samchain/econo-pairs-v1 huggingface dataset:
The problem with this argument is that insurers are beginning to dominate a number of these markets, notably equity release mortgages. 8  Similarly, the Solvency II capital requirement for an insurer with an internal model on a Matching Adjustment bond portfolio is based on a one-year default and downgrade stress as opposed to a one-year credit spread widening stress. The insurer is not exposed to a stress in secondary bond markets. But it is exposed to credit deterioration of borrowers. 6  All speeches are available online at www.bankofengland.co.uk/speeches  6  In at least some of these markets, it seems likely that they are now the marginal lenders and returns should therefore reflect the risks that they face. Another possibility is that the Matching Adjustment is capturing returns in excess of an appropriate risk premium. If insurers are finding niches where other types of investors face barriers to entry, they may be able to earn profitable returns. The fact that the Matching Adjustment is calculated as a residual means that it captures any factor causing the yield on an asset to be higher, not just compensation for risks to which the insurer is not exposed. If true, it is possible that the Matching Adjustment on some illiquid assets will decline over time as other investors spot the opportunities and markets become more competitive. As a prudential regulator, my primary concern is that the Matching Adjustment is being calculated correctly.

The Bank of Albania requires that you design management policies that are oriented toward profit maximization. The limitation to simple financial intermediation, such as collecting public savings and keeping them in the form of excess reserves waiting to be invested in low risk government papers, is not a characteristic of contemporary financial markets. All I mentioned above implies the indispensability for a more effective management under the conditions of enhancing the transparency. As to the structural excess liquidity, the Bank of Albania is currently targeting to keep it under appropriate levels, in order to increase the degree of the banking system reaction to Bank of Albania’s operational decisions. At the same time, we are carefully evaluating necessary refinements to monetary policy instruments, to further promote the trading in the interbank money market. Beyond the structural liquidity position, another important issue is the existence of limits that certain banks apply in lending relations with one-another. From a pure academic viewpoint, it is quite easy to label these limits as an effort to ensure an oligopolystic structure in the market. I do not like to prejudice the prudent stance and measures reflected in these limits. However, I should state that in your business with non-bank clients, there may be identified elements, to which you take a higher degree of risk than the one materialized in interbank money transactions.
This has been reflected, since late summer 2017, in a growing discrepancy between the growth of the GDP deflator and core inflation. The GDP deflator has followed a more pronounced upward trend, rising from 0.6% at the end of 2016 to 1.5% at the end of 2018. One development that may have contributed to lower imported inflation was the appreciation of the euro exchange rate by around 8% in nominal effective terms over the last two years. ECB internal analysis suggests that this had an impact on non-energy industrial goods inflation in 2018, especially for durable goods.15 The upshot is that the pass-through of wages to prices is likely to be moderate until these various factors have played out. But there are several reasons to believe that they will unwind over the medium term. Our monetary policy will remain accommodative and will respond to any changes in the inflation outlook. The effects of exchange rate appreciation have now reversed. Demand should recover, so long as the downside risks to our outlook do not materialise. And with stronger demand, firms should be able to rebuild margins. Moreover, even if the economy were to slow more than expected, the risks to wage growth may be contained. Since the end of 2017, wage growth has been driven less by wage drift16 and more by negotiated wages, which are more persistent and react more slowly to cyclical labour market conditions. Negotiated wages for 2019 have to a substantial degree already been set by previous negotiating rounds.

Mario Draghi: Monetary policy in the euro area Speech by Mr Mario Draghi, President of the European Central Bank, at the conference "The ECB and its watchers XX", Frankfurt am Main, 27 March 2019. * * * The last year has seen a loss of growth momentum in the euro area, which has extended into 2019. This has been predominantly driven by pervasive uncertainty in the global economy that has spilled over into the external sector. So far, the domestic economy has remained relatively resilient and the drivers of the current expansion remain in place. However, the risks to the outlook remain tilted to the downside. The monetary policy measures we took at the last Governing Council meeting reflect this assessment. In the face of a weaker growth outlook, they help maintain the accommodative policy stance that we managed to preserve last year as we rotated our instruments from net asset purchases to forward guidance. Our policy thereby continues to accompany the economy on its path towards our inflation objective. The outlook for the euro area economy We expected the expansion to slow in 2018 as the business cycle matured and growth retreated towards potential. But as the economy weakened in the second part of last year, it was not yet certain whether we were witnessing a temporary departure from this scenario, or a more lasting deterioration in the growth outlook.
For a start, each year’s deficit translates into higher debt and debt-servicing burdens, which already stand at 67 per cent and 3.4 per cent of GDP, respectively. 5 Put differently, the 196 million euro in interest due on the debt next year is equivalent to what the Government would spend on medicines  2  Structural Issues Report 2010, which focuses on the impact of the energy markets on the macroeconomy. A detailed report is to be published next year in the form of an ECB Occasional Paper. 3  Weathering the challenges, in Ernst & Young’s 2009 Malta Attractiveness Survey. 4  Paul Krugman, The Age of Diminished Expectations: US Economic Policy in the 1980s, MIT Press, 1992  5  Estimates taken from the Budget speech 2010. 4  BIS Review 154/2009  in three years at today’s prices. To complete this perspective, despite the reduction planned from 2011, the general government deficit in that year is still expected to remain just above the 3 per cent benchmark, and the forecast reduction to 2.9 per cent in 2012 is contingent on seemingly optimistic nominal growth assumptions. What are the options for reducing the deficit? Since any increase in the tax burden, already high at around 40 per cent of GDP, would have a negative impact on competitiveness, expenditure restraint seems to be the only possibility. This option is more complex than it might seem, however, because of the structure of recurrent government spending.

6 The projected reduction in the workingage population will translate into slower economic growth and will, therefore, negatively impact tax revenues, at the same time as the fiscal burden of a larger population of elderly people increases. The Commission calculates that by 2015 the share of age-related spending in GDP is expected to reach 20.1 per cent, two percentage points up from 2007, mainly due to the increased cost of pensions and healthcare, and will continue to rise thereafter. The fiscal correction required to bridge the implied sustainability gap clearly cannot be achieved without a culture change regarding the welfare state. Put simply, it needs to be understood that you cannot give away what you do not have. We must, therefore, adopt a more cost-efficient approach to the provision of public goods and services, whereby only those demonstrably in need would benefit. Access to social benefits, healthcare and subsidies should be streamlined through a combination of means testing and market-based mechanisms. In addition, the benefits structure could be further refined beyond the recent Budget measures with a view to making work pay and reducing the disincentives to enter the labour market. Conclusion The Maltese economy is experiencing its first major test since it adopted the euro. While membership of the euro area has provided a degree of protection during the crisis, in particular exchange rate stability, the road ahead is still fraught with challenges.
6  In the original Taylor rule, the policy rate is determined by inflation and the GDP gap. See Taylor, J.B., “Discretion versus policy rules in practice”, Carnegie-Rochester Conference Series on Public Policy, NorthHolland, 1993. 7  See the article “The driving forces behind trends in the economy can be analysed using a production function” in the Monetary Policy Report of October 2010. 8  It is important to make a distinction between labour productivity, which is defined as output per hour, and total factor productivity. 9  This is the logarithm of what is known as a Cobb-Douglas function: the relationship in the text applies to the logarithms of Y, K, H and TFP. BIS central bankers’ speeches  . Consequently,  3  In accordance with the production function, the potential level of production can also be divided up into potential total factor productivity, potential capital stock and potential hours. Deviations from the potential level can be estimated for each of the three factors affecting output – capital, hours worked and TFP. These deviations can then be weighted together to give a total output gap. Calculations of potential GDP This section describes the calculations forming the basis for the GDP and hours gap published in the most recent Monetary Policy Update.10 Figure 4 shows an estimate of actual and potential TFP. Actual TFP is estimated with the Solow residual. The TFP estimate thus captures all change in output that cannot be explained by the development of capital and hours.

This is why they certainly need to be closely monitored, not only within individual firms but also at the level of supervisory bodies. •  At a moment when all activities are tending to accelerate and render location issues more acute, changes in the regulatory environment are crucial to fostering efficient financial markets. Let me mention in particular the UCITS (mutual funds) Directive and the directive on occupational pension funds, which ought to eliminate barriers to investment and, of course, the importance of the directive on take-over bids in the context of the integration of national stock exchanges. More generally, it is very important for the European Union to accelerate reforms in the financial field. In this respect, as I said, key directives have to be laid down and transposed adequately in national laws, whereby the public authorities within FESCO and professionals (like the members of your association) should play a role to facilitate a harmonized set of principles or recommendations. On all these subjects, we can expect a lot of progress in the following months, within the guidelines already issued by the European Commission (in its Financial Services Action Plan). France, for its part, has already expressed its intention to put these matters on the Agenda when it takes over the presidency of the European Union in July. 2.2 Coming now to the process of consolidation in the banking sector, there is no need to recall how banking and financial consolidation has sped up in recent years in Europe.
All borrowers want to consider carefully their ability to make the payments they’re signing up to, but no individual can be expected to take into account the spillover effect of their debt on the wider economy. After all, no individual will really make a difference. These spillover effects are – in the language of economists – an ‘externality’. So lenders are the first line of defence against the wider economic risks of high debt levels. An enlightened lender should factor in the risks of losses on the rest of their business from high levels of mortgage debt. And they should factor in the risks of losses from the consumer credit they’ve extended. The emphasis there was on ‘should’. Because in reality, the opposite can happen; lenders can enter a spiral of complacency. It begins with a period of good economic performance and low loan losses. 6  All speeches are available online at www.bankofengland.co.uk/speeches  6  Lenders extrapolate that into the future, attributing success to skill rather than chance. 4  Nowhere is this clearer than page 8 of the 2006 Annual Report of Northern Rock: “The credit quality of our assets remains strong…The reason for this improvement is … because we have further improved our credit scoring …Our scorecards are highly predictive…which gives an early warning of potential default - so we are confident that the current historically low level of default will continue.”  Within three years, the arrears rate on its mortgage book had increased ten-fold.

Source: Bank of England 2017 Q2 Credit Conditions Survey (CCS). (a) A positive balance indicates that the changes in the factors described have served to increase credit availability. (b) Question: ‘How have the following factors affected overall secured credit availability to households over the latest three months relative to the previous three months?’ The chart shows responses to the option 'market share objectives'. (c) Net percentage balances are calculated by weighting together the responses of those lenders who answered the question by their market shares. Chart 17. Proportion of new mortgages with (a) no fees  Chart 18. Loan to income distribution of new (a) mortgage lending  Per cent  Proportion of £ fee new mortgages  50 45 40 35  30 25 20 15 10 5 0 2011  12  13  14  15  16  17  Sources: Moneyfacts and Bank calculations. (a) The proportion of £ fee products in each year is calculated relative to the total number of new mortgages offered during the year. The proportion in 2017 is calculated based on data from January to April 2017. Sources: FCA Product Sales Database and Bank calculations. (a) The Product Sales Database includes regulated mortgages only. 21  All speeches are available online at www.bankofengland.co.uk/speeches  21  Chart 19. Major UK banks’ capital ratios  Chart 20.
This forecast is premised on a market yield curve in which interest rates rise gradually though to levels substantially below their pre-crisis average. The forecast recognises the risks to this picture from another unfortunate event in the form of a harder landing in emerging markets.6 Secular signals? But while one can still explain the current conjuncture this way, there must be less confidence in the healing story than when I first arrived on the MPC. We have already incorporated a weaker structural picture into our thinking. A few years ago we were expecting a period of above trend productivity growth to recover some of the productivity growth lost during the Great Recession. We no longer expect any catch-up of the lost productivity growth and indeed, productivity growth in our latest forecast only recovers to 1.8%, compared to 2.7% between 1950–2007 and 2.2% in the decade before the crisis. This downgrading of prospects is true more broadly – according to the IMF, potential output growth in advanced economies fell from 2.2% over the period 2001–07 to 1.5% over 2013–14. And the natural rate of interest probably remains around, or a touch below, zero. This is the unobservable underlying real interest rate that is consistent with inflation at target and economic activity at its potential. One cannot observe this “natural rate” directly; it has to be estimated and that is difficult to do with precision.

Richard Dzina: Luncheon remarks at the Community Bankers Conference Remarks by Mr Richard Dzina, Executive Vice President of the Financial Services Group of the Federal Reserve Bank of New York, at the Community Bankers Conference, Federal Reserve Bank of New York, New York City, 18 April 2018. * * * Good afternoon. I am conscious that I am the concluding speaker for today’s conference, a line usually followed by “and the only thing that separates you from the bar.” In this case, I’m the only thing that separates you from the gold vault, which may be even more compelling, so I’ll keep things brief, but hopefully meaningful. Allow me to share two preliminary comments as prelude to formal remarks: First, convening this conference underscores for me and my colleagues that fulfillment of Federal Reserve mandates in monetary policy, supervision, and financial services does not constitute an end to itself, but a means to an end. The end is to foster conditions and to provide services that support robust and sustainable economic activity on which our nation depends and in which community banks play an integral, indeed indispensable, role. May those of us who have the privilege of serving this great institution, and working within these walls, never forget the ultimate object of our mandate, at which you sit at the center. Second, my perspective in addressing you today is not as overseer, or as policy maker, but as head of Financial Services at the Federal Reserve Bank of New York.
Business loans could help entrepreneurs, large or small, to build or expand their operations that could eventually benefit not only the shareholders but also the workers and the consumers as a whole. An instalment loan could help us buy a property or consumer goods that would otherwise be inaccessible or unaffordable. While debt can bring about many attractive benefits, it has just one major drawback. That is, debt is a liability that needs to be paid back, with interests, sometime in the future. This means that someone who borrows money needs to use his or her future income to pay for interest and principal at some future time. This being the case, a prudent person or enterprise must take due care in ensuring that there is sufficient future income to meet the future payment liability arising from the debt obligation. Global financial crisis: More government debts 8. Earlier I referred to the fact that the industrial nations’ total debt stabilised at around 115% of GDP in the 1970s. Now, let us see what had happened in these countries since then. During the last three decades, both the private sectors and governments in the developed countries repeatedly borrow money at a rate much faster than their economic or income growth. As a result, the average ratio of total debt to GDP of the developed economies increased to about 290% before the eruption of the Global Financial Crisis in 2008.

More concretely, business should understand that bank is an integral part of its activity, if it is willing to be successful for a long-term period. Finally, I would encourage more institutionalised links of the banking system with various business organisations. Maybe it is time that Association of banks establishes regular contacts with business representations, contacts that would certainly upgrade the relations between business and bank to a higher level. Also, I use the opportunity to renew the Bank of Albania commitment to participate in this initiative by offering its expertise in projects, round tables, forums, debates, etc., which will aim at improving the business climate as well as increasing and channelling more efficiently the bank credit. Thank you. 4/4
This symmetry means that both negative and positive deviations from the target are equally undesirable. The ECB too points out that the marked decline in the equilibrium real interest rate has meant that the effective lower bound for nominal interest rates is likely to limit monetary policy more often. It also emphasises that one consequence of this is that strong or sustained monetary policy measures are needed when the interest rate is close to the lower bound to avoid negative deviations from the inflation target becoming permanent. It also notes that the new strategy may mean that inflation periodically will be above the target, but, unlike the Federal Reserve, it has chosen not to introduce an average target.7  Mutual dependence We have thus seen that a prerequisite for fiscal policy and monetary policy to be effective is that they have a stable long-term foundation. For fiscal policy, there must be confidence that public debt is stable over the long term and, for monetary policy, there must be confidence that the central bank can keep inflation low and stable. In order for monetary policy to be able to use the policy rate to counteract economic downturns and increased unemployment, it is also necessary for average inflation not to be too low.

Required yields have now fallen again in the secondary market and so has pricing of Icelandic banks’ CDSs. The banks have also tapped international credit markets on favourable terms recently and have more than met their capital requirement so far this year. Their market position has therefore definitely improved again, which must be welcomed. The banks have vigorously expanded in other countries in recent years. Most indications are that their foreign investments have been successful, in the Central Bank of Iceland’s view. Their subsidiaries are sound financial companies subject to stringent supervision in their home countries, just like the parent companies in Iceland. Likewise, these companies operate in stable economies where the outlook is bright. At the end of 2005, two-thirds of the banks’ consolidated lending was to foreign borrowers. In effect, therefore, overseas expansion has strengthened the banks’ foundations. They are no longer so much at the mercy of economic fluctuations in Iceland or any other country. On the contrary, their risks are dispersed. Pension funds I shall now turn to the matters in which you are most directly involved, the position of pension funds in Iceland. Their position is remarkable in all respects, especially by international comparison. Most or all other industrial countries have rapidly ageing populations and face growing and serious fiscal concerns about future pension fund arrangements. Since their pension schemes are largely funded by taxation, a sharp rise in contributions is foreseeable over the next few decades.