samchain/econo-pairs-v1 huggingface dataset:
Furthermore, this month the Eurosystem will set in motion a new programme to purchase mortgage-backed securities, or securities backed by other loans held by banks, i.e. in Spain’s case, our various types of covered bonds. Following the approval of this set of measures, the ECB has reiterated its commitment, unanimously backed by its Governing Council, to resort if necessary to further unconventional measures. Developments in and outlook for the Spanish economy In contrast to the weakening of the recovery in the euro area, the momentum of the Spanish economy in 2014 has progressively firmed. GDP rose in the second quarter by 0.6%, marking four consecutive quarters of increases. The latest figures point to this trajectory continuing over the rest of the year, albeit at a more measured pace. That will allow the yearon-year rate of change in GDP to draw close to 2% in the final quarter, a rate at around which the Spanish economy may be expected to grow on average in 2015 as a whole. The growth rate of employment during the first half of the year exceeded forecasts across the board in the productive sectors, albeit more intensely so in market services. Our expectation is that this pattern of job creation and of gradual reduction in the unemployment rate will continue, although perhaps somewhat more slowly. 2  BIS central bankers’ speeches  National demand is playing a key role in this phase of recovery.

This further cut to the negative deposit facility rate increases the incentive for banks not to hold immobilised surplus liquid balances in their accounts with the Eurosystem. In the non-conventional arena, the ECB has set in train a new long-term refinancing operation explicitly geared to make lending to the private sector more buoyant. These operations, which will be launched from September this year to June 2016, may have a term of up to 4 years, at a very attractive cost for banks: 10 basis points above the main refinancing operations rate, which is equivalent at present to only 0.15%. Given that the aim of new long-term injections is to stimulate bank loans to the non-financial private sector, their availability has been linked to both the stock and the flows of lending extended by banks to households and firms, although loans for house purchase have been excluded from these calculations. The non-conventional measures agreed in September also include two new asset purchase programmes, the details of which will be addressed in the next ECB Governing Council meetings. The Eurosystem may acquire financial instruments derived from securitisations that meet various requirements. They must be simple, transparent and based on loans to households and firms in the euro area. The programme is expected to be able to contribute to reinvigorating the securitisations market, a major market that has been greatly affected by the crisis.
A corporate sponsor of a defined-benefit pension scheme is, in effect, providing a guarantee or, broadly, writing a very complex option 4 : one on which the present value of the payoffs is related to, amongst other things, the future growth in earnings of its workforce, their longevity, and the yield on an equivalent-maturity risk-free bond. Apart from the design of the scheme itself and the associated balance of wages and pensions in employee remuneration, the sponsor makes two big choices: the level of contributions it makes to the fund, and the asset allocation of the fund. (It may seem odd to say that the sponsor makes a decision about fund asset allocation, because of course that is formally the responsibility of trustees. But as guarantors, those decisions affect the risk run by sponsors who, in principle, could make adjustments to their own balance sheet if they regarded trustee choices as suboptimal.) Past increases in life expectancy entail higher contributions and, other things being equal, add to the marginal cost of a firm’s labour force. An unavoidable source of uncertainty is future developments in longevity. 1  See footnote 18, Chapter IV ‘Awash with cash: why are corporate savings so high?’, World Economic Outlook, April 2006, page 151. 2  For the household sector, the effect has been that employer contributions more than account for total net savings. 3  A breakdown of contributions into ‘one-off’ and ‘regular’ is available only for self-administered schemes.

Fast economic growth does not happen without shaking a society's economic, social, cultural, political and institutional equilibria. This 'shaking' is both a condition and a consequence of  economic acceleration. It is both an effect of economic, social, cultural, political and institutional disruption and a cause of economic, social, cultural, political and institutional disruption. This is not a moral judgement; it is a statement of what I believe is a sober understanding of the state of affairs. In the well-known words of the Foreword to the Second Edition of Liquid Modernity, the late Zygmunt Bauman, remarks that “Forms of modern life may differ in quite a few respects – but what unites them all is precisely their fragility, temporariness, vulnerability and inclination to constant change.” Bauman’s “liquid modernity” is characterised by, I quote him, “the growing conviction that change is the only permanence, and uncertainty the only certainty. A hundred years ago 'to be modern' meant to chase 'the final state of perfection' -- now it means an infinity of improvement, with no 'final state' in sight and none desired.” Of course Joseph Schumpeter, almost sixty years before (and he was not the first one), had already emphasised the centrality of the disruptive process of transformation that characterises modern economic reality. He described it as “…by nature a form or method of economic change and not only never is but never can be stationary.
–  From the beginning of January 1999, cross-border money market transactions increased sharply, to reach almost two-thirds of total activity on all money market segments. The unsecured deposit interbank market —which is mainly concentrated on the shortest maturities— is highly integrated. The integration of interest rate markets within the euro area is a key achievement which deserves to be underscored. EONIA and EURIBOR have provided the market with uniform benchmarks that are fully accepted by all market participants. This is reflected, for instance, in the amount of daily transactions and the huge development of the euro interest-rate swap market. These structural changes in the euro area money market have prompted market participants to concentrate their euro cash management activity in order to take advantage of the higher liquidity levels on the secondary market. Needless to say, such integration has to be brought to fruition in the other segments of the money market, i.e. the repo market and the short-term securities market. Further integration will enhance the efficiency of the euro area financial markets and will be beneficial to both borrowers and investors. –  As regards stock markets and bond markets, major progress has been made in terms of integration. According to recent statistics, the euro, together with the dollar, appears to have been a major bond issuance currency in the first semester of 2001, with the euro accounting for close to 40% of total issuance.

(2021). Several of the world’s large economies are now in a period of slower labour force growth, making it less profitable for companies to undertake major investments. Even if savings are falling, companies’ incentives to invest are declining even further. The prediction is therefore that the global real interest rate will fall for a long time to come. 6 When the inflation target was introduced at the beginning of the 1990s, the Riksbank had support from the then prevailing economic crisis, in the sense that inflation was pushed down to a level close to the target, making the task then ‘only’ to try to keep inflation at this level. 4 [15]  way that companies set their prices and the wage demands that households put forward. The inflation that results from the inflationary price-setting and wage formation confirms expectations and in turn affects the new expectations of future inflation. This gives a new round of effects on price-setting and wage formation, and the high inflation thus becomes a self-generating process. One reason why the high inflation was built into expectations among households and companies was that it was not sufficiently counteracted by the overall economic policy. Instead, this policy became systematically too expansionary. At that time, Sweden had a fixed exchange rate. The idea was that this would have a disciplinary effect on price-setting and wage formation: If Swedish prices and wages increased faster than prices and wages abroad, our competitiveness would weaken, exports would decline and unemployment would increase.
Moreover, there is no emergency handbook that comes with the rule that says what to do in this event. An apparently unstated branch of the Taylor 1993 rule includes setting the federal funds rate to zero during these circumstances and then simply wait and presumably smile confidently in public while holding to zero rates. As a rigid policy prescription, we are thus left with inaction. And inaction looks like policy abdication because we are left doing nothing to try to make timely progress in reducing policy misses. This rule cannot be the be-all and end-all for monetary policy; for a policy rule that some say should be enshrined in the Federal Reserve Act explicitly to govern the implementation of U.S. monetary policy, its prescriptions under the recent circumstances we’ve faced are an absolute failure. Furthermore, given that the Taylor rule has failed so badly and done so for so long, how can we be confident that its prescriptions will still be a good policy to follow once the rule says that the fed funds rate should rise above zero again? Indeed, that’s what many versions of the Taylor rule say today – that it’s time now to begin to increase the fed funds rate. How can we know if the policy prescriptions are from a reborn and healthy policy tool or perhaps instead from one still suffering from a zombie-like hangover in terms of its prescriptions?

Evans, Charles L., and Jonas D. M. Fisher, 2011, “What are the implications of rising commodity prices for inflation and monetary policy?,”(pdf) Chicago Fed Letter, Federal Reserve Bank of Chicago, No. 286, May. Friedman, Milton, and Anna J. Schwartz, 1963, A Monetary History of the United States, 1867–1960, Princeton, NJ: Princeton University Press. Krugman, Paul, 2013, “Secular stagnation, coalmines, bubbles Summers,”(external) New York Times, opinion pages, November 16.  and  Larry  Summers, Lawrence, 2013, speech(external), Fourteenth Annual Research Conference in Honor of Stanley Fischer, International Monetary Fund, Washington, DC, November 8. Taylor, John B., 2013, “A review of recent monetary policy,” testimony(external-pdf) before the U.S. House Committee on Financial Services, March 5. 13  For more about the quantitative easing programs (also referred to as large-scale asset purchases) and the rationale behind them, see Board of Governors of the Federal Reserve System (2013). BIS central bankers’ speeches  9  Taylor, John B., 1999, “A historical analysis of monetary policy rules,” (external-pdf) Monetary Policy Rules, Chicago: University of Chicago Press, pp. 319–341. Taylor, John B., 1993, “Discretion versus policy rules in practice,”(external) CarnegieRochester Series on Public Policy, Vol. 39, Vol. 1, December, pp. 195–214. Taylor, John B., 1979, “Estimation and control of a macroeconomic model with rational expectations,”(external) Econometrica, Vol. 47, No. 5, September, pp. 1267–1286. 10  BIS central bankers’ speeches
However, it is often the case that a rapid fall in a credit and debt cycle entails a corresponding fall in the normal economic cycle – and not uncommonly a balance-sheet recession.6 Monitoring the credit and debt cycle thus becomes a way of stabilising the normal economic cycle. With this view, it is less obvious that financial stability policy and monetary policy should be conducted separately. But, once again, it is probably quite rare that there will be reasons to coordinate them. The policy rate will probably need to support financial stability policy With regard to the question of the role of the policy rate in financial stability policy, it is my personal opinion that one must always be prepared to use it to slow down an excessive expansion in credit, or to “lean against the wind” as it is usually called. Hopefully, it will be possible to find a set of macroprudential tools that are efficient enough so we do not need to use the policy rate for this purpose. Hopefully it will also be possible to find appropriate forms as to when they shall be used and by whom. But my feeling is that even when we have a proper framework for macroprudential supervision, situations may arise where support is needed from monetary policy “leaning against the wind”. One reason is that experience shows that it is difficult to construct regulations that can never be circumvented. The policy rate is a blunt instrument, as it has a broad impact on the economy.

6  BIS central bankers’ speeches  Figure 2 Government bond yields, 10-year maturity Per cent 8  8 Italy  7  UK  7  6  6  5  5  4  4  3  3  2  2  1  1  0  0 08  09  10  11  Source: Reuters EcoWin. This situation is very similar to the one experienced by Argentina, for instance, when they had a “currency board” that firmly tied their domestic currency to the US dollar. In the event of a crisis there has been no central bank that could create currency – in other countries with similar problems the physical currency has run out and the only solution has been to fly in dollar bills from the Federal Reserve. Now, of course, the fundamental problem is that Italy, like Argentina, has lost competitiveness, had a deficit on its current account and built up debt until the market has gradually lost confidence and demanded higher and higher interest rates. Competiveness then needs to be restored through some form of internal devaluation. This is unavoidable, but it takes a long time and does not help the acute liquidity crisis. The situation is different in the United Kingdom. If investors are concerned over the British credit worthiness they will sell their government bonds as in the example above.
The issuance of loans has grown very rapidly, especially in the United States but also in the U.K. and other European countries (Chart 15), and now accounts for close to a tenth of aggregate corporate debt in the advanced economies. At the same time, the terms on which they’ve been issued have become looser: the share of “covenant-lite” loans, imposing fewer restrictions on borrowers, has risen significantly.11 And at least until recently, the spreads on these loans – the extra margin on the interest rate, relative to safer government debt, demanded by lenders – had been falling (Chart 16). Chart 16: Spreads tightened through much of that period  Chart 15: Large flows of leveraged loans over the past two years 12-month flow £ 110  12-month flow £  Basis points  500  2,500  US (RHS) UK (LHS) EU (LHS)  90  Leveraged loans  400  70  High-yield bonds  2,000  300  1,500  200  1,000  100  500  50 30 10 -10 2001  0 04  07  10  13  16  19  Sources: LCD, an offering of S&P Global Market Intelligence and Bank calculations. 2005  2008  2011  2014  2017  Sources: LCD, an offering of S&P Global Market Intelligence, ICE/BofAML, Board of Governors of the Federal Reserve System (US) and Bank calculations.

In cross-country data the scale of the economic downturn after the crisis was positively correlated with prior growth rates of debt but uncorrelated with its level (Charts 3 and 4 cover 15 European countries, the US and Japan). In longer-term data, growth rates of debt are better predictors of financial crises. Even across individual households, the rate at which debt had accumulated in the run-up to the crisis seemed to tell you more about a borrower’s subsequent difficulties than the level of gearing. I want to say a little more about this today, using various examples from the UK. Chart 3: Levels of gearing ahead of the crisis unrelated to GDP growth after it  Chart 4: Growth of debt does better  Sources: BIS total credit statistics, Datastream from Refinitiv and Bank calculations. Sample includes 15 European countries, Japan and the US. Sources: BIS total credit statistics, Datastream from Refinitiv and Bank calculations. Sample includes 15 European countries, Japan and the US. I should say at the outset that I’m certainly not claiming that levels of debt are irrelevant. It must surely be the case that, all else equal, more debt means more financial risk. It’s possible there are lots of particular, country-specific factors – things like the non-recourse status of mortgages in the US or the tax regime in the Netherlands – that make a given quantity of debt more risky in some places than in others.
For instance, the simple approach of Basel II ties the amount of required capital to ratings by External Credit Assessment Institutions (ECAIs) because they have the strength in both the wealth of data and expertise in credit risk assessment. Unfortunately, only a few large companies in emerging countries are rated. Therefore, the challenge for regulators lies in the process of ECAI recognitions and risk-weight mapping processes as they must ensure the stability of the banking system while at the same time, foster the development of local ECAIs and the bond market. These efforts will undoubtedly take considerable time and patience, but it is a road that has to be taken. Financial development and the strengthening of policy institutions and framework, therefore, are the two most important structural features of emerging markets that need to be promoted, developed, and strengthened in the pursuance of monetary and financial stability. In my view, this is the most important reform issue that need to be effectively carried out. For the remaining part of my lecture, let me now turn to my last topic, that is the challenge of implementing structural reforms. While the two facets of monetary and financial stability discussed above are present in all economies, the interaction between them and the tensions that arise in terms of where the policy emphasis is placed are arguably more varied and more complex with greater welfare implications in the emerging market context, not least because the gains to be had from structural reforms are much higher in these countries.

As part of efforts to ensure sustainability in this new and more challenging environment, a Task Force on Islamic Finance and Global Financial Stability was formed by the Islamic Development Bank (IDB) and the Islamic Financial Services Board (IFSB). The report, which was completed in April this year, sets out eight areas that need to be further strengthened to bring the Islamic financial system to a  2  BIS Review 95/2010  higher level of performance in this new economic and financial order that is emerging. A recommendation of the report is the establishment of an Islamic Financial Stability Forum (IFSF) based at the IFSB as a strategic platform for productive dialogues to promote financial stability in Islamic financial system. The IFSF would also be a platform for the Islamic financial system to interface with the conventional system via the Financial Stability Board to facilitate the common objective of achieving global financial stability. To enhance the efficiency of the Islamic financial institutions, a solution is currently being developed to facilitate liquidity management at both national and international level. A Liquidity Management Task Force was established by the IFSB and the IDB to develop this solution. This task force is expected to make key announcements later this year to facilitate cross border liquidity flows for efficient resource utilisation by Islamic financial institutions. Islamic finance has come a long way and is set to continue its trajectory upwards and onwards.
In the end, clarity about the regulatory perimeter is both desirable and unavoidable – a task given to the Financial Policy Committee as part of the Bank of England’s new responsibilities. And the attraction of the more radical solutions is that they offer the hope of avoiding the seemingly inevitable drift to ever more complex and costly regulation. The broad answer to the problem is likely to be remarkably simple. Banks should be financed much more heavily by equity rather than short-term debt. Much, much more equity; much, much less short-term debt. Risky investments cannot be financed in any other way. What we cannot countenance is a continuation of the system in which bank executives trade and take risks on their own account, and yet those who finance them are protected from loss by the implicit taxpayer guarantees. The difficulty is in finding the right practical way to achieve that. Some of the solutions that economists have proposed have been dismissed by some as impractical and pie in the sky. But I am reminded of Keynes’ dictum that “practical men who believe themselves to be quite exempt from any intellectual influence are usually the slaves of some defunct economist” (Keynes, 1936). Of all the many ways of organising banking, the worst is the one we have today. I have suggested a number of ways in which the system could be reformed. But making the right choice will take much careful thought and a good deal of time.

While the “rags to riches” story has been a popular theme in U.S. history, income mobility in the United States is now notably lower than in many other advanced economies. Unfortunately, substantial differences in economic mobility exist within the United States. Important research by Raj Chetty and his co-authors suggests that upward mobility strongly depends on where one grew up.4 That is, places themselves seem to have a measureable effect on economic outcomes for children as they reach adulthood. In particular, this research indicates that higher upward mobility is associated with areas that are less residentially segregated by race or income, and that have higher-quality schools, stronger social networks, greater community involvement, and stable family structures. Significantly, they find that places with greater upward economic mobility tend to have lower income inequality. This evidence suggests that there is a fundamental inequality of opportunity for advancement that is tied to where people live. Reducing inequality of opportunity is something we should all work toward. Directions for Policy So, what are some specific ways policy can address inequality and improve economic mobility? While this is a difficult and complex set of issues with no easy answers, I do have a few thoughts. First and foremost, we can improve the quality of education for our most vulnerable citizens. Children who attend better schools and attain higher levels of education have more favorable long-term outcomes, including better job prospects and higher earnings.