samchain/econo-pairs-v1 huggingface dataset:
We saw that impact on a few of the big banks earlier this year. In the securitised markets, the pace can look slower to begin with but then comes in a rush. Chart 7 shows the spreads on different tranches of the ABX index, the main benchmark index for sub prime securities. What is remarkable here first is how slow the spreads were to move at all. Of course, the predicted losses on particular tranches do no move smoothly with rising defaults, but throughout 2006 the economic press was a buzz with worry about the US housing  1  In particular, the High-grade Structured Credit Enhanced Leverage Fund and the Higfh-grade Structured Credit Fund both managed by Bear Stearns Asset Management (BSAM). BIS Review 84/2007  3  market; sentiment changed several times on whether the housing downturn would lead to a general recession. Throughout this period the originators continued to write new sub prime loans and the prices of the ABX scarcely quivered. But since January the story has been quite different with two dramatic hikes in the spreads first of BBB and then of the A-rated index. In total, the spread for BBB has gone from 500 basis points at the turn of the year to over 3000 basis points. Each of these steps has left casualties.

My argument is that the uncertainties today are a return to normality after two years of exceptional predictability in monetary policy both in the UK and elsewhere. A particular area of uncertainty at present is in the credit markets. The dangers of combining a traditional credit cycle with the new derivatives markets have emerged in the US sub prime sector. The US housing market is in its downswing and there are some signs that the same is true in the UK of unsecured credit and commercial property. The position of the bigger UK sectors is less clear cut. The shift in pension fund priorities and the growth of sovereign wealth funds are further clouding the picture. It is our job on the MPC to work through these issues and reach a judgement on them. Our target is to reduce inflation to 2% and keep it there. I can assure you that we will do whatever is needed to achieve that.
16  Gráfico 13 Mundo: Proyecciones contenidas en los últimos IPoM  Precios efectivos y proyecciones (1) (2) (índice; dólares el barril; dólares la libra) Series3 IPoM Sep.22 IPoM Jun.22  (variación anual, porcentaje)  Mar.21 Mar.22  6  Jun.21 Jun.22  Sep.21 Sep.22  Dic.21  5 3  5  1  4  16  17  18 19 20 Petróleo IPoM Jun.22  21  22 23 24 IPoM Sep.22  16  17  18 19 20 Índice FAO IPoM Sep.22  21  22 23 24 IPoM Jun.22  16  17  21  22  125  3  75  02  02 25  2  160  1  120  0  80  22  23  18  19  20  23  24  (1) Para el petróleo es el precio promedio entre el barril WTI y Brent. Para alimentos es el índice FAO. (2) Precio/índice efectivo corresponde al promedio de cada año. Líneas punteadas corresponden a las proyecciones 2022-2024 contenidas en cada IPoM. Fuentes: Banco Central de Chile, Bloomberg y FAO. Fuente: Banco Central de Chile.

Compared to the levels prevailing at the close of the June Report, the prices of oil and copper have fallen between 15% and 20%. On the other hand, the price of lithium has continued to rise, driven by the strong demand linked to the production of electric vehicles, while the supply has limited capacity to respond to the challenge. Food prices have also fallen, although in this case supply-side factors, including the agreement between Russia and Ukraine to resume grain exports and the improved production prospects in some relevant countries, have had a greater impact. Global supply chains have shown some normalization, with freight costs declining. Even though bottlenecks have been gradually resolved, the risk of new quarantines persists given China's zero-Covid policy. In this context, external cost pressures are still substantial (figure 9). Global financial markets have reacted to this scenario by exhibiting high volatility in recent months. Doubts about the trajectory of the Fed's monetary policy and its potential effects have been among the main sources of financial fluctuations. Thus, market sensitivity to data or statements by authorities has increased, with episodes of high volatility and fluctuating risk aversion. Compared to the close of the last Report, interest rate hikes, stock market declines, and a global strengthening of the dollar to twenty-year records have been observed. These movements are consistent with the Fed's hardened messages regarding the monetary policy efforts needed to reduce high inflation.
9  VOLATILITY IN THE VALUE OF THE SOVEREIGN WEALTH FUND MUST BE TAKEN INTO CONSIDERATION  NORGES BANK ECONOMIC PERSPECTIVES 17 FEBRUARY 2022  Alongside its central banking tasks, Norges Bank has another important mission, namely the management of Norway’s sovereign wealth held in the Government Pension Fund Global (GPFG). Since the first capital transfer in May 1996, the GPFG has grown larger than anyone had imagined (Chart 9). And the investments have paid off handsomely. Cumulatively over the entire period, we have now earned more on investments abroad than the transfers to the GPFG. We have more than doubled our money. Chart 9 The money is more than doubled GPFG. In billions of NOK 16000  16000  12000  12000  8000  8000  4000  4000  Total value Deposits Returns Petroleum revenue spending Exchange rate  0  0 –4000  –4000 1998  2001  2004  2007  2010  2013  2016  2019  Sources: Ministry of Finance and Norges Bank  The fiscal rule ties petroleum revenue spending to the value of the GPFG. As its value has increased sharply, petroleum revenue spending has followed suit (Chart 10). In the years prior to the pandemic, one krone in six of government expenditure was covered by the GPFG. Chart 10 The GPFG finances a large portion of government expenditure Structural non-oil deficit as a share of government expenditure.

The problem arises in the case of people who are unable to move forward at the speed of the market. They become laggards and are left out. Hence, there should be a special strategy to bring them to the mainstream of economic life. The normal strategy that had been adopted to address this issue has been the introduction of safety nets to capture them before they make a free fall to the ground. The safety nets so introduced have taken different forms depending on the era or the country. About five decades ago, the safety nets took the form of providing outright grants to the poor people. The objective of the grants was to provide some relief to them, so that they could at least meet their food requirements. The weaknesses in this type of strategies are well known. It encourages poor people to remain in the safety net forever. They have no incentive to move out of the net, because moving out would mean their having to work hard for a living. If at least the basic requirement of food is provided free of charge, then why would anyone want to work for the same? Economists have long named this problem “moral hazard” problem. This problem simply says that, when one helps another, the person being helped does not have the incentive to adopt even the minimum safety measures. As a result, he increases the chance of the occurrence of the event which the helper desires to prevent.
This was the so-called Lunar Society, which included such personalities as Matthew Boulton, James Watt, Erasmus Darwin (grandfather of Charles), and William Small - a friend of Benjamin Franklin and Thomas Jefferson, all with wide-ranging interests, all sharing a sense of optimism and responsibility for building a better world. Imagine what a blessing it would be if the G-7/G-8 - our new Birmingham group - were to be inspired by such an example when dealing with their pressing agenda! As a modest preface to their work, I would like to share with you my personal views on the need for change the Asian crisis reveals, the building blocks available for a new architecture, and the work already under way at the IMF and, in the best traditions of Chatham House, to fly a few kites and suggest some further steps for the longer term. * * * Change is needed As in the days of the Industrial Revolution, we are now at a defining moment of human history. The question before us is straightforward: how to utilize the full potential of globalization to improve the living standards of all - particularly the poorest - while containing the risks it entails, such as those we have seen materialize so brutally in Asia, and those at least equally pernicious, even if less spectacular, of the continuous marginalization of the poorest countries. What kind of new architecture of the global system could achieve this? The response must be deduced from a proper analysis of the most recent crises.

Their efforts are in danger of falling short, however, because their domestic savings rates are still too low to finance the volume of investments needed to boost their rate of growth from approximately 5 percent to over 7 percent, which is not an unrealistic objective; it could be attained and sustained for a long time if local savings were supplemented by an appropriate mix of public and private foreign support and if a few key conditions were met, notably: • •  continued modernization of the framework for private investment; and improvement in public governance through the total commitment of new governing teams. Together with the World Bank and bilateral donors, we can make a difference. But a strong political impulsion by the world’s leaders and the example of their countries’ cooperation to development will be of the essence. May their communiqué demonstrate their vision and leadership in this domain also. The stability of the international monetary system has been on the agenda for more than 20 years of annual summits. The Asian crisis has highlighted how disruptive developments in exchange markets can help trigger a crisis. It is in this domain that efforts to strengthen multilateral surveillance over the international monetary system could be particularly fruitful. Moreover, the development of the euro into a key international currency could make a major contribution to stability of the overall architecture, provided that close cooperation is established among the monetary authorities of the tripolar system that might take shape.
Building strong and simple: the first step Speech given by Victoria Saporta, Executive Director of Prudential Policy Bank of England Virtual Webinar 29 April 2021  I would like to thank Austen Saunders and James Thatcher for helping me write this speech and David Bailey, Sarah Breeden and Sam Woods for helpful comments. 1  All speeches are available online at www.bankofengland.co.uk/news/speeches and @BoE_PressOffice  Last year, I set out my views on the ideal framework of post-Brexit prudential regulation in the UK. I outlined the key features that this prudential framework should exhibit. That it should be legitimate and democratically accountable, that it should have time-consistency embedded within it, and that it should adapt to changing circumstances whilst upholding prudential standards.1 I concluded that the framework which best embodies these features is one where policy is made by an independent regulatory body, with a clear mandate, and robust accountability mechanisms, in particular to Parliament. I am therefore pleased that this was the model consulted on in HMT’s Regulatory Framework Review last October. Of course the legislative process still needs to be completed. But we at the PRA must prepare in anticipation of the enhanced role we are set to play in this post-Brexit world. I would like to use this speech to sketch a vision for our updated approach to policymaking, before devoting the majority of my time to giving detail on a key upcoming policy initiative – the so-called ‘Strong and Simple’ framework for small banks and building societies.

Research, including the PRA’s own analysis of survey responses from UK firms, suggests that the fixed costs of implementing new requirements can be proportionally higher for small firms than for large ones when measured as a fraction of a firm’s assets.7 What this tells us is that there are economies of scale when it comes to compliance costs and that some costs fall relatively heavier on small firms than on large firms. At the same time, separate research by Bank staff shows that prudential requirements that are well-matched with the risks that cause large banks to fail are not so well-matched with those that cause small banks to fail.8 Putting this evidence together, we can ask whether there are requirements which are relatively more costly for small firms to implement but which deliver fewer benefits than when they are applied to large firms. And that is what we do in this Discussion Paper. Having identified requirements which do not make a material  6  Amadxarif et al.
Furthermore, after rising in the second half of 2018, credit default swap premia are now back at roughly the same level as in mid-2018. In the area of resolution, the Swiss big banks have improved their gone-concern lossabsorbing capacity since last year’s Financial Stability Report. Credit Suisse and UBS already meet all look-through requirements on a consolidated basis. Page 1/3  Berne, 13 June 2019 Fritz Zurbrügg  News conference  In addition to those at group level, the Federal Council has drawn up requirements on big banks’ loss-absorbing capacity at the level of individual group entities, and in early April initiated a consultation on a corresponding amendment to the Capital Adequacy Ordinance. These requirements are intended to ensure that not only the group as a whole, but also material group entities have sufficient loss-absorbing capital in the event of a crisis. The SNB supports the proposed amendments to the Capital Adequacy Ordinance. Work is also underway with regard to liquidity in a crisis, known as ‘funding in resolution’. It is aimed at ensuring that the big banks have sufficient liquidity during preparations for and in the phase immediately after resolution. For this purpose, FINMA is drawing up resolution funding plans in line with international standards. In cooperation with the SNB and the two banks concerned, it is currently assessing the big banks’ liquidity needs under possible crisis scenarios.

Beyond the theoretical considerations, it is important that financial regulation, in all its forms, should contribute to maintaining financial system diversity. Thus, attempting to measure all assets and liabilities at fair value has some drawbacks – and even entails risks – that need to be taken into account if lessons are to be drawn from the financial crisis for accounting rules. To conclude, I would like to stress an important point regarding the new financial regulatory framework. It would be unrealistic to believe that financial regulation is the answer, and, above all, that it is capable of protecting us from the risk of financial instability. Indeed, the crisis can largely be attributed to financial institutions’ inadequate risk management, which stems from an irrational trust in quantitative tools. Financial regulation should be an incentive for financial system participants to develop a sound and efficient management framework. It is no substitute. 2  BIS Review 161/2008
There also needs to be greater clarity about the Fund’s obligations, and how it is to be held to account for fulfilling them. A new Surveillance Decision The 1977 Surveillance Decision needs to be replaced by a coherent and comprehensive set of principles covering all aspects of the Fund’s surveillance. A new Decision should start from the overarching objective to promote external stability. Consistent with this, it should shift the emphasis toward multilateral surveillance and the analysis of policy spillovers. And, unlike the 1977 Decision, it should cover both exchange rate policies and domestic policies insofar as they may affect external stability, rather than exchange rate policies, per se. This is a key area where the consensus has moved on since the late 1970s. It is now well recognised that exchange rate policies cannot be divorced from domestic policies. Where exchange rates are allowed to float freely, the paths they take will be affected by a wide range of domestic factors, including both monetary and fiscal policies. These policies can have significant foreign exchange and spill-over effects even when they are not implemented for an explicit balance of payments purpose. But even where nominal exchange rates are pegged, competitiveness and hence  4  BIS Review 103/2006  trade flows depend crucially on relative inflation rates, which reflect domestic monetary and financial policies. So both the effects of a fixed exchange rate, and questions about whether such a peg is sustainable at a given level, depend fundamentally on other domestic policies.

When I attend conferences and seminars at other central banks, my foreign colleagues often assume that such a policy must have been tremendously popular. Indeed, the economics behind it is straightforward, and the resulting boost to peoples’ wages is hard to deny. In spite of that, the exchange rate commitment caused the sharpest ever deterioration of public confidence in the Czech National Bank: from around 75% to around 50%. Confidence only recovered after the commitment was terminated. These were precisely the times when its hard-won independence had to be put to work. Thus, central bank independence built into the country’s law code is a treasure without which price stability is rarely possible. But equally important is the perception of independence by central bankers themselves. This perception, in turn, depends on the compatibility of the monetary policy regime with the preferences of the population. It is often overlooked, however, that central bankers have an impact on these preferences. Rhetoric matters a great deal, and communication is now one of the most potent tools of monetary and other policy. True, enhancing financial literacy and altering public preferences in the process is a thankless, tiresome, long-term job, one that is often only appreciated years or even decades later. The man responsible for instilling a low-inflation mentality in Czechs, Alois Rašín, was shot dead in 1923 by a young communist. At that time, Rašín’s policies were very unpopular among some groups of the population.
But if failure is orderly, and does not compromise our public policy objectives, the responsibility should rest with the board and management for failing to serve the private interest of their shareholders and creditors. Last on the theme of failure, having firms that are either too big or too important to fail is bad for competition in the industries that we regulate. An industry where exit is too difficult is one where entry is likewise inhibited. This is what we see in the banking industry. Embedding resolution into the public policy objectives of financial regulation matters for two reasons relevant to competition: first, because, to repeat, exit enables entry; and, second, because if, as we will, we require new entrants to satisfy us on their resolvability in order to be authorised, we will lower the barriers and costs of opening for business. Put simply, if we don’t know how to deal with a failed firm, we will inevitably set a higher barrier to entry. We have already started to put this new approach into operation. Resolution of failed firms consistent with the public policy objectives is one key plank of the new approach to financial regulation. Another key plank concerns the macro prudential approach to regulation. The legislation has formally established the Financial Policy Committee (FPC) charged with the primary objective of identifying, monitoring and taking action to remove or reduce systemic risks with a view to protecting and enhancing the resilience of the UK financial system.

The FPC also has a secondary objective, to support the economic policy of the Government, including its objectives for growth and employment. The root of the introduction of macro-prudential regulation sounds quite obvious, which is to take into account the impact of financial regulation on the functioning of the real economy. Obvious you might say – yes, but it wasn’t done in the past. Macro-prudential regulation is focused on protecting the financial system as a whole. It is quite simply about ensuring that financial regulation is conducted with an eye on the state of the economy. In a very big picture sense, there is nothing new about this activity. The problems of the last five years have emphasised the close links between the health and behaviour of banks and the condition of the economy. This is a lesson of history, and one that should not have been forgotten. But, forgotten it was. A clear objective of macro-prudential policy is to act in a countercyclical fashion – to restrain booms by acting to tighten regulation, and to seek to dampen the impact of busts. Unfortunately, the record of the past shows that the behaviour of regulators has not been consistent with these objectives. The crisis illustrates the dangers of not applying restraint in what appeared to be good times. But it requires a very strong culture to allow this type of restraining to happen.
My argument is that the uncertainties today are a return to normality after two years of exceptional predictability in monetary policy both in the UK and elsewhere. A particular area of uncertainty at present is in the credit markets. The dangers of combining a traditional credit cycle with the new derivatives markets have emerged in the US sub prime sector. The US housing market is in its downswing and there are some signs that the same is true in the UK of unsecured credit and commercial property. The position of the bigger UK sectors is less clear cut. The shift in pension fund priorities and the growth of sovereign wealth funds are further clouding the picture. It is our job on the MPC to work through these issues and reach a judgement on them. Our target is to reduce inflation to 2% and keep it there. I can assure you that we will do whatever is needed to achieve that.

It is essential to channel them more towards financing the two major transformations of the coming decade: the ecological and digital transformations. As regards the economic situation, listening to more than 8,000 companies, we will publish our next monthly survey on Tuesday 11 January, and will provide a first assessment of the effects of the fifth wave. We remain confident that they will be relatively limited: we have learned over the past two years that every Covid wave, however serious, has diminishing economic effects. In our December projection, we showed that even an adverse scenario of further severe health restrictions – which is not the case today – would not prevent the French economy from returning by next year to the GDP trajectory it would have followed in the absence of the Covid crisis. These possible restrictions would admittedly reduce average growth in 2022, but this should be fully offset by additional growth in 2023. The other short-term issue is of course that of inflation: it is now close to its peak in our country (December showing first signs of stabilisation) and in the euro area. While remaining very vigilant, we believe that supply difficulties and energy pressures should gradually subside over the course of the year. We should then return not to the low inflation of the past, but to a new inflation regime close to our 2% target, with monetary policy normalising in stages accordingly.