samchain/econo-pairs-v1 huggingface dataset:
This might include actions to 1)  prudently expand access to mortgage credit for homebuyers, including by limiting putback risks that discourage loan origination and addressing problems with appraisals;  2)  eliminate frictions and lower costs to refinancing for all borrowers with prime conforming loans;  3)  enable borrowers who are “underwater” on their loans but continue to make their monthly payments to earn accelerated principal reduction over time;  4)  provide bridge financing for borrowers with proven ability to service their debts who lose their jobs and may take longer than normal to find new jobs in today’s weak labor market; and  5)  manage the disposition of homes repossessed by creditors in a manner supportive of large-scale conversion into rental units. I am encouraged by the recent decision by the Federal Housing Finance Agency (FHFA) to make it easier for certain borrowers with high loan-to-value ratios to refinance. I hope this initial step will be followed by others that collectively move in the direction of stabilizing house prices. I believe this would not just be good economic policy, but it would also be extremely beneficial for taxpayers, who now effectively own the credit risk of those home loans guaranteed by Fannie Mae and Freddie Mac. On the fiscal policy front, ongoing support for demand from the public sector at a time when many households are deleveraging sustains jobs and incomes.

BIS central bankers’ speeches  3  To understand our prospects a bit better, we need to look at the likely behaviors of business and household sectors separately. Circumstances for the business sector are mixed with larger corporations generally in much better shape than smaller businesses. Many large corporations entered the recession with healthy balance sheets. While leverage1 did increase sharply in the recession, it has subsequently come back down to levels similar to the 1990s. Record profit margins have enabled large corporations to build substantial buffers of highly liquid assets. Large businesses are cautious because of concerns about the sustainability of growth and demand, political dysfunction, the health of the financial system and their ability to retain their access to credit throughout the business cycle. For smaller firms, the situation is generally more difficult. Because this sector has a higher exposure to real estate, falling real estate values pushed up leverage for this group and it remains well above previous historical highs. Although small businesses identify weak demand as their major problem, the availability of credit is also an issue. An improvement in their ability to obtain credit would seem to require some stabilization of real estate prices and a substantial increase in demand for their products and services. Turning now to the household sector, Chart 4 shows that a combination of the fall in interest rates, paying down of debt and debt write-offs has substantially lowered the share of income required for households to service their debt.
Supervision is about how we apply that framework every day. They are not the same thing. Rules are for the most part in our world the product of international agreement, eventually. There are good reasons for this in terms of seeking to ensure comparable standards of protection where services can be provided across borders, and where encouraging free trade in services is consistent with open economies. When it comes to supervision the PRA will be applying judgement around the framework of rules. This is important for a number of reasons, but above all against a background of inexorable increases in rule making we must have the determination to be focussed on the key risks that matter to our objectives. One of my commitments is that we must be focussed on the (I hope) small number of big risks that threaten our objectives of safety and soundness and policyholder protection. I don’t have any difficulty with intensive and intrusive supervision where it is focussed and justified by the risks. We are not, however, substitute compliance officers – that is the job of firms, and one that we will expect to see in place and functioning along with risk and audit functions. Another key aspect of judgemental supervision is that it must be forward-looking to the risks that may arise. This is crucial, and was not properly incorporated into the pre-crisis regime of supervision. Let me give a few current examples of this for insurers.

The essence of the With Profits contact as I understand it is that the provider offers a guaranteed minimum return, variously structured , plus the prospect of additional returns derived from the return earned on a pooled fund that combines many contracts including over different generations of policyholders. There is of course a logic to pooling returns, but for the policyholder the return can be complicated, and sometimes made opaque, by the practice of pooling different generations of policyholders who may have different expectations on their returns (conditioned, for instance, on changes in the external  BIS central bankers’ speeches  3  environment); and by the practices of smoothing returns and of charging differentially for the economic value of the guarantees. Additionally, problems have arisen because the funds are made up of many different groups of policyholders with different guarantees, some of which, essentially on the annuity side, became increasingly valuable as nominal interest rates fell from the mid 1990’s. The existence of these guarantees was often, at best, unclear or, at worst not disclosed to new joiners to the fund. Bear in mind also that these contracts are long-lived with maturities typically of 25 years of more; and that the With Profits insurers themselves have often built up over many years through the take-over or mergers of many smaller providers, each with their own distinct products, associated policyholder expectations, and administrative “legacy” systems.
2  BIS central bankers’ speeches  – are able to muster the courage to craft tax, spending and regulatory incentives for jobcreating enterprises to mobilize liquidity for expansion and payroll growth. Thus far, inflation has yet to raise its ugly head, and inflation expectations as measured by consumer surveys and market-traded instruments have remained stolid. However, with each passing day, constantly adding massive amounts to the monetary base will inevitably present a significant challenge to the FOMC, which must ultimately manage this high-power money so that it does not become fuel for sustained inflation above the committee’s 2 percent target once it is activated and flows into the economy. Thus, I was more than supportive of the collective decision of the FOMC to begin cutting back on our rate of accumulation of assets beginning in December. Over the course of our recent meetings, we have cut back from accumulating $ billion per month in Treasuries and MBS to a present rate of $ billion per month. This is still somewhat promiscuous. Even with the taper, the recent decline of mortgage supply has driven our absorption of the MBS market to 85 percent of fixed-rate MBS issuance. The fall in net MBS supply is outpacing the taper. At the current reduction in the run rate of accumulation, the exercise known as QE3 will terminate in October (when I project we will hold more than 40 percent of the MBS market and almost a fourth of outstanding Treasuries).

This is the very best we can offer you, whether you are from ancient Ithaca or Delphi or modern Hong Kong. Those who think we can be more specific in stating our intentions and broadcasting our every next move with complete certainty are, in my opinion, clinging to the myth that economics is a hard science and monetary policy a precise scientific procedure rather than the applied best judgment of cool-headed, unemotional decision-makers. We will cross the river that separates us from a normalized economy and a normalized monetary policy by feeling the stones. We may slip on occasion, but you should not underestimate our intention to apply whatever talents we possess as policymakers to do what is right to advance economic prosperity while strictly adhering to our commitment of containing inflation and maintaining market stability. Thank you (謝 謝). 7  6  Richard Fisher joined Mario Draghi, Mark Carney, Joachim Fels and others at a symposium on “Financial Stability and the Role of Central Banks,” organized by Jens Weidmann and Deutsche Bundesbank in Frankfurt am Main on Feb. 27–28, 2014. BIS central bankers’ speeches
Up to now, for NPLs outstanding more than 1 year, banks have been required to provide for 100 percent of the amount of loan net of collateral. We will, from the end of this year, require incremental provisioning for remaining amount of loan for NPLs outstanding for more than 2 years. By this new rule, if an NPL still remains outstanding for more than 4 years, provisioning for the entire value of the loan must be set aside. By that time, banks’ balance sheets will be very prudent. More important is the introduction of more prudent criteria to classify NPLs of banks. On top of the record of non-payment, the Bank of Thailand auditors have, since the beginning of 2003, looked at the “ability to repay” based on the potential cash flow as well. All these prudential measures are designed not only to strengthen the Thai financial system, but also to increase its credibility. Ladies and gentlemen, To sum up, the Bank of Thailand has taken several measures to ensure monetary and financial stability. The Thai economy has proven to be resilient. This year, despite the many recent challenges, the economy has been able to adjust well to shocks, owing importantly to the strong underlying fundamentals und a continued growth momentum. Going forward, as economic recovery continues, we need to be alert and be vigilant on the possible risks to economic stability, especially the risk on inflation.

M R Pridiyathorn Devakula: Maintaining stability with a nuanced approach Speech by Mr M R Pridiyathorn Devakula, Governor of the Bank of Thailand, at the Stock Exchange of Thailand, Bangkok, 20 September 2004. *  *  *  Distinguished participants, ladies and gentlemen, Let me begin by thanking the Stock Exchange of Thailand for inviting me here to speak today. You have already heard from our Minister of Finance a comprehensive framework for sustainable growth in the next five years, with an integrated set of targets for various sectors and various dimensions of the economy. This is a welcome initiative and an important policy development. The Bank of Thailand’s role is to ensure economic and financial stability in order to support continued growth of the economy. From our experience, monetary policy alone is not enough to achieve desirable stability. WE need to involve ourselves in two other areas, i.e. to guard against possible build-ups of financial imbalances and to further strengthen the financial sector. First of all, I will begin with our assessment of the current economic conditions to assure you that, in spite of the greater risks and challenges that have emerged this year, Thailand’s growth momentum continues to remain firm, with economic and financial stability intact. Key challenges have included increased external pressure from higher oil prices, rising global interest rates, and the potential impact of a slowdown of the Chinese economy.
So targeted macroprudential measures for residential real estate markets and the activation of macroprudential capital buffers 2/4  BIS central bankers' speeches  should be considered in some euro area countries to build resilience in a timely manner. In the medium term, after the COVID-19 crisis it will be important to look at the capital framework for banks holistically, with a view to simplifying it and removing potential obstacles to its effectiveness. In particular, the functioning of capital and liquidity buffers warrants further consideration, and an assessment needs to be made of whether there is sufficient releasable capital in place to address future systemic shocks. Specific attention may need to be paid to the non-bank financial sector, where the COVID-19 market turmoil revealed significant vulnerabilities. Taking into account its growing role in financing the real economy and the interlinkages with the rest of the financial system, the sector needs to be made more resilient through regulatory reforms and the further development of a macroprudential approach. Longer-term financial stability vulnerabilities have been also building up. The pandemic has left a legacy of significantly higher debt in non-financial sectors. Residential real estate prices have continued to rise sharply in many euro area countries, underpinned by strong lending dynamics, which raises concerns of potential overvaluation. Vulnerabilities in financial markets have also increased amid strong risk exposure and deteriorating liquidity at non-bank financial institutions.

It is estimated that 2.7 billion adults in the world economy are currently excluded from the financial system. In addition to the G20 initiative, there are other global institutions such as the Consultative Group to Assist the Poor (CGAP), Alliance for Financial Inclusion (AFI) and the International Finance Corporation (IFC) that have assumed an increasingly active role at the international level in developing new research, setting standards and providing a platform for policymakers to share experiences. This improved visibility of financial inclusion on the global agenda has lent significant support to the initiatives at the national level to promote greater financial inclusion. In this recent decade there has also been a growing body of research in the area of financial inclusion. This has contributed towards enhancing our understanding of the different approaches and policies that have been adopted and their relative successes in achieving greater access to financial services. This has also allowed for an enhanced appreciation of the issues that need to be addressed and on how sustainable financial inclusion might be achieved in our own countries. While considerable progress has been made in improving the financial inclusion environment, the sheer numbers that remain excluded from the financial system suggest that much more needs to be done, both at the national and international level. Barriers to financial inclusion continue to exist in many countries.
Were we still producing the same labour-intensive goods as before, with output concentrated in industries like agriculture (including hops), textiles, coal-mining and ship-building, we too would have seen the price of our own output fall, just as it did for hop growers a century ago. Instead we allowed output and employment to expand in those industries where we could exploit a comparative advantage. In Kent, the expanding sectors include financial services, transport (with 18 million tons of freight passing through the Channel Tunnel each year) the exploitation of life sciences, and higher education (with five universities in the county). As consumers, we have benefited from falling prices of goods made in China and elsewhere in Asia. Between 1995 and 2005, the prices of imported manufactured goods fell by a sixth and, relative to the price of domestically produced output, by no less than a third. So over the past decade we have been able to increase consumption by more than the increase in production. Openness to the world economy has resulted in a higher standard of living. The second signpost marks the rise in oil and other commodity prices. Rapid growth of production in China, India and other newly integrated economies has led to a substantial rise in the demand for oil and other raw materials. Between 1995 and 2004, net imports of oil to China rose by a factor of seven.

Monetary policy will, therefore, need to be alert to the information contained in a wide range of asset prices, to be forward-looking in its aim of maintaining low and stable inflation, and to be ready to respond to changes in the signposts. The remarkable degree of stability that the UK economy has enjoyed over the past decade has been less evident over the past twelve months. Growth slowed and inflation rose above target. But after a period driving along a smooth new highway, a change to a more challenging road surface does not, as I said recently to the House of Lords Economic Affairs Committee, mean that the wheels are coming off the economy; rather, it tells us that there are somewhat more and somewhat larger bumps on the road. Monetary policy can try to avoid some of the worst bumps, but it cannot ensure a flat road surface. Nevertheless, growth has picked up and inflation has fallen back close to its 2% target. Our central view remains one of steady growth and low inflation. But there are risks to that central view emanating from the rest of the world and we shall watch developments in world capital markets carefully. By keeping inflation close to the target, and so doing what it can to maintain economic stability, the Monetary Policy Committee aims to allow you and other businesses to follow the signposts which guide a market economy.
Presentation at the conference: Arbeidsmarked, lønn og økonomisk politikk, (The labour market, wages and economic policy) University of Oslo, 23 January 2007. 18  BIS Review 15/2007  But growth has a price. This is particularly reflected in increased emissions of greenhouse gases as a result of growing human activity. The highest emission levels per capita are found in rich, industrialised countries. Growth in total emissions is nevertheless highest in Asia.19  Scientific findings are clear: In the past 100 years, the global mean temperature has risen by 0.74ºC. There is more than a 90 per cent probability that the increase in gas emissions has contributed to global warming over the past decades. Developments mean that the Arctic ice may melt away, the climate may become more unstable and the supply of safe source water may decline. The changes also have an economic cost. It is expensive to repair damages to buildings and infrastructure following storms and floods. Insurance pay-outs are rising and premiums are following suit. When insurance is not possible, society must bear the cost directly. It is important to combine knowledge about nature and knowledge about the functioning of the economy in addressing environmental challenges. Maximum positive impacts and minimal negative impacts are achieved by using instruments that induce businesses and individuals to choose the technology and consumption pattern that stem emissions. Using these instruments releases the full  19  John Llewellyn (2007): ” The Business of Climate Change. Challenges and Opportunities”, Lehman Brothers, February 2007.

There were long periods when the Icelandic króna was pegged against or managed with respect to the currency of some trading partner countries or a basket of currencies, with varying degree of adjustability and commitment. During the 1980´s the exchange rate regime had been relatively flexible. But in the first half of the 1990´s it became much more stable,  BIS Review 21/2003  1  after the króna was fixed in December 1989. Exchange rate stability during this period was one of the cornerstones of the successful disinflation policy that took inflation in Iceland down from double digits in the late 1980s to below 2 per cent around the middle of the 1990s. Once the liberalisation of financial markets was more or less completed in the mid 1990´s, exchange rate flexibility was gradually increased. The margins around the exchange rate target were widened from 2¼ per cent in either direction to 6 per cent in September 1995 in order to allow for the possibility of greater fluctuations in the exchange rate with more volatile capital movements. In February 2000 the target band was widened further to 9 per cent in either direction in order to create greater scope for monetary policy which was increasingly focusing on the maintenance of price stability. Recent experience around the world has demonstrated that it is difficult to maintain soft exchange rate pegs with free capital movements, and the same has been the case in Iceland.
Aside from a single currency and a fiscal brake, EMU’s institutional architecture was minimalist: governance of economic and financial policies remained firmly a national competence. What lay behind these expectations? Of course, political considerations were a dominant factor, insofar as governments had incentives to limit the centralisation of fiscal, economic  BIS central bankers’ speeches  1  and financial policies. But to an extent, it also reflected the economic thinking that prevailed at that time. The rational expectations, perfect foresight paradigm was – and to a large extent still is – dominant. Many of its followers are, of course, aware of its limitations but hope to successfully expand the theory to encompass new aspects of reality. Standard models feature unboundedly rational agents and complete knowledge of all variables’ probability distributions in all possible future states of the world. They do not foresee significant credit cycles or irrational asset price bubbles. Moreover, information is fully symmetric and complete state-contingent contracts can be written and enforced. Default – a situation in which debtors cannot repay due debt in some states of the world – was also ruled out. The optimal lending contracts in such an environment do not even resemble a debt contract. Agents use so-called “Arrow-Debreu” securities. The set-up allows a different payback for every future eventuality so that borrowers are always able to meet due repayments.

In the end, this will make the whole structure more stable and robust. 2. Origins of the sovereign debt crisis in Europe  It is striking that those countries which experienced the European sovereign debt crisis in 2010 – notably Greece and Ireland – were among the best performers in terms of growth in economic activity within the European Union (EU) over the decade preceding the crisis (charts 1 and 2). Indeed, Ireland was called the “Celtic Tiger”, drawing a parallel with the fastgrowing “Asian Tigers” in earlier decades. While prima facie a paradox, the relationship between strong pre-crisis growth and the severity of the crisis itself reveals much about the origins of the underlying economic, structural and institutional weaknesses that lie at the heart of recent events. The introduction of the euro in 1999 led to a sharp fall in real interest rates especially in the so-called peripheral countries of the euro area, as nominal interest rates converged to low German levels (Chart 3). In addition, the credibility of monetary policy’s commitment to maintain price stability was bolstered by the institutional changes associated with Monetary Union (Chart 4). The resulting improvements to the growth outlook were further supported by the completion and deepening of the EU Single Market and the prospect of structural reforms underpinning national competitiveness in this integrated market. In this context, the outlook for income growth in the peripheral countries was widely believed to have been transformed for the better.