samchain/econo-pairs-v1 huggingface dataset:
The integration of new emerging economies such as China and India into world trade, in conjunction with lower tariffs and reduced trade barriers, has contributed to a decline in prices for imported finished goods. This development has probably been most noticeable for clothing and footwear and audiovisual equipment. New producer countries with very low cost levels and increasingly more efficient production have contributed to a low rise in prices for other goods as well. Global competition has intensified and productivity growth has been high both in Norway and abroad. Competition has also increased in Norway in a number of industries. The airline industry has perhaps been in particular focus, where the entry of the airline Norwegian in the Norwegian market has resulted in substantially lower air fares. In the retail trade we have also witnessed the impact of more efficient purchasing schemes, a larger number of chains and intensified competition. Margins and prices are falling in the financial industry. The rise in prices, for example in the hotel and restaurant industry, is surprisingly low. In the labour market, we see traces of increased competition and a more flexible supply of labour as a result of the accession of new countries to the EU and greater mobility in the international labour force. These developments may have contributed to keeping wage growth at a lower level than would otherwise have been the case.

When evaluating whether the interest rate level is appropriate, one must consider the quality of the analyses of developments in the Norwegian and international economy, as well as the trade-offs that have been made. When we look back and assess interest-rate setting, we must also take into account the reasons for the deviations from the target. For the average annual rise in consumer prices over time to be the same as the inflation target, the disturbances that affect the economy must be fairly symmetrical. Price inflation has been lower than the inflation target for a longer period and the interest rate is being set with a view to gradually closing the inflation gap. The aim is not for inflation to overshoot the target to the same extent a few years ahead. Therefore, when we in retrospect assess interest-rate setting, we cannot solely look at average CPI inflation. Monetary policy must also be seen in the light of historical inflation. In the 1970s and 1980s, inflation was very high and volatile. The economy did not at that time have a nominal anchor. Since the beginning of the 1990s, inflation has been low and stable, both internationally and in Norway. While inflation in the 1970s and 1980s varied between 4 and 15 per cent, inflation has generally remained in the interval 1½ - 3½ per cent since 1990. The economy now has a nominal anchor.
There is no doubt that tremendous efforts have been made in the wake of the financial crisis to reach our objective of financial stability, providing the policymakers with additional tools to build-in robustness into the global financial system, increase the loss absorption capacity of financial institutions and infrastructures, and limit the scope for contagion while new approaches to prevent systemic risk have been developed, namely macroprudential policies. However, due to the magnitude of the task, its difficulty and its complexity, global regulators had to proceed with a sequential approach, starting by the banking system where their knowhow was the best, and expanding gradually a framework to the rest of the financial system in concentric circles. As a consequence, we are currently facing three challenges that I would like to focus on: keeping the momentum for reforms, allowing for the diversity and ensuring the robustness of the global financial system. 1. Keeping the momentum  After such a long and intense conference day, you might already feel a sentiment of regulatory fatigue! Consequently, you might appreciate the feeling of regulators and financial intermediaries after more than 8 years of intense regulatory developments and debates! And yet, the latter are not completed nor their implementation! Banking regulation, which is almost complete now, will only come into force in 2018–2019, even though it has already been largely factored in by markets and banking institutions. But regulation is still under development for the rest of the financial system.

Pressures increase from regulated entities, which complain about regulatory uncertainty, and from policy-makers, who are keen to foster economic recovery and growth after 8 years of low economic performances almost a lost decade! Keeping the momentum relates to three objectives: –  complete the regulatory agenda, in particular regarding what is named now as “market-based finance”, so as to effectively and comprehensively strengthen the financial system and remove regulatory uncertainty;  –  make sure that the regulatory spectrum expands well beyond the sole banking sector so as to avoid unfair level playing field, regulatory arbitrage and a paradoxical outcome that is favoring and encouraging those who are still “in the shadows.” On top of that, keeping pace with the creativity of all players is no small challenge. BIS central bankers’ speeches  1  –  devoting adequate resources and designing the proper organization of supervision which needs to be intrusive. 2  Preserving diversity  While the objective of expanding the scope of regulation beyond the banking sector may require applying similar – though not identical- regulation to similar asset classes or risks, irrespective of the legal status of the intermediary bearing them, it must also be acknowledged that business models, accounting frameworks, liability structures, time horizons of decisions may differ across sectors and entities. In that respect, it can be argued that that “one size does not necessarily fit all” and that one should preserve and ensure diversity.
Regarding the tighter liquidity requirements (modeled as a 25% increase in the holding of liquid assets, combined with an extension of the maturity of banks’ wholesale liabilities) MAG’s estimations point to a median increase in lending spreads of 14 basis points and a fall in lending volumes of 3.2% after four and a half years. This is estimated to be associated with a median decline in GDP in the order of 0.08% relative to the baseline trend. An IMF study dating as of February 2012, reports similar results to MAG’s research, finding that in the absence of any monetary policy response, a permanent synchronized global increase in capital requirements for all banks by  1  For instance the EBA requirements and the Volcker Rule, within the Dodd-Frank Law in US. 2  Banco Bilbao Vizcaya Argentaria. 4  BIS central bankers’ speeches  1 percentage point would cause a peak reduction in GDP of around 0.5 percentage points, of which around 0.1 percentage point would result from international spillovers. Their findings show somewhat higher losses in EMEs as compared to AEs (0.74 percentage point loss in GDP in EMEs as compared to 0.46 percentage points in AEs) due to higher estimated spillover effects. The third point of transmission relates to development of financial markets EE’s. The development of deep domestic financial markets can improve the economy’s ability to absorb shocks and manage financial risks.

To address current structural and cyclical challenges we need to rely on the analysis and advice of well-trained economists whether they are in the academia, in the public administration, central banks or the private sector. This is why it is so important to have academic institutions like CEMFI, that produce groundbreaking research and invest heavily in boosting the single most important determinant of economic growth: human capital. Students of the class of 2022, what you take from here – your knowledge and the tools needed to analyse and understand reality – is the accumulated capital stemming from what is probably the most important investment you will make in your whole life. You have invested your time and effort. And the yield on this investment will be a wide array of opportunities. But, above all, this human capital you now possess is something that nobody can take away from you. It will accompany you everywhere you go and you can apply it in every endeavour you may undertake. Besides the Master and PhD programmes, organised in collaboration with the Universidad Internacional Menéndez Pelayo, the CEMFI provides other valuable services, such as a summer school that brings leading academics to teach courses in relevant areas to participants – among them a large number of central bankers – and a highly valued summer internship programme for top undergraduate students. And it also collaborates with the Banco de España in various research activities, including the organisation of workshops and international conferences.
Firstly, it should be said that it is not possible to point to any individual variable that will alone be a determining factor in an interest rate decision. Prior to each interest rate decision we weigh together all of the new information received since the previous decision. But employment is of course an important element; when, for example, we said in February that economic activity was now on firmer ground one of the things we were referring to was the stronger labour market. It was a contributing factor to the marginal adjustment in the repo rate path we made then; with a first repo rate increase coming slightly sooner than implied in the repo rate path from December. Our most recent repo rate decision entails both the repo rate and the repo rate path being held unchanged. A weaker GDP outcome for the fourth quarter could on its own have been a negative signal and made us more doubtful about the timing of the coming interest rate increase. But we also had surprisingly positive information on the labour market, which provided support for the assumption that the economy is moving in the right direction. Our forecasts are based on employment only increasing at a slow rate in the future and on resource utilisation being lower than normal for the greater part of the forecast period. But the situation is that the crisis has hit the export industry particularly hard, while the services sector has escaped relatively lightly.

It also finds that potential deviations from the globally agreed Basel III reforms – for example, with regard to the output floor – would significantly dilute the benefits to the real economy. 2/3  To sum up, there are clear and significant benefits to all from implementing the Basel III standards in a full, timely and consistent manner in Europe: -  For households and businesses, it would reduce the probability and impact of future banking crises, and provide banks with the capacity to maintain lending in both good times and bad. -  For European banks, such an implementation would shore up their resilience by fixing some of the outstanding frailties in the banking system. It would also avoid any stigma and negative signalling to financial markets about their noncompliance with global standards. The pandemic has further reminded us that the benefits of a resilient banking system should not be taken for granted. -  For policymakers, it would help safeguard global financial stability and avoid the risk of a harmful “race to the bottom” in bank prudential standards. And it would serve as an important input towards greater financial integration in Europe. Europe has a strong track record of playing a lead role when it comes to multilateralism and sticking to global agreements. Now, more than ever, it is crucial for Europe to continue to demonstrate these traits, including with regards to globally agreed prudential standards.
In Spain, the restructuring process of the banking sector has required close coordination between the Government, the Banco de España and the Resolution Fund (FROB). The Managing Board of this latter agency is composed of representatives of the Banco de España and of the respective Economy and Finance Ministries. The institutional arrangements aim at combining the knowledge and technical expertise of the supervisor with the necessary involvement of government representatives, given the substantial amount of public resources employed in the resolution and restructuring processes. At the technical level, it was essential to ensure good communication between the staff of the Banco de España and of the FROB, because both agencies were directly and intensely involved in the resolution policies. Indeed, under national legislation the Banco de España is entrusted with the tasks of initiating resolution and approving resolution plans. The FROB’s role is to prepare resolution plans, monitor compliance with those plans once approved by the Supervisor and implement all resolution actions, including the bail-in tools. Furthermore, the FROB has the power to run institutions under resolution on a temporary basis if so 4  BIS central bankers’ speeches  decided by the Banco de España and to manage the government’s stakes in financial institutions that have received public support, including the definition and implementation of divestment strategies. I think that all the parties involved and most external observers agree that these arrangements have worked very effectively so far.

Moreover, although the minimum 8% bail-in envisaged in the regulation and the € billion resolution fund established by the Intergovernmental Agreement accompanying the SRM Regulation will probably provide a sufficiently large buffer to meet resolution costs in most cases, it remains to be ensured that a suitable public backstop – for instance in the form of an ample credit line for the Singe Resolution Fund – would also be available, following the example of other jurisdictions, such as the US. 4  Lessons from the Spanish experience  Finally, let me comment on some of the lessons learnt from the Spanish experience. Amid intense debate on the precise specifications of the resolution framework, but before the BRRD was approved, Spain passed in 2012 a relatively ambitious legislative reform which anticipated many of the main features of the Directive. That new legal framework allowed the Spanish authorities to employ new resolution powers – alongside public support – to resolve as many as five financial institutions and to restructure four more under the financial assistance programme. In all cases, previous shareholders were almost completely wiped out (in six institutions) or suffered considerable dilution. Junior debt holders were also bailed in to generate around € billion in new capital. In addition, all nine banking groups receiving State aid were required to transfer problematic assets to an external asset management company at prices that were administratively set.
But I will dwell on one particular point: what makes life difficult for these funds is not so much the fall in bond yields per se but one that isn’t accompanied by a fall in yields (rise in prices) on other, riskier securities they hold as assets. That’s precisely what has happened in recent years: on days that long-term real interest rates have fallen, equity prices have declined. More often than not, in other words, the yields on gilts and equities have gone in opposite directions and, over time, the gap between those yields has widened considerably. Since an independent easing of monetary policy tends at the margin to depress yields (raise prices) of all assets – and that’s precisely what you observe if you focus specifically on those episodes – it’s hard to believe that policy shocks are the main reason for the divergence between bonds and equities that underlies  2  All speeches are available online at www.bankofengland.co.uk/publications/Pages/speeches/default.aspx  2  the rise in pension deficits. More likely candidates are growing pessimism about future economic growth, across the world, and the perception that risks around that lower central path are skewed to the downside. This is part of the wider point that, in large part, central banks have been accommodating a long, drawn-out decline in the neutral real rate of interest. The decline in policy rates is a symptom not a cause of the forces shaping the global economy.

The big moves in asset prices during 2009 – a 50% rise in equities, 150bp fall in LIBOR spreads, the 150 bps fall in targeted corporate bond spreads for example – will have been strongly supported by the Bank’s monetary policy operations. And by purchasing the gilts which asset managers and others would normally have bought, the impact of the quantitative easing programme will have been to increase the demand for more risky assets – like corporate bonds. So the corporate and gilt purchase programmes have been complementary. Conclusion In my talk this evening, I hope I have explained a bit more clearly the motivation for and the design of the APF corporate purchase schemes. The Bank has not sought to provide large scale funding directly using public money. Rather, the operations have been consistent with a central bank acting as “Market Maker of Last Resort”. The Bank has transacted in modest quantities designed to improve the liquidity of corporate credit markets, bring down the cost of credit and encourage private sector lending. That has been supported by the much larger programme of quantitative easing and the low level of Bank Rate. The evidence suggests that, in conjunction with a very large monetary stimulus, abroad as well as at home, the corporate purchases have been successful in helping to invigorate those corporate credit markets in which the Bank has intervened. References Benford J, Berry S, Nikolov K, and Young, C (2009), “Quantitative Easing”, Bank of England Quarterly Bulletin 2009 Q2, available at http://www.bankofengland.co.uk/publications/quarterlybulletin/qb090201.pdf.
With a share of an estimated 26% of the world market, the Swiss banking centre is the leader in this area.5 In addition, the two big banks, UBS and CS, are among the most important institutions worldwide in some areas of investment banking, such as derivatives and foreign exchange trading. How did Switzerland, a comparatively small country, end up with a banking centre with such a wide international reach? A number of different elements may serve to explain this. First, I would like to mention the conditions which make the banking centre attractive for international investors. They include political, legal and economic stability, reliable banks, and a convertible currency whose value remains stable. In addition, a role in the steady inflow of foreign funds was played by the banking secrecy provisions established in 1934 and the enhanced protection of privacy associated with these provisions. These advantages appear particularly striking from a historical point of view, since, after the two world wars, neutral Switzerland presented a great contrast to the surrounding countries, which were suffering from currency turmoil, inflation and an increased risk of expropriation.6 Second, Switzerland’s prosperity and the relatively narrow local capital market – in terms of Swiss economic power – mean that Swiss investors seek investment opportunities beyond the national borders. At the same time, our economy also has a strong international focus.

It is against this background that financial sector supervision should also be directed at financial institutions that pose the greatest risks, such as, non-bank financial institutions. In this regard, the adoption of the risk-based approach allows the supervisor to devote more supervisory effort to those areas that have a high-risk profile. This therefore, entails that supervisory authorities should shift their focus from the traditional Capital, Assets, Management, Earnings, Liquidity, and interest rate Sensitivity (CAMELS) approach to a more risk-based approach. A risk-based supervisory approach would involve the identification of key risks, the level of these risks and the key risk areas. After identifying these risk factors, a comprehensive supervisory framework with appropriate resources is then assembled to mitigate the risks. The amount of resources required is dependent on the level and intensity of the perceived risk. However, suffice to mention that this does not mean that the risk-based supervisory approach ignores the strengths of the CAMELS approach, but rather addresses the weaknesses by putting more emphasis and resources on areas with potentially higher risk. Ladies and Gentlemen As many of us are aware, financial sector operations have become complex nowadays, as they entail, among others, managing financial, market and operational risks, which depend, to a large extent, on public confidence in the financial system. In this regard, proper supervision is critical to minimising risks as well as ensuring the stability of the financial sector and engendering public confidence.
Mr George looks at past, present and future challenges for the City of London  Speech given by Mr Eddie George, Governor of the Bank of England, at a City University Conference at the International Maritime Organisation in London 7 December 1999. *  *  *  Mr Chairman, Ladies and Gentlemen, As we approach the end of every year we naturally tend to look back at the past, to take stock, and to look forward to the challenges ahead. The temptation to do that this year on the brink of the new Millennium, is almost irresistible. But take courage - I will at least try not to dwell upon the historical origins of the City this morning. Instead, I will start from where we are now - which is a good place to start because by and large the City is in pretty good shape. It is, of course, the hub of the financial and business services industry of this country, which, broadly defined to include shipping and real estate as well as other forms of intermediation, and the accountancy and legal professions, contributes directly something like a quarter of total national output - with some 7-8% coming from the financial services sector alone.

And, whatever the periodic outcry whenever something goes wrong - as it will from time to time - the demand for these services does not of course exist in a vacuum; it exists because of the very positive contribution that the business services sectors, including financial services, make to growth and employment and rising living standards in the wider economy. That is true nationally, but it is equally true in a global context. Indeed the unique characteristic of the City is its role as the predominant international financial centre. It accounts for a fifth of all international cross-border lending, for example; for a third of global turnover in foreign exchange and OTC derivatives, and as much as two-thirds of issuance and secondary trading in eurobonds, or of global turnover in international equities, with more foreign firms listed on the LSE than on any other exchange. And London has a near-monopoly in exchange-traded short-term euro interest rate derivatives. I will not labour the point further, Mr Chairman. Despite - or perhaps driven by - a continuous stream of shocks and competitive challenges, the City has in fact gone from strength to strength, most recently coming through the global financial turbulence of the last couple of years as well as the advent of the euro at least as strong as before. It is perhaps worth asking why the City is as strong as it is. Certainly it does have to do partly with history.