samchain/econo-pairs-v1 huggingface dataset:
In order to restore an adequate flow of credit to the economy, banks should take advantage of governments’ commitments to support banks’ balance sheets through capital injections, the provision of government guarantees on new bank debt, as well as through asset relief schemes aiming at removing troubled assets from banks’ balance sheets. The common goals of these government measures in Europe and elsewhere are to safeguard financial stability, help restore the provision of credit to the economy and bolster confidence in the soundness of the financial system and in the prospects of the economy. Needless to say, the ongoing structural adjustment in the banking sector and the low confidence of investors in the soundness of some institutions cannot be counteracted by monetary policy and the provision of central bank liquidity. IV. Bank support measures and fiscal stimulus  At present, the European economy is experiencing a mutually reinforcing interaction between, on the one hand, the weakening of economic activity and rising unemployment, and, on the other hand, the deleveraging of banks’ balance sheets and the persisting bank stresses in some bank funding markets. The deleveraging process and the emergence of an adverse feedback loop between the real economy and the financial sector will affect the favourable impact of monetary policy and liquidity provision on the economy. These developments underscore the importance of effective implementation of the government measures to strengthen bank balance sheets and improve banks’ medium-term market funding.

BIS Review 65/2009  9
For example, there is a striking correlation between the pattern of unemployment and wage growth in the UK and the US (Charts 3 and 4). In the US, unemployment has fallen to its lowest levels since 1969, while pay growth has remained modest. Given the strength of jobs growth, the weakness in pay has surprised many people, including the Bank of England. Chart 5 plots the Bank’s wage forecasts at annual intervals since 2012. Over this period, there has been a sequence of negative forecast errors, averaging around one percentage point per year. The same has been true of external wage forecasts, for the UK and elsewhere. These surprises suggest that the recent pattern in pay and unemployment has been unusual by historical standards. In the 1950s, A W Phillips uncovered a negative empirical relationship between pay growth and unemployment: pay grows faster when unemployment is lower. The Phillips curve was born (Phillips (1958)). This relationship has since become a central pillar of macro-economic theory and policy. Part of  3  All speeches are available online at www.bankofengland.co.uk/speeches  3  the attraction of the Phillips curve lies in the fact that it tells a simple story: the tighter the jobs market, the greater the pressure on pay. Exactly 60 years on, the Phillips curve is still widely used, and widely debated, by economists and policymakers. But with pay undershooting expectations, and with unemployment touching generational lows, some big questions are being posed of it.

Department for Business, Energy & Industrial Strategy (2017), ‘Industrial Strategy: building a Britain fit of the future’, BEIS Policy Paper. Espinosa-Vega, M and Russell, S (1997), ‘History and Theory of the NAIRU: A Critical Review’, Federal Reserve Bank of Atlanta Economic Review, 1997 Q2. Gardiner, L (2016), ‘A-typical year?’, article for the Resolution Foundation. Gordon, R (2013), ‘The Phillips Curve is Alive and Well: Inflation and the NAIRU During the Slow Recovery’, NBER Working Paper, No. 19390. Gregg, P, Machin, S and Fernandez-Salgado, M (2014), ‘Real Wages and Unemployment in the Big Squeeze’, The Economic Journal, Vol. 123, pp. 403-432. IMF (2017), ‘Understanding the Downward Trend in Labor Income Shares’, IMF World Economic Outlook, Chapter 3. Krueger, A (2018), ‘Reflections on Dwindling Worker Bargaining Power and Monetary Policy’, Federal Reserve Bank of Kansas City Economic Symposium, Jackson Hole. Manning, A (2003), Monopsony in Motion: Imperfect Competition in Labor Markets, Princeton University Press. Moscarini, G and Postel-Vinay, F (2017), ‘The Cyclical Job Ladder’, Annual Review of Economics, Vol. 10, pp 166-188. Mueller, H, Ouimet, P and Simintzi, E (2017), ‘Wage Inequality and Firm Growth’, American Economic Review, Vol. 107, No. 5, pp. 379-383. Phillips, AW (1958), ‘The Relationship between Unemployment and the Rate of Change of Money Wage Rates in the United Kingdom, 1861-1957’, Economica, Vol. 25, pp. 283-99.
Contrary to some claims, the outcome was a travesty for democracy and at odds with the will of the people. The referendum in question was initiated by the National Environmental Research Council (NERC) and involved a public ballot to choose a name for the new polar Royal Research Ship. Various options were mooted as suitable candidates, including “Sir David Attenborough” (the famous British naturalist), “Henry Worsley” (the famous British explorer) and “Pingu” (the famous cartoon penguin). The winner of the public ballot was none of these. With almost 80% of the popular vote, “Boaty McBoatface” romped home courtesy of a social media campaign. At that point, NERC jettisoned the will of the people. The ship was named instead “Sir David Attenborough” - though, in a small concession to democracy, its remotely operated sub-sea vehicle was named Boaty McBoatface. This is an object lesson in the perils of public polling for policy purposes. Sometimes, there is madness in crowds. 80  That is not to say, however, that public opinion is always and everywhere mad. In his book Superforecasting, Philip Tetlock uses evidence drawn from a variety of experimental studies to determine the ingredients of a good forecast. 81  He finds that the key lies in diverse perspectives, drawn from amateurs as  well as experts. Often, he finds, there is wisdom in crowds. If harnessed, the wisdom of crowds and of amateurs can improve the forecasting performance of experts.

With the huge financing gap for infrastructure development standing at $ trillion in the decade to 2020, AIIB will be looking to play a major role in bridging the shortfall. Under the strong leadership of President Jin, AIIB would provide a global platform to coordinate efforts among existing international financial institutions and government authorities to bring development issues to light; it also has the capability to mobilise the liquidity and field expertise from investors, financiers and project developers from the private sectors to facilitate infrastructure development and their related financing activities. To the HKMA, President Jin has been a long-time friend. Just four months ago, we had the honour of President Jin as the officiating guest at the launch of IFFO and a key panel speaker at our inaugural conference. President Jin acknowledged that IFFO can be an important contributor to Asian infrastructure by helping to guide liquidity from private and institutional investors into productive investments, while also serving as a platform for communication, cooperation and knowledge exchange. Today we have the presence of 300 leaders from various sectors including finance, architecture, building and construction engineering, project management and consulting, project development and operation as well as professional services, many of you being the senior management of your leading organisations in the field. Indeed, Hong Kong possesses a critical mass of financial professionals which can support the operations of AIIB in areas such as project financing, bond issuance, investment, financial management and foreign exchange management.
5  The intention is to avoid a firm drawing on publicly-provided liquidity support mechanisms if they actually have a fundamental problem of solvency or viability. But liquidity risk can never be completely distinguished from solvency risk at a point of stress. 2  BIS Review 126/2010  facilities, reserve account holders can deposit with, or borrow from the Bank overnight for unlimited amounts at a penalty to Bank Rate. 6 Open Market Operations The Bank’s Open Market Operations (OMOs) take the form of reverse repo operations – economically equivalent to secured lending – at different maturities. Normally we would lend (cash) short-term for one week and longer-term for multiples of three months. Shortterm repos have not been needed regularly since we started to inject cash directly via the asset purchase programme. But normally short-term lending operations would take place weekly at a size designed to be consistent with the commercial banks’ aggregate reserve targets for that maintenance period. This short-term lending takes place against a relatively narrow set of high quality collateral – mainly government bonds. The price has usually been Bank Rate 7 and bids pro-rated. Short-term repos are not intended to provide any back-stop liquidity support. They are limited, competitive and take a narrow range of high quality collateral. They are designed to help implement the monetary policy stance. If there is excess central bank money in the system relative to reserve targets, the Bank can also drain cash out.

A similar point can be made about debt issued under the Government’s Credit Guarantee Scheme – the Government provides a guarantee but it is still the market which buys the bonds and provides the cash. As these schemes come to an end, the challenge for the banks is not so much the sourcing of an additional quantity of funding. It is to roll over that existing market funding into different funding instruments. More generally, a central bank should not allow its liquidity operations to become, or even to be perceived as a source of sustained funding for banks or for any other form of mediumterm lending. The only medium-term source of commercial bank funding, and hence for their lending, is private sector savings, whether channelled through retail or wholesale markets. A central bank does not have access to those private sector savings. The grey area is that short-term liquidity support, in size and continually rolled over, looks and acts a lot like funding. That is why the Special Liquidity Scheme was designed to lend against legacy assets only and one of the reasons why the Bank has been so determined that it will end as scheduled. Suppose the scheme were to be rolled on indefinitely. What was intended and designed as system-wide central bank liquidity support would become instead a fiscal operation. We would be using government debt – and hence public money – to subsidise a group of private sector firms, with the public purse being at risk.
Let me stress it for French and European bankers who are gathered here: accepting good compromises is often a sign of intelligence; maintaining for ever excessive demands is not, and can be a road to failure. III. Maintaining the momentum to implement the Capital Markets Union Let me now turn to CMU, which is the natural complement to the Banking Union. Capital markets and banks together provide diversified sources of financing, offering both safety and flexibility to economic agents. From a central bank point of view, a deeper and more integrated financial system is desirable to improve the transmission of our single monetary policy to all parts of the euro area and help absorb asymmetric shocks. In the United States around 60% of the impact of state-level shocks is alleviated through private capital flows, against a poor 20% in the euro area where, financial flows even tend to worsen imbalances and fragmentation in times of crisis. We need to reverse this trend, and in particular to foster equity financing which is the most appropriate tool for innovative projects. Insofar as innovation will be the key factor of success in the two major transformations ahead of us – digital and ecological –, we ought to pay special attention to the take-off of venture capital in the EU, which is still fivefold less developed than in North America. The EU has the world’s greatest pool of savings at its disposal: the surplus of domestic savings over investment structurally exceeds EUR 300 billion.

The public consultation launched by the Commission is a unique opportunity to put forward constructive proposals, on both sides of the coin: on the demand side, through well-calibrated prudential incentives for market participants; and on the supply side, notably with the extension of the scope of clearing, for products and entities. We have a collective responsibility to reduce systemic risk and we have to act now. As a conclusion, let me take a take inspiration from the recent Adam Mc Kay and Leonardo di Caprio movie “Don’t look up” to provide a broader perspective. We may be coming out of a storm called Covid, which has heavily disturbed our traditional landmarks and consumed a lot of our energy. We may be facing another crisis in geopolitics. But we must not forget to “look up” at the stars to see where we are in our journey and to remember where we are going… The two “great transformations” ahead of us require a Financing Union in Europe. The time to act is now. I thank you for your attention. 4/4  BIS central bankers' speeches
Mr. Plenderleith considers what is new in the financial markets in the United Kingdom Speech by Mr. Ian Plenderleith, an Executive Director of the Bank of England, at the 6th Central Banking Conference, in London on 18/11/97. 1. This has been a year marked by important developments in the UK financial markets and I am delighted to have this opportunity to take you through some of the highlights. The UK’s new monetary framework 2. Perhaps the single most momentous change in the financial landscape in the UK has been the new government’s decision, in May, to give operational responsibility for interest rates to the Bank of England -- essentially, to establish operational independence for the central bank. This significant reform, which took effect immediately, and is to be the subject of legislation recently introduced in the UK Parliament, represented an immediate concrete demonstration of the new government’s commitment to monetary stability. It ensures that monetary policy will continue to be directed to the pursuit of low inflation, recognising that that is an essential pre-condition for achieving the sustained growth in output and employment that we all seek to achieve. The step was warmly welcomed by the markets, as was evidenced by the immediate fall of around 50 basis points it precipitated in long bond yields. 3. The framework put in place with that announcement has been carefully constructed and I would like to point to four features of it that I believe will be important to its long-run effectiveness. 4.

The UK’s sterling Real-Time Gross Settlement (RTGS) system is being developed to accommodate the euro, so that from the beginning of 1999 euro wholesale payments may be made in a safe, efficient and cost-effective way as sterling payments can now, even though the UK will not be a participant in the monetary union at the outset. That development remains on schedule, and it is encouraging that the UK system (CHAPS) has had expressions of interest recently from a number of overseas banks wishing to join. 23. The UK euro system -- CHAPS euro -- will allow payments to be made both between parties within the UK and cross-border from and to the UK through its link to TARGET. Using the knowledge and expertise we have acquired through developing and operating by far the largest RTGS system in Europe -- with average daily volumes of some 70,000 payments, worth some £ bn -- we are contributing a great deal to the technical development of TARGET. Because it extends the benefits of RTGS systems, in reducing the risk in payments, for the first time cross-border, it is a project we wholeheartedly support. 24. But we also want to see TARGET as efficient and effective as possible, so that it becomes the payment system of first choice for banks, in order to maximise its benefits in reducing systemic risk. We have to recognise that TARGET will be competing with alternative euro payments mechanisms, including correspondent banking and the European Banking Association’s net end-of-day settlement systems.
Many large financial firms have increased their attention to misconduct risk and cultural drivers in the wake of serious frauds and enforcement actions over the past several years. But, the degree of commitment and progress in these efforts has not been even across the industry and serious or persistent misconduct continues in some firms. So, why wouldn’t a firm do more? One can turn to traditional economic theory to offer an explanation for why a firm might underinvest in cultural capital. Firms may operate with levels of cultural capital beneath both the social optimum and even the private optimum due to different types of market failures. Today I will consider three well-known phenomenon— externalities, principal-agent problems, and adverse selection—that may explain why misconduct risk persists and why firms might underinvest in cultural capital relative to what might be socially optimal. Externalities Externalities are the impact that one actor has on other, unrelated actors. Externalities can drive a wedge between private and socially optimally outcomes and, from a supervisors’ perspective, lead firms to underinvest in their own resiliency by ignoring the broader impact of bad outcomes on the financial sector and the real economy. In other contexts like environmental policy, externalities such as pollution motivate government intervention.

It is analogous to physical capital, like equipment, buildings and property, or to human capital, like the accumulated knowledge and skills of workers,6 or reputational capital, like the franchise value or brand recognition.7 Cultural capital is an input into a firm’s production process—impacting how it does its business. Cultural capital is an intangible asset. That is, we generally experience the impact rather than the thing itself—but its impact can be measured, assessed, and ultimately influenced. For example, in an organization with a high level of cultural capital, misconduct risk is low and observed structures, processes, formal incentives, and desired business outcomes are consistent with the firm’s stated values. The unspoken patterns of behavior reinforce this alignment. Problems are escalated to senior managers routinely, as employees feel empowered to raise their hand and believe that their efforts will result in meaningful responses. And senior leaders advance through the organization because, in addition to strong business performance, they set a credible tone from above by modeling behaviors consistent with the firm’s values. By contrast, consider some characteristics of an organization with low levels of cultural capital.
Faced with such swings in sentiment, I want even more to stress today two ideas that are constant and consistent: (A) the ECB has been an innovative and efficient inflation-targeter, including in the Covid-crisis; (B) beyond Covid, the ECB has a powerful “quartet of tools” to keep its monetary policy as accommodative, and for as long as necessary. A. The ECB as an innovative and efficient inflation targeter In the first part of my remarks, let me try to answer three questions: is the ECB clear in its objective? is it consistent in its instruments? and is it efficient in its results? Page 2 sur 9 I. Is the ECB clear in its objective? For the ECB, like all other major central banks, our inflation objective is our lodestar. That means our definition of price stability should be simple, symmetric, and medium-term oriented. However, not everyone may perceive it this way. Hence, in the context of the Strategy Review launched by Christine Lagarde, we are currently reflecting on whether it can be communicated more clearly. To make it even simpler, we should reexamine the overly sophisticated qualifiers attached to the 2 % figure (“close to but below”). There is no benefit in appearing ambiguous about what we are aiming at. “Symmetric” refers to the fact that our objective is a target and cannot be a ceiling. Looking backwards, a central bank that has been successful in achieving its target on average will have had roughly as many episodes of inflation above its target as below.

Among major economies worldwide, the euro area has the lowest interest rates, be they nominal or real, short or long-term. And the ECB has developed a wide range of tools. Quantitative Easing was not created in Europe, but corporate bond purchases, the wide range of eligible collateral, TLTRO or negative rates were developed here. In calibrating our decisions, we look of course at both the stance (based on our desired effect on future inflation) and the effective transmission of monetary policy (is the stance having the intended effect for economic agents, including SMEs and households?). These two considerations are evident in our recent decisions about the PEPP. The purpose of the PEPP is to preserve favourable financing conditions for all borrowers during the crisis phase of the pandemic and thereby prevent inflation from falling even further below our objective. From  Page 4 sur 9 the start in March 2020 and still more since December, we have included the possibility to buy flexibly across time, jurisdictions and asset classes, to ensure that all borrowers benefit from favourable financing conditions. The recent evolution of long-term sovereign rates illustrates our consistency. In January and February, long-term sovereign bond yields in the euro area began to increase, largely reflecting transatlantic spillovers from US monetary and fiscal policies. So we decided in our Governing council on March 11th to conduct our purchases “at a significantly higher pace”, which was implemented promptly and efficiently and limited the rates increase. From mid-April nevertheless, our action has been hampered by unwarranted tapering fears.