samchain/econo-pairs-v1 huggingface dataset:
As you will no doubt know, quantitative easing aims to depress a range of longer-term yields and raise asset prices, so boosting demand. Our analysis suggests that our first £ billion of asset purchases reduced the yields on gilts and corporate bonds by around a percentage point2. Studies for the United States, using a similar methodology, find comparable effects from the Federal Reserve’s large-scale asset purchases, which is comforting. The asset purchases also have the effect of boosting banks’ holdings of the most liquid asset, central bank reserves, which may be of particular value at the current juncture. While one cannot be confident about the impact of our earlier purchases on the real economy, our analysis points to a peak effect on output of 1½–2 per cent and of ¾–1½ percentage points on inflation. At this juncture at least, we have no reason to believe that, suitably pro-rated, the current phase of purchases will be greatly different in their effect on either asset markets or on the real economy. 2  For a summary of the evidence, including references to related studies, see Michael Joyce, Matthew Tong and Robert Woods (2011), “The United Kingdom’s Quantitative Easing Policy: Design, Operation and Impact” Bank of England Quarterly Bulletin, 51(3), 200–212. BIS central bankers’ speeches  3  Several commentators have suggested that the effectiveness of quantitative easing could be enhanced by spending the newly created money on something other than government debt.

In the eight quarters since the trough of the recession in the middle of 2009, real household income has fallen 2½ per cent, as only modest wage growth has been more than offset by elevated inflation. And with higher utility prices pushing consumer prices up another 1¼ per cent since June, it is probable that real household disposable income will turn out to have fallen during the second half of this year too. Against that background, it is not surprising that real consumer spending growth has been weak. Although elevated inflation has been the medium through which some of this squeeze in living standards has been brought about, the squeeze reflects three deeper real economic forces that monetary policy can do little to negate. The first force is the aforesaid rise in the price of commodities, relative to the prices of global goods and services, associated with the confluence of strong demand growth in the emerging economies and commodity producers’ inability or unwillingness to increase supply to match the extra demand. The second force is the fall in the purchasing power of sterling. Before the financial crisis, the UK was operating with an unsustainably low level of national savings and an associated current account deficit. In addition, the crisis has probably led to a long-lasting hit to the demand for financial services exports.
Many people have claimed in this context that companies in countries, which have recently deregulated their capital markets, have a tendency to take on more loans than they can manage. This does not appear to be the case. On the contrary, empirical research indicates that while non-financial companies with access to the international capital market increase their borrowing, their equity increases at the same rate. It also appears that these companies increase the duration of their loans. In this perspective, it is difficult to imagine that the risk of taking out excessively large loans increases as a result of deregulation. The various types of funds managed by many of you make a contribution to this, by supplying share capital to companies in other countries. 2  BIS Review 75/2001  Economic policy content of crucial significance Allow me to return to the criticism of developments on the financial markets. As I said, it cannot be dismissed out of hand. It is evident that there are some problems in the way these markets function. One only has to look at the Mexico crisis of 1995 and the Asia crisis of 1997-98 to see that. It is, however, important to remember that the origins of the crises lay in domestic problems in those countries that were hardest hit. In Asia, as was the case here in Sweden at the end of the 1980s, the countries developed a financial vulnerability through rapid credit expansion, over-investment in certain sectors, grossly inflated asset prices and short-term borrowing abroad.

They would probably result in further reinforcement of fluctuations, as activity - and thus liquidity - on the markets would decline. As representative of a central bank, I would also like to point out that nor do I believe that monetary policy alone can counteract exaggerated movements on the financial markets. On the other hand, a clear monetary policy, aimed at price stability, is necessary in the work on maintaining financial stability. It facilitates economic decision-making in society. However, part of the solution must lie in breaking the pattern that causes players to behave in exactly the same way as one another. Increased transparency with regard to countries' and companies' economic status is an important step in the right direction here. Developments in technology have demolished many of the barriers that previously hampered the spread of this type of information. However, this requires that authorities and companies make use of the opportunity and actually release important information. We at the Riksbank, like many other Swedish authorities, have for quite some time now made use of the advantages of the Internet in this context. All important information is published on our website, which is easily accessible to most people. This applies regardless of whether one is an analyst at a major bank or whether one is a private person. Information technology has thus created a powerful instrument, which can be used to counteract the 'follow the leader' behaviour.
Whether this is a result of proportionality – our efforts to lower barriers to entry – or barriers to growth is a key question. Second, more novel if perhaps less fundamental: there appear to be minor discontinuities around the thresholds of £ £ and £ and a more substantial flattening and bump at £ These may be worth investigating further. 6  All speeches are available online at www.bankofengland.co.uk/news/speeches  6  Complexity Another thing we’ve been looking at afresh is the complexity of our prudential rules. The scale of the global financial crisis resulted in part from the huge complexity of the financial system, and the many gaps in the rules that sought to regulate it. Fixing these gaps required more regulatory constraints and more regulatory discretion – a necessary increase in ‘essential’ regulatory complexity.5 But when should we start worrying about ‘too much’ complexity? This is important for at least two reasons: first, excessive complexity may well be counter-productive in terms of our safety and soundness objective6; and second, complexity may be anti-competitive if it is harder for small firms to bear the cost of mastering it. Designing a framework to trade off costs and benefits of complexity is an emerging research question. But there’s a complementary, empirical step: we have wanted to measure the framework’s complexity – to say how complex it is. Legal and linguistic scholarship suggests the information burden of understanding individual rules, as well as the nature of the interactions between them, both matter here.

Credit union meets robot Speech given by Sam Woods, Deputy Governor for Prudential Regulation and Chief Executive Officer, Prudential Regulation Authority  Mansion House, London Thursday 24 October 2019  I am very grateful to Hannah Schraer for her help in preparing this speech. 1  All speeches are available online at www.bankofengland.co.uk/news/speeches  Introduction Earlier this year I gave a speech, which fortunately for most of you in this room you did not have to sit through, on competition. I avoided the temptation to list all of the things we’ve done to facilitate competition and instead posed a set of seven questions which I think are more awkward for us. The three-line version of that speech is this: we’ve done a lot to lower prudential barriers to entry into the banking sector, with the result that we’ve got a lot of new banks. But have we done enough to lower the equivalent barriers to growth, given no little bank has recently become a really big bank? Since then I have unleashed the competition team within the PRA to roam about the institution digging up whatever they can find on the barriers to growth issue. They have already come up with two things.
Black, A and Fraser, P (2002), “Stock Market Short-termism – An International Perspective”, Journal of Multinational Financial Management, Vol. 12, pp. 135–158. Campbell, J and Shiller, R (1988), “Stock Prices, Earnings, and Expected Dividends”, The Journal of Finance, Vol. 43 (3) pp. 661–676. Carr, N (2008), “Is Google Making Us Stupid? What the Internet is doing to our brains”, Atlantic Magazine, July-August 2008. Chartered Financial Analyst Institute (2006), “Breaking the Short Term Cycle. Discussion and Recommendations on How Corporate Leaders, Asset Managers, Investors, and Analysts Can Refocus on Long-term Value”, CFA Centre for Financial Market Integrity/Business Roundtable Institute for Corporate Ethics. Cuthbertson, K, Hayes, S and Nitzsche, D (1997), “The Behaviour of UK Stock Prices and Returns: Is the Market Efficient?”, The Economic Journal, Vol. 107 (443), pp. 986–1008. Dean, G, and Irwin, J O (1964), “The stock of fixed capital in the UK in 1961”, Journal of the Royal Statistical Society, Vol. 3, pp. 327–358. Department for Business Innovation and Skills (2011), “A Long-term Focus for Corporate Britain, Summary of Responses”, March. Duruigbo, E (2011), “Tackling Shareholder Short-termism and Managerial Myopia”. Fama, E F (1970), “Efficient Capital Markets: A Review of Theory and Empirical Work”, The Journal of Finance, Vol. 25 (2), pp. 383–417. Financial Times (2011), “BNSF chief hits at short-termism”, 12th Feb. Graham, B (1949), “The Intelligent Investor”, HarperCollins. Graham, J R, Harvey, C R and Rajgopal, S (2005), “The Economic Implications of Corporate Financial Reporting”, Journal of Accounting and Economics, 2005.

Including exchange rate effects, in Sing Dollar terms, MAS recorded a net loss of $ billion. In short, we made good investment gains, but when measured in Sing Dollars, these gains were more than offset by the strength of the currency. If we had reported our P/L in an international currency it would show a healthy profit. The effect of a strong Sing Dollar on our reserves should be seen in a broader context. First, the international purchasing power of our reserves is unaffected by strength of Sing Dollar. MAS’ foreign reserves serve two primary purposes in times of crisis: they finance our imports from the rest of the world, and safeguard the value of our currency. On both fronts, it is foreign currency value of the reserves that matters. Second, the strength of the Sing Dollar has safeguarded our domestic purchasing power. It has helped to moderate the increase in Singaporeans’ cost of living. For instance, while global oil prices rose by 20% in FY2010, domestic prices of oil-related items increased by only 10%. Or take another example of food prices. During FY2010, the rate of increase in food prices in Singapore was about half of that in our major trading partners, which includes both advanced and emerging economies. Last, I will elaborate on our efforts to maintain high regulatory standards. MAS is well-placed to meet higher global standards emerging from international regulatory reforms following the crisis.
Indeed, this became the norm across the income statement. Thus, ordinary profit rose by more than 30%8 year-on-year in the first quarter, with increases of 9% both in net interest income and fee and commission income. Meanwhile, impairment losses fell by 12.5% compared with March 2021. It must be noted, however, that the full economic and financial impact of the war in Ukraine did not materialise in the first quarter of the year. As regards the cost of bank funding, the average cost of liabilities9 has fallen since the onset of the pandemic, down to 0.5% at end-2021. The latest data available point to a change in trend, albeit with these costs holding below pre-pandemic levels (slightly above 1%) for now. In particular, wholesale market funding costs rose in the initial months of 2022. Indeed, expectations of interest rate rises have fed through to wholesale market interest rates on long-term bank debt (a measure of funding costs) more robustly than to the Overnight Index Swap (OIS) rate.10 Thus, banks’ credit risk spread has widened. Banks stepped up their debt issuance in 2021 to comply with prudential and resolution requirements, with issuances of Tier 2 instruments and contingent convertible bonds  8  By contrast, in 2022 Q1 net profit fell by 30% compared with the same period a year earlier, but this was due to the almost € billion recorded in extraordinary gains in March 2021 as a result of the merger at CaixaBank.

Specifically, compared with the forecasts published at end-2021, our latest macroeconomic projections published in June expect real GDP growth of 4.1% in 2022 and 2.8% in 2023 (1.3 percentage points (pp) and 1.1 pp, respectively, below the December 2021 projections), while inflation is expected to stand at 7.2% on average in 2022 and at 2.6% on average in 2023 (3.5 pp and 1.4 pp, respectively, above the estimates published in December 2021). The risks to our baseline scenario are tilted to the downside in the case of activity and to the upside in the case of inflation. All against a backdrop of extraordinary uncertainty, linked in particular to the duration and intensity of the war in Ukraine. A greater degree of passthrough of the recent increases in prices and costs to other prices in the economy and to wages is an additional and very significant source of risk. Other sources of risk include the uncertainties surrounding the pace of the effective roll-out of the NGEU programme in Spain and the possible consequences of monetary policy normalisation in terms of the degree of tightening of financial conditions. 2  In any event, in the absence of any fresh shocks or an escalation of the war in Ukraine, these projections would still be consistent with the Spanish economy holding on a gradual recovery path – that could see it reach pre-pandemic GDP levels in the second half of 2023 – and with inflation rates remaining high in the coming months and subsequently moderating gradually thereafter.
First, the need for further convergence in real and nominal terms, second, the need to advance on the compliance with the Treaty in the field of central bank and other relevant legislation and, third, the need to strengthen the financial and banking sectors. In addition, I would like to finish my presentation by briefly recalling how the entry of new Member States into the euro area is likely to impact the monetary policy of the ECB. Advancing convergence in real and nominal terms Advancing real and nominal convergence with the euro area in a parallel manner should take top place on the agendas of accession countries' policy-makers. This means that the need to catch-up with the EU in terms of both the real economy structures and income levels and the need to advance disinflation should be pursued as a "dual track". Let me explain why I like to stress the need for this parallelism. Very often, higher inflation rates in accession countries have been partly explained by their need to catch-up with the real income and price levels prevailing in the euro area. This empirical phenomenon has been observed in many fast-growing economies and is often referred to as the BalassaSamuelson effect. Although the magnitude of this effect and, thus, its impact on inflation is difficult to quantify, most empirical studies for the accession countries have estimated it at around 1 to 3 percentage points of inflation. For monetary policy, this has a double meaning.

The impact of enlargement on the monetary policy of the ECB Enlargement will imply important new challenges for the monetary policy of the ECB. Nevertheless, there is no doubt that the ECB will be able to ensure the continuation of price stability, even in an enlarged euro area, in a credible and lasting manner. At the technical level – as was the case when Greece joined EMU – it will be necessary to employ new monetary and non-monetary aggregates. 4  BIS Review 84/2001  Looking at the broader picture, however, there are other types of challenges that one should also consider. These challenges are closely related to what are the fundamental differences between the accession countries and the current euro area members. I have already mentioned what is, perhaps, the most striking difference: the divergence of per capita income levels and, related to this, the difference in price levels. Other important factors, however, may also be worth investigating, such as the different potential vulnerabilities to external shocks. Some of these 'features' of the new Member States will probably not have fully disappeared, when these countries will join the euro area. The successful implementation of structural reforms and the acceleration of the catching-up process of the accession countries would definitely facilitate the task of integrating these countries into the euro area. Indeed, the deepening of the integration process between current and new Member States is likely to reduce the risks associated with the effects of asymmetric shocks.
This is necessary for assessing, determining and calibrating the appropriate policy measures, as those taken by the Eurosystem to address the market turbulence. All in all, the turmoil has confirmed a number of strengths in our information-exchange and statistical arrangements. At the same time, it has revealed some information gaps and weaknesses that will need to be addressed once we draw the main lessons of the current  4  BIS Review 143/2007  turmoil. Indeed, it has been suggested that insufficient information has been the main reason why problems originating from the relatively small sub-prime segment of the US mortgage market have had such widespread consequences. 3 For instance, the turmoil has revealed information gaps related to the valuation of illiquid complex structured products or the assessment of the concentrations among various types of collateral – including sub-prime – within structured finance securities. Besides, the turmoil has shown that there is a need for credit rating agencies to provide also information on the liquidity risks associated with structured investment products. In addition, the turmoil has confirmed that the significant lags in the release of some statistics, for instance those on integrated accounts, reduce our ability to use them in real time. Challenges for communication under stress As I mentioned earlier, implementing monetary policy under stress poses special challenges for communication. Indeed, following deviations from the standard practices and the setting in motion of a learning process, central banks must re-establish a “reputational equilibrium” with their counterparts.

Øystein Olsen: Monetary policy and wealth management in a small petroleum economy Speech by Mr Øystein Olsen, Governor of the Norges Bank (Central Bank of Norway), at the Harvard Kennedy School, Cambridge, USA, 9 April 2013. *  *  *  Please note that the text below may differ from the actual presentation. Charts in pdf-format  Introduction I am delighted to be here at the Harvard Kennedy School, and I really appreciate this opportunity to talk to you. My topics are Norwegian monetary policy and the central bank’s management of Norway’s oil fund, the Government Pension Fund Global. I will begin with some background on the macroeconomic policy framework in Norway, and why we believe it works well. A rules-based approach was adopted after two turbulent decades of boom-bust economic cycles. The path towards the current regime was developed and supported by successive governments in the 1990s and early 2000s as it gradually came into place. Since 2001, the operational target of monetary policy has been annual consumer price inflation of around 2.5 percent over time. With growing petroleum revenues, asset management has also become one of Norges Bank’s main tasks. Both in our conduct of monetary policy and in asset management, transparency is a guiding principle. I will explain how we see ourselves as a global financial investor, and elaborate on the main elements of our investment strategy.
Now, we’ve all become very familiar with breathless reports on China’s “economic miracle,” so I won’t go over this at length. Still, the startling pace of growth does warrant underlining. In a little over a decade since the year 2000, the Mainland’s nominal GDP increased sixfold from 1.2 to 7.2 trillion US dollars; and its external trade expanded more than sevenfold, from less than 500 billion to over 3.6 trillion US dollars. At the same time, its cross-border direct investments rose fourfold, from just over 40 billion to approaching 180 billion US dollars. These are all impressive indicators of the vast amount of business opportunities present. It is perhaps even more astonishing that, by 2016, the Mainland is expected to contribute over a third of total world economic growth, according to the projections of the International Monetary Fund. Change in the international financial system Such shifts in the global economy have inevitably foreshadowed a change in the international financial system. As the Mainland economy has grown, its currency and financial sector have moved increasingly centre-stage. Over the last decade or so, policymakers, investors and others have shown more interest in using a greater mix of currencies for international trade and financial transactions. This trend has been accelerated by the recent Global Financial Crisis, as the need to reduce reliance on just one or two global currencies has grown. Taken together, these trends imply a greater role for the RMB in the Mainland’s trade and investment with the rest of the world.

The convergence of productivity and living standards gives rise to differentials in inflation rates via the rate of increase of non-traded goods prices. Countries with higher levels of economic development tend to have higher prices of non-traded goods. BIS Review 123/1999  2  Higher living standards mostly reflect high productivity in the traded goods sectors but, given integrated national labour markets, wages are generally higher in the economy as a whole and although the scope for productivity gains may be more limited in the non-traded sectors of the economy, a general rise in wages tends to lead to higher relative prices in the non-traded to traded goods sectors. The euro area countries undergoing this catch-up process will, therefore, in general have higher inflation. As an ultimately temporary but nevertheless protracted phenomenon, there is also an ongoing process of convergence of prices of individual goods. Price differences across countries will tend to be reduced for goods and services which are widely traded across national boundaries as a result of increasing integration of the single market. The introduction of the euro can, of course, be expected only to intensify this process through increased price transparency and the elimination of exchange rate risk. Are national differences a cause of concern? Are differences in growth and inflation among euro area countries a matter of concern? In terms of growth, there are no indications that the differences are particularly large or unusual.