samchain/econo-pairs-v1 huggingface dataset:
A continued recovery requires that this is accompanied by a broad and sustained increase in demand; otherwise the upswing is liable to be relatively brief. In this respect there may still be some uncertainty, mainly perhaps as regards the American economy. The economic imbalances in the United States are still large and stock-market values are high, both historically and in relation to the current cyclical phase. However, high productivity compared with the rest of the world may make these problems less troublesome. Household saving has admittedly become somewhat higher relative to disposable income since the end of last year but the level remains very low compared with earlier years. Unemployment continues to rise. Against this background there are grounds for expecting that growth in the coming years will not be as high as in the late 1990s. But as overall economic policy is expansionary, there should be a successive recovery during the second half-year, though of course there are both upside and downside risks. Turning now to Europe, there do not seem to be any clear signs of a strong recovery. Leading indicators admittedly point to a more positive business mood but the prospects for Germany – the largest economy in the euro area – are still uncertain and unemployment is rising from a high initial level. The euro area has not accumulated imbalances such as those in the United States and this may help to maintain a recovery once it has begun.

As a result, central banks tend to prefer a monetary policy strategy that lies somewhere between these two extremes, avoiding excessively large interest rate adjustments but not hesitating to adjust when this is called for. The Riksbank normally formulates monetary policy with a view to inflation one to two years ahead. This unfortunately means that the repo rate has to be set with the aid of forecasts and forecasts can err. Moreover, there is always the possibility of price shocks that are a-cyclical but still affect the rate of inflation. A forward-looking policy has the advantage, however, of permitting an implementation that is smoother yet firm. The Riksbank reacts to the inflation forecasts in a determined manner but as the forecasts include an assessment of the extent to which inflationary impulses are transient, over-reactions are avoided. The supply shocks I referred to earlier as having occurred during the past year are examples of price fluctuations that, with the monetary policy strategy the Riksbank has chosen, can occasion deviations from the inflation target. This is not the first time inflation has been affected by occasional factors. In the late 1990s, for example, successive deregulations of electricity and telecom markets resulted in deviations from the target, the difference being that at that time the gap was on the downside. What has happened now is the opposite. With our monetary policy strategy, this is a natural case of striking a reasonable balance between maintaining the fixed value of money and avoiding excessively large fluctuations in economic activity.
ECONOMIC PERSPECTIVES 18 FEBRUARY 2021  Chart 6 Forceful fiscal policy response Increased spending and reduced taxes. As a percentage of GDP  10  5  5  0  0 ay or N  m er G  w  an  ce an  ly Fr  Ita  di In  na hi C  pa  il Ja  az Br  U  U  y  10  a  15  n  15  K  20  S  20  Sources: IMF and Norges Bank  The lockdown this past spring was sudden and brutal and its impact on businesses varied widely. Fiscal policy measures have targeted the industries hardest hit by containment measures. The objective has been the same: Persons who were out of a job had to be secured financially. Unnecessary job losses had to be avoided. Monetary policy has underpinned fiscal policy measures. Policy rates were reduced where possible. Moreover, unconventional monetary policy, such as asset purchases, was stretched even further. Central banks have also effectively performed the tasks assigned to them for ensuring well-functioning capital markets. Extensive central bank measures prevented problems in the financial system from amplifying the global downturn. 8  NORGES BANK  Chart 7 Very low interest rates Three-month money market rates. Trading partners1) .

Yet as long as the crisis is ongoing, an expansionary monetary policy will be needed to stimulate the economy. This reduces the risk that unemployment becomes entrenched at a high level. At the same time, persistently low interest rates entail a risk of a build-up of financial imbalances. In Norway, rapidly rising house prices and further household debt accumulation pose a particular risk. Once there are clear signs that economic conditions are normalising, we will again seek to normalise the use of instruments – as we did after the financial crisis in 2008 and after the oil price fall in 2014. 11  SUBSTANTIAL TRANSFERS FROM THE GOVERNMENT PENSION FUND GLOBAL  NORGES BANK  The monetary policy stance in the period ahead will be influenced by the timing and means of fiscal policy normalisation. Here the authorities face a difficult balancing act. ECONOMIC PERSPECTIVES 18 FEBRUARY 2021  On the one hand, the crisis is not yet over, and there is uncertainty regarding infection rates and the progress of vaccination. Against this background, the Storting (Norwegian parliament) has decided to extend the extraordinary support measures aimed at both individuals and businesses until September. At the same time, it is important that the support measures are scaled back as the situation becomes more normal. If these measures are extended too far into the future, we risk impeding necessary business restructuring. Workers may miss out on opportunities to seek new jobs, and unemployment may become entrenched at a higher level than prior to the crisis.
The e-krona, a new kind of money for the general public? We have thus been able to establish that cash is disappearing at a rapid rate, while, at the same time, new electronic ‘currencies’, issued by other players than central banks, are appearing. In general, technological developments are proceeding rapidly and digitalisation is placing higher demands on payment services that are available round the clock. In this environment, it is natural to ask whether central banks should offer the general public a secure electronic alternative that could work in approximately the same way as cash. It is for this reason and others that we, at the Riksbank, have opened an analysis of the possibilities for issuing a so-called e-krona. 28 The analysis is founded in the question of which problems may arise if cash were to disappear. We can note that this means that banks are continuing to have access to central bank money, while the general public in Sweden is losing the access to central bank money it has had since the 17th century. 29 But is this a problem? Has there been a weakening of the arguments that have existed for providing the general public with an asset and a means of payment that is completely free from risk? Is it a fact that the Swedish people generally no longer have a need for central bank money? Or is it rather that they do not want physical banknotes and coins?

SPEECH DATE:  4 June 2018  SPEAKER:  Stefan Ingves  VENUE:  Stockholm School of Economics  SVERIGES RIKSBANK SE-103 37 Stockholm (Brunkebergstorg 11) Tel +46 8 787 00 00 Fax +46 8 21 05 31 registratorn@riksbank.se www.riksbank.se  Money and payments – where are we heading? Today, I am going to talk about money. This is a subject that concerns us all – most of us use money practically every day. But we probably don’t give much thought to how important it is that our daily purchases can be carried out smoothly. It's more or less the same as not giving so much thought to your health as long as you’re healthy. But once you get sick, it becomes almost the only thing you can think about. Our system for payments is similar; as long as it works securely and efficiently, we don’t think about it. And, to continue the analogy: It is the Riksbank's task to ensure that the payment system remains healthy and contributes to a well-functioning society. Right now, we, at the Riksbank, are devoting a lot of time to issues regarding payments and the payment system. The background to this is formed by the rapid changes on the payment market and the rapid decrease in cash usage in Sweden – a development that we are practically alone in, worldwide. Only a few other countries are undergoing a similar, albeit less dramatic, development.
The combination of illiquidity, growing concerns with the real estate market, and ebbing confidence in the ratings resulted in dramatic declines in the pricing of Triple-A securities as the financial crisis worsened.4 Myth 3 – The “originate to distribute” model limited the balance-sheet risk of banks Over the decade preceding the crisis, large commercial and investment banks had become increasingly involved in securitizing mortgage assets. They argued that this provided a steady stream of fee income but generated little risk for the bank. While they packaged mortgages, they were not retaining the risk in their own portfolio – instead, the risk was taken by those that purchased the mortgage securities, particularly the lower-rated mortgage securities. What was frequently ignored by many was the rapid growth of Triple-A mortgage securities holdings elsewhere within the banks, as well as in off balance sheet structures. While these off balance sheet structures were considered separate entities, banks found the potential reputational risk of not supporting their sponsored off balance sheet risk sufficiently great that many ended up supporting these off balance sheet structures. In a sense, “originate to distribute” was, in practice, something more like “originate to hold, loosely, somewhat off to the side.”5 In addition, risk managers, bank management, and regulators were sufficiently lulled by Myths 1 and 2 to develop their faith in Myth 3.

Securitizations were structured so that any losses were first borne by lower-rated securities built from the pool of underlying mortgages. Given the structure, the assumption was that lower-valued securities would take all potential losses if borrowers defaulted. Many – but not all, of course2 – assumed that home-price declines and related defaults would have to be very extreme before the highest rated, Triple-A securities were impacted. Under this assumption these securities fully deserved the Triple-A rating given by the rating agencies. I should note that making this assumption about Triple-A rated mortgage backed securities (MBSs) proved less problematic than making this assumption about the recombined lower  2  Boston Fed researchers note some examples of contrary analysis of Subprime ABS structures written in 2005 suggesting vulnerability to even a 5 percent fall in house prices. See “Making Sense of the Subprime Crisis” by Paul Willen with Kristopher S. Gerardi, Andreas Lehnert and Shane Sherlund (Brookings Papers on Economic Activity, Fall 2008). BIS central bankers’ speeches  3  tranches of mortgage-backed securities that were billed as Triple-A rated collateralized debt obligations (CDOs).3 But many investors focused not on the security’s underlying components, merely on the ratings. Figure 8 shows that Triple-A securities remained at par values as the securitization boom gathered steam. However, Figure 9 shows that when the severity of the decline in house prices manifested itself, even the Triple-A rated mortgage securities collapsed in value.
This reassuring picture should not, however, mask the short-term challenges of the emergence from the crisis, and the more structural challenges that our financial institutions will face over the coming decade (II). I. Financial institutions have proved more resilient than expected during the Covid crisis  Just a short word, to start with, on the situation for insurers, which Jean-Paul Faugère will go into in greater depth. Despite a fall in profits, France’s insurance sector is holding up well and remains the leading market in Europe in terms of balance sheet size:  Insurers have managed to keep their solvency ratios on the whole solid, at around 243 %, which is one of the highest levels in Europe. But we need to be careful not to become complacent: the solvency of insurers is still a major focus of attention. Consequently, as one of its control priorities, the ACPR will carry out reinforced supervision in 2021, which will take the form of regular, targeted interviews, in parallel with the resilience exercises conducted jointly with the EIOPA.

It is important to stress this: tiering and the particularly attractive pricing – now up to - 1 % – of our TLTROs more than make up, in 2021, for the annual charge  generated by negative interest rates. The path to profitability is now through the continuing modernisation of financial institutions themselves, but also through the emergence of a genuine “single banking market”. We need to take advantage of the size effect and encourage the formation of pan-European banking groups: we must never give up on the goal of a genuine Banking Union, despite protectionist resistance from “host” countries. This integration also requires efficient methods of crisis management. Europe needs to strengthen its resolution framework, to ensure the effective exit of non-viable banks in Europe, without burdening solid banking systems with additional financing – which would mean adjusting the financing of the SRF (Single Resolution Fund). The impact of low interest rates is different, however, for insurers. The integration of PSRs into own funds has already allowed them to offer sufficiently attractive revaluation rates in a low interest rate environment. It should also give insurers valuable time to rethink their offering and shift it towards longer term, more equity-based products that make better use of savings to strengthen our economy. Innovation will be at the heart of the transformation that financial institutions need to make over the next decade. Europe is clearly losing momentum here, just as the crisis is accelerating the adoption of digital technologies, with Bigtechs poised potentially to redefine financial intermediation.
Charles Bean: Pension funds and quantitative easing Speech by Mr Charles Bean, Deputy Governor for Monetary Policy of the Bank of England, to the National Association of Pension Funds’ Local Authority Conference, Cotswolds, Gloucestershire, 23 May 2012. All speeches are available online at www.bankofengland.co.uk/publications/Pages/speeches/default.aspx  *  *  *  Thank you, Joanne (Segars), for that kind introduction. When I was invited to address this conference, I was asked to discuss how the Monetary Policy Committee’s asset purchases – colloquially, though rather inelegantly, known as quantitative easing or QE for short – affect pension funds. I was actually quite pleased to be assigned this brief, as in my view some of the commentary regarding QE has taken a rather partial view of its effects. Not only is the adverse impact of QE on pension funds often exaggerated, but the excessive focus on QE as a cause of low long-term risk-free interest rates also risks distracting attention from other factors driving yields which may present a more durable challenge to the sponsors and trustees of pension funds. To begin with, it may be helpful if I remind you how QE works and what it seeks to achieve. QE essentially involves us trading one liability of the state – gilts – for another – monetary claims on the Bank of England.1 The maturity structure of our purchases is designed to ensure that the gilts are largely sourced from private sector non-bank investors, such as insurance companies, pension funds and hedge funds.

What is probably more relevant to the supply of credit at the current juncture is the amount of bank capital and the cost and availability of bank funding. QE may then boost credit supply indirectly if it leads investors to increase their demand for bank debt and equity. As you will be aware, the Monetary Policy Committee has so far purchased £ billion of gilts, £ billion in a first phase during the worst of the recession in 2009 (QE1) and £ billion in a second phase as the economy slowed at the end of last year and which was  1  Cash can be thought of a zero-interest perpetuity issued by the state. But it has value because it can be used in transactions. The MPC’s asset purchases are actually financed by issuing bank reserves which pay Bank Rate rather than nothing and which can be easily converted into cash. BIS central bankers’ speeches  1  completed shortly before our latest policy meeting (QE2). To give some context, that represents around a quarter of the total stock of UK government debt in issue. It is, though, important to remember that throughout this time the Debt Management Office has been issuing substantial net quantities of new gilts in order to fund the Government’s budget deficit. So, despite the scale of our purchases, the stock of conventional gilts held by the private sector is actually higher now than when we started our purchases (see Chart 1). What impact have our purchases had on asset prices?
These are often fast moving so we need to monitor them on a daily or weekly basis so we can ascertain how businesses are performing and to identify product or risk management vulnerabilities. Good practice examples of the data we typically receive where a strong and cooperative relationship exists with home state supervisors and firms, are set out in the statement. They include:  a. daily or weekly profit and loss figures covering global and local business lines; b. weekly or monthly group market risk reports; c.  the outputs from reviews e.g. the Supervisory Review and Evaluation Processes;  d. information on stress tests and how these affect the UK entity; e. group liquidity information regularly in normal time and more frequently once there is a period of market stress; f.  any material change in the operational resilience of the firm or group, for example, cyberattacks that may affect the group systems and are used by the UK business or which threaten the survival of the firm or group; and  g. material findings from internal risk or audit functions, or external audit reviews (particularly where there are common group wide systems and controls). I would stress that, where we ask for Group information, we are not duplicating the work of the Home Authority. Rather we are looking at the information through our host lens - focused on how developments at Group could influence and impact the local entities we supervise, and how local management are responding.

As the 2008 financial crisis highlighted, through institutions like some of the Icelandic Banks or Lehman Brothers, groups can be a source of both risk and support to UK branches and subsidiaries. Therefore, access to proportionate and timely information on the risks posed by a firm’s group is critical to the PRA’s approach to supervising international banks. Our expectations are set out in two parts. Firstly, a clear baseline of information we want on all international banks. This concerns: the nature of the firm and group’s business model; the resilience of the firm and its parent from both an operational and financial perspective; material risks to the firm’s strategy; and resolution planning. Then, on top of that, a proportionate and tailored set of data that reflects a firm’s business model, its scale and potential impact on UK financial stability. Proportionality is key here. We need more detail on a firm’s group where it is larger, more systemic and where its business model is highly integrated globally e.g. trading and custody. This is because the more highly integrated UK operations are within the group, so the more readily losses or disruption can be transmitted to the UK operations. 6  All speeches are available online at www.bankofengland.co.uk/news/speeches and @BoE_PressOffice  6  For highly-integrated businesses such as the trading activity of GSIBs, we expect access to regular profitand-loss and risk data for key trading business lines.
Although the effects are minor, a raised risk-weight floor for mortgages has the advantage that it can contribute to higher mortgage rates for households, and that banks are forced to retain more capital in order to cover their mortgage lending. Direct loan limitations for households reduce the risks – but only affect new borrowers One alternative is to focus on households and limit the amount they are able to borrow. Examples of such measures include debt-to-income limits, loan-to-value limits, an amortisation requirement and minimum levels for banks’ discretionary income calculations. 15  12  See Financial Stability Report 2015:1, pp. 5–6. BIS central bankers’ speeches  This affects the flow of credit, or new loans in other words. The effect on the stock of debt therefore takes time. It is possible to understand the effects of different types of loan-limiting measures by using a simple equation which describes the development of the stock of debt over time: 𝐷𝐷𝑡𝑡 = (1 − 𝛼𝛼) ∗ 𝐷𝐷𝑡𝑡−1 + 𝐿𝐿𝑡𝑡 ,  where 𝐷𝐷𝑡𝑡 is the level of debt stock on date t, 𝛼𝛼 is the rate of amortisation in the loan stock and 𝐿𝐿𝑡𝑡 are new loans on date t. The development of the debt stock is therefore determined by the rate of amortisation on existing loans and by how many new loans are taken out. All types of loan limitation discussed so far concern new loans.

In the UK, it has been stated that a maximum of 15 per cent of the banks’ new mortgages may have a loan-to-income ratio exceeding 450 per cent, while in Ireland it has been stated that a maximum of 20 per cent of the banks’ new mortgages may have a loan-to-income ratio  20  16  Our updated calculations indicate that the effect of debt-to-income limits would be slightly greater than those presented previously in the Financial Stability Report 2015:1, for example. BIS central bankers’ speeches  exceeding 350 per cent. 21 In the UK, the exempted share is expressed in terms of the number of new mortgages, while in Ireland it is expressed in terms of the volume of new mortgages. It is not easy to calculate the effects of exempting, for instance, 15 per cent from a rule, but in Figure 13 we have tried to make such an estimate. We can see that the effect is somewhat smaller than if there is no exemption, but the difference is not major. There is already a loan-to-value limit in Sweden. One alternative could be to lower this from the current level of 85 per cent. But as I mentioned, there is a clear point to complementing the loan-to-value limit with a debt-to-income limit. Our calculations also indicate that a reduction in the loan-to-value limit would lead to relatively minor effects on total household indebtedness.