samchain/econo-pairs-v1 huggingface dataset:
Currently, the amount of spare capacity appears to be close to historical averages, which is not what we might expect when the economy is in such an early stage of recovery from recession. This, and other evidence, casts doubt on the degree of spare capacity in the economy and on how significant this factor will be in dampening inflation from its currently elevated level. 10  Business failures in the recent recession peaked at below 1% of firms, compared with 2.6% in the early 1990s and 1.8% in the early 1980s. 10  BIS Review 134/2010  Another puzzle is a surprising drop in productivity we have seen over the recession. Unusually, the decline in output appears to have been much bigger than the decline in employment when normally we observe the opposite result. In terms of the impact on unemployment, this has been a good thing, helping to dampen the cost of the recession in terms of lost jobs. But this raises further questions about how much slack there is in the UK labour market as the economy begins to grow and generate new jobs. The behaviour of productivity in the recession also raises the question of whether the UK productivity growth trend over the medium term has shifted. If it has, we may make big mistakes basing our assessment of underlying growth on past productivity trends.

Inflation has been above target, not below it – and is expected to remain so for some time. Because of these changes in economic conditions, I have voted for a rise in interest rates at recent MPC meetings – as a start to a gradual movement away from the exceptional level of monetary stimulus put in place to combat very difficult economic conditions last year. And I continue to believe that this the right policy for the situation the UK economy currently faces. In the years ahead, we will see much tighter restraint of public spending as the large deficit which built up over the recession is reined in. That process of deficit reduction is necessary to ensure longer term confidence in the future stability of the economy in financial markets and more generally. In this environment, it is the private sector which will be the engine of growth for the UK economy – just as it was in the 1990s recovery and the previous recoveries we have experienced here in the UK. Confidence that inflation is being kept under control is a key factor in sustaining that private sector engine of growth. My view remains that we should be starting now to make a gradual adjustment of monetary policy.
The euro-area sovereign debt crisis: some thoughts on its origins, its implications, and the challenges ahead  The origins of the euro-area sovereign debt crisis are twofold: the real cost of the overall financial crisis and the excesses of the pre-crisis period have jointly contributed to the gravity of the current situation. While this is not specific to the euro area, the consequences have turned out to be particularly harmful here. Indeed, by not internalizing the policy requirements associated with the participation in a monetary union, several euro-area countries entered the global financial crisis in a particularly vulnerable position. One of these policy requirements is fiscal discipline. Within the Stability and Growth Pact, fiscal discipline was associated with pre-agreed quantitative ceilings for the deficit and debtto-GDP ratios. In practice, many euro-area countries did not take advantage of expansionary periods to reduce the probability of reaching these limits in recessionary phases. BIS central bankers’ speeches  1  Unfortunately, an exceptionally hard recession, by all historical standards, hit the euro area in 2009, as a consequence of the financial turmoil initiated in the US in 2007–2008. The tax revenue went down and the large fiscal stimulus packages that were then required to contain the real consequences of the crisis and to avoid major disruptions in the financing of the economy also resulted in swift increases in public debts across the board.

Emergence of faster-pay infrastructures and mobile financial services within our region like the FAST payment and Wing in Cambodia, Wave Money in Myanmar, or PromptPay here in Thailand have helped reduce the cost of financial services for financial institutions and the public at large. For Thailand, the PromptPay infrastructure has helped cut down cost of retail fund transfer so much so that most financial institutions now offer online transfers free-of-charge. These infrastructures are critical foundations for which new add-on services can be built upon to support growing e-commerce activities in our region. b. In addition, we have seen firms experimenting with using alternative online data and machine learning for credit scoring model. A credit 2/5  scoring model created from data of payment receipts should help financial institutions better assess credit risks while ensure that borrowers, especially small enterprises, gain funding at a fair price. c. Another initiative undergoing testing here in Thailand is the use of blockchain for cross-border financial transactions. This technology should make cross-border payments more secure, more efficient, and more affordable to businesses and a larger population in the near future. Ladies and gentlemen, All of these are just some examples of the developments happening in our financial landscape. What is more important is that we must recognize that financial technology is a powerful tool for us to improve on productivity, immunity, and inclusivity. Efficiency in financial services is enhanced, as new payment ecosystem can enable more efficient transfer of funds and significantly lower transactions costs for consumers.
The objective would be to avoid the overvaluation of assets, to constrain excessively risky behaviour on the part of financial intermediaries and hence to prevent bubbles from emerging, or at least to reduce their size. In contrast, Alan Greenspan was widely credited for supporting a “clean up after bubbles” approach. This basically involves central banks actively sustaining the economy after an asset price bubble has burst, rather than using monetary policy to try to prevent the bubble from developing in the first place. The rationale for this approach is that it is more costeffective overall, as bubbles are very hard to identify. Erroneously implemented “leaning against the wind” policies could well impose significant economic costs with no real subsequent benefit. The huge cost of the recent financial crisis has decreased the weight of such objections to “leaning against the wind”. It is therefore important to further examine the potential of a preventive policy. Charles Bean et al16 strive to estimate the impact a “leaning against the wind” would have had on asset prices and real output in the recent financial crisis. The charts in Slide 6 show the simulated impact on credit, real estate prices and GDP growth of a policy which would push US interest rates 200 basis points higher than were actually observed between 2003 to 2006. The slide illustrates that the simulated policy would probably have kept real house prices some 7.5 percent lower than they were at their peak.

Few doubt that there are challenges to defining and calibrating the indicators used to determine when capital buffers should be triggered, and by how much. However, to quote Borio, “while calibration is  17  Assenmacher-Wesche and Gerlach (2010). 18  Hott and Monnin (2008). 19  For examples of models which illustrate downward spirals, please refer to Markus Brunnermeier and Lasse Pedersen (2009), Stephen Morris and Hyun Song Shin (2004). BIS central bankers’ speeches  5  not straightforward, the difficulties can be overstated”.20 To support his claim, Borio notes that traditional monetary policy also confronts such challenges when interest rates are set on the basis of indicators, such as output gaps or natural interest rates which are unobservable and difficult to measure accurately. It is however commonly accepted that central banks have, to a large extent, surmounted these difficulties. Of course, countercyclical buffers cannot be implemented without inflicting some costs to the economy, but the trade-off involved seems significantly more favourable than is the case with “leaning against the wind” policies. A 2011 study by the Bank of International Settlements estimates that, by reducing the probability of a severe crisis, the benefit of countercyclical buffers is on average 10 times higher than their costs in terms of real output growth per year. V.  The Swiss case  Every central bank in the world faces its versions of the challenges I have mentioned. The Swiss National Bank is no exception.
But what we cannot do is to target the exchange rate, without putting the stability of the economy as a whole at risk. The exchange rate is just one example of the many uncertainties that confront us in our pursuit of the Government's inflation target. We do not know, for example, with any great confidence what is happening in aggregate on the supply-side of the economy, nor therefore precisely what rate of growth we can expect to sustain. We can observe that there has been less price pressure in both goods and labour markets given the strength of demand in those markets than past relationships would have suggested and we can try to understand the reasons for this change. But while we do in fact make some allowance in our projections for the more benign relationships to continue, we do not actually know very much about the size of the improvement or whether or not it will persist. There are familiar uncertainties, too, about the prospective strength of domestic private sector demand growth, which remains quite robust for the time being, but which could be adversely affected by confidence effects from developments elsewhere, and which may in any event need to moderate to accommodate the planned acceleration of public spending.

The financial sector is key to mobilising Asia’s large pool of surplus savings more efficiently and channelling it to investment opportunities in the region. Situated at the heart of Emerging Asia, Singapore serves to intermediate the flows of savings and investments, helping to finance growth, manage risks, and connecting markets. Singapore’s financial centre is able to play this role because of four factors:   the credibility of its financial regulatory framework;    the competencies of its workforce;    the connectivity it has with the rest of Asia; and    the collaboration MAS has with the financial industry. Let me say a few words about collaboration. Working closely with industry is an important part of MAS’ work – be it in formulating regulatory policies or growth strategies. Regulation must be appropriate to the risks they are meant to address. We have not flinched from imposing high prudential standards – sometimes above international norms – but have always consulted industry actively to make sure that the prudential outcomes that we want are achieved at minimal compliance cost. Likewise, we have worked closely with industry to help create a strong financial ecosystem, deepening and broadening our markets, building critical infrastructure, and developing a skilled and competent financial sector workforce. JPM has been an important partner in our journey together to develop Singapore as a dynamic and vibrant financial centre.
With regard to monetary policy, this means continued improvement of analysis and forecasting methods and to find ways to clarify the balance between the inflation target and the real economy. For fiscal policy it could mean finding ways to make the automatic stabilisers even more effective, but primarily it entails designing preventive systems to enable smoother structural adjustments in the economy when various shocks unavoidably occur. It does not entail any changes in the fundamental role allocation as regards stabilisation policy. 4  BIS Review 39/2005  Summary Let me briefly summarise my responses to the three questions. Stabilisation policy is important, but one should not overestimate what it can achieve. Other economic policy measures are much more important to long-term growth in prosperity. A smoother adjustment process when the economy suffers shocks could benefit employment more than an active stabilisation policy. The allocation of roles between fiscal policy and monetary policy with regard to stabilising the macro economy has functioned well in the new regime and I see no good reason to change it. Both fiscal policy and monetary policy can and should develop, but this should occur within the framework of the present allocation of roles regarding stabilisation policy. For monetary policy this is a question of analysing and describing the considerations made between the inflation target and developments in the real economy. The most important issue regarding fiscal policy is not measures aimed at stabilisation, but providing a good general foundation for prosperity growth. Thank you! BIS Review 39/2005  5

Risks from leverage: how did a small corner of the pensions industry threaten financial stability? − speech by Sarah Breeden Given at ISDA & AIMA  Published on 07 November 2022  Sarah Breeden explains how leverage in non-banks can pose risks to financial stability and so to the economy as a whole. She sets what needs to be done by participants, by regulators and by financial stability authorities - to ensure those risks to financial stability are reduced. Speech On the afternoon of 28 September, I found myself in a rather unusual position: having to explain to journalists why a part of the pensions industry, unheard of to most of their readers, had posed such a large threat to financial stability that it warranted intervention in the gilt market from the Bank of England. Financial markets globally had been volatile for months. But in the days leading up to that fateful Wednesday and following the announcement of the Government’s growth plan on 23 September, long-dated gilt yields in particular had moved with extraordinary and unprecedented scale and speed. Now volatility itself does not warrant Bank of England intervention. Indeed, it’s essential that market prices are allowed to adjust to changes in their fundamental determinants efficiently and without distortion. However, some liability-driven investment (LDI) funds were creating an amplification mechanism in the long-end of the gilt market through which price falls had the potential to trigger forced selling and thereby become self-reinforcing.
Without results showing that the inflation target is in fact reached over time, the credibility of monetary policy is put at risk. In assessing various considerations, monetary policy must be geared to meet its primary objective – low and stable inflation. Other instruments must be used to attain other objectives. 4  6  See, for example, Leif Johansen, Offentlig Økonomikk [Public Economics] (1965). BIS central bankers’ speeches  Implementation of the fiscal rule Chart 12: The Government Pension Fund Global. As a percentage of GDP. 2000 – 2010 We have also gained ten years’ experience of rules-based economic policy in the area of fiscal policy. The Government Pension Fund Global has grown from close to NOK 400 billion in 2001 to more than NOK 3.1 trillion today. As a percentage of GDP, the size of the fund is in line with that projected in 2001. When the Fund was established, it was natural to build on existing expertise in the central bank gained through management of the foreign exchange reserves – the wealth was to be invested abroad. The central bank has been and will continue to be an appropriate institutional setting for the Fund. Under the fiscal rule, government oil revenue spending over the past ten years has totalled NOK 730 billion in current kroner. This is around NOK 100 billion more than a strict interpretation of the fiscal rule would imply. Chart 13: Relative labour costs. Projections from the National Budget for 2003 and actual developments.

A lack of reliable information resulted in excess risk-taking by many, perhaps unknowingly. Investors and banks believed they could pass on losses to others or expected the authorities to intervene in the event of failure. It is now widely recognised that the regulatory framework for financial markets was too weak. Increased ambitions with regard to regulating financial markets and new and better instruments are on the agenda. I will revert to this later. But let me start with the external environment. The world economy: Keeping one’s house in order provides robustness The global economic crisis in autumn 2008 was the biggest economic earthquake in our time. The following year, world GDP fell for the first time in generations. The crisis was triggered by an abrupt decline in the US housing market, but a tightly interwoven financial sector caused the problems to spread rapidly across countries and sectors. When the bubble burst, excessive optimism in the financial sector turned to deep pessimism. The flow of credit dried up. It became expensive and difficult for financial institutions to procure funding even though the problems had originated in asset value losses in a faraway region. Cross-border trade, which is dependent on well functioning credit channels, was adversely affected. Even an expansionary economic policy, with record-low interest rates, low tax receipts and strong growth in public demand for goods and services, could not prevent the downturn from deepening in many countries. However, it did help reduce its duration compared with the depression in the 1930s. Chart 1: Current account.
Andrew G Haldane: On being the right size Speech by Mr Andrew G Haldane, Executive Director, Financial Stability, Bank of England, at the Institute of Economic Affairs’ 22nd Annual Series, The 2012 Beesley Lectures, at the Institute of Directors, London, 25 October 2012. *  *  *  The views are not necessarily those of the Bank of England or the Financial Policy Committee. I would like to thank Andrew Gracie, Varun Paul, Kirsty Rodwell, Timothy Richards, Vicky Saporta, Rhiannon Sowerbutts and Belinda Tracey for their comments and contributions  1. Introduction  It is a pleasure to be delivering one of this year’s Beesley Lectures. I want to discuss financial regulation. But my title is drawn from neither finance nor regulation. Instead it is drawn from evolutionary biology. In 1928, evolutionary biologist J. B. S. Haldane wrote an important article whose title I have borrowed, On Being the Right Size.1 The essential point was simple. The sheer size of an object, institution or animal determined their structure. In particular, as their size rose, their structure needed to strengthen more than proportionately if they were to remain robust and resilient. This principle is sometimes enshrined in the so-called “square-cubed” law. A proportional rise in an object’s size causes its area to rise by the square, and its volume by the cube, of that rise. At one level, this is simple mathematical geometry. Yet in the real world, it carries fundamental implications for evolutionary structure. Take the animal kingdom.

Chart 7 looks at the response of bank and sovereign CDS spreads around the time of bank bail-outs in a selection of crisis countries. While bail-outs lowered bank CDS spreads, as might be expected, bail-out came at the expense of a rise in sovereign CDS spreads. It is not difficult to see why. The financial crisis has caused huge damage to the balance sheets of governments in advanced economies. For the G20 countries, the IMF forecast that the debt-to-GDP ratio will rise by almost 40 percentage points between 2007 and 2016, to almost 120%. At these levels, public sector debt may be a significant drag on medium-term growth (Rogoff and Reinhart (2010)). For economies with large banking systems and without a credible resolution regime, this leaves policymakers caught between a rock and hard place. When the call comes to ride to the banking rescue, government may be unable to afford not to. But nor, at least over the medium term, can they afford to. This is just the dilemma facing advanced countries today. Structural reform One way of lessening that dilemma, and at the same making resolution and bail-in more credible, is to act on the scale and structure of banking directly. Perhaps not surprisingly, recent regulatory reforms have sought to do just that. They have taken seriously the maxim that, if a bank is too big to fail, then it is too big. The result has been detailed proposals for structural reform in a number of advanced countries.
Barbro Wickman-Parak: What can monetary policy achieve? Speech by Ms Barbro Wickman-Parak, Deputy Governor of the Sveriges Riksbank, at a meeting, Karlstad, 27 March 2009. *  *  *  Economic policy can be divided up into two areas: fiscal policy and monetary policy. In Sweden and all other countries with independent central banks, there is as we all know a distinct difference between these two policy areas. The Government is responsible for fiscal policy and the central bank for monetary policy. The central bank is not allowed to receive instructions from any other party when carrying out its monetary policy tasks – it is to conduct its monetary policy in an independent manner. So what is the range of the policy area delegated to an independent central bank; that is, what can we expect a central bank to be able to achieve? This question is the theme of my speech today. Economic policy ultimately concerns creating the best possible conditions for long-term growth and thereby a high level of welfare for the population. The given limit for growth is set by developments in the labour force and in productivity. To attain long-term growth the policies must be aimed at, for instance, educating the labour force, creating an incentive structure that stimulates people to work, creating a good innovation climate that promotes technological developments and so on. This is all common knowledge, but may be worth saying sometimes.

Our forecasts show a substantial fall in demand and the lower interest rate policy is intended to contribute to softening the fall. When the circumstances have suddenly changed, monetary policy has been rapidly adapted to the new situation. The two cases I have taken up show the flexibility inherent in our monetary policy and which we have made good use of. What is the driving force behind inflation? A fundamental question As monetary policy’s ability to influence inflation and ultimately economic developments depends on the type of shock to which the economy is subjected, we must analyse the driving forces behind inflation. 5 When inflation is governed by supply factors that push up inflation, as in 2007-2008 when for instance energy prices rose, the initial effect cannot be prevented by monetary policy. When inflation became too low in relation to the target around 2005, this was largely because productivity rose more than expected. This is essentially a positive development that neither should nor can be prevented by monetary policy. However, it provided a possibility to hold the interest rate at a low level and to allow a higher level of demand than would otherwise have been the case. But the effects on employment were limited by the underlying productivity growth. However, the Riksbank might have needed to cut the repo rate further if one had at the same time observed a deterioration in demand or that the more long-term inflation expectations were far below the target.