samchain/econo-pairs-v1 huggingface dataset:
QT and the MPC’s forecasts I want to turn now to the second question I posed at the beginning: should the MPC not recognise in its forecasts some particular and additional drag on demand and on inflation, on top of that induced by higher Bank Rate, from the ongoing “quantitative tightening” (or “QT”)? This began over a year ago, initially by failing to replace maturing gilts in the APF. In September, the MPC commenced outright sales of assets and said that, by both means, it would reduce the size its size by £ over the following year. Page 28  Readers who’ve come this far will be glad to hear that this section will be pretty brief because I’ve actually gone through the main points already. There are two. First, because the impact of QE has been variable I don’t think it would be right to pretend there’s some fixed, unchanging effect on the economy – to translate, for example, a given quantity of asset purchases (or sales) into some notional equivalent in terms of Bank Rate. It’s partly because of this, and the fact that we can only be less sure of its impact than that of conventional policy, that the MPC views Bank Rate is its “primary” policy instrument. By design, the Committee did not embark on QT until the official interest rate reached a certain threshold – a level from which (were the need to arise) it could then be cut.

Several key initiatives contribute to this Financing Union and already exist: (i) the Capital Markets Union, which promotes the diversification of private financing; (ii) the Juncker Investment Plan, which mixes public and private investment towards the real economy; and (iii) the Banking Union, which addresses persistent financial fragmentation. These initiatives, however, lack the unified governance of a Financing Union, which would help circumvent bureaucratic barriers and foster synergies. In addition, progress towards a Financing Union is still needed in four key areas: First, providing incentives for cross-border investments – mainly in equity – through accounting, taxes and insolvency laws. Strengthening the free movement of capital within the EU requires overcoming a wide range of legal obstacles. We should improve the 2/5  BIS central bankers' speeches  predictability of insolvency frameworks, eliminate tax-related biases that penalise equity and harmonise the accounting rules for small businesses; Second, developing pan-European savings products more oriented towards long-term investment. This could be done through a variety of savings vehicles: the creation of European venture capital funds, new market initiatives for green bonds, securitised portfolios that are diversified across member states, and so on and so forth; Third, completing the Banking Union; Fourth, controlling financial activities and risks that are of vital importance for the euro area, such as supersystemic CCPs. Improvements in these four areas are needed so as to reach significant gains for digitalisation, SME’s scaling-up or energy transition. In each of these fields we have significant investment needs.
Stefan Ingves: Managing structural risks in the Swedish banking sector Speech by Mr Stefan Ingves, Governor of the Sveriges Riksbank and Chairman of the Basel Committee on Banking Supervision, at Affärsvärlden’s “Bank & Finans Outlook”, Stockholm, 20 March 2013. *  *  *  Today I intend to speak about the Riksbank’s view of the structural risks in the Swedish banking sector and how they can be managed. As so often in recent years, I will take the crisis of 2007–2009, and the risk reassessments that banks, investors, researchers and decision-makers all over the world were forced to make as a result of the crisis, as my starting point. I will begin by saying a few words about the international work on regulations that arose as a consequence of the crisis. Then I will go into a little more detail about the structure and special characteristics of the Swedish banks. On the basis of this, I will present my view of the possible implications of the implementation and follow-up of the Basel III regulations for the Swedish banks. The risks associated with banking operations need to be limited First, however, I would like to give you a small example of the risks we are talking about. The US mortgage crisis became acute in 2007 and marked the start of the global financial crisis. At that time, the capital adequacy ratio, that is the amount of capital in relation to riskweighted assets, in the major Swedish banks averaged around 7 per cent.

There were in fact transitional regulations that initially meant that the banks were not able to calculate so liberally, but these were the regulations that would apply in the longer term and thus those that the banks and investors, and often the authorities, primarily focused on. Given that the banks, in Sweden and in other countries, only needed a small amount of capital, and given that it was often assumed that they were backed by government guarantees, it was highly profitable for them to take substantial risks. The banks themselves carried only a small part of these risks, while it turned out that the banks’ customers and the taxpayers had to carry the major part. In several countries – Spain, Ireland and Denmark for example, in addition to the United States – we have seen how substantial falls in the prices of the banks' assets, mainly in the form of mortgages, have led to major economic problems. The point is that the risk capital that the banks and their shareholders provide is limited to the value of the share capital. But society’s risks are greater than this. A mainstream assessment in economic research is that a national crisis in the financial system costs the economy around 60 per cent of GDP. In Sweden, this would be equivalent to over SEK 2 000 billion, or  BIS central bankers’ speeches  1  more than SEK 200 000 per Swede.
It is thus an opportune time to be gathered at this year’s Global Payments Week (GPW). Indeed, Bank Negara Malaysia is deeply honoured to host the first GPW in Asia-Pacific. This is fitting for the times, given the growing pervasiveness of digital payments in Asia in recent years. The 2018 World Payments Report estimates that the growth of non-cash transactions in emerging Asia has outpaced Europe and North America by at least four to five times between 2012 to 2016. The trend is expected to continue – emerging Asia is forecasted to record roughly 250 billion noncash transactions by 2021, making this region the market leader by volume of electronic payments for the first time. Indeed, the future of payments look brighter than ever. Digital payments adoption is growing. The technological advancements supporting it show no signs of slowing down. Yet, no matter how optimistic everyone else is – it is in our DNA as regulators to think about what could go wrong. For today’s keynote address, allow me to therefore highlight the key challenges and risks that may lie ahead. I will then share a few perspectives that I believe are crucial for the regulatory agenda for payments going forward. The first key challenge is the evolving landscape of technologies and the resultant risks for payment systems. The rapid development and adoption of technology in recent years has brought about greater efficiency and productivity. However, the pace of change itself can be a key challenge, if not managed well.

Not too long ago, the advent of the Internet heralded a new era for payments by enabling transactions to be conducted remotely using online banking services and payment cards. Today, payment technologies have evolved rapidly to include an alphabet soup of different modes of payment – for example RFID, NFC and QR just to name a few. At the same time, new use cases leveraging on biometrics, open API, artificial intelligence and blockchain are also being developed. While such technological innovations demonstrate great potential, the full impact and resultant risk may yet to be fully understood. Cyber security is also a fast-growing area of concern, given the sophistication of cyber threat actors and as more consumers and businesses are plugged into digital payments. This is further 1/6  BIS central bankers' speeches  compounded by the interconnectedness of payment systems which heightens contagion risk. While sources of risks are borderless, the non extra-territorial nature of most payment regulation and supervision presents a key challenge to effective regulatory oversight. Concentration risks also require close attention, given the largely centralised model of prevalent payment systems. Network effects are a double-edged sword. As a payment system becomes more widely used, the implications of operational disruption would also be more far-reaching. In 2018, we have seen two global card networks face service disruptions, affecting at least five million transactions in Europe and the US. If the frequency and magnitude of such disruptions increase, there is a real risk that public confidence in digital payments would be undermined.
The main challenge is to limit flows of persons into benefit. Recent research findings can provide us with guidance.18 During periods of restructuring of private and public sector activities, the number of new benefit claims rises. Findings show that the interaction between unemployment benefit schemes and other social security schemes is not optimal. When demand for labour falls, flows into benefit increase. But the flows do not primarily go into unemployment benefit and seeking work and activity, but directly into rehabilitation. And rehabilitation is to a large extent a gateway to disability benefit. A broad range of measures is probably needed to limit these flows. The new government agency the Norwegian Labour and Welfare Organisation is facing considerable challenges. Moreover, there should be strong financial incentives in enterprises to counter employee flows into benefit. Certain schemes should be reassessed, schemes that now function as pure poverty traps, because for certain recipients there is little to be gained financially in early phases from moving from welfare to work. 5  Growth and the environment  Strong growth in the world economy is reducing poverty at a faster pace than ever before. Increased trade and economic integration are bringing opportunities for raising living standards to ever larger groups. 17  European Foundation for the Improvement of Living and Working Conditions (2006):”Fourth European Working Conditions Survey”. 18  Knut Røed:” Hvor stor er arbeidskraftsreserven? Og hvordan kan den mobiliseres?” (How large are labour reserves? And how can they be mobilised?)

In the poem “Otherness land”20 he describes Norway as a country in the far north, a nation struggling and resisting intimidation. A prominent feature of Norway is its natural resources. The harvesting of waterfall power, oil and gas, timber and fish are important to income and welfare in Norway. Jacobsen writes: “… But we became a civilised people in the end, seafarers from the start, rulers of the whole of the North Atlantic. And now we are reaping black gold from the seabed (…)” And So do not …….. dwell in a dream for we await your hands and goodwill. We should hope that we have become a civilised people – but we should not believe that we can safeguard welfare simply by reaping black gold from the seabed. Welfare is secured by putting hands back to work, productive labour and the willingness to change – and of no less importance by protecting the environment. 20  20  A previous translation of the poem does not exist. The verses included in the address have been translated by Norges Bank's staff translators Janet Aagenæs and Helle Snellingen. BIS Review 15/2007
I have been immensely interested in - and greatly encouraged by - what you have had to tell us. Perhaps I might add a few observations of my own - from my inevitably more distant perspective. For much of the past two or three years the external environment facing Iran was a difficult one. The slowdown in world economic growth in the wake of the global financial crisis and the associated fall in oil prices - to an unsustainably low level - significantly weakened the financial positions of all major oil-exporting countries. Iran was no exception. The current account swung from a surplus of 2.2% of GDP in 1997/98 to a deficit of over 2%. And the fiscal position deteriorated to a deficit of 6.7% of GDP. But Iran’s response to worsening economic conditions was a positive one. The authorities began to formulate a medium-term reform strategy, which has now been articulated as the Third Five Year Development Plan. Since then, the combination of sound economic management at home, coupled with continued economic expansion in the industrial countries and rising oil prices, have improved Iran’s prospects considerably. The IMF forecast GDP growth of 3.4% in Iran in 2000/01. The external account has strengthened, with a surplus of 4.7% of GDP recorded in 1999/2000. And the budgetary position swung from deficit to a surplus of 1% of GDP in 1999/00. Foreign exchange reserves have risen by $ billion to $ billion since 1998/99.

Establishing an Oil Stabilisation Fund, which ensures that the government balance sheet is strengthened when oil price movements are favourable, should help insure against the type of debt servicing problems faced by many emerging market economies during the difficult international environment of 1997-98. Iran was able to maintain an excellent debt service record through this period, and prudent debt management policies should help preserve this record going forward. Total external debt is expected to decline to around 10% of GDP this year, and short-term debt to only about 40% of reserves, having fallen from around 65% in 1999/2000. The strong external position has encouraged the World Bank to approve loans of some $ million this year. Importantly, it should hold Iran in good stead in attracting inflows of private capital, which are so crucial to a country’s long-term growth prospects. The international financial crises of 1997-98 stemmed largely from vulnerabilities within countries’ financial systems. In the aftermath of the crises, the official community has been assisting the financial sectors in emerging market economies through technical assistance and improved surveillance. This has been an area of notable success in the redesign of the international financial architecture. A key step in this regard has been the joint IMF-World Bank initiative of Financial Sector Assessment Programs, or FSAPs.
A couple of years ago I held a speech in which I explained why it is not necessarily more unnatural to have a negative nominal interest rate than a negative real interest rate, that is, the interest rate discounting inflation. 7 Unlike a negative nominal interest rate, a negative real interest rate has arisen every now and then. The reason why one might think there is not such a big difference is that it is usually our purchasing power that concerns us. If one lends money, one will be able to consume less than before, both in the case of a negative real interest rate and a negative nominal interest rate. In the case of a negative real interest rate, this is because inflation is higher than the interest one receives, and one is therefore unable to buy as much for the sum of money one receives from the borrower. When the nominal interest rate is negative, one can say that the negative return is written into the contract from the start. But seen in terms of purchasing power, a negative nominal interest rate is not very different from a negative real interest rate. Since I held that speech we have had a negative repo rate for a further two years. My experience is that communication about the negative interest rate has not become easier, which I thought would be the case.

The time dimension of bank provisions, particularly potential pro-cyclicality and financial stability implications of the new approach, sets the stage for an exciting Panel 4. Admittedly, there is still little evidence gathered so far, given the short period of time over which the expected loss model has been in force, to arrive at definitive conclusions; intuitively, moving from the incurred loss paradigm to the expected loss model should reduce the procyclicality of provisions in the future. I am sure that this issue will attract interest from academics, supervisors and practitioners not only during this conference but far beyond it as more evidence and data are gathered. Whether provisions are pro-cyclical or not is a key matter for financial stability. Finally, learning from the implications and interactions between the new provisioning standards and other types of regulations to which banks are subject – most notably financial market regulations and micro- and macro-prudential regulations – will prove a perfect topic  5/7  for the final panel of the conference. In this regard, the Banco de España experience2 with the setting-up of so-called dynamic provisioning3 , which shares many characteristics of the current countercyclical capital buffer and is close to the concept of the expected loss model, serves as a good example of how closely linked provisioning standards, capital and macroprudential policies are. From a financial stability perspective, the fact that supervisors are given macroprudential tools should allow us to deal better with lending expansions and contractions in order to protect the economy from financial excesses.
Here we adopt a somewhat different approach. Specifically, we consider how effective various combinations of regulatory constraints would have had been in identifying banks which subsequently failed during the crisis (the “hit rate”), while at the same time avoiding incorrectly signalling stress among banks which survived (the “false alarm rate”). To do this, we exploit a dataset on the pre-crisis balance sheet characteristics of global banks developed by Aikman et al (2014). The dataset includes almost all global banks which had more than $ billion in assets at end-2006 – 116 banks in total across 25 countries. A range of balance sheet metrics are proxied at consolidated (group) level for each of these banks at end-2006. Restricting attention to those banks for which data are available to compute all of risk-weighted capital ratios, leverage ratios and NSFRs reduces the sample to 76 banks. If we focus on risk-weighted capital ratios, leverage ratios and loan-to-deposit (LTD) ratios (as a simplified proxy for the NSFR which captures the ratio of retail loans to retail deposits) the sample size is 96 banks.20 These banks can be divided into those that ‘survived’ and those that ‘failed’ between 2007 and the end of 2009.

IMF (2011a) examined international capital flows over the last 30 years and found that net capital flows to emerging markets have been strongly correlated with changes in global financing conditions, rising sharply during periods with relatively low global interest rates. Based on these and similar observations some observers have conclude that the effects on capital flows to other countries should be taken into account in, for instance, Federal Reserve policy decisions. For example, Eichengreen, Rajan, and Prasad (2011) find that the political authorities in large economies “should let considerations of these external effects play an explicit role in the monetary policy framework. Central banks in these countries should pay more attention to their collective policy stance and its global implications.”5 I do not agree with that conclusion. The Federal Reserve’s mandate concerns U.S. inflation and employment, and the Federal Reserve is not responsible for inflation, real developments, and monetary policy in other countries except as they feed back into the United States. That responsibility should rest with the policy authorities in those countries. Countries that choose to stabilise their dollar exchange rate or even peg to the dollar will tend to import U.S. expansionary monetary policy into to their own country. This monetary policy may in many cases be too expansionary for the countries concerned, creating an overheated economy with risks for bubbles and other negative consequences. A flexible exchange rate would give the countries the option of conducting an independent monetary policy appropriate for the country in question.
It is not possible to say how much of this increase is due to greater recognition of the term.

Technology would give birth to a new “leisure class”. Debates on the relationship between jobs and technology stirred again during the 1960s in the US, during the 1970s in advanced economies, and again in the 1980s and 1990s in the UK and parts of Europe. In each case, the prompt was rising rates of unemployment. And in each case, this debate subsided as unemployment rates fell. 4  BIS central bankers’ speeches  Moving into the 21st century, this debate has once again been re-kindled. The prompt this time has not so much been rising rates of unemployment. Rather it is been the rapid emergence of smart machines, jet-propelled by modern computing. These machines are different. Unlike in the past, they have the potential to substitute for human brains as well as hands (Autor et al (2003), Manyika et al (2013)). In Race Against the Machine and The Second Machine Age, Eric Brynjolfsson and Andrew McAfee paint a persuasive picture of robot-fuelled growth in productivity and an accompanying reshaping of the role and nature of work (Brynjolfsson and McAfee (2011, 2014)). Whether this vision is utopian or dystopian, it poses a fundamental challenge to the relationship between jobs and technology, to which I will return. The economics of these debates, which I hope is not too bloodless, is relatively straightforward. There are two opposing effects at work. The first is the substitution or displacement effect. Labour-saving technologies displace workers, almost by definition. Capital substitutes for labour, machine for man.