samchain/econo-pairs-v1 huggingface dataset:
It could be for France even slightly higher than forecasted (1.6%), if we look at our Banque de France forecast for Q4 published this morning – at 0.5%. It will be sustained in the next two years thanks to strong investment and increased convergence among countries. These forecasts, including a positive but still subdued inflation, confirm the adequacy of the gradual normalisation of our monetary policy we are engaged in. There is a risk, however, that the debate will continue to revolve around two long-standing divisions: “German rules” vs “French expenditure” and “community methods” vs “intergovernmental methods". Too many fears and suspicions have been inherited from the past, but we are living in a new era – which is also thanks to the acceleration of reforms in France – and in a time of unique historic opportunity. In Rome, on 25 March of this year, the Member States all expressed their clear will for “the completion of the Economic and Monetary Union". We are in agreement on the “why": greater stability, to counter the risk of a new crisis befalling an unprotected euro area; and greater growth, to catch up our past lag on the United States and finally treat the fatal disease of mass unemployment in Europe. But how can we achieve this shared objective?

Our trade negotiators are well aware of these principles and mechanisms and I am sure they will negotiate effectively. Now in addition to all the deals which that have been negotiated with India, China and Singapore, we have the bilateral FTA in goods with Pakistan which is being invigorated, and on top of that, of course we have EU GSP plus. If you take all this together, if we are able to conclude these Trade Negotiations successfully, Sri Lanka could have access, preferential access, to a market of 3 billion people, which is a massive USP. Now I think Singapore has  preferential access to both China and India. But they don’t have preferential access to EU. So there is no other country in the world that I know of, which has preferential access to China, India and Page 14 of 17  Europe. I know that GSP plus is only for four years. But four years is enough time for us to take advantage of it. So that is a massive opportunity. Now, of course this market of  three billion people is going to provide opportunities for our own exporters. But on top of that the trick is to use this preferential access  to  this  3  billion  person  market  to  leverage  the  trade/investment nexus. We can tell people you can come and locate here and sell on a preferential basis to China, India and Europe.
This tool has been selected owing to its forward-looking nature and its ability to incorporate alternative scenarios. In an initial stage, the aim is to assess the risks entailed by the environmental transition, leaving physical risks for a second phase. Specifically, we need a tool that can analyse the different policies or events for which there is no past experience and whose impact extends over a lengthy timeframe (around five years). Examples of the type of scenarios would be policies that internalise the social costs of pollution at emitting agents, technological innovations that further reduce the cost of using renewable energy sources and shifts in agents’ preferences towards more environmentally sustainable goods and services. Given the complexity of this matter, an iterative modular approach has been adopted through which the macroeconomic effect of these shocks and policies can be analysed separately, so as to then calibrate the impact of changes in the macroeconomic environment on banks’ income statements and solvency. The macroeconomic module includes a general equilibrium model with a substantial sectoral breakdown, in which economic agents interact. In this way it is possible to take account of the changes in the sectoral structure of the economy triggered by the transition, with the least pollutant sectors gaining weight to the detriment of the most pollutant sectors, whose emissions decrease. The banking module models the different credit risk parameters (PDs, LGDs, etc.) on the basis of the sectoral and aggregate macroeconomic variables provided by the macro module, enabling projections of banks' income statements to be obtained.

As regulator, our mandate is to ensure the financial stability of the economy. In this regard, our competencies as micro- and macroprudential supervisor require us to be able to assess and quantify the risks entailed by the transition to a more sustainable economy, both for each individual bank and for the financial sector as a whole. Indeed, the transformative measures to change our productive model will affect bank borrowers. In some cases, they will give rise to opportunities, but there is no way of hiding that these transformations will adversely impact the business model of certain sectors. Therefore, it should come as no surprise that as supervisors we require that banks measure the risks derived from the transition process and incorporate them into their management. It is well known that the ecological transition process entails two types of risk: (i) physical risks, caused by the direct effects of climate change, storms, floods and natural disasters, and (ii) transition risks, which refer to the potential effect on specific borrowers of technological changes, changes in customer behaviour and preferences and the regulatory measures taken precisely to prevent physical risks from materialising. The measurement of these risks poses significant challenges. For example, the long time horizon over which the effects of physical risk are observed far exceeds that used to measure conventional banking risks.
The crisis also left some lessons for the profession and the way we use our highly stylized models in policy-making. The narrow view is to think they are a precise description of how the world works, when in truth it is much more complicated. However, the other extreme view – and a very bad one for policy-making – is disregarding all that we have learned from academic work. We need to be humble about the extent of our knowledge, but we also have to be rigorous and serious about policies. 6  BIS central bankers’ speeches  References Acharya V. and H. Naqvi (2010), “The Seeds of a Crisis: A Theory on Ban Liquidity and RiskTaking over the Business Cycle,” mimeo, NYU. Bernanke, B. (2011), “The Effects of the Great Recession on Central Bank Doctrine and Practice,” speech at the Federal Reserve of Boston 56th Economic Conference. Bernanke, B. and M. Woodford (1997), “Inflation Forecast and Monetary Policy,” Journal of Money, Credit, and Banking, Vol. 29, No. 4, part 2, pp. 653–684. Davies, H. and D. Green (2010), Banking on the Future. The Fall and Rise of Central Banking, Princeton University Press. De Gregorio, J. (2007), “Defining Inflation Targets, the Policy Horizon and the OutputInflation Tradeoff,” Working Paper N° 415, Central Bank of Chile. De Gregorio, J. (2008), “La Gran Moderación y el Riesgo Inflacionario: Una Mirada desde las Economías Emergentes,” Estudios Públicos, N° 110, pp. 5–20, otoño. Galí, J. and L. Gambetti (2009), “On the Sources of the Great Moderation,” American Economic Journal: Macroeconomics, Vol.

As regards complex structured products, we insist on imposing certain prohibitions, and both Anatoly Aksakov and Nikolay Zhuravlev have already said this. We have been discussing at the Federation Council that we need adequate laws in this area. The second problem is high hidden fees in consumer lending. In the conditions of low interest rates, banks, regrettably, also get involved in dubious practices striving to increase their interest income. Some banks ‘conceal’ the actual cost of a loan in insurance premiums and fees, while their amount may reach up to 50% of the loan cost. Often, people are unable to understand how much they would have to actually pay for a loan. Therefore, we are proposing a new approach to calculating the effective interest rate and hoping to be supported by legislative authorities on this issue as well. The new approach implies that the calculation will cover all additional services and insurance options approved by a borrower. As a result, a client will receive exhaustive information. Furthermore, as loans with a high effective interest rate involve higher capital requirements, banks will be less interested in granting so expensive loans. 5/7  BIS central bankers' speeches  The third topic is floating interest rates on retail loans. Banks want to be capable to efficiently manage their interest rate risk. Indeed, we appreciate that banks are careful in controlling their interest rate risk. This risk should never be underestimated. Nevertheless, we believe it inappropriate to fully transfer these risks to retail borrowers, especially on long-term loans.
For example, quoted bid-ask spreads, after widening sharply during the financial crisis, subsequently narrowed and have remained stable at pre-crisis levels since 2010. (Exhibit 1) Other measures paint a more mixed picture. While order book depth is appreciably lower now than in 2012 and 2013, it is much higher than during the financial crisis, and does not appear to be unusually low by historical standards. (Exhibit 2) Similarly, the price impact of trades appears to have risen a bit since the October 15 flash rally indicating some deterioration of liquidity, but is still not high relative to its longer-run experience. (Exhibit 3) Average trade sizes have followed a similar pattern to the order book depth and have recently declined somewhat. (Exhibit 4) Another way to assess liquidity conditions is through the potential impact on Treasury yields. If liquidity had deteriorated markedly, then we would expect to see larger deviations of actual yields compared to the yields predicted by an empirically fitted yield curve. If liquidity were more costly, the deviations of actual yields from fitted yields would increase because the costs of arbitrage to eliminate those divergences would be higher. During the financial crisis, for example, there was a sharp deterioration in liquidity, which was associated with a sharp rise in some measures of yield curve fitting errors to a peak of about 20 basis points. This compares to less than 2 basis points prior to the crisis. In contrast, yield curve fitting errors have been low and stable recently and not outside historical norms.

(Exhibit 5) Of course, the Federal Reserve’s large scale interventions in the Treasury market over this period may also have had an impact on this measure. Turning to corporate bonds, given their heterogeneous nature, liquidity in the corporate bond market depends on the ability and willingness of dealers to hold these securities on their balance sheets while they find buyers. Disaggregated data on dealer balance sheet holdings have only been published since April 2013. While limited in terms of its history, these data indicate no clear reduction in investment grade security holdings over time, but do show a significant reduction in high-yield security holdings since the end of the financial crisis. This might be indicative of deterioration in market liquidity in corporate bonds. To investigate corporate bond market liquidity in more detail, let’s examine three liquidity measures: the average trade size, “effective” bid-ask spreads and price impact. The evidence on the average trade size for investment grade corporate bonds indicates a slight reduction from between $ to $ in the early 2000s to around $ in the last few years. (Exhibit 6) However, price measures of corporate bond liquidity do not substantiate the trend in this quantity measure. The effective bid-ask spread has been trending down since the early 2000s, around the same time that TRACE reporting was introduced. The spread spiked during the financial crisis, but is now lower than its pre-crisis levels.
Ever since the single currency was introduced, the integration of financial markets has advanced much faster in terms of integration in the field of payments. However, the crisis has conditioned a segmentation of the European financial markets, while the convergence of payment habits has been an ongoing process supported in large by the European SEPA project. The implementation of SEPA project has inspired new integration processes in the European Union, which proved to be necessary in times of economic and financial instability, such as building the banking union by establishing the Single Supervisory Mechanism, the Single Resolution Mechanism for banks and the unique rules regulating the deposit insurance schemes. Therefore, the integration in many fields is a consequence of the  BIS central bankers’ speeches  1  monetary integration in the European Union, which was timely foreseen in the field of payments where we have gradual and continued integration. However, the ultimate goal of SEPA is not to make the users of payment services behave uniformly, but to harmonize principles, business practices, and rules and technical standards for conducting payments. In that respect, recently, the main focus was the migration of credit transfers and direct debts under the SEPA standards, with the deadline for the members of the euro area being August 2014. In the period ahead, the efforts within the SEPA project are expected to aim towards harmonization of card payments.

Importing the stability-oriented policy that had long been conducted in the EMU's core countries helped to create better conditions for future growth. The policy model we now follow comes originally from Germany. During the entire post-war period they have endeavoured, to a great extent successfully, to maintain price stability. The task of achieving this has fallen to the German central bank - the Bundesbank - which has operated independently, at arm's length from party politics. The Bundesbank model is now copied by a number of industrial nations, which have given their central banks a large degree of independence and the task of aiming for price stability. This policy is also reflected in the Maastricht Treaty and in the Riksbank legislation. My colleagues in the major industrial nations also try - as long as they are sure that inflation is not about to deviate from the desired level to take account of economic activity and unemployment. There are thus considerable similarities and this applies not only in Europe, but also in a comparison with, for instance, the US, although the stipulated targets vary, sometimes for historical reasons. In this sense we are all the children of the Bundesbank! Within the central bank world the methods of working have also become more similar in recent years. Although not all industrial nations with a floating exchange rate say that they use inflation targeting, they actually do so in some form.
In Australia, for example, this adjustment had already begun at the end of 2012 with the postponement of investment projects in iron or coal. Peru and Chile saw their adjustments in the second half of 2013. On the financial side, the normalization of international financial conditions has resulted in greater market volatility in emerging economies, together with higher risk premiums and capital outflows, plus a depreciation of their currencies against the U.S. dollar. In Chile, unlike past episodes, the effects on domestic financial markets have been bounded. The long-term rates have fallen while the money market has operated smoothly, and the risk premium is close to or only marginally above its levels of a while back. The exchange rate has absorbed the shock to terms of trade and the tightening of international financial conditions. Actually, the depreciation of the Chilean peso is among the highest in emerging economies. From a year ago, the currency has depreciated around 17% against the U.S. dollar, and the real exchange rate (RER) did by about 15%. This depreciation of the currency, in any case, is a desired effect, since it means an adjustment of relative prices and thus contributes to rebalance the sources of growth across economic sectors. In fact this is consistent with the macroeconomic framework that Chile has in place. Short- and long-term interest rates have declined while the currency has depreciated. In this scenario, inflation in Chile has returned to near 3% and medium-term expectations are in line with the target.

Lars Nyberg: The ESRB – reflections after 9 months of operation Speech by Mr Lars Nyberg, Deputy Governor of the Sveriges Riksbank, at Norges Bank (Central Bank of Norway), Oslo, 27 September 2011. *  *  *  The financial crisis that started in 2007–8 exposed serious weaknesses in the regulatory system. Firstly, it turned out that the banks had too little capital and that the quality of that capital was not good enough. Furthermore, issues of liquidity had largely been neglected by regulators. All this has been addressed by the Basel III compromise, which is to be slowly implemented over the years to come – too slowly in the view of some countries, too quickly according to others. Secondly, the crisis revealed some embarrassing weaknesses in the EU framework for financial stability. The quality of supervision varied substantially between countries and coordination within Europe was insufficient, to say the least. Perhaps even more importantly, the concept of macro-prudential supervision (I will return to this concept in a while) was largely unheard of. To address these issues, the Commission, in late 2008, set up a group (where I had the honour of being a member) led by Jacques de Larosière with the mandate of presenting a roadmap for strengthening the European supervisory framework. The group delivered its report in March 2009. One of the main ideas was the creation of a new institution, which eventually came to be called the European Systemic Risk Board and which is my subject for today.
It can be said that, apart from reserve requirements and other similar tools, which are seldom changed, the Bank’s interest rate decisions, foreign exchange market intervention, and capital controls are its chief monetary policy instruments. These instruments must be properly aligned, and consequently, interest rate decisions take account of capital controls. The controls provided some shelter for interest rate decisions for a while; however, as soon as they are relaxed, interest rates must be high enough to give investors an incentive to hold ISK assets. Just how high they must be is determined in part by the risk premium on the Republic of Iceland, which fortunately has declined significantly in the recent term. For example, the Republic’s CDS spread has fallen from around 1000 basis points at the beginning of the year to about 350 points. But what about foreign exchange market intervention? It is a tricky instrument and, if misapplied, yields nothing at best and generates enormous losses at worst. Refusing to use it at all, however, would be unnecessarily extreme. One of the lessons of the financial crisis is that the proper deployment of foreign exchange reserves can be of key importance in preserving monetary and financial stability under difficult circumstances. This is supported by innumerable examples from countries from Brazil to Korea. There is no benefit in amassing foreign exchange reserves during an economic upswing if one is chary of using them in times of need.

•  Financing restrictions – in the form of LTVs and caps on loan tenures – were imposed on housing loans and car loans to moderate demand and reduce price pressures. •  Over 2013–2014, inflation came down steadily as housing and car prices declined. So, monetary policy and macroprudential policy can potentially be complementary to help achieve both macroeconomic stability and financial stability. They can do this sometimes by acting in the same direction; sometimes in opposite directions. •  Charles Bean 7 gives a useful pedagogical exposition of how a restoration of price and financial stability could be achieved by a combination of instrument tightening and loosening, similar to employing an optimal mix of fiscal and monetary policies to influence the composition of aggregate demand. 7  Bean, C. (2015), Comment on Applying an Inflation-targeting Lens to Macroprudential Policy Institutions, International Journal of Central Banking, Vol 11, Supplement 1  BIS central bankers’ speeches  7  •  But we need to deepen our understanding of when to use monetary policy and when to use macroprudential policy and when to combine the two, if at all. Does tighter regulation weaken the efficacy of monetary policy? There is one other aspect of the interaction between monetary and regulatory policy that I would like to touch on. •  Just as monetary policy that is set to achieve macroeconomic stability can sometimes be inappropriate for financial stability, could there be a situation where regulatory policy weakens the transmission mechanism of monetary policy?
3  See Atif Mian and Amir Sufi (2011), ‘‘House Prices, Home Equity-Based Borrowing, and the U.S. Household Leverage Crisis,’’ American Economic Review 101, 2132–56, and (2011), ‘‘What Explains High Unemployment? The Aggregate Demand Channel,’’ University of Chicago, unpublished paper. BIS central bankers’ speeches  3  reversal reduced the aggregate wealth of homeowners and, in the worst case, left many “underwater,” meaning that the amount of mortgage debt secured by their home exceeded its current value. This outcome is reflected in the dramatic decline in owners’ equity in household real estate, seen in Chart 3 (Result was a Huge Decline in Owners’ Equity in HH RE). It is interesting to note that while home prices rose during the boom, homeowner’s equity share remained constant. Thus, prior to the end of 2006, on average for each 1 percent increase in home prices, homeowners increased their mortgage debt by 1 percent (through higher balances on first mortgages, cash-out refinances, second mortgages, and home equity lines of credit). When house values began to fall, so did corporate equity values, which depressed household wealth further Chart 4 (Stock Market Wealth also Fell Sharply), limiting households’ options for reducing their debt burdens or sustaining their prior levels of consumption. Consequently, and in line with the logic of the research I discussed earlier, U.S. households decreased the cash flow available for consumption by paying down debt during the recession and early recovery.

Here we see that the share of new mortgage borrowing by applicants of all credit scores below the highest quartile declined, while that of the highest quartile increased from about 40 percent to 70 percent. This suggests that lenders were far more selective in their underwriting standards for mortgages than they had been in the period between 2000 and 2006. Many of these powerful forces of demand and supply that together led to the decline in household borrowing, and hence to the fall-off in resources available for consumption, have either diminished or slowly reversed as the economic recovery that began in 2009 has continued. First, equity values, which dropped 51% between October 2007 and March 2009, as measured by the S&P 500 index, have recovered significantly, rising by almost 140% percent through the end of 2013 Chart 8 (Stock Market Wealth also Fell Sharply, 2nd half). In addition, as seen in Chart 9 (House Prices Peaked and Fell Precipitously, 2nd half) house prices have finally begun to recover, and have been doing so on a broad geographical basis. House prices are up 21 percent since their nadir in 2011. This has helped restore owners’ equity in their homes Chart 10 (Result was a huge decline in Owners’ Equity in HH RE, 2nd half). In sum, as seen in Chart 11 (Household Net Worth), aggregate household wealth has recovered substantially as a percent of disposable income, albeit with a lesser contribution from housing and a greater contribution from corporate equities.