samchain/econo-pairs-v1 huggingface dataset:
These interventions have largely succeeded in avoiding deflation and a cumulative fall in GDP during the most acute phases of the crisis. It remains true, however, that, contrary to past episodes which followed deep recessions, the current recovery appears sluggish, uncertain and fragile. The global growth environment remains affected by significant uncertainties. Today, I would like to reflect upon these developments and focus on the challenges facing central banks in the post-crisis environment. 1. Let me start with a few stylised facts The first, and most visible, is the spectacular expansion in central banks’ balance sheets. In all advanced economies, their size has been multiplied, over four years, by a factor of two to five. This is an unprecedented development. Beyond advanced countries, central banks in emerging economies have also, to a lesser extent, expanded their balance sheets, mainly, but not only, as a result of foreign exchange interventions. A second, and related, feature is the diversification of central banks’ interventions. Prior to the crisis, central banks would conduct monetary policy by determining the policy rate, and, in some countries, by imposing compulsory reserve requirements on banks. The crisis has led to the development and proliferation of so called “non-conventional measures”, with two objectives. First, to remedy financial market disruptions; and second, to provide further monetary accommodation once policy rates have been brought down to very low levels and hit the so-called “zero lower bound”.

Zamani Abdul Ghani: Malaysia - an investment destination Speech by Mr Zamani Abdul Ghani, Deputy Governor of the Central Bank of Malaysia, at the Investors’ Conference, Kuala Lumpur, 22 June 2005. *  *  *  Bismillahirrahmanirrahim Your Excellencies, Distinguished Guests, Ladies and Gentlemen, Assalamualaikum warahmatullah hiwabarakatuh and good morning, First of all, allow me to welcome all of you to this conference on "Malaysia: An Investment Destination" held in conjunction with the 30th IDB Board of Governors' Meeting. We are most heartened that there are representatives here this morning from more than one hundred global financial institutions and from over thirty countries. I would like to welcome all of you to Malaysia especially those who are here for the first time. I hope you have had a good rest after a journey from your respective countries because we have a very special program waiting for you. Indeed it is a great honour to be given the privilege to host this historic conference. The theme for the conference "Malaysia: An Investment Destination" is a fitting choice as we would highlight to you a wide range of investment opportunities available for you in Malaysia. This theme is most appropriate given a fast changing global and regional financial landscape, driven by financial liberalization and consolidation, economic transformation and more discerning and demanding investors. Ladies and gentlemen, We will do our best to ensure that this conference will be rewarding and useful for you.
In my speech today, I would like to focus on the ongoing reforms aimed at enhancing the mechanisms with which authorities can handle problems in banks and reduce the potential impact of failures, should they occur. First, I will briefly recall the main shortcomings of the current resolution regimes. Second, I will consider the international, European and national initiatives to cope with the challenges. Finally, I would like to say a few words about the future path towards an optimal arrangement for cross-border resolution. The main shortcomings of the current frameworks During the current crisis we have seen several government-funded bailouts and one case where, in place of a bailout, a disorderly collapse occurred with widespread effects around the globe. There are multiple reasons why no better alternative between these two extreme solutions was available in these cases. First, letting financial institutions fail was often not a feasible alternative from a legal perspective. In a majority of countries, only normal corporate insolvency proceedings were – and in many countries, still are – available to banks. However, limiting credit and liquidity losses in the case of failure may not be effectively ensured by using these mechanisms, because they were not designed to take into account the special nature of credit institutions. Second, even if a well-designed special bank resolution or insolvency regime is in place in a particular country, this does not guarantee that cross-border banks can also be dealt with effectively.

As for cooperation among authorities, the new resolution regime will take the form of a coordination framework. Accordingly, national authorities will ultimately maintain their discretion in the most important decisions, although they will be strongly encouraged to try to reach joint decisions on the ways to handle bank crises in resolution colleges. This is a realistic approach, already representing a major step forward. However, I think there may be a need for even more integration in the longer term. As an example, insolvency laws are addressed by neither the FSB standard nor the EU proposal – at least not its first phase of implementation – although they may well be important in practice. One also wonders whether there are other areas in which we could make progress. There were, and in fact continue to be, numerous proposals for the optimal European arrangement in the academic and policy sphere. Let me just mention three of them, which I find particularly inspiring. Most of you will be familiar with the influential arguments of Charles Goodhart and Dirk Schoenmaker, who have said that, as a form of coordination among national governments to handle cross-border bank crises, legally binding burden-sharing rules should be drawn up ex ante. Others, including David G. Mayes, have recommended adopting the prompt corrective action approach of the United States by designing a framework that would be based on stringent rules.
This is an indication that the economy was exposed to sizeable unexpected disturbances. The exchange rate appreciated more than projected. After the publication of Inflation Report 3/02 in October last year, the krone appreciated further. This was related to unexpectedly weak developments in the global economy resulting in lower interest rates abroad and a wider interest rate differential between Norway and other countries. Negative events such as the accounting scandals in large US companies, fears of terror and war in Iraq and the spread of SARS contributed to weak growth and low inflation in other countries. Developments in the international equity markets and the risk of higher oil prices also contributed to strengthening the krone. In addition, the Norwegian business sector has clearly felt the effects of the high Norwegian cost level and the strong krone in 2002. Growth in private consumption came to a temporary halt last winter as a result of high electricity prices and general uncertainty. This probably affected profit margins in retail trade, particularly for durable consumer goods. Public entities have also had to make adjustments following last year’s wage settlement. Sluggish global and domestic growth has in turn had an impact on the Norwegian labour market. Inflation in 2003 has been pushed down by the fall in prices for imported consumer goods in particular. The low rise in imported price inflation is a consequence of the appreciation of the krone throughout 2002 and low inflation abroad. The rise in prices for domestically produced goods and services has also gradually slowed.

Before going into the specific refinements, I would like to elaborate the background of the arrangement for the conversion of RMB conducted by Participating AIs through the Clearing Bank in Shanghai: (1)  First, RMB funds flowed into Hong Kong through trade payments or other channels will become RMB deposits in Hong Kong, and these RMB funds can be used, deployed or exchanged freely into other currencies in the market in accordance with the applicable laws and regulations in Hong Kong. This is the main premise of developing an RMB offshore market in Hong Kong. In other words, the exchange rate and interest rate of RMB are to be determined by the supply and demand of RMB funds in the Hong Kong market. As the offshore and onshore markets are segregated, it is not unusual that the pricing may be different between the two markets. BIS Review 175/2010  1  (2)  Secondly, we should look at the actual supply and demand of RMB funds in the Hong Kong market this year. At the end of November, the total amount of RMB deposits in Hong Kong reached RMB 280 billion. This means that Hong Kong has accumulated a substantial pool of RMB funds which can meet the market’s daily demand.
This might account for the acceleration we’ve seen in average productivity and wages; it could also explain why there’s been a narrowing of the gap between AWE growth and the surveys. So having summarised the main points let me describe in a little more detail where the data comes from and how these effects have been estimated. I’ll then say something, if only tentatively, about why they might have differed from the last cycle – why, in particular, the compositional effects have been more negative during the recovery, and perhaps before that as well (my hands will be waving slightly at that point). A short final section concludes with some remarks about policy. Generating the estimates To understand the results it helps to know something about where the data come from and how they’re constructed. The first and most important point is that the headline measure of wages in the UK, the AWE, is what it says it is – an average. Employers are asked simply to divide their total wage bill by the number of employees. So if – say – a responding firm were to substitute a less experienced, less well-paid person for someone better paid, its submission to the AWE would fall even if no individual’s wage had changed. It is these “compositional effects” that we are trying to measure and account for. We do so using data from a different source – the Labour Force Survey – which is sent out to households.

As much as public bodies are willing to step in as coordinators before and during times of crisis and eventually as lenders of last resort, they also want to see private sector entities being involved and actively participating in shaping resilience and resolving crises. The responsibility for financial stability is a shared responsibility. I am fully aware that none of us can precisely estimate today the economic consequences of what we all yet have to do in order to increase the resilience of financial systems. Since this resilience is bound to be tested again harshly sooner or later, there is no alternative to rapid, serious, adequate and if necessary costly preparations by all of us. Let me end by expressing my gratitude. I enjoyed contributing to the exchange of information, evaluations and views. This is the essence of the SIBOS conference. I am particularly grateful since I know that all of us in this room as well as those financial sector professionals who were unable to attend this conference, those of the private sector as well as those from the public sector, willingly share the noble responsibility for the efficiency and stability of today’s and tomorrow’s financial systems. Thank you very much for your attention. BIS Review 55/2002  5
This process of reducing unintended consequences is made easier by close co-ordination of different policymakers, which at the Bank of England is facilitated by having monetary, macro- and micro-prudential policy all under one roof. The role of central banks in money markets Let me turn to the role of central banks as a participant in money markets. Just as private market participants have grappled with new challenges in the post-crisis world, so too have central banks. And we have responded in three ways. First, we have become more flexible in the way we implement changes in the policy rate. The frameworks we use to influence market rates need to recognise the fact that there are a lot more reserves in the system than before, and that regulation has reduced the incentive to arbitrage small differences in money market rates. As the paper sets out, the Fed’s RRP is a good example of adapting to this new reality. The facility improves pass-through efficiency by offering a risk-free asset to a broad range of counterparties that extends beyond banks, thus strengthening the floor on money market rates more generally. The counterpart to this facility in the UK is our ability to issue Bank of England bills, though thus far we haven’t had the need to do so: since we began paying Bank Rate on all reserves in 2009 the wedge between overnight unsecured money market rates and Bank rate has averaged 4bps, and the standard deviation also been 4bps (Chart 6).

Norges Bank’s most important instruments are its two key rates - the interest rate on banks’ deposits and the overnight lending rate. Experience shows that the central bank’s key rates have a fairly substantial impact on money market rates at the very short end of the market, i.e. overnight and one-week rates. The effect on interest rates on financial instruments with longer maturities is not as direct. Here, expectations concerning the central bank’s course of action and general confidence in monetary policy play a role, as does the level of very short-term rates. Money market rates influence the krone exchange rate directly through the return that can be achieved on krone positions, but also indirectly through the effect on the outlook for the real economy and price and cost inflation in Norway. A higher interest rate will, therefore, normally result in an appreciation. Both the appreciation and the interest rate increase will lower demand. The appreciation will also in itself lead to lower inflation on imports, while lower demand will reduce the general inflation level. Over time both the inflation rate and the activity level will influence the exchange rate. Thus, Norges Bank needs to exercise discretion in monetary policy by considering the effects of interest rate changes not only directly on the exchange rate, but also on the rest of the economy, and to focus on the fundamental conditions for exchange rate stability over time.
With my assessment of the GDP gap, the repo rate according to the Taylor rule would instead have been around 6 per cent in the third quarter of 2008, but still considerably higher than the 4.75 per cent it reached before the crisis (see Figure 10). When I look back on the monetary policy conducted since I joined the Riksbank on 1 January 2006 up to the point when the financial crisis hit Sweden in September 2008, I therefore believe that monetary policy was too expansionary in the years preceding the crisis. Inflation increased and reached a level that was tangibly higher than the inflation target, Resource utilisation was higher than normal and there was a rapid expansion of credit. Despite this, the repo rate was lower than normal for most of the period leading up to the crisis. A more rapid increase of the repo rate would thus have been better. There are also two other circumstances that I for my own part believe were unfortunate. The first is that I did not enter a reservation in April 2006 when the Executive Board decided not to increase the repo rate, which I regretted afterwards. This would not have made any difference to the actual development of interest rates, but it would have been a good idea to make my view clear already at that time.

In their evaluation of Swedish monetary policy in the period 1995–2005, Giavazzi and Mishkin say that this was a sign that monetary policy had been too tight from the beginning of 2002.4 I do not agree with them. Looking back after the event, we can perhaps say that a couple of repo rate increases in 2001 and 2002 could have been avoided. The previous Governor of the Riksbank, Lars Heikensten, also admitted this at a hearing in the Riksdag Committee on Finance on 1 April 2004. But my view is that the repo rate was then reduced too much and was too low for too long. I can see four factors that support this. First, resource utilisation was probably higher than the Riksbank then estimated. The GDP gap is difficult to calculate, particularly at the end of a time series and in connection with severe downturns. According to the two GDP gaps presented in the Monetary Policy Report in February, the GDP gap prior to the crisis was approximately +4 per cent. My own assessment is that the GDP gap was in fact approximately +2 per cent.5 However, the fact that resource utilisation was so high was not as apparent before the crisis. This can be seen, for example, by comparing the calculations of the GDP gap in real time, that is at the point in time concerned, and the most recent calculations. The calculations in real time show that the GDP gap was actually assessed as relatively normal before the crisis (see Figure 6).
It is also crucial that we retain flexibility in the implementation of our asset purchase programmes, to avert any potential financial fragmentation problems. Second, in the current phase of the crisis, in which problems are more concentrated in specific sectors, policies aimed at supporting firms should be adjusted by targeting them on those firms most affected by the shock. In addition, a more selective approach that gives priority to supporting viable business projects should be considered. In the particular case of loan guarantee programs, it may be necessary to expand these facilities in future, but some of their parameters could be adjusted (i. e. the percentage of public guarantee) in order to incentivize lending by banks to viable firms. Finding the right balance between continuing to provide the necessary protection and maintaining a sufficient degree of selectivity will require the practically constant reassessment and adaptation of these instruments in coming quarters. Third, so far, fiscal support has focused on averting the materialisation of liquidity risks. This strategy has been very successful in this regard, but firms have accumulated more debt as a result. Further accumulation of debt might prove unsustainable for firms with a high level of indebtedness. Here, public support in the form of temporary equity injections could be an option to explore, especially in the case of large companies where this option seems more feasible. The Spanish Government has already set up a public fund that can be used for that purpose. For other firms, direct grants could be considered.

14.10.2020  Risks and vulnerabilities in the corporate sector as a result of the COVID-19 crisis: the experience of Spain 5th annual EU and US Perspectives: How to Spend it/ SUERF (The European Money and Finance Forum) Pablo Hernández de Cos Governor  Ladies and gentlemen, I wish you a good morning or good afternoon, depending on your time zone. First of all, let me thank the organisers for their kind invitation to participate in this conference. My presentation will focus on the impact of the COVID-19 crisis on the risks and vulnerabilities of non-financial corporate sector, the role played by policies in tackling these risks and the main challenges ahead. I will illustrate these vulnerabilities and challenges focusing on the Spanish case. This discussion is very relevant since the activity of the corporate sector has been particularly hit by the crisis and indeed many of the policy measures applied have focused on supporting the viability of firms which, despite being solvent, have seen their liquidity position deteriorate as a consequence of the crisis. The swift implementation of these policies is being and will continue to be crucial to prevent the temporary shock of the pandemic turning into the closure of many firms and therefore into a permanent loss of productive capacity. However, these policies have not been able to avoid an increase in the indebtedness of many firms since the beginning of the crisis.
Total completed foreclosures including short sales and deeds-in-lieu from the beginning of 2008 until the end of the third quarter of 2010 represent around 58 percent of all foreclosure starts over that same period. In addition, in each quarter the pace of foreclosure starts has exceeded the pace of completed foreclosures. At best, then, we are only halfway through the resolution process. To conclude where I began, the name “Great Recession” is also appropriate in that it reminds us not only of the severity of what took place, but also of the travesty that was avoided – that is, the second Great Depression. This was only possible with the aggressive monetary and fiscal policy actions that were undertaken both domestically and abroad. Much was learned in the process about how to effectively deal with a financial crisis, and much remains to be learned about how to prevent them from recurring in the future.

In this recession, there was an actual decline in consumption rather than just a slowdown (Chart 2). When households need to cut back on their consumption, they typically do so first with durable goods – for example, by delaying the decision to replace a car or to trade up to a nicer house. It is no surprise then that auto sales dropped significantly (Chart 3). Housing starts had been declining since late 2005, and the decline continued during the recession (Chart 4). Producers reacted quickly to the sharp decline in consumer demand, but inventories still rose sharply relative to sales (Chart 5). In order to realign production to the declining level of demand, firms quickly cut their staffing levels, which resulted in a rapid rise in unemployment across all age groups (Chart 6). From the peak in December 2007 to the end of the recession, private non-farm payroll employment declined by 7.3 million jobs – bringing employment below its level in January 2000 (Chart 7). The severity of the Great Recession is very apparent when you realize that an entire decade’s worth of job growth was lost. Household wealth declined sharply as well during the Great Recession due to losses both in equity and real-estate wealth. The household saving rate increased in reaction to this negative shock to household wealth (Chart 8). Several factors were likely behind the higher saving rate. First, as already noted, households likely increased their saving rate to begin to rebuild their wealth.