samchain/econo-pairs-v1 huggingface dataset:
With the final tranche on July 14, the disbursement of the proceeds from the gold sales will have been completed, representing the largest financial transaction in the history of the Swiss National Bank. In my view, the most important lesson to be drawn from the SNB’s gold sales is that the decision to sell official gold holdings should be made separately from any consideration on how to use the proceeds. The history of the SNB sales shows that notwithstanding the constitutional and legal complexities I referred to earlier, the time between the expert opinion about the SNB’s excess reserve capital and the first sales was two and a half years. Switzerland’s politicians, on the other hand, failed to reach a consensus on what to do with the proceeds. After eight years of relentless debates and a squarely rejected referendum on the Swiss Foundation for Solidarity in 2002, the funds will be disbursed according to the constitutional distribution key for the SNB’s regular profits. I don’t want to burden you with the intricacies of the Swiss political debate around the gold proceeds. Let me simply say that it was not for lack of creative ideas that a consensus failed to emerge. This lesson strikes me as relevant with regard to potential renewed discussions about IMF gold sales. Such discussions should exclusively be conducted on the basis of a thorough examination of the solidity of the IMF’s financial position and not become entangled with proposals on how to allocate any expected proceeds.

11.07.2022  Welcoming remarks to the conference on econometric methods and empirical analysis of microdata in honour of Manuel Arellano Pablo Hernández de Cos Governor  Good morning, and welcome to this conference on econometric methods and empirical analysis of microdata in honour of Manuel Arellano, one of our country’s leading economists and a key figure in the field of econometrics at international level. Let me take this opportunity to, once again, congratulate professor Arellano on all his important achievements. We are indeed very honoured at the Banco the España to have Manuel with us at the CEMFI. In his recent acceptance speech at the award ceremony of the King of Spain’s Prize for Economics, Manuel Arellano argued that a nation without good administrative data is like a hospital system without access to advanced magnetic resonance equipment. I couldn’t agree more with this comparison. To have an accurate diagnosis of the problems of an economy it is crucial to be able to observe economic reality in sufficient detail. And, the analysis of an economy in high resolution is possible thanks to the empirical analysis of data, of microdata in particular, using, of course, the appropriate econometric methods. Indeed, in recent decades, the analysis of microdata has revolutionised research in the social sciences1 and policy evaluation. The availability of granular data, together with the development of innovative econometric methods, has radically changed the way researchers approach and understand social issues.
This is because the main reasons underlying the outbreak of the current financial crisis are deficiencies and mistakes in the establishment of economic policies along with the fulfillment of regulatory and supervisory activities. Nevertheless, we all know that the reconstruction of economic balances under normal conditions relies on the proper execution of these functions. Another factor leading to uncertainty is the enforcement of global financial and monetary measures of a size, speed and coordination that has never been witnessed before. This raises ambiguity pertaining to the responses to these measures from financial markets and economies in the upcoming period. In the current conjuncture there is a consensus that the recovery in global economic activity will not be anytime soon and what worries the global community is what will follow the crisis. The question about mechanisms to avert any future global financial crisis similar to the current one will completely occupy the agenda of academics and policy-makers in the near future. Moreover, the extent and pace of the reversion for financial measures and nontraditional monetary policy exercises against the financial crisis on the back of stabilization in economies will top agenda very soon. The global financial crisis has led to a significant slowdown in economic activity in Turkey as in other developing countries. A remarkable tightening in lending conditions and a surge in interest on loans were experienced during the worst period of the financial crisis.

Consequently, other tools than the policy rate will continue to be needed to ensure that other interest  10 See CGFS (2019) for a summary and discussion, and Hansson et al. (2018) for implications for the monetary policy analysis. 11 As I have said, after the financial crisis, new models were developed that included a role for asset purchases; see, for example, Gertler and Karadi (2015). 8 [13]  rates and lending develop in such a way that capacity utilisation in the economy is maintained and the inflation target is met. How far can the policy rate be cut? At present, the Riksbank’s policy rate is at zero per cent and, according to the Monetary Policy Report from November 2020, the Executive Board’s best assessment is that it will remain there over the entire forecast period, which is to say until the end of 2023. At the same time, we have emphasised that the policy rate may be cut to below zero, should the circumstances justify it. We have done this before – cut the policy rate to slightly below zero, that is. Between February 2015 and December 2019, the policy rate lay in the range of -0.1 to -0.5 per cent. Our experiences of this period were mainly positive, as the low policy rate contributed to inflation again rising towards the target without any major negative side effects. Cutting the repo rate ‘deeply’ is another thing, however.
They reached a climax in the sophisticated assault of early August, which mobilised massive resources in an attempt to play off the currency board system against the stock and futures markets. This attack was unprecedented in scale and organisation. It posed a grave threat to the stability and integrity of our whole financial system. Decisive, albeit controversial, action by the Hong Kong SAR Government ensured that this threat was averted. In combination with other factors, this action helped to ensure stability in our markets for the remainder of the year and beyond. The HKMA’s role in the August operation is well known to Members. For my part, I am fully convinced that what we did was necessary and right for Hong Kong, and that it delivered our financial system from the brink of a profound and very dangerous crisis. The portfolio of shares acquired by the  1  BIS Review 48/1999  Government as a result of operations has been placed under the management of EFIL, which will draw up plans for disposing the majority of them in a gradual and orderly manner. But so much has been said about this subject that the impression is sometimes given that that is all that the HKMA did in 1998. This is a pity, because we have other solid achievements to place on record. Among the achievements worth singling out are: •  Effective supervision of the banking system to ensure stability and soundness during a period of intense regional financial crisis and domestic slowdown.

•  A growth of 27.5% in the accumulated surplus of the Exchange Fund during the year, or 15% if the gains from the equity portfolio acquired in August are excluded. •  Continuing currency stability, within the framework of the linked exchange rate system, against unprecedented speculative attacks, and during a year of currency instability in much of the rest of the region. •  Substantial improvements to the currency board system, which have made it more resilient, more transparent, and less vulnerable to manipulation than it was before. •  Increased involvement in regional and global initiatives to promote Hong Kong as an international financial centre and to seek action to repair defects in the international financial architecture. Progress in this field has been slow, but not for lack of any advocacy on Hong Kong’s part. The three broad mandates of the Hong Kong Monetary Authority are to maintain currency stability, to promote the safety and stability of the banking system, and to enhance the efficiency, integrity and development of the financial system. I think that the HKMA can justifiably claim that it has successfully delivered on all of these mandates during 1998, and in the face of considerable difficulties. Accountability and transparency Monetary and banking stability is, of course, the result of efforts by the whole of the financial sector, and not just the work of the HKMA. It also depends on international faith in the integrity of our system, and, equally important, on the confidence of the community of Hong Kong.
I would like to highlight the initiative undertaken in cooperation with the World Bank, and funded by the SECO, for the implementation of Project Greenback 2.0 in Berat. This project consists in enhancing financial inclusion and financial education for emigrants and their families, who receive these funds, as well as in establishing effective channels in terms of costs for the delivery of these funds. In addition, to expand the market knowledge regarding remittances, in June, the Bank of Albania published “Remittances: A support for development". This publication is entirely dedicated to remittances and adopts a comprehensive approach to various aspects in the domestic market. Some of these aspects are the macro-level analysis of remittances and their impact on development in general and on the receiving families; the analysis of the infrastructure of the remittances market in Albania, and the need for intervention, as well as providing adequate statistics on remittances. An important step in the framework of financial education was also undertaken by the Albanian Association of Banks. In June, a memorandum of cooperation was signed on establishing the Albanian Network for Financial Education and fostering inter-institutional cooperation and coordination in the field of financial education. However, there is still much to be done, despite the developments I mentioned earlier. In this context, I would like to invite you all to continue with the efforts made so far, with the same intensity, in order to modernize the domestic payment market.

In the medium term, the Bank of Albania will focus its efforts on a number of initiatives, notably on further legal developments and infrastructure improvements. An important step in the medium term is the drafting of the bill “On the payment account". The bill will transpose the European Union Directive “On the Payments Account” and promote transparency by creating a public register to present all commissions applied by institutions, which can be easily compared. At the same time, during this period, the Bank of Albania will engage in a number of infrastructure developments that support financial inclusion, reduce the costs of using these instruments and is estimated to have an impact on the remittance market, mainly from the point of view of remittance receivers and their use. Here we can mention the creation of a national platform for processing payments in real time (instant payment and processing of card payments). The platform creates conditions for the development of innovative and low-cost services and also aims at market segments that create ample volumes by targeting state institution payments as well as daily payments that Albanian citizens make. Last but not least, I would like to thank the Government of Albania for the importance it places on this matter and its continuous support. In particular, I would like to thank the ministries such as the Ministry of Diaspora and the Ministry of Finance and Economy for their support and fruitful cooperation.
Jordà, Òscar, Moritz Schularick and Alan M. Taylor (2016), The great mortgaging: housing finance, crises and business cycles, Economic Policy, 31 (85), pp. 107-152. Kovacs, Agnes, May Rostom and Philip Bunn (2018), Consumption Response to Aggregate Shocks and the Role of Leverage, Discussion Papers 1820, Centre for Macroeconomics (CFM). Levina, Iren, Robert Sturrock, Alexandra Varadi and Gavin Wallis (2019), Modelling the distribution of mortgage debt, Staff Working Paper No. 808, Bank of England. Nakajima, Jouchi (2018), The role of household debt heterogeneity on consumption: Evidence from Japanese household data, BIS Working Paper No 14  All speeches are available online at www.bankofengland.co.uk/news/speeches  14

In 1986, the General Banking Law introduced limitations on currency mismatch, constraints on related party lending, and restrictions for banks to receive goods instead of liquid resources; all of them, elements that were common practice before the 1982 crisis. Paradoxically, what could be considered harsher regulation did not hamper financial deepening. Instead, it fostered solvency and credibility of the banking system and allowed its healthy development in the ensuing decades. At the core of this development was the creation of a funded pension system, and subsequent capital market reforms, together with capital market openness, which dramatically changed the size, composition, depth, and strength of the financial sector in Chile. Now, during the transition toward fully implementing the current policy framework, Chile experienced a period of capital control that have been highly reviewed in the literature. The unremunerated reserve requirement (URR) implemented in Chile during the 1990s helped to change the composition of capital flows toward longer terms but was less effective in terms of reducing the aggregate level of capital flowing into the country. After removing the URR completely by the end of the 90s and allowing the exchange rate to fluctuate freely, the banking and corporate sector learned to operate in a completely different environment, characterized by an extensive used of the derivative market. In In particular, corporations have learned to operate in a flexible FX environment by using both, natural and market-based FX risk hedging instruments.
8 But if the pendulum swings back too far and access to credit becomes too restrictive, that could become an impediment to growth over this recovery. In terms of the cost of funds, monetary policy has provided a powerful offset to any lending constraints. As Chart 8 shows, the cost of mortgage finance for households and the average rate on business borrowing has come down significantly. The current level of interest rates – even allowing for higher spreads on mortgage and business loans – is much lower than those prevailing over the recovery in the 1990s and at the current inflation rate the average loan rates shown in Chart 8 are close to zero in real terms. 9 There have been concerns registered about access to finance by individual businesses and business groups, though the banks also point out that the demand for new lending is subdued because of the natural caution of businesses about investment at present. In recent visits I have undertaken to businesses around the country, the general picture for manufacturing and services companies appears to be that they can get the finance they need, but it is more difficult and is taking longer and absorbing more management time. Lending related to property and construction appears more constrained, with some of the major banks seeking to substantially reduce their exposure to these sectors. 8  See Hume, M. and Sentance, A., (2009) “The Global Credit Boom: Challenges for Macroeconomics and Policy”, Bank of England Monetary Policy Committee Unit Discussion Paper no.27, June 2009.

The ability of British manufacturing industry to provide strong impetus to private sector growth will be an important offset to the drag to domestic demand from the rebalancing of public finances over the next few years. There is also evidence that strong growth in the global economy is benefiting parts of the services sector. Earlier this week, the airport operator BAA reported a 7.6% annual rise in traffic volumes at Heathrow Airport in September – driven by strong business travel growth to Asia and other emerging markets. From the position a year ago – when demand had fallen sharply at home and abroad in the wake of the financial crisis – this turnaround is impressive. So my verdict on the recovery would be “so far, so good”. But we have to recognise that we are still at an early phase of the upswing. It is not surprising, therefore, that growth is uneven across sectors and from quarter to quarter, and that confidence is still somewhat fragile. The state of confidence is not helped by the negative tone of much of the economic commentary at present – which seems to reflect a high degree of nervousness about the  3  Data is latest available: for manufacturing it relates to the three months to August and for services to the three months to July. BIS Review 134/2010  3  progress of the recovery. But this raises the obvious question: if things are so good, why do they feel so bad – to some people at least?
A second, complementary, approach for containing or cushioning fluctuations in the credit cycle would be to rethink the design of contracts – if you like, lowering the alcohol content of debt instruments. Some debt contracts are ill-suited to the needs of their customers, with the debt servicing burden rising at just the point borrowers are least able to pay. For example, the “teaser rate” mortgages offered to households in the US generated an automatic and correlated spike in income gearing as rates were reset. This amplified repayment and default risk. A better-designed debt contract would automatically adjust repayment terms when the borrower found the going getting tough. Debt would become, in the language of economics, state-contingent – contingent on the borrower’s state of financial health. By cushioning fluctuations, these instruments have the potential to stabilise automatically debt dynamics. And by averting costly default, they potentially benefit both creditors and debtors. There has been recent interest among banks in issuing state-contingent instruments – socalled contingent capital. These instruments convert into equity in the event of a pre-defined stress trigger being breached. So these instruments offer repayment insurance to banks at the point it is most valued. They are, in effect, a contractually pre-committed form of debtequity swap. The design of contingent capital needs further consideration – for example, the definition and calibration of the trigger thresholds. Nonetheless, experience to date offers encouragement. The contingent capital instruments issued at the end of last year by Lloyds Banking Group have risen in price since being issued.

A normalisation of long-term interest rates would increase UK companies’ debt servicing costs from 17% of profits currently to around 33%. 6  Reinhart, C M and K Rogoff (2009), This Time is Different – Eight Centuries of Financial Folly, Princeton University Press. 7  Data are not available for all ten countries, so period averages are based on slightly different samples. 8  Bank of England Financial Stability Report, December 2009. 4  BIS Review 10/2010  That is significantly below the levels reached in the early 1990s, when debt servicing peaked at 58% of profits. But the distribution of debt across companies again paints a less promising picture. In 2007, around 25% of UK firms made insufficient profits to cover their interest payments (Chart 11). This is a long tail. For sovereigns, debt servicing costs among the G7 economies are currently low, at around 3% of GDP. But were medium-term interest rates to normalise, against a backdrop of rising debt ratios, the combined effect would be significant. Over the medium term, debt servicing relative to GDP in the G7 economies would double. Finally, banks’ refinancing burden in the next few years has grown as a result of a shortening of debt maturities during the crisis. The average maturity of US banks’ rated debt is estimated by Moody’s to have fallen from 6.7 years to 3.2 years since 2005. Among UK banks, it has fallen from 6.8 years to 4.3 years.
As the financial system changes shape, it seems plausible to think that further change could be necessary. If so, that change would benefit from further research on the costs and benefits of the extended regulatory and central bank safety net. (f) The Macroprudential Policy Framework: As a still-fledgling framework, there are a wide range of questions still surrounding the macroprudential framework. There is no settled, practical approach to defining the breadth of objectives of a macroprudential regime. Should the potential for aggregate demand externalities associated with a debt overhang in the household sector, for instance, fall under the purview of a macroprudential authority? Nor, in the main, is there any settled approach to defining the appropriate set of macroprudential instruments, whether for banks or especially for non-banks, or the optimal strategy for their use to address emerging vulnerabilities. If household debt externalities are within scope, is it better to deal with this risk by restricting mortgage lending directly via loan to income or loan to value limits, or by adding a macroprudential overlay to risk weights on mortgages (Turner (2017))? This lack of a settled approach has some benefits, in making for a diverse range of cross-country experiences. This is giving rise to a period of “learning by doing” among regulators. It does, however, come at some cost. A regime without especially well-defined objectives is likely to suffer greater problems of time-inconsistency. It may also increase uncertainty among outside participants about the likely regulatory policy reaction function.

The range of published estimates in the LEI study reflected different assumptions about the persistence of the effects of crises on GDP, an area of particular empirical uncertainty in the academic literature. A contemporaneous study by Miles et al (2013) concluded that optimal capital requirements were likely to be higher – perhaps around 20% - if account was taken of the offsetting risk and cost of capital effects of higher solvency standards (the Modigliani-Miller offset). It is useful to revisit the calibration in the LEI study in the light of subsequent research. A little notation may be useful to organise this evidence. Suppose the aim of policy is to keep output in the economy, y, as close 11  These figures are expressed in terms of current definitions of capital and risk-weighted assets. The mapping from the estimates reported in the LEI report and those above are due to Brooke et al (2015). 9  All speeches are available online at www.bankofengland.co.uk/speeches  9  as possible to its trend growth path, y̅. The objective for the authorities is then to minimise a loss function, which can be written as: L = (yt − y̅t )2 Let’s simplify further and assume two factors can cause output to deviate from its trend: first, higher capital requirements, k, which act to reduce output each period by δ; and second, the occurrence of a financial crisis which, with probability γ, leads to a discrete drop in output of ∆.