samchain/econo-pairs-v1 huggingface dataset:
Firms Markets are places where end-users and intermediaries meet. Securities regulation affects financial firms – traders and asset managers – as both intermediaries and as users. It is important this gives proper weight to financial stability. Three broad thoughts on that. Regulated banks: provisions and disclosure Everybody in this room and outside knows, or should know, that for much of the past quarter of a century there was a stand off between bank supervisors and securities regulators over provisioning policy. On the one hand, until they gave up in exhaustion, many bank supervisors wanted banks to set aside (general) provisions against losses that were implicit in portfolios but not yet manifest in arrears or other concrete measures of impairment. Today we would call this forward-looking or expected-loss or dynamic provisioning. On the other hand, securities regulators typically opposed this because they feared, no doubt with some reason, that it could be used to smooth profits in a misleading way. There were some famous stand offs. I do not doubt the sincerity of the securities regulators’ concerns. And no-one could ignore the constraints that, as the years passed, were codified into accounting policy. But the stand off across the supervisor/market regulator divide was a problem. Progress is now being made by the IASB and FASB on developing more forward-looking impairment standards.

But while nearly all markets are subject to regulation, relatively little thought has been given over the past decade to how different markets matter to stability and, hence, about the role of the authorities in this area. 1  On that, see the Bank of England/FSA paper released last week on how banking supervision is being reformed in the UK in preparation for the establishment of the new Prudential Regulatory Authority. 2  See Tucker P M W “Macroprudential Policy: Building Financial Stability Institutions”, 2011 for a discussion of macroprudential regimes. 3  Bank of England Annual Report and Accounts 2010 pp 26–27. BIS central bankers’ speeches  1  Markets matter to stability in different ways As a provisional attempt at this, I think it might be helpful to distinguish between three types of market: infrastructural markets, intra-financial-system markets, and end-user markets. The first type is those markets that provide essential, quasi-infrastructural support to banking. The obvious example is the overnight wholesale money markets. They are effectively part of the payments system infrastructure. Banking, which is integral to the provision of all three core financial services, simply could not operate without these markets. They have long been, and will remain, of concern to central banks. I will not return to them today. The second category is intra-financial system markets (a slightly broader concept than inter-dealer markets). These markets determine the interlinkages amongst financial firms.
Such an instrument already exists, in theory, in the ESM toolbox in the form of the ‘Precautionary Financial Assistance’. Yet, it has never been used, and could probably be improved, with clear rules and some form of automatic prequalification system, to avoid a stigma effect. This enhancement of the crisis prevention instruments could form part of a broader transformation of the ESM and its governance into a European Monetary Fund (EMF). The issue of allocation should also be seriously addressed. In order to boost potential growth in the long term, expenditure on investment and on our future are vital, including on education and training and, of course, new technologies. This is true of national budgets, but we could amplify the effect through a euro area investment budget. This budget could be used to finance, for the benefit of all euro area Member States, certain “common goods” such as digital technology, energy transition, security, and external border protection. As all countries would benefit from this budget, it would be precisely the opposite of a transfer union. In a nutshell, what I have elaborated on so far are the accelerators of the Economic Union: micro, macro and fiscal [slide]. 3/ This leads me to the third and last cliché: we should stop pitting risk reduction against risk sharing or, to put it another way, responsibility against solidarity or, in a complementary perspective, rules against discretion. These oppositions create a sterile division between northern Europe and southern Europe.

We as central bankers are concerned here with avoiding overburdening monetary policy by the next recession, but it is of course the responsibility of politicians to act. 1/ The first cliché that emerges when we talk about reforming the euro area is the opposition between vision – be it French or otherwise – and pragmatism – seen as a northern European virtue. We must be practical, and take real needs and particularly those of businesses and entrepreneurs as our starting point. At the same time, we need a political ambition if we are to act – call it a “vision” if you wish. Today, the key to growth in the euro area is investment and innovation. But to innovate, in digital technology or in the energy transition for example, companies need to be able to take more risks, which requires more equity financing over the 1/3  BIS central bankers' speeches  long term, rather than debt financing. The euro area is seriously lagging behind in this respect: equity capital amounted to only 73% of GDP in the third quarter of 2017, compared to 123% in the United States. This brings me to my first solution for strengthening our Economic Union: a European-level "Financing Union for Investment and Innovation", which would better channel the euro area’s EUR 350 billion savings surplus into equity financing for innovation, in digital or renewable energy technologies.
The Maastricht Treaty, which was signed in 1992, made monetary policy a euro area competence but left economic and fiscal policies under the responsibility of national governments. The concept of economic union relied essentially on the single market, with few binding constraints on economic and fiscal policies. Over time, this turned out to be a significant institutional shortcoming. Moreover, the transfer of a core sovereign prerogative like monetary policy to the supranational level is a highly political act which entails important political commitments for the future. In particular, the participating countries must undertake to conduct fiscal and economic policies in a way that allows monetary union to work properly. This is a responsibility that the euro area countries share, a responsibility that governments have to fulfil vis-à-vis their peers and vis-à-vis their own citizens. Seen from this perspective, it is clear that the concept of EMU goes beyond economic and monetary integration. Let me add that the single market itself has a political dimension as the proper functioning of markets requires strong institutional underpinnings, such as enforcement of contracts, consumer protection and competition policy. It has mandated the creation of a federal executive (the European Commission), legislative (the European  1  In the late 1970s, European countries agreed on closer exchange rate cooperation by setting standard fluctuation bands of plus/minus 2.25% for their bilateral exchange rates.

When the bubbles burst after the global financial crisis of 2007, governments stepped in to support growth and some of them were called to rescue ailing banks. In this way, private indebtedness turned into public indebtedness, with disastrous fiscal consequences even for countries that had run fiscal surpluses prior to the crisis, such as Ireland and Spain, and even more for those that had not, such as Greece. A further shortcoming of the Maastricht framework was the inability to deal with what is now being called the “bank-sovereign nexus”. When systemically important banks run into trouble, governments are expected to step in and provide fiscal support to contain the spillovers. Beyond that, banks are typically the largest holders of government debt from their respective sovereigns. These ties, or nexus, between banks and their governments can lead to a dangerous downward spiral Another effect of this downward spiral, under way since the euro area crisis erupted in 2010, is the fragmentation of capital markets. The bank-sovereign nexus has led to a situation whereby cross-border lending of banks has gone down significantly, as banks retreat more and more to their domestic markets, encouraged by their shareholders and, sometimes, by  BIS central bankers’ speeches  3  national banking supervisors. The crisis is undermining a key achievement of the euro, the integration of capital markets. A fundamental problem of the Maastricht Treaty was its over-reliance on the assumption that market discipline and peer pressure would provide sufficient incentives for national policy-makers to conduct sound fiscal and economic policies.
•  China growing at 6% today adds $ billion of GDP compared to $ billion that a smaller China growing by 10% added 10 years ago. •  China contributed to more than one-third of world GDP growth last year, more than the combined contributions of the US, Europe and Japan. Addressing vulnerabilities Against this backdrop of moderating growth, China is also faced with the task of addressing vulnerabilities in its economy and financial system. The chief risk is leverage – both its level and its growth. •  According to the BIS, China’s credit-to-GDP ratio stands at around 250%, having risen by 100% points since end-2008. Nearly 70% of that increase is attributable to corporate debt. •  There are concerns that part of the corporate borrowing has been used to pay off existing loans, rather than being channelled towards productive activities. •  Many of the Chinese firms having difficulty servicing their debt are from the heavy industry sector facing excess capacity. China has the fiscal resources to backstop its financial sector’s liabilities and thereby stave off a systemic financial crisis. But the debt overhang will weigh on corporate investment and present a further headwind to growth. Indeed, with continuing producer price deflation, the real debt burden will keep rising, even as profitability falls. In a good scenario, the debt ratio stabilises at the current level, and then gradually declines as nominal GDP rises faster than credit; in other words, China grows out of its debt problem.

We have gained an increasing understanding that how we finance postsecondary education has significant effects on a variety of critical economic outcomes, including economic growth and inequality. For example, our research suggests that higher student debt and delinquencies reduce household formation and depress homeownership. But there are many important questions still left unanswered. What is the relationship between the amount and type of educational investment that people make and their outcomes? What attributes are associated with borrowers who are more successful at  1  2  Payback Time? Measuring Progress on Student Debt Repayment. BIS central bankers’ speeches  repaying their student loans? Are there particular types of degrees that are associated with better performance with respect to student debt repayment or with better living standards earlier in life? What are the best interventions to help borrowers avoid the consequences of delinquency and default, and to limit any default costs to taxpayers? Do borrowers who use programs like income-based repayment eventually succeed in paying off their debts? How do income-based repayment programs affect important decisions such as labor supply, consumption and household formation? These are important questions for the nation, as the human capital of our citizens is far and away our most important asset, and student loans are an important mechanism for financing needed investments in that asset. But it is very hard to answer these questions with existing data.
Nevertheless, the Celtic tiger was not immune to the challenges that the financial crisis posed to many of the world’s advanced economies. On the contrary: Ireland has had to deal with more severe challenges than most. Much has been written about how Ireland arrived in this position. But let me state this right at the beginning: Ireland is not the only country that needs to reform. Fiscal consolidation and growth enhancing structural reforms are needed everywhere in Europe to remain competitive on a global marketplace. Ireland is, however, one among several countries with more severe adjustment needs. Our view is that to set the correct course, we must be clear-headed about the reasons why we are where we are. To frame the issue somewhat bluntly, the Irish State and people woke up to a painful new reality when the Irish housing bubble burst at the onset of the international financial crisis in 2007. Extraordinarily high growth in the run up to the crisis had gone hand-in-hand with the build-up of economic and financial imbalances. The path back to full fitness has been enormously difficult and entailed wrenching economic, financial and social change. And the path has not been smooth. Indeed, about one-and-ahalf years ago the economy was close to cardiac arrest. The patient required life support – kept alive with the substantial assistance from international lenders, as well as the continued levels of extraordinary support from the Eurosystem. But progress since then has been good: the programme is on track. So far, Ireland has delivered.

Average inflation between 2001 and 2013 was 3.1% annually. Pillar number three is our floating exchange rate regime. Exchange rate flexibility allows to rapidly and effectively accommodate big external shocks such as changes in the terms of trade via movements in the exchange rate. This flexibility gives more room to monetary policy to contribute to the smoothing of the domestic business cycle. Chile’s long-term interest rates, unlike those of other economies, have decreased in recent months. And they are certainly lower than they were in the 1990s. By way of example, compare the 6.5% average rate of indexed 10-year bonds in the nineties with their 2% rate of today. The floating exchange rate provides the right incentives to the private sector to administer the currency and foreign liquidity risks in a much globally integrated economy like ours. On the financial sector side, there is a sound regulatory and supervisory framework grounded on a set of prudential norms and standards. These are in line with international recommendations, and are under the supervision of specialized regulatory entities, aimed at the correct management of financial institutions. All this has helped to develop a mature, stable, solvent financial system. The Basel index, measured by the Capital Adequacy Ratio of the Chilean banking system is more than 13%. The banking sector shows sound capital and funding structures, concentrated in long-term sources. Additionally, they carry no significant currency mismatches on their balance sheets, nor do their customers.
And this combination of events is likely to create an environment in which business investment spending will gather strength. Finally, I believe this tug-of-war analogy is useful in explaining the recent inflation dynamics. As is well known, total inflation, as measured by the personal consumption expenditures (PCE) deflator, has slowed sharply over the past year and is now running below the FOMC’s expressed goal of 2 percent. Much of the slowing of total inflation is due to declining energy prices resulting from the weakening of global growth mentioned earlier combined with increased energy production here in the U.S. However, it is also the case that core inflation, that is, excluding food and energy, has slowed sharply as well. A decomposition of the slowing in core inflation reveals that some of it is due to slowing in the rate of increase in prices of non-food and non-energy goods. This probably is due in large part to the softening of global demand for goods and the modest appreciation of the dollar that has occurred since mid-2011. In the service sector, the rate of increase in prices of medical services and “non-market” services – the latter includes some financial services – also has slowed notably recently. In contrast, the rate of increase in prices for other non-energy services has been relatively stable.

Comparing this set of conditions to that in 2010, the recent slowing of inflation has been less widespread across core goods and core services, and inflation expectations so far have declined less appreciably than they did in 2010. Thus, my best guess is that core goods prices will begin to firm in the months ahead as global demand begins to strengthen and inventories get into better alignment with sales. 1  2  CoreLogic Report Shows Home Prices Rise by 12.1 Percent Year Over Year in April. BIS central bankers’ speeches  As is always the case, there is substantial uncertainty surrounding this forecast. Moreover, there is always the possibility of some unforeseen shock. Thus, we will be monitoring U.S. and global economic conditions very carefully and will adjust our views on the likely path for growth, inflation and the unemployment rate accordingly in response to new information. At its meeting last week, the FOMC decided to continue its accommodative policy stance. It reaffirmed its expectation that the current low range for the federal funds rate target will be appropriate at least as long as the unemployment rate remains above 6.5 percent, so long as inflation and inflation expectations remain well-behaved. It is important to remember that these conditions are thresholds, not triggers. The FOMC also maintained its purchases of $ billion per month in agency MBS and $ billion per month in Treasury securities, with a stated goal of promoting a substantial improvement in the labor market outlook in a context of price stability.
The approach for the implementation of the action plans outlined  BIS Review 49/2005  1  in a Master Plan needs to be done in an iterative manner, taking into account the potential for change that may occur in both the domestic and external environment. The Master Plan will also identify the building blocks of the various parts of the financial sector that need to be put in place to provide the foundation on which further progress can be built. The Financial Master Plan thus provides the sequencing of priorities and identifies the key financial infrastructure that needs to be put in place before advancing forward. In some areas, the implementation can be simultaneous, while in others a more direct route can be taken to enable a more rapid pace of development. In designing and formulating the Master Plan, consideration needs to be given to the diversity of the member countries of the IDB. The member countries are at various stages of economic development, facing different economic and financial challenges, and with different development priorities. The Master Plan aims to highlight the approaches, templates and building blocks that can be adopted at the different stages in the development of a comprehensive Islamic financial system. A phasedapproach would provide the Master Plan with the flexibility to take into account the different stages of economic development of respective countries. While the starting points may differ, countries may adapt the approaches to their requirements and that is commensurate with their stage of development.

Real effort is needed to try to understand the dynamics of collective, and sometimes irrational behaviour of firms, their clients and counterparties - particularly behaviour that could lead to one-way markets. In a downward market they can be the scourge of stability and destroyer of liquidity. 3. Financial stability and public policy  The business of oversight of, and possible intervention in, the financial system falls to public authorities. The justification for this involvement is accepted by all but the freest of free marketers. 1  Raymond Goldsmith, Comment on Hyman Minsky’s “The Financial Instability Hypothesis: Capital Processes and the Behaviour of the Economy” in C P Kindleberger and J-P Laffargue Eds, Financial Crises: Theory, History and Politics. Cambridge University Press (1982). BIS Review 5/2004  1  Financial stability can be looked on as a public good. And the costs to society of crises and instability can go well beyond the cost borne by players within the financial services arena itself. Not only is it important in providing an effective monetary transmission mechanism, but collapse and instability can lead to decline in aggregate demand and a rise in unemployment. Research suggests that the average cumulative output loss of a banking crisis in an emerging market economy is nearly 14% of GDP, and up to 25% in developed countries.2 The roles and aims of the public authorities - a combination of supervisors, central banks and government - embrace two interdependent fields.
Asia’s young and increasingly urban and increasingly more affluent population, supported with policy initiatives to strengthen social safety nets – including for healthcare and retirement – will further enhance domestic demand in the region. This will further unlock our trade and growth potential. Our diversity also continues to be an important source of strength for the region. The complementarities between the economies in the region provide significant opportunities for greater shared prosperity and mutually reinforcing regional growth. The progressive liberalization of the domestic financial sectors, the development of domestic capital markets and the integration of payments and settlement systems have opened up new channels for regional financial institutions and markets to intermediate funds across borders. These developments have facilitated the recycling of surplus funds from the region for economic development in the region, while also enabling greater diversification of risks. The lessons drawn from the Asian financial crisis more than 15 years ago also continue to shape our financial sector reforms, liberalization and economic and financial integration in the region. The focus is on developing a financial sector that serves the needs of the real economy, and which is built on solid foundations of sound risk management and strong financial buffers. An important precondition for financial liberalization and integration in the region has been ensuring that we build the capacity and financial infrastructure that would enable us to respond to emerging risks while also minimising their contagion effects.

Jean-Pierre Roth: Economic prospects for 2005 in a subdued European environment Summary of a speech by Mr Jean-Pierre Roth, Chairman of the Governing Board of the Swiss National Bank, at the “Les Rencontres au Château” meeting, Sierre, 22 February 2005. The complete speech can be found in French on the Swiss National Bank’s website (www.snb.ch). *  *  *  Although the Swiss economy expanded by almost 2% in 2004, this was not sufficient to reduce unemployment significantly. Hopes for an improvement in this respect are thus focused on this year. However, they might unfortunately remain unfulfilled once again. At the end of 2004, there were already signs of a slowdown in growth caused by the weak dollar and persistently high oil prices. These factors also played a key role in the National Bank's decision to leave interest rates unchanged. Overall, the international economy developed in line with expectations during the first two months of 2005: the US and Asia saw further growth, while Europe was confronted with increased difficulties. The US economy is burdened with high budget deficits and the current account deficit. In Asia, the Chinese economy is booming, whereas Japan is still struggling to find its way back to the growth path. The monetary situation in Asia, too, appears less than stable. In Europe, the economic environment presents a rather dim picture. Germany, Italy and the Netherlands are expected to see rather modest growth, while the outlook for France is more upbeat.