samchain/econo-pairs-v1 huggingface dataset:
Imbalance within the economy has in fact been a persistent pre-occupation for us on the MPC. We necessarily, of course, take account of the exchange rate in trying to predict the future course of the economy. Its strength against the euro has been a factor which has dampened both external demand and the rate of inflation, so that interest rates have certainly been lower than they would have been if the exchange rate had been weaker. It is nevertheless true that, in common with most other analysts, we have not fully anticipated the persistence of euro weakness. We don't of course have a crystal ball. But even if we had, it is important to recognise that the link between relative interest rates and exchange rates is much more complicated - and indeed more unpredictable - than is often suggested. Our own exchange rate against the euro today, for example, is actually somewhat stronger than it was before our reductions in interest rates this year; and the dollar, too, is substantially stronger against the euro than it was before the much larger cuts in US interest rates. So, in setting interest rates, we can - and do - make allowance in our projections for what has happened, and, on a best guess, for what is likely to happen, to the exchange rate, and that may cause the exchange rate to soften or it may cause domestic demand growth to strengthen, thereby offsetting the exchange rate's dampening effect on the economy.

Given our starting point, with inflation somewhat below target and expected to remain so for a while, we are relatively well placed to weather the storm if it begins to blow more strongly. BIS Review 33/2001  3
3  The full implementation of this phase will require a political agreement that is up to the scale of the challenge we face and that will foreseeably run for several legislatures. The rest of my address today is structured in three major sections. In the first, I shall provide some details on the scale of the economic shock we are undergoing, including its effect on financial stability. Next, I shall review the role the different economic policies are playing in this shutdown phase of our economy. Finally, I will offer some thoughts on the function that, in my opinion, economic policies should perform once we are over the worst of the crisis. 4  Short-term developments and reference macroeconomic scenarios  Globally, the expansion of the pandemic and the necessary containment measures have sharply disrupted the world economy. The evidence coming to light in recent months reveals a marked slump in activity and employment, acutely so in the services sectors and in those countries which, affected by a more severe outbreak of the epidemic, have pursued more stringent containment measures. In China, the first economy to be hit by the illness, the first quarter of the year saw a fall-off in GDP close to 10% quarter-on-quarter. In the United States, the decline was smaller, around 1.2% quarter-on-quarter. Admittedly, though, the spread of the disease was belated.

The measures approved include using the remaining funds from the EU budget and new financial aid to cover the expenses arising from the short-term rise in unemployment. Financial support is also provided in the form of credit lines to businesses from the European Investment Bank, and to general government through the European Stability Mechanism. True, these are valid measures for alleviating the crisis in the short term. But they cannot make up for the main deficiency: the absence of a framework for sharing fiscal efforts, aside from the indirect role that can be played by the ECB's asset purchase programmes in this respect. Such a framework would enable all agents - public and private alike - in the euro area to fund themselves in comparable conditions between jurisdictions and at low interest rates. This need could be covered through a recovery fund that harnesses the common capacity for mobilising future resources in the present, which would far exceed the individual capacity of each country. In the short term, this instrument should be geared towards funding the public expenditure triggered directly by the pandemic, while in the medium term, it should focus on covering possible needs for restructuring the productive system. The crisis has shown that, in the long term, a bigger EU budget will be key to completing the monetary union and would enable the bloc to deploy sufficient firepower to react to future crises.
Jon Cunliffe: Pay and productivity – the next phase Speech by Sir Jon Cunliffe, Deputy Governor for Financial Stability of the Bank of England, at the Automative Fellowship International dinner, Luton, 22 June 2015. *  *  *  Between 2000 and 2007, the average worker in the UK automotive manufacturing industry produced 7.7 vehicles a year. Over the past seven years he/she averaged 9.8 vehicles a year. Productivity – output per worker – in car manufacturing has increased by 30% since the onset of the great financial crisis. Britain has become the fourth-biggest vehicle maker in the EU and is more efficient than bigger producers such as Germany and France. It has not all been plain sailing. In the recession, productivity in the car industry fell as firms cut back production and held on to workers. But productivity in the industry recovered quickly. If productivity in the UK economy as a whole had grown in the same way as in the car industry, and employment generally had grown as it did, the economy would now be 30% or £ trillion larger than it is today. Annual GDP per person would be about £ higher than it is. Unfortunately productivity in the UK has not followed the lead of the car industry. Indeed, the opposite is true. In 2014 labour productivity in the UK was actually slightly lower than its 2007 level. In the seven years between 2000 and 2007 labour productivity grew at an average annual rate of about 2% a year.

But the evidence of the past six months is that despite very low inflation, peoples’ expectations about inflation have so far remained pretty anchored. The ratio of household debt to income is not rising. We are certainly seeing no evidence of debt-deflation or of deflationary spirals. But there are other risks as well. Productivity growth might not pick up. It has, after all, been a cause of serial disappointments over the past seven years. And if productivity does not pick up pay growth might not be sustained. Were that to happen, the increases in peoples’ real incomes that we are forecasting to support consumption and growth will not transpire. BIS central bankers’ speeches  3  Demand will be weaker. Lower productivity would mean less supply capacity in the economy. But there would be less demand as well because of weaker pay. In such a scenario, the prospects for inflation might therefore not be very different to our forecast. But the impact would certainly be felt through weaker economic growth. It is however also possible that productivity does not pick up but pay continues to grow. There is some room for pay to grow before productivity picks up and as any remaining spare capacity in the labour market is used up. In fact, we need to use that to boost unit labour costs and push inflation back to target.
According to my experience, it is important to listen to the AMC rather than to the bank if the purpose is to get the restructuring done. If the management and board of the AMC can make reasonable profits by selling its assets, which indeed is the purpose, this is what they will do. However, if they have acquired the assets at too high prices, every sale will show a loss and they may even have to approach the owners to get more capital. The owners will not like this, whether the company is owned by the bank which delivered the assets or some external financial investors. Hence the board will avoid showing losses and consequently little restructuring will be done. Thus transferring assets at market prices is essential if the restructuring process is to work. The trouble is that by doing this you may be forced to write down the assets in the books of the bank, since they have not been valued correctly. This in turn will uncover the hole in the balance sheet and may require a capital injection. And putting more capital into the bank may not be feasible at the time, for political or for other reasons. At this point, you can always start a discussion of what market prices really are. This happened in Sweden and it has happened elsewhere. But a hole in the balance sheet is always a hole, whether you decide to see it or not.

When the Swedish currency depreciated, the borrowers could not repay the higher loan values because their revenue stream was in local currency. The banks believed themselves to be hedged against the foreign exchange risk since they were funded in the currency of the loans given, but they failed to see the corresponding increased credit risk. Other risks were less prominent in the Swedish crisis but, in my opinion, will be of increasing importance to banks all over the world. Among those are operational risks. Several recent financial debacles, such as the Baring crisis, were due to operational risk. Even though the Y2K problem was successfully managed, the huge computer systems of banks could cause large losses if technical or other failures occur. Another risk, which in my mind will become increasingly important, may be called “strategic risk”. The financial market in most countries is highly competitive. In order to survive and prosper, banks must take bold decisions on new activities, new establishments, mergers, technological investments and so on. Decisions like these have to be taken, but should they go wrong, banks may suffer large losses and may even go bankrupt. To handle these and other risks, internal controls and internal audit systems are becoming increasingly important. The huge mass of information in modern banking makes it impossible for supervisors to monitor individual transactions.
After the global crisis in the 1930s, the path that was chosen up to around the 1970s (its duration varied from country to country) was regulation. Credit and exchange controls were reintroduced. In Sweden, the credit system had been liberalised in the middle of the 19th century but after the 1930s it was regulated once more. The risk of serious financial crises was countered by controlling the domestic credit supply in detail and more or less prohibiting cross-border capital movements that were not directly connected with trade in goods and services. But these controls also had the effect of hampering the financial system’s development. If the costs of this period of regulation could be identified and estimated, we would probably find that they were considerable. What this amounts to is that high capital requirements for banks are costly, not just for the banks but for the entire economy, and the same applies to controls on credit and foreign exchange. As this was recognised by more and more countries, national policies in this field were realigned in the course of the 1970s and 1980s. Controls were abolished and domestic capital markets were opened up for cross-border capital flows. But in many instances the financial system was unprepared for a freer environment. The era of regulation had lulled many banks into a false sense of security. Moreover, supervision concentrated on the wrong issues and was by no means appropriate. Neither did economic policy observe the discipline that a deregulated financial system requires.

It must be borne in mind that models are no more than a highly simplified and limited image of the real world. While their simplicity does make them very useful in the work of identifying risks, it is also perhaps their chief disadvantage. Models fail to catch a great deal of what is happening in a dynamic and complex environment. Events in the autumn of 1998 and the problems at that time in connection with the American hedge fund LTCM are a telling example of the limitations of risk models, or perhaps rather of errors in the ways they are used. Firstly, there was the evident difficulty in separating the management of market risks from credit risks. As a result of major shifts in market prices, the credit risks, which had seemed to be negligible initially, suddenly became considerable. Loans are often provided against collateral in the form of securities; the securities are not pledged for their full value, which leaves a margin for unforeseen events. This buffer, however, is often relatively small. Additional collateral, it is said, can always be called for if market prices make this necessary. Alternatively, the existing collateral can be realised. There has been a tendency to disregard both the potential credit risk in arrangements of this type and the possible refinancing and liquidity risks. What happened with LTCM in the autumn of 1998 showed that market value can deteriorate so rapidly that there is not enough time for calling in and receiving additional collateral.
It is not easy to quantify, but it is noteworthy that the number of sovereign defaults has declined quite sharply during the 1990s. If sovereign risk is mis-priced by private capital markets, this sows the seeds of future crises. The increased provision of official finance would proceed hand-in-hand with an increased incidence of crises. Second, to be effective, a lender of last resort must have the ability to extend sufficient resources that the market has no doubt whatsoever about the ability to provide whatever it takes to deal with the immediate crisis. The IMF is not in that position. There is no political commitment to provide the IMF with unlimited funds. As the finance ministers and central bank governors representing all IMF member countries said in their communiqué of the IMFC last September in Prague: "The Committee notes that Fund resources are limited and that extraordinary access should be exceptional …". In practice, however, exceptional access has often been more the norm in recent years. Normal access is typically defined as 300% of IMF quota. During the Asian crisis, Korea's programme was almost 2000% of quota and Thailand's over 500%. More recently, Turkey's programme was over 1500% of quota and Argentina's 500%. If creditors and debtors continue to believe that exceptional access is readily available, then international credit will be over-extended and the incidence of crisis will increase.

Recently, the focus has moved partly away from pure studies of the effects of the income tax system to the combined effects on the labour supply of taxes and various benefit and social insurance systems. The focus has often been on people that work to a smaller extent, that are on sick leave or that are outside the labour force. We know from economic research that different types of compensation and benefit affect the individual’s reservation wage, that is to say, the wage level that primarily influences the individual’s decision to participate in the work force. The reservation wage varies from person to person and if the wage level offered on the market is lower than the reservation wage, the person chooses not to work. One can say that the individual values his or her time more highly than the market does. The relationship between the wages for work offered on the market and the individual reservation wage is thus a decisive factor in the decision on whether or not to work. It is easy to understand that the reservation wage will be affected by taxes, compensation levels in the unemployment and social insurance systems, rules for early retirement, etc.
Christine Lagarde, Managing Director of the International Monetary Fund, and Stanley Fischer, Vice Chairman of the Board of Governors of the Federal Reserve System, headlined a contingent of over 20 public sector authorities from around the globe. They were joined by the CEOs, senior executives, and board  9  Letter of Martin P. Dunn to the Office of Chief Counsel at the U.S. Securities and Exchange Commission’s Division of Corporation Finance, January 17, 2014. 10  Federal Advisory Council and Board of Governors, Record of Meeting, May 8, 2015. 11  See Supervision of Behavior and Culture: Foundations, Practice & Future Developments (Mirea Raaijmakers, ed. 2015). 12  U.S. Attorneys’ Manual, § 9–28.500. 13  See Memorandum of Sally Quillian Yates, Deputy Attorney General, regarding Individual Accountability for Wrongdoing, September 9, 2015. 14  See U.S. v. Allen et al., 14-cr-00272, Dkt. No. 147 (S.D.N.Y Nov. 6, 2015) (jury verdict against Anthony Allen and Anthony Conti). BIS central bankers’ speeches  3  members of global financial institutions. Together, they discussed methods of reforming culture and the continuing challenges in this effort. In my view, the workshop offered a number of useful insights, chiefly: •  Culture is a soft concept that is hard to measure, and perhaps harder to manage and sustain. But it is as important as capital and liquidity, and should receive continuous and persistent attention. •  A bank’s culture must be consistent with public expectations and promote behavior that considers the firm’s many stakeholders, including the public.

In September 2013, shareholders of a major U.S. bank requested that the bank prepare “a full report on what the bank has done to end [its] unethical activities, to rebuild [its] credibility and provide new strong, effective checks and balances within the [b]ank.” That request was forwarded, by the way, by a Catholic nun. The bank responded through its attorneys that the nun’s proposal was “materially false and misleading” and “impermissibly vague and indefinite.”9 Fast forward to May 2015. The Federal Advisory Council-a panel of bankers that advises the Federal Reserve System-reported that “Regulators and the banking industry have worked extensively to restore financial stability through a series of mechanisms and rules that establish appropriate levels of capital, liquidity, and leverage. . . . As often as not, however, the challenges faced in recent years have been behavioral and cultural; post-crisis episodes such as LIBOR and foreign exchange manipulation provide hard evidence that there remains work to be done.”10 This is clearly an encouraging difference in perspectives. The public sector, too, has paid increasing attention to culture. The Group of Thirty, the Basel Committee, the European Systemic Risk Board, and the Financial Stability Board have issued papers on culture, governance, and misconduct risk. The Fair and Effective Markets Reviewa joint project of the Bank of England, the Financial Conduct Authority, and Her Majesty’s Treasury-has called for heightened standards for market practice in matters affecting the public good.
Their study suggests that the American  purchases of government securities did not affect the term structure and did not press down rates on other securities. 10 This interpretation is also in line with the Riksbank's communicated assessment that it would be possible to cut the policy rate to lower levels (see, for example, the Riksbank, 2016). 5 [30]  market, and the even lower rate on short government securities, which also led to a fall in the rate on longer-term government securities. Figure 3. Government bonds and covered bonds against expected policy rate Basis points  Note. Differential between rate on each bond and expected policy rate. Refers to bonds with a maturity of 5 years and an expected policy rate of 5 years ahead. Footnote 7 explains how the expected policy rate is calculated. Sources: Bloomberg, Macrobond, Refinitiv and the Riksbank. A relevant question is whether the Riksbank could have achieved the same effect by cutting the policy rate to −0.80 per cent instead of buying government bonds. I am unsure of the answer, but suspect that the effects would then have been different. Perhaps a lower policy rate had more clearly affected lending rates and also pressured the banks' profitability, but had similar effects on the exchange rate, something I will come back to in a moment.11 I also suspect that the Riksbank would have found it more difficult to communicate an even more negative policy rate.

I believe that we can enhance our levels of productivity by maximizing knowledge, especially in the subject of finance. Over these three days, a total of 100 booths will be featured during this carnival, each offering a variety of finance-related activities and opportunities. This includes facilities to open a bank account, assistance in loan applications, CCRIS checks, debt management advice (by AKPK and the Small Debt Resolution Scheme), platforms that allow consumers to seek redress solutions, opportunities for innovative SMEs to submit business proposals as well as group lecture sessions. On behalf of the Bank and other related stakeholders, I sincerely hope that you may fully utilise the wealth of opportunities available in this Finance Carnival by visiting the exhibition booths and participating in dedicated activities designed for fellow visitors. Our aspiration is for this event to be a powerful enabler to increase knowledge and awareness on the importance of financial management, which, if done wisely, possesses the distinct potential of uplifting lives. Finally, allow me to take this opportunity to express my gratitude and appreciation to the committee, the ministry of finance, relevant government agencies and financial institutions, whose efforts have all contributed towards realising the success of this Carnival. 4/4  BIS central bankers' speeches