samchain/econo-pairs-v1 huggingface dataset:
Although devaluation provides short-term benefits linked to the fall in export prices, in the medium term these are potentially outweighed by the negative effects, which we have tended to forget: inflation caused by higher import prices, a fall in the value of the country’s wealth and an increase in its external debt. Italian creativity, your commercial ingenuity, dating back to Venice, Genoa and Florence, all count much more than the ease of a weak lira. 2/ The second reason is the economic results. For the past 20 years, Italy and France have reaped substantial benefits from the single currency: price stability [slide], in other words a contained level of inflation that preserves household purchasing power. Before the euro, inflation sometimes reached very high levels in Europe: it averaged 8.1% in Italy in the 20 years before the euro, compared with 1.8% in the last 20 years. stable financing conditions, due to a marked reduction in interest rates and a narrowing of spreads between countries [slide]. The spread between Italy and Germany, for example, has more than halved: it averaged 5.1% over 1986–92 – a period when we had a single market without a single currency, between the Single European Act that followed the Milan European Council, and Maastricht – compared with 1.9% in 2017–18, even though it has widened again recently due to the re-emergence of uncertainties. And in France, it went from 1.9% to 0.4%.

This mix between an expansionary budgetary and fiscal policy during a period of abovepotential economic growth and the worsening global market sentiment towards emerging economies in general can enhance volatility and affect financial stability via several channels: the interest rate, the exchange rate, the inflation rate. The advance in household indebtedness can cause these risks to pass through from the macroeconomic level to the microeconomic level for debtors. Last years’ environment 5  marked by low interest rates and sustained increase in new loans favours the build-up of possible vulnerabilities concerning the sustainability of the level of indebtedness through both banks and NBFIs (Figure 26), especially for lower-income debtors. The fact that the great majority of the stock and flow of housing loans and corporate loans are variable-rate loans (Figure 27) is an aggravating factor for financial stability in the context of the start of a new interest rate hike cycle – for external reasons, domestic reasons or for a combination of reasons. The fact that the advance in household indebtedness occurs concurrently with the high economic growth rates indicates the problems of economic growth: it is unbalanced and it leads to deeper inequality between social groups. Debt service-to-income ratio for debtors earning minimum to average wage economy-wide stands higher than that for debtors earning double the average wage, notably among borrowers with housing loans (Figure 28).
This is the stance that should, in my opinion, inform the actions of central government and other government bodies, which in Spain’s highly decentralised system of regional government have very significant responsibilities, as well as the behaviour of economic and social agents, whose attitude may determine the degree of flexibility of the productive system and of the institutional framework and the viability of the necessary reforms. We should be aware that there is very little room for expansionary demand policies here and that inappropriate use of such policies may even be counter-productive. Monetary policy ceased to be an autonomous economic policy tool a decade ago. Its primary objective is to maintain price stability in the euro area over the medium term. From the point of view of domestic requirements, the monetary and financial conditions in which Spanish households and businesses have been operating have been becoming progressively tighter and are currently more in line with the need to stem inflationary pressures in the Spanish economy. For its part, the fiscal position is in a favourable starting position since public finances were again in surplus in 2007 (2.2% of GDP) and the debt ratio stood at 36.2% of GDP, levels unprecedented in the recent history of the Spanish economy. These results reflect the strong commitment of previous governments to fiscal discipline, but also substantial growth of the Spanish economy in recent years and the buoyancy of the property market. That has resulted in strong growth in tax revenues, exceeding that seen in previous upturns.

We should all accept that in a situation like the present one in which the economy is facing a slowdown, in an adverse international setting and surrounded by risk factors, it is more important than ever that economic policies be firmly geared in two directions: first, towards safeguarding macroeconomic stability; and further, to promoting the adoption of structural measures and reforms in product and factor markets, to enhance the degree of competition in the environment in which agents take their decisions, the mobility of factors of production and the flexibility of price and wage-setting mechanisms. I believe that both strategies generate substantial synergies if they are pursued simultaneously. And in Spain we have the experience of the key role they have played in the real convergence of the Spanish economy over the last decade. And this is so because it is essential that the response of supply and demand to the changes required to rebalance the various sources of spending and the various sectors of activity should be flexible, so as to ensure that the slowdown is mild and leads promptly to a new path of high growth, in line with the economy’s potential, that is more balanced and sustainable.
Sir Andrew Large: Financial stability - managing liquidity risk in a global system Speech by Sir Andrew Large, Deputy Governor of the Bank of England, at the Fourteenth City of London Central Banking and Regulatory Conference, London, 28 November 2005. * 1. *  *  Introduction  Much is written today about the search for yield. Much is said about the factors that underlie it: accommodative monetary policy; savings gluts; and financial engineering which multiplies the opportunities for increasing leverage. And much, too, is said about new instruments, such as those involving credit risk transfer, or new players, such as hedge funds, that trade them. However, my main concern today is not with the search for yield as such, nor with market innovations or new players. Rather, it is with the financial vulnerabilities to which they could give rise, and what can be done to mitigate those vulnerabilities. Because it seems to me that the search for yield also highlights some less benign aspects of today’s financial system: the opacity of markets in some new instruments; the difficulty of knowing the real value of assets and contracts; reliance on models that have not been tested in the full range of economic conditions; the uncertainties over behaviour of new participants in the markets should events turn adverse; and the difficulty we have in judging just how deep markets will prove to be should a substantial number of investors decide simultaneously to try to realise their investments.

But one of the roles of, and indeed justifications for, regulation is to ensure that firms also take sufficient account of the interests of others who would be adversely affected by their failure: their own borrowers and depositors, for example, but also the customers of other banks that would suffer losses if a particular bank were to get into difficulties. In other words, one purpose of regulation is to align private choices with public welfare maximisation. Hitherto, public authorities have placed much emphasis on capital requirements as a way of achieving this reconciliation. Indeed, one reason for imposing capital requirements is to limit the risk of liquidity problems, by giving the market a level of assurance over the solvency of a firm. But this emphasis on capital has perhaps overshadowed the importance of direct liquidity requirements. Analytically, liquidity is a more difficult area. But arguably the case for prudential liquidity requirements in some form is just as strong as for capital. Liquidity cushions are a first line of defence: in times of stress they can buy time, and where organisations are solvent they can help to prevent liquidity problems turning into solvency ones. I will return to this later. But besides regulation, the public authorities—specifically central banks—have a crucial role as the ultimate providers of liquidity. They therefore need to ensure that they are properly equipped to carry out this function.
The business cycles of Morocco and the EU are largely synchronised and the existence of various economic transmission channels such as trade, tourism, and remittances, explain why both the European and Moroccan economies are going through a challenging period in the present global context. My speech today will focus on the global financial crisis and its roots, on the ECB’s response to the crisis and on the role of emerging market economies in the world economy. The global financial crisis and its roots Let me start by briefly highlighting the origins and evolution of the current crisis. Imagine a neutral observer who looked at the financial sector about a decade ago and then didn’t look at it again until the eve of the current financial crisis. He would have found a completely different financial industry, one which over the past decade has undergone a dramatic shift of focus. He would have discovered a financial system that had moved away from its traditional role of supporting trade and real investment. He would have found a financial system in which speculation and financial gambling had run rife. He would have encountered a system transformed – a system no longer managing genuine economic risks but one actually creating and assuming financial risks – risks resulting from arbitrage and intentional exposure to asset price changes. That same observer would have realised that financial liberalisation and innovation had made our economies more productive. The securitisation of assets, for example, had great potential to diversify economic risks and to manage them efficiently.

An economic turnaround has occurred, with a soft landing after the long period of high cost inflation in Norway and a low level of activity in other countries. But inflation is too low. As mentioned, there are three main factors that have contributed to this. First, the global downturn had considerable implications for the impact of interest-rate setting in Norway. A strong krone contributed to the decline in inflation. The krone has now returned to its previous level so that the effect will be reversed. Second, low inflation in other countries and rapid changes in the international division of labour have resulted in a fall in prices for imported goods and services, even when measured in terms of what Norwegian importers pay in foreign currency. Third, intensified domestic competition also appears to have exerted downward pressure on prices. As a result of both changes in the international division of labour and increased domestic competition, there is idle labour and available real capital in Norway. We cannot rule out that adjustments will be made over a period of time and that these adjustments will encompass a large portion of the domestic economy. Thus, it is possible that the level of output that is consistent with stable inflation will increase. Inflation will remain low in 2004. However, the easing of monetary policy will gradually push up inflation. As mentioned, it may take some time before interest rates in other countries are increased to a considerable extent.
6  BIS central bankers’ speeches  Figure 2 Government bond yields, 10-year maturity Per cent 8  8 Italy  7  UK  7  6  6  5  5  4  4  3  3  2  2  1  1  0  0 08  09  10  11  Source: Reuters EcoWin. This situation is very similar to the one experienced by Argentina, for instance, when they had a “currency board” that firmly tied their domestic currency to the US dollar. In the event of a crisis there has been no central bank that could create currency – in other countries with similar problems the physical currency has run out and the only solution has been to fly in dollar bills from the Federal Reserve. Now, of course, the fundamental problem is that Italy, like Argentina, has lost competitiveness, had a deficit on its current account and built up debt until the market has gradually lost confidence and demanded higher and higher interest rates. Competiveness then needs to be restored through some form of internal devaluation. This is unavoidable, but it takes a long time and does not help the acute liquidity crisis. The situation is different in the United Kingdom. If investors are concerned over the British credit worthiness they will sell their government bonds as in the example above.

Monetary policy stimulation has less effect than normal and developments in the economy as a whole are weak. Studies show that this type of mechanism largely explains why the recovery in the United States has been, and still is, so slow.2 A financial crisis may also have other consequences. For instance, one can claim that the sovereign debt crisis we are currently in the midst of is in many ways a consequence of the financial crisis, and thus of the credit expansion that preceded it. Bank crises and sovereign debt crises are often connected. Public finances in many countries have weakened substantially because demand has fallen and in some cases also because they have needed to support a precarious banking system. Moreover, in many countries the credit expansion concealed the need for structural reforms in the labour market and in public administration, which meant they were ill-equipped when the recession came. So, all in all, there are many good reasons to try to avoid a situation where credit and lending accelerate out of control. Various perceptions of the link between monetary policy and financial stability policy So what should we do to prevent, or at least reduce the risk of, this type of development in the future? Opinion is currently divided on this question. The role central banks should play has been debated a lot, and in particular whether rate-setting should be used to subdue credit expansion.
It also excludes the direct effects of changes in indirect taxes and subsidies. This measure was previously called UND1X. This name referred to the fact that it was a measure of underlying inflation, but probably appeared a little too cryptic. I remember that I may have let slip that I thought it sounded like the name of a rocket fuel during my first hearing. The new and hopefully slightly less difficult name since a week ago is CPIX, where the X indicates that something has been excluded from the CPI. This takes me onto today’s second theme, namely inflation prospects, our most recent interest rate decision and our view of what monetary policy will be appropriate in the future. The economic situation and future prospects It can hardly have escaped the attention of anyone here today that we now base our forecasts on our own assessment of what future movements in the repo rate we believe will provide a well-balanced monetary policy. So before I take up the rest of the economic analysis, I shall first describe the interest rate assumption. Our analysis is based partly on the increase in the repo rate of 0.25 percentage points to 4 per cent which we decided on just over two weeks ago, and partly on the fact that the interest rate will need to be raised slightly further in the future – to around 4.25 per cent during the first half of 2008. So how did we reach this assessment?

2  All speeches are available online at www.bankofengland.co.uk/speeches  2  The accompanying burst of financial innovation spread the application of these technologies and supported the process of globalisation that bolstered trade, productivity and incomes. Once again, however, the hard and soft infrastructure of the financial system failed to keep pace. Lighttouch regulation, out-moded codes of market conduct, inadequate settlement and clearing infrastructure all contributed to the global financial crisis. We can draw on these experiences to help ensure that FinTech boosts growth and promotes financial stability. Not least because, following a raft of post-crisis reforms, the Bank’s regulatory frameworks are now fit for purpose. The Bank of England’s Financial Policy Committee (FPC) is mandated to assess new and emerging risks to financial stability, including those that may exist beyond the existing regulatory perimeter. And it now has the powers to treat similar risks consistently, wherever they originate. 4  With this new approach, the Bank can help build the right infrastructure for FinTech to realise its promise. The Promise of FinTech To its advocates, FinTech will democratise financial services. Consumers will get more choice and keener pricing. SMEs will get access to new credit. Banks will become more productive, with lower transaction costs, greater capital efficiency and stronger operational resilience. Financial services will be more inclusive; with people better connected, more informed and increasingly empowered. And tantalisingly, FinTech could help make the system itself more resilient with greater diversity, redundancy and depth.
Since the remarkable work of the Pébereau Commission in 2005 on public debt, there has been a succession of plans for reform, from a General Revision of Public Policy (RGPP) under President Sarkozy, through Modernisation of Public Policy (MAP) under President Hollande, to Public Action 2022 under the current presidency. More recently, another revision of the Organic Budget Law adopted in 2021 aimed in particular to improve multi-year oversight of the public finances, by introducing a nominal public spending target in billions of euros [rather than in GDP points], as well as a three-year ministerial performance trajectory. Unfortunately, the first public finance planning act under this new framework is struggling to be adopted. The absence of an overall perspective, overlapping sectoral reforms and successive waves of decentralisation have resulted in a lack of consistency and "a loss of vision by the administration". i I am perfectly well aware of how difficult it is for politicians and our elected representatives to deal with the unrelenting pressure of urgency, exacerbated by a succession of unprecedented crises. However, the growing tyranny of "the news cycle" and of emotions tends to mask the structural challenges we face. De Tocqueville's thoughts on the Ancien Régime and the Revolution are strikingly apposite today: "[The government] seldom undertakes or soon abandons the most necessary reforms, which in order to succeed, demand a persevering energy". ii  Page 8 of 19 The increased use of assessment has also been a disappointment in terms of improving public sector efficiency.

OECD (2019), PISA 2018 Results (Volume I): What Students Know and Can Do, PISA, OECD Publishing, Paris xii Borne, E., Rencontres des cadres dirigeants de l'État, speech , 17 May 2023. xiii Villeroy de Galhau, F., « Comment la France et l’Europe vont vaincre l’inflation », Letter to the President of the French Republic, April 2023. xiv Cour des comptes, La DGFiP, dix ans après la fusion, 20 June 2018. xv Baromètre - Institut-Paul-Delouvrier 2022 xvi Banque de France, Annual Report 2022, 22 March 2023. xvii Le sursaut, Vers une nouvelle croissance pour la France, working group chaired by Michel Camdessus, 2004. xviii Rapport de la Commission pour la libération de la croissance française, 23 January 2008. xix Conseil d’Etat, Simplification et qualité du droit, annual review, 25 September 2016. xx DITP, Baromètre BVA de la complexité administrative et de la confiance en l’administration par évènement de vie, 24 May 2023. xxi Commitment No. 3 of the 7th Interministerial Committee for the transformation of public services of 9 May 2023. xxii Cour des comptes, La décentralisation 40 ans après, Public Annual Report 2023. i  ii
But even the World Trade Organisation, despite the critical importance to the world economy, and especially its poorer citizens, of opening up trade, has found it difficult to arouse sufficient “sympathy”, to use Smith’s word, to get agreement on constraints on our future behaviour. But let us not be pessimistic. The three principles of institutional design may be helpful in thinking about future collective decisions in areas as diverse as health, education, pensions and taxation, just as they were in constructing a new monetary policy framework. But that is for others to take forward. Conclusions I recognise that the success of central banks in keeping inflation low and stable over the past decade may owe something to good fortune as well as to good policy. But, as the legendary football manager Bill Shankly used to say, “it’s strange, but the better we play, the luckier we get”. What really matters, however, is that we as central bankers acknowledge that we owe everything to the design of the institutional framework. As I have argued this evening, a central part of Adam Smith’s legacy is an appreciation of the essential role played by social institutions. So it is appropriate that it was another son of Kirkcaldy who, over two hundred years later, created the new institutional framework for the Bank of England in 1997. As Niccolo Machiavelli wrote in The Prince, “Nothing brings a man greater honour than the new laws and new institutions he establishes”.

Now I too share the privilege of speaking in the Kirk where Gordon Brown’s father used to preach to the people of Kirkcaldy. Double trouble, you might think. I am particularly mindful of the controversy which Greenspan’s lecture stirred in the world of Smith scholars: “an unseemly battle is being fought over the soul of Adam Smith”, as one remarked. It is a sign of the resurgence of interest in Adam Smith that at almost every point on the political spectrum one can find people who claim Smith as their own. But, in a lecture in 1926 to commemorate the 150th anniversary of the publication of The Wealth of Nations, the economist Jacob Viner wrote, “Traces of every conceivable sort of doctrine are to be found in that most catholic book, and an economist must have peculiar theories indeed who cannot quote from the Wealth of Nations to support his special purposes”. 2 My intention today is certainly not to propose “peculiar theories”, but to examine the importance of social institutions in a market economy. Self-interest explains many economic decisions. But a market economy also requires social institutions. 3 They represent collective agreements about how to constrain our actions. Some social institutions constrain our individual actions. For example, a market economy cannot flourish in a world of anarchy in which we suspect that everyone else will cheat. If I lend you money it is in both our interests that there be some mechanism by which repayment can be enforced.