samchain/econo-pairs-v1 huggingface dataset:
Large established firms seem to be most advanced in deployment. There is some reliance on external providers at various levels, ranging from providing infrastructure, the programming environment, up to specific solutions. Approaches to testing and explaining AI are being developed and, perhaps unsurprisingly, there is some heterogeneity in techniques and tools. Firms said that ML applications are embedded in their existing risk  6  McKinsey (2018) ‘Adoption of AI advances, but foundational barriers remain’ 4  All speeches are available online at www.bankofengland.co.uk/publications/Pages/speeches/default.aspx  4  frameworks. But many say that new approaches to model validation (which include AI explainability techniques) are needed in the future. Of the firms regulated by the Bank of England that responded to the survey, 57 per cent reported that they are using AI applications in risk management and compliance areas, including anti-fraud and anti-money laundering applications. In customer engagement, 39 per cent of firms are using AI applications, 25 per cent in sales and trading, 23 per cent in investment banking, and 20 per cent in non-life insurance. By and large, firms reported that, properly used, AI and ML would lower risks - most notably, for example, in anti-money laundering, KYC and retail credit risk assessment. But some firms acknowledged that, incorrectly used, AI and ML techniques could give rise to new, complex risk types - and that could imply new challenges for boards and management. Challenges of AI and ML for boards  Let me suggest that there are three challenges for boards and management.

Until recently, most firms were using a rules-based approach to AML monitoring. But this is changing and firms are introducing ML software that produces more accurate results, more efficiently, by bringing together customer data with publicly available information on customers from the internet to detect anomalous flows of funds. About two thirds of banks and insurers are either already using AI in this process or actively experimenting with it, according to a 2018 IIF survey.4 These firms are discovering more cases while reducing the number of false alerts. This is crucial in an area where rates of so-called “false-positives” of 85 per cent or higher are common across the industry. ML may also improve the quality of credit risk assessments, particularly for high-volume retail lending, for which an increasing volume and variety of data are available and can be used for training machine learning models. But it is a prudential regulator’s job to be gloomy and to focus on the risks. We need to understand how the application of AI and ML within financial services is evolving, and how that affects the risks to firms’ safety and soundness. And in turn, we need to understand how those risks can best be mitigated through banks’ internal governance, and through systems and controls. Firms’ rates of adoption of AI and ML So what do we know about how – and how fast – the application of AI and ML is evolving within UK financial services?
A recurrent vulnerability of the region has traditionally been the reliance on foreign currency denominated financing. This financing pattern was exposed to sudden stops in capital flows. With the progressive achievement of price stability, the attractiveness of local markets and local currencies increased and the Latin American authorities took this opportunity to promote the development of their domestic financial markets. The widening of the local banking base has been an essential complement to this policy. Foreign banks investing in the region have played an important role in a context of financial and banking liberalization. Most of those foreign banks brought a model based on retailing that fitted particularly well the need to strengthen the local financial base. The fact that many of the subsidiaries had to finance themselves locally – independently from parent institutions – also helped to promote financial inclusion among the population and contributed to reduce external vulnerabilities. Conclusions The economic and financial crisis in Spain and other euro area countries – with its particular mixture of international and domestic elements – has also brought important lessons in terms of financial stability. BIS central bankers’ speeches  3  One of them is the relevance of the macroprudential layer of supervision and the fact that having a good micro-prudential supervision is a necessary, but not sufficient condition to build a resilient financial system. There is the need for developing the framework and the tools to ensure that the macro perspective is duly taken into account.

Memoranda of Understanding regulating these interactions will be prepared in the coming months. Conclusion To conclude, it is unavoidable that the existence of the SSM will alter the functioning of the ESFS. This is, after all, the most significant development in financial supervision in the history of the European Union. However, I am confident that the changes brought by the SSM will strengthen the ESFS, and will overall enhance the quality and consistency of supervisory and regulatory practices across Europe. The more Member States that are involved in Banking Union, the greater these positive effects will be. Thank you for your attention. BIS central bankers’ speeches  3
However, the severe impact was quickly over by the end of the quarter, and external income from services started to return to normalcy by July. For August, the number of foreign tourists indicated positive year-on-year growth, and the service account was in strong surplus for the second consecutive month. Favorable conditions for the export of goods and improving environment for the export of services have allowed for a continued current account surplus and a reduction in external obligations. Steady external debt repayments, both by the public and private sectors, have resulted in a remarkable decline in the external debt stock, from the peak of 112 billion US dollars in June 1997 to only 52 billion US dollars at the end of July 2003. Even with the last portion of loan prepayment to the IMF two months ago, it is good news that our international reserves position continues to remain at a comfortable level of 39 billion US dollars. Looking ahead, barring any unusual market developments, export should do well for the rest of this year. We have already seen in recent months sizeable raw material import in preparation for export at end year. Beyond that, the momentum is likely to benefit from encouraging signs of economic improvement in the US and Japan. Ladies and gentlemen, The other important engine of growth in this recovery has been private consumption.

The regulator's role is to ensure systemic stability, the integrity of the payments systems, and fair rules of competition, while promoting a conducive environment for the growth of the financial centre. The industry's role is to compete, innovate, and enhance the value of their business. But both seek a more integrated, efficient and sound international financial system. I hope your deliberations at this conference will contribute to this goal. BIS Review 45/2001  5
But if we look ahead, it is likely that the picture will be further complicated by the changes that will follow in the wake of the financial crisis. What I am mainly thinking about here is the increased focus on macroprudential policies. After the financial crisis we have learnt two main lessons. The first is that the central banks’ interest rate-setting must take into account financial stability to a greater degree. The second is that we need new regulation in the financial market that focuses on systemic risk. But the macroprudential policies may have effects that are in many ways similar to the effects of monetary policy – particularly if the tools are varied over time. This increased interaction between monetary policy and macroprudential policies is another circumstance that means that the connections between the simple theoretical framework and practical monetary policy become twisted. Of course, it is not the case that monetary policy and regulation were two entirely independent policy areas prior to the crisis and that after the crisis they will be fully integrated. But I nevertheless believe that monetary policy and regulation will come closer to one another in the future. When I was here a year ago, I spoke at length on how monetary policy can contribute to maintaining financial stability and how different types of regulations can affect monetary policy and its transmission mechanism. I will not go into this again today.

I need hardly say that the step between this simple theoretical example and a practical solution is fairly large. But this is actually just a further example of the complications that form the main theme of my speech. Perhaps I should add that the question of how to divide responsibility for the means of control is currently being examined by the financial crisis committee appointed by the government a while ago. It will of course be interesting to see the committee’s conclusions. Conclusion Let me round off. I would guess that many of you here today are used to seeing monetary policy through an academic’s eyes. When you hear the term monetary policy you may first and foremost associate it with the theoretical framework – the way that monetary policy is often portrayed in textbooks and scientific articles. Others of you may think instead of the more conventional, day-to-day image of monetary policy given in the media, with a focus on the Riksbank’s interest rate changes and possible disagreement among the Executive Board. One might say that these two images in some way represent the start and finish of the monetary policy process. When an interest rate decision is to be made, the process starts in one way or another with the simple theoretical framework. As I noted earlier, this captures fairly well the intuition behind flexible inflation targeting – that a well-balanced monetary policy concerns finding a suitable balance between stabilising inflation and stabilising the real economy.
The discipline of economics can readily be formulated in the language of mathematics, and economic models are usually tested empirically before gaining acceptance. Conflicts arise when theories that appear to be patently true are unsupported by empirical evidence, or when contradictory theories find support at the same time. In other words, we economists are in a borderland between faith and the strict proofs of mathematics. The notion of learning from history cannot easily be explored without invoking the American physicist Thomas Kuhn. This year is the 50th anniversary of the publication of his groundbreaking work, The Structure of Scientific Revolutions.1 According to Kuhn, disciplines progress within an established set of truths – a paradigm. Observations irreconcilable with the paradigm are tolerated as inexplicable. Eventually, however, the number of inexplicable observations can become so overwhelming that the paradigm breaks down. New truths have to be established – a paradigm shift occurs. Such shifts can be painful. The old paradigm will usually be defended by those whose training lies in a more distant past, often persons in positions of leadership in academia and government bureaucracy. Long before Kuhn, Henrik Ibsen touched upon the same idea in An Enemy of the People. Dr. Stockman talks about the few who attain the new truths, unlike the compact majority that have yet to embrace them. Social scientists, like economists, face some peculiar problems when attempting to learn from history. First, we do not have a laboratory in which we can perform experiments.

Hence, the extent of financial stability cannot be summarised in a single, simple financial variable. This type of measurement problem is in fact also apparent in the inflation rate and the resource utilisation. The formal inflation target for the Riksbank is measured using CPI, but we also use various measures of underlying inflation. In order to measure resource utilisation, we look at a series of different measures such as the GDP gap, unemployment gap and the employment gap. For inflation and resource utilisation, we have long learned to use different measures even though we know they are inherently uncertain. Applying that experience will be useful when it now comes to evaluating different measures of financial stability. Financial stability cannot be assessed by relying on various indicators alone, though. The reasons for the development must also be understood. It can be compared to the reasoning of central banks in assessing inflation. An increase in inflation does not in itself constitute a reason for increasing the policy rate. Appropriate monetary policy depends on the reason for the change. If the rise is due to price pressure from increased demand, the monetary policy will not be the same as it would have been had the rise been due to lower productivity. Similarly, rapid credit growth is not necessarily always a sign of lending being unsustainable and posing a threat to financial stability. A hot topic on that subject is how much house prices and the debt build-up of households should weigh in monetary policy assessment.
However, today, when it is clear that bank-based systems are inferior to more capital market-based ones, and when loan-to-deposit ratios are close to one, the goal should probably be to turn towards developing more efficient structures of the financial markets. How should we, as policymakers, react to this? What are the next steps that we have to take? How much do we know? Well, we know that when it comes to standards of living, in the long-run it is all about labour productivity. And labour productivity, in turn, depends on the amount of capital per unit of labour and something that we call total factor productivity (TFP) or multifactor productivity. The problem is that both of these components are hard, or impossible, to measure, so we have to estimate them, and that is by no means an easy task. Much has been said about the TFP growth in the context of the discussions on the slowdown in the productivity growth, or discussions of the convergence in Europe. However, if you try to decompose the data that are used in these discussions, I believe that you'll come to realise that there are serious measurement issues. For example, it is hard to believe that there has been almost no increase in capital stock per worker in Romania and at the same time, the country managed to increase its TFP by far the fastest rate compared to any other country in the region, or to believe that an almost similar situation was seen in Slovakia.

Initiatives have been taken by both the International Monetary Fund and the Bank for International Settlements to create a new international regulatory framework and system. This work is aimed at reducing the risk and effects of severe financial crises, and is so far-reaching that it has also been referred to as a new ‘architecture’ for the global financial system. Norway should support these endeavours. First, the new architecture must improve surveillance systems and promote greater openness and transparency in the finances and practices of government and enterprises. Necessary measures include more uniform accounting procedures and the development of international statistical standards. More modern company, bankruptcy and securities legislation must be drawn up in many emerging market economies. Second, private investors must to a greater extent bear the costs of their ill-advised investments. The IMF must impose requirements on banks in industrial countries so that they contribute to resolving the crisis they have contributed to creating. This will deter banks from assuming excessive risk. Third, supervision of the financial sector must be tightened. Capital requirements that are more closely linked to financial institutions’ exposure to risk are among the measures under consideration. In addition, it is important to enhance crisis management systems because, irrespective of what we do on the preventive level, we will probably never be able to eradicate financial bubbles that escalate into financial crises. The work on a new international financial architecture is a demanding and long-term process. This work nevertheless offers hope of achieving international agreement on some effective measures.
In this context, the approach has varied both across time and across states. Shortly after the new Member States’ accession to the European Union, the assumed target dates for euro adoption were very ambitious, although the fulfilment of some of the Maastricht 1/4  BIS central bankers' speeches  criteria was still a long way ahead at the time. The more prudent stance manifest afterwards does not necessarily point to the inability or difficulty in complying with the nominal convergence criteria. Rather, it occurred after the beginning of the global crisis, when some of the benefits of euro adoption faded away, while the related costs became increasingly visible. We are therefore witnessing a substantially revised and more comprehensive approach to the euro accession process overall. As regards the actual differences in countries’ strategies, for some it might be puzzling that Bulgaria is thinking of joining the euro area sooner than Romania. It is true that these neighbouring countries have a lot in common, but there are also other things that set them apart (not only the Danube!). Bulgaria has a currency board in place and it is natural for it to contemplate euro adoption as a sound exit from this monetary policy arrangement (the adoption of which, two decades ago, meant half a step towards the euro area).

We had to manoeuvre through uncharted waters and we may not yet have arrived in the Promised Land”. It is obvious that for a smooth economic catch-up it is important to maintain a long-term perspective and to implement coherent policies and reforms. 3/4  BIS central bankers' speeches  Past achievements in nominal and real convergence, while significant, do not guarantee future success (for instance, joining other countries in the middle-income trap is a real danger). A realistic and balanced approach to euro adoption implies that it should be steered taking into consideration absolutely all relevant elements for the sustainability of economic convergence. It is the only way we can safely sail to the port of destination… Thank you for your attention and I wish you lively, yet equally fruitful debates! 4/4  BIS central bankers' speeches
In 1980, the self-employed accounted for less than 8% of the workforce. In 2016, they stood at an historic high of around 15%, or around 4 ¼ million people (Chart 6). The increase in self-employment has occurred within each age cohort, although the pick-up has been greatest among the old. In 1990, 30% of the self-employed hired other workers. Today, that share is around 16%, with more of the self-employed working independently. 8  As with decreasing unionisation, it seems unlikely these trends will reverse. As older workers are more likely to be self-employed, the ageing of the population will by itself generate further increases. As a rough ready-reckoner, were the incidence of self-employment in each age group to remain constant, the ageing of the population would by itself generate an extra 100,000 self-employed people over the next decade. If numbers in self-employment kept on increasing at the same rate as in the past, the increase could be much more substantial, perhaps as much as an extra 1 million people over the next decade. A more recent phenomenon in the labour market – and one which has attracted particular attention – is the “zero hours” contract. As recently as 2010, 0.6% of those in employment were on zero hours contracts, around 170,000 people. By 2016, that had increased to almost 3% of employees, or almost 1 million workers (Chart 7). It is unclear how much of the measured increase in zero hours contracts is a genuine trend, rather than reflecting increased awareness and reporting.

Blanchflower, D, Costa, R and Machin, S (2017), ‘The Return of Falling Real Wages’, CEP Real Wages Update, London School of Economics Centre for Economic Performance. Bradley, J (2016), ‘Self-employment in an equilibrium model of the labor market’, IZA Journal of Labor Economics, 5:6. Bryson, A (2014), ‘Union wage effects’, article for IZA World of Labor. Chapman, B (2017), ‘UK must combat unfulfilling jobs and commit to ‘good work’ economy, says Matthew Taylor’, article in The Independent. Evans, C (2011), ‘A risk management approach to monetary policy’, speech delivered at the Ball State University Center for Business and Economic Research Outlook Luncheon. Gardiner, L (2016), ‘A-typical year?’, article for the Resolution Foundation. Gregg, P, Fernandez Salgado, M and Machin, S (2014), ‘Real Wages and Unemployment in the Big Squeeze’, Economic Journal, 124 (576), pp. 408-432. Hamilton, B,H (2000), ‘Does Entrepreneurship Pay? An Empirical Analysis of the Returns of Self-Employment’, Journal of Political Economy, Vol. 108, No. 3, pp. 604-631. Hook, L (2015), ‘Year in a word: Gig economy’, article in the Financial Times. Hudson-Sharp, N and Runge, J (2017), ‘International trends in insecure Work’, Report for the TUC. IMF (2017), ‘Understanding the Downward Trend in Labor Income Shares’, IMF World Economic Outlook, April 2017. Lewis, HG (1986), Union Relative Wage Effects: A Survey, University of Chicago Press. Monetary Policy Committee (2017), ‘Monetary Policy Summary and minutes of the Monetary Policy Committee meeting ending on 14 June 2017’, Bank of England. OECD (2017), ‘OECD Employment Outlook 2017’, OECD Publishing, Paris.