samchain/econo-pairs-v1 huggingface dataset:
Because the contribution to growth from inventory investment can be quite volatile on a quarter-to-quarter basis, the growth in real final sales probably provides a better sense of the state of economic activity than does the GDP figure. Moreover, when one digs deeper, the fundamentals supporting domestic demand look quite sturdy. For example, consumer spending has been well-supported by real income gains and rising household net worth. Household balance sheets do not appear over-extended. The household debt service burden is low, the household saving rate is not low relative to household net worth, and household credit growth has been slow. Housing fundamentals are solid as well. Decent payroll gains have supported household formation over the past year and mortgage rates remain low. Housing prices are rising and the constraint on growth in residential investment now appears to be more on the supply side, as building contractors struggle to mobilize the resources needed to construct more homes. The National Association of Home Builders’ index rose in October to the highest level  BIS central bankers’ speeches  1  since late 2005. While the housing indicators will likely continue to be volatile on a month-to-month basis, I expect the gradual improvement in the housing sector to continue. Also, the international outlook appears less problematic than it did just a few months ago. Although substantial questions remain about the Chinese growth outlook and the consequences of lower commodity prices for major commodity-exporting countries, we have seen two important positive developments.

And there are now some 1.7 million credit card transactions involving $ billion every day. It is also noteworthy that for a small city of just over seven million people, Hong Kong has around 34 million Octopus cards in circulation, with an average of 14 million transactions per day. This means on average each person in Hong Kong makes two transactions by Octopus cards daily. Anyway, there are many new developments in the mobile payment market since we granted 13 stored value facility (SVF) licences in 2016. Second, I believe it unlikely that fintech firms will displace or replace traditional banks because, in addition to speed and convenience, customers also need protection of their life savings or investments. I have previously stated my view on the future landscape of banking and finance. I’ll say it again here. On the one hand, we will see more and more tech companies venturing into finance by riding on the highly successful and popular e-commerce, payment or social media platforms that they have developed. The paradigm of these newly emerged platforms is that it is highly “customer-centric”, meaning they design everything to provide what the customers want, taking care of many practical and life-style needs of customers. However, when it comes to finance, tech companies need to realise and accept that they have to earn the trust and confidence of customers if they wish to handle their savings and investments.
Urban Bäckström: Asset markets and monetary policy  Speech by Mr Urban Bäckström, Governor of the Sveriges Riksbank and Chairman of the Board of Directors and President of the Bank for International Settlements, at a conference organised by the Riksbank and the Stockholm School of Economics, held in Stockholm, on 16 June 2000. *  *  *  Ladies and gentlemen, it gives me great pleasure to welcome you to this conference on Asset Markets and Monetary Policy that the Riksbank and the Stockholm School of Economics are jointly organising. The Riksbank has the ambition to host a conference every other year on a topical subject. Two years ago we organised a conference jointly with the Institute for International Economic Studies on Monetary Policy Rules. This year I am very pleased to announce that we will again be able to present a set of papers written by scholars of the highest international academic standard and on a subject matter that is extremely topical: asset markets and monetary policy. In my opening remarks two years ago I suggested that the question of monetary policy and asset prices should be a topic for a future conference. The interaction between asset prices, the real economy, and monetary policy is by no means a new matter for central bankers and economists, but the development of asset markets in the last few years has brought the question to the forefront of the policy debate.

One such reason is the central bank’s responsibility for the stability of the financial system. If asset prices have been driven up to unsustainable levels that do not correspond to the underlying fundamentals, we are faced with a special kind of problem. We know from experience that speculative asset price bubbles eventually burst. When they do, collateral values will fall and balance sheets deteriorate, potentially threatening the stability of the banking system. To avoid this kind of development, the central bank needs to closely monitor the potential for excessive credit growth and the possibility of asset price bubbles building up. It seems that historically the forming of speculative price bubbles has been closely linked to an excessive expansion of credit. But we need to operationalise both the concept “excessive” and the difficult concept of an asset’s “fundamental value”. As history has shown us, judging to what extent rising asset prices reflect strong fundamentals, rather than the “irrational exuberance” of investors, is easier said than done. How does a speculative asset price bubble get started and how do we spot it? And if we spot it, what do we do about it? In most countries the risks associated with a property price bubble would probably be considered to be greater than in the case of an equity price bubble. This is because in most countries banks are more exposed to risks in the property market, since real estate is used as collateral for a considerable amount of bank loans.
MMFs play an important part in the story, because they act as a bridge between depositors’ desire for immediate liquidity and banks’ desire for term wholesale funding: providing the former with on-demand cash, while holding a significant share of their assets in banks’ term liabilities, including commercial paper (CP) and CDs. In total, sterling MMFs saw outflows of some £ or 10% of their total assets, in the eight days between 12 and 20 March (Chart 7). At first, they met these outflows by running down cash holdings. But as the outflows intensified, the MMFs tried to liquidate some of their CDs and CP, only to find, just as we’d heard, that the market was effectively closed. As MMF liquid asset ratios fell towards regulatory thresholds, we faced the prospect of one or more MMFs deciding to ‘gate’ access to investors, cutting off their access to liquidity in the fund – something that some feared could trigger further contagion. 3  The drawdown by Boeing of a $ syndicated loan facility on Wednesday 11 March was a particularly widely-cited example in global markets. 7  All speeches are available online at www.bankofengland.co.uk/news/speeches  7  As demand for cash grew, but supply failed to respond, sterling money market rates rose sharply (Chart 8). Though sharpest at longer tenors, we also saw a pickup in overnight repo rates: a particularly serious sign of dysfunction, and a challenge to our commitment to keep such rates broadly aligned to Bank Rate.

The City of London has been making a positive and constructive contribution to their development by doing what it does best: providing a lead through innovation; and setting the standard for excellence. As a result, all the available evidence continues to indicate that, since the launch of the euro, London has fully maintained its market share. Let me give you a few figures. •  There are 482 foreign banking institutions in London, around double the number in Frankfurt, and more than double the number in Paris. •  The wholesale euro payment system in London, CHAPS euro, has recently accounted for 19% by value of cross-border payment flows in TARGET, the pan-European payment system. This figure has grown from 15% since the launch of the euro, and the UK now accounts for more crossborder payment flows in euro than any other country, except for Germany, even though the UK is not participating in EMU. •  London is estimated to have a 32% share of global foreign exchange turnover, compared with 5% for Germany and 4% for France. •  London's global market share of over-the-counter derivatives is around 35%, compared with 5% for Germany and 6% for France. •  Over 98% of the euro short-term interest rate contracts on the three major European derivatives exchanges (in London, Frankfurt and Paris) are traded on LIFFE.
There has been a clear endeavour to counter the upward price tendency. In my opinion, however, it would have been an advantage if management of the exchange rate had been clearly assigned to the central bank, instead of the leaving the responsibility to so many. As regards fiscal policy, experience has not been entirely positive. As I mentioned earlier, in Stage Three of EMU the Stability Pact is monitored with annual stability programmes. This process has worked fairly well in exerting peer pressure on countries with large deficits: no country has yet exceeded the Pact’s lower limit. But assessments of individual countries have tended to differ without there always being factual grounds for this. Neither has particularly good use been made of the golden opportunity that Europe’s present economic upswing provides for faster budget consolidation. Countries should now be making the most of the chance of quickly turning a deficit into a surplus but that is not happening. This may prove to be unfortunate further ahead and it runs counter to the spirit of the Pact. Peer pressure has evidently not been strong enough. Examples of short-run considerations gaining the upper hand in this respect were evident when the dramatic oil price rise led several countries to cut petroleum taxes or subsidise oil-intensive industries, which is hardly sustainable in the longer run for either the economy or the environment. Before concluding I should also like to say something about financial stability in the EU area.

Wage formation is accordingly of major importance for enabling the countries in a monetary union to harmonise their business cycles without being hit by unemployment. Another type of problem in a monetary union can come from differences in the construction of fiscal policy. A national currency and interest rate are no longer available as clear indicators of market confidence in a country’s economic policy. This means that a part of the forces which previously tended to discipline pressure for fiscal expansion and counter unduly large budget deficits no longer acts. That applies in particular to small countries, in that their mistakes can be concealed, at least for a time, in the overall development of the monetary union’s exchange rate and interest rates. The opposite applies if the large countries commit economic policy mistakes - the consequences are liable to hit the entire union. In theory, perhaps problems of this kind should not be all that grave. If a euro country’s budget is markedly underbalanced and money is distributed to the inhabitants, they ought to be prudent enough to set aside some income to cope with the strains that are bound to come when, sooner or later, the government finances have to be consolidated again. But things don’t work like that in practice, at least not sufficiently so. Short-term budgetary expansion therefore normally leads to increased consumption and that in turn is liable to result in higher inflationary pressures throughout the euro area.
Table 1 International baseline scenario assumptions 2021  2022 (f) Mar.22 Jun.22 Report Report  2023 (f) Mar.22 Jun.22 Report Report  2024 (f) Mar.22 Jun.22 Report Report  (annual change, percent) Terms of trade Trading partners' GDP World GDP at PPP Developed economies GDP at PPP Emerging economies GDP at PPP  11.8 6.3 6.1 5.1 7.0  -3.1 3.3 3.1 2.9 3.2  -4.0 2.7 2.6 2.4 2.6  LME copper price $ Average WTI-Brent oil price $  423 69  435 94  425 104  (f) Forecast. Source: Central Bank of Chile.

I am worried that households do not realise that the factors that previously justified a high level of indebtedness may change and that what was a rational behaviour before, may not be so in the coming period. Mortgage rates and the return on the equity market and mortgage market are not constant over time; they change. One conclusion of the results of this study is that it is important to create the right incentives via, for instance, the tax system. The current situation has advantages and disadvantages I have now painted a picture of how we arrived at our current situation, with a global and complex financial system and high level of household indebtedness. There is no doubt that the financial system we have now has created considerable welfare gains. Households have been able to invest their savings in mutual funds instead of traditional savings accounts and have in this way been able to spread the risk in their saving and thus gain a higher return. For the banks, the greater degree of market funding has similarly entailed greater opportunity to spread risk between different funding sources. The possibility to obtain funding on the international capital markets has also meant that access to capital has increased and that the banks have thus been able to fund Swedish mortgages more easily and more cheaply. This in turn has meant that a larger number of households have been able to borrow and probably also at a lower interest rate than would otherwise have been the case.
The purpose of this rigorous exercise is threefold: •  to foster transparency about the condition of the European banking system;  •  to take the needed corrective actions;  •  and finally to restore confidence. Of course, this exercise is a challenge. But I think that it is also a great opportunity for European banks to show that they have cleaned up their balance sheets and that they are trustworthy. As you can see, the SSM is well on track and I am fully confident that it will be operational at the end of this year, as expected. But this good result should not lead to forget that for the banking union to be fully successful, the SSM needs to be completed with the adoption of a Single Resolution Mechanism. Indeed, in line with my colleagues at the ECB, I consider the Single Resolution Mechanism to be another essential pillar of the banking union, alongside the SSM. Ideally, the SRM should consist of three main elements: a single system, a single authority and a single fund. This is why the ECB has constantly been encouraging all the relevant parties to make further progress in adopting the SRM, which should be in place by the time the SSM becomes operational. You know that a political debate is taking place currently between the European Council of Ministers and the European Parliament.

Strengthening the ethical culture of financial services should therefore reduce the volume of bad behavior we have been seeing. Some of the skeptics say, “Prove it.” I confess that proof is hard to come by. Yet, I am not alone in the fundamental belief that a strong ethical culture will lead to better behavior. A 2010 Corporate Executive Board survey of more than 500,000 respondents shows a widespread  1  To call enforcement traditional is not to say that it is static. Eric Holder, the Attorney General of the United States, recently recommended that Congress create new criminal liability for bank officers who were in a position to detect and deter illegal conduct, but failed to do so. That is, individual executives could be criminally liable for failings within their organization without specific bad intent. See Eric Holder, Remarks on Financial Fraud Prosecutions at NYU School of Law, September 17, 2014. BIS central bankers’ speeches  1  view that corporations with strong ethical cultures experience less misconduct. 2 This makes intuitive sense even in the absence of empirical proof. 3 Further, the natural tendency to go with the intuitive is bolstered by the potential benefit of a reduction in enforcement actions against financial services firms, and by a healthy change in the public perception of the financial services industry. And, of course, there is ready evidence for the contrapositive view.
I was tempted by this flight of the imagination to frame my remarks today as the views of that author looking back at the work we are undertaking in 2005. In truth, though, I thought it might depart too much from the usual field of play of central bankers and supervisors. Instead, I’d like to share my views on how the elements of Basel II take us “back to the future,” not unlike the journey of Mr Wong’s author in 2046 from the future to the past. In many ways, Basel II brings us back to a traditional focus on risk, but with the benefit of the most advanced techniques emerging today and into the future. 2. Overview  Specifically, I would like to try to address four key points. Firstly, I would like to consider the current framework for promoting financial stability. I will argue that, despite significant progress, our policy and decision-making framework for financial stability is still incomplete, especially if we draw a comparison with the framework for monetary stability. That said, there are a number of lessons we have learned in recent years that can be useful for the future, and which we have taken into account in designing the new Basel II capital framework. One of the most important of these is the very real and positive contribution that sound risk management practices can make to promoting financial stability.

Is it worth accepting slightly weaker demand and thereby inflation over the coming years if the economy develops as we have assumed in our forecasts in order to perhaps reduce the effects of possible corrections following inflated asset prices and loan stocks? Before I get into a discussion of this dilemma, I would like to give a brief reminder of how central banks with price stability as their objective take into account developments in the real economy. Flexible inflation-targeting policy requires openness and clarity In the short term, monetary policy can affect demand in the economy. Most countries with an inflationtargeting policy use this possibility and conduct what is known as flexible inflation-targeting policy, which means that some consideration is given to short-term fluctuations in the real economy. However, in the long term growth is essentially determined by factors outside of the control of monetary policy, such as technology and population growth. As I mentioned earlier, monetary policy’s best contribution is to ensure that inflation is low and stable, which requires confidence in the target. This sets limits as to how much consideration can be given to short-term fluctuations in the real economy, but also limits the uncertain negative effects on inflation and the real economy that in some cases risk arising from a strong growth in asset prices and loans. To be able to maintain confidence, it is necessary that the inflation target has strong support from the general public, the politicians and the financial markets.
At the global level it has at times been used by the latter as an excuse for delaying adjustment. Global imbalances are the result of a lack of policy coordination. 2  BIS Review 126/2010  It seems to me that we need better economic analysis in order to address this issue. First, we need to understand whether a given level of world growth, if achieved through unsustainable imbalances, is in itself sustainable. In 2003–07 the world economy grew at an unprecedented pace, also owing to the large imbalances financed through the recycling of large capital flows. If these imbalances were not sustainable, the underlying rate of growth of the world economy, and of some of its components – in particular the deficit countries – was probably in itself not sustainable. Accordingly, asking who will provide the demand of last resort if the deficit countries save more might not be the right question to ask, because it is based on the presumption that the unsustainable pre-crisis growth rate represents the postcrisis objective. We certainly need a better understanding about the potential growth of the various economies and its structure, taking due account of how comparative advantages have changed, also as a result of the crisis. My intuition is that such an analysis would suggest that potential growth in the United States is substantially lower than the average growth it experienced over the past decade and requires a shift of resources from the non-tradable to the tradable sector.

New legislation When new legislation was adopted for the Central Bank of Iceland in 2001, these international developments were taken into consideration and the Icelandic Act patterned on recent legislation in other industrialised countries. There was broad political consensus on this, as people realised that low inflation is one of the cornerstones of economic growth and improved living conditions. In addition to the legislation, inflation targeting was introduced as the Bank’s objective in a joint declaration by the government and the Central Bank. The decision to float the Icelandic króna was taken at the same time, since experience had shown that in the long run it was impossible to ensure a specific exchange rate with free movement of capital in and out of the country. In such case the exchange rate is determined by the market where supply and demand control the value of the króna. This new framework for monetary policy was immediately subjected to a baptism of fire. The Icelandic economy was overheated and inflation rising rapidly. The Central Bank had to respond by raising interest rates. The fall of the króna played a part in the elimination of the current account deficit much more rapidly than anyone had dared to hope two years ago. The economy is more stable at the moment than it has been for some time and, acccording to the outlook, the current slight slowdown will be short-lived.