samchain/econo-pairs-v1 huggingface dataset:
There are several factors that may explain the decline in net interest margin observed in this period. First, it is the result of the increase in the relative share of non-productive assets, that is, assets that do not earn interest, such as non-performing loans or foreclosed assets. In addition, this period saw a severe contraction in banks’ credit portfolios, a reflection of the sharp correction in the high indebtedness accumulated by Spanish households and firms in the pre-crisis years, and of the loss of share of the banking system in the financing of the economy. Banks cushioned the balance sheet effect of this contraction in their credit portfolios by increasing their exposure to other assets, especially through government debt purchases. As these debt securities provide lower returns than lending to households and firms, in the long run this portfolio rebalancing resulted in a fall in the average return on assets. However, when the sovereign debt crisis came to an end, the increase in value of these debt securities provided a positive, albeit short-lived, boost to profitability. On our estimates, the overall effect of these changes in asset composition – associated with the increase in non-performing loans and the decrease in the relative share of credit on balance sheets – would explain some 70% of the decline in net interest margin in the Spanish banking system between 2007 and 2018.

Despite the recent recovery observed in Spanish banking system profitability, the present levels are below the pre-crisis levels and below the cost of capital estimates available. This situation is not exclusive to Spain, but is in fact quite widespread within the euro area. Indeed, the average profitability of Spanish banks is currently somewhat higher than that of the main European banking systems and the euro area average. The breakdown of the return on assets shows that the main reason why Spanish banks’ profit levels are higher than the euro area average is that their net interest income is higher. This reflects the larger relative share of Spanish banking business in less mature markets, such as the Latin American economies, where margins are higher. Conversely, Spanish banks have higher impairment related expenses and provisions than their euro area peers. Average return on equity among Spanish banks is also higher than for banks of other European countries such as Switzerland or the United Kingdom or for Japanese banks. But it is lower than average return on equity observed in other more profitable banking systems, such as the United States, Sweden, Norway, Canada and Australia. In any event, there is a high level of dispersion in profitability between banks, both in Spain and in the rest of Europe. This shows that profitability problems do not affect the sector evenly, given the range of banking business models, both between countries and within each jurisdiction, and also the combination of multiple explanatory factors.
Reflecting these gains, a number of emerging market countries have been strong supporters of open trade, a sign of how much the world has changed in recent years. A few examples can help to illustrate some of the benefits of globalization. India’s green revolution—which helped to greatly increase its agricultural productivity and food security—was facilitated by U.S. technology and scientists working with their Indian counterparts. Similarly, as is well known, Indian engineers and entrepreneurs have played a key role in the technology sector’s tremendous achievements in recent decades and now lead some of America’s largest companies, including Google and Microsoft. This success, in turn, has had important benefits for India as well, including increased foreign investment flows and employment opportunities that have helped develop a vibrant information technology ecosystem. But, increased openness to trade is not a panacea in and of itself. Actual benefits depend on a range of other critical factors, including macroeconomic policy, the business and regulatory environment, the legal regime, the quality of infrastructure, and the quality of public services, including education. While the gains from a liberalized trade regime are not guaranteed, the alternative of trying to achieve a high standard of living by following a policy of economic isolationism will fail. Trade has played a key role in nearly all of the high-growth success stories since the middle of the last century.

Indeed, such measures often backfire, resulting in harm to workers and diminished growth. A better course is to learn from our experience. From a U.S. standpoint, we should work to reduce remaining foreign trade restrictions that impair our ability to capitalize on our comparative advantages. For example, market access restrictions can mean that certain U.S. industries cannot realize their full potential. Similarly, weaknesses in the protection of intellectual property rights limit the ability of U.S. producers to realize the full returns from their investments. This lowers profits and diminishes incentives to grow the business and employ more workers. If we are going to enhance the benefits of free trade and better manage its costs, it is critical that we continue to strengthen the global rules-based system. On the positive side, I would point to the WTO’s recent Trade Facilitation Agreement, which addresses customs procedures and could reduce global trade costs by almost 15 percent. But, at a broader level, the momentum behind global trade reform has clearly waned in recent years. This has occurred notwithstanding the fact that there are substantial areas in need of further reform, such as agriculture, services and non-tariff barriers. That momentum needs to be rekindled and reaffirmed. Although advanced economies historically have tended to lead the way, it is important that large emerging market countries now play a greater role. This is appropriate given their growing prominence in the global economy. There are many approaches to dealing with the costs of globalization, but protectionism is a dead end.
Speech  Embargo 21 September 2017, 5.30 pm  Second Karl Brunner Distinguished Lecture Introduction of John B. Taylor  Thomas J. Jordan Chairman of the Governing Board Swiss National Bank Zurich, 21 September 2017 © Swiss National Bank  Page 1/4  Ladies and gentlemen I am very pleased to welcome you to the 2017 Karl Brunner Distinguished Lecture. The Swiss National Bank established the Karl Brunner Distinguished Lecture Series to pay tribute to academics whose research is of particular relevance for central banking. With this annual lecture, we want to reach a wide audience, including, in particular, students. For this reason today’s event is taking place at the ETH Zurich, which is internationally one of the most renowned academic institutions. I would like to thank the President of the ETH Zurich, Professor Lino Guzzella, for making these fantastic premises available to us. This year, we are paying tribute to John B. Taylor. He is one of the world’s foremost economists. John’s work is characterised by a keen interest in highly relevant questions, from both an academic and an applied point of view. He has made major contributions to economic theory. In addition, by bridging the divide between theory and practice, he is one of few economists to have had a profound impact on economic policy and thus on macroeconomic stability. John is also a very effective teacher. Just let me give you one example. Did you know that Tiger Woods, the famous golf professional, was his student in the introductory class at Stanford?

Total mainland activity increased by 1 percent between 2014 and 2015. This is the lowest pace of economic growth since 2009. Growth may edge down even further this year before gradually picking up again. Growth is being restrained by the marked fall in petroleum investment and weak growth in other business investment, while it is being supported by household consumption, exports of traditional goods and public demand. The depreciation of the krone is also supporting inflation. The rise in prices for imported goods has increased over the past year, and the year-on-year rise in the consumer price index has been just over 3 percent in recent months. Inflation may be dampened ahead by the decline in wage growth and as the effects of the krone depreciation unwind. Chart: Key policy rate The key policy rate was lowered to 0.5 percent at the March monetary policy meeting. According to the Executive Board’s assessment of the outlook in March, the key policy rate may be reduced further in the course of the year. The key policy rate was kept unchanged at the monetary policy meeting in May. There is no crisis in the Norwegian economy, but we are facing restructuring. Restructuring must start in the business sector. Activity in the oil sector will be reduced to a considerably lower level. Other industries must emerge and provide the basis for new jobs. Economic policy can only facilitate this process. Restructuring takes time. Monetary policy is the first line of defence in managing the economy.
Rather than borrowing against the rising equity in their homes, mortgage balances have instead essentially stabilized and remain well below their previous levels. As my colleagues will describe in more detail shortly, this stabilization reflects an increase in debt paydown due to a combination of lower interest rates, shorter loan terms and aging of mortgages. This trend is reflected in increased household saving and growing home equity, and we expect these trends to continue to help households rebuild their balance sheets over the near term, thereby further increasing the household sector’s resiliency to shocks. Low interest rates have also been important in driving the household debt service ratio to the lowest levels observed in our data. This means that households have more capacity with which to absorb any temporary adverse income shocks. One clear reflection of these improvements is the very significant decline in delinquency rates. At this point, the great majority of the bad debt from the boom years has been charged off and new foreclosures are at the lowest level we’ve seen in our data. The combination of charge-offs and tight mortgage underwriting standards over the last several years has shifted the stock of outstanding mortgage balances toward lower-risk borrowers, who are typically older with more stable incomes. For all these reasons, the household sector looks much better positioned today than in 2008 to absorb shocks and continue to contribute to the economic expansion.

In the coming years, the greater global participation in this developmental process, both directly and indirectly, would enhance the potential role that Islamic finance would have in contributing towards greater global financial stability in the international financial system. BIS Review 136/2008  5
José Manuel González-Páramo: The European Union and the lessons from the crisis – the way forward Speech by Mr José Manuel González-Páramo, Member of the Executive Board of the European Central Bank, at the RBC Capital Markets’ Central Bank Conference “Impacts and Implications of Integrated Global Markets”, Madrid, 12 May 2011. *  *  *  Ladies and gentlemen, I. Introduction  It is a privilege for me to participate in this conference dedicated to the very important topic of the “impacts and implications of integrated global markets”. As we are all aware, from the very start of the current crisis, economic and financial distress has been transmitted around the world through a variety of channels that, together, have formed an unusually rapid and pervasive cross-border transmission mechanism. The high degree of integration in today’s global financial markets is generally seen as one of the factors that have contributed to the amplification and spread of the current crisis. However, the fact that integrated financial markets can contribute to the destabilisation of our economies is not intuitive. Economists usually believe that more integrated and innovative financial markets are conducive to sustained economic growth and reinforce economies’ capacity to withstand shocks. The experience of the last four years shows though that, under certain conditions, financial integration and some types of innovation can increase the scope for contagion across institutions, markets and borders and contribute to the emergence of systemic risks.

Similarly, in other markets, London’s dominance in foreign exchange trading, OTC derivatives, fund management and bond origination means that London is the financial centre for euro wholesale financial services. Even in the area of payment systems the UK accounts for a significant proportion of the euro payments flowing through TARGET, even though for us the euro is a foreign currency. But these are just the immediate, first round effects of the euro. The more substantial challenges are posed by the more uncertain outlook as to just how the euro markets will develop in the medium term. So I want now just to say a little about how the euro markets may develop over the next ten to fifteen years. One thing to keep in mind here is that some of what may happen, though driven by events in the EU, will reflect factors beside the single currency. I think we may well see more privatisation, greater reliance on private provision of pensions, and other structural reforms. If we do, it will significantly affect European, and hence, euro financial markets. But such trends have their roots in the more general process of creating a single market, rather than EMU itself. Considerable progress towards a single EU market for financial services had been made long before the euro. A considerable number of directives are already in place, perhaps most significantly the Investment Services Directive, which was implemented in 1996 and gave regulated firms and exchanges from one Member State a ‘passport’ to do business in another Member State.
In the banking system, credit activity is growing moderately, except for mortgage loans. Corporate and consumer loans continue to grow slowly. On one hand, the slowdown of the commercial portfolio is consistent with the economy’s cycle, which coincides with the reduction BIS central bankers’ speeches  5  in demand revealed by the Bank Credit Surveys of the past few months. On the other hand, the consumer portfolio shows zero growth in the lower amount segments, usually associated with lower-income debtors. In the mortgage category, the greater expansion of debt comes from loans of more than five thousand UF, partly explained by the housing price dynamics. Bank financial indicators show the sector losing strength. At the third quarter of 2015, ROE dropped to 15 percent, largely because of reduced interest rate spreads. This reflects the shift in portfolio composition from higher-yield segments (consumer and commercial) to mortgage. The capital adequacy ratio (CAR) continued to decline, to slightly below 13 percent as of August 2015, consolidating a fall of just over one percentage point in the last four years (figure 14). This has occurred in a context where international banks have tended to increase their capitalization levels to strengthen their capacity to respond to episodes of financial stress, in line with the new international regulations (Basel III), or as a voluntary way of building resilience. Although Chile, with capitalization levels of around 14.3 percent in 2009, was around the median of OECD economies, its place today is in the lower part of the distribution (figure 15).

Households have traditionally borrowed mostly for housing, and the current increase in this type of lending is perhaps not so surprising in view of the fact that housing prices in metropolitan areas have risen relatively significantly. What is more remarkable is that lending for other purposes is increasing at a higher rate. It is difficult to see from the statistics exactly how the borrowed money is used, but lending both from banks and finance companies is now growing at a faster rate than lending from mortgage institutions. This has given rise to apprehensions that households are borrowing for consumption or in order to invest in shares, which could lead to rapid increased risks. In order to gain a better understanding of whether or not this is the case, the Financial Supervisory Authority has recently commenced an examination of the banks’ lending to the household sector. 1  Excluding repos. BIS Review 50/2000  2  There are several reasons why property prices play a central role in any discussion of financial stability. In addition to the fact, as I mentioned earlier, that the credit demand among households is largely governed by the demand for and price level of property, property can also be used as collateral for loans. Another reason for monitoring the property sector is that a large part of the banks’ lending is to property companies. These companies also accounted for a large part of the loan losses during the banking crisis in the early 1990s.
This may indicate that there is a relationship between the degree of openness and deviations from target, although Canada is an exception. It should also be noted that the figures for the twelve-month rise in consumer prices are considerably more volatile here than in other countries. We see from the figures that consumer prices in Norway, even when tax changes and energy products are excluded, are more volatile than indices in other countries where these products are included. Developments in recent years have also been influenced by the pronounced favourable disturbances to which the Norwegian economy has been exposed. Developments in Norway’s terms of trade provide an illustration. As consumers, we enjoy the benefits of falling prices for many imported goods. As a nation, we benefit from a fall in prices for the goods we import relative to prices for the goods we export. Norway’s terms of trade have improved. The impact of the rise in oil and gas prices is particularly strong. However, there have also been terms-of-trade gains in the mainland economy. The situation in Norway differs from that of our Nordic neighbours. Although the domestic economy is partly insulated from oil price fluctuations through the oil fund mechanism, terms-of-trade gains have been a challenge to monetary policy in Norway. Low imported inflation has put downward pressure on our rate of inflation. At the same time, our currency has remained strong, partly reflecting an improvement in Norway’s terms of trade.

We know that recoveries from financial crises tend to be slow; it takes on average about eight years to reach the pre-crisis level of real per capita income following financial crises. 3 Distorted and damaged financial sectors don’t allocate resources effectively. We may not pay the price for a number of years as the boom builds up. But in the end the price we pay is large when a financial system misallocates resources in the boom and in the following bust. Real GDP per head – the best measure of our aggregate living standard – remains 1% below its pre-crisis peak. This high cost to the economy and to society is why we need not only robust regulation of financial institutions but also of the financial system as a whole. Financial stability and sustainable growth are complements. They are not alternatives. Turning back to the reallocation mechanism, there are now some positive signs. The financial sector is well into its recovery. Bank lending growth to non-financial businesses was positive in 2015 Q1 for the first time since the crisis. Beyond the banking system, the Bank’s agents are reporting private equity firms purchasing debt-laden companies and restructuring their funding. The creation of new firms, a sign of vibrancy and reallocation in the economy, increased by 30% in 2013. And labour market ‘churn’, the movement of workers between firms is almost back to its pre-crisis average having fallen sharply in the crisis. In addition, we have seen a return of business investment over the past two years.
Preparedness to act rapidly and in several different ways has now become part of ordinary monetary policy in Sweden and other countries. During the financial crisis, the Riksbank did not carry out asset purchases. Monetary policy was instead primarily broadened by new forms of, and conditions for lending to the banks. But in 2012, the Riksbank purchased government bonds for SEK 10 billion, a relatively small amount in the context, to create operational preparedness in the event that large-scale asset purchases would later become necessary. And in 2015, when inflation had been too low for too long and the ECB was initiating large-scale purchases of bonds, the Riksbank was able, in a relatively simple way, to make monetary policy more expansionary - that is, to hold down the general level of interest rates in Sweden - via large purchases of government bonds. Correspondingly, this year, we have decided on the purchase of corporate bonds to a value of SEK 10 billion to strengthen monetary policy preparedness. We are thus building up an operational capacity in the event a highly unfavourable scenario arises and more comprehensive purchases, for example of corporate bonds, become necessary to ensure that lending and the financial conditions do not deteriorate too much. In this context, I need to address the Riksbank Inquiry. Previously, in its consultation response, the Riksbank has questioned the actual starting point for the Inquiry's way of looking at monetary policy.

Consequently, other tools than the policy rate will continue to be needed to ensure that other interest  10 See CGFS (2019) for a summary and discussion, and Hansson et al. (2018) for implications for the monetary policy analysis. 11 As I have said, after the financial crisis, new models were developed that included a role for asset purchases; see, for example, Gertler and Karadi (2015). 8 [13]  rates and lending develop in such a way that capacity utilisation in the economy is maintained and the inflation target is met. How far can the policy rate be cut? At present, the Riksbank’s policy rate is at zero per cent and, according to the Monetary Policy Report from November 2020, the Executive Board’s best assessment is that it will remain there over the entire forecast period, which is to say until the end of 2023. At the same time, we have emphasised that the policy rate may be cut to below zero, should the circumstances justify it. We have done this before – cut the policy rate to slightly below zero, that is. Between February 2015 and December 2019, the policy rate lay in the range of -0.1 to -0.5 per cent. Our experiences of this period were mainly positive, as the low policy rate contributed to inflation again rising towards the target without any major negative side effects. Cutting the repo rate ‘deeply’ is another thing, however.