samchain/econo-pairs-v1 huggingface dataset:
Businesses and Employees Let’s start with some context and recall why unprecedented action was necessary in March. Amid a synchronized global demand shock of uncertain length and severity, access to credit takes on outsized importance. Companies that issue public bonds and commercial paper depend on financing to make investments and meet their obligations, including payrolls, and together likely account for nearly one-fourth of all U.S. private sector employment and just under 50 percent of U.S. output.2 Even companies that do not themselves have public bonds are closely linked through the supply chain, as they receive trade credit from or sell to large corporate bond issuers. Research suggests that shocks impacting large businesses spill over to smaller firms, perhaps accounting for 10 percent of the reduction in employment at small firms during the last recession.3 The unusually high level of uncertainty about the pandemic shock was reflected in the functioning of markets that finance large U.S. employers. Market liquidity—the conditions under which companies’ debt is issued and traded—rapidly deteriorated to levels experienced during the Global Financial Crisis. Even for investment-grade companies, the cost of debt skyrocketed to five times pre-pandemic levels. At the height of the strain, many companies lost access even to short-term financing, and issuance of longerterm corporate bonds declined precipitously. From late February through early March, overall corporate issuance dropped 60 percent year-over-year, with virtually no new issues pricing on several consecutive days. Firms that could not access capital markets were at risk of being weakened irreparably.

In their solution to the debt crisis, our political leaders must develop an entirely new structure of incentives for private businesses and investors to put their money to work creating jobs here at home. Only fiscal authorities have the power to affect this outcome. Monetary authorities, like me and my colleagues on the Federal Open Market Committee of the Federal Reserve (FOMC), have limited influence. We can fill the gas tank with attractively priced fuel – abundant and cheap money – needed to propel the economy forward. But we cannot trigger the impulse to step on the pedal and engage the transmission mechanism of job-creating investment by the  2  2  See Collected Short Stories, by William Somerset Maugham, New York: Penguin Books, 1972. BIS central bankers’ speeches  private sector. This is the province of those who write our laws and regulations – the Congress of the United States. I firmly believe that the Federal Reserve has already pressed the limits of monetary policy. So-called QE2, to my way of thinking, was of doubtful efficacy, which is why I did not support it to begin with. But even if you believe the costs of QE2 were worth its purported benefits, you would be hard pressed to now say that still more liquidity, or more fuel, is called for given the more than $ trillion in excess bank reserves and the substantial liquid holdings above the normal working capital needs of corporate businesses.
But interest rates and exchange rates cannot shoulder entirely the burden of adjustment to large and volatile capital flows. Asian countries have been experimenting the use of so-called macroprudential tools to complement the more traditional macroeconomic tools in dealing with capital flows and asset price inflation. These include the use of loan-to-value ratios, taxes and stamp duties on asset market transactions, and minimum holding periods for assets, all of which serve to dampen demand for domestic assets. Asia needs to continue refining these tools, learning from experience and adapting to different circumstances. Deepening and broadening financial markets Third, Asia must deepen and broaden its financial markets. Asia must do a better job in effectively intermediating its considerable savings pool as well as capital inflows towards  BIS central bankers’ speeches  3  more productive investment in the region. Deeper financial markets will help to absorb or redeploy more effectively capital from abroad. Broader financial markets will help minimise the flow of capital to unproductive investments by offering a wide range of investment instruments. The ADB has estimated that some $ trillion will be needed in Asia to finance infrastructure projects through 2020. Capital markets provide an efficient way to intermediate flows and can reduce the cost of borrowing. In fact, the financing needs of Asia – in infrastructure and other high fixed capital investments – are particularly amenable to capital market solutions, given the size of the financing tranche and the need for credit risk diversification.

Aligning Incentives with Good Conduct  It is now widely recognized that in the lead up to the crisis, bonuses were too closely linked to short-term revenues, with little weight placed on the longer term risks to the firm. These pay structures incentivized excessive individual risk-taking and left shareholders and ultimately tax payers to absorb huge losses and incur misconduct fines when risks crystalized. Moreover, contract theory tells us that high powered incentives work best when outcomes are easily measurable (such as sales targets). But more senior roles involve managing many unquantifiable but very important outcomes – such as reputation and risk culture. In the United Kingdom, we have taken the following actions to incentivise individuals to consider the longer-term health of the firm:   Remuneration rules require a substantial portion of bonus rewards to be deferred for up to 7 years for senior managers. This allows for malus (the reduction or cancellation of unpaid bonus awards) and clawback (a contractual agreement whereby the staff member agrees to return paid bonus awards to the firm where risks have subsequently crystallised or instances of individual misconduct have been uncovered). 10  There is evidence that malus is being increasingly used by firms – malus  adjustments within major UK banks has more than trebled from c. £ in 2010 to c. £ in 2014.
Foreign exchange reserves In the last decade, emerging countries have constantly sought to expand their foreign exchange reserves. The emerging markets’ average reserve ratio has more than quintupled from 4 percent to over 20 percent of GDP since 1990 (Obstfeld et al. 2009, Matteo y Lagos et al., 2009). One cannot assume, however, that equilibrium has been reached and that the demand for reserves will stabilize. On the contrary, there are strong indications that this trend will persist, or even be amplified, following the crisis. How much reserves are enough? Theoretical reasoning would balance the benefits of holding reserves against their cost, with some notion that there is an optimum. On the benefit side, reserves can be detained or accumulated for a variety of motives:   to smooth out the impact on consumption of shocks on the current account, which is the most basic and traditional motive, even in the absence of international capital flows    as a result or by-product of foreign market intervention to prevent exchange rate appreciation. This is usually defined as a “mercantilist” motive.   as precaution against possible abrupt capital outflows (the “sudden stop” syndrome)  The costs of holding reserves are also well identified:   there is a direct opportunity cost because foreign exchange reserves’ risk / return profile may be lower than for other, alternative, investments.   finally, as reserves accumulate, countries are getting increasingly exposed to exchange rate risk and face the possibility of significant valuation losses.

So, in the period to come there may be both an increased demand worldwide for risk free assets and much less certainty on their future supply. The search for a liquid instrument which would also provide a reliable international store of value has been going on for many decades. When discussions were held to build the Bretton Woods system, Keynes proposed the creation of a new international currency, the “Bancor” which could serve both as a source of liquidity and a store of value. Thirty years ago, there was extensive discussion in the IMF on the creation of a substitution account. This was a mechanism through which countries could exchange their reserve currencies against SDRs, and get a protection against exchange rate risk. Most recently, Governor Zhu has reopened the debate and suggested, over the long run, the creation of a new “super reserve” currency, while, in the meantime, enhancing the role and status of the SDR. There are good arguments to create international instruments providing a reliable store of value:   First, the safer investors feel about the risk-return profile of their holdings, the bigger the exposures they are prepared to accept. In that way, structural characteristics of the International Monetary System have an influence on the sustainability of global imbalances.   Second, once uncertainty on relative values settles in, it would likely be accompanied by extreme volatility as investors, whether public or private, constantly reshuffle their existing portfolios between countries and currencies in order to manage their exposure.
This may happen in part because the EMU countries have chosen to subscribe to a set of common guidelines on the magnitude of their fiscal deficits, and in part because these countries will compete for a common pool of savings in an integrated capital market. The prospect of market-based discipline on the fiscal policies pursued by the EMU countries is not so different from the situation faced by individual states and municipalities in the United States. The need for these entities to tap a common capital market to finance their deficits places their actions under a stricter market test than they would face if they could rely mainly on captive local savings. The municipal bond market in the United States is today a very active and competitive market, where yield differences on public debt reflect investors’ perceptions of default risk, and inefficient state and local administrations are quickly penalized for fiscal profligacy. Similar markets are likely to evolve in Europe after 1999. In fact, the major rating agencies are already planning for European issues of government debt following the creation of EMU. By all accounts, the agencies expect these ratings to mirror those currently assigned to countries’ foreign currency debt, with fiscal factors driving rating changes once EMU is well under way. As I hope I have made clear in my remarks this evening, we in the United States, as elsewhere, have been observing the progress toward monetary unification in Europe with great interest.

Short-term demand management through monetary policy too often led instead to accelerating inflation, and increasing external deficits, which had eventually to be brought under control through recession – an absolute recipe for short-termism in both financial and business behaviour. Equally, excessive public expenditure – which had ultimately to be financed through higher taxation – imposed burdens on the private sector which weakened its capacity to generate employment and income and wealth. So the emphasis now, more or less everywhere, is on effective price stability as the immediate objective of macro-economic policy – not simply as an end in itself but as a measure of the balance between aggregate demand and underlying supply in the economy as a whole. In effect the aim of monetary policy in particular is to moderate, rather than aggravate, the economic cycle, and so to provide the basis for sustainable growth at around the underlying rate of growth of productive, supplyside, potential. And the emphasis now – again more or less everywhere – in relation to fiscal policy is to limit public sector borrowing, and the outstanding level of public sector debt, to levels that can be sustained into the medium and longer term without the need for increasing tax burdens or the imposition of rising real interest rates on the private sector.
Eva Srejber: The role of monetary policy for growth in Sweden  Speech by Ms Eva Srejber, Second Deputy Governor of Sveriges Riksbank, at the FöreningsSparbanken’s Economics Day, held in Vellinge, on 6 June 2000. *  *  *  I would like to begin by thanking you for the invitation to speak here at FöreningsSparbanken’s Economics Day. In my speech today, I shall try to look beyond the day-to-day monetary policy where the focus on interest rate points and minor differences in assessments of the consumer price index at times entails a risk of a lack of perspective. It can therefore sometimes be justified to remind oneself and others of the role that economic policy can and should play. For me as a decision-maker at the Riksbank, this applies in particular of course to the role of monetary policy and the importance of the stability of the payment system. I would also like to recall the successes achieved in the Swedish economy during the past decade, where fiscal and monetary policy have both made important contributions. The challenge now is to reinforce what has been achieved and at the same time be strong enough to carry out the changes that remain. It is also important to continually evaluate and discuss the design of economic policy as new experiences are obtained. This requires openness, which has been a lodestar for the Riksbank in recent years.

Economic policy should be designed so as to minimise uncertainty and so that the regulatory framework and tax system do not distort the allocation of resources in the economy. If fiscal policy is carried out so that the central government debt is stabilised at a reasonable long-term level, certainty is established in the design of the transfer systems and coming tax burdens and investment and consumption decisions are facilitated. Structural policy also has an important role with regard to creating good conditions for growth. Structural policy is such a broad concept that I can only point to some important components. The tax and transfer systems, for instance, should be designed so that they do not create motives for citizens to act in a way that is harmful to long-term growth and welfare. The task of the educational system is to provide access to relevant, high-quality education and that of labour market policy to ensure that demand and supply of labour power match. 1  BIS Review 48/2000  The tasks of the Riksbank A monetary policy aiming at price stability reduces uncertainty about future real incomes. Agreements on future payments and assessments of future income are thereby facilitated. Demands for compensation for risk are reduced which, among other things, stimulates real investments. Price stability also improves the ability of the price system to spread information about how resources are to be distributed to areas where they most benefit citizens.
There are valid http://www.ecb.europa.eu/press/key/date/2017/html/sp170330.en.html[03.04.2017 15:53:14]  Central bank independence revisited  arguments for granting operational and financial independence to supervisors and, in fact, it has been accepted that operational independence is one of the core principles for effective banking supervision. The specific question that I am exploring is whether the highest possible level of independence granted to a central bank by virtue of Article 130 of the Treaty for the pursuit of the primary objective of price stability may be extended to the supervisory function of the ECB. Operational independence of the ECB as a supervisor When the Council conferred supervisory tasks on the ECB, it also set out the principles and conditions governing the exercise of those powers, including the level of independence for the ECB. Instead of including a direct cross-reference to Article 130 of the Treaty,[38] as was the case in relation to the scope of the ECA’s mandate vis-à-vis the ECB, the independence of the ECB in an SSM context is set out expressly in Article 19 of the SSM Regulation. The wording of Article 19 of the SSM Regulation is similar to, but does not replicate, Article 130 of the Treaty. It stipulates that when “carrying out the tasks conferred on it by this Regulation, the ECB and the national competent authorities acting within the SSM shall act independently.

As a consequence, the ECB independently defines its monetary policy strategy and quantifies the price stability objective. Instrument independence refers to the central bank’s ability to determine its policy tools in pursuit of price stability without interference. It means that the central bank has discretion to use and clarify its monetary policy instruments foreseen in primary law such as outright purchases, the collateral framework and its counterparties. Personal independence safeguards the capacity of the members of the ECB’s decision-making bodies to take decisions without external influence. This translates into requirements for appointment and protection from dismissal, as well as the length of mandates that should be longer than the electoral cycle. The members of the Executive Board have the requirements spelled out in the Treaty; their tenure is 8 years and their dismissal on grounds of either inability or serious misconduct is pronounced by the CJEU. The national laws for appointing governors, who in their personal capacity are members of the Governing Council, are to be compatible with the Statute of the ESCB. The reasons for dismissal are the same as for the members of the Executive Board and subject to the CJEU’s scrutiny as soon as there is knowledge of material evidence of such a procedure. Their terms of office must be 5 years at a minimum.
At the end of the sales programme, the National Bank still held 1,290 tonnes of gold, corresponding to one third of the value of its currency reserves. Even though it has been demonetised, the yellow metal still plays an important role in our reserves. It is an asset category that traditionally affords good protection in times of crises in the international monetary system. It also allows us to hold part of our reserves on our own country, which is not possible with financial assets. Moreover, as expressly requested by Parliament, Article 99 of the Federal Constitution requires the National Bank to hold part of its currency reserves in gold. The Governing Board considers that the holdings of 1,290 tonnes are appropriate to the current international environment. It does not intend to proceed with further sales of gold. Distribution of profit This General Meeting of Shareholders will find a special place in the National Bank's annals, as you are going to decide on how the proceeds of the gold sales are to be distributed. This will close a chapter first opened in 1997, when a group of experts came to the conclusion that the SNB's currency reserves were larger than required for the execution of its mandate and that it could thus consider selling half its gold holdings, once the Swiss franc's gold parity was discontinued.

10  BIS central bankers’ speeches  (i)  TABLE AND CHART ANNEX  Table 1: Similarity of industrial structures  EA (Core vs VEAPs)(a)  EA (17 countries)(b)  rUK and Scotland(c)  rUK and Scotland (oil on geographic basis)(d)  Energy  0.1  1.0  1.8  10.0  11.5  3.1  Construction  0.6  1.3  0.1  0.7  1.3  0.6  Manufacturing  1.3  6.1  0.7  0.5  4.8  4.5  Finance and insurance  0.3  2.5  0.8  1.4  2.2  3.2  Other  0.3  5.6  1.5  7.4  8.5  5.2  Sum  2.6  16.4  4.7  20.1  28.3  16.6  Canada (13 provinces and territories)  US (50 states + DC)  Sources: Bank calculations; Statistics Canada; US Bureau of Economic Analysis; Eurostat; ONS Regional Gross Value Added. rUK and Scotland data are for 2011; Euro Area (EA), US and Canada data are for 2012. Industrial classifications in the US and Canada are NAICS, in the UK SIC, and in the Euro Area they are NACE Rev2. These were consolidated into the five broader industrial classifications to ensure consistency. Notes: The table shows absolute differences between output industry shares in each region and the monetary union as a whole, which are then averaged for each industry in each monetary union.
Real interest rates and house prices Per cent and index, 2005=100. Note. Real interest rates refer to 10-year zero coupon rates for real (index-linked) bonds for Sweden and the United States and 10-year benchmark rates for real (index-linked) bonds for Germany and the United Kingdom. Sources: Bank of England, Bloomberg, Federal Reserve, Statistics Sweden and the Riksbank. This also points to another trend: While public debt has fallen in recent decades, the debts of private operators have increased. Those who have large debts become unavoidably more vulnerable, and if asset prices rise for too long in a way that is decoupled from developments in the rest of the economy, this can lead to financial imbalances and ultimately to a financial crisis. The Swedish financial markets have grown and look different from at the beginning of the 1990s. Today, the banking sector is bigger in relation to GDP than it was thirty years ago, and mortgage loans have become a larger and increasingly important part of banks' operations. 11 [16]  Diagram 8. Banking sector and GDP over time Nominal amounts, SEK billion 12 000 10 000 8 000  6 000 4 000 2 000 0 1996  2000  2004  2008  2012  2016  2020  Balance sheet GDP  Note. Total balance sheet total for the operations of Swedish banking companies, savings banks and foreign-owned bank branches in Sweden. The measure excludes subsidiaries of Swedish banks abroad. Source: Statistics Sweden.

In Norway, the banks dealt with the problem loans themselves, and there is good reason to try to achieve this, where possible: the originating banks themselves are the best placed to deal with the problem loans. However, this presupposes that the problem loans account for only a limited proportion of total lending, so that the banks are able to continue to operate normally. Sweden and Finland established a “bad bank” that took over the high-risk loans. But this was in most cases done only after the state had nationalised the banks and was thereby able to control the kinds of loans that were transferred to the “bad bank”. Third, banking crises do not need to be prolonged. In the Nordic economies the prompt and extensive writing down of problem loans and recapitalisation of the banks limited the economic downturn, which lasted only around a few years. This experience stands in contrast to that of Japan, where loan losses were recognised too slowly, with substantial and decade-long consequences for economic developments. All that said, however, the challenges facing banks today require a broader set of instruments than those used by the Nordic authorities 20 years ago, for two main reasons: First, the situation for banks is more complex. The authorities have to distinguish more clearly between insolvent banks and banks that are solvent but in need of more capital in order to increase lending. The lessons from the Nordic banking crisis can be drawn on for the insolvent banks.