samchain/econo-pairs-v1 huggingface dataset:
Spain has recently introduced various reforms to improve the effectiveness of bankruptcy procedures, though it is still too early to appreciate in full what additional reforms are needed to further improve those procedures. At the European level, I also welcome the Action Plan on Building a Capital Markets Union recently approved by the European Commission. This project envisages some measures to overcome information barriers that could inhibit SME lending. That includes, following the Spanish example, the strengthening of the feedback given by banks declining SME applications and the promotion of systems facilitating the availability for investors of comprehensive information on SMEs. Moreover, the Action Plan also foresees actions to reactivate securitisations markets. Let me stress the importance of this specific set of measures. For smaller firms, for which direct access to markets is not feasible due to problems of scale, bank credit will remain the predominant financing source. Therefore, an adequate availability of funds for SMEs requires banks to have sufficient means and capacity to properly conduct their intermediation activity. In that regard, the development of the securitisation markets seems a promising avenue to facilitate credit risk management by banks and, therefore, to support lending. Indeed, securitisation markets activity was seriously impaired after the subprime crisis due to the stigma attached to any kind of asset-backed securities, and the lack of recognition by investors and regulators of the specific quality of each product.

At the same time, some measures recently introduced at the national level have also supported the availability of bank financing to SMEs. Specifically, the regulatory definition of an SME has been significantly widened, bringing it in line with that predominating at the European level and so extending the benefits of the lower capital requirements associated with loans to such firms. As a result of the conjunction of the previous developments, most quantitative and qualitative indicators point to a higher dynamism in credit flows in Spain which is linked both to supply and demand factors. For instance, data from the Central Credit Register show an upward trend in the number of credit transactions with non-financial corporations which has been driven by an increase in both loan applications and their approval rates. This evidence is moreover consistent with the results of the survey on the access to finance of firms conducted by the ECB on the basis of a sample of European companies. In particular, since the end of 2013, Spanish SMEs have reported an improvement in their perception of access to credit, a signal which is consistent with that from the Bank Lending Survey. 4. Policy considerations on SME’s financing  Allow me to say now a few words on policy considerations regarding the specific case of small firms’ financing. Undoubtedly, the crisis has been a painful reminder for us that the access of SMEs to finance may deteriorate suddenly and sharply in periods of high uncertainty.
With a price level target, high inflation today must be followed by low inflation tomorrow. This is not the case with an inflation target. One advantage of a price level target is that it may reduce the uncertainty surrounding the price level ahead. But the view has been that a price level target results in wider fluctuations in output and employment and less stable inflation. Recent literature challenges this view.5 As far as we know, there are no concrete plans in any country to shift to a price target. A third characteristic of inflation targeting is that the central bank alone sets the interest rate - the central bank has instrument independence. One exception must nevertheless be mentioned here. In the UK, the authority to set interest rates was not transferred from the Ministry of the Exchequer to the Bank of England until 1997, five years after an inflation target had been set. In some countries, legislation allows the authorities to review the decisions under very special conditions. This has not had any practical significance. A fourth characteristic is that central banks in inflation-targeting countries are transparent. This provides broad insight into the basis for interest rate decisions. Transparency makes monetary policy more predictable. Inflation targeting provides an explicit and understandable framework for clarifying and stating the reasons for the trade-offs in interest rate setting. Central banks practice transparency in different ways.

One view is that it is neither possible nor desirable to counter financial imbalances with an active monetary policy. According to this view, it is impossible to determine precisely the level of debt, asset prices and investments that constitutes an unacceptable risk for the financial system. Both an increase and the level of these variables may be important, but also the situation in the rest of economy. In addition, it is very difficult to determine the timing for a monetary policy response since monetary policy often functions with a lag. Third, the change in the interest rate that is necessary to reduce financial imbalances may be so large that it results in a sharp downturn. It is also conceivable that such an active policy may lead to moral hazard. Investors may undervalue risk if they expect the central bank to intervene when financial imbalances build up. The result may be that economic agents take more risk than is desirable. 9  See Rogoff, K. (2003), “Globalization and global disinflation”, in Monetary policy and uncertainty: Adapting to a change in economy, Federal Reserve Bank of Kansas City. 10 In the UK, developments have been similar. See King, Mervyn (2005), “Monetary Policy: Practice Ahead of Theory, Mais Lecture 2005“, lecture at the Cass Business School, City University, London, 17 May. BIS Review 43/2005  7  Central banks will, nevertheless, place emphasis on the effects of developments in asset prices, the money supply and credit on future inflation and output. The grounds are somewhat different.
We thus will need to see more data to determine the extent to which the March data represent a transitory weather-related setback. Regardless of the importance of the mild winter in distorting the recent economic data, real economic activity has yet to be strong enough on a sustained basis to make a big dent in the overall amount of slack in the U.S. economy. While growth was stronger in the fourth quarter, most of it was due to inventory accumulation. Growth of final sales remained quite weak. Historically, quarters in which inventory investment makes significant growth contributions are typically followed by quarters in which that growth contribution is modest or even negative. That appears to be what is shaping up for the first quarter of this year. Based on available data, our current expectations are that real GDP will expand at around a 2 ¼ percent annual rate during the first quarter of 2012. Even with the robust increase of light vehicle sales, overall consumer spending in the first quarter appears to be rising at a similar moderate rate. At the same time, real disposable income has been flat over the past three months, and the large increase of gasoline prices is likely further sapping consumers’ real purchasing power. And growth of business investment spending, which softened in the fourth quarter of 2011, may have been even a little softer in the first quarter of this year.

In mid-2007, serious problems with structured products backed by sub-prime mortgages put an abrupt stop to the boom in securitisation. False incentives, inadequate control mechanisms, shortcomings in the rating system and insufficient personal responsibility on the part of investors were the main criticisms aimed at securitisation practices. What is important now, is to correct these deficiencies, so that the trust of market participants in these products can be restored. It would be wrong to ban the securitisation of mortgages, since these refinancing instruments generate substantial economic benefit and are an indispensable part of our modern financial system. The mortgage securitisation weaknesses revealed in the financial market crisis do not apply in the case of the Swiss mortgage bond. Consequently, it should definitely have the potential to play an even greater role in maturity-matched refinancing of mortgages in Switzerland in the future. In addition, banks can improve their liquidity by holding portfolios of Swiss mortgage bonds themselves. Mortgage bonds could be converted into liquidity quickly and simply, as required, by means of repo transactions – either in the Swiss franc interbank market or at the SNB. BIS Review 60/2008  1
François Villeroy de Galhau: The Banking Union ─ Time to move forward again Speech by Mr François Villeroy de Galhau, Governor of the Banque de France, at the Eurofi Financial Forum, Ljubljana, 10 September 2021. * * * I would have liked to be in Ljubljana today, but I extend my warmest thanks online to David Wright and Didier Cahen for making this event possible. During the acute phase of the crisis, EU governments and the ECB did the right thing in supporting economies, so that we can now bounce back quickly. The European banking system proved its resilience, and contrary to many exaggerated fears, there will be no tsunami of corporate insolvencies, and hence no major rise in NPLs. However, now that firefighters have been successful, it is time to turn to our architects to start building again: Europe must finally unlock the full potential of its Banking Union. This morning I will be in the same vein as Andrea Enria’s impressive speech yesterday, which I fully welcome and support. Today, I will first discuss where we stand including the ongoing deadlock in the Banking Union, before elaborating on the pragmatic solutions we can come up with. I. Banking Union: it is time to move forward again Where we stand. After a strong initial impulse having achieved an efficient first pillar – supervision –, Banking Union now lacks momentum and remains incomplete. Let us be frank: the project has come to a complete standstill.

Europe is clearly losing momentum and competitiveness here: the market share of the six major US investment banks in Europe towards their six major European competitors has increased from 44% to 58% in the last seven years. Moreover, larger groups could invest more in the key challenge of digital transformation: as most of the investment costs are fixed, size is a decisive advantage. But not only the largest, all other institutions will benefit from the increased depth of the market, allowing to reap the fruits of their competitive advantages in a larger market. At the macro level – and I say this as a central banker –, Banking Union would decisively enhance private risk sharing within Europe. The political discussion and energy remain primarily focused on public stabilisation mechanisms, such as a possible common fiscal capacity. Let me stress that private stabilisers are just as important and efficient, and less divisive. Banking Union would enable, in conjunction with progress towards a Capital Market Union, a better 1/4  BIS central bankers' speeches  channelling of our abundant savings through a genuine “Financing Union for Investment and Innovation“. How to move forward again. The first obvious fact is that we should neither relax now that the banking crisis is mostly over, nor wait for the next crisis to act. It is precisely because we are not in a crisis situation that we should move forward now.
I personally see no need to administer additional doses unless the patient goes into postoperative decline. I would suggest to you that, if the data continue to improve, however gradually, the markets should begin preparing themselves for the good Dr. Fed to wean them from their dependency rather than administer further dosage. I am well aware of the salutary effect of accommodative monetary policy on the equity and fixed-income markets – remember, I am the only member of the FOMC who used to be on the other side. My firms’ record of substantially outperforming the equity and fixed-income indexes over a prolonged period before I hung up my investment business and entered public service in 1997 was achieved by focusing on the long-term fundamentals of the real economy and the underlying value of the securities we purchased or sold – not by depending on central bank largesse. Counting on the Fed to perpetually float returns is a mug’s game. From my present perspective on the side of the angels, as a member of the policymaking team on the FOMC, I believe adding to the accommodative doses we have applied rather than beginning to wean the patient might be the equivalent of medical malpractice. Having never before pursued this course of healing, we run the risk of painting ourselves further into a corner from which we do not know the costs of exiting.

Manufacturing – which accounts for approximately 8 percent of total Texas employment – added over 27,000 jobs. All told, the private sector in Texas expanded by 266,400 jobs in 2011, while the public sector contracted by 54,800, due primarily to layoffs of schoolteachers. In sum, Texas payrolls grew 2 percent, significantly above the national rate of 1.3 percent. This performance is not unique to last year. As you can see from this graph of nonagricultural employment growth by Federal Reserve district going back to January 1990, the Eleventh District has outperformed the nation on the job front for over two decades. Note the slope of the top line, which depicts job growth in the Eleventh District compared with each of the other districts and, importantly, relative to employment growth for the U.S. as a whole – denoted by the black line, the seventh one down. As was pointed out in high relief by the media when a certain Texas governor was briefly in the hunt for his party’s presidential nomination, we do have some serious deficiencies in the Lone Star State. We have a very large number of people earning minimum wage; we have an unemployment rate that, while trending downward, is still too high, abetted by continued inflows of job seekers from less-promising sections of the country.
For me, the biggest and costliest downside risk is that in our haste to get back to “business as usual” monetary policy, we could stall progress and backtrack to the economic circumstances of recent years – an economy mired in the ZLB. To say the least, conducting monetary policy at the ZLB has been a difficult experience that we all want to avoid repeating unnecessarily. In the winter of 2009, with the unemployment rate soaring to double digits, the Fed would have very much liked to lower the nominal federal funds rate an additional 300 basis points; but we couldn’t because the rate was already at zero. Faced with a pressing need to provide additional accommodation, we were forced to turn to innovative, but controversial, unconventional monetary policies. These policies have been extremely helpful. But there is no denying that they were second-best options; the ZLB had made lowering the fed funds rate, which is our first-best interest rate tool, infeasible. Everyone will welcome a return to more normal times and a reliance on the traditional policy framework of adjustments to the federal funds rate. But the decision about when to begin to raise rates shouldn’t be made prematurely. Rather, the decision for policy liftoff has to be made for the right reasons – that is, it should be dictated by economic conditions. Like my colleague Minneapolis Fed President Narayana Kocherlakota. 2 I think that policy at all times must be goal-oriented. Our experiences since the crisis began and current economic conditions are highly unusual.

The FOMC should not simply set its policy instruments by mechanically aligning them with historical norms if those norms are not currently relevant for the conditions needed to attain both of our dual mandate goals. Rather, our policy instruments should be set to achieve our ultimate goals as efficaciously as  2  4  See, for example, Kocherlakota (2013). BIS central bankers’ speeches  possible given current and prospective economic conditions, all the while with an eye on managing against important risks to the outlook. I believe that the biggest risk we face today is prematurely engineering restrictive monetary conditions. In this scenario, the FOMC could misjudge the presence and magnitude of economic impediments and misread the recent progress we have made as evidence of sounder economic trends. If we were to presume prematurely that the U.S. economy has returned to a more business-as-usual position and reduce monetary accommodation too soon, we could find ourselves in the very uncomfortable position of falling back into the ZLB environment. Such an outcome could be a serious setback to the timely attainment of our dual mandate policy objectives. This risk consideration means that the decision to lift the funds rate from zero should be made only when we have a great deal of confidence that growth has enough momentum to reach full employment and that inflation will return to a sustainable 2 percent rate. We should also proceed cautiously and keep the path of rate increases relatively shallow for some time after we begin to raise rates.
Chart 7: Key strands of FSF work Supervisory framework and oversight −  Capital arrangements  −  Liquidity buffers  −  Risk management practices  −  Off balance sheet activities Underpinnings of the originate and distribute model  •  Uses and role of credit ratings  •  Market transparency  •  Supervisory and regulatory responsiveness to risks  •  Authorities’ ability to respond to crises  6  BIS Review 24/2008

The interest rate applicable to the long-term financing facility, which aims to stimulate lending, was reduced and an expanded asset purchase programme was announced. This programme includes, in addition to the purchases of asset-backed securities and covered bonds issued by the private sector, purchases of bonds issued by euro area central governments, agencies and European institutions. The size of this expanded programme is ambitious, with monthly purchases amounting to € billion. The purchases will commence in March and, in principle, it is intended that they will be carried out until September 2016, although the Governing Council of the ECB has given itself the option to continue to make purchases if the path of inflation is not consistent with its aim of achieving inflation rates below, but close to, 2% over the medium term. The programme requires that, to be eligible for purchase, securities must be at least investment grade, or if not, that their issuers are under an EU-IMF financial assistance programme. These conditions are similar to those applied in the requirements for collateral to be eligible for monetary policy operations and those envisaged, in August 2012, in the announcement of the sovereign bond purchase programme known as Outright Monetary Transactions (OMTs). Of the additional asset purchases, 12% will be purchases of bonds issued by European institutions and the other 88% will be purchases of bonds issued by central governments and agencies of countries in proportion to their shares in the ECB’s capital key.
We need to catalyse thinking on new approaches towards policies that have assumed greater importance since the crisis from macroprudential policy to bank resolution. 2  See Bagehot, W (1873), Lombard Street: A Description of the Money Market; and Boyle, A (1976), Montagu Norman: A Biography, London: Cassell. 3  See Woodford, M (2005), “Central bank communication and policy effectiveness”, NBER Working Paper No. 11898, December. 2  BIS central bankers’ speeches  At the Bank of England, our enhanced research function, including a new Research Hub, will bring together staff and thinking from across the institution creating a two-way flow between research and policy. It will seek to foster a shared understanding of the frontier of policy possibilities amongst colleagues and ensure that the insights gained in one policy arena can benefit others. But these efforts will not succeed if they are confined to the corridors of Threadneedle and Moorgate. The Bank recognises that we need to do more to reach out to the wider research community. Policymaking can benefit tremendously from advances in all fields of economics and finance; from psychology to epidemiology; from computer science to law. That is why I am pleased to see such a diverse range of discussants and attendees at the conference today. In order to focus the conversations we are being clear about the key questions that interest us, as policymakers, the most. Let me now turn to those. Our One Bank Research Agenda is structured around five themes which span all aspects of central banking.

Recently, research informed the recommendations of the Warsh Review into what we could do to enhance monetary policy transparency here at the Bank of England. This research theme continues in that vein by asking what more might be done to enhance effective transparency in all areas of policy. The fourth research theme covers “New data, methodologies and approaches” Increasing amounts of data – structured and unstructured, current and historical – are available on almost every aspect of the economy and the financial system. That holds great promise. Computing power has transformed our economies; it needs now to be harnessed to transform our understanding of them. Theoretical and methodological techniques continue to advance. In some cases that will mean measurement ahead of theory. That is one way to advance. In the short term, a black box could be better than none, and with time the patterns it reveals could prompt a greater understanding of the underlying forces. Recall that Kepler needed to uncover the empirics of planetary motion before Newton could conjure the theory of celestial mechanics. It is important to exploit developments in advanced analytics of large data sets to formulate better policy. They’ll improve our understanding of household and corporate behaviour, the macroeconomy and risks to the financial system. They need to be harnessed to enhance our forecasting and stress testing capabilities.