samchain/econo-pairs-v1 huggingface dataset:
These losses are considerably steeper than after most major hurricanes that have hit the United States. However, they are not as devastating as Katrina’s impact on the New Orleans economy more than a decade ago, which was and remains unprecedented. Nonetheless, the labor market, at least in Puerto Rico, appears to be stabilizing as jobs in sectors that were most affected—such as leisure and hospitality—have started to come back. And, as repair and rebuilding efforts get underway in both Puerto Rico and the U.S. Virgin Islands, jobs are being created in sectors such as construction. These job gains are expected to continue for some time to come. Looking ahead Puerto Rico now must not only complete the recovery from the hurricane, but also do what is necessary to get on a sustainable economic and fiscal path. Given the Island’s high debt, unfunded pension obligations, declining population, and now the hurricane, the outlook may seem grim. But there are good reasons not to despair. As I have noted previously, New York City went through a similar crisis during the 1970s: its population was declining, the economy was in a fiveyear recession, and the city had literally run out of money to pay its employees and could not borrow in the debt markets. However, leaders had the courage to confront these problems head on, and they adopted a series of reforms, including the establishment of a fiscal oversight board and a more transparent budgeting process.

All of this helped transform the city from an increasingly blighted urban landscape to the vibrant economy of today. And, New York City is not the only example of a major turnaround. Now-dynamic cities such as Washington, D.C., Pittsburgh, and Seattle also went through wrenching economic and fiscal contractions. While Puerto Rico’s path to prosperity will not look exactly like that of New York or other cities, history can provide valuable lessons, as well as hope for a better future. The same can be said for the U.S. Virgin Islands. In addition, Puerto Rico has a number of unique attributes and endowments that it can leverage as it seeks a path toward prosperity, including its educated and bilingual workforce, its proximity and access to markets on the U.S. mainland, and its extensive experience as a host to various major U.S. multinational corporations. But, a recovery is not going to happen on its own. We at the New York Fed have made a number of suggestions over the years that we think can help improve Puerto Rico’s competitiveness and economic prospects.2 Some of these issues are now being addressed, and still more are at least being discussed. Among others, lowering the costs and disincentives to doing business, helping Island residents develop and use their human capital, and improving labor market opportunities are all important steps that must be taken. On the fiscal side, the Financial Oversight and Management Board and the Commonwealth together will be making a series of difficult choices over the coming months.
For monetary policy, it means what we call IT+, where IT is coupled with a managed float, supported by macroprudential policies and possibly on-and-off capital flow management tools to deal with excessive inflows related to carry trade that greatly complicate the conduct of monetary policy, as indeed happened in Iceland last summer and autumn. For financial stability, it means putting the finishing touches on the implementation of prudential rules on FX liquidity and financing of banks that would greatly curtail their ability to build oversized FX balance sheets with rollover risk. This would be part of our current policy to have predominantly domestic-oriented banks as long as global and regional frameworks make cross-border banking in small countries with their own currency unsafe. Let me finally and very briefly mention some of the lessons learned. We can expand on those and other topics during the Q&A session if you wish. It is too risky to headquarter big international banks in small countries unless a credible multilateral financial safety net is available. The framework for cross-border banking in the EU was and is deeply flawed. A full banking union will take care of that, but not for EEA countries outside the Eurozone, due to potential FX risks on bank’s balance sheets. A flexible exchange rate can be both part of the problem and the solution. Capital controls in some form are here to stay as part of the toolbox, but comprehensive capital controls should not be imposed lightly.

Már Guðmundsson: Iceland’s recovery – facts, myths, and the lessons learned Speech by Mr Már Guðmundsson, Governor of the Central Bank of Iceland, at the Official Monetary and Financial Institutions Forum (OMFIF) City Lecture, London, 28 January 2016. *  *  *  Accompanying figures can be found at the end of the speech. Chairman, Ladies and Gentlemen, I would like to begin by thanking OMFIF for giving me the opportunity to speak to you here today in the City of London about Iceland’s recovery. This is interesting for me because, for better and worse, the UK and Iceland deeply shared some aspects of the financial crisis, and because the City of London has for decades been Iceland’s international financial centre. But it also gives me great pleasure to see so many in the audience who have in various ways helped Iceland over the years. Today I will focus on the recovery from the crisis and the current challenges, including the task of lifting capital controls. But the recovery cannot be understood without an understanding of the nature of the negative shocks that hit Iceland during the crisis. It is well known that Iceland was the first advanced country to experience a full-scale banking crisis in autumn 2008, when its three big cross-border banks failed. It was also the first advanced country to go on an IMF programme during the Great Financial Crisis.
Alessandro Manzoni, one of the greatest Milanesi, wrote in 1815 : « Liberi non sarem se non siam uni v [Liberi non saremo se non siamo uniti]». Today, we Europeans will not be masters of our own destinies if we are not united. Let us now overcome the current “malinconia” and face our challenges not with fear or distrust, but with pride. Pride in what we have already achieved and pride in the future we want to shape. Thank you for your attention. Televised address by Federal President Frank-Walter Steinmeier on the coronavirus pandemic at Schloss Bellevue, on 11 April 2020. ii « Education in the digital world », Speech by Ignazio Visco, Governor of the Bank of Italy, Centesimus Annus Pro Pontifice Foundation – Seventh Consultation Meeting “Ethos, Education and Training: Avenues toward equality and ethical behaviours in the digital era”, Catholic University of the Sacred Heart, Milan, 31st January 2020 iii Arnoud Boot, Elena Carletti, Hans‐Helmut Kotz, Jan Pieter Krahnen, Loriana Pelizzon, Marti Subrahmanyam, “Corona and Financial Stability 4.0: Implementing a European Pandemic Equity Fund” 25 April 2020, Vox, CEPR Policy Portal. iv European Fiscal Board (2019), “Assessment of EU fiscal rules with a focus on the six and two-pack legislation”, août, Bruxelles. https://ec.europa.eu/info/sites/info/files/2019-09-10-assessment-of-eu-fiscal-rules_en.pdf v Alessandro Manzoni, in Proclama di Rimini, 1815. i

Per cent 25  25 20  20  Equities  15  15  10  10 Fixed income instruments  5  5  0  0  -5  -5  1935  1945  1955  1965  1975  1985  1995  2005  Soruce: Ibbotson Associates og Datastream  10. Norway’s national wealth Per cent of total wealth 90  83  1999  80  83  2030  70 60 50 40 30  10  20 10  6  8  1  7 0  0 Petroleum wealth Real capital wealth  Financial wealth  Discounted value of labour  Source: Long-Term Programme 20022005  10  BIS Review 13/2003  11. ”The resource curse”  Source: J.D. Sachs & A.M. Warner (2001)  12. The case of Venezuela Per cent 18  1000 Bolivares 36  16  Real GDP per capita (right-hand axis)  14 12  28 24  10 8  32  20 Unemployment (left-hand axis)  16  6  12  4  8  2  4  0  0 70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00  BIS Review 13/2003  11
Luis de Guindos: Europe’s role in the global financial system Keynote speech by Mr Luis de Guindos, Vice-President of the European Central Bank, at the SUERF/Netherlands Bank Conference “Forging a new future between the UK and the EU”, Amsterdam, 8 January 2020. * * * It is my pleasure to deliver the keynote speech at this year’s SUERF/DNB conference. The title of this conference is very apt. Brexit will certainly require a new future to be forged between the United Kingdom and the EU. The United Kingdom’s departure has important implications for the EU financial system, most notably for capital markets. So we need to give serious thought to optimally shaping the future relationship between our financial sectors in the awareness that London, though likely to remain an important global financial centre, will become less integrated with EU markets and firms. We will also need to step up our efforts to further develop the EU’s domestic capacity in capital market activities, so as to avoid a Brexit-induced increase in financial fragmentation, while at the same time ensuring that the United Kingdom and EU Member States do not engage in a race to the bottom on regulation. Taking up the theme of the conference, I would first like to focus on how to forge a new future between the United Kingdom and the EU with regard to some key financial activities. I will then turn to the much-needed drive to strengthen the European financial system by completing the capital markets union and banking union.

This requires designing policies to support the development of markets’ size and scope, removing barriers between EU capital markets, expanding sources of funding for companies, and broadening the role of the non-bank financial sector. Ultimately, a well-developed CMU will increase private risk-sharing, promote financial stability and boost economic growth. Starting in 2015, the European Commission launched a series of initiatives to stimulate the development and integration of EU capital markets. On market development, the Commission adopted a set of harmonised rules on securitisation and published its fintech action plan in 2018. Initiatives on market integration included the review of the European Supervisory Agencies and the covered bond legislative package. The former aimed to make our system of financial supervision more efficient and effective and also gave the European Banking Authority a coordinating role in the areas of anti-money laundering and terrorist financing. The latter should foster the development of covered bonds by creating a harmonised EU framework, providing a source of long-term financing for banks and supporting the real economy across the EU. Despite the efforts of policymakers and market participants, retail investors are far from having embraced investing in capital markets. While the full impact on the real economy may take time to materialise, it is concerning that the initial ambitions of the plan launched by the European 3/5  BIS central bankers' speeches  Commission towards the development of a CMU were significantly lowered to enable colegislators to reach an agreement.
The first is an internationally agreed standard on the total loss absorbing capacity (or TLAC) that globally systemic banks must hold. It will be based on clear principles. But it will be much more than a list of aspirations. It will include a detailed indicative term sheet that will cover the amount; the type, and the location of that loss absorbing capacity. It will establish a level playing field between global systemic banks, while taking into account differences in national resolution regimes. It will ensure globally systemic banks finally have the quantum of total loss absorbing capacity that extensive analysis show balances the benefit of greater resilience against the higher funding costs for the banks that results from the removal of public subsidies. It will set clear roles for home and host regulators in a resolution. It will give host nations the confidence that they won’t again be side-swiped by the failure of a large foreign bank. And, by removing the implicit subsidy that systemic banks have long enjoyed, it will reestablish market discipline. Once implemented, it will make our financial systems more resilient and our economies stronger. The proposal will be subject to a rigorous consultation and Quantitative Impact Study and market survey in 2015 and will take into account insights from the FSB’s ongoing Resolvability Assessment Process for every systemic bank’s resolution plan. The TLAC agreement will be complemented by another agreement just announced yesterday.

The crisis showed that there was ample scope to improve the efficiency and resilience of the global financial system. Through clarity of purpose and resolute implementation Brisbane will mark an important milestone in our efforts. That we have reached this point is a triumph of the optimists. But we must not stop work. There is still much scope to improve. The process of reform is not over. We will continue to learn and adjust. And we must continue to manage the system effectively in the face of new risks. With that we can deliver the open and resilient financial system that can support strong sustainable balanced growth around the world. BIS central bankers’ speeches  5
Lending to households and companies Annual percentage change  Note. Lending to households and companies according to financial market statistics. Source: Statistics Sweden. Figure 4. Annual change in the major banks’ lending Per cent and contributions in percentage points 25  25 Swedish mortgages Other lending to Swedish customers  20  20  Lending abroad  15  15  10  10  5  5  0  0  -5  -5  -10  -10 05  06  07  08  09  10  11  12  13 kv 3  Note. The coloured fields show how the different types of lending have changed in relation to the major banks’ total lending to the general public. No consideration is given to change in exchange rates. Sources: Bank reports, Statistics Sweden and the Riksbank. 12  BIS central bankers’ speeches  Figure 5. Inflation expectations one, two and five years ahead, all participants Per cent  Sources: TNS SIFO Prospera and Statistics Sweden. BIS central bankers’ speeches  13

However, the difficulties in pricing the structured products linked to sub-prime mortgages and, above all, the patent lack of transparency in the process of pooling, segmentation and redistribution of credit risk carried out through these products are causing problems of confidence between institutions. All these problems have practically paralysed the interbank markets for term loans, in which transaction volumes are very low, and led to interest rates above those expected under  2  BIS Review 134/2007  normal circumstances. European stock market prices, particularly for financial and construction firms, have also been adversely affected, while some investors have shifted to lower-risk assets such as government debt, resulting in declines in yields on these securities. The uncertainties deriving from all these movements pose evident added complexity in monetary policy decision-making. Fortunately, the financial turbulence described reaches Europe at a time of high economic buoyancy and, therefore, notable resilience in the euro area. The GDP of the euro area grew somewhat less than expected in the second quarter of the year, but 2007 to date represents, overall, a continuation of the economic boom initiated in the area in mid-2005. The sound financial position of firms, the expected profit rates and the favourable response of employment to the step-up in activity suggest that this stage of output expansion will persist over the coming quarters at a rate that, although it may well be slightly lower than anticipated some months ago, continues to be around potential growth.
With respect to the first metric, we have seen labor market improvement since the program began last September. Over this time period, the unemployment rate has declined to 7.3 percent from 8.1 percent.4 However, at the same time, this decline in the unemployment rate overstates the degree of improvement. Other metrics of labor market conditions, such as the hiring, job-openings, job-finding rate, quits rate and the vacancy-to-unemployment ratio, collectively indicate a much more modest improvement in labor market conditions compared to that suggested by the decline in the unemployment rate. In particular, it is still hard for those who are unemployed to find jobs. Currently, there are three unemployed workers per job opening, as opposed to an average of two during the period from 2003 to 2007. With respect to the second metric – confidence that the economic recovery is strong enough to generate sustained labor market improvement – I don’t think we have yet passed that test. The economy has not picked up forward momentum and a 2 percent growth rate – even if sustained – might not be sufficient to generate further improvement in labor market conditions. Moreover, fiscal uncertainties loom very large right now as Congress considers the issues of funding the government and raising the debt limit ceiling. Assuming no change in my assessment of the efficacy and costs associated with the purchase program, I’d like to see economic news that makes me more confident that we will see continued improvement in the labor market.

The conundrum for consumers is a simple one: if consumer spending growth is to exceed 2 percent annualized on a sustained basis at a time when real disposable income growth is below 2 percent then this would require the household saving rate to decline persistently. But there is little reason to expect such a decline given that the current saving rate is at a level consistent with current level of household wealth relative to income. We have a chicken-egg problem. If the saving rate remains stable, then stronger consumption growth will require a pickup in income growth. But for income to rise, demand must increase. This suggests that there may need to be an impetus to growth from other sectors of the economy to generate a boost in consumer spending growth. One possible source is the housing sector. As noted earlier, housing starts are still quite low relative to what the country’s demographics should support in the long run. But there are two difficulties here. First, the strength of the housing recovery may be blunted by the recent rise in mortgage rates. For example, before last week’s partial reversal, the 30-year fixed mortgage rate had risen by about 120 basis points since May to more than 4½ percent.
It is possible that the e-krona could increase competition for household deposits on the margin, but this does not mean that lending need be affected. New loans are not created solely from new deposits in the modern economy. For instance, the Swedish bank have around SEK 6,000 billion in loans issued on their balance sheets, and just under half of this in deposits, around SEK 2,800 billion. 10 Another way of putting it is that Swedish banks get around half of the financing for their loan portfolios on the market. This is more than the banks in the rest of Europe, and it has not prevented Swedish credit granting from growing at a faster pace. Deposits are thus not necessary to create lending. On the other hand, they have traditionally been a source of cheap financing for the banks. If deposits were to decline somewhat as a result of the e-krona, the banks would have to replace this with wholesale funding, which tends to be somewhat more expensive. Alternatively they can raise the interest on deposits. Another question that often arises is whether central bank digital currency can increase the risk of bank runs. The idea is then that in times of unease a bank can rapidly lose its deposits, as it is easier to move electronic money than withdraw cash. 11 However, it is questionable whether cash is the relevant point of comparison in this context.

If the use of fiscal policy in the past has not been optimised – and that is often the case, with fiscal policy often being used for political ends rather than as an economic tool – then it is likely that fiscal policy has not only been ineffective in creating the conditions for sustainable growth, but that the opportunity to use it to support growth has also become significantly narrower. This is indeed the place where many emerging and developed nations now find themselves. Today, we are seeing the limits of debt-fuelled growth. The world seems to need more and more debt to create less and less growth. That cannot go on. Debt has a role in supporting growth but over-dependence on it, and its misuse, has repeatedly resulted in bad outcomes. Therefore, we have to look at alternative means of creating more sustainable growth. One of those alternatives may be greater economic integration, regionally and globally. In fact, economic and financial integration, whether regional or global, has been occurring. As a result, it has become increasingly difficult for individual countries to determine their independent path to prosperity. While not downplaying the importance of keeping our house in order and the need to promote competitive and transparent economies, it is nevertheless  BIS central bankers’ speeches  1  obvious that the fates of economies are increasingly linked to those of others. Integration has its benefits and it has its costs.
The Government has given the Financial Policy Committee the power to implement limits on the flow of lending at certain debt-to-income limits in respect of new owner-occupied residential mortgages. This gives the FPC a tool to target overall household indebtedness should it consider that it posed a risk to financial stability. What does the last financial cycle tell us about sustainability? Putting all of this together, it seems reasonable to conclude that since the 1980s there have indeed been long lasting forces that pushed down on both the risk-free interest rate and the spread that lenders charge. This lowered the rates charged to borrowers and raised the price of houses. It will also have raised the sustainable level of debt. But it is not at all clear that in future these forces will raise the level of sustainability further. There is much uncertainty and discussion now about further downward shifts in the real interest rate as a result of secular stagnation and lower potential economic growth. But though such effects, if they occur, may continue to push down the risk free interest rate, they will as I have said, also push down income and are therefore unlikely to improve sustainability. Judgments about sustainability are difficult. The household debt to income ratio has come down materially since the crisis – back to its 2004 level of 135%. The debt service ratio shows a similar picture. It is back to 2001 levels.

On the other hand, some of the factors which affect preferences for desired saving and investment (demographics and the income distribution, for example), are likely to lift the sustainable level of debt and asset prices. Credit spreads and credit supply The interest rate charged to borrowers and by which risky assets are valued reflects more than just the risk free rate. It includes the spread above the risk free rate charged by the lender to reflect the costs and risk of lending. If reductions in the spread above the risk free interest rate are long lasting, they too will raise both the sustainable level of debt relative to income and the sustainable level of asset prices. In the run up to the recent crisis, the spread over the risk free rate fell. For example, lending spreads on new UK mortgage lending fell from around 100bps in around 2000 to a low of around 30bps in 2007. More generally, shifts in credit supply may occur through increased bank competition over nonprice factors (such as increasing the availability of credit to borrowers with high LTIs and LTVs), or because of regulatory and other policy changes that affect banks’ ability to lend. These shifts in credit supply may appear as direct increases in the credit to GDP ratio but show up less obviously in lending rates. Such shifts may show up as increases in deposit rates rather than falls in lending rates if they affect competition for retail and wholesale funds.