samchain/econo-pairs-v1 huggingface dataset:
10  All speeches are available online at www.bankofengland.co.uk/speeches  10  Chart 11: LTVs high in late 1980s, lower today  Percentage points 10  Per cent 95 LTV on new mortgage loans  90 85 80  Chart 12: The rental/gilt yield spread has been a good predictor of house price inflation  8 6  4 0  4 2  75  0 1995  12  8  Average  70 1985  Per cent 16  2005  2015  Sources: UK Finance Regulated Mortgage Survey and Bank of England. -4  Rental yield spread over government bonds (LHS) Average house price growth over the following five years (RHS)  -8 -12  -16 -2 1987 1992 1997 2002 2007 2012 2017 Sources: ONS, Zoopla/Whenfresh, Land Registry, Bank of England, and Bank calculations. Another upside risk is a re-acceleration of house prices. I’m not so daring as to offer you a precise forecast. Let me just point to a couple of pieces of evidence about the housing market and let you draw your own conclusions. One is that housing is currently “cheaper” than government debt, at least on a very crude comparison of their yields. The red line in Chart 12 is the difference between the estimated rental yield on housing and the yield on 10-year indexed government debt, an indicator of the “neutral” real rate of interest.

through the adjustment of domestic prices and costs relative to external ones, and by curbing government spending and revenue shortfalls, in real terms. This is what the Spanish economy has, with great effort, been achieving since 2012. In the truly difficult circumstances of 2012, Spain avoided a bail-out that would have been very painful in many ways, and certainly from an economic and social standpoint. Spain never lost its access to the capital markets. Admittedly at very high interest rates, and with very large risk premiums, our Treasury was always able to fund itself on the markets, because the markets, while mindful of the risks involved, very quickly appreciated (I am referring to the summer of 2012) the seriousness and decisiveness of the corrective action being taken. Spain reacted as a responsible and loyal European Union and Monetary Union member. It did not attempt to shift the blame onto anyone else, even though the euro crisis, which affected us very directly, obviously did not arise exclusively, or originally, in the Spanish economy. BIS central bankers’ speeches  3  To call the correction of unsustainable imbalances (like the balance of payments deficits of 2007 and 2008, of around 10% of GDP, and the budget deficits, which ranged from 9% to 11% between 2009 and 2012) austerity, is not really a very good description of reality. Changing direction when on a path towards impossible and unsustainable situations is not “austerity” but common sense and, in a very real sense, patriotism.
They set loan-to-income (LTI), loan-to-value (LTV) and interest cover ratio policies, with the objective of safeguarding the stability of the financial system. These so-called macro-prudential policy measures are being used increasingly by policy authorities internationally (IMF-FSB-BIS (2016)). The various agents in the model, and their inter-linkages, are shown schematically in Figure 17. 28  All speeches are available online at www.bankofengland.co.uk/publications/Pages/speeches/default.aspx  28  Figure 17: Agents and interactions in the housing market model  Source: Baptista et al (2016). This multi-agent model can be calibrated using micro datasets. This helps ensure agents in the model have characteristics, and exhibit behaviours, which match those of the population at large. For example, the distribution of loan-to-income or loan-to-value ratios on mortgages are calibrated to match the UK population using data on over a million UK mortgages. And the impact on the sale price of a house of it remaining unsold is calibrated to match historical housing transactions data. One of the key benefits of the ABM approach is in providing a framework for drawing together and using, in a consistent way, data from a range of sources to calibrate a model. For example, a variety of data sources were used to calibrate this model, including:   Housing market data: FCA Product Sales Data, Council of Mortgage Lenders, Land Registry and WhenFresh/Zoopla.   Household surveys: English Housing Survey, Living Cost and Food Survey, NMG Household Survey, Wealth and Asset Survey, Survey of Residential Landlords (ARLA) and Private Landlord Survey.

The integration processes called for a voluntary agreement between the parties. In the midst of the crisis, these agreements were not easy and they required, moreover, the approval of the related regional government authorities. But in 2011 nobody, or practically nobody foresaw the double-dip recession and less still how violently it would affect the Spanish economy. In April 2011 most agencies, including the IMF, the OECD, the European Commission and the Banco de España, were forecasting growth for our economy of around 0.8%, which at the end of the year turned out to be a decline in GDP of 1.0%, the biggest forecasting error on record in recent times for these institutions. The European Central Bank was acting in response to what it saw as a recovery scenario for the euro area, as testified by the fact that it raised its benchmark interest rate by 25 bp on two occasions, in April and in July 2011, only to reverse these rises from November, in light of the worsening sovereign debt crisis. The forecasting error was also most significant in 2012: in their 2012 spring projections, most institutions estimated a decline in GDP of around 1.6%, and ultimately it was 2.9%. Overview As is addressed in the final chapter of the Report, I should now like to take an overall view of the crisis.
Øystein Olsen: The economic outlook Speech by Mr Øystein Olsen, Governor of the Norges Bank (Central Bank of Norway), to invited foreign embassy representatives, Norges Bank, Oslo, 4 April 2013. The speech is based on the annual address 2013, Monetary Policy Report 1/13 and previous speeches. Please note that the text below may differ slightly from the actual presentation. *  *  *  Excellencies, Ladies and Gentlemen, First of all, I would like to welcome you to Norges Bank. Five years after the financial crisis started, growth is weak and unemployment high in many countries. The economic situation in Norway stands in contrast to developments abroad. Norway’s economy is still growing and unemployment remains low. There is a tendency to see ourselves as a country apart. Truly, Norway’s oil and gas resources provide an economic base that few other countries enjoy. Income levels are among the highest in the world. At the same time, our increasing dependence on oil and gas increases the vulnerability of the Norwegian economy. The theme of my presentation today is how to enhance the resilience of the Norwegian economy. When the financial crisis washed over the Norwegian banking sector in autumn 2008, we were reminded of how dependent we are on the world around us. Nonetheless, the Norwegian economy weathered the crisis well. After about a year, the downturn in Norway was over.

The latest (2004) estimate is that growth was actually 4% a long way above trend. As Robin Leigh-Pemberton, then Governor of the Bank of England, said “we put the brakes on when the speedometer indicated we were doing 60mph. Some time later it was revealed we were doing 55. When the tachograph was opened, however, it revealed that we had actually been doing 70, when the speedometer read 60… more brake pressure was therefore entirely appropriate.” This episode marked a low point for the UK’s GDP statistics in recent times. Since then, a number of methodological changes have been introduced, and data sources have been improved. Analysis both by the ONS and the Statistics Commission indicates a dramatic reduction in the average size of revisions over the past fifteen years. Even so, measuring the economy remains a complex task, and data uncertainty is a fact of life. So what does the MPC do to ensure its judgements are as firmly grounded in reality as possible? We have a four pronged approach: •  We monitor a very wide range of data  •  We pay careful attention to data quality  •  We talk to business people around the country  BIS Review 71/2004  3  •  We are working closely with ONS to transform the quality of official statistics  Monitoring a wide array of indicators First, we critically review an enormous quantity of data.
This is because, due to the narrowness of the income base, the output of the rural sector cannot be absorbed by the rural sector itself. Hence, the sustainability of the rural poor will depend on active internal trading which they could do with those in the urban sector. Second, the current tendency of the rural population, especially the youth, has been to prefer more lucrative and convenient occupations in the urban sector and not the rural agricultural sector in which their fathers and fore-fathers had been engaged for generations 10 . It has also been found that when the rural poor move from low paying jobs in agriculture to high paying jobs in industry or services in the urban sector, they could conveniently escape poverty. When this internal migration to industry and services is supported by a high level of educational competencies acquired by the poor, the reduction in poverty levels too becomes noticeably greater 11 . As a result, investments made in the rural agriculture sector would go unused without the support from the segment of people for whom they were really meant. Third, rural agriculture suffers from both a growth limitation and a capacity limitation. Agriculture is not a high growth contributor and, over the last two centuries, world’s agricultural output has risen, on average, by less than two percent per annum 12 . Hence, agriculture, despite the heavy volume of investments made, cannot raise rural incomes to a level sufficient to push its population out of poverty.

For example, Chart 1 shows estimates of the 5- to 10-year forward inflation compensation constructed by Barclays, the research staff of the Federal Reserve Board, the New York Fed Markets Group and inflation swaps. The differences are produced by differing assumptions on the liquidity of various securities and the use of an estimated yield curve to produce the Board research staff estimates. No attempt is made to remove the compensation for inflation risk in these measures, thus these are estimates of compensation for expected and unexpected inflation. There are clearly different short-term fluctuations in the various estimates, but they all show a similar pattern – with the exception of the height of the financial crisis, they have been contained within a range of just below 2.5 percent to just above 3 percent. CPI inflation has averaged historically about 0.3 to 0.5 percentage points above the inflation rate for personal consumption expenditures (PCE), the price index for which the Federal Reserve Board members and Reserve Bank presidents provide forecasts four times per year. Estimates of the amount of compensation investors require for inflation uncertainty at this forward horizon vary from close to 0 percent to more than 1 percent. Yield curve model-based estimates can provide a decomposition of the whole forward structure of inflation expectations. As shown in Chart 2 for the Board research staff measure of inflation compensation, the effect of the recent surge in energy prices is centered on shortterm inflation compensation with slightly negative movement in forward inflation compensation from 2013 onward.
But even if it is discovered that the risktaking channel is something worth taking into account, it is not so easy to see how this should be done in practice. I cannot see, for instance, that it is realistic to believe that a central bank would refrain from cutting its policy rate below a certain level on the grounds that this might lead to greater risk taking in the economy. Should developments in the economy as a whole warrant a low policy rate and there are no tangible signs of increased risk taking, it would be very difficult to justify such a policy. However, it is of course important  for instance, Geanakoplos, J., “Solving the Present Crisis and Managing the Leverage Cycle”, FRBNY Economic Policy Review, August 2010. 5  See, for instance, Gambacorta, L., “Monetary Policy and the Risk-Taking Channel”, BIS Quarterly Review, December 2009, Ioannidou, V., S. Ongena and J.-L. Peydró, “Monetary Policy, Risk-Taking and Pricing: Evidence from a Quasi-Natural Experiment”, European Banking Center Discussion Paper No 2009-04S, 2009, Jiménez, G., S. Ongena, J.-L. Peydró and J. Saurina, “Hazardous Times for Monetary Policy: What do Twenty-Three Million Bank Loans Say About the Effects of Monetary Policy on Credit Risk?” CEPR Discussion Paper No. 6514, 2009, Altunbas, Y., L. Gambacorta and D. Marques-Ibanez, “Does Monetary Policy Affect Bank Risk-Taking?” BIS Working Papers No 298, 2010, Delis, M. D. and G. Kouretas, “Interest Rates and Bank Risk-Taking”, Munich Personal RePEc Archive, MPRA Paper No.

There is as yet rather limited empirical research on the risk-taking channel, but some papers on the subject have now begun to appear. The studies are based on data from the eurozone and the United States, as well as other countries. They appear on the whole to support the theory that low policy rates lead to the banks taking greater risks. 5 Well worth more research… My personal view is that the risk-taking channel is definitely an interesting line, well worth further research. Our knowledge of the monetary policy transmission mechanisms is far from complete and the way that monetary policy affects the banks’ risk taking is something we need to learn more about. I also believe it would be useful to broaden the question and try to find out if low interest rates for a long period of time can lead to an increase in risk propensity in society as a whole – among households, companies and other participants in the economy – and not just among banks. So far, research in this field has been even scarcer. 6 As I see it, an increased risk propensity among households could be an equally strong driving force behind a rise in property prices as greater risk taking by the banks. …but not so easy to do in practice It is of course difficult to predict today what the conclusions eventually will be and what implications they may have for monetary policy.
Sabine Lautenschläger: The banks and the market Speech by Ms Sabine Lautenschläger, Member of the Executive Board of the European Central Bank and Vice-Chair of the Supervisory Board of the European Central Bank, at a Lecture at the Florence School of Banking and Finance, Florence, 15 March 2018. * * * Almost ten years ago to the day, the world of finance was shaken by a strong tremor. On 16 March 2008, JP Morgan offered to buy the investment bank Bear Stearns. And it was time. Bear Stearns was in deep trouble: its share price had fallen by two-thirds since the beginning of that year; it was bleeding money; and it was basically shut out of the funding market. At the time, the failure of Bear Sterns was considered a major event. No one knew that the big quake was still to come. It happened half a year later, on 15 September 2008, when another investment bank failed: Lehman Brothers. It pushed the financial system close to the abyss. Trust evaporated, markets dried up, and around the globe, banks were sent reeling. All in all, it was the biggest financial crisis in decades. It dragged down the real economy, which fell into what we now call the Great Recession. In the euro area, economic output went down by almost 4.5% in 2009, while unemployment jumped by more than a quarter to 9.6%. Three years later, it reached 12%.

If each country were to go its own way, the market for the relevant financial instruments would become too fragmented. The ECB welcomes current proposals which foresee the introduction of non-preferred senior debt instruments and a general depositor preference rule. This would further facilitate bail-ins. The second question is: what happens if the Single Resolution Fund runs out of money? What if there’s a major crisis, and the € billion is not enough to cover the losses? Well, in such a situation we would need a common European backstop for the SRF. And we need it quickly, and in any case before 2023, which is when the SRF will reach its target volume. European leaders committed to this when setting up the SRF, and they should stick to their commitment. The backstop could take the form of a direct credit line from the European Stability Mechanism to the SRF. The important thing is that it can provide both solvency and liquidity support. And now to the third and final question: has public support for failing banks really become a thing of the past? “Almost” is the answer to this question. And the rules are now such that any public support for a bank in fact triggers a “failing or likely to fail” decision. There are a few exceptions, however. One of these is known as precautionary recapitalisation. It allows governments to recapitalise banks using public funds. But the scope for this kind of state aid is very narrow.
I would like to name three priorities or key trends here. First, I would say what we have seen in the past year showed that our implementation of the Standards must constantly adapt to changing circumstances. 16. While we all had Business Continuity Plans (BCP), these were unavoidably limited in scope. For example, we never expected that banks and their customers, as well as banking 2/5  BIS central bankers' speeches  supervisors, would all be in the same situation of working remotely. Certainly we cannot predict future events, but we can say that our collective responses to COVID in terms of BCP have so far stood up to the test. That said, in order to achieve the step-change we all aspire to, and deliver better outcomes, it will be essential for governments, regulators and the private sector to continue to be adaptable in how we approach AML/CFT work. 17. I have just now provided examples of how we fully used the built-in flexibility of the risk-based approach, together with the application of technology, to deliver an effective response to some of the challenges of COVID-19. We acted quickly, and with NO change required to the standards that all of our systems are based upon. 18. At the same time, we must not simply regard FATF standards, as well as Mutual Evaluations (ME), as simply compliance-orientated or, in the case of MEs, static assessments that take place once every eight or nine years.

When I was preparing for this event, I could not help but look back to three years ago – April 2018 – and the thoughts that I shared with you at that event. On that occasion, I highlighted three issues as having significant potential to change how effective we are in our AML work: The promise of technological innovation; The emerging focus on public-private information sharing; and Getting the risk-based approach right by thoroughly understanding risks. 5. Three years on, I think we can all agree that the potential of each of these has been clearly demonstrated. The path to achieving a step-change in the outcome of current responses to money laundering and terrorist financing – based on the tools and techniques at our disposal – is much clearer. Let’s quickly recap what we have seen and experienced so far. 6. First, the value of technology in allowing us to swiftly overcome some of the challenges caused by COVID-19 is well recognised. Digital and online innovation has helped to improve remote access to financial services. That has also allowed banks and other financial institutions to protect their workforces through work-from-home arrangements, and provided data analytics to raise red flags on networks of COVID-19 fraud accounts. At the HKMA, we are committed to supporting innovation that works for all types of customers and for both small and large institutions. We also recognise that our regulatory framework needs to keep pace – focusing on outcomes, and being forward-looking.
This forecast is premised on a market yield curve in which interest rates rise gradually though to levels substantially below their pre-crisis average. The forecast recognises the risks to this picture from another unfortunate event in the form of a harder landing in emerging markets.6 Secular signals? But while one can still explain the current conjuncture this way, there must be less confidence in the healing story than when I first arrived on the MPC. We have already incorporated a weaker structural picture into our thinking. A few years ago we were expecting a period of above trend productivity growth to recover some of the productivity growth lost during the Great Recession. We no longer expect any catch-up of the lost productivity growth and indeed, productivity growth in our latest forecast only recovers to 1.8%, compared to 2.7% between 1950–2007 and 2.2% in the decade before the crisis. This downgrading of prospects is true more broadly – according to the IMF, potential output growth in advanced economies fell from 2.2% over the period 2001–07 to 1.5% over 2013–14. And the natural rate of interest probably remains around, or a touch below, zero. This is the unobservable underlying real interest rate that is consistent with inflation at target and economic activity at its potential. One cannot observe this “natural rate” directly; it has to be estimated and that is difficult to do with precision.

One reassuring point is that the major UK banks and building societies were tested against precisely this scenario by the Bank of England in 2015 and demonstrated they had the resilience to weather such a shock and carry on lending to the UK economy. Conclusion Looking back over the last two years, I think that the slow healing story can still explain where we are and provide a guide to our future prospects. But the story has to be adapted in the face of more UK and world weakness than I had expected and this weakness might be signalling that there are deeper structural factors at work. Nonetheless, my central projection remains that the UK economy will continue to grow solidly and that inflation will return to target over the next few years. But, as always, policymakers need to be alive to the possible meaning of disappointments, to be very sensitive to the possibility of changing temperatures around them, and to the risk of unfortunate events. We have a range of tools at our disposal and should be ready to use them whichever risk materialises. BIS central bankers’ speeches  7