samchain/econo-pairs-v1 huggingface dataset:
Figure 2 Changes in financial markets since December 2019 MP Report US dollar parities (1) (2)  Nominal 10-year rates (1)  (percent)  (basis points)  Russia  23.6  South Africa  23.3  Brazil  23.2  Mexico  21.6  Colombia  15.7  Ind onesia  15.7  Norway  15.1  Turkey  14.5  Australia  10.5  Hungary  8.4  N. Zealand  8.1  Canada  6.4  Poland  6.1  Chile  6.1  Ind ia  5.2  Sweden  5.2  Singapore  4.3  U.K.  4.2  Korea  3.5  Peru  1.5  China  0.9  Euro area  0.3  Denmark  South Africa Peru Colombia Brazil Ind onesia Hungary Russia Chile Portugal Poland Mexico Italy Spain Greece Japan Korea -13 Sweden -20 Euro area -21 Ind ia -28 Australia -31 N. Zealand -32 U.K. -40 China -51 Norway -52 Singapore -53 Canada -77 U.S. -109  0.2  Japan  -1.1  U.S. (3)  -4.6 -20  0  Stock markets (1)  20  40  -200  -100  (percent) 240 182 180 169  77 48 42 34 27 18 17 13 12 11 6  0  100  200  300  China N. Zealand Malaysia U.S. Russia Korea South Africa Japan Mexico Portugal Norway Canada U.K. Euro area Germany Australia Italy Hungary Chile Spain Ind onesia Poland Colombia Peru Ind ia Brazil Greece  -4.5 -14.5 -15.4 -15.6 -16.7 -17.9 -18.2 -18.9 -19.6 -21.7 -22.2 -23.2 -23.6 -23.7 -24.3 -24.5 -25.8 -26.3 -26.3 -27.3 -28.0 -28.2 -29.4 -30.6 -31.1 -31.5 -37.4 -60  -40  -20  0  20  (1) Green bars stand for emerging economies; orange bars for Latin America; blue bars for developed.

The tide will turn  An orderly reversal of the euro’s exchange rate will take place as a result of a triple narrowing. •  Narrowing of the growth differential between the United States and the euro area. This is because the current extraordinary growth rate of the United States is probably not sustainable in view of the widening of the external deficit. Euro area growth is well balanced, while the US economy is affected by imbalances. This will be progressively taken into account by the markets. •  A narrowing of the interest-rate differential as a consequence of the narrowing of the growth differential. •  Narrowing of the “restructuring differential” between the United States and the euro area economies. It seems to us that although corporate restructuring in Europe was lagging behind the United States a few years ago, we are now observing a catching-up process. This leads me to my last point: the undertaking (and speeding up) of structural reforms is a major condition for the euro to be a complete success. 4. The conditions for the complete success of the euro: sound macroeconomic policies and structural reforms  In this regard, the Lisbon European Council meeting last month can be viewed as a further important step towards the necessary medium-term strategy for structural reforms in the Union. The labour market has become much more flexible in the past few years in Europe.
Mervyn King: Monetary policy developments Speech by Mr Mervyn King, Governor of the Bank of England, on the 2012 BBC Today Programme Lecture, London, 2 May 2012. *  *  *  Fifty years of rising living standards came to an end with the financial crisis. As a nation, we are now significantly worse off than we were four years ago. The crisis has cast a long shadow. Of course, the immediate challenge is to get our economy growing again. But fifty years from now will our grandchildren ask why we lacked the courage to put in place reforms to stop a crisis happening again? I hope not – and that’s why I want to speak to you tonight about the changes we need to make. Believe it or not, it’s more than seventy years since the Governor of the Bank of England last gave a talk on radio in peacetime. In March 1939, Montagu Norman spoke to the BBC in the wake of the economic slump that we now call the Great Depression. Just listen for a moment to the 1930s version of Evan Davis introducing the broadcast: AUDIO INSERT: “The Rt Honourable Montagu Norman, Governor of the Bank of England, speaking in the Empire Series on the City of London.” More the presenter of “yesterday” than “today”! In those days, the Bank of England, known affectionately as the “Old Lady of Threadneedle Street”, was a private bank performing the role of a central bank only by custom and practice.

Here he is, in his first fireside chat, explaining banking to the American people: AUDIO INSERT: “My friends I want to talk for a few minutes with the people of the United States about banking… We have had a bad banking situation. Some of our bankers have shown themselves either incompetent or dishonest in their handling of the people’s funds. They had used some money entrusted to them in speculation and unwise loans. This was of course not true in the vast majority of our banks but it was true in enough of them to shock the people of the United States for a time into a sense of insecurity and to put them in a frame of mind where they did not differentiate but seemed to assume that an act of a comparative few had tainted them all. And so it became the government’s job to straighten out this situation and to do it as quickly as possible and that job is being performed.”  BIS central bankers’ speeches  3  We too have had a “bad banking situation”. Roosevelt showed bold and decisive political leadership in explaining to his listeners the reasons why they should not fear banks but trust their Government to ensure that the economy could be saved from the bank failures that had led to the Great Depression. For the sake of future generations, we too must be bold and decisive and, while the memory is fresh, learn the lessons from this crisis. Reform is essential.
The outcome is obviously the major uncertainty surrounding the global economic prospect, and policymakers elsewhere can only monitor, continuously and very closely, the emerging evidence and react to that in the light of its likely impact on their own situation. The US slowdown comes at a particularly bad time for Japan which is already suffering from a combination of weak domestic demand – particularly consumer demand – and supply-side constraints reflecting pressures on the banking system, heavily burdened with non-performing loans, and an acknowledged need for restructuring parts of the non-financial sector. Japan has pretty well exhausted the scope for macro-economic stimulus. Successive fiscal packages focussed on public works, and a sustained period of attempted monetary expansion, at near-zero interest rates in the face of deflation, have failed to overcome a high rate of precautionary saving by an ageing population facing an uncertain economic future. The policy emphasis of the new Japanese administration appears to be shifting towards firmer action to bring about supply-side reform in the belief that this will help to engender greater confidence. The danger is that, to the extent that more aggressive restructuring  2  BIS Review 47/2001  results in bank ruptcies and higher unemployment in the short term, that in itself might tend to weaken consumer demand for a time before the benefits of the restructuring come through. I make no judgement about the prospects in Japan. You certainly are better placed to do that than I am!

The aim of the CBRT’s road map is to improve the resiliency of the economy to external shocks through (i) maturity lengthening – encouraging banks to shift their non-core liabilities from short-term to long-term; (ii) providing incentives to banks for borrowing and lending directly from and to the Central Bank on times when foreign players are reluctant to engage with banks in Turkey due to heightened volatility in global markets; (iii) bolstering safety-nets – making sure that the banking sector has access to adequate foreign exchange liquidity in times of market stress; (iv) supporting financial stability – providing incentives to banks to improve loan to deposit ratios; and (v) simplifying the monetary policy framework to improve the communication of the monetary policy stance. All but the interest rate corridor simplification step on the roadmap have already been taken and the focus is now firmly on fine-tuning their parameters. Overall, these measures ease the policy tradeoffs posed by the excessive volatility in cross border flows, enabling the interest rate policy to concentrate on the primary objective of price stability. So far the financial market performance of Turkey suggests that the measures undertaken since August 2015 have helped Turkey outperform many peer EM countries. Of course, on the way, Turkey also enjoyed the benefits of lower oil prices relatively more than many EMEs and reduced political uncertainty after the general election result in November 2015.
For instance, the European Commission, under the framework of the RePowerEU initiative, has proposed a plan to reduce the EU’s demand for Russian gas by 60% by the end of 2022. There are two main pillars to this initiative. First, diversifying gas supplies by increasing imports from non-Russian suppliers, including liquefied natural gas (LNG). Spain has a key role to play here, given that it accounts for 25% of the EU’s regasification capacity. However, to fully exploit this capacity investment will be required in cross-border interconnections to eliminate the existing bottlenecks. Second, reducing the EU’s reliance on fossil fuels more swiftly by accelerating the roll-out of renewables and boosting energy efficiency. The European Commission also proposes requiring that storage facilities be filled to at least 90% of their capacity by 1 October each year, before the winter season begins. Under the plan, options would also be explored to optimise the design of the electricity market in view of the foreseeable changes in the production mix. A further possibility is to temporarily ease the State aid framework for the business sector and establish certain temporary limits on retail electricity prices. All this with the aim of addressing the rise in electricity prices. More broadly, the war has abruptly awoken Europeans to the need to accelerate European integration if we want the continent to be an important player on the global stage, capable of deciding its own future and defending its values.

Third, we adjusted what has come to be known as our “chained forward guidance”. Indeed, in recent months the Governing Council had been explicitly stating its expectation that net purchases would end shortly before it starts raising policy interest rates. However, in our meeting last week, we agreed that any adjustments to the key ECB interest rates will be take place some time after the end of our net purchases under the APP and will be gradual. The change from “shortly before” to “some time after” maintains the sequential process we intend to follow in adjusting our instruments, but widens the possible time interval between these two events (the end of net purchases and the point at which we start raising our interest rates). This increases the flexibility with which we can implement our decisions in such an uncertain economic and geopolitical context. The gradual adjustment of interest rates is indicative of the Governing Council’s commitment to avoiding abrupt changes to monetary policy instruments. 6  Domestic policies Domestic economic policies must also have a vital role to play at the current juncture. First, it is important for domestic fiscal policy to exploit its ability to act in a very granular and targeted manner and to focus on supporting the households, businesses and sectors most affected by this combination of shocks. This includes particularly lowerincome households, which bear the brunt of the impact of inflation, and more energyintensive firms.
The funds diverted to those counterparties reduce the amount available to others, intensifying the scramble to get to the front of the line. For non-financial firms, an automatic stay mitigates a disorderly destruction of value. But banks are in the business of circulating funds and cannot function under a persistent payment freeze. There are also wider economic costs. Smaller firms without easy access to public debt markets face switching costs if they have to establish new banking relationships. While they are searching for new credit, they are likely to cut spending, adversely affecting the economy.6 Failure therefore brings substantial costs, for both the failed bank’s creditors and wider society. The equity owners need not internalize all these costs so debt finance should carry a risk premium, incentivising equity to be preferred over debt, ie lower leverage.7 Taken together, these various departures from Modigliani-Miller’s simple world mean that a bank’s overall funding costs do depend on its capital structure, but in a non-linear way. So long as a bank’s capital buffer is sufficient to make the perceived probability of bankruptcy remote, the bank will most likely want to economise on equity, if only for tax reasons. By contrast, if capital levels are too thin, bankruptcy will be a real possibility. Economising on equity capital is then likely to prove counter-productive as debt-holders, with an eye to the costs of resolution or liquidation, will demand ever higher rates of interest.

In this hypothetical scenario, the policymaker has something of a tightrope to walk. For an individual bank, cutting risk exposures by reducing lending might at first blush seem to be a step towards restoring capital adequacy. For the system as a whole, however, it would clearly be counterproductive for all banks to delever in that way. The better path, not only for economy but for individual banks as part of the financial system, would be for banks to strengthen their capital structure so that credit supply was not impaired. A second distinction is between the market and the macroprudential policymaker having the same information and views on what ought to be done (Column 1, Figure 1) and their having different information and views. Most interesting are those cases where the market and the FPC are out of synch. Suppose the market spotted first that the system was dangerously under capitalised. Banks’ debt funding costs would rise sharply and would remain elevated until the market saw evidence that either the banks or the authorities were grasping the nettle. A belated but decisive action to raise capital levels would then come as welcome news (Column 2, Row B). Funding costs should fall back, perhaps significantly, and credit conditions could well ease. That would take some of the edge off the downturn. I want to stress that in this particular hypothetical scenario, an increase in capital requirements has the effect of easing credit conditions.
Real yields, again measured by our own indexed gilts have fallen back to a little more than 3¼%; and the first US indexed bond issue yields much the same. And nominal yields have fallen by 200 basis points or more in continental Europe and Japan - though rather less in the United States and the UK. There has been more excitement in the foreign exchange market, with the dollar in particular first weakening against the yen and the major continental currencies until the spring of 1995 and then progressively recovering. BIS Review 22/1997  -2-  These developments were certainly influenced by the factors which I mentioned a moment ago. In particular they have been influenced by the continuing broadly-based consensus - in countries all around the world, and across a large part of the political spectrum within countries - on the importance of macro-economic policy discipline. Macro-economic policy is no longer seen as an instrument for short-term demand management, which can be used to trade-off the conflicting demands of growth and stability in the short run. It is now much more widely understood and accepted that the rate of growth that can be sustained, or the level of employment that can be achieved and maintained in anything other than the short run, depend fundamentally on the structural, supply-side, characteristics of the economy, and not just on the level of demand.

Mr. George conveys his reflections on the development of bond market yields over recent years Remarks by the Governor of the Bank of England, Mr. E.A.J. George, at the Euromoney International Bond Congress held in London on 25/2/97. I’m honoured to have been invited to open this 3rd Euromoney International Bond Congress. I remember with great pleasure launching your initial Congress in October 1994 in the Barbican. It is an even greater pleasure now to launch the QEII! That first Congress was an ambitious and imaginative venture. But it immediately established itself as a major event in the international financial calendar. I congratulate Euromoney on that achievement, and, to judge from the program, on organising an even bigger and better Congress on this third occasion. I am delighted to welcome you all here. I remember our debate at that first Congress particularly well, Mr. Chairman. I remember it because I looked up my notes over the weekend! The context then was one in which yields had fallen very sharply, to unusually low levels, almost everywhere during 1993 only to back up just as sharply during 1994. We concluded, I think, that none of us really understood either the earlier strength of the market or its subsequent weakness! But we had a very enjoyable two days of discussion.
In Europe, in particular, economic activity will be extremely weak on account of the financial and debt crisis. Switzerland will experience a significant economic slowdown over the rest of the year. Only because of the unexpectedly strong winter half-year does the SNB now expect growth of around 1.5% for 2012. The risks for the Swiss economic situation remain exceptionally high. The uncertainty about future developments in the euro area has again risen. If global activity proves disappointing or the turmoil on the financial markets increases, downside risks will again emerge for the economy and price stability in Switzerland. The imbalances in the Swiss residential mortgage and real estate markets increased further last quarter. Consequently, the SNB welcomes the Federal Council decision to make available a countercyclical capital buffer which can counter adverse developments on the domestic credit market. Global economic outlook Let us examine the economic outlook and the inflation prospects in a little more detail. In the first quarter of 2012, the global economy continued to grow at a moderate pace although this varied considerably from one region to another. The emerging economies were still making a major contribution to global growth. By contrast, overall momentum in the advanced economies was subdued, although here, too, differences from one country to another were considerable. Japan experienced strong growth in the first quarter due to a catch-up effect. In the US, momentum was moderate. In the euro area, a number of countries are in deep recession, while in Germany, GDP continued to expand strongly.

As China’s consumption increases, its rising import demand will have a positive impact on Asia and on the rest of the world. Besides China, India’s middle class is estimated to grow to almost 600 million people by 2025, and almost 60% of Indonesian households, in a country of 240 million people, are expected to reach middle-class status by 2020. The Asian Development Bank projects that, by the middle of the century, Asia will account for more than half of global GDP and will own half of the world’s financial assets and financial institutions. I’m sure all of you are cautious about long-term extrapolations, but this projection is one of many which are reflective of the optimism and growth potential that we see not just in China, but Indonesia and other Southeast Asian countries. As these countries in Asia power ahead, they will drive further economic integration within this region. PricewaterhouseCoopers’ “Future of World Trade” study describes how new trade corridors will form within Asia as a result of this integration. In 1990, 20 years ago, the developed economies dominated the world trade map. Europe was responsible for over half of the world’s exports, although these were mainly intra-Europe flows. In 2010, this map has changed with the global shift in manufacturing to Asia, with China accounting for 9 out of the top 25 bilateral trade routes by value.
Thus, in countries like Albania, Croatia, and Macedonia as well, the growth of household’s deposits is tepid. In the first two countries, the average growth rate is around zero in the last four years, while in Macedonia, although the growth rate is positive, a slowdown is observed in 2015 and 2016. In the Macedonian case, a comparison of household’s savings and its fundamentals was conducted, and the analysis revealed that the slowdown cannot be explained by the change in the disposable income, nor by other savings alternatives. Hence, some country-specific factors – political instability, and the drop in the interest rates were detected as possible causes for the slowdown. Chart 6: Annual growth in % 100  Deposits of households  75 50 25 0  average -2005-2007  average -2008-2012  average - 2013-2016  region avg  SLO  SRB  ROM  POL  MKD  LIT  LAT  HUN  EST  CZR  CRO  BUL  BIH  AlB  -25  2016  Source: Central Banks’ internet pages. Apart from the interest rate channel, quantitative easing is another possible spillover channel of ECB policy that so far has not been subject to a wide research. The expected outcome of the ECB assets purchase programs for the region would be allocation of part of the liquidity on the CESEE financial markets, enabling increase of the cross–border capital flows, compression of the longer term yields, of the government in particular and possible increase of the stock market indices.

The average deposit rate on households and corporate deposits for the region equals 1.4% and 0.9% in 2016, compared to around 5% and 4%, respectively in 2007.5 The correction is in line with the policy rate and lending rates adjustment, and reflects the natural response of the banks for preserving their profitability at acceptable levels. Yet, it seems that deposit interest rates in some of the countries in the region, in the members of the Euro Area in particular, are approaching the lower bounds. Albeit saving alternatives for the private sector in the region are limited, further drop in deposit rates might act as a constraint for further deposit growth. The falling opportunity costs can increase the propensity to hold cash or short-term funds in the banking system, thus eroding the quality of the financing sources and banks’ ability to provide more credit. Still, given that recent bank profitability indicators point to a gradual improvement in profitability, profitability concern will probably weigh less on the deposit interest rates. Nevertheless, in few of the countries (Croatia, Hungary, and Bosnia) profitability indicators are still worrisome. In addition, further decline of the ECB rates, for some of the countries might also pose challenges in this regard. 5  Interest rate data for Bosnia, Croatia, Serbia available since 2011, or 2012. Hence the 2007 figures do not include these countries, and Albania as well, for which sector by sector data is not available.