samchain/econo-pairs-v1 huggingface dataset:
One cornerstone of that integration is the creation of a permanent central fiscal capacity in the euro area to facilitate the economic policy response to severe shocks, such as the 4  current one and the pandemic-related crisis of the last two years, replacing the existing ad hoc agreements. The design of the common fiscal capacity must be informed by the very lessons that we learn from our fiscal response to the war and from the NGEU and SURE programmes. The financial realm is a second area of economic integration. Pan-European bond issuances to finance the NGEU programme, and any other issuances as part of the response to the invasion of Ukraine, are an important step towards creating a European safe asset. In addition, deeper capital market integration in the euro area would pave the way for greater risk-sharing in the face of asymmetric shocks. Lastly, a third necessary element to shore up the euro area’s institutional architecture is the completion of the banking union, establishing a European deposit insurance scheme and a common framework for resolving systemic crises. ECB monetary policy Last week the ECB Governing Council held its first meeting since the invasion began. Against a backdrop of high inflationary pressures in recent months, we decided to take a further step towards normalising our monetary policy. However, given the enormous prevailing uncertainty, we combined this with greater flexibility and optionality in our actions going forward to allow us to react to the incoming data. Let me explain these measures in more detail.

As a result of this analysis, and having found it less necessary in the current setting than in the past to reinforce our accommodative monetary policy stance through net asset purchases, the ECB Governing Council decided that monthly net purchases under the Asset Purchase Programme (APP) would amount to € billion in April, € billion in May and € billion in June. This means reducing the monthly volumes for May and June compared with those agreed in December. We also agreed that the calibration of net purchases for the third quarter will depend on developments in, and our assessment of, the economic outlook. In parallel, given the current extraordinary uncertainty, we underlined the data-dependent nature of our decisions and increased flexibility and optionality in the use of instruments. First, we pointed out that we will adopt whatever measures are necessary to fulfil the ECB’s price stability mandate and to safeguard financial stability. This allows us to provide certainty to all economic agents about our commitment to these objectives during a particularly uncertain time. Second, we explicitly stated that, if in the coming months new data support the expectation that the medium-term inflation outlook will not weaken even after net asset purchases have stopped, we will end net asset purchases under the APP in Q3. However, should the medium-term inflation outlook change and should financing conditions be inconsistent with continued progress towards our 2% target, we stand ready to revise the net asset purchase plan in terms of both its amount and its duration.
It is hardly equitable to provide free health care and medicines to all irrespective of income levels. Means testing  BIS Review 59/2007  1  would, moreover, help to ensure that essential health and welfare services could be provided free of charge in the years to come to those who truly deserve them. The provision of stipends to all students in higher education is even more difficult to justify. For apart from equity considerations, stipends draw funds away from other uses, such as the provision of better library and laboratory facilities and the recruitment of more full-time teaching staff instead of part-timers. I acknowledge that it is not easy to implement means testing fairly because those who under-declare their income, and thus evade taxes, would qualify for benefits undeservedly. The answer, however, is not to rule out means testing in principle, but to wage a more effective campaign against tax evasion. I also recognize that a wider application of such testing might make only a relatively small contribution to the correction of the fiscal imbalance. But it would be highly symbolic in that it would send a powerful message about the need for change to a citizenry which firmly believes that public goods and services can be had for “free”. The truth is that there is no free lunch – somebody must pay for it! Let me give you two topical examples. First, take the Park and Ride scheme. The popular impression is that it is free. This, however, is not correct.

If anything, the importance of the Bank’s independence, which is already enshrined in Maltese law and has been duly respected by successive governments, will be even greater once the Bank becomes a member of the Eurosystem. First of all, the autonomy of national central banks is mandated by the Maastricht Treaty. Reflecting this requirement, the Central Bank of Malta Act now fully guarantees the institutional, functional, financial and personal independence of the Bank and of the members of its decision-making bodies. As for the ECB, it has adopted low inflation as its overriding objective, and its independence helps to guarantee its ability to deliver on this commitment. As I said earlier, the governors who sit on the Governing Council of the ECB do so in a personal capacity and must be guided only by euro-area wide considerations. As members of this Council, therefore, governors of national central banks must not only be persons of recognized professional competence and personal integrity, but they must also be prepared to defend their own bank’s as well as the ECB’s ability to act independently of political and other pressures. 4  BIS Review 59/2007
Impatient investors demand immediate dividend gratification, leading to large and rising distributions. This dividend ratchet is a puzzle in empirical finance (Black (1976)). If anything, it is one which is growing over time. The payout pattern among Chinese quoted firms could not be more different. Increases and decreases in payout ratios are roughly evenly split. The high proportion of “unchanged” payout ratios simply reflects the zero payout policy of more than half of quoted Chinese companies. There is no distribution ratchet. Profits are largely ploughed back. In this respect, Chinese payout behaviour today is not dissimilar to that among US companies during its rapid growth phase in the 19th century (Chart 12). There is more than one explanation for this behaviour among Chinese firms. A benign interpretation is that it reflects the high option value of Chinese companies retaining funds given future growth prospects, as with US firms in the 19th century. A less benign interpretation is that it reflects an absence of external sources of company finance and shortfalls in corporate governance, with insufficient discipline on companies by outside investors. In practice, both factors are likely to have been important over recent years. Turning to US and Chinese households, during this century household gross saving as a fraction of GDP has averaged less than 5% in the US. In China, it has averaged around 20%.

Over time, we would expect countries’ income levels to converge, as currently low income countries catch-up with their high income trading neighbours (Solow (1956)). This convergence process is a well-established empirical phenomenon (Barro (1991) and Mankiw, Romer and Weil (1992)). Accompanying this GDP convergence is likely to be catch-up in gross external balance sheet positions. As countries develop, so too does their integration into global capital markets, with higher levels of gross external assets and liabilities. Cross-country evidence bears this out. There is a well-defined empirical relationship between a country’s GDP per head and its gross external balance sheet position (Chart 16). BIS Review 174/2010  9  Taken together, these two factors imply a pattern of steadily rising gross capital flows over time, with growth strongest among countries catching up with their high-income trading neighbours. It is possible to calibrate these integration trends and project them forward to simulate future external balance sheets positions among the major economies. These simulations take as initial conditions cross-country GDP per capita, projected forward using a calibrated rate of growth convergence drawn from previous empirical studies and adjusted for known future changes in population growth. This gives a set of cross-country projections for GDP per capita. These are then translated into gross external balance sheet positions using historical relationships with per capita GDP. Chart 17 plots some projections of (the average of) gross external assets and liabilities relative to GDP for the G7 countries, China, India, Brazil and Russia. These projections go out to 2050.
The Inflation Report that we published today shows that the economic and inflation outlook on which the Riksbank based its monetary policy in 2002-2003 was in no way significantly different from that held by other leading forecasters of the Swedish economy during this period. (Figure 3). If anything it seems that the Riksbank was one of the most successful forecasters, or perhaps rather one of the least unsuccessful, although it also has to be remembered that our forecasts, unlike others’, had been based on the assumption of an unchanged repo rate. Part of the recent monetary policy debate has seen our forecasts compared with those of the National Institute of Economic Research (NIER). It turns out, however, that the NIER’s view of the appropriate repo rate path has not differed more than marginally from the Riksbank’s. (Figure 4). On average the NIER recommended a repo rate that was barely 0.2 percentage points lower. Given the effects that one generally expects from monetary policy, inflation in 2004 would only have been marginally closer to the target if we had followed the NIER’s recommendations. Nor would we have had more than a very slight impact on employment. The point is that the differences in opinion regarding future inflation and the stance of monetary policy have been small in relation to the drop in inflation and the rise in unemployment.

This is because uncertainty is reduced as market expectations are formed using a more superior set of information. And third, being more transparent also helps raise the quality of central banks’ own works which directly contributes to enhancing their credibility. However, despite the positive benefits, there are occasions when there would be arguments for central banks to go less than full transparency, especially with regards to their market operations. This is because transparency is not only about providing information as the academia normally assume. But transparency is also about how a central bank is being seen or being known in its operations in financial markets. Hence, for its operations to be effective, sometimes less-than-full transparency can be more efficient, for example, in the foreign exchange markets. Therefore, from practical considerations, the rationale for limiting central bank transparency includes: First, legal requirements and the risk of impinging on personal privacy, as well as for reasons of market or commercial sensitivity and public interest; Second, the risk of compromising the decision-making process; for example, saying too much or giving out too much information about what went on in the policy meetings; Third, too much information can also be tricky because of the risk of misinterpretation. This is because one cannot assume that all markets are efficient in processing the same information; Fourth, in central bank operations, elements of surprise can be useful on occasion; And fifth, central banks being what we are should reserve the right to act.
In all likelihood, the fast upswing in prices has contributed to the fact that housing construction now appears to have picked up in earnest, although the low level of interest rates that has kept down financing costs has probably also played an important role. Changes in house prices also affect household consumption by altering the size of households’ wealth. Since household consumption comprises about half of total economic demand the potential effects on inflation can be considerable. The impact on consumption of an increase in wealth can come about in different ways. One is that households feel richer and therefore become more inclined to consume. In addition, the size of their wealth can affect their ability to obtain loans. The larger the collateral a household can put up for its loans, the greater its chances to borrow and thus to consume. When the value of the home owned by a household rises, it also creates the possibility to mortgage the home further, e.g. to build an extension or renovate and further raise the value of the home or to consume other goods. Another effect is that a higher valuation enables a household to refinance its second mortgage as part of its first mortgage and thereby reduce the interest costs of the debt. Historically, there has been an almost surprisingly strong relationship between changes in the value of households’ real wealth – houses and tenant-owned apartments – and how large a proportion of their incomes that households choose to consume, the so-called consumption ratio.

Allow me to come back to that in a moment and just say here that even in the event of such a more general price fall we do not deem there to be any immediate risk of problems for financial stability. The reasons again are those I gave earlier, chiefly that households on the whole can afford their homes and that experience shows that the household sector seldom causes any significant problems for the banks. So the Riksbank does not view the developments in house prices and household debt as a danger to the stability of the payment system. House prices, demand and inflation As I indicated in the beginning, developments in house prices are important to monitor also, and perhaps even mainly, because they have potential implications for the Riksbank’s second objective – price stability. If house prices fall, households’ willingness to consume goods and services – their demand– declines. If prices drop at a measured rate over a long period it does not have to be a problem. If the price decline occurs rapidly there is reason for greater vigilance. How then do house prices affect the activity level in the economy? This can happen through various channels. One such channel – which I only intend to mention in passing – is housing construction. The higher house prices are, the more profitable it is to build them, all other things being equal.
The excessive budget deficit procedure was initiated against Germany and France which exceeded the maximum budget deficit allowed according to the Growth and Stability Pact, 3% of the GDP - and the number of such member states will probably grow. At the same time, the situation initiated a discussion regarding sufficient flexibility of the Growth and Stability Pact, first and foremost in the context of a weaker economic situation. •  Estonia's budgetary policy is and has been strict and balance-oriented. This gives us a competitive advantage over others and does not place us in an inferior position, contrary to what has been erroneously claimed. The current debt burden of the Estonian government sector is about 5% of the GDP (the lowest in the EU accession countries); the budget deficit of the government sector rose above the maximum level allowed under the Maastricht criteria only in 1999. 6  BIS Review 26/2004  •  While assessing the relevance of the budgetary balance requirement from the viewpoint of Estonia's future competitive ability, one certainly has to bear in mind that merely meeting the budget criterion might not be a sufficient success guarantee. In the conditions of the common monetary policy, the budgetary policy will become the principal economic policy tool through which the government can independently influence economic development (e.g. stimulate its economy in the period of slow growth).

First, a supervisory risk assessment which will identify the key risks in banks’ balance sheet; second, a point-in-time Asset Quality Review (AQR) to enhance transparency over asset quality, provisioning and capital; and third, a stress test to examine the resilience of banks’ balance sheet to stressed scenarios. The assessment will conclude with a single disclosure of the outcomes, which will be published before the ECB assumes its supervisory role in November 2014. As the ECB has recently released a communication about this exercise, I will not go into more detail on its features today. Let me however stress that the exercise will be rigorous and transparent and will involve private expert firms, such as external auditors, consultants and specialised asset evaluators. Their presence, together with the announced “strong central governance structure”, will enhance the credibility of the exercise. National Supervisors and private firms involved in the assessment will work within the terms of a detailed framework defined by the ECB and their final output will be subject to a central review to assess their quality and analyse their consistency across banks and countries. We of course do not know what the assessment will find. But we trust that the euro area banks are today better prepared to undergo such an exercise. They are much stronger than in recent years. They have significantly strengthened their capital positions and now compare reasonably well with US banks in that respect.
Stage 3: loan applications and approvals The next stage is for the reduction in rates to induce an increase in the demand for credit. A key parameter for the response in quantities is the price elasticity of demand for credit. We have been hearing lots of positive comments about the state of demand in the housing  BIS central bankers’ speeches  9  market since early in the year: from builders, estate agents, lenders and contacts of our regional network of Agents, and this has recently reflected into an improvement in the data. Let me note that although the housing market is clearly gathering momentum, and house prices have started to hit the headlines, I must say that don’t see any evidence of bubble behaviour as yet, with mortgage lending still subdued relative to what is likely to be normal levels of activity. The housing market is recovering from a number of years of very low transactions, with house prices having risen well below the inflation rate. It is not surprising if we see an adjustment of relative prices when the market recovers and of course London has special demand pressures which are not present elsewhere in the UK, especially for highend housing. But we may well see a response in new housing supply in due course, limiting the effects of demand on house prices. Let me assure you that the Bank will not be complacent about allowing financial stability risks to build through an over-expansion of the housing market.

Paul Fisher: Financial markets, monetary policy and credit supply Speech by Mr Paul Fisher, Executive Director for Markets of the Bank of England, Member of the Monetary Policy Committee, to Richmond University, London, 2 October 2013. *  *  *  Thank you for having me back at Richmond University. In this lecture today, I aim to review the behaviour and development of financial markets over the past year, including the period of heightened volatility since May and the introduction by the Monetary Policy Committee of explicit forward-looking monetary policy guidance in August. I will also assess the working and impact of the Funding for Lending Scheme over its first year of operation. Developments in financial markets When I spoke to you a year ago, financial markets were still scarred by the crisis years and there remained a number of significant downside tail risks to the global economy. Contacts were citing: the risks of a breakup of the euro-area; the possibility of a “fiscal cliff” in the US; a slowing in China, alongside already weak growth in the advanced economies; and tensions in the Middle East – especially around the Straits of Hormuz. But those tail risks were seen to be offset in large part by the commitment of central banks to respond. The ECB had announced its Outright Monetary Transactions programme and had been interpreted as publicly committing to do whatever it takes to keep the euro-area together.
Svein Gjedrem: On monetary policy and the krone Speech by Mr Svein Gjedrem, Governor of Norges Bank (Central Bank of Norway), to Industrinettverket Sunnhordland, Stord, 7 June 2004. The text below may differ slightly from the actual presentation. The address is based on the assessments presented at Norges Bank’s press conference following the Executive Board’s monetary policy meeting on 26 May, Inflation Report 1/04 and on previous speeches. The charts in pdf-format can be found on the Norges Bank’s website. *  *  *  The primary objective of monetary policy is to ensure nominal stability. There were wide fluctuations in the Norwegian economy in the 1970s and 1980s. Economic developments were marked by high and variable inflation. Inflation rose gradually and it took a long time before it fell. The absence of a nominal anchor was one of the main reasons behind these pronounced swings in the Norwegian economy. With a policy of low interest rates and devaluations, inflation took root. Nominal interest rates were kept at a low level even though inflation and the value of tax- deductible interest expenses rose. Frequent devaluations from 1976 were unable in the long term to prevent a decline in the manufacturing sector. On the contrary, they proved to be self-reinforcing. The wide fluctuations culminated in a credit boom in the mid-1980s, and a rise in costs as a consequence of the spring 1986 wage settlement. A pronounced downturn and high unemployment followed at the end of the 1980s.

The U.S. was not alone in this shortcoming, but given our position in the global financial system, we especially should have done better. We’ve taken important steps reflecting both new legislative mandates and a broader effort to rethink our regulatory and supervisory framework. In particular, systemically important banking organizations must now hold amounts of capital and liquidity that are better aligned with their risk profiles, compensation schemes for these institutions will be more focused on rewarding long-term results and the official sector is making progress in solving the “too-big-to-fail” dilemma. All of this remains very much a work in progress. But, these efforts should help us to avoid repeating the mistakes of the recent past, and to take a more proactive stance toward mitigating potential future vulnerabilities. Of course, we at the Fed are not alone here. Since the recent financial crisis, central banks worldwide have been engaged in a broad rethinking of how to better fulfill their mandates. Let me close with a final thought. The largest problems that countries create for others often emanate from getting policy wrong domestically. Recession or instability at home is often quickly exported. Equally important, growth and stability abroad makes all our jobs easier. This means that there are externalities in the work we do, so that more effective fulfillment of our domestic mandates helps to bring us to a better place collectively. Ensuring global growth and stability is and will remain our joint and common endeavor. BIS central bankers’ speeches  3