samchain/econo-pairs-v1 huggingface dataset:
For example, in its recent publication, the French Treasury has used a more extensive approach, by also including other measures more broadly dedicated to the protection of purchasing power, such as the revaluation of social benefits or public wages, in proportion of the rise of energy prices in the overall price index. It also includes measures related to the electricity tariff shield. Using this more extensive approach, the breakdown of the extra energy bill obtained is 42% for companies and 52% for the state, with the households being very significantly compensated. II.3 The ex-post distribution: too early to tell? But some parallels with the past can be drawn Then, let me briefly elaborate on the most important but uncertain final distribution of this external shock on the domestic economy, still with the illustrative case of France. As mentioned before, the final distribution process after macroeconomic adjustment is still an ongoing issue and depends particularly on two key parameters: the degree over time of wage adaptation,  Page 11 of 14 and the firms’ capacity over time to increase their prices given their financial situation, the demand they face and the general macroeconomic environment. I stress that this should be assessed “over time”, let say as a minimum over a forecast horizon of around 3 years, because some short run losses or gains can be mitigated in subsequent years. Here again, the comparison with the oil crisis episode in the 1970s is quite informative.

You can see in the two right-hand side charts that the trade balances of the euro zone in general and of France in  Page 3 of 14 particular have fallen sharply since the end of 2021, with a cumulative deficit over 12 months for the euro area reaching almost 300 billion euros in September. While the bulk of this staggering fall is in energy, the situation is also deteriorating for non-energy goods. International trade, in purely accounting terms, is a zero-sum exercise and the deficits of some feed the surpluses of others. This transfer of wealth comes essentially from a change in the prices of traded goods as you can see in the bottom left chart for France that experienced a more rapid growth of its import deflator compared to its export deflator over the last 4 quarters. This “external tax” is a negative shock on the real income of both households and firms. Overall, this shock, along with the associated spike in inflation, is likely to have a sizeable negative impact on growth for several quarters at least. Let me now put forward quantitative measures of this external tax. It’s not that simple, and several ways of measuring it can be considered. We can look at a “gross” external tax, i.e. the amount of extra energy bill, for energy importing countries.
While responsibility for individual firms lies with the FSA, the Bank takes a close interest in the impact on the wider economy of the regulatory structure and the links between individual institutions and markets. The Bank also has a direct role as lender of last resort. In the event that a bank has liquidity difficulties that might undermine confidence in banks more generally, the Bank has the power to step in to provide support on a temporary basis. But in exercise of this power and in other aspects of financial stability, the Bank works closely with the FSA and HMT; and this common interest is governed by a Memorandum of Understanding. The three parties also meet monthly in a Standing Committee to  BIS Review 19/2000  2  discuss any issues of current concern; and relations with the FSA are further cemented by the fact that I sit on the FSA Board and Howard Davies is a Member of Court. One of the major driving forces in financial markets currently is technology. The face of banking is changing rapidly, with barriers to entry in particular markets and between markets falling as first telephone banking and now internet banking and e-commerce impact on more traditional banking services. Technological innovation creates opportunities for integration of services and wider access to markets that previously did not exist. This can be seen clearly in the movement towards integration of stock exchanges and clearing houses. But more technology brings with it more operational risk.

The international community has been active since in putting in place arrangements for more advance warning of risks to the financial system. The accent has been on improved disclosure, establishing new international standards for transparency in monetary and financial policies and for publication of economic and reserves data forcountries to follow; and for firms (in particular, banks) in developing countries improving standards for corporate financial disclosure. The Bank has been actively involved in these initiatives. For example, to watch over the financial system, in order to permit either early warning of an impending crisis or to permit the coordination of a speedy response to problems, a new body was established, the Financial Stability Forum; and this body brings together representatives from central banks, governments and regulators from most of the major world economies. All this may seem a long way from South Wales but the stability of different parts of the financial system, here and overseas, can have a significant impact on what is happening in our back yard, not least because of the importance of foreign direct investment from countries such as Korea into the United Kingdom, and particularly here in Wales. Core purpose: effectiveness of financial services There is a connection here to the Bank’s third core purpose - promoting the efficiency and competitiveness of UK financial services. The Bank has been active in particular in promoting financing for small business. This role dates back to 1993 in the aftermath of the last recession.
I understand the strong desire of the authorities to minimise the costs associated with the banking sector rescue, including costs incurred to date, and those still to come. Let me make some comments in this area. When the programme for Ireland was designed, the costs of the banking sector measures already in place, including the promissory notes, were fully factored in. The annual cash repayments of promissory notes is thus financed by programme resources. That programme is on track. Any deviation from that programme should be considered very carefully indeed. The perceptions that have built-up around Ireland’s successes in the programme should not be jeopardised. It has been hard-won and it is worth fighting for. Therefore, the ECB remains of the opinion that Ireland should honour its commitments stemming from the promissory notes, as foreseen. This in our view is the best way to regain sustainable market access. I frequently hear in the Irish debate the sense that the debt resulting from the bank rescue is not Ireland’s debt. I can understand this sentiment and how many people feel about this situation. But what must be understood, is that in the run-up to the crisis, insufficient domestic policies (banking supervision and economic policies) played a major role in excessive credit growth and risk management failures in the Irish banking sector, the bubble in the housing market and the loss of competitiveness. The ECB has no supervisory responsibilities, despite claims to contrary.

I know that the decisions concerning the repayment of bondholders in the former Anglo Irish Bank have been a source of controversy. Decisions taken by the Irish authorities such as these are not taken lightly. And the consequences of subsequent actions are weighed carefully. It is true that the ECB viewed it as the least damaging course to fully honour the outstanding senior debts of Anglo. However unpopular that may now seem, this assessment was made at a time of extraordinary stresses in financial markets and great uncertainty. Protecting the hard-won gains and credibility from the early successes in 2011 was also a key consideration, to ensure no negative effects spilled-over to other Irish banks. Determined action and a willingness to take tough, even controversial decisions, has placed Ireland’s financial system on a steadier footing. A necessary step for Ireland to emerge from this crisis will be to ensure the long-term viability of the banking system as a pillar of the Irish economy. Doing so will further enhance confidence in the system and limit the burden that the banking system places on the taxpayer. Any proposal to reorganize and strengthen the Irish banking sector, and in this context to replace promissory notes with support from the EFSF must meet important criteria, including that it should improve the chances of both the State and the banks returning to market-based funding, and of the banks reducing their extraordinary reliance on the Eurosystem. The ECB is ready to work with the Irish authorities on such proposals.
Let’s take the euro area perspective for a moment: What would have happened to euro area exports to Switzerland if the minimum exchange rate had not been introduced? Given that Switzerland is the euro area’s fourth largest export destination, this is an important question. Moreover, European intermediate goods serve as an important input for Swiss exports worldwide. In the absence of the minimum exchange rate policy, the Swiss franc would have continued to appreciate strongly in an extremely volatile environment, and the risk of Switzerland entering a deflationary trap would have escalated. This would have depressed Swiss aggregate demand and European exports to Switzerland. In short, a policy of deflation avoidance had benefits for both sides in Swiss-European bilateral trade. In addition, given the broad use of the Swiss franc as a funding and credit currency in Europe, the introduction of the minimum exchange rate had a positive impact on financial stability beyond our country’s borders. Switzerland’s economic stability is not just important in the realm of international finance and trade. It should be remembered that Switzerland is the second most important provider of international remittances, directly after the United States. Moreover, in terms of FDI, even the U.S. is a major beneficiary of Swiss investment.

The banks, on the other hand, were funded by deposits and short-term bonds, but were not allowed to issue long-term 2  BIS central bankers’ speeches  mortgages. However, the mortgages were indirectly funded by the general public’s savings in that the banks were forced to invest in housing bonds. In the 1960s, the general pension fund (AP fund) was established, which meant that the state gained further control over savings in the economy and over the conditions for the banks’ funding. When pension allocations began to be deposited with the AP fund, it quickly grew to become the largest investor in mortgage bonds, among others. Developments accelerated when the credit and currency markets were deregulated in the mid-1980s at the same time as technological developments were beginning in the financial markets. New participants entered the markets and began to offer new financial products, such as saving in unit trusts. The Swedish banks were not slow in following the trend and began to offer their customers their own unit trusts. Saving in unit trusts involved gains for both the banks and households. The banks gained a new source of income and households were given the opportunity to actively invest their savings and spread risk. State initiatives have since continued to push household saving towards the securities market. “Allemansfonder” (national public saving funds), investment savings accounts, unitlinked insurances and individual pension savings are all examples of savings forms that are under certain circumstances taxed at a lower rate than savings in traditional bank accounts.
Should they fall slowly in line with futures prices, inflation is forecast to fall below the 2% target by a meaningful margin at the policy-relevant horizon. Yet uncertainty on this dimension remains considerable. With the pandemic giving way to geopolitics as the driver of international energy prices, they are unlikely to become easier to forecast. This brings me to the second key element of the forecast: our treatment of the labour market and wage developments. Recent data confirm that the UK labour market is tight. It is tighter than we expected at the time of the previous Monetary Policy Report published in November.4 And we expect it to tighten further in the coming months. On the back of this labour market tightness and in light of our Agents’ recent wage survey – which embodied the highest expectation for pay settlements since well before the financial crisis 5 – we have revised up underlying wage growth in 2022 to rates approaching 5%. Given expected productivity developments, this rate is probably stronger than that consistent with the inflation target over the medium term. But we expect the forecast stronger momentum in domestic wage and cost growth to ease beyond this year, as headline inflation falls and unemployment rises owing to the impact of higher energy prices on real incomes and domestic demand. This is a crucial assumption – the ‘big call’ – underlying our inflation outlook.

Although the risk controls seem to have done a pretty good job of capturing the economic terms of the trades, the assignment problems create uncertainty about the actual size of exposures to individual counterparties that could exacerbate market liquidity problems in the event of stress. What can be done to mitigate these risks? The two general areas that offer the highest potential return in reducing systemic risk are improvements (1) in the sophistication of the risk management process used to generate adequate capital and liquidity cushions against a severe economic or market disruption and (2) in the post trade processing and settlement infrastructure. The frontier of challenges in the risk management process lies principally in the discipline of stress testing and scenario analysis to capture potential losses in adverse conditions in the "tail" of the distribution. This has been and will continue to be a principal focus of our supervisory efforts.
Credit risk transfer has facilitated the dispersion and sharing of risks across the financial markets, thus potentially enhancing their efficiency and stability. However, the recent market turbulence confirmed concerns about the risks stemming from the lack of transparency as to where the risks ultimately reside in the financial system, and in particular if those risks have been acquired by market participants that can properly manage them. The existing reporting requirements of the banking sector did not allow for a full  8  BIS Review 120/2007  assessment of banks’ exposures to the structured products, leading to the absence of accurate and timely information. Are Basel II requirements sufficient concerning the sponsoring by banks of SPV? Is bank disclosure of securitization operations, and exposures to SIV adequate? Questions also arise in relation to the functioning of markets for complex financial instruments. How to inform the individual investor when there are difficulties in measuring risk in structured finance products and valuate them? In this category of improved transparency, I shall also mention the need to implement ESCBCESR standards for payment and settlement including ICSDs and large custodians in order obtain more information on intraday market liquidity. Second: Valuation More work is needed on standards to ensure reliable valuation of assets particularly of those assets where markets are potentially illiquid in time of stress. At the same time compatibility with international financial reporting standards must be assured.

In case of Estonia, our earlier policy choices have resulted in an environment characterized by the openness of the economy - export and import reaching 179-180% of the GDP, by a stable fixedexchange-rate, by a long tradition of balanced fiscal stance and rapid integration with the European markets - all of them features favourable to a relatively rapid real convergence. We could even say that the convergence that presently takes place in our real economy takes place in a de facto EMU environment. 2  BIS Review 42/2003  According to an analysis recently conducted by the ECB, the correlation of manufacturing industries' business cycles between Estonia and the five larger EMU member countries is even higher than that for some of the present member countries, the correlation of overall economic cycles is slightly lower but that is due to the more rapid economic growth in Estonia compared to the euro area. But there is one more important aspect I would like to stress in this context - and that is the crucial role of the financial system in real convergence under a currency board based fixed exchange rate regime. It is fair to say that Estonian banking system is presently strong, well capitalized and liquid. The banks' forced reliance on their own capital and liquidity has had a direct impact on the market structure. Strategic foreign ownership - mostly by Scandinavian financial groups - has provided Estonian banks with both strong capitalization and transfer of international best practices.
This combines a higher basis of comparison and, especially, a poor performance of the mining sector (figure 6). This worsened in February because of downtime in geographic areas affected by the intense highland winter, according to the INE’s Manufacturing Production Index, which fell 9.4% in said month. Several indicators suggest that the lower growth of early this year will be a rather limited phenomenon. About demand fundamentals Regarding the determinants of demand, it is worth noting that borrowing costs continue to be favorable by historic standards and that both supply- and demand-side conditions have improved in recent quarters. In terms of expectations, signals are mixed. While consumer expectations (IPEC) show a decline with respect to the end of the year, the business component (IMCE) shows an improvement in the same period, where worth noting is the progress in the construction sector. In the labor market, the national unemployment rate has been stable around 7%. On the investment side, the latest survey of the Capital Goods Corporation (CBC) ratified the significant increase in projects under execution that we saw at the end of 2018. It even revised upward investment plans for this and the next two years, with special emphasis on 2020, with investment in mining projects continuing to contribute the most according to the survey. Inventories posted a significant increase throughout the year, where accumulated buildup went from 0.5% to 1.3% of GDP between 2017 and 2018, largely concentrated in the exporting sector and imports of machinery and equipment.

There is still no sign, however, that the time for this is approaching. On the contrary, the risks still point downward. Should the recovery in the US and in Europe be delayed or should the Swiss franc appreciate markedly, the expected upswing in Switzerland would be threatened. In such a case, the National Bank is ready to react by appropriate means. Under present conditions, however, our monetary policy is sufficiently expansionary. Currently, the risk of deflation is being widely discussed. As can be seen from our forecast, this risk is likely to be negligible in Switzerland in the medium term. Certainly, in the short term it is always possible for special effects, e.g. a marked reduction in the oil price, to lead to negative inflation rates in individual quarters. Nevertheless, we consider a continuously falling price level in conjunction with a strong decline in the demand for goods and in production improbable in the present circumstances. Our expansionary monetary policy and the flexibility of the Swiss economy would prevent such a development. In the present situation, however, other efforts are needed besides an expansionary monetary policy in order to maintain or to enhance the attractiveness of Switzerland as an industrial and business centre. The efforts aimed at a further liberalisation of the domestic economy may not be abandoned. Sectors suffering from structural problems must improve their competitiveness by means of consistent adjustments. Our experience with the monetary policy concept Let me briefly describe the experience gained with our monetary policy concept.
In any case, as a policy, the Central Bank at the moment of making a decision and defining scenarios takes as given what happens in other spheres of national life. There is no clear rule, but there are some principles. First, the Central Bank must be rigorous in referring to all matters that have macroeconomic impact and consequently condition its actions. Secondly, when the connection is not so straightforward, we must be particularly cautious, especially when politically controversial subjects are involved. The Central Bank is a technical and autonomous institution and must take great care that the messages it puts out are not used politically. There are some very important subjects requiring discussion in our country, such as the educational reform, but it would not be prudent for the Bank to be affected by approaching any matter in an inadequate or inopportune way. Even more complex would be to discuss a tax reform that changes the composition of taxes or a labor reform that alters the dynamics of the business cycle. Subjects like these have enormous implications for economic efficiency, but they also evoke tremendous political passion. Since there are no clear rules, and I have no defined position on this matter, I can offer two popular recommendations that I tend to follow: “nothing can be rejected out of hand” which allows an ample degree of flexibility and “when in doubt, refrain,” which is the best advice to prudence.

BIS Review 92/2008  7  Meade, E. and D. Stasavage (2008), “Publicity of Debate and the Incentive to Dissent: Evidence form the US Federal Reserve”, The Economic Journal, april, pp. 696-717. Woodford, M. (2007), “The Case for Forecast Targeting as a Monetary Policy Strategy,” Journal of Economic Perspectives, Vol. 21, No. 3-24. 8  BIS Review 92/2008