samchain/econo-pairs-v1 huggingface dataset:
Headed by Professor Trond Helge Torsvik, this group worked to incorporate the theory of plate tectonics into a broader theory of mantle dynamics as an explanatory model for movements in the Earth’s crust. The aim is to understand the development of the Earth over several hundred million years. This is truly an ambitious example of learning from history. The Centre for Earth Evolution and Dynamics at the University of Oslo was just awarded the status of Centre of Excellence in research. 3  Descriptions of the causes of the financial crisis that began in1929 bear a striking resemblance to today’s headlines: a massive and unregulated shadow banking system, global imbalances and substantial income inequality (see John Kenneth Galbraith (1997): The Great Crash, 1929, Houghton Mifflin). 4  “More than anyone else”, Einar Lie writes, “he adhered to the fiscal policy convictions that he brought along to the postwar Ministry of Finance, which bore the stamp of his experience from a time without sufficiently stringent regulation of government finances”. Lie, E. and C. Venneslan (2010) Over evne. Finansdepartementet 1965–1992 [Beyond our power], Pax forlag  2  BIS central bankers’ speeches  markets were self-correcting. Following the Depression, a new truth emerged, with John Maynard Keynes and Norway’s own Ragnar Frisch at the forefront: prices and wages do not adjust that quickly – nor can we expect that markets will automatically ensure full employment. Hence, government should play a more active role in economic policy. At the Ministry of Finance, Nissen kept to the traditional view.

John Law saw the possibility of printing banknotes to finance promising development projects in the New World. Excessive confidence in the potential for profits fuelled both the printing presses and equity prices in Paris. The bubble burst and John Law fled to Italy.24 Today, the  24  Government debt in France had reached enormous proportions after the Spanish War of Succession (1702–1713). After the death of Louis XIV in 1715, John Law persuaded the French authorities to convert government debt into equity capital in the Compagnie d’Occident, also known as the Mississippi Company. The company was awarded exclusive rights to develop the French territories in North America and a number of trade privileges. Banque Générale was taken over by the state, given the name Banque Royale, and later merged with Mississippi Company. John Law was appointed Contrôleur Général des Finances and now controlled in practice France’s finances and all trade between France and countries outside Europe. Banque Royale was given unlimited rights to issue banknotes (livres tournois). This was the first time paper money had been issued in France. The banknotes were made legal tender and the bank was given the right to collect taxes. An increasing number of stocks in the Mississippi Company were issued against government debt or paper notes issued by the Banque Royale. This led to a speculative bubble and new rounds of share issues. The value of the shares rose twentyfold in the course of 1719 and the number of millionaires rose sharply.
Chart 11 plots UK Phillips curves over three periods: 1500-1700 (pre-Industrial Revolution); 1860-1950 (post-Industrial Revolution); 1950-1977 and 1977 to date (post-war period). In each case, wage inflation is measured on the y-axis and an estimate of the output gap on the x-axis. In the post-war period, the Phillips curve conforms to type. Since 1950, it has a clearly positive slope (less slack in the economy is associated with higher wage inflation) and an intercept which is positive (reflecting positive trend inflation). The Phillips curves covering the periods either side of the Industrial Revolution are more interesting. They share one important similarly and have one important difference. The similarity is that both are associated with an average inflation rate of around zero. This is consistent with the price level being broadly stable over these periods. The striking difference is in the slope of the Phillips curve. The post-Industrial Revolution Phillips curve has a conventional upward slope, similar to that operating after 1950. Higher growth or lower unemployment is associated with higher rates of wage and price inflation. The pre-Industrial Revolution Phillips curve is altogether different; it is as flat as a pancake. Indeed, it bears a close resemblance to the Phillips curves which have operated, in the UK and globally, since 2008. There are many potential explanations of this flatness in the pre-Industrial Revolution Phillips curve, including noisy data. And its similarity with the present-day Phillips curve may be purely coincidental.

24  All speeches are available online at www.bankofengland.co.uk/speeches  24  Chart 17: Investment intention indicators Percentage change on a year ago  20 10 0 -10 -20 -30  2007  2008  2009  2010 BCC  2011 CBI  2012 2013 Agents  2014 EEF  2015 ONS  2016  2017  Sources: Bank of England, BCC, CBI/PwC, EEF, ONS and Bank calculations. Notes: (a) ‘ONS’ is the chained-volume measure of business investment. Data are to 2017 Q1 and adjust for the transfer of the nuclear reactors form the public corporation sector to central government in 2005 Q2. (b) EEF and CBI measures are net percentage balances of respondents reporting that they have increased planned investment in plant and machinery for the next twelve months. EEF measure corresponds to the manufacturing sector and CBI sectoral surveys are weighted together using shares in real business investment. (c) BCC measure is the net percentage balance of respondents reporting that they have increased planned investment in plant and machinery. Sectoral surveys are weighted together using shares in real business investment. Data are non-seasonally adjusted. (d) Agents measure shows companies’ intended changes in investment over the next twelve months, with sectoral surveys weighted together using shares in real business investment. Last observation in the quarter.
That’s true of the most recent period as well: prices of non-oil goods exports rose 12% through the course of last year, in line with those of imports. Admittedly, the behaviour of the sterling price of services exports is rather different. They’re more stable in the face of exchange-rate movements (Chart 8), implying that depreciations do indeed reduce them in foreign currency terms. I think this is understandable. Services are less homogenous than goods and there’s more room for non-price competition. The UK has a larger presence in this area, accounting for 7% of global services trade in total, 12% for business and financial services specifically. Those wholesale services are relatively specialised. Chart 8: Sterling price of services exports more stable  Equally, and for many of the same reasons, the evidence suggests that service export volumes are much less sensitive to any cross-country variations in prices than in goods markets. Indeed it’s only because of this relative insensitivity that such variations can persist for any length of time. At any rate, my main point here is that the positive effects of a currency depreciation depend at least as much on the response of domestic firms as on that of foreign buyers.

This is true whether measured in terms of the amount of duration being pulled out of the market or purchases as a share of total issuance. Lessons learned As I mentioned earlier, there have been at least six major areas where there has been significant learning, which has influenced the evolution of policy. Let me turn to them. The importance of managing expectations Managing expectations is always central to monetary policy. However, at the zero bound this is even more critical than usual. There are two aspects of this. First, keeping inflation expectations anchored at levels consistent with the central bank’s medium-term inflation objective – 2 percent on the personal consumption expenditures deflator in our case – is vitally important. Once deflation expectations become well entrenched, it is very difficult to change them. And, because inflationary expectations are an important driver of actual inflation outcomes, deflationary expectations can be self-fulfilling in driving actual deflation outcomes. Also, if inflation expectations were allowed to fall, this would raise the level of expected real interest rates, making monetary policy less accommodative. Conversely, a central bank does not want medium-term inflation expectations to climb above levels consistent with its inflation objective. If inflation expectations were to become unanchored to the upside, that could damage credibility and result in higher risk premia for  BIS central bankers’ speeches  5  financial assets and tighter financial market conditions.
Indeed, it is the credibility of our commitment to price stability that has enabled the Bank to cut interest rates and to inject money so aggressively in order to support nominal demand in the wake of the credit crisis. If, as in the bad old days, the monetary authority lacked credibility, I believe that the stimulus would have had to be smaller and the downturn would, in consequence, have been greater. That underlines the risks of tinkering with central bankers’ inflation targets, as some commentators have seemed to suggest. When, unusually, we face any kind of choice in the path of demand and activity consistent with maintaining price stability, we obviously err towards the stronger path. As I have described, that is a factor today when some businesses have suspended but not yet scrapped capacity. In aggressively stimulating demand in order to absorb slack, we aim to keep inflation in line with the target over the medium term and also to reduce the extent to which the economy’s productive capacity is wasted. Due to the endogeneity of firms’ supply capacity, that is going to call for some difficult judgments in the quarters ahead about the evolution of slack in the economy and about pricing pressures. Another element of stability – in the financial system – is plainly necessary to maintain stability in demand, output and employment. As many researchers have shown, recessions associated with financial crises have tended to be longer and deeper. 14 That is the backdrop to the debate on reforming the financial system.

To achieve the 2% inflation target over the medium term but at the cost of an avoidable depletion of the economy’s supply capacity would not be congruent with the MPC’s Remit, which includes supporting growth and employment in so far as that is consistent with the overriding goal of price stability. I was glad that the “effective supply” way of thinking about this was reflected in our latest Inflation Report. But I would readily concede that we must not lose sight of the potential “speed limit” effects that featured in our November Report. Given the need for some rebalancing in the pattern of demand and activity, and the likely lags in firms bringing even suspended capacity back on-line, bottlenecks are a distinct possibility. We will need to be especially alert to messages from the Bank’s Agents, to survey evidence, and to data on productivity, wages and prices for any sign of inflationary pressures. Volatility of inflation, and inflation expectations The Committee’s strategy has warranted maintaining the very substantial monetary stimulus notwithstanding the marked pick-up in inflation over recent months. As the Governor explained at our press conference a fortnight ago, we think that the recent rise in inflation is accounted for mainly by the increase in petrol prices, the restoration of VAT to 17.5%, and lagged effects of sterling’s substantial depreciation. But we can’t be, and aren’t, comfortable about it. Not least because the country has to trust us that these will be temporary disturbances.
This benefits not only the participants but the CCP and the system as a whole; with a larger and more diversified pool of participants, the impact on the CCP due to a default of any single particular participant would be reduced. Self-clearing can also widen CCP access on cost-effective terms and allow proprietary derivatives trading firms, such as buy-side players, to join CCPs as members and thereby reduce their counterparty and fellow customer risks. CCPs will have the flexibility to design suitable self-clearing models, taking into account the risks and needs of self-clearing members. We have seen recent innovations by Eurex and CME to allow certain market participants which are not allowed to take part in the CCP risk mutualisation as a result of their mandates, to selfclear on the CCP. Remote clearing will allow offshore participants, which do not currently have a presence in Singapore, to join our CCPs, thus bringing about new, additional liquidity to local markets. The increased breadth and depth of the markets in turn benefits onshore members which will continue to be key players in our domestic markets. At the same time, such memberships allow offshore firms to gain familiarity with the local market and to deepen their participation. There are some understandable concerns if remote or self-clearing can undermine financial stability in domestic markets. In Singapore, our regulatory standards and expectations will not change. We will only allow CCPs to admit self-clearing or remote clearing members if they have put in place adequate admission, ongoing monitoring and risk management frameworks.

In the area of large value payment infrastructures, the degree of integration has increased very quickly. We should bear in mind that EURO 1 and TARGET have been clearly set up to face the challenge of the EMU. It was of great importance for large value payments, in particular those linked to the money market, to rely on systems handling efficiently and safely cross border transactions. Moreover, TARGET was a prerequisite for the effective conduct of the single monetary policy, because it ensures the settlement of monetary policy operations. The timeframe was particularly tight to build up the TARGET system. Therefore, the design of TARGET 1 was based on the principle of minimum harmonisation and on a decentralised architecture, with an interlinking of the national RTGS (Real-Time Gross Settlement Systems). TARGET 2, which is due to go live in 2007, will further improve the degree of integration of wholesale payment infrastructures. It will provide fully harmonised settlement services across Europe in real-time in central bank money, supported by a single price structure for domestic and cross-border payments and a single processing platform. This single platform will be used by all central banks of the ESCB to provide services to their banking community. TARGET 2 will enhance cost-efficiency and meet stateof-the-art business continuity procedures.
In addition, the industry itself has failed to co-operate to enable it handle mega risks and stop the externalisation of insurance funds. Unlike the Bankers Association of Zambia (BAZ), whose existence and strength is cemented by the banks themselves, the insurance industry has a very loose arrangement about how it should promote a common front. There is neither a written nor binding memorandum of understanding among the insurance companies to foster cooperation on some of the thorny issues confronting the insurance industry today! However, I must acknowledge here, that there is an organisation called the Insurers Association of Zambia (IAZ), whose membership is compulsory but which may not be very strong in guiding its membership. BIS Review 74/2004  1  Ladies and Gentlemen, from my observation, the insurance and pension industry in Zambia is facing many challenges. These include: 1)  Amendments to the Insurance Act of 1997 and the Pension Schemes Regulation Act of 1996 so that laws and regulations that impose stricter corporate governance practices and structures in all institutions managing pension and insurance funds are introduced;  2)  The Investment Act must be harmonised with the Insurance/Pensions Acts in such a way that all insurance companies formed or already formed must have local ownership/equity partnership. This would greatly contribute to minimising capital flight and huge repatriation of dividends;  3)  Need for the establishment of a national re-insurance company to avoid capital flight;  4)  Insurance companies need to harmonise their operations so that clients benefit from fair competition.

A crisis was narrowly averted when the counterparties were persuaded to purchase LTCM. I might say that in due course they got their money back: which only goes to show that a liquidity crisis can arise even when the solvency position of the institution remains positive. Thirdly, we cannot ignore the threat of a “Major Operational Disruption” (MOD). What I mean by this is a natural disaster, a major act of terrorism like 9/11, or an IT catastrophe such as we sought to mitigate in the Y2K preparations. Considerable time has been devoted to work in this area, on ex ante mitigants to provide predictability and help to enable the system to get back to work quickly. You need robust back-up sites, operating procedures, personnel regrouping plans and so much more. We are not on our own of course if a financial crisis does occur. Clearly we would work closely with FSA and the Treasury both directly and through the Tripartite Standing Committee. The Standing Committee of representatives of the Bank, FSA and Treasury meets on a monthly basis and of course ad hoc. We discuss both individual cases of significance and specific threats which could be relevant to financial stability. The Committee covers surveillance, strengthening the infrastructure and crisis management. For the latter, the objectives and roles of each party are outlined on the Financial Sector Continuity Website. The Bank’s roles relate to ensuring the orderly functioning of the UK markets, including the maintenance of adequate liquidity and the functioning of payment systems.
ETFs clearly bring many businessas-usual benefits which market participants value – for example, the convenience of being able to transfer risk at high-frequency via standardised, exchange-traded securities in fast markets. There is a question, however, of how these interlinkages work in stress. During the turbulence of August 2015, for example, equity investors flocked to trade in exchange-traded funds, causing ETFs to appear to be priced at large discounts to the value of their – sometimes less liquid – underlying security (Chart 11). On this occasion, once again, the dislocation was short-lived. But if a future stress in fast markets – such as those for ETFs – were to persist for a longer period, it might spill over to cause stress in other linked markets, including for less liquid underlying instruments, including government or corporate bonds as well as equities, leading to wider implications for financial stability. 17 18  This also caused the firm to default at the CCP, creating a loss that was mutualised among the rest of the CCP’s members. See Greenwich Associates (2016), ‘Long-term investors embrace FX algos’. 7  All speeches are available online at www.bankofengland.co.uk/speeches  7  There is therefore a need to ensure that market participants’ risk management frameworks keep pace with the speed at which these markets are capable of moving, taking into account the speed of possible shocks and the potential for propagation, including to slower markets.

The changing distribution of risks for individual firms  Moving on to my second example, even in the absence of systemic spill-overs from flash episodes, fast markets alter the pattern of risks that individual market participants are exposed to. And there good grounds for concluding that more needs to be done to ensure market participants take account of this consistently. 14  See BIS (2017), ‘The sterling ‘flash event’ of 7 October 2016’, January. See Joint Staff Report (2015), ‘The US Treasury Market on October 15, 2014’. 16 In this spirit, the FPC concluded following the sterling flash event that “such disruptions underscore the concern that liquidity in some markets may have become more fragile in recent years”. See Record of the Financial Policy Committee Meetings held on 23 and 29 November 2016. 15  6  All speeches are available online at www.bankofengland.co.uk/speeches  6  Use of algorithms does not change the fundamental risks associated with trading in financial markets (e.g. market, counterparty and operational risks). But use of high-frequency trading algorithms does change their relative intensity and can materially increase the potential to build up significant intraday positions. This latter point is most obviously true for those bank and non-bank intermediaries that specialise in highfrequency trading. And though these firms should be expert in managing such risks, history shows this is not a given.
Yet the risk of further market correction remains high. 6. The global economy remains highly vulnerable and we cannot fully assess the extent of the crisis yet, due to three factors: uncertainty over the dynamics of the pandemic; high spillovers on several fronts, and weakened international and domestic institutions. 7. The Covid-19 poses major challenges to emerging-market economies (EME). The spread of the disease finds them with worse living conditions and less resources. EMEs remain heavily exposed to spillovers due to dependence on capital inflows, commodities and remittances. Economic informality, limited social safety nets, and shallow financial markets limit the effectiveness of shock absorbers and policy responses. 8. Yet not all EMEs are the same. Some face this crisis with stronger fundamentals, broader policy space and more credible and effective institutions. 9. Chile has been hit hard by the pandemic. The first cases emerged in early-March and contagion seemed to stabilize by end April, only to rapidly escalate over the last month and a half. The country is now in its 15th week of the pandemic, with 250.000 confirmed cases and active cases stabilizing again. While Chile currently stands 8th in number of cases in the world, mortality rates remain low and testing broad, thanks to its stronger health system compared with other EMEs. 10. The spread of contagion has led authorities to adjust their NPC strategies. This has included stricter and broader quarantines, which have grown from 20% of the population in April to 49% these days.

The MPR is likely to be held at its technical minimum over the next 24 months; FCIC funds are provided over a 4-year horizon, and even short-term liquidity facilities will remain in place until early 2021. 16. Still, some challenges remain on three fronts: a. Lending to large corporations. For a number of years, big corporations have been tapping international and domestic corporate bond markets. They faced the Covid-19 crisis with rather sizeable cash holdings from bond issuing in the first quarter and the drawdown of bank credit lines. Yet this liquidity will not last forever. Reactivating the corporate bond market is key to prevent largescale corporations from crowding out SMEs from access to bank lending. The government and the CMF have adjusted regulations to speed up bond issuing and the Central Bank asset purchase program is likely to trickle down to corporate bonds, but more government action may be needed in order to reduce risk over these assets. b. Expanding non-conventional tools. Right now, the Central Bank has limited reach in the asset market, since the Constitution forbids it from buying Treasury bonds even in the secondary market as well as nonfinancial corporate bonds. A Constitutional reform is making good progress in Congress to remove the first constraint. c. Recovering private consumption and investment. Consumer and firms’ expectations have plummeted in the last eight months, responding to the social crisis, first, and to the risk-off mood of the Covid-19 pandemic, later. Private consumption and Investment are expected to drop 6% and 12% this year.