samchain/econo-pairs-v1 huggingface dataset:
Global debt securities outstanding are nearly a third higher at just over $ trillion, having quadrupled over the same period. Turnover in foreign exchange markets has also quadrupled over a similar period to some $ trillion a day. Completely new markets have developed to manage and match risk and to expand funding options. Derivative markets now dwarf the markets in the underlying instruments on which they are based. Total derivatives outstanding have increased nearly six fold over the past 20 years to around $ trillion. In 1914, such markets existed on a small scale for agricultural products. Repo and securitisation markets which hardly existed when financial globalisation restarted are now each worth around $ trillion. 4  As financial globalisation has grown, so has the tendency for activity to concentrate in financial centres. Concentration, as Paul Krugman observes, is the most striking feature of many industries’ economic geography. Labour market externalities mean that larger concentrations allow for a more efficient matching between employers and employees, and encourage the formation of a pool of specialised workers. Concentration increases the scale of the demand for intermediate inputs encouraging the development of more specialisation in the suppliers of those inputs. And concentrations facilitate the exchange of knowledge and skills. Given the importance of access to specialised labour, to intermediate inputs and to knowledge, it is not surprising that financial services are subject to very strong pressures to concentrate activity in key centres. 3 4  See World Federation of Exchanges H1 2016 Market Highlights.

A message that emerged with great clarity and force from the non-financial sector participants was that there remains a major lack of trust in financial markets and financial institutions because of misconduct. Participants saw cultural and ethical changes as an essential component of restoring the social license for financial markets. The Bank of England is not responsible for market conduct and integrity in the UK. That task rests with the FCA under the very able leadership of my erstwhile colleague Andrew Bailey. But our overall responsibility for the financial stability of the UK, our prudential responsibility for the major wholesale financial firms and the Bank’s close and historic interaction with London as an international financial centre means we have a very active interest in the integrity and fairness of the wholesale financial ecosystem which is located here. That is why the Bank, alongside colleagues from the FCA and HMT, led the fair and effective markets review which reported last year and why we have made significant progress in ensuring that its recommendations are implemented. 8  7  See ‘From ‘ethical drift’ to ‘ethical lift’: Reversing the tide of misconduct on global financial markets’, Remarks given by Minouche Shafik, 20 October 2016, available at: www.bankofengland.co.uk/publications/Pages/news/2016/078.aspx.
Since the creation of the PRA we’ve authorised 22 new start-up banks, and five in 1  Prudential Regulation Authority (2020), Consultation Paper 9/20: Non-systemic UK Banks: The Prudential Regulation Authority’s approach to new and growing banks – https://www.bankofengland.co.uk/prudential-regulation/publication/2020/new-and-growing-banks 2 See https://www.gov.uk/government/publications/ring-fencing-information/ring-fencing-information 3 Under the Financial Services and Markets Act 2000 (as amended), the PRA has two primary objectives: i) a general objective, to promote the safety and soundness of the firms we regulate; and ii) an objective specific to our regulation of insurers, to contribute to the securing of an appropriate degree of protection for those who are or may become policyholders. The PRA’s secondary objective is to act, so far as is reasonably possible, in a way that facilitates effective competition in the markets for services provided by the firms we regulate when they carry on regulated activities. See Prudential Regulation Authority (2018), The PRA’s approach to banking supervision, (October) 4 See https://www.bankofengland.co.uk/prudential-regulation/new-bank-start-up-unit. The approach to setting up a new bank has been broken down into different stages to help lower the barriers to entry. This includes early engagement with the regulator in the ‘preapplication stage’ and a ‘mobilisation’ stage where a bank authorised with restrictions is subject to less onerous requirements than a mature bank, allowing it time to secure further investment and build its capabilities before it becomes a fully functioning bank.

I note with interest that the workshop will discuss potential solutions to this dilemma. It is important that as the credit reporting landscape continues to evolve and assume more prominent roles in influencing borrowing and lending behaviours, appropriate attention is paid to consumer education to mitigate consumer anxiety and ensure that consumers understand and can exercise their legitimate rights. As uncertainties continue to cloud the global economic outlook at a time when borrowers have become more financially literate, lenders have become more innovative, and financial products have evolved to become more sophisticated and intricate, the need for an effective and efficient financial infrastructure becomes increasingly more critical to ensure the prudent expansion of credit and risk taking. This workshop addresses a key part of that infrastructure that can contribute towards avoiding damaging effects of a financial crisis induced by credit excesses. 2  BIS central bankers’ speeches  Before I end my remarks, allow me to say a few words about this magnificent building, Sasana Kijang. Designed to be a nexus for thought leadership and collaboration in central banking, “Sasana” is a Sanskrit word that describes a site, centre, building or arena where communities gather for meetings, while the Kijang is a small yet very intelligent animal that is depicted in Bank Negara Malaysia’s logo.
The structure of the credit market and the wording of the loan contract also affect property prices, and lead to differences in trends between countries. One example is that in some countries, such as the United States and Denmark, there is an opportunity to renegotiate fixed-rate loans - at a very low cost - when interest rates fall. 2  BIS Review 51/2004  One phenomenon that is probably significant for indebtedness and property prices in some other countries, but which does not appear to be particularly common in Sweden, is that private households invest in property to rent out. This occurs, for instance, in the United Kingdom and, probably to an even greater extent, in Australia, where loans for making investments comprise approximately one-third of the banks’ lending to households.1 The fact that households borrow money to buy property in addition to their own housing to rent out probably increases the risk of speculative elements in the price-setting. At the same time, it makes households more vulnerable to changes in interest rates and income. They also become more sensitive to changes in the balance of the rented property market. This means that the risk of substantial fluctuations in house prices is probably greater in countries where it is common to buy housing to rent out. There has thus been an increase in indebtedness internationally, parallel to a rise in property prices. As has been the case in Sweden, questions have arisen regarding the sustainability of this trend and what happens when interest rates rise.

However, there may be reason for some upward revision to the inflation forecast made in May, and perhaps even to the one made in August. One factor which could indicate a higher inflation rate, at least in the short term, is the high oil prices. Resource utilisation may also be slightly higher than anticipated in the coming years. One reason is the strong figures for Swedish growth that we have seen over the summer. Another is that fiscal policy will probably become more expansionary  BIS Review 51/2004  5  now. Inflation can nevertheless be expected to be in line with the Riksbank's target two years from now. This is also the picture painted in a speech by Riksbank Governor Lars Heikensten in London today. Conclusion Let me summarise what I have said this evening. Despite stock market fluctuations and a periodically weak economic climate, both household indebtedness and house prices have increased substantially, on a national level, in recent years. There have been similar developments in many countries, and households’ debts and interest payments as a percentage of disposable income are not remarkably high in Sweden. Although the debt ratio is approaching the high level prior to the financial crisis at the beginning of the 1990s, the low interest rates have meant at the same time that households' interest expenditure as a percentage of income has largely been halved since then.
Industrial revolution and “hollowing-out” Or is it? Looking more closely at past phases of rapid technological change paints a more nuanced picture. Each phase has eventually resulted in a growing tree of rising skills, wages and productivity. But they have also been associated with a “hollowing out” of this tree. Indeed, this hollowing-out has widened and deepened with each new technological wave. Economic historians tend to partition the growth timeline into three distinct phases: the first Industrial Revolution, the era of steam engines and spinning jennies, commencing in the middle of the 18th century; the second, the era of mass industrialisation, commencing in the second half of the 19th century; and the third, the era of information technology, commencing in the second half of the 20th century (Haldane (2014)). These industrial revolutions each brought about a remarkable re-shaping of the jobs landscape (Chart 17). The employment share of agriculture and other primary activities has fallen from around 50% in 1700 to around 1% today. Secondary activities, notably manufacturing, rose to 45% of employment at the end of the 19th century, before falling to around 10% today. Meanwhile, the employment share of services has roughly doubled each century since 1700, to reach around 80% today. These dramatic shifts are even more striking at an occupational level. Chart 18 plots employment in four occupations since 1870: agricultural labourers, telephonists, accountants and hairdressers (Deloitte (2015a)).

Implementation of the New Accord  (a)  Overview  Today, the Committee is close to finalizing the new capital framework, and I know that many banks and supervisors in different countries have already begun to think about the practical implications  2  BIS Review 7/2003  surrounding implementation. This second stage of the Basel II effort is close on the horizon, and both banks and supervisors must give serious thought to what they need to do to get ready. I’d like to spend a few moments describing some of the efforts currently underway. It is no secret that implementation of the New Accord will require a substantial resource commitment on the part of banks and supervisors alike. I think it is important to emphasize that the efforts banks will need to undertake to comply with Basel II build on the efforts that some large and well-managed banks already had in train before the new framework was contemplated. I know that many banks are devoting more attention to enhance tracking and assessment of the quality of the loans they make. Further, banks have been looking to strengthen their credit assessments by employing experts who do not stand to gain from overly favorable reviews. Time and effort has also been invested in working to pull all of this together in a management information and control system that produces timely and accurate reports for senior management review.
Lars Nyberg: After the crisis – new thoughts on monetary policy Speech by Mr Lars Nyberg, Deputy Governor of the Sveriges Riksbank, at Nordea, Stockholm, 6 December 2010. *  *  *  I would like to thank Mikael Apel and Erik Lenntorp for contributing to this speech. Crises lead to all sorts of problems. But they also cause us to rethink ingrained ideas and earlier accepted practices. If we succeed in learning the right lessons from a crisis and implementing wise changes, this may lead to a better development in the long run. But it is not always easy to see exactly what lessons we need to learn. For example, we are still not entirely agreed on all of the details regarding the crisis in the 1930s – why it arose and how it became so severe. In the same way, it will probably take time before there is a consensus on what lessons we should learn from the financial crisis we have just experienced. Some of the lessons are fairly obvious, however. For instance, we can with hindsight note that there were clear inadequacies in the regulations and supervision intended to maintain financial stability. New regulatory frameworks are now taking shape both internationally and in individual countries, and there are discussions on how to make supervision more effective.

8 The concept of a balance sheet recession can be described as follows. Let us assume that we have experienced a large price rise on an important asset market, for instance, the property market, and that this rise has been largely financed through loans – that is, roughly what happened with the North Atlantic property bubble. If prices then fall drastically, many people will be stuck with assets that have declined substantially in value, while the value of the loan remains unchanged. In other words, their balance sheets look much worse than they had anticipated. This can create uncertainty regarding the outlook for the future. In this situation the participants in the economy may set a target that overshadows all others – to get rid of enough of their debts. This means that their income will for some time to come be used for amortisation rather than consumption and investment. Interest rate cuts less effective when everyone wants to pay off their debts It is then of minor importance if interest rates are cut – the participants in the economy are still only interested in consolidating their balance sheets. Even if one steps on the monetary policy accelerator pedal, the engine does not give the usual response. This is what I meant earlier when I said that monetary policy has less effect than usual in certain situations. The actual consolidation of the balance sheets may go more quickly if the interest rate is cut, as this creates scope to increase the pace of the instalment payments.
Having been a lecturer at the University of Zambia in the earlier days of my career, puts me in a better position to understand the passion and deep knowledge of the local issues the Zambian teachers and lectures possesses. I have no doubt that supporting our local institutions will lead to a stronger motivation and morale in our teachers. To this end, my Institution, the Bank of Zambia, currently provides scholarships to the University of Zambia and the Copperbelt University. Additionally, we also provide salary supplements to relevant departments as a way of encouraging our Zambian academics who are working under very difficult and challenging situations. Furthermore, I am reliably told, that the Masomo Scholarship is conferred only on the best and intelligent young men and women. The stringent selection criteria ensure that only deserving candidates possessing outstanding performance in academic and co-curricular activities are selected. I am further informed that the candidates are of exemplary character and are committed to the betterment of their families, societies and the nation at large. Ladies and Gentlemen, I am also informed that this year, the Foundation received several applications from a wide section of candidates. It is gratifying to know that many young men and women wish to have an opportunity to better their education in these trying times. It is for this reason that I call on all of us to assist, foundations like Masomo, to increase the number of scholarships so that many more people could benefit from the scholarships.

Third, we need to reduce the likelihood that systemically important institutions will come close to failure in the first place. This can be done by mandating more robust capital requirements and greater liquidity buffers, as well as aligning compensation with the risks that are taken by the firm’s employees. In addition, instruments such as contingent capital-debt that would automatically convert to equity in adverse environments – need to be considered. Such instruments would enable equity capital to be replenished automatically during stress environments, dampening shocks rather than exacerbating them. I would now like to take some time to discuss some of the proposals that Congress is debating regarding regulatory reform. As Congress and the Administration consider what legislative changes are warranted, the Federal Reserve’s actions before and during the crisis have been getting close inspection. Given the Federal Reserve’s key role in our financial system, and the scale of the damage caused by the financial crisis, this careful scrutiny is necessary, appropriate and welcome. Not surprisingly, there are legislative proposals that would significantly alter the Federal Reserve’s powers and responsibilities, particularly with respect to supervision of bank holding companies. Again, that’s entirely within Congress’s purview: the Federal Reserve only has the powers and responsibilities that Congress has entrusted to us. But in drawing up new legislation, it’s important not to throw the baby out with the bathwater – we should preserve what has worked and fix what hasn’t.
The advice will build on the Bank’s professional judgement and take into account factors other than the indicators mentioned. The weight given to different indicators may vary. As we gain experience and insight, the set of indicators can be developed further. 1  http://www.regjeringen.no/en/dep/fin/news/news/2013/systemically-important-credit-institutio.html?id=726797. 2  The trend is estimated using a one-sided Hodrick-Prescott filter (lambda = 400000) extended using a forecast. The mean is for the entire period in the chart. BIS central bankers’ speeches  3  Uncertainty and the need for resilience suggest that the buffer should not be reduced automatically even if there are signs that financial imbalances are receding. In periods of prolonged lending growth and low losses, banks should normally hold a countercyclical capital buffer. Banks will be allowed to draw on the buffer in the event of an economic downturn and large bank losses. If the buffer functions as intended, banks will tighten lending to a lesser extent in a downturn. This may mitigate the procyclical effects of tighter bank lending. The four key indicators are not well suited to signalling whether the buffer should be reduced. Other information, such as market turbulence and loss prospects for the banking sector, will be more relevant. The benefits of higher capital requirements for banks must be weighed against any costs the countercyclical capital buffer imposes on the economy. Several analyses, such as those conducted by the Basel Committee on Banking Supervision, suggest that higher capital requirements will not give rise to considerable, permanent economic costs in the longer term.

We consider that our work has been both interesting and rewarding and we hope that it has also helped some of our colleagues to make their own institutions stronger. 2  BIS Review 123/2006
Having such a system in place may lead over time to major progress in both the structural analysis of the euro area and the assessment of the current economic situation. Fully integrated sectoral accounts provide the ideal framework for analysing the structure of the economy and its changes over time as well as the propagation of shocks through the system. This helps to gain further insights into the monetary policy transmission mechanism and the relative importance of the various transmission channels. At the same time, monitoring a wide range of key indicators in a single macroeconomic accounting framework provides a coherent picture of the current economic situation. This is particularly important in the context of the ECB’s monetary policy strategy, which takes into account a broad range of indicators. Integrated financial and non-financial sector accounts provide a framework for analysing the link between the financial and the real economy - an issue notoriously difficult to analyse on the basis of the currently available analytical framework. An integrated system of quarterly sector accounts would also provide a powerful information basis for forecasting, allowing what is nearly impossible today, namely the integration of monetary and financial variables in macro-econometric models. Of course, many of these uses will only be possible once an integrated system of sectoral accounts has been available for quite a number of years and with an appropriate timeliness. But being forward-looking and developing visions is of great importance in the field of statistics.

A partial representation of the economic structure can only partially help in monetary policy decision-making, notably in real time. For instance, it is very difficult to find empirical models that allow for an integral view of both non-financial (‘real’) and monetary-financial phenomena. So, it may be impossible to arrive at a convincing explanation of the origin and propagation of a significant financial shock, say, on the basis of sets of equations that do not elaborate on the role of the financial sector or account for only tenuous links between that sector and the rest of the economy. Another example is provided by the many pitfalls that come with using “synthetic” indicators of inflationary pressure. The most famous of these “synthetic” indicators is the so-called “output gap”. The “output gap” can be defined as a measure of the deviation of the aggregate output of an economy from the maximum level that would be consistent with price stability. This maximum level is then the “potential output”. When current output is above potential, the pressure on the scarce resources should then translate into an increase in prices, that is, inflation. In the real world, the monetary authority constantly faces the challenge of observability and measurement. Unfortunately, we cannot “assume” to know the “potential output”. The best we can do is to try to “estimate” the output gap by using observations of many other correlated variables. We all know how imprecise and model-dependent this “estimated” measure can be.