samchain/econo-pairs-v1 huggingface dataset:
As Joseph Stiglitz put it, “Whenever there are “externalities”– where the actions of an individual have impacts on others for which they do not pay or for which they are not compensated – markets will not work well.” 8 In the real world of banking, potential market failures are particularly relevant. An important market failure stems from the fact that banks enjoy the benefits of a safety net. Many countries have explicit deposit insurance schemes, which limit depositors’ losses. Moreover, in almost every country there is some degree of implicit government protection for large banks. In the current crisis, government protection has become manifest and explicit in the form of the recent G7 and G20 communiqués. Most notably, in October the G7 finance ministers and central bank governors declared unambiguously that they “agree to take decisive action and use all available tools to support systemically important financial institutions and prevent their failure.” 9 In other words, governments imply that large banks are simply “too big to fail”. Clearly, there are benefits to banks having safety nets. But there are also serious costs. It is a fact that the presence of insurance leads to less careful behaviour, otherwise known as moral hazard. If you rent a fully insured car, you will likely exercise less care driving it. 4  See the October 2008 issue of the IMF‘s Global Financial Stability Report, entitled ”Financial Stress and Deleveraging“. 5  Declaration of the Summit on Financial Markets and the World Economy, G20, 15 November 2008.

Based on what we know and understand today, I would suggest that risk-weighted capital requirements, broadly as proposed under Basel II, probably remain the most rigorous way to address banks’ tendencies to incur excessive risks and, ultimately, to ensure adequate capital levels. However, we must address the serious short-comings of the risk-weighted approach, which have become so powerfully manifest during this crisis. What Basel II needs, therefore, is a safeguard to provide the financial system with additional protection against the negative consequences of these short-comings. I want to stress that a safeguard of this kind is needed in addition to the improvements to Basel II that are currently under way as a result of the recent FSF Report to the G7 ministers and governors. 16 Which brings me back to the obvious and simple response to excessive leverage: The imposition of a limit on banks’ leverage as a complement to the risk-weighted approach reflected in the current Basel framework. The regulation of banks’ leverage is usually referred to as a “leverage ratio”. Specifically, the idea is to set a lower limit to the capital-to-assets ratio of banks. Let me stress again that this instrument is not meant to and should not replace Basel II. There is no reason to eliminate the benefits of risk-weighted capital requirements. The leverage ratio should be applied as a complement to the risk-weighted approach as reflected in the current Basel framework. That means we would have two independent measures of capital adequacy.
This means that, while the responsibility for the stability of the financial system lies with the competent authorities of the Member States, the Eurosystem may intervene to support, coordinate or complement the actions of those Member States whose currency is the euro. The specific tools given to the ECB by the SSM Regulation[52] to tighten up macroprudential measures adopted by the national macroprudential authorities (but not to ease them) in order to address the risk of cross-border spill-overs also reflect this division of competences between the Union and national levels: the adoption procedure for those top-up ECB decisions[53] may be initiated only at the initiative of the national macroprudential authorities, thus emphasising the national character of macroprudential competences. The Treaty does not set macroprudential supervision as a basic ESCB task or financial stability as an ESCB objective. The reasoning appears to be that it is national, rather than Union, developments which contribute to systemic risks, and that the bearing of costs arising out of financial crises is predominantly a national rather than a Union matter. [54] Accordingly, the macroprudential authorities are accountable to their respective national stakeholders. Although, after the 2008 financial crisis, there were calls for greater central bank involvement in the oversight of macroprudential aspects of banking activities,[55] in the end, no changes beyond the contributory role of the ESCB were initiated. The ESCB contribution to the work of national authorities in this area can be seen as a contributory task rather than an own competence.

Such private industry interference is less pronounced in the area of monetary policy. In addition, only “undue” political influence is prohibited. Recital 75 also explicitly refers to the notion of the “operational independence” of supervisors. In addition, Article 19 of the SSM Regulation does not contain an explicit prohibition on the ECB and the national competent authorities (NCAs) accepting instructions, unlike Article 130 of the Treaty with respect to the ECB and the NCBs. In the SSM context, Article 19 of the SSM Regulation only imposes such a prohibition on the members of the Supervisory Board and its steering committee. The drafting of Article 19 of the SSM Regulation reflects the legal situation in some Member States, where the NCAs are bound by the instructions of the respective ministries. [40] Article 19 of the SSM Regulation requires only that the ECB and the NCAs “act independently” while carrying out their supervisory tasks under the SSM Regulation. [41] Third, the principle of personal independence does not apply to the members of the ECB’s Supervisory Board (apart from the specific rules applicable to the Chair[42] , Vice Chair[43] and the ECB representatives[44] ). There is neither a legislatively protected minimum term of office for them, nor a limitation of the grounds for dismissal by the appointing authority.
But the Phillips curve for stickers looks to be somewhat flatter, and the rise in pay somewhat weaker, than might be expected given labour market tightness. Why might companies have felt less need to pay-up to retain staff than in the past? Equivalently, why might the pay power of existing workers have fallen? One possible explanation is recent change in employment contracts. Although the cyclical degree of job insecurity has fallen as people have become less fearful of losing their job, there may have been a compensating rise in structural job insecurity as people have become more uncertain about their hours and income in a job. There are various dimensions of employment contracts and different metrics of their impact on job security. One commonly-used measure is the share of the working population self-employed, doing agency work or on temporary or zero-hours contracts. The share of workers in each category has risen significantly recently. For some, these shifts in employment contract are welcome as they bring increased job flexibility. For others, they may be less welcome. The dark side of job flexibility is increased income uncertainty and job insecurity. It is estimated that more than one in ten of those on part-time contracts would prefer full-time work and close to half of those on zero-hours contracts would prefer to be on fixed-hours contracts. At the same time as the quantity of work has risen, for a growing number of workers its quality may have fallen. This pool of poorer-quality work appears to be fairly deep.

For example, around a quarter of those in temporary work say they could not find a permanent job and over 10% of part-time workers say they could 12  not find a full-time job. A Skills and Employment Survey published just last week found around 1.7 million  workers might be suffering from high levels of anxiety about their uncertain hours of work. 13  One of the side-effects of structurally-higher job insecurity is a reduced willingness to add to that uncertainty by moving job. If so, this would mean “twisters” are fewer in number than in the past and that stickers are at 11 12 13  Note that data for pay growth for “stickers” and “twisters” is annual, with latest estimates to 2017. Taylor (2017). Skills and Employment Survey (2018). 9  All speeches are available online at www.bankofengland.co.uk/speeches  9  an even greater pay disadvantage to twisters as their outside option has lost value. In short, job insecurity reduces workers’ pay power and weakens upward pressure on pay. Empirical evidence is consistent with that. Even after controlling for different occupations and locations, self-employment has been found to result in a wage discount for workers of around 15%. 14  Temporary  contract workers face a wage discount of around 5-6% and agency workers of around 2 ½%. contract workers suffer a wage discount of around 7%.
The European Central Bank, for instance, continued to place great value on the usefulness of a monetary pillar. And, as discussed below, there were some who believed that central banks should also use their constrained discretion to lean against incipient asset-price bubbles and credit growth. But the set of beliefs above were, we believe, held sufficiently widely in policymaking and academic circles to be described as a consensus. In the rest of this paper, we re-visit some aspects of this consensus in the light of the crisis. It is not possible to cover all the elements of the consensus, though we shall offer some more wide-ranging observations at the end. In particular, we focus on: whether the experience with unorthodox policies during the crisis has changed our view of the appropriate policy instruments in normal times; whether the target rate of inflation should be increased or a shift to price-level targeting is warranted; and what the experience of the crisis has taught us about how monetary policy should respond to credit/asset-price booms. 1 As a precursor to  1  2  Some of these themes already figured in the contributions to the conference held here eleven years ago. BIS Review 111/2010  that discussion, however, we ask whether monetary policy decisions contributed materially to the crisis. 2. Monetary policy and the crisis  It is worth stressing at the outset that a multitude of factors, both microeconomic and macroeconomic, played into the crisis.

With policy rates reaching their effective ZLB in a number of jurisdictions and most of the central banks concerned having resorted to unorthodox monetary policy measures in order to inject additional monetary stimulus into their economies, the question naturally arises as to whether this conclusion still stands. Or should inflation targets be raised to, say, 4 per cent as suggested by Blanchard, Dell’Ariccia and Mauro (2010), providing another two percentage points of extra room to cut policy rates before reaching the ZLB? Some analytical evidence in favour of a higher inflation target comes from Williams (2009). With the help of the Federal Reserve’s macroeconomic model, he asks what policy the FOMC (represented as an appropriate Taylor Rule) would have chosen during the Great Contraction had it not been constrained by the ZLB and what the impact would have been on output and inflation; he then compares that with the outcomes when the ZLB bites. He finds that although the ZLB did not materially aggravate the US downturn in 2008 – essentially because the fall in activity after the collapse of Lehman Brothers was so sharp that, in the absence of perfect foresight, no monetary policy actions could have impacted fast enough – the ZLB does appear to have constrained the pace of recovery. In particular, if real policy rates could have been set around four percentage points lower, the recovery in output would have been significantly faster and the rise in unemployment mitigated.
Even after those losses, the system would have a capital base more than twice as strong as it had before the financial crisis (Chart 19). Losses on consumer debt were an important driver of the test results. 20% of their consumer loans went bad in the test, costing them £ and adding to mortgage losses of £ (Chart 20). Very sharp falls in used car prices would result in only small losses for the banking system. Banks haven’t been the major players in this arena. Even allowing for the loans they’ve made to car finance companies as th  well as to car buyers, their exposures to the car market are just 1/5 of their credit card and personal loan books. Having reviewed their practices, we know the banks’ PCP deals tend to have a cushion between expected used car values and the final balloon payment. Even a 30% fall in used car prices, with all PCP contract cars handed back at the end of their term, would leave them with a loss of just £  Because they need to pass rigorous stress tests, the wider economy is being protected from the rapid growth of consumer debt. But it’s important that this defence line keeps pace with the risks. Lower interest income on their loans, more interest free balance transfers and less capital allocated to consumer debt, may mean banks may have become, at the margin, a little weaker.

Working from home should be simple and everything should function properly even when a senior official is at home looking after children. Staffing therefore has to be arranged with this in mind. We are also having a drive for more women in managerial posts. Last year we started a mentor programme for female administrators with a view to broadening the base for the recruitment of new managers. ·  Besides altering the ways in which we communicate monetary policy in order to reach a wider public, during these years we have run an educational programme for upper secondary teachers and developed an Internet game called Stargold. At present we are working on an idea for a competition in civics between classes in Sweden's upper secondary schools. 2  BIS Review 51/2001  Evaluating all this is not an easy matter, particularly when one is fully engaged in it. I believe, however, that our efforts to make the Riksbank more transparent have worked well. To use the terminology of the BIS report, we have certainly become more "outward-looking". It has been more difficult to break what the same terminology refers to as "upward-looking". It is not so easy to build up an efficient cooperation and sense of responsibility, unencumbered by prestige, throughout our organisation. It is gratifying that among students in our subject, we are the most popular workplace in the public sector. In the league of all workplaces in Sweden, we rose seven pinholes last year to fourteenth place.
As I said before, structural changes can affect the economy over a long period of time. Even afterwards it is difficult to know how much a specific factor has affected the labour market or inflation, for instance. We have seen in our own evaluations that lower price mark-ups as a result of, for instance, digitalisation, may have contributed to holding back inflation, particularly during the period 2014-2015. At the same time, the most important reason for the low inflation during this period appears to have been low domestic cost pressures.26 And as resource utilisation has increased, inflation has also risen towards the target. It is evidently possible to attain a quantified inflation target. When I follow the debate on monetary policy in Sweden, the argument keeps cropping up that the two-per cent target for inflation will be impossible to attain as the economy becomes increasingly digitalised. However, one should also look at events in other developed countries with similar targets. Because of course Sweden is not alone in being affected by digitalisation. There does not seem to be any clear relationship in these other countries between for instance the spread of e-commerce and inflation. However it is possible that the lack of simple correlations in data hides some causal relationship. Better indicators of the spread of digitalisation may give other  22 Cavallo (2017). 23 Cavallo (2018). 24 Gorodnichenko and Talavera (2017). 25  Swedish Trade Federation (2018). 26 Sveriges Riksbank (2018b). 9 [12]  results.

We nevertheless have reasons to cheer: in 2021 around EUR 100 billion were invested in the European technology ecosystem, almost three times the previous record of 2020, with around 100 new unicornsi. Furthermore, although technologies have not yet shown their full potential in terms of productivity, we may be at a turning point with the latest advances in artificial intelligence, biotechnologies or telework-related reorganisations - after a lag which corresponds to the process of appropriating these technologies by the economic fabric (investment, training, etc.). Page 7 sur 9 These disruptions are also reflected in the monetary, financial and payments spheres – which we scrutinise as central banks and supervisors –, where digitalisation is bringing about a triple revolution – and it is far from over: (i)  First, the arrival of new players: new actors born from the tech world – Fintechs and Bigtechs – are challenging historical players with radically new approaches to financial services and at present much less regulation;  (ii)  Second, the emergence of new assets: crypto-assets from the blockchain universe in the form of tokens: they will never according to me be credible as “crypto-currencies”, but could be used as settlement means – think of stablecoins for instance;  (iii) Lastly, the emergence of decentralised market infrastructures: new technologies tend to reduce the use of proven centralised settlement systems. These revolutions offer the potential for increased market efficiency while reducing costs and time.
At the other extreme, where financial markets are very large relative to international capital, sudden movements of the latter will only lead to ripples, which are not big enough to cause any financial-stability concerns. The most vulnerable financial markets, other things being equal, are the medium-sized ones, which have adequate liquidity to attract international capital but which are, unfortunately, small enough for shortterm trends to be dictated by large operators looking for short-term gains. There is also the temptation, for some, to engage in manipulative behaviour, amplifying volatility and vulnerability to financial instability. 13. I do not want to give the impression that the size of a financial market can substitute for sound macroeconomic policies as a guard against volatile capital flows. Indeed, I take it for granted that the authorities in the region are committed to prudent monetary, exchange-rate, and fiscal policies. But I am convinced that expanding the effective size of Asian financial markets through greater integration across jurisdictions, can increase the ability of our economies to absorb the volatility of international capital, as effectively as the US and European markets. It is therefore heartening to observe that several official initiatives towards greater financial linkages in the region are bearing fruit, notably the Chiang Mai and the Asian Bond Fund initiatives. I note that my colleague Julia Leung will describe the latter in some detail in the afternoon session. 14.

I should also mention that Hong Kong is not alone in this culture campaign. In October last year, I was invited by President Bill Dudley of the New York Federal Reserve Bank to join him in a panel to discuss corporate culture. This was in fact the third annual conference on culture organised by the New York Fed. The key takeaway from the New York conference was that there is a growing momentum amongst key supervisors as well as large international financial 3/4  BIS central bankers' speeches  firms to encourage and nurture good corporate culture and ethical values in the industry. I should also add that, since my appointment to chair the Standing Committee on Supervisory and Regulatory Cooperation of the Financial Stability Board in April this year, I have been pushing for closer international collaboration in promoting good corporate culture. The priority of this Committee in the next year or two is to place greater emphasis on three aspects of governance, namely, (i) addressing information gaps and due diligence in employment of individuals with a history of misconduct, or the so called “rolling bad apples” problem, (ii) responsibility mapping for senior managers of financial firms, and (iii) the use of governance framework and appropriate compensation system to address culture risk factors that drive misconduct. These priorities, when implemented, will go a long way in promoting the right kind of culture in the financial industry and in helping restore public confidence and trust in the financial firms.
International Capital Flows in the Post-crisis World, September 2019 CENTRAL BANK OF CHILE  Monetary policy framework and its effectiveness  Monetary policy is strongly supported by the free-floating FX regime 10Y interest rate and FX volatility (*)  Currency implied volatility 1-month EE  (sample: 2017-2018)  (percent) 30  FX Median  10-year interest rate (weekly change)  0.14  20  Brazil  Egypt  0.12  Nigeria  Turkey  10 0.10  Philippines  0.06 Indonesia 0.04 Vietnam  0.02 0.00  0 Jan.10  Romania  0.08  Bulgaria  Peru  Mexico  Croatia Hungary  Poland  10-y rate Median  Jan.14  Jan.16  Jan.18  (percent)  0.6 0.4  Russia  0.2  Chile  0.5 1.0 Exchange rate (weekly percentage change)  Jan.12  10Y rates volatility 1-month EE  South Africa  India  Thailand Malaysia China  0.0  Colombia  1.5  0.0 Jan.10  Jan.12  Jan.14  Jan.16  Jan.18  (*) Red points correspond to economies with free-floating FX regime according to IMF classification (Annual Report on Exchange Rate Arrangements and Exchange Restrictions, 2017). Source: IMF and Bloomberg. This framework has basically remained in place for almost two decades and its effectiveness has improved as markets, agents and institutions have adapted to it.

300  10000  Free floating  5000  200  0 90  92  94  96  98  00  02  04  06  08  10  12  14  16  18  82  85  88  91  94  97  00  03  06  09  12  15  18  (*) Foreign exchange rate defined as CLP per USD. Sources: Central Bank of Chile and De Gregorio, J., S. Edwards, and R. Valdés (2001), “Controls on Capital Inflows: Do they Work?” NBER WP 7645. All these elements allow monetary policy to operate as a first defense mechanism against external shocks in normal times. Besides monetary policy, the CBC has a financial stability mandate. Such mandate should be pursued by a combination of regulation, information, and macroprudential management. In particular, monetary policy tools should be used primarily to achieve the price stability mandate, and only as a last resort to deal with financial instability. The free-floating FX regime is perfectly consistent with achieving both mandates (price and financial stability), as (i) the inflation targeting regime is highly credible, and (ii) the corporate sector is well hedged against exchange rate volatility. High-level Policy Seminar on Integration or Fragmentation?