samchain/econo-pairs-v1 huggingface dataset:
Perhaps one lesson to be learnt from history is that the simplest method can sometimes be the best, as Andy Haldane has argued. Friedrich Georg Nissen’s rule that budgets should always balance was not particularly sophisticated, but if his ideas had been followed before the crisis, many countries would now be better off. However, the principles behind Nissen’s ideas were not completely unfamiliar when European politicians drew up the Maastricht Treaty at the beginning of the 1990s. The Treaty contained simple rules for economic policy: budget deficits should be below three percent and government debt below 60 percent of GDP. The rules sparked debate, and academics the world over – including in Norway – ridiculed them as far-fetched and hopelessly rigid. And as so often before, the rules soon sank into oblivion, particularly after the major EU countries Germany and France had pushed them aside. 14  Georg F. Nissen was not alone in focusing on the fiscal balance. Nicolai Rygg wrote the following in 1948: “There is a tenet that is not difficult to endorse: in times of slow economic growth, when the private sector relaxes, central and local government should support the economy, initiate projects to sustain activity and to prevent a rise in unemployment.

But the other side of this coin is also important: in years when economic conditions are favourable, when the private sector is at full speed, the government should hold back and put aside reserves to boost its financial strength so that it can provide support when the economy needs it.” Nicolai Rygg (1948), “I økonomisk stormvær” [In stormy economic weather], festschrift for Joh. H. Andresen, also published as an annex to the periodical Statsøkonomisk tidsskrift nr. 3/4 1948, p. 23. In this article, Rygg highlights his assertion that government budgets must balance over the business cycle. 15  Governments consistently overestimate growth in their forecasts (Frankel 2011). But this is difficult; in summer 2008, the average OECD country overestimated the budget situation in 2007 – the year prior to the forecast – in an amount equivalent to 2 percent of GDP (National Budget 2013). 16  In his 1933 pamphlet “Saving and Circulation Regulation”, Frisch proposed the establishment of an advisory committee on the business cycle, composed of economics experts. 6  BIS central bankers’ speeches  In retrospect, we can acknowledge that simple rules of thumb can often be useful. For my own part, many years’ experience of economic policy have led me to notice the prevalence of the figure 4.17 A current account deficit exceeding 4 percent of GDP is often a harbinger of future problems. Spain is a case in point: government finances were fairly healthy, but deficits were building up in the private sector.
Recent examples include the volatility of technology stocks, the growing size of telecom debt or the problems of the Japanese insurance industry. Much of the work is published in the Bank’s Financial Stability Review which is intended to promote public understanding of financial stability. The most important part of the FSR is an assessment of the global conjuncture and potential risks to the UK financial system. Emerging market economies have attracted particular attention in recent years. Not only were these countries the source of the most recent shock to the international financial system in 1998 but, since that time, they have been a major focus in international groups such as the FSF. The work to strengthen the financial system has centred as much on crisis prevention as crisis resolution. Under crisis prevention, the accent has been on improved disclosure, establishing new international standards for transparency for governments and private sector firms in the publication of economic and financial data. In terms of crisis resolution, discussion has turned to the role of the official sector, and the IMF and World Bank more particularly, in helping countries that get into difficulty. Many of the crises in emerging market economies have been marked by a sudden withdrawal of private sector capital, including outflows to private sector creditors of official funds intended to stabilise the position and reverse this capital flight.

Jaime Caruana: Words of welcome - ECB Governing Council Dinner Speech by Mr Jaime Caruana, Governor of the Bank of Spain and Chairman of the Basel Committee on Banking Supervision, at the Governing Council Dinner on the occasion of the meeting of the European Central Bank Governing Council, Madrid, 7 June 2006. *  *  *  It is a source of great satisfaction for me to welcome you to this dinner on the occasion of the meeting of the ECB Governing Council in Madrid. We are particularly honoured by the presence of the President of the Government and by that of the other authorities and personalities accompanying us today. As many of you are aware, this is the second time the Governing Council of the European Central Bank has met here. The first was in March 2000, a little more than one year after the start of Monetary Union, unquestionably the most visible feature of European construction. On that occasion, the euro area economy appeared set on a notably dynamic path with year-on-year growth exceeding 3% and the Spanish economy, in turn, was maintaining a sustained pace of expansion, benefiting from the favourable monetary and financial conditions and strong job creation. Against this backdrop, Spanish citizens could already perceive the favourable effects of our participation in the euro area and, therefore, the success of the economic policies applied during the convergence process.
The single currency will also minimize the need for maintaining separate cash floats, a widespread practice in the local tourist sector. BIS Review 61/2004  1  At the level of the individual firm, the single currency should also translate into a reduction in the risks and costs associated with managing exchange rate fluctuations. When Malta adopts the euro, currency risks will be hedged automatically for a large volume of transactions, allowing businesses to focus their resources on those activities which generate real value. For locally-oriented SMEs in particular, the potential reduction in currency mismatches, and in the volatility in cash flows and profitability associated with them, can be substantial for whatever their dependence on foreign markets in terms of exports, they are all, in varying degrees, consumers of imports. The end result should be lower operating costs, higher levels of efficiency, improved profitability and healthier balance sheets, all of which should result in access to credit on more favourable terms. Some of these benefits will indeed materialise ahead of entry in the euro area. You will recall that in ERM II the Maltese lira will be fully pegged to the euro, so that the variability, albeit limited, in the lira/euro exchange rate associated with the fact that the euro has a weight of 70% in the Maltese lira currency basket will disappear. On the other hand, some variability could nevertheless manifest itself to the extent that the currency fluctuates within the ERM II band.

If however action were needed on financial stability, this would be effected chiefly through temporary liquidity instruments, which would not conflict with the increase in interest rates needed to ensure price stability. II. A plea for more focused multilateral cooperation Be they energy price pressures or financial spill-overs, the challenges currently faced by central banks require more than individual actions – they call for strong and effective multilateral impetus. I say it here in Washington, during the IMF Spring Meetings. However, the tide has been turning the other way since the Russian invasion of Ukraine. As geopolitical rifts deepen and trust fades, it is becoming more and more difficult for the G20 to deliver on its mandate, despite remarkable efforts from the Indonesian and now the Indian presidency. We need to find pragmatic ways forward to overcome deadlocks in global action and adapt to the new realities. Alternatives to multilateral cooperation, such as regionalism, “minilateralism”, ii or “polylateralism” iii can usefully supplement it. Working on smaller scales, or relying on non-state actors could help achieve breakthroughs. Yet they cannot replace it. They lack the global reach of international state cooperation.iv Hence my call for a focused or pragmatic multilateralism. v The principle is simple: rather than pursuing an exaggerated ambition, focus at present multilateral efforts on a few selected global issues, where there are clear common interests.
Many have pointed out that development in the Swedish economy in recent years has resembled that in the United States although with a time lag. A difference in the assessment of the impact a cyclical downturn can have is that Swedish households and companies overall are not indebted to the same extent as their American counterparts have been in recent years. This is reflected among other things in our having had a balance of trade surplus ever since the mid-1990s. The current account in the United States has on the contrary been negative throughout the 1990s and it has been the private sector’s savings deficit that has increased and now totals over 6 per cent of GDP. Swedish households and businesses have instead had a savings surplus for large parts of the 1990s and it is first recently that a deficit has been noted. There are also many other factors that are positive for the Swedish economy in the short term: tax reductions keep household disposable income up and the real hourly wage increases are high. Another factor that counteracts a cyclical downturn is that housing investment is on the increase and will not be affected in the short term by a dampening of the cycle. It also seems as if the expansion of broadband is taking place in an appropriate cyclical situation if the plans are fulfilled. These investments are also spread throughout the country.

The aim is, should the case arise, to provide for the management of situations of bank nonviability while preserving the stability of the financial system, minimising public financial support, safeguarding depositors and ensuring the continuity of the critical economic functions of the banks in question. All of the foregoing might influence the management of bank balance sheets and have a particular bearing on the composition of their liabilities, part of which must be eligible for absorbing losses and for their recapitalisation. The SRM comprises two elements: the Single Resolution Board and the Single Resolution Fund. The latter, by means of contributions from the banking sector, is expected to amount to € billion in 2024. In the national arena, the recently approved legislation on the recovery and resolution of credit institutions and investment services firms distinguishes between pre-emptive resolution functions, which correspond to the Banco de España in the case of credit institutions and to the National Securities Market Commission (CNMV) in that of investment services firms, and enforcement resolution functions, attributable to the Fund for the Orderly Restructuring of the Banking Sector (FROB), which sits moreover on the SRM Board, with the Banco de España having observer status. Performance of credit institutions in 2014 Before concluding, I shall review the recent performance of Spanish credit institutions. The year 2014 saw an improvement in financial conditions and a recovery in activity and employment.
If government indebtedness reaches a sufficiently high level that it triggers a loss of confidence in fiscal sustainability, investors will require additional risk premia to compensate for having to bear greater sovereign credit risk. The resulting rise in sovereign risk premia can be passed through to private sector funding costs, especially if there is doubt about the ability of the public sector to counter adverse disturbances to non-financial and financial sectors. Chart 2 on slide 6 shows how CDS spreads for large banks have become increasingly correlated over the past seven and half months with the sovereign CDS spreads of the countries where these banks have their headquarters. Two snap-shots are shown in the chart: one for 26 November 2009 and the other for 19 May 2010. As can be seen from the chart, between these two dates, as sovereign CDS spreads have risen, so have bank CDS spreads. It is furthermore interesting to note that, in the cases where concerns about fiscal imbalances have been greater, the co-movement has been substantial. The third risk we have identified outside the euro area financial system is the possibility of vulnerabilities being revealed in non-financial corporations’ balance sheets, because of high leverage, low profitability and tight financing conditions. The balance sheet conditions for the euro area non-financial corporate sector have slightly improved since the last issue of the FSR, which has translated into a moderate lowering of the expected write-downs facing euro area banks on their corporate loan portfolios by end–2010.

The bail-in changes the ownership of the group but it does not affect the balance sheets of the subsidiaries. Contrast Lehmann. 2  BIS central bankers’ speeches  That doesn’t mean there is nothing to do. Far from it. For example, firms (legal entities) issue bonds not only in their home county but in a host of other jurisdictions. We shall need the documentation of bond issues by banks and by their holding companies to make clear in terms that they may be bailed in or subjected to another type of resolution operation by the firm’s home authorities; at the consequent change of ownership does not trigger “default” or ‘control” clauses. That should not be a high hurdle. It is equivalent to incorporating Collective Action Clauses (CACs) in sovereign bond documentation. There is also a debate about which particular kinds of creditor claim should be subject to bail-in via resolution. Indeed, this is one of the key questions in the Commission’s consultation. One thought on this. It seems to me that the approach to putting losses on to different types of creditor should probably be the same whatever the resolution tool used and, indeed, the same as in a standard insolvent liquidation. That would suggest that one way of addressing proposals to “exempt” some types of claim from bail in, and to establish a hierarchy amongst other types of claim subject to bail-in, would be to alter the creditor hierarchy in insolvency law.
The problems were the result of a development that had been going on for a long time, and even though it had been a cause for concern for almost as long, we had not been able to get to grips with it. Perhaps the main concern was the strong domestic inflation trend with price and wage spirals that collided with attempts to maintain a fixed  *I would like to thank Mikael Apel for his work on this speech, Eric Leeper for fruitful discussions, Johan Almen-  berg, Roberto Billi, Charlotta Edler, Bul Ekici, Mattias Erlandsson, Jesper Hansson, Åsa Olli Segendorf, Marianne Sterner and Anders Vredin for valuable comments and Calum McDonald for translation. The views expressed in this speech are my own and are not necessarily shared by the other members of the Executive Board. 1 [17]  exchange rate, and therefore led to recurring cost crises and devaluations. Another reason, which was partly connected to this, was that fiscal policy was often too expansionary, with rapidly rising public spending and tendencies towards structural deficits as a result. In addition, there was a deregulation of the credit market in the mid-1980s, which would turn out to lead to greater problems than were anticipated when the reform was implemented.1 In the early 1990s, these and other ingredients contributed to another domestic cost crisis, which also coincided with a financial crisis largely caused by excessive lending to households and companies. Unemployment rose sharply and public finances deteriorated dramatically.

But other reasons were also given when the surplus target was introduced, namely that good public finances create room for stabilisation policy and that an ageing population entails challenges that need to be addressed.2 The surplus target was thus seen not only as an end in itself, but also as a means of increasing the fiscal room for manoeuvre over time. This was, of course, a wise way of dealing with the problems that the Swedish economy had been struggling with for so long. In order for monetary policy and fiscal policy – and thus macroeconomic policy in general – to be conducted in an efficient manner, some basic conditions must be met. One of these is that they are anchored over the long term, and this, above all, was what Sweden wanted to achieve. 1 The Economic Commission (1993), otherwise known as the Lindbeck Commission’s report, remains perhaps the  best account of the crisis of the 1990s and the developments that preceded it. 2 Swedish Government (1997). 2 [17]  Long-term sustainable finances are the anchor for fiscal policy… For fiscal policy, it is crucial that economic actors have confidence in public finances and see them as sustainable in the long term, or, in other words, that public debt is stable in the long term, expressed as a share of GDP.
Indeed, it  is evidence of the lower tail of companies with flat-lining productivity having lengthened during the crisis and by more in the UK than in competitor countries, consistent with the long tail hypothesis. Why might the UK’s long tail, and hence technological diffusion, problem be more acute than elsewhere? Several reasons have been posited and probed. 73  One interesting window on this issue is provided by  looking at the intensive and extensive diffusion margins, to see if these provide clues. Looking at a range of ICT technologies, the data suggests that high and relatively consistent levels of technological adoption, but low and variable rates of technological penetration, mimicking the international evidence. Take internet access. Almost all UK businesses – in excess of 90% – now have internet access. But the UK 74  ranks poorly compared to other OECD countries in terms of broadband penetration (Chart 9). That is true  not only for standard broadband connectivity, but also for more advanced infrastructure such as optical fibre connections. Those low rates of penetration largely reflect large/small firms differences. As with other OECD countries, broadband usage by large firms is almost 100%. But for smaller firms that falls to 93%. Similarly, the share of UK businesses with a website is above the OECD average, at around 83%. But that masks sizable large/small firm differences. Almost 100% of UK large firms use websites, which has been the case for a decade. Only two-thirds of small firms had a website in 2007.

For instance, with this crisis, we witness a breakdown in the key assumptions that form the basis of our thinking about the efficiency and the self-correcting nature of markets which, for a long time, underpin the rationale for globalization, liberalization, and deregulation. These assumptions are now being challenged. Next, in this crisis, the most damage comes from the most regulated sector of the economy, notably the financial sector. What we saw is that, even with regulation in place, the sector surprisingly exhibited important failure in risk management discipline across a variety of institutions and players, including banks, institutional investors, credit-rating agencies, and regulators. On this, a better way to manage risk to support the process of international financial intermediation still needs to be worked out. And finally, the global economy has never before been put in a position that it might have to deal with the consequences of the  BIS Review 92/2009  1  massive policy response that have been put in place both on the fiscal and the monetary fronts. These 4 consequences are the known unknowns, and the approach we choose to address them will importantly influence the direction that global finance will take going forward. Given the focus of this conference is on the stake of emerging economies in the international financial system, let me share with you briefly how emerging economies in Asia so far have managed in the current crisis, and how we see the direction of global finance evolving.
In choosing for such an option, Curaçao and St. Maarten could continue to benefit from the financial soundness of the dollar, while still maintaining a certain degree of monetary independence. Last but not least, I would like to point out that the currency choice, whether at the end it would be a local currency or the US dollar, is purely a stage for an economic act. Depending on the actors, the outcome of the play would be a drama or a happy one. In the choice of a dollarization, the role of the central bank would be limited if not nihil, while that of the government would become even more prominent. There is a significant shift of responsibility. While the starting fiscal position for both St. Maarten and Curaçao would be advantageous as autonomous countries, meaning a low debt stance, it is critical that fiscal rules and benchmarks are legally imbedded, and that accountability is a normal way of life. This would ensure that internal fiscal discipline is guaranteed, and it does not need to be forced upon by an external party. That is true independence. I would even go a step further and recommend the creation of special reserves, which would be used to counteract any financial stress. This would provide the necessary confidence to promote financial and economic stability. There is no doubt that these are exciting times in the Netherlands Antilles. I strongly advise you to learn from the experiences of Aruba, the good but also the bad ones.

I will now briefly elaborate on the pros and cons of dollarization on a macro-economic level, thus not the operational implications. Whether an effect of dollarizing the economy is considered a positive or a negative, it could greatly differ between its advocates and its opponents. I will now briefly refer to some effects of dollarization: 1. Dollarization could lower transaction costs, especially when most payments to nonresidents are in US dollars. 2. Depending on the capital restrictions in place and the depth of the domestic banking sector, it could lead to reduced interest rates, thereby making it less costly to borrow. This could also be the case when acquiring an international loan, as there will be no exchange devaluation premiums on rates charged to local companies and the government. 3. Because of the elimination of exchange rate risk, dollarization could be beneficial to international trade and foreign investment. 4. The import of the monetary policy of the U.S., being the issuing country of the adopted currency, is unavoidable. This means that local policymakers are no longer in the position to use the exchange rate to absorb external shocks or to finance budget deficits by printing money. 5. Some of the tasks of the central bank, especially the function of lender of last resort, which is the credit line for local banks when experiencing financial stress, will disappear. This is typically linked to the ability of the central bank to print its country’s currency. 6.