samchain/econo-pairs-v1 huggingface dataset:
The strong contractionary impact of the decline in domestic spending on economic activity has been cushioned, however, by external demand. That said, the positive effect of foreign trade has been the consequence, above all, of the substantial cut in imports, since exports – despite improving their market share – have also been affected by the sharp decline in world trade. Fortunately, the latest figures for the Spanish economy indicate that, as in the euro area and in the rest of the world, the sharpest phase of the contraction is now behind us. The decline in activity in the second quarter was still substantial (1.1%), but more moderate than in the  2  BIS Review 124/2009  first quarter (1.6%). As in other areas, the main conjunctural indicators are beginning to show signs of more modest declines or of stabilisation, suggesting that the virulence of the crisis has continued to abate in the third quarter of this year. The recession is also correcting some of the main imbalances that built up in the Spanish economy during the boom period, mainly high private-sector debt, the excessive weight of the real estate sector and a persistent inflation differential, which translated into a growing external deficit. The growth rate of credit to the private sector has fallen substantially and will probably continue to do so in the coming quarters. Such developments in lending correspond to what might be expected – in circumstances like the present – of its usual cyclical pattern, exacerbated by the tension on international financial markets.

All these developments will help soften the impact of the crisis on employment, reallocate surplus labour towards more productive sectors and raise our economy’s potential growth rate. And there are more reforms recommended by analysts: the re-directing of support policies to the unemployed, so greater importance is given to active policies such as training, improvements to the intermediation capacity of public employment services, etc. In addition to the reform of labour institutions, there are other areas where action should not be delayed, even though the effects will be over a longer term. This is the case primarily of education, which is pivotal for ensuring a continuous increase in human capital and for reinforcing one of the main sources of improving productivity. And, of course, there is a long list of reforms outstanding to increase competition in many industries, such as services, energy, rail freight transport, etc., to which I have repeatedly referred. Lastly, the soundness of the financial system is essential for ensuring the financial flows needed to restore economic dynamism. The Spanish financial system has weathered very well the direct and indirect effects of the international financial crisis thanks to a series of widely known factors that I shall not repeat here.
In particular, on 12 March the European Commission released a proposal that seeks to harmonise their regulation in Europe. The proposal includes a Directive that specifies the core elements of what may be termed “European covered bonds”. It also amends banking prudential regulations, strengthening the conditions under which banks investing in these products may benefit from lower regulatory capital requirements. Once the Commission’s proposal is approved, the Directive shall be transposed so that banks may begin to issue as soon as possible instruments that benefit from the advantages of obtaining the “European covered bond” label. So, it is true that there is still a long way to go before these regulatory changes materialise but first steps are being taken to pave the way for more harmonised covered bond markets, which will foreseeably enlarge the potential investor base for these bonds. Lastly, in addition to the specific initiatives already taken under the umbrella of the Capital Markets Union to activate certain markets, I would also like to mention that other opportunities for the markets may arise from new instruments. I have in mind here, for example, the recently created non-preferred senior debt instruments. This new category of debt instrument ranks behind ordinary debt in the order of seniority of claims in insolvency proceedings and extends the range of liabilities that banks can issue to comply with their  4/6  MREL requirements. Some Spanish banks started last year to issue this new debt instrument and others will follow soon.

Mario Draghi: ECB press conference - introductory statement Introductory statement by Mr Mario Draghi, President of the European Central Bank, and Mr Vítor Constâncio, Vice-President of the European Central Bank, Frankfurt am Main, 21 July 2016. *  *  *  Ladies and gentlemen, the Vice-President and I are very pleased to welcome you to our press conference. We will now report on the outcome of today’s meeting of the Governing Council, which was also attended by the Commission Vice-President, Mr Dombrovskis. Based on our regular economic and monetary analyses, we decided to keep the key ECB interest rates unchanged. We continue to expect them to remain at present or lower levels for an extended period of time, and well past the horizon of our net asset purchases. Regarding non-standard monetary policy measures, we confirm that the monthly asset purchases of € billion are intended to run until the end of March 2017, or beyond, if necessary, and in any case until the Governing Council sees a sustained adjustment in the path of inflation consistent with its inflation aim. Today we discussed developments since our last monetary policy meeting in early June. Following the UK referendum on EU membership, our assessment is that euro area financial markets have weathered the spike in uncertainty and volatility with encouraging resilience. The announced readiness of central banks to provide liquidity, if needed, and our accommodative monetary policy measures, as well as a robust regulatory and supervisory framework, have all helped to keep market stress contained.
Uncertainty and capital adequacy Ease of exit is a consequence of the good risk management that pillar 2 requires of firms: risk management that is forward looking and prepares for unpalatable scenarios by structuring the balance sheet and business model appropriately. Good risk management is also about organising the firm in a way that allows the adequacy of the  Goldilocks and the three pillars: how much capital is just right? ‐ speech by Anna Sweeney | Bank of England  Page 4  capital base to be sensibly assessed, and the judgement about any need for intervention to be made in a timely way. In any balance sheet there will be risks that can be quantified, and there will be uncertainties that cannot. Uncertainties emerge for example, from reliance on unobservable assumptions or indeed concentration of exposure to any single risk factor on either side of the balance sheet. Another pertinent example is reliance on matching adjustment for illiquid assets: market prices of such assets are not directly observable and the calibration of the matching adjustment benefit relies on further splitting that unobservable spread into unobservable credit and liquidity components: so heavy reliance on the resulting matching adjustment is a source of material, inherent uncertainty. The greater the exposure to uncertainty, from any source, the less confidence we can have in the adequacy of the capital determined by a quantitative model.

Ultimately, the overall reserve management process will be better controlled. To conclude, I wish all of you a fruitful and efficient participation in the workshop, with hopes that you will have incentive to take out the maximum from all the issues to be discussed with the distinguished lecturers from the World Bank, as well as between each other during the exercises. Have a nice week during this workshop, in Skopje. Thank you. BIS central bankers’ speeches  3
Of paramount importance in making the financial system more robust is the need for a viable resolution mechanism for large, complex financial firms. The Dodd-Frank Act does this for the nonbank operations of systemically important U.S. financial firms by authorizing the Federal Deposit Insurance Corporation (FDIC), under certain conditions, to establish a “bridge” bank to liquidate the troubled firm’s operations in an orderly manner. Any net outlays incurred by the FDIC in this process must be recovered by assessing levies on the financial industry. This resolution process is beneficial because an orderly resolution prevents the type of catastrophic collapse that leads to widespread market disruption. And it does so in a way that taxpayer funds are not at risk. However, much work needs to be done so that market participants can understand how such resolutions would work in practice. In particular, there will be some uncertainty about the precise conditions that will trigger a resolution under Title II of DFA. Even after DFA, the alternative of a normal Bankruptcy Code filing remains. In fact, DFA requires an evaluation as to why a filing under the Bankruptcy Code is not appropriate. In addition, the Dodd-Frank resolution process is complex, requiring multiple steps. Moreover, the resolution regime in Title II of Dodd Frank could be very difficult to implement for complex, globally active firms. These banks operate in diverse legal regimes worldwide and it is very doubtful that DFA will apply to these banks’ operations outside the United States.

Paul Tucker: The state of the markets – four issues Remarks by Mr Paul Tucker, Deputy Governor, Financial Stability, of the Bank of England, at the Association of British Insurers 2009 Biennial Conference, London, 9 June 2009. *  *  *  Many thanks for the invitation to be here today. The Bank greatly values its relationship with the insurance industry. We are just immensely grateful for the intelligence you provide, as asset managers and insurers; and for our constructive dialogue on policy issues. I have a few brief remarks on four broadly linked issues. The macroeconomic outlook and bank lending Since the beginning of the year I have felt that it will take until late autumn at least to have any kind of a handle on broadly what type of outlook we face. My view on that hasn’t really changed. Of course, over recent weeks near-term indicators, notably the business surveys, have improved a bit. Confidence seems to have stabilised. And that has been most obvious in the financial markets, where the really good news is that firms on both sides of the Atlantic have been raising funds in the equity and bond markets. But a sense of perspective is needed if those apparently small steps forward are not to be frittered away. Inevitably the medium-term outlook remains highly uncertain, and the path back to anything like normality can only be gradual I’m afraid.
Complexity also jeopardizes the capacity to move from scientific research to economic policy proposals. For academic ideas to be useful in economic policy making, they must be persuasive. Perhaps that was the virtue of the IS-LM model that was used for many years in macroeconomic policy discussions, or of Solow’s growth model that to this day remains the cornerstone of economic growth analysis. Fortunately, this is not a time where prescriptions are taken by policymakers without scrutiny – and are later labeled as orthodox – and therefore, the capacity to intuitively explain a result is essential. Models are only a part of the reality that allows us to organize our ideas before diagnosing and prescribing. The arguments’ logic and a good deal of judgment are also critical when it comes to making economic policy decisions. Indeed, the current crisis has revealed that models have a limited ability to deal with all the complexities of the real world. Even current state-of-the-art DSGE models, used in many central banks, have been unable to consider in a manageable and explicit way all the intricacies associated with financial markets’ distortions and imperfect arbitrage, let alone the existence of default and credit losses. This brings me to the theory of finance. If there ever was one discipline that should have anticipated the vulnerabilities that were building up in financial markets, it was finance. Had the origin of the problem been inflationary, then the problem would have been macroeconomics, but the origin was financial.

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.
BIS central bankers’ speeches  13  Figure 11 Housing price indicators (*) (index, base 2008=100) 160  160 Metropolitan Region, CBC  140  140  120  120  CBC CChC  100  100  80  80 10  11  12  13  14  15  (*) CBC indicator calculated by the Central Bank of Chile using stratified methodology. CChC indicator calculated by the Chilean Chamber of Construction using hedonic methodology. Sources: Central Bank of Chile and Chilean Chamber of Construction (CChC). Figure 12 Vacancy rates and rental prices (percent; UF per year / m2) 12  7 Rental prices(*) (right axis)  8  6 Vacancy rate  4  5  4  0 10  11  12  13  14  15  (*) Values for class A and class B, weighted by surface. Source: CBRE. 14  BIS central bankers’ speeches  Figure 13 Household indebtedness (DTI) and financial burden (FIR) (percent of disposable income) 80  20 FIR (right axis)  60  15  DTI  40  10  20  0  5  06  07  08  09  10  11  12  13  14  15  0  Source: Central Bank of Chile based on SBIF, SuSeSo and SVS data.

Whether such divergences create problems for the performance and functioning of a monetary union depends on their causes, size and persistence. What are the facts about the relative macroeconomic performances of euro area member countries? And what is the diagnosis about the causal factors and the underlying processes that explain them? I would like to point out two interesting facts that are contrary to popular perceptions. The first is that during the first six years since the creation of the euro, the growth and inflation differentials observed between member countries have not been greater than those recorded in the 25 years before the establishment of EMU. On the contrary, according to some measures, the dispersion in growth rates has recently reached a historically low level. The second fact is that both growth and inflation differentials in the euro area since the introduction of the euro have been broadly of the same order of magnitude as the corresponding differentials observed across regions and metropolitan areas in the United States. These facts would seem to suggest that, at least on the basis of size, the heterogeneity  2  BIS Review 46/2005  observed in the macroeconomic performance of euro area member countries is not exceptional and thus need not be a cause of alarm. Nevertheless, there are certain other developments that suggest caution and point to the need for a deeper and more comprehensive analysis. One such development relates to the significant and persistent divergences in measures of competitiveness between member countries.
In the case of savings vehicles, moreover, significant differences are observed on the basis of educational level (primary, secondary or university) and the level of income which, generally, are less marked in the case of debt and insurance products. Secondly, as regards whether interviewees have or have recently acquired any of these financial products, a notable 97% have a current account, 43% have some type of savings vehicle and 41% have debt of some sort. The commonest saving product is the savings account, followed by pension schemes. Once again differences are observed on the basis of educational level and level of income, more markedly so in the case of savings vehicles than in that of debt products. Among the international patterns identified in respect of the holding of financial products, it is worth mentioning that while in Spain holding a current account is more generalised than in the OECD and EU countries, holding savings products stands slightly below the average for these countries. It should be borne in mind, however, that the results on the comparison of the holding of savings products should be viewed with caution since the list of products considered as savings vehicles may vary from country to country. 4/7  As to the recent acquisition of financial products, the Survey shows that 38% have acquired some type of saving or insurance vehicle, a means of payment, or have incurred debt over the past two years. This percentage is lower than the average observed in the OECD countries (54%) and EU members (50%).

As regards expenditure, 28% of interviewees live in households whose spending has outpaced income over the past 12 months, a percentage that is in line with the average observed in OECD and EU countries. 51% financed this shortfall resorting to savings, and 35% through informal credit (friends, employer, etc.). As in the foregoing cases, differences were observed in terms of educational level and level of income. As both levels increase, the percentage of instances in which spending has exceeded income diminishes and the percentage of cases where greater spending is financed with savings increases. Undoubtedly, financial behaviour does not depend solely on financial literacy, but is also influenced by other circumstances; but, in light of some of the above-mentioned results, I do believe there is clearly room for improvement in the field of financial education in Spain, and that we should continue to strive in this direction. Financial education in a context of technological innovation and developments Giving priority attention to financial education is, moreover, particularly significant in the current context of financial innovation. Technological developments are changing the way in which customers relate to financial institutions and how they take up financial products. And this, though it has attendant advantages, also entails risks. Greater financial culture, greater awareness of the new reality and a greater development of the general public’s digital competences can help mitigate these risks. 5/7  I would like to refer, in particular, to three examples of these risks.
However, the estimated scale seems to be much exaggerated. One problematic issue is related to the  BIS Review 6/2007  1  fact that before the eurozone, we did not have examples of currency unions between developed countries. So the Rose study was based on data on currency unions involving poor and/ or small countries. As noted by Micco, Stein and Ordonez (2003), “one does not need to be a eurosceptic to wonder whether such findings are directly applicable to Europe’s single currency”. Follow-up studies (e.g. Rose and Wincoop (2001), Kenen (2002), Persson (2001)) attempted to correct the Rose estimates but arrived, rather inconclusively, at anything between a 50% and 150% growth of bilateral trade. Recently, the first studies based on euro area data emerged. These show that the trade creation effect of the euro was substantial, although (until now) by an order of magnitude smaller that the original Rose estimate (e.g. Micco, Stein and Ordonez (2003)). Our knowledge about trade creation effects of the euro is still far from complete and we will probably have to wait another 10+ years to have enough data to draw firm conclusions about its magnitude in the eurozone. Now let me move to the cost side. As already noted in contrast to the benefits, some costs have a contingent character. They are tail-events – rather unlikely but with a possibly high impact if they happen. Let me concentrate on two issues: -  asymmetric shocks,  -  arising micro- and macroeconomic imbalances.

The most prominent is wage adjustment – after a negative shock falling wages can help reduce the cost of production and as a consequence prices. This will increase demand and help the economy return to equilibrium. A crucial prerequisite for this channel to operate smoothly is a flexible labor market – only if wages adjust immediately can increasing unemployment and an economic slowdown be avoided. We know, however, that this downward wage flexibility is rarely seen in real life. Regarding asymmetric shocks one thing seems certain. We are not able to foresee if serious asymmetric shocks are going to affect the Polish economy after joining the euro or not. We can only speak in terms of probabilities, and given the data, it seems that the probability of huge shocks seems limited. The Polish economy is strongly integrated with the eurozone, with a majority of exports going to the common currency area. Moreover, most studies (e.g. Fidrmuc, Korhonen 2003, Eickmeier, Breitung 2005) show a relatively high correlation of business cycles between Poland and the eurozone. This substantially reduces, but does not eliminate, the risk of asymmetric shocks. Looking ahead one can see potential risk factors. One of them is production clustering. If the recently observed trend for country specialization (e.g. Slovakia specializes in producing cars, India in business process outsourcing) holds on, it may increase the risk of asymmetric shocks in the future (De Grauwe 2003). Another example of a possibly distant future asymmetric “shock” is global warming.