samchain/econo-pairs-v1 huggingface dataset:
10  BIS central bankers’ speeches  Chart 1 Total AUM of US insurance companies, pension funds, mutual funds and other funds, 1946 – 2013 ICPFs Mutual funds (a) Other non-property funds  Per cent of GDP 250  Chart 2 Total AUM of UK insurance companies, pension funds and mutual funds, 1980 – 2012 ICPFs  Mutual funds  Per cent of GDP 250  200  46 51 56 61 66 71 76 81 86 91 96 01 06 11  150  150  100  100  50  50  0  Source: US flow of funds  80 83 86 89 92 95 98 01 04 07 10  Chart 3 Relationship between GDP per capita and managed assets  Chart 4 Global assets under management in selected specialised mutual fund types(a) 60,000 50,000 40,000  Emerging market Corporate bond High Yield Mortgage-backed Total Return  $ billions 900  30,000  800 700 600 500 400  20,000  0 100 200 300 AUM of ICPFs and mutual funds as per cent of GDP  0  Source: OECD, ONS, Investment Management Association and Bank calculations  (a) Other non-property funds include closed-end funds, exchange-traded funds and money market mutual funds  GDP per capita, $ current prices  200  300  10,000  200  0  100  Source: OECD Statistical database and Bank calculations.

Perhaps the defining feature of the sector is the long-term nature of its liabilities, especially for institutional investors like ICPFs. This makes the sector a potentially important source of long-term financing to households, companies and governments – for example, in the form of equity and long-term debt. Yet the data tell a different tale. Chart 7 plots the portfolio allocation of UK ICPFs over the past quarter-century. The most striking trend is the erosion in ICPFs’ direct holdings of UK equities, where the portfolio share has fallen from around 50% in the late 1980s to less than 10% today. Their shares of the UK stock market have mimicked this path. There has been a huge “de-equitisation” of portfolios. Although this pattern is not found universally across countries, it is also evident in, for example, Japan and France. 7 There is no single cause of these portfolio trends in the ICPF sector. Some explanations are benign. For example, as the population ages and a larger chunk near or reach retirement, pension liabilities mature. We would then expect to see pension funds switching into lowerrisk, shorter-duration assets, such as fixed income securities. And this is indeed what has occurred. But this seems unlikely to have been the sole explanation for de-equitisation. In particular, regulation and accounting appear to have played a significant role. Take the UK. In 1995, the Pensions Act introduced a Minimum Funding Requirement (MFR) – the ratio of assets to liabilities – of 90%.
Economic governance is not only about preventing crises, but also about creating the conditions for economic growth. At present, this is a major challenge requiring greater coordination across the euro area. Projections of the euro area’s long-term growth prospects remain weak, depressed by the fiscal burden of age-related expenditure, slow productivity growth, and on going debt sustainability challenges. I agree with recent comments by Professor Rogoff that Europe needs to do more to reverse this trend. It is essential to give renewed impetus to a comprehensive and ambitious programme of growth-enhancing structural reforms supported by intensive monitoring and follow-up. Let me conclude. It is precisely against the backdrop of the challenges stemming from the current crisis that we can fully appreciate the invaluable contributions of scholars like Kenneth Rogoff. I extend my sincerest congratulations to him as he receives the 2011 Deutsche Bank Prize in Financial Economics, a well-deserved recognition for his work. 4  BIS central bankers’ speeches

And it is key to the  1 2  www.bankofengland.co.uk/-/media/boe/files/record/2017/financial-policy-committee-meeting-september-2017.pdf www.bankofengland.co.uk/financial-stability-report/2018/june-2018 2  All speeches are available online at www.bankofengland.co.uk/news/speeches  2  Bank’s objectives – risk free rate transition is a core part of the Bank’s strategic goal to catalyse reforms in financial markets to make them fairer and more effective. The good news is, transition is happening. There has been real progress in establishing SONIA as the successor to sterling Libor. In the past 6 months there have been a number of positive developments in the sterling cash market. From a zero base this time last year, SONIA linked floating rate note (‘FRN’) issuance now dominates sterling floating rate financials issuance and there is clear momentum towards using the compounded SONIA rate across bond markets. The first 5 months of 2019, have seen 21 different banks, sovereigns, and supranationals issue FRNs referencing compounded SONIA, with a total value of about £ We’ve also now seen the first move by a bond issuer to switch their outstanding Libor linked bond to reference compounded SONIA instead. They are currently going through a bondholder Consent Solicitation process, with the deadline next week. This is a development which is being closely watched. We have also seen the first SONIA linked securitisations issued. In other areas, we are seeing progress. One UK firm has announced it has switched the basis of its balance sheet over to SONIA.
- Next, I would like to share the Albanian and regional perspective on the possible implications from Brexit. - Concluding, I would like to present an overview of challenges facing the two main central bank policies: the monetary policy and the macroprudential policy. 1. Albania and Western Balkans in the post-crisis period The last global crisis affected the economic, financial and social dimensions of the human activity. By size of shock, complexity of challenges and interdependence of transmission channels, the crisis was unprecedented, for decades. It started as turbulence in certain segments of the financial system to later transform into a fully-fledged crisis of the system; before long, it was transferred to the real sector. This shock caused immense loss in production 1/4  BIS central bankers' speeches  and employment levels, reduced the welfare and put to test the stability of growth and development models in many countries. Western Balkan countries were not at the eye of the cyclone of the global crisis. Yet, while at the periphery, the effects of the crisis became increasingly stronger on the region, as well. The decline in foreign demand, increased uncertainties, tightening of financing conditions and deleveraging in the region decelerated the economic activity and evidenced a series of structural problems. I would rather not list all the channels and consequences of the global crisis, but I would like to say that withstanding the crisis required revising many conventional policies and practices. First, central banks were obliged to explore untrodden paths.

And second, there were no people with well-founded experience on how to run and lecture these programs. There was a generation problem - one generation was - and still is - missing. Where we stand today and how we have coped with those drawbacks? There was no magic solution but I dare say that today we have almost overcome the problem of missing generation in economic education and that we have been closing the gap between us and the developed world fast. I see three important factors which contributed to this development. On the first place I would put the new generation of young and strongly motivated people. They created enormous pressure on those who with their limited know-how - started to prepare new economic courses. This is my second point in this respect that there was a learning-by-doing process of creating new courses, mostly designed along the recent trends in economics and business education. Despite the fact we did not have any experience with these courses, we roughly knew which direction to go. Last but not least, the Czech education system received a strong support from abroad, both in terms of visiting lecturers and money. In some cases, these two aspects were interconnected, and completely new programs were gradually built up. Among all, let me name Center for Economic Research and Graduate Education, US Business School Prague and CMC Graduate School of Business. I can offer another illustration of how far we have gone. I have been with the Czech National Bank for six years.
In our view, the key issue here is to reduce a possible large swing in the availability and the price of credit stemming from the tendency of banks to underestimate risks in good times, and then to overestimate them in bad times. On this, our approach has been to ensure that banks’ capital and riskmanagement policy is forward-looking by using a combination of three instruments. The first is stress testing to ensure that bank’s own internal process for assessing the adequacy of capital and overall risk management is alert to possible key risks. Thai banks have begun conducting stress tests as part of the supervisory process since early last year when we first underwent the FSAP assessment. From our experience, we find stress testing to be a useful and effective instrument for helping banks in formulating strategy for capital and risk management in a forward-looking manner. Also importantly, it provides a formal process for a two-way dialogue between banks and supervisors on risk management and on other financial stability issues. The second instrument is the fair value accounting rules or IAS 39, which we have adopted for non-performing loans and for structured products. In our view, these rules can help strengthen market discipline over bank lending and investment. And because fair valuation involves marking to market, its adoption also helps make provisioning for asset impairment more forward-looking. The third instrument is prudential policy to limit excessive procyclicality.

Andrew G Haldane: Small lessons from a big crisis Remarks by Mr Andrew G Haldane, Executive Director, Financial Stability, Bank of England, at the Federal Reserve Bank of Chicago 45th Annual Conference “Reforming Financial Regulation”, Chicago, 8 May 2009. I would like to thank Andrew Mason, Adrian Chiu, David Gregory and Nick Vause for comments and contributions. *  *  *  Macro-prudential policy is a new ideology and a big idea. That befits what is, without question, a big crisis. There are a great many unanswered questions before this ideology can be put into practice. These questions will shape the intellectual and public policy debate over the next several decades, just as the Great Depression shaped the macroeconomic policy debate from the 1940s to the early 1970s. But there are already some smaller lessons to be drawn from crisis events. That is the purpose of these comments. Seven issues arising from the crisis are discussed and their implications for policymakers and practitioners assessed. If there is a unifying theme, it is informational failure. This has been a crisis borne of, and prolonged by, lack of information. That fog of uncertainty remains dense 18 months on. Because financial markets are, first and foremost, a market in information, these informational failures have generated prolonged paralysis in financial markets. Tackling them is priority number one. Lesson 1: Finance is no golden goose Imagine having placed a hedged bet back in 1900.
You shouldn’t see this as too accurate a prediction of the future path of monetary policy; rather it’s what is right today for our current level of inflation, for the state of the economy and for growth. Low rates provide an incentive to diversify savings, but, as we all know, this raises important challenges. Therefore, without claiming to have any clear-cut answers, I’d like to suggest three avenues worth exploring in this important debate. 1  Gross average over four quarters. 2  Risky assets are defined here as debt securities, listed shares, unlisted shares and other equity interests, shares in non-money market funds, shares in pension funds and shares in unit-linked life insurance products. Risk-free assets include cash, sight deposits, term deposits, shares in money market funds and shares in eurodenominated life-insurance products. BIS central bankers’ speeches  1  II  We need to act in two main areas, while taking one essential precaution. a) First we need to gradually pass the decrease in interest rates through to the returns on risk-free investments. This is why I proposed lowering the interest rate on new French housing savings plans (PEL), which since yesterday has been set at 1.5%; it’s also why we need to continue lowering the returns on life insurance savings invested in eurodenominated funds, in addition to the cuts already announced this year. b) The second focus for action is the development of new savings products.

François Villeroy de Galhau: Identifying various forms of savings in France Speech by Mr François Villeroy de Galhau, Governor of the Bank of France, at the 25th Parliamentary Conference on Savings, Paris, 2 February 2016. *  *  *  It gives me great pleasure to take part in this 25th Parliamentary Conference on Savings. Before answering your questions, I’d like to share with you an observation followed by a few possible avenues for thought. I  First, the observation, which is that here in France, we have plenty of savings, but not enough goes towards financing investment and hence growth. a) France certainly doesn’t lack savings. It has one of the highest household saving ratios in the euro area, at 15.2% 1 in the third quarter of 2015 compared with 12.7% for single currency bloc. The vast majority of these funds are invested in property; however, nearly 7% of household income is channeled into financial investments. At end-September 2015, close to EUR 4.4 trillion were invested in financial products – that’s twice the size of French GDP. b) That said, French savers are increasingly opting for safer forms of investment, primarily bank deposits and regulated savings products, which are highly liquid, and eurodenominated life insurance products, essentially bond funds: 63% of household financial assets in Q3 2015 compared with 56% in 2006.
That is one reason why Glass-Steagall is now back on the international policy agenda. It may be the wrong or too narrow an answer. But it asks the right question: can network structure be altered to improve network robustness? Answering that question is a mighty task for the current generation of policymakers. Using network resilience as a metric for success would help ensure it was a productive one. Conclusion Through history, there are many examples of human flight on an enormous scale to avoid the effects of pestilence and plague. From yellow fever and cholera in the 19th century to polio and influenza in the 20th. In these cases, human flight fed contagion and contagion fed human catastrophe. The 21st century offered a different model. During the SARS epidemic, human flight was prohibited and contagion contained. In the present financial crisis the flight is of capital, not humans. Yet the scale and contagious consequences may be no less damaging. This financial epidemic may endure in the memories long after SARS has been forgotten. But in halting the spread of future financial epidemics, it is important that the lessons from SARS and from other non-financial networks are not forgotten. References Akerlorf, G, and Shiller, R (2009), “Animal Spirits: How Human Psychology Drives the Economy, and Why It Matters for Global Capitalism”, Princeton University Press. Albert, R, Albert, I and Nakarado, G.L (2004), “Structural vulnerability of the North American power grid”, arXiv:condmat/040107v1.

For Bank A, not knowing the links in the chain means that judging the default prospects of Bank B becomes a lottery. Indeed, in some ways it is worse than a lottery, whose odds are at least known. In this example, Bank A faces uncertainty in the Knightian sense, as distinct from risk, about the true network structure. Counterparty risk is not just unknown; it is almost unknowable. And the higher the dimensionality of the network, the greater that uncertainty. It is possible to formalise this intuition with some simple numerical examples. 17 Consider two states of the world, pre-crisis and crisis. And consider the impact of network complexity on CDS pricing. Once we introduce Knightian uncertainty, asset prices are no longer determinate; they are defined by a range rather than a point. So the range of equilibrium CDS spreads can be taken as a metric of the uncertainty, and hence distortion, arising from different network structures. Chart 4 plots a pre-crisis world where it is assumed that counterparty default probabilities, and the uncertainty around them, are low. Subject to those assumptions, it illustrates how the range of CDS spreads is affected by Bank B’s number of counterparties. Larger numbers of  17  The following is based on work in progress at the Bank on asset pricing under network Knightian uncertainty, by Sebastiano Daros and Kemal Ercevik. 8  BIS Review 53/2009  counterparties are marginally beneficial. There is a “law of large numbers” benefit.
Institutional change must go up against vested interests. This process falls squarely in the political domain. And as we are reminded by the events in Egypt and elsewhere, the political process and power struggles are rarely clean. Exercise is sweaty and messy. The fact is, institutional reform is highly contingent. They depend upon events transpiring in a particular way at critical junctures. This is shaped by the prevailing political economy context and social attitudes at the time, as well as luck. There was nothing inevitable in Deng Xiaoping’s rise to power in China in the late 1970s, which was the key pivotal moment that set China towards economic reforms that bolstered the role of market forces. The set of events that transpired were highly contingent on the outcome of a power struggle between remnants of the Cultural Revolution leadership, namely the Gang of Four, and more reform-minded members of the Communist Party. In other countries, such power struggles have come out on the other side and oppressive economic institutions remained. A confluence of factors, especially at critical junctures, largely determines the path of institutional change and development. The window of opportunity comes and goes. We must be ready to seize it as a society. Successful growth-promoting reforms are pragmatic and opportunistic. Building institutions is not like building a house – brick by brick in a linear fashion. It is more like scoring a goal in soccer.

78, No 2, Papers and Proceedings of the One-Hundredth Annual Meeting of the American Economic Association, 435–439. Bernanke, B. and M. Gertler (1995), “Inside the Black Box: The Credit Channel of Monetary Policy Transmission”, Journal of Economic Perspectives 9 (Fall), 27–48. Blattner, T.S. and M. Joyce (2016), “Net debt supply shocks in the euro area and the implications for QE”, ECB Working Paper No 1957. Blattner, T.S. and J. Swarbrick (2017), “Monetary policy and cross-border interbank market fragmentation: lessons from the crisis”, mimeo. Campa, J.M. and L.S Goldberg (2008), “Pass-Through of Exchange Rates to Consumption Prices: What Has Changed and Why?”, in Ito, T. and Rose, A.K. (eds. ), International Financial Issues in the Pacific Rim: Global Imbalances, Financial Liberalization, and Exchange Rate Policy, University of Chicago Press, Chicago, 2008, 139–176. Cœuré, B. (2017), “Scars or scratches? Hysteresis in the euro area”, speech at the International Center for Monetary and Banking Studies, Geneva, 19 May. Comunale, M. and D. Kunovac (2017), “Exchange rate pass-through in the euro area”, ECB Working Paper No 2003. Corsetti, G. and L. Dedola (2005), “A macroeconomic model of international price discrimination”, Journal of International Economics, Vol. 67, Issue 1, 129–155. Di Mauro, F., R. Rüffer, and I. Bunda (2008), “The changing role of the exchange rate in a globalised economy”, ECB Occasional Paper No 94. Dornbusch, R. (1987), “Exchange Rates and Prices”, American Economic Review, Vol. 77, No 1, 93–106. Draghi, M. (2015), “Global and domestic inflation”, speech at the Economic Club of New York, 4 December.
Mark Carney: Breaking the tragedy of the horizon – climate change and financial stability Speech by Mr Mark Carney, Governor of the Bank of England and Chairman of the Financial Stability Board, at Lloyd’s of London, London, 29 September 2015. *  *  *  I am grateful to Rhys Phillips and Iain de Weymarn for their assistance in preparing these remarks, and to Michael Sheren, Clare Ashton, Matthew Scott and Professor Myles Allen for their comments. I’m grateful to Lloyd’s for the invitation to speak tonight on the occasion of the first City Dinner held in this magnificent, eponymous “Room”. Lloyd’s is the bedrock of the UK insurance industry. An industry whose direct contribution to the UK economy is impressive: 300,000 high-paying jobs and £ in annual GDP. Its economic contribution goes much deeper. Insurance supports households, companies and investors, safeguarding them from perils they could not otherwise shoulder. It matches long-term savings and investment, financing the infrastructure essential to productivity. With its unique perspective and skill set, insurance diversifies the financial system and reinforces its resilience. Since 1688 Lloyd’s has, in the great tradition of the City, served both the UK and the world, providing protection against the perils of the age; helping enterprise and trade to thrive. From its origins in marine insurance, the Lloyd’s market has evolved constantly to meet the needs of a rapidly changing world. The first excess of loss reinsurance was created here.

Via the programme, we are offering banks loans of up to SEK 500 billion, on condition that the banks in turn lend the money to Swedish companies. To strengthen the programme and ensure that the money reaches companies, the Riksbank has also made it possible temporarily for more banks and credit institutions to gain access to our money. We are doing this because many small companies around the country are customers at smaller, local banks rather than at the major banks. Something else that often happen in times of crisis is that the demand for safe and liquid assets increases as agents try to dispose of riskier assets. The safest and most liquid asset on the financial markets is central bank money, money created by the central bank. The Riksbank has therefore taken measures to make it easier for banks to gain access to central bank money without having to sell their assets to a great extent. We have eased the requirements regarding the collateral banks can pledge when they borrow from the Riksbank. We have, for example, given banks generous opportunities to use a greater proportion of mortgage bonds and other covered bonds as collateral. More generous collateral requirements also strengthen the programme of corporate lending and simultaneously help to keep the large Swedish mortgage bond market running. We have also cut the lending rate for Riksbank loans overnight to banks from 0.75 to 0.20 per cent.