samchain/econo-pairs-v1 huggingface dataset:
For all these reasons, as economic agents we all have a significant "to do" list ahead of us. I shall begin by referring to credit institutions, since it is up to them to continue managing properly the risks they assume, developing adequate risk measurement, control and management systems and, in short, determining what level of solvency is appropriate to their risk profile. In the present circumstances of the international financial markets, there are certain considerations that I believe to be particularly significant. First, Spanish banks must respond appropriately to the change in cycle under way in our economy. This entails not only properly managing defaults as they occur, but also tempering the slowdown in the rate of credit expansion. It would be counter-productive for the Spanish economy if an excessive reduction in credit growth were to limit its capacity to grow. Second, as I have pointed out already, Spanish banks’ income statements have escaped the effects of the US sub-prime mortgage crisis. However, unquestionably the environment in which Spanish banks will have to operate, and indeed in which they already do operate, has become very difficult. Insofar as higher financing costs may affect their operating margins, alternative mechanisms for keeping their income statements sound must be strengthened. An initial consideration in this respect is that a high percentage of the financing granted in Spain is variable rate, so banks have a greater, almost automatic, ability to pass cost increases through to borrowers.

However, procyclicality can be most mitigated by improving risk management: the most procyclical banks are those incapable of properly managing their risks over the course of the cycle, so that when the cycle turns adverse, they have to react abruptly. The debate on the procyclicality of international accounting standards has, to date, been more limited. This is surprising since, as current events are showing, the impact of fair value valuation on banks' income statements, and therefore on their retained earnings and on their capital, is notable, especially when markets are illiquid and internal valuation models are suffering the consequences. I believe that a reform now would only increase investor uncertainty. Therefore, once this period of turbulence is behind us, the debate on the procyclicality of accounting standards should be deepened, to consider what the weaknesses of using fair value in specific circumstances are. Further, it would be advisable to focus the discussion on the role of provisions, i.e. on measuring the losses incurred by banks due to credit risk. Greater flexibility in their calculation would enable procyclicality to be reduced, making the accounting standards more consistent with prudent risk management. This has been the traditional position of the Banco de España on accounting regulation, to consider it always as a key element of prudential regulation. In this respect, accounting Circular 4/2004, on the adaptation to international accounting standards, made a notable effort to retain prudential criteria in those areas in which the standards permitted more than one option.
2 The origin of the crisis was closely related to financial innovation and the creation of instruments that should have diversified risks. Most of financial innovation was used to circumvent regulation, allowing credit expansion with a weak capital base. Low interest rates, search for yields and a monetary policy that promised to rescue after severe falls in asset prices prompted the creation of a housing bubble. Enormous efforts were made to price many extremely complex financial instruments, but even those efforts failed to build valuation models that realistically considered the instruments’ insolvency probabilities. No evidence is necessary to assert that these methods failed because of an extreme event that struck everything. These failures were exacerbated by severe liquidity shortages and widespread panic in the markets. It is paradoxical that while asset price theories, and their application to the real world, are based on the existence of full arbitrage (consider, for example, the CAPM), corporate finance theories are essentially dominated by information asymmetries and are plagued by frictions from principal-agent problems. This dichotomy will have to be corrected over time to ensure that more realistic models of how financial markets work become available, models which will shed more light on economic policy recommendations. On crisis prevention and management A pervasive question for the past and current crises is whether they could have been anticipated.

      21 18 32 18 3933 981 8201 23 198 3 71 $ 389 3 9 3 2983 93 33 813 71 97 321 89 1333 93")-# %87 97 7327 "),# 818 23 1   383  3933 8918 22803 3  971 32898  33 9   8 564 8 8 8 1 8 5 % 8 1  561 8 6 5 8 9561 5 1  8 8 6 8 71 8 1 6561 8 % 861 08 71 8 71 67 8 8645 8 5 1 8  561 && 65 8  5  561 8 598 1  8765 1 868 5 6#8  5  561 1  1  561 8 1  6789:;<=78  98 7888 8 98!6 5 1 8 5 5    2618 7 442 628 15   52126 86 Y2 87 628 6 727   6 628 86  1 7 1 8 $ 1 $ 97 52 62 1 97 52 1 5; 5768 = !97 78 0 2  75 5#652 1 ;;6A 10 6# 5 8A6A 7 O042 & 1 6% 5^ 1 97 52 1 867 97 52 7 69 $ V% !97 K;;# OPS2 1 ; J 89 9657 6978A2   0)*+0+    ? ? ? ? @ A 5EF412
Real GDP expanded at a 3.0 percent annual rate in the fourth quarter of 2011, the fastest growth since the first half of 2010. The average monthly job gain was 212,000 in the first quarter of 2012, up from 164,000 in the fourth quarter. Sales of light-weight motor vehicles were about 14 ½ million at an annual rate in the first quarter, the best quarter for vehicle sales in four years. Survey measures of business activity have rebounded from their dips in the middle of last year, and are now at levels that typically indicate solid overall growth. Even housing starts have firmed somewhat in the last few months, although they remain at depressed levels. While these developments are certainly encouraging, it is still too soon to conclude that we are out of the woods. To begin with, the economic data looked brighter at this point in 2010 and again in 2011, only to fade later in those years. Moreover, the United States experienced unusually mild weather over the first quarter, with the number of heating degree days more than 20 percent below the average of the preceding five years, which may have pulled forward some economic activity and hiring. In this regard, the somewhat softer March labor market report that was released last Friday may reflect the earlier positive influence of the mild weather on job creation in January and February, although other less sanguine interpretations are also plausible.

But, while these developments are certainly encouraging, it is far too soon to conclude that we are out of the woods in terms of generating a strong, sustainable recovery. On the inflation front, the year-over-year rate of consumer price inflation has slowed in recent months, and despite the recent rise of gasoline prices, we expect inflation to moderate further in 2012. Here in Buffalo, the economic restructuring has positioned the region’s health and education sector as a potentially solid base for longer-term growth. Thank you for your kind attention. I would be happy to take a few questions. BIS central bankers’ speeches  5
Focus on applied research Research is also an important investment for long-term competitiveness of the industry and is a key driver for greater innovation. Research institutions together with the industry must continuously strive towards introducing innovative solutions which will add vibrancy and diversity to the market. Joint research initiatives should extend beyond geographical boundaries, with cross-border initiatives and convergence of ideas. Research by academic faculties and research agencies can also contribute to the knowledge repository of Islamic finance. In addition to research that have been issued by universities in Malaysia, The International Shariah Research Academy (ISRA) has been established as a dedicated international agency for applied research in Islamic finance. Further in-depth research on contemporary Shariah issues relating to risk mitigation, liquidity management and hedging would facilitate the generation of new ground-breaking developments in Islamic finance. Greater involvement of the industry is essential not only to provide funding support, but also to give perspectives that contribute to the implementation of the research output. The launch of IBFIM’s flagship programme today – the Islamic Finance Qualifications Framework and Progression Route – is part of this strategy for upgrading the skills and competencies of the existing talent in the industry. It is an innovative training framework that provides a progressive structured route to the acquisition of the relevant knowledge for the different levels throughout the career of the workforce in the industry. Successful completion of the comprehensive series of programmes would lead to qualifications at three different levels.

Yet citizens can be certain that three elements will remain constant. The ECB will do what is necessary to ensure price stability. It will remain independent. And it will always act within the limits of its mandate. Yet it should be understood that fulfilling our mandate sometimes requires us to go beyond standard monetary policy tools. When markets are fragmented or influenced by irrational fears, our monetary policy signals do not reach citizens evenly across the euro area. We have to fix such blockages to ensure a single monetary policy and therefore price stability for all euro area citizens. This may at times require exceptional measures. But this is our responsibility as the central bank of the euro area as a whole. The ECB is not a political institution. But it is committed to its responsibilities as an institution of the European Union. As such, we never lose sight of our mission to guarantee a strong and stable currency. The banknotes that we issue bear the European flag and are a powerful symbol of European identity. Those who want to go back to the past misunderstand the significance of the euro. Those who claim only a full federation can be sustainable set the bar too high. What we need is a gradual and structured effort to complete EMU. This would finally give the euro the stable foundations it deserves. It would fully achieve the ultimate goals for which the Union and the euro were founded: stability, prosperity and peace.
Decline in US potential GDP  BIS central bankers’ speeches  5

These figures are consistent with developments in the 1990s. Wage growth averaged 4½ per cent and productivity growth 2 per cent in this decade. This resulted in an inflation rate of 2½ per cent combined with a stable krone exchange rate. 2  BIS Review 51/2002  An unexpected upward shift in labour costs will require an increase in interest rates in order to avoid higher inflation. When wage growth reaches a level that is inconsistent with the inflation target, the result over time will be higher interest rates, lower employment and higher unemployment. There is a relationship between wage growth and interest rates. The lower wage growth is, the lower interest rates will be, and vice versa. The differences between interest rates in various countries reflect to a large extent differences in wage growth. Japan represents the one extreme, with an interest rate of zero and no wage growth. At the other extreme are Iceland and Norway, with high interest rates and high wage growth. The relatively high wage growth in Norway is the result of a tight labour market. In other countries, the situation is different, with sluggish economic growth and abating inflation. As a result, the interest rate is higher in Norway than in other countries. Households are enjoying strong growth in income and are borrowing heavily. Wage growth is high. Financial savings are low. There is strong growth in retail sales measured in current prices. House prices are high. Petroleum investment is also high.
There was a sharp break in the trend in the mid-1970s (see Figure 2). From a rate of increase for the business sector of around 6 per cent a year during the 1960s, the trend increase fell to around 2 per cent a year during the second half of the 1970s and in the 1980s. After the economic crisis at the beginning of the 1990s, productivity growth increased again. Growth rose to around 3 per cent a year during the period 1995-2007 and was at its highest during the years 2002-2006, when it increased on average by 4.4 per cent a year. It was a broad upturn, covering almost all sectors. BIS Review 12/2008  1  But in 2007 productivity slowed down considerably. It fell by 0.5 per cent during the first three quarters, compared with the previous year. I will return to the decline later on. Productivity is affected by economic activity What explains the fact that productivity has shown an increase trend? At the beginning of the 1990s part of the increasing productivity growth was probably linked to the rapid exclusion of companies and labour with low productivity during the crisis years. When the crisis was over, companies had plenty of spare capacity and could therefore increase production. In addition, the substantial weakening of the krona in autumn 1992 contributed to a rapid increase in exports. When production and resource utilisation rose, this led to an upswing in productivity.

Given past events, my feeling is, although I have no firm facts to base it on, that the low productivity outcome for 2007 will be revised upwards somewhat as the statistical base improves. But this will not alter the picture of 2007 as a year of very weak productivity growth. We will not know the definite outcome for a couple of years yet. In the Monetary Policy Update published in December last year we could observe that productivity growth had been weaker than we estimated in our October Report (see Figure  12  Sveriges Riksbank (2007). 13  Öller (2007). BIS Review 12/2008  5  3). We therefore revised down our forecast slightly in the short term. In 2008 we envisaged a gradual recover in productivity. After that, our assessment was that productivity growth would develop roughly in line with the trend rate of increase. Several factors indicate that the long-term rate of increase in productivity will remain relatively high, although it will not be as high as during the years at the beginning of the 2000s. Globalisation is one such factor, and will probably continue to be a driving force behind productivity for a long time to come. Integration within the EU is deepening. The countries in eastern and central Europe who have moved away from planned economies have many years of rapid development ahead of them before they catch up with western Europe.
Simulations using the Bank’s main forecasting model suggest that the Bank’s monetary policy measures raised the level of GDP by around 8% relative to trend and lowered unemployment by 4 percentage points at their peak. Without this action, real wages would have been 8% lower, or around £ per worker per year, and 1.5 million more people would have been out of work. In short, monetary policy has been highly effective. 12  All speeches are available online at www.bankofengland.co.uk/publications/Pages/speeches/default.aspx  12  Financial outcomes So monetary policy has been highly effective in doing its job, but what have been the distributional effects on financial outcomes? Has monetary policy robbed savers to pay borrowers? Has the MPC been Robin Hood in reverse? In a word, no. Chart 15: … as have all income quintiles  Chart 14: The poorest have gained the most while all wealth quintiles have gained since 2006-8… Lowest wealth Second lowest wealth Middle wealth Second highest wealth Highest wealth  Total net wealth (% change since 2006-8) 60  Lowest income Second-lowest income Middle income Second-highest income Highest income  % change since 2006 12 10  50 8 40  6 4  30  2  20  0 10  -2 -4  0 2006-8 2008-10 2010-12 2012-14 Source: Wealth and Assets Survey (WAS, ONS) and Bank Calculations. 2006 2007 2008 2009 2010 2011 2012 2013 2014 Source: Family Resources Survey (FRS) and Bank Calculations. Income deflated by the consumption deflator.

2  All speeches are available online at www.bankofengland.co.uk/publications/Pages/speeches/default.aspx  2  The deepening of the symbiotic relationship between global markets and technological progress has lifted more than a billion people out of poverty (Chart 2), while a series of technological advances have fundamentally enriched our lives. Chart 1: 3 ½ billion people have internet access  Chart 2: 1 billion fewer people live on less than $ a day since the early 1980s  Billions of people  Billions of people  3.5  2.0 1.8  3.0  1.6 2.5  1.4 1.2  2.0  1.0 1.5  0.8 0.6  1.0  0.4 0.5  Number of poor at $ a day (2011 PPP)  0.2  0.0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016  0.0  Source: Internet Live Stats. An internet user is defined as an individual who can access the Internet at home, via any device type and connection. 2015 and 2016 are estimates. 1981  1986  1991  1996  2001  2006  2011  Source: World Bank. $ a day is the World Bank’s current global poverty line. Globally, since 1960, real per capita GDP has risen more than two-and-a-half times (Chart 3), average ii  incomes have begun to converge, and life expectancy has increased by nearly two decades (Chart 4).
But there are a couple of Covid-related distortions that have been pushing up on this growth: there is a large base effect from the fall in average earnings last year, and a compositional effect from the pattern of impact of Covid on activity across the economy and how that relates to typical pay rises by type of job[2]. All of that said, we think the rate of growth of earnings in an underlying sense is probably around the 4% level – higher than we saw before Covid, and somewhat higher than we would expect to see in these economic conditions. But, there is another interesting development. The dispersion of pay growth has risen quite markedly – so for the high numbers we read about, there are also low ones. I am going to come back to this point. The final piece of the economic picture I want to cover is inflation. Having been well below target last year and into this year, it has risen above rapidly, to 3.2% in August. Much of the latest rise reflects base effects from last year, but we have also seen unusually strong rises in some items, including some foodstuffs, used cars and accommodation. Our forecast in August had inflation rising to 4% by the end of this year, and developments since then mean that inflation is likely to rise to slightly above 4%. The major contributors to the further increase are not base effects but rather the strength we are now seeing in goods and energy prices.

Within this view, some members put more emphasis on the continuing shortfall in the level of GDP relative to pre-Covid, while others emphasised the continuing direction of travel towards closing that gap and the evidence of cost pressures accompanying the closing. But all of this group were of the view that the stimulus to monetary policy enacted in response to Covid would need to start to unwind at some point, that unwind should be enacted by an increase in Bank Rate, and if appropriate would not need to wait for the end of the current asset purchase programme. The other view places more weight on current evidence of cost and price increases and accompanying signs of labour market and capacity pressures, leading to more persistent excess demand and higher inflation. Moreover, a policy change now would contribute to ensuring medium-term inflation expectations remain well anchored. From this, I would draw out a number of important points. The great strength of the MPC process is that nine reasonable and I would say well informed people can differ on these interpretations, and we do so transparently. But, all of us believe that there will need to be some modest tightening of policy to be consistent with meeting the inflation target sustainably over the medium-term. Recent evidence appears to have strengthened that case, but there remain substantial uncertainties and we are monitoring the situation closely. Let me finish with a thought which builds on the whole area of supply shocks.
My main focus thereby will be on what central banks can and should do. Why are loans useful from an economic perspective? Lending is one of the cornerstones of a successful economy based on the division of labour. This fact has been recognised since ancient times (cf. slide 5). As much as 5,000 years ago in Mesopotamia, seeds for crops were made available on loan, with repayment including interest due after harvest. Loans were also commonly used in ancient Greece and Rome. 1 Lending in its present form dates back to the emergence of the ‘modern’ banking system in Europe in the late Middle Ages. 2 To this day, banks fulfil key functions in brokering loans. Without them, efficient large-scale lending as we know it would not be possible. 3 Most recently, alternative methods of credit provision have emerged thanks to digitalisation – P2P or crowd lending for example. Nevertheless, banks remain the mainstay of an effective credit system. I will now explain why growth and prosperity would be significantly lower without an efficient credit system. To do so, I need to clarify the two basic functions of loans (cf. slide 6). First, loans enable borrowers to have future income at their disposal now. And second, loans allow creditors to make optimal use of their available capital. Loans enable borrowers to have future income at their disposal now  Let me explain this in greater detail. Regarding function number one: Without loans, expenditure at any given time is limited to one’s savings and one’s current income.

25  Macroprudential instruments are, for example, a component of Basel III, the post-financial crisis amendment to the global minimum standards in bank regulation issued by the Basel Committee for Banking Supervision of the Bank for International Settlements, cf. BCBS (2010). Page 13/16  Along with the CCyB, these measures have helped to reduce momentum on the credit and real estate markets in the last three years (cf. slide 26). 26 But it is still too early to give the allclear. It remains to be seen how sustainable the cooling of price momentum in the real estate market is overall. Imbalances remain in the real estate and mortgage markets. Price momentum in the residential investment property segment remains high. There are also signs of renewed price rises in the owner-occupied segment. At the same time, lending rates are still extremely favourable. As a result, the incentives for households, banks and investors to take excessively high risks in the mortgage and real estate markets remain strong. The following conclusion can therefore be drawn: Macroprudential instruments have become a key instrument in the toolbox of central banks and regulators – and rightly so, in my opinion. They facilitate the targeting of specific risks in the financial system. At the same time, however, it would be presumptuous to assume that these macroprudential instruments might be able to curb all risks to financial stability. Conclusion Ladies and gentlemen, let me now wrap up. Credit is good, debt is bad – how can we explain this widespread public ambivalence to lending?