samchain/econo-pairs-v1 huggingface dataset:
Foreign direct investment in the banking and the financial sector should also be encouraged as it allows the transfer of technology and management skills. But it should be clear that such an opening up of the capital account should, in times of financial stress, not lead to fire-sale prices. Measures aiming at protecting the financial system liquidity from the adverse consequences of sudden changes in market sentiment (the so-called “liquidity-at-risk policy”) should be given further consideration. The Argentine authorities have adopted such a policy by introducing a liquidity requirement on banks’ short-term liabilities (foreign as well as domestic liabilities). This system has been supplemented by a Contingent Liquidity Facility with a number of international banks. More generally, policies designed to discourage excessive short-term foreign borrowing and based. on market mechanisms should be supported. For instance, unremunerated reserve requirements on short-term foreign liabilities are an incentive to lengthen debt maturity; domestic savings should be more systematically mobilised through a development of domestic financial markets (promotion of larger and deeper financial markets). In particular, making short-term foreign liabilities more costly would also promote borrowing in local currency, making the financial system less vulnerable to external shocks. BIS Review 81/1999  2  International financial markets and international governance issues As to the promotion of efficient functioning of global markets, I would like to insist on three points: í  Firstly the specific dangers associated with the “herd instinct” of market participants.

This, in conjunction with poor corporate governance ended up in large stocks of non-performing loans which, together with governments’ implicit guarantees, created a sizeable “contingent fiscal liability”;  í  the other main explanation views the self-fulfilling pessimism of international lenders as the root cause of the crisis. This analysis puts emphasis on panic and on herd behaviour of foreign investors and lenders. The crisis is the result of shortcomings in the international capital markets and their vulnerability to sudden changes in market sentiment. According to this view, the macroeconomic and microeconomic imbalances were not severe enough to warrant a financial crisis of the magnitude that took place in 1997 and 1998. I do not consider these two explanations as competing or conflicting but see them rather as complementary. In short, the first approach focuses on what is wrong in crisis countries, the second on what is wrong in international financial markets and international financial institutions that “govern” global finance. 1  BIS Review 81/1999  The severity of the Asian’s financial crisis, the speed with which it spread and the shortcomings of the international response have contributed to a wide-ranging debate on the basic rules and institutions that govern global finance. Recent efforts to improve the global financial architecture began at the Halifax Summit of the G7 leaders in 1995.
(1998)  Graph 1a: EUR Money Market 1.2  5 4.8  1  4.6 4.4  0.8  4.2 0.6  4 3.8  0.4  3.6 3.4  0.2  3.2 3 01.01.07 14.02.07  0 30.03.07 13.05.07 2 W Repo  26.06.07 09.08.07 3 M Libor  22.09.07 05.11.07 19.12.07  Ted Spread (rhs)  Graph 1b: GBP Money Market 7  1.2  6.5  1  6  0.8  5.5  0.6  5  0.4  4.5  0.2  4 01.01.07 14.02.07  0 30.03.07 13.05.07 Base Rate  8  26.06.07 09.08.07 3 M Libor  22.09.07 05.11.07 19.12.07  Ted Spread (rhs)  BIS Review 141/2007  Graph 1c: CHF Money Market 3  0.9 0.8  2.75  0.7 0.6  2.5  0.5 2.25  0.4 0.3  2  0.2 0.1  1.75  0 -0.1 1.5 01.01.07 14.02.07 30.03.07 13.05.07 26.06.07 09.08.07 22.09.07 05.11.07 19.12.07 1 W Repo  3 M Libor  Ted Spread (rhs)  Graph 1d: USD Money Market 6  2.5  5.8 5.6  2  5.4 5.2  1.5  5 4.8  1  4.6 4.4  0.5  4.2 4 01.01.07  0 14.02.07  30.03.07  13.05.07  Fed Funds  BIS Review 141/2007  26.06.07 3 M Libor  09.08.07  22.09.07  05.11.07  19.12.07  Ted Spread (rhs)  9

But they necessarily remain our best judgements and that, of course, leaves us vulnerable to assertions that we do not give sufficient weight to this or that factor. For what it is worth, at the time of our last forecast in November, our central projection – on the assumption of 6% interest rates – was for output growth of around 2½% over the next couple of years, with RPIX inflation remaining modestly below target this year but rising to 2½% in 2002. There was, of course, a good deal of uncertainty around that central projection, as there always is, for the reasons that I’ve tried to explain. But on the basis of that forecast the short answer to the question: can our steady economic progress be maintained over the next couple of years is a cautious “yes”. Since that forecast was completed things have gone in different directions. The prospect for external demand has somewhat weakened and so too has the oil price. There are mixed messages relating to  2  BIS Review 1/2001  tightness in the labour market, but earnings growth has so far remained reasonably well contained - as it must continue to do. On the domestic demand side, private consumption growth has remained stronger than we had supposed, while the growth in private investment has been weaker; meanwhile it is not clear that underlying public sector demand has – at least yet – picked up as rapidly as planned. The exchange rate has fallen, and so, too, have market interest rates.
We – at the Riksbank – have been publishing stress tests of individual banks since 2006. With a track record of reasonable stress tests, the credibility of the methodology and the results has continued to increase during the crisis. Building confidence in the long-run: liquidity and capital regulation The financial crisis of the past two years has been very costly. We must ensure that this crisis does not repeat itself. Lawmakers, central banks and financial regulators have a daunting task ahead of them. Regulatory and supervisory reform is needed. I have great hope that we will take this opportunity to create a safer and sounder financial system. In this respect, I would like to bring up two important issues for a safer financial system: liquidity and capital regulation. Liquidity or, rather, illiquidity has been in the centre of this crisis. Banks will always be exposed to liquidity risk due to the maturity mismatch, as this is a central feature of banking. However, in the run up to the crisis, this maturity mismatch increased too much. Banks relied on the misguided perception that short-term financing would be available from liquid markets. A key lesson from the crisis is that a liquid market can very quickly become illiquid. The conclusion is that liquidity must be regulated more firmly. Banks need to hold a buffer of liquid assets large enough to allow them to weather a liquidity shock.

A major aim of regulatory reform should thus be to ensure that trust does not dissipate so rapidly and completely again. In order to do this, we need to increase capital requirements, both in terms of the quality of capital and the amount of capital. After all, capital provides protection against bad outcomes. Increasing the quality and amount of capital will increase the resilience of individual banks. In addition, strengthening the ability of banks to absorb losses mitigates the risk of contagion – therefore more and better capital will also strengthen the resilience of the system. In my view, the important part of capital is loss-absorbing common equity. In addition, other forms of capital are needed to protect the state. If a bank defaults, capital typically evaporates very quickly. I have seen many examples of banks that have defaulted because they did not meet the capital adequacy rules. In my experience, when bank managers say that they have a problem, they often claim to have – say – 6 per cent regulatory capital, rather than the required 8 per cent. When the authorities eventually and realistically assess the assets, capital is often negative and the state has to bail out the bank. Thus, capital should be of good quality to protect the bank on a going concern basis, but also to protect the state in the event of a default.
Social benefits were improved during this time. Compensation for sick leave was raised and the qualifying day was abolished. Furthermore, legislation was introduced for job security and co-determination in the workplace. Many believe that firms’ costs rose and that production was disrupted by sick leave and other kinds of leaves of absence that had also been introduced. These factors are difficult to assess but it is likely that they contributed. At the same time as the oil price shock, the Swedish economy was also hit by a domestic cost crisis which resulted in a decline in production. In spite of this, firms retained employees to a greater extent than in other countries, which led to lower growth in labour productivity. 2  BIS Review 56/2003  Moreover, in the mid 1970s, there were dramatic changes in capital formation, which undoubtedly explain some of the slowdown in productivity growth. Of course, this capital growth is in turn the result of a variety of economic conditions for enterprise and the public sector, including those mentioned earlier. For the most part we speak about investment activity in our country in gross terms. This concept also includes such investment that is needed to replace the depreciation that occurs during all production. When we exclude the part of gross investment that is made to compensate for this depreciation, we are left with net investment. Net investment is the new additions to the capital that is already employed in production in the form of plant, machinery and buildings.

So, as regards net investment, in other words the contribution to capital formation, this was more than halved as a percentage of GDP in the mid 1970s. This meant two things. First, capital growth per employee, or per hour worked, fell. For a number of years, investment dropped so much that capital per employee in the business sector actually declined. In other words, each employee worked with less capital. In order to illustrate what capital per employee means, we can take an extreme example, namely what a lone worker can accomplish when digging with a spade and iron bar compared with a hydraulic excavator. The latter represents considerably more capital per employee than just digging with a spade, as well as substantially less physical effort for the worker. Therefore, we should expect productivity growth to fall when capital per employee declines. But there is also another indirect effect. With new capital, new technology is introduced into the production process. Investment is the means for putting new technology and research into practical production. Through investment, new methods and new technology are ushered into production processes. For this reason, we should expect less technological progress in production when capital formation falls. An excavator is so much more than a large number of spades; it represents entirely new technology that affects the whole production process. Figure 1 shows that capital formation, net investment as a percentage of GDP, fell in the mid 1970s from around 15 per cent of GDP to about 5 per cent.
Bartering is a complicated and time-consuming process. Someone who wants to sell an item has to find a buyer who wants that particular item at that particular time. And the buyer must also be able to offer something in exchange that the seller wants. The need for a third item that could serve as an intermediary in the bartering process thus arose at an early stage in the history of civilisation. Metals of various kinds, especially silver and gold, soon acquired a central position as a currency for trade as they are relatively durable and easy to transport and divide. An important step in the development process was taken when people began to use the metals to mint coins. This made it possible to use an authorised stamp that guaranteed that the metal content and weight were correct. The next logical step was taken when people realised they could use pieces of paper to represent the value of a metal coin. In other words, notes that could be exchanged for metal coins on request. This made handling and transportation even easier and worked as long as the public accepted the notes as a means of payment and had confidence in those who issued them. A further stage in the development process was reached when it became possible to issue money without the back-up of reserves in the form, for example, of gold and silver.

The pace of recovery however varies across regions. Though global conditions have improved, recent developments in Europe have once again unsettled financial markets as doubts have arisen over the fiscal sustainability of several countries in the Euro zone. These episodic concerns serve as broad reminders that the world economy still faces serious challenges as governments, financial institutions and corporations adjust to the new realities of greater prudence, tighter market conditions and lower tolerance for weak governance and excessive leverage. 4. In Asia, economic growth has rebounded strongly above pre-crisis levels and become more broad-based. Fundamentals in Asia continue to be strong, boosted by robust domestic demand, healthy balance sheets and strong resurgence in intra-regional trade. According to the International Monetary Fund (IMF), Asia is expected to grow by an average of 7.1% in 2010 and 2011, up from 3.4% in 2009. Having reformed and restructured their economies following the Asian Crisis a decade ago, Asia was better positioned with less fiscal imbalances or corporate excesses to emerge faster from the downturn. Prospects for sustained growth in ASEAN are also good. Its outlook is enhanced by continuing efforts to create an integrated single market by 2015. With improved trade links with the two Asian giants – China and India, ASEAN will become an even more dynamic and vibrant region within Asia. 5. The GCC countries too enjoy solid growth prospects, and look set to achieve around 5% GDP growth in 2010 and 2011, according to the IMF.
Chart 1: Anxiety score (mean response)  Chart 2: HH and business consumer confidence 6 5  40  Headline consumer confidence (RHS)  30 20  4 3 2  -15  0 -10  -20  Overall business confidence (LHS)  -25  Jul-20  Apr-20  Jan-20  Oct-19  Jul-19  -35  Apr-19  -40  Jan-19  0  Oct-18  -30  Jul-18  -30  Apr-18  1  Jan-18  02-Jul  05-Aug  04-Jun  07-May  09-Apr  2019  2018  2017  2016  2015  2014  2013  2012  -5 -10  10  -20  2011  0  Source: ONS  Sources: GfK/EC Consumer Confidence Survey, Lloyds  Note: Quarterly data to March 2020 and weekly data  Business Barometer  thereafter  Note: Headline consumer confidence is based on the average of five survey balances: general macroeconomic situation over the past 12 months and expectations for the next 12  The failure of consumer confidence to recover is particularly striking, given the complete recovery in consumption by households over the same period. Put differently, the historical correlation between consumer confidence and spending appears to have broken down (Chart 3). A wedge has emerged between peoples’ expectations and their spending, between their risk perceptions and economic reality. The same is true, to a somewhat lesser extent, among businesses. For households, that wedge might have arisen because of fears about future unemployment or inflation.

But there is still time for this operational work to be done and it will be important businesses prioritise that in the weeks ahead to minimise disruption to their businesses and the economy. I am confident UK companies will rise to this challenge, as they have to the challenge of Covid. Let me say a final word on monetary policy. The MPC has already taken extraordinary monetary policy action in the face of the Covid crisis, reducing Bank Rate by 65 basis points and expanding QE by a further £ billion. Through its forward guidance, the MPC has made clear that it will not tighten monetary policy until there is clear evidence of progress being made towards reducing unemployment and returning inflation to target on a sustainable basis. The MPC has also made clear that it stands ready to take whatever further action is needed to support the economy and return inflation sustainably to target, should that prove necessary. Alongside public health and fiscal measures, this forms part of the on-going economy-wide insurance policy put in place during the Covid 12  All speeches are available online at www.bankofengland.co.uk/news/speeches and @BoE_PressOffice  12  crisis. That insurance policy should be a source of confidence and comfort for companies and households with understandable concerns about their businesses and jobs. At its meeting earlier this month, MPC decided no further monetary policy action was needed to achieve its statutory objectives.
The current economic situation Before the war, the world economy was on a path of gradual recovery, following the most acute phase of the pandemic, although the recovery was already flagging from the second half of 2021 owing to global bottlenecks and the increase in inflationary pressures. The gradual path of recovery in activity prior to the Russian invasion of Ukraine was, in any case, highly uneven across geographical areas and sectors of activity. Thus, while some economies had already regained or even surpassed their pre-crisis levels of activity, others had not. Spain, despite having one of the highest levels of vaccination in the world, was among the latter. At the end of 2021, Spain’s output was still 3.8 percentage points (pp) below its pre-pandemic levels, while in the euro area as a whole this gap had already closed. One factor that would explain the difference in progress is the sectoral composition of activity. In particular, the recovery tends to be more delayed in those countries, like Spain, in which services that are highly dependent on personal interaction, such as those linked to tourism, account for a large share of the economy. Economic developments in Spain, and in the rest of the world, have been affected by upward inflation surprises since the second half of 2021, driven in particular by energy and food, although there has also been a slight rise in underlying inflation. Between December 2020 and March 2022, the annual increase in consumer prices rose from -0.6% to 9.8%.

This percentage is much higher in countries such as Germany and Italy (17% and 22%, respectively). However, in a highly volatile environment, the war is affecting the cost of these goods on global markets, irrespective of their origin. In particular, the rise in energy prices has significant effects on the cost of the household consumption basket and on firms’ costs of production. Also, the war itself could ultimately hamper the supply of some of these goods, which would obviously tend to have a large impact on prices and economic activity. The European authorities have formally announced their intention to reduce structural energy dependence on Russia, but clearly this is not something that can be achieved in the short term. The surge in inflationary pressures apparent in the March data partly reflects the increase in commodity prices associated with the war, but also the delayed effects of the acceleration in intermediate costs in the preceding months on the prices of other goods and services, and the scarcity of certain products as a result of the road hauliers’ strike. The impact of the increase in energy costs is highly uneven across groups of agents. In the case of households, those with low incomes are most affected. In the case of productive sectors, the impact is naturally greater on the more energy-intensive ones. A second channel, that is also very significant, is the impact of the war on household and business confidence, given the extraordinary uncertainty surrounding the duration and course of the war.
Lars Nyberg: Hedge funds and the recent financial turmoil Speech by Mr Lars Nyberg, Deputy Governor of the Sveriges Riksbank, at the Nordic Hedge Fund Investment Forum, Stockholm, 28 January 2008. *  *  *  Hedge funds have come to play an increasingly important role in the financial system. In the past decade the assets managed have quadrupled and now stand at around USD 2 000 billion; growth of between 25 and 30 per cent per year. 1 But it is not just the fact that the hedge funds have grown in number and size that makes them important. They also have different trade strategies and more liberal investment rules than many other types of investor. This makes them important players on several of the world’s financial markets. Many have said (and some have perhaps hoped) that hedge funds would cause the next financial crisis. As we know, the past autumn saw a number of unpleasant surprises in the financial markets. In this context I believe it may be of interest to note that the hedge funds have not contributed to amplifying the problems in the market. To date, if anything they have had the reverse effect, that is, their actions have generally had a stabilising effect in the markets. 2 At the same time, many hedge funds, like many other financial market agents, can surely learn some lessons from recent events. I will reflect on this today. This also brings me to the current animated debate on the regulation of hedge funds.

Joseph S Tracy: A strategy for the 2011 economic recovery Remarks by Mr Joseph S Tracy, Executive Vice President of the Federal Reserve Bank of New York, at Dominican College, Orangeburg, New York, 28 January 2011. *  *  *  Good morning. It is a pleasure to be with you this morning to look back on the tremendous events impacting the economy over the past several years, and to assess the outlook for the economy going forward. Let me note that the views that I will discuss with you are my own and not necessarily those of the Federal Reserve Bank of New York or the Federal Reserve System. On September 20, 2010, the National Bureau of Economic Research (NBER) determined that the “Great Recession” officially ended in June 2009. The Great Recession did not earn its moniker due to its length. At 18 months, the length of the Great Recession was only slightly longer than the average of 17.5 months for the 33 recessions tracked by the NBER since 1857. In fact, the longest recession was 65 months and lasted from October 1873 to March 1879. The Great Recession distinguished itself from earlier recessions in terms of its severity rather than its length. There was a decline in real output relative to trend of $ trillion or 8 percent (Chart 1). This contraction brought the level of real output back to its level in 2006. In most recessions, consumption growth slows but remains positive.