samchain/econo-pairs-v1 huggingface dataset:
The Rehnberg Agreements of 1991–1992 resulted in significantly lower agreed wages than previously and – more importantly – they removed the price and wage clauses from the agreements, thus contributing to breaking the price and wage spiral. The Industrial Agreement of 1997 was another important change. The wage bargaining rounds of 1995 had resulted in relatively high wage increases of over 5 per cent per year for the following two years. This resulted in pressure from the government of the time on social partners to change wage formation through negotiation. The Industrial Agreement was exactly this kind of change. It assumes that the manufacturing sector, exposed as it is to international competition, should determine the level of wage increases. The Agreement also means that there are rules for the conducting of negotiations, for example that demands should be specified well ahead of the expiry of agreements and that the conclusion of negotiations should be supported by mediators, the so-called impartial chairman. There are also similar, but not as far-reaching, agreements in other sectors. The National Mediation Office, which was set up in 2000, was another important change. As is widely known, the Office’s tasks are to mediate in labour disputes and to actively promote efficient wage formation. The active promotion of efficient wage formation entails, among other tasks, ensuring that wage formation permits the strong growth of employment.

The impact has been identified and quantified; the bailout of Continental Illinois in 1984 artificially reduced the funding costs of all other banks that were considered ‘too big to fail’ by  4  2  The ‘Lifeboat’ was a Control Committee of the Bank of England and the English and Scottish clearing banks, consisting of senior representatives of each under the chairmanship of the Deputy Governor of the Bank, which first met on 28th December 1973. BIS central bankers’ speeches  more than a quarter of a percentage point (32bps).5 And while fluctuating over time, these ‘implicit subsidies’ remained sizable throughout most of the 1990s and 2000s. And indeed, expectations of bailouts were generally right. Very few banks were allowed to go into insolvency in the global financial crisis. Lehman was very much the exception that proved the rule. The impact of Lehman’s failure revealed that things had not moved on since Continental Illinois; the official machinery in most jurisdictions was completely unable to handle the failure of a large – or in the UK case even a medium-sized – banks in a way that did not pose risks to the financial system. So in most cases banks were bailed out. The risks of contagion, loss of confidence in the system and disruption to the provision of banking to the economy were simply too great. But the costs had grown since the Continental Illinois episode of the 1980s.
In this case, a supranational authority would be needed to ensure that this regulation is interpreted and applied in the same way across all Member States. Finding this balance between discretionary powers and centralisation comes to the fore, for example, in the context of supervision of securities markets, instruments and market infrastructures. Day-to-day supervision is currently largely done at the national level. We should consider whether this is still appropriate and what role the European supervisory authorities will play in the future. Their tasks and responsibilities are currently being reviewed in Brussels. Closing remarks As you see, the capital markets union is a bigger project that cannot be implemented overnight, not to mention the progress that is still needed in terms of integration in other political areas. But this should not discourage us from getting started on it. Political scientists would tell you that it is completely normal that we didn’t have a fully accomplished currency union from day one and that we still don’t have it today. Hardly any international agreement was as ambitious at the first attempt as some of the negotiators would have perhaps liked. The United States also needed many decades and went through several crises before its currency union achieved its current form. The “Four Presidents’ Report” (European Commission, European Council, Eurogroup and ECB) presented to the Heads of State or Government in 2012 discusses the need to complete the Economic and Monetary Union.

Yves Mersch: Advancing Monetary Union Speech by Mr Yves Mersch, Member of the Executive Board of the European Central Bank, at the Euro Exhibition, Osnabrück, 25 January 2015. *  *  *  Ladies and gentlemen, Euro banknotes and coins are not just a means of payment. The bridges and arches on our banknotes are a symbol of European integration. They stand for the fact that there is a lot which connects us within the Monetary Union, and that our once so divided continent has succeeded in overcoming these deep divisions, as the crisis has recently shown. Our common currency also therefore stands for shared values. “Stability of institutions guaranteeing democracy, the rule of law, human rights and respect for and protection of minorities” have been some of the accession criteria for membership of the EU since the European Council in Copenhagen in June 1993; “Membership presupposes the candidate’s ability to take on the obligations of membership including adherence to the aims of political, economic and monetary union.” 1 The recently published legal opinion of the Advocate General of the European Court of Justice in the case of Peter Gauweiler and the Die Linke party against the ECB on the Outright Monetary Transactions (OMT) programme also refers to these constitution-like shared legal values. This “constitutional compact” underlies European integration and includes the German constitutional principle of constitutional identity review – it does not exclude it.
Monetary policy should in retrospect be evaluated on the basis of whether it has contributed to countering deflationary tendencies. In such a situation, as well, there may be reason for Norges Bank to notify the government authorities that measures other than those available to the central bank are necessary. The evaluation criteria I have outlined are summarised in the matrix in Chart 14. At the beginning of 1999, the krone was weak, interest rates were high and there was a considerable risk of a recession of the type that would further reduce confidence in the krone. We could thus easily have ended up in a situation that is represented by the box in the upper left-hand corner of the matrix. Norges Bank decided to reduce interest rates in order to stimulate the economy. As I mentioned earlier, the krone  BIS Review 7/2001  11  appreciated when interest rates were reduced, indicating that the decision resulted in increased confidence in the krone. Following the interest rate reductions in 1999, the krone exchange rate against the euro was approximately at its initial range, while price inflation was approximately on a par with the level aimed at by the ECB. We were thus in the situation represented by the box in the middle of the matrix. During the autumn of 1999 and spring of 2000, however, there was growing evidence that the growth pause in the Norwegian economy would be shorter than assumed, and it appeared that price and cost inflation was picking up.

The underlying inflation rate, the CPIF excluding energy, was 0.7 per cent in 2014 but rose to 1.4 per cent in 2015 and is expected to remain on the same level this year and next year. Of course, we do not know how inflation would have developed with a different monetary policy, but let us assume that all this inflation upturn of 0.7 percentage points can be explained by the unconventional monetary policy with bond purchases and a negative repo rate. Since the repo rate has been and is expected to remain close to its effective lower bound during 2015-2017, we further assume that the upturn in inflation has not affected the repo rate in this three-year period. If this is true, the unconventional monetary policy has led to lower real interest on both the outstanding debt and new borrowing. With a bond stock of SEK 700 billion, the result is that the monetary policy, by avoiding excessively low inflation in 2015-2017, has reduced the real borrowing costs for the outstanding debt by 0.007*700*3 = SEK 15 billion. According to some studies, central bank bond purchases in Sweden and other countries have also had a significant impact on nominal interest rates when policy rates have been restricted by their effective lower bounds. De Rezende, Kjellberg and Tysklind’s (2015) study indicates that Swedish interest rates may have been pushed down by 0.4 to 0.7 percentage points of the purchases.
•  Local governments are now allowed to raise funds in the bond market, reducing their reliance on land sales to fund expenditures. •  And earlier this week, on 1 May, China replaced all business turnover taxes with a more efficient value-added tax (VAT). But work remains in the areas of reducing off-budget spending, strengthening social spending, and refining environmental and property taxes. Domestic financial liberalisation is another area where the glass is half full and half empty. A lack of depth and sophistication in China’s domestic financial market has limited the returns on household savings, indirectly crimping their purchasing power. It has also restricted financing to promising businesses. •  China has taken the important step of liberalising interest rates. •  But it also needs to develop deeper and broader capital markets. This will help better price risk capital and ensure that financing flows to more productive economic activities. China has proceeded with capital account liberalisation in a careful and systematic way, “crossing the river by feeling the stones”. •  Since 2008, the use of RMB outside China has been permitted for all current account transactions. •  Capital account transactions in RMB were subject to various quotas and schemes, which have been progressively expanded. •  And late last year, China allowed foreign institutions to issue bonds in China’s onshore interbank bond market for the first time.

Germany and France did not respect the Pact in 2003–4, while Spain and Ireland respected it more or less fully until 2007. Indeed, Spain was running a budget surplus before the crisis. Neither does it seem that fiscal policies played a primary role in driving the economic cycle before the crisis. There was no uniform rise in government debt ratio in the euro area before the crisis, and in several countries debt-to-GDP ratios actually fell. In Spain, for instance, the  BIS central bankers’ speeches  1  public debt ratio fell from 62% of GDP to 36% from 1999–2007 and in Ireland from 47% to 25%. The more important factor driving the economic imbalances up to 2007 was the increasing private financial deficits – or put differently, rising private debt levels financed by the banking sectors of both core and peripheral countries. Contrary to public debt ratios to GDP, private debt was increasing much more rapidly in all peripheral countries before the crisis. In Portugal the private debt ratio to GDP increased by 49% from 1999 to 2008, in Spain by 75%, in Ireland by 101% and in Greece by 217%. To fund this expansion of private debt, cross-border lending between euro area banks increased significantly, encouraged by the absence of exchange rate risks after the introduction of the euro. The exposures of banks from core to peripheral countries more than quintupled between 1999 and 2008. These developments largely explain the evolution of fiscal, current account and competitiveness positions before the crisis.
Mr Lopes’ speech before the Economic Affairs Commission of the Federal Senate Summary of a speech by the new President of the Central Bank of Brazil, Mr Francisco Lopes, before the Economic Affairs Commission of the Federal Senate in Brasilia on 26/1/99. Translated from Jornal do Brasil of 27/1/99. Inflation I am sure inflation will not come back. Of course, there will be some adjustment in relative prices but there is no possibility of resuming the old inflationary process. We will have to put in place tight monetary policy and prevent any forms of indexation, opportunism or speculation. As the Brazilian economy is relatively closed - imports correspond to 8% of GDP - a devaluation of 50%, (i.e. the exchange rate stabilising at the very depreciated level of $ 1.80), would add about 4 to 5% to the rate of inflation. Overvaluation of the real The use of the exchange rate anchor made an exchange rate overvaluation inevitable. Nevertheless we had imagined it would be possible to shift from the mini-band regime to the free floating regime in a rather gradual way, while the economy was still attracting foreign capital. But reality sometimes frustrates the best intentions. With the benefit of hindsight (after the Asian and Russian crises), the widening of the exchange rate band in April last year, which widened the amplitude of the exchange rate fluctuation by 1% per year, was a rather timid movement. But it is easy to be wise after the event.

Presentation of the 2020 Annual Report of the Autorité de contrôle prudentiel et de résolution (ACPR) Press conference, Friday 28 May 2021  Speech by François Villeroy de Galhau, Governor of the Banque de France Chairman of the ACPR  Ladies and Gentlemen, It gives me great pleasure to be with you again for the presentation of the 2020 Annual Report of the Autorité de contrôle prudentiel et de résolution (ACPR – Prudential Supervision and Resolution Authority), in the company of the new Vice-Chairman, Jean-Paul Faugère, Dominique Laboureix, Secretary General of the ACPR, and Alain Ménéménis, President of the Sanctions Committee. I would first like to pay tribute to the staff at the ACPR – more than 1,050 men and women whose professionalism is exemplary and recognised – who have worked especially hard, both on-site and remotely, to monitor closely the effects of the economic crisis on financial stability. Exactly a year ago, when we were just at the start of the Covid crisis, I pointed out to you, in this exact same setting, how vigilant we were being and how confident I was, both in the competence of our supervisor and in the resilience of the financial system. Looking back, we haven’t done too badly at all: at this stage, the financial risks are, on the whole, under control, thanks to resilient financial institutions with solid fundamentals (I).
The sectoral contributions to this rise in debt are roughly equally split between households, companies, the financial sector and governments. The accumulation of debt has perhaps been greatest within the financial system. Among UK and US banks, leverage has increased dramatically over the past century. The ratio of assets to equity rose from single digits at the start of 20th century to over twenty by its end. 5 Despite recent capital raising, banks’ leverage remains high absolutely and relative to the past, at between 20 and 50 times equity (Chart 9). 2  Laffer, A (2004), “The Laffer Curve, Past, Present and Future”, available at www.heritage.org. 3  Krugman, P (1989), “Market-based Debt Reduction Schemes”, in J Frenkel (ed. ), Analytics of International Debt, IMF. 4  McKinsey’s Global Institute (2010), “Debt and Deleveraging: the Global Credit Bubble and its Economic Consequences”. 5  Haldane A G (2009), “Banking on the State”, available at www.bankofengland.co.uk. BIS Review 10/2010  3  Among households, debt-to-income ratios have risen materially over the past twenty years. In the UK, household debt-to-income ratios rose from around 100% in 1988 to a peak of around 170% in 2008. In the US over the same period, the household debt-to-income ratio rose from 80% to 135%. From different starting points, similar trends are evident in Spain, Canada and South Korea. Most households in these countries still have significant net wealth, however; in the UK, total assets are five times household debt. Those debt trends are repeated in parts of the corporate sector.

Right idea 3: global standards for globally systemic insurers While much progress has been made on the home front, the focus of the global reform agenda since the crisis has been on putting a third idea into practice: common global standards for systemically important insurers. The goal of this work is to increase systemic resilience; preventing spillovers from the failure of an insurer to the wider financial sector and the real economy. Policymakers agree that traditional insurance activities need not of themselves be a source of systemic risk. Indeed, recent events demonstrated three reasons why insurers are better able to withstand crises than other financial institutions. First, the underwriting cycle is generally not correlated with the business cycle; Second, the inherent resilience of business models that take a long-term view, and Third, an insurer’s production cycle is inverted as they collect premiums today with a view to paying claims tomorrow. This model reduces liquidity risks and immunises insurers against risks of a run. Insolvency takes time to manifest, and wind-down when it happens has historically been more orderly. Given all that, you might ask: why the concern about systemic risk in insurance? The answer is simple: The financial crisis laid bare that the actions of some individual insurers – like AIG – can have broad spillovers; that some insurance markets – like the monolines – are systemic, and that the insurance sector plays a systemic role in diversifying the financial sector thereby reinforcing its resilience. AIG was the extreme case of a systemic insurer.
Circumstances proved very different in this episode. For one, the rise of the shadow banking system meant that a preponderance of financial intermediation in the United States was being performed by non-depository institutions that funded themselves in wholesale rather than retail markets. Further, traditional discount window loans have always been vulnerable to stigma – that is, if a bank borrows from the central bank it runs the risk that markets and counterparties may infer that it is closer to insolvency than was previously thought. The potential for stigma to damage the effectiveness of this crucial backstop facility explains why the identity of discount window borrowers is not disclosed by the Federal Reserve. Indeed, we saw early in this crisis that many depository institutions proved unwilling to take the risk of possible stigma, the result of which was an increasingly severe impairment to the flow of liquidity to the rest of the financial system. In late August 2007, a new facility was designed to help overcome stigma through the use of an auction mechanism. As the market calmed in September to late October, this facility was shelved but was ultimately introduced on December 12, 2007, as the Term Auction Facility in a coordinated announcement with other central banks. This phase has some obvious lessons for financial stability.   Financial products that are new and complex should be treated with caution. Regulators, credit rating agencies and market participants all have limited ability to evaluate the properties of such complex products at their inception.

On August 9, 2007, the large French bank BNP Paribas announced that it had suspended activity in three of its funds so it could more precisely assess their value. The problem was stated as follows: “The complete evaporation of liquidity in certain market segments of the U.S. securitization market has made it impossible to value certain assets fairly regardless of their quality or credit rating.”  1  I would like to thank my colleagues Meg McConnell, Jamie McAndrews and Brian Peters for numerous useful comments and suggestions on these remarks. BIS Review 81/2010  1  Central banks immediately responded to the evaporation of liquidity in the standard manner. For example, the Federal Reserve issued a statement on August 10 indicating it was providing liquidity for the orderly functioning of markets, and in that statement the Federal Reserve emphasized that “As always, the discount window is available as a source of funding.” One week later it reinforced this statement with a 50 basis point cut in the discount rate and the addition of 30-day term loan to complement the standard overnight discount window loan. At that time, the discount windows of Federal Reserve Banks were only open to depository institutions. Standard monetary economic theory and previous experience were consistent with the notion that depository institutions could act as intermediaries to pass liquidity through to the rest of the financial system. Indeed, in many earlier episodes the mere fact that this backstop liquidity was present had been sufficient to calm financial markets.
Such enhanced collaboration offers attractive alternatives to ringfencing or other actions that seek to impose local solutions to risks facing globally active firms. Similarly, information about counterparty exposures is not broadly available. Occasionally, information is revealed following specific stress tests, but disclosure is very incomplete and irregular. Nor is good pricing information on many financial market instruments such as OTC derivatives readily available. This may ultimately change as such OTC derivatives instruments become more standardized, are centrally cleared, and the data associated with such trades are reported to trade repositories – but, as noted earlier, this still lies off in the future. Similarly, implementing a global legal entity identifier standard that would enable regulators (and potentially others), to easily aggregate information on a consolidated legal entity basis is still a work in process. Similarly, there has been little progress made with respect to reengineering the financial system so that the transmission mechanisms act to dampen rather than amplify shocks. However, I wouldn’t be very critical here. This is particularly difficult work for several reasons. First, it is difficult because it relates to how all the parts of the financial system interact. It requires a holistic approach and an evaluation of how the financial system responds to shocks. Up to this point, regulatory reform efforts have been more focused on individual banks and infrastructures, rather than how the entire system functions.

As you know, it can pursue two courses of action. The first, aimed at facilitating mergers of viable institutions, focuses on improving their efficiency in the medium term, strengthening the solvency of the post-merger institution and promoting a reduction of capacity. Thus, for example, the merger plans approved within the framework of the FROB envisage cuts of approximately 20% in the number of offices. The aid given is conditional, since the institutions have to comply with a plan previously approved by the Banco de España; it is temporary, because the funds provided in the form of preference shares will have to be returned within five years; and it involves a cost, because these funds bear interest at 7.75%. The second course of action open to the FROB is designed to achieve a swift and efficient resolution of the institutions which have not been able to overcome their difficulties and are no longer viable. If it is necessary for the Banco de España to take control of an institution and to replace its directors, the FROB contributes financial resources and ability to act. To date, this second form of action has only had to be used at CajaSur. Consequently, the FROB has predominantly used the first course of action. Eight mergers have been approved and € billion in government assistance have been requested. The request yet to be made by Banca Cívica will be for an estimated further € billion. Additionally, there are another five mergers under way which have not involved a request for assistance.