samchain/econo-pairs-v1 huggingface dataset:
In 2021, 1  Firms are understood to be highly indebted when their ratio of net financial debt to (gross operating profit + financial revenue) is higher than 10, or they have positive net financial debt and zero or negative earnings. 4  households’ gross disposable income (GDI) grew by 2.2%, although it was still 2.8% down on 2019. From the onset of the health crisis to end-2021, households’ aggregate net wealth rose by 9.8%, assisted by the increase in value of their financial and, above all, their real estate assets, and by their relatively stable debt levels. Overall, households’ bank debt-to-total asset ratio fell, particularly in the lower net wealth deciles.2 Nevertheless, in the first net wealth decile, debt continues to far exceed the value of assets (by around 50%), thus signalling the financial vulnerability of this segment. Also, households significantly increased their saving rate during the pandemic. The accumulated savings could serve as a cushion, at least in part, in the face of a potential deterioration in their real income. But the increase in saving was uneven across households, concentrated among those with the highest purchasing power. In the housing market, house purchases in Q1 were 22% higher than in the same period of 2019. Meanwhile, new residential mortgage lending has risen, standing at its highest levels since 2010.

Recent developments in these indicators have been mixed. The labour market remains tight on traditional indicators, with employment growth expected to be more resilient and unemployment rates lower than expected a few months ago. But wage developments – particularly higher frequency indicators of current momentum – appear to be easing, even as services price inflation surprised to the upside, albeit largely on the back of components typically though to be erratic on a month-to-month basis. The mixed character of developments in these key indicators makes it all the more important to keep a structural framework in mind on which to form judgements about the overall implications for inflation persistence and monetary policy. For the reasons I have developed above, the evolution of energy prices plays a key role. Now that that terms of trade shock is being at least partly reversed by the large and rapid fall of  Page 11  wholesale gas prices – both in absolute terms and relative to the path of futures upon which the MPC’s February macroeconomic forecast was conditioned – developments are moving in a more favourable direction. Relative to where we were a few months ago, the difficult ‘trade-off’ facing monetary policy as a result of the adverse terms of trade shock – that is to say, rising inflation in concert with a squeeze on domestic real incomes and spending – has eased. The MPC should be cautious about ‘looking a gift horse in the mouth’ by viewing better prospects for activity as something inherently inflationary.
The more sustainable banking practices that would be developed based on VBI concepts encourage the creation of new business opportunities and provide the foundation for more sustainable returns for Islamic banks over the long term. Customers, particularly businesses and entrepreneurs would benefit from the opportunity to be more involved, in the design of more innovative products and services, that are best tailored to meet their needs and circumstances. Business propositions from new sectors such as the SMEs, would also benefit from VBI-based practices where financing applications would be assessed by Islamic banks based on their potential value creation, not just their credit scores. Society at large also stands to gain from reduced negative externalities as any activities that damage the community and environment would be reduced overtime. The practice of Islamic banks in giving back to society, such as by integrating waqf and sadaqah within Islamic financial transactions, can also create positive socioeconomic impact in communities. VBI should not be mistaken for corporate social responsibility (CSR). In fact, VBI goes beyond the concept of CSR with a pervasive approach to reconfiguring the way Islamic banking works. Globally, we can also see value-based concepts being demonstrated in the banking sector, where value-based practices have emerged to restore the role of finance in acting for the greater good. TeamBank in Germany for instance, capitalises on the concept of fairness in its dealings with customers to market its EasyCredit as its primary product proposition.

The success of this strategy has positioned TeamBank as the country’s third largest consumer finance provider. Equally commendable is Westpac Banking Corporation, the first Australian bank that has incorporated environmental filters in its day-to-day business decisions. In Malaysia, I believe Islamic financial institutions are now at the right stage of development to drive this important change. It is expected that Islamic banks would take the lead in the VBI initiative and to embrace the new principles in their business strategies and operations. Given the universal nature of VBI, the application and adoption of similar strategies by financial groups which comprise conventional financial institutions would be the next phase of this evolution as we move forward. In time, I believe that the underpinning thrusts of VBI will also be expanded to enhance its relevance to the takaful industry. 2/4  BIS central bankers' speeches  Realising the tangible impact of VBI is more of a journey than a fixed destination. However, it is encouraging to note that a number of our Islamic banks have already started applying principles of VBI in one way or another. What is needed now are strategies to realise the full potential and amplify the impact of VBI in creating positive outcomes for shareholders as well as broader stakeholders in Islamic finance. I would like to suggest three critical areas that require immediate attention, for this momentum of change to be sustained. First, VBI calls for a “transformation of the mind”, a change in how we think and how we act.
Although application of the Matching Adjustment is subject to a number of asset and liability eligibility criteria, it has much in common with a similar feature of the previous UK ICAS framework – the ‘liquidity premium’. Within the EU, the main users are UK life companies. Indeed the only countries with firms currently using the Matching Adjustment are Spain (15 companies) and the UK (23 from the UK). 3  2  Under Solvency II, the scope of internal models is comprehensive and firm-wide. A typical insurance group internal model might take 1 day to run 500,000 scenarios with key processes requiring multiple model runs. A diversified insurance group internal model may use around 150 risk drivers, separated into over 10 different risk categories (e.g. credit, market, mortality, lapse, operational). By contrast, under Basel standards and the EU Capital Requirements Regulation, bank internal models are separate and limited to particular risks eg credit and market, with capital requirements from them added up at the firm level. 3 Long Term Guarantee Report, EIOPA, December 2016. 3  All speeches are available online at www.bankofengland.co.uk/speeches  3  In its Financial Stability Report in November 2016, the Financial Policy Committee concluded that the matching adjustment “is beneficial from a macroprudential perspective by reducing potential instability across the financial system”. 4  This combination of internal models and the matching adjustment has created strong incentives for UK life firms to invest in long-term illiquid assets, such as commercial property, equity release mortgages and infrastructure financing.

8  All speeches are available online at www.bankofengland.co.uk/speeches  8  Chart 3: Estimated contributions to annuity  Chart 4: Component of annuity rates not  rates, using the relationship in Table 1 over  explained by risk-free rates using the  2007-16  relationship in Table 1 over 2007-16  Residual Risk-free rate Annuity rate (actual)  Corporate bond spread Constant Per cent 8  Residual  Per cent 1.0  Corporate bond spread  7  0.8  Component not explained by risk-free rate, excluding constant  6  0.6  5  0.4  4  0.2  3 0.0  2  -0.2  2017  2016  2015  2014  2013  2012  2011  -0.6 2010  -1  2009  -0.4 2008  0 2007  2017  2016  2015  2014  2013  2012  2011  2010  2009  2008  2007  1  Sources: Bank of America Merrill Lynch, Bloomberg,  Sources: Bank of America Merrill Lynch, Bloomberg,  sharingpensions.co.uk and Bank calculations. sharingpensions.co.uk and Bank calculations. 9  All speeches are available online at www.bankofengland.co.uk/speeches  9
That reduces the weight given to those retail outlets where prices are rising the fastest, and allows the overall measure of inflation to take into account the way families are changing their shopping habits away from outlets where prices have been rising relatively rapidly, like traditional high street stores, towards those where they have been rising relatively slowly, like newer more heavily discounted stores. For that reason, the formula used to calculate CPI inflation is superior to the formula used in RPIX. Arcane though it may sound, the “formula” effect reduces estimated inflation in Britain by about half a percentage point a year. In this respect, the difference between RPIX and CPI inflation as a measure of the economic temperature of the economy is rather like the difference between Fahrenheit and Centigrade as a measure of physical temperature. In both cases moving from one measure to another changes the number without there having been any change in the temperature itself. Because the temperature whether physical or economic - is independent of the particular measure, then the implications for decisions which depend on temperature - whether of farmers deciding on when to harvest their crops and then how to price them or the Monetary Policy Committee deciding on when to change interest rates - are unaffected by the measure used, provided the conversion is calculated correctly. Hence the switch to a new CPI target has in itself no implications for monetary policy.

It is 2% as measured by the Consumer Prices Index or CPI, formerly known as the Harmonised Index of Consumer Prices. What is this new inflation measure, and how will it affect monetary policy? On the RPIX measure, inflation was at or above target for the whole of last year. In contrast, the CPI measure of inflation was below 2% throughout the same period. Indeed, CPI inflation has been below 2% for all bar three months since May 1997, and it is almost six years since it was last above 2%. How can it be possible for inflation to move from above to below target - just like that? To answer that question, we need to examine how inflation is calculated. Inflation is measured as the increase in the price of a particular basket of goods and services over the previous twelve months. So there are as many measures of inflation as there are baskets. Since no two people in this room spend their income on exactly the same items, in principle each of you could construct your own measure of inflation. The Office for National Statistics calculates an average inflation measure by weighting together the inflation rates of over 650 different goods and services, using as weights the estimated expenditure on each item for a representative household. But where  1  Unpublished writings of J.M.Keynes, copyright of the Provost and Scholars of King’s College, Cambridge to whom I am grateful for permission to publish this extract.
In light of the more challenging environment going forward, generating the supply pipe line for talent and addressing the short supply of critical talent with new skills need to be given urgent priority. What are these skills? There has been considerable attention to the shortage of new and higher technical competencies – including in the area of risk assessment and management – required by financial institutions in the new operating environment. The growth in Islamic finance has also added important new dimensions to the talent requirements. Beyond these clear gaps however, the promotion of more sustainable business models in finance will require additional new skills which have not traditionally been areas of focus in financial institutions. This includes skills in change and crisis management, business recovery planning, the ability to develop and sustain long-term customer relationships, and skills to direct and manage operations in international and cross-cultural contexts. Also particularly important will be the ability to build, motivate and lead strong teams under significantly more challenging conditions in which institutions may be more constrained by regulation in their ability to recruit and retain talent simply by paying more. Perhaps more than in any other sector, the response to the challenges facing the financial industry in managing talent needs to be much broader, forward looking and more strategic given its central role within the economy.

If the banking community itself turns out to be unable to resist the temptation of descending into practices that are abusive for consumers, we will be responding adequately. As I have already said, the first issue of our concern is misselling and hard selling. We believed the banking community to be interested in retaining people in the financial market and keeping their funds inside the financial system. We were hoping that banks would be able to agree upon selling rules and would not offer such a product to a client that would be disappointing, striving to sign one contract, would not be misleading about product prices or conceal additional services. The associations of financial market participants jointly developed selling standards two years ago already. Eventually, as little as 20 banks have joined these standards, and even these banks fail to comply with them. As you remember, we have held several discussions on this topic, emphasising that if the banking community does not comply with the standards itself, we will have to request legislative authorities to adopt adequate regulation. Disappointingly, that negative episode we have also discussed when investment life insurance policies were being sold through banks was followed by the sales of complex structured products. This implies that even such a dramatic episode as investment life insurance has had no influence on abusive practices in banks’ sales under agency agreements. Therefore, we were forced to request legislative authorities to grant us the powers to stipulate selling rules through our regulation.
Perhaps we shouldn’t be too surprised by the first panel. The “leavers” tend to foresee a positive economic impact, the “remainers” the opposite. The “remainers” are apparently more uniform in their answers: adding them up, the balances in the aggregate sample are also negative. What’s striking, however, is that there’s no  Chart 6: Even households who are negative  Brexit-induced cut in planned spending, even for the  about Brexit do not plan to cut spending  “remainers”. We need to be a little careful here, as it’s not clear whether people are telling us about their spending in real or in nominal terms. If it’s the latter then, allowing for inflation, perhaps some of the bars might turn negative when measured in real terms. But, on the face of it, there is very little correspondence between people’s views about the economic impact of Brexit and their consumption plans, and no anticipated response of spending for the sample as a whole. Whatever the reason – perhaps, given all the myriad uncertainties involved,  Sources: NMG survey and Bank calculations. 6  The empirical research has demonstrated that, even if consumers do respond to expectations of future income, they are more sensitive than the simple theory predicts to shifts in current income, even when these are identifiably temporary. For an extremely readable account of the prevailing view of the evidence at the time, see Deaton (1992). For a possible explanation, see Carroll (2001).

If, as seems likely, resources in different sectors are highly specialised – the physical and human capital suitable for one area aren’t as productive in others – the effect of this shift on aggregate supply is immediate. This is what the MPC was getting at when it said in the last Inflation Report that a “reduction and reorientation of trade and supply chains… may result in some existing supply capacity becoming obsolete.”  The second point involves the importance of expectations, something else the MPC has emphasised. At least until the formal date of departure, and possibly for some time afterwards, the effects of Brexit will depend centrally on what people expect it to do over the future. Those expectations are neither fixed nor uniform – some people are optimistic about its effects, others less so. It’s partly these differences in expectations that can lead to independent moves in demand and the exchange rate. In particular, you can see the current inflation we’re experiencing as the result in part of a more pessimistic view of Brexit in financial markets – above all in the foreign exchange market – than among consumers. This gap in expectations helps to explain why, in Chart 2, the latest figure for the real exchange rate – the diamond towards the right of the graph – is well below the line for domestic demand growth.
Of course, these forecasts are uncertain and can also be made in different ways. One of the main purposes of the Inflation Reports is to explain how we make them, so that others can question us and discuss our methods. I shall return to the forecasts, as we have recently changed our methods in this area. During the spring I and my colleagues on the Executive Board described in a number of speeches the principles that guide our monetary policy. In May we also published a special document where we described these principles. 1 One of the reasons why we considered it important to publish such a document was that there had been a lively debate on monetary policy for some time with disparate opinions. For instance, some people considered we should have more than one objective for monetary policy, in addition to the inflation target. Others claimed that we already had more than one objective, while some debaters pointed out that more than one objective risked creating confusion. Although the debate has not been quite so lively since then – which may of course be connected with the fact that we have had a long, pleasant summer that may have turned people's thoughts to other matters than monetary policy – I see that monetary policy is still sometimes described in a way that I do not really recognise.

In addition, if longer-term viability is not an option, insurers should be mindful that in certain circumstances a managed exit from the market may be most appropriate. As communicated in our Dear CEO letter on 2021 priorities2, we are currently developing our approach to recovery and resolution planning. We will expect firms to demonstrate – in a proportionate manner for their size – that they have a suitable structure and business model, and adequate contingency plans to be able to exit the market smoothly. In some cases, entering into run-off could be in the best interest of existing policyholders. More than fifty insurers regulated by the PRA are currently in some form of run-off and we endeavour to take a proportionate approach, thereby minimising the burden of entering this regime for smaller firms. Diversity and inclusion Mutual insurers have a considerable strength to celebrate in social purpose, and that should provide them with a relative competitive advantage. Within firms, we – at the PRA and the Financial Conduct Authority (FCA) – believe that increased diversity and inclusion will advance our statutory objectives by resulting in improved governance, decision-making and risk management within firms, a more innovative industry, and products and services better suited to the diverse needs of consumers. We would like to see firms collectively consider how they can build a diverse workforce too. 3 in The PRA, together with the FCA and the Bank published a joint Discussion Paper (DP 21/2) July on diversity and inclusion in financial services.
This would lead to a greater-than-expected tightening of global financial conditions, which would cause additional restrictions for the Chilean economy, significantly reducing inflationary pressures. In such a risk scenario, deeper MPR cuts than indicated by the lower bound of the corridor would be needed. Concluding thoughts Dear Senators: After several Reports in which I was in charge of informing you of the complex inflationary situation that our economy was going through, this Report brings news pointing in a more favorable direction. The macroeconomic scenario has evolved in line with our forecasts. The economy is on an adjustment path and imbalances have been resolved in a manner consistent with what we anticipated in the March Report. Inflation has declined to 8.7%, with a significant contribution from volatile prices. Core inflation stood at 9.9% annually, with a slower and smaller reduction than the total CPI. Thus, considering the progress of the economy, the Board of the Central Bank has announced that, if these conditions are maintained, we will soon begin a process of MPR reduction. All in all, inflation is still too high and well above the 3% target. The Central Bank will continue to monitor the evolution of the scenario, ensuring that this downward trajectory of inflation is maintained until it converges to the 3% target, which we expect during the second half of next year.

Public savings will remain around 2% of GDP over the projection horizon, in line with compliance with the structural balance target. It is estimated that the current-account deficit will close this year at 3.7% of GDP, to stand at around 4% in 2024 and 2025. In the central scenario, Gross Fixed Capital Formation will maintain a low profile. This projection continues to incorporate a complex external scenario, with high uncertainty and still restrictive financial conditions. Survey information also shows low levels of investment for the coming quarters, and entrepreneurial expectations continue to be pessimistic, mostly so in the construction sector (table 1). The external impulse relevant to Chile will remain moderate. Although first-quarter figures exceeded expectations in some economies, such as China, several factors suggest that this will be transitory. In fact, bank credit to companies has tightened in the U.S. and the Eurozone, pointing to a weak performance of activity and investment ahead. In Latin America, the outlook remains unfavorable, as it combines deteriorating financial conditions with stress factors in several economies. In this context, fiscal spending is not expected to be a major source of external momentum, given the fiscal consolidation process and the weak global scenario. Thus, and heavily influenced by China's improved performance earlier in the year, our trading partners' projected growth for 2023 rises to 3%, up from the 2.4% estimated in March. For 2024 and 2025, there is no change, with projected increases of 2.3% and 3.0%, respectively (figure 18).