samchain/econo-pairs-v1 huggingface dataset:
This came not a moment too soon. In the immediate post-war period, the UK faced pressing financial infrastructure problems – the so-called “Macmillan gaps”. These gaps referred the inability of small firms to finance themselves with long-term loans. If these gaps sound strangely familiar, then they should. The post-war Bank set about closing these Macmillan gaps with gusto. In 1945 it set up two new financing entities – the Finance Corporation for Industry (FCI) and the Industrial and Commercial Finance Corporation (ICFC). These were financially supported by banks and institutional investors, providing a platform for the supply of longer term funding and venture capital finance to small firms. In 1973, the two corporations combined to form Finance for Industry (FFI). During the early 1980s, the company was rebranded as Investors in Industry, commonly known as 3i. In 1987, the entity went public as 3i Group. This was not a flop. Arguably, 3i and its predecessors were one of the largest feathers in the Bank’s post-war cap, helping support generations of new businesses and start-ups. And those MacMillan gaps? Regrettably, the crisis has re-opened them. Today, small firms are once more starved of finance, including many here in Northern Ireland. Once again, the quest is on for a new financial infrastructure to help close these gaps. Through the 1980s and 1990s, there were further examples of the Bank stepping in to close structural financial gaps. When the UK’s high-value payment system started creaking in the early 1980s, the Bank designed and built a new, bullet-proof system.

Back then, press interviews were rare and scripted to within an inch of their life. In the past year, Bank officials gave around 65 speeches and over 200 press interviews. In Montagu Norman’s day, the combined total was one. The days of “keeping the Bank out of the press and the press out of the Bank”14 are well and truly gone. Earlier this year, the Governor gave the Bank’s first live peacetime radio address to the nation for 73 years. The Bank Tweets, fortunately with rather less vigour than your average Premiership footballer. Soon we will have, for the first time in history, published minutes of the Bank’s Court of Directors. The Governor has appeared before the Treasury Committee on no less than 47 occasions since he took office. In 2011, a word search of “Mervyn King” in the press revealed more hits than “Kylie Minogue”. To my knowledge, this is the first time a sitting Bank of England Governor has toppled the Aussie pop princess in the media opinion polls. Given its new responsibilities, the Bank cannot fail to remain in the public’s eye in the period ahead. Transparency and accountability will remain the watchwords – and rightly so. Conclusion When pressed by the Macmillan Committee in 1930 to explain the Bank’s actions, Montagu Norman replied: “Reasons, Mr Chairman? I don’t have reasons, I have instincts”.15 I suspect such an answer would work less well with today’s Treasury Committee, to say nothing of today’s media. All public policymakers have an obligation to explain.
Based on our experience with the PEPP, we could move towards some additional flexibilities, in terms of allocation and/or volume. The way negative rates are implemented continues to be effective. If needed, the present level of the DFR is not a floor. In particular, the tiering system limits the negative side effects on bank intermediation of low-for-long interest rates. The tiering multiplier could be adapted flexibly to support the “low-for-longer” policy. I would favor a more rule-based approach to adjust the level of the multiplier. For instance, this multiplier could depend on the change in excess liquidity (net of TLTROs). As the third instrument of the quartet, our forward-guidance gives visibility to the future path of interest rates and could be enhanced by stronger commitment  Page 8 sur 9 and communication. A particular focal point is the present puzzle between the date of anticipated lift-off and the expected inflation then, which at present remains under our target. To strengthen the impact of our forward-guidance on rates, we should clarify our state-dependent reaction function. Consistent with the symmetry of our objective, our willingness to tolerate upside risks on inflation has to be more widely understood. I would not go as far as embracing flexible average inflation targeting as the Fed did in its new strategy framework: it raises several complex questions and can create excessive constraint. But the forward guidance is a more tactical and adequate tool, stating clearly that we are ready to overshoot temporarily 2% before any rise in interest rates.

Let me be crystal-clear: any hypothesis of a reduction of purchases partly for Q3 or the following quarters is purely speculative. As Christine Lagarde has said, we did not even discuss phasing out at our April Governing Council meeting. Our net purchase volumes will be freely determined until at least March 2022 by our commitment to preserve favorable financing conditions for all economic agents. Our monetary policy can be patient, as the euro area inflation is well below other jurisdictions. Page 5 sur 9 III. Is the ECB efficient in its results? Over the period 1999-2007, inflation averaged 2.1%. But the inflation rate has dropped to only 1.0 % between 2013 and 2019. This is a substantial shortfall. Headline inflation in the US (CPI) experienced a similar decline of 1.1%, having dropped from 2.7% to 1.6% between the two periods, although the gap to the target is smaller. In the euro area, according to Banque de France’s analysis, two factors explain most of the gap between the observed level of inflation and our targetiii. The first one is caused by the Great Recession and the sovereign debt crisis.This set of crises has durably depressed demand and therefore prices, through the Phillips curve; while the slope of the Phillips curve seems to have decreased in recent decades, it is still positive. The Phillips curve remains well alive: in the bad news of “missing inflation”, this is the good news for monetary policy.
It is now time to act in Europe: four accelerators of the Economic Union In Rome, on 25 March of this year, the Member States all expressed their clear willingness to work “towards completing the Economic and Monetary Union". We are in agreement on the “why". Let me say one word about our monetary policy. Taking into account our progress, the Governing Council decided at the end of October to pursue a gradual normalisation. We will clearly follow this path of gradual normalisation, with caution but combining the whole range of our instruments – and there shouldn’t be excessive focus on the net purchases of assets. But monetary policy cannot be the only game in town, and therefore we should not overburden it. Furthermore we aim at greater stability, to counter the risk of a new crisis befalling an unprotected euro area, with all its damaging political and economic repercussions; and greater growth, to catch up our past lag on the United States and finally treat the fatal disease of mass unemployment in Europe. 1/5  BIS central bankers' speeches  With this objective in mind, how, concretely, can we make progress on Economic Union? In my view, we should trigger four accelerators: a macro accelerator, which would consist of a collective economic strategy shared by all euro area Member States; a micro accelerator, which would take the form of a Financing Union for Investment and Innovation, going beyond the Capital Markets Union; a fiscal accelerator, which would draw on a euro area budget.

As part of the Financing Union, completing the Banking Union Allow me now to dwell for a moment on the third area of progress, which is also my third concentric circle: completing the Banking Union. The Banking Union is a major step forward for the euro area and is now operational, based on the single rulebook and – already – two pillars: the Single Supervisory Mechanism (SSM) since end-2014; and the Single Resolution Mechanism (SRM) since the beginning of 2016. Those two pillars will have to be complemented by a third pillar: Deposit Insurance, where we could find practical and reasonable compromises. But there are two additional challenges that are less often mentioned: consistency, and consolidations. The first challenge in order to complete the Banking Union is to achieve better consistency between regulation, supervision and resolution, at three levels: First, in the concrete mechanisms: finalising and simplifying the resolution pillar should be a priority. The case of the Italian banks has illustrated just how complex it is to combine the resolution regime laid down in the Bank Recovery and Resolution Directive (BRRD) with the State aid framework for orderly liquidation. In addition, confidence in the Single Resolution Fund (SRF) and its capacity to intervene has to be bolstered. The setting-up of a common backstop, as mentioned in the European Commission’s communication of 11 October, is a promising avenue, which could take the form of a credit line granted by the ESM.
China’s economic growth has stabilized and the U.S. has avoided much of the drastic fiscal adjustments that were legally programmed for early 2013. This time around, we have revised the global growth outlook slightly upward and external financial conditions have improved thanks to very expansionary monetary policies in the main advanced economies. In contrast, the Eurozone remains in recession with still fragile financial and fiscal conditions, as illustrated by the recent events in Cyprus. World commodity prices remain high, although copper has had a relapse. Chile continues to display a dynamic economy and limited inflation. GDP increased 5.6% in 2012, while domestic expenditure rose 7.1%, thus increasing the current account deficit to 3.5% of GDP (figure 1). In this regard, it is worth noting that in recent years the dynamism of domestic demand has been driven by investment, especially in mining. As shown in a box inside our Report, the current level of mining investment is the highest of the past four decades. Most recently, the implementation of these projects has had a number of direct and indirect effects on domestic demand, other sectors’ activity, the labor market, imports of capital goods and the current account deficit. In the medium term, as these projects mature and the full expansion of the capital stock is completed, the level of imports will be reduced, output and exports will rise, and the growth rate of consumption will stabilize together with personal income. The way the current account deficit is being financed is also important to underscore.

Even then, its political system sometimes struggles to take difficult decisions. The euro area, on the other hand, has existed for just 13 years. The strengthening of its institutions began only two years ago. Against that background, what has been achieved through the creation of the European Financial Stability Facility and European  BIS central bankers’ speeches  1  Stability Mechanism, the entry into force of the “Six-Pack” legislation and the agreement on the Fiscal Compact, is already very significant. On 29 June, the Euro Summit took a further series of steps to strengthen crisis management. They agreed that loans to Spain as part of its bank recapitalisation programme would not have a senior status, removing a key concern for investors about the programme and their continued purchases of Spanish government debt. They committed themselves to use the full range of EFSF and ESM instruments in a flexible and efficient manner. And most importantly, they decided that the ESM should have the ability to recapitalise banks directly, once a single supervisory mechanism is in place involving the ECB. These are all very significant developments. Let me elaborate. First, the possibility for direct bank recapitalisation by the ESM is crucial to break the vicious circle between banks and their sovereigns that is at the heart of the crisis. It would allow for banks to be stabilised without increasing the debt level of the sovereign, thereby avoiding further damage to sovereign debt markets and banks’ balance sheets.
The underlying economic exposures involved are harder to assess in part because of the complexity of the instruments, the embedded leverage in many products and the difficulty of estimating correlations across different exposures. BIS Review 55/2006  1  For these reasons, the risk individual dealers attribute to exposures involving some types of credit derivatives exhibit a very large variance, substantially larger than one would typically find in measurements of traditional credit exposures. That variance illustrates the magnitude of the uncertainty involved in capturing the direct exposure in these markets. But perhaps the more difficult challenge is to capture the broader risks the institution might confront in conditions of a general deterioration in confidence in credit and an erosion in liquidity in these markets. This task, which is the province of stress testing and analysis of very low probability but extreme scenarios, is, of course, fundamentally difficult. The analytical challenge is magnified by the inherent difficulty in predicting how behavior changes in crisis, that is, how investors and counterparties would react to actual losses and the fear of future losses. This challenge is substantially more difficult in markets where there have been dramatic changes in the instruments involved, in the nature of the participants and in the structure of the markets. We tend to look more closely at things we can measure than those we cannot. We are drawn to approaches that offer the comfort of precision and tend to look past the wide band of uncertainty that surrounds those estimates.

Measuring these broader risks is harder today because the classic array of historical stress events drawn from the past 25 years of financial crises are probably even less valuable than they were as an illustration of how market dynamics might unfold today in response to similar changes in asset prices and credit losses. Those past crises would likely cause less damage today, if they were to recur, because of the many changes in the structure of our financial system - namely, the greater dispersion of credit and market risk, the improvements in risk management, the size of the capital cushions, and the improvements in many parts of the payment and settlement infrastructure. But most crises come from the unanticipated. Assessing a firm’s exposure to risk in the tail of the distribution requires, among other things, an evaluation of the impact of the failure of a major counterparty and the impact that failure might have on other counterparties and on market prices. It requires, for the largest institutions, an understanding of the constraints the firm may face in its ability to adjust positions or hedge against further losses without amplifying the shock. And it requires anticipating potentially adverse effects on market liquidity, as other market participants react to actual and anticipated losses. In the financial system we have today, with less risk concentrated in banks, the probability of systemic financial crises may be lower than in traditional bank-centered financial systems.
This is a line of ongoing research that allows us to better understand the evolution of the labor market and its implications for medium-term inflationary pressures. Domestic financial conditions, meanwhile, are still good in terms of interest rates. However, lending volumes have slowed compared to previous years, which the respondents to the Bank’s Business Perceptions Report and Bank Credit Survey interpret as the consequence of weak demand (figure 7). In our baseline scenario, we estimate that this year the economy will grow between 1% and 2%, down from the range we projected in December, 1.5% to 2.5%. Around 0.2 percentage points of this correction originate in the effects of the Escondida mine downtime. Because of the importance of this mine in the country’s copper production— 15% to 20% in 2016—, this downtime will have a substantial impact on first-quarter GDP, around 1 percentage point of reduced growth, taking the figure to near zero. Despite its economic impact, the Escondida deadlock, plus the effects of massive forest fires in January and February, are all one-time events that not only do not affect the long3  term trajectory, but neither do they influence the dynamic of the business cycle. Thus, we do not expect these events to have any material repercussion on the performance of other economic sectors or on inflation.

Source: National Satistics Institute (INE),  15  Table 1 Domestic scenario (annual change, percent)  2015  2016 Dec.16 Report  GDP Domestic demand Domestic demand (w/o inventory change) Gross fixed capital formation Total consumption Goods and services exports Goods and services imports Current account (% of GDP) Gross national savings (% of GDP) Nominal gross fixed capital formation (% of GDP)  2.3 2.0 1.7 -0.8 2.4 -1.8 -2.7 -2.0 21.4 23.6  1.5 1.1 2.0 -0.6 2.8 0.1 -1.4 -1.7 19.3 22.2  2017 (f) Mar.17 Report 1.6 1.1 2.0 -0.8 2.8 -0.1 -1.6 -1.4 20.2 23.2  Dec.16 Report 1.5-2.5 2.6 2.0 0.7 2.4 2.0 4.1 -1.9 19.2 21.7  2018 (f) Mar.17 Report 1.0-2.0 2.3 1.9 0.2 2.5 1.6 4.3 -0.9 20.3 22.5  Mar.17 Report 2.25-3.25 4.1 2.8 3.0 2.8 2.7 7.2 -2.1 20.5 22.6  (f) Forecast. Source: Central Bank of Chile. Figure 7 Real lending by type of credit (*) (annual change, percent)  25  25  Consumer  20  20 Housing  15  Commercial  15  10  10  5  5  0  0  -5  -5 02  05  08  11  14  17  (*) Horizontal dashed lines show last 15-year average for each series. Source: Central Bank of Chile using SBIF data.
This document, which we hope to be able to publish shortly, once we have incorporated a number of comments received during the public consultation period, does not resolve all the problems, but it does represent a significant step forward in improving coordination and the distribution of tasks between supervisors. We are also keeping a close watch on how cooperation is being handled in practice between countries with supervisory responsibility for institutions belonging to international banking groups. In this respect, the AIG is gathering and sharing information and experience on the functioning of bilateral agreements and of supervisory colleges. In my view, either of these two collaboration methods can be fully valid, depending on the size and complexity of the group concerned. Over the years, these kinds of agreements on the exchange of information and reciprocal cooperation have been established among supervisors as a means to perform effective crossborder supervision. Time has shown that such agreements are more effective when the relations between home and host supervisors are based on mutual trust. In this regard, I believe that we as supervisors should steer clear of excessively formalist and legalistic approaches and try to be pragmatic. I think that the questions which need answering are more operational than legal in nature. It is a matter of finding a way of cooperating that makes us all more efficient in the use of our resources, reduces the supervisory burden for the banks and improves the stability of the financial system.

Those are absolute prerequisites for stability in banking. Active, and sometimes intrusive, supervision of banks, and particularly of global banks, has to be at the foundation for stable banking and finance. I don’t think any reconfiguration of the structure of banking and finance is going to get us to an intrinsically safer system, taken as a whole. And we have to remember that this last global crisis, which is still with us in many ways, started not with large universal banks or large global banks, but with narrow or specialised players. Countrywide (the mortgage provider) in the US, Northern Rock in the UK, investment banks like Bear Stearns and Lehman Brothers. It was accentuated through AIG’s Financial Products division, which played a prominent role on the derivative markets. But it was not global banks that sparked off the crisis, although they helped propagate it globally. It bears reminding ourselves of that. BIS central bankers’ speeches  1  No matter how we restructure the system, no matter how we cut down or dice the pieces, banking will involve risk. And without the right culture – whether it’s about an investment bank or commercial bank or a mono-line player – and without the active and intelligent supervision, we’d have the same problems over and over again. The problems that underpinned this global crisis were old-fashioned problems – property booms that were misjudged by banks, regulators and borrowers; and the problem of banks relying too heavily on borrowing short term to invest long-term.
Irma Rosenberg: Monetary policy and the labour market Speech by Ms Irma Rosenberg, First Deputy Governor of the Sveriges Riksbank, at Simra, Stockholm, 22 May 2007. *  *  *  Introduction Thank you for the invitation to come here! After the economic crisis and the changeover in economic policy at the beginning of the 1990s, the Swedish economy has functioned much better than anyone could have imagined. GDP growth has been higher than in the 1970s and 1980s, inflation has been low and more stable and real wages have increased much more quickly than during both of the previous decades. However, developments in the labour market have not been as favourable. Unemployment rose tangibly in connection with the crisis in the 1990s and has since then remained at a higher average level than before. Inflation has on average been slightly lower than the Riksbank’s inflation target since it was introduced in 1985. During the years 2004-2005 inflation was noticeably below the target. It may therefore be relevant to claim that the high unemployment is largely due to incorrectly balanced monetary policy. There are also debaters who have implied that an economic policy that aims at low inflation can in itself contribute to unemployment being higher than necessary. I intend to devote my speech today to explaining my views on this.

Monetary policy’s effects on unemployment are minor in relation to those due to structural problems. The current situation in the labour market Let me before I finish briefly comment on how I viewed the current situation in the labour market in connection with the monetary policy meeting in May. A large number of central wage agreements are being renegotiated this year. There are several factors governing how high wage costs can be expected to be in future. One important aspect is to what extent the social partners take into account the labour market situation in their wage bargaining rounds. Another is how well the labour market functions with regard to matching the demand for and supply of labour. The wage bargaining rounds have so far resulted in wage increases that appear to be slightly above what we had estimated in the February Monetary Policy Report. We pointed this out at the monetary policy meeting on 3 May. The labour market situation has strengthened and it is therefore reasonable to assume in future that there will be slightly higher wage increases than we have been used to in recent years. The information that we had access to at our monetary policy meeting in May indicated that resource utilisation in the labour capacity was slightly more strained than we anticipated in the February report. There were signs that the labour shortage in the business sector has continued to increase.