samchain/econo-pairs-v1 huggingface dataset:
Then, this argument claims that the housing bubble was caused by monetary policy, which failed to act opportunely and permitted severe imbalances to accumulate. Nonetheless, one must bear in mind that soaring asset prices do not necessarily end up in a crisis like this one. Closer attention must be paid to the financial fragility that accompanied this process, whose main culprit was the unrestrained financial innovation that generated deep distortions that neither markets nor regulators were able to predict. An expansionary monetary policy can undoubtedly induce an excessive increase in the prices of assets and credit. The ultimate role of monetary policy is to smooth the business cycle and control inflation. 1 Therefore, it is possible to think that a very expansionary monetary policy, more so than that needed to reach the inflation target, can exacerbate an economic boom. Moreover, such a policy will have serious consequences on output once the monetary impulse is withdrawn. However, an expansionary monetary policy could not explain by itself the severity of the financial collapse and the global recession the world is seeing today. There are countries where monetary policy was expansionary, with interest rates at their minimum, and no housing bubble nor financial collapses occurred. A couple of examples are Canada and Chile, two inflation targeters where, consistently with this policy framework, interest rates hit very low levels not so different from the Fed Funds rate (Figure 1). Still, housing prices generally did not experience increases comparable with those of other economies, and their financial systems have remained sound.

One issue that will have to be carefully examined in the future is the cause of the real estate boom and the housing crisis, and why it occurred in the United States. At this point it is clear that lending standards were relaxed beyond reason, and financial innovation went too far. 3 2. Inflation targeting and asset prices  A corollary of those blaming monetary policy is that, apart from focusing on the variation of the prices of goods and services, it should also take into consideration asset prices, beyond their direct impact on projected inflation. Under an inflation targeting regime, increased lending and asset prices can have repercussions on the inflation outlook, through their impact on the output gap. This would require a monetary policy adjustment to prevent a persistent rise in inflation. Hence, in an inflation targeting regime, asset prices and the level of credit aggregates affect the monetary policy decision to the extent that they affect the inflation perspectives (Bernanke and Gertler, 1999). 2  Interestingly and, according to Blinder and Reis (2005), using Taylor rules as from the first quarter of 1988, the residuals indicate that in all the mentioned episodes the Federal Reserve set the interest rates significantly below those prescribed by the rule. 3  Ellis (2008) shows that in the U.S., households had strong motivation to increase their leverage through tax, legal and regulatory incentives.
In this country, it is felt most in terms of SME and mid-cap finance. Many were struck by the potential ability of financial technology – fintech – to help bridge this financing gap, but I would emphasise that there was also bit of a caution, as I believe Reverend Giles Fraser noted in the last panel. We should not get too far ahead of ourselves, but look to further evidence that it can bridge the gap. I think the Chancellor is absolutely right that fintech has potential both in terms of expertise in finance and capability in technology. If these can be married effectively, we have an opportunity. There were a few specific examples that were mentioned that I would just like to reinforce. First, and as Alex Brummer very rightly emphasised, the opportunities that come from big data and a greater open architecture that is already there. As our Chief Operating Officer Charlotte Hogg would note, the Bank of England is one of the biggest repositories of big data. There is always a question about to what extent that can be leveraged more broadly into the system, and though it is still early days, the Bank may want to consider taking this on as a challenge. Jon Cunliffe raised a separate and important issue with receivables finance, where fintech could make a real difference. Following the crisis, payment terms for companies increased to 120 days and have not come back.

Further innovations are needed if the sector is to come to terms with the new business models that Andrew Bailey and others have mentioned today. For example, innovations in the way banks are organised that are consistent with orderly resolutions. Separately, and as noted in a number of panels today, asset managers also need to innovate to adapt to the new realities of market liquidity. The increase in the scale of the asset management sector since the crisis has been notable, as has been the emergence of investment funds that offer daily liquidity while investing in securities that only appear liquid. The Bank, the Financial Conduct Authority and the Financial Stability Board are keenly aware of these risks, and we are working to resolve them in an orderly manner. The area of market liquidity is one place where there may be duplicative regulations and scope for adjustment. Market participants should rest assured we have made adjustments in the past where we have gotten things wrong. We adjusted the liquidity coverage ratio. President Draghi noted the joint work between the Bank and the European Central Bank to change securitisation – an example of fixing something we had not gotten exactly right. We will continue to adjust our market operations. Let me move towards the conclusion of my conclusion. The point about reform and review being a continual effort came through in spades. David Kynaston noted that there have been four big bursts of reform in the last 150 years.
However, possibly because of the effects of globalisation, the income share of the top 1% tripled from 5% in the early 1980s to 15% by 2009, though it has fallen back somewhat since the crisis (Chart 8). The distribution of wealth also appears to have been relatively flat since the mid-1990s (Chart 9), partly vii  reflecting the pattern of home ownership, though it is much less equal than for income, with the share of the richest 1% persistently high, at around 20%. viii  For both income and wealth, some of the most significant shifts have happened across generations. A typical ix  millennial earned £ less during their twenties than their predecessors. Since 2007, those over 60 have x  seen their incomes rise at five times the rate of the population as a whole. Moreover, rising real house prices between the mid-1990s and the late 2000s has created a growing disparity between older home owners and younger renters (Chart 10). Chart 8: … yet the income share of the top 1% rose steadily to reach 15% in 2009, before falling back somewhat  Chart 7: Income inequality in the UK rose notably in the 1980s, then plateaued… Before housing costs After housing costs  Gini coefficient  Per cent 18 16  0.4 14 12 0.35 10 8  0.3  6 4  0.25  2 0  Source: "Living Standards, Poverty and Inequality in the UK: 2015", Institute for Fiscal Studies.

A further component of economic policy’s new direction was Sweden’s membership of the European Union in 1995. Sectors that had previously been protected were now exposed to international competition. Stronger competition in a number of fields meant that prices for some goods and services began to be adjusted downwards towards European levels. This process may continue in the years to come, though we cannot take that for granted. There are a good many goods and services for which prices in Sweden are higher than elsewhere in Europe. The point I want to make is that in many respects the favourable economic trend in recent years stems from the economic policy realignment that began in the 1980s and has been in progress ever since. This conclusion has two positive implications. 1  BIS Review 84/2000  One is that the measures which have been taken have most probably contributed to what is happening now. The other is that a continued policy orientation on stability and credibility can yield even better results in the future. In the 1990s the new direction of economic policy was accompanied by rapid, worldwide advances in the new information technology, which is being adopted successively in various sectors in Sweden. This has lowered the thresholds for establishing and running companies. Existing production processes can be made more efficient. The internet has made information more accessible and many firms can cut transaction costs. There is less need to tie up capital by holding large stocks.
Islamic securities has also maintained its dominance in the Malaysian bond market, accounting for 58% of total bond market. And almost two thirds of the equity market comprises Shariah compliant securities. Growth has also been experienced in the takaful sector in which the funds asset has registered an increase by 8.2%. This recent decade has also seen the increase in number of Islamic financial institutions including full-fledged Islamic banks, development financial institutions that engage in Islamic banking, takaful, re-takaful and capital market intermediaries. Several of these players have strategic partnerships with foreign players. In April this year, as part of the liberalization initiatives announced, new mega Islamic banking licenses and up to two family takaful licenses will be issued this year. On the global front, Islamic financial assets are projected to grow to USD1.6 trillion by 2012 while the global sukuk outstanding valued to date at approximately USD152.8 billion. In the third series of this seminar in 2007, the vital role of a strong legal and Shariah framework in the sustainable development of Islamic finance was extensively discussed. It is key to providing certainty and predictability to financial transactions. The current international financial crisis has demonstrated the importance of recognizing that the rapid transformation of the functioning of the international financial system had to be accompanied by the need to ensure that regulatory and legal framework was aligned with these developments.

Indeed, the accord could smooth the punishing volatility of capital flows in and out of emerging markets as banks and investors better understand lending risks by applying the new rules. “Good risk management should also support emerging markets,” he said. Caruana said he welcomed China's announcement in August that it would delay adoption of the new accord, introducing its own rules in the meantime as its capital-weak banks struggled to modernise and reform. “It was perfectly consistent with what we were saying...a right timing and a proper sequencing was important, not to rush,” he said. *  *  *  Caruana, man of simple taste, faces complex Basel II Bank of Spain Governor Jaime Caruana is a man of simple tastes. A recent visitor to the Bank of Spain commented on the elaborate chandeliers in a conference room, a mass of coloured glass grapes. “I love those chandeliers,” the visitor said. “Personally I find them rather excessive,” Caruana replied. For a fan of the simple, it's no small irony that Caruana is driving a highly complex rewrite of global bank safety rules as the head of the Basel Committee on Banking Supervision, in one of the most dramatic and controversial financial reforms ever. In his most difficult job to date, Caruana took control of the committee at a time of unprecedented criticism for New Basel Capital Accord or Basel II, designed to replace the 1988 accord that set out how banks allot cash to buffer against surprise risks.
It models the entire distribution of gross capital inflows to emerging market economies (EMs) based on a set of covariates, and focuses on the dynamics of the left tail of those conditional distributions, which is taken to be the relevant measure of capital flows-at-risk. In the baseline specification, the distribution of capital flows is estimated conditional on proxies for “push” and “pull” factors. For this purpose, the framework makes use of in-house financial conditions indices (FCIs), which measure co-movement in a series of financial indicators at the country level. 34 The global average of these indices is considered to be a summary measure of “push” factors, and the residual obtained from regressing country indices on this global FCI to be a country-specific summary measure of “pull” factors. For different horizons (h) and quantiles (φ) of the distribution, a panel regression of capital flows is performed on a constant, and the proxies for push and pull factors:35 KF@R i,t+h,φ = αt+h,φ + βt+h,φ 𝑃𝑢𝑠ℎt + γt+h,φ 𝑃𝑢𝑙𝑙i,t+h,φ + εi,t+h,φ  (1)  This specification allows capital flows-at-risk to be estimated, which is measured as the 5th percentile of the distribution in the baseline case. This specification is estimated on quarterly gross-inflows from non-residents to a set of 13 EMs over the period 1996-2018.36 The specification is estimated separately for FDI, banking and portfolio flows, and a split of portfolio flows into those intermediated via investment funds and those which are not.

But except in the US, securitisation has in fact so far made only limited progress, and debt sales have been focused mainly on impaired developing country or corporate debt. One reason why prime corporate loans are not so far traded is the importance that both banks and borrowers still attach to their mutual relationships. My guess is that the liquidity of bank assets by these means will gradually increase; and that process may be helped by the development of techniques such as credit derivatives. But for the time being - and indeed some time to come - bank loans are, for the most part, likely to remain illiquid in most countries. BIS Review 13/1997  -5-  We can nevertheless look at the crude balance sheet data, and, for what they are worth, we have looked at the share of loans to non-banks in total assets as a measure of the liquidity of the asset portfolio for a range of different types of institution. These data show that: for some representative small, domestic, UK banks the loan ratio is still some 70-80% of the total, apparently with no particular trend; for large UK, internationally-active, banks the share of loans is currently around 50%, having fallen quite sharply from some 65-70% some five years ago, perhaps reflecting the expansion of their investment banking activity; for large continental banks the share of loans is either side of 50%, having fallen more gradually. Again JP Morgan and Bankers Trust are outliers.
It is necessary to reduce general government debt both to lessen the vulnerability of public finances to any potential tightening in financing conditions and to restore scope for a fiscal policy response to any future adverse shocks. However, even in the current favourable environment of economic growth and low interest rates, the probability of the level of Spanish general government debt standing below the euro area reference level of 60% of GDP in the next decade is low. Factors conducive to public sector deleveraging are higher economic growth in real terms, the prospect of higher inflation, limited interest rate movements and a reduction in the deficit. I shall focus on the last two factors: the interest burden and budgetary consolidation. Evidently, a high level of public debt involves a likewise-high interest burden. While general government interest expenditure has eased owing to the effects of monetary policy, its level, at close to 3% of GDP, is above the average recorded since the launch of the single currency, in 1999. Moreover, the opportunity cost of this expenditure is very high: we might recall, for instance, that the volume of resources assigned at present by overall general government to nursery, primary and secondary education is similar to the cost of covering debt service. Further, we should bear in mind that public debt financing conditions may become less favourable than at present.

I need not stress that these movements are negative for our recovery prospects and, in general, for an economy such as Spain that is increasingly integrated into the global framework and which in recent years has notably improved its competitive capacity abroad. The United Kingdom’s departure from the European Union is, in my view, a negative phenomenon, although the results in recent European elections appear to indicate a brake on or at least a re-drawing of the lines marking these trends. In any event, in the euro area – where our economy operates – it will be very important to maintain the goals of integration into the financial and banking area and to address the capital markets union project. But it is important, too, that the achievement of a true economic union may go beyond the financial realm. Along these lines, our Annual Report refers to the discussion of possible ways forward towards a fiscal policy that includes common stabilisation elements within the euro area, in a setting, such as the present, in which the high levels of public debt restrict the budgetary room for manoeuvre in a good number of countries. Progress here would contribute to equipping fiscal policies within the area with greater strength and, therefore, to minimising the potential adverse repercussions – economic and social alike – of future crises. Thank you for your attention. 8/8
Cash cards have not been successful (fig. 6). Chip cards with e-money function may be used in transactions of low value and for acceptance at smaller points of sale. This, however, is the part of the market where cash is most appreciated. The national roll out of the so-called Cash card occurred in Sweden in the latter part of the 1990s. Three of the four largest banks in Sweden, that together comprise the lion share of the card payment market, stand behind a common technology. The introduction has not been a success. Up to now, the growth in the use of the new product has been very modest and recently even negative in terms of number of transactions. However, the development of card based e-money is still in a very embryonic stage of development. Caution ought to be applied in drawing too rapid conclusions on its future evolution. In conclusion, although the growth of the card payment market during the last decade has been large, there seems still to be considerable potential for expansion, mostly through displacement of cash payments, and most obviously in Sweden (fig. 7). Why are Swedes so suspicious of cards and such lovers of cash? We do not know for certain. I can just assure you that it is not due to successful marketing of cash by the Riksbank, even though we issue the currency and live on the seignorage. Cash has many advantages, no doubt about that.

Is the market not better handled by the private sector without public intervention? According to the law, the Riksbank is to promote a safe and efficient payment system. Like most central banks, the Riksbank is heavily involved in large value payments, running and providing credit to the RIX-system, where payments can be made in central bank money. Here the central bank role is simple to explain. But why should we be involved in the small value payments handled in the card market? Safety problems, although they may be important, are usually not systemic in nature. And in a well-functioning market, economic efficiency should be attained by the market itself, without public intervention. In my view, central bank involvement is appropriate only in the cases of market failure, coordination problems of some magnitude or the presence of obstacles outside the market itself. Usually, they 2 relate to efficiency rather than safety. Typically, we would ask questions such as 1. Are there legal and regulatory impediments to market development and innovation? 2. Are market conditions competitive? 3. Are security and operating standards and infrastructure arrangements efficient? 4. Are settlement services, however provided, safe and efficient? To answer these questions, we follow the market for retail payments and we try to exchange information and cooperate with other relevant public and private bodies. In the card payment market, issues of competition, pricing and security are of particular importance. I shall comment shortly on the first two of these.
We have been working with DPs to ensure that they are ready both to deliver ISO 20022 in a way that promotes the benefits, and to transition smoothly and safely. Our approach includes a robust programme of assurance, consisting of: bilateral exchanges; detailed delivery readiness reporting; Senior Manager Regime (SMR) engagement and readiness attestations; testing at a participant and industry-wide level; dress rehearsals; working groups; a senior sponsors forum; and external assurance for the most significant firms. Responsibility lies with the DPs to manage and communicate with their thirdparty technology providers to ensure enhancement and testing of their systems, processes and 4/6  BIS central bankers' speeches  client facing materials. DPs are also responsible for communicating and explaining these changes to their customers and suppliers: be those other financial institutions that indirectly participate in CHAPS, corporate customers, retail customers and other third-parties. Ongoing dialogue between the DPs and their stakeholders is essential to enable the whole industry to be ready and to benefit from the changes. It is therefore crucial that there are open channels of communication between DPs (as CHAPS settlement banks) and the financial institutions, corporates and individuals to whom they provide payment services. We strongly encourage a close dialogue so that these customers understand how their CHAPS settlement bank is approaching the transitions; how the changes will impact the way they send and receive payments; and how they can provide the richer data which ISO 20022 messages can carry.

We cannot allow innovation to have “free pass to ignore public interest”.3 Earlier this month the Bank published a discussion paper on digital money including the possibility of central bank digital currencies (CBDC).4 A CBDC would, if introduced – and that is an important if being considered by a number of recently announced groups5 – be a new form of central bank digital money issued by the Bank of England for use by households and businesses. Importantly it would co-exist alongside cash, commercial bank deposits, and core payments infrastructure such as RTGS. RTGS at the heart of UK payments A decision on whether to introduce CBDC will be made in due course. But a significant programme to enhance the existing infrastructure is already well on the way to delivery and is set to start to make a real difference 12 months from now: the renewal of the RTGS service itself. RTGS sits at the heart of UK payments. It is the infrastructure where the key UK payment systems ultimately settle – CHAPS and a myriad of retail systems including Bacs, Faster Payments, cheques and cards. The RTGS service settles an average of £ each working day (which is equivalent to more than the UK’s GDP every three days). This settlement occurs in central bank money, the ultimate risk-free asset. In addition to its settlement functionality, RTGS also plays an important role in the implementation of monetary policy.