samchain/econo-pairs-v1 huggingface dataset:
Looking at the breakdown by instrument, in the first three quarters of last year households continued to increase their cash holdings and deposits at a good pace, with new investments in these liquid instruments amounting to € billion. By contrast, households divested € billion from other financial instruments. This may owe to the weak performance of financial markets in 2022. Lastly, repayments of outstanding debt increased over the course of 2022, driven by the repayment of loans for house purchase, possibly as a result of higher interest rates increasing the debt payments made by households with floating-rate loans. Some of those with surplus savings may have used part of these to pay down debt, at a time when high inflation is eroding the real value of cash holdings and deposits. To sum up, in 2020 the bulk of the savings built up – mainly by higher-income households – was put into liquid assets. In 2021, residential investment began to gain upward momentum, while a larger share of net financial asset acquisitions took the form of investment funds and cash holdings, and deposits represented a lower relative share. Lastly, in 2022 (albeit in the absence of data for the full year), the acquisition of financial assets declined as savings levels dropped. 3  Further, we will have to wait and see how investment decisions are affected by rising interest rates, both in terms of the type of financial product (investment funds, debt securities, etc.)

An IMF study of twenty property crises in different countries shows that they entailed a fall in prices of 30 per cent. The countries’ GDP was on average four per cent lower three years after a property crisis had started than it would have been without the fall in prices. 1 The scars in the real economy may well be considerable and given this it is interesting to discuss how a central bank should react to changes in asset prices. In the international debate on asset prices and monetary policy there are several different points of view. A common view is that monetary policy should only react to changes in asset prices to the extent that these affect the central bank’s inflation and growth forecasts. One should thus not have a separate strategy for dealing with changes in property prices. Others think that a central bank can improve the outcome for inflation and production by reacting to changes in asset prices over and above their consequences for the inflation forecast. Two main arguments have been put forward. Firstly, monetary policy can alleviate the effect of the price change on the real economy. Secondly, the actual knowledge that the central bank will react should reduce the probability of exaggerated price movements occurring. The difficulty lies in determining whether or not prices are increasing at an exaggerated rate. It is not necessarily so that a central bank is better qualified to make such an assessment than the market participants.
The good news in the United States means that we are better able to handle bad news from Europe. With that said, the exposures of U.S. banks climb sharply when one also considers their exposures to the core European countries and to the overall European banking system. U.S. money market mutual funds, in particular, have significant European holdings. This means that if the crisis were to broaden further and intensify, it would put pressure on the capital and liquidity buffers of U.S. banks and other financial institutions. Third, severe stresses in European financial markets would disrupt financial markets here, which could harm the real economy. Stress in the financial markets causes banks to more carefully husband their balance sheets. When that phenomenon occurs, the availability of credit to U.S. households and businesses becomes constrained. Such conditions could also cause equity prices to fall, impairing the value of Americans’ pension and 401(k) holdings. This would damage the U.S. recovery and result in slower output growth and less job creation. At a time when U.S. unemployment is very high, this is a particularly unacceptable outcome. In the extreme, U.S. financial markets could become so impaired that the flow of credit to households and businesses would dry up. 2  BIS central bankers’ speeches  U.S. dollar swaps In today’s globally integrated economy, banks headquartered abroad play an important role in providing credit and other financial services in the United States.

It is the duty of the financial institution and its representative to help the customer understand what he is buying and what risk he is taking. Disclosure alone is not enough. Ask any consumer of financial products having to go through hundreds of pages of product disclosure written in unintelligible legalese. Financial institutions must make the information they provide more transparent: transparent about risk, especially the circumstances under which the customer could lose all or most of his money; transparent about the assumptions underlying return projections or estimates; and transparent about fees, charges, and commissions. Financial institutions must ensure that their sales representatives have sufficient knowledge and skills. In Singapore, prospective financial advisory representatives are required to pass relevant examinations before they are allowed to offer advisory services. They are tested on not just product knowledge but also the skills to effectively engage their customers to understand their financial needs and risk profiles. Going forward, they will be tested on their understanding of ethical principles. More specifically, their ability to assess situations where there might not be explicit rules, but which nevertheless present potential conflicts of interest. Those who sell financial products should recommend what to buy based on what is most suitable for their customers, not what will maximise their own commissions or rewards. MAS worked with the industry a few years ago to put in place a “balanced scorecard” as the basis for remunerating financial advisory representatives.
We believe that it will take more time, perhaps as much as another year, for enough of these homes to be bought that residential construction might begin a meaningful recovery. On the labor front, the most recent employment report for January 2011 is quite difficult to interpret. Only 36,000 nonfarm payroll jobs were added, well below expectations. Yet, we get a very different perspective from the unemployment rate, which fell by 0.4 percentage points for the second month in a row and now stands at 9.0 percent. Job growth was undoubtedly held down by the severe winter storms that affected many major cities, including our own. BIS central bankers’ speeches  1  The decline in the jobless rate was not an unmitigated positive, as a significant part of this decline was due to fewer people looking for work. Thus, neither the disappointingly slow job growth nor the welcome steep drop in unemployment seems to paint the full picture. The truth lies somewhere in between. Despite the stronger job growth that we expect in the months ahead, we will continue to have a substantial amount of slack in our labor markets that will take time to absorb. At this point, while the soft patch is over and the risk of a double dip has subsided, the economy still faces headwinds as a result of the aftermath of the financial crisis, the housing bust and the high level of unemployment that still prevails.

The nature of the run-up to the crisis has been well-documented, so let me focus here on the latter two phases: the crisis and convalescence. During the crisis, weakness in the housing market contributed to financial strains as many families found that their mortgages were “underwater,” that is, their homes were now worth less than their mortgage balances. As a result, they had no financial buffer they could tap if their finances came under stress. And, as the economy weakened further, many households faced sharply reduced incomes as family members lost their jobs or had their work hours cut. So, more families found it difficult to pay their credit card bills and other debt obligations on time. As a consequence of these strains, households began the painful process of deleveraging. They started reducing the amount of debt they owed, relative to their income. During the runup to the recession, households were saving only about 2 percent of their income; now they are saving around 6 percent of their incomes. This increase in saving was mostly used to pay down their debts, but it also included adding to their savings accounts and borrowing less. Of course some of the reduction in debt reflects loan charge-offs of bad debts. But work done here with the Consumer Credit Panel shows that some consumers also became more frugal, rebuilding their net wealth by paying down their debts.
But perhaps it has been equally important that it has been possible to adjust workforces and wage growth at a local level. First, companies can adapt the use of labour to production by using overtime, part-time positions or contract labour. Moreover, the supply of labour is highly flexible. When demand rises, the number of job-seekers increases. Those who are already employed work more. During an upturn, we have in particular observed an increase in labour force participation among young people. Along the same lines, the number of persons in education tends to rise when unemployment is rising. When labour demand increases, we see an influx of job-seekers from our neighbouring countries. In addition, close to 30 000 persons had some form of employment in Norway throughout or during parts of 2001, but resided in Sweden. With the enlargement of the EU Norway has become part of a larger labour market. Enlargement also provides scope for increased trade in services. This increases the production capacity of the Norwegian economy. For example, it seems that capacity in the construction industry has increased. The activity level is now very high, and there are still no signs of rising wage growth. Hence, labour mobility can eliminate bottlenecks in the labour market. Employment is also strengthened by local wage negotiations. Some of the newer industries apply performance-related pay to a greater extent, allowing firms to reduce costs more easily while retaining employees when earnings decline. There also seems to be wage flexibility in more traditional industries.

During spring 2005 and 2006 the credit assessments appear to have deteriorated, at the same time as loans were granted on terms that far from corresponded to the risks. The price of risk was quite simply too low. However, during this period risk premiums on all assets fell. So it was not merely on subprime loans where the price was set too low. The same also applied, for example, to the market for leveraged buyouts. Hedge funds were the first to experience problems The first signs that the spark had reached the powder keg came during the summer, when it was evident that there would be more defaults on subprime loans than had been feared earlier. Two hedge funds tied to the US investment bank Bear Stearns were among the first to be affected. The funds had borrowed money which was then invested in structured credit instruments linked to securitised subprime loans. When the financiers wanted to pull out, the funds were forced to sell their assets. However, they were not successful as suspicions against subprime loans had increased and the funds collapsed with substantial losses. At around the same time the credit rating agencies began downgrading credit instruments containing subprime loans. As the ratings have set the tone for how the instruments are assessed, the downgradings have meant that the financial markets more or less lost confidence in anything that might contain subprime loans. Finally the banks were also affected But it was not only hedge funds that had invested in subprime loans.
Ravi Menon: Financial advisory services – putting the customer first Keynote address by Mr Ravi Menon, Managing Director of the Monetary Authority of Singapore, at the Life Insurance Association 50th Anniversary Gala Dinner, Singapore, 26 March 2012. *  *  *  LIA President, Mr Tan Hak Leh Distinguished guests, ladies and gentlemen, good evening. Role of life insurance and financial advisory services Saving for the future, investing for returns, and protecting against risk – these are the fundamentals of managing our finances. Yet so few of us do it well. We are far better at earning an income than investing it and protecting against risk. To make matters worse, many life insurance and investment products are often not easy to understand. Many people are not financially savvy. And many of those who are, do not have the time to review the range of insurance and investment products available, and understand what is best suited for their needs. This is where financial advisory service comes in. Financial advisers can help people identify their insurance and financial planning needs and recommend suitable products. The roles of insurers and financial advisers are intimately intertwined. It must be so. Insurance protects dependants. Investments grow savings and wealth. How can we buy insurance without regard to our broader investment portfolio? Likewise, how can we invest without considering how well we are protected against death or disease? Life insurance and financial advisory services go hand in hand.

But of late, we have noticed a worrying trend of FA representatives conducting or wanting to conduct other activities alongside providing financial advice. Let me give a few examples.   We have received queries from insurance agents who also want to be real estate agents. They want to be allowed to market and earn commissions from property transactions, often to the same customers they provide financial advice to.   Some FA representatives have even applied to the Casino Regulatory Authority for a junket promoter license!   MAS has received complaints against FA representatives who used their regulatory status to market questionable schemes in gold bullion. Some of these activities are clearly in conflict with FA activities. They risk undermining the interests of consumers. We will review the activities that FA representatives can conduct outside their advisory role, to ensure that representatives continue to put their customers first. Specifically, we will work with the industry on a list of activities that FA representatives should not engage in. To my mind, the activities with clear conflicts include:   money lending;    promoting junkets for casinos;    selling real estate; and    marketing investment products which do not accord safeguards to customers under the Financial Advisers Act. 4  BIS central bankers’ speeches  We will also review other activities that FA representatives engage in that are not in conflict but which may distract representatives from their professional focus.
And as I mentioned earlier, I am expecting further improvements in economic activity, with real GDP growing at around 3 percent over the next 18 months and the unemployment rate declining further to a little over 5 percent by the end of 2016 – in line with what I think is its long-run neutral level. So I do see us getting back close to our policy goals over the next two to three years. A balanced approach to monetary policy It is important for me to say that this forecast is predicated on the assumption that the FOMC takes a very patient approach to reducing policy accommodation. Let me elaborate on why I think this is appropriate. I see two important and divergent ways my forecast could go wrong. One is that I may be overestimating the underlying strength in the real economy, so that a successful and sustained exit from the ZLB may be more difficult than I currently believe. Guarding against this risk calls for a more patient removal of accommodation. The second is that I may be  BIS central bankers’ speeches  3  wrong about the inflation outlook, and we could be poised for a much larger rise in inflation than I am forecasting. This risk calls for more aggressive rate hikes. How do I think policy should balance these divergent risks? How should they affect the FOMC’s strategy of pursuing a balanced approach to achieving our policy goals?

As in many places around the region, employers in Rochester are having difficulty finding workers to fill a number of middle-skill jobs, like nurses, automotive technicians and computer-controlled machine operators. Out of this partnership, we launched a pilot project challenging college students to create a short video profiling middle-skill jobs that are available in the area in order to drum up interest in opportunities many people may not even know exist. Access to credit for small businesses is another important issue we’ve focused on in recent years. Our outreach group conducts a bi-annual poll of small businesses in our region to better understand their credit needs and access to credit. The results consistently show that gaining access to credit is one of the top growth challenges for small businesses. In my visits across the District, I have heard small business owners voice similar concerns. In response, we’ve helped bring small businesses together with lenders to help smooth access to credit. Over the past year we have conducted ten access-to-credit events— workshops, clinics and conferences—for companies interested in learning about traditional and alternative sources of financing. We partnered with local and national government agencies, small business development centers and local nonprofit organizations to hold these events throughout the District. One such workshop was held recently in Queens. The Queens Economic Development Corporation and the Queens Chamber of Commerce, with support from the New York Fed’s Asian Professional Network Alliance, co-sponsored a resource clinic for small businesses.
11  For example, ‘Treasury Committee Questionnaire ahead of appointment hearing for Mr Paul Tucker’, The Monetary Policy Committee of the Bank of England: appointment hearing, First Report of Session 2005-06, Volume II. 12  Erceg C.J. and A.T. Levin, 2003, ‘Imperfect credibility and inflation persistence’, Journal of Monetary Economics, 2003, vol. 50, issue 4. BIS Review 46/2006  3  Notwithstanding the extent to which analysis of real economic variables seems to dominate the pages of most central banks’ published analysis, including the Bank of England’s, maintaining real aggregate demand in line with supply is not a sufficient condition for achieving an inflation target; indeed, it would be consistent with any level of inflation. We absolutely have to attend to indicators of medium-term nominal trends. That is why central bankers like me look at measures of inflation expectations from as many sources as we can: bond markets, surveys etc. And it is why the ECB and others, including at the Bank of England, track the monetary aggregates as a cross check, a potential amber light alerting us to medium-term risks. Stabilisation policy and the impracticalities of fine tuning: real-side stuff That brings me to the second element in the conduct of policy: stabilisation of the path of demand and output, in order to keep inflation in line with the target over the cycle, to underline the commitment to medium-term stability, and as something desirable in its own right. Well-anchored inflation expectations do make stabilisation policy ‘easier’.

Jean-Pierre Roth: The position of the Swiss franc exchange rate in the Swiss National Bank monetary policy strategy Summary of a speech by Mr Jean-Pierre Roth, Chairman of the Governing Board of the Swiss National Bank and Chairman of the Board of Directors of the Bank for International Settlements, at the University of St. Gallen, St. Gallen, 19 December 2007. The complete speech can be found in German on the Swiss National Bank’s website (www.snb.ch). *  *  *  The exchange rate is an important factor in determining the domestic price level in Switzerland. Nevertheless, it is not a monetary policy goal for the Swiss National Bank and is only relevant insofar as it has an impact on future inflation. Our concerns about our currency's weakness should not be read as a hidden form of exchange rate policy but rather as genuine concern about future price stability. A sustained tendency to weakness on the part of the Swiss franc could trigger inflationary effects that – sooner or later – would have to be countered with monetary policy instruments taking the form of interest rate measures. In the medium-term, this could lead to a reduction in the interest spread between the Swiss franc and the euro. BIS Review 151/2007  1
One cannot rule out the possibility that we ourselves at some point 24 [35]  will need support in a corresponding manner, and I really hope that one will review the proposals in this aspect so that the Riksbank can continue to play the constructive role we have had for a long time. I also consider it to be of central importance that the Riksbank can cooperate in an efficient manner with the ECB and not be regarded as something of an odd bird in EU contexts. Another problem is how the new proposed act relates to EU legislation. The ECB has pointed this out in a critical comment on the work of the inquiry used as a base for the Government’s proposal. In particular the narrow definition of what is considered to be monetary policy, and which is thus covered by the Riksbank’s independence pursuant to the proposal, has aroused criticism from the ECB. The proposal therefore gives the impression of a general distancing from EU legislation. As IMF has provided criticism of the Committee’s proposal, one also gains the impression that the proposal is on the whole a distancing from international standards regarding central bank tasks. The Riksbank is a part of the European System of Central Banks, ESCB, and covered by EU legislation. As I see it, this cooperation will be made more difficult with a definition of monetary policy that differs from what applies to the other central banks in the EU, and even globally.

I believe that the role played by the Banco de España in promoting this accumulation of provisions is well known, so I shall not dwell on this point. I will, however, point out that there are various idiosyncratic factors in the performance of Spanish institutions that have limited their exposure to the current shocks. I have already mentioned that in the euro area there is no equivalent to the US sub-prime mortgage market, an observation that applies fully to Spain. Rather, the credit quality of Spanish mortgages is high, as shown by the low doubtful assets ratio and the moderate levels of the average loanto-volume ratio and of the collateral required. Along these same lines, the weight of the assets linked to the sub-prime mortgages on institutions’ balance sheets is completely marginal, as is also their indirect exposure through any lines of credit granted to other financial intermediaries that may actually hold such assets. The fact is that intermediaries of this type have not proliferated in Spain’s financial system. One of the factors that has probably contributed most to preserving the quality of assets in the Spanish financial system is the persistence of a traditional banking model in which, unlike in other countries (especially the United States) in recent years, institutions have used asset securitisation mainly to fund the expansion of activity and not to transfer to third parties the risks associated with their loan portfolio.