samchain/econo-pairs-v1 huggingface dataset:
Moreover, in a highly competitive environment, many institutions whose customer base was typically linked to a specific region responded by looking for new markets, opening branches beyond their traditional geographical area. Clearly there was no sense in maintaining these organisational structures and such a dense branch network, with all the associated costs, at a time when the future outlook for banking activity was considerably less favourable than previous to summer 2007, and considering also the impact of possible margin squeezes. Restructuring is clearly the responsibility of the banks themselves. But the authorities designed the FROB (Fund for the Orderly Restructuring of the Banking Sector) as a mechanism to further this process in a way that would minimise the burden for the taxpayer. As a result, and as the banking sector overall is in a healthy position, Spain has been spared the voluminous and widespread recapitalisations, with no commitment to restructuring, seen elsewhere. The FROB envisaged action on two fronts. On the one hand, it gave the Banco de España broad powers to take control of any institution that were to fail. And on the other, on what we could call the preventive side, it allowed financial support to be provided for the restructuring of viable institutions and their management teams, and helped them digest the process; that said, the institutions themselves, and especially those that had experienced management failures, would have to bear the attendant cost.

We must, moreover, act with the urgency demanded by our responsibilities as active members of the common European project in defence of stability and the success of this project. The report I present today is specifically geared to contribute to this task. From spring last year, the economic indicators offered signs that the world economy was emerging from the most critical phase of the gravest real and financial crisis since the Great Depression. Progress since along the path to recovery has been much more evident in the emerging economies, for which the latest projections indicate growth rates above 6% for 2010. By contrast, the developed countries’ economies are recovering at a considerably less dynamic rate, of around 2%. This turnaround confirms that the rapid and energetic economic policy action to support financial systems, to stimulate demand and to sustain confidence was pivotal in halting a spiral of recession and financial instability which, had it continued, would have undoubtedly had disastrous consequences for the world economy. Halting this recessionary spiral was crucial for placing the world economy once again on a path of sustained output and employment growth. But if the incipient recovery – still subject to considerable uncertainty and risks – is to take root, further measures on various fronts will be needed. The bulk of the measures adopted to check the accelerated economic and financial downturn were exceptional. Accordingly, they have to be withdrawn.
This is not a hypothetical story; it is the UK story. If levels of productivity among companies hold the key to explaining regional variations in incomes, this naturally begs the question why does productivity differ by region. Past empirical studies have highlighted a range of factors - economic, geographic, technological, social – in explaining productivity. 11  From that  potentially long list, let me highlight two factors: physical capital and human capital. One important determinant of a firm’s efficiency is the amount it invests in machines and technology - its physical capital stock. Measuring the capital stock is difficult even at an aggregate level and there are no reliable data on regional capital stocks. There are data, however, on regional patterns of business investment and research and development spending – the flow rather than stock of physical capital. Chart 6 shows regional spending on R&D per head of the working age population. This shows a wide regional divergence, with the most R&D-intensive region (the East of England) having levels of investment four times those in the least R&D-intensive region (the North East). This map has a close correspondence with regional measures of productivity, consistent with capital-intensive regions having higher levels of productivity. 12  A second determinant of firm-level productivity is the skill level of workers, so-called human capital. 10 11 12  See ONS ‘Sub-regional labour productivity’, available here. See Barnet et al (2014), IMF (2015), Haldane (2015), OECD (2015).

Would an insurance-type payment be appropriate for firms that enjoyed lender of last resort access but did not have insured deposits? How would the Fed’s role, as the lender of last resort, be coordinated with the oversight responsibilities of the primary regulators? Conclusion Which path to go down – limit wholesale funding or backstop it more broadly – would depend in large part on the social value of the capital markets-based activities presently being  18  A lender of last resort finances with an appropriate haircut. 19  This was demonstrated recently by the European Central Bank’s Outright Monetary Transactions program  20  Several of the largest broker-dealers adopted bank holding company status in recent years, but Section 23A rules restrict the capacity of their banking subsidiaries to channel liquidity to their broker-dealer operations. BIS central bankers’ speeches  9  financed in unstable short-term wholesale markets and the utility of short-term wholesale funding for lenders. Of course, the choice might not be as black and white as this. Some activities undertaken by securities firms or other nonbank entities presumably are much more socially useful than others. In this case, legislators might deem that certain classes of securities firms should be granted access to a lender of last resort facility, but restricted in the scope of their permitted activities to those that do clearly create social value. The sheer size of banking functions undertaken outside commercial banking entities – even now, after the crisis – suggests that this issue must not be ignored.
This happens because banks are highly interconnected – either directly or indirectly. The failure of one bank may trigger the failure of other banks. Such contagion can occur by banks being exposed to each other. When a bank defaults on its debt, creditor banks suffer direct financial losses. But contagion can also be more subtle. The failure of a bank may cause investors and depositors to wonder about the health of other banks. Trust then evaporates and funding sources dry up. Even sound banks might find themselves in the midst of a liquidity crisis. This is what happened in the financial crisis. Either way, a bank’s failure can infect the entire banking system. And in this respect some banks are considered to be riskier than others. I am talking about banks that are big, complex, interconnected, and which cannot easily be replaced. Their failure can disrupt financial stability big time. Such banks are systemically important. If they fail, the financial system can grind to a halt. And not only that: the flow of credit stops, investment and consumption stall, and jobs are destroyed. The social costs can be huge. To prevent all this from happening, governments have repeatedly bailed out systemically important banks with public money. Even medium-sized banks were bailed out for fear of contagion. But the short-term gain of preserving financial stability comes at a great cost in the long term. The belief that banks would be bailed out whatever the cost created bad incentives.

In Italy, for instance, output fell by more than 5% in 2009, while unemployment peaked at almost 13% in 2014. These figures are alarming, but they tell us little about the people who lost their jobs, their homes and their future. Taking all this suffering into account, the crisis turned into a tragedy. As for its causes, I admit that the story I’ve just told is far too simple. Of course, it was not the failure of a single investment bank that caused all this mayhem. The full story is much longer and much more complex. However, no one can deny that banks played a crucial role. It became obvious that they can pose a huge risk to financial stability and the economy. But at the same it’s an inescapable truth that we need banks. Or, to be more precise, we need the services they provide. Why we need banks Who does an investor turn to when she needs money to start or expand a business, when she needs to hedge risks or wants to acquire another company? Who does a saver turn to when he wants to deposit money? Who does a family turn to when it needs a loan to buy a home? Here in Europe, all of them would most likely turn to a bank. Banks provide a vital service to the economy. Without them, the economy would not work. All this leads us to a crucial question: how can we ensure that banks reliably serve the economy?
If money such as Bitcoin or Diem become dominant in Norway, we will move closer to a new 4/7  BIS central bankers' speeches  financial system. Let me first point out that a complete eradication of the Norwegian krone requires that the government also uses a different currency for paying salaries and benefits and accepts it as payment for taxes. In the long term, one should be careful to rule out anything completely, but as it stands today, this does not appear very likely. Yet we can imagine an intermediate solution where the government continues to use the krone, while the private sector prefers one or more cryptocurrencies. For this to take place on a large scale, an infrastructure is needed so that the money can be used at more locations than today. Chart: How much does a cup of coffee cost? With many competing currencies in circulation, we will lose the Norwegian krone as a common measurement unit for what goods and services cost. A simple question about how much a cup of coffee costs may have a complicated answer. Prices must be stated in several currencies, and customers and merchants must agree on which currency should be used in the transaction. Wide exchange rate fluctuations can make this particularly demanding. Even with one cryptocurrency in the private sector, those with income in cryptocurrency who pay taxes in Norwegian kroner will incur an exchange rate risk.

With the right to create money comes obligations. Competition from new participants Chart: Competition from new participants Many of the services banks offer can be provided by others. In recent years, the competition to provide financial services has taken a new turn. The competition comes from both specialised FinTech companies and from global tech giants (BigTech) such as Amazon, Apple and Facebook.7,8 Technological advances are paving the way for new ways of paying. In addition, payment services have become more of a competitive arena. It will now be up to customers, and not banks, to decide which payment solutions will be linked to their bank account. Payment services have become of greater strategic importance for banks as well as other participants. There is increased competition not only for the way we pay, but for the means of payment.9 An example is the e-money offered by PayPal. This is a means of payment that can only be used within closed systems, and that can be converted into bank money at a fixed rate. E-money is often well integrated with other widely used applications and offers efficient payment solutions, for example across borders. Increased use of new means of payment may make banks’ deposit funding less stable. If keeping large sums in new kinds of money becomes more attractive, the money deposited into our accounts will be quickly converted and remain in our current account for a shorter amount of time.
Ladies and gentlemen, While the efficiency of electronic means of doing banking is valued, the basic tenet of banking services that is providing security and safety still remains. The potential benefits from electronic delivery channels need to be exploited without undermining the security and confidence of the banking public. The challenge to providing multi channel services in today’s banking is the ability to integrate and interface the different delivery channels. Multi channelling strategies therefore needs to be approached holistically. BIS Review 22/2003  1  Technological development is not only about creating alternative delivery channels, but it is also redefining the financial landscape. Indeed, as a result of significant innovations in technology, the payments industry landscape will be redefined with the entry of non-banks into payment services once thought to be the domain of banks. Banks need to be more proactive in their role in the payments mechanism. This includes continually finding new effective ways to provide the payment services in a cost-effective, and efficient manner by taking advantage of technological advances and meeting the changing demands of businesses and consumers. Banking institutions need to innovate to reach potentially new markets and consumers. It is not just about web enabling existing products and services but also being able to provide the complete financial services required by consumers and businesses. It is also not just about implementing technology solutions but being able to customise the product offerings to our local requirements and preferences.

The relaxation on the policy on payment gateway would promote greater competition in the payments system while the flexibility accorded on the issuance of credit cards would enable the partnering of licensed institutions with non-banking institutions in offering greater choices to consumers. Ladies and Gentlemen, In conclusion, I would like to re-emphasise that banks should continuously seek to educate and familiarise consumers in the use of electronic and other technology based banking applications which are more efficient and cost effective. The occasion today is an important step towards maximising banking convenience that technology can offer to the consumers. I am delighted to take part in today’s  2  BIS Review 22/2003  launch and would urge the participation of all financial institutions in this effort to promote the use of electronic payments in the country. Thank you. BIS Review 22/2003  3
For example, the 10-year real rate beginning in 10-years’ time implied by current government bond yields is -¾%. The comparable number over 2000-2006 was +1⅔%. And even during the height of the financial and euro area crises over 2008-2012 it was +¾%. (Chart 7) In the long term, the most important determinant of potential output growth is productivity growth, which is in turn determined by the rate at which new ideas are generated and implemented. And given the very disappointing productivity performance of the UK over the past 7 years, it would perhaps be understandable were financial markets to have lost hope that productivity growth would ever return. Perhaps they agree with those who argue that recent innovations cannot contribute as much to productivity growth as historical ones such as the electric light bulb, the internal combustion engine and indoor plumbing once did. 14 Human history has had many periods in which pessimism about innovation and technological progress has been proven wrong, dating at least back to Malthus. There is much by way of exciting innovation that has yet to be fully exploited. 15 3D printing is transforming the R&D process by vastly increasing the capability to produce prototypes. Advanced robots are being developed that will allow increased precision and safety in their use, thus increasing our ability to automate many routine activities. Firms are learning how to harness the power of Big Data, which will allow them to personalise their products better and reduce waste.

Indeed, doing so has been my primary motivation in not voting for an increase in Bank Rate over my first 10 months on the MPC. But it seems to me most likely that: first, the factors currently pulling down on headline inflation will not do so permanently; second, the headwinds currently affecting demand in the economy will continue to gradually ease over  17  6  For more information on the Bank’s market intelligence http://www.bankofengland.co.uk/markets/Documents/marketintelligence/charter.pdf  programme,  see:  BIS central bankers’ speeches  the coming years (facilitated by accommodative monetary policy); and third, a return to productivity growth will facilitate potential output growth over the long term. So while we on the MPC should heed some of the warning implied by low yields, you should seek out the potential opportunities they offer. References Barro R (2006) Rare disasters and asset markets in the twentieth century, The Quarterly Journal of Economics 121 (3). Bernanke B (2005) The Global Saving Glut and the U.S. Current Account Deficit, Sandridge Lecture, Virginia Association of Economists, Richmond VA. Dynan KE, Skinner J and Zeldes, SP (2000) Do the rich save more? NBER working paper No. 7906. International Monetary Fund (2009) What is the damage? Medium term output dynamics after financial crises, World Economic Outlook, October, Chapter 4. King M and Low D (2014) Measuring the “world” real interest rate, NBER working paper No. 19887. Koo R (2014) Escape from balance sheet recession and the QE trap, Wiley.
This can be done using several different methods and assumptions. These are far from transparent and leave a lot of scope for arbitrary judgements. A particular monetary policy can therefore be justified by making a clever choice of both measures and the normal levels used. This is why we should mainly stick to one measure. Let me illustrate the problem of estimating potential GDP by comparing the Riksbank’s estimate and forecast for Sweden’s potential GDP with the estimate and forecast for the United States’ potential GDP produced by the Congressional Budget Office (CBO). According to the CBO’s estimate and forecast, potential output in the United States largely follows the previous trend for the United States’ GDP (Figure 5). 2 The output gap between the United States’ GDP and potential GDP is therefore large and negative for several years ahead. 3 According to the Riksbank’s estimate and forecast in February 2011, Sweden’s potential GDP is on the other hand curving downwards and is below the previous trend for Sweden’s GDP. Sweden’s output gap is therefore closing rapidly according to the Riksbank’s forecast. How can the estimates and forecasts for potential GDP in the United States and Sweden differ so greatly while the level now and forecasts for actual GDP are rather similar? Why should the development of Sweden’s potential GDP be much worse than that of the United States? The United States has been subjected to structural shocks in the housing, construction and finance sectors and has major structural problems in these sectors.

They’re driven by demographic changes and slow productivity growth, which are unlikely to reverse any time soon. Low r-star implies that many central banks will be grappling with the challenges of life near the 1/4  BIS central bankers' speeches  ZLB, which is why it’s so critical to consider how the ZLB alters strategies related to monetary policy. Monetary Policy Near the ZLB And that’s exactly the question we looked at around 20 years ago. In a paper and subsequent FOMC briefing in January 2002, my colleague Dave Reifschneider and I evaluated the effects of the ZLB on the macro economy and examined alternative monetary policy strategies to mitigate the effects of the ZLB.3 This work highlighted a number of conclusions based on model simulations.4 In particular, monetary policy can mitigate the effects of the ZLB in several ways: The first: don’t keep your powder dry—that is, move more quickly to add monetary stimulus than you otherwise might. When the ZLB is nowhere in view, one can afford to move slowly and take a “wait and see” approach to gain additional clarity about potentially adverse economic developments. But not when interest rates are in the vicinity of the ZLB. In that case, you want to do the opposite, and vaccinate against further ills. When you only have so much stimulus at your disposal, it pays to act quickly to lower rates at the first sign of economic distress. This brings me to my second conclusion, which is to keep interest rates lower for longer.
Nigel Jenkinson: Developing a framework for stress testing of financial stability risks Comments by Mr Nigel Jenkinson, Executive Director, Financial Stability, Bank of England, at the ECB High Level Conference on “Simulating Financial Instability”, Frankfurt am Main, 12-13 July 2007. I am very grateful to Adrian Penalver, Prasanna Gai, Geoff Coppins and Piergiorgio Alessandri for input and helpful comments. *  *  *  1 Developing a rigorous, coherent and robust framework to analyse the resilience of the financial system to withstand strain presents many well-known and formidable challenges. Financial system behaviour is very difficult to model, particularly under stressed conditions when strategic interactions between participants and risks of spillover and contagion come to the fore. And, thankfully, episodes of stress are rare, so history offers only limited assistance. 2 We are currently witnessing a period of major change in financial markets. The global financial system is evolving at a tremendous pace, fuelled by rapid innovation and crossborder integration, and supported by lower macroeconomic volatility. Innovation and integration may have a profound impact on the behaviour of the financial system under pressure. In particular, risks may have been dispersed more broadly through credit risk transfer and increased participation in capital markets. The resulting reduction in credit risk concentration may have strengthened the robustness of the financial system to withstand small to medium shocks. But equally, greater market integration has strengthened the ties between financial firms within and across borders, both through direct exposures and through common exposures to asset markets.

Furthermore, a large amount of research has highlighted that higher uncertainty in general has a negative impact on the economy, particularly through lowering the investment level, see e.g., Bloom (2009) and Bloom, Bond and van Reenen (2007). [2]  See Coibion and Gorodnichenko (2015) and Aastveit, Bjørnland and Cross (2023). [3] Research on energy prices has shown that energy price fluctuations may have an adverse effect on the macroeconomy. The impact is likely to depend on the source of the shock (energy demand shock or energy supply shock), the persistence of the shock and the sign of the shock. See e.g., Kilian (2009), Aastveit, Bjørnland and Thorsrud (2015) and Baumeister and Hamilton (2019) on the effects of oil supply vs. oil demand shocks. See e.g., Hamilton (1983, 1996, 2003, 2011), Mork (1989) and Davis and Haltiwanger (2001) on the non-linear effects of oil price changes on the macroeconomy. [4] See Auclert, Monnery, Rognlie and Straub (2023) and Chan, Diz and Kanngiesser (2022). Published 30 June 2023 14:15