samchain/econo-pairs-v1 huggingface dataset:
However, there are some signs that the economy has stabilized in recent months. Regional employment trends Now, let me turn specifically to employment trends in the region, the focus of our briefing today. In particular, we want to describe our region’s experience during the recession and recovery. Nationally, the Great Recession, which began in December 2007, has been the deepest economic downturn since World War II. At the jobs trough in February 2010 – about 7 months after the official end of the recession – the country had lost almost 6.5 percent of its jobs and the unemployment rate had more than doubled. Many people lost their jobs or saw their hours or income cut, and the duration of unemployment for jobless workers reached a historical high. For many families, this distress was compounded by losses of wealth from declining home prices and stock market losses. Since the jobs trough, unemployment has retreated by a percentage point and jobs growth has resumed, albeit at a slow pace. Today, we will review questions about jobs in our region such as: How severe was the downturn? Where are jobs returning? And, what factors affect the employment outlook? As in other parts of the country, employment in our region declined substantially during the recession. But, New York and New Jersey and Puerto Rico had very different experiences. Employment in much of New York State, including New York City, declined less severely than the nation. Both the state and city lost about 3.8 percent of their jobs.

The recession, which began in 2005, has seen employment leveling off since last summer, but no clear reestablishment of growth. Businesses in a variety of services sectors have contributed to the recovery of jobs in the region, including professional and business services, education and health, and leisure and hospitality, as well as finance. The overall expansion of our private sector is being partially  BIS central bankers’ speeches  3  offset by ongoing losses in manufacturing and construction, where firms in our region are not matching the modest growth seen in jobs at the national level. In addition, state and local government jobs in our district have declined sharply. After holding steady for much of the recession, state and local governments in New York and New Jersey have reduced job counts by more than 40,000. These losses effectively offset about half of the private-sector jobs created over the period. The government job declines were particularly severe in New Jersey and Puerto Rico, and considerably steeper than in the United States overall. Looking ahead, the continued expansion of employment at the national level should have positive effects on many industries in our region. As elsewhere, state and local government will likely be a drag for some time. However, some new detailed job listing data point to an expansion of job openings in a number of key occupations in the region. Finally, despite the overall recovery of employment across much of the region, unemployment rates remain very high.
The combination of macro challenges and regulatory reforms: The current and forthcoming financial landscape for banks I will comment now on the financial landscape for banks and the regulatory reforms. The prevailing low-interest rate environment may pressure banks’ interest rate margins downwards when the negative impact on the interest rate differential exceeds the positive effect of low interest rates on banks’ activity. This potential unintended consequence of monetary policy lies in parallel with other factors that are putting pressure on banks’ profitability, in particular, regulatory reforms aimed at addressing vulnerabilities in the global banking system as well as deficiencies in the current framework. BIS central bankers’ speeches  3  Some of these reforms have already been implemented and banks have improved their resilience. Solvency ratios have been reinforced with a new calibration of the requirements and the definition of the eligible capital instruments for the numerator of these ratios. However, different problems in the denominator related to the measurement of risk still persist and should also be addressed. In this regard, I would say that the major general outstanding issue to finalize the Basel postcrisis reforms is how to mitigate the unwarranted variability in the risk weighted assets that are calculated by banks when using internal models. This revision should be feasible by striking a right balance between sensitivity, simplicity and comparability. There is a special focus also on avoiding significant increases for overall capital requirements.

On the other hand, authorities like Finansinspektionen may need to take the same type of measure for their task of protecting the consumer. Their proposal for a ceiling for loan-to-value ratios, for instance, is based on consumer interests. The question of how responsibility and roles should be divided between the different authorities will probably be discussed in detail in Sweden and abroad in the coming period. And it is important to find a system that works efficiently. Some of the criticism of the strategy of “leaning against the wind” with the policy rate also applies to alternative measures. If the central bank or another authority takes such measures, one must have a good understanding, as with the policy rate, that the measures are really being implemented at the right point in time. Otherwise there is a risk that the fluctuations in the banks’ credit granting will be greater rather than smaller. Monetary policy and house prices Credit volumes and house prices are not targets for monetary policy. They are indicators that should affect monetary policy if they are expected to affect inflation and resource utilisation in the economy. But my assessment is that there may also be occasions when indicators such  6  BIS Review 70/2010  as house prices and credit growth contain information on future economic developments over and above what we can capture in our quantified forecasts.
Commodity prices do not explain wholly why inflation is so low. Generalised inflationary pressures in the economy are also subdued. Core inflation measures are running at 1.3%. That is a legacy of a long period following the crisis in which unemployment has been high and wage growth muted. 14 With additional falls in petrol prices in the pipeline, inflation is likely to fall further over the coming months and turn slightly negative for a period. It should pick up again in twelve months or so as the direct effects of a lower energy price drop out of the inflation rate. The Bank has the means, will and responsibility to return inflation to the 2% target within the next two years. That is consistent with the average horizon over which the MPC has sought to return inflation to target following overshoots in the past and with the nature of shocks the UK currently faces. The UK economy is expanding solidly. Over half a million jobs have been created in the past year and there are signs that wage growth is picking up. Interest rates can be expected to begin to return towards more normal levels over the next few years. Relative to what we and the markets expected a year ago, that path of interest rate increases can be expected to be more gradual and more limited. 4. What is needed in the euro area? The challenges for monetary policy are much greater in the euro area than in the UK.

The economic convergence criteria ensure that the applicant countries have established economic conditions that are conducive to the maintenance of price stability and the  2  BIS Review 17/2008  coherence of the euro area. The framework of analysis comprises developments in prices, fiscal balances and debt ratios, exchange rates and long-term interest rates, together with other factors. A number of general rules are used in the application of these criteria. 1. The individual criteria are interpreted and applied in a strict manner. 2. The criteria constitute a coherent and integrated approach. They must all be satisfied. The Treaty lists the criteria on an equal footing and does not suggest a hierarchy. 3. The criteria must be met on the basis of actual data. 4. The application of the criteria should be consistent, transparent and simple. 5. Convergence must be achieved on a sustainable basis and not at a given point in time only. This approach is firmly based on economic arguments. It is generally recognised that a monetary union requires sustainable macro-economic convergence among the participating countries. Once a country joins a monetary union, it loses the possibility to use the nominal exchange rate as an instrument to correct a loss in competitiveness. As monetary policy decisions in the EMU are taken in the light of the economic conditions prevailing in the entire area, economic convergence is required to ensure that a country’s economy is sufficiently prepared for the monetary union.
Another issue is how to handle companies with high carbon emissions who are actively aiming to transition towards lower emissions. These are questions that have begun to be analysed and where the Riksbank can contribute knowledge and analysis. The Riksbank’s balance sheet The assets on the Riksbank’s balance sheet are valued at around SEK 900 billion. The two largest items on the asset side are the foreign exchange reserves, which total around SEK 420 billion, and the policy portfolio, which contains Swedish government bonds totalling almost SEK 380 billion.30 It is here, with regard to the balance sheet, where we have to ask the really difficult questions about the role of central banks in climate adaptation. Should green bonds be included when the Riksbank buys bonds for monetary policy purposes? How sustainable are the bonds in central bank FX reserves? Can the Riksbank consider climate-related risks in the collateral it requires from counterparties in monetary policy transactions?31  Sustainability perspective in management of the FX reserves Since 1 January 2019, the Riksbank has had a new financial risk and investment policy. The policy states, among other things, that consideration shall be given to sustainability in the choice of assets in the FX reserves, in addition to other requirements laid down in the Riksbank’s mandate. The Riksbank’s gold and FX reserves are managed so that there is preparedness to supply the financial system with liquidity in foreign currency and to intervene on the FX market for monetary and foreign exchange policy purposes.

First, the SNB must try – despite volatile risk premiums and interest rate expectations – to keep the targeted three-month Libor as close as possible to the desired goal. Second, with its operations and its choice of instruments, it must contribute to a well-functioning money market. Even though there have been several innovations in the area of monetary policy instruments, the SNB’s options in this complex environment are limited, however. In particular, there is no magic bullet with which central banks could restore the lost confidence among market participants. In dealing with the financial market crisis, therefore, banks and other financial market participants must also try to help restore the proper functioning of markets by implementing measures to shore up confidence. BIS Review 34/2008  1
The burden on household income was probably greatest in 1996 but even in the coming two years the fiscal stance measured in this way will be tight. It is accordingly helping to lower inflationary pressure. If, in the current situation with good prospects for growth, unexpected budget improvements were to be used to give fiscal policy a more expansionary turn, the result might be an earlier need to tighten monetary policy in order to secure the objective of price stability. It is then by no means certain that the overall effect on demand would be what was intended. Secondly, the fiscal trend in a longer context of “sustainability” is also important for monetary policy. If the government deficit appears to be growing uncontrollably, as was the case for some years in the early 1990s, uncertainty may arise as to whether the problems can be tackled at all. This can have negative consequences for monetary policy; the exchange rate may weaken sharply, for instance, with an increased risk of inflation. The budget consolidation has BIS Review 68/1997  -6-  naturally been important in this respect, too. It is the main single explanation for the krona’s appreciation since the crisis years, as well as for the Riksbank being in a position to lower interest rates so markedly. As a result of the years with massive general government deficits, however, from 1990 to 1996 public sector debt has grown from 44 per cent of GDP to 78 per cent.

When inflation fell back in the early 1990s it became apparent that the investments in real estate had been founded on unrealistic expectations that prices would continue to rise. The property market collapsed and credit institutions were hit by massive loan losses. The bank crisis accordingly accentuated the economic downturn in Sweden. BIS Review 68/1997  -2-  Inflation is also associated with an arbitrary redistribution of income and wealth, often contrary to the ambitions of distribution policy. Referring again to the 1980s, the chief losers from the inflationary economy at that time, with the resultant price fall, were probably not the property speculators but households whose bank savings were eroded by two-digit inflation and whose wages were only subsequently adjusted for inflation. Price stability is the Riksbank’s objective The reason why monetary policy is assigned the task of safeguarding the value of money is basically simple: by adopting an appropriate monetary stance the central bank can choose, or at least strongly influence, the rate of inflation. In the short run price increases are of course affected by many other factors such as the state of economic activity, the direction of fiscal policy, wage formation, etc. But in the long run inflation is a monetary phenomenon. By controlling the supply of money in a wide sense, in the long term the Riksbank can also govern movements in the value of money and in inflation. Interest rate management by the Riksbank cannot, on the other hand, generate economic growth and employment in the longer run.
Mr McDonough’s statement on the work done at international level by the Basle Committee on Banking Supervision on banks’ dealings with highly leveraged institutions Statement by the President of the Federal Reserve Bank of New York, William J McDonough, before the Subcommittee on Financial Institutions and Consumer Credit of the Committee on Banking and Financial Services, US House of Representatives, on 24 March 1999. Good morning Chairman Roukema and members of the Subcommittee. I appreciate the continued attention that you and your colleagues on the Subcommittee and on the Banking Committee as a whole have brought to bear on the complex and important issues under discussion today. The near-failure of Long-Term Capital Management last fall raised a number of issues regarding the activities of highly leveraged institutions. Since then, banking supervisors have been hard at work to assess where banks have been deficient in their dealings with hedge funds and other highly leveraged institutions, which I will refer to as “HLIs”. This work has resulted in the issuance of supervisory guidance, both internationally and in the United States, with the aim of improving banks’ policies and practices regarding HLIs. I am happy to be appearing before you with my colleague Governor Meyer – who I understand will concentrate on discussing the Federal Reserve’s policy guidance to banks regarding hedge funds – and Deputy Comptroller of the Currency Brosnan.

For one, the Committee found that banks did not obtain sufficient financial information to allow for a full assessment of how much and what types of risk had been assumed by large HLIs. In particular, banks did not obtain the information needed to assess leverage sufficiently. They did not have sufficient information to understand HLIs’ concentrations in particular markets and risk categories, or their exposure to broad trading strategies. BIS Review 36/1999  2  Also, banks did not sufficiently understand the ability of HLIs to manage their risks. Because risk profiles can change from one day to the next, or even from moment to moment, it is necessary for an HLI’s counterparties to ensure that the HLI can effectively manage its business operations and risks on an ongoing basis. Exposure Measurement The Committee also concluded that banks should develop better measures of the credit exposure resulting from different types of trading activities. In particular, banks must develop more effective measures of what is called “potential future exposure.” Potential future exposure measures the credit exposure between a counterparty and a bank, and how this exposure could change in the future as market prices fluctuate. The ability of banks to measure potential future exposure is crucial when dealing with HLIs. Unfortunately, methods for calculating potential future exposure had not kept pace with the growth and complexity of HLIs. As we have seen, under volatile market conditions, a bank’s exposure to HLIs can grow substantially. In many instances, banks request HLIs to post collateral covering their exposures.
For example, the current capital rules incentivise firms to reduce the volumes of outstanding derivative transactions on their books, as this reduces the capital charge applied. This is achieved by ”tearing up” or closing out unwanted trades. While it is not the primary intended consequence, some of this activity also makes firms simpler and more resolvable which should, in turn, reduce risks to financial stability. However, some innovation is pure regulatory arbitrage – that is, action taken by firms to reduce specific regulatory requirements without any commensurate reduction in their risk. Let me share with you a few recent examples of behaviour that might be problematic, even if they comply with the specified rules. Off-balance sheet leverage. The leverage ratio requires all on-balance sheet assets to carry a minimum level of capitalisation regardless of their risk. Off-balance sheet transactions are also captured in the leverage ratio, but if an on-balance sheet transaction can be restructured into an economically similar off-balance sheet transaction, it may not always attract the exact same capital charge. We have noticed that some  20  All speeches are available online at www.bankofengland.co.uk/speeches  20  institutions are now moving on-balance-sheet financing to off-balance-sheet formats using special purpose vehicles, derivatives, agency structures or collateral swaps. Some of these structures might meet the detailed requirements for calculating a specific financial ratio whilst others may have a harmless motivation. But we have noticed that some carry material credit risk which escapes the detailed aspects of the capital framework.

One of its key functions was to oversee inter-society mergers, which became a frequent occurrence as the number of building societies 30  reduced (largely through merger) from around 2,200 in 1900 to 480 in 1970 . By this point, Registry staff were examining societies’ annual returns and seeking to identify weaknesses in capital and liquidity; indeed, there was a keen focus on the latter when, in 1976, building societies started to submit a monthly liquidity return. I am told that at that time, the Registry had one electronic calculator to which the three building society teams each had access for half a day each week. History does not relate what the calculator did for the other three-and-a-half days – perhaps it was resting. I hope it will be as obvious to you as it is to me that many of these practices have shaped the PRA’s approach to supervision today, just as much as our heritage from the Bank on the banking side. This is partly because as the prudential supervisor of banks, building societies and insurers we must of course draw in full on our heritage across all three sectors. But it’s also because some of our wisest staff have been here all the way through – most obviously Eric Engstrom who was, I understand, born in Ketley’s pub in 1775. Indeed, the general approach that started to emerge for building societies in the early 80s was forward-looking and judgment-based, though nobody at the time would have described it in such terms.
•  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.

2  BIS central bankers’ speeches  However, this requires that enterprises that are no longer viable are unwound in an orderly manner. •  Earlier this year, Chinese authorities announced plans to reduce excess capacity in the steel and coal sectors. •  The government has also issued directives to banks to stop extending loans to firms that are persistently loss-making, while providing credit to competitive companies which are experiencing temporary difficulties. The road to addressing China’s debt vulnerabilities is long and fraught with risks along the way. But if recent efforts are sustained and economic growth does not tank, the prospects are good for an orderly and gradual deleveraging. Structural reforms More than the moderation in economic growth or even the vulnerabilities in the financial system, it is the outcome of the structural reform effort that will be decisive for the long-term prospects for the Chinese economy. The Third Plenum reform blueprint of 2013 provides a comprehensive roadmap for China’s full transition to a market economy. It is a thoughtful, coherent, and well-conceived plan. While implementation has been slower than expected in some areas, China has probably made more progress in structural reforms than any major economy during the last few years. But much work still lies ahead. Take for instance fiscal reform. China has taken several steps to improve the sustainability and transparency of its public finances, especially at the local government level. •  Changes to China’s budget law last year have helped to bring more government spending on-budget.