samchain/econo-pairs-v1 huggingface dataset:
BIS Review 52/2008  In their expansion, the banks exploited the particularly favourable opportunities offered in the global financial markets in the form of abundant liquidity at historically very low prices. Thus, they relied on capital markets funding for their operations, raising the share of borrowed funds on the liability side of the balance sheet. The rapid expansion of the banks did not go unnoticed. It drew the attention of many observers at the end of 2005 and the early part of 2006, resulting in considerable headwind for the banks in that period. Questions were raised about their business model, their reliance on wholesale funding in international markets and low level of deposits, lack of transparency and cross ownership among other things. The banks responded effectively to the criticism levelled at them. They increased transparency, reduced cross ownership, and placed emphasis on raising the share of deposit on their funding side. They also significantly strengthened their capital base and last but not least greatly improved their liquidity position. As a result they were much better prepared for the sudden change in global financial conditions after the middle of last year. Most importantly, they had a strong liquidity cushion. The Icelandic banks have been the focus of considerable international attention in recent months. Questions have been raised about their viability and those have been reflected in their extraordinarily high CDS spreads since late last year.

The third important factor that contributed to the overheating of the Icelandic economy was the reduction in both direct and indirect taxes which, in addition to relatively large increases in general pay, led to a rapid increase in real disposable incomes. All of this happened during a period of an international liquidity glut and historically low interest rates which further facilitated domestic demand growth. The expansion of private consumption and the investment in the aluminium production capacity and the related power sector led to a widening of the current account deficit. It  BIS Review 52/2008  1  reached the equivalent of more than a quarter of GDP in 2006, a phenomenally large deficit both in Icelandic economic history and by international comparison. The part of the deficit that resulted from the investment in aluminium and power evaporates as construction is completed and exports of aluminium picked up as of late last year. However, the larger share of the deficit, which resulted from other domestic demand, will only subside as restrictive economic policies have their intended effects. The current account deficit fell towards 15% of GDP in 2007, it will remain more or less unchanged this year but fall further in 2009, aided by the depreciation of the króna which I will touch on later. Needless to say, inflationary pressures emerged early in the expansion phase. The Central Bank began to tighten policy in the spring of 2004.
I am the vice-chairman of the Federal Open Market Committee, the Fed committee that sets monetary policy to promote its statutory goals of full employment and price stability. Last week, the committee reaffirmed that it currently anticipates that the Federal Reserve’s federal funds rate target will remain exceptionally low – which I understand to mean at its current level – at least through late 2014. The FOMC also voted to provide additional support for economic activity by extending its maturity extension program – popularly referred to as Operation Twist – through the end of the year. This extension means that we will be buying an additional $ billion of longer term Treasury securities, paid for by selling or redeeming the same amount of shorter term Treasuries. This action reduces the supply of longer dated Treasury securities on the market and lowers longer term interest rates relative to where they would otherwise be in the absence of such a program. That puts downward pressure on corporate borrowing costs and mortgage rates, and supports asset prices such as housing and equities – all of which promotes growth. In addition, the FOMC adopted new language to describe its policy outlook, stating that it is “prepared to take further action as appropriate to promote a stronger economic recovery and  BIS central bankers’ speeches  3  sustained improvement in labor market conditions in a context of price stability.” I will let those words speak for themselves. Local economic conditions Now let me turn to economic conditions in Puerto Rico.

More generally, there are several reasons to think that inflation will remain moderate. First, the economy continues to operate with significant slack. Second, measures of underlying inflation show little upward pressure, and the growth rate of nominal labor compensation is low and stable. Moreover, inflation expectations remain well-anchored. Taking into account all these factors along with our current stance of monetary policy, I anticipate that inflation will be slightly below our 2 percent long-run objective over the next few years. One of the challenges I face as a policymaker is how much to adjust my medium term economic forecast in response to near-term developments, particularly when there is elevated uncertainty. Although I have made some adjustments of late, they have been relatively modest to date. That is because there are important issues – such as the outlook in Europe and the degree to which we have lost underlying momentum at home – where more information is needed before making an informed judgment. Although some of the current uncertainties will take time to resolve, I can imagine material data on a number of dimensions could become available in the coming weeks and months that could lead me to adjust my forecast further. I will be paying particularly close attention to whether domestic momentum and hiring picks up now that the pay-back for the mild winter is over, and whether financial conditions, which are heavily influenced at present by developments in Europe, ease or tighten further.
Finally, in China, while the policy cycle has turned and the economy appears to have reaccelerated, the authorities there will need to continue to deal with new challenges, including rapid growth in non-bank finance, increased leverage across the economy, and maintaining equilibrium in the midst of rapid structural change and increasing complexity. BIS central bankers’ speeches  1  So, while global growth appears to be picking up (after a lackluster 2012 which saw Europe and Japan contracting in the second half of the year, and a second consecutive year of slowing growth in the emerging market economies) the pick-up is likely to be only moderate; and significant economic slack in the mature economies (high unemployment, large output gaps, etc.) seems likely to be with us for some time to come. Against this backdrop, developed economy central banks are continuing to take extraordinary measures to support growth. Policy interest rates are close to zero, and central bank balance sheets have grown to unprecedented proportions via asset purchases and lending. As you know, the Fed is in its third round of large scale asset purchases. The Bank of England and Bank of Japan (BoJ) have been expanding their balance sheets as well, and markets expect the BoJ to engage in stepped-up asset purchases in the months ahead.

The reform effort has many moving parts, and further efforts are clearly needed to ensure that those parts fit together, and that the various parties work together. And these reforms are yet to be fully implemented, let alone tested over a full credit cycle. Of course, building a stronger system is not just about regulatory reform. Changes in institutional governance and culture are also needed. Many of the problems that surfaced during the crisis and more recently reflect a culture that emphasizes short-term gain over institutional sustainability – a culture in which regulation is viewed as an obstacle to be arbitraged or circumvented, rather than as an additional check on broadly shared objectives. That needs to change if progress is to take root. Making sure that happens will require a realignment of incentives, and strong leadership from the top. All of this will take time. The question is, how much time do we have? While risk-taking has been somewhat constrained in the aftermath of the crisis and the resulting uncertainties in the macro environment, we are beginning to see signs of things heating up in some areas of the markets: e.g., record issuance of junk bonds and emerging market debt, including enthusiastic take-up for issuers from “frontier markets” with little to no prior presence in the capital markets; increased leveraged buyouts; weakening covenants; and a rebirth of the collateralized loan obligation market. Complacency at this point would not be a good thing.
In this case, we can expect that in the third and fourth quarters economic activity will be recovering quarter-on-quarter. The economic situation will be returning to normal step-by-step. The direct adverse impact of the restrictions primarily falls on this quarter, while their secondary effects will continue to manifest in the future. According to our surveys, over 80% of the businesses across various industries have been experiencing the influence of the coronavirus pandemic and current 1/3  BIS central bankers' speeches  restrictions. Companies’ business sentiment has materially declined. It will take time to restore business processes, logistics and production chains, offset the reduction in profit and revenue, build up reserves and savings that have been used to a greater or lesser extent over the second quarter. Combined with uncertainty regarding potential changes in the external environment, this will limit production, investment and consumer activity. In these conditions, GDP will shrink yearon-year in the third and fourth quarters, that is the annual rate of economic growth will be negative. According to the Bank of Russia’s forecast, GDP will overall decrease by 4–6% in 2020. The major contributor to this reduction will be a decline in exports that may reach from 10% to 15%. Moreover, fixed capital investment will also substantially decrease (by 6– 10%) compared to the previous year. Companies will be primarily using their financial resources to restore their daily operations. Uncertainty about the prospects of domestic and external demand will be confining investment plans.

While additional study of the effects of large-scale asset purchase (LSAP) programs should be encouraged—as it furthers our understanding of the use of these unconventional monetary policy tools—the paper’s findings do not, in my mind, invalidate the use of LSAPs when the Federal Reserve is operating at or close to the zero lower bound for shortterm interest rates. That is the key issue—not the magnitude of the effects of LSAPs or whether short-term interest rates should be the primary tool of monetary policy. On the latter point, which is consistent with the FOMC’s statements about policy normalization, I see broad agreement. Concluding that LSAPs are less powerful than suggested by some of the estimates from the event study literature does not imply that there is no role for LSAPs at the zero lower bound. In such circumstances, LSAPs can be used to provide additional monetary accommodation by depressing bond term premia and the spread between agency mortgage-backed securities (MBS) and Treasury securities, as well as by strengthening the credibility of forward guidance on the path of short-term interest rates. This can provide support to asset values more generally and make financial conditions more accommodative. Thus, discarding such a tool or ruling out its use seems counterproductive for two reasons. First, to the extent that such a tool can provide accommodation, ruling out its use would raise the risks of insufficient monetary policy accommodation when interest rates are pinned at the zero lower bound. Second, expectations matter.
Addressing these challenges, G-20 Summit held in Brazil on 8-9 November 2008, issued a communiqué that included the following statement: “We affirmed our determination to take all necessary steps to foster non-inflationary growth in a stable and sustainable manner according to the needs and available instruments in our respective countries, including through monetary and fiscal policy.” Distinguished Guests, As concerns over inflationary pressures have subsided all over the world, maintaining the smooth functioning of financial system and efficiency of credit markets has become the main priority of policy makers. It will be proper to evaluate the recent developments in Turkish economy in this perspective. BIS Review 144/2008  1  In Turkey, the banking system has been relatively prepared for the current crisis in terms of foreign exchange liquidity. Its foreign exchange short position is also well contained. Foreign exchange position of the public sector is almost negligible. The household sector is net creditor in terms of foreign exchange, while real sector is net debtor. Since securitized products are rarely used in the Turkish banking sector, the ongoing financial turmoil has not put a marked pressure on local banks through that channel. Current account deficit, historically a source of vulnerability for the Turkish economy, is likely to experience a sharp drop in the upcoming period due to correction in commodity prices, slow down in economic activity and depreciation in New Turkish Lira. Still, extraordinary fluctuations in global liquidity conditions have adversely affected Turkey like other countries, which are sensitive to international financial developments.

In other words, just as new apps are constantly being developed for smartphones, so too will we be able to add new functionalities to the platform to meet emerging market needs and requirements. These functionalities will benefit from being designed for a single, harmonised platform. As we consolidate the financial market infrastructure in Europe, another area requiring further attention is that of collateralisation. With increased regulation following the financial crisis, collateral requirements are higher than ever. This is why it is so important that banks and  BIS central bankers’ speeches  1  financial institutions are able to manage their collateral in an efficient way and why the optimisation of liquidity-saving measures presents such a benefit to market participants. With T2S, it is now possible to have a single, centralised, pool of collateral, making it much simpler and faster to move collateral from where it is to where it needs to be. This then brings to the fore the issue of harmonising our own collateralisation techniques and procedures. As we look to the future, the Eurosystem will seek to drive harmonisation forwards, particularly as regards Eurosystem operations for the mobilisation of marketable assets, as well as the handling procedures for non-marketable assets. We live in a fast-paced world, and customers have come to expect instant services in all aspects of life, including from their banks.
And the withdrawal of these measures will push consumer prices upwards in the coming years, especially in 2024.3 In this regard, it is important to stress that, in the current high inflation setting, an appropriate policy mix requires a fiscal stance that, at the aggregate euro area level, is not at odds with the tightening of our monetary policy. This means that government support measures should be temporary, targeted and tailored to preserving incentives to consume less energy, and they should be gradually rolled back as energy prices fall. Otherwise, we are at risk of driving up medium-term inflationary pressures, which would call for a stronger monetary policy response. 2  The ten-year risk-free rate yield on April 7th was 15 bps below the level reached at the cut-off date for the projection exercise on February 15th. However, risk premia have risen, reflecting the increased uncertainty, and so did the average cost of financing in the capital markets for banks and low credit quality non-financial corporations in the euro area. Thus, the average cost of long-term capital market financing for banks has increased by 6 bps, while in the case of low credit quality non-financial corporations the cost has increased by 45 bps.. For investment grade companies, the cost of financing has decreased by 14 pb. On equity markets, the Euro Stoxx 50 index barely changed in the same period, while the banking sector index fell by 8.8%.

Turning to the data, indeed a sluggishness in households’ time deposit rates has been observed in some countries.22 This can be explained by banks’ specific characteristics, by the structure of the banking sector and the competitive environment. Specifically, banks with larger liquidity buffers react to a lesser extent to increases in market interest rates.23 And we have seen a significant shift of funds from overnight deposits to other less liquid but better remunerated instruments (mainly time deposits), thus reducing the liquidity available for economic transactions. In fact, M1 annual growth turned negative in January 2023 for the first time since the creation of the monetary union. In addition, the increase in bank lending rates in the euro area has been very significant, mainly reflecting the faster pace of policy rate hikes, and has been accompanied by a tightening of credit supply standards. In particular, in the ECB’s latest euro area bank lending survey (BLS), banks reported a substantial further tightening of credit standards 20  Total debt is defined as the sum of the outstanding amount of credit from euro area banks and fixed income securities. 21  See the ESRB report "Vulnerabilities in the residential real estate sectors of the EEA countries”. 22  The smallest increases in households’ time deposit rates are observed in Spain, Ireland and Portugal, while Germany, Italy and France have recorded the largest increases.
There is a growing momentum in scaling up the green agenda on a global basis, with countries such as Denmark, South Korea, Finland and Germany already embarking on green technology movements in their respective countries. Since 2007, the worldwide market for green technology has grown on an average of 12% annually, and is now worth over EUR2 trillion. By 2025, it is forecasted to double to EUR4.4 trillion. The global market for renewable energy namely wind, solar photovoltaic (PV) and biofuels has grown by more than 30% in the recent few years and is estimated to reach nearly $ billion by 2021 . Economies that have  BIS central bankers’ speeches  1  strategically invested in the green technology sector are already reaping the benefits of the transition to green initiatives. Germany, for example, has a green industry growing at an annual average of 12% since 2007 and a global market share of 15%. Green technology companies contributed 11% of its GDP and employing 1.4 million workers. In the case of the solar energy sector, Malaysia is now one of the top producers in PV manufacturing and this industry has generated direct foreign investment of over RM12 billion and created over 10,000 skilled and well paid jobs . Green technology offers specific solutions for pressing ecological and social challenges, and for this reason it is expected to continue to gain global importance.

Against the grain of established thinking, and now famously, Raghu Rajan argued at Jackson Hole in 2005 that the Federal Reserve’s commitment at the beginning of last decade to keep policy rates low for a prolonged period had fuelled financial risk taking.9 While this is now  6  See Borio and Disyatat (2011), “Global imbalance and the financial crisis: Link or no link”; and Cecchetti (2011), “Global imbalances: current accounts and financial flows”. 7  The gross foreign assets of each country’s residents, summed across all the countries in the world. 8  See Cabellero (2009), “Global Imbalances and Financial Fragility”, American Economic Review Papers and Proceedings, Vol 99, No. 2, May 2009, pp. 584–588. 9  See Rajan (2005) “The Greenspan Era: Lessons for the future”. Speech given at a Symposium Sponsored by the Federal Reserve Bank of Kansas City, Jackson Hole, Wyoming. August 27, 2005 He warned “persistent low interest rate can be a source of significant distortions for the financial sector, and thence for asset prices. Not only does this mean staying further away from deflation so that extremely low policy rates don't have to be used as a tool, it also implies exercising greater supervisory vigilance when those rates are in place to contain asset price bubbles”. 4  BIS central bankers’ speeches  posited as the “risk channel” of monetary policy,10 there has until recently been relatively little empirical work bearing on whether it actually exists. That may be changing.
It is a question of monetary policy, as I said earlier, being first and foremost aimed at ensuring there is a credible nominal anchor in the economy. As long as this nominal anchor does not risk coming loose, monetary policy can be aimed at stabilising the real economy. I shall return to this shortly and for now merely emphasise that the key word here is stabilise the real economy and nothing else. It may be interesting to note in this context that the experiences from the period of low, stable inflation have meant that price stability is now increasingly perceived as both an objective in itself and as a means of achieving other macroeconomic objectives. 5 There are many indications that price stability has beneficial effects on efficiency and growth in the economy. The reasons can be those I just mentioned, i.e. that the price system functions better as a signalling mechanism in a low inflation environment and that households and companies can spend more time on productive activities instead of trying to protect themselves against inflation. Essentially it is a question of price stability being a necessary condition for an efficient payment system, as I said earlier. In addition, the period of low and stable inflation has also been characterised in many countries by less fluctuations in growth in the real economy than was previously the case.

BIS Review 23/2006  1