samchain/econo-pairs-v1 huggingface dataset:
In addition to these buffers, the government responded swiftly once adverse shocks occurred especially with additional fiscal measures, including, soft loans for farmers and low-income earners and allowing travelling and shopping expenses to be tax deductible temporarily. So, what about 2017—when uncertainty appears to loom even larger than last year especially on the global front? Against the backdrop of improving global economy, risks to global growth continue to run high. The number one risk, in my assessment, is the direction of global trade and investments after the U.S. Presidential election. Yet there are others that cannot be ignored. These include China’s highly leveraged corporate debt problem and financial stability concerns, political developments in Europe, the deep-rooted problems in the European banking sector, and geopolitical risks in Northeast Asia and the South China Sea. All these factors could result in significant financial market volatility and easily derail the global economic recovery. Even so, I believe the Thai economy and the Thai financial system will remain resilient to withstand these challenges. As you have seen, the impacts of adverse external shocks on Thai financial markets have so far been limited, unlike many emerging market economies, thanks to our robust external position. We have international reserves greater than three times of short-term external debt. Compared with more than 30 percent on average in emerging markets in this region, foreign ownership of Thailand’s public sector bonds amounts to less than 9 percent1. Thailand is, therefore, relatively less prone to capital flight, should foreign investors change their sentiments and expectations.

In the latter part, I will share with you my thoughts on the way the Thai economy is moving forward as well as opportunities for Japanese businesses. Let me start with the first part, by reviewing what we went through last year. I believe you all agree with me that 2016 was full of unexpected events and turns. On the domestic front, we faced with a severe drought early in the year followed by a historic flood in the South around the end of the year, and of course the passing of His Majesty the late King Bhumibol, which caused all Thai people the greatest sorrow. Also, the government’s crackdown of illegal tour operators led to temporary yet significant effects on the tourism industry which had been a major growth driver of the economy in the past few years. On the external front, we saw the Bank of Japan’s adopting a negative interest rate policy in January of last year, an unease  1  over the fate of European financial institutions, the Brexit vote, and the unexpected outcome of the U.S. presidential election. Yet the Thai economy was able to weather these storms, one after another, and ended up with a 3.2 percent growth with all stability intact. The resilience reflected the underlying strength of the economy which owed partly to preemptive policies to create shock absorbers for the economy such as ample international reserves and ample banks’ capital base and loan loss provision.
If we assume that equilibrium unemployment is as high as 6.5 per cent in Sweden, the unemployment gap is about the same as in the eurozone and the United Kingdom. These level figures showing GDP and unemployment undoubtedly provide a more nuanced picture of the Swedish economy and the level of resource utilisation than merely looking at GDP growth. Given these figures, we can wonder what justification there is for tightening monetary policy in Sweden when the central banks in the other three countries are still conducting very expansionary policies. In the United States, Federal Reserve Chairman Ben Bernanke (2010) recently held a muchpublicised speech, in which he observed that the forecast for inflation was too low and the forecast for unemployment too high, in relation to the levels compatible with the Federal Reserve’s mandate. He therefore drew the following conclusion: “given the Committee’s  5  In Figure 2 the unemployment gap, which is the difference between the unemployment rate and equilibrium unemployment rate, is used to measure resource utilisation. I consider the unemployment gap to be a more robust, transparent and less easily manipulated indicator of resource utilisation than the alternatives. Moreover, until new and better estimates are made, I consider equilibrium unemployment to be around 5.5 per cent. I gave more detailed motives for this at the most recent monetary policy meeting (Sveriges Riksbank 2010c). It is also easy to do sensitivity analysis with different assumptions about the equilibrium unemployment rate.

17.11.2016  Challenges facing the retail banking sector Remarks at the dinner event organised by the European Savings and Retail Banking Group (ESBG), Madrid Fernando Restoy Deputy Governor  Good evening. It is a pleasure to have the opportunity to participate in this event and to address this eminent group of bankers. I am grateful to Isidro Fainé and José María Méndez for inviting me. I hope that you have now got your breath back and recomposed yourselves after viewing Picasso’s impressive and to some extent disheartening masterpiece, Guernica. You certainly need a strong mind to discuss banking issues nowadays. I imagine that probably much of the agenda of your regular meetings is devoted to exchanging experiences on how financial institutions such as those participating in the European Savings and Retail Banking Group (ESBG) are addressing the current challenges affecting the entire financial sector in the current post-crisis period. Allow me to attempt to make a modest contribution to that discussion. I would like to say from the outset that I do not believe that the financial crisis, as such, has challenged any specific business model. We have seen institutions with quite different sizes, governance structures and business orientations failing all around the world. The crisis has affected both investment and commercial banks as well as wholesale and retail businesses.
The labour markets in Europe – including Sweden – have shown clearer tendencies towards this than in the United States. During the period 1960-1999 employment increased substantially in the public sector. Since then it has stagnated and it is not likely that it will be the same engine for employment growth in future as it was previously. At the same time, employment in industry is continuing to decline. Instead, employment has increased most in the private service sector (see Figure 10). The capacity of the labour market to adapt to these changes in demand is of course important. In future, a large part of employment growth will probably be in the private service sector. It will be very important that the labour market functions in a way that enables a smooth transfer to growth sectors. This concerns retraining, localisation of new production and also wage formation. Something that one can feel apprehensive about is how the Swedish economy will manage an international recession. We are strongly dependent on exports. Investment is also increasingly made abroad. I therefore believe that it is important to make it attractive to invest in Sweden so that the domestic economy is strengthened. The current account surplus also shows that there would be scope to increase domestic demand, which could increase employment in Sweden and alleviate the effect of an international downswing. Wage formation Normally, increased competition in the goods and labour markets leads to lower profit shares and in the long term to lower unemployment and higher welfare.

16  supply of safe European assets, facilitating the general functioning of financial markets and the specific conduct of monetary policy. 17  References Aguilar, P., Ó. Arce, S. Hurtado, J. Martínez-Martín, G. Nuño and C. Thomas (2020). “La respuesta de la política monetaria del BCE frente a la crisis del COVID-19”, Occasional Paper, Banco de España, forthcoming. Andreeva, D. and M. García-Posada (2019). The impact of the ECB´s targeted long-term refinancing operations on banks’ lending policies: the role of competition, Working Paper No. 1903, Banco de España. Arce, Ó., R. Gimeno and S. Mayordomo (2017). Making room for the needy: the creditreallocation effects of the ECB’s corporate QE, Working Paper No 1743, Banco de España, forthcoming in Review of Finance. Arce, Ó., I. Kataryniuk, P. Marín and J. J. Pérez (2020). Thoughts on the design of a European Recovery Fund, Occasional Paper No 2014, Banco de España. Arce, Ó., M. García-Posada, S. Mayordomo and S. Ongena (2018). Adapting lending policies when negative interest rates hit banks’ profits, Working Paper No 1832, Banco de España. Arce, Ó., G. Nuño and C. Thomas (2019). “The Eurosystem’s monetary policy following the end of net asset purchases”, Analytical Articles, Economic Bulletin 1/2019, Banco de España. Bernanke, B. S., M. T. Kiley and J. M. Roberts (2019). “Monetary Policy Strategies for a LowRate Environment”, AEA Papers and Proceedings, No 109, pp. 421-426. Brunnermeier, M. K., and Y. Koby (2018). The Reversal Interest Rate, NBER Working Paper, No 25406. Eggertsson, G. and M. Woodford (2003).
Rates of infant mortality have fallen by th  8  40 percentage points since the end of the 18 century. The estimated lifespan of a human has risen by a 9  factor of over two. And estimated male skeleton heights have risen by 5-10cm. 10  Humans have grown,  financially and physiologically, in lockstep. The world has moved from a Malthusian Era to a Golden one. 5  Stiglitz, Sen and Fitoussi (2009). For example, Clark (2009). 7 Malthus (1798). 8 Our World In Data: https://ourworldindata.org/child-mortality 9 Our World In Data: https://ourworldindata.org/life-expectancy 10 Haldane (2015a). 6  3  All speeches are available online at www.bankofengland.co.uk/speeches  3  A Story with One “i”  What explains this extra-ordinary inflexion point in the history of economic growth and living standards? So fundamental is this question to so much of social and economic history that, understandably, it has attracted huge amounts of empirical, historical, social and theoretical research. Out of this cloud of evidence, a clear sunbeam of understanding has emerged about the deep causes and catalysts of economic growth. th  If you ask a schoolchild what happened in England around the middle of the 18 century, as I often do, many will give you the right answer. It marked the dawn of the Industrial Revolution. But what exactly was this a revolution in and what exactly caused it? In the standard account, the catalyst for this revolution in economic growth came from a single source, from one “i” - ideas.

In addition, the instruments at its disposal were reviewed, with notably the creation of a new credit line facility aimed at  BIS Review 75/2009  3  countries with a proven track record and designed to avoid the stigma that up to now has too often been associated with the IMF's interventions. The Financial Stability Board is the other face of the new international financial architecture. As you know, this is the new name of the former Financial Stability Forum. In fact, it's much more than a change of name. The Forum is becoming a fully-fledged international body. It is gaining in firepower thanks to a reinforced and permanent administrative structure. It is also gaining greatly in legitimacy thanks to the broadening of its membership to all G20 countries. Moreover, it is acquiring new powers through its position as the supervisor of international standard setters. Lastly, it is strengthening its key role in the supervision of financial stability through its full participation in the exercise to identify vulnerabilities being developed by the IMF. Let me stop here. Thank you ladies and gentlemen. 4  BIS Review 75/2009
Second, net settlement systems have been abandoned in favour of real-time settlement, in which each transaction is recorded immediately and permanently, rather than transactions being netted, for example, at the end of the day. It now appears to be generally accepted that settlement systems, where the central bank provides settlement services, should be real-time systems. In light of this, in 1997 the Central Bank began in co-operation with financial institutions a review of domestic settlement systems with the view of bringing them into line with best international practice. The aim is to establish a real-time settlement system in 1999. The operation of a real-time settlement BIS Review 42/1998  -8-  system will be a precondition for participation in the European Central Bank’s TARGET settlement system should it become available. Financial System Stability Securing the sound operation of financial institutions is a task of steadily growing importance for the Central Bank. By law, the Central Bank is required to protect the monetary system and support sound money and securities transactions. Central banks pursue this task in a variety of ways. They carefully follow those macroeconomic developments, which impact money flows and thus the profitability of financial institutions. Securing payment and settlement systems is a central bank task across the world. Central banks are also lenders of last resort to financial institutions and need to be prepared to lend resources in excess of what would normally be required.

The Central Bank’s short-term foreign liabilities were close to zero at year-end, where they in fact remain. The Bond Market Bond market reforms were continued in 1997. In 1996, the Central Bank decided to withdraw from the long-term market and reached custodian agreements with three securities firms following a bidding process. The Bank handed over to the firms a part of its securities portfolio and at the same time ceased to be a market maker in government bonds, government notes and housing bonds. The experience from these agreements is positive and they were BIS Review 42/1998  -4-  renewed in March 1997. The new agreements were more extensive than the earlier ones, and in their wake two banks announced that they would engage in market making for certain classes of government securities in the same manner as the custodial firms. It is not unlikely that such custodial agreements will become unnecessary and that the Central Bank will no longer need to be involved in ensuring adequate market making in the long-term market. Both the Treasury and the State Housing Authority began to reorganize the classes of bonds they issue, with the effect of improving the price determination of government guaranteed bonds and raising turnover in the secondary market. The Central Bank’s Monetary Policy Instruments In 1997, the Central Bank began preparing changes to its monetary policy instruments.
Higher financial buffers are not about protecting the banks – just like other firms, they can and should fail. They are there to protect the customers of banks, reducing the chances of them suffering panic or loss. And they are there to protect taxpayers too, reducing the chances of them footing the bill. Does this new regulatory protection go far enough? Banks will go from being 99% debt-financed to being 95% debt-financed – in other words, still high. Many academics have made the case for tighter regulatory standards. Their analysis is compelling and, frankly, I have seen no analytically-coherent counter arguments. But once again, time will tell. If more capital is needed, regulators will simply ask for more. Third, compensation. There is a deeply-rooted problem of short-termism in modern capital markets, with too great a focus on near-term versus longer-term, on spending over saving, on twisting rather than sticking. John Kay’s recent review for the UK government made some useful suggestions for tackling this problem. This short-termism problem is especially acute in the financial sector, where job tenures and performance targets have tended to be short, especially for CEOs. Pre-crisis, this encouraged unhealthy rent-seeking and risk-taking, gambling on one more big bonus. This gave rise to all the wrong incentives if the aim was to generate long-run value for customers and investors. How to lean against these incentives? Altering the time horizon for pay would be a good starting point. For example, some banks now use a remuneration model based on “deferral until retirement”.

Replacing missing prices in this way is usually referred to as imputation. The total weight in the CPI for the products where prices are imputed in this way is not particularly large; it amounts to just under 3 per cent of the total weight of the CPI, see Figure 2. The percentage of imputed prices is at present much higher in other parts of Europe. Figure 2 shows the aggregate weight for the product groups where imputation has been necessary in total for the euro area and the larger euro-area countries. The statistics refer to the harmonised index for consumer prices, the HICP.3  2  See the press release and the material presented at an extraordinary meeting in the Consumer Price Index Board on 1 April. 3 The HICP was developed by Eurostat, which is the EU’s statistical body. The measure was designed to facilitate international comparisons of inflation. 3 [6]  Figure 2. Percentage of imputations in the HICP 4 Per cent  Source: Eurostat  What do the many imputations abroad entail for the quality of the statistics? The conclusion in a current working report written by two world-leading researchers in this field is that the principles recommended by international organisations lead to underestimation of the rate of inflation and overestimation of the real increase in consumption.5 However, this is probably no major problem for Sweden, as the percentage of prices imputed is relatively low. The problems could be much greater for other countries, and therefore for international comparisons.
That is the purpose of my comments today: to diagnose some of market failures or frictions in stress-testing practices highlighted by the crisis; and, more speculatively, to suggest some practical ways in which stress-testing might deliver answers which are “roughly right”. The Golden Decade To understand the recent failures in risk management, some history is instructive. Prior to the current financial crisis, the previous two low tide marks for the financial system and risk management were the stock market crash of October 1987 and the failure of the hedge fund LTCM in September 1998. Both prompted a sea-change in risk management practices and technologies. BIS Review 18/2009  1  The October 1987 crash in many respects marked the birth of Value at Risk (VaR) as a key risk management tool in financial firms. By 1989, Dennis Weatherstone, JP Morgan’s thenchairman, called for a “4:15 Report”, which combined all of the firm’s data on market risk in one place. That report should contain information sufficient to answer the question “How much could JPM lose if tomorrow turns out to be a relatively bad day?” With this as the top-down edict, it is perhaps unsurprising that JP Morgan were an earlydeveloper and early-adopter of VaR. By 1996, they had published their methodology and the detail of the parameterisation of their risk models. In 1998 RiskMetrics Group, an independent for-profit business, spun off the JP Morgan methodology and began offering consultancy services to the risk management community.

Implicit in these ratings was the assumption that a large, national decline in home prices was extraordinarily unlikely. The rise in home prices led to a surge in construction activity, which helped to sustain the housing boom for a time. This effect was particularly powerful in states such as Arizona, California, Florida, and Nevada. Rising home prices also bolstered the economy by supporting consumption, as households monetized these gains by cash-out refinancings and home equity lines of credit. The housing boom was also supported by an accompanying financial boom. The financing activity associated with the surge in mortgage originations and securitizations pushed up the earnings of the major banking and securities firms. These strong earnings created incentives to ease underwriting standards further. But, as housing supply responded to the increase in home prices—housing starts rose from a 1.5 million annual rate in mid-2000 to a 2.3 million annual rate in early 2006—the positive feedback loop began to run in reverse. Home prices began to soften, subprime borrowers found it more difficult to refinance, and mortgage loan defaults and delinquencies rose. As the bust got underway in earnest, residential investment declined and consumer spending was undercut as home equity levels fell. The housing boom and bust underscores several important lessons. First, the financial sector is not only a very complex system, but also one that can be inherently unstable—subject to excess, then sharp reversal.
Few people - even in the suffering sectors - argue that we should - not because of insensitivity to the economic and social distress that can result for those communities that are most affected, but because of the more extensive damage that it would be likely to cause to the wider community. I said a moment ago macro-economic stability depends upon keeping overall demand growth continuously broadly in line with the underlying structural, supply-side, capacity of the economy to meet that demand. There is not a lot frankly that macro-economic policy itself can do directly to affect the supply side which is obviously crucial in determining the rate of growth we can sustain. That depends fundamentally on the ability of management and the skills of the workforce, though it can be importantly affected by the whole range of government policies beyond overall fiscal and monetary policy. These policy choices are far more complicated than the more technical choices at the macroeconomic level - and they are way beyond my area of competence. But they are essential to the present debate so let me offer a view, as it were from the sidelines. A key issue in this area concerns the respective roles of government on the one hand and private markets on the other. And there is little doubt that the tide has recently been flowing in favour of private markets - certainly as far as direct government involvement in the processes of production is concerned.

At the same time, in connection with public spending, primary spending has held at a high growth rate in recent years, attaining levels that cannot be sustained for much longer and which, therefore, it will be necessary to reduce. In turn, the deterioration in the budgetary position is taking the form of a rapid increase in public debt and, therefore, too, in the amount of resources needed to meet the payment of the interest burden. It should also be stressed, as various recent past episodes in some developed countries show us, that the dynamics of rising debt can prove difficult to reverse. All the more so when some factors that helped towards its reduction in the past, such as lower interest rates and the high growth of nominal GDP, can no longer be counted on. The need to reverse the high structural deficits and to prevent the risks linked to debt dynamics from materialising thus evidences the fact that there is no more room for expansionary budgetary policy. Given the fiscal imbalance that has built up, it will be essential to devise a transparent and credible budgetary consolidation strategy for the medium term that will require the adoption of ambitious measures, especially on the expenditure front. In a setting in which the recovery is still uncertain, the necessary fiscal adjustment should be designed in such a way as to minimise the potential adverse effects on economic growth.