samchain/econo-pairs-v1 huggingface dataset:
A key part of this test will be to examine the resilience of banks to a housing market shock and a snap back in interest rates. Let me therefore finish by drawing seven important messages for the future from this example of UK housing conditions and how the new system of financial regulation will operate: •  first, an effective macro-economic framework needs the credibility to influence people’s expectations of future conditions and how our policy actions will influence them. Our actions, and therefore the expectations of them, have to be credible and therefore consistent over time. The FPC has taken steps to lay out the future actions it would take if it judged the momentum of the housing market to be too strong;  •  second, in doing this “laying-out” of future actions, we are signalling that we will act to prevent the pro-cyclical tendencies of the past – whereby lending and underwriting standards weakened in the good times and then suffered a knee-jerk reaction back when conditions deteriorated;  •  third, the FPC and PRA are going to be very explicit in their use of forward-looking judgemental tools of prudential supervision, of which stress tests are a prime example;  •  fourth, our policy-making tools in the Bank of England will be joined up, consistent with our single-mission directed at the public good. A clear example of this is that our three statutory bodies, the MPC, FPC and PRA Board will work together closely.

Yes, we have had one or two very highly publicised revelations on legacy problems – but none of that should take away from the fact that the UK system is stronger today, in my view markedly so. But, I can tell you that achieving such progress on this public good has not been as straightforward or uncontroversial as you might think. And that continues to concern me, because it conveys the message that acceptance of the benefit of the public good is not as entrenched as it needs to be – we have work to do to build the consensus around what constitutes financial stability. I am firmly of the view that last year’s actions on capital were correct, and I have no doubt at all that the recovery in bank lending to support economic activity requires a belief and an expectation that the banking system is and will remain well capitalised, and that if we doubt either of these positions, action will be taken. And that is why we, and other countries, are introducing, or have done introduced, regular stress tests. It is about regulation being forward-looking and using judgement. The second point I would make here is that a stable financial system is a necessary precondition of realising other benefits. Let me give a few pertinent examples. The first one comes from the insurance industry, in which I also have a very strong interest. The Government announced some very major reforms in the Budget to the provision of pensions, notably in the annuities market.
”For example (Giovanni Carosio, June, 2010) says, in the euro area should it be linked to area-wide variables (credit growth), to address level playing field concerns, or should we leave the door open to disaggregated measures, as I will argue below? And would market pressures allow banks to run down the buffer in a downturn?” As for the systemic risk which arises from the liquidity dry-ups, Carosio writes that no uncontroversial solution has been found yet. The Basel Committee proposed new standards (for example, The liquidity coverage ratio and Net stable funding ratio). It seems, Carosio says, that they are powerful instruments, but are still very micro-prudential in nature and do not necessarily address the “fallacy of composition” that is typically of liquidity...In principle (he continues) the systemic dimension of liquidity risk could be addressed by designing a countercyclical liquidity buffer, similar to the capital buffer ..., possibly without raising overall liquidity requirements.

(4) Oliver Blanchard and other authors, in their paper “Rethinking Macroeconomic Policy” stated: “With the neglect of financial intermediation as a central macroeconomic feature, financial regulation and supervision focused on individual institutions and markets and largely ignored their macroeconomic implications. Little thought was given to using regulatory ratios, such as capital ratios, or loan-to-value ratios, as cyclical policy tools.” By analyzing the reasons we came up with many lessons, which it has delivered up to this moment. For some of the questions there is already a global consensus. For others, it still has to be constructed. For some questions there is a general consensus, but the devil is in the details and therefore there are and there will be confronting opinions that demand time for adjustment until they become operative and applicable. What lessons could be, at the moment, more relevant? I. There is an agreement that a global crisis in a highly interdependent world needs a global response. A global response needs global institutions, a global economic and financial architecture. Current institutions have proved to be insufficient and inefficient. Generally, the structure of that global architecture is already drawn and its shaping is moving in a good direction.
We proceed from the fact that the global economy will be bouncing back faster than we expected in February. This will be driven by a large-scale fiscal stimulus in advanced economies and the mass vaccination of people worldwide. The growth of the global economy will boost the demand for Russian exports. Taking into account this factor and the slower recovery of oil production under the OPEC+ agreements, we have raised our forecast for oil prices from 50 to 60 US dollars per barrel this year and to 55 US dollars per barrel next year. The forecast for 2023 remains unchanged at 50 US dollars per barrel. Accordingly, we have also increased the forecasts for exports and the trade surplus. As domestic demand has been expanding, we have revised the imports forecast upwards. The current account surplus will grow to 56 billion US dollars this year from 34 billion US dollars last year. Now, I would like to discuss in detail risks that are beyond our baseline forecast. Proinflationary risks are primarily associated with increased inflation expectations. As inflationary pressure is stronger and supply-side factors exert additional influence on price growth, inflation expectations may stay elevated for longer time. Consequently, the saving ratio may decline faster, with consumer activity rising above expectations. As always, there are risks related to the external sector, including changes in the geopolitical environment. We have always taken them into account.

On the government level, borrowings would really be handy when it wants to keep up public expenditure and to enhance welfare payments, healthcare and the military. This would not only improve the standard of living and employment, but also help boost national power and speed up economic growth. The list of wonders that borrowed money can bring goes on, but we almost forget there is a catch, that is, debts must be repaid somehow some day; and the higher the interest rates, the more we will have to pay back over time. For individual borrowers, except for those with a handsome pay rise, they can only hope to pay off earlier debts by reducing consumption in the days ahead. Well-run enterprises should have no problem servicing their debt if their business expansion financed by loans does indeed enhance their productivity and competitiveness. Likewise, heavily indebted governments will be able to service their debts only when they have sustained economic growth and rising tax revenues. In other words, the ability to repay debt hinges on increased productivity and improved income, or otherwise, reduced future spending and increased savings. But despite the substantial GDP growth in major industrialised countries in the past 30 years, debts in these countries have piled up concurrently at an even more alarming rate. Advanced economies from across Europe and the US to Japan have all sought to boost economic prosperity, standard of living and employment with ever more borrowings and increased consumption and public spending.
And what of short-term fiscal dynamics in the euro area? President Draghi recently underscored the importance of fiscal policy as a short term stabilisation tool as well as the difficulty of utilising it in the current imperfect union. Consider the following comparison between the euro area and the UK. In the euro area, the private sector continues to generate surplus savings of 3½% of GDP (Chart 7). Those must be recycled effectively to generate an expansion. The UK no longer faces that challenge. Its private sector is in balance. The euro area unemployment rate of 11½% is twice that in the UK. Gross general government debt in the euro area is roughly the same as in the UK and below the average of advanced economies. The weighted average yield on 10-year euro area sovereign debt is around 1%, compared to 1½% in the UK. And yet, the euro area’s fiscal deficit is half that in the UK. It structural deficit, according to the IMF, is less than one third as large. It is difficult to avoid the conclusion that, if the euro zone were a country, fiscal policy would be substantially more supportive. However, it is tighter than in the UK, even though Europe still lacks other effective risk sharing mechanisms and is relatively inflexible. A more constructive fiscal policy would help recycle surplus private savings and mitigate the tail risk of stagnation.

The fall in real incomes caused by the depreciation of sterling was absorbed by employees, effectively purchasing faster job creation. 13 In addition, large inflows of foreign capital – now financing a current account deficit of 6% of GDP – mean spending and investment are higher than would otherwise be possible. This underscores the value of the UK maintaining its attractiveness as an investment destination through a competitive tax system, deep human capital, a flexible economy and ready access to a wide range of markets. Finally, the UK has a highly credible monetary policy framework. The UK’s inflation target of 2% is symmetric: we care about inflation below the target as much as above. 9  With other reforms to further the fairness and effectiveness of market-based finance, and major steps taken towards end Too-Big-To-Fail, the UK is also on track to ensure greater risk-sharing between its creditors and debtors. 10  It is estimated that on average around a fifth of variation in regional personal income relative to the national average is stabilised by central government transfers. Estimates reported in Melitz and Zumer (2002), “Regional Redistribution and Stabilization by the Center in Canada, France, the UK and the US: A Reassessment and New Tests”. Journal of Public Economic, 86, pp. 263–286. 11  The geographical share of North Sea oil revenues, estimated by the Scottish Government, was 84.2% in 2012–3, down from 92.9% in 2008–9. In 2012–3, Scotland’s per capita share of North Sea oil revenues was estimated by the Scottish Government to be 8.2%.
It should be recognised, however, that the use of buffers may be hindered if banks are afraid that reaching certain capital ratios would be penalised by the financial markets, raising their cost of financing and, thus, their solvency levels. This market stigma effect may lead banks to avoid using capital buffers, which, according to the above-mentioned analysis, would have a negative impact on the economy. One way of trying to alleviate this problem has been through the forceful monetary and fiscal policy measures applied during the crisis, which have enabled the financing costs of European banks to remain very low. The use of these capital buffers by banks may also be hindered if there are doubts regarding the process of capital buffer rebuilding after the crisis. The difficulty would be if banks were required to rebuild their buffers at a time when the capacity to generate profit was modest or the market was not receptive, as the fall of the banking sector on global stock markets demonstrates. To ease this problem, the authorities have made it clear that banks will have sufficient time to restore compliance with capital requirements and that the process will not start before the main effects of the pandemic have been dispelled. An additional issue that hinders banks’ use of capital buffers is that, under current regulations, if their capital levels fall below certain thresholds, preventive measures, such as a ban on paying dividends and the suspension of interest payments on AT1 and T2 instruments, are activated.

The only way ahead over the medium term, then, is for crisis-hit countries to find a combination of current account surpluses and nominal GDP growth that can produce both external and internal balance. So how can that be achieved? Further action on the nominal side is clearly necessary, in particular to support employment and resource reallocation. And, within limits, that would not necessarily be inimical to growth: a recent modelling exercise by the IMF shows that wage moderation may have a positive economic effect on crisis-hit countries, especially if accompanied by more dynamic wage growth in surplus countries.10 The structural reforms undertaken since the crisis would also allow such adjustments to be made more quickly and with less employment cost than in the past. However, at some point nominal adjustment leads to a change in dynamics – that is, the positive substitution effects of relative price changes are dominated by the negative effects on incomes and real rates. That is why any effective adjustment strategy also has to be based around productivity growth. Productivity growth both lowers ULCs, supporting exports, and lifts permanent income and potential output, supporting debt reduction through real GDP growth. And though this might lead to higher investment, that would not necessarily be contrary to current account adjustment. If new investment occurs in the tradable sector it should lead to a stronger exporting base in the future.
Sixth, in the pursuit of this national agenda, an MIFC Executive Committee comprising heads of relevant Ministries, agencies and industry representatives has been set up as a single coordinating committee to efficiently and effectively act collectively in the implementation of the recommendations. The Committee is entrusted to provide direction as well as review existing policies for the comprehensive and coordinated promotion of MIFC, and to align the role and responsibilities of the respective parts of Government and the industry to the development of MIFC. The secretariat is Bank Negara Malaysia, which will act on behalf of this committee as a one-stop body to fulfil this task. We believe that these measures and initiatives will serve as a catalyst in our efforts for Malaysia to become a centre of origination, issuance and trading of Islamic capital market and treasury instruments, Islamic fund and wealth management, international currency Islamic financial services, and takaful and retakaful business. It is also aimed at positioning Malaysia as the gateway for tapping investment opportunities in this rapidly growing region. 4  BIS Review 74/2006  In this environment, financial players, particularly with investment banking and fund management expertise, would need to sharpen their strategies and intensify their efforts in structuring cutting-edge Islamic investment instruments and in attracting new funds. Investors, especially those from the Middle East have shown strong interest to invest in Malaysian assets and to become partners with our local business corporates. There are therefore significant opportunities to strengthen trade and investment ties with the Middle East region.

Chart: Market value of the Fund The Fund is among the world’s largest funds. Performance fluctuates in step with developments in global financial markets. Nevertheless, the most conspicuous feature (see chart) is not the fluctuations, but the sharp, virtually continuous rise in the Fund’s market value. The stable growth of recent years is due in part to large transfers from the Ministry of Finance in autumn 2008 while equity markets declined. The krone exchange rate also weakened through the crisis, serving to mitigate the impact on the value of the Fund, as measured in NOK. Chart: Return on the Fund Returns over the past two years have been good. After a return of more than 25 per cent in 2009, the return in 2010 was about 10 per cent. This must be seen in the context of weak performance in 2008. Following substantial losses during the financial crisis, the Fund has more than recouped these losses. Chart: Excess return on the Fund  4  Rising Prices on the Menu, Finance&Development, Mars 2011, Vol. 48, No. 1, IMF (Hebling, T and Roache S.)  BIS central bankers’ speeches  5  The figures for excess return – the return on the Fund in excess of the benchmark indices – also reflect the financial crisis. Substantial losses in the second half of 2008 have been more than made up for by the Fund’s favourable performance since then. Since 1998 the annual excess return on the Fund has been above 0.3 percentage point.
Clearly, green finance and climate risks management have gone from the “nice to have” to the “must have”, from emotion to reason. From the point of view of your financial institutions, climate change is no longer confined to Corporate Social responsibility (CSR) policy. Concerning central banks and supervisors, the creation of the Network of Central Banks and Supervisors for Greening the Financial System (NGFS) in Paris in December 2017 has been a decisive step forward. In 18 months, this coalition of the willing has increased from 8 founding members to over 40 members and observers from all 5 continents, with the Banque de France acting as its permanent Secretariat. This momentum has an important meaning: supervisors and central bankers have collectively acknowledged that climate change-related risks are a source of long-term financial risk. In April 2019, the NGFS published its first comprehensive report issuing four recommendations for central banks and supervisors, and two additional recommendations for policy makers. Let me now say a few words on the road ahead for us. I will mention three priorities for the near future. First, we must rely on enhanced disclosures that need to be built on sound taxonomies. The taxonomy published by the  Page 5 sur 5 Technical Expert Group (TEG) on Sustainable Finance of the European Commission three weeks ago [on 18 June] is a welcome step. Second, we have to better anticipate long-term climate-related risks, through what I call “the video of the risks”.

For the time being, that includes the survey of the most important exporters and importers, the inflation expectations survey, and the survey of banks' credit activity. The State Statistical Office contributed to  BIS Review 100/2006  3  the realization of part of the aforementioned surveys, by providing information and consultations, for which we are especially grateful. However, I would take this opportunity to ask the entities selected for the needs of these surveys to maintain and improve their cooperation with the Central Bank, since at the end of the day, those surveys serve for the needs of the entire economy, including themselves. Central banks are providers, but also massive users of statistical information and data, which will continue to be the case in the future, too. However, the nature of the information and data necessary for performing the tasks of the central banks constantly changes. Statistics departments are aware of this fact and in order to be able to take the new challenges and meet the new requirements they have to improve their knowledge and techniques continuously, and apply operational methods in accordance with the international standards and recommendations. It is a great task, which will never come to an end.
They may also be linked to the stagnation, or in some cases falls, in disposable incomes in some regions, age groups and income cohorts. A third area of perceived deterioration concerns income. With a sizable fraction of households having seen their disposable incomes stall, especially once account is taken of housing costs, that should perhaps come as no surprise. One metric often looked at here is poverty. For example, Charts 30 and 31 look at the fraction of households whose incomes are below a fixed threshold (“absolute poverty”) and below 60% of median incomes in the UK (“relative poverty”), in both cases after housing costs. 13 It does so for three cohorts: under-16s, those aged 16–65 and the over-65s. Whether in absolute or relative terms, the story is roughly the same. Among those over-65, levels of poverty have declined steadily both prior to and following the crisis, if at a less rapid rate over the past few years. That is not true, however, of the 16–65 cohort. Their levels of poverty have tended if anything to drift upwards slightly over the past few years. In other words, poverty levels among those of working age have increased at the same time as the economy as a whole has recovered fairly robustly. This, too, puts a somewhat different gloss on whose recovery this has been. Monetary policy implications What, then, does this mean for monetary policy? Around a year ago, my assessment of the UK economy was a cautious one.

Figure 2: Annual CPI Inflation and Target Path  14 12 10 8 6 4  Annual CPI Inflation I*  2  Outer Band Target Path  1109  0909  0709  0509  0309  0109  1108  0908  0708  0508  0308  0108  1107  0907  0707  0507  0307  0107  0  * Temporary tax adjustments corrected I Index Source: TURKSTAT, CBRT. Figure 3: Contribution to Annual CPI Figure 4: CPI Sub-groups Inflation (Third Quarter Percentage Change) (Annual Percentage Change) Food and Energy Services  Tobacco and Gold Core Goods  12  2006-2007 Av erage  10  2008  10  8 6  2009  8  4  6  2  14 12  0  4  -2  0909  0609  0309  1208  0908  0608  0308  -6 1207  0 0907  -4 0607  2  * Food and Energy: Food, non-alcoholic beverages and energy. ** Tobacco and Gold: Alcoholic beverages, tobacco and gold. Source: TURKSTAT, CBRT. Foo d  Energy  Tobacco Co re and Gold* Goods**  servic es  *Core Goods: Goods excluding food and nonalcoholic beverages, energy, alcoholic beverages and tobacco and gold. Source: TURKSTAT, CBRT. Although processed food and energy were instrumental in the downward trend of inflation, core goods and services inflation also hovers around historic lows (Figure 3).