samchain/econo-pairs-v1 huggingface dataset:
Fiscal policy has been, and remains, the most appropriate tool to act in this setting, since it has the instruments to achieve this objective with targeted actions that are suited to a shock whose duration is uncertain and heterogeneous. The response of European governments, mainly centred on measures to support the income of households and firms, has generally been very forceful and, on this occasion, was also backed by unprecedented joint action, especially following the approval of the European recovery programme Next Generation EU by the European Council. 1  For its part, monetary policy also needed to act, and has acted, very forcefully. Indeed, the pandemic-induced economic shock was initially accompanied by a sharp tightening of financing conditions in the euro area. As various governments announced plans to contain the virus, financial markets began to factor in heavy declines in economic activity and an increase in public and private debt. This pushed up interest rates in the sovereign and corporate debt markets, a situation which could have amplified the fall in aggregate demand and, therefore, in inflation had it not been addressed in time. Moreover, the initial phase of the COVID-19 crisis did not affect all euro area countries evenly, but asymmetrically. Some countries, such as Italy and Spain, which already had relatively high levels of public debt, were hit harder by the first wave of the virus, both epidemiologically and in terms of their reliance on more vulnerable industries (for example, tourism). As a result, borrowing costs rose much more markedly in these countries.

Faced with this situation, with the dual objective of easing financing conditions and addressing emerging signs of financial fragmentation among euro area countries, on the ECB Governing Council we approved a package of measures which acted in two main dimensions: asset purchases and liquidity-providing operations. First, through the pandemic emergency purchase programme (PEPP), and second, through targeted longerterm refinancing operations (TLTROs). These measures have subsequently been expanded and strengthened (most recently, in December), owing to the persistence of the pandemic and its negative effects on the economy. I would now like to discuss each of these measures in greater detail. The PEPP, a programme for the purchase of public and private-sector bonds, was launched in March 2020. Its flexibility is what sets it apart from the previous asset purchase programme (APP). Thus, whereas the APP is relatively rigid in terms of how the asset purchases are distributed both over time and across jurisdictions, during the most critical months of the pandemic the PEPP has allowed us to concentrate purchases on those countries whose financing conditions have, at any given time, been subject to a greater degree of tightening. 2  Thanks to this flexibility, together with its large initial envelope, the announcement of the creation of the PEPP on 18 March served to substantially reduce interest rates on sovereign debt (especially that of the countries hardest hit by the health crisis at that moment, such as Italy and Spain).
4 In this context, emerging countries are forced to borrow in units of currencies that they are basically unable to issue. All these concerns have direct impact on the fragility of financial markets. Therefore, any doubt over the sustainability of fiscal discipline causes volatility in financial variables and has a high possibility of endangering central bank goals. In the case of Turkey, when we look back, we see that the period of high and variable inflation coincides with high public deficit being financed by the Central Bank. An increasing lack of fiscal discipline in public expenditures and further widening of budget deficits caused inflation to get out of control and the public sector borrowing requirement to grow continuously. This structure affected the banking system, as well. The Turkish banking sector was not able to perform its intermediary function effectively. Instead, the sector mostly financed public sector deficits. Looking to the present, on the other hand, one of the most important changes is that the Central Bank of Turkey no longer extends credits to the Treasury or any other public institution by the amendment made in its Law in 2001. And it is no coincidence that inflation has been on a declining trend since then. Moreover, tight fiscal policies have been put into practice for the last five years. A very high level of primary surplus, that is 6.5 percent, has been targeted. The positive effect of these measures has started to be observed in several areas.

In fact, what is more important than the figures is that central banks were first established mainly as the lender of last resort and banknote issuer, rather than as an institutional body of monetary policy. Today, there are 160 central banks operating around the world. Some of them are also responsible for supervision and regulation of financial system and have been publishing financial stability reports, and some of them are targeting a certain measure of general price level and have been issuing inflation reports. Thus, in a broader perspective, the evolution of central banking has followed a course from maintaining liquidity when it is necessary and issuing banknotes, towards keeping inflation low and stable, and preserving stability in financial markets. In some sense, this evolution process can be characterized as the converging of the objective functions of central banks all around the world. To be more precise, it is generally accepted that in the case of both industrialized nations and emerging economies, the main contribution that a central bank can make to economic welfare in the long run is achieving and maintaining price stability. Moreover, maintaining price stability is not merely an issue of maximization of economic welfare. It gives people the confidence that money will retain its value over time, ensures that price signals function as a guide for markets to function efficiently and establishes trust in the interaction among economic agents, in property rights, in society and in the future in general 1 .
21  This might help explain why the UK’s labour share has  fallen less markedly than in these other countries. Using the Acemoglu and Restrepo ready-reckoner, if the UK had the same degree of industrial robot penetration as the US spread over a decade, this would lower 22  wage growth by around 0.4 percentage points per year. 19  For example, Acemoglu and Restrepo (2018). IMF (2017). These automation measures take no account of differences in industry structure across countries. 22 We use 0.4 as the approximate mid-point of the Acemoglu and Restrepo range. 20 21  11  All speeches are available online at www.bankofengland.co.uk/speeches  11  What is true across countries appears also to be true across sectors. Chart 22 plots a measure of automation across sectors against changes in the labour share. It suggests a downward-sloping relationship, consistent with increased automation depressing pay. (d)  Monopsony  A final factor influencing the pay power of workers is the degree of concentration in the corporate sector. There has been much recent discussion of the rise of so-called “superstar” firms, benefitting from global network economies of scale and scope. 23  The larger a company’s share of the product (monopoly) or labour 24  (monopsony) market, the greater its degree of power over customers or workers. Measures of industry concentration in the US (and in some other countries) have trended upwards, secularly and significantly, over several decades.

Conclusion  Pay prospects are determined in part by employment, in part by productivity and in part by power. All three have been important in explaining the weakness of pay during its recent “lost decade”. And each is likely to continue to be important for pay in the period ahead. Monetary policy can support the first piece of the pay jigsaw – employment. It has done so significantly over recent years, perhaps to the tune of creating 1 ½ million new jobs. But it can do little over the medium term to support productivity or to reshape the structural forces influencing pay power, the second and third pieces of the pay jigsaw. Doing so relies on policies which shift the supply side of the economy. Longer-term, it is through improved skills, productivity and structural reform and regeneration that pay power for workers can be restored. This underlines the importance of the Government’s Industrial Strategy, whose objectives are to do just that. In its White Paper on Industrial Strategy published last year, the Government proposed setting up an Industrial Strategy Council. 31  This independent body of experts was designed to monitor, and report  publically, on progress towards meeting the objectives of the industrial strategy. Earlier this week, I was delighted to be appointed, in a personal capacity, to Chair the Industrial Strategy Council. I believe it can play an important role in supporting the Government’s industrial strategy, which seeks to increase living standards across the UK, help industry to thrive and boost workers’ pay power.
[11] Balance sheet run-off, together with higher expected net issuance, will gradually help alleviate the underlying tensions. It will increase the amount of government bonds in the hands of private investors and thereby help smooth the plumbing of the financial system. Over time, QT will be more efficient in alleviating general asset scarcity per unit of balance sheet change than the repayments of targeted longer-term refinancing operations (TLTROs). While recent repayments have rechannelled government bonds that had been pledged with the Eurosystem back to the market, the release of high-quality collateral that is particularly scarce in repo markets has been limited (Slide 7, left-hand side). This is because banks do not tend to mobilise their safest and most liquid assets as collateral with the Eurosystem, partly reflecting the introduction of collateral easing measures during the pandemic. The impact of QT on the availability of sovereign bonds, by contrast, depends on the composition of maturing securities in our public sector purchase programme (PSPP) portfolio for which the share of higher-rated jurisdictions is substantially larger than for the collateral freed up by the TLTRO repayments (Slide 7, right-hand side). Withdrawing accommodation in support of desired monetary policy stance The third consideration relates to the effect of the stock of our monetary policy bond holdings on our policy stance. We have clarified that our key interest rates are currently the primary tool for restoring price stability.

(2016), “The ECB's asset purchase programme: an early assessment”, Working Paper Series, No 1956, ECB, September; Eser et al. (2019), “Tracing the impact of the ECB’s asset purchase programme on the yield curve”, International Journal of Central Banking (forthcoming); and Blattner, T.S. and Joyce, M. (2020), “The Euro Area Bond Free Float and the Implications for QE”, Journal of Money, Credit and Banking, Vol. 52(6), January, pp. 1361-1395. For a discussion of the different transmission channels of the pandemic emergency purchase programme, see Schnabel, I. (2021), “Asset purchases: from crisis to recovery”, speech at the Annual Conference of Latvijas Banka on "Sustainable Economy in Times of Change", Frankfurt am Main, 20 September. 2. Partial reinvestments will be conducted broadly in line with the practice followed during the full reinvestment phase. In particular, the remaining reinvestment amounts will be allocated proportionally to  the share of redemptions across each constituent programme of the APP and, under the public sector purchase programme, to the share of redemptions of each jurisdiction and across national and supranational issuers. See ECB (2023), ECB decides on detailed modalities for reducing asset purchase programme holdings, press release, 2 February. 3. See also Schnabel, I. (2023), “Monetary policy tightening and the green transition”, speech at the International Symposium on Central Bank Independence, Sveriges Riksbank, Stockholm, 10 January. 4. For more information on the differences between a corridor and a floor system, see Åberg, P. et al.
Clearly, however, the new PEPP programme has contributed significantly to alleviating some of the financial distress to which the health crisis gave rise in the first half of March. Such distress had taken the form of a strong rise in sovereign and corporate debt yields, which has subsequently been reversed in the main following the announcement of the programme. The positive effect of the new package has been visible not only in the prices of the debt instruments through interest-rate spreads, but also in the amounts issued. Thus, new investment-grade corporate debt issues, by the most creditworthy companies, which had slowed significantly since early March, rebounded strongly after the announcement of the PEPP. As a result, the improvement in financing conditions has helped firms with sufficient credit quality to continue funding themselves on the capital markets. As to the long-term refinancing operations, the preliminary information based on euro area bank lending surveys suggests that banks are using this liquidity mainly to grant loans to households and firms, and that they plan to do so to an even greater extent in the coming months, especially to firms. In any event, the scale of the economic downturn caused by the pandemic, its effects in terms of the large increase in countries’ financing needs and the uncertainty over the  25  duration of these effects make it necessary for monetary policy to stand ready to act further if conditions so require.

A characteristic feature of the new programme is that it envisages large measures of flexibility in terms of its distribution over time and, in the specific case of public asset purchases, of the issuing country, too, if market conditions were to make it necessary, in particular if any sign of financial fragmentation within the euro area were to emerge. 23  This announcement completed the broadening of the APP on 12 March, which entailed an increase in the volume of net purchases, to the end of the year, of € billion. Lastly, the Council decided to increase the asset classes of private issuers that can be purchased, deeming commercial paper of sufficient credit quality to be eligible. As regards liquidity programmes, on 12 March the ECB announced the application of more favourable conditions to its so-called and already existing “targeted longer-term refinancing operations” (TLTRO-III). These operations provide financing at a favourable cost to banks. This may be all the more attractive if banks meet a series of requirements regarding the use of such funds. The requirements involve maintaining or increasing the volume of their lending to households (excluding lending for house purchase) and to firms during the period from 1 March 2020 to 31 March 2021. The current conditions, which are the outcome of an additional review conducted on 30 April to make them even more favourable, offer funds to banks at a cost 50 bp lower than the ECB’s deposit facility rate (currently at -0.50%).
18.10.2018  Welcome Address Conference “The New Bank Provisioning Standards: Implementation Challenges and Financial Stability Implications”/ Banco de España, FSI and CEMFI Pablo Hernández de Cos Governor of the Banco de España  Good morning to everyone. It is my pleasure to welcome you all to the conference: “The new bank provisioning standards: implementation challenges and financial stability implications”, hosted by the Banco de España and co-organised with the BIS Financial Stability Institute and CEMFI. Let me first thank these two institutions for their participation and active involvement in the conference. The invaluable work and expertise of the FSI and the ever-necessary academic rigour provided by CEMFI combine perfectly with the Banco de España’s long-dated experience in banking supervision and create the sufficient conditions for this event to be a fruitful one. These three elements should be the ideal ingredients to ensure a promising and, hopefully, successful conference. Furthermore, the presence of leading international figures from academia, the banking industry and supervisory, accounting and auditing organisations as chairs and panelists, are an effective guarantee that a lively and enlightening debate over the next two days will arise and retain the interest of the audience and ultimately meet the organisers’ original aspirations for the conference. As a starting point, we should recall that credit risk is, by far, the most important type of risk universal banks face, as their customary activity is based on granting loans.

In addition to problems in achieving the right pricing and quantity, there are also other aspects that must be considered in the event that the state-issued means of payment disappears from the payment market in the future. Social welfare maximisation is a broader goal than private actors’ interest in maximising their profits. For example, it is important for central government to achieve a good balance between socio-economic risks and costs. Central government also takes account of factors connected with ensuring accessibility for all groups in society, resilience to shocks, preparedness and equal conditions regardless of where in the country users may live, for example. What I want to say is that it would probably require increased state governance and quite extensive resources to ensure that the private market delivered on all these points. What would be required is something that needs to be analysed further in parallel with the analysis of the e-krona. The alternative to regulation is for the Riksbank to continue to supply a means of payment that sets the standard for the country’s means of payment and that also exposes the private sector to a certain amount of competitive pressure, just as we have done for 350 years. Several measures are needed for resilience on the payment market The Riksbank also carries out other work than the analysis of the e-krona to safeguard the resilience of the payment market.
(2) Strengthening the resilience of the global financial system Faced with such developments, it would be prudent to strengthen further the resilience of the global financial system. [Slide 3] I would argue that macroprudential policy has a key role to play to address the immediate concerns and is one critical element in strengthening resilience further. Macroprudential authorities can seek to prevent an acceleration of the financial cycle. Or, with more reasonable ambitions, to contribute to limit the formation of “lumps of risks”. The most ordinary macroprudential intervention relies on communication. By reminding time and again of the possible pitfalls of leveraging up and becoming complacent about risk taking, we seek to prompt second thoughts and ensure that risks are effectively understood, adequately priced and sensibly managed. If it starts with communication, macroprudential policy in this respect can also go further. Indeed, this preventive reasoning led the HCSF, the French macroprudential board, to limit the main French banks’ exposure to large “highly indebted firms”: by making it more difficulty to an already heavily indebted corporate to take on even more debt, the aim is to restrain the development of a segment of overstretched large firms. But the main objective of macroprudential authorities and an easier one to achieve should be to strengthen the resiliency of the financial sector when things are going well to allow it to withstand the shocks that will eventually hit. This is the rationale behind the CcyB. We do not intend to curb the overall credit growth.

This rapid swing—a reduction of more than $ billion on an annual basis—in the resources available for household consumption was associated with a sharp and prolonged slump in personal consumption expenditures during the Great Recession. Typically, consumption growth slows but remains positive during a recession. In contrast, consumption actually contracted by over $ billion during the Great Recession. Between 2009 and 2012, households continued paying down debt of all kinds—with the exception of student loans, which behave differently from most other forms of consumer borrowing. Ultimately, housing prices stabilized and began to increase again in 2012. 2/5  BIS central bankers' speeches  However, since that turning point in home prices over five years ago, something surprising has happened. Nationally, home values have risen over 40 percent since 2012, and are now very close to their pre-crisis levels on average—just 4 percent below their all-time peak reached in early 2006. Most other kinds of debt—first auto, and now, credit card debt—have joined student debt by starting to rise again, resuming their traditional role in financing consumption. The surprising development is that housing debt has stayed virtually flat. The previous behavior of using housing debt to finance other kinds of consumption seems to have completely disappeared. Instead, people are apparently leaving the wealth generated by rising home prices “locked up” in their homes. The implications of this development have been quite significant for the retail sector.