samchain/econo-pairs-v1 huggingface dataset:
The lacklustre consumption and investment of recent years are telling in this connection, and denote the presence of structural shortcomings which dampen household confidence and dent corporate profit expectations. Accordingly, questions such as the uncertainty over the viability of the public pension system currently in place or the constraints preventing higher productivity growth not only have long-term repercussions but also exert a contractionary effect on the present economic situation. These overall characteristics of the area do not apply to all the member economies. Growth rates vary considerably, largely due to the different degrees of vigour shown by internal demand. Amid these divergences, Spain is one of the countries that has consistently posted substantially higher-thanaverage rates of expansion. The Eurosystem monetary policy has retained an accommodative stance, with the intervention rate set in June 2003 unchanged at 2%. Although the forceful oil shock has hampered the reduction of inflation, medium-term inflation expectations have held at a rate compatible with the Eurosystem’s definition of price stability, partly as a result of sustained wage moderation. The favourable trend of labour costs is a natural corollary of the prevailing sluggishness of activity and of employment creation, but it also reflects the credibility of the anti-inflationary goal of monetary policy. The European Central Bank has been able to sustain monetary conditions propitious to the strengthening of activity although, as indicated earlier, these have so far proven insufficient to achieve a satisfactory degree of dynamism.

However, through discussions with governors and other representatives from central banks abroad, the Board of Governors of the Central Bank of Iceland had become aware of growing opposition to the Icelandic banks’ accumulation of deposits. No doubt this opposition stemmed from many factors, among them the fact that banks in those same parts of Europe felt the pressure of the sudden competition and communicated their concerns to their authorities. Another cause was the fact that the accumulation of deposits in foreign subsidiaries increased the potential obligations of the deposit insurance schemes in the countries of operation. A third factor may have been concerns that the relatively high interest rates offered by the Icelandic banks might reflect underlying weakness. A fourth consideration was the concern about the Icelandic deposit insurance scheme with respect to deposits in foreign bank branches. It was clear, however, that the Icelandic system fulfilled the requirements set forth in European directives, which stipulate that the government must ensure that such a deposit insurance scheme is established but do not address the issue of government responsibility for the scheme’s commitments, and certainly not in the event of a system-wide shock. Official European documents corroborate this. Some declared outright that the Icelandic banks would be prevented from receiving deposits or that they would be forbidden to receive further deposits in the countries where they were already established.
The lack of a breakdown between client and proprietary sources of revenues is problematic when making sense of investment banking activities, both in the run-up to and during the crisis. In the run-up to crisis, FICC and equity-related activity contributed significantly to revenues, partly on the back of proprietary trading in assets whose prices were rising rapidly. Some of these gains then dissolved when asset prices, in particular for FICC, went into reverse during 2008. The story of 2009/10 is of a strong recovery in FICC and equity revenues. The source of this revenue recovery is, however, different to the boom. Instead of proprietary risk-taking, increased revenues appear instead to have been driven by market-making activities on behalf of clients. These were boosted by a bulge in client activity and wider bid-ask spreads, against a backdrop of lower levels of competition (Chart 38). It is an open question whether these returns to market-making will persist. In some respects, returns to M&A and advisory activities represent even more of a puzzle. For a start, it is well known that most M&A activity is value-destroying (for example, Palia (1995)). Advisory fees of 0.5–1.5% are typically taken, even though these activities are essentially risk-less. And in total under-writing fees are often around 3–4% in Europe and higher still in the US, having risen during the course of the crisis. The level and persistence of these fees is also something of a puzzle.

Banks can in a variety of ways assume tail risk on particular instruments – for example, by investing in high-default loan portfolios, the senior tranches of structured products or writing insurance through credit default swap (CDS) contracts. In each of these cases, the investor earns an above-normal yield or premium from assuming the risk. For as long as the risk does not materialise, returns can look riskless – a case of apparent “alpha”. Until, that is, tail risk manifests itself, at which point losses can be very large. There are many examples of banks pursuing essentially these strategies in the run-up to crisis. For example, investing in senior tranches of sub-prime loan securitisations is, in effect, equivalent to writing deep-out-of-the-money options, with high returns except in those tail states of the world when borrowers default en masse. It is unsurprising that issuance of asset-backed securities, including sub-prime RMBS (residential mortgage-backed securities), grew dramatically during the course of this century, easily outpacing Moore’s Law (the benchmark for the growth in computing power since the invention of the transistor) (Chart 32). 5 Tranched structured products, such as CDOs (collateralised debt obligations) and CLOs (collateralised loan obligations), generate a similar payoff profile for investors to sub-prime loans, yielding a positive return in stable states of the world – apparent alpha – and a large negative return in adverse states. Volumes outstanding of CDOs and CLOs also grew at a rate in excess of Moore’s Law for much of this century.
The economy is still below the pre–pandemic level, and even more importantly, the growth outlook is under new threat in the midstream of the recent upheavals in Ukraine. Subsequent shocks and the need to respond in crisis management mode increase the risk of distancing from structural policies that provide impetus to a faster transition and more productive growth. However, growth decomposition exercise reveals that even before the health crisis, the growth of the Macedonian economy, similar to the growth of other CESEE transition economies, was not predominantly driven by innovative and efficient sources. The average growth in the decade preceding the pandemics gravitated around 2.5%, somewhat above the CESEE average, with the contribution of total factor productivity (TFP), as a measure of economic efficiency and innovation, being relatively marginal. Although two thirds of growth dynamic was capital driven, the impact of the ICT capital was rather small. Labour had also positive contribution to the growth, but it was predominantly due to labour quantity, and less due to labour quality. During the pandemics, the bulk of the adjustment in fact went through the TFP which declined close to 5%, as the overall context was barely conducive for innovative decisions. 1/3  BIS - Central bankers' speeches  In this context, global competitiveness index in terms of innovation capabilities and ICT adoption locates us at the 97th and 70th rank (out of 152 countries), similar to Western Balkans peers, but much further from the advanced Europe.

The issue, therefore, underscores the inadequate risk management, covering the entire process: from the lack of proper risk measurement, especially with regard to complex product, as well as liquidity risk, to inadequate risk management and control, and to micro-prudential risk-based supervision. In addition, there is now greater attention being paid to the importance of macroprudential approach, in recognition of the risk from procyclicality and interconnectedness of institutions, especially the large and highly complex financial institutions. Also, greater recognition is given to the problem of the unregulated shadow banking sector, like the hedge funds, which are also key in systemic risk process. All these issues pose a major policy challenge, as indeed the various working groups and committees of the BIS are now working on the guidelines, and on the key issues such as accounting, valuations, procyclicality, and adequacy of capital and provisions. In view of the depth of the current problem, and the fact that it may be quite sometime before the global standards on these issues can be settled, regulators, in my view, must be ready to take the needed action to ensure that we address these risks in our financial systems systematically. This is why Pillar II is all the more important, because the essence of Pillar II is to ensure that financial institutions have adequate risk management process and capital, commensurate with their risk profiles.
Second, further differentiating our regulatory and supervisory approach to capture new sources and transmission of risks while allowing room for experimentation and for firms to develop economies of scale. An important objective will be minimising regulatory arbitrage, which can lead to risks building up in parts of the financial system that may be subject to differentiated regulations. We anticipate that this will call for a much more dynamic approach to regulation and supervision as well as better communication of regulatory developments going forward. Third, strengthening platforms for collaboration. In this regard, the Bank, together with the financial industry, is in the process of establishing a Financial Threat Intelligence Platform. The platform will collate, analyse and disseminate real time information on cyber threats and trends to strengthen the detective capabilities of the industry against such threats. We expect to operationalise the platform before the year end. I am also pleased to announce the establishment of a dedicated innovation lab, right here in Sasana Kijang. The lab will provide a collaborative environment for the purpose of creating, elaborating, and prototyping innovative solutions to clearly defined problem statements. Recall that ocean tides present us with both opportunities and risks. The fact that humanity today is better able to understand, predict and master ocean tides should give us encouragement for the future of finance. The goal of a relevant, safe and socially responsible financial system can be attained by focusing our energies toward this shared goal in which we all have a critical stake.

19  This is not to suggest that Gallatin was opposed to government-sponsored infrastructure projects. Indeed, in 1808, he presented the Gallatin Report on Roads and Canals. As he put it at the time, the vision of roads and canals to link up the young nation “could not be left to individual exertion.”  20  The federal debt stood at approximately USD 83 million when Gallatin took office in 1801. By 1808, Gallatin had succeeded in reducing it to USD 57 million, including the extra USD 15 million added by the Louisiana Purchase. United States nominal GDP has been estimated at approximately USD 520 million in 1800 (see Susan B. Carter, Scott S. Gartner, Michael R. Haines, Alan L. Olmstead, Richard Sutch, and Gavin Wright (eds. ), Historical Statistics of the United States, Volume Three: Economic Structure and Performance. Cambridge University Press, New York NY, 2006). Hence, almost doubling the size of the United States through the purchase of the Louisiana territory from Napoleon in 1803 cost approximately 3% of the GDP of the existing territory. 21  Balinky, op.cit., for example, comes out strongly against Gallatin’s debt reduction strategy, arguing that it was a narrow-minded and short-sighted fiscal policy for a country in need of economic development. 22  More precisely, the United States debt-to-GDP ratio was reduced by an estimated 56 percent between 1801 and 1808. This estimate is based on nominal GDP estimates for the US in the early 1800s provided in Carter et.
Although there is a great number of arrangements that ensure money transfers between financial intermediaries, in practice, financial transfers tend to be concentrated on a few of them. Thus, the largest volumes and values of payment orders are currently carried out in multilateral payment systems. On the basis of several surveys conducted by the Eurosystem since 1999, we consider that the market share of these systems is nearly 80 %, both in terms of volume and value. However, we should not minimise the role of correspondent banking, which holds the remaining 20 % of the market. Correspondent banking arrangements also show a high degree of concentration: out of all reporting banks to the Eurosystem’s survey, the ten largest banks account for about 80 % of the overall value of correspondent banking transactions. Moreover, correspondent activities of some banks are substantial and similar in size to those of some interbank funds transfer systems. The issue of the infrastructures diversity for payments in euro across the EU was raised prior to, and due to, the introduction of the euro. At that time, it was realised that diversity had drawbacks to the  BIS Review 49/2005  1  extent that it came together with a discrepancy of service level between national and cross border payments, at the expense of the latter. With respect to the objective of financial integration, it was clear that this situation could not be considered as an optimum. The issue was taken into account before the launch of the euro.

2  BIS Review 49/2005  However, meeting this ambitious objective implies a significant evolution of the current retail infrastructures towards a pan European infrastructure, the so called PEACH, which will aim at reinforcing the global efficiency of payments in Europe. The main achievement with regards to infrastructures until now has been the launch of STEP2, since it is the first infrastructure compliant with the PEACH requirements, as defined by the EPC. But there is still a significant way to go since STEP2 handles low volumes, 170.000 payments in May 2005, and can still not offer the same level of service as national ACHs. In that context, it must be seen as a positive prospect that most national retail payment systems are now preparing themselves to the implementation of SEPA, through the spreading use of standardisation, which will allow the interoperability of infrastructures. In France for example, several banks have initiated the STET project in view of SEPA. However, one should note that the idea of consolidating the retail systems platforms is for the time being not really at the forefront of market initiatives, even though consolidation is a source of cost savings and efficiency. Why such a gap in the level of integration between large-value payment systems and retail payment systems? I see two main explanations. First, large value payment systems have benefited from the incentive of the adoption of the single monetary policy in the Euro area, which made the creation of TARGET mandatory.
Whatever the criticisms, European integration has come a long way, not least in the financial field. The acronym “FSAP” in its specific European meaning has been successful in bringing increased efficiency and access, and lower costs to many, but more needs to be done, for instance for retail transactions. The flip side of integration is increased dependence and greater risk for contagion from developments in other countries. In the financial field we face this mainly in the cross-border operating banks and other major financial institutions and also in the infrastructure for the conduct of payments and settlements. But financial stability may also be indirectly affected by real sector developments, such as real estate prices. I can see two alternative ways of structuring a regional European FSAP. It could either be founded on a “whole region-approach” identifying the general situation and then analysing how various developments affect overall stability; or it could start from the individual countries and analyse how each country might be affected by influences from abroad – be it through their financial groups at home, abroad or through other channels, including the payment infrastructure such as regional exchanges. The analyses of a number of countries could then be added together to form a relevant  BIS Review 52/2006  3  region, which could be the EU, the euro area, the EEA, some subset thereof or even one of these regions plus one or more financially important systems in the neighbourhood, such as Switzerland. My leaning would be toward the second one.

The storm shut down all New York City schools for a full week, and many schools across the region remained closed the following week. Hardships borne by students and families are also reflected in record low post-storm attendance rates. The New York City Department of Education moved quickly to relocate schools from damaged buildings to temporary premises, enabling children to resume their studies. But even two weeks after the storm, schools that had to be relocated had attendance rates below 70 percent, a huge drop from their regular rates of over 90 percent. Research shows that lost school days and relocations can significantly impair student learning. The good news is that the situation is getting closer to normal every day. Today, only 9 out of a total of 1,750 New York City schools remain relocated. Also of particular importance is that their leaders – administrators, teachers, principals and others – have agreed to make up three and a half days of the lost time. It is impressive that so many districts across the region are working hard to make up for much of the lost time. Our region must learn the right lessons from this experience. The storm revealed significant shortcomings in the resilience of our public and private infrastructures in three critical areas: power, transport and communications. This vulnerability must be addressed. National economic conditions Turning to the storm’s effects on the national economy, I expect a modest negative effect on the annualized growth rate of real GDP for the fourth quarter of 2012.
Such an outcome is likely to raise the rate of unemployment consistent with stable wage growth i.e. the NAIRU. The second outcome is different. Vacancies may be temporarily higher, and above their steady state level in the short-run, if firms are anticipating that it will be harder to find workers in the future when unemployment falls. In that scenario, demand picks up, the impact of matching frictions in the labour market dissipate over time, and both vacancies and unemployment fall. The NAIRU would be less affected in this scenario. Another possible explanation is that the level of advertised vacancies is elevated due to employers overestimating the growth of demand to come just as the speed of the recovery falls off. In this case, some of the vacancies turn out not to be jobs as employers change their mind, or at least hiring is put back. The implications of these labour market outcomes are quite different for growth, inflation, and thus monetary policy, which illustrates the uncertainty we face. Before turning to inflation, I want to say something on earnings. On the face of it, headline earnings are elevated. Pay growth of around 8% for July (the latest available number) is very high.

As for the issue of asset price bubbles, while the signs of accelerating asset prices observed in many countries in Asia are not so apparent in Thailand at this time, the risk is not BIS Review 164/2009  3  neglected. As a matter of prudence, the Bank of Thailand will continue to closely monitor asset prices to ensure financial stability prevails in the long term. Ladies and Gentlemen, I would like to conclude my speech tonight by reiterating that the economic recovery in Thailand is expected to continue going forward. Nevertheless, the risk of an aftershock is not negligible due to fragile global and domestic environment. Hence, businesses and policymakers alike need to remain vigilant, but at the same time, should not be overcome by unreasonable fear. One important factor that will help speed up the process of recovery is the return of investment and trade within the country. With our economic resilience and strong economic fundamentals, I would like to assure you that Thailand remains a lucrative place to invest. Despite this difficult time, the BCCT has always been a great supporter of our investment programs, an example of which is your Thailand Means Business 2008 report which is very relevant in terms of attracting new or re-investment from British businesses. I hope that this long relationship will continue to be as good as ever or even better in the coming years. Thank you. 4  BIS Review 164/2009
That counterparty bids more aggressively for funds – something that is immediately observable from the pattern of bids (Table 2 and Chart 6). These examples highlight how the new ILTRs can provide an “early warning indicator” of stresses in the market, at both an individual and aggregate level. That information can be used to determine the size of and frequency of subsequent ILTRs (hence solving one important problem with the old LTRs). The ILTR supply curve The Bank’s supply curve is pinned down by its preferences – namely to provide liquidity insurance to the banking system at a price that doesn’t undermine the incentive to prudently manage liquidity. The Bank summarises its preferences using a Relative Supply Schedule (RSS). The RSS dictates how the proportion of each auction allocated to the wider collateral set responds to changes in the bids submitted, and specifically the difference between the clearing spreads on the narrow and the wider collateral set (known as the stop out spread). Chart 7 below shows some illustrative examples of an RSS. A larger stop out spread increases the proportion of the auction allocated to the wider collateral set, so the Bank’s “supply schedule” is upward sloping. Consider two simple examples. With a perfectly inelastic RSS, the Bank essentially pins down the quantity of funds it would provide against wider collateral, regardless of the bids submitted. With a perfectly elastic supply curve, the bank would, once a certain price threshold is exceeded, be prepared to allocate against all the wider collateral bids.

They are complexity on the one hand, and homogeneity on the other. In essence, the financial network has over time become progressively more complex and less diverse. Why? And what have been the consequences? In the 1987 film Wall Street, the financial sector mantra was “greed is good”. The stock market crash of the same year put paid to that doctrine, at least temporarily. By the early part of this century, both the circumstances and the individuals had changed. So too had the mantra. It had become the rather gentler “diversification is desirable”. Risk-taking became less Gordon Gekko and more Merton Miller. Diversification came care of two complementary business strategies. The first was “originate and distribute”. Risk became a commodity. As such it could be bundled, sliced, diced and then re-bundled for onward sale. Credit became, in the jargon, structured. Securitisation was one vehicle for achieving this. Derivatives, such as CDS, were another. As these marketable instruments passed between participants, the network chain lengthened. In principle, these instruments delivered a Pareto-improving reallocation of risk. Risk would flow to those best able to bear it. They had deep pockets which they sought to line with higher yield. For the system as a whole, this sounded like the land of milk and honey. For a risk shared was a risk halved – perhaps more than halved, given the magic of diversification. The network chain, meanwhile, just kept on growing. 1  Federal Reserve Bank of New York (2007); May, Levin and Sugihara (2008); Allen and Gale (2000).