samchain/econo-pairs-v1 huggingface dataset:
Earlier, I drew the conclusion that demographic changes will increase the need for long-term saving. This need is reinforced by the transition from allocation-based pension systems to systems that are based to a greater extent on premium reserves. In addition, the indications are that individuals will need to take greater responsibility for their own pensions. All in all, this should lead to a larger percentage of savings being channelled through the securities markets. How will the markets be able to meet this need? Are new products required, for instance, bonds with a much longer time to maturity, to manage the assets side of the life insurance companies? One of my earlier points was that we probably have not seen the end of the international consolidation of the financial infrastructure. On the contrary, there are indications that we will see more cooperation and more mergers between different stock markets and between different clearing and settlement organisations. A few years ago there were 27 stock markets in Europe. Now there are 20. Will this consolidation process continue? My guess is that in five years’ time there will be 10 or less. When we know the answers to these questions, we will also know more about the shape of future securities markets. Thank you. BIS Review 66/2004  5

Seamless integration with these new trading processes is essential for CCPs to contribute to financial stability. The financial crisis also highlighted the significant gaps that existed between the data collected and the data necessary to adequately monitor developments in the global financial system. In addition, the crisis underscored an important limitation of the current data structure: the inability to combine data effectively across jurisdictions in order to develop a comprehensive view. As a consequence, policymakers often did not have timely access to  3  See Basel Committee on Banking Supervision and the Board of International Organization of Securities Commissions (2013) Margin Requirements for Non-Centrally Cleared Derivatives. 4  See Committee on Payment and Settlement Systems and the International Organization of Securities Commissions (2012) Principles for Financial Market Infrastructure. 6  BIS central bankers’ speeches  key information that would have informed both the diagnosis of emerging problems as well as the likely efficacy of proposed interventions. As we all know, it is difficult to safely steer a fast-moving car if outward vision is impaired by a windshield that is largely obscured. In response, the G20 in April 2009 instructed the Financial Stability Board (FSB) and the International Monetary Fund (IMF) to detail these information gaps and to develop proposals for resolving them. The Data Gaps Initiative (DGI) was the response to carry out this important work.
62 63 64  See Binkley (1997). O’Neill (2002, 2014). Shannon (1948). 17  All speeches are available online at www.bankofengland.co.uk/speeches  17  These days, building trust and improving understanding may require a different approach. It may be less about communication than conversation, less about edicts than engagement, ideally on as personalised and localised a basis as possible. It may involve listening as much as speaking, understanding of the public as much as public understanding, a two-way door. Conversation means ears as much as mouths. What new tools and techniques might help achieve this wider engagement? Let me offer a few ideas, ranging from the workaday to the speculative. Even more than usual, the speculative ideas are not the views of the Bank of England or its policy committees. (a) Different Strokes for Different Folks  Many macro-economists are brought up learning the representative agent model, as a simplified way of making sense of aggregate behaviour. When it comes to central bank engagement, thinking in these terms is unhelpful. The public are anything but monolithic in their abilities and appetites. They are different folks. This suggests that, as a first step in any programme of improved central bank engagement, an improved understanding of these different folks is needed: their concerns, their constraints, their degrees of understanding and distrust, their appetite for information and their preferred means of receiving it. Knowing your audience is public relations 101. Yet it is one lesson central bank publications may, historically, have failed fully to heed.

For example, Charts 8A and 8B focus on the topic of the “labour market” in the MPC’s minutes. They suggest the fraction of time spent discussing this topic picked up in 2013, the year that the MPC issued forward guidance linked to the unemployment rate. 37  Charts 9A and 9B do the same for the FOMC’s deliberations, focussing on groups of words from FOMC transcripts related to “recession”. With individual FOMC transcripts, we can also track how much time each individual FOMC member devoted to this topic, shown in the range. The median FOMC member started talking more about recessions at the point the US downturn took hold, although there was a significant variation in the time different FOMC members devoted to this topic. Taking this literature together, it suggests the great strides forward in central bank transparency over recent years have delivered some significant stabilisation benefits, most notably for financial markets, inflation expectations, macro-economic forecasts and, to some degree, media reporting. So what the missing links when assessing the potential benefits of central bank communications? Three stand out. First, the vast majority of studies have focussed on the ex-ante informational benefits of central bank transparency. There is far less evidence assessing whether openness initiatives have affected central bank legitimacy – the ex-post accountability benefits. In other words, empirical evidence has focussed on the role of central bank transparency in fostering understanding rather than trust.
Indeed, even among the most critical of respondents we had support for the Committee’s three pillars and its intent to align capital more closely to risk; to introduce greater consistency in the supervisory review of capital adequacy; and to promote effective market discipline by enhancing transparency. It  BIS Review 42/2003  1  was, moreover, satisfying for us that most commentators acknowledged substantial improvements in the proposals since the release of the second consultative paper in early 2001. Respondents have raised a large number of issues for consideration, including several that address some very fundamental concepts and many that have been debated throughout the entire process. In addition, some member jurisdictions will continue to receive responses through their national rulemaking processes up until late autumn of this year, during which time we can expect to hear additional views on the proposals. For those of you who have not yet managed to make it through all of the responses posted on the BIS website, I would like to mention some of the most common issues which have been raised. First of all, the complexity of the proposals. This has also been raised in the past, and is, I think, a valid concern. At the same time, we mustn’t forget that many of the areas of the new Accord have expanded in size and complexity precisely as a response to calls from the industry for different types of business to be more finely reflected.

As you are aware, the comment period for the third consultative paper (CP3) closed at the end of July. If you have seen the “comments on CP3” page of the BIS website, you will not be surprised to hear that we have received over 200 responses. I must admit that this is more than we had expected, even if it is below the 250 responses we received on the second consultative document two years ago. Obviously, not all of the comments are mutually compatible, nor would it be feasible to incorporate them all. However, there are some substantive issues which have been raised, and I will mention some of these briefly in a moment. But just let me say first that the Committee is taking the comments very seriously and working extremely hard to resolve the issues that have been raised. What is most important to the Committee is the quality and consistency of the new Accord, and we are clear that this cannot be unnecessarily constrained by deadlines and timetables. Michelangelo once said that, having seen an angel in a block of marble, he carved until he set it free. From most of the letters of comment received by the Committee this summer, it seems that the industry sees an angel in the proposals and wants to carve away at the text until it’s been set free.
The Modigliani-Miller proposition is that the two effects offset exactly, leaving the overall cost of finance unchanged. The argument is simple: so long as the returns on a firm’s portfolio of assets – ie its business – do not vary as its financing structure changes, the total cost of its funding is invariant to how those returns and risks are divided up between shareholders and debt-holders. If that were true, there would be no cost to banks, or to the real economy, from ever higher equity requirements. Nor – and this point is rarely made – would there be an objection to the opposite: ever higher leverage in ever more thinly capitalised banks. In reality, a number of features of the real world break the Modigliani-Miller result. As for all firms, interest paid by banks on debt is deductible from corporation tax, which reduces the cost of debt relative to equity. Other things being equal, the average cost of funding can therefore be reduced by issuing debt. That cost advantage should be largely passed on to customers.4 In addition, banks are special in that they fund themselves with retail deposits, which provide monetary services: the nature of banks’ liabilities are central to their business, not just how their business is financed. Many of those deposits are protected by guarantee schemes. Interest rates on transactions deposits are, therefore, not especially sensitive to the risks a bank is running, making it cheaper for banks to fund themselves via this particular form of debt finance.

In general, credit terms should be calibrated to the quality of the information provided by the hedge fund counterparty. To the extent this is done generally across those funds that are less transparent, have weak risk management disciplines and/or inadequate operational infrastructure, they will be able to take on less leverage, which would limit the potential risk they may pose in a disruptive event. As these points suggest, it is not enough to simply manage the firm’s direct potential future credit exposure to hedge funds within prudently low limits. This has to be complimented with a more exacting approach to the evaluation of a firm’s overall vulnerability to market risk that includes full consideration of the potential impact of a large shock, including one that involves hedge funds. Alongside these enhancements to risk management practices, we believe that market participants should also intensify their efforts to improve the underlying infrastructure of the markets in which hedge funds are important. Weaknesses in close-out procedures for OTC derivatives were among the areas singled out by the CRMPG for collective action in the wake of LTCM, and important progress has been made in this area since. In addition, there are potentially valuable efforts underway to standardize documentation and improve the confirmation and execution process in these markets.
Since the financial crisis and subsequent recession, another factor likely to have contributed to depressing yields is the sharp decline in investment, prompted by the deterioration in the outlook and heightened uncertainty. To date the recovery has been painfully slow, with negligible growth in the United Kingdom over the past year and a half. And though there is some variation in the pace of recovery across countries, in general growth has been weaker than after a normal cyclical downturn. In part that reflects the fact that recoveries after financial crises tend to be weaker and more drawn out as balance sheets are repaired, but also it probably reflects the exceptional uncertainty in the aftermath of the financial crisis. It is consequently hard to know when the animal spirits of businesses, and with it the propensity to invest, are likely to revive. Certainly the impact of QE on yields should ultimately reverse when the economic environment improves and we start to sell the gilts back to the market in order to withdraw the present exceptional monetary stimulus. Unfortunately, with the present heightened uncertainty associated with the problems in the euro area, the likely future date for us to commence selling gilts has receded somewhat. And if conditions do deteriorate significantly, we may need to re-start the programme of purchases. Indeed, as the minutes released earlier today reveal, the decision at our May meeting not to extend the programme was already quite finely balanced.

Meanwhile, it is clear that all models – no matter how good they are – need interpretation from the perspective of the events that the moment poses and in the view of the dominant phenomena of time. Dear participants, COVID-19, coupled with the issues it has caused and the restrictions taken to contain it, continues to dominate both our economic and social life and activity. It has also certainly become an important part of the analysis and research work of the central bank. This is not a surprise. I think that the shock triggered by the pandemic and the related effects will continue to be part of the research agenda for a long time, even after the pandemic is over. However, recent developments show that the research agenda of the central banks have been enriched by the study of other risks, such as those related to climate change and environmental protection, demographic risks, digitalisation and digital currency. These have been identified as big and long-term challenges to both the global economy and the authorities of every country. The Bank of Albania has started to work on to establish the infrastructure for modelling and analysing these phenomena. It is crucial to not think of these topics only for the purpose of testing assumptions or academic discussions, but rather to consider them in the concrete framework of policy making and decision taking. I am confident these topics will become important themes for discussion themes in our Research Workshop in the future.
But I think it is useful and feasible to offer an economic narrative that is based on data and “statedependent”. This is part of the “new predictability” that I would like to see. You can be sure of our unwavering determination in bringing inflation back towards the target of 2% over the next two years. Our actions will be transmitted via two efficient channels: that of expectations and that of financing conditions. And on these channels, our interest rate trajectory could, in my view, go through two navigation locks: for a stabilisation of interest rates, that of a clear turnaround in underlying inflation; and then for a possible lowering of rates, that of a clear prospect of a durable return to the inflation target. Jorge Luis Borges wisely wrote: “Don’t talk unless you can improve the silence”. Forgive me for not following his advice, but I hope I have at least reduced the 18  Page 19 of 19  sometimes confusing noise that surrounds our monetary policy. And thank you for listening. 19

The US economy has not returned to pre-crisis levels of output, the Eurozone remains in recession, and emerging economies are starting to show more signs of weakness. Against this backdrop, Asia has been resilient but remains vulnerable to external shocks. Nevertheless, given the region’s strong fundamentals, we continue to be confident about Asia’s longer term growth potential. 5. One bright spot is demand for financing in Asia. Demand for almost every segment of Asian finance is also growing – trade and structured trade finance, cross-border corporate lending, infrastructure finance, capital-raising in equity and bond markets, corporate treasury services and wealth management. Trade finance is driven by burgeoning Asian trade, which is projected to grow at about 8.3% per annum. By 2020, 60% of global trade will have an Asian component.2 Corporate funding needs in Asia are also growing, with 57% of Asia Pacific business leaders expecting their funding needs to increase over the next 2 to 3 years, compared to 32% in Europe3. On infrastructure finance, we are familiar with ADB’s estimates that Asian infrastructure spending is expected to amount to $ trillion from 2010 to 2020. 6. To meet this strong demand, there is scope to broaden and deepen financial intermediation in Asia. However, this is likely to take place against some headwinds caused by (i) European bank deleveraging (ii) banks’ diminished ability to provide long-term financing  1  According to Bloomberg Markets, DBS is 8th in the second annual ranking of the world’s strongest bank in 2012.
The usual disclaimer applies: my opinions are not necessarily shared by the Czech National Bank, but I do not care too much, as I am very much a part of the group which formulates the bank’s positions anyway, so I do not want to distance myself from myself. I just want to say that all the blame for what I say is on me. Our topic is life outside the euro, and as you can see I am alive and well. After what I heard yesterday about the countries in the Eurozone, I am even happier than before that we are not in this particular club at the moment. I heard many comments on de-industrialisation in the Eurozone. Well, this is not our case. With industrial production accounting for much more than 30% of our GDP, the Czech Republic has the highest proportion of industrial production on output in the whole of the EU. And this share has actually been rising rather than falling over the last 10 years or so. This is manifested in the fact that the Czech Republic is the second biggest producer of cars per head in the world. Moreover, the Czech Republic and Slovakia (the Eurozone country) – which formed a single state until 1993 – are together by far the biggest car-producing countries in the world in per capita terms. With 150 cars produced per every 1,000 citizens these two countries are well ahead of South Korea and Germany combined in per head metrics.

And as we can see, the shocks are pretty asymmetric among countries in the EU and the Eurozone. I believe in the stabilisation role of monetary policy and its ability to make cycles smoother and shallower. But you have to be prepared to use monetary policy. For instance, the population in my country is not happy with zero interest rates and the weaker crown, but we nonetheless believe it is one of the key reasons why we now have the lowest 2/3  BIS central bankers' speeches  unemployment rate in the EU and increasing real wages. C. The third reason is that some expectations regarding euro adoption were, to say the least, not fulfilled. The euro was supposed to help the Eurozone countries become richer and outperform those outside the Eurozone. As the data show, this has not been the case so far. My article for the forthcoming issue of the New Direction magazine calculates that on average the Eurozone countries grew by 1 percentage point less every year after the euro was established, compared to the countries staying outside. This is significant. Add to that the fact that many people realised during the crises that the euro project was probably not well prepared for bad times and that the Eurozone is now looking for new creditors rather than anything else, and you will understand the low attractiveness of the euro in the Czech Republic. However, it was not ever thus.
It is true that unemployment continues to be high but it is falling. This is the most promising development for 30 years: We have strong growth at the same time as we have balance or large surpluses in central government finances and foreign trade. The challenge for monetary policy is not to dampen demand unnecessarily but neither should demand be allowed to increase more than is compatible with the inflation target. In the long-term, monetary policy has, of course, no direct impact on the rate of growth although during a shorter period, demand and growth are influenced by the interest rate set by the Riksbank. If, for instance, monetary policy is made more stringent too late, there is a risk that inflation expectations will rise and gain a hold. To restore inflation to the target, a longer period of stringent monetary policy will then be required with weaker demand as a result. Then investment will also be throttled and capacity growth braked. The inflation target has not only a value per se but is also first and foremost a means for creating the prerequisites for stable, sustainable growth. The best contribution the Riksbank can make is to maintain the inflation target but there is no simple rule of action as to how monetary policy is to be  1  BIS Review 20/2000  conducted. According to the Riksbank Act, the overall objective for the activities of the Riksbank is to maintain stable prices.

Gross fixed investment as a per cent of GDP 30  30  25  25  Gross fixed investment  20  20  15  15  Grossfixed investment, excl residential 10  10  5  5  Källa: SCB 0  0 1950  1955  1960  1965  1970  1975  1980  1985  1990  1995  Savings, Investments (net) and Current account as a per cent of National Disposable Income 1950-96 20  15  10  5  0  -5 1950 D :\ex\d-sv\data\datany  55  1960  65  Nettosparande  (Net savings)  1970  75  N ettoinvesteringar  (Net investment)  1980  BIS Review 20/2000  6  1990  (Current account)  Source: National accounts. Note: From 1986 reinvested capital gains is included. Source: Lennart Berg  85  Bytesbalans  95  Labour productivity growth 5 SWEDEN 4,5 4 3,5  USA USA  3 2,5 SWEDEN  2 USA  1,5  SWEDEN  1 0,5 0 60-74  75-94  7  95-99  BIS Review 20/2000