samchain/econo-pairs-v1 huggingface dataset:
Constantinos Herodotou: Recent developments in housing markets and related policy challenges Speech by Mr Constantinos Herodotou, Governor of the Central Bank of Cyprus, at the HL conference organised by the NBB, Nicosia, 18 February 2022. *** The target of macroprudential policy is to mitigate threats to financial stability, by reducing vulnerabilities and promoting the resilience of the financial system. In order to achieve its goal, the macroprudential toolbox has been designed to include two broad categories of measures. First category, authorities can use Borrowed Based Measures, such as limits on the Loan-to-Value ratio, which strengthen the resilience of borrowers against potential vulnerabilities and limit demand for credit. The second category are the Capital Based Measures, such as higher risk-weights on specific exposures, which strengthen the resilience of credit institutions, by increasing available buffers that can be released in case of adverse developments1. One of the macroprudential risks authorities face stems from the overheating of the residential market. The fact that not all euro area countries receive relevant warnings and recommendations by the ESRB is an indication that the Residential Market in the euro area is characterised by heterogeneity. In the upper right quartile of the chart, we find a number of countries that registered an accumulated increase in residential property prices of at least 25% in the last three years. Other countries have recorded accumulated growth as low as 5%.

One of the reasons why macroprudential tools are not always effective, could be that vulnerabilities are not necessarily driven by the credit cycles. In the cases examined, it is evident, that credit for house purchases is not always correlated with the trends in housing prices. For example, Slovenia and the Netherlands experienced a build-up in vulnerabilities in the residential real estate market without a corresponding excessive growth in housing loans. Structural factors could explain the above observation as they affect both demand and supply of housing. More particularly, Net migration and population growth are factors that have continued to put pressure on house prices in countries such as Luxembourg, which experienced net population growth of 13,6% in 2020. Countries with low vulnerabilities in the housing market, such as Greece, experienced a negative population growth. Strong preference for home ownership could also be a driving factor for the observed vulnerabilities in Luxembourg and Slovakia. Homeowners represent 92,9% of the population of Slovakia whereas in France, a country with low identified real estate vulnerabilities, homeowners represent 65,2%. From the above examples, we can conclude that in designing a macroprudential tool, idiosyncratic structural factors need to be identified and accounted for. Monetary policy also plays a role. Although macroprudential policy is the first line of defence, the ECB has recognised that Financial Stability is a precondition for price stability. It has also been acknowledged that monetary policy, can, in principle, influence asset prices such as real estate.
There is no doubt that the housing market has been weakening significantly in recent months and the trend is more advanced still in commercial property markets where prices are falling rapidly. It is widely assumed that weakening property prices will also depress consumption. The Bank has tended to be sceptical of this mechanism. 9 While property prices and spending tend to move together, that doesn’t prove that one causes the other. Both may result from changes in income and expectations of future income. 10 Indeed, in the same way as you can’t have your cake and eat it, it is not clear that a general increase in house prices does create extra spending power for the population as a whole. Owners who expect to remain in their current house for a long time cannot also spend their housing wealth and the benefits to those trading down are broadly offset by the costs to those trading up. While older owners may be richer and believe they can support a more expensive lifestyle, the rise in prices will show through in higher rents and larger deposits for those wanting to get on the ladder. 7  The Deloitte CFO Survey: Benchmarking Corporate Financial Attitudes, 4 January 2008. 8  Benford, J and Nier, E (2007), “Monitoring cyclicality of Basel II Capital Requirements”, Financial Stability Paper No. 3 (December 2007), Bank of England.

John Gieve: The impact of the financial market disruption on the UK economy Speech by Sir John Gieve, Deputy Governor of the Bank of England, to the London Chamber of Commerce and Industry, London, 17 January 2008. *  *  *  Introduction These are testing times for the MPC. The latest official figures for growth confirm the strength of the economy in Q3 with above trend growth in domestic demand and a growing current account deficit. But the evidence from surveys and other timely indicators is that growth is slowing quite sharply now, in part because of the rises in interest rates last year. That in itself might justify a progressive shift in policy – from restrictive to a more neutral stance. And the case for easing has been greatly strengthened by the disruption in global credit markets and in our own banking system which brings a risk of a deeper downturn. However we have also seen a big rise in the world prices of oil and food. That is being amplified in the UK by a fall in sterling and is now coming through in our food, petrol, gas and electricity prices. These are likely to raise our inflation rate well above target in the coming months at a time when short term inflation expectations remain uncomfortably high. This combination of upside and downside risks complicates our task of keeping inflation on track to meet the 2% target.
Financial institutions also have a strong starting position in this regard, having amassed a great deal of information on their customers over the years. Evidently, they need to retain access to these data, while always observing high standards of compliance with privacy and data management rules and best practices. Yet it is not merely a question of having this information, but also of having the capacity to take full advantage of it. In other words, being able to process it so as to measure risks properly, analyse profitability and costs on a case-by-case basis, offer quality services and compete on equal terms with the new players. Banks’ position has so far gone unscathed by the entry of competitors. However, this may change with PSD2. Specifically, authorised third parties have access to customers’ bank data, yet banks are not afforded similar treatment. Indeed, rather than banking business opportunities per se, these new operators are more interested in the data. The report rightly states that in order to compete with BigTech on equal terms, a broad exchange of data – and not just financial data – is required. In this connection, the European Commission has already started on various lines of work that seek to improve the re-utilisation of information in the market. Also, proposals such as the Digital Market Act may somewhat mitigate some of the undesired consequences of BigTech’s advantages stemming from anti-competitive conduct.

It is frequently said that regulation always lags behind reality. Yet you must admit that, for some time now, reality has been changing at an ever-increasing speed. Believe me, producing “flexible regulations” is no mean feat. In fact, you might say that concept is practically an oxymoron. 4/5  BIS central bankers' speeches  This is precisely why a regulatory sandbox was recently created in Spain. A sandbox is a closed environment for testing certain innovative projects that do not easily fit the current regulatory framework. This controlled environment allows us to analyse the effects of novel solutions on consumer protection, financial stability and market integrity, and to ensure that they are not used for money laundering. One final matter addressed in the report, which is without doubt receiving huge media coverage, are cryptocurrencies or, as we, the supervisors, prefer to call them, cryptoassets. The report quite rightly draws an instructional distinction between these assets, the “stablecoins”, and central bank digital currencies (CBDCs). Let’s accept that supervisors and regulators are wary of cryptoassets and the limitations of the current regulatory framework to contend with the new digital currency reality. In this regard, the Basel Committee has just issued a public consultation on preliminary proposals for the treatment of these assets. Meanwhile, last September the European Commission presented for consultation a proposal for a regulation on markets in cryptoassets (MiCA). This proposal aims to further enable and support the potential of digital finance in terms of innovation and competition while mitigating the risks.
If the central bank needs to be recapitalised, for example, the government will at some point have to tax the private sector to pay for this (for more on the wealth effects of changes in central bank liabilities see Weil (1989)  , Harrison and Thomas (2019) and Buiter (2020)  ). 5. Reserve remuneration began in late 2005 – see footnote 1 and Chart 1. 6. Those unfamiliar with the model might ask where the upward sloping “LM” curve comes from and why an increase in MS means it shifts to the right. The answer is that money demand is said (reasonably) to depend on spending (Y) as well as the interest rate – desired money balances (including the demand for central bank money) rise along with the level of economy activity. The LM curve traces out the combinations of r and Y consistent with equilibrium in the money market for a given level of reserves (MS) – it’s upward sloping because, if the demand for money is to remain unchanged, in line with fixed supply, then a rise in Y (raising MD) would require a rise in r. When MS is increased this amounts to a new LM curve, to the right of the old one. 7. This has more on the Bank’s market operations and how Bank Rate is set. Some economists (see Woodford (2000) ) have argued you don’t even need central bank money to set the official interest rate or, more generally, to influence demand and inflation. 8.

But we certainly asked ourselves whether that would be all the stronger because of the liquid nature of this extra wealth. Asking the question is one thing, answering it accurately another. It’s obviously possible that we got that judgement wrong and under-estimated the significance of these extra deposits. However, in my view it’s quite hard to argue that this could account for much of the subsequent upside surprise in inflation. First, consumption growth – and that of aggregate demand – turned out to be weaker, not stronger, than the MPC (and many other forecasters) had anticipated. It was also weaker than the prediction of a simple, money-driven model. The orange line in Chart 4 (reprinted from the introduction) plots the forecast values of an empirical “consumption function”, estimated on data up to the end of 2019, that looks a bit like equation [1] but includes an additional term in household  Page 24  deposits (effectively splitting the “W” term into monetary and non-monetary assets). In principle this would allow for any additional impetus provided by the liquid nature of the extra wealth that households had accumulated during the pandemic. Yet the MPC’s forecast in the May 2021 Monetary Policy Report was stronger than this model’s prediction. And the actual out-turn was weaker than both. This might be for any number of reasons. One thing that might help to explain the shortfall is that the “excess deposits” seemed to be skewed towards those – older and betteroff households – less likely to be credit constrained.
Following the financial crisis, a number of studies have been made regarding which capital levels are most appropriate from a socioeconomic perspective 2. Many of them have shown that the macroeconomic advantages of increasing the resilience of the financial system clearly outweigh the costs of the reforms, both in the short term and the long term. 3 It is not in any way so that the necessary reforms now being discussed threaten general economic developments. On the contrary, economic research has shown that well-capitalised banks tend to lend more than banks with little capital do. 4 This is because banks that are well-capitalised also face lower funding costs. We have experience of this in Sweden, where the relatively higher capital requirements have contributed to the financial markets having considerable confidence in Swedish banks. This in turn has increased the banks’ access to cheap funding. With regard to the effect for banks, I would like to point out that the forms the Basel Committee is working with concern how the minimum capital requirement, also known as the Pillar 1 requirement, should be calculated. Banks with crossborder operations benefit from Basel III now containing this type of joint minimum standard. But Pillar 1 is only a part of the total capital requirement. The amount of capital a bank needs to hold in total is also determined by Pillar 2 and by national buffers, that is, requirements set by national authorities.

Additionally, an integrated ASEAN market will also serve to facilitate the meeting of global standards as SMEs upgrade to meet the more harmonised compliance requirements across the region. Thirdly, SMEs will also benefit from the drive to strengthen connectivity in the ASEAN region. As highlighted in the Master Plan on ASEAN Connectivity, a comprehensive roadmap of strategies has been outlined to address connectivity challenges on three key areas, namely physical infrastructure, institutions and the people in ASEAN. Increased connectivity across all three dimensions will provide the physical and soft elements needed to create the enabling business environment for SMEs. Fourthly, various SME-specific policies by the ASEAN member countries will also benefit SMEs in the region. This includes the establishment of a regional SME internship programme which has assisted SMEs in seven ASEAN countries to enhance the skills of their employees through structured staff exchanges and capacity building workshops. A further initiative is the recent launch of the online ASEAN Marketplace which aims to provide SMEs with information on the business environment in each respective ASEAN country and a business directory of SMEs to facilitate the access to the markets in the region as well as the potential for collaboration of SMEs across the region. To date, more than 1,000 SMEs across the region have registered with this online portal. It is expected to attract more than 20,000 businesses during the course of this year.
The achievement of the overriding policy objective: price stability Confronted with a series of adverse exogenous supply shocks (affecting in particular oil prices, food products and services prices) leading to a rise in the HICP of above 2% in year-on-year terms from 2000 to 2002, the level around which the HICP has hovered since, the Eurosystem has been able to achieve its main objective: since the Eurosystem became responsible for monetary policy in the euro area, HICP inflation has averaged 2%, which is near to the “close to but below 2%” at which we aim over the medium term. Let me remind you that HICP inflation was around 4% in the 1980’s and about 9% in the 1970s [see Figure 1]. Until recently, the single monetary policy also succeeded in stabilising and anchoring medium to longterm inflation expectations at around 1.8% to 1.9%, despite all the above mentioned shocks. That is to say, once again, at a level close to, but below, 2% in accordance with our definition of price stability – whether one takes the inflation expectations derived from surveys (for example, Consensus Forecast, or the ECB survey of professional forecasters – [see Figure 2] ) or those drawn from market data, notably index-linked government bonds. Recently, the awareness of a durable higher cost of oil has pushed expectations slightly above 2%. The last December key ECB interest rate’s hike has however brought these market expectations back to 2% that is to say in line with our definition of price stability over the medium term.

They are entirely institutionally, operationally and financially independent. 2  BIS Review 4/2006  1.2. Transparency and accountability are also essential for gaining credibility Naturally, the independence of these institutions requires transparency in their decision-making processes and accountability vis-à-vis the general public and their representatives. As regards new institutions such as the ECB, transparency is even more important for gaining credibility and building up economic agents’ confidence in the new currency. In order to establish this credibility and gain the confidence of agents, it is imperative to be understood, which in turn calls for transparency. For the sake of transparency, the Governing Council has specified and quantified its definition of price stability (inflation below but close to 2% over the medium-term). Second, the ECB has gone beyond the accountability requirements laid down by the Treaty by instituting regular testimonies by the President of the ECB before the European Parliament and regular informal meetings with the Eurogroup of Finance ministers. Another channel for transparency is constituted by the regular publication of reports on economic developments and Central Bank analysis, of the Eurosystem’s and ECB’s staff projections exercises, most prominently in the ECB’s Monthly Bulletin. Finally and most importantly, following monetary policy decisions, the President and Vice-President of the ECB hold a press conference followed by an open discussion with journalists, the transcript of which is published on the ECB’s website.
Philipp M Hildebrand: Where is productivity growth in Europe? Summary of a speech by Dr Philipp M Hildebrand, Member of the Governing Board of the Swiss National Bank, to the Vereinigung Basler Ökonomen, Basel, 28 October 2004. The complete speech can be found in German on the Swiss National Bank’s website (www.snb.ch). *  *  *  Since 1996 the E.U. is lagging behind the U.S. in terms of productivity growth. This phenomenon has become more pronounced since 2001. The growth of GDP per work hour in the E.U. between the periods 1990-1995 and 1995-2002 is lower by two percentage points per year. This difference amounts to 2,8 percentage points per year if one compares the periods 1990-1995 and 2000-2005. Differences in GDP measurement account for roughly 0,5 up to a maximum of 1 percentage point of the productivity growth differential. The remaining difference is caused by two factors. On the one hand, total factor productivity growth has accelerated in the U.S. This was made possible by a wideranging restructuring of the U.S. economy which provided an optimal backdrop for the new information and communication technologies. On the other hand, capital deepening in Europe was lessened by employment growth. The productivity of this additional labour input has to be increased through strong educational efforts, open markets and additional investment. Labour market reforms remain indispensable in order to enhance the productivity of all workers. Product market reforms will be crucial in order to unleash the full productivity potential of the new technologies.

Jean-Claude Trichet: Interview with L’Espresso An interview with Mr Jean-Claude Trichet, President of the European Central Bank, conducted by Mr Claudio Lindner, published 15 September 2006. *  *  *  Mr Trichet, let us begin our examination of Europe with the message that the figures are giving us: are we in fact seeing a recovery? As early as the second half of 2005 our diagnosis was that the euro area was experiencing a gradual recovery and approaching the level of its growth potential. This diagnosis has now been confirmed by the very good data for the second quarter of 2006 which allow us to record good – and better than forecast – progress in the first half of this year. However, a word of caution: this does not mean that we are changing our diagnosis for trend growth. When we had a rather disappointing figure for growth in the fourth quarter of last year we said it did not change our sentiment that trend growth was around potential. I would say the same today after those flattering hard figures. We have to view everything from a medium-term perspective. And we should not discount the level of uncertainty that exists in the world today. Not least because the United States, by contrast, seems to be experiencing a slowdown. What counts for us right now is the overall economic situation, on a global level, and therefore not just in the United States.
Market financing costs have fallen, while bank lending rates for both firms and households have dropped by more than 110 basis points and are now at historical lows. This has been accompanied by rising lending volumes and improved access to finance, especially for small- and medium-sized enterprises. And crucially, our policy has not only eased financing conditions on average, but triggered a remarkable convergence in borrowing costs across different euro area countries. Granular data show that in June 2014 the median lending rate for firms in vulnerable economies was 120 basis points higher than for those in stronger ones – despite overnight rates being close to zero. Today the difference is only 20 basis points. Without this, it is likely that large parts of the euro area would have been remained stuck in a self-sustained credit crunch. The recovery is progressing and gaining momentum As this policy stimulus has worked its way through the economy, the atypical makeup of the recovery – relying mostly on monetary policy and oil prices – has been gradually shifting towards a stronger contribution from underlying growth forces. This is evident from the fact that, as the impetus coming from oil prices wanes, the economy is accelerating rather than slowing. There are indeed three features of the recovery which give us confidence that it may be gaining its own momentum, although – given the severity of the slump we are emerging from – monetary policy still remains critical to facilitate the transition.

The growing importance of balance sheet considerations in monetary policy only reinforces the importance of transparency in central bank communication. 5 Finally, let me make an obvious but nonetheless crucial point, even if it goes beyond today’s topic. Transparency is a valuable good in its own right. For good reasons, central banks are powerful and for the most part politically independent institutions. Moreover, the officials who run central banks are typically appointed for lengthy terms and are difficult to remove from their positions. Transparency is a crucial element in creating democratic legitimacy for politically independent institutions whose actions can have wide-ranging consequences for a country’s citizens and its elected government. As former Fed Chairman Alan Greenspan (1996) said ten years ago, it “cannot be acceptable in a democratic society that a group of unelected individuals are vested with important responsibilities, without being open to full public scrutiny and accountability.” Transparency is of little use if markets and the public do not believe what a central bank says. Credibility is therefore a condition that is a sine qua non for a successful monetary policy. How can credibility be established? Alan Blinder (1998) summarises credibility as a "painstakingly built up history of matching deeds to words". A long history of actually matching deeds to words, of honest communication and a reputation for delivering price stability will therefore ensure central bank credibility.