samchain/econo-pairs-v1 huggingface dataset:
The experience of the crisis increased the advantage from being perceived as TBTF, and, thus, strengthened the incentives to become bigger, more complex, and interconnected. The Dodd Frank Act (DFA) set out to end TBTF. One means was by eliminating the Federal Reserve’s discretion to provide emergency financial support through a program open only to a single financial institution, and, in general, raising the bar for broader-based emergency interventions under section 13.3 of the Federal Reserve Act. But, as the DFA recognized, simply tying the Fed’s hands on intervention is insufficient. It does not reduce the cost to society from the failure of a large and complex firm. In order for the non-intervention strategy to be both fully credible and consistent with the public interest, we need to tackle the underlying externalities and incentive problems that give rise to TBTF in the first place. Tackling too big to fail As I see it, solving the TBTF problem requires working on a number of different margins. These include measures that are firm-specific and those that address the structure of the financial system more broadly. One set of measures works to reduce the incentives for excessive risk-taking and to lower the probability that large financial firms fail or come close to failure. Another set lessens the disruption to the financial system and hence the cost their failure imposes on the broader economy and society as a whole.

And it could do this without actually solving the problem of system risk externalities that aren’t related to balance sheet size. 8  BIS central bankers’ speeches  Evaluating the socially optimal size, scope and organizational structure of financial firms is a complicated business, and so is establishing a viable transition path to a system of much smaller firms. It would be helpful in this regard if advocates of break-up solutions would put a bit more flesh on the bones and develop detailed proposals that address essential questions of how such downsizing or functional separation would be accomplished, and what benefits and costs could be expected. Such an analysis should answer several questions: How would you force divestiture (in good times and bad)? Should firms be split up by activity or reduced pro-rata in size? How much would they have to be shrunk in order for the externalities of failure to no longer create TBTF problems? How would global trading and investment banking services and network-type activities be supported? Should some activities be retained in natural monopoly form, but subject to utility type regulation? How costly would it be to replicate support services or to manage liquidity and capital locally? Are there ways of designing size limits that cannot be arbitraged by banks via off-balance-sheet structures and other forms of financial innovation? So far, advocacy for the break-up path has been strong, but without the detail to assess whether this is indeed superior to the course we are currently following. But, I’m openminded.
José De Gregorio: Current challenges to central banking in emerging market economies Presentation by Mr José De Gregorio, Governor of the Central Bank of Chile, at the International Symposium of the Banque de France: Regulation in the Face of Global Imbalances, Paris, 4 March 2011. *  *  *  I am very grateful for comments and discussions with Rodrigo Cifuentes, Kevin Cowan, Luis Oscar Herrera, and Enrique Orellana. I am very grateful for the invitation to participate in this panel on Lessons from the Crisis on the Role of Central Banks. The crisis has revealed weaknesses in the functioning of financial markets and the regulatory and supervisory frameworks in several advanced economies, which went through years of credit expansion and leveraging that ultimately proved unsustainable. There are many lessons to be learned in order to reduce the likelihood of another crisis of this magnitude. Indeed, many of the policies implemented during the recent crisis, and which helped to avert a catastrophe, were lessons we learned from the Great Depression. But the recent episode has also revealed the strengths of policy frameworks and financial systems in emerging market economies (EMEs) that were able to successfully mitigate the effects of the worst global crisis since the Great Depression. Fiscal prudence, more autonomous central banks, low inflation, flexible exchange rates, and financial regulation and supervision, consistent with their lower degree of financial sophistication, were central to this unprecedented performance.

A gradual approach would work best, reduce risk and enable incorporation of known future trends and customer requirements. A customer-centric approach would help to reduce transaction costs to them through pooled or shared platforms. To avoid inordinate fears of using common platforms it is desirable to have a set of self-regulations and ethical practices agreed upon by all stakeholders. Banks also need to coordinate with the telecommunication service providers to link bank IT systems with those of the telecommunication services. The Telecommunication has been a popular mode of accessing financial services. Banking through SMS has made virtual money transactions popular in recent times. Some banks have already started link ups with telecommunications and others need to follow suit. 10. Conclusion  10.1 IT development has undoubtedly brought-in enormous benefits to banks, particularly in terms of productivity increases, cost reduction through labour saving and increased profitability. Consequently, IT development in banks has become more product centric and retail and wholesale IT products have positively influenced productivity and profitability. IT use has increased outputs and reduced costs as both IT capital investments and IT human resources have a positive relationship to productivity. Banks should stay ahead of the game and sustain growth by taking bold decisions to survive and beat competition. The time has come to move towards a customer-centric approach, as customers should be given an opportunity to enjoy their share of benefits stemming from IT development.
Conclusion Singapore has not shied away from tough measures to remake our economy and maximise our chances in a difficult environment. These measures will enhance our competitiveness, strengthen our companies and consolidate our social cohesion. They will make our economy more flexible, resilient and able to adjust quickly to changing circumstances, and so help it to remain ahead in the race of nations. Although the media impression is that Southeast Asia has stagnated since the Asian Crisis, the reality is less gloomy. ASEAN economies have made progress in picking up the pieces and pursuing domestic reform and restructuring, albeit some more successfully than others. Between 1999-2001, ASEAN economies as a whole grew by about 4% per annum. Last year, an export-led slowdown on the back of a global electronics slump broke the recovery trend. But ASEAN economies weathered the downturn fairly well, with most still managing positive GDP growth. Most are running current account surpluses, in contrast to the large deficits that prevailed in 1997. From a macroeconomic standpoint, the countries have held up well and even shown a certain resilience. Reflecting this, ASEAN stockmarkets have generally performed better than their counterparts in the rest of the world thus far this year. Part of Southeast Asia’s negative image is attributable to political and security concerns, which are indeed real. A week or so after the Bali attack, these worries naturally loom large. Many observers, seized by the mood of the moment, are now forecasting the worst for the region.

Similarly, we hope that the US-Singapore FTA will become a model for a USASEAN FTA in the longer term. These link-ups show that ASEAN is not turning inwards and away from the global economy, and will give ASEAN a valuable edge as an investment destination. Singapore’s economic restructuring: philosophy & initiatives Given this bracing environment, Singapore is at a turning point in our economic development. The whole landscape has changed. We need to change our strategies to continue to thrive. This is why we convened the Economic Review Committee (ERC), to carry out a comprehensive review of our economic policies, and to identify ways to develop a vibrant and competitive private sector. We have concluded that the key tenets of our economic strategy are as follows:  BIS Review 61/2002  3  First, we must enhance the competitiveness of our economy. This means keeping direct taxes as low as possible. There is a worldwide trend towards lowering taxes to attract and anchor companies. We also need to cut personal tax rates to spur entrepreneurship, risk-taking and wealth creation, and to attract and retain talent. Hence we undertook a major restructuring of our tax system, reducing corporate and personal tax rates from around 25% to 20% over three years. We will tax individuals who are not ordinarily resident in Singapore, based on the number of days they actually spend working in Singapore. To make up part of the revenue shortfall, we are raising our consumption tax from 3% to 5%. Tax incentives have also been enhanced.
BIS Review 29/1997  -4-  The bottom line in all this is that if EMU goes ahead on time and whether the UK is in or out, the impact on your business will depend very much upon the nature of the business you are in. Up to now, we at the Bank have concentrated mainly on ensuring that the banking system and the wholesale financial markets will be ready to operate in euros from Day 1, because they will be affected first, and they will be affected whether or not the UK is a part of the “first wave”. But we are conscious of the developing thirst for information from the rest of the business community. With this in mind, we have co-operated with the CBI and the British Chambers of Commerce in organising regional workshops - including one to be held here in Liverpool on 23 April. We are participating too in seminars organised by the Forum of Private Business - and I am sure that if you are interested you will be able to prevail upon Stan Mendham, who I am delighted to see here this evening, to organise such a seminar here too! If you are really lucky, 007 might even provide you with a short Bank of England guide: “Introduction of the Euro - what does it mean for business?” which, for reasons that I can’t quite understand, in this case comes absolutely free.

And interest rates have been lower and less volatile over this period than they have been for more than thirty years. Some people, it’s true, still say to me that all this has not had much effect on them - it’s not like it was in the boom times! And I recognise, of course, that economic conditions do vary across regions and sectors and between individual companies. More than ever before it’s a tough competitive world. But what most people say to me these days is that steady growth and low inflation is exactly what they want so that they can make rational, long-term, decisions in their own businesses, which is what enables them to face the global competition. The major preoccupations that I hear are about whether our recent, more stable, economic environment will continue, and about the implications - good or bad - for that environment of a move to a single European currency. Let me say a word first about our domestic economic prospects before turning to Europe. In fact, Mr. Chairman, we set out the Bank’s views on the domestic economy at some length in our quarterly Inflation Report only last month. But in summary we have seen a gradual pick-up in the pace of activity over the past year, driven by domestic demand - notably consumer spending - so that the money supply and both demand and output are now growing at above-trend rates. Other things equal we would expect that to continue.
(a)  Classic principal/agent problems  Following the work of Jensen and Meckling (1976), the most extensively studied cost of separation arises when management pursues their own private interests at the expense of shareholders: for example, through corporate perks such as private jets or sponsored football teams, empire-building such as value-destroying acquisitions, or rent extraction through excessive executive remuneration. This is a classic principal/agent problem. Those theoretical concerns gained practical prominence during the 1970s. The response then was, on the face of it, ingenious: to align shareholder and managerial incentives, remuneration contracts for management needed simply to be linked to shareholder returns. This could be achieved by paying managers not in cash but in equity or in equity-linked instruments, such as stock options. And so it came to pass. Between 1980 and 1994, the average value of stock options granted to CEOs of large US companies rose by almost 700%, while salaries and bonuses rose by less than 100% (Hall and Liebman (1998)). The proportion of companies remunerating their CEOs in stock more than doubled. Those trends have continued apace in the two decades since. In 1994, US CEO compensation was split roughly one third salary, one third bonus and one third stock and stock options. By 2006, the dawn of the crisis, that split was less than 20% salary, less than 30% bonus and more than half stock and stock options. Among banks, the latter fraction was higher still. Whether this shift in compensation practices put a lid on CEO rent-seeking seems altogether more questionable.

Christensen, J., Rudebusch, G. (2012). The Response of Interest Rates to US and UK Quantitative Easing. The Economic Journal, Royal Economic Society, vol. 122, pages 385–414. Gagnon, J., Raskin, M., Remache, J., Sack, B. (2011). The Financial Markets Effects of the Federal Reserve’s Large-Scale Asset Purchases. International Journal of Central Banking, vol. 7 (1), pages 3–43. Gambacorta, L. (2009). Monetary policy and the risk-taking channel. BIS Quarterly Review, December 2009, pages 43–53. Gordon, R. (2012). Is U.S. Economic Growth Over? Faltering Innovation Confronts the Six Headwinds. NBER Working Paper No. 18315. Miller, M., Weller, P., Zhang, L. (2002). Moral Hazard and the US Stock Market: Analysing the “Greenspan Put”. The Economic Journal, Royal Economic Society, vol. 112, pages 171–186. Schularick, M., Taylor, A. (2012). Credit Booms Gone Bust: Monetary Policy, Leverage Cycles, and Financial Crises, 1870–2008. American Economic Review, American Economic Association, vol. 102(2), pages 1029–61. Tinbergen, J. (1954). Economic Policy: Principles and Design. North Holland Publishing Company. BIS central bankers’ speeches  7  8  BIS central bankers’ speeches  BIS central bankers’ speeches  9  10  BIS central bankers’ speeches  BIS central bankers’ speeches  11  12  BIS central bankers’ speeches  BIS central bankers’ speeches  13  14  BIS central bankers’ speeches
It would be too much to promise that that can never recur. Nor can we hope completely to eliminate the linkages within the system that can propagate distress. But this realism is not remotely a counsel of despair. On the contrary, I want to emphasise this morning that the emerging new regime will enable the authorities to lean against stability-threatening exuberance and will make the financial system much more resilient . The tendency to excessive risk in the system That excesses occurred in the run-up to the current crisis is not remotely in doubt. As leverage increased, asset prices rose, increasing net worth and so inducing more balance sheet expansion. The buoyancy in markets gave intermediaries the confidence to lend secured on wider classes of securities – temporarily enhancing day-to-day liquidity. Facing depressed returns from their core business of providing liquidity to customers, banks sought to sustain high headline returns by resorting to ever more leverage and maturity transformation. In other words, increasing leverage fed upon itself. This poses deep but pressing questions about the efficiency and effectiveness of capital markets in monitoring and pricing risk. Why did boards and investors in bank equity expect such high returns? Why didn’t the capital markets downgrade the value of bank equity and debt as leverage and other sources of risk increased? Why didn’t the markets distinguish more between banks? 1  These remarks draw on a chapter contributed to a book, edited by Andreas Dombret of the Bundesbank and Professor Otto Lucius, being published next year.

Philip R Lane: The monetary policy toolbox and the effective lower bound Welcome address by Mr Philip R Lane, Member of the Executive Board of the European Central Bank, at the ECB Conference on Monetary Policy “bridging science and practice”, Frankfurt am Main, 11 October 2021. * * * It is a pleasure to welcome you to the 2021 edition of the annual ECB Conference on Monetary Policy. As captured in the title of this year’s event, this conference series serves a vital role in bridging the science and practice of monetary policy. In particular, it is essential for the ECB to incorporate in our analytical framework the theoretical and empirical insights generated by the global academic community, and the conference format (albeit in webinar mode again this year) is very effective in providing us with a platform to discuss the latest developments. The breadth of academic research (in terms of both topics and research techniques) that is relevant for monetary policy is quite wide and this is reflected in the composition of the conference programme. The agenda includes research that exploits financial market data to examine the transmission of monetary policy, studies the impact of the pandemic on firms and banks using entity-level datasets, analyses the interactions between monetary policy and financial stability in a full-scale macroeconomic model, and explores the impact of monetary and fiscal policies on the formation of household expectations.
If investors have doubts about the dollar, there is no need any longer to rush into the Swiss franc, the euro will do just fine. Second, the eurozone, although not quite to the extent of the United States, is largely a closed economy. Movements in the euro are far less devastating than movements of similar magnitude in the Swiss franc or in the German mark. The euro is much more capable than any other currency to take on the role of shock absorber against the U.S. dollar. The eurozone, in some ways, is the large closed economy that the world needed as the counterweight to the U.S. economy. Be it by intent or by chance, the new, two-headed international monetary system, far from being a freak of nature, is a harmonious and balanced construct that should benefit all small open economies, not least Switzerland. There is a third reason why the arrival of the euro has changed the landscape and should fundamentally prove beneficial to the stability of the international monetary system, and that is competition. Even though the U.S. monetary authorities do not have a mandate that is as specifically directed at price stability as the ECB does, investors now have a choice and can vote with their feet. Thus the pressure is on the United States to deliver price stability as well.

Future price developments While we have been able to see some slowdown in the rate of increase in house prices over the past year, the rate is still high; the average price of a single-family dwelling rose by 8 per cent between the first quarter of last year and the first quarter of this year. I believe that we will have to assume that property prices and indebtedness will continue to increase relatively substantially over the coming period. This belief also appears to be shared by the households in SEB’s house price indicator and SBAB’s estate agents barometer. The probability of this happening also seems to have increased recently. For instance, we have seen a rapid increase in the number of persons employed over the past year, which means that more people have the opportunity to be able to buy a house. In addition, it now appears that the property tax will be abolished completely with effect from January 2008. This tax will instead be replaced by a municipal charge of a maximum of SEK 4,500. At the same time, tax on capital gains on housing will probably be raised from 20 to 30 per cent. It is no easy task to quantify the potential effects this tax reform may have on house prices. Even if the abolished tax is financed through the housing sector, I believe that it will push up property prices to  BIS Review 56/2007  5  some extent.
This reasoning even led some governments to adopt policies with a bias to promote manufacturing in the belief that this would be the route to more rapid overall growth, although this seemed to ignore the demand side – that the public would become saturated with goods and increasingly desire to consume services. I don't know whether any of the protagonists of that school of thought are still alive today. If they are, and even if they could still identify some services where productivity has not advanced very much (hairdressers and taxis are among the usually quoted examples), they would be astonished at the productivity growth which has been apparent in banking and certain other service sectors around the world in recent years, as a result of the forces of globalised competition and the opportunities presented by technological advances. It is clear, therefore, that banking and other financial services not only provide essential support to development but also make their own contribution to national income. I am often asked questions such as what is the long-term growth prospect for this sector or how will the mix of activities within the sector evolve. The simple and honest answer is that I don't know. Plainly, there are limits to the likely domestic demand for these services. But that demand may be supplemented if overseas customers are attracted to use our local services, or, of course, diminished if local customers choose to satisfy some of their needs from overseas.

Price-earnings ratio for Sweden and USA Affärsvärlden general index and S&P 500 40 35 30 25 20 15 10  S&P 500 average for 1871-1999  5 0 1950  1955  1960  1965  1970  1975  1980  1985  1990  1995  2000  Note: Exceptionally high P/E ratios for Sweden in 1992 and 1993 are not shown here Sources: Global Financial Data and Statistics Sweden  Although long series for the Stockholm Exchange’s P/E ratio are hard to find, it is hardly controversial to say that the present level is well above the historical average. The deviation of share prices from the fundamental conditions that have applied historically is even clearer after a look at the path of  Real trends in US shares S&P 500, average annual percentage change  15  15  Total real return  11  Real share price 10  Real earnings/share 6  5 1  2  2  0  1940-1981  1982-1999  Note. Averages calculated as geometric mean. Somewhat different results may be obtained with an arithmetic mean, an estimated time trend or another base year, but the results still support the conclusion that the earnings trend in recent years is not markedly higher than for the entire post- World War Two era. Source: Global Financial Data  BIS Review 137/1999  2  earnings.