samchain/econo-pairs-v1 huggingface dataset:
The aftermath If the famous philosopher Erasmus of Rotterdam were to have lived in our times, he would certainly have added an additional chapter to his satirical masterpiece “The Praise of Folly”, with its pointed attacks on human weaknesses and excesses, to describe some of the practices in financial markets 3 and corporate behaviour that have been so blatantly evident in recent years. Some, as we know, have used the expressions “irrational exuberance” and “infectious greed” to describe these 4 developments. I have nothing to add to these statements. Unfortunately, when stock prices came down sharply, the costs of the excesses became evidently clear. Since their peak in March 2000, stock prices in the euro area - as measured by the broad Dow Jones Euro Stoxx index - have fallen by roughly 57% as at the end of April 2003. It has been calculated that buying a thousand Deutsche Marks' worth of beer would have been a better investment than investing the same amount of money in Frankfurt's Neuer Markt at the height of the bubble - at least with the beer you could have made some return by selling the empty cans. The fall in the value of financial assets since 2000, associated with the fall in equity prices, has led to an increase in leverage ratios of non-financial corporations. The decline in the value of collateral has led to an increase in risk premia when taking up loans or issuing debt securities.

The latest data and survey evidence up to November confirm this picture of a weaker growth profile in the period ahead. At the same time, the outlook for a modest economic recovery remains in place. On the one hand, domestic demand should be supported by our monetary policy measures, the ongoing improvements in financial conditions, the progress made in fiscal consolidation and structural reforms, and significantly lower energy prices supporting real disposable income. Furthermore, demand for exports should benefit from the global recovery. On the other hand, the recovery is likely to continue to be dampened by high unemployment, sizeable unutilised capacity, and the necessary balance sheet adjustments in the public and private sectors. BIS central bankers’ speeches  1  These elements are reflected in the December 2014 Eurosystem staff macroeconomic projections for the euro area, which foresee annual real GDP increasing by 0.8% in 2014, 1.0% in 2015 and 1.5% in 2016. Compared with the September 2014 ECB staff macroeconomic projections, the projections for real GDP growth have been revised substantially downwards. Downward revisions were made to the projections for both domestic demand and net exports. The risks surrounding the economic outlook for the euro area are on the downside. In particular, the weak euro area growth momentum, alongside high geopolitical risks, has the potential to dampen confidence and especially private investment. In addition, insufficient progress in structural reforms in euro area countries constitutes a key downward risk to the economic outlook.
Today I am going to reflect on what I consider that different economic agents should do during a macroeconomic adjustment phase like the one we are currently experiencing in Spain. It seems to me that it would be useful for us all to understand what is happening and what we can do to get through this phase at the lowest possible cost. Admittedly each agent has a different degree of freedom of action, but it is important to remember that it is not only the authorities (governments, parliaments, the ECB, etc.) who can help our economy to return to a high growth path as soon as possible. *** To start with, I should like to point out that the most important thing is not to fall into the temptation of adopting policies that try to avoid the adjustment, since that would only prolong it and prevent the economy rebuilding the foundations for fresh growth. It is understandable that firms for which oil is an important input should appeal to governments to reduce the cost of energy through some mechanism, such as subsidies or lower taxes, as likewise it is understandable that businessmen and financial institutions that can no longer obtain low-cost, long-term funds on the market think that the State could provide them with larger volumes of financing and on better terms than the market.

Lower inflation rates would not only favour the competitiveness of our economy, which is so vital at a time when national spending is slowing, but would also improve household purchasing power against a background of declining household income on account of the oil price shock and the slowdown in employment. There are many other fields (such as the postal service, railway transport, ports, airports, energy, etc.) in which structural reforms giving a greater role to the private sector and competition need to be adopted as soon as possible. As I have already mentioned, the residential sector clearly needs to slim down and it has been doing so quite rapidly in recent months. The rise in uncertainty regarding both the economic outlook and house prices is inhibiting residential demand, even though household creation, due to the increase in the population and the observed tendency for average household size to decline, is still growing at significant rates. Improving the regulation of rented housing, to make it more flexible, profitable and attractive, would enable the demand for residential services from those who do not wish (or are unable) to buy to be met and would reactivate that part of the demand to purchase housing that basically stems from the investment motive, thus reducing the current excess supply in the market. In particular, providing legal certainty to home owners and deregulating the rental periods that may be agreed by tenants and landlords would boost the rental market.
2  BIS central bankers’ speeches  Finally, growth is only resuming at a slow pace.3 Investment has been too low in Europe over the last 15 years, and the crisis has exacerbated this trend. At the same time, total factor productivity, which forms the basis of long-term growth, has also been disappointing.4 If this trend continues over the long term, the euro area will not generate enough wealth to sustain the standard of living of its citizens and to ensure the sustainability of its social model, which is a defining feature of its identity. We sometimes ask ourselves how to keep the reform momentum going without the pressure of the financial crisis.5 We would like to believe that what has been achieved since 2010 to strengthen EMU is enough to make it strong and sustainable and we can therefore claim “mission accomplished”. But the challenges I have just outlined provide enough of an answer. What has been achieved so far is not enough. The euro area is not in a financial crisis anymore, but it must still contend with high debt, low growth and unacceptably high unemployment. These are reason enough to remain alert and continue acting. Stability – a precondition for growth For companies to invest, for firms to hire, for households to consume, a stable economic environment is tantamount. If uncertainty reigns, economic activity suffers. In my view, there are three relevant dimensions of economic stability: price stability, financial stability and macroeconomic stability, including the health of public finances.

8  See Rawls, J., A Theory of Justice, Harvard University Press, 1971. 9  See Cœuré, B., “Is Eurozone governance fit for purpose?”, speech at a dinner organised by the Centre for European Reform, London, 30 January 2014. BIS central bankers’ speeches  5
The forecasts for 2012 are also marked by uncertainty and potential adverse effects of the events related to the euro area crisis. Given the generally unfavorable expectations for the European economy, the growth prospects of the countries in the region are also uncertain and accompanied by downward risks, considering the relatively close trade relations with the European Union. The lower external demand, along with the lower capital flows to the region, creates a need of proper adjustment of the domestic demand aimed to ensure sustainable external position. Therefore, some countries will need fiscal consolidation. The growing European debt crisis, the series of downward revisions of credit ratings of several international banks, the volatility of stock markets and the uncertainty clouding the future developments undermined the confidence of investors, in global terms, thus making the issue of deficit financing more pronounced and being treated more prudently. BIS central bankers’ speeches  1  Besides the macroeconomic performances, the attention has been and will be focused on the financial stability. The new risk to the financial sector triggered by the European debt crisis is either direct or indirect exposure to the Greek debt and the subsequent potential losses. The second risk is attributable to the reduced availability of funding from foreign parent banks, when some of them face the need of recapitalization that refers to additional risks to the intensity of credit activity in the countries from the South-Eastern Europe, particularly those where borrowings from foreign banks played a significant role in the establishment of credit potential.

Dimitar Bogov: Challenges of countries from South-Eastern Europe in the current economic and financial turbulence in the euro area Opening speech by Mr Dimitar Bogov, Governor of the National Bank of the Republic of Macedonia, at the NBRM conference on the occasion of the 20th anniversary of the monetary independence of the Republic of Macedonia, Skopje, 27 April 2012. *  *  *  Dear Deputy Prime Minister, dear ministers, distinguished Governors, Your Excellences, dear guests, colleagues and friends It is an honor to greet you and wish you welcome to this conference, which is a part of the activities for marking the 20th anniversary of the monetary independence of the Republic of Macedonia. The last two decades of monetary independence, the Republic of Macedonia has faced, and in our opinion, successfully addressed many challenges. Our twentieth anniversary takes place in exceptionally turbulent developments of global economy, particularly marked by events triggered by the euro area debt crisis. This means that as the other central banks from the region, we face a new challenge. Taking into account the timing of the conference, its topic came quite spontaneously, and therefore we consider that it will raise interesting discussion of current issues of the central banks of the South-Eastern Europe and beyond.
Investment behavior in these countries may be motivated by broader strategic considerations, which may prompt retaliatory measures and result in restrictions on crossborder capital flows. Global and prompt policy action is warranted yet again. To this end, the G20 has embarked upon an unprecedented exercise in policy collaboration with the adoption of the Framework for Strong, Sustainable and Balanced Growth. IMF surveillance will acquire a new dimension by assisting G20 Finance Ministers and Central Bank Governors in the process of mutual assessment of their economic and financial policies. It is crucial that the G20 framework lives up to expectations. The decisions and policies adopted by its members will affect the environment for the formulation of economic policies in all countries, large and small, rich and poor. The Governor of the Bank of England, Mervyn King, remarked last month that “…so far the only specific agreement [among the G20] is to talk to each other. Concrete steps to reduce the scale of global imbalances have, to date, been notable by their absence.”  6  Press release (27 January 2010) on the G20 website: President Lee to Attend Davos Forum. 7  Mark Carney: The Evolution of the International Monetary System, Remarks at the Foreign Policy Association in New York City, November 19, 2009. 4  BIS Review 22/2010  And I agree that the G20 has laid its reputation on the line. It will be damaged if the framework comes to nought.

11 In an article in the Financial Times late last year, Anders Åslund, a Senior Fellow at your Institute, argued in a refreshingly blunt manner for a change in the G20. 12 The ongoing efforts to change global governance should not be limited to the IMF alone. In saying this, I repeat that I fully recognise the important role played by the G20 in the time of crisis. However, while the G20 continues to exist and even expands into policy areas as varied as food security, energy and climate change, its legitimacy and democratic foundations must be reinforced. This can be achieved by, for example, representation and participation on a rotating basis. Everyone does not have to be present all the time. The constituency model of the IMF and the World Bank could be adopted, providing for the participation of other countries, even if only indirectly. In that vein, the G20 might be expanded by, say, four members in conjunction with the adoption of a structure which embraces the rest of the world. On the matters of economics and finance, I view the G20 as a complement, not an alternative, to the IMF. An appropriate solution would be the recognition of the IMF and the IMFC as the statutory-based principal forum. G20 collaboration on these matters would be recast in the IMFC or in an enhanced version in the Council if the membership decides to activate the provisions on its establishment. The IMFC is an institution of the IMF and thus has a statutory basis.
On various occasions, the reasons why they performed differently have been pointed out. On the one hand, their business is “traditional retail banking”, which hardly involves structured products that can ultimately become “toxic”. BIS Review 161/2010  1  On the other, Spanish banking regulation and supervision retained its conservative stance and did not follow the international trend which advocated low-intensity regulation and supervision. Well-known examples are “dynamic provisions” and the compulsory consolidation of any “off-balance-sheet structure” that might involve a risk. Nonetheless, our banking system has not been insulated from the consequences of the crisis. The sector built up imbalances during the long twelve-year expansionary period of our economy from 1995 to 2006. The interplay of these sectoral imbalances, which began to be tackled at end-2006 with the outbreak of the international crisis, suffices to explain the resulting impact. On the assets side, there was a strong, sustained increase in lending. Coming in unison with one of the defining features of the Spanish economy’s growth pattern, the exposure to real estate developers turned out to be excessive, all the more so considering that it is a highly cyclical activity which is currently contracting sharply. In this respect, it should be pointed out that in Spain there are fundamental differences between credit for real estate development and that extended to households for house purchase. Thus, while the former shows, as I have said, pronounced cyclical behaviour, retail mortgage lending is the type of credit which has the lowest default rates during recessions.

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With this in mind, let me start out by stating my main message but before doing so let me stress that these are my personal views and do not represent the official opinion of any institution. In my view we need to plan for a special body – let us call it a European Organization for Financial Supervision (EOFS) – to gather information and produce a coherent and consistent assessment of the risks in the major cross-border banks in Europe. As you all know, a separate regulatory framework for banks is based both on consumer protection arguments and on financial stability considerations. Banks provide fundamental services to the economy but could be subject to bank runs. There are also large contagion risks in banking activities so that problems in one bank could easily spread to other banks. Here, I will concentrate on the financial stability perspective. Banking developments in the EU Until not so long ago, most banks had a clear national (or local) character with most of the activities limited to one country. Sure, many banks have had international operations for many decades but that has typically been limited to wholesale markets and services to large corporations. Financial services to retail customers and small and medium sized companies (SMEs) have been provided on a national or local basis. In this setting the national character of the regulatory framework has been appropriate. Now this is rapidly changing, especially in Europe – but also elsewhere.

Initially, these employees could of course be recruited from the existing national supervisors. Also the staff of the EOFS would have to cooperate with the national supervisors. I also want to stress that the EOFS should be an independent agency. This independence is important to achieve a division of labor and power. It should not be part of the European Commission and not of the ECB. One possible solution is therefore that EOFS is established directly by the EU countries and with an obligation to report to the European Parliament. My proposal is therefore quite different from the existing CEBS-structure which is part of the Lamfalussy regulatory framework in the EU. Although some of the EOFS’s tasks would overlap with those of CEBS, the focus is different. CEBS’s main tasks are to advice the EU-Commission, to enhance supervisory co-operation and to contribute to convergence of Member States' supervisory practices. CEBS is therefore a regulator and not a supervisory agency. The EOFS would be much more of a supervisor with as main task to produce coherent assessments of the risks and vulnerabilities of cross-border banking groups. In my view and to start out with, the EOFS need not have formal powers, with the exception that it should have the right to require cross-border banks to submit information. Formal supervision could still rest with the national supervisors according to the existing home-host arrangements and potential sanctions be decided by the national supervisors. In this respect, the EOFS should be limited to suggesting actions to the national supervisors.
This partly reflects the global trend towards lower neutral interest rates observed in recent years and is consistent with the reduction in the trend growth estimate for Chile. The technical minimum of the MPR is kept at 0.5 percent. As in March 2020, this considered that the money market is managed by various administrators competing with each other and with banks. Among others, they offer quick exit investment instruments that allow them to meet the immediate cash needs of households and businesses, being able to withdraw their funds the following day. When selling these instruments, there may be price differences that need to be covered. Therefore, as the MPR approaches zero, the probability that firms and households will incur losses increases. To keep this mechanism in operation, the Board estimates that the technical minimum of the MPR is 0.5 percent. Still, it is important to note that this technical minimum is not a constraint for an expansionary monetary policy, thanks to the fact that we are far from a deflationary scenario. Moreover, the interbank rate can move within a corridor of ±25 basis points around the MPR and, in fact, in periods of high monetary expansion, it has been below the technical minimum. This has been the case in the last year and was also the case in 2009, when the MPR also hit 0.5 percent and the Bank used its Term Liquidity Facility (FLAP). 1  It should be noted that the present exercise has used TFP information from the last four years.

Page 25 of 27  Table 3 Structural parameters Long-term copper price  Long-term oil price (dollars per barrel)  (dollars per pound)  Trend non-mining GDP next 10 years  Nominal neutral MPR (percent)  Technical mínimum MPR (percent)  (annual change, percent)  Dec-15/Mar-21  Dec-15/Mar-21  Jun-19/Mar-21  Jun-19/Mar-21  Jul-09/Mar-21  2.7  70  3.25-3.75  3.75-4.25  0.5  June 2021  June 2021  June 2021  June 2021  June 2021  3.3  60  2.4-3.4  3.25-3.75  0.5  Source: Central Bank of Chile. ***  Page 26 of 27
Immediately prior to the Industrial Revolution and running chronologically, these included the th  th  th  windmill in the 12 century, the mechanical clock in the 13 , the cannon in the 14 , the printing press in the th  th  th 17  15 , the postal service in the 16 and the telescope and microscope in the 17 . It will surprise no-one that waves of innovation, big and small, have been lapping the shores of society for the entirety of human civilisation. In other words, while ideas and innovation may well be a necessary condition  14  Van Reenen et al (2010), for example, document the economic impact of ICT. See Bughin et al (2017) and Haldane (2018), for example. Flohr (2016), for example, discusses innovation in Roman society. 17 Clark (2009). 15 16  5  All speeches are available online at www.bankofengland.co.uk/speeches  5  for economic growth, the historical record suggests they may not themselves have been sufficient. Other forces appear to have been at play, translating these ideas into sustained growth in living standards. What might those forces be? I want to provide two different, but complementary, lenses on the growth story. The first focusses on a rather broader set of “capitals” – not just physical capital (plant and machines) but human (skills and expertise), intellectual (ideas and technologies), infrastructural (transport and legal systems), social (co-operation and trust) and institutional (national and civic, private and public) capital.

43  12  All speeches are available online at www.bankofengland.co.uk/speeches  12  Typically, the two sides of this argument are taken to be in a secular struggle: the dark forces of secular stagnation pitted against the dynamic forces of secular innovation. Yet in practice, both arguments have merit. They are certainly not mutually incompatible. It is perfectly possible to imagine a world of rapid innovation which nonetheless leaves large swathes of society in its slipstream. More than that, recent research suggests this is a likely outcome of the Fourth Industrial Revolution. There are good conceptual grounds for thinking the displacement effects of the Fourth Industrial Revolution may be larger than ever-previously. Every industrial revolution has resulted in a hollowing-out, typically of mid-skilled tasks. Historically, that has meant largely manual, labour-intensive tasks. Machine has replaced human in activities that are routine and repetitive. The future could well be very different. For example, the dawning of AI means that humans will no longer having the cognitive playing field to themselves. Thinking or non-routine tasks may increasingly be taken up by machines. They will be able to process more quickly, more cheaply and with fewer errors than their human counterpart, at least in some activities. That could make the hollowing-out of human tasks, now cognitive as well as manual, far greater than ever before. 48  A cottage industry has emerged over recent years manufacturing estimates of job loss that might result from 49  this rise of the robots.