samchain/econo-pairs-v1 huggingface dataset:
Although growth remained high in the emerging economies and exceeded the long-term trend in Europe, economic activity in the US slowed considerably in autumn on the back of the credit crunch on the property market. The last few months of 2007 were characterised by the emergence of considerable uncertainties regarding the future path of the global economy, with the latest energy price hikes and, of course, the destabilisation of the financial markets in autumn being the main sources of concern. Switzerland has not remained unscathed amid all this turmoil. Since the summer, we have seen substantial stock market corrections and a return to lower-risk investments, particularly in Swiss francs. However, we experienced these turbulences during a very dynamic phase in our economic cycle. Despite the volatile climate of recent months, the Swiss economy has continued to enjoy sustained growth. For the fourth year in succession, real GDP growth was significantly higher than the longterm average, reaching 3.1%. We owe this gratifying result to the extremely broad-based nature of Swiss economic growth. As already in 2006, the global economy and the performance of the Swiss franc facilitated exports, accounting for a jump of some 10% in this sector. What is more, robust domestic demand also played a role this time round. Significant increases in real salaries and the continued labour market upturn had a positive impact on private consumption, while the robust financial health of the corporate sector coupled with a rosy business outlook helped to stimulate investment.

We now have the same policy commitment to price stability as the rest of the world. That leaves around 40 per cent of the depreciation to account for. Our work at the Riksbank suggests that in the 1970s and ’80s, the major part of the real exchange rate’s weakening can be attributed to deteriorating terms of trade, low GDP and productivity growth compared with the rest of the world and growing external debt. One of the models we have used indicates that about three-quarters of the depreciation stemmed from relatively poorer growth in Sweden and about a quarter to worsening terms of trade. The picture in the 1990s looks different. As far as we can tell at present, in the past decade neither productivity nor GDP growth has been poorer than in the rest of the world (Fig. 1). So in this respect, too, there seems to have been a change for the better. It is partly against this background that the krona’s persistently weak average path in the latter part of the 1990s is surprising. BIS Review 75/2001  3  Fig 1.
For the year 2009, a GDP loss of about 4 percent was recorded for the OECD countries. There is possibly also a permanent depressing effect on medium-term potential output.3 Governments and central banks took unprecedented action globally in response to the perils originating from the financial market turmoil. Euro area governments, for instance, increased their deficits on average by more than 5 percentage points of GDP in 2010. This was a joint consequence of rescue packages for financial institutions, cyclical stimulus packages and operations of automatic stabilizers. In 2010, Ireland recorded a deficit of over 30 percent, resulting from a one-off support for its banking sector. Debt-to-GDP ratios in advanced economies have increased on average by about 25 percentage points since 2007. Central banks around the world expanded their balance sheets, though to different extents and with different asset-liability structures. It is clear that in our democracies, such measures taken by fiscal and monetary authorities can only be an exception. They are not at all repeatable, neither in nature nor in scale. The disasters that we witnessed in the financial system must not repeat themselves. It all leads to one conclusion: Reforms are urgent! The Basel III framework means some progress on the way towards a more sound and resilient financial system and in my view it is at the core of financial regulation. Nonetheless, to complete the G20 Action Plan, further policy actions need to be taken.

In current conditions of uncertainty, investors – reading our rate guidance – tend to anticipate a more extended period of time to the date of a rate hike. By the chained structure of our forward indications of all instruments, this automatic adjustment mechanism extends the horizons for full reinvestments too, and thus reinforces the impact of rate guidance on longer-term interest rates. Moreover, our new series of long-term refinancing operations (TLTRO-III), which started in September 2019 and will end in March 2021, help to ensure favourable bank funding conditions in support of an efficient bank-based transmission of monetary policy in the euro area. The combination of our monetary policy measures continues to prove effective in stabilising the economy and in ensuring very favourable financing conditions. This is evident in the successful pass-through of our policy measures to financing conditions that matter for the real economy. In fact, bank lending rates for both firms and households have continued to decline in the recent months and remain close to historical lows. Loan growth to non-financial corporations, while moderating in tandem with the slowdown in the economy, is still supporting capital creation and the mortgage market. Our recent Bank Lending Survey confirms that credit supply conditions are favourable. 2/3  BIS central bankers' speeches  Overall, the present monetary policy stimulus lends substantial support to growth and inflation developments, buffering to a large degree the negative impulse from global factors.
It also makes changes to the obligations of product manufacturers by imposing a product design process that takes account of the interests and characteristics of the targeted customers. Lastly, extensive work on the delicate subject of the compensation of sales staff and other employees should be completed in the coming months. As regards the latest and not least substantial European developments in the area of business practices, the aim of the drive to standardise rules in the framework of a crosssectoral approach is simplification. This drive should be extended. An obvious case is the Key Information Document of the PRIIPS Regulation. It will allow customers to easily compare two investment products, irrespective of whether they are classified as bank products, insurance products or financial instruments. But I could also cite examples of work in the area of “product governance”, conflicts of interest or compensation, which bring regulations from the three sectors closer into line. I will finish by discussing changes stemming from new technologies. We are all aware that they change business practices by affecting consumption patterns and customer relations. The contractual nature of the banking and insurance industries means that relationships are rich and often long-standing. Such relationships are based on the consent of both parties to the contract and execution on the basis of trust. Today, over and above agreement on the price and on the object, which forms the basis for a sales contract, the possible use and security of customer data is increasingly relevant.

François Villeroy de Galhau: Supervision of business practices Opening speech by Mr François Villeroy de Galhau, Governor of the Bank of France and Chairman of the Autorité de contrôle prudentiel et de resolution (ACPR), at the ACPR conference “Supervision of business practices”, Paris, 20 November 2015. *  *  *  Ladies and gentlemen, I am delighted to welcome you today to this new conference organised by the Autorité de contrôle prudentiel et de résolution and would like to thank you all for coming. This is an opportunity for me to tell you for the first time how important I find this type of event, where the Authority that I chair explains its actions and the principles that guide it. It is also an opportunity for us all to listen to the parties concerned, on a topic that brings us together today – that of the supervision of business practices – on which I would like to put forward three ideas: (I)  First, our supervision of business practices is important for the current mobilisation of the nation. (II)  Second, our supervision of business practices is important for financial stability. (III)  Lastly, our supervision of business practices must increasingly take account of developments in technology and changes in Europe. Our supervision of business practices is important for the current mobilisation of the nation. Many lessons can be learned from the dramatic events of Friday 13 November in Paris and its suburbs, which requires of us a total mobilisation.
14 We can see that they have not been entirely accurate. The forecasts we have produced for the exchange rate of the krona since the exchange rate was allowed to float have often indicated that the krona would strengthen. Typically, however, this strengthening has only materialised in periods preceded by a substantial weakening of the krona exchange rate, as in the periods 2002–2003 and 2006–2007. 12  Rose and Yellen (1989) is a classical study in this field. 13  The effects of a weaker krona on the Swedish economy were also described as an alternative scenario in MPR08:3. 14  The TCW index weighs together the krona exchange rate against other currencies according to the other countries’ share of Sweden’s foreign trade. The Riksbank’s forecasts in the Figure are from the first report (Monetary Policy Report or Inflation Report) of that year, which has usually been published in February. BIS Review 3/2010  5  Figure 2 The Riksbank’s forecasts for the krona exchange rate (TCW index) Index, 18 November 1992=100  Source: The Riksbank. Figure 3 Consensus forecasts for the krona exchange rate (approximate TCW index) Index, 18 November 1992=100  Sources: Consensus Economics and the Riksbank. 6  BIS Review 3/2010  However, the Riksbank has certainly not been alone in expecting that the krona will strengthen. Figure 3 shows the forecasts according to “Consensus forecast” for an approximate TCW index. 15 This can be said to represent the average of the other analysts’ forecasts at the same point in time.

It is this tradeweighted krona rate that the Riksbank tries to analyse and forecast. If one looks at the period with a floating exchange rate (since November 1992), one can draw the conclusion that the nominal and real exchange rates are strongly correlated. This is because exchange rates, which translate prices into a common currency, change quickly, while price levels change slowly. Nominal exchange rates are determined at the trading counters daily, while it takes time to change prices. Figure 4 Nominal and real TCW-weighted exchange rates Index, 18 November 1992=100  Note. Broken lines represent the Riksbank’s forecasts. The real exchange rate has been calculated using Swedish and TCW-weighted CPI. Sources: Statistics Sweden and the Riksbank. How do we compare the impact from the nominal exchange rate on inflation, which I took up earlier, with Figure 4, which shows a strong correlation between the nominal and real exchange rates? According to the earlier example, only around 15 per cent of a nominal exchange rate change “spills over” into domestic inflation. This means that 85 per cent of the nominal exchange rate change does not have any effect on inflation and that the real exchange rate is thus affected by 85 per cent of the change in the nominal exchange rate. There is thus a strong, but not complete, correlation in the short term between the nominal and real exchange rates.
The unfortunate result was that these banks were not as protected from falling housing prices as many had assumed, and this contributed to the substantial decline in stock prices and the need for government support for many of these large financial intermediaries. Myth 4 – Investment banks were not subject to runs, because their liabilities were collateralized There has long been an understanding, and indeed a regulatory presumption, that banks could be subject to “runs,” resulting in a need for both deposit insurance and a heavily regulated environment to reduce that risk. At the same time, it had largely been presumed that investment banks were better protected against such runs. While the balance sheets of investment banks had substantial short-term liabilities, many of them were collateralized. Investment banks would buy longer-term securities but finance them with short-term borrowing (using repurchase agreements). It was assumed that because there was collateral backing up the loans, borrowers were protected and would not run. Financing securities with short-term borrowing allowed investment banks to substantially expand their balance sheets, as shown in Figure 10. However, the lenders in this market  3  Collateralized debt obligations (CDOs) constructed from subprime asset-backed securities (ABS) are perhaps the most potent example of underestimation of risk. Triple-A rated CDOs did more damage to balance sheets than Triple-A rated ABS. 4  Holding to maturity may have moderated some losses, but many did not have that luxury. Investors needing to sell with the threat of downgrades suffered substantial losses, particularly in an illiquid environment.

Luis de Guindos: Europe’s role in the global financial system Keynote speech by Mr Luis de Guindos, Vice-President of the European Central Bank, at the SUERF/Netherlands Bank Conference “Forging a new future between the UK and the EU”, Amsterdam, 8 January 2020. * * * It is my pleasure to deliver the keynote speech at this year’s SUERF/DNB conference. The title of this conference is very apt. Brexit will certainly require a new future to be forged between the United Kingdom and the EU. The United Kingdom’s departure has important implications for the EU financial system, most notably for capital markets. So we need to give serious thought to optimally shaping the future relationship between our financial sectors in the awareness that London, though likely to remain an important global financial centre, will become less integrated with EU markets and firms. We will also need to step up our efforts to further develop the EU’s domestic capacity in capital market activities, so as to avoid a Brexit-induced increase in financial fragmentation, while at the same time ensuring that the United Kingdom and EU Member States do not engage in a race to the bottom on regulation. Taking up the theme of the conference, I would first like to focus on how to forge a new future between the United Kingdom and the EU with regard to some key financial activities. I will then turn to the much-needed drive to strengthen the European financial system by completing the capital markets union and banking union.
In a speech on economic prospects in July 1957, the former Chancellor of the Exchequer, who had recently become Prime Minister after the resignation of his predecessor following an unsuccessful military excursion in the Middle East, said: “Indeed, let us be frank about it: most of our people have never had it so good. Go around the country, go to the industrial towns, go to the farms, and you will see a state of prosperity such as we have never had in my lifetime – nor indeed ever in the history of this country. What is beginning to worry some of us is, is it too good to be true? – or perhaps I should say, is it too good to last? … Our constant concern today is, can prices be steadied while at the same time we maintain full employment in an expanding economy? Can we control inflation? This is the 3 problem of our time”. Some of you may think that it is the problem of our time too. CPI inflation has now risen above 3%, the highest rate since the MPC was set up. Although I believe we are better equipped to maintain stability now than fifty years ago, largely because we have a monetary framework based on an inflation target and clearly defined responsibilities for the Bank of England, we should perhaps look in more detail at how the MPC has worked before coming to a final judgement on the likelihood of continued success.

The geographical proximity and cultural similarities have been reinforced by the diverse strengths that exists in the region. These factors have been important in enhancing the integration process. As this greater regional economic and financial integration is advanced, it will serve as a powerful catalyst for the future expansion of intra-regional trade and investment, creating a self-sustaining and mutually reinforcing economic growth in the New Nusantara region. Ladies and gentlemen: It is my pleasure today to speak on the potential role of an integrated economic and financial platform within the Nusantara region, a region of rapid economic growth in which almost 300 million Muslims resides. My remarks will focus on the potential generated by a collaborative platform and the significance of building linkages between the Nusantara region with other parts of the world. The region's current economic progress, prosperity and financial stability has now accorded us a new strategic window of opportunity to develop new value propositions to unleash the full potential accorded by the accelerating economic and financial integration process. There are already encouraging formal and informal inter linkages between our respective financial markets as well as a higher level of engagement between the respective corporate communities, the market participants and the authorities. A collaborative platform that is based on the diverse comparative advantages of the Nusantara economies can benefit from the complementarities between our respective economies. Essentially, these opportunities will increase the potential to expand markets, increase products lines and deepen the research and development capabilities.
More than that, developments during the year have helped in several ways to strengthen the prospect of our being able to sustain this improved economic performance going forward. A year ago, output was growing at over 3%, which is arguably faster than we can hope to sustain for any length of time without running risks of generating inflationary pressures. We needed therefore to see some degree of moderation in the pace of overall demand, to ensure that the economy could continue to grow without generating strains. For preference, the moderation needed to come principally in the area of consumption spending, which had been the major factor driving growth through last year, as households enjoyed the benefits of high employment and rising incomes. Sustainable growth in household spending is, of course, highly desirable and very much the mark of a healthy and growing economy; but it needed to be balanced against the equally desirable planned increases in government spending on public services, and the higher levels planned for public investment on improved infrastructure, both made possible by the government's strong fiscal position. The need was to ensure that all these sources of demand did not over-stretch the economy's overall productive capacity. The evidence that consumption spending may indeed have moderated somewhat towards the end of the year, and in parallel that there has been a resumption of growth in business investment, represents an improvement in the balance of demand in the economy which in turn improves the prospect of our being able to sustain growth going forward.

First, we need to recognise that we are talking of slowdown in the US from what have been extremely buoyant rates of growth, maintained for several years past, as the US economy has reaped the benefits of the application of information technology and the rise in productivity growth that had engendered - the new economy. There is plenty of evidence that growth in the US needed to slow somewhat, to alleviate imbalances in the economy. So part of what is happening should be helpful in providing a sounder base for sustainable recovery. 2  BIS Review 22/2001  Secondly, the new economy is, in the US, a reality: there plainly has been a continuing process of improvements in efficiency, achieved by harnessing the benefits of IT, which have raised the growth capacity of the economy. It seems unlikely that those gains will vanish into the night and, if they remain in place, they should provide a basis for a recovery in US growth when the present adjustment has run its course. That, of course, says nothing about how long the adjustment may take. But a third important feature is that the Federal Reserve has demonstrated a willingness to act rapidly and vigorously in easing monetary conditions in response to the downturn. Monetary policy cannot remove economic cycles. But active and intelligent management of interest rates can help substantially to alleviate the severity of the adjustment. And a fourth factor suggests that the markets share this view.
Increases in electricity and oil prices are examples of this type of supply shock. It is therefore important to separate the effects of the energy price rises from the effects of other driving forces behind inflation. This is also completely in line with the clarification of the inflation target published by the Riksbank in 1999. The Riksbank's assessment is that energy prices one to two years ahead will fall back to roughly the same levels as forecast before the increases. However, these forecasts include a slight trend increase in electricity prices. Uncertainty in connection with the Iraq conflict Assessing more exactly how much is a temporary rise in inflation and how much depends on more lasting tendencies is a delicate task. The assessment of economic activity, both here in Sweden and abroad, plays an important role here. The uncertainty currently prevailing in the global economy makes it more difficult than usual to interpret various economic indicators and to predict future developments. When weak figures are received from various sources, it is difficult to know whether they are the result of a slowdown in the economic recovery due to fundamental reasons, such as households wanting to increase their saving to compensate for the large stock market falls, or whether they are the result of an inability to act while waiting for the solution of the Iraq crisis. The assessments of the economic situation and even more the oil prices are largely due to the assumptions made with regard to developments in the geopolitical situation.

Let me emphasise, before I go into this, what is actually obvious; a war entails much more than just economic consequences of the type the Riksbank has reason to observe in its Inflation Report - first and foremost considerable human suffering. Let me also say that in this field - i.e. geopolitics - we are of course amateurs, although we have tried to use our international contacts when putting together our forecast. The Riksbank's main scenario assumes a solution will be reached in the Iraq conflict that does not give any reason to significantly reconsider the picture we have of a gradual recovery in economic activity. The surveys we have made indicate that the macroeconomic consequences of a brief war will not be so different from a less dramatic development. In this sense one can say that our main scenario is consistent with both a peaceful solution and a brief war. The Inflation Report describes in greater detail how we assess the effects of a worse development, which is, of course, a possibility. A weaker recovery An increasing number of indicators over the past few months have given the impression that the international economic recovery will be more protracted than anticipated. The main difference from the assessment we made in the December report, is the deterioration in prospects for the euro area. All in all, our assessment is that international growth will be slightly lower this year than we believed when making our forecasts in December.