samchain/econo-pairs-v1 huggingface dataset:
“The Great Leveraging,” NBER Working Papers, No. 18290. BIS central bankers’ speeches  1  this context, Turkey established the Financial Stability Committee in 2011. Along with the Central Bank, the Committee is composed of the Banking Regulation and Supervision Agency, the Capital Markets Board of Turkey, the Savings Deposit Insurance Fund and the Undersecretariat of Treasury. Distinguished Guests, Now I would like to briefly mention Turkey’s contributions to global financial stability. Turkey became a member of the Financial Stability Board (FSB) in 2009. In 2014, Turkey will participate in G20 Troika and assume Presidency of the G20 in 2015. During the period from 2014 to 2016, when Turkey will be taking part in G20 Troika, our representative from the Undersecretariat of Treasury will be assigned to the FSB Steering Committee. Turkey became a member of the Basel Committee on Banking Supervision (BCBS) and the Group of Governors and Heads of Supervision (GHOS) in 2009. The Central Bank of the Republic of Turkey will participate in the FSB Steering Committee during the period 2013–2015 when it will be chairing FSB Regional Consultative Group for the Middle East and North Africa (MENA). The New Constituency group, formed upon an agreement signed within the International Monetary Fund (IMF) governance reform framework, includes Austria, Hungary, the Czech Republic, Slovakia, Slovenia, Belarus and Kosovo along with Turkey. According to this agreement, during the periods of 2014–2016 and 2018–2020, Turkey will assume the Executive Director position on behalf of the group for two-year terms.

At the latest G-20 meeting held in Los Cabos, a number of emerging market countries including Turkey declared their intention to contribute to global financial stability by increasing the resources of the IMF. The Central Bank of the Republic of Turkey will contribute to IMF resources up to USD 5 billion, to be counted as part of its international reserves. Distinguished Guests, The Central Bank of the Republic of Turkey will continue to play its part in order to achieve and maintain price stability and to contribute to financial stability in the upcoming period. I believe that this two-day-meeting will be both fruitful and beneficial in terms of contributing to global financial stability. I would like to take this opportunity to welcome once more all distinguished participants to Istanbul. Thank you. 2  BIS central bankers’ speeches
In November 1992 the fixed exchange rate simply had to be abandoned, making it necessary to work out new ways of working in a credible way with a flexible rate. Meanwhile, the problems in the banking system had to be sorted out, while the Riksbank endeavoured to build up a future system for oversight and related matters. Today I want to talk about two subjects. One is related to financial stability, the other to monetary policy. I shall be fairly practical and, as I mentioned, speak from the point of view of a decision-maker rather than an academic drawing on our own experiences. At the same time, the topics are ones that I know are currently being discussed a good deal in the European Community. Financial stability Let me first deal with the management of a banking crisis. Some of the previous speakers have touched briefly on this. Our experience demonstrates that an important element in crisis management is clear-cut rules and structures. Time is short and the risks are huge. I also believe that there is now an increased risk of future crises being triggered by mistakes within banks under increasing pressures. This kind of crisis can emerge very rapidly indeed, maybe more rapidly than a crisis related to macroeconomic problems. It is sometimes argued that clear-cut rules are liable to create the problem of moral hazard. I do not deny that the risk exists and should be born in mind when rules and so on are constructed.

At that time, in the midst of a fairly lively discussion of interest rate policy, similar to that in the rest of Europe, we managed to cut our rate in several rapid steps without being accused of political bias. We could make our point by referring to a very concrete picture of our view on inflation. It is sometimes said that you need a firm foundation before venturing to publish forecasts. I don’t subscribe to that. Admittedly the Riksbank began by just compiling inflation indicators. It was not until 1996 that we published really comprehensive accounts of economic tendencies and inflation, followed in 1997 by the first projections of inflation. However, I personally believe that an understanding of how the Riksbank acts could have been achieved sooner if we had started earlier with fuller accounts of inflation and stuck to them in policy. In this context the recent Brasilian experience is interesting. In time the policy framework was augmented with what could be called a rule of action or a policy rule. We made it clear that if inflation is expected to exceed the 2% target in the coming one to two years, then we will normally raise the interest rate and vice versa. This formulation reflects our judgement that policy’s effects mainly occur after a time lag of twelve to twenty-four months. The rule of action has made policy even clearer.
In other words, are women being promoted because of their gender or because they are the best candidate irrespective of their gender? After being promoted, women’s wage progression is, on average, faster than men’s. This suggests that the women selected for promotion perform better.6  Allow me to focus on my organisation now. As I said earlier, the Banco de España currently has a gender-equal workforce, with the share of women having gradually risen from 30% at the end of the 1980s. Significant momentum was gained in the mid-2000s, coinciding with greater awareness about the advantages of gender diversity. However, at that point no specific policy geared towards increasing women’s presence was implemented. Instead it came about ‘naturally’. Despite the workforce parity achieved, there are still sizeable differences across professional groups: in 2019, women accounted for 40% of managerial staff, 46% of senior experts, 52% of experts and specialists, 66% of administrative staff and 11% of other support services staff. 6  The criticism that this could be to compensate for prior wage gaps after the diversity policy was ushered in also appears to be baseless since women’s relatively quicker salary increases after promotion were faster still pre-2011. 6  This recent momentum was above all due to women making up a relatively larger share of new entrants joining the Bank (see centre panel). Logically, among the most experienced staff, the relative share of women has increased at a much slower pace (see right-hand panel).

7  The average gender wage gap is a commonly used measure to summarise gender differences in career progression. In recent years, this gap has stood at 17% at the Banco de España (black bar), i.e. the average wage of male members of staff is 17% higher than that of female members. This is the raw gap and could therefore be due to differences in staff’s individual characteristics causing wage differences. The gap narrows from 17.2% to 8.4% when factoring in demographic characteristics (grey bar). Family situation lies behind a portion of this difference. The gap closes to 7.9% if we factor in marital status and parenthood (blue bar). Adding in characteristics such as years of experience and area of activity narrows the gap further to 6.8% (red bar). Taking professional group into consideration, the gap closes completely (green bar). Yet it is important to take into account that, unlike the other individual characteristics that we can assume to be exogenous, an employee’s career history has a significant bearing on their professional group. Once staff members’ individual characteristics have been factored in, a significant gap only remains for women with children. In summary, when considering the underlying causes of the gender wage gap, the two usual suspects are in play: parenthood and movements between professional groups (or promotions). In these times, marked by a sense of urgency to find solutions and answers, I believe central banks must spearhead efforts to analyse and address the major challenges facing society and the economy.
And as is discussed in the aforementioned Central Bank report, such exchange rate volatility can sometimes be a source of economic volatility. Furthermore, as examples have shown, lack of fiscal discipline together with overly loose financial regulation and lax supervision can undermine independent monetary policy with either a floating or a fixed exchange rate, even if the latter takes the form of a currency board. The “capital flow problem”, as we could call it, lies in capital inflow surges based on excessive optimism and underpricing of risk – capital inflows that then stop and reverse, with fire and brimstone and severe repercussions for economic and financial stability. Experience shows that this problem is not limited to countries with a floating exchange rate – quite the contrary, in fact. Countries with a pegged exchange rate have suffered severely from just such a scenario, as have countries within the euro area. This problem was a key player in the crises in Greece and Spain, to give two examples. As a consequence, there is no less need for so-called macroprudential tools in countries with a pegged exchange rate or countries in a currency union than there is in countries with independent monetary policy and a floating currency. Some view foreign exchange reserves as the cost of pursuing independent monetary policy.

And according to the Bank’s baseline forecast, the outlook is good: continued strong GDP growth and full employment; a current account surplus throughout the forecast horizon; the prospect that Icelanders will soon own more assets abroad than foreign nationals own in Iceland; and inflation at target for the entire period. One can ask, in view of this, why some observers are so dissatisfied with monetary policy. I will discuss this in more detail later on. But there are significant risks, and we must be on the watch for them. There is an obvious risk of economic overheating. The labour market could spiral out of control. Economic policy mistakes could take place – for instance, if fiscal policy begins to pull too strongly in a different direction from monetary policy. We have seen the repercussions of this before. I will now turn to the main topics of my speech today: the level of interest rates in their long-term context, the foreign exchange market, and possible changes to the monetary policy framework. Level of interest rates During the run-up to the recent Parliamentary elections, there was considerable discussion of the level of interest rates in Iceland. If we are to come to a sensible conclusion on whether the nominal interest rate set by monetary policy is appropriate or not in terms of inflation, inflation expectations, the business cycle, a plausible estimate of the equilibrium real rate, and foreign interest rates, it is important that the discussion be based on facts.
The sector has so far shown itself resilient to the financial consequences of the severe shock represented by the Covid-19 pandemic. But equally, the supply of insurance seems in the round to meet demand from the economy. Moreover, we do not think about capital requirements in isolation, but as part of a three pillar regulatory regime (comprising capital, risk management, and disclosure). Today I want to talk a little about how we think about capital adequacy within that broader framework, and specifically the interplay with strength of market discipline, the ladder of intervention, and the way that firms structure themselves. In the light of those factors, how do we judge when the level of capital is ‘just right’? The three pillar regulatory regime Last year I talked about what the insurance sector does for the wider economy[3], which itself defines our mission in insurance supervision: the protection of policyholders and the stability of the supply of financial services to the wider economy. Broadly speaking, those services are the pooling of risk, provision of secure retirement income, and long term investment. The safety and soundness of individual firms is a primary objective, but is not really an end in itself, it is a means to fulfilling our mission.

It is in the interests of firms and the people of the United Kingdom, whose interests the Bank of England exists to serve, that we have that debate and that it be informed not by caricatures of each other’s positions, but by a shared understanding of both the costs and benefits of the capital element of prudential regulation, as well as its place in the wider regime. I would like to thank Alan Sheppard, Anthony Brown, Charlotte Gerken, David Humphry, and Manuel Sales for their help in preparing these remarks. 1. https://www.gov.uk/government/publications/solvency-ii-review-call-for-evidence 2. Letter from Sam Woods: Solvency II Risk Margin 3. Ask not what the economy can do for insurers – ask what insurers can do for the economy - speech by Anna Sweeney  Goldilocks and the three pillars: how much capital is just right? ‐ speech by Anna Sweeney | Bank of England  Page 5  Anna Sweeney Executive Director, Insurance  Sign up for latest updates  Goldilocks and the three pillars: how much capital is just right? ‐ speech by Anna Sweeney | Bank of England  Page 6
In the market for private sector bonds, interest rates fell as well, but not by as much as government bond yields, reflecting the greater substitution opportunities for corporate bond investors. While the introduction of the negative interest rate caused interest rates on the money and capital markets to decline, mortgage rates did not decrease to the same extent. Indeed, for long-term mortgages, interest rates are slightly higher than they were at the beginning of the year. This is because banks’ refinancing costs have not fallen to the same extent as money market interest rates. As a result, banks’ interest margins have come under pressure. 1 To partially offset this effect, banks have raised their mortgage interest rates. As yet, therefore, fears that the negative interest rate might contribute to stronger growth in mortgage lending have proved unfounded. 1  This affects the banks’ “liability margin”, which is the difference between the interest on maturity-matched alternative funding sources and the interest on deposits. BIS central bankers’ speeches  3  The Swiss economy in a difficult environment So far, I have spoken mainly about exchange rates and interest rates – that is, monetary conditions in the Swiss economy. I would now like to turn to the real economy. Switzerland is a relatively small open economy. 2 In general, this means that international developments matter a lot to Switzerland. However, during the global recession of 2009 and the sluggish recovery that followed, the Swiss economy proved to be surprisingly resilient.

There are three aspects of our collective goal [slide 7]: first, we aim to reach all members of the public, young people of course, teachers, students and financially vulnerable people, as well as all our fellow citizens over their entire lifetimes; second, we will deal with all subjects, from budgetary to financial and economic questions, in order to provide the basic knowledge required in all these fields to better understand and therefore make informed decisions; and lastly, we will use all relevant means to pass on this financial knowledge as widely as possible, including websites, efforts on the ground and partnerships. 2. The strategy is being quickly and effectively implemented [slide 8] On 24 January 2017, the dedicated financial education internet portal, "mes questions d'argent.fr", went on line. This portal is intended to become the primary information source for all our fellow citizens looking for answers to their day-to-day banking, budgetary, economic and financial questions, and a first milestone of 200,000 consulted pages has already been reached. Access through the portal is simple and quick; in three clicks users can access free content carefully chosen for its educational qualities, neutrality and freshness. We have opted for a similar approach to the Dutch "Money Wise" platform, in that it is both practical, with a limited amount of entries and materials, as well as cooperative, offering a variety of sources from all of our partners.
Exactly how the problems will take shape can vary, but it is almost always a question of some sector having become “over-leveraged”, which sooner or later leads to problems. Here I will assume that it is household indebtedness that is the main problem. At some stage, it becomes evident that the credit boom and the increased indebtedness have been based on too optimistic expectations and calculations. A lot more people will want to sell rather than buy the asset that formed the basis for the credit expansion and its price therefore falls. Let us assume that, as with the most recent crisis, it mainly concerns housing. The banks become cautious and reduce their lending, as the value of the collateral declines. Households’ assets have now fallen in value substantially, but the size of the loans remains unchanged. To attain a better balance between assets and debts, households reduce their consumption and begin to save. In addition to the fact that the credit supply declines as a result of the banks becoming more cautious, the demand for loans also declines. This adjustment in households’ balance sheets gives a fall in demand, which in practice has often proved fairly prolonged.3 This process often leads to a substantial weakening in public finances, too, partly because of the rapid decline in economic activity and partly because the banking system may in a worst case scenario require support. This development means that the business cycle and the financial cycle take a simultaneous downturn, as in Figure 1.

For instance, the Riksbank’s analysis of the financial sector became more structured and systematised, and from 1997 we began to present our analysis in the form of Financial Stability Reports. This financial stability work was, however, far from fully-developed when a new financial crisis broke out just over six years ago, this time on a global scale. For instance, we still lacked a system for crisis management. We also failed to prevent a too rapid credit boom in the Baltic region, at the same time as Swedish banks proved to have liquidity problems when the dollar market froze. As the new crisis was deeper and affected a much larger number of countries than the crisis at the beginning of the 1990s, it also acted as a stronger and more worldwide signal that major efforts were needed to avoid financial imbalances causing problems in the economy as  BIS central bankers’ speeches  1  a whole. The most concrete expression of this opinion was the emergence of the policy area that came to be known as macroprudential policy, which aims to take the overall view of the financial system as a whole that was lacking prior to the crisis. In this context, it is worth pointing out that in Sweden the boundary between macroprudential policy and supervision of individual banks, microprudential policy, is not particularly distinct because of the market structure we have, with four dominant major banks.
Drivers of today’s elevated inflation If that commitment is as strong as I claim, it begs the question of how we have ended up in the current situation, with inflation so uncomfortably high. Answering that question requires we delve a little further into recent economic developments – peeling another layer from the onion. The character of external shocks In large part, recent price developments have been driven by a succession of unanticipated external disturbances to the UK economy – among others, the Covid-19 pandemic and its aftermath, and the Russian invasion of Ukraine. In the jargon of economics, we label this ‘a sequence of adverse external shocks’. Four features of these disturbances are worth emphasising. First, they were genuine ‘shocks’ in a specific, technical sense: they were not (and could not have been) anticipated. [5] Second, they have transmitted into UK inflation relatively quickly. For simplicity, I’ll focus for a moment on the impact of higher international oil and gas prices on UK consumer price inflation. [6] The direct implications of these external shocks for UK price developments transmits within a matter of months. Even with the added complications implied by the OfGEM price cap, higher European wholesale gas prices entered UK utility prices – and thus UK CPI inflation – within six months. Moreover, many of the subsequent indirect implications of higher international energy prices – that is, their impact on a wider set of UK goods and services prices, via (say) higher transport or utility costs – are already also being felt.

It is worth mentioning that this macroeconomic stability is a reflection of the successful combination of key economic policies, that is to say, monetary and fiscal policies, during last year. More specifically, the fiscal policy aimed and succeeded to realise the necessary consolidation process following a fiscal expansion that accompanied economic developments in 2009. Fiscal consolidation was accomplished through better control over public expenditures and collection of revenues close to foreseen levels. The exchange rate for the national currency, regardless of its underpricing in 2009, less so in 2010, has been much more stable than currencies of other countries in South Eastern Europe, which apply a free flexible exchange rate policy. A gradual under-pricing of the Albanian Lek is deemed to have had a positive affect on the reduction of trade and current account deficits through establishing a more favourable dynamic for our economy’s exports and imports. Eventually, it is fully proven that the adoption of a flexible exchange rate regime has been one of the most outstanding choices of economic and financial policies over the past two decades. Annual increase of consumption prices has been almost all the time within the parameters established by the Bank of Albania, namely 2–4 per cent. Under moderate inflationary pressures, the Bank of Albania has followed a facilitating monetary policy, injecting liquidity into the inter-bank market and lowering the key interest rate to the level of 5 per cent. For 2011, macroeconomic indicators are expected to follow a trend similar to that of 2010.