.

Another key fiscal indicator, namely recurrent expenditure as a ratio of GDP recorded a value of 14.0 per cent during this period. Capital expenditure and net lending also increased by 28.2 per cent during this period. The main contributors to this increase were the acceleration of infrastructure development and tsunami related reconstruction activities. All in all, the overall budget deficit in the first nine months of 2006 reached 6.0 per cent of GDP, while the budget deficit in 2006 is estimated to be 8.7 per cent of GDP. In relation to the outstanding debt stock of Government, we note with satisfaction that it is expected to decline to 93.1 per cent of GDP by end 2006 from 93.9 per cent as at end 2005. The outstanding government debt to GDP ratio is also expected to decline in the medium term in line with the path enunciated in Fiscal Management (Responsibility) Act. We could also report that the tight monetary policy stance adopted from end 2004 was further firmed in 2006 to curtail high growth in monetary and credit aggregates to contain rising inflationary pressures. Accordingly, the Central Bank raised its policy interest rates by 25 basis points in June 2006, 12.5 basis points in July 2006, 50 basis points in September 2006, and a further 37.5 basis points in December 2006: a total of 125 basis points during the year. This is in addition to the increase of policy rates by 175 basis points during 2004 and 2005.
But not all of the sectoral differences that have emerged are necessarily unwelcome. Indeed, for those seeking to ensure stability in the economy as a whole, it is really just as well that consumption growth has remained robust at a time when the net trade position of the economy has worsened so markedly. And, as recent MPC minutes show, that has been our intention. So long as the world economy recovers quickly enough to pick up the slack as consumption slows, it may be that we in the UK will avoid the sharp recessions of previous cycles. Of course, this is a big 'if', and I do not want to imply that I am excessively confident that this will occur. Rapid consumption growth brings with it considerable risks, not least when it is financed by a large build up in consumer debt. But it is the MPC's central expectation that we will escape a serious slowdown at current interest rates. In the last few weeks, we have seen some tentative signs of an unwinding of some of the more severe sectoral gaps in the economy, with the slowdown in retail sales growth since the start of the year, and an encouraging pickup in a number of surveys of business confidence and investment intentions. 2  BIS Review 18/2002  Overall, it seems to me that the risks around the outlook for UK inflation are fairly evenly balanced.

Best practice in listed companies has for some time recognised the importance of rotating individual auditors. But the relationship between a major listed company and its auditor goes well beyond the role of the senior day-to-day audit partner. Before coming to the Bank of England, I had been involved with companies where the audit partner had rotated; but the senior partner of the firm, who took a close interest in the relationship, of course had not. If the profession believes that rotation is important to maintain independence, should that rotation not relate to the firm, with whom the relationship is, rather than any individual? There are of course good arguments on the other side, and it will be interesting to see where the review of these and related matters, recently announced by Patricia Hewitt, comes out. Conclusion Ladies and gentlemen, it has been a pleasure for me to come to Northern Ireland, to meet with a number of business people during the course of this visit, and to join you this evening. Can I take this opportunity to wish you, and the business communities you serve, all success for the future. 4  BIS Review 18/2002
A growing number of firms, not only machinery companies, have targeted the oil industry. Labour shedding in some sectors has freed up labour for other uses. Oil companies have shown the capacity and the willingness to pay. Tax rules have favoured investment spending. Earnings have been solid. The companies’ employees have been wage winners here in Norway (see Chart 3). A state-of-art oil service industry has emerged. New products and technological solutions have been developed. For many, the contracts on the Norwegian continental shelf have been a springboard to new export markets. There is a wide array of examples of company turnarounds. Let me offer one: The manufacturing company Øglænd in Rogaland, established by Jonas Øglænd from Sandnes as far back as in the 1860s, launched the bicycle brand DBS in 1932, which later became a household name in Norway. Today, the company, which is one of Norges Bank’s regional network contacts, is one of the world’s leading producers of suspension systems. Its customers are mainly oil and gas production companies. The company has more than doubled its turnover over the past three years. Around three-quarters of its sales are outside Norway. The oil and gas industry has been decisive for the strong growth in the Norwegian economy over the past 40 years. But the past 15 years stand out. From the end of the 1990s, the price of North Sea oil rose from about USD 10 per barrel to over USD 100 per barrel.

Norman T L Chan: Strengthening risk management of banks in Hong Kong Statement by Mr Norman T L Chan, Chief Executive of the Hong Kong Monetary Authority, to the media, Hong Kong, 19 May 2017. * * * In view of the increasing risk of overheating in the property market, I would like to announce that the Hong Kong Monetary Authority (HKMA) has decided to introduce three new counter-cyclical prudential measures today to strengthen the risk management of banks. 2. The first measure requires those banks using Internal Ratings-Based Approach to  calculate capital charges for credit risk to raise the risk weight floor by 10 percentage points from the existing level of 15% to 25% for new residential mortgage loans. 3. The second measure requires banks to lower the applicable loan-to-value ratio (LTV) cap by 10 percentage points for mortgage loans extended to applicants with one or more pre-existing mortgages. 4. The third measure requires banks to lower the applicable debt servicing ratio (DSR) limits by 10 percentage points for mortgage loans extended to applicants whose income is mainly derived from outside of Hong Kong. 5. These three measures take immediate effect. However, mortgage applications for transactions with provisional sale and purchase agreements signed today or earlier will not be affected. 6. Finally, I would like to remind the public that, for most people, buying a property is not only one of the most important decisions in life, it is also a financial transaction entailing significant leverage through borrowing.
The much stronger monetary policy reaction, a greater willingness to run fiscal deficits and incomparably larger amounts of support to the financial sector are the distinctive features of the present crisis. Monetary and fiscal policy were both restrictive in the Great Depression. The opposite is the case in the Great Recession; both have been and continue to be very expansive. Stabilisation packages to help the banking sector have been very large, while they were non-existent in the early thirties. It will be hard to argue that these policy responses have not played a crucial role in avoiding a repetition of the Great Depression. Of course, expansive fiscal policies, support measures to the financial sector and unconventional monetary policies do not come for free. This can be seen in the increase in public debt levels registered in many countries and in the size of, and the corresponding risks present in, many central banks’ balance sheets. What in turn are the reasons why, in Switzerland, the Great Recession took the form of a “relatively severe recession”? A number of factors, some of which were already hinted at in my Money Market speech last year, were surely at play: the sound condition of the Swiss economy when it entered into the crisis, the demand impulse provided by immigration, the absence of a real estate bubble, strong private savings ahead of the crisis, and, last but certainly not least, a very expansionary monetary policy response completed with a determined and calibrated support to one of our big banks.

However, these numbers are estimates given that almost all of the repo transactions are conducted over the counter. See also IMF (2010), Global Financial Stability Report, October 2010. 2  BIS central bankers’ speeches  there is no new information but only the application of the existing and published criteria. Compared to many other central banks, the definition of eligible collateral is unusually open in the sense that the SNB is rare among central banks in accepting securities denominated in foreign currencies and not only in its home currency, the Swiss franc. The quid-pro-quo of this multi-currency policy is that securities eligible for SNB repo transactions must satisfy stringent quality requirements: these requirements concern their credit ratings and liquidity properties. This policy is coherent – open but strict! – and it has substantial advantages. First, no initial margin or haircut is applied during standardised repo transactions, making the system more capital efficient.8 Second, it allows a broad range of financial institutions to participate, including many international banks. Third, it creates incentives for banks to hold high-quality, liquid assets in their balance sheets. Finally, as already suggested, this highly credible collateral policy has resulted in SNB eligible collateral becoming the standard for the secured interbank money market in Swiss francs. This, in turn, has made an essential contribution to creating a robust secured interbank market and thereby keeping interbank credit lines open at all times during the crisis. II.