samchain/econo-pairs-v1 huggingface dataset:
The figures I have just mentioned suggest that, overall, structural reforms in the labour market still need to be high on the agenda. This appears even more urgent if we consider that in the past Europe’s growth performance has been, and will be in the future (all else equal), increasingly constrained by its low population growth rate and population ageing. Indeed, since the mid 1990’s, population in the euro area has been growing at a yearly rate of just 0.4% compared to 1.1% in the US. However, what is worrisome is that at the same time, the gap in population growth has been even larger with regard to growth in the working age population. The working age population grew on average by 0.3% per year in the euro area over the period 1995-2007 compared to 1.2% in the US (1.1% in Spain). Finally, turning to labour productivity, while during the 1980s and the first half of the 1990s, hourly labour productivity in the euro area grew on average by 2.3%, it slowed down to 1.3% between 1995 and 2007. Similarly, over the same period hourly labour productivity growth in Spain decelerated very significantly from 2.5% to 0.5%. By contrast, US hourly labour productivity growth rose from 1.4% to 1.8%. The positive labour supply shock, reflected by the increase of employment particularly in the unskilled segment of the labour market experienced in the euro area as well as in Spain has,  2  Average to 2007Q3. 3  Source Eurostat.

More generally speaking, the evidence suggests that the reallocation of capital from declining industries to industries with high investment opportunities and high productivity is faster in countries with developed financial markets. These findings suggest that countries with more liquid capital markets and a developed banking system are growing faster on average. 15 Increasing product market competition – at the EU and national levels – would enable more efficient production structures. The benefits of opening network industries to competition can be seen in the telecommunications sector. The hourly labour productivity in this particular sector saw a significant acceleration from 4.5% to 7.3% from the periods 1980-1995 to 1995-  11  See the ECB Occasional Paper Series No 44 “Competition, productivity and prices in the euro area services sector”, by the Task Force of the Monetary Policy Committee of the ESCB, April 2006. 12  European Commission, “The single market: review of achievements”, November 2007. 13  Today, the services sector accounts for 70% of GDP, 68% of employment and 96% of the new jobs created, but only 20% of intra-EU trade. This discrepancy reflects not only the fact that services often have an intrinsically local character, but also the many barriers and obstacles still hindering the free movement of services within the European Union.
5 4/5  BIS central bankers' speeches  5 John C. Williams, Now is the Time for Banking Culture Reform, June 18, 2018. 6 Reforming Culture and Behavior in the Financial Services Industry: Progress, Challenges, and the Next  Generation of Leaders 7 Stephanie Chaly, James Hennessy, Lev Menand, Kevin Stiroh and Joseph Tracy, Misconduct Risk, Culture, and  Supervision, December 2017. 8 John Sterman, “Learning from Evidence in a Complex World,” Public Health Matters, 96(3), 2006. For example,  the overuse of antibiotics that spread resistant pathogens. 9 Michael Held, Reforming Culture and Conduct in the Financial Services Industry: How Can Lawyers Help?,  Remarks at Yale Law School’s Chirelstein Colloquium, Mar. 8, 2017. 10 Banking Standards Board 11 Richard H. Thaler and Cass Sunstein, Nudge: Improving Decisions about Health, Wealth, and Happiness,  2009. 12 Kurtz and Snowden, “The new dynamics of strategy: Sense-making in a complex and complicated world,” IBM  Systems Journal, Vol. 42, No. 3, 2003; and, David Snowden and Mary Boone, “A Leader’s Framework for Decision Making,” November 2007, Harvard Business Review. 13 See Misconduct Risk, Culture, and Supervision for more on the concept of “cultural capital.”  5/5  BIS central bankers' speeches

Importance of scenario analyses and stress tests A second challenge arises from the lack of satisfactory analytical tools to measure the impact of climate change on traditional financial risks and on the resilience of banks and the financial sector as a whole. Scenario analysis exercises and stress tests are particularly appropriate: their forwardlooking nature and the ease with which numerous assumptions can be included make them especially suited to measuring these risks. 14  Proposal for a Corporate Sustainability Reporting Directive (CSRD), European Commission, April 2021. 15  Basel Committee on Banking Supervision press release, BCBS, November 2021. 5  These instruments are not new. Indeed, they have been used by supervisors for prudential purposes since the last global financial crisis. However, some significant adaptations are needed to capture the complexity and uniqueness of climate risks. In this respect, the BCBS published a report in 2021 analysing the main problems that arise when measuring these risks.16 Essentially, three difficulties stand out: the complexity associated with the design of different physical and transition climate-risk scenarios, the need to incorporate different time horizons into the assessments and the operational problems involved in carrying out these exercises, in terms of the data and resources required. As regards the scenarios, the NGFS has developed a set of scenarios intended mainly for central banks and supervisors, which may also be useful for stress tests for financial institutions.
But it is a challenge, too, for the financial authorities who need to balance the need for market competition with the maintenance of minimum prudential and business behavioural standards by individual financial institutions, and the need to preserve overall macro-level financial stability. How far we are succeeding in meeting this challenge is, to my mind, the essential criterion against which we should seek to assess the development of our financial systems. Against that background let me now try to identify some of the main drivers of change that have been, and are, affecting all our financial systems to varying degrees. The first is financial deregulation, that is to say the relaxation of controls designed to override market forces in either an overall macro-economic or a directional sense. In the case of the UK this extends back very importantly to the abolition of exchange controls and direct controls over bank lending over twenty years ago, to enabling building societies (our principal mortgage providers) to extend their range of financial services activities, to the opening up of membership of the Stock Exchange and broader capital market intermediation and so on. Deregulation in this sense was both encouraged by, and in turn contributed to, increasingly intense competition within the financial services industry, including a blurring of traditional distinctions between different types of financial institution.

Whether or not these initiatives lead over time towards greater "convergence" of our financial systems in some structural sense – as they may – taken together with national deregulation they should at least contribute to greater competition, including cross-border competition, and help to improve the effectiveness of our financial systems in terms of the key criterion which I suggested earlier in my remarks. That is particularly true, at least potentially, of the steps proposed to advance the European single financial market, as set out in the Commission's Financial Services Action Plan, because of its broad scope. But progress has so far been painfully slow. In that context I welcome the recent emphasis on closer and more active co-operation between financial regulators within Europe, regardless of national regulatory structures. And I particularly welcome the proposals put forward by Alexandre Lamfalussy and his "Wise Men" for accelerating progress on measures that would encourage greater efficiency in Europe's securities markets. But there is clearly a great deal more that we can do in this whole area. Such changes in national financial services regulation, and related international and regional actions, taken together with increasing awareness in many parts of the world of the potential advantages of opening national financial markets to international competition, provide an encouraging environment for a second main driver of change in our financial systems – globalisation.
Since mid-2007 decisions have become more difficult and the task more stressful, but the overriding objective of achieving the CPI inflation target and maintaining confidence in this target has remained the right guide for policy. A significant part of an MPC member’s work is explaining policy to various audiences, or accompanying the Banks’ regional Agents on visits and discussions with business and other contacts. I am sure that the work of the Bank’s twelve Agents based around the UK, and the willingness of MPC members to be seen out and about, both contribute to the credibility of the MPC. They also serve the valuable purpose of giving us high-quality and up-to-date feedback on business trends. While these visits enable business audiences to question and debate policy, perhaps another aspect of accountability has been a little less satisfactory. Once a quarter, several members of the MPC accompany the Governor to an appearance before the Treasury Committee. The purpose of the sessions is to hold us to account for our individual votes. However, despite some recent improvement, it remains the case that the vast majority of questions from the MPs tend to be directed at the Governor. My view is that it would be better in future to ensure that each MPC member attending, including the external members, has the opportunity to explain their recent votes and to comment on the key policy issues. As I leave the MPC, the challenges remain considerable.

David Miles: Leverage and monetary policy Speech by Mr David Miles, Member of the Monetary Policy Committee of the Bank of England, at The Economic and Social Research Institute/Foundation for Fiscal Studies (ESRI/FFS) conference, Dublin, 12 October 2010. *  *  *  I would like to thank Jing Yang and Gilberto Marcheggiano for research assistance and to colleagues at the Bank of England for helpful comments. The views expressed are my own and do not necessarily reflect those of other members of the Monetary Policy Committee. You do not need me to stand here in Dublin this morning and tell you what profoundly difficult economic times we are going through. As an elderly New York friend of mine enquired of me recently when I offered such a thought “for such pearls we need economists?” I feebly replied that knowing how much of a mess you were in was of some use and (with rather more confidence) that thinking how you get out of the mess was something economics could help with. Today I want to talk about setting monetary policy as we emerge from one mess and how we can reduce the chances of getting into another one. I am going to focus on the UK but I think much of what I say has relevance here in Ireland and beyond. That it has been a very bad mess is clear.
Independence is of great importance in the medium and long-term perspectives of the Central Bank. An independent central bank, with respect both to its goals and its instruments, will promote the achievement of the price stability target. A central bank which is independent with respect to instruments will implement its monetary policy effectively. It is also recognised that a central bank which is independent of political authority will play an important role in minimising fluctuations arising from political uncertainties. Today, it is apparent that economies with independent central banks that have maintained monetary and financial stability are very strong. The basic features of the Central Bank’s medium and long-term strategies are to choose price stability as its main target, to establish consistency between its functions and its main target, and to revise any functions that may impede the implementation of its monetary programme and in this context to achieve its independence. On the other hand, the organisational efficiency of the Central Bank can be seen as the complementary element of this strategy. There is no doubt that a central bank with qualified personnel, which fulfils its duties with high productivity, will earn full credibility. Distinguished guest, here let me quote one of the economists: “ Credibility cannot be purchased, it must be acquired. And this is achieved step by step, through consistent policy implementations.” To carry the Central Bank, one of Turkey’s most credible institutions, into the future with this in view is the fundamental mission of my fellow workers and myself.

Pursuing monetary policy to stabilise inflation and raising the key rate to achieve this, the Bank of Russia curbs growth in long-term interest rates in the economy. This quarter experience is a good illustration of the above. Despite the increase in the key rate on three occasions since last March for a total of 125 basis points, the yields of long-term OFZs are currently on the same level as in late March. As far as the pace of lending growth is concerned, it remains high both in corporate and particularly retail segments. Thus, mortgages are rising by more than 25% year-on-year. In addition, retail loans are heating consumer demand. We are also concerned by the fact that lending is growing due to loans to borrowers with a high debt burden. Therefore, we resume prepandemic macroprudential add-ons on unsecured loans from 1 July and on mortgage loans with a low down payment and a high debt-to-income ratio of borrowers — from August. The Bank of Russia will stand ready to further increase macroprudential add-ons to prevent the accumulation of systemic risks and to ensure financial stability. Since our meeting in April, the balance of risks has tilted even more towards proinflationary risks. Elevated inflation expectations as a response to high inflation and low interest rates still pose a major risk. With fears of future price growth, people tend to spend more today and save less for tomorrow. This makes prices grow even more rapidly. Disinflationary risks look weaker.
Therefore, high inflation is a major source of concern to the Central Bank as it poses a threat to general economic development. With regard to the real estate sector, high inflation will affect the cost of property. In the case of the low income group, high inflation will make real estate prices unaffordable. Apart from inflation, there are other financial prices which are of great concern to the Bank of Zambia, especially in our efforts to stabilise the macro-economy. One such financial price is the level of interest rates. Interest rates, being the cost of funds, can inhibit borrowing for investment in real estate if they are too high. Inflation also affects the level of interest rates. To this effect, lowering of interest rates requires that all key stakeholders play their respective roles effectively and consistently. The Government, by reducing domestic borrowing, contributes to the lowering of yield rates on Government securities, which are often used as anchors by commercial banks in setting their interest rates. Commercial banks are, on their part, also expected to respond favourably to improving macroeconomic conditions consistent with low interest rates, while borrowers need to improve their credit culture. As for the Bank of Zambia, the greatest contribution we can make to the lowering of interest rates is reduction of inflation to single digit levels. In this regard, the Bank will continue monitoring financial conditions and take appropriate actions to contribute to the lowering of lending interest rates.

My response is that you do not need to see the words “financial stability” in the Federal Reserve Act for that to be a key part of our mandate. The Federal Reserve’s financial stability mandate is seen in the penumbra of the Federal Reserve Act, and that is legally sufficient. Without trying to cover this important topic exhaustively as in a formal legal opinion or a brief filed with a court, let me outline here the essence of the analysis. The starting point in every discussion of the Federal Reserve’s mandate is Section 2A of the Federal Reserve Act, known to many as the dual mandate. It directs the Federal Reserve “to promote effectively the goals of maximum employment, stable prices, and moderate longterm interest rates.”3 While there are actually three discrete objectives in the dual mandate, most economists would say that moderate long-term interest rates are a tool to produce maximum employment and price stability. Such economic reasoning also involves some clever and simple arithmetic – it reduces a tripartite mandate to a dual mandate. With respect to financial stability, leading economic thinkers would now say, and the financial crisis seems to offer us the perfect illustration, that price stability and maximum employment are possible only in a context of financial stability.
And the increase in the diversity of nonbank financial institutions that hold risk may also serve as a stabilizing force in credit markets. But the greater relative importance of nonbank financial institutions also means that distress among these institutions has the potential to have a substantial impact on market behavior and liquidity. Understanding these relationships is an important part of the risk management challenge for banks, even in a world where derivatives have helped spread risk more broadly. The innovations that have taken place in the credit derivatives market were driven to a significant degree by the losses experienced in past crises, but most of the growth in this market has occurred in relatively favorable overall economic and financial conditions. This wave of innovation in credit markets has occurred in an environment in which: •  the price of insurance against credit risk has fallen substantially as realized losses have declined and perceptions about corporate credit fundamentals have improved;  •  volatility has declined in many different types of asset prices, as have expectations of future volatility  •  the number of bank failures in the United States have fallen to levels not seen in a generation or more, and the price of protection against default by the largest financial institutions has fallen to levels that suggest a very low probability of failure; and  •  overall liquidity in markets has been high.

This assessment is also broadly reflected in the March 2019 ECB staff macroeconomic projections for the euro area, which foresee annual HICP inflation at 1.2% in 2019, 1.5% in 2020 and 1.6% in 2021. Compared with the December 2018 Eurosystem staff macroeconomic projections, the outlook for HICP inflation has been revised down across the projection horizon, reflecting in particular the more subdued near-term growth outlook. Turning to the monetary analysis, broad money (M3) growth decreased to 3.8% in January 2019, from 4.1% in December 2018. M3 growth continues to be backed by bank credit creation, notwithstanding a recent moderation in credit dynamics. The narrow monetary aggregate M1 remained the main contributor to broad money growth. The annual growth rate of loans to non-financial corporations declined to 3.3% in January 2019, from 3.9% in December 2018, reflecting a base effect but also, in some countries, the typical lagged reaction to the slowdown in economic activity, while the annual growth rate of loans to households remained at 3.2%. Borrowing conditions for firms and households are still favourable, as the monetary policy measures put in place since June 2014 continue to support access to financing, in particular for small and medium-sized enterprises. The policy measures decided today, and in particular the new series of TLTROs, will help to ensure that bank lending conditions remain favourable going forward.
Since many of those rates are unobservable by the MPC, money, credit and asset prices may contain valuable information about the likely outlook for spending.15 As chart 10 shows, there are times when monetary developments have represented shocks that have affected the supply of money and proved a warning sign of inflationary risks. At other times, its movements have been dominated by changes in the demand for money. In 1973, for example, broad money growth had picked up sharply but inflation was subdued. Yields on gilts provided no indication that a rise in inflation was expected by financial markets. But the rise in money growth, which looked at first to be another instance of a change in the demand for money, was in fact an increase in supply and led to faster expansion of spending in the economy and, by 1975, higher inflation. The 1980s illustrate shocks to both money demand and supply. The first part of the decade was a period of large structural change in financial markets. The demand for money rose sharply relative to spending in the economy so, for a time, broad money growth was rapid and inflation was falling. That structural change probably continued into the second half of the decade. But it now seems that there was also some unwarranted expansion of the supply of money. For a time, that shock was disguised as further structural change in the demand for money but, in 1988, inflation began to rise. It is easy to be wise after the event.

Conclusions  There has been a sea change in the way monetary policy is conducted in the UK. That is evident in the changing dynamics of inflation and in the stability of the economy more generally. It is not, I believe, credible to dismiss that solely as the result of luck. Our monetary policy regime is firmly based on an explicit target for inflation, a floating exchange rate, and clear institutional arrangements for decisions on interest rates which are decided by majority vote of the Monetary Policy Committee with individual accountability of its members. The MPC operates on a regular and pre-announced decisionmaking cycle which respects the principle of individual and accountable voting – there is no hiding place on the MPC. All this amounts to a revolution in the way decisions on interest rates are made in this country. As I said to this audience five years ago, “the MPC has proved to be one of those rare “instantly invented precedents” that seem to have worked”. It is hard now to imagine policy being set any other way. The crucial achievement of the MPC is to have anchored inflation expectations. But, as the saying goes, we are only as good as our last meeting. We fully recognise that we must keep our eye on the ball if we are to continue to anchor inflation expectations on the 2% target. I have talked tonight about some of the challenges facing the MPC over the next ten years.