samchain/econo-pairs-v1 huggingface dataset:
The question is whether it is expected to become better or worse. Consequently, these variables are not good measures of the level of resource utilisation, but rather of whether this is increasing or decreasing. However, the business tendency surveys also include variables that measure levels. For example, this applies to the shortage of labour in the business sector and capacity utilisation in the manufacturing industry. These have both increased recently and it cannot be ruled out that these will reach normal levels by the end of this year. (Figure 8. Shortage of labour in the business sector and capacity utilisation in the manufacturing industry). It is also interesting to compare shortage of labour with unemployment. These co-varied significantly before the crisis. However, shortage of labour is now increasing more rapidly than unemployment is falling. This indicates that there may be significant matching problems in the labour market long before unemployment comes down to a normal level. (Figure 9. Shortage of labour in the business sector and unemployment). At the Riksbank, we have also developed a special indicator to measure resource utilisation, the so-called RU indicator. 11 This uses a principal component method to extract common information from a large number of business cycle indicators in levels. The RU indicator also indicates that resource utilisation in Sweden was about as high in 2007 as at the previous peak in 2000. This contrasts with the GDP gap based on HP trends, which was much higher in 2007 than in 2000. (Figure 10.

The shift was towards managing the consequences of greater openness with much more emphasis on the stability of the financial system and its ability otherwise to do harm, both domestically and internationally. What was needed was not just openness, but safe openness. This emphasis was never more evident than during and after the global financial crisis. There was a moment at the height of the financial crisis when it might have been natural to consider forfeiting the commitment to an open financial system in the face of damaging international linkages. That did not happen to our great relief – the G20 nations stood firm to the principles of Bretton Woods and committed to significantly reforming the international financial system and its regulation, by raising global standards for regulating the system and reinforcing the institutional structure. The Covid crisis has been the first big test of those reforms – and it has been a big test. The scorecard to date is encouraging – by no means perfect, but the core of the system has stood up well, which is needless to say a huge relief. In order to preserve this public good of an open world economy and now also an open financial system, has required a commitment to institution building both internationally and domestically. Bretton Woods created the IMF and World Bank, and slightly less directly the GATT and then W TO.
However, as we saw in the mid-2000s, there is also the associated risk of upward pressure on inflation from global energy and other commodity prices, if the momentum of world growth becomes too strong. Fourth, the high degree of stimulus provided by fiscal and monetary policy to combat the recession will need to be withdrawn over a period of time. Returning budget deficits to a more sustainable level will require a prolonged tightening of fiscal policy in many countries, including the UK. Monetary policy can provide an offset by continuing to support the growth of private spending – though the appropriate degree of monetary stimulus will need to be continually reassessed in the light of the progress of the recovery at home and abroad and its impact on inflationary pressures. Given the turbulence we have seen in the major economies of the world over the last two years, it is very natural to worry about setbacks to the recovery, both in the UK and overseas. In the past, economic recoveries have not been smooth and linear. So we should expect to see some variability in growth rates, both at home and abroad, as this recovery develops. However, looking through this data volatility, there are also good grounds for expecting the growth of the world economy to continue to provide a healthy support to the UK’s economic recovery over the years ahead.

For example, the volume of international air traffic, which is highly sensitive to world growth trends, was 6.4% up on a year ago in January 2010. 3 Despite the gloomy headlines surrounding the release of the latest UK trade figures last week, the UK economy is benefiting from this revival in world trade and activity. The latest trade data show that since the second quarter of last year, the volume of UK goods exports, excluding oil and erratics, have risen 8.5%. 4 This is equivalent to an annual growth rate of 15% – around three times the trend rate of UK export growth since the early 1990s. 5 But imports have bounced back too, which is why the trade deficit is not shrinking at present. In the short-term that should not be a source of concern – rising imports at this stage of the cycle are usually a sign of a recovery in demand and a turnaround in the stock cycle. But over time, we should see rising exports helping to close the UK’s trade deficit. The very positive responses on export orders and confidence shown by a range of recent business surveys suggest that there is a significant further boost to our international trade performance on the way – supported by the competitiveness benefits of sterling’s depreciation since mid-2007. This bounceback in the world economy is much stronger than we might have expected a year ago. 6 So what has been driving it? And how resilient might it prove to be?
And so pooled LDI funds became forced sellers of gilts at a rate that would not have been absorbed in normal gilt trading conditions, never mind in the conditions that prevailed during the stressed period. Other LDI funds, with segregated mandates, were more easily able to raise funds from their individual pension scheme clients. However, given their scale, at 85-90% of the market, some of these funds were also contributing to selling pressure, making the task at hand for pooled LDI funds even harder. And of course if the pooled funds had defaulted, the large quantity of gilts held as collateral by those that had lent to the funds would potentially be sold on the market too. With the gilt market unable to absorb such forced sales, yields would have been pushed even higher, making the scale of the selling need even larger still. This is the self-reinforcing spiral that the Bank intervened to prevent. The Bank’s 13 day and £ billion intervention was made on financial stability grounds. It was the first example of us acting to deliver our financial stability objective through a temporary, targeted intervention in the gilt market. But let me emphasise: the asset purchases were a means to an end. They were designed to create the right conditions in the right part of the gilt market for long enough so that the LDI funds could build resilience so that their leverage would be well managed once the asset purchases had ceased and should gilt market instability return.

In a number of recent events, central banks have had to intervene in size, using public money, to remove the threats to financial stability. Providing backstop liquidity insurance when tail risks to financial stability crystallise is a core part of central banks’ job. And the FPC has discussed the importance of examining whether central banks should have facilities to provide liquidity to a wider set of financial market participants in stress. But central banks cannot be a substitute for the primary obligation of market participants to manage their own risk, or for internationally co-ordinated reforms that enhance the resilience of the non-bank financial sector. For that reason, such facilities must be carefully targeted on the financial stability vulnerability at hand, and designed in ways that incentivise the right private sector behaviours, incuding reducing incentives for excessive risk taking in the future. [24] My colleagues in our Markets area have been considering these issues,[25] including with colleagues internationally[26] – and a number of these principles were implemented in our LDI interventions. Conclusion Events of recent weeks, months and years have once again reminded us of the systemic risks posed by poorly-managed leverage in the non-bank financial system. All too often excessive risk taking alongside improper liquidity risk management has threatened conditions in the real economy - an issue that feels especially pertinent in the current environment of high volatility and tightening financial conditions.
The focus of this section is on how innovation in financial instruments extends the choice of risk management products available to companies and households, moving us closer towards a vision of liquid markets in state contingent securities. But it must also be borne in mind that imperfections within financial markets will affect the performance of these innovative financial products, that may in turn limit their availability. Such frictions may thus impact on the ability of the financial system to support corporate and household risk management. That is covered in section 4. 7 As an illustration of the potential benefits of innovation in contract design and broadening choice, consider the market for corporate credit risk. In previous decades, the only securities available to investors wishing to invest in corporate debt were corporate bonds. One might call such assets “natural assets” as the same instrument that is issued by the borrower is also that held by the investor. In this example, the role of the financial system is simply to facilitate the intermediation between end borrowers and end investors, and, in some cases, to provide a secondary market in the asset, intermediating between alternate end investors. There is no transformation of the asset. 8 Financial engineering can, however, decompose the returns on a corporate bond into different fundamental components or “atoms” of risk: •  For example, credit default swaps can be used to separate the return on a corporate bond into the compensation for default risk and the compensation earned on a riskfree security.

We care about the health and stability of the tri-party repo market both because of our interest in promoting stable and liquid financial markets and because we use it to implement monetary policy. The recent financial crisis showed us that the tri-party repo market was inherently unstable due to deficiencies in the settlement infrastructure. Prior to 2008, there was limited recognition of the ways in which adverse developments in this market could quickly transmit risk to other parts of the financial system with unforeseen consequences. We now know, with the benefit of hindsight, that the market was overly reliant on massive extensions of intraday credit by the clearing banks to the broker-dealers, that market participants did not adequately appreciate the magnitude of the risk embedded in the role played by the clearing banks, and, as a result, market participants underpriced risk in ways that undermined the market’s resiliency during periods of stress. These vulnerabilities were made apparent in the spring of 2008 when the events surrounding Bear Stearns demonstrated the run risk that existed more broadly in the tri-party repo market, prompting the Federal Reserve to intervene in order to restore confidence and market functioning. This intervention took the form of the creation of a Primary Dealer Credit Facility in March 2008, and a subsequent expansion of the facility in September 2008. The scope and scale of the market disruption were clearly very troublesome.
Trends and changes Sweden is in the forefront I said earlier that Sweden is in the forefront with regard to using other payment services than cash, and this is illustrated in this chart, which summarises the situation in a few selected countries.5 The picture that appears is that use of cash is much lower in Sweden than in most other countries and that the use of cards, primarily bank cards, is higher. The situation is roughly the same in our Nordic neighbour countries. I mentioned earlier that Sweden is a technology-friendly country. We have an extensive infrastructure for telecommunications and a high percentage of households have Internet in their homes, are familiar with technology and have smart phones and tablets. Moreover, there is a high degree of confidence and trust between households, companies, payment intermediaries and public authorities. This chart shows an aggregate of all of these factors. It is the World Economic Forum’s ranking of countries according to how well they are situated  5  If we look at cards and cash, it is unfortunately difficult to find good and comparable statistics. The information on other countries than Sweden is often a few years old, and the exact percentages should be taken with a pinch of salt. BIS central bankers’ speeches  3  with regard to utilising possibilities offered by information and communication technology. We can see that Sweden is highly placed and has been for a long time. Of course, this creates the right conditions for the payments market to develop.

This context provides useful information for how and why our stance has evolved over time. During the summer of 2018, the economy was growing above trend as businesses rode the wave of fiscal stimulus. The unemployment rate had fallen below 4 percent, a figure not seen since the peak of the tech boom in 2000. The global outlook was still quite positive, and inflation was close to our 2 percent goal. Against that backdrop, very gradually bringing interest rates back to more normal levels was appropriate in order to keep the economy on a sustainable path of growth. But the economic outlook and the uncertainty around that outlook have evolved considerably since then. While there’s not been a dramatic change seen in the overall numbers yet, the more detailed picture that emerged by summer of this year pointed to an outlook of slowing growth and inflation falling short of our goal. This in turn argued for a somewhat more accommodative monetary policy stance. The combination of muted inflation, slowing global growth, and uncertainties related to trade and other global developments led the FOMC to adjust the federal funds rate down by a quarter of a percentage point and conclude the run-off of the Fed’s balance sheet two months earlier than previously indicated. Our policy actions and communications have contributed to an easing of financial conditions that should help sustain the expansion and get us closer to our dual mandate goals.
Recent legislation reduces the legal liability for statements made in good faith that later turn out to be inaccurate. Supervisors have been supportive of these efforts, and I encourage each of you to consider whether substantial impediments to meaningful information sharing may exist in your own countries. The final point that I will make in this area concerns the power of leading by example. As supervisors and regulators, we should each strive to communicate frequently and openly with our constituents about our own Year 2000 programs. At the Federal Reserve, we BIS Review 85/1998  -5-  have testified before Congress on our efforts and have made available a large amount of material through the World Wide Web and numerous publications. As leaders in the financial markets, it is important that we set the right tone in promoting information sharing and transparency in our own preparations. Assessment and the Role of the Supervisor I will now turn to the role of supervisors in promoting Year 2000 readiness among the firms that we supervise. The primary effort must be to communicate the seriousness and urgency of the problem to the firms under our jurisdiction. In the United States, the bank supervisors are examining every bank operating in the United States regarding its Year 2000 program. As part of this program, the Federal Reserve conducted reviews of approximately 1,600 organizations, including a significant number of foreign banking organizations.

Urban Bäckström: In the wake of financial turmoil Speech by Mr Urban Bäckström, Governor of Sveriges Riksbank, at the Conference on WorldCom and Enron - aftermath in the US and lessons for Sweden, held in Stockholm, 5 September 2002. *  *  *  Thank you for the invitation to discuss this interesting topic. The circumstances connected with WorldCom and Enron unquestionably raise some burning questions to do with the roles of the owners, the boards and the auditors, as well as with construction of the rule system. There is a risk, however, that a drive for quick solutions will result in hasty conclusions. Experience shows, in my opinion, that when dealing with complex problems, there is often much to be said for reflection and closer consideration. In many cases it is not until some time has passed, enabling us to gain a better understanding of what happened, that we are in a position to take the steps that are truly important and crucial. My starting point here is that the events to do with WorldCom and Enron are a part of a broader context. In the first place they are, of course, directly connected with the recent years’ stock-market bubble. But at a deeper level I believe they stem from two major processes and that, as so often happens when things go quickly, our current institutions - in a wide sense - have not quite kept up with the course of events.
If the 15  government succeeds in negotiating a “new, comprehensive, bold and ambitious free trade agreement ” with the EU, and in opening up trade with non-European countries, the UK’s overall degree of openness may not worsen and it could improve. If so, and all else equal, the currency should in time rebound. But this makes longer-term investment in the tradable sector a somewhat tricky decision. Either the currency market is too pessimistic, in which case sterling’s depreciation is likely to be reversed over time. Or it’s not, in which case the costs of exporting will eventually go up. Barring some other source of exchange rate weakness, such as a sharp rise in the household saving rate (which would have its own implications for the economy), the sweet spot is unlikely to last indefinitely. So while investments with shorter-term payoffs make commercial sense, especially for those already running up against capacity constraints, the uncertainties involved in longer-term decisions could temper the usually positive response of business spending to depreciations in the exchange rate. Indeed they’re probably already doing so somewhat. In its latest forecasts the MPC expects this caution to persist. That’s why, in the central projection in the February Inflation Report, growth slows slightly this year, from 2.0% at the end of last year to 1.7% by 2017Q4.

Climbing Mountains Safely  Speech given by Sarah Breeden, Executive Director, UK Deposit Takers Supervision  Building on remarks given at the PRA Annual Conference for Chairs of the Non-Systemic UK Banks and Building Societies on 6 July 2020 22 July 2020  I am grateful to Nick Lock, Will Saunt, Philip Sellar and Alex Stringer for their assistance in drafting these remarks 1  All speeches are available online at www.bankofengland.co.uk/news/speeches and @BoE_PressOffice  Introduction Today the Prudential Regulation Authority (PRA) is launching a consultation1 on a new guide for banks – a guide that is designed to help new and growing banks scale the mountain from initial authorisation to becoming an established player in the banking market. The guide builds on the steps we have already taken to lower barriers to entry for new firms, and which over the past few years have helped support real change in the UK banking system. But there is more to do. And we hope these clear expectations will promote continuing competition in the sector by allowing firms to plan a safe route higher up the mountain. As firms plot their path out of the Covid stress, we must do our best to support competition, not risk a return to the ways of the past. The start of our climb In the years following the financial crisis, consolidation rather than competition seemed to be the norm.
MAS is stepping up efforts to promote greater public awareness of simple, low cost financial products as well as compareFIRST and DPI. 55. MoneySENSE, national financial education programme, is centrepiece of this effort. 56. MAS will continue to work with industry, schools, and other government agencies to enhance financial literacy among Singaporeans so that they can take sound financial decisions. •  Institute for Financial Literacy (IFL), a collaboration between MoneySENSE and Singapore Polytechnic, delivered over 1,500 talks and workshops to almost 50,000 working adults since its launch in 2012. •  MoneySENSE will partner schools in use of “gamification” to reach primary and secondary school students in fun and engaging way. 57. Last year, I asked for media’s help in our financial literacy effort. •  Heartened by media’s support, working with us, with industry, and on your own, to carry messages on financial education. •  We look to media’s continued support for MoneySENSE initiatives. Financial centre development Financial sector growth: broad-based and higher than overall economy 58. Financial services grew by 7.7% last year, compared to overall GDP growth of 2.9%. •  Since recovery from GFC, financial sector growth has outpaced overall economy. •  Sector grew by average 8.2% during 2011–2014, nearly twice overall economic growth of 4.2%. •  Growth has also been broad-based: across most business segments. 59.

I should emphasize that the weaknesses of the current regulatory capital framework are much more relevant to the supervision of the largest and most sophisticated banks than they are generally across the industry. For the vast majority of the thousands of U.S. banks, the existing regime largely works. In recognition of this, among other considerations, we expect that in the U.S. most banks will stay on Basel I while the largest and internationally active banks will adopt the advanced Basel II approaches. We are considering some simple adjustments to Basel I to ensure that the framework is up to date and that there is competitive equity with Basel II adopters. In any event, the lack of risk sensitivity and incentives for arbitrage have made Basel I less relevant in our supervision of the largest banks - it is a benchmark requirement to be met, but not, in practice, a critical discriminating factor as we judge their financial condition. As supervisors, we have focused increasingly on assessing the rigor and effectiveness of each organization’s risk management and control systems. We have looked to understand the risk appetite of each firm, and then assess how well it is able to measure and manage the resulting degree of risk taking. A key recent part of the supervisory effort has been to encourage the development of banks’ internal economic capital models - models that link risk taking to capital and that look to compare risk taking, and the returns on risk, across business lines, regions and products.