samchain/econo-pairs-v1 huggingface dataset:
As the European Fiscal Board has highlighted, for the next few years, countries should maintain a neutral or even slightly restrictive aggregate stance. This is particularly important for highdebt countries, as they can combine a restrictive tone in the nationally -funded part of the budget with an expansionary tone in the expenditure financed with European funds, for instance under the NGEU programme. This would be in line with the current fiscal orientation of the European Commission for 2023. Second, fiscal policy should stand ready to react flexibly to the materialisation of adverse scenarios. In the case of a downturn in activity, the best way to achieve a targeted and timely response is by letting automatic stabilisers operate freely. If more intense inflationary pressures materialise, a more contractionary budgetary policy stance might be required. Third, fiscal policy measures should be targeted, focused on the households and firms that are most vulnerable to rising energy prices. According to OECD estimates, so far most of the measures adopted in advanced economies to limit the impact of high energy prices have been non-targeted. Moreover, the best fiscal policy response would be to help adjust the supply side of the economy, by supporting investment projects that will increase potential growth and the resilience of the European economy to shocks, including higher integration and interconnection of energy markets. Lastly, the measures adopted should be temporary. This would help ensure that the fiscal cost is manageable and that it does not increase additionally structural public deficits. Conclusions Let me now conclude.

1  A concept constructed by subtracting those workers in a temporary employment adjustment situation from those paying social security contributions. 1  And the economic vulnerability of those working in these sectors is greater. Their income is not only on average lower, but also they have a less sound financial position: they form part of households with less accumulated saving2 and their median net wealth is 17% lower. This heterogeneity is also patent in the business sector, in particular regarding financial vulnerability. Thus, somewhat less than 15% of firms were in a vulnerable position before this crisis.3 This proportion did not vary significantly on the basis of firm size and sector of activity. Conversely, the proportion of vulnerable firms increased by an estimated 20% in 2020, with the rise more pronounced at small firms; and by sector, in hospitality, the figure would have stood at 40%. The banking sector, for its part, has shown notable resilience. Underpinning this have been the improvements both in its balance sheet quality and solvency in the past decade, and the forcefulness of the economic policies applied since the onset of the crisis.4 The CET1 capital ratio increased by 71 bp and the NPL ratio fell by 0.4 pp in 2020. But the sector’s profitability declined significantly as a result, above all, of the increase in provisions for impairment losses, more than 50% up on those in 2019.
But we did not pursue this policy with the ultimate goal of reconstructing banks’ profitability. Rather, the purpose of our enhanced credit support has been to ensure the transmission of monetary policy transactions to the broader economy. Global economic governance The crisis has important implications for economic governance, and here remarkable efforts have been made or are under way. On the global level, the G20 has become the main forum for international cooperation, and a strong consensus has emerged within this group not only  2  BIS Review 59/2010  about the causes of the crisis but also about the appropriate policy responses. The G20 has been highly effective in addressing the global crisis. The more technical questions concerning regulation and financial stability are mainly delegated to the Financial Stability Board (FSB). The extension of both the membership and the range of tasks of the previous Financial Stability Forum have pushed the Financial Stability Board into a leading role when it comes to coordinating the reform of financial regulation. The European regulatory response to the crisis will include a new body that will provide macroprudential oversight and focus on the avoidance of systemic risk in the financial system of the European Union as a whole. This is the European Systemic Risk Board (ESRB), the establishment of which intends to make macro-prudential oversight operational at the European level.

There is certainly an element of rivalry between China and India but India is not going to allow itself to be used to check and contain China. Both Chinese and Indian leaders want their two countries to have good relations. They believe that the world is large enough to accommodate the aspirations of both, plus of course, the US, Europe, ASEAN and other countries. ASEAN with more than 500 million people is large but it is not a country. It is an organisation of 10 countries. It does not threaten the interests of the major powers. That is why ASEAN has been able to provide a neutral venue to bring larger powers together. Placing ASEAN at the centre of the Asian construct helps to reconcile and assuage the tensions between major players and their competing interests. It is also the reason why ASEAN must remain in the driver's seat and the political underpinning for the multitude of dialogues and fora that ASEAN has spawned such as the ASEAN +3, ASEAN Regional Forum and the East Asia Summit (EAS). The inaugural 16-member EAS was held last December. Major powers outside the grouping need not be worried that the EAS would work against their interests. It is in ASEAN's interest that the EAS remains open and inclusive. Conclusion Let me conclude. A rising new Asia will usher in a new era of opportunities for the world. It is therefore appropriate for the Institute of International Finance (IIF) to hold this meeting in Singapore, a gateway to access Asia.
Going forward, a less favorable macroeconomic scenario would lead to some these credits being defaulted. The evolution of the labor market has begun to reflect in deteriorated economic and financial indicators of households. Thus, since the last FS Report, bank consumer loans posted an increase in non-compliance. Meanwhile, mortgage default ceased to decline as it had for some years (figure 14). Meanwhile, households' aggregate indebtedness continues to rise, most of all the mortgage component (figure 15). Most recently, survey responses reveal an increase in the financial burden over income, which, together with the increased non-compliance in the consumer portfolio, calls for follow-up. Actually, any further deterioration in the labor market could deepen households' non-payment behavior. The housing market continues to adjust. Sales of new homes in the Metropolitan Region have slowly recovered, while the prices of both new and used homes decelerated in the second half of 2016. At the same time, the launching of new projects has slowed, in line with the reduced growth outlook for the sector. All in all, different indicators of the residential real estate sector— including mortgage credit—show a slowdown, reflecting both the economic situation and the tax and regulatory changes discussed in previous FS Reports (figure 16). Lastly, cancelled home purchase agreements have remained bounded, but may increase in the face of a further deterioration of the labor market. This could affect real estate companies lacking sufficient cash flows to cover the costs of putting a cancelled sale unit back on the market.

This adjustment was completed with a final cut of 25 bp in our monetary policy meeting last May. The action of the Central Bank has meant accentuating the expansionary orientation of monetary policy, which has kept the MPR below its neutral levels for more than three years. This will cushion the effects of the business cycle downturn and ensure that we achieve the inflation target within the policy horizon. In fact, over the next several months this more expansionary monetary policy will permeate the economy, complementing the impact of better external conditions and the replenishment of inventories and capital, gradually speeding up the pace of economic activity and allowing inflation to converge to target. This will also prevent further deterioration of the labor market and financial compliance indicators. Discerning about the change in the macroeconomic scenario, as well as the magnitude and speed of monetary tightening has been a major challenge for the Central Bank. We have addressed it with the conviction that monetary policy decisions must be based on projections that anticipate events rather than on the latest data or a backward-looking analysis. This approach allows decisions to be made in a timely manner and monetary policy to act whenever needed. 11  To the extent that a more forward-looking approach demands interpretations and opinions based on partial information, different opinions will inevitably exist. Moreover, this diversity is essential to feed the analysis and internal discussion required by institutional decisions.
Further, supervisors should be vigilant in ensuring that banks’ so-called “treasury” or “liquidity” portfolios are not concentrated in funding instruments, such as FRNs, issued by other banks. That turns out to have been all too prevalent. And they were not liquid when the music stopped. Years ago, regulators decided to deduct banks’ holdings of each other’s capital-instruments, to avoid the system as a whole generating illusory capital. The same principle could perhaps apply in liquidity regulation. The authorities also need to be clear about what level of stress, and/or what proportion of short-term liabilities, the stock liquidity buffer must cover. That must be a judgment for the authorities; and it must, as the Turner Report makes clear, be more demanding than in the past. But just as important, we must not imagine that the kind of modelling that can be applied to, say, credit risk and, perhaps, to some types of market risk can sensibly be carried across to liquidity risk. Liquidity goes wrong when there is, in the jargon, strategic interaction: I run (or sell) because I think you will etc. Liquidity buffers need to sustain confidence; if successful, the buffer is never needed. A time series of data showing low use of a liquidity buffer is not compelling evidence that a requirement was too high. Our successors must remember that in 10-20 years time. Of course, no liquidity buffer can be proof against all circumstances. Which is why central banks are in the business of providing liquidity insurance to the system.

First, there were too many large financial businesses for which an AAA rating was, fatally, more than a description of their credit standing; it constituted their business model. Examples include Fannie and Freddie; the Landesbanks; the US monoline insurers; the SIVs; and, if they can be thought to have a business model, the ABCPs. These institutions distorted the supply of credit across the global economy. (In the case of the monoline insurers, for structured finance they were effectively in the business of providing “end-of-the-world insurance with a settlement period of T+1”.) An even wider group of private-sector AAA institutions were not required to collateralise derivatives-related counterparty-credit exposures. The effect for the system as a whole was to introduce an extraordinary vulnerability to a ratings downgrade of any of these institutions or structures. There was, in effect, a potentially systemic cliff. A second serious faultline in global capital markets – arguably the greatest – was the firm expectation of “no break the buck” in the massive global Money Market Mutual Fund industry; c. $ in the US, more or less the same size as commercial bank deposits. The failure to pay par at a major US money fund when Lehman collapsed helped trigger the unravelling of confidence across global markets.
Toward the end of the year, we will publish the results of our first round of simultaneous across major UK banks stress tests, which will follow the publication by the European Banking Authority of its stress tests in just over a week from now. Our stress tests are a real step in the direction towards the full use of such tests as one of the three pillars of the capital framework. This is a major development compared to the cumbersome and slow process of stress testing one bank after another that we developed during and after the height of the crisis. We will be using these tests to assess whether firms have capital positions and capital plans looking forwards which will provide re-assurance that they will be safe and sound under stressed conditions, as the name suggests. If they don’t – and you should take no inference on the results from what I say here – we will ask them to look again at their plans. Stress tests should not be a dramatic event, they should be part of the health check and they should prompt measured responses where necessary, and reflecting the fact that at different speeds banks are heading out of the crisis. Last on capital is the issue of loss absorbency in going and gone concern states. For the major banks this is the too big to fail problem.

Society expects higher standards, and the PRA supports the FCA in upholding these standards as part of the global effort to restore trust between financial institutions, regulators and – most importantly – the public. Three things strike me as important as part of this effort and I pick these three because they are close to my role and that of the PRA and the wider Bank of England. First, the Fair and Effective Markets Review under my colleague Minouche Shafik, with Martin and Charles Roxburgh, is vitally important to establish the better standards that society reasonably expects. Second, we need better international coordination among authorities to enable conduct risks to be dealt with effectively, but also in ways that do not threaten safety and soundness. That is a high priority. And third, to support credit and borrowing in the economy, and thus growth, we must all work to ensure that people feel confident to use banks and thus overcome the legacy of mistrust from revealed misconduct. The fourth issue on which I want to comment concerns incentives. These lie at the heart of good pro-active supervision, getting the incentives right. Unfortunately, we see areas where that has not happened. I want to cover two of those. The first is remuneration. Once again there is a lot being said on this subject. My view has not changed.
Certainly, some countries have more reasons to worry than others about these adjustments in the world economy, because of their external and domestic vulnerabilities. Meanwhile, the past and present volatility of the world will continue to affect our economy, but, while we are certainly not immune to what happens outside our borders, we feel we are on a good stand to deal with this transition. At home, output and demand are gradually decelerating and inflation is still low. Our projections, which I will be reviewing shortly, indicate that in the short term the Chilean economy will continue to expand somewhat below trend, affected by the normalization of the mining investment cycle and labor market conditions. We thus estimate a 4.2 percent growth for this year and a 3.75 to 4.75 percent range for next. This 2014 forecast range is slightly less than what we were expecting in September. Although these growth rates represent a slowdown from previous years, we see no obstacles ahead that could prevent our economy from resuming growth at closer to trend rates, which we continue to estimate at 5 percent annually. In this context, the Board decided to lower the monetary policy rate from 5 to 4.5 percent in its meetings of October and November, in order to accommodate the monetary stimulus to our slower economy and not jeopardize the convergence of inflation to the target.

Chile)  2.8 -0.6 1.9 7.7 5.1 3.8 2.7  1.9 -0.4 1.1 8.1 6.3 4.3 3.3  1.5 -0.5 1.7 7.5 5.4 3.8 2.7  1.7 -0.4 1.8 7.6 4.1 3.8 2.6  LME copper price $ Brent oil price $  361 112  350 108  330 108  Terms of trade  -4.1  -0.4  -5.2  Dec.13 Report  2.5 2.6 2.6 1.3 1.0 1.0 1.3 1.0 1.3 8.2 7.4 7.4 6.4 5.8 5.3 4.7 3.9 4.0 3.7 2.9 2.9 (levels) 332 340 305 310 109 101 108 106 (annual change, percent) -3.9 -1.6 0.1 0.2  2.7 2.1 0.8 7.5 6.3 4.1 3.7  2.7 1.4 1.0 7.2 6.3 4.5 3.4  290 97  290 100  -1.2  -1.5  (f) Forecast. Sources: Central Bank of Chile based on a sample of investment banks, Consensus Forecasts, IMF, and respective statistics bureaus.
Given that such a shift in resources cannot occur instantaneously, it should not be surprising if the US economy experienced a period of temporary higher unemployment. In that case, trying to stimulate growth and reduce unemployment to achieve the pre-crisis equilibrium through macroeconomic policies, as some are suggesting, might only delay the adjustment and lead again to an unbalanced path. On the other hand, some surplus countries, such as Germany, might be able to achieve higher growth than in the past decade, because of the increased potential resulting from their better positioning in international trade specialisation achieved over the years and if they are able to employ resources more efficiently in the non-tradable sector. The second issue that I would like to raise relates to the endogenous factors that induce rebalancing of growth between deficit and surplus countries. Theory suggests that if external demand falls, owing to the lower levels of growth in deficit countries, surplus countries will be able to export less and thus also experience lower growth. This would free up resources in the latter countries which should then be allocated to the non-tradable sector. Furthermore, the interest rate in surplus countries should fall, inducing residents to save less and consume more. However, these adjustment mechanisms may take time and may lead to temporary sub-optimal growth. It is necessary to investigate whether the adjustment process is indeed slow, especially after a crisis such as the one we have experienced.

However, at the latest monetary policy meeting in April 2010 I chose not to advocate a lower repo-rate path but instead an “extended” repo-rate path. In this extended path, the period in which the repo-rate is 0.25 per cent is extended to the end of the fourth quarter of 2010 instead of to the end of the second quarter as the majority decided. I thus supported the decision to leave the repo rate unchanged at 0.25 per cent, but entered a reservation in favour of the extended repo-rate path. My reason for this was that such a repo-rate path has the same effects as the lower repo-rate path; that is a higher level of resource utilisation and a level of CPIF inflation closer to the target. 1 An expansionary monetary policy can thus be achieved either with a lower repo-rate path in which the repo rate is reduced now or with an extended repo-rate path in which the repo rate is maintained at a low level for a longer period of time. Some of my colleagues have had certain doubts about a repo-rate level below 0.25 per cent. As you know, I do not share these doubts. In this context, the extended repo-rate path has the advantage that these doubts are no longer relevant. It also has the advantage that it reduces the monetary policy decision to the question of when the repo-rate should be increased.
Increased credibility for an inflation target can lead to inflation not being as sensitive to variations in resource utilisation as before. Low inflation in itself is considered to make it less appealing to raise prices often due to the costs that are associated with such rises. The inflation rate becomes more persistent, which means that it doesn’t react as strongly to variations in resource utilisation as when inflation was higher. Low inflation can, for example, result in misjudgements of the output gap as well as in overly accommodative monetary policy. Other factors that can contribute to restraining inflation are more a result of “bubble phenomena”. Rising asset prices can increase corporate profits and thereby also companies’ ability to narrow their profit margins so as to cope with stiffer competition. Another factor that can temporarily dampen inflation when asset prices rise is the currency appreciation that can occur when foreign investors invest their money in the country’s equity market in the hope of continued price rises. How should monetary policy react? To sum up, I have pointed to studies and empirical observations that could lead to a situation where central banks with a monetary policy that is mainly governed by medium-term inflation forecasts do not observe in time when asset prices and credit developments are indicating that large macroeconomic disturbances could be triggered later on. But even though we don’t have sufficient knowledge to be able to identify a development that may result in future macroeconomic disturbances, we have to make monetary policy decisions.

Were central banks via tighter monetary policy to attempt to stop such a fundamentally motivated development, it could instead prove costly to the economy. Do asset prices and credit play an independent role for the real economy? Having said this, we must ask ourselves the following questions: (1)  Is there reason via monetary policy to reduce disturbances that can be expected to have a substantial impact on the macroeconomy if this did not affect the forecasts of inflation in the medium term? (2)  Is there any information in asset prices and debt levels that is systematically not taken account of when forecasting inflation? 2  Heikensten, L. & Vredin, A. (2002), “The art of targeting inflation”, Sveriges Riksbank Economic Review  BIS Review 40/2004  3  Allow me to begin with the first question. Besides the task of maintaining price stability, most central banks also have a role as regards financial stability. If systemically important banks are hit by a crisis or by losses large enough to cause a sharp decrease in the credit supply or a disturbance in the payment system, this results in considerable macroeconomic disturbances. If financial stability is threatened by a credit expansion in such a way that systemically important banks have not heeded a macroeconomic risk that has been identified by the central bank, this could therefore need to be taken into account when taking interest rate decisions.