samchain/econo-pairs-v1 huggingface dataset:
These hard and soft rules, have at times, guided policymakers through some turbulent episodes. Of concern however is when this set of prescriptions act like a straitjacket, constraining policymakers from making bold and necessary policy decisions, just because it does not conform to ‘consensus thinking'. This is in spite of universal acknowledgment that we are experiencing change that is unmatched, both in pace and dimensions. Clearly this changes the rules of the game. Conformity could come at a cost. And that cost can be significant if it is driven solely by ideology. John F. Kennedy once said, “Conformity is the jailer of freedom and the enemy of growth". The issue of conformity and how it affects social behavior has been the subject of study for decades. It was in 1972 that Irving Janis, a psychologist at Yale and forerunner in the field of social dynamics, first coined the term “group-think". Professor Janis described this collective behaviour as “a mode of thinking that people engage in when they are deeply involved in a cohesive in-group…when the members’ strivings for unanimity override their motivation to realistically appraise alternative courses of action". In other words, group-think occurs when there is pressure to conform to an over-arching view or strategy. As a result, members of the group often feel uncomfortable to deviate from the “norm", leading to tunnel-vision and a fear to voice out opinions and come up with new ideas. Sometimes, it can provide dubious cover for doing less than what is appropriate, and what is needed.

I saw further confirmation of the great potential of Italy and of the Italian corporate sector, but I also found unanimous agreement that one of the most important problems facing Italy is the insufficient labour productivity and consequently the rise of unit labour costs. It is a European problem, and not only an Italian problem, but in Italy it is particularly visible: we have to do all that we can to implement the Lisbon agenda aiming at accelerating productivity growth. But the Italian industrial structure is weak nowadays. What should be done? Research carried out in Italy and in Europe, more generally, has concluded that we are not benefiting sufficiently from productivity gains in sectors that use new technology (and not only in the sectors that produce the technology themselves) and this seems to be due to overly rigid labour, goods and services and financial markets. Structural reforms that would allow the economy to be made more flexible are the primary tools for achieving a leap in productivity. In the United States this was made possible in the mid-1990s. And, consequently? One should never underestimate the importance of investment in research and development, which are today insufficient both in Italy and in the euro area as a whole. You have mentioned structural reforms, which are currently at the heart of the Italian political debate on developments in the finance laws. Let us begin with the deficit-to–GDP ratio, which is well above the 3% limit. Is the situation in Italy a cause for concern for you?
The assumption that the repo rate will develop in line with expectations in the financial markets should not be interpreted as a stance with regard to which interest rate path the Riksbank considers to be most desirable, just as the assumption of a constant repo rate was no reflection of this. If the forecasts of inflation two years ahead are on target, it means that the interest rate path expected by the market could be a desirable path for the repo rate. However, we must also evaluate the course for inflation and the real economy that the interest rate path is expected to entail. The monetary policy decisions and how we regard market expectations are based on a total assessment of these courses of events. Personally, I think the time is right to go one step further and publish our own interest rate path. My experiences of increased transparency have been only positive. As we have gone over to the new interest rate assumption, it has been a natural progression to abandon the simple policy rule that was previously used to explain monetary policy and relied on forecasts based on a constant repo rate. One purpose of the rule was that it would be simple to understand. However, it often did not provide a sufficiently good description of the monetary policy considerations. For instance, the policy rule did not give any guidance as to how the Riksbank views future interest rate developments.

In recent years, house prices and household borrowing have increased rapidly, partly as a result of low interest rates. We have stated that we feel some concern that this development may go too far, with a risk of severe adjustments in the future. One risk is that a sharp brake in house prices could lead to households perceiving their debt burden to be too high, and that they would therefore quickly increase their saving. This could lead to a severe decline in demand in the economy and in inflation. In the considerations behind our decision on the interest rate at the beginning of the year, we considered these risks to be one reason for not postponing an increase by a few months - which I otherwise believe would have been fully possible given the forecasts we otherwise make and the precision of these forecasts. I would not like to claim that this is necessarily always the optimum means of managing this type of risk in monetary policy considerations. The relationship between credit volume and asset prices on the one hand and monetary policy and the real economy on the other hand has not yet been sufficiently mapped to be able to draw any clear policy conclusions. In addition, our experience of deregulated financial markets is still limited to a small number of economic cycles. At the same time, we cannot ignore the risks to future inflation and economic activity with which we believe that developments in the housing market are connected.
As an economist who should know the importance of comparative advantage, I will spend the balance of my time focusing on what central banks can do to support inclusive capitalism. The Bank of England’s mission “to promote the good of the people of the UK by maintaining monetary and financial stability” suggests that central banks have an important role to play in supporting social welfare. Central banks can contribute in two areas. First, our core macroeconomic objectives promote social welfare. Second, we can help to create an environment in which financial market participants are encouraged to think of their roles as part of a broader system. By building a sense of responsibility for the system, individuals will act in ways that reinforce the bonds of social capital and inclusive capitalism. Some of this is straightforward. Inflation hurts the poor the most and the real costs of financial instability – unemployment and the seizure of credit – are likely to be felt most  11  Padoa-Schioppa (2010). 12  Sandel (2012). 13  See Martin (2012), also Lewis (2014). BIS central bankers’ speeches  3  acutely by the poor. 14 Conversely monetary and financial stability are cornerstones of strong, sustainable and balanced growth and therefore directly affect distributive justice. Some is more nuanced. While to not have acted would have been catastrophic for all, the distributional consequences of the response to the financial crisis have been significant.

For another, Solvency II requires us to monitor the fitness and propriety of a broader range of staff than in banks. In coming months we will build on the provisions of legislation to produce a regime that in spirit is aligned with the standards to which we hold bankers, but that in practice is a tailored approach for insurers. It will combine accountability with efficiency. Ultimately, of course, social capital is not contractual; integrity can neither be bought nor regulated. Even with the best possible framework of codes, principles, compensation  20  As the CEO of TD Bank, Ed Clark, observed, “Bank leaders created cultures around a simple principle: if it’s legal and others are doing it, we should do it too if it makes money. It didn’t matter if it was the right thing to do for the customer, community or country.” See Clark (2012). BIS central bankers’ speeches  7  schemes and market discipline, financiers must constantly challenge themselves to the standards they uphold. A meaningful change in the culture of banking will require a true commitment from the industry. That is why a second initiative, the creation of the Banking Standards Review Council (BSRC), is particularly welcome. 21 This new independent body, again proposed by the Parliamentary Commission, is designed to create a sense of vocation in banking by promoting high standards of competence and behaviour across the UK industry.
We do admit that the higher interest rates affected the stock market and property market. But we should also remember that high interest rates are necessary to cool the overheating in the asset markets that prevailed until recently. Given the excess demand situation in Hong Kong as the economy grew by 6.4% in the second quarter, a correction was expected. A moderation in property prices will help bring houses to more affordable levels to homebuyers. 34. Higher interest rates will also bring down inflation, by encouraging savings. Once inflation and the asset markets correct under the free market regime, Hong Kong will become much more competitive. In real effective exchange rate terms, the competitive effect of neighbouring depreciation will be offset somewhat by a rise in domestic inflation. Higher interest rates will also bring the external account more in line with the fundamentals and improve the trade balance. Hong Kong, as a free market economy, is adjusting exactly according to the textbook. 35. Moreover, our banking sector is very robust and strongly capitalized to withstand any shocks. Operating profits of the local banks grew by about 18% in the first half of 1997 and the bad debt charged fell in the first half of 1997 as the level of classified loans was 2.08%, down from 2.91% a year earlier. The capital adequacy ratios of local banks as a whole exceeds 17%. The average loan-to-value ratio is 70%, with the actual measured loan-to-value ratio being 53.3%, according to our survey at end September 1994.

Undue exuberance on the part of investors, when price-earning ratios grow beyond fundamentals, or on the part of bankers who failed to assess the impact of high interest rates on collateral or cash flows, would expose both the investor and the lender to asset losses. 17. Specifically, banks in Asia, having easier access to funds as a result of high global liquidity, were able to expand lending much more quickly and, thereby, incurred higher risks in their portfolios that they need to manage more soundly. Ironically, domestic banks may have been induced to move into more risky lending due to increased competition in the form of new entrants and financial intermediation. There is no question that they need to manage these new risks better. 18. There is also one distinguishing feature of the Asian turmoil. The debt problems have not been those of the public sector. On the contrary, the fiscal positions of Asian governments have by and large been quite sound. East Asia, excluding Japan, ran a fiscal surplus of $ billion BIS Review 109/1997  -4-  or 0.1% of GDP in 1996. The debt burden, in fact, has been largely one of private sector overborrowing. The resolution of the debt of the private sector makes the Asian problems quite different from the experience of the sovereign debt issues of the 1980s. 19. In essence, the Asian problem is the age-old question of efficient resource allocation.
We will need to consult on elements of change along the way and be responsive to the comments. All this takes time and thought, but the quicker these processes are completed, the quicker the vision will be realised. 3  All speeches are available online at www.bankofengland.co.uk/news/speeches and @BoE_PressOffice  3  We will best realise our vision to be a responsive and accessible policymaker by continuing to proactively engage with the wider world – both at home and abroad. This will ensure that our prudential framework keeps pace with innovation, and so we identify and best respond to risks at an early stage. We will continue to engage with our counterparts in other jurisdictions, and we will continue to lead policymaking through our membership of international standard-setting bodies such as the Basel Committee. Our key aims remain to ensure that global standards are robust and that regulatory fragmentation for firms is minimised. Strong engagement with Parliament and industry will be essential. We will take seriously our task to understand Parliament’s priorities within the framework of the objectives and ‘have regards’ that Parliament will give to us. And industry input will be particularly important on areas of the regime we are targeting for reform, which brings me to the main subject of this speech. A strong and simple prudential framework for non-systemic banks and building societies I would like to turn my attention now to speak specifically about one particular policy initiative which the PRA is pursuing.

William C Dudley: The national and regional economy Remarks by Mr William C Dudley, President and Chief Executive Officer of the Federal Reserve Bank of New York, at Rensselaer Polytechnic Institute, Troy, New York, 7 October 2014. *  *  *  Good afternoon. I am pleased to be here today at Rensselaer Polytechnic Institute (RPI). It is always a pleasure to speak with members of the different communities that make up our region, and it is particularly exciting to have the opportunity to speak with the students and faculty here at the Lally School of Management and Technology. Much of my day in the Albany area has been focused on the intersection of technology, the workforce and innovation, so it is a pleasure to speak with the people who are the future leaders in this fascinating evolution. My meeting with you today is part of our continuing efforts to understand what is going on at the grassroots level of our economy. Earlier on this trip, I met with government and business leaders to learn about some of the challenges the region faces as well as the collaborative efforts being taken to further economic development. I listened to community leaders describe the problems in affordable housing, workforce development and employment facing many in the lower income communities. I was also impressed by the potential innovations in energy production at the GE Global Research Center. These could have large consequences not only in the United States but in developing nations as well.
Implicit in these observations are strong forces pulling in different directions in the monetary and financial system on the Mainland, all with implications for monetary and financial stability, not just on the Mainland, but also for Hong Kong, being so close to and so integrated with the Mainland. There is great emphasis on controllability, gradualism and the ability to take initiatives in the reform and liberalisation of the Mainland, all in the context of the building of a socialist, market economy. I have no doubt that the Mainland authorities will be able to steer the right course through this potent scenario on the monetary and financial fronts, and avoid mishaps. One can therefore be optimistic about Hong Kong, as the international financial centre of the country, continuing to benefit from monetary and financial developments on the Mainland, although we should not forget that in the capitalist, free market environment that we are in, there is a possibility of market volatility or adjustment being magnified. The task is for all concerned to ensure that they are in a position to cope  4  BIS Review 139/2007  with magnified volatility, in other words, manage market risks that may be greater than what they have seen in the past. The linked exchange rate system Let me turn to the THIRD and last issue that I wish to cover this evening. This concerns our own exchange rate system.

The effect of globalization is the establishment of international financial conglomerates. In the case of an economic crisis, the conglomerates may channel it through to other markets. Such companies could be very important for the stability of the financial system in a country or region. Their bankruptcy may evoke a crisis, even in a steadily growing economy and even in the situation when the financial problems have stemmed from a foreign market. The lack of standard procedure for solving problems of international financial institutions impairs prevention and solving of financial crises. The existing safety net established by national economic authorities is frequently a source of moral hazard for large  11  Issing O. “The globalization of financial market”, 2000, www.ecb.int. 12  Lutkowski K., “Mechanizm przepływów kapitałowych w epoce globalizacji” in: ”Globalizacja od A do Z”, NBP 2004. 13  Małecki W., Sławiński A., Piasecki R., Żuławska U. “Kryzysy walutowe”, PWN, Warsaw 2001. 14  Mishkin F.C. “Is Globalization Beneficial?”, NBER Working Paper 11891, 2005. 15  Kamisky G. L, Reinhart C.M. “The Twin Crises: The Causes of Banking and Balance of Payments Problems”, American Economic Review 89, 1999, pp. 473–500. Caprio G., Klingebiel D. “Episodes of systemic and borderline financial crises”, the World Bank , mimeo, 2003. 16  Rajan R. G. “Has Financial Development Made the World Riskier?” NBER Working Paper 11728, 2005.
Andrew Hauser: Building the market infrastructure of tomorrow – CREST, RTGS and the Bank of England, 20 years on Speech by Mr Andrew Hauser, Executive Director for Banking, Payments and Financial Resilience of the Bank of England, at the CREST Twentieth Anniversary Conference, London, 20 September 2016. *  *  *  I am grateful to Sana Siddique for her help in preparing this speech, and to David Bailey, Jo Clennell, Toby Davies, Rachel Greener, Chris Redmond, Iain Saville, Hugh Simpson and Paul Symons for their input and guidance. Introduction July 1996 was an eventful month. Dolly the world’s first cloned sheep was born. Boris Yeltsin was re-elected as President of Russia. The Spice Girls’ first single, “Wannabe”, was riding high in the charts. And the summer Olympics opened in Atlanta. By the time the Games closed in early August, Great Britain had won only 15 medals in total, finishing 36th in the rankings – three places behind North Korea, twelve behind Kazakhstan and 32 behind China. As that song of 1997 had it, “things could only get better”. But there was one rather more upbeat event that month back in the summer of 1996. On 15 July, in a crowded room high up in Trinity Tower, Wapping, Chancellor Ken Clarke picked up a computer mouse – then still a relative novelty – and, waving it towards a large computer screen like a wand, declared the CREST settlement system open for business.

Although most countries now have well-functioning modern Central Securities Depositories, the structures below this top layer for providing posttrade services in securities markets remain in many cases extraordinarily complex and balkanised. Multiple tiers of custodians and sub-custodians, issuing agents, correspondent banks, clearing members, registrars and brokers – many operating on a solely national basis – provide an overlapping web of services to separate pools of market participants, using different operating procedures, systems and databases. That siloised model delivers settlement and collateral movements which, though much smoother than they were twenty years ago, are still typically measured in days rather than minutes or hours, and require multiple reconciliations – posing fixed costs, raising settlement and operational risks, tying up collateral, reducing transparency and posing barriers to entry. These segmented structures have not arisen by chance – in many cases they reflect the differing needs of market participants, variations in national practice and regulatory rules, and legacy systems. But they stand in the way of establishing a genuinely efficient international capital market. And they are now under unprecedented pressure from three sources: demand, technology and regulation. The strongest demand pressures come from the largest users of capital markets, who need to find further sharp cost savings if they are to deliver improved return on equity to investors.
The personal computer, for example, is a great tool that enhances the productivity of people with lots of education, while it may actually be a substitute for unskilled labor. In addition to its effect on earnings, higher education improves one’s quality of life by improving other outcomes, like health. Even when the large net benefit of college attendance is accurately perceived, there are significant financial constraints on many families’ ability to finance a college education. After all, the costs of college are concentrated in a few years at the very beginning of a career, while the benefits are spread out over a long period that comes later. Borrowing is a natural solution to problems like these, but there is limited enforceability of uncollateralized debt  BIS central bankers’ speeches  1  contracts and the private sector may be willing to provide less than the optimal amount to support good educational outcomes. In this environment, even optimal private debt contracts will not account for the second important part of the benefit of higher education: that which accrues to society as whole. Better-educated workers are higher paid and so pay more taxes, and they have a lower incidence of dependency on programs like unemployment compensation and welfare. There are positive spillovers from educated workers to others, raising aggregate productivity. Better-educated workers produce more innovation and are more civically engaged. In a democracy we are all better off when our fellow citizens understand the issues facing the country. Overall, a more skilled workforce is beneficial to us all.

Rather we see our evidence as suggesting that the way we as society finance those degrees – with an increasing reliance on debt held by the students – has costs to both borrowers and lenders that are only now becoming clear. Given the social benefits of an educated population, we see a strong case for some public role in financing college. Nonetheless, there are many private benefits, including higher lifetime earnings to be had by the successful college graduate. Therefore it is likely that the best system of finance also includes a tuition payment by the student. Because many prospective students are credit and liquidity constrained, and because of the limited enforceability of debt, we outlined the case for a government-supported student loan program to support the payment of tuition. However, we see a case for stronger underwriting standards that would assess the likely quality and outcome of the education match between a prospective student and the educational institution, which would better deliver resources to high potential educational matches, and avoid encouraging poor ones. We’ve learned a lot over the past several years about how student loans are affecting individual borrowers, the taxpayers and the aggregate economy. We’ve by no means answered all the relevant questions, and with over a trillion dollars in outstanding debt and the future of our workforce at stake, I consider these issues to be of first-order importance to the nation.