samchain/econo-pairs-v1 huggingface dataset:
After growth equal to or higher than 3% over the three years spanning 2015 to 2017, and which eased somewhat last year to around 2.5%, the latest macroeconomic projections of the Banco de España, published last December, envisage the continuation in the coming years of above-potential economic growth, enabling the still-high level of unemployment to continue to be absorbed. However, the rate of expansion of GDP is expected to slow gradually in the coming years. This easing in growth essentially reflects the progressive exhaustion of the positive effect of various exogenous factors that have been operating in recent years, such as the expansionary demand-side policies (monetary policy, in particular) and strong world growth, which has already shown signs of dwindling to some extent in 2018. Beyond this baseline scenario, the downside risks to growth have been increasing. These risks, whose source is essentially external, include a possible resurgence of financial strains associated with the US economic policy mix and its potential effects on the more vulnerable emerging economies, and a hypothetical escalation in protectionist measures, which might affect the vibrancy of trade and global activity. In the European arena, the political vagaries in some European countries (particularly in Italy) and the uncertainty over the outcome of Brexit entail additional sources of risk. In Spain, the current parliamentary fragmentation also adds uncertainty over the future course of our economic policies.

Reducing fiscal imbalances should be compatible with an improvement in the quality of public finances, as should too the combination of a fiscal consolidation drive with other structural reforms, which I shall later mention. Indeed, improving the parameters that depict the public finances position is particularly necessary in our country, given the major challenges that population ageing poses in the medium and long term. The latest estimates augur a significant increase in public spending on pensions, health and long-term care as a result of the significant increase in the dependency ratio (measured as the percentage of over-65s relative to the working-age 5/7  population), which is expected to practically double in the coming decades, according to the various demographic projections available. As regards the pension system, the 2011 and 2013 reforms included adjustments allowing the effect of the expected increase in the dependency ratio in the long term on total spending on the system to be offset. The latest legislative developments in this area, however, have softened the implementation of these mechanisms. As a result, ensuring the financial sustainability of the public pension system will require additional measures to be introduced, on either the revenue or expenditure side, so as to offset this added burden.
This is why French law imposes on banks to provide a specific offer for these clients, comprising minimal services with reduced fees of 3 euros per month. To follow up on the implementation of this provision, an Observatory for Banking Inclusion was created in France. Chaired by the Governor of Banque de France, it brings together public authorities, NGOs and banks and has proved to be a very helpful forum. A second example is the “Mediator of Credit” function. Led by an official of Banque de France, it is aimed at small businesses and it relies on the operational support of the local branches of Banque de France. Its objective is to help entrepreneurs who have been refused a loan by providing mediation with their banks and creditors to overcome these financing difficulties. 20.000 successful mediations have taken place since the creation of that function in 2008. This mediation function does not just provide financing: it also reduce the risk of bankruptcy for the companies which benefit from it. Another contribution of Banque de France to improving acces for fragile populations takes the form of support to assisted microcredit activities. Banque de France is a strong supporter of these activities through funding of a credit guarantee fund (5 million euros in 2018) and the development of a local networks of correspondents. To help preventing inequalities of treatment, Banque de France is involved in preventing and addressing household over-indebtedness issues.

There are different estimates and they change all the time as the news from the US housing market deteriorates. 1  Calculated using purchasing power parity (PPP) exchange rates. 2  Again, calculated at PPP exchange rates. BIS Review 136/2007  1  Second, there is great uncertainty about where these exposures will end up. So banks have become more worried about the creditworthiness of their counterparties. And third, this lack of information, in a complex and globally interconnected financial system, breeds fear: of ratings downgrades, of fire sales and just of unknown consequences. And fear breeds more uncertainty. So banks have been hoarding liquidity, to protect themselves against further upsets; and they have become more reluctant to lend to other banks. So the rates at which they lend to each other have risen, relative to the levels which are expected to be set by central banks. The squeeze in core liquidity markets has already been unusually prolonged. And it is very hard to say when conditions will return to something more like normal. When the dust has settled, the financial landscape may look a bit different. Investors may be more aware of risk and warier of complexity. Some recent financial innovations will disappear. Others may survive but in modified form, and probably at an increased cost to final borrowers. What does all this mean for UK monetary policy?
This meant that if the interest rate changed during a maintenance period, the change would not have been fully reflected in the interest payments to depository institutions until the beginning of a new maintenance period. This methodology likely would have resulted in slow adjustment of market rates to changes in the IOER rate. The revised calculation bases interest payments to depository institutions on the IOER rate in effect each day and the level of balances held each day. 20  See Clouse, Ihrig, Klee, and Chen, “The Federal Reserve’s Tools for Policy Normalization in a Preferred Habitat Model of Financial Markets,” October 2014; Martin, McAndrews, Palida, and Skeie, “Federal Reserve Tools for Managing Rates and Reserves,” September 2013; and Armenter and Lester, “Excess Reserves and Monetary Policy Normalization,” September 2015. 21  Testing focused on two types of term operations. Term RRPs are similar to ON RRP in most respects; for example, both operations use the same expanded set of counterparties. The key differences are that term RRPs are conducted for longer than overnight, they each have their own, separate, aggregate capacity limit, and the term RRP does not incorporate a per-counterparty cap. Term RRPs can be used in a variety of ways. In the current framework, they have been used to offer increased RRP capacity, using an interest-rate-oriented approach, around periods when larger-than-usual demand is expected, but they could also be used in a quantityoriented way to drain reserves.

These include crimes such as trafficking in drugs, women and children, as well as trading of illegal weapons. But there are more subtle forms of economic crime where authorities find it difficult to agree on the risks. In such cases, cooperation in combating such crimes would be more difficult. Examples of such cases are when bigger nations exploit the natural resources of smaller nations, which have been a practice for over 100 years since the days of colonization. Modern fortes of such crimes can be seen in cases where influential businessmen from large countries move into smaller countries under the pretext of technological advancement to exploit the latter's natural resources, which often are claimed for the mutual benefits of both parties. But it is clear that the allocation of such benefits is often not balanced. There is also a case of exploitation of consumers in smaller nations when products which are hazardous to health in bigger nations, have been relocated for production and sale in less developed nations. An example of this is tobaccos and cigarettes, which come under stringent restrictions on sales and advertisement in bigger nations but have been sold in other nations with highly persuasive but subtle advertisement campaigns aimed at teenagers and women. There are also cases of certain medicines which have been banned in more developed markets and yet can still be found on the shelves of other less developed markets. There is no way for the authorities of two nations to agree that such dubious practices constitute economic crimes.
17 When interest rates are below the natural rate at which desired investment and savings equilibrate, banks will continue to expand credit. When economic agents are determined to take risks, they will find ways to circumvent measures that central banks and regulators have put in place. Non-monetary tools like macroprudential policy will therefore not adequately address the root problem caused by interest rates that are too low. 18 Under these circumstances, only monetary policy can “get in all of the cracks” to plug the vulnerabilities. An increase in short-term interest rates will trigger a more realistic evaluation of asset and collateral values, income flows, and thus risks. This will curtail the extent of leverage created by banks and capital markets and keep asset managers from crowding into risky assets. The effects of monetary policy are all-pervasive, and cannot be easily circumvented. 19 This approach, if formalised, amounts to augmenting the Taylor rule with an additional term to capture deviations in financial variables from their equilibrium levels.3 If financial market imbalances are growing, ceteris paribus, monetary policy should be tightened, even if it causes further deviations in output from potential in the short term. This approach does not preclude the need for robust financial regulation and supervision. But the key is to get the price of money right, to encourage a more realistic perception and tolerance of risks. 20 While no central bank currently implements monetary policy in this way, the concept behind the approach may not be as abstract as it seems.

4  BIS central bankers’ speeches  •  During a property boom, compared to interest rates, expectations of price appreciation may have a greater influence on current prices. •  Kenneth Kuttner and Illhyock Shim estimate that a 100 basis point increase in the short-term interest rate would lower real annualised credit growth by less than 1 percentage point in the following quarter. Such a rate hike will also reduce real housing price growth by only 1 percentage point. •  Using monetary policy to prick a property bubble may therefore require very sharp increases in interest rates to be effective. But this may have unintended spillovers on other parts of the economy. Macroprudential policy: targeting the cracks 30 This brings us to the third approach to securing financial stability: using macroprudential policy, while monetary policy continues to focus on price and output stability. Macro-prudential policies can be more effective for “targeting the cracks” where specific vulnerabilities are concentrated. 31 But what exactly are macroprudential policies? Given its recent rise to prominence, it is still a nebulous concept with differing definitions. Let me offer my thoughts on what macroprudential policy is and what it is not, from the perspective of Singapore, which has been an early experimenter and practitioner in this area. 32 First, it is closely related to yet distinct from microprudential policy. Some have called macroprudential policy “old wine in new bottles”. Yes and no.
•  We evaluate the processes in place to ensure that clients and customers are offered products and services that suit their needs. •  We monitor the volume of customer complaints of mis-selling and examine how complaints are dealt with. What can industry do? But even the most intrusive supervision can only go so far in promoting a culture of ethics. The industry must itself take collective responsibility to promote higher ethical standards. It is better that industry develops codes of good conduct that take into account operational realities that they know best and that holds firms accountable to their peers, than wait for the regulator to set rules that may be impractical or too onerous. The industry has already begun to do so. •  In the UK, high street banks have set up the Banking Standards Review Council (BSRC), which aims to work with the industry to improve banking practices in three broad areas: culture, competence and customer outcomes. Participating banks will be required to commit to a programme of improvement and report to the BSRC on their performance every year. •  In the Netherlands, the Dutch Banking Association is exploring plans for a disciplinary system for ethics violations, similar to what the medical profession is subject to. I am pleased to note that in Singapore, our industry associations have not lagged behind. The Association of Banks in Singapore (ABS) has published guidance for its member banks and minimum service standards that customers can expect from their banks.

It is important to have such a tangible point of reference for standards of conduct, but setting the right tone requires more than lofty exhortations for good behaviour. First, lead by example. Management must take time and effort to clearly articulate the firm’s core values and purpose. They have to demonstrate commitment and credibility by “walking the talk” with concrete policies, processes and actions. The firm’s leaders must themselves be seen to be guided by those same qualities they want their staff to emulate. And programmes to build a culture of trust and ethics cannot be a one-off exercise to fend off bad publicity or to placate the regulator. Shaping culture demands a sustained effort. Second, create a safe environment for whistle-blowing. This means providing the necessary mechanisms to challenge, question, and report ethical breaches. •  A number of banks in Singapore have put in place new channels for whistleblowing and enhanced the escalation and investigation processes to facilitate staff reporting. Third, align human resource policies to a culture of trust and ethics. I have already mentioned compensation as being an important way to create incentives for the right behaviour. But the incentives for ethical conduct must go beyond compensation and encompass all HR policies: recruitment, on-boarding, appraisal, training and coaching, promotion, and career development. •  An organisation’s HR policies and practices are the clearest demonstration of its value system, the qualities it regards as important.
What I just described fits in with the development in Sweden. When the bank crisis came, we had no deposit guarantee system but the government found it necessary instead to issue a general guarantee, sometimes referred to as a blanket guarantee protecting all depositors but also other counterparts to Swedish banks, with the exception of the shareholders. This guarantee was in fact much broader, and potentially more expensive, than a limited deposit guarantee. After the crisis, Sweden has introduced legislation on a system of explicit limited deposit protection. All current deposits up to a certain amount, approximately 35 000 US dollars, are covered. For this, the banks pay a yearly premium, currently 0.10 percent on average of the total amount of deposits. Other parts of the financial sector In my presentation I have focussed on the banks, but an efficient financial sector must also contain a broad range of institutions and markets. They can specialize in certain activities and instruments and improve competition and diversity. They may also reduce the risk concentration on the banking system which implies that the overall economy will be less gravely hit if there ever is a systemic banking crisis. Compare for example Thailand in 1997, where the banks played a dominant role and Russia in the same year where banks played a minor role. Both countries were hit by financial problems but the overall effects on the economy were much worse in Thailand. In Sweden many different types of institutions and markets perform specialized roles alongside with the banks.

Such events might mean that the bank would have to suffer a loss although it thought it had protected itself. The conclusion is that the authorities must force the banks to assess whether the risk buyers have adequate financial and organisational capabilities and whether the legal arrangements are robust. As in many other countries, there is a strong tendency in the Swedish financial sector to move from “bricks and mortar”, such as having many branch offices, to providing their services through the Internet and telephone. About half of all payments of companies and physical persons in Sweden are made through the Internet and by phone. This has made it possible to increase bank efficiency in  6  BIS Review 111/2006  terms of staff numbers and branches. Each Swedish bank branch now services an average of 4,700 persons in the population compared to, for instance, only 1,900 being serviced by the German banks’ branches in Germany. Of course, each country is free to choose its own service level and may prefer a higher level, although it brings higher costs. Modern regulation In my view, Sweden abolished its old-fashioned regulations for good reasons. Using the banks for directed lending and for other non-commercial purposes may seem handy for the government, but entails large risks and costs.
If an asset turns out to be bad, banks can hide negative earnings in the short run by engaging in risky policies to boost returns – in effect, engaging in risk illusion. When a bank engages in a risky policy, an immediate loss is avoided with probability . But risky policies always involve longer term expected losses of . If instead of setting risky policies banks choose immediately to liquidate assets, they set a tight policy, realising a loss of –1 for sure. So banks’ choices when faced with low asset returns determine their risk profiles. If returns are low, under a risky policy banks can increase short term earnings with some positive probability, but must incur a long term loss; while under a tight policy, banks can accept low short term earnings for sure now, avoiding losses in the future. Suppose banks attach weight to their reputation in the market and to the net present value of future profits. When the asset is good, banks earn a return normalised to zero. When the asset is bad, two strategies are possible. If a bank chooses a risky (superscript ) policy, it obtains  where a proportion l of all banks also set a risky policy. The bank makes a loss of 1 with probability  , incurring long term cost  while enjoying reputation  5, 6  Dybvig (1983). For a survey of coordination games in macroeconomics, see Cooper (1999) and Morris and Shin (2000).

Therefore, the impact of remittances in creating new jobs has been limited. In this view, I do not want to downplay the importance of remittances, but to draw attention to additional structural reforms needed to enhance their impact in the economy. It is not a coincidence that after reaching the level of 14 percent of GDP, the growth rate of remittances has been as constant as that of foreign direct investments in Albania. This shows that in the mid-term, there is no difference between the decision of foreign investors and remitters to invest in Albania. Of course, emigrants may have a better knowledge of domestic markets. They are more connected to their home-country and react faster than foreign investors. Nevertheless, they demand guarantees for their investments as much as foreign investors do. Therefore, both the volume of remittances and their effectiveness largely depend on improvements of Albanian business environment. While efforts to speed up reforms aiming to improve business environment are underway, especially now with the most recent signing of the Stabilization and Association Agreement, a question still remains: is there any other measure that may enhance the contribution of remittances in the development? The Bank of Albania in cooperation with other governmental and non-governmental institutions has been considering some concrete measures, which I have already highlighted in a  BIS Review 16/2006  1  conference organized by EBRD on these issues last September. I would like to briefly mention some of them here again, with some new insights.
•  It has sometimes been argued that some macroeconomic stimulus from aggregate demand policies might help foster the implementation of structural reform packages by offsetting potential short-term costs of reforms. This idea that there could be a trade-off between structural reforms and macroeconomic accommodation is disputable, notably in the EMU. Such accommodation could be provided either by monetary policy or fiscal policy, which I will now discuss in turn. •  In the EMU monetary policy is not the appropriate tool for mitigating the potential shortterm costs of structural reforms or for providing incentives for reforms at the national levels. First, reform needs differ across euro area countries and the single monetary policy is by its very nature unable to mitigate the potentially different short-term countryspecific costs of reforms. Second, there are well-known and overwhelming implementation problems of ex ante coordination between policy makers with different objectives. This typically gives rise to incentive distortions for the policy actors involved. An immediate consequence of any attempt to seek closer coordination with the ECB would be a blurring of responsibilities, which would lead to every institution being made responsible for everything, which in the end would mean that, amid confusion, no institution was responsible for anything, and no successful reform implemented. •  Price stability is the best contribution monetary policy can make to structural reforms in Europe.

Pros and cons of different institutional alternatives: banking supervision and macroprudential authority – inside or outside the central bank; 6. A historical perspective on the experience of becoming a modern central bank, a process undergone not only by the NBR. 1. Defining the objectives – the starting point in designing central bank governance It goes without saying that ground zero in building the central bank governance framework is clarifying the objectives it has to pursue. For quite a long time, at least in Europe, “price stability” enjoyed the position of overriding objective, but since the outbreak of the crisis it became obvious that the “inflation first” approach may turn counterproductive in an environment of financial instability. Therefore, financial stability concerns made their way up on central bankers’ agenda. Is that really a novelty? As the representative of an emerging economy central bank that never had the luxury of being concerned exclusively with price stability, I dare say it is not. Actually, central banking has always been about the preservation of, to quote Charles Goodhart, “the three aspects of stability”, namely price stability, (external) currency stability and financial stability. Moreover, the fact that these aspects of stability do condition each other was not discovered in the aftermath of the crisis – central bankers, maybe even more so emergingmarket central bankers, have long been keenly aware that failure to ensure one kind of stability is bound to jeopardise the achievement of the others.