samchain/econo-pairs-v1 huggingface dataset:
Miguel Fernández Ordóñez: The state of Spain’s economy Testimony by Mr Miguel Fernández Ordóñez, Governor of the Bank of Spain, before the Parliamentary Budget Committee in relation to the draft State Budget for 2011, Madrid, 5 October 2010. *  *  *  Ladies and gentlemen, I appear before this Committee in connection with Parliament’s discussion of the State Budget for 2011. In my view, this Budget will be crucial for Spain’s economic future and it will be subject, more than on any other occasion, to in-depth analysis and close scrutiny not only by Spanish society as a whole but also by the main supranational agencies, by our European partners and by the international financial markets on which Spanish households, firms and governments obtain the funds they need to finance much of their activity. As is known, Spanish budgetary policy responded most forcefully to the global economic and financial crisis, in step with the support programmes for the financial sector, coordinated at European level, and with the firm, resolute action by the European Central Bank, which drastically cut its interest rates and implemented a wide range of conventional and non-conventional measures to prevent liquidity tensions from ultimately shutting down the European financial system. The fiscal policy response undoubtedly contributed to softening the adverse effects of the crisis on the Spanish economy.

Looking beyond short‐term volatility, the real question is whether this architecture will be conducive to the efficient and stable allocation of capital over the long run; or whether, on the contrary, it will lead to an accumulation of imbalances and recurrent bouts of instability. An optimistic view can be found in the “Bretton Woods II” theory, which posits that the pattern of international capital flows results from a mutually beneficial equilibrium between two groups of countries. On the one hand, emerging economies follow an export‐led  BIS Review 127/2010  1  development strategy and seek to prevent appreciation of their real exchange rates by constant foreign exchange intervention (together with capital controls). As a consequence, they accept to accumulate increasing stocks of liquid assets denominated in dollars. On the other hand, the United States is happy to receive both reserve inflows to finance its deficits and cheap imports to fuel their demand for consumption goods. Such equilibrium is stable by virtue of the mutual benefits it brings to both groups. Moreover, the longer it lasts, the more impossible it is to change since both groups become mutually dependant through the stock of claims and debts they have reciprocally accumulated. This “financial balance of terror” is supposed to keep the system in place for a long period of time. A more recent, and pessimistic, explanation is provided by the “asset shortage” theory according to which the world has a shortage of liquid and riskless assets.
During decades of spectacular growth, total factor productivity or TFP rose only modestly. Overtime, Thailand’s inability to further move up the quality ladder, after it graduated from a low-labor-cost production- base status, gradually led to the erosion of our export competitiveness. In relation to the attitude towards risk, Thailand’s use of leverage, being among the highest in Asia, put the country in a vulnerable position to potential adverse shocks. When the crisis hit in 1997, many companies thus found themselves in desperate straits to service their debt, eventually leading up to a major collapse of the real economy. While these weaknesses have been and are being addressed since the crisis, these measures take time to become fully effective. In the meantime, these shortcomings have been accentuated by the recent change in global competitive landscape brought about by China’s WTO accession. Thailand, like many other countries, will need to reposition itself quickly to meet this new global challenge. Stepping beyond the realm of the real sector, another expensive lesson learnt during the crisis is that the world financial markets have become extremely slippery. As today’s financial world becomes increasingly interconnected, disturbances in one market can quickly spread to others with devastating results. These merciless and indiscriminating financial storms therefore need to be guarded against around the clock, with an early warning system developed to help protect all those involved. Looking back over the past ten years, the Thai financial sector has changed considerably.

Thailand’s better performance this year, notwithstanding a lackluster global economy, has been supported by the strong momentum in both domestic demand and exports. Front-loaded fiscal measure sparked up the initial momentum in domestic demand, while private consumption and investment are now adding firmly to the growth process. As the regional economies began to recover in the last five months, export growth has also provided an additional impetus to the recovery. Along with this recovery, inflation remains subdued, credit growth has turned positive, and business profits are improving, encouraging firms to expand their capacities through new investment. These broad movements are indicative of a positive dynamic linked to the current recovery. The most significant improvement since the crisis, however, has been the strengthening of external stability. Continued current account surpluses have allowed external debt to run down in concomitant with a build-up of international reserves. The coverage ratio of reserve to short-term debt has risen to 290% in July 2002, four times the ratio at the end of 1997. Ladies and Gentlemen, Although I share the view that the worst may now be behind us, I believe Thailand still has some way to go. The key question is how can we make it last, especially now that the global economic recovery  BIS Review 62/2002  1  may be somewhat slower than earlier anticipated? The answer to this question probably lies in the answers to yet another important question: what have we learnt from the recent crisis?
This would be above the range which the SNB equates with price stability. The forecast shows that the current level of interest rates cannot be maintained once the economic situation normalises. Since monetary policy has been expansionary for a long time now, there is a greater threat of inflation in the future. If the economic outlook continues to improve, it will be necessary to make adjustments to monetary policy. With our decision to leave the three-month Libor unchanged, we are adhering to our previous monetary policy course for the time being. We continue to support the economy, using the leeway available to us. This policy should guarantee longer-term price stability. As mentioned before, the SNB will respond appropriately if the Swiss franc appreciates rapidly, and is keeping all its options open for this eventuality, as it has done in the past. Observed inflation June 2005  Inflation forecast on March 2005 with Libor at 0.75% and of June 2005 with Libor at 0.75%  Inflation forecast of June 2005 (53 kb)

6  All speeches are available online at www.bankofengland.co.uk/publications/Pages/speeches/default.aspx  6  Chart 2: ECB forward guidance has helped to anchor forward interest rates through the euro area recovery Introduced rates guidance  Linked forward guidance to APP  Euro Fwd 1y rate Euro Deposit Facility Rate  Per cent  Extended by 6 months to end 2019 Date based guidance to summer 2019  0.6  Extended by 6 months to first half of 2020  0.4 0.2 0.0 -0.2 -0.4 -0.6  2013  2014  2015  2016  2017  2018  2019  2020  The ECB has also innovated with guidance on its asset purchase programme. In the September 2014 press conference the President said that the aim of policy was to steer the balance sheet towards its size at the beginning of 2012. This guidance was important to dispel any doubts about the ECB’s ability to deliver. The Bank of England introduced guidance in 2013 in order to secure the nascent recovery while granting the MPC the flexibility to learn more about the rapidly changing supply capacity of the economy. When the longawaited UK recovery began to take hold, even though inflation had been persistently above target, there remained a significant but highly uncertain margin of spare capacity in the economy and it was unclear whether productivity growth would pick up. We felt that guidance was essential to help clarify our reaction function so that stakeholders could learn alongside the MPC.
Collateral should be required, but good collateral can never outweigh a borrower with a poor credit rating or an uncertain project. The bank must also make a realistic assessment of the value of collateral. For example, it is common to provide the borrower’s own premises as collateral. However, when a borrower goes bankrupt the value of the premises often declines substantially, as it is difficult and costly to adapt them to another user. The banks accepted high concentrations, not merely in lending to individual borrowers, but also credit granting to individual sectors and geographical areas. For example, the banks’ loans to the property sector, or with property as collateral, accounted for more than 60 per cent of all loan losses. This is a concentration risk that contravenes all sound risk management and is currently prohibited. However, it is easy to say all this with the benefit of hindsight. At the end of the 1980s, the banks had substantial profitability and low loan losses. Economic activity was strong. I believe that all of us active in the financial system then would have found it hard to believe that a crisis was impending. Nevertheless, the Swedish banks had one important piece of the puzzle already in place prior to the crisis. They were well capitalised and had built up capital reserves that corresponded to, or exceeded, the statutory level of 8 per cent. This created some resilience and to a great extent reduced society’s direct costs when the crisis occurred, as the bank owners’ money was lost first.

I intend today to describe in broad terms the design of, the background to and the effects of the Swedish regulations and then go on to discuss the deregulation process. After this I shall point out which factors led to the crisis and what it entailed for Sweden. This is because I believe that our experiences in Sweden are in many respects relevant to other countries. Although conditions tend to differ somewhat between countries, financial crises usually have similar causes and similar results. For example, comparisons have been made between the crises in South East Asia at the end of the 1990s and the crisis in Sweden. It appears that at least three quarters of the crisis causes were the same, including the excessively rapid credit boom, insufficient credit assessment and overheating in the economy. The sequence of events for the actual crisis was also similar; with large currency outflows, rapidly increasing loan losses and insolvent banks. I therefore hope you will have the patience to listen to my account of the Swedish experiences. I believe you will be surprised at how many similarities there are! The Swedish regulations During the period between the Second World War and up to the 1980s, the Swedish financial system was subject to a number of regulations. I shall mention some of the most important ones. Credit regulation was one of these. Around half of the Swedish banks' lending must be directed to the Government and provided at a low interest rate and with a long duration.
As a result, very few prices are denominated in cryptoassets and not many large brick-and-mortar or online retailers accept bitcoin for example, although there are some exceptions [i.e. showroomprivé.com, France’s second largest flash sale web retailer, which has accepted bitcoins since 2014]. Second, as intermediaries in exchanges, crypto-assets are far less effective than a settlement asset with legal tender status, insofar as (i) their price volatility makes it hard to use them as a means of payment, (ii) they generate transaction fees that are far too high for simple retail transactions (for instance, the redemption fee on Tether is 3%), and (iii) they offer no guarantee of a refund in the event of fraud. 3/6  BIS central bankers' speeches  Third, the fact that they have no intrinsic value and that they offer no guarantee that they can be converted at par upon demand with commercial bank money or central bank money means that they cannot be used to create trustworthy stores of value. In addition, crypto-assets « front end » and « back-end » payment arrangements are  significantly exposed to risks of various nature, including legal, financial, operational and compliance risk with money laundering and terrorist financing, consumer and investor protection, which need to be seriously addressed if they are not to become the « weak links » in our payment systems, with the risk that they undermine the safety of the whole payment chain.

3- Indeed, it is quite clear that crypto-assets undergoing technical and economic trials bring  about not only opportunities to improve our payment systems but also material risks which on the contrary might weaken them if unaddressed, both from an efficiency perspective and a safety perspective through the introduction of new sources of fragmentation, instability and fraud. As many central bankers have pointed out, today’s crypto-assets do not satisfactorily offer  the qualities expected from a settlement asset to be used interchangeably with commercial bank money and central bank money, let alone to displace central bank money as the central reference of value, as the privileged settlement asset for wholesale transactions and as the last recourse settlement asset given its legal tender status. The reasons for this assessment are well known and documented and boil down to stressing that there are misnamed as « currencies » for three reasons: First, their value fluctuates enormously, preventing them from being used as units of account. For instance, the value of Bitcoin (not however representative of all crypto-assets) went up to more than 19 300 euros in December 2017 and has since fallen down to 7400 euros in September this year. And stablecoins represent an imperfect improvement in this field: their value aims to be relatively stable based on backed assets, but in fact fluctuates, in particular if they are not backed on safe assets.
What impacts of cyber-criminality on financial stability? There is one question we must pay particular attention to: the virtual currencies. Recent operations against financial criminality have evidenced that new payment methods using the internet, and linking the virtual sphere with the real sphere, are a privileged way for cyber criminals to launder money. Virtual currencies have indeed recently drawn attention from authorities and from central banks in particular. Designed as alternatives to official currencies but with no guarantee of reimbursement, they cannot be classified as currencies because they lack legal tender and therefore do not infringe the central banks’ monopoly in the issuance of money. However, although they currently do not pose a significant threat to financial stability, they do pose serious questions in terms of money laundering and can be perceived as vehicles for speculative investments. Virtual currencies therefore bring challenges to authorities when it comes to regulating them. Our speakers on the virtual currencies topic could address such questions as: should the use of virtual currencies be prohibited to protect us from cybercrime and the expansion of money laundering or  2  BIS central bankers’ speeches  terrorism? Or is it better to set out the legal, regulatory and ethical issues of the virtual currencies? A round table dealing with financial sector solutions to curb new cybercriminals’ strategies will follow. To what extent do current guidance and principles deal with the threat of cybercrime? Can cybercrime be effectively deterred or only defended against?

This has unified the basis on which supervision is carried out. The largest and most significant banks are now supervised directly from Frankfurt, in close partnership with the national authorities. The euro area has also set up the Single Resolution Mechanism to ensure the orderly resolution of failing banks, while at the same time reducing the impact on the taxpayer. Conclusion This account of how policymakers and researchers have interacted in the past ten years shows 5/7  BIS central bankers' speeches  how indebted the former are to the latter. From my point of view, one can draw five lessons for policymakers. First, sudden shocks often make visible the flaws in our policy frameworks and challenge the explanatory power of existing theories in ways that have been previously overlooked. But analysis conducted by researchers and embraced by policymakers remains essential in designing the policy response. Second, a policy response that has its foundation in rigorous research is less prone to being impaired by political compromise and easier to explain to the general public. Third, Keynes is often quoted as saying, “When the facts change, I change my mind. What do you do, sir?” Well, for policymakers, it is not that simple, and research helps us to decide whether a change in the facts deserves a policy response or, as we say, we should look through it. Fourth, when the world changes as it did ten years ago, policies, especially monetary policy, need to be adjusted.
For example, the $ proceeds must be swapped into foreign currency if they are to be used outside Singapore. Our approach was a cautious one, for although we wanted to promote the bond market, we maintained our basic stance of discouraging the internationalisation of $ But we stated that so long as the stability of the exchange rate was not compromised, the actual implementation of the non-internationalisation policy would continue to evolve as we gained experience with the new rules, and as our financial sector and capital markets grew and developed. We also committed to review the restrictions after a year. We have now completed the review. The response to our new policy has been encouraging. Since the new Notice was introduced, there have been 19 $ bond issues by 16 foreign entities, raising a total of almost $ billion. The issuers were a good mix of supranationals, financial institutions and corporates of good credit standing from around the world. The financial institutions have given MAS feedback, proposing changes to the Notice to give the players more flexibility and generate more liquidity and depth in the market. We have adopted many, but not all, of their suggestions. We will liberalise guidelines in four key areas. Repo consultation limit The development of a liquid repo market is critical to the Singapore government securities (SGS) and $ debt market. An active repo market enables investors and primary dealers to finance their bond inventories and hedge their $ debt positions.

Over this period, Malta’s performance has been quite distinct, outperforming the non-stressed countries, while having a declining trend since 2013. This year, at 5.4%, it is the second lowest in the euro area, after Germany. Chart 2: Unemployment rates by groups of countries  Chart 3 shows the employment performance. Since 2008 employment in Malta increased by around 18%, compared with a rise of just under 3% in the non-stressed economies and a contraction in employment in the stressed ones. In particular, the private sector employment growth rate averaged above 3% per year over the past three years. 2  BIS central bankers’ speeches  Chart 3: Employment growth by groups of countries  Of significant importance is the strong potential output growth, which has been supported by the robust dynamics in the Maltese labour market. In its projections, the European Commission had foreseen potential output growth in 2015 in excess of 3.5%, compared with around 1% in the euro area as a whole, as shown in Chart 4. In fact, according to the European Commission, Malta and Germany were the only two Member States in which potential GDP in 2014 had already exceeded its pre-crisis growth rate. Chart 4 – Potential GDP  Labour market participation is a critical factor supporting potential output, particularly the steady increase in female participation. This is further reinforced by inward migration, mostly from the European Union. In fact, we estimate that in the period 2010 to 2014, migrant workers contributed to 0.6 percentage point of potential output growth.
The interest rate only has a predictable effect on the krone exchange rate when it influences price inflation in the right direction.2 Historically, it has often been the case that the central bank has raised its key rate when confidence in monetary policy has declined, and the currency has been exposed to depreciation pressure. This is probably one of the reasons why it has proved difficult to find empirical support for a direct relationship between the interest rate and the exchange rate. The impact of the interest rate on the krone exchange rate will depend on how uncertain krone positions are perceived to be and the size of the risk premium required for these positions. The Bank’s analyses3 indicate that the krone exchange rate is also affected in the short term by uncertainty in the global economy and international financial unrest. Volatility in international foreign exchange markets may explain short-term fluctuations in the krone exchange rate, particularly since 1997. This may be because international operators are more aware of the Norwegian krone as a speculative object. The direct relationship between the interest rate and the exchange rate is therefore not stable, and the exchange rate level in itself provides limited information for the setting of interest rates. It is essential to take into account that the Norwegian economy is small and very open. Norway’s foreign trade is substantial. All capital controls have been removed. Our financial market is becoming increasingly integrated into the international economy. Significant structural changes took place during the 1990s.

Inflation has fallen to single digit, while the exchange rate has remained relatively stable. In 2011 inflation closed at 7.2% from 7.9% in 2010. In February 2012, inflation was recorded at 6.0%;  iii. The financial sector has also recorded tremendous growth since the commencement of liberal economic and financial policies in the early 1990s; and  iv. Equally, positive developments have been registered in the payment systems. I must caution though that sustaining macroeconomic stability remains a key challenge in the face of a weak global economic outlook and limited domestic resources. It is important that we all keep an eye on economic developments with a view to striking a balance between wealth redistribution on one hand and sustaining the required investment and economic growth on the other. Ladies and gentlemen, in the recent past, we have witnessed a number of work stoppages as workers press for increased remuneration. In this regard, I wish to urge the Union leadership to be wary of sparking a wage price spiral because this may cause a rise in inflation. As you may be aware, high inflation is detrimental to our economy because of the following reasons: i. Makes Planning difficult for economic agents;  BIS central bankers’ speeches  1  ii. Companies and consumers are unable to draw up effective investment and expenditure plans;  iii. Government is also unable to make good projections of revenue collections and thus unable to effectively plan its current and capital expenditures;  iv.