samchain/econo-pairs-v1 huggingface dataset:
The most important concrete instrument for promoting cohesion is, of course, the EU’s convergence criteria for EMU participation: low inflation, low interest rates, a stable exchange rate and balanced government finances. Much has been said and written about these criteria. I have already suggested that perhaps it is not just these criteria as such that are the key to a monetary union that functions properly, although the part they have played in disciplining policy in a number of member states should not be underestimated. But I do believe they have had the important effect of contributing to a greater consensus than before on issues of stabilisation policy. The Maastricht Treaty’s institutional requirements concerning formal central bank independence and the legal infrastructure of the financial sector have also contributed to the consensus that has been achieved and which I believe is central for the proper functioning of EMU. A remarkable degree of economic convergence throughout the EU was achieved in the second half of the 1990s. If one excludes Greece, the gap between the highest and lowest rates of inflation among EU countries narrowed from 10 percentage points in 1990 to 1% point in 1997. In 1995 the gap in the public finances extended from a deficit of almost 8% of GDP in Sweden to a deficit of 2.3% of GDP in Denmark. By 1997 the gap had narrowed to a 0.1% surplus in Denmark and a 3.0% deficit in Spain. The EMU process also led to more similar levels of interest rates.

But an intense dialogue has now started on structural issues at extraordinary Council meetings, such the coming meeting in Stockholm, as well as in more regular processes such as the Luxembourg process for better employment policies and the Cardiff process for more efficient product markets. The EMU to date It must then be asked, of course, how well this framework is working now that EMU is a reality. It is certainly too early to draw definite conclusions about these matters but I can offer some observations. The first point worth noting is that we are now reaping the benefits of the convergence process and of the consensus on stabilisation policy that has, in fact, been established. Europe is now experiencing an  3  BIS Review 102/2000  economic upswing in which macroeconomic conditions are more stable and inflation expectations lower than for many decades. Since the move to EMU, there have been no clear signs of asymmetric shocks that might hit a particular country or group of countries, although the Asian crisis and the subsequent unrest did affect the member states somewhat differently. And we do not know what would have happened during the tempestuous autumn of 1998 if Stage Three had not been well on the way. Perhaps exchange rate developments in Europe would have been considerably more dramatic and disruptive. It will be recalled that the Swedish currency’s deviation from a reasonable long-term level was considerably greater than that of, for example, the Finnish markka.
From an economic perspective, coming on top of what was already a very steep rise in the cost of globally traded goods, in the wake of the pandemic, the invasion has led to substantial rises in the cost of energy and other commodities. As a big net importer of manufactures and commodities it’s doubtful that the UK has ever experienced an external hit to real national income on this scale. From the narrow perspective of monetary policy it will result in the near term in the difficult combination of even higher inflation but weaker domestic demand and output growth. However, the MPC has already said quite a bit about these things, individually and collectively, and – dramatic though its economic effects have been – my topic today is not this awful conflict or the immediate questions it poses monetary policy. I’ve no doubt we will  discuss these things in the Q&A. Instead, I wanted to talk about something more general, namely the communication of monetary policy, and specifically the role of “forward guidance”. I will take this to mean statements by monetary authorities about future policy. The question “what’s going to happen to interest rates?” is asked of us routinely. (Sometimes it’s phrased directly, sometimes more circuitously, but it always seems to come in one form or another.) And perhaps it’s understandable that people should want to know, particularly in an environment as uncertain as this.

This was the first, and I daresay the last, time that MPC members were likened to an elite sportsman. )[2]  Chart 2: Forward interest rates and economic activity also co-moved closely before the financial crisis, less so afterwards  Six-month rolling averages. Combined IHS Markit/CIPS and CBI distributive trades lagged one month. Six-month change in one-year forward one-year LIBOR rate, spliced onto one-year, one-year OIS rate in 2022. Sources: ONS, IHS Markit/CIPS, CBI, Bloomberg Finance L.P. and Bank calculations. So if financial markets are able to react this way, without any explicit hints from the policy maker, why has there since been more communication from central banks about future policy – and more expectation of it in financial markets? What is the rationale for “forward guidance”? At least in theory there are two distinct types of guidance. The reasons for both, I think, are connected with changes in the economy in recent years. But they are quite distinct and it’s important to understand how. The first – sometimes described in the economics literature (somewhat grandiosely) as “Delphic” guidance – seeks in general to convey what is sometimes referred to as “private information” held by the central bank. This makes it sound more exciting than it really is. More often than not it means making clear to the outside world the policy maker’s view of how the economy might evolve over the future – its forecasts – and to clarify the so-called “reaction function” (how monetary policy might respond to possible future events).
Assuming this pre-crisis trend was a reasonable one 8, this is a cumulative income loss of over one year’s worth of pre-crisis GDP or £ trillion. For advanced economies, the corresponding cumulative loss of income is also close to one year’s worth of pre-crisis GDP or $ trillion. These are simply mind-boggling sums. And the clock, of course, is still ticking. These losses are unlikely ever to be fully recovered. Quite how we value the net present value of this continuing stream of losses depends on how much we discount the income of future generations and how sustainable pre-crisis rates of growth were believed to be. But even on conservative estimates, it seems possible the eventual cumulative losses of income could total multiples of annual pre-crisis GDP. One reason these losses may have endured is because crises have a deep, and irreversible, scarring effect on an economy’s growth potential. 9 That may arise because credit-starved companies are unable to invest or indeed start-up in the first place. Or it may be because financial crises act as a permanent drag on risk-taking and entrepreneurship, as was also evident after the Great Depression of the 1930s. 10 Either way, perhaps it should come as no surprise that productivity has flat-lined since the crisis. Yet it is perhaps along the third dimension – social capital – that the losses arising from the crisis may prove most enduring. Social capital is inextricably linked to trust. And banking is quintessentially a trust business. At root, it involves swapping promises to pay.

The main themes from that exercise were outlined in the BSB’s first Annual Review published earlier this year. 35 Following several episodes of misconduct in wholesale capital markets, the Fair and Effective Markets Review (FEMR) was launched in 2014 to assess their functioning, overseen by the Bank, HM Treasury and the FCA. It reported last year, making a number of recommendations including the establishment of a FICC Markets Standards Board (FMSB). 36 The FMSB came together last year with a remit to provide guidance on appropriate standards of conduct in wholesale markets. Encouragingly, most of the major players in wholesale markets have joined the FMSB. Regulators will use these standards to inform their judgements under the expanded Senior Managers Regime. At an international level, the Financial Stability Board (FSB) agreed in early 2015 a work-plan to reduce misconduct risk, including in the area of key market benchmarks. 37 Following a recommendation in FEMR, work is underway to develop a global code of conduct in the foreign exchange market. Also in 2015, the G30 issued a report on Banking Culture and  34  For further details see http://www.fca.org.uk/consumers/financial-services-products/insurance/paymentprotection-insurance/refunds. 35  See BSB (2016). 36  See FEMR (2015). FICC here refers to Fixed Income, Currency and Commodity markets. 37  FSB (2015). 8  BIS central bankers’ speeches  Conduct. 38 And in the same year, the New City Agenda published its assessment of progress towards improving culture among UK banks. 39 This is good progress.
The fall in equity prices is not expected to have any major effects on growth in China. The Chinese central bank’s decision to devaluate its currency came as a surprise to the market. The motive given for the devaluation was that the yuan had strengthened substantially in recent years. However, another motive may be that the Chinese regime wants to create the conditions for the yuan to eventually become a reserve currency. This is bearing in mind that the guidelines for the daily pricing of the currency were also moved toward a more market-based way of valuing the yuan in connection with the devaluation. However, there is also a possibility that the devaluation is a sign that the Chinese economy is weaker than we previously thought. The fall in the oil price may contribute to lower inflation abroad The oil price has fallen by around 10 dollars a barrel since the beginning of July, see Figure 10. It has thus become lower than we had forecast. Forward pricing also indicates a lower oil price in the coming years than we had expected. International inflation may thus be slightly lower than our earlier assessment. But the lower oil price can also be positive for growth and demand in the oil-importing countries, which could counteract the direct downward effect on inflation.

The first implication, that the central bank has a strong stake in preventing financial instability, has several elements. The central bank needs to be willing to respond to limit financial market bubbles from developing in the first place. This includes not just paying attention to asset price bubbles, but also to related excesses in leverage and in short-term funding markets. As I noted in a speech a few years ago, this is difficult to do in practice.3 After all, bubbles are difficult to identify in real time and the central bank’s policy toolkit to deal with bubbles may be limited. However, this difficulty cannot be an excuse for inaction. Using the bully pulpit, implementing macroprudential measures, or adjusting monetary policy can generate superior results compared to inaction. The central bank also has to ensure that the financial system is sufficiently robust and resilient so that if there are financial market shocks, the banking system can absorb any shocks and continue to perform its credit intermediation function. This has many elements including tough capital and liquidity requirements for banks and strong financial market infrastructures. It also includes taking action to eliminate sources of vulnerabilities whenever they may arise – for example, strengthening the triparty repo system, reducing the vulnerability of money market mutual funds to runs, or forcing derivatives contracts to be standardized and centrally cleared. These actions should be undertaken during “peacetime” rather than when a crisis is already underway.
Intermediaries reported being relatively unaffected by the increase in margin calls in March 2020. Even for those intermediaries that experienced the largest increases in margin outflows relative to liquidity resources, the proportion of their liquidity resources this represented remained relatively small, amidst unprecedented central bank interventions to support liquidity. The picture on clients is more varied and the data less reliable. But there was evidence that some clients faced liquidity needs materially greater than anticipated. And turning high quality assets into cash to meet margin requirements was a problem for some participants. Drawing on the findings in the report, CPMI, IOSCO and the BCBS have consulted on six potential areas for further work. I will group these under three heading: procyclicality; transparency; and preparedness. First, we need to ensure that the necessary pro-cyclicality of margin does not add unnecessarily to a systemic stress. On variation margin, this means tackling the issue on predictability and preparedness identified but also considering ways toward more efficient collection and distribution of variation margin around the system. On initial margin, it means looking at the trade-off between levels of margin in business as usual. This is why we have proposed an in-depth evaluation of the responsiveness of centrally cleared initial margin models to market stresses, with a focus on impacts and implications for CCP resources and the wider financial system.

In my view—and I really cannot say this strongly enough—ensuring that the largest and most systemically important banks do robust capital and liquidity planning, have strong internal controls, do good risk identification and have very healthy amounts of capital (especially common equity) and liquidity resources is fundamental to fostering a stable banking system that can perform its critical financial intermediation role in both calm and stressed economic environments. What I hoped to do today is simply to point out that one of the key objectives of the original SCAP stress program—leaning into the wind during a severe economic downturn— might be getting less emphasis as the time since the financial crisis grows, the economic expansion continues, and the supervisory stress testing regime evolves. Thanks for your attention this morning. I hope that you enjoy the rest of the conference. 1  See, for example, Viral Acharya, Irvind Gujral, Nirupama Kulkarni and Hyun Song Shin. 2012. “Dividends and Bank Capital in the Financial Crisis of 2007 2009.” CEPR Discussion Paper No. 8801. February 2012; Beverly Hirtle. “Bank Holding Company Dividends and Repurchases during the Financial Crisis.” Federal Reserve Bank of New York Staff Report No. 666. March 2014; and David S. Scharfstein and Jeremy C. Stein. 2008. “This Bailout Doesn’t Pay Dividends.” New York Times. October 21, A29. 2 Beverly Hirtle, Til Schuermann and Kevin Stiroh. Macroprudential Supervision of Financial Institutions: Lessons  from the SCAP, Federal Reserve Bank of New York Staff Report no. 409. November 2009. 3 Randal K. Quarles.
The fact that few data on sexual behaviour were available was not a good reason for focusing on demographic variables - the researchers were looking for the key under the lamp-post rather than where it fell. Quantitative models are obviously essential to explain empirical evidence. But the idea of a single comprehensive model, whether of a population or an economy, which can capture all the relevant features to explain all phenomena is an illusion.10 There is no substitute for thinking about the underlying process which is generating the data. Robert May’s article “Uses and Abuses of Mathematics in Biology”, published earlier this year, should be compulsory reading for anyone involved in public policy. In pointing to the dangers of models so complex that intuition is impossible, he writes, “It makes no sense to convey a beguiling sense of ‘reality’ with irrelevant detail, when other equally important factors can only be guessed at. … Remember Einstein’s dictum: ‘models should be as simple as possible, but not more so’” (May, 2004). In many areas, successful public policy depends on a quantitative analysis of risks by experts and researchers. It is important that the general public understand that such assessments are only judgments. To enhance confidence in those judgments experts need to engage in a debate among themselves about what they know and what they do not know.

The real exchange rate of the króna is somewhat below its likely long-term average, although it has risen in the past year. 6  BIS Review 138/2010  As economic recovery gains pace, the outlook for capital account liberalisation improves. Recovery tends to be accompanied by increased inflow of foreign capital in the form of credit or direct investment. Significant inward foreign direct investment could set the stage for removal of the controls. Although suggestions that recovery began late in 2009 or in the first half of 2010 have proven to be a mirage, a number of indicators imply that Iceland has hit bottom or is close to it, and that growth will resume in the latter half of this year. But the pace of the recovery will depend greatly on our success in attracting foreign capital for exportgenerating investment. The main objective of the IMF programme is to build confidence in Iceland’s economy and economic policy. If that confidence existed now, it would be possible to lift the controls today. Considerable discussion has been devoted to the instability of foreign capital that could flee as soon as the controls that hold it in place are reduced or eliminated. Although the magnitude of foreigners’ frozen ISK assets is broadly known, information on non-resident retail owners of ISK assets is largely hidden.
It is encouraging that credit flows are no longer contracting because households’ renewed demand for credit has no doubt supported some of the recent rise in consumer spending. Trends in household debt in the region One key question we’ll address today is how this process is playing out for households in our region. In general, our region has fared well in comparison to the nation as a whole. Following the three phases of the cycle that I noted for the nation, I will consider three questions:   How much debt did our households take on during the run-up?   How much deleveraging has occurred throughout the region during the crisis?   Are we beginning our convalescence – have households started to increase borrowing again, and what signs of stress remain? One reason that households in our region have weathered this credit cycle relatively well is that debt levels are lower relative to income and this debt rose more modestly in the run-up to recession than in the nation as a whole. Using the debt-to-income ratio to help us make meaningful comparisons across different geographies, debt levels are particularly low in upstate New York and New York City. Three key exceptions to this generalization are Long Island, Edison, New Jersey and Puerto Rico, where household debt-to-income ratios have risen to levels above the U.S. average.

The nature of the run-up to the crisis has been well-documented, so let me focus here on the latter two phases: the crisis and convalescence. During the crisis, weakness in the housing market contributed to financial strains as many families found that their mortgages were “underwater,” that is, their homes were now worth less than their mortgage balances. As a result, they had no financial buffer they could tap if their finances came under stress. And, as the economy weakened further, many households faced sharply reduced incomes as family members lost their jobs or had their work hours cut. So, more families found it difficult to pay their credit card bills and other debt obligations on time. As a consequence of these strains, households began the painful process of deleveraging. They started reducing the amount of debt they owed, relative to their income. During the runup to the recession, households were saving only about 2 percent of their income; now they are saving around 6 percent of their incomes. This increase in saving was mostly used to pay down their debts, but it also included adding to their savings accounts and borrowing less. Of course some of the reduction in debt reflects loan charge-offs of bad debts. But work done here with the Consumer Credit Panel shows that some consumers also became more frugal, rebuilding their net wealth by paying down their debts.
Christian Noyer: It was vital to break the adverse feedback loop between bank and sovereign risk Interview with Mr Christian Noyer, Governor of the Bank of France and Chairman of the Board of Directors of the Bank for International Settlements, in Les Échos, 17 September 2012. *  *  *  Do the ECB’s announcement to purchase sovereign debt and the German Constitutional Court’s approval of the European Stability Mechanism mark a turning point in the crisis? These announcements were welcomed by the markets and the outlook now appears much clearer. The European Stability Mechanism is a key factor for strengthening the cohesion of the euro area and demonstrates that the euro is here to stay and irreversible. It will help ailing economies return to competitiveness and growth. The Governing Council’s decision to purchase, subject to appropriate conditions, government debt is reassuring for at least three reasons: purchases are potentially unlimited, which should end speculation about the possible collapse of the euro area; the strict conditionality will oblige countries to pursue their fiscal consolidation efforts; lastly, these purchases fall squarely within the ECB’s mandate as they are conducted in the secondary market and aim to ensure the proper transmission of the policy stance to the real economy. The ECB has played its role. What must governments now do? Euro area Member States need to restore their credibility and they are already making efforts to do so.

They are based on spurious international comparisons since other central banks – such as the Bank of England – do not print their own banknotes, do not (yet) incorporate the banking supervisor and do not perform tasks such as the management of  BIS central bankers’ speeches  3  over indebtedness, which is entrusted to the Banque de France by law. More than 200,000 households debt applications processed every year is no mean feat! We have already made a great effort over the past few years as our staff levels have been cut by nearly 20% in ten years. And we will continue with this effect; but it is based on a detailed analysis of our activities and requires substantial investment in order to increase productivity. Our programme is ambitious but in keeping with the reality of the tasks we perform and respectful of our employees. 4  BIS central bankers’ speeches