samchain/econo-pairs-v1 huggingface dataset:
To an external observer, especially from Asia, the reform process may seem slow and haphazard, but one has to keep in mind that institutional evolution is almost never a formal optimization exercise starting from a “clean slate”, but rather something that builds on the existing institutional setting and adds additional layers and structures, and the institutional evolution of EMU is no exception, as pointed out in recent ECB research.6 The need to agree on reforms at both the domestic and the European level also introduces an additional element of complexity, which is perhaps difficult to understand from the outside. But it is important to point out that if one looks back it is impressive how much has been achieved in a matter of a couple of years. Let me just briefly describe what has changed in the institutional setting of EMU – and indeed also in the EU more generally – in just a few years. I will start with innovations in the crisis prevention toolkit, and will then move to crisis resolution tools. Fiscal governance reforms. As I mentioned earlier, one of the major weaknesses of the original institutional setting of EMU was that EU fiscal rules were not sufficiently binding and in particular that sanctions were not credible. This has been addressed in a series of reforms, starting with what we call “six pack”, a group of six Regulations which entered into force in December 2011.

Milesi-Ferretti (2010), “The cross-country incidence of the global crisis”, CEPR Discussion Paper, No. 7954. 2  See H. S. Shin (2012), “Global banking glut and loan risk premium”, mimeo, Princeton. 3  See V. Acharya and P. Schnabl (2012), “Do global banks spread global imbalances? The case of assetbacked commercial paper during the financial Crisis of 2007-09“, NBER Working Paper, No. 16079. 4  See V. Acharya, P. Schnabl and I. Drechsler, “A tale of two overhangs: The nexus of financial sector and sovereign credit risks”, 15 April 2012. 2  BIS central bankers’ speeches  financing in foreign currency of long-term investments (maturity mismatch) and insufficient prudential standards leading to excessive risk taking and rent seeking behaviour. Unfortunately the warnings were not taken seriously until the issues and risks materialised first with the depreciation of the Thai baht in July 1997. Perhaps we have not learnt enough from the past! As growing financial market tensions made the financing of these deficits ever more difficult, the last and most unexpected layer of the iceberg – namely the so-called “redenomination risk”, the possibility of a break-up of the euro area – came to the surface in the middle of last year. By that time, the sovereign spread of high-yield euro area countries relative to other euro area countries had widened to an exceptional extent, hardly justified by fundamentals and fundamentally incompatible with a well-functioning monetary union.
In the long run, output is determined by the supply of labour and capital and adaptability, but in the short and medium term monetary policy can also have an impact on the real economy. The economy grows over time. Output moves in waves. Output will in some periods lie below trend growth and in others above trend. The difference between trend output and actual output is called the output gap. Stabilising output growth means that one seeks to maintain actual output near trend. The output gap provides an indication of pressures in the real economy. Developments in the output gap provide a basis for assessing output stability and can thus also shed light on domestic inflationary pressures in the economy. When the economy is booming, the output gap is positive. When the economy is at a low ebb, the output gap is negative. We have had pronounced economic cycles in the Norwegian economy. The downturn at the beginning of the 1990s was followed by an upturn from 1993. This upturn peaked in 1998. There was a shift from a recovery to a period of strong expansion. Growth came to a halt in 2002. An upturn is now in progress. BIS Review 16/2004  1  Other indicators may also shed light on stability in output and employment. The wage gap is an indicator of the social partners’ perception of employment and labour shortages.

It was the CPMI’s analysis and standard-setting that led to the adoption of payment systems that provide “real-time gross settlement with intraday finality,” securities settlement systems that ensure “delivery versus payment,” and foreign exchange settlement systems that ensure “payment versus payment.” This fundamental evolution of systemically important payment and settlement systems was instrumental in mitigating significant sources of systemic risk and laying a solid foundation to support the increasingly global financial system. In parallel, it was the CPMI that first defined the concept and processes of “central bank oversight of payment and settlement systems” and implemented the associated principles for “central bank cooperation.” This also supported many central banks and securities regulators in their efforts to gain explicit legal responsibility and power to apply standards aimed at promoting broader “financial stability” and containing “systemic risk.” Title VIII of the DoddFrank Act in the United States is a good example of this. This means that many authorities now have greater capacity and responsibility to apply and enforce the PFMI as requirements, where previously a number of regulators were constrained to treating earlier standards merely  BIS central bankers’ speeches  1  as “recommendations.” Taken together, we have made considerable progress in terms of the global regulatory regime to reflect the growing importance of FMIs and central counterparties (CCPs) within the financial system. Let me briefly list a few of the accomplishments of the PFMI: •  They are now being globally adopted and implemented as mandatory, and the specific requirements themselves have been raised substantially.
Evidence on companies’ investment behaviour supports that conclusion – for example, by looking at the investment choices of two otherwise-identical firms, one of which is publically listed, the other private-owned. Studies in the US have found evidence otherwise-identical private companies consistently invest considerably more, for given profits, than public companies (Asker et al (2014)). Chart 6 shows some diagnostics for a matched sample of public and private UK companies (Davies et al (2014)). In line with US evidence, it suggests that investment is consistently and significantly higher among private than public companies with otherwise identical characteristics, relative to profits or turnover. In other words, shareholder short-termism may have had material costs for the economy, as well as for individual companies, by constraining investment. Shareholders/managers and other stakeholders (a)  Risk-shifting  A fourth incentive friction arises in the relationship between shareholders and creditors in a company. From the work of Robert Merton, under limited liability the equity of a company can be valued as a call option on its assets, with a strike price equal to the value of its liabilities (Merton (1974)). The value of this option is enhanced by increases in the volatility of asset returns. Why? Because, under limited liability, this increases the upside return to shareholders, without affecting their downside risk. So for a firm seeking to maximise shareholder value, an expedient way of doing so is simply to increase the volatility of company profits. BIS central bankers’ speeches  9  This risk does not, however, disappear into the ether.

Eva Srejber: Life outside Euroland Speech by Ms Eva Srejber, Second Deputy Governor of Sveriges Riksbank, at the annual meeting of the Economic Society, Helsinki, 11 February 2002. *  *  *  Let me begin by thanking you for the invitation to speak at the Economic Society's annual meeting. I intend to take developments in Finland and Sweden during the 1980s and 1990s as the starting point for my talk and to illustrate the similar experiences our countries have had. After that, I shall touch on the economic arguments in favour of and against EMU membership and take up the role of the Riksbank in this debate. As the political temperature has risen in the EMU issue in Sweden, I intend to conclude with some words regarding the potential timetable. Sometimes Finland and Sweden are compared in terms borrowed from family life or the world of sport. However, the question is not which brother or sister is the oldest, or who is ahead in the international economy race. Our countries are interwoven to such an extent today that we often go in the same direction. However, in one area our two countries have chosen – at least for the time being – to take different paths. This applies, of course, to membership of the Economic and Monetary Union (EMU). Finland has for various reasons decided to participate fully from the start, while Sweden has decided to "wait and see".
The  4  BIS Review 84/2005  payoff was significant: the volume of German exports rose by 47 per cent over the same period, compared with 25 per cent in France. The French were not unaware that they, too, had a competitiveness problem. A commission of independent experts led by the former Managing Director of the IMF, Michel Camdessus, was set up in 2003. Reporting earlier this year, the experts concluded that without a change of direction, decline was a real threat for France. They identified two obstacles to growth: first, not enough people worked, and those who did failed to work long enough; second, the heavy State had become a costly drag on the economy. Our own country faces a similar predicament. Malta’s labour participation rate is among the lowest in the EU at 58 per cent; as for hours worked, during 2004 the Maltese worked 72 fewer hours than the hardest working people in the EU, the Estonians, Lithuanians, Poles and Slovenes, mainly because we enjoyed 13 public holidays, the most in the EU, whereas the countries just mentioned had only 8; as for the cost of the State, the public sector in Malta absorbs just over half of the GDP, the fourth highest percentage in the EU. Conclusion Mr. President, we are indeed facing an unprecedented challenge.

In the five years to 2004, the annual growth rate averaged only 1.2 per cent in real terms, well below that of many of our EU partners; and while this year’s growth rate up to September, at 1.7 per cent, may be encouraging, it is too early to know whether the implied acceleration will be sustained. And yet the need to achieve a faster pace of economic growth has probably never been as urgent as at the present time. Growth is not only necessary in order to satisfy society’s legitimate aspirations for higher living standards. Beyond that, an expansion in the economy’s supply capacity and an enhanced degree of international competitiveness are essential to overcome the daunting challenges the country is currently facing. A threefold challenge: globalization and its implications The first challenge derives from the pervasive process of globalization, which, powered by rapid advances in technology and trade liberalization, has given rise to an unprecedented mobility of resources between countries in pursuit of the best cost-quality combinations. Suffice it to say that over the past two decades exports and foreign direct investment have been growing twice and three times faster than global output, respectively. Globalization is undoubtedly creating numerous profitable business opportunities. At the same time, however, it represents a potential threat for open economies like Malta’s because of the concurrent intensification of competition.
Figure 11: In the August MPR GDP was projected to continue to recover…  Stylised representation of the MPC’s views on uncertainty and risks around the central projection for GDP  GDP projection based on market interest rate expectations, other policy measures as announced  Figure 12: … unemployment to peak in Q4 then decline gradually …  Figure 13: … and inflation to return to target in the medium term. Unemployment projection based on market interest rate expectations, other policy measures as announced  CPI inflation projection based on market interest rate expectations, other policy measures as announced  10  All speeches are available online at www.bankofengland.co.uk/news/speeches and @BoE_PressOffice  10

Fiscal balances have improved, with the median deficit the lowest it has been in three decades, and the high public debt countries are running primary surpluses large enough to stabilize if not reduce the debt-to-GDP ratio. Exchange rate regimes are more flexible, removing the implicit guarantee in a fixed regime and providing greater independence for monetary policy. Monetary policy frameworks have matured, with greater institutional independence for central banks. Better monetary policy, along with improvements in fiscal balances, have helped to bring about a dramatic reduction in inflation and the volatility of inflation rates in emerging economies. It is hard to look at this record and find support for the argument that the financial resources deployed by the IMF and the major economies in the crises produced a damaging degree of moral hazard moral hazard in the form either of governments more prone to profligacy or investors prone to excess risk-taking in lending to banks and sovereign in emerging markets because of the expectation of financial resources from the IMF. Of course, those interventions must have produced some increase in moral hazard, but the effect on incentives does not seem to have been powerful relative to the countervailing effect of the economic and financial losses incurred in the crises. These changes in policies, and the reduction in external vulnerability that they have brought about, make it less likely that financial market shocks will trigger the types of acute, broad-based crises we saw in the late 1990s.
Of course, the ancient Romans did not have a god for the Internet, but perhaps Mercury – the god of commerce and communications – comes closest. The future of Juno, Plutus, and Mercury is increasingly becoming entwined, in large part due to technology. Let’s check out what Juno, Plutus, and Mercury have been up to lately. JUNO AND INNOVATIONS IN MONEY Juno has been busy in the past decade with new forms of money emerging. But before we can make sense of new money, let us refresh our understanding of existing money. Today, we keep money in two forms: physical cash in the form of notes and coins; and digital money in the form of deposits with commercial banks. Most of our money is privately created by commercial banks and is in digital form. Bank deposits account for 92% of the money supply in Singapore and are the basis for all electronic payments by households and firms, using debit and credit cards, e-wallets, and account-toaccount bank transfers. The commercial banks in turn place reserves with the central bank to settle inter-bank transactions arising from these electronic payments. Confidence in money is anchored by the central bank. Central banks conduct monetary policy to ensure low and stable inflation, which safeguards the purchasing power of our money. In addition, by regulating commercial banks and acting as lenders of last resort during crisis periods, central banks underpin the overall soundness of the banking system.

There is a saying which is common to the Chinese and Arabs which goes, “the journey of a thousand miles begins with one step”. I am glad to note that a lot of progress has already been made on all the three tasks. However, the journey ahead is long. Let us continue to work together towards integrating the Islamic financial markets. In this way, we can grow much faster and much more, bringing greater economic benefit to our regions. Finally, we are honored to be given the opportunity to host IFSB’s 6th annual Summit next year, which will be a landmark event for Singapore and our Islamic finance industry. May I  3  Islamic Research and Training Institute. 4  Bahrain Institute of Banking and Finance. 5  International Centre for Education in Islamic Finance. 4  BIS Review 63/2008  thank the IFSB Council, Professor Rifaat and the IFSB secretariat. I would like to extend a very warm welcome to you all to Singapore. BIS Review 63/2008  5
A good rule of thumb for financial stability is that when some form of credit is growing fast one needs to look very carefully at whether lenders’ underwriting standards are slipping and at what is happening to the distribution of borrowers’ indebtedness. The Prudential Regulation Authority (PRA) conducted a review of lending for buy-to-let mortgages and concluded that there was indeed some evidence of loosening underwriting standards and a possibility that this might increase. As a result, the PRA Board has issued a Supervisory Statement to clarify expectations for underwriting standards in the market. The statement includes guidelines for testing the affordability of interest payments and a minimum stressed interest rate for use in lenders’ affordability tests. There are also substantial tax changes affecting the buy to let market. The FPC’s expectation is that the Government’s changes in stamp duty and mortgage interest tax relief for buy-to-let, together with the PRA’s actions, will probably dampen the growth of buy-to-let lending. Mortgaged buy-to-let accounts for only around 10% of all housing transactions for house purchase so the impact on the housing market as a whole may not be great. But market dynamics are difficult to predict and given the uncertainty around the impact of the tax and supervisory changes, the FPC decided to wait and see how the market reacted before considering whether to take action on buy-to-let. The Committee continues to watch the buy-to-let market closely. 3  For further details, see Cunliffe (2016). 4  See Bank of England (2016a).

The current conjuncture The FPC’s current assessment of the financial cycle is that following a subdued and lowrisk period of post-crisis repair to bank, household and corporate balance sheets, we have now entered a more standard period of risk and credit growth. The stock of private non-financial credit, economy wide, is around 140% of GDP. As I said earlier, the bulk of this is property-related debt. It is growing at broadly the same rate as nominal GDP. In contrast, in the 10 years before the crisis it grew annually at around twice the rate of GDP reaching 177% of GDP in 2009. The stock of household debt relative to income is 135%, down from 155% pre-crisis. In 1992, when Bricks and Mortals was published, it was only 100%. Debt servicing ratios, however, are not stretched at the moment because interest rates are very low – the household debt service ratio is now at 2001 levels of around 8%. But  2  2  For example, Jorda et al (2015) show that a housing bubble combined with a build-up of credit before a recession has more than twice as large an impact on GDP per-capita compared with an equity bubble. BIS central bankers’ speeches  the composition is very different: in 2001 the stock of debt was half the current level and the interest rate twice the current level. There are good reasons why the sustainable level of household debt may have risen over the past 30 years.
Thus, in markets cleared through a central counterparty, all market participants have just one single counterparty, rather than numerous bilateral business relationships, and the complexity of the financial system is significantly reduced. What is even more important, however, is the fact that, in the event of a bank collapse, a central counterparty guarantees that it will fulfil the commitments it has entered into with respect to the other market participants, thereby eliminating the traditional domino effect. That is why, together with other central banks and supervisory authorities, the SNB is supporting the banks’ ongoing efforts to clear a larger part of the enormous over-the-counter derivatives market through central counterparties. These central counterparties come at a cost, since it goes without saying that they must run a very sound risk management system. For even a central counterparty could be threatened with failure. Since the consequences of such an event would be catastrophic, central counterparties need to command sufficient financial resources to ensure that they can withstand the failure of the largest market participant, even in extreme market conditions. 4. Political responsibility  The SNB is investing substantial resources in actively carrying forward the approaches to solving the “too big to fail” and “too big to rescue” issues that have just been outlined – not just in international bodies like the FSB or the Basel Committee, but also at the national level, in conjunction with FINMA. The reasons for this are obvious.

In this sense, we, at the BNB, just as we have done so far, will always support an economic policy in Bulgaria that does not threaten long-term economic interests at the cost of achieving quick economic effects – such as the policy of continuing structural reforms, enhancing the efficiency of institutions and improving the general environment for doing business in this country. The BNB traditionally supports conservative fiscal policy owing to which Bulgaria today demonstrates excellent fiscal indicators and given the stable banking system we have reasons to expect that our new issue of euro-denominated Bulgarian global bonds will be well received. We would also welcome efforts at speeding up privatization and active concessioning – inasmuch as they would not only strengthen our country’s fiscal position, but would also improve the long-term competitiveness of the Bulgarian economy. We, however, cannot be indifferent to any ungrounded economic experiments whatsoever. At the same time, the range of working solutions for Bulgaria’s economic prosperity must also take into account the analysis of the comparative advantages of the Bulgarian economy in a global context. In fact, it is exactly the current crisis that has highlighted and provided empirical evidence of the resilience of Bulgaria’s economy. Allow me to recall that before the crisis many argued that the currency board in Bulgaria was restraining the economy’s flexibility and that the high current account deficit (above 1/4 of GDP in 2007) was a dreadful “imbalance” that could in no way be funded in the event of capital flight from the country.