samchain/econo-pairs-v1 huggingface dataset:
How confident are you about the state of the political European landscape now? Is there more of a momentum for reforms now? Constâncio: Crises are always bad for the social and political mood, and recoveries are always good. And so there is a bit of a recovery, which is becoming stronger, and that, of course, has had its effects, in the mood of societies, of public opinion, and also in the political sphere. That’s what I think the President indicated, and indeed, there were fears, especially from outsiders, that some of the political developments in some European countries would go in the direction of creating some doubts, which were dispelled. So that’s what he refers to. But throughout all this period there is one thing that is important to recall: if you go to the Eurobarometer that is the result of surveys in all Member States, you see throughout all these years, all these years, that the support for the euro – being in favour of the single currency, the euro – has been stable at around 70% of Europeans in the euro area countries; and that in all countries there was a majority supporting the euro. A majority in all countries. The numbers are different according to the different countries, but in all they are the majority. So this has been the support that the project has benefited from, and the present recovery has indeed reinforced those views. But we are talking about reforms as well.

Excluding short-term influences, bond yields in the major countries - apart from the special case of Japan - are converging around a level of around 7% which suggests that relative macro-economic, monetary and fiscal discipline will be sustained, though it will stop short of effective price stability. I conclude, secondly, that the markets see current developments in the US and the UK as essentially cyclical; and that they anticipate a pick-up in activity elsewhere somewhat further ahead. And I conclude, thirdly, that there remains some considerable uncertainty about the prospect for European Monetary Union, in particular about its initial membership but also about the extent of the discipline it will involve. Now, of course, these conclusions are based on the bond markets as they currently are, which is a bit like forecasting the past! What you really need to know is how the markets will evolve in the future. Happily it is not my task to venture down that path. It is during our next session that the market experts will seek to “forecast the future”. But I do hope they will tell us whether they agree that relative stability will indeed persist, in the medium and longer term, how they see the different national situations evolving in the more immediate future, and what prospects they see for EMU. These seem to me to be the key issues for the future and I look forward to listening to what they have to say. BIS Review 22/1997
The faith that the public places into the central bank imposes a constant obligation on the central bank to honour this trust and fulfil the promise of stable money. The bond of trust between the public and its central bank can be seen as something like a credit relationship. Indeed, the term “credit” is Latin for “he believes”, i.e. it expresses the hope and expectation that initially one-sided trust will be reciprocated and returned in the future. Trust is given “on credit” but in turn it is based on credibility or trustworthiness. If you allow me to jump from these etymological reflections straight to the mundane tasks of central banking in practice I should like to stress the following. In the case of European Monetary Union the promise of maintaining prices stable over the medium term - and thus maintaining the value of money - is built on solid and credible institutional foundations. So far in its young life the European Central Bank has lived up to its promise and there is every reason to believe that price stability in the euro area will continue to be maintained over the medium term. Long-term bond yields and surveys of inflation expectations continue to indicate a high degree of confidence in the ECB’s ability to deliver on its primary objective over the medium term. This is what ultimately counts. For this achievement the ECB can deservedly claim some “credit”, if I may say so.

And in the last year, we have seen emerging approaches to supervision that aim to address culture, conduct, and governance. In particular, the central bank of the NetherlandsDe Nederlandsche Bank-has pioneered new techniques for the supervision of corporate governance, especially for assessing the group dynamics of boards and senior management.11 Culture also features prominently in criminal enforcement. The U.S. Department of Justice requires its prosecutors to determine “the pervasiveness of wrongdoing” at a corporation before seeking an indictment. According to its prosecutors’ manual, “[T]he most important [factor in making this determination] is the role and conduct of management. Although acts of even low-level employees may result in criminal liability, a corporation is directed by its management and management is responsible for a corporate culture in which criminal conduct is either discouraged or tacitly encouraged.”12 Individuals, including senior managers, also face criminal liability for their conduct. Recent guidance from the U.S. Department of Justice places greater emphasis on individual culpability.13 And the recent convictions of two traders for rigging LIBOR, one of whom served as the Global Head of Liquidity and Finance at a major bank, may send a powerful message to bankers about the consequences of their misconduct.14 The new acceptance of culture as an important area of focus was evident at a workshop that the Federal Reserve Bank of New York hosted on November 5.
The absence of a consensus for low inflation in the 1970s as an objective of public policy led to – and I will tell you the source of this assessment at the end – policy making which lacked the courage and conviction to do what was needed to achieve an objective which in itself was not always accepted as necessary. Policymakers did not persist with actions when criticised (criticism will of course happen), they tended to give too much weight to perceived political constraints and too little weight to the cost of failure to achieve the objective of policy. They talked tough, but didn’t match their words with 2  BIS central bankers’ speeches  actions, and their actions in response to criticism tended to be of the “do something” variety. And the result was? A policymaking process and institutions with low credibility in the eyes of the public, a very dangerous place to be. Now, I haven’t made this up, you can read it in one of the best accounts of the failings of monetary policy in the 1970s, the history of the Federal Reserve by Allan Meltzer. The reason for drawing this point out is that if the reforms are to work, we must have a clear consensus that financial stability is a goal which will enable other things that improve the welfare of the public to be achieved more easily. So, what does this mean for important aspects of the regulation of the financial system?

In doing so we steer the shortest end of the yield curve, which is the starting point of the transmission process of monetary policy, ultimately reaching the real economy in order to achieve price stability. I would like to commence by describing how the ECB has implemented monetary policy during the financial market turbulence, which started in August last year. In this context, I shall describe how the Eurosystem took action through its liquidity provision to the euro money market in order to ease tensions. I shall then turn to the coordinated action taken by central banks, and how important it was for them to address effectively tensions in global financial markets. In the second part of my intervention, I will discuss the measures put in place by the international financial community to restore market functioning and to ensure that the weaknesses highlighted by the current market correction do not recur in the future. In this regard, I will cover the progress made on the implementation of the priority recommendations of the Financial Stability Forum (FSF), as well as policy areas in which work is currently underway, including risk management of financial institutions, procyclicality and cooperation between central banks, supervisors and regulators. I will conclude with the most recent “action plan” that was adopted by the G7 in Washington and on the “concerted European action plan of the euro area countries”, which was just agreed last Sunday in Paris. 1.
For example, its efforts over the past two years to promote market functioning and minimize contagion were critical in preventing the strains in our financial markets from resulting in even more severe damage to the economy. These “lender of last resort” interventions on the part of the Fed, including facilities such as the Term Securities Lending Facility (TSLF) and the Primary Dealer Credit Facility (PDCF), as well as programs such as the foreign exchange reciprocal currency agreements, are examples of the rapid and responsive application of basic central bank tenants to the unique challenges we faced as this crisis evolved. Indeed, in many ways, the crisis has underscored why the Federal Reserve was created almost a century ago: to provide a backstop for a banking system prone to runs and financial panics. BIS Review 6/2010  1  Where it proved necessary and feasible to do so, the Fed also used its emergency lending authority to forestall the disorderly failure of systemically important institutions. These actions truly were extraordinary – well outside the scope of our normal operations, but our judgment was that not taking those actions would have risked a broader collapse of the financial system and a significantly deeper and more protracted recession. Faced with the choice between these otherwise unpalatable actions and a broader systemic collapse, the Fed, with the full support of the Treasury, invoked its emergency lending authority and prevented the collapse of certain institutions previously considered to have been outside the safety net.

The fact that the Fed needed to take those actions provides a stark illustration of the significant gaps in our regulatory structure, gaps that must be eliminated. Among those holes was the absence of effective consolidated oversight of certain large and deeply interconnected firms; the collective failure of regulators – including the Federal Reserve – to appreciate the linkages and amplification mechanisms embedded in our financial system; and the absence of a resolution process that would allow even the largest and most complex of financial institutions to fail without imperiling the flow of credit to the economy more broadly. Addressing these shortcomings will require important reforms in our country’s regulatory architecture. We entered the crisis with an obsolete regulatory system. For one, our regulatory system was not structured for a world in which an increasingly large amount of credit intermediation was occurring in nonbank financial institutions. As a result, little attention was paid to the systemic implications of the actions of a large number of increasingly important financial institutions – including securities firms, insurance conglomerates and monolines. In addition, many large financial organizations were funding themselves through market-based mechanisms such as tri-party repo. This made the system as a whole much more fragile and vulnerable to runs when confidence faltered. With the benefit of hindsight, it is clear that the Fed and other regulators, here and abroad, did not sufficiently understand the importance of some of these changes in our financial system.
On the other hand, the monetary tightening, i.e., the transition towards an environment of higher interest rates could certainly expose some vulnerabilities of the financial systems, and again test their resilience, as the pandemics did. The pace of the financial tightening matters in particular, as history shows that the effects are better manageable if tightening is gradual, well guided. The last year financial market turmoil in the UK and recent developments in the USA and EU clearly underline the need for vigilance. This nexus opens the debate on the so-called "financial dominance", the possible tradeoff between rising costs to curb inflation and effects for financial stability. Against this background, one of the key questions is how well are financial systems prepared to rise to the challenge of rising interest rates. The answer to great extent boils down to the health of the balance sheet of households, companies and banks, i.e., their capacity to absorb shocks. What is very important is that banking systems in the region weathered the pandemics shock well and in many countries, including in NM, emerged with even stronger capacity, which can be observed by higher capital and liquidity buffers and better quality of credit portfolio. Although according to the recent EIB Surveys banks expected deterioration of credit quality, NPL ratios have remained low (below 4%).

Still, given the elevated debt levels of the private sector that hovers around 80% of GDP, increase in real estate prices, which in CESEE reached 15.5% - the highest growth since the GFC, as well as  2/4  BIS - Central bankers' speeches  expected further tightening of the credit conditions, it is not time for complacency. One of the key lessons learnt from the COVID 19 crisis is the resilience and it must remain the name of the game for the banking sector going forward. In the current context when the interplay between monetary policy and financial stability is more complex, and trade-offs are larger, macro – prudential management plays an important role. A recent BIS paper finds that prudential policy tightening, ahead or during the monetary policy tightening, reduces the likelihood of financial stress and provides more headroom for monetary policy. Following the pandemics, countercyclical or systemic risk capital buffers were actively deployed across the region. Financial regulators in seven countries, including in our case, intervened with the countercyclical capital buffer4, in six countries (Bulgaria, Croatia, Romania, Slovenia, Serbia and Montenegro) have continued to apply or introduced the systemic risk buffer and in five countries implemented borrower-based measures5, which more directly affect the quality of credit demand and contain risks. Keeping banking sector sound and in good capacity to lend is important in the light of the urgently needed structural reforms in the region.
BIS Review 67/2004  I see at least six such necessary conditions: the institutional independence of the ECB; the clarity of its Treaty mandate - price stability; the accountability vis a vis public opinion, including through the hearings before the European Parliament; the comprehensive nature of its monetary policy concept, with an economic and a monetary pillar; its medium term perspective and, last but not least, its transparency. We are displaying publicly our monetary policy concept. Not all central Banks do that. We are displaying our definition of price stability. Not all central Banks do that. We were the first important central Bank, in January 1999, to publish in quasi real time after our decisions our diagnosis and the reasons for our action and to hold a press conference. Not all central banks do that, even today. We are making public the quarterly projections of the staffs of the ECB and of the Eurosystem. And I profoundly trust that it is this substantial level of transparency which has also contributed to make the ECB’s policy decisions highly predictable for the market as academic research has documented. A last remark. As already mentioned, all what I have said presupposes that data are reliable and credible. It is absolutely imperative that figures are not influenced by political interference and by electoral cycles. The ECB’s Governing Council strongly encourages countries to tirelessly improve the professionalism and independence of the relevant institutions.

In particular, the efficient and effective coordination between the statistical departments of the ECB and of the national central banks within the ECB’s Statistics Committee has been very conducive to the development of the comprehensive set of euro area statistics that is disseminated by the ECB. Equally, the cooperation between Eurostat and the ECB’s Directorate General Statistics is very intensive and fruitful, and is based on the allocation of tasks laid down in the Memorandum of Understanding signed in March 2003. Secondly, I would like to stress the importance of close cooperation with users, which should guarantee that the statistics are “fit for purpose”. At the same time, with the right institutional arrangements in place, responsiveness to user needs in the design and accessibility of statistics should not undermine the independence of statistics and statisticians, which is an essential factor. A third important “success factor” in the design of statistical systems is a strong legal basis. Article 5 of the Statute of the ESCB and of the ECB states that “in order to undertake the tasks of the ESCB, the ECB ... shall contribute to the harmonisation, where necessary, of the rules and practices governing the collection, compilation and distribution of statistics within its fields of competence”. As a consequence, the ECB developed a legal framework for the collection of statistics and for ensuring compliance with these legal acts. Legal instruments are necessary to achieve satisfactory standards and equal treatment across Member States.
This conference series seeks to bring together top  1/2  BIS - Central bankers' speeches  researchers to present their recent work on topics of critical importance for the Spanish economy, and also distinguished policy-makers to discuss their views on these topics. But past successes are simply a good starting point. CEMFI has ambitious plans. It has a plan to implement a strategic vision for the future (underpinned by rigorous external evaluation), it has outstanding leadership (current and incoming) and it has plenty of talent. All these elements have been brought to fruition this year. In fact, the academic year that we are closing today has been full of good news for CEMFI, starting with the successful restructuring of the Master programme, the refurbishing of the new premises in Casado del Alisal 12, and the increase in the size of the faculty from 16 to 19 members, in line with the Board of Trustees' decision to have 25 faculty members by 2025. Even so, we should never forget, that all this – the premises, staff, faculty, strategic plans – are merely instruments. You, the students at CEMFI are the ultimate purpose. Your education and your future. They are at the core of our decisions. Apart from the Master in Economics and Finance, the other major academic programme at CEMFI is the PhD in Economics. In this respect, I would like to mention that 10 students have already defended their PhD theses or will do so in the near future.

It should also be emphasised that the Spanish economy is in the midst of a process of macroeconomic adjustment and, as noted above, its growth prospects depend on the external sector, which tends to yield only moderate increases in tax revenue in the short and medium term, particularly if this is accompanied, as in the Spanish case, by an adjustment in the real estate sector. On the expenditure side, the draft Budget proposes highly significant reductions concentrated in capital expenditure and also in current transfers and goods and services purchases. In the case of transfers to government-owned corporations, it is important for the planned reduction to be accompanied by adjustments of similar size in the effective expenditure of these entities, so as to achieve a lasting reduction of the imbalances. Here, too, the Budget projections are generally not free from risk. First, because it is often difficult to restrain the high inertia of certain items, frequently resulting in the past in overshooting with respect to the initially budgeted figure, particularly in the case of goods and services purchases. Nor can we rule out further unfavourable changes in those items, such as unemployment or pension benefits, whose size depends on external factors, such as the unemployment rate, population or inflation. This is related to the fact that the risk of deviating from the budget is higher in social contributions.
Rather, our guidance should reassure you that, absent risks to either price stability or financial stability, we will tighten policy only when we are well along the road to recovery. Yes: interest rates will rise at some point. But only against a far stronger economic backdrop, when your output is higher, your order books are fuller, and you and your customers are better able to withstand a rise in borrowing costs. Moreover, although still some way in the distance, we shouldn’t look at the prospect of an eventual rise in interest rates with a sense of dread and fear. Assuming that interest rates rise due to the vigour and durability of the recovery, rather than concerns about either inflation or financial stability, we should see interest rates beginning to rise as a sign of the strength of our economy. As a sign that that we are well on the way to making a full recovery. As a sign that the emergency life-support measures put in place since the crisis are no longer required. The MPC is fully aware that extraordinary low interest rates are likely to be needed for some time yet. But when they cease to be, this will be a sign that we have finally turned the corner for home. Conclusion Let me summarise At long last, we appear to be moving back to an economic environment of which Eddie would have approved. One in which the economy is growing robustly and inflation is close to target.

Global rebalancing of the world economy needs countries in a strong cyclical position to direct domestic demand to imports, while countries with insufficient domestic demand to increase exports. Exchange rate adjustment should facilitate this process. Therefore, a faster appreciation of the yuan would relieve some appreciatory pressures in other EMEs, making the adjustment more balanced. But, for this to be achieved on a sustained basis, it is not enough to let the exchange rate adjust. Structural reforms will also be required to achieve a sustainable and efficient reduction of China’s savings rate. On the other hand, a rise in advanced economies’ interest rates, in particular in the U.S., would also alleviate currency tensions. However, the main responsibility for policymakers is to secure sustainable growth in their home economies that favors their citizens, and we all have to deal with the repercussions of those actions. The response in emerging market economies Emerging market economies have been facing two challenges as a consequence of this global environment. First, exchange rate appreciation and a resumption of capital inflows, and second, inflationary pressures. Sometimes, these two challenges may lead to inconsistencies in macroeconomic management. However, it is important to highlight that in small open economies any attempt to persistently manage an exchange rate away from its fundamentals, in particular at an overvalued level, may end up leading to inflation. If the adjustment does not come from a change in the value of the currency, it will happen through inflation.