samchain/econo-pairs-v1 huggingface dataset:
Detailed recommendations on the regulatory treatment of shadow banking are expected to be prepared only by 2012. In the EU, work on shadow banking, however is at a relatively early stage, currently focussing on a stocktaking of existing regulations and conducting a data sharing exercise. Finally, let me also mention that the development of effective bank resolution regimes, which has been on the top of the global and EU regulatory agendas, is also a key element of a successful policy response to the recent crisis. There is now a broad consensus that all distressed institutions, particularly systemic ones, should be dealt with by authorities in a way which safeguards the stability of the financial system as a whole and minimises public costs and economic disruption. In the US several banks were allowed to fail in an orderly manner in the recent years, which could provide an example for other countries as well concerning the set-up of an efficient resolution regime in a national context. However, it has to be acknowledged that most of these banks in the US were rather small compared to average European bank sizes and they were almost exclusively national based with no or very little cross-border operation. Therefore, substantial challenges remain for authorities around the globe to establish effective cross-border resolutions schemes, in particular for global systematically important banks.

Some people place as much trust in an anonymous tweet or Facebook post as they do in an article in the Financial Times, Le Monde or El País. Some people see “fake news” as real news and “alternative facts” as a solid basis for taking decisions. So, can data and statistics help to counter “alternative facts” and “fake news”? Can they help to build a more solid base for making decisions? Well, over the years, it has become somewhat fashionable to doubt the ability of statistics to shed light on the facts, on the truth. I am sure that every statistician in the room has been told more than once that “there are three kinds of lies: lies, damn lies and statistics”. Ironically, the quote has been attributed to so many different people that its true source is unknown. So tonight, I think we should focus on how we can defend statistics and good data as a source of facts. One of the key questions is how we can engage with those who doubt us. In my view, there are two things we need to do. The first is to admit that real-world statistics have their limits, and to be transparent about how and when we use judgement. The second is to ensure that we, as institutions and as individual experts, earn people’s trust. Statistics is a discipline that is certainly aware of its own limits: it not only acknowledges uncertainty, it quantifies it!
But if secondary effects arise, or if inflation expectations rise, monetary policy may need to be tightened. It is important for monetary policy that what started as increases in oil and food prices in the world market does not spread to other areas and that inflation expectations in the slightly longer term do not become entrenched at a higher level, but fall back towards the inflation target once again. We know that inflation expectations can be largely explained by the actual rise in inflation. However, we do not know very much about how monetary policy affects inflation expectations over and above the effect via inflation, and how inflation expectations in their turn affect long-term inflation. There is an interesting approach in the academic research which involves the general public looking at outcomes and gradually learning how the economy functions and how the central bank reacts. If households are to believe that the central bank focuses on low and stable inflation they must be able to observe such behaviour. But such a process may take time, which we in Sweden could conclude in the mid-1990s when our own inflation target was established. This is an area we need to study more. Wage costs rising more than before In the Monetary Policy Report we assumed that hourly wages would increase by an average of around 4 per cent a year during the three-year agreement period. This is around 1 percentage point a year more than during the previous three-year period.

Although substantial losses have been taken up in the financial institutions’ balance sheets, and they have been allocated new capital to a large degree, we have not yet seen the end of the financial crisis. Different measures of risk premiums are still at a high level compared with the period prior to last summer. One can illustrate the problems in different ways, for instance by means of the so-called basis spreads, which demonstrate the difference between interest rates between the banks and the expected policy rate set by the central bank. This measure reflects pricing of the risk faced by the banks when lending to other banks. The basis spreads increased significantly in August last year. Sweden has also been affected by the global financial crisis, but to a lesser extent than many other countries. The basis spreads have, for instance, increased more in the United States and the euro area than in Sweden. But it is at the same time important to remember that the crisis has increased the Swedish banks’ vulnerability to shocks. Although the basis spreads have declined somewhat in the euro area and in Sweden since last spring, they have not returned to the earlier levels yet and one cannot exclude the possibility of new problems arising that will push risk premiums even higher. Weaker growth in the USA Economic developments in the United States continued to deteriorate during the first half of the year. This was largely connected to problems in the financial markets.
Then the energy of its single market, which we now have to push to its full potential:  Page 11 sur 14  Enabling our human capital  As you all know, there is a very strong correlation vii between growth and education. In Europe, we have some of the best education and vocational training systems – and you are the best proof of them! But there is a large human capital divide in the EU with regard to the distribution of skills. Southern EU countries, including mine, have a distribution of skills with more low-skilled people – Spain and Italy have twice as many as Sweden, as of share of the adult population – and fewer high-skilled individualsviii – France has half as many as the Netherlands or Finlandix. As education inequalities have been dramatically exacerbated during the Covid crisis, investment in education should be targeted as a priority in order both to raise human capital and reduce inequalities. On-the-job training is another factor of growth as tomorrow’s jobs will be even more changeable than today. Take the example of digital experts: “as of 2019, there were 7.8 million ICT specialists in Europe, which is far below” the requirement of 20 million experts, including “for key areas such as cybersecurity  Page 12 sur 14 or data analysis”x. Europe’s competitive advantage depends on its ability to ensure mobility through vocational education – what economists call “mobicationxi”. One word on the importance of “managerial quality” which can affect the implementation of innovative reforms inside firms.

As you know, he was born in Europe but passed away in America – and it’s probably no coincidence. Accordingly, I would like to elaborate on three potential “candidates” as explanations for Europe’s lag: the first two – our social model and our macroeconomic policies – would be Keynesian failures and the third one – our lack of innovation – is on the Schumpeterian side. To put it in a nutshell, I don’t believe in the first two explanations, but I believe in the third one. Hence, Europe ultimately needs to gather together its two sons, to reconcile Keynes and Schumpeter. Page 5 sur 14 A. Our social model? A frequent explanation for Europe’s lag seeks to lay the blame with our common social model. In my view, this is not convincing. On the contrary. Look at the Nordic economies. They have a high ratio of social spending as a percentage of GDP (28% in Denmark, 25% in Sweden, 29% in Finland, well above the OECD average of 20%), and nevertheless their economic performances is better : for instance, the unemployment rate was 5.1% in Denmark, 6.8% in Sweden and 6.7% in Finland in 2019 (before the outbreak of the Covid crisis), which is well below the euro area average (7.6%). Sweden and the Netherlands successfully gave birth to “decacorns” such as Spotify and Adyen, etc.
In response to these shock waves from the global economic and financial system, the MPC cut the official Bank Rate to 0.5% – the lowest level in over 300 years of the history of the Bank of England – followed by direct injections of money through the programme of Quantitative Easing. These policies, accompanied by similar measures around the world and government interventions to stabilise the financial system, succeeded in arresting the sharp downturn in demand in late 2008 and early 2009 and a recovery has been underway here in the UK and in other major economies since the second half of 2009. The bounceback in the global economy since the middle of 2009 has been particularly impressive, supported by strong growth in Asia and emerging markets, and stimulatory economic policies across the world economy. World GDP growth last year was 5% according to the IMF, well above the longterm average and much stronger than most forecasts were suggesting in early 2009 at the trough of the recession, when the IMF itself was forecasting that world growth would be less than 2% in 2010. Here in the UK, we have also seen the economy begin to recover from recession over the last eighteen months or so. As is the case with all economic recoveries, growth has not been even from quarter to quarter or across sectors of the economy.

But the longer it persists, the more likely it is that sterling prices will adjust to euro prices, creating the potential for quite long term impacts on UK inflation relative to the euro area. That is what we appear to be seeing at the moment, with the historic relationship shown in Chart 6 suggesting that UK inflation could run 1 to 2 percentage points above euro area inflation for a considerable while unless there is some noticeable appreciation in the value of the pound. The counterargument to this view is that the recent substantial depreciation of the pound against the euro and other currencies is needed to support a rebalancing of the UK economy and sustain the growth of UK manufacturing and other internationally competitive sectors of the economy. But the extent of the depreciation of sterling since 2007 has been much greater than we have seen in previous rebalancing episodes, such as the mid-1990s – which raises the question whether sterling has fallen much further than needed.5 And it is not clear  5  8  See Sentance (2011) for a comparison of the recent fall in sterling with previous episodes. BIS central bankers’ speeches  that the export-based manufacturing activities which could benefit from a large depreciation have the capability to respond quickly by scaling up output – particularly when their demand is already being boosted by a recovery in global demand.
I believe that we have to deal  5  with three main challenges: structural reforms, financial stability and the accession to the EU of new Member States. *  *  *  The challenges ahead Structural reforms The first challenge is beyond dispute to implement structural reforms in the euro area’s economies. Structural reforms were crystallised at the European level in what is called the Lisbon strategy. The first objective of this strategy is to substantially raise our potential output growth. The second is to make our economies more competitive. Implementing the reforms: the Lisbon strategy The European Council meeting held in Luxembourg in December 1997 explicitly mentioned structural policies among the items selected for strengthened co-ordination. The Lisbon European Council, held in March 2000, further enhanced the medium-term strategy to introduce structural reforms in the Union. This strategy aims at making the European Union the world’s most dynamic knowledge economy by 2010. It has since been rounded out to include social issues (at the Council of Nice) and environmental issues (at the Council of Gothenburg). Work to date in the field of structural reforms is quite encouraging. Noticeable successes have already been registered with regard to certain policies, such as new rules in telecommunications, electricity and gas markets. Before reviewing the priority areas where fresh impetus is required, I wish to briefly make two remarks: First, the responsibility for structural reforms in the European Union rests with the individual Member States.

We also cautioned repeatedly against the positions taken by some Member States – particularly those who traditionally uphold the independence of monetary policy – and ultimately reflected in 2/3  BIS central bankers' speeches  the draft amended text of Article 22 discussed by EU legislators. Under this approach, the ECB would have had no competence over EU CCPs, contrary to its mandate as central bank of issue for the euro, which calls for powers over all euro clearing regardless of its location. The ECB would have been given an exhaustive list of specific and circumscribed powers – replicating the present and future provisions of EMIR II – in respect of some systemic third-country CCPs, as designated by the European Securities and Markets Authority (ESMA). This would have been uncharacteristic and overly granular for the ESCB Statute, which is primary law and gives the ECB broad discretion in the exercise of its monetary mandate, and it would have violated the ECB’s functional independence. This was compounded by a requirement that ECB measures be “in alignment with” legislative acts and measures taken under those acts. Given these grave legal concerns, the Governing Council concluded that the final text seriously distorted its recommendation and interfered with fundamental principles of the Treaty, including the independent exercise by the ECB of its monetary policy. The recommendation to amend the Statute was therefore withdrawn, which is a matter of regret.
We in the Governing Council of the ECB discussed and debated at length the issue of what the European Central Bank should and had to do in such a situation in order to fulfil its tasks and responsibilities. Effective action The instrument being considered had to be effective, in order to eliminate the unfounded fears regarding the reversibility of Monetary Union and the resulting interference with our monetary policy mandate. In setting up the OMT programme, we learnt from our experience with the first bond buying programme from 2010 – the Securities Markets Programme (SMP) – and made the OMTs even more targeted. The OMT programme differs from the SMP in the following ways. First, there is strict conditionality because the OMTs are attached to a European Financial Stability Facility/European Stability Mechanism (EFSF/ESM) programme, thereby ensuring that the Member States concerned remain under considerable pressure to implement reforms and maintain fiscal discipline. The OMT programme seeks only to reduce unwarranted interest rate spikes. I would like to make it very clear at this point that the OMT programme was not aimed at harmonising the financing conditions of the Member States. The market mechanism will continue to operate. Another important point in this regard is that an EFSF/ESM programme is a necessary – but not a sufficient – condition for OMTs. There is no automatic follow-on. The Governing Council of the ECB will decide independently in each individual case, looking exclusively at the necessity of OMTs from a monetary policy perspective.

fears concerning the “reversibility of the euro” and the  BIS central bankers’ speeches  1  associated implicit exchange rate risk. This view was supported by model calculations which showed that, in July 2012, the spread that could not be attributed to fundamentals stood at up to 2 percentage points for Italian and Spanish two-year government bonds. There were also signs that international firms were hedging against the risk of individual Member States leaving the euro area. Britain’s financial supervision authorities were advising financial institutions to be prepared in the event of the euro area collapsing. Moreover, Spanish and Italian banks lost their access to market-based financing instruments. Between April and July 2012 Spanish bank bonds to the value of € billion matured, but no more than € billion of Spanish bank bonds could be newly issued during that period. Against that background, we had to conclude that, in individual parts of the euro area, the steering of monetary policy was not functioning fully, or was in part not functioning at all. The key interest rate had lost its key function, with considerable disruption of the transmission of monetary policy on account of the implicit exchange rate risk. This economic environment clearly pointed to a significant credit crunch and a severe decline in economic activity. There was a risk of an incipient deflationary spiral – a process involving continual declines in prices. Price stability would then no longer have been ensured across the euro area.
Christian Noyer: World financial crisis – public and private strategies to overcome the crisis Speech by Mr Christian Noyer, Governor of the Bank of France, at Paris-Europlace, Dubai, 22 January 2009. *  *  *  Ladies and Gentlemen, It is a great pleasure for me to be here and share some thoughts on the financial crisis and on solutions that may be found to overcome the situation. It is too early to draw definitive lessons from recent events in financial markets. It is however vital to start reflecting on the experience of the last few months. Even more in periods of tension than in normal times, action and reflection should reinforce one another. It is at the very moment of managing the crisis that we lay the foundations for the future financial system. Having said that, I propose to discuss with you two main topics: •  The nature of the financial crisis  •  The policies implemented to address it both from a public and a private sector perspective. The nature of the crisis The crisis first emerged as a liquidity crisis. The first symptoms appeared at the beginning of August 2007 when serious disruptions surfaced on the inter-bank market in the Western world. More than a year later, tensions on money markets are still with us. Recent months have witnessed abnormal levels of spreads, a shortening of maturities, and the contraction, or even closure, of some market segments.

Prompt Pay will be an impetus in changing consumers’ behaviours to use electronic payment for everyday goods and services. Transactional banking 2  could be easily completed online or via mobile phone rather than going to bank branches. This move towards less reliance on cash will reduce the cost of cash handling thereby increasing efficiency of the banking industry and the Thai economy as a whole. On the downside, technology comes with associated risks. In recent years, cyber threats have increased dramatically in frequency, sophistication and their widespread effects. This year, at least four financial institutions in Bangladesh, Vietnam, Ecuador, and the Philippines became victims of cyber heist involving the SWIFT system while ATMs in Japan, Taiwan, Thailand, and recently in many European countries have been hacked. IT security and cyber security need to be addressed for secure transactions and to ensure trust among customers. The Bank of Thailand and the Thai Bankers Association (TBA) have collaborated to set up an Information Sharing Group (ISG) or financial-sector CERT. The group enables comprehensive information sharing and connects to other involved parties such as cyber security specialists, vendors, and legal enforcement agencies, to develop defensive, preventive and responsive plans. This is a first step for Thailand. Given the borderless cyber world, collaboration on cyber security among ASEAN countries needs to be enhanced. ASEAN banks have to step up efforts and join hands in setting up processes and tools for sharing cybersecurity incidents, exchange of information and knowledge, conducting cyber attack exercises, and developing cyber security experts.
However, it increases the difference in treatment between repo transactions with central banks and interbank repo transactions not backed by level 1 HQLA. 13  See Stein (2013, op. cit.). BIS central bankers’ speeches  5  pricing of the CLF should therefore strike the right balance to protect monetary policy without undermining the effectiveness of the LCR as a prudential instrument. On the one hand, in order to reduce pressure on demand for central bank funding, it is necessary that banks find it more attractive to pay the CLF commitment fee rather than to obtain central bank liquidity and leave it on their accounts at the central bank. A CLF that would only be used in stressed times would not serve our purpose. On the other hand, there is a danger perceived by some that a CLF could materially change the effectiveness of the LCR, as the definition of HQLA would de facto be substantially widened, which would offset the objective that banks should self-insure against liquidity risk. To avoid such an outcome, the following remedies exist: first, the pricing of the CLF in normal times should reflect the opportunity cost of a bank for holding HQLA rather than non-HQLA. As a result, reliance on the CLF should not be more attractive than holding private-market HQLA. Second, it has to be borne in mind that access to the CLF needs to be collateralised; hence collateral availability puts a “natural” limit to accessing HQLA in the form of a CLF.

For instance, in order to bring the debt-to-GDP ratio back to 60% in 20 years while maintaining a primary deficit in line with the historical evidence, real growth in the euro area would have to be twice its historical value (1.3% on average over 1995-2021), or alternatively the implicit rate on government debt would have to be half the current one (see right-hand side figures in slide 5). Although simplistic, these exercises illustrate the significant 4  effort needed for the transition to the medium-term fiscal targets, and, indirectly, how it would limit fiscal policy’s capacity as a stabiliser for the duration of the adjustment process. These are just some of the arguments behind the broad consensus on the need to reform the fiscal governance framework in the European Union. However, while everyone appears to agree that reform is needed, views differ on the necessary steps forward and their sequencing. I personally believe we need a coordinated effort aimed at reinforcing the euro area and making it more resilient to shocks. And, in my view, this would involve reforming several areas of economic governance: fiscal and structural policies, the banking sector and capital markets. Allow me to offer a number of reflections on the desirable elements of such a reform, with a view to improving the operation of the policy mix in the euro area.