samchain/econo-pairs-v1 huggingface dataset:
Foreign trade has increased from around 43% of global GDP in 1995 to about 70% today. And around 30% of foreign value added is now created through global value chains. [4] At the global level, this process has been driven not just by policy choices, but in large part also by technological progress. Businesses have capitalised on the advances in transportation, telecoms and computing that make it easier to trade globally and fragment production. [5] Previous policy decisions and geographic proximity make the EU by far the most important trading area for European economies. The majority of world trade takes place within three main trading blocs – the EU, the North American Free Trade Agreement (NAFTA) and Asia – and though linkages have grown between those blocs, they remain relatively closed to one another. The ratio of extra-regional trade to GDP in these regions is below 15%. [6] The EU is the most integrated of these blocs. Two-thirds of EU countries’ trade is with other Member States, compared with about half for the NAFTA region. Around 50% of euro area crossborder financial holdings are from other euro area countries. Practically speaking, this means that Italy exports more to Spain than to China, and more to Austria than to Russia or Japan. In 2017, German direct investment in Italy was five times higher than that of the United States.

Some illustrations of this include the large shift in subprime mortgage originations to less regulated institutions;  BIS Review 27/2008  5  the incentives to shift risk to where accounting and capital treatment is more favorable; and the amount of risk built up in entities that operate in the grey areas of implied support from much larger affiliated institutions. We need to move to a simpler framework, with a more uniform set of rules applied evenly across entities involved in similar functions, and a more effective balance of regulation and market discipline. And institutions that are banks, or are built around banks, with special access to the safety net, need to be subject to a stronger form of consolidated supervision than our current framework provides. Capital The U.S. banking system entered this financial shock with capital cushions significantly above the regulatory thresholds, and in a stronger position to withstand a downturn than was the case in the past. This has made it possible for bank balance sheets to expand rapidly, which in turn has helped offset the effects of the withdrawal of many nonbank financial institutions from credit markets. Yet the shock absorbers in the financial system as a whole – the financial cushions that are critical to financial stability – have proved to be thinner, and behavior has been more procyclical than desirable. This is in part the consequence of changes in the structure of the financial system.
It stated that it would enforce this minimum rate with the utmost determination and was prepared to buy foreign currency in unlimited quantities for this purpose. This policy is still in force, without any restriction. The impact on the Swiss economy of the deterioration in the international environment as well as the exchange rate movements in July and August had been steadily increasing. Economic activity weakened significantly over the course of 2011 and the pressure on profit margins intensified further in many industries. However, in the past few months there have been growing signs that the economic situation in Switzerland has stabilised as a result of the minimum exchange rate. Thus the minimum exchange rate of CHF 1.20 per euro has, to date, proved to be effective. It has reduced the very substantial overvaluation of the Swiss franc. Moreover, the extreme exchange rate fluctuations which had been experienced previously have been lessened. This has given business leaders a better basis for planning, thereby clearly limiting the damage inflicted by the appreciation of the Swiss franc on the real economy. However, apart from the exchange rate, future economic growth in our country will once again depend on developments in the international economy. That is why I will now present to you our assessment of the international economic outlook. Economic outlook and outlook for price stability The latest economic statistics suggest that the international economic recovery will continue, although growth rates are likely to be on the low side by comparison with typical recovery phases.

For instance, the International Monetary Fund (IMF) expects a current account deficit in the United States of just under 3% of GDP this year, while the Chinese surplus is expected to have fallen to around 2½% of GDP. But, as with the euro area, the crucial question is how much of this narrowing is simply a reflection of the cyclical weakness in the deficit economies or whether it represents a more durable shift in the pattern of demand in both deficit and surplus economies. If it is down to the former, then the imbalances can be expected to reemerge as recovery proceeds. The answer to this question depends very much on the degree to which the substantial shortfall, relative to pre-crisis trends, of activity in the deficit economies represents a permanent impairment of supply potential as a result of the financial crisis and subsequent recession, or whether it will ultimately be reversed. Successive Inflation Reports and speeches by several MPC members 6 have addressed this issue in the context of the United Kingdom, and I think it is fair to say that the evidence is presently inconclusive.
For my part, I have felt very convinced of two things, which I clearly explained in the most recent minutes. Firstly, we ought to increase the repo rate in the months ahead, as the Swedish economy is developing so strongly. Resource utilisation is increasing, which will increase inflationary pressures over time. We should therefore ease up in order to avoid excessive inflation in the period ahead. Secondly, the long-term repo rate should be approximately 4 per cent, corresponding to inflation of 2 per cent and a real interest rate of 2 per cent. The latter figure is what the short real interest rate on government bonds has been, on average, in both the United States and the eurozone for long periods of time. On the other hand, it is difficult to have a definite opinion of what the repo rate ought to be in two or three years. Neither our own nor the market’s forecasting abilities are sufficient to make solid forecasts over such a period. Among other reasons, the repo rate will be dependent upon developments in the eurozone and in the United States, and the impact these may have on the Swedish economy. Weaker international development could entail weaker development in Sweden and a lower repo rate path in the long term. However, stronger development of the Swedish labour market could entail higher inflationary pressures and a higher repo rate path. Despite this uncertainty, my view is that we should report the assumptions we make about the repo rate in conjunction with our forecasts.

13 However, the fact that it is difficult to estimate stable links between resource utilisation and inflation using econometric methods does not mean that these links do not exist. International experience indicates that minor variations in resource utilisation in normal times do not significantly affect inflation, but that a very low level of resource utilisation noticeably dampens inflation. In the current crisis, with a very low level of resource utilisation in the United States and the eurozone, underlying inflation has fallen from normal levels of around 2 per cent to around 1 per cent. As far as Sweden is concerned, it appears that, despite everything, there is a relatively strong link between underlying inflation and resource utilisation measured using the RU indicator with a time lag of one to two years. (Figure 12. The RU indicator and HICP inflation excluding energy 14 ). In Sweden, underlying inflation measured in terms of the CPIF (the CPI with a fixed mortgage rate) has stayed at, and even above, 2 per cent over the last two years despite the fall in resource utilisation. This is probably related to the substantial weakening of the krona in the most acute phase of the crisis. This contributed to rising import prices measured in Swedish kronor, which kept up inflation. The krona has now strengthened again and is more or less back to its pre-crisis level against the euro, and CPIF inflation has fallen back to below 2 per cent. (Figure 13. CPI and CPIF inflation).
Some of the firms that encountered difficulties in 2008 paid out large bonuses early in 2008 despite the deterioration in market conditions and in their own financial performance. There is an opportunity to rethink capital preservation policies to ensure that banks’ incentives are consistent with the supervisory objectives of a safe and sound banking system. Such capital conservation rules could operate on both sides of an economic downturn – conserving capital going into the downturn and rebuilding capital coming out. One example would be the imposition of constraints on the ability of banks to reinstate or increase dividends prematurely or to undertake share buybacks during a downturn or during the early stages of an economic recovery. Higher capital requirement for systemically important institutions Currently, some large systemically important institutions may have a competitive advantage because they are perceived to be “too big to fail.” Unless we address this disparity, we will have an ongoing moral hazard problem and inevitable market structure distortions as institutions take steps to become systemically important in order to gain a competitive advantage. The regulatory regime could lean against this in two ways. First, we could improve the resolution mechanisms for large, complex institutions and thereby reduce the costs associated with failure. A more robust resolution regime would make it more feasible to allow the failure of a large financial institution without that failure threatening the stability of the entire financial system.

By forcing all of the banks that participated in the SCAP to have sufficient capital to help them withstand a stress environment, this process improved confidence and increased the willingness of banks to engage with each other. It also made it easier for the banks to be able to tap the capital markets. The SCAP exercise made a bad state of the world less likely, helping to create a virtuous circle rather than a vicious one. The SCAP exercise was developed and conducted in response to the crisis and a specific need. Now, we need to figure out how to conduct these types of exercises on a systematic basis. Such exercises may even need to be hardwired into the supervisory oversight of the financial system. Transparency In some critical segments of our financial markets, both before and during the crisis, limited or ineffective disclosure undermined market discipline and this contributed to the accumulation of risk. In the years leading up to the crisis, the lack of transparency contributed to increased risk and leverage in off-balance sheet vehicles, structured credit products and in over-the-counter securities such as asset-backed securities (ABS), commercial mortgage-backed securities (CMBS), residential mortgage-backed securities (RMBS) and collateralized debt obligations (CDOs) and their associated derivatives. Once the crisis was underway, the opacity of many of these vehicles, structures and securities contributed to the concerns about counterparty credit risk. This uncertainty exacerbated the erosion in market liquidity conditions and further intensified the crisis.
Indeed, those latter countries have in addition embarked on programmes of asset purchase which might have intensified downward pressures on euro and yen assets. This decoupling of the relative demand and monetary policy positions of the UK and US on the one hand, and the euro-area and Japan on the other, might have on-going implications for exchange rate movements. If these trends continued, they could result in some further appreciation of sterling and the dollar relative to the euro and yen, which would tend to increase disinflationary pressures in the UK and US. Chart 23: IMF output gap estimates and world export prices Percent Percent 6 4 5 3 4 2 3 1 2 1 0 0 -1 -1 -2 -2 -3 -3 -4 -4 2000 2003 2006 2009 2012 2015 2018 Global output gap - UK wtd (rhs) Global output gap - PPP wtd (rhs) World export prices - UK wtd (lhs) Sources: IMF, CEIC, Eurostat, Thomson Reuters Datastream and Bank calculations. Notes: The world export price series shows domestic currency non-oil export prices of goods and services of 49 countries weighted according to their shares in UK imports.

6  15  0  -5  2  1983-2011 Wage Fitted 1971-1982 inflation 10 9 8 7 6 5 4 3 2 1 0 4 6 8 10 12 Unemployment rate  Sources: Thomson Reuters Datastream  Chart 14: Inflation Report forecast errors on wage growth and unemployment Unemployment  Wages  Percentage points  4 2 0 -2 -4 -6  2005Q2  2007Q2  2009Q2  2011Q2  2013Q2  Source: ONS and Bank calculations. Notes: Chart shows one year ahead errors. Wage forecasts were for Average Earnings Index until 2010Q2 and Average Weekly Earnings thereafter. The discontinuation of the AEI series in 2010Q2 means it is not possible to calculate wage forecast errors for forecasts made between 2009Q3 and 2010Q2, so those observations are left blank. See Yellen (2014). BIS central bankers’ speeches  7  Even after making these adjustments, however, the wage puzzle has persisted. This can be seen by comparing the actual and estimated paths of wages from the Bank’s suite of wage equations, using as inputs the Bank’s estimates of “slack” in the labour market, as well as productivity and other wage determinants. Wage growth has consistently and significantly undershot its expected path, even after controlling for slack and other shocks. Cumulatively, this undershoot is large, with the level of wages more than 2% below predicted estimates over the past two years. There are a number of possible explanations for this wage puzzle. These have potentially quite different implications for future wage growth and hence policy.
Looking ahead, the Governing Council expects real GDP to grow at a moderate and still uneven pace over time and across economies and sectors of the euro area. The ongoing recovery at the global level and its impact on the demand for euro area exports, together with the accommodative monetary policy stance and the measures adopted to restore the functioning of the financial system, should provide support to the euro area economy. However, the recovery of activity is expected to be dampened by the process of balance sheet adjustment in various sectors and weak labour market prospects. This assessment is also reflected in the June 2010 Eurosystem staff macroeconomic projections for the euro area, according to which annual real GDP growth will range between 0.7% and 1.3% in 2010 and between 0.2% and 2.2% in 2011. Compared with the  March 2010 ECB staff macroeconomic projections, the range for real GDP growth this year has been revised slightly upwards, owing to the positive impact of stronger activity worldwide in the short run, while the range has been revised somewhat downwards for 2011, reflecting mainly domestic demand prospects. The June 2010 Eurosystem staff projections are broadly in line with forecasts by international organisations. In the Governing Council’s assessment, the risks to the economic outlook are broadly balanced, in an environment of unusually high uncertainty. On the upside, the global economy and foreign trade may recover more strongly than projected, thereby further supporting euro area exports.

European Central Bank: Press conference – introductory statement Introductory statement by Mr Jean-Claude Trichet, President of the European Central Bank, and Mr Vítor Constâncio, Vice-President of the European Central Bank, Frankfurt am Main, 10 June 2010. *  *  *  Ladies and gentlemen, Mr Constâncio, the new Vice-President of the ECB, and I are very pleased to welcome you to our press conference. We will now report on the outcome of today’s meeting, which was also attended by Commissioner Rehn. Based on its regular economic and monetary analyses, the Governing Council decided to leave the key ECB interest rates unchanged. The current rates remain appropriate. Taking into account all the new information which has become available since our meeting on 6 May 2010, we continue to expect price developments to remain moderate over the policyrelevant medium-term horizon. Global inflationary pressures may persist, while domestic price pressures are expected to remain low. The latest information has also confirmed that the economic recovery in the euro area continued in the first half of 2010, but quarterly growth rates are likely to be rather uneven. Looking ahead, we expect the euro area economy to grow at a moderate pace, in an environment of continued tensions in some financial market segments and of unusually high uncertainty. Our monetary analysis confirms that inflationary pressures over the medium term remain contained, as suggested by weak money and credit growth.
We must accept these challenging economic conditions for the time being. The SNB is aware that many companies find themselves in a difficult situation. And it has great respect for the challenges facing Switzerland's businesses and their staff. BIS central bankers’ speeches  1

We are already in discussions with international organisations such as the International Finance Corporation on how to leverage their expertise on this. 18. Apart from these three initiatives, the HKMA helped to issue Hong Kong Government’s inaugural $ billion, 5-year green bond under the Government Green Bond Programme earlier in May. (i) We have seen strong demand for this issuance, attracting orders exceeding $ billion, allowing the green bond to be priced at a tight spread against the US Treasury at issuance. The issuance has helped to set an important new benchmark for potential green bond issuers in Hong Kong and the region. (ii) The deal has attracted interests from a diverse group of conventional and green investors. Orders were received from over 100 global institutional investors, and 50% of the Green Bond was distributed to Asia, 27% to Europe and 23% to the United States. By investor type, 29% was distributed to banks, 30% to fund managers, private banks and insurance companies, and 41% to sovereign wealth funds, central banks and supranationals. Based on some rough calculations by our Joint Global Coordinators, about half of the investors participating in our deal could be loosely defined as “green investors”. 19.
Paul Tucker: Banking reform and macroprudential regulation – implications for banks’ capital structure and credit conditions Speech by Mr Paul Tucker, Deputy Governor for Financial Stability at the Bank of England, Member of the Monetary Policy Committee, Member of the Financial Policy Committee and Member of the Prudential Regulation Authority Board, at the SUERF/Bank of Finland Conference, “Banking after regulatory reform – business as usual”, Helsinki, 13 June 2013. *  *  *  Many thanks for input and conversations to Steve Cecchetti and Anil Kashyap and, at the Bank, James Benford. For secretarial support, to Sandra Bannister, Alexandra Ellis and Vicky Purkiss. Although the current reform programme rightly extends to the capital markets – over-thecounter derivative markets, clearing houses and shadow banking for example – nevertheless banking is at its core. So today I am going to draw out some of the implications for the credit system – starting with the micro regulatory regime and banks’ capital structure; and then moving on to the introduction of new macroprudential policies and their effect on credit conditions. Micro regulatory reform and banks’ capital structure At a micro-level, the banking reforms have two important components. A step change in regulatory requirements on capital, leverage and liquidity, in order to reduce the probability of banks failing. And recognising that failure cannot and should not be ruled out, establishing credible and effective resolution regimes. Separately and in combination, they will change how the risks in banks’ portfolios are distributed across shareholders, bondholders, depositors and, perhaps most important, taxpayers.

The first danger is that there are sharks lurking under water-- in the form of highly leveraged institutions and hedged funds. No matter how well you try to manage your economy, no matter how good your intentions, there will often be some things out of synchronization. This will cause your currency or your stock market to be temporarily out of balance, or even wrongly perceived to be so. This is exactly when you need some time to work out the problems. But the attack by sharks can rob you of this precious time. I asked myself -- how can these sharks create so much trouble for the emerging markets? The problem is that these sharks are often able to command oversize resources financed by large international banks. I strongly believe that these financing should be curbed. Leveraging beyond a certain threshold is particularly risky. I propose that the international banks that give credits to such institutions should be required to weigh these risks, in their capital requirement calculations, at a much higher rate than the 150 per cent currently being considered in the new Basle Accord. The second danger is that during good weather you tend to get assistance from many international banks. They will give you tow lines hitched to their catamarans that help increase your speed. However, when your ship starts to leak, they tend to cut the lines just when you need them most. On this issue, therefore, I strongly support the idea of private sector involvement that the IMF is proposing.