samchain/econo-pairs-v1 huggingface dataset:
And this, despite a drop in the cost of capital, mainly due to the lower risk-free interest rate of the economy, but also to banks’ improved risk profile, manifested, among other variables, in higher solvency ratios. By contrast, US banks have managed to achieve very high levels of profitability (in 2018, 11% in the USA compared with 6% in Europe) more in line with the cost of capital (between 8% and 10% in 2018). Our analyses indicate that this is one of the reasons why the market value to book value ratio of US banks significantly exceeds that of European banks, which remains at values below one. 1  Also, a high level of capital entails a stronger link between the personal wealth of the owners and the economic performance of the banks, thus contributing to mitigate the risk profile that the latter are prepared to assume and, therefore, the likelihood that they will overreach themselves and will subsequently require traumatic correction measures. 4/29  Spanish banks are no exception to this European pattern, although their profitability at consolidated level remains above the European average. The breakdown of the return on assets shows that the higher figures of Spanish banks compared with the euro area average are basically due to their higher net interest income. This reflects the fact that Spanish banks have a higher share of their business in less mature markets where margins are higher, such as the Latin American economies.

In view of this situation, central banks have responded by further easing monetary conditions. In the case of the European Central Bank (ECB), at our September meeting we resolved to launch a package of measures which included cutting the deposit facility interest rate by 10 basis points (bp) to -0.50%, strengthening forward guidance on interest rates and improving the financing conditions of quarterly targeted longer-term refinancing operations (TLTRO-III). We also decided to resume net purchases under the asset purchase programme at a monthly pace of € billion as from 1 November and without a defined time limit. Our analysis indicates that this package of monetary policy measures provides a substantial monetary stimulus which will help to further ease the conditions of lending to households  2/29  and firms and thus assist the economic recovery of the euro area and, consequently, the sustained convergence of inflation towards our medium-term target. In any event, from the financial stability standpoint, the downward revision of the growth and inflation outlook and the resultant higher expectation that interest rates will remain very low, or will even be negative for a further period pose challenges of at least two types for credit institutions. First, this macroeconomic context will represent a challenge for deposit institutions to recoup levels of profitability more in line with the cost of capital. Indeed, in the last few months market expectations for growth of bank profits have declined.
And second, what about the readiness of other payment instruments, in particular payment cards? Let me first give you my views on the readiness of the customer. Readiness of customers? A parallel can be drawn with another major project, namely the changeover to the euro notes and coins in 2002. Indeed, as with SEPA, many of the preparations for the euro changeover were not visible to the citizens, as they were carried out by technical experts. Furthermore, the banknotes’ security features were disclosed only four months before the launch. As with SEPA, it was difficult to predict how the customer would react. On the other hand, well before the euro changeover took place, the central banking community discussed customer readiness in depth with the aim to ensure acceptance of the euro notes and coins. Well in advance of 2002, the Eurosystem started organising a “partnership programme” that involved the main bodies in the various sectors. This partnership programme emerged from the “megaphone idea” and the understanding that communication on the changeover to the euro had to be at national level by the national public authorities, banking communities and end-user associations. Each sector was encouraged to inform their target groups. Indeed, as if with a “megaphone”, the Eurosystem passed on a common set of key messages to target groups, and they in turn passed on the information to others. Applying the principle of subsidiarity in this context proved itself as the correct way to deal with differences in culture, language and institutional setting.

The legal and judicial system must make the rights and responsibilities of both banks and their counterparties clear and enforceable so that banks and borrowers can make the most effective use of collateral, guarantees, and other measures to secure credit. Third, we must confirm that the banking industry is developing a sense of a “culture” of risk management. This is perhaps the hardest criterion to define. To a great degree, Basel II is intended to create incentives for the banks to renew their focus on a risk management culture. At a minimum, countries that seek to apply Basel II must ensure that their banks view risk management not as an exercise in complying with external requirements, but rather as a means for pursuing opportunities responsibly. We must all understand as well that risk management is an art, not a science: it is a way to approach business decisions, but it does not provide automatic answers. Its successful application requires that we constantly improve our skills and our expertise. It demands the use of the best tools and best data available to support our analyses. And ultimately, it requires that we apply our best human judgement to all significant decisions. All of us can take immediate steps to strengthen our financial and supervisory infrastructure along these three areas. We must ensure the effectiveness of our supervisory systems. We must improve the transparency of our markets. And we must promote the development of sound risk management cultures.
Wage growth is expected to come down this year from a high level in 2008. Lower corporate profitability,  8  BIS Review 37/2009  rising unemployment and lower consumer price inflation will probably result in low negotiated pay increases this year. The export sector has been particularly hard hit by the global downturn. Traditional exports have fallen markedly since autumn last year. A contraction in the world economy will result in a substantial decline in Norwegian exports ahead. Moreover, due to the marked fall in commodity prices, export prices are now very low. Expensive and reduced access to credit, high interest expenses and uncertainty about developments ahead amplified the downturn towards the end of 2008. Private consumption fell markedly, the decline in housing investment accelerated and mainland business investment started to fall. The downturn in the world economy and the abnormal conditions in  BIS Review 37/2009  9  financial markets are expected to continue to mark the Norwegian economy ahead. Mainland GDP is projected to contract by 1 per cent between 2008 and 2009. Norwegian government finances are sound with substantial net wealth, although the surplus will be reduced by the fall in oil prices. The automatic stabilisers in the national budget together with discretionary fiscal policy will stimulate the mainland economy by the equivalent of 5 per cent of GDP from 2008 to 2009. Fiscal policy is assumed to become less expansionary between 2010 and 2012.

This has reduced business cost pressures and thus overall inflation. Third, the tighter monetary policy stance has nudged the level of output closer to its potential, thus preventing the economy from overheating. The positive output gap is projected to narrow from nearly 4% of potential GDP in 2010 to around 1% this year. MAS’ policy stance has begun to yield results. Both CPI-All Items inflation and MAS Core Inflation have eased from their recent peaks. •  CPI-All Items inflation has fallen from 5.5% in Q3 2011 to 4.0% in Q1 2013. •  At 1.6% in the first quarter of this year, MAS Core Inflation is running at nearly half the pace seen a year ago. BIS central bankers’ speeches  5  But there is no room for complacency. The pace at which business costs are passed through to consumer prices could pick up in the latter half of this year. MAS will remain vigilant in ensuring that the recent gains in controlling inflation are sustained. Macroprudential policies: augmenting monetary policy to promote economic and financial stability Let me move on now to macroprudential policy. This is the new buzzword in central banking circles. It has not been much referred to in Singapore, but we have been applying macroprudential policies for some time now. I will describe now the workings of macroprudential policies in Singapore, explaining why they are necessary in our context, and how they have been applied.
In Switzerland and the UK, where this trend has been going on the longest, 30-40 per cent of the shops’ products are private labels.4 Sweden has long been one of the countries with the lowest share of private labels, around 10 per cent. According to a limited survey by the Swedish Competition Authority of typical low-price goods, the prices of supplier brands have developed in line with the CPI while the prices of private labels have fallen sharply. Increased competition and lower prices Food prices in the CPI have dropped more or less since the start of last year. Tougher competition increases the pressure on food retailers to cut prices in order to keep customers, even though other factors, such as service and quality, are important to consumers in their choice of shop. Lower prices are made possible by reduced profit margins, lower taxes or lower costs resulting from, for instance, lower wages, higher productivity or a more limited product range. VAT rates in the Swedish non-durables sector have not changed during the current decade. However, wage costs have increased at a slower rate, which has led to lower unit labour costs in the wholesale and retail markets, despite a decline in productivity growth in recent years. Moreover, companies' profit margins have continued to narrow. So it seems that the stiffer competition has contributed to lower food prices primarily through smaller profit margins and low wage increases. How much lower can Swedish food prices go?

As regards producer prices of imported goods, these have dropped since the end of 2002. This partly reflects the more or less continuous strengthening of the krona between 2001 and 2004, which has had an impact on the prices with a slight lag. Moreover, consumer price inflation in the international market was muted during the last economic slowdown. We have also seen a rise in the share of imports from low-cost countries, which has also contributed to the low rate of price increases for consumer goods. The effect of this shift towards cheaper import countries is not fully captured, however, by the method that we so far have used to forecast import prices. This could be one reason why our forecasts have not completely managed to predict the fall in import prices. This is a problem that we are working on at the moment. The distribution sector also important for inflation The prices of consumer goods have fallen more than the aggregate producer prices of imported and domestic goods. That is because consumer goods prices, in a second step, are also affected by what happens in the distribution sector, i.e. the part of the business sector that distributes goods from producers to consumers. It is difficult to find comprehensive data for the distribution sector, but we have seen that unit labour costs in the sector that includes transportation fell in 2004.
Going forward, we may come out with social impact rules such as minimum age, or rules to limit the number and types of gimmicks currently being used by somc service providers to attract new customers. Maintaining Thailand’s cconomic growth and vitality is a goal that all of us in this room share, and it is my hope that we all will work together towards preserving Thailand’s existing savings culture, in order to keep it an integral part of Thailand’s economic development for tomorrow and beyond. Thank you. 2  BIS Review 50/2004

It will probably be necessary to scale it back in increments as demand pressures in the domestic economy recede and growth in trading partner countries gathers more momentum. Current forecasts indicate that this will happen, as can be seen at the right in the chart. Long-term interest rates will reflect this, and the longterm interest rate differential will narrow. Chart 6  Another important factor is that it is unclear what benefit the investments affected by the capital flow management measure have for Iceland at present. The Treasury’s borrowing need is limited in historical context, and strictly speaking, the Treasury does not need the funds generated by the bonds in question. If the special reserve requirement were not in effect, the Central Bank would probably have to hold larger foreign exchange reserves so as to mitigate the risk associated with carry trade-related inflows and the potential for sudden outflows. This would be quite costly, as the global market returns on the reserves are unusually low at present. At the same time, foreign investors can expect attractive returns on Icelandic Treasury bonds, and the more stable the króna, the greater the risk-adjusted interest rate differential. In order to reduce 7  that differential, the Central Bank would therefore need to allow increased exchange rate fluctuations, which would also exacerbate the risk faced by residents. Under current conditions, it can even be argued that for the Icelandic economy, the net benefit from such inflows is negative.
However, it is also the case that core inflation, that is, excluding food and energy, has slowed sharply as well. A decomposition of core inflation reveals that some of the decline is due to slowing in the rate of increase in prices of non-food and non-energy goods. This probably is due in large part to the softening of global demand for goods and the modest appreciation of the dollar that has occurred since mid-2011. In the service sector, the rate of increase in prices of medical services and “non-market” services – the latter includes some financial services – also has slowed notably recently. In contrast, the rate of increase in prices for other non-energy services has been relatively stable. Comparing this set of conditions to that in 2010, the recent slowing of inflation has been less widespread across core goods and core services, and inflation expectations so far have declined less appreciably than they did in 2010. Thus, my best guess is that core goods prices will begin to firm in the months ahead as global demand begins to strengthen and inventories get into better alignment with sales. As is always the case, there is substantial uncertainty surrounding this forecast. Moreover, there is always the possibility of some unforeseen shock. Thus, we will be monitoring U.S. and global economic conditions very carefully and will adjust our views on the likely path for growth, inflation and the unemployment rate accordingly in response to new information.

At its recent meeting, the FOMC decided to continue its accommodative policy stance. It reaffirmed its expectation that the current low range for the federal funds rate target will be appropriate at least as long as the unemployment rate remains above 6.5 percent, so long as inflation and inflation expectations remain well-behaved. It is important to remember that these conditions are thresholds, not triggers. The FOMC also maintained its purchases of $ billion per month in agency MBS and $ billion per month in Treasury securities, with a stated goal of promoting a substantial improvement in the labor market outlook in a context of price stability. BIS central bankers’ speeches  3  In its statement, the FOMC said that it may vary the pace of purchases as economic conditions evolve. As Chairman Bernanke stated in his press conference following the FOMC meeting, if the economic data over the next year turn out to be broadly consistent with the outlooks that the FOMC sees as most likely, which are roughly similar to the outlook I have already laid out, the FOMC anticipates that it would be appropriate to begin to moderate the pace of purchases later this year. Under such a scenario, subsequent reductions might occur in measured steps through the first half of next year, and an end to purchases around mid-2014.
Investment has declined sharply in an international comparison, suggesting that the excess capacities created in the late nineties were particularly pronounced. The bursting of the equity market bubble had a severe impact on the financial sector and business in the once flourishing investment banking and asset management sectors has slumped, resulting in the need for radical structural reforms and consolidation. The Swiss National Bank has responded to the difficult economic situation with a rapid and massive easing of monetary policy. In the course of the last two years we have cut our reference interest rate the three-month Libor - by 325 basis points to practically zero. With the marked slowdown in economic activity and the appreciation of the Swiss franc, inflationary pressures were also easing. Indeed, since spring 2001 our inflation forecast has indicated that the risk of inflation is very limited in the years to come, which has enabled us to bring about a significant reduction in short-term interest rates. Our expansive policy has aimed at supporting demand and limiting the upward pressure on the franc. BIS Review 27/2003  1  So far we see no sign of a concrete recovery. We expect GDP to stagnate in 2003. Growth should accelerate again at the end of this year following a strengthening of the world economy. Basically, our business cycle closely follows the economic development of our neighbours: Germany, France and Italy, which absorb the bulk of our foreign trade. Let me now turn to Switzerland as partner of the EU. 3.

Ten years ago – at the time of the Asian crisis – emerging markets as a whole were running a current account deficit. Since then they have been running progressively bigger current account surpluses reaching an estimated $ billion last year (1.3 % of world GDP). 3 The counterpart to this is that developed countries as a group have been running progressively bigger current account deficits not just in the United States but also in a number of other developed countries including the UK. 4 Of course there are some notable exceptions in each group: Canada, Japan and Germany for example are still creditors while many countries in central and eastern Europe and Africa are running large deficits. But maps 1 and 2 show how much the pattern has changed in the last 10 years. Most of South America and South East Asia have swung from deficit to surplus. Perhaps as important, the scale of the differences has grown with more countries running surpluses or deficits of over 5% of GDP. Oil and other commodity inflation is part of the story, of course, but that does not account for the large current surpluses in most of East Asia. Here strong manufacturing growth resulting from higher labour productivity has not been matched by higher domestic spending so savings have grown ahead of even dramatic investment growth. A deliberate policy of fostering export industrial growth has slowed the rise of exchange rates that would reduce these imbalances.
Variables such as inflation expectations, wages, output, unemployment, the exchange rate, commodity prices, and so on, have important effects on inflationary forecasts and must be taken into account when deciding the future path of monetary policy. However, it is also important that investors, wage and price setters understand and share the importance of these variables for the inflation process. Communication is essential, and that is the role of Monetary Policy or Inflation Reports, monetary policy statements, minutes, projections, speeches, and so forth. A key question during the financial crisis was to which extent central banks should react to asset prices, such as housing or stocks prices. The answer from the perspective of inflation target should be: as long as they affect the forecast of inflation, they should be considered in the reaction function of monetary policy. Asset price bubbles or distortions that may threaten financial stability should be considered when evaluating financial vulnerabilities, but not influence monetary policy if they do not have an impact on inflation. It is not clear that an increase in interest rates will be capable of stopping an increase in asset prices. The required adjustments might be so large that they could end up unnecessarily generating high unemployment and an undesired drop in inflation. Under inflation targeting, any interest rate movements that is inconsistent with inflation converging to the target may undermine the credibility of monetary policy, destabilizing inflationary expectations and weakening the effectiveness of monetary policy.

This preamble is not to give my biography, but just to mention some of the things I have done in my professional life, and to add that one of my most difficult and rewarding jobs so far was to organize the LACEA conference in 1999. As a university professor we have access to limited funds, so fundraising becomes a tedious, but necessary task. Then, organizing the program and all the details is tough, and above all it is a task that has a strict deadline and everything has to happen in just a few days. I had the privilege to meet and work with the cochairman, Dominique Hachette, an extraordinary economist and friend. Our weekly meetings in his house were really a pleasure, and we miss him a lot. So, let me start by expressing my sincere congratulations and gratitude to the organizers. However, I will not talk about organizing conferences, but about central banking. In particular, I will refer to the new challenges facing central banks after the crisis and their role in securing price and financial stability. Central banks and price stability Many years ago we reached consensus that central banks should focus mainly on ensuring low inflation. Moreover, there were some scholars and practitioners that argued that price stability should be the only objective of central banks, so the goal would be more credible and monetary policy more effective in achieving stability. However, we didn’t know how exactly or operationally to achieve this target.