samchain/econo-pairs-v1 huggingface dataset:
The banking system lacked the necessary know-how for risk management, both for its own institutions and for its clients. People had become used to credit being rationed and were now suddenly able to borrow large amounts. The political system, the authorities and professional economists all stressed the advantages of deregulating the financial system but were less clear about the risks. In their struggle for readers, listeners or viewers, the media sometimes forgot to question and scrutinise important  2  BIS Review 50/2002  elements of what was happening. Think how much advice about share transactions has been passed on airily in recent years without a careful scrutiny. In the early 20th century these financial cycles and the risks of major crises were given a lot of thought by economists, not least those of the Austrian School. They pointed to the existence of transitory risks in the process of adjusting to a higher rate of productivity growth in connection with technological breakthroughs. At first there is a good circle: rising productivity tends to pull share prices up, making it easier to finance new investments. New investments and a growing capital stock lead through capital deepening to even higher productivity growth. When productivity goes on rising, however, expectations may become excessive and push share prices up still more. In certain cases, moreover, expectations of increased profits may lead to higher lending. All this can generate a vicious circle where a further increase in asset prices results in a continued expansion of credit.

Perhaps a society has to undergo a learning process on a broad front so that earlier mistakes yield new insights. Economic policy decision-makers like myself are, of course, no exception here. But as financial turbulence does not inevitably lead to a serious crisis in the real economy, we need to ask why it is that in certain cases output and employment do suffer severe setbacks and the attendant deflation. Much will have been gained if we can learn to tell whether or not an extensive share price fall, for example, besides being troublesome enough for many people, is likely to result in a situation with general deflation, rapidly falling output and rising unemployment. An answer to that question was suggested in the summer of 1999 by the Federal Reserve chairman, Alan Greenspan: While bubbles that burst are scarcely benign, the consequences need not be catastrophic for the economy. The bursting of the Japanese bubble a decade ago did not lead immediately to sharp contractions in output or a significant rise in unemployment. Arguably, it was the subsequent failure to address the damage to the financial system in a timely manner that caused Japan’s current economic problems. Likewise, while the stock market crash of 1929 was destabilising, most analysts attribute the Great Depression to the ensuing failures of Policy. Most things indicate that when banks run into trouble on account of financial turbulence, the supply of credit may dry up and the payment system cease to function.
“Financial Intermediaries, Financial Stability and Monetary Policy”, in Maintaining Stability in a Changing Financial System, 287–334. Federal Reserve Bank of Kansas: Kansas City. Adrian, Tobias, and Hyun S. Shin (2009). “Money, Liquidity and Monetary Policy”, American Economic Review, Papers and Proceedings, 99, 600–605. Adrian, Tobias, Emanuel Moench and Hyun S. Shin (2010). “Macro Risk Premium and Intermediary Balance Sheet Quantities”, Federal Reserve Bank of New York, Staff Report No.428. Ambler, Stephen (2009). “Price-Level Targeting and Stabilization Policy: A Review”, Bank of Canada Review, Spring, 19–29. Andrés, Javier, J. David López-Salido, and Edward Nelson (2004). “Tobin’s Imperfect Substitution in Optimizing General Equilibrium”, Journal of Money, Credit and Banking, 36(4), 665–690. Bean, Charles R. (2003). “Asset Prices, Financial Imbalances and Monetary Policy: Are Inflation Targets Enough?” in Anthony Richards and Timothy Robinson (eds.) Asset Prices and Monetary Policy, 48–76. Reserve Bank of Australia: Sydney. Bernanke, Ben S. (2005). “The Global Saving Glut and the US Current Account Deficit”, Sandridge Lecture, Virginia Association of Economics, Richmond, Virginia, 10 March. Bernanke, Ben S. (2010). “Monetary Policy and the Housing Bubble”, speech to the American Economic Association, Atlanta, Georgia, 3 January. Bernanke, Ben S., and Mark Gertler (1999). “Monetary Policy and Asset Price Volatility”, in New Challenges for Monetary Policy, 77–128. Federal Reserve Bank of Kansas: Kansas City. Bernanke, Ben S., Mark Gertler, and Simon Gilchrist (1999). “The Financial Accelerator in a Quantitative Business Cycle Framework“, in John B. Taylor and Michael Woodford (eds.) Handbook of Macroeconomics, edition 1, volume 1, 1341–1393. Elsevier: Amsterdam.

Similarly, “Credit market shocks” is the net impact of the credit demand and credit supply shocks. 34  BIS Review 111/2010  Chart 4b Historical Decompositions: United Kingdom Real credit growth (ann %)  Real house price inflation (ann %) 40  25 20  30  15 10  20  5  10  0 ‐5  0  ‐10  ‐10  ‐15  ‐20  ‐20 ‐25 ‐30 1970  1974  1978  1982  1986  1990  1994  1998  2002  2006  ‐30 1970  1974  1978  1982  1986  1990  1994  1998  2002  2006  2010  2010  Bank Rate (%)  GDP growth (ann %) 12  20 15  8 10 4  5 0  0  ‐5 ‐4 ‐10 ‐15 1970  1974  1978  1982  1986  1990  1994  1998  2002  2006  2010  ‐8 1970  1974  1978  1982  1986  1990  1994  1998  2002  2006  2010  Legend: Trend Aggregate demand and supply shocks Credit market shocks  BIS Review 111/2010  Macro volatility shock Monetary policy shock House price shock  35  Chart 5 Central Bank Assets (LHS) and Liabilities (RHS) United States  Euro Area  36  BIS Review 111/2010  Chart 5 (cont.)
The CCyB aims to counteract somewhat that time-varying risk profile, with additional capital required during the upswing which can be released during the downswing. There is international reciprocity in the setting of the CCyB to reduce incentives for cross-border arbitrage (BCBS (2010a)). The framework has been implemented in most jurisdictions. Similarly, one of the key lessons of the crisis was that some institutions impose greater degrees of risk on the system because of their size, complexity or interconnectedness (FSB (2010)). Basel III recognises the need for these systemically-important firms to carry a structurally higher capital requirement, currently of up to 3.5%, to help mitigate the additional risk they bring to the system. These capital add-ons apply to the 30 designated global systemically-important banks (G-SIBs) and the roughly 160 domestic systemicallyimportant banks (D-SIBs), to be phased-in between 2016 and 2019. Stress tests were used by regulators before the crisis to assess whether banks had sufficient capital to withstand an adverse tail event. But these tests tended to be neither comprehensive nor transparent. In 2009, the US authorities undertook a comprehensive stress test of the major US banks and published the results. For banks failing the test, regulatory restrictions on their behaviour were imposed. For some people, this marked the turning point for the US financial system.

If financial market participants are driven by crowd psychology, emotion and narratives, as much as by economic fundamentals and rational calculation, then risks are unlikely to be well captured by standard models (Tuckett and Taffler (2008), Tuckett (2011), Shiller (2017), Bailey et al (2016)). These risks are likely to be highly non-linear, heavily state and time-dependent and thus significantly fat-tailed. In a world of such Knightian uncertainty, it may be difficult to estimate risk weights on individual assets with any degree of precision. Indeed, attempts to do so may result in “over-fitting”, increasing the potential fragility of these model estimates out-of-sample. In uncertain settings, simpler weighting schemes have been found, in a variety of different environments, to offer a better defence against “unknown unknowns” (Gigerenzer (2014)). For example, a 1/N or unweighted asset allocation heuristic (Benartzi and Thaler (2001)), which allocates an equal amount of wealth to each of the assets in one’s portfolio, has been found to outperform more complex strategies such as Markowitz’s (1952) mean-variance optimisation in out-of-sample tests, unless the sample size is very large.19 That logic is one rationale for the use - and, in some settings, predictive superiority – of the LR in capturing solvency risks. It is a variation of the Brainard (1967) portfolio argument. In this vein, Aikman et al (2014) conduct simulations which demonstrate how simple methods, akin to a leverage ratio, can sometimes dominate complex, risk-weighted approaches to calculating banks’ capital requirements when guarding against solvency problems out of sample.
It will also affect industries like construction, which rely on outdoor work. Lower income countries are particularly vulnerable to global warming, while coastal states are vulnerable to rising sea levels. These shocks to output cannot but have significant implications for prices. Climate change will impact how the economy operates and will exert a substantial influence on price dynamics. Indeed, given the Eurosystem’s primary objective is price stability, it is important for monetary policy makers to be aware of these effects as they set the policy stance. Monetary policy is going to be affected by climate change, as well by the measures taken by governments to address it. First, climate change will affect the structural parameters of the economy. One key parameter is the natural rate of interest. The natural rate of interest is fundamental notion of central banking. When interest rates lie below the natural rate, monetary policy is accommodative, and vice-versa. In turn, the monetary policy stance has an impact on the price level. There is uncertainty over the direction of the impact of climate change on the natural rate- our r star: climate factors could contribute to the secular decline of natural rates in line with prevailing structural trends such as demography. Conversely, higher investment to combat emissions could lead to a rise in productivity which may push up r-star. 3  Second, climate change will alter the transmission mechanism of monetary policy. The value of assets posted as collateral by financial intermediaries could decline due to the higher frequency of extreme weather events.

The gap between richest and poorest region is around 150%. For wealth per household, the North-South divide is also large, with a gap between richest and poorest of 130%. These are striking differences. But are they unusual compared either with the past or other countries? 6  All speeches are available online at www.bankofengland.co.uk/speeches  6  Chart 2: Cartogram of UK income per head  Sources: Eurostat and Bank calculations. Notes: Purchasing power standard (PPS) per inhabitant for NUTS 1 regions. 7  All speeches are available online at www.bankofengland.co.uk/speeches  7  Chart 3: Cartogram of Great Britain wealth per household  Sources: ONS Wealth and Assets Survey and Bank calculations. Notes: Data refer to 2014-16 for NUTS 1 regions, re-sized and coloured by median household wealth. No equivalent data available for Northern Ireland. 8  All speeches are available online at www.bankofengland.co.uk/speeches  8  On the first of those, Chart 4 plots the distribution of income per head across UK regions on three dates: 1997, 2007 and 2016. All of the distributions are centred on mean levels of income in 2016. This suggests a modest increase in the degree of regional income dispersion over time. The 2016 distribution has somewhat fatter tails, lower and upper, than in earlier periods.12  Chart 4: Distribution of UK income per head over time (mean-aligned)  Sources: ONS and Bank calculations. Notes: Chart shows regional gross disposable income for different time periods at current basic prices, centred around the 2016 mean.
It depends on the importance of imported goods in the consumer price index and on whether lower import prices are passed on to consumers. 5 In the UK in the ten years from 1994 to 2004, the price of imported goods fell on average by one per cent per annum, so the direct effect of this on the consumer price index was quite marked. This shows up in the striking contrast between goods and services consumer price inflation (Chart 3). But the impact of greater competition does not stop with prices. Business tells us that greater competition between companies is encouraging them to protect their profits by cutting costs. This involves control of wage growth and the search for productivity improvements. This has been complemented by greater contestability in the labour market due to both greater migration and the potential for out-sourcing and relocation of production should wage demands become excessive. My view therefore is that the disinflationary pressure from globalisation may well have been more substantial than the direct estimates suggest, and this helps to explain why inflation has fallen throughout the world over the last 15 years from 30% in the early 1990s to about 4% in 2003. 6 This  4  The weight of manufacturing in UK gross value added was 14.7% in 2003. (United Kingdom Economic Accounts, 2006q1).

Global economic activity has weakened in recent months. Although GDP growth is likely to pick up again somewhat after stagnating in the second half of 2018, the inflation outlook for this year and next is subdued. In addition to this, given the economic and political uncertainty in many countries, the situation on the financial and foreign exchange markets remains fragile. Page 6/8  Against the current backdrop, our unconventional monetary policy with the negative interest rate and our willingness to intervene in the foreign exchange market as necessary remains both essential and appropriate. And this is in part also because it does not attach greater weight to any individual issues over others, and is instead at all times focused on the interests of Switzerland as a whole. The negative interest rate has its place among the instruments at the SNB’s disposal, which include conventional and unconventional measures alike. It is incumbent on us to use the instruments best suited to tackling the situation at hand. However, I would like to stress one thing: I am convinced that we will at some point return to positive interest rates. I cannot tell you now when exactly that will be. This will hinge on developments in inflation, growth and exchange rates going forward. Ladies and Gentlemen, allow me to conclude by taking this opportunity, also on behalf of my Governing Board colleagues Fritz Zurbrügg and Andréa Maechler, to thank our employees for their hard work and dedication.
14.10.2019  Financial stability situation in Spain X Financial Sector Meeting/Expansión-KPMG Pablo Hernández de Cos Governor  Good morning ladies and gentlemen. Let me first thank the organisers for inviting me to participate in this tenth edition of the Financial Sector Meeting. On this occasion my address will focus on the Banco de España’s assessment of the main factors of risk to financial stability at present, the potential impact on deposit institutions and the tools available to the Banco de España and the other authorities to mitigate such risk. Assessment of the balance of risks to financial stability The balance of risks to the Spanish financial system’s stability has worsened somewhat in the past six months. This has been due in particular to the downward revision of the global economic outlook. Indeed, global GDP growth continued to ease, to a year-on-year rate of 2.8% in 2019 Q2, more than 0.5 pp lower than a year earlier. This slowdown is particularly affecting some emerging economies and Europe. Moreover, growth projections have been revised downwards in recent quarters in most economies. In fact, the increase in global GDP this year is expected to be the lowest since the international financial crisis. This downturn in activity has likewise affected the Spanish economy. As a result, the Banco de España revised its growth projections for our economy down last September, to 2% in 2019, 1.7% in 2020 and 1.6% in 2019.

Over the past few decades, these flows have facilitated the efficient cross border utilisation of capital and have provided liquidity in financial markets. By adding an international dimension to financial intermediation, the mobility of international capital has clearly been helpful in promoting growth and development in both the capital exporting and the importing economies. The mobility of capital has more recently been boosted by advances in telecommunications and information technology, allowing capital to move into or out of an economy in huge amount and within a very short space of time. The virtue of capital mobility therefore carries the risk of capital volatility. The volatility is destabilising in both directions. Too rapid a build-up of capital inflows places severe upward pressure on domestic asset prices, fuels inflation, and exacerbates macroeconomic imbalances. Conversely, sudden and massive reversals of these flows place intense downward pressure on the exchange rate, and therefore upward pressure on interest rates, causing asset bubbles to burst and splatter. When rapid build-up is followed suddenly by massive withdrawal, we see the kind of crisis that swept across this region in 1997 and 1998. The volatility of international capital flows is also attributable in part to the phenomenal growth of derivatives and the global over-the-counter (OTC) market in the past decade. A survey by the Bank for International Settlements (BIS) in June 1998 estimated the size of the global OTC derivatives market at an aggregate notional value of $ trillion.
2 CGFS (2015), ‘Regulatory change and monetary policy’, CGFS Papers No. 54, Committee on the Global  Financial System, Bank for International Settlements. 3 ICMA (2017), Regulatory Policy Newsletter, January. 5/5  BIS central bankers' speeches

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 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, as underlined by the March labor market release. 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.
Together, we can build and promote a resilient and thriving financial system, and so I look forward to continuing to engage with many of you here – be you users, end users, suppliers, innovators, peers - to help shape and deliver a resilient and innovative payment ecosystem. 10  https://www.bankofengland.co.uk/payment-and-settlement 7  All speeches are available online at www.bankofengland.co.uk/news/speeches  7

William C Dudley: Regional economy and manufacturing update Remarks by Mr William C Dudley, President and Chief Executive Officer of the Federal Reserve Bank of New York, at the Quarterly Regional Economic Press Briefing, New York City, 22 July 2010. *  *  *  Good morning and welcome to the New York Fed’s July 2010 Regional Economic Press Briefing. I value this opportunity to talk with the journalists covering our region – and through you, to the people in our District. My goal this morning is to share how I see regional economic conditions, with particular focus on the manufacturing sector in the Second Federal Reserve District. My colleagues will follow me and provide more detail on the patterns that I’ll describe. As always, what I have to say reflects my own views and not necessarily those of the Federal Open Market Committee or the Federal Reserve System. I. National economic conditions  To provide some context, I’ll begin with a few words about national economic conditions. U.S. economic activity has expanded for four consecutive quarters, but at rates that can only be described as modest when compared with early stages of past recoveries. The June payroll numbers tell the story of this sluggish recovery in employment. The economy gained only 83,000 private-sector jobs, following a downwardly revised gain of only 33,000 in May.
In Europe, it is the consequence of an economic and financial crisis resulting from weaknesses in the architecture of Europe’s Economic and Monetary Union (EMU). Institution-building takes time. Even though European integration started over six decades ago, the building of those institutions remains a work in progress. But to understand the challenges that Europe is currently facing, we should take a step back and look briefly at the origins of the Europe’s integration process. I will then share with you my thoughts on what I believe to be the main shortcomings in the current EMU framework. Finally, I will give you my views on the short- and longer-term measures that the euro area should take to overcome the crisis. 1. Building Europe after World War II: the path towards economic and monetary union  In 1945, Europe emerged from the Second World War as a devastated continent, economically broken and politically divided. But even during the darkest days of the war, there were some Europeans who were convinced that Europe would eventually overcome its divisions and unite in peace. One of them was Robert Schuman, a French statesman, who in 1950 made a declaration that became a rallying cry: he proposed that Europe should aim for closer economic and political cooperation. The declaration was well received, also by West Germany. This was a crucial point because Germany and France had been rivals in a century-long quest for dominance over the European continent.

The four Presidents are proposing that a genuine EMU should be built on integrated frameworks for budgetary policies, economic policies and financial market policies, which in turn must be underpinned by greater democratic legitimacy and accountability. When we look at the options to establish budgetary policies in a monetary union, and exclude any uncoordinated conduct of fiscal policy by Member States, three possible models come to mind. First, there could be a fully-fledged fiscal union, with a central budget and federal debt issuance. It is not on the cards in the short run as important steps would need to be taken to establish the necessary euro area-wide political legitimacy and governance. The second model would involve sharing sovereignty on national fiscal policies, with reciprocal control of public expenditures serving as a basis for common debt issuance by governments. Such reciprocal control would also require strong democratic legitimacy, involving national parliaments. The third model would only rely on unqualified adherence to fiscal discipline by Member States, without risk-sharing. None of these three models alone is possible in the short run. There will be a combination of the three. The desirable mix has to be decided upon by the people of Europe with the appropriate democratic checks. EMU is a unique construct, tailored to European specificities, and it need not resemble any existing federation. Let me give some examples.