samchain/econo-pairs-v1 huggingface dataset:
I expect that our new Chair, Janet Yellen, will play a significant role here as she uses her press conferences to explain what simply cannot be communicated with a series of dots or within the statement we release after each meeting. Alas, there is Congress Now mind you, your monetary authority – your Federal Reserve – does not hold every card to your future in its hand. No matter how clearly we communicate, no matter how expertly we tailor our supervision of your banks, no matter how we conduct monetary policy, our work is necessary but not sufficient to the success of the Louisiana, Texas and U.S. economies. The fiscal authorities – Congress and the executive branch – must do their job to provide the proper tax, spending and regulatory incentives for businesses to take advantage of the cheap and abundant money the Fed has made possible and put it to work to grow, expand their payrolls and let America truly prosper. I will spare you my thoughts on Congress (it is not very central banker-like to resort to profanity). All I will say is that you and your neighbors and friends and customers are the ones who elect people to office and whether you are a “D” or an “R,” you need only look at yourself in the mirror to see who is in charge of placing the right people in office to get the job done of putting the American economy back on track. I’d say you have some serious work to do here.

You might have noted that Janet Yellen’s speech of May 1 to the Independent Community Bankers was titled “Tailored Supervision of Community Banks.” The Federal Reserve banks take this charge seriously. This is no idle claim. Just looking at the Eleventh District, we are increasingly being petitioned by banks for membership in the Federal Reserve System. The number of state member banks in the Dallas Fed district increased by 8 percent in 2012, by 19 percent in 2013, and we have already increased membership an annualized 26 percent in the first three months of 2014. So I would just say this to those of you who are madder than (bleep!) about what Congress and the regulators have wrought: The Federal Reserve knows what community and regional banks do for their communities. We appreciate that you are the backbone for the homeowners, small businesses, service clubs and school sports teams and scouts and churches and myriad other activities that make for better communities. We want you not only to endure, but to succeed and grow. And we want to make sure you play on an even playing field with those who have legions of white-shoe lawyers and K Street lobbyists you couldn’t dream of affording. I wanted to just say that at the outset. 2  BIS central bankers’ speeches  Monetary policy going forward: de-spiking the punch bowl 10 ounces at a time Now, if you will indulge me, I want to speak of the direction of monetary policy from here onward.
It will also give the board the opportunity to convey its views directly to us, for example on whether we are imposing too much of a regulatory burden. As a result of the consultation exercise, we have received a number of supportive comments. It is difficult, after all, to argue against the principle that banks should be encouraged to raise their governance standards. However, a number of concerns have also been voiced. I will not go into these in detail, but some of the questions that have been raised are as follows: Is the HKMA interfering too much in the way in which banks choose to manage themselves? Is too much burden being placed upon the board, and upon non-executive directors in particular, in terms of establishing policies and controls? Should there be a distinction between listed and non-listed banks? Is it right to place more onerous requirements on banks compared with other companies, for example as regards the required number of independent directors? And is it going to be possible to find sufficient independent directors of the right quality? I have answered some of these questions already in this speech. We do believe that banks are different from other companies because they are looking after other people’s money. From this point of view, it does not matter whether the bank is listed or non-listed. We also believe that banks are exposed to special risks compared with other companies, and that the board needs to ensure that policies are in place to manage these risks.

With regard to the more current developments in the labour market, unemployment looks to be slightly lower and wage increases to be slightly higher than we assumed in the previous Monetary Policy Report in February. We will present a new assessment of economic activity and inflation prospects in our next Monetary Policy Report in June. This will also show our views on the labour market situation and what consequences this will have for monetary policy. Thank you for your attention! 6  BIS Review 52/2007
We delegated proxy voting for equity investments to investment managers that have signed up to the United Nations Principles for Responsible Investment, requiring them to incorporate environmental, social and corporate governance (ESG) standards into their voting policies. And, together with our external asset managers, we are considering broadening the options for ECB staff to invest in sustainable financial products. For our own funds portfolio, which consists of the ECB’s paid up capital and general reserve fund, we have started an internal investigation on how ESG criteria could be implemented in the future.28 Purchasing green bonds from a number of eligible issuers could be an option, as long as the markets are deep and liquid enough. And we could potentially expand our investment universe to other asset classes where the ESG-compliant investment space is broader. Work conducted under the first work stream – that is, the development of a clear and transparent taxonomy – will help accelerate progress on this front. Now, when it comes to our policy portfolios, our objectives are different. The main purpose of our foreign reserves is to ensure that the ECB, at any given point in time, has sufficient liquidity in foreign currency to conduct foreign exchange operations if needed. Our portfolio is therefore composed of the most liquid and creditworthy fixed income assets in a few major currencies, leaving little room for climate-related objectives.29  6/9  BIS central bankers' speeches  This much is probably uncontroversial.

A detailed review of the collection shows that both Spanish and foreign historians have collaborated in the project, covering an agenda that includes modern and contemporary issues. Although the collection is open to all kinds of quality research, monetary and financial topics predominate. Now, I would like to say a few words about our library, which has played a key role in our economic history studies and research. It was set up in 1931, and from the first half of the 1970s professor Rojo promoted the formation of a highly specialised library, stepping up the acquisition of new collections and the modernisation and expansion of its services. 3/4  The most prized section of the library, the so called Fondo de Especial Valor, comprising more than 16.000 pieces from the 14th to the 19th centuries (now in the process of digitalization), is a testimony to economic thought and practice in Spain and Europe; its content encompasses 16th century merchants’ instructions, writings of the School of Salamanca, the publications of the 17th century arbitristas and the works of 18th century Enlightenment thinkers. The collection of royal decrees and proclamations (around 4,000 documents, including the 1745-1796 compilation ordered by the Count of Campomanes), dealing mainly with fiscal, mercantile and monetary matters, enriches the library’s scope with the perspective of legislation topics. The fact that these collections are complemented by others, such as the Goldsmiths’-Kress Library of Economic Literature and the King’s College collection of the papers of J.M.
A stronger exchange rate will curb the rise in prices for imports, which directly and indirectly account for 40 per cent of goods and services in the consumer price index. A stronger krone weakens earnings and reduces activity in enterprises in the internationally exposed sector. This has an impact on enterprises’ capacity to pay, wage growth and price inflation. We do not expect a change in interest rates to have an immediate effect on inflation. Our analyses indicate that a substantial share of the effects of an interest rate change occurs within two years. Hence, the key rate is set with a view to achieving an inflation rate of 2½ per cent two years ahead. The social partners will take account of the inflation outlook in their wage negotiations. If there are prospects of higher inflation, the nominal wage increases will be higher. At the same time, higher wage growth means higher inflation. Developments in the labour market and wage formation are therefore important for interest rate setting in Norges Bank. It is also important to be aware that developments in labour costs may influence inflation, growth and employment differently in a system with a floating exchange rate that in a system with a fixed exchange rate.

The results demonstrate that the leverage ratio does appear to weaken incentives of clearing members to provide client clearing services. The research illustrates the benefits of evaluation exercises in providing evidence on whether or not the post-crisis reforms are achieving their desired  15  All speeches are available online at www.bankofengland.co.uk/speeches  15  aims, including whether the ways reforms interact are generating problems. How could analysis like this inform a decision whether to make a dynamic adjustment to offset the effect of initial margin held on behalf of clients on the leverage ratio denominator? What are financial stability benefits and costs that would need to be taken into account in making a decision? One benefit would be reversing the impact on client clearing discussed above. Another benefit would be that the adjustment could make the provision of client clearing more resilient should a large client clearing service provider withdraw or fail. If providing client clearing is less constrained by the leverage ratio, providers will have greater capacity to take on trades of clients of a withdrawn or failed clearing member; a process called ‘porting’. If porting was not possible, client trades would have to be closed out, potentially at a loss. The benefit of this greater resilience is trade continuity for clients and the avoidance of these potential losses.
On the other hand, some of the factors which affect preferences for desired saving and investment (demographics and the income distribution, for example), are likely to lift the sustainable level of debt and asset prices. Credit spreads and credit supply The interest rate charged to borrowers and by which risky assets are valued reflects more than just the risk free rate. It includes the spread above the risk free rate charged by the lender to reflect the costs and risk of lending. If reductions in the spread above the risk free interest rate are long lasting, they too will raise both the sustainable level of debt relative to income and the sustainable level of asset prices. In the run up to the recent crisis, the spread over the risk free rate fell. For example, lending spreads on new UK mortgage lending fell from around 100bps in around 2000 to a low of around 30bps in 2007. More generally, shifts in credit supply may occur through increased bank competition over nonprice factors (such as increasing the availability of credit to borrowers with high LTIs and LTVs), or because of regulatory and other policy changes that affect banks’ ability to lend. These shifts in credit supply may appear as direct increases in the credit to GDP ratio but show up less obviously in lending rates. Such shifts may show up as increases in deposit rates rather than falls in lending rates if they affect competition for retail and wholesale funds.

The debt stock has grown but so has the value of the housing assets it is financing. The total size of the household sector’s balance sheet grew over the period. But the debt is fixed while the value of the asset can vary quite widely. And large balance sheets can be vulnerable at times of stress. I will look at some of the risks around this later on. 4  See Drehmann et al (2012) and Aikman et al (2015). Arguably, if one looks through the pause in the early 1990s, the upswing of the last financial cycle lasted for 30 years. 5  For the United Kingdom, this estimate is provided by Hills et al (2010). For the United States, the estimate is from the National Bureau of Economic Research’s business cycle dating committee. http://www.nber.org/cycles.html. 6  As I observed in a speech in 2015: “Nor did this increase in lending drive a commensurate increase in economic growth in this particular credit cycle. Over the period 2000-2007 GDP growth averaged little more than its long-run average of around 2.8%. In fact, business investment over the period averaged just 1.3% a year and it appears that most of this was related to commercial real estate.” See Cunliffe (2015). BIS central bankers’ speeches  3  Drivers of the credit boom The obvious and tempting conclusion when looking at the upswing of the last financial cycle, growth of credit and of household balance sheets in the UK economy is that this was surely unsustainable.
Who would have thought that Balcerowicz, the initiator of shock therapy in Poland, whose name will always be linked to its transition from a centrally-planned economy to a market economy, considered a hero of reforms in the ’90s and even before the global crisis, would become now a sort of scapegoat for the less positive aspects of transition – the leader of Law and Justice Party in Poland, Jaroslaw Kaczynski, committed to “ finally reject the unfortunate concepts of the pest Balcerowicz”1 . I don’t have now the time to discuss in detail these complex processes or the differences between countries. I am sure that this conference will lay another brick to the better understanding of these processes. My intervention aims at sharing with you a few lessons that I am formulating from my present position as a central banker. The first lesson I would like to mention refers precisely to real convergence. In almost two decades, all CEE economies have made significant progress – at various paces – in terms of real convergence, with the catching-up process benefiting substantially from their EU accession. 1/4  BIS central bankers' speeches  In Romania’s case, GDP per capita as a percentage of euro area average (based on PPS) expanded almost threefold compared to the year 2000, reaching 61 percent in 2018.

But since 1995, the gap has started to widen again as ICT investment has boosted productivity growth in the United States. The empirical evidence suggests that one of the most successful ways to speed up convergence in productivity is to promote international trade and investment, and openness more generally. Within manufacturing, the rate at which the productivity gap between Britain and the US closed during the 1980s and early 1990s was greater in the more open than the less open sectors. Against that background, let me suggest three areas for questions: First, why is the gap in the level of productivity between the US and the UK so persistent? And what are the obstacles that prevent the gap from narrowing - are they in the fields of trade, technology transfer, or flows of investment? What are the respective roles of business and government in removing them? Second, can the UK benefit as much as the US from the IT revolution? Is it a question of the speed with which business adapts? Or is it the need to fund our research-based universities on the scale of the best elsewhere in order to exploit our comparative advantage in the English language and regain Britain’s place at the frontiers of knowledge? Or is it a matter of raising standards of education in schools to enable the workforce as a whole to use the new technology?
As the information on the loan stock presented in the surveys is at the aggregate level, it is also not possible to analyse, for example, the distribution of debt ratios. In November 2013, the findings of a government inquiry, “Over-indebtedness in a credit society”, were published. The data in the inquiry was partly based on new information from the Swedish Enforcement Authority and from UC, a credit information agency. However, the data constituted only a cross-section of the households’ debts and thus did not enable an analysis of how debts had developed. All in all, this means that existing sources of data do not provide a complete picture of household debt, and that the discussion of the risks associated with household indebtedness has so far been based on limited material. The Riksbank’s credit data an important piece of the household-debt puzzle In order to be able to perform better analyses of household debt at the individual and household levels, the Riksbank therefore decided in the summer of 2013 to gather credit information on all of the borrowers of the eight largest banks. 6 This information covers all the  4  International studies have shown that a substantial build-up of debt can increase the probability of financial crises and of falls in housing prices, as well as exacerbating the effects if a crisis does occur. See, for example, Borio and Drehmann (2009), Schularich and Taylor (2012), and the IMF (2012).

The analysis of the data shows, for example, that households in general are highly indebted in relation to their incomes – and this applies above all to low and middle-income earners. It also applies irrespective of where they live in Sweden and how old the borrowers are. The analysis also shows that almost four out of ten borrowers do not reduce their debts over time and that most of those who do reduce them very slowly. This indicates that the information on household debt that we previously had access to is more generally applicable than we thought. A continued increase in indebtedness in the household sector may have serious consequences for the real economy and for financial stability. I therefore see clear risks with the Swedish households’ debt situation. Given the results of this analysis, and given that there are vulnerabilities in the Swedish financial system specifically linked to the banks’ mortgage lending, it is of the utmost importance to prioritise work on preventive measures. We need to reduce the risks relating to indebtedness and strengthen the resilience of the banks. I think that the Riksbank’s analysis can provide an important contribution to this work. Although we now have better information about household debt, important pieces of the puzzle are still missing. The Riksbank’s data collection was a first measure and there is no older, historical information on debts at the household level. And, as many others have said before me, we do not have any information on household wealth either.
And nominal GDP targeting relies too heavily on an unobserved variable, potential GDP growth. •  Finally, changing the regime, or even just raising the inflation target, in the middle of a crisis risked damaging the credibility that central banks have gained under the IT regime. However, if the secular stagnation hypothesis that has been revived by Larry Summers and Paul Krugman is to be believed, this debate may be far from over. The argument is that there may be a tendency for a chronic excess of savings relative to investment, for various reasons including slower population growth and a less capital-intensive economy. If so, real equilibrium interest rates will be lower than in the past and the zero-lower-bound will be a recurrently binding constraint. I am still unconvinced by this hypothesis, however. As has been pointed out by Ben Bernanke, the secular stagnation arguments tend to ignore the global nature of today’s economy. As long as there are profitable investment opportunities somewhere in the world, capital will tend to flow from economies with excessive savings to those with excessive investment demand. The resulting exchange rate depreciation would increase aggregate demand and therefore neutral interest rates in the economies with excessive savings. And indeed, there are abundant high-return, capital-intensive investment opportunities in many emerging economies including Brazil, particularly in infrastructure. However, if the hypothesis does turn out to be realistic, the zero lower bound will recur, and the shortcomings of the inflation targeting regime under those conditions may lead to a renewed search for alternatives.

Furthermore, there are still a number of open questions. What combination of policy instruments should recipient countries use in order to minimize costs? To what extent should the burden of adjustment also be on source countries? Is it possible to improve on the decentralized outcome through international policy cooperation? I am still unconvinced that there is room for much greater international policy coordination – central banks have domestic, not global mandates. However, it seems to me that there is some scope for cooperation at least in identifying potential cross-border and financial stability risks and adopting, when necessary, targeted macroprudential policies – either in recipient or in source countries – in order to prevent capital flows from fueling unsustainable financial bubbles. *  *  *  I’ve raised a number of open issues in central banking that I believe will shape central banking for some time to come: •  Financial stability is once again a core function of central banks, but macroprudential policies and frameworks are still in their infancy, and a proper role of monetary policy in ensuring financial stability is still under discussion. •  Inflation targeting remains the dominant monetary policy regime, but if growth skeptics are correct and the zero-lower-bound recurs, there will be renewed calls for moving to innovative regimes or at least higher inflation targets in mature economies. •  A laissez-faire approach to capital flows is off the table.