samchain/econo-pairs-v1 huggingface dataset:
Recessions are actually often credited with improving average levels of efficiency, as less productive firms are forced out of business and others drive through productivity gains in order to stay afloat. Only the fittest – and the most efficient – survive. But this recession differed to those in our recent experience since it was triggered by a financial crisis. Banks’ ability to lend was reduced. Credit conditions tightened. The implications of this for the efficiency with which companies operate are potentially far reaching. Many smaller companies and new businesses, which are a critical source of innovation in our economy, have struggled to secure the finance they need to grow and expand. Company start-ups fell sharply during the recession, and evidence from the Bank’s Agents suggests that many smaller businesses are still struggling to access funds at affordable rates. In that context, it is worth recalling that small companies, employing less than 100 employees, hold over 40% of UK patents, even though they account for less than 20% of total investment.12 Even for those companies that are able to borrow funds, the tightening in credit conditions is likely to have impeded the efficiency of supply. Some companies have become more cautious, preferring to hang onto liquidity or pay down debt rather than invest in increased levels of training and R&D. The increased cost of working capital has led many firms to cut back substantially on their inventory levels, disrupting the efficiency of supply chains.

As such, it is often natural for the main focus of policy to be concentrated on the prospects for demand. But judgements about supply also matter, particularly so in the aftermath of a deep recession. In recessions, demand typically falls by more than supply. An output gap opens up – the economy can supply more than is currently demanded. And unless that gap is closed, it will push down on costs and prices. The job of monetary policymakers is to loosen policy, so that demand is brought back into balance with supply and inflation remains close to target. Exactly how expansionary policy should be depends critically on the size of the output gap. But assessing the size of the output gap is very difficult, for exactly the reasons we have been discussing today. Early estimates of economic activity can be revised substantially, so it is hard to know just how weak demand and output really are. And it is equally difficult to know the extent to which the supply potential of the economy has been affected by the recession.13 This difficultly greatly complicates the setting of monetary policy. Indeed, in a series of influential papers, Athanasios Orphanides (eg Orphanides 2003) has argued that over-estimates of the size of the output gap played an important role in the policy mistakes that led to the period of persistently high inflation in the US in the 1970s and 80s. 13  6  Or indeed, if shocks to supply were instrumental in causing the recession.
Needless to say, there is no way that the financial sector can completely insulate itself from more widespread Year 2000 disruptions by developing contingency plans. However, we should do what we can to prepare realistically for a wide variety of outcomes, including some that may not be very likely. We also should open lines of communication with relevant associations and regulatory bodies outside the financial sector in order to better understand their preparations and contingency plans, and so that they could understand ours. BIS Review 85/1998  -9-  Conclusions These thoughts represent my perspective on the key issues facing the global supervisory community regarding the Year 2000 challenge. As you can infer, I am a very serious believer in the need for vigorous efforts to address the problem. The scope of the challenge is enormous and much work remains to be done before January 1, 2000. Nevertheless, I am not a doomsayer. I believe the financial sector can and will successfully address Year 2000. I say this because I believe we are capable of harnessing an unprecedented level of cooperation to tackle the problem. I see this happening here today. I say this because the resources that are being devoted to address Year 2000 are large and growing. We see a number of firms and systems testing successfully ahead of the schedules they have set for themselves, demonstrating the value of the Year 2000 investments that these organizations have made.

Some organizations are using a series of point-to-point tests to effectively simulate an end-to-end testing process. With regard to Fedwire, the Federal Reserve’s large-value funds transfer system, we have made the system available for external tests from July of this year. We have also begun BIS Review 85/1998  -7-  a program of shared testing days that allows multiple customers to simultaneously perform endto-end testing over the system. These tests will cover the full range of payments and accounting applications that we provide and will address both the century date conversion and the leap year date in 2000, which many systems also may not handle correctly. One of the key lessons that has come out of our test process for Fedwire is the importance of extensive planning for each aspect of the testing program. For example, both the testing schedule and test scripts required extensive efforts to develop. Furthermore, without the very substantial amount of communication and advance planning by the Federal Reserve and the banks involved, we could not be confident that the tests would provide a meaningful output. Naturally, appropriate internal testing must also be completed in order to derive maximum value from the external testing program. These lessons are particularly pertinent in the case of industry-wide external tests that are designed to permit most or all system participants to test simultaneously with each other. For example, the Securities Industry Association in the United States has developed a very ambitious program of this type for the US stock market.
The AQR itself resulted in a gross impact on asset values in need of adjustment by € billion, € billion of which did not generate a capital shortfall. So if you add up the € billion with the € billion shortfall, you get the overall impact on the banks of € billion coming from the comprehensive assessment. This you can compare with the expectations in the market. I just quote two examples of publications by investment houses of September, the more recent ones, of two big investment banks. One made calculations for a sample of 37 banks and found that, considering the measures already taken by the banks, the shortfall would be zero, and three banks would fail. The other one considered a sample of 34 banks and concluded that, taking  BIS central bankers’ speeches  1  into account the capital measures taken by the banks in 2014, zero banks would fail and the capital shortfall would be zero. This compares with our result that out of the 25, 12 banks have already taken measures in 2014 that are enough to cover their shortfall. But there are then 13 banks that still have either to exactly apply their restructuring downsizing as it is foreseen in their plans with the European Commission, or they will have to come up with ways to increase their capital. So this is an important explanation of the meaning of the results that we have.

But nested within these objectives is an instruction that our objectives are to be advanced by avoiding adverse effects on the stability of the UK financial system. In other words, although our work is primarily microprudential we have an important role to play in ensuring financial stability. What does this imply for how the PRA should take an interest in operational resilience? It implies that we are interested in operational resilience for its own sake, not just because its absence can have a financial consequence for firms. But we are interested only to the extent that it could have a negative impact on safety and soundness and/or the stability of the UK financial system. That is a fairly high bar. In practice this is likely to mean that we put more emphasis on operational resilience for larger firms doing activity whose disruption could have a financial stability impact. For smaller firms we are only strongly interested where something is going on that is big enough to threaten the firm’s safety and soundness. So for example: if you are a big bank you can expect us to take an interest in your ability to process payments; if you are an insurer with a large annuity book, we will want to know what the operational risks are to your ability to supply people’s retirement income; and if you are a smaller firm spending huge sums on a 5  All speeches are available online at www.bankofengland.co.uk/speeches  5  major IT project, we will be interested in that.
It should be noted that regional pooling is efficient only when countries are facing asymmetric liquidity shocks within the region. Pooling brings no additional benefits when shocks occur on a global scale and all countries are hit simultaneously. Also, regional arrangements cannot avoid the moral hazard problem that all multilateral schemes are facing. Nevertheless, there seems to be considerable scope for regional arrangements to prosper in the future. First, they can act as useful complements to more global schemes and be articulated with (and supported by) IMF facilities. Second, one can expect regional financial integration to progress, especially in those parts of the world where huge pools of savings are available and currently intermediated through financial systems located outside the region. With deeper financial integration, the probability of significant portfolio shifts inside one region increases markedly, creating the potential for asymmetric liquidity shocks. The development of regional liquidity arrangements may appear very useful to underpin the development of regional financial markets. Stores of value One consequence of the crisis has been to cast doubts on the ability of some assets, up to now considered as riskless, to serve as reliable stores of value. The ability of the private sector to create “safe” assets through financial innovation has proved largely illusory (Caballero, 2009). So, in the period to come there may be both an increased demand worldwide for risk free assets and much less certainty on their future supply.

Indeed, at that time, the ECB was subject above all to criticism contrary to that levelled by Franco Bruni. At least three European heads of state, and many ministries of finance, not to mention business people, trade unionists, journalists, politicians and commentators, exerted public pressure on the ECB to finally cut rates. And when, at the end of 2005, the ECB decided (rather late, in Bruni’s opinion) to increase them, many of those persons lined up, together with renowned international institutions, to severely censure the decision, because  1  2  La Stampa, 2 December 2005. BIS Review 82/2009  they felt it would have cut off the legs of the recovery. The ECB is independent, fortunately, and cannot dump on others the responsibilities of its own choices. But what we should not forget is the context in which it operates, largely influenced, also in the countries of continental Europe, by an “activist” vision of monetary policy with an Anglo-Saxon inspiration. It is also surprising how the teachings taken from that period of monetary policy are quickly put aside when you go from the historical analysis to that of the economic juncture, in particular the current economic situation.
The difficult judgment facing the Monetary Policy Committee is to what extent that increase in labour supply, and hence potential output, will allow a faster expansion of total money demand without upward pressure on inflation. Given the uncertainties about the supply potential of the economy, we will need to keep our eye on the ball and monitor closely the evolution of wage and cost pressures. But it is no easier for the Monetary Policy Committee to read those than for most English batsmen to read Shane Warne’s deliveries, and it is just as difficult for someone who, in terms of MPC meetings is 114 not out as it is for those still playing themselves in. The new factor is that, although wage pressures have so far been subdued, it is still not clear that earnings have been sufficiently restrained to accommodate the past rises in energy prices and the fall over the past year in the prices of our exports relative to our imports without a squeeze on profits. Ultimately, both developments must result in lower real incomes. At this point, let me save the economic commentators a degree of anguish. Nothing in this speech is meant as a hint about our decision in November, which will be based on an assessment of the outlook for inflation two years or so ahead. That decision will be taken only in November, and much can change between now and then. Rather, I have tried to explain the challenges facing the MPC when it decides on interest rates.

When the prices of some goods fell, such as imports in the late 1990s, people had more disposable income to spend on other goods and services. That pushed up demand in those sectors and encouraged companies to raise prices. Conversely, when some prices rose, as with energy prices over the past two years, the resulting squeeze on income available to spend on other goods and services helped to bear down on inflation in those sectors. With steady growth of money spending, a change in relative prices can be consistent with stable inflation overall. Monetary policy – a credible commitment to the inflation target and a broadly stable growth of total money spending – was then, and is always, the key to low and stable inflation. That point was made forcefully in a speech in February by the late David Walton, whose untimely death in June was a great loss to the Monetary Policy Committee. Over the past couple of years our economic performance has not been quite as “nice” as in the NICE decade, but it was “not so bad”. 2 In 2005, output growth slowed to 1.9% and inflation rose to 2.5%. Back in 1976, to describe this as “not so bad” would have been the understatement of the year. It followed a period of rather strong nominal domestic demand growth which, by placing pressure on the supply capacity of the economy, accounted for some of the subsequent pickup in inflation.
In 2017, the Thai economy recovered markedly and achieved an annual GDP growth of 3.9 percent. Merchandise exports grew 9.7 percent in USD terms, highest in the past 6 years, and was one of the main drivers of growth. The tourism sector continued to perform well, with the number of tourists reaching new highs of over 35 million. The economy is expected to continue a strong momentum this year, with GDP growth in 1/10  the first quarter registering an impressive rate of 4.8 % year on year, the highest in 5 years, with private investment growth recording a 3-year high. Nevertheless, this recent economic upturn is different from the other episodes. Indeed, the GDP outturn and macroeconomic numbers showed strong improvements over the previous years, but a closer look revealed that growth was uneven across different segments of the economy. At the same time indicators such as the unemployment rate and NPL ratios were rising slightly between 2015 and 2017. This is contrary to what you would expect to see when the macroeconomy performs better. Although both unemployment rate and NPL ratios have recently stabilized, their developments reveal that some segments of the economy did not benefit much from the economic recovery. In my view, there are at least three reasons behind these developments. First, the recovery has primarily been driven by external demand. Hence growth benefits are felt mostly by those associated with the external sectors.

Thailand is transitioning to a new era of digital payment system and financial technology in which the Bank of Thailand is fully committed to foster. First and foremost, electronic payment infrastructures must be put in place to realize the full potential of digital economy. Under the National e-Payment Masterplan, last year the Bank of Thailand together with the Ministry of Finance and 6/10  the Thai Bankers’ Association launched our new faster payment system – PromptPay – which propelled the wider adoption of e-payment in Thailand. PromptPay is an instant payment platform that links bank accounts to various forms of identification including national ID numbers and mobile phone numbers. With PromptPay, funds can be transferred to a recipient’s preferred bank account in real time and at virtually no cost. This new technology has significantly boosted the usage of mobile banking, and has potential to lead to significant growth in e-commerce in Thailand as well as to radically change the way government welfare payments are distributed. In just over a year since the launch of PromptPay, there are over 40 million IDs registered on the platform and more than 2.7 million transactions a day. The increasing usage of PromptPay also served as a catalyst that eventually led to the announcements of most commercial banks two months ago, to eliminate transfer fees for all transfers through mobile and online banking. All in all, PromptPay provides a crucial payment infrastructure which opens the door to many other digital payment services.
Mr. George looks at the question as to whether banks are still special Speech given by the Governor of the Bank of England, Mr. E.A.J. George, at the IMF 7th Central Banking Seminar entitled Banking Soundness and Monetary Policy in a World of Capital Markets and held in Washington on 29/1/97. Mr. Chairman, I am delighted to take part in this well-directed and well-timed seminar. I am particularly pleased to be able to share with you my thoughts on the question you put to me “Are banks still special?” That question is partly a matter of institutional fact; but beyond that lies the question of whether the institutional characteristics of banks still justify central banks’ special concern for the stability of the banking system reflected in both macroand micro-prudential oversight and in their role as lender of last resort. So the answers to those questions could have far-reaching implications for the role of central banks themselves. In offering my answers I will ask, first, why banks have been regarded as special? Then I will ask whether banks have changed, or whether other financial institutions have become more bank-like? I will save my conclusions until the end! I am conscious, in this international forum, that I speak from a British perspective - in terms of the institutional and legal contexts and their evolution in relation to banks. But I would hope that, while some of the detail may be specific to the UK, the broad substance will not be.

Even where disintermediation creates new chequing facilities, as for example, in the case of money-market mutuals, these are still cleared through settlement banks. It is true that new forms of money transmission - e-money are being developed, sometimes outside the conventional banking system. But I suspect that they, too, will typically depend upon clearing through the banking system. To the extent that they come to involve the creation of what are effectively direct deposits, they will represent banking in a different form and become special, and logically subject to regulation, in much the same way as conventional bank deposits. In the payments system context, too, important progress is being made to reduce inter-bank exposures (through the introduction of real time gross settlements systems in many countries, for example, and through the netting of foreign exchange settlements) but those exposures, as well as inter-bank exposures incurred in direct inter-bank transactions - the large bulk of all of which are unsecured - remain extraordinarily large. Individual inter-bank limits can substantially exceed 25% of capital (the normal supervisory limit for large exposures), and as an example of aggregate inter-bank exposures the major UK retail banks currently place some £ billion, or 16% of their total assets, with each other or with other UK banks. Turning to the assets side, there is some evidence of a gradual erosion of the role of banks in financial intermediation.
There is no such a thing as a “Fed put.” What we care about is the country’s growth and inflation prospects, and we take financial market developments into consideration only to the extent that they affect the economic outlook. Our focus on the global implications of our policies also has a broader dimension. Given the central place of U.S. markets in the global financial system and the dollar’s status as the leading global reserve currency, we in the United States have a special responsibility to be good stewards of the global economic commons. This makes it all the more important that we conduct policy transparently and according to clear principles. This highlights the importance of effective Fed communication. I noted earlier our attempts in the spring of 2013 to provide guidance about the potential timing and pace of tapering may have served to confuse market participants. Market participants seemed to conflate the prospective tapering of asset purchases with monetary policy tightening, and pulled forward their expectations about the likely timing of liftoff, thus raising their expected path for the federal funds rate. Since then, we have adjusted our approach with improved results. The actual tapering of the Fed’s asset purchase program went smoothly and liftoff of our policy rate from the zero lower bound was in line with widely held market expectations.

This focus is appropriate. Like other central banks, our monetary policy mandate concerns domestic objectives: maximum sustainable employment and price stability. Our monetary policy actions, however, often have global consequences that, in turn, influence the U.S. economy and financial markets. At the same time, external factors can impact the monetary policy transmission mechanism in the U.S. and influence the effectiveness of our monetary policy in achieving our objectives. We cannot appropriately calibrate policy without keeping these spillover and feedback effects in mind. In some cases, these effects can be significant. An example is the market volatility we saw in the spring and summer of 2013 during the so-called “taper tantrum.” In the U.S., we saw a spike in Treasury yields, with the 10-year rate rising by more than 100 basis points from early May of that year before peaking in September. Financial markets in emerging market economies (EME) were hit hard as well, with declines in equity prices, a widening in sovereign debt spreads and a sharp increase in foreign exchange volatility. Volatility in EME financial markets re-emerged last summer and has continued into this year. For EMEs as a group, declines in equity prices and currency values have been larger than what we experienced during the taper tantrum. The recent episode, however, appears to largely reflect concerns about risks emanating from EMEs themselves, rather than concerns about the direction of Fed policy. Three related concerns appear to be at the forefront. First, there has been a broad-based slowdown in EME growth.