samchain/econo-pairs-v1 huggingface dataset:
It is obvious that structural problems require structural solutions. Implementing an inflationary monetary policy would not result in lasting reductions in unemployment, but would actually serve to exacerbate the problem over the medium term. I recognise that structural reforms are not always easy to implement. The benefits are often enjoyed in the medium term, while short-term costs for some groups may mean that reforms are vigorously opposed by interest groups. Although there is a common objective of reducing unemployment, there is no common programme of reforms that will work in all countries. While it is possible to learn from the experience of others, each Member State will wish to develop workable policies that reflect its own particular circumstances. Although the path of structural reform is not always an easy one, it is the only way in which we can achieve the lasting reductions in unemployment that are so urgently needed. Only structural reforms that aim to create stable labour markets in which there is flexible interaction between supply and demand will ensure that the benefits of EMU in terms of economic growth are achieved to the maximum extent possible. Conclusions To conclude, Economic and Monetary Union provides a great opportunity to create and maintain a large zone of price stability and economic prosperity in Europe. However, while price stability is a necessary condition for fully grasping the opportunities of EMU, it is not, in itself, sufficient. Stability-oriented polices regarding the development of national fiscal positions and the functioning of labour markets are also of crucial importance.

These measures recognize that to avert or contain future financial crises, we need a financial system that can withstand large negative shocks. First, market participants must not have incentives to take excessive risks. Instead, incentives should reward actions that support economic growth and financial stability. And financial firms must set aside enough capital and liquidity so that when things go wrong they can absorb losses with their own resources. Finally, if these buffers prove inadequate and a financial firm veers toward failure, the official  BIS Review 141/2010  5  sector needs the tools to wind them down in an orderly manner without having to make the terrible choice between a chaotic failure that harms the whole economy and a taxpayerfunded rescue. Conclusion I appreciate the opportunity to talk to you about how my job at the New York Fed ties in with your lives and work here in Upstate New York. The links are many, including   How the Fed’s dual mandate for full employment and stable prices guides our actions and affects your lives;    How we rely on understanding economic conditions in Upstate New York as input when we formulate our policies; and    How our efforts to restore financial stability have provided a more solid foundation for lending to households and businesses – including small businesses.
Tier 1 capital also included so-called “hybrid” capital instruments – debt that was supposed to convert to equity to absorb losses. However, the ability of these instruments to absorb losses proved to be illusory. Moreover equity itself was distorted by factors such as the inclusion of deferred tax assets – tax credits that could only be realised when a profit was made and so of no use in a crisis. And banks were slow to recognise losses – leading capital ratios to be overstated. And, as to banks’ assets, the major banks were, by 2008, using their own models to assess the riskiness of much of their portfolios for regulatory capital purposes. From their origin in the late 1980s, the international capital adequacy standards – the Basel standards – had  BIS central bankers’ speeches  1  focussed on risk adjusted capital. This was based on the sensible principle that the level of a bank’s capital should reflect the riskiness of its assets. As the Basel standards developed, banks were increasingly, first for the trading book in 1996 and later, through the move to Basel 2 in 2008, for the banking book as well, able to use their own modelling to assess the riskiness of their assets. Again, there was logic in this. It replicated for regulatory purposes the way the banks themselves managed risks.

These efforts to reverse financial exclusion from the global system from termination of correspondent banking relationships can be complemented by greater use of financial technology to promote inclusion. Over the past decade, mobile and web-based payment providers have dramatically expanded access to payment services, particularly in developing countries. Consider Vodafone’s M-PESA since its launch in 2007. It has reached 23.4m customers across 11 countries, many of whom do not have bank accounts. 13 Meanwhile alternative lending models have opened up access to credit and investment. Examples include Faircent in India, which aims to provide credit on demand for all Indians, and Biva in Brazil which seeks to operate in regions traditionally underserved by banks. 14  12  In responding to a recent World Bank survey, whose results are summarised in its October 2015 ‘Report on the G20 survey on de-risking activities in the remittance market’, half of banking authorities, three quarters of large banks and a majority of local and regional respondent banks reported a decline in correspondent banking relations. 13  Data from M-PESA, http://www.vodafone.com/content/index/media/vodafone-group-releases/2015/mpesaghana.html  14  Data from Peer & Social Lending, http://peersociallending.com/investing/peer-to-peer-lending-sites-16-of-theworlds-best/  4  BIS central bankers’ speeches  If fully realised, recent developments – including expanded use of legal entity identifiers, know-your-customer utilities and even potentially distributed ledger technology – have the potential to restore correspondent banking services and remittance flows. Financial technologies can redraw the parameters of the financial system and promote inclusivity and growth.
It could thus become increasingly difficult for us to defend our own interests. Enlargement is therefore very likely to influence our relationship with the EU. Let me now move to one of the key features of our economy: our financial sector, which currently also faces some major challenges. 4. Switzerland as a European financial centre  Since the beginning of the last century the Swiss financial sector has been a mainstay of our economy. It accounts for just under 6% of total employment, but currently generates over 10% of the country’s GDP. Relatively speaking, therefore, it is more than twice as big as the German or French financial sectors, for example. Switzerland’s globally active big banks and insurance groups are also major international competitors in most market segments. The two big banks are among the world’s ten largest banks. In terms of value added by the financial sector, Switzerland occupies fourth place behind New York, London and Paris, but is ahead of Frankfurt. Switzerland plays a leading role in banking, above all, in asset management. Almost four trillion francs worth of assets are managed in Switzerland. This accounts for around one-third of the world’s portfolios of cross-border investments. Over the last 10 years, our financial institutions have also greatly expanded their activities abroad on a global basis. In 2000 the value of their foreign investments amounted to some 54 billion Swiss francs, which is equivalent to around 14% of total Swiss investments abroad. Switzerland is also a magnet for foreign banks.

8 Beyer, R. and Smets, F. (2015), “Labour market adjustments and migration in Europe and the United States:  how different?”, Economic Policy, Vol. 30, Issue 84. 9 Dolls, M., Fuest, C., Kock, J., Peichl, A., Wehrhöfer, N. and Wittneben, C. (2015), “Automatic Stabilizers in the  Eurozone: Analysis of their Effectiveness at the Member State and Euro Area Level and in International Comparison”, Centre for European Economic Research, Mannheim. 10 Beyer, R. and Smets, F. (2015), op. cit. 11 For a review of the development of this literature see Mongelli, F. (2002), “New views on optimum currency area  theory: what is EMU telling us?”, ECB Working Paper No. 138. 12 For a fuller explanation of financial risk-sharing within monetary unions, see ECB (2016), “Special Feature A:  Financial integration and risk sharing in a monetary union”, Financial Integration in Europe, May. 13 Asdrubali et al. find that financial risk-sharing in the United States increased monotonically each decade from  the 1960s to the 1990s. See Asdrubali, P., Sorensen, B. and Yosha, O., “Channels of Interstate Risk Sharing: United States 1963–1990”, The Quarterly Journal of Economics, Vol. 111, Issue 4, 1 November 1996. 14 See Hane, G. (1998), “The Banking Crises of the 1980s and Early 1990s: Summary and Implications”, in FDIC  Banking Review, Vol. 11, No 1. 15 ECB calculations based on FDIC data. The term “institution” refers to a separately chartered commercial bank  or savings institution.
Constantinos Herodotou: The global debt trap – the implications for growth and possible solutions to tackle it Speech by Mr Constantinos Herodotou, Governor of the Central Bank of Cyprus, at the YPO - Cyprus Chapter event, Nicosia, 19 January 2023. *** Global debt, both public and private, has risen significantly over the last two decades. It is no surprise that many economists as well as the IMF and the Word Bank frequently warn about the possible adverse consequences of excessive debt levels on the global economy, and the macroeconomic, financial and fiscal stability of countries. When governments, households and corporations are excessively indebted, it may impair their ability to borrow - that is to finance their needs for consumption or investment. This has a negative impact on growth prospects. Excessive debt may affect the stability of the financial and banking system, if repayments of debt increase unsustainably, and this could also lead to further economic slowdown. If a country's level of private and public debt leads to a crisis which is severe enough, the current system of extensive global financial interlinkages could cause further economic hardships. Given the current high level of global debt and the above considerations, a number of economists refer to the situation as a potential "trap" that needs to be addressed urgently. The linkages through which excessive debt, private and public, affect the economies are widely acknowledged in economic analyses and literature.

In fact, the high private debt of 236% in Cyprus relative to the euro area average of  4/5  BIS - Central bankers' speeches  140% and the European Commission's threshold of 133%, combined with the high percentage of loans in Cyprus with floating interest rate, makes them particularly sensitive to the higher interest rate era that we are entering. At the current juncture, the prudent CBC supervisory Debt-Service-to-Income ratio (DSTI) tool, defined as a household's total monthly debt payments divided by its monthly net disposable income that is in place in Cyprus, is expected to somewhat mitigate the negative impact of higher lending rates. Nevertheless, extra vigilance and concerted action is required at all levels to address these debt risks and minimise any crowding out effects. Let me conclude. Debt, both private and public, is essential for any economy as it is one of the main sources to finance vital growth components, such as investment and consumption. Excessively high debt however, both public and private, has a negative impact on a country's growth rate. In most cases, the impact becomes more pronounced as debt accumulates and may also lead to financial stability issues. Even though many efforts have been made in recent years by international and national regulatory bodies to implement a more sound financial architecture and to strengthen financial system regulation and oversight, new vulnerabilities, such as the pandemic crisis and the war in Ukraine, have increased the risks of rising private and public debt.
Funds raised in the US from money market funds were round-tripped back into the US through the purchase of asset-backed securities by European banks. When US money funds withdrew their dollar funding, this chain went into reverse gear causing a dollar funding problem. Understanding those links in the cross-border financing chain is impossible without detailed sectoral data. That is now in train. Yet there remain significant data constraints on our ability to map the macro-financial system of systems in the detail necessary to capture accurately interactions within and across subsystems. Even among the world’s largest banks, data on their bilateral exposures to one another remains partial and patchy, especially for off balance sheet positions and securities holdings. That means large parts of the core of the international banking map remain, essentially, uncharted territory. 10  BIS central bankers’ speeches  These data gaps are even more acute when moving beyond the banking system. Large parts of the non-bank sector remain in the shadows from a data perspective. For example, reliable measures of the aggregate and/or individual leverage, maturity and foreign currency mismatch positions of non-bank intermediaries – some of the key vulnerability metrics – are thin on the ground. The FSB has an agenda to fill these data gaps. More broadly, flows of funds data, both within the financial sector and between it and the wider economy, domestically and internationally, is at present partial.

For instance, a structural low interest rate level such as typically observed in Switzerland can help explain a relatively high credit-to-GDP ratio in international comparison. Similarly a prolonged period of exceptionally low rates such as the one we are currently experiencing is a potential explanation for an increase in credit volumes. At a superficial level this relation is obvious. Low interest rates reduce the cost of servicing a given credit which becomes affordable for a broader range of households. Alternatively, borrowers can afford higher credit lines. Moreover, low interest rates translate into higher asset prices and higher notional wealth. The increased collateral values support higher credit lines and decrease the amount of credit rationing. This is, in particular, relevant with  6  Stiglitz, J. and Weiss, A. (1981)  BIS central bankers’ speeches  3  reference to the real estate market where higher house prices imply higher mortgage volumes to finance the same stock of housing. The rationality of this explanation has to be relativized, however. This is certainly the case if we think of credit financing long run projects such as real estate. Here the average interest rate over the life-time of the credit must be relevant for investment decisions. An exceptional, prolonged period of low rates might imply a decrease in the lifetime average rate, a form of “window of opportunity”.
While less flexible labor markets and the absence of a federal fiscal system will certainly pose constant challenges for the management of a common European currency, a fluctuating exchange rate need not be the optimal way to respond to these shortcomings. The argument that Europe -- even a core component of Europe -- can ill afford to renounce exchange rate flexibility rests crucially on the view that Europe is significantly more BIS Review 109/1997  -6-  heterogeneous than the United States and, therefore, more vulnerable to country-specific shocks that can best be corrected by exchange rate changes. I do not support this view. Rather, I believe that in many respects differences among the European economies have been over-emphasized in the public debate. It is possible to suggest, for example, that the economies of some European countries have more in common today than do those of some individual states in the United States, such as New York and Michigan or California and Idaho. Moreover, as a result of the convergence of economic policy objectives, the economic cycles among many European countries have become more synchronized over the last ten years, a trend that is likely to be reinforced by monetary unification. Furthermore, when shocks are mainly at the industry level -- for instance, when a recession hits the automobile or steel industry in Germany and France -- the German and French economies would hardly benefit from an exchange rate change. Such a change, in this case, simply would not affect the appropriate relative prices.

Given its need to instil confidence in the markets and to ensure the stability of the euro exchange rate, the European central bank is likely to want to be perceived as ready and able to operate effectively in the dollar market, for which substantial dollar reserves may be required. In the short term, the response of non-European central banks to the introduction of the euro is also likely to be cautious. Ultimately, the desired euro holdings of these central banks will largely depend on the decisions they make about their exchange rate regime. A number of countries -- including the central European countries that have applied for membership in the European Union and other countries in Africa -- may decide to peg their currency to the euro. Yet these countries may well wait for the newly-formed European central bank to establish its policy record and clarify its operating procedures before they commit their currencies to a euro peg. Indeed, history suggests that a currency’s role as an international reserve, means of exchange, and store of value is slowly gained and slowly lost -- as the examples of the dollar and pound sterling illustrate. The dollar, in particular, may have seemed on the way to losing much of its international prominence after the demise of the Bretton Woods system in 1973. After declining as a share of international reserves and a means for international transactions from 1974 to the mid-1980s, however, the dollar’s relative use has not changed significantly during the past decade.
Relative to the conditions that prevailed in the early 1990s, the higher levels of capital in the core now provide a larger buffer against shocks and enhance the ability of the banking industry to act as a critical stabilizer in times of stress by providing liquidity to the corporate sector. When financial markets  BIS Review 85/2006  1  dry up, firms turn to banks and their unused loan commitments and lines of credit. Banks are in a position to fund this liquidity because transaction deposits tend to flow into the banking sector. In times of crisis, it appears that U.S. investors now run to banks, not away from them. In view of the critical role that efficient credit provision plays in economic growth and development, the benefits to the global economy of getting the underpinnings of a stable, efficient financial system in place are substantial. At the same time, we also know that these important markets are susceptible to certain “market failures,” such as information asymmetries, incentive conflicts, moral hazard and agency problems. By at times distorting incentives to manage risk, these market imperfections can alter credit decisions and lead to a higher overall level of risk-taking than may be optimal for the economy as a whole. This provides the classic rationale for supervision and regulation. Supervision and regulation have the potential to help mitigate these sources of market failure.

Let me now turn to the other side of the coin. Despite the above examples of areas where good prospects may arise for market activity, there are also elements of uncertainty on the horizon, and one of them is Brexit. Brexit On 29 March 2017, the United Kingdom notified the European Council of its intention to leave the European Union. This means that 30 March 2019 is, in principle, the “withdrawal date”. So far, in the draft Withdrawal Agreement, there is no specific regime with regard to financial services and this unquestionably generates a context of uncertainty that affects all market participants. Allow me to focus on how it affects banks. “Wait and see” is not an option. Banks need to prepare. Within the framework of the Single Supervisory Mechanism (SSM), the ECB, together with National Competent Authorities, is trying to communicate, to banks which may be considering relocating their banking activities to the euro area, the SSM’s supervisory expectations on different aspects such as: authorisations and licences to carry out banking activities in the euro area; internal governance and staffing arrangements; or authorisations and use of internal models. These expectations have a key underlying principle, which is the need to guarantee consistency across the existing and the relocating institutions, so that they both operate under the same regulatory, prudential and supervisory standards. There is another key aspect, which is the need to ensure that relocating banks are not empty shells.
Although the low interest rates and the long average maturities of liabilities keep the financial burden within moderate limits, at end-2004 the cushion of saving available after interest and capital payments had fallen to practically zero for Spanish households as a whole. However, the effects of higher indebtedness and of this lower saving on household wealth were again more than offset by the notable surge in their real-estate wealth, which was strongly linked to the rise in house prices. As a result, the overall financial position of Spanish households remains sound. The strength of the sector’s balance sheet as a whole is likewise reflected in the microeconomic information drawn from the Spanish Survey of Household Finances recently compiled by the Banco de España. Although this survey identifies a household segment that is in a more vulnerable situation than is apparent from the overall indicators, the size of this segment is small. While the notable changes in the household balance sheet have not led to a weakening of their wealth position, there has been an increase (by various mechanisms) in this sector’s exposure to a relatively broad range of possible shocks, thereby raising the sensitivity of consumption and of residential investment to them. These shocks notably include those that may affect employment, a variable which, as mentioned above, largely determines the behaviour of household spending. Obviously, the behaviour of interest rates is also very important. However, the greatest uncertainties lie in the possible implications of developments in the real-estate market.

Born in Louisville, Kentucky, Benjamin Friedman went to Harvard University with the intention of studying law, but soon realised that economics suited him better. He pursued his studies at Harvard and at Cambridge University in England. Early in his career, Ben worked for various entities of the Federal Reserve System and at Morgan Stanley. In 1972, at the age of 25, he was appointed assistant professor of economics at Harvard University. Ben has remained a loyal faculty member at Harvard for five decades, including a three-year spell as the chairman of the economics department. Page 2/4  When Ben recently celebrated 50 years as a professor at Harvard, many of his former students travelled from all around the world to attend the occasion. The interaction with his students has been of utmost importance to Ben, and he would remain in contact with them for decades following their graduation. A number of these former students today occupy leading positions in academia, central banking and government. This shows that Ben has been not only an outstanding researcher, but also an influential teacher of economics. Spending 50 years in the same place is not as unusual as one might think, at least not when we consider some of the great Enlightenment thinkers Ben so deeply admires. Take Immanuel Kant, who developed his philosophy without ever leaving his hometown of Königsberg. According to legend, Kant became such an integral part of the city that people would set their watch by the time he left his house for his afternoon walk.