samchain/econo-pairs-v1 huggingface dataset:
The UK first adopted specific targets for inflation over a decade ago, and at the same time the Bank launched a new quarterly Inflation Report to share its thinking about the economic prospect. In 1997, that approach was developed, and its credibility significantly enhanced, when Gordon Brown gave responsibility for setting interest rates to an independent Monetary Policy Committee, consisting of outside experts as well as Bank of England officials. By any past standards, the period since 1992 has seen a quite remarkable degree of stability, with low and stable inflation and a record period of sustained positive output growth and steadily improving employment. Better monetary policy is not the whole story; but it can share some of the credit for that success. How does monetary stability like this benefit an area like Merseyside? The Bank of England’s job is to control inflationary pressure in the country as a whole. What we do is set interest rates to keep the total demand in the economy in line with the economy’s productive capacity. We don’t – and can’t – favour any section of the economy, or the country. Merseyside is a region facing deep seated economic and social challenges, stemming from the decline in its traditional industries. In recent decades, many well paid jobs have gone for ever, and in the new world, earning good money has required a very different set of skills. That kind of change wasn’t just a challenge to individuals and their families; it threatened the viability of whole communities.

So you may be reassured to hear that we spend most of our time worrying about the risks that could throw the UK economy off course; and arguing about how to respond appropriately. So what are the main risks facing us now? Last year saw the fastest growth in world output in three decades. We expect growth this year to be less spectacular but still robust. But while the US and China are still expanding strongly, growth has showed signs of faltering in Japan and, to a lesser extent, in our major overseas market, the euro area, and especially Germany. We think this weakness is likely to prove temporary, but we could be disappointed. Unbalanced growth creates strains. The US has a large current account deficit, which is mirrored by surpluses in the other major trading blocks. The risk is that a better balance will only come about through sharp adjustments in exchange rates and a marked increase in US savings, which may cause a slowdown in global activity. Closer to home, there is uncertainty about the near term momentum of household spending, by far the largest influence on domestic demand. While it is difficult to be confident about the path of retail sales since the autumn, there is little evidence of much underlying buoyancy. Retail sales are not the whole story, and our central view is that any weakness in consumer spending is likely to be temporary. But we could easily be wrong.
In the case of monetary policy, from our experience here in Thailand, combining inflation-targeting with macroprudential measures under a flexible exchange rate regime has proven to be a good workable policy framework for meeting the challenge posed by the dual mandate of maintaining price and financial stability. Nonetheless, in an environment of large and persistent capital flows, having the right policy framework alone may not be adequate. Monetary policy will need to be supported by and coordinated with other policies to ensure the best outcome. For example, well-aligned fiscal and monetary policy is important at a time of strong capital inflows to help moderate the adverse impact of capital flows on domestic demand. This means fiscal policy will need to be less procyclical as domestic interest rates rise. Next, deeper and more diverse local financial markets will help lessen the chance that volatile capital inflows will create substantial risk to the economy. This calls for the need to continue with policies to strengthen and reform the financial system. And to the extent that sustained inflows generate the need for real resources to be reallocated across the economy in response to changes in relative prices, a high degree of flexibility in the local economy will be needed to support these adjustments, which will lessen the risks of imbalance and price pressures. The second issue to think more clearly about is the disconnect between the global nature of the problems facing central banks and the domestic orientation of the policy response.

And, as with all the other denominations in the new series, it is narrower and shorter than the previous note. The theme of the 100-franc note is Switzerland’s humanitarian tradition, and the key motif is water. Both are reflected in the note’s core design elements. The hand and the globe are the main images on the front of the note. The hands are scooping up water, and isobars are depicted over the globe. Page 1/3  Berne, 3 September 2019 Fritz Zurbrügg  News conference on new banknotes  The back of the note shows an irrigation channel, or ‘suone’, feeding glacial meltwater down a cliff face to the fields below. A suone is a method of transporting water from high altitudes to lower-lying areas for irrigation purposes. In the past, such irrigation channels were used for land cultivation, especially in the Valais region. The image of a suone symbolises the treatment and distribution of water – a major component of Switzerland’s humanitarian and development aid effort. The key motif also plays an important role on the security strip, which features a network of waterways over the map of Switzerland, together with a list of the country’s longest rivers. The remaining security features, such as the transparent Swiss cross or the shimmering globe, are the same as those on all denominations of the new series – you will already be familiar with these.
Allow me finally to touch upon an overlooked industrial sector in Swedish business - basic industries. Basic industries - a good example. In the public debate during the 1990s on the New Economy, it was often claimed that the old industrial society had had its day and that traditional industry would suffer the same fate as agriculture. Basic industries, which are roughly composed of the iron and steel industry, paper and wood product industry and mining, have indeed declined in significance in recent decades, especially for employment, but are still important for net exports. While the rise and fall of the ICT sector during a number of years has taken centre stage in the debate, an evolution has long been under way within other industry. For it is in non-ICT industries that much of the gains afforded by the new technology have been achieved and will be able to be achieved. Basic industries have undergone marked structural change. For example, average production capacity per mill in the forestry sector has increased eight times for paper manufacture and six times for the manufacture of pulp in the past 40 years. The small mills have been closed down and there is now a substantial concentration of companies. The exploitation of economies of scale as well as stricter environmental standards have forced companies to invest on a large scale. Sweden currently accounts for about 3 per cent of paper manufacture in the world and 9 per cent of exports.

The basic growth mechanism for our standard of living, i.e. labour productivity, now becomes the weighted sum of capital growth per capita and technological progress. Given a constant age structure of the population, and an evenly balanced age pyramid, the basic formula for growth in the standard of living can also be expressed as the weighted sum of capital growth per employee and technological progress (a complication that I will return to later is that the age structure is not constant). Capital formation contributed to lower productivity growth in Sweden Why did it go badly for Sweden during the 1970s and 1980s? First, it should be noted that the majority of industrialised nations suffered a drop in productivity growth from the beginning of the 1970s. This was due to the supply shock associated with the first oil crisis, when the price of oil tripled, followed by a second oil crisis at the end of the 1970s when the price once again increased threefold but this time from a higher level. As we know, the price of oil affects many parts of the economy. Oil is used as energy for transport and heating purposes and its price therefore has a direct impact on the costs of these. Moreover, firms’ costs are affected since oil products are often used as intermediate inputs in, for example, different plastic products. So all countries encountered problems due to the oil supply shock, but productivity growth declined more in Sweden than in other countries. Many explanations have been put forward for this.
It is perhaps not surprising that as they have become more acclimatised to a low inflation/low nominal interest rate environment, households have been prepared to incur more debt relative to incomes, and the debt to income ratio has indeed risen to an all-time high over recent years. But that adjustment cannot go on indefinitely and will at some point come to an end. In the meantime many commentators have recently focussed on accelerating house price inflation which is closely related to the build-up of debt - as worrying evidence of a bubble that will eventually burst. And we, on the MPC, agree that the current rate of house price increases is unsustainable, although it is less obvious that that necessarily applies also to the present level of house prices, though of course it may. In any event, while, of course, we pay close attention to what is happening to house prices, as we do to other asset prices, our principal concern, in this part of the equation, is with consumer demand as a whole - and that depends on a range of other factors, not just on house prices. What is clear is that if external demand does improve as we expect, and if consumer demand growth does not moderate to accommodate it, then we will need at some point to raise interest rates to bring that moderation about. It is important that both borrowers and lenders should understand and take account of that possibility in their decision-making. But you will note the qualifications.

There is, of course, a circularity involved, since liquidity depends on valuation, fair value must be based on a market price, and the ability to price an asset itself depends on sufficient liquidity in the market. The difficulty to get out of this circularity in periods of stress is currently creating significant uncertainty. Another example is risk measurement. In a securitized world, investors heavily depend on rating agencies for information about the risks attached to various instruments. These agencies have been strongly criticized recently. It is not my purpose to enter into any blame game. Suffice it to say that there has been a deep misunderstanding between investors and rating agencies as to the scope and true meaning of ratings. Most investors were not fully aware that rating did not encompass liquidity risk; nor did they realize that ratings for structured products were intrinsically more volatile than for more simple "plain vanilla" securities. The use of identical metrics for rating what are fundamentally different categories of assets certainly did not help and may have contributed to the confusion. Some observers have argued that investors should be faulted for relying too much on ratings. Instead, the argument goes, they should do their homework and put themselves in a position to directly assess risks. But it is doubtful that we can dispense of the rating process. If each and individual investor had to carry their own due diligence, the costs of gathering information would be prohibitive and this would introduce important frictions in the functioning of the market.
At the same time, repairing banks’ balance sheets and ensuring their soundness is a pre-condition for re-establishing adequate financing of the economy. This is why the SSM, including the comprehensive assessment, and the single resolution mechanism are crucial steps towards improving euro area governance. The European institutional context may sometimes appear cumbersome, but the progress made shows that Europe recognises problems and responds to them. Nevertheless, even with these changes, solving a stock problem means addressing a prolonged adjustment in flows in the future. We are all well aware that debt consolidation alone weighs on economic activity just like a diet leaves one with the feeling of fatigue. The deleveraging process will require time; we should not lose patience in the process. Compared with past episodes, deleveraging has, in fact, become even more challenging. The global dimension of deleveraging makes burden-shifting across countries impossible and today’s demographic trends are putting strain on our growth prospects. It is therefore crucial to balance the consolidation across generations12. Nonetheless, I reemphasise the need to complement the consolidation process with structural changes in order to make our economies fitter. This involves reducing red tape to ease business creation, streamlining governance of state-owned enterprises and reallocating workers more flexibly from stagnating and declining industries to productive and expanding ones. Structural reforms are not only required in the countries in the euro area, but have also been recognised by Prime Minister Abe in his third arrow as essential to securing the Japanese recovery over the long term. Thank you for your attention.

As regards public finances, euro area fiscal deficits exceeded 6% at the peak of the crisis in 2009 and 2010, but are expected to fall below 3% this year, while primary budgets are even expected to post a surplus of 0.2%.4 This adjustment strategy has brought with it painful cuts in our social models and has not been without controversy. In fact, some commentators and academics suggest that governments should continue increasing deficits to support aggregate demand while the private sector is deleveraging. They argue that parts of the private sector are debt-constraint and need to reduce their leverage, while parts that are unconstrained are not increasing their leverage sufficiently.5 In such an environment the role for government spending is to expand demand for funds, and especially so when the nominal interest rate is constrained by the zero lower bound.6 I would agree to this approach if the fiscal budget allowed for room for manoeuvre. But the recent sovereign debt crisis has shown that fiscal space is very limited for many European countries. In Japan, the strategy of fiscal expansion has led to a situation in which gross government debt levels now exceed 200% of GDP. The continued favourable financing conditions appear to also be owed to the fact that more than 90% of Japanese government bonds are held domestically. This situation can be seen as a special privilege for the government.
The high level of interest rates and the strong krone reflect real economic driving forces, such as a high level of petroleum revenues, a tight labour market and strong growth in household income, consumption and borrowing. In addition, a shift in the wage formation process may have added to the particularly high rate of overall wage growth. If these forces are restrained, there is also hope that the pressures on monetary policy will subside. The bond market Market interest rate rates determine the compensation afforded to savers for abstaining from consuming today and the price the investor has to pay for borrowing the savings of other agents. The financial sector is the intermediary that channels savings to profitable investment projects and seeks to achieve optimal use of existing capital. The financial system should also enable borrowers and investors to diversify risk. Banks and securities markets ensure the distribution of capital and risk management. • The financial system has been subjected to shocks: • Cyclical downturn in the major industrial countries • The IT share bubble burst • Terror attacks in the US • Argentina "bankrupt”  • Confidence eroded • Large-scale fraudulent accounting practices by US companies  SG Kommunalbanken, 30.august 2002  In the last few years, the financial sector has been under considerable strain. There has been a downturn in the major industrial countries, a collapse in technology stocks, terror attacks in the US and default on government debt in Argentina. Equity prices have plummeted and bond defaults have increased sharply.

These figures demonstrate that we should be able to seize the abundant business opportunities arising from the Mainland’s expansion in external trade if we continue to fortify our trade relations with the Mainland and the rest of the world, just like our trade intermediation activities growing from 15% of GDP in 1979 to 20% in the early 1990s, and then to 25% now. 6. Let me illustrate with another example why Hong Kong will not be marginalised as the Mainland continues to open up to the world. Let’s look at the opening of the cross-strait “Three Direct Links”. Prior to 2008, there were no direct flights between the Mainland and Taiwan. Passengers had to make a mid-way stopover at a third place. As a result, Hong Kong became the busiest transit point between the Mainland and Taiwan by virtue of its favourable location. Some pundits predicted that the opening of the “Three Direct Links” would deal a devastating blow to the aviation industry between Hong Kong and Taiwan. On the contrary, air traffic between Hong Kong and Taiwan increased by 15% from an average of 118 flights per day in 2007, before the implementation of the “Three Direct Links” in 2008, to 136 daily flights in 2013. This clearly illustrates that as long as Hong Kong is able to maintain its attractiveness and competitiveness, we can continue to effectively perform our role as an intermediary between the Mainland and Taiwan. Are Hong Kong and Shanghai deadly rivals? 7.
Journal of Financial Economics, 115(3): 471-485. Greenwood, R., Hanson, S. G., Stein, J. C., & Sunderam, A. (2017). Strengthening and Streamlining Bank Capital Regulation. Brookings Papers on Economic Activity. BPEA Conference Drafts, September 7-8. Guttentag, J., & Herring, R. (1986). Disclosure policy and international banking. Journal of Banking & Finance, 10(1), 75-97. Haldane, A. G. & Madouros, V. (2012). The Dog and the Frisbee. Speech by Andrew G. Haldane at the Federal Reserve Bank of Kansas City’s 366th economic policy symposium, The changing policy landscape, Jackson Hole, Wyoming, 31 August 2012. Haldane, A. G. (2009a). Rethinking the financial network. Speech delivered at the Financial Student Association, Amsterdam, April, 28. Haldane, A. G. (2009b). Why Banks Failed the Stress Test. Speech given at the Marcus-Evans Conference on Stress-Testing, 9-10 February. Haldane, A. G. (2013). Constraining discretion in bank regulation. Speech given at the Federal Reserve Bank of Atlanta Conference on ‘Maintaining Financial Stability: Holding a Tiger by the Tail(s)’, Federal Reserve Bank of Atlanta, 9 April. Haldane, A. G. (2015). Multi-polar regulation. International Journal of Central Banking, 11(3), 385-401. Haldane, A. G. (2016). The dappled world. Speech at GLS Shackle Biennial Memorial Lecture, 10 November. Haldane, A. G., & May, R. M. (2011). Systemic risk in banking ecosystems. Nature, 469(7330), 351. 58  All speeches are available online at www.bankofengland.co.uk/speeches  58  Hale, G., Krainer, J. & McCarthy, E. (2015). Aggregation level in stress testing. Working Paper Series 2015-14, Federal Reserve Bank of San Francisco. Halpern, D. (2015).

The definition and classification of failure follows Laeven and Valencia (2010), supplemented by additional judgement in a few instances.21 To fix ideas, suppose that banks are subject to a single regulatory 20  The dataset also includes a liquid asset ratio but this is a relatively poor proxy for the liquidity coverage ratio (LCR), so we exclude consideration of the LCR from this analysis. 21 Because very few banks technically defaulted during the crisis, but many would have without significant government intervention, the definition of failure is necessarily somewhat judgemental. Beyond clear-cut cases of default or nationalisation, Laeven and Valencia (2010) define banks to have failed if at least three of the following six conditions were present: (i) extensive liquidity support (5 percent of deposits and liabilities to non-residents); (ii) bank restructuring costs (at least 3 percent of GDP); (iii) partial bank nationalisation (eg government recapitalisation); (iv) significant guarantees put in place; (v) significant asset purchases (at least 5 percent of GDP); (vi) 22  All speeches are available online at www.bankofengland.co.uk/speeches  22  metric – the leverage ratio. And using this metric, suppose that we set a cut-off threshold consistent with a particular calibration of that regulatory standard – a leverage ratio of 3%. One can identify banks which operated below that standard at a point in time.
Large shocks to the functioning of the financial system would also reduce the effectiveness of monetary policy, as the transmission mechanism is affected by the efficiency of the capital supply and the mediation of payments. The fact that there are close links between the central banks' two tasks becomes particularly evident when the effects of financial bubbles are discussed. An important part of the process leading up to large imbalances is credit granting by the banks. The fact that households and companies demand loans for increased consumption and investment when asset prices are rising is one thing, but it also requires that the banks increase their supply of loans. If the banks have well-developed risk systems, and rules and supervision are designed to motivate the banks to utilise them, the risk of exaggerated lending will be reduced. The way that capital adequacy rules are designed and applied is of great significance. The new capital adequacy rules, Basel 2, are aimed at reflecting to a greater extent than now the risks the banks actually take. However, valuating credit risks over a whole economic cycle is very difficult. The indications are that both internal credit risk models and credit rating agencies tend to underestimate credit risks during an upturn in economic activity and to overestimate them during a downturn. There is thus a risk that the banks will tend to strengthen the fluctuations in economic activity, even with the new capital adequacy rules.

Indeed, the current turmoil has underscored the importance of robust liquidity management by banks, as well as the need for supervisory approaches which keep pace with structural market developments. Many initiatives with a view to addressing issues and risks arising from the recent financial market turbulence that go into the right direction have already been launched, both at the international level, namely by the Financial Stability Forum, and at the EU level, with the ECOFIN agreeing to a roadmap for action by 2008, and also by the private sector. They must be pursued now with even stronger impetus. In this respect, co-ordination at the global level should be ensured. In closely interlinked financial markets, any policy measure should be agreed to and consistently applied at the international level. Fifth, in the same vein, there is a need to reflect carefully on the “originate-anddistribute” business model. The period ahead is likely to provide a first material test of changing banking business models and the increased reliance on secured funding. Although currently profitable and well capitalised, many banks will experience income and credit losses, which may trigger a re assessment by some of them of the suitability of the so-called originate-and-distribute business model. The current episode has also shown that the transfer of credit risk outside the banking sector may ultimately not be effective. This is related with reputational and other concerns, which induce banks to take credit risk back onto their balance sheets.