samchain/econo-pairs-v1 huggingface dataset:
Firstly, the correction of the real estate sector and of the high level of private-sector debt, which had started prior to the crisis, already entailed significant elements of spending containment. Further, however, the forceful effects of the international financial crisis and of the global recessionary trends compounded this situation, amplifying the contraction of domestic demand, eliminating any possible external support and exacerbating the loss of confidence. This latter factor was, moreover, particularly affected by the impact of the far-reaching deterioration of the labour market on income expectations, an important matter which I shall return to later. As a result of these factors, there was a marked decline in Spanish household spending, both on consumption and on residential investment. In 2008, both items accounted jointly for 80% of the decline in the contribution of national demand to output, which stood at slightly more than 4 pp for the year on average. Naturally, the heightening of the financial crisis in the final stretch of the year, and the subsequent deterioration in macroeconomic expectations, saw the contractionary impulses spread to the other components of domestic spending, meaning that business investment ultimately collapsed in the second half of the year. Indeed, the sole prop of spending in 2008 was net external demand, which showed a marked increase with a contribution of 1 pp to GDP growth for the year as a whole and of 2.3 pp in the final quarter.

This means that consumption will not increase as much and that an expansionary fiscal policy will have little or no effect (see for example Barro and Redlick, 2011). 7  IMF, World Economic Outlook, October 2010. 8  BIS central bankers’ speeches  economy recovered relatively quickly following the crisis of the 1990s. However, Michael Bergman of Copenhagen University has shown that budget consolidation in Sweden between 1994 and 1997 actually had a negative impact on GDP and consumption and also led to an increase in unemployment.8 Given this it is reasonable to expect that cuts in the euro area and the United States will lead to reduced demand on export markets that are important to Sweden, and to lower resource utilisation. Risk of an impact on the exchange rate The fact that countries with weak public finances may be forced to implement fiscal tightening in what appears to be a weak economic climate has consequences for monetary policy. We can expect more central banks abroad to conduct an expansionary monetary policy in order to counteract the dampening effect of fiscal tightening on demand. However, as policy rates in many countries are already close to zero there is limited scope for further policy-rate cuts. Many central banks are instead expected to leave their policy rates unchanged for some time to come.
Against this background, it needs to be stressed that monetary policy in an enlarged euro area would not – and could not - include, as an own objective, the promotion of the catching up process of any participating country. Notwithstanding that catching up is desirable, it is our conviction that the best contribution the ECB can make to enhancing the growth prospects of current and new participants in the single currency area is to guarantee stable prices. Moreover, it should also be realised that the entry of new Member States into the euro area will neither lead the ECB to redefine the scope for monetary policy, which is the formulation of a monetary policy for the euro area as a whole. If individual countries are faced with an asymmetric economic development, national economic policies should be used to tackle the problems that might be the result of such an asymmetric development. Concluding remarks I should like to close my presentation here. Yet, before concluding my remarks, let me stress that we at the ECB, as well as at the Eurosystem level at large, are fully aware of the magnitude of the political, economic and institutional challenges faced by accession countries along the road towards the adoption of the euro.

All in all, our initial findings demonstrate impressive efforts on the part of the accession countries to achieve satisfactory regulations with regard to their central banks and financial systems in conformity with EU requirements, even if further work is still needed. At the same time, a sound financial legal system requires not only the adoption of the "right" financial laws, but also the support of an infrastructure – and, indeed, a culture – that ensures that the relevant laws can be effectively applied. The strengthening of the financial and banking sectors Although the restructuring process in accession countries has made substantial progress, the financial sectors of accession countries still need to be further developed in terms of size, depth and functioning. This applies, in particular, to the banking sector that largely dominates the financial sector of these economies. The challenges ahead are numerous: inter alia, the weakness of banking intermediation, reflected in the low level of credit to the private sector, the relatively large proportion of bad loans in banks' balance sheets in some countries or the exceptionally high spreads between lending and deposit rates that will progressively vanish in the next years. Fortunately, the privatisation process and the increasing participation of foreign investors in the banking system have supported the rehabilitation and transformation of formerly state banks into efficient and profitable banking institutions.
Therefore, the number of observations in common with an artificially reduced register could be very low or even zero. The path to striking a balance between giving access to the research community to the more interesting databases while ensuring confidentiality and anonymisation could much benefit from the experience of other institutions. To this end, a few years ago several central banks set in motion the so-called INEXDA network. At present this network comprises central banks, including the participation of the ECB Statistical Directorate, and other statistical institutes, like Eurostat. In this forum participants from the statistical areas and datalabs exchange experiences in the management of micro data, the aim being to guarantee the harmonisation of certain procedures and share best practices in this domain. Access to the information in the hands of private sources is also a very interesting field where we can make further progress. INE had a very good experience this year in exploiting data from mobile phones to analyse citizens’ mobility in different cities and regions, easing and lessening the cost of developing such statistics, with the help of new technologies. The need to better understand and organise the transition from customer data, privately used by service corporations, to citizens’ micro data, of interest for public analysis, has to be studied thoroughly. That is why I welcome and congratulate INE on recently launching a Business to Government Working Group (B2G WG), under the name of “WG about the role of official statistics on data stewardship”.

And associated with such a re-balancing, one would expect to see some shift in the structure of production away from sectors focussed on serving domestic needs towards those producing internationally tradable goods and services. The re-balancing should be facilitated by the depreciation of sterling – down around a quarter since the middle of 2007 – but is still at an early stage. Household spending stagnated over 2010 and remains around 4% below its pre-recession level (Chart 2). The sluggishness of consumer spending should hardly be a surprise. Real post-tax labour incomes have been squeezed by a mix of low pay growth and elevated inflation on the back of higher VAT, energy and import prices. In addition, heightened uncertainty probably led some households to increase their savings or pare back their debts. The most recent survey of retailers by the British Retail Consortium suggested that the fine Easter weather and the royal nuptials may have brought a welcome fillip to the High Street, but with the squeeze on real pay likely to continue through this year, it seems likely that consumer spending will remain subdued through this year at least. Public spending will also  1  Though not all: recent employment data, for instance, have been surprisingly robust. BIS central bankers’ speeches  1  provide little impetus to overall activity, given the necessary fiscal consolidation that is now under way. That, of course, is a particular issue here in Northern Ireland. So, the prospect for overall growth depends heavily on business spending and external demand.
The other key element of the capital and liquidity regime to be agreed is the Net Stable Funding Ratio. This standard addresses banks longer-term liquidity risks. Proposals are currently out for consultation and the Basel Committee aims to agree the standard in September this year. Concerns have been raised by some in the industry that taken together, the main elements of the new capital and liquidity regime can interact to have potentially serious and unwelcome unintended consequences particularly on market liquidity. The official sector takes such concerns seriously and is already looking closely at them. We should not however set the objective of ensuring a return to pre-crisis liquidity conditions. Liquidity premia were likely too low with liquidity risk very probably under-priced before the crisis. Prior to the crisis, market-makers were permitted to fund their inventory with dangerously high levels of leverage, funded at very short-maturities. Though lax standards allowed dealers to carry high levels of inventory and to easily accommodate shifts in the demand for market making, dealers were vulnerable to falls in asset prices and tightening in  4  BIS central bankers’ speeches  wholesale markets conditions. When faced with severe stress, they were forced to withdraw from market making altogether. With regulation tighter, it may be harder for dealers to absorb inventory when end investors wish to offload assets; market liquidity may start to fall away at an earlier point. Market participants will need to recognise this change in market structure and adjust their balance sheets accordingly.

Thomas Jordan: The challenges of the global economic crisis – can Switzerland master them? Summary of a speech by Mr Thomas Jordan, Vice-Chairman of the Governing Board of the Swiss National Bank, on the occasion of a panel discussion at the Central Bank of the Republic of Austria, Vienna, 1 February 2011. The complete speech can be found in German on the Swiss National Bank’s website. *  *  *  Many countries are facing major economic challenges as a result of the financial and economic crisis. Which of these are of particular importance for Switzerland? And how can we tackle them? Switzerland is currently facing three key challenges. First, the crisis has shown that countries can encounter serious difficulties due to systemically important banks. Switzerland has two systemically important banks, in fact, these big banks are systemically important even at the global level. Thus for our country, in particular, it is essential that the stability of the financial system be sustainably reinforced. Second, the crisis has substantially changed the economic environment in which Switzerland – an economy with an extremely global orientation – operates. On the one hand, our country has to cope with the appreciation of the Swiss franc, particularly against the euro, which has come under pressure because of the sovereign debt crisis affecting certain European countries. On the other hand, the crisis has reinforced the shift in economic power towards the emerging economies.
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By re-regulation, I don’t mean the return to tight control by regulators, but rather “smarter” regulation that focuses on systemic risks. Let me show my point with some examples. As a regulator, I would not be doing my job if I did not talk about Basel III. To avoid going overboard on its massive details, I will highlight just a few of its key features. In a nutshell, there are three parts to Basel III: capital requirement, liquidity risk management, and supervision of global systemically important financial institutions. Of the three, the capital part is in the most advanced stage with national implementation started last year in many countries including Thailand. It is expected that by 2019, most countries will be in full compliance with Basel III capital standards which include a countercyclical capital buffer that varies with credit cycles and a leverage ratio that limits excessive buildups of leverage. The liquidity part is new and aims to strengthen banks’ management of liquidity risk. A stress-test-based liquidity coverage ratio and a longer-term net stable funding ratio will be mandated in 2015 and 2018, respectively. The final part of Basel III deals with supervision of global banks whose failure could trigger the meltdown of the global financial system. Identified global systemically important banks will be subject to an additional capital surcharge above Basel III capital requirement. This extra loss absorption capacity is to be met with common equity and will be phased-in between 2016 and 2018.
In addition, the electoral debates in several European countries and the United States reveal a higher probability of a shift to more protectionist policies. On the bright side, it is possible that the impulse policies, in the developed world and in China, will succeed more effectively in boosting global growth. Finally, the situation in Latin America is also an important source of risks that, if they come true, could have negative effects on both financial conditions and external demand facing Chile. One preoccupation is the increased exposure of the region to the Chinese economy and the need of several economies to make an additional adjustment. All this in a context where inflation has risen in several countries, inflation expectations are above the target and the room for further monetary stimulus and/or taxes has narrowed. Plus the increased political risk, in Brazil and Venezuela. Meanwhile, it is worth mentioning that in Argentina there have been adjustments and negotiations with creditors, which could open the door for them to international markets. At home, recent data show output and demand losing strength, a struggling labor market and still pessimistic expectations of consumers and firms. In this context, slower growth than was assumed in the baseline scenario cannot be ruled out, should any of these events intensify. Still, since our economy is well balanced from a macro standpoint, with virtually zero public debt, well-anchored inflation expectations and a stable, well regulated financial system, more favorable news may cause growth to recover faster than assumed in the baseline scenario.

6  BIS central bankers’ speeches  Figure 1 GDP: Total, natural resources and other  Domestic demand by components  (annual change, percent)  (annual change, percent)  8  8  15 GFCF  NR 6  6 4  10  2  -2  -2 14  15  5 0  -5  -5  -10  -10  Total 0  Domestic demand  0 2  0  10  Private consumption  5  4  Other  13  15  -15  -15 13  14  15  Source: Central Bank of Chile. Figure 2 Trading partners' GDP (*)  Terms of trade (*)  (annual change, percent)  (index, 2008 = 100)  8  8 140  140  6  6 130  130  4  4 120  120  2  2 110  110  0  0 100  100  -2  -2 00  04  08  12  Sep.15 Report  16  90  90 09  Dec. 15 Report  11  13  15  17  Mar.16 Report  (*) Dashed lines show the forecast included in respective Monetary Policy Report. Source: Central Bank of Chile.
The remit recognises that inflation may deviate temporarily from the target on account of shocks, however. Since 2013, the remit has explicitly recognised that in these circumstances, bringing inflation back to target too rapidly could cause volatility in output and employment that is undesirable. The remit requires the MPC to consider, balance and explain such short-run monetary policy trade-offs. Specifically, in exceptional circumstances, “shocks to the economy may be particularly large or the effects of shocks may persist over an extended period or both”. When this is the case, the challenge facing the MPC can be more significant, and the remits directs that “[i]n forming and communicating its judgements, the Committee should promote understanding of the trade-offs inherent in setting monetary policy”, including, importantly “the horizon over which the Committee judges it is appropriate to return inflation to the target”. 2. Achieving price stability A simple framework for thinking about how to manage the monetary policy trade-off is shown in Figure 1. The red line in the figure illustrates a policymaker’s preferred trade-off: mapping the size of the shortfall of output below potential – the output gap – that the policymaker is prepared to tolerate for a given overshoot of inflation from target, and vice versa. The flatter the line the less the weight the policymaker places on output stabilisation and the more they are willing to tolerate large output gaps in order to eliminate small overshoots in inflation.

Despite these positive effects, the presence of foreign banks in the country instigates improvements in the institutional framework, by pushing the application of international accounting, reporting and supervision standards, which does not only help the commercial banks’ decision-making process but also the central bank’s. Therefore, the FDIs are expected not only to promote the production activity in the country, but also to have a direct and indirect impact on the Albanian financial system. Foreign production companies will directly need financial transfers and services (channel payrolls through the ATMs, POS), which will be executed through the domestic financial system. The international companies investing in the country will make use of commercial banks’ funding sources in order to prevent exchange rate and interest rate risk. There have been many property-related developments in the Albanian banking system. Since its establishment, the domination of state-owned banks has been reducing and today, foreign commercial banks’ assets account for over 90 per cent of the banking system. The increase in the number of foreign banks in the system has been also favoured by the fact that such investments have not been penalized in Albania; the requirements for establishing a bank are similar for both domestic and foreign-owned banks. 2  BIS Review 102/2007  The current ownership is diverse; there are foreign investors from Austria, Italy, Greece, USA, Turkey, Germany, Bulgaria, Malaysia and some Arab countries.
Empirically, the behaviour of the economy matters more for interest rates than prior forecasts. In addition, the MPC isn’t solely concerned with inflation anyway, still less its most likely rate at a fixed point in the future. That means that the target horizon for inflation is generally longer than the earliest point at which policy can affect it – there is therefore no single, unique path of interest rates that will do the job. It also means that the horizon itself can vary. I will therefore conclude with something of an apology. For those in the audience wanting me to give a direct and unequivocal promise as to when Bank Rate will change, you will, I’m afraid, be disappointed. I can’t. But you should look on the bright side. If there is any value in listening to people like me, it is to help you with what is the best way to try and predict future interest rates - to forecast the economy yourselves (which is probably more interesting). After all, if the future were perfectly predictable we wouldn’t have to bother trying. References Broadbent Ben, 2014, “Unemployment and the conduct of monetary policy in the UK”, Speech given at the Federal Reserve Bank of Kansas City 38th Economic Symposium, Jackson Hole, Wyoming. Campbell John, 1995, “Some lessons from the yield curve”, Journal of Economic Perspective, Vol. 9, No. 3. Eguren-Martin F. and N. McLaren, 2015, “How much do UK market interest rates respond to macroeconomic data news?”, Bank of England Quarterly Bulletin.

If the central projection’s a long way from target, that can tell you something about the MPC’s view of the suitability of the yield curve – given, at least, all the other assumptions in its forecasts. In May 2009, after the first slug of QE, the Inflation Report forecast was well below target. This suggested that, unless the economy improved much faster than it expected, the Committee believed that monetary conditions would need to be looser than implied by the yield curve at the time. As things turned out, that’s exactly what happened. But there are limits to how far this kind of reasoning should be taken. One particular problem, when it comes to the so-called “lift-off” date for interest rates, is that the yield curve is currently very flat. As a result, even relatively moderate changes in forward rates, prompted by unexceptional news about the economy, can result in big shifts in the date at which the yield curve first reaches some particular level. But that doesn’t mean the MPC’s views about future policy have moved so dramatically. If nothing else, this demonstrates the problem with focusing too obsessively on that particular date. More generally, the MPC’s inflation forecast is a far from perfect indicator of interest rates. It involves lots of conditioning assumptions, not just forward interest rates, and any of these can change. Our understanding of the economy evolves over time and the economy itself is always subject to unforeseeable shocks.