samchain/econo-pairs-v1 huggingface dataset:
On one hand, banks have been able to gain access to the ECB’s long-term financing under most advantageous conditions thanks to the purpose-built programmes introduced by the ECB. On the other, the public guarantees on loans to firms and the self-employed approved by the Government have contributed to lessening financial institutions’ potential reluctance to take new risks on board in such an uncertain setting. Analyses by the Banco de España based on the evidence available suggest that these guarantee facilities are, in particular, paving the way for the financing both of firms facing greater difficulty gaining access to credit and of small enterprises, marked by having been affected by the impact of the health crisis and for having a greater risk profile. Thanks to the guarantees, SMEs have been able to finance themselves in recent months under more favourable conditions in terms of the interest rate, the amount of credit and, above all, the maturity of the operation, which on average has stood at close to five years. The role of lending to companies in the current crisis is thus proving to be of great importance. It is contributing to reducing the risk of bankruptcy for firms that are viable but which face temporary liquidity problems, with the adverse consequences this would have in terms of job destruction and damage to the productive system, and, in sum, to the robustness and momentum of the economic recovery.

With lockdown-easing having concluded, some services segments are still affected by restrictions on operating normally, and the proportion of workers affected by furlough arrangements continues to be a majority. This is the case of the accommodation, air transport and travel agency segments where, at end-June, the reach of ERTEs was still between 70.4% and 53.7%. The very high proportion of workers protected by an ERTE in these specific services segments is in striking contrast to the 8  percentages in manufacturing industry and construction (8.9% and 4.2%, respectively). That highlights the deeply asymmetric effects of this crisis on different productive activities. In absolute terms, at the end of Q2 almost half the workers on ERTEs were in the retail and hospitality sectors. In response to this situation and to the high uncertainty over the recovery, the ERTE support measures - initially programmed to end-June - have been extended, albeit with amendments, to the end of Q3. The new conditions include the possibility of increasing Social Security exemptions in the event of a fresh outbreak of the virus, which is an explicit acknowledgement of the uncertainty surrounding the recovery. These new conditions also attempt to square the objective to continue providing support to firms and workers temporarily affected by restrictions on operating normally with the aim of providing incentives for a progressive reallocation of employment towards activities with a better future outlook.
That is, they cannot reduce the volatility of both inflation and output growth. An example of that “stability possibility frontier” is shown in chart 4. Points B and C represent alternative choices by central banks with different reaction functions, corresponding to the different weights they attach to the costs of volatility in inflation and output. Central bank B tends to bring inflation back to target more slowly than central bank C. So the real surprise is that, over the past decade, we have moved not along the frontier, say from point B to point C, but instead to A. The frontier itself has moved significantly inwards.6 The conventional wisdom has been overturned. Was that the result of luck: an absence of shocks and favourable structural changes in the economy? Or has the new monetary framework itself played a role? How might the MPC have been lucky over its first decade? First, there might have been unusually few significant economic shocks to which the Committee had to respond. Output and inflation would have been more stable even without a change in the monetary framework. Second, when shocks did occur the economy might itself have responded in a self-regulating manner. On the first, it is difficult to argue that there have been no major economic shocks since 1997. At the outset, the Committee had to confront the consequences of a 25% rise in the effective exchange rate and the resulting fall in import prices.

Capital incomes are the compensation paid to owners of, for example, machinery and inventories, commercial real estate, residential property and land. As a large part of this capital is owned by firms, it follows that an expected increase in corporate profits must lead to higher growth of either total GDP or of the GDP share that consists of capital income. Experience shows, however, that in the long term the profit share is fairly constant at around one-third of GDP; the remainder, approximately two-thirds, consists of wages. The stable long-term relationship between these shares accordingly means that the trend rate of increase in corporate profits roughly matches GDP growth. Historically, therefore, the increase in corporate profits should lie between 2 and 3 per cent. The historical statistics on the profits of Swedish listed companies are rather inadequate but a look at the American companies in the S&P 500 index shows that their long-term profit growth does not quite come up to the trend for GDP (Diagram 3). There have been periods, however, when profit growth was above this trend; the profit share was then probably higher in the total economy but sooner or later it fell back to the long-term trend.
We can test how the system is likely to behave under stress. But we have until recently been in a very muted phase of the credit cycle. We are now, I hope, entering a more normal phase of the cycle, and approaching the point at which, from a macroprudential stand point, the Financial Policy Committee (FPC) will have to spend less of its time on the design of the regulatory framework and a lot more of its time on whether and when it needs to address the build-up of cyclical risk in the financial system. And, as we learn how the financial system behaves in first the more normal and then the more challenging parts of the credit cycle, we will also learn more about how the new regulatory framework functions as a whole. There will, as I and others have said, be areas where we find the reforms do not work as intended and that it is necessary to adjust them. It would be surprising if this were not the case. In response to the biggest global financial crisis since the 1930s the international regulatory community has agreed and is carrying through the biggest, most complex and most comprehensive programme ever of interlocking regulatory reform. There will be elements that need to be adjusted – indeed this process has already started with the reforms to securitisation now underway in the EU motivated in no small part by the joint work of the Bank of England and the European Central Bank.

More specifically, can greater foreign exchange flexibility in certain areas, and particularly the emerging economies, help to restore some balance? In Europe and Japan, we expect an increase in potential output following structural reforms on financial, product and labour markets. Beyond the mechanical effect of a reduction in the growth differential, what would be the impact on capital flows? In the United States, bearing in mind the savings behaviour of private agents, what lever should be used in addition to the tightening of the policy mix to substantially improve the savings-investment balance? Lastly, could international institutions play a bigger role in the management of global imbalances? 2  BIS Review 80/2005  In this third session, Otmar Issing, former Professor at the University of Würzburg and Member of the Executive Board of the European Central Bank, will explore the avenues for finding a way out of the current global imbalances notably by presenting the analyses developed by his institution in the areas of fiscal and foreign exchange policy and structural reform. The last session will focus on the consequences of these developments for international financial stability against the backdrop of the liberalisation, the increase in and redirection of capital flows. The emerging economies have on several occasions borne the brunt of erratic capital flows. The Asian crisis of 1997 thus brought to light the risks associated with the accelerated liberalisation of short-term capital flows, particularly where prudential supervision structures were inadequate. What is the appropriate global financial integration policy for an emerging economy?
And if the merchant be a regular customer, a banker does not like to refuse, because if he does he will be said, or may be said, to be in want of money, and so may attract the panic to himself.” This sentiment is described more prosaically in Tables 3 and 4. They show that the risk premia demanded by investors to lend to all large banks rose very sharply during the crisis. For most banks the spreads on their senior unsecured debt had more than trebled in October 2008 relative to their levels at the start of 2007. Similarly, credit default swap premia – the cost of insuring a bank’s debt – shot up. All banks, irrespective of the precise nature of their business and balance sheet, were tarred with the same brush. Moreover spreads and CDS premia remain elevated today – almost universally, large UK and US banks face much higher borrowing charges compared to risk-free rates, and are seen as riskier entities, than prior to the crisis. The size, concentration and riskiness of banks have increased in an extraordinary fashion and would be unrecognisable to Bagehot. Higher reported rates of return on equity were superficial hallmarks of success. These higher rates of return were required by, and a consequence of, the change in the pattern of banks’ funding with increased leverage and more short-term funding. They did not represent a significant improvement in the overall rate of return on assets.

The analysis of the Banco de España suggests that the higher possibilities for firms, in the presence of adverse shocks, to adjust wages and, in particular, hours worked, which were introduced through the 2012 labour market reform, led to a significant slowdown in job destruction flows, despite the adverse economic situation in 2012 and 2013. Apparently, however, the reform has not been able to change either the structure of the collective bargaining system or the acute segmentation of the working population. These two features of the Spanish labour market have been at the core of the high volatility of employment and the high level of unemployment and, therefore, should be at the core of the reform agenda in this area. Raising medium-term growth prospects The third session will be devoted to the general question of how to improve medium-term growth prospects. Spain’s potential output growth is estimated to be somewhat below 1.5% over the following decade, a level much lower than that of 3% before the crisis. Among the most important structural factors limiting Spanish growth prospects are ageing of the population, a lower contribution of the participation rate now that many women have already been incorporated into the labour force, and a lower contribution of the stock of capital following the high growth recorded in the previous upturn. These factors are common to most developed countries. Hence, the growth of the Spanish economy will essentially rely on its capacity to raise low productivity growth.
There is no simple link between one measure of resource utilisation and one measure of inflation. Resource utilisation can instead be measured in several ways, each of which has its strengths and weaknesses. Inflation can also be measured in a number of ways and we regularly utilise a large number of measures  13  For a more detailed discussion see Adolfson, M. and Söderström, U. (2003) “How is the economy affected by the inflation target?” Sveriges Riksbank Economic Review 1/2003. 14  The HICP is the EU-harmonised consumer price index and largely corresponds to the CPIF, but is not affected by weighting changes at the end of each year. BIS Review 130/2010  7  of underlying inflation. In this multi-faceted world, we make the best assessments we can of the direction of monetary policy. At the latest monetary policy meeting on 1 September, we decided to raise the repo rate by 0.25 percentage points to 0.75 per cent, and our assessment was that the repo rate will gradually be increased to more normal levels as resource utilisation increases. The repo rate will nevertheless be abnormally low for some time to come in order to support the recovery in the economy. I supported the forecast for the repo rate made in the latest Monetary Policy Update – a forecast that I believe is well in line with the picture of a stable economic upturn in Sweden. (Figure 14. Repo rate).

In fact, most of our non-standard measures have focused on providing adequate liquidity to financial institutions and did not require changes to our operational framework. The adjustments were merely on the parameters of the existing framework. Yet, the provision of liquidity by central banks needs to be linked to a clear assessment of solvency of the counterparties. Only by being able to distinguish solvent from insolvent financial institutions can central banks continue to fulfil their mandate of being lenders of last resort to the financial system. Detailed information on the health of financial institutions and the capacity of the central bank to resolve insolvent banks would ensure that liquidity provision is kept to the circle of solvent banks. Conclusion Let me conclude. During the financial crisis central banks assumed an active role as crisis managers. The ensuing episodes from the subprime crisis with the collapse of Lehman Brothers to the debt crisis has left the ECB as one of the few actors in guaranteeing stability over the past five years. One may argue that central banks are in an extremely difficult position, that they may suffer from the outcome of the recent crisis and that “paradise is lost”. 11 If paradise is lost, it may however be the right time to take on a new and a pro-active role in “the real world” or in the “new normal”. We will not turn the clock backwards. 9  The contribution by Kyotaki and Moore on credit cycles in 1997 served only recently to numerous macroeconomic extensions.
Scepticism towards far-reaching parallels between theory and practice So how do the monetary policymakers view the relationship between monetary policy theories and the practical implementation of monetary policy? We can gain one indication from a survey carried out a while back. In this, a questionnaire was sent to all of those who are or have been members of the Executive Board of the Riksbank since it was first created in 1999.7 The questions concerned, for instance, how the members view different hypotheses within the research into monetary policy decision-making by a committee. As far as I know, this is the only such survey carried out on a monetary policy committee. An equivalent study is now under way in Norway. Some of the questions concern the link between the way monetary policy is often described in academic research and how monetary policymakers view it with the eyes of a practitioner. For instance, the following question was included: “Would you consider – using your own judgement or, for instance, the Riksbank’s analysis resources – stating in terms of a figure how much importance you would normally place on stabilising resource utilisation in the economy in relation to stabilising inflation (that is, stating your λ)?” A total of nine persons out of the twelve who responded to the survey replied that they would not consider this. These members were given a number of alternatives to select as the reason for their response.

This could mean that the central bank chooses a repo rate path that, while it does not give the lowest squared deviations over the three-year forecast period, is nevertheless judged preferable from a longer-term perspective. For instance, the bank may hold the policy rate higher to try to prevent a credit boom that is feared would cause problems – with large squared deviations – beyond the forecast horizon. A closely-related reason is that the central bank under certain circumstances gives consideration to specific risks when setting interest rates. This is something I personally find to be one of the most important factors missing in the simple analytical framework. This could also be expressed as the central bank holding the policy rate at a higher level to reduce the risk – within or beyond the forecast horizon – that, for instance, a credit boom would continue too long and cause problems. The central bank might also wish to hold the policy rate at a higher level to reduce the risk of inflation expectations rising too high, which could also be problematic. The higher policy rate could give larger deviations during the forecast period, but may nevertheless be preferable as it reduces the risk of a really poor outcome. Framework more difficult to apply with an Executive Board Another circumstance that I perceive as complicating matters with regard to putting the theoretical approach into practice is the fact that there are six of us making the monetary policy decisions.
The sub-region came into the new millennium with a combined gross domestic product (GDP) of $ 80 billion, representing about 10 percent of the GDP of Spain and against a backdrop of high unemployment, it is not surprising that income per capita averages 386 US dollars for our sub-region one of the lowest in the world. In addition, virtually all the countries are burdened by a huge debt overhang. Indeed, only two of the 15 countries of ECOWAS are not classified among the highly indebted poor countries (HIPC). Ladies and Gentlemen, I do not intend to spoil your day with depressing statistics about the economic performance of the sub-region as this would be tantamount to showing you only one side of the coin. The more pleasant face of this coin shows a sub-region parading some of the world’s leading exporters of crude oil, diamonds and gold, as well as abundant maritime resources. Many of our countries also perform well in the global market for other commodities, including cocoa, cotton and groundnuts. However, when the abundant resource-endowment of the sub-region is set against its pandemic poverty, we see a development paradox that challenges scholars and policy makers alike. Several reasons have been advanced for this state of affairs. They include inappropriate macroeconomic policies, weak institutions, weak executive capacity, weak legal institutions, and severe exogenous and endogenous factors. Time will not permit me to dwell on the relative contribution of each of these factors to the overall poor economic performance.

For instance, the volume of cocoa exports more than doubled from 1,178 metric tons in 2002 to 2,752 metric tons in 2003, while diamond exports as valued by the Government Gold and Diamond Office (GGDO) increased by 155 thousand carats or by over 44 per cent in 2003. Not surprisingly, the problems associated with fiscal management in a post-conflict environment have exerted enormous pressures on government finances. In an effort to strengthen its revenue base, government has established the National Revenue Authority to unify the Income Tax and Customs and Excise departments into a single unit. As a result, there was a significant increase of 20.52 percent in domestic revenue collection in 2003. Nevertheless, the fiscal out-turn, excluding grants, resulted in an overall deficit of 16.7 percent of GDP. This represents a 3 percentage point reduction over the level recorded in the preceding year. As a result of the high credit expansion to both Government and the Private Sector, there was a large injection of liquidity into the economy as broad money growth accelerated to 21.9 percent against the planned target of 14 percent. Consequently, inflation reared its ugly face in 2003, crossing the doubledigit threshold for the first time in five years. The case for a legislature/executive partnership Distinguished Ladies and Gentlemen, I am informed that this is the third in the series of special Forums for Legislators and senior officials of the executive arm of government organized by WAIFEM.
Alternatively, more direct supervisory requirements may be necessary for addressing the improvement of information systems or the separability and preservation of critical payment systems. But such measures have costs and I would argue increase the relative benefit of efforts to identify the no doubt very difficult changes necessary in both the private and the public sectors to reduce organizational complexity in financial firms. I note that the CBRG report not only has recommendations largely addressing the four impediments to recovery I described, but also a recommendation to simplify financial firm organizational structures. A final benefit of recovery planning is that it is a prod to concrete action in the near term, when the institution is healthy and provides a ready-made menu of options when the firm is distressed. Moreover, the impediments to recovery are also impediments to resolution. If the recovery plan does not succeed in averting failure, but the firm has acted on the plan, it will enter resolution with better information systems, a reduced risk profile and perhaps fewer intragroup exposures than it otherwise would have. Resolution planning As I mentioned at the outset, the financial crisis validated for many concerns about the adequacy of measures to resolve large financial firms without high costs and destructive externalities. The Lehman bankruptcy reminds us that every financial institution is resolvable, but at a cost.

Adnan Zaylani Mohamad Zahid: Launch of the World Bank's Islamic Trade Finance Report Opening remarks by Mr Adnan Zaylani Mohamad Zahid, Assistant Governor of the Central Bank of Malaysia (Bank Negara Malaysia), at the Launch of the World Bank's Islamic Trade Finance Report, 23 August 2021. * * * Thank you to the World Bank for inviting me today. I am pleased to be part of this event to launch the World Bank’s Islamic Trade Finance Report. The publication of this special report will provide greater insights into the substantial role that Islamic trade finance can play to support trade, foster growth, and accelerate post-pandemic recovery. I therefore, wish to congratulate the World Bank for this timely contribution towards advancing Islamic finance. It was recently reported by the World Trade Organization (W TO) that global trade in goods, which has been at record highs, could be near its peak. Some indicators point to a slowing with the outlook clouded by downside risks. The biggest threat being the pandemic which could undermine the recovery. Global trade, at least in goods, has been quite robust and resistant to the economic adversity that we see in general across many sectors and economies. Indeed, W TO still expects the volume of merchandise trade to hit 8% growth in 2021 after the 5.3% drop last year while the International Monetary Fund estimates expansion of 9.7 percent in 2021. As a trading country, Malaysia has certainly benefited from this despite the pandemic-related challenges to domestic activity.