samchain/econo-pairs-v1 huggingface dataset:
Institutions, very frequently due to the pressure exerted by the market, often decide to distribute these profits to shareholders through generous dividends, which in turn has a negative impact on the institution’s capital. When the downswing arrives and the risk assumed in the past turns into bad debts, the income statement is not capable of withstanding the losses. These losses may erode a very significant part or even all of the institution's capital. Recapitalising banks during downswings is not easy, as recent events have so starkly shown. By the way, I should note here that the current recapitalisation with public funds raises significant challenges in terms of management incentives at the recipient institutions and of competition policy for the entire banking system in question. However, this is neither the time nor the place to go into this in more details. BIS Review 149/2008  3  Accordingly, from the prudential standpoint, there are more than enough arguments to justify the development of regulatory policy instruments that enable credit institutions to recognise during upswings the higher level of credit risk accumulating in their balance sheets. The dynamic provisioning is a way to achieve this recognition. The idea, an extremely simple one, is that banks should set aside provisions for loan losses when the risk is assumed. They will then be able to use these provisions during the downswing, when the risk materialises.

It was also Rojo who, in the final stage of his mandate as governor of the Bank of Spain, designed and put into practice the prudential regulatory mechanism of dynamic provisioning. This has contributed to reinforcing the stability of the Spanish banking system and today commands wide recognition; but, when initially launched, it aroused understandable rejection by Spanish banks and was met with indifference on the part of the international community of banking regulators and supervisors. Let me give you the background to this prudential and countercyclical regulatory mechanism. The origins of Spanish dynamic provisioning must be sought in credit developments in the late 1990s. Having emerged from the 1993 recession, the worst for 40 years in Spain, the economy, and much more intensely so bank lending, began to expand at an increasingly brisk pace. The Bank of Spain was led to introduce dynamic provisioning, which came into force in mid2000, by a combination of factors. These included most notably: the mix of strong credit growth, with the dangers this entailed for the stability of the financial system; heightened competition, which acted to exacerbate these risks given that credit institutions applied increasingly lower risk premia to maintain their market share; the deterioration in the level of loan loss provisions and their extremely high correlation with current default rates; and, finally, the Bank of Spain’s past supervisory experience.
On the other hand, the need of private businesses to carry out new investments has been low, against the backdrop of a moderate demand for goods and services and the existence of spare capacities in production. Fiscal policy has been stimulating during 2011. For the first ten-month period of the year, budget deficit posted ALL 30.9 billion or about 33.0% higher than a year earlier. The performance of budget deficit has been determined by the sluggish increase in expenditures and revenues by an annualized rate of 3.9% and 1.4%, respectively. The stimulating fiscal  BIS central bankers’ speeches  1  policy has been winding down steadily following the first quarter of the year, as also shown by the decelerated increase in public spending and budget deficit. This fiscal stance has contributed to maintaining the level of public debt under control. The Bank of Albania assesses the latter as one of the most essential indicators of macroeconomic stability at home. In this context, we encourage fiscal authorities to take appropriate measures, in order to ensure long-term sustainability of public debt. Foreign demand has supported the Albanian economic growth, notwithstanding the concerns surrounding the global economy and especially our trading partners. Albanian exports continue to grow, albeit at decelerated paces compared with the previous year. Exports grew 27.3% in the third quarter of the year, while imports grew 8.6% over the same period. Trade deficit increased 6.8% in the first nine-month period of the year.

The Bank of Albania is very heedful to external balances of the Albanian economy, regarding their correction as one of the main priorities of the country’s macroeconomic policies. This objective assumes more importance against the backdrop of recent developments in global financial markets. In the long run, its attainment requires ongoing structural reforms, which will enhance competitiveness of the Albanian economy and will generate higher revenues from the export of goods and services. Monetary inflationary pressures remain subdued in the medium run. Monetary expansion has maintained stable annual growth rates during the year, resulting 10.4% in September. Public sector demand for funding has been downward in recent months, making the private sector’s demand provide the largest contribution to money supply growth. Private sector credit grew 14.0% in September, marking a slight acceleration compared with the first half of the year. However, as we have constantly stated, the relatively sluggish performance of private sector credit reflects mostly its weak demand. The banking sector appears liquid and well capitalized to credit the Albanian economy, but it has increased its prudence in terms of lending, thus reflecting the new reality of the Albanian economy and global financial markets. The Bank of Albania assesses that, within the parameters of prudence, there is room for a more rapid growth of credit and for supporting sound investment projects by the banking sector. On our behalf, we will continue to support the financial system with liquidity and monetary stimuli in order to boost lending.
The line in the chart will therefore move further down and to the left with a more credible monetary policy. 3. Norwegian monetary policy and cyclical fluctuations  In the long term, we cannot influence growth potential or prosperity by means of monetary policy - not even in Norway. But we can influence the fluctuations in the economy, the short-term cyclical movements. Norges Bank also takes into account that monetary policy should not cause unreasonably sharp fluctuations in output by setting a relatively long-term horizon for the attainment of the inflation target, and allowing deviations in the intervening period. It would probably be possible by a very aggressive use of instruments to force inflation back to the target within a time frame of 3-4 quarters - perhaps even less if the foreign exchange channel is strong. This would cause very pronounced fluctuations in the real economy, however. In this sense, variations in output enter our “loss function”. The thinking that follows from the theoretical research is to a large degree present in the actual setting of interest rates. For practical purposes, we, and other central banks with inflation targeting, make estimates of future price inflation. Our instruments are oriented in such a way that there are prospects of attaining the inflation target two years ahead. The theoretical literature has given us useful knowledge as to how far forward in time this horizon should be set. The result of using too short a horizon will be considerable instability in output and in nominal and real interest rates.

But Beauty comes in a package along with the Beast, and the Beast in this case is the single monetary policy - the single, one-size-fits-all, interest rate. The trouble is that it may not in the event suit the domestic monetary policy needs of the different individual Euro-area countries. And if you don’t find that instantly repulsive I suggest you ask yourself how, at this particular juncture, we could keep the economic porridge - if I may mix my fairy stories - at just the right temperature if we were obliged now to have German-level interest rates. Now you can’t just hope the Beast will never appear. I don’t know of any serious analysis that doesn’t acknowledge that tensions could arise between the domestic policy needs of BIS Review 14/1997  -2-  the different member countries - as a result of different cyclical positions, or different fiscal policies, or as a result of external shocks which affect some member countries more than others, or as a result of structural changes in one member country as against another. The risks, like the potential benefits, are, as I say, real. You might more reasonably hope that Beauty’s Beast will turn into Prince Charming - and that all their problems turn out to be little ones. But I have to tell you that it was always at this point in the story that I began to wonder if my mother was making it all up!
And nominal regular pay growth (which strips out bonuses, but includes merit related increases in pay) has remained subdued over the past year, averaging around 2%. Assuming that the potential growth rate of the economy has not been damaged by the financial crisis (and there is no compelling evidence to suggest that it has), then this level of wage growth would be too low to be consistent with the inflation target in the medium term. Looking ahead, it is most likely that there will remain a reasonable margin of slack in the labour market, which should help contain any pressure on nominal wages and hence price inflation. But this is unlikely to persist indefinitely. Historical analysis of the UK labour market shows that the longer individuals are unemployed, the lower their chances of getting a job become. Hence, persistently high actual unemployment tends to be followed by an increase in the level of structural unemployment. Theory and empirical evidence predict that the structurally unemployed exert less downwards pressure on wage inflation. Major shifts in the pattern of employment – as we are likely to see from the shifts in growth from services to manufacturing, and from the public to private sector – tend to reinforce that effect. If structural unemployment rises sufficiently, then the downwards pressure on inflation from spare capacity will eventually start to dissipate. For now, contacts of the Bank’s Agents confirm that the margin of slack in the labour market should continue to restrain wage growth in the coming months.

We can’t be sure since no two historical episodes are ever exactly the same. Until underlying growth resumes, we can’t be certain that it will, of its own accord. At the very least, that makes me pause to consider when policy should start to be normalised or even whether further loosening might be justified. The recovery in 2010 was driven by a particularly strong contribution from business investment and stock-building (Chart 4). The latter was always likely to offer a transitory boost to overall growth as companies returned stock holdings towards their desired levels, after de-stocking during the recession. And investment was always likely to make some positive contribution – at least once delayed projects and routine maintenance were re-started. But that boost is unlikely to persist without a pick-up in final demand to justify it. And consumer spending, the most important component of UK demand, has been stagnant for a year (Chart 5). The current behaviour of consumption is markedly different to that during the 1980s and 1990s when consumption had broadly regained its pre-recession level by this point in the cycle, rather than being around 4% below it (Chart 6). BIS central bankers’ speeches  3  Chart 4  Chart 5  Contributions to 4-quarter GDP growth(a)  Household consumption(a)  Percentage points 6 4 2 0 -2  Consumption Government spending Investment Stockbuilding Net trade GDP (per cent)  -4 -6 -8  2000  2002  2004  2006  2008  (a) Investment includes valuables. excluding the alignment adjustment.
While in general it fares pretty well relative to others, the Bank’s net trust rating currently stands at 28%. 29 The Bank has a positive trust rating of more than 80% among some members of the public, but among others it has a trust deficit of more than 50%. As for banks, governments and the media, this too is quite a Great Divide. It was writer Norman Douglas who said that “distrust of authority should be the first civic duty”. 30 And as someone sometimes described as an iconoclast, I have sympathy with that sentiment. But, again rather like cholesterol, it is possible to have too much of a good thing. Taken too far, distrust can be corrosive rather than regenerative. Sometimes bridging that Great Divide can be a bridge too far. Progress so far That begs the question of what can be done to close the gap, to restore trust in the financial sector, to alter the social identity of banking. There has been no shortage of ink spilled in crafting a response to the crisis. That includes regulatory response where there has been root-and-branch reform of both banks’ prudential standards – their safety and soundness – and consumer protection – their offering to customers and clients. The prudential regulatory reform agenda has been covered extensively elsewhere, including in speeches and consultation documents by the Bank of England, over the past few years. 31 So I shall confine myself to three points.

Andrew G Haldane: The Great Divide Speech by Mr Andrew G Haldane, Executive Director and Chief Economist of the Bank of England, at the New City Agenda Annual dinner, London, 18 May 2016. *  *  *  I would like to thank James Antwis, Andrew Bailey, Jeremy Franklin, Jonathan Fullwood, Andrew Hauser, Andrew Hebden, Alex Holmes, Leanne Leahy, Emma Murphy, Ben Nelson, Laurie Roberts, May Rostom, Pedro Santos, Minouche Shafik, Emma Sinclair and Paul Robinson for their comments and contributions, and to Gillian Stamp for conversations on these issues over many years. In November last year, the Bank of England hosted a so-called Open Forum. This was a new departure. For the first time in its 300-plus year history, the Bank brought together all of the main stakeholders in the financial sector: not just policymakers, banks and investors, but politicians, civil society, businesses, regional representatives, religious groups and the media. This was a deliberately broad church, with an eclectic congregation comprising religious zealots, high priests, regular church-goers, agnostics and atheists. The aim of the Open Forum was to discuss, in an unscripted way, the progress made towards fixing the financial sector. The Open Forum was an opportunity to hear a different set of views from a different set of voices: from the customers and users of finance, as well as the producers and investors; from the often-silent majority of outsiders to finance, as well as the often-vocal minority of insiders. This made for a very different dialogue.
Low interest rates, for example, can contribute to the build-up of  4  On this, see the discussion in Robert Shiller (2000), Irrational Exuberance, Princeton University Press. 5  This has been convincingly argued by Christina Romer (1990), “The Great Crash and the Onset of the Great Depression”, Quarterly Journal of Economics, 105(August), 597–624  6  As quoted in John Lewis Gaddis (2005), The Cold War: A New History, Penguin Press. BIS Review 158/2010  3  financial imbalances via the so-called “risktaking” channel. 7 Simply put, very low interest rates may create incentives for banks to take on more risks. Recent research has provided empirical evidence compatible with such a notion. It has been documented, 8 for example, how market based measures of bank’s risks as perceived by financial market participants tend to react positively to changes in interest rates, so that a lower interest rate leads investor to perceive banks as less risky. By the same token, several papers 9 have shown that credit standards are correlated with the level of interest rates: lower interest rates, in particular, imply lower credit standards including to customers who are perceived as representing a higher credit risk. On the theoretical side, research done at the Banque de France 10 has shown that, when the regulatory environment is not transparent, a decrease in the level of real interest rate increases banks’ risk-taking behavior, in parts because it may facilitate the under-pricing of risks typical when asset prices rise.

They have also been the focus of testimony before a number of committees in Congress, including Secretary Geithner and Thomas Baxter’s January 27,  4  BIS Review 73/2010  2010 testimony before the House Oversight and Government Reform Committees. A summary of the salient facts, however, follows. As part of the November 2008 restructuring, Treasury invested $ billion in newly issued Senior Preferred Stock of AIG under its TARP authority. 2 In connection with that investment, the Federal Reserve modified the terms of the Fed Facility to be more sustainable: The maturity of the Fed Facility was extended to five years (due 2013), the maximum amount available was reduced from $ billion to $ billion, and the interest rate and commitment fees were reduced. The Fed Facility remained secured by substantially all of AIG’s assets, and the company continued to be required to apply proceeds of asset sales to permanently repay any outstanding balances under the facility. At the same time, the Board approved the establishment of an additional lending facility that would provide a permanent solution to the AIG securities lending program’s losses and liquidity drains, thus eliminating the need for the Securities Borrowing Facility. Under the new facility, the New York Fed extended approximately $ billion in secured, non-recourse credit to a special purpose limited liability company, Maiden Lane II, in which AIG would hold a $ billion first-loss position. Maiden Lane II then purchased, at market prices, RMBS with a par value of $ billion from certain AIG domestic insurance company subsidiaries.
Central matters here are, of course, investment horizons, how buying and selling is arranged and the degree of diversification across companies and geographical regions. Another parameter is, as indicated, the  4  Morris, Stephen and Hyun Song Shin (1999): Oxford Review of Economic Policy, vol. 15, no 3.  life cycle; the possibility of saving for the long run is restricted by how much capital is likely to be needed in the nearer future. Admittedly, this process has to some extent begun already. However, the decisive steps lie ahead.

For ten years, therefore, Iraq had two currencies: one issued by the official government and the other backed by no government at all. The Swiss dinar continued to circulate in the North, even though backed by no formal government, central bank, nor any law of legal tender. For a fiat currency this was an unusual situation. Whatever gave the Swiss dinar its value was not the promise of the official Iraqi government, or indeed any other government.13 Although there was little or no trade between North and South Iraq, both the Swiss and Saddam dinars were traded against the dollar. The implied Swiss to Saddam dinar cross-exchange rate from 1997 onwards is shown in Chart 3.14  Chart 3: Saddam/Swiss Dinar exchange rate, Jul 1997-Oct 2003 Saddam/Swiss Dinars (log scale) 400  200  100  50 Jul-97  Jul-98  Jul-99  Jul-00  Jul-01  Jul-02  Jul-03  Source: United Nations, Central Bank of Iraq  After 1993 the Swiss dinar deviated from parity and rose to around 300 Saddam dinars to the Swiss dinar by the time Saddam’s regime was deposed in 2003. The appreciation of the Swiss dinar is  13  At no stage did the Kurdish groups lay claim to the Swiss dinar as their currency - they had no control over it - as shown by the interview given to Gulf News on 30 January 2003 by the Kurdistan Regional Government Prime Minister Barzani who said, “We don’t have our own currency”.
The high level of borrowing, particularly among US households, was an important factor contributing to the financial crisis in autumn 2008. Although debt growth has slowed in Norway, the level of debt shows no sign of falling. While monetary policy and fiscal policy have been anchored within a long-term, operational framework over the past ten years, there has been no comparable, coherent regulatory system for financial markets. Requirements are currently imposed on individual banks, but without adequate regard to overall risk in the financial system. The financial crisis highlighted the need to strengthen the current framework. In the event of shocks to the economic system, the authorities have a role as lender of last resort. This also has a side effect – banks may feel at liberty to take on excessive risk. The banks keep the profits in good time, while they expect the public to foot a share of the bill in the event of failure. Regulation of the financial sector must therefore secure financial stability, but at the same time protect the public against losses. Akerlof, Spence and Stiglitz – the 2001 Nobel Prize laureates – described how market participants adapt their behaviour and provided important background for the literature on the design of regulations. We should not have ambitions to fine-tune the economy, whether it is the real economy or the financial economy. But we must have ambitions to establish a sound operational framework that protects society against losses. This is now on the agenda in Norway and in other countries.

Improving the OTC and commodity derivatives markets is a key part of this agenda, It is a complex matter and one in which alignment of details is essential to avoid regulatory arbitrage. BIS central bankers’ speeches  1  The third challenge is to enhance transparency across the board: with regards to markets, institutions, and products. Insufficient information contributes to mispricing of risks, mistrust among market participants, which can result into downturns and crises. At our October meeting of G20 Finance Ministers and Central Banks Governors we will be discussing IOSCO “recommendations to promote markets’ integrity and efficiency to mitigate the risks posed to the financial system by the latest technological developments”. 2. Improving policy discipline globally  Aside from a more resilient global financial system, we need to have more disciplined macro policies as the lack of discipline in macroeconomic policies in several countries led to the build-up of unsustainable external imbalances before the financial crisis. There is still a gap between the degree of economic integration and the willingness of policy makers to take into account interdependence and spillovers. Keeping one’s house in order is no longer sufficient in an integrated world. Spillovers from the rest of the world can influence economies considerably. Multilateral surveillance is now being enhanced along two tracks. The informal G20 track and the formal IMF track. The G20 Framework for Strong, Sustainable and Balanced Growth, incorporates a first systematic multilateral assessment of global imbalances.