samchain/econo-pairs-v1 huggingface dataset:
Budgetary policy in 2017 Before going on to specify the broad outlines of budgetary policy for 2017, allow me to remind you that the State and Social Security budget provides only a partial picture of general government activity. In a country as decentralised as Spain, in which more than 40% of public spending is by local and regional government, it is essential to take a broader perspective. Since my speech to the Parliamentary Budget Committee on 25 April, the Government has published (at the end of April) the Updated Stability Programme for the period 2017-2020. This document offers an overview of the budgets of central government agencies along with those of regional and local governments. Moreover, the Stability Programme, by adopting a 4/8  broader time horizon, provides a medium-term plan, which is important for correcting public finance imbalances. The macroeconomic projections accompanying the Stability Programme, which update those included in the draft budget for 2017, involve an extension of the current economic recovery to 2020, albeit with GDP growth gradually slowing from the 3.2% rate recorded in both 2015 and 2016. Specifically, real GDP is projected to grow by 2.7%, 2.5%, 2.4% and 2.4% in 2017, 2018, 2019 and 2020, respectively, while prices are projected to recover, so that nominal GDP growth would stand, on average, slightly above 4% throughout the period. These projections thus incorporate a path of slowing economic growth, which is also present in the forecasts of the Banco de España.

Philipp Hildebrand: Financial market turbulence and the economic outlook Summary of a speech by Mr Philipp Hildebrand, Vice-Chairman of the Governing Board of the Swiss National Bank, at the Handels- und Industrieverein des Kantons Bern, BurgdorfEmmental section, Burgdorf, 25 October 2007. The complete speech can be found in German on the Swiss National Bank’s website (www.snb.ch). *  *  *  It is very difficult to assess how the shifts in the credit markets triggered by the US sub-prime mortgage market will impact on the real economy. As a result, the uncertainties with regard to the economic outlook have increased considerably. The evaluation of structured credit products, some of them very complex, is based on models. Because of the difficulties this evaluation poses, the market for such products gradually disappeared. The uncertainty as to the degree of exposure of individual banks in the structured credit market led to illiquidity in the unsecured interbank market. Central banks around the world have reacted to this unusual situation with injections of liquidity. An adequate supply of liquidity to the economy is essential for our economic system to function. A favourable aspect of the situation was the fact that the credit market turbulence occurred at a time when the global economy and the Swiss economy were both in good shape. BIS Review 121/2007  1
The pattern is found throughout the animal world, in features as conspicuous as over-sized antlers and over-elaborate plumage.3 In many cases, these physiological features have evolved as a response to a competitive sexual race, a Darwinian tournament. Matthew Ridley calls this the Red Queen Race from the Alice in Wonderland scene in which “however fast they went, they never seemed to pass anything.4 As elephant seals, deer and peacocks can attest, it is a race in which, in their quest to win, the species as a whole may end up as loser. So nature can deliver an evolutionary equilibrium which is sub-optimal for its participants, a market failure. The more intense the competitive race, the greater this market failure or co-ordination problem. Elephant seals would prefer to co-ordinate on a lower-blubber equilibrium, deer on a shorter-antler equilibrium, peacocks on a smaller-tail equilibrium. Competition prevents them from doing so. If there were a benign, enlightened zoological planner, able to compel less-conspicuous features, this would benefit not only each animal but the species as a whole. Unfortunately, there is not. ************ These inefficient Darwinian equilibria are as common in social as in natural systems. Garrett Hardin’s 1968 classic Tragedy of the Commons uses the metaphor of individual herdsmen grazing their cattle on common land. “Each man is locked into a system that compels him to increase his herd without limit – in a world that is limited.

That spiral defined the pre-crisis arms race in financial returns. It generated an equilibrium of synchronously high returns and pay, as banks unilaterally militarised as defence against their competitors. But as in military arms races, the resulting outcome was a sub-optimally risky one. High equity returns came through risky leverage. And high pay, especially in equity-based forms, further encouraged risk-taking.17 The resulting high-leverage equilibrium sowed the seeds of the financial crisis. With hindsight, it was easy to spot this market failure, the co-ordination problem. Banks and the financial system as a whole would have been better off had there been a benign, enlightened regulatory planner, able to co-ordinate banks on a lower return equilibrium. Unfortunately, there was not. ************ Over the past decade, trading in financial markets has undergone a technological revolution.18 The frontier of this revolution is defined by speed. A decade ago, trade execution times were measured in seconds. A few years ago, they were measured in milliseconds. Today, they are measured in microseconds. Tomorrow, it will be nano-seconds or pico-seconds. For technologists, this is a “race to zero” – the promised land of zero  12  Haldane (2011a). 13  Haldane (2011a). 14  Gabaix and Landier (2008). 15  Aikman, Haldane and Nelson (2010) provide a formal, multiple equilibrium model of this phenomenon. 16  McLean and Nocera (2010). 17  Cheng et al (2010), Fahlenbrach and Stulz (2009). 18  See, for example, Foresight (2011).
12 For example, the most reliable measure of capacity utilisation in manufacturing – the CBI Industrial Trends Survey – shows capacity utilisation at around its average level, which is quite surprising at this stage of the recovery. There is more survey evidence of spare capacity in the services sector. But this does not seem to be exerting much downward pressure on inflation. The CPI measure of services price inflation has picked up from 2.4% at the end of last year to average around 3.8% in recent months. This is considerably in excess of the 2% target and also slightly above the average rate of services price inflation we experienced during the decade prior to the financial crisis, as Chart 7 shows. This does not appear consistent with the view that spare capacity in the UK services sector is serving to hold down inflation. With the economy recovering at home and abroad, inflation above target and set to rise further, I believe there are three powerful arguments for a gradual rise in interest rates which have been evident for several months. First, the main elements of demand for UK businesses – overseas markets and domestic private sector spending – have been recovering for over a year now and look set to continue to grow. The outlook for growth suggests the UK economy should be able to withstand a gradual rise in interest rates, even taking into account the impact of fiscal consolidation.

Though the latest Budget and OSR plans imply a somewhat bigger fall in the public spending share of GDP than in the mid-1990s, this is offset by a smaller rise in the tax burden. Taking tax and spending together, the projected impact is broadly similar. Public borrowing fell by over 8 percentage points of GDP between 1993/4 and 1998/9, compared with a 9 percentage point fall projected over the next five years in the coalition government 2010 Budget. 10 It is also important to recognise the profile for total public spending conceals significant variations between different areas of spending. But the overall total is not being cut back as dramatically as some of the media headlines suggest. The broadest measure of public spending – Total Managed Expenditure – is still set to rise in cash terms at 1.5% per annum over the four years to 2014/15, not far below the targeted inflation rate of 2%. The profile for real spending in future years is not dissimilar to the mid-1990s when there was also a virtual standstill in the real growth of spending. In the 1990s, the public spending squeeze was also accompanied by a significant reduction in employment in the public sector, not dissimilar to the figures currently projected by the Office of Budget Responsibility. Despite this, unemployment fell in the 1990s from over 10% of the labour force to around 5% later in the decade because the private sector generated many more jobs than were lost in the public sector.
Enable, Empower, Ensure: A New Finance for the New Economy Speech given by Mark Carney, Governor of the Bank of England Speech at the Lord Mayor’s Banquet for Bankers and Merchants of the City of London at the Mansion House, London 20 June 2019  I am grateful to Jennifer Nemeth and James Benford for their assistance in preparing these remarks, and to Julia Kowalski, Tom Mutton, Varun Paul, Simon Scorer, Oliver Thew and the Climate Hub team for their help with background research and analysis. 1  All speeches are available online at www.bankofengland.co.uk/news/speeches  New Economy – New Finance There’s a new economy emerging driven by changes in technology, demographics and the environment. This new economy requires a new finance. A new finance to serve the digital economy. A new finance with products that are more cost effective, better tailored, and more inclusive. A new finance to support the transition to a sustainable economy. A new finance that balances innovation with resilience. With its leadership in fintech and green finance, the UK private sector is creating the new finance, but your efforts will be more effective with the right conditions in which to innovate and the level playing fields on which to compete. New Finance - New Bank That’s why a new finance demands a new Bank of England. Our strategy is to enable innovation and to empower competition, while ensuring monetary and financial stability.

We see opportunities at each of the three stages of the supervisory process: 1. Rule-setting and reporting;  2. Analysis and monitoring; and  3. Setting and communicating a supervisory strategy to mitigate identified risks. Consider rule setting and reporting compliance. At over 638,000 words, the PRA Rule Book is longer than War and Peace. It is also somewhat less interesting and infinitely more complex. We are currently using advanced analytics to understand that complexity and to simplify our rules in order to make compliance with them easier and less expensive. An even bigger opportunity lies in the Bank re-thinking completely how we collect, store and analyse data. We cannot do this in isolation but will engage with industry to explore a range of options. Our vision is that the Bank could be able to “pull the data on demand” from firms rather than “sit back and wait to receive data” from them. With the right API, Web Portal or Platform, manual interventions could become obsolete, making the process quicker, more efficient and hugely less expensive. It would free up resources for firms to focus on delivering a better service to their customers, and it could discipline us to take only the data that we need to use and have the capacity to review. 25  “McKinsey & Company research for the Future of Finance review”.
The objective would be to avoid the overvaluation of assets, to constrain excessively risky behaviour on the part of financial intermediaries and hence to prevent bubbles from emerging, or at least to reduce their size. In contrast, Alan Greenspan was widely credited for supporting a “clean up after bubbles” approach. This basically involves central banks actively sustaining the economy after an asset price bubble has burst, rather than using monetary policy to try to prevent the bubble from developing in the first place. The rationale for this approach is that it is more costeffective overall, as bubbles are very hard to identify. Erroneously implemented “leaning against the wind” policies could well impose significant economic costs with no real subsequent benefit. The huge cost of the recent financial crisis has decreased the weight of such objections to “leaning against the wind”. It is therefore important to further examine the potential of a preventive policy. Charles Bean et al16 strive to estimate the impact a “leaning against the wind” would have had on asset prices and real output in the recent financial crisis. The charts in Slide 6 show the simulated impact on credit, real estate prices and GDP growth of a policy which would push US interest rates 200 basis points higher than were actually observed between 2003 to 2006. The slide illustrates that the simulated policy would probably have kept real house prices some 7.5 percent lower than they were at their peak.

In the context of rapid liquidity expansion, asset prices may overshoot, leading to potentially costly boom bust cycles, the misallocation of resources and pressures on price developments. In this respect, ECB research has also shown that monetary liquidity shocks have played a role in driving asset prices during the boom phase of asset price cycles. However, the issue of empirical causality between asset prices and portfolio allocation, on the one hand, and money and credit developments, on the other, remains a subject of ongoing research. A full understanding of the dynamics and forces behind global monetary liquidity is important for providing insights into the various transmission channels through which liquidity can affect the global business cycle, asset prices and global inflation. In the current context, if global economic growth and global liquidity are likely explanations for the recent increase in commodity prices, the resulting inflationary pressures should not necessarily be dismissed as “non-core”. The long-run impact of global commodity price pressures on inflation will depend on whether they reflect a temporary shock or a more persistent nominal trend, driven partly by ample global liquidity. Overall, when looking at the major OECD economies, consumer price inflation has been successfully contained for quite some time now. However, for the euro area at least, the information available at the current juncture – not least the monetary data at both the areawide and global levels – points to upside risks to price stability. Let me now address the second issue I raised earlier.
Whatever happens, monetary policy will be set to return inflation sustainably to target while supporting as best it can the necessary adjustments in the economy. ------------------------------------I would like to spend the rest of my time on another balance, or rather other imbalances, whose resolution will be an important determinant of our future prosperity. II. The Challenge of Global Imbalances With many concerned that global trade is taking local jobs, protectionist sentiments are once again rising across the advanced world. Excessive trade and current account imbalances are now politically as well as economically unsustainable. Perhaps because imbalances ultimately reflect savings and investment choices within a country, they are often described as morality tales with the virtues of Swabian housewives contrasted with the vices of the Anglo Saxon rakes. In fact, trade imbalances are natural features of an open system and can be warranted by differences in demographics, levels of development and expected paths for income. 3  3  Savings and investment imbalances will shift with changes in relative prices, including changes in prices of final goods and services, changes in nominal exchange rates, changes in relative production costs (including unit labour costs), and changes in the costs of trade. Lags and frictions will mean that different components will shift at varying speeds. This, in turn, can result in large adjustment costs not present in economic models, which can make a laissez faire approach risky.

2  BIS central bankers’ speeches  Changes in the management of foreign exchange reserves I now come to my third and final topic. Two important new developments have occurred in the SNB’s investment activities this year. The SNB has enlarged its investment universe, moving into both Chinese government bonds and shares of companies in emerging economies. These developments took place in view of the level of our foreign currency investments, at over CHF 570 billion, as well as our ongoing efforts to diversify our placements of them as broadly as possible. Investment in Chinese government bonds In July 2014, the SNB communicated that it had been granted a renminbi investment quota by the People’s Bank of China (PBC). The investment quota amounted to RMB 15 billion, or somewhat more than CHF 2 billion. This made it possible for the SNB to invest in the market for Chinese government bonds, which is the fifth largest in the world, for the first time. Experience so far has shown that the market is sufficiently liquid and that trading and settlement of transactions works smoothly. As is the case for our other investments in the Asian region, the operational side is handled by our Singapore branch. As it continues to open up, the Chinese bond market is likely to become even more attractive for foreign investors in the future. For instance, in July 2015, the PBC announced that public sector investors, which includes central banks, are to be granted unlimited access to the Chinese bond market.
Nor have they developed a class of professional entrepreneurmanagers, like those who drive MNCs in the West and Japan. Changing these institutional features of Asian economies will be an arduous task. But over time the countries can, and must, change discredited practices. State-owned or family-run enterprises can be transformed into firms run along meritocratic lines by professional managers. Greater public ownership can strengthen market discipline and the incentive to improve returns for all shareholders. Companies that are not profitable have to be closed or restructured. Asian leaders understand this. For example, the governor of the Bank of Thailand Mr Chatu Mongol Sonakul said, describing efforts to promote corporate governance in financial institutions and companies:4 “What we are doing is a very long process. We’re not talking of months or years. We are talking in, maybe, decades or generations. We’re not changing our way of working; we actually try to change our way of life.” Governments play a key role in fostering and managing this process of change. They have to make the political judgment on how fast to go, how to sell the changes to the people, and what compromises are necessary. Only they have the mandate to decide, and only they can take responsibility for the outcomes. South Korea under President Kim Dae Jung is a good example of how this can work, as well as of how difficult the process can be.

I am particularly pleased to be doing this at a Lecture held in honour of a man who dedicated his life to these goals. Pre-crisis wisdom For a decade before the crisis, the conventional belief was that globalisation was an unmitigated good. The dramatic success of the Asian tigers had shown that openness to trade and foreign investments was a key source of economic growth. A 1992 World Bank study on the “East Asian Miracle” credited their success chiefly to market friendly and outward oriented policies. There was broad intellectual consensus, including in the multilateral institutions, in favour of free markets: put simply, deregulation, privatisation, and trade and financial liberalisation were always good, and the faster the better. This was what John Williamson called the “Washington consensus”, but the view went beyond the US Treasury, the IMF and World Bank. One important element of this intellectual consensus was the liberalisation of capital accounts. Free trade in goods and services had enabled countries to exploit comparative advantage and international division of labour, and produced half a century of unprecedented global prosperity. It was argued that in the same way, free flows of capital would open new avenues for deploying savings and funding investments, and promote more efficient allocation of resources. Financial markets were globalising, driven by technology and deregulation. The faster countries plugged into the global network, the more they would benefit. The pre-crisis consensus did acknowledge the risks associated with open capital markets.
For as long as the scheme’s in place this will temper any further rise in headline inflation, and with it any related increase in “second-round” effects over the medium term. However, by relieving some of the immediate pressure on household finances, the policy would also add significantly to domestic spending over the next year (relative to our last forecast). At the margin, the task of reducing overall demand growth, in order to bring inflation back to target, would therefore tilt more towards monetary policy. And as I argued earlier, there’s less reason to respond to this news in a “gradual” or “smoothed” manner. Whether or not that response needs to be as large as the shift in market interest rates, since our last set of forecasts, remains to be seen. For one thing, there is now some uncertainty about the prospective scale and nature of the government’s energy subsidies. On Monday the Chancellor said the Energy Price Guarantee would be maintained only for six months, rather than the two-year period originally planned. He suggested support was likely to continue, beyond six months, albeit in a more targeted fashion. But we are unlikely to know for a while precisely the form that will take. Second, the rise in market interest rates has been very dramatic. At the time of the Monetary Policy Report in August, prices in financial markets were consistent with Bank Rate rising to a peak of 3% next spring and then falling back a little over the following year.

Here, the following elements are crucial: (i) setting appropriate credit standards, (ii) proper valuation of collaterals and (iii) development of sound credit risk models. As to credit standards, pricing policies are crucial as they should be oriented to cover, at least, the costs of financing, structure and credit risk inherent to each type of operation. Banks should calculate the cost of the credit risk for different homogeneous risk groups in a manner consistent with their history of recognition of defaults and associated losses and recoveries, as well as with expected economic developments. Data integrity, reliable documentation of losses and adequate modelling to project expected losses ahead all play a key role in this respect. The setting of global limits to credit as a means of controlling the volume of the risks incurred, their evolution over time, their maturity and the application of conservative conditions whenever refinanced credits are negotiated, are all integral elements of the general lending standards that banks should observe and keep up to date as part of their credit risk management policy. Moreover, rapid credit growth usually has a negative impact on lending standards which, down the road, translates into increased needs for provisions, as non-performing loans start to pop up. We saw this clearly, and on a large scale, during the lastest banking crisis in Spain1 and elsewhere, and it is our responsibility to remain vigilant to prevent this from recurring with the appropriate supervisory tools.