samchain/econo-pairs-v1 huggingface dataset:
For the UK, this is well documented for small-firm finance during the early-90s recession.6 Although the stability of output growth over the recent past happily deprives us of a proper test, there are reasons to think that cyclical swings in the availability of finance may now be somewhat less marked than in the past. In the first place, the greater stability brought by the new monetary regime may make a difference. Compared with the past, there should be less risk of the monetary authority delaying a response to incipient inflation until the point that it is forced to slam on the brakes, effectively engineering recession to quell inflation expectations and in the process contributing to a sharp spike in unemployment, loan defaults and bank losses. A more stable macroeconomic environment may also, by reducing the risks for new entrants, be one amongst a number of influences fostering competition. There is perhaps some circumstantial evidence of that in, for example, the decline in margins on personal loans (Chart 10). That would tend to reduce the credit constraints facing households. As does the increased availability of loan products that enable homeowners to borrow against the free equity in their houses. Broadly similar changes have been underway in business finance, where competition also comes from outside the banking sector through firms’ access to richer capital markets. The proportion of UK nonfinancial firms’ debt accounted for by bonds has risen from around 15% in 1990 to over 30% now (Chart 11).

Anecdotally, the role of migrant labour has increased in various sectors – partly associated with the enlargement of the EU’s single labour market. If that continued, with new residents continuing to help to meet particular skill shortages, the labour supply available to UK businesses would increase, implying that the economy could potentially accommodate stronger aggregate demand than otherwise. However, the available data do not really enable us to get beyond anecdote and speculation. Financing Another important input for firms is finance – for working capital and investment. Here too, there seem to have been changes – in the range and terms of the sources of finance available to both firms and households – that could potentially influence the extent of cyclical fluctuations in output and inflation. One characterisation of the past would be that firms and households depended on bank loans for external finance; and that banks loosened or tightened credit conditions sharply in the different phases  5  See, for example, Nickell S. and Quintini G.,(2002), ‘The recent performance of the UK labour market’, Oxford Review of Economic Policy, Vol. 6(4), pages 26-35. BIS Review 16/2005  3  of a business cycle, reining back when the economy suffered a downturn and arrears and losses mounted.
Estimates of the drag from Brexit vary, but to give some perspective, the level of UK GDP is currently some 3% lower than might have been expected given how demand in the rest of the world has evolved since June 2016.22 Supported by the package of monetary policy measures, the broad-based global expansion and fiscal easing in late 2016, UK growth did rise above the subdued rate of potential supply growth. Over the course of 2017 and 2018, unemployment continued to decline and spare capacity was steadily used up. As the labour market tightened and companies found it harder to recruit and retain staff, wage growth began to pick up as expected (Chart 11). Across the economy as a whole, pay growth rose from around 1½% a year during 2010-15 to around 2¼% in 2016 and 2017 and 3% in 2018.23 Although these rates of pay growth were still lower than pre-crisis averages that largely reflected weak productivity growth. As a result, indicators of domestic inflationary pressures, such as unit labour cost growth, rose towards rates consistent with the inflation target. The steady absorption of slack and the prospect of moving into excess demand by the end of the MPC’s three-year forecast period – evident in the dots showing the successive Inflation Report projections in Chart 10b – reduced the degree to which it was appropriate to accommodate an extended period of inflation above the target.

12  Indeed, even when purchases of additional longer-term securities cease, the enlarged balance sheet will provide substantial ongoing stimulus. It is important to recognize that the Fed could remain in this posture with policy “on hold” for a significant period. BIS central bankers’ speeches  9
But we cannot know for certain the extent and the speed at which payment stablecoins might be adopted and we may well need limits, at least initially, to ensure we avoid disruptive change that could threaten financial stability. Another important question will be whether the requirement to be redeemable in fiat money, on demand and at par and the backing asset model will be sufficient to ensure uniformity of sterling stablecoins with each other and with other forms of sterling money. This will depend to some extent on whether there are frictions in the redemption and interchange process. It has been suggested that ensuring the uniformity (or ‘singleness’ of money) requires that all transactions between different monies settle ultimately in central bank money across the books of the central bank. While it is not clear to me that this should be the case, it is clearly an issue that should be considered carefully in the design of the regulatory regime. Finally, on stablecoins, it is important to emphasise that powers in the Bill and the Bank’s regime will be for stablecoins used for payments. A digital representation of an asset with a generally stable value could be used for other purposes. It could offer a return as an investment product akin to a money market fund. Or it could be part of the credit creation process, with the loans issued in the form of stablecoins.

Under the real-time gross settlement model payment instructions are exchanged and settled individually on a gross basis throughout the business day (unlike under a ‘deferred net settlement’ model where payments are exchanged by participants during a ‘clearing cycle’). Under the RTGS model ‘settlement risk’ does not occur and our financial stability objective is promoted as claims and liabilities between banks and other participants are settled in central bank money which is the ultimate secure and liquid asset. It is also the platform through which monetary policy decisions are implemented and provides liquidity to the financial system. Why are we renewing? Just metres from this conference venue is Pudding Lane where in 1666, after a long, hot summer it was an ember from a baker’s oven that set off the Great Fire of London. This triggered the rebuilding of St Paul’s Cathedral, the city’s gates and bridges and much more. I’m pleased to say that the Bank of England today finds itself in the far more fortunate position of renewing its critical infrastructure through choice rather than necessity. RTGS was launched in 1996, and the world, let alone the financial system, has changed dramatically in the intervening 22 years. RTGS has undergone various upgrades but now is time for a more fundamental renewal. Technology is changing, the payments landscape is changing and the demands of users and potential users are changing.
Considering the fact that the relationship between macroeconomic variables changed remarkably along with the structural transformation in the economy after the 2001 crisis, it is assessed that the mentioned uncertainty in Turkey is at least as high as those in other countries. However, in light of the recent normalization experience, it is possible to produce forecasts about the period required for monetary policy to influence inflation. The latest observations indicate that the period needed for monetary policy measures to affect domestic demand varies between 3 to 9 months, while the change in demand influences inflation in a period between 3 months and 1 year. This leads us to the conclusion that the impacts of monetary policy on inflation spread over a period of one and a half years on average. In this context, taking into account the lagged impacts of monetary policy, the Central Bank defined the policy horizon as approximately one and a half years in the main policy statement published last year. Although it is forecasted that the impact of monetary policy on inflation will show itself in a more lagged manner and that the control horizon may be extended as the normalization process of the economy continues, the control horizon is maintained as one and a half years at this stage. There is no doubt that this period may be extended or shortened depending on the extent of shocks and the period needed for their influence to reflect on prices.

In addition, in order to ensure that there is enough recapitalisation capacity in resolution, one-third of the minimum TLAC requirement is expected to be covered with instruments other than CET1 (that is, debt). It is important to bear in mind that the TLAC establishes a common minimum global requirement and that national authorities have the right at any time to apply higher requirements in their jurisdictions. The TLAC is a new prudential requirement that has different objectives than the capital ratio. Regulatory capital is mainly to absorb losses in a going-concern situation, whereas TLAC is meant to ensure loss absorption in gone-concern situations (that is, beyond the point of nonviability). I should add that, in a resolution context, the location of loss absorbing resources becomes very important and, for this reason, the TLAC standard gives guidance on how these resources should be distributed within the banking group. This highlights another important difference between the capital framework and TLAC: the location of resources. While the former is required on a consolidated basis for the group as a whole, TLAC is required where resolution takes effect and where critical functions are performed. One of the most complex issues in the design of the TLAC was the need to ensure consistency between the two main banking resolution strategies: the Single Point of Entry and the Multiple Point of Entry.
Banks’ experiences during the crisis, structural changes in the banking system, and post-crisis changes in financial regulations will likely increase the level and variability of the demand for reserves relative to before the crisis, but we don’t currently know the precise shape and position of banks’ demand curves. The FOMC has said that it expects to learn more about the underlying demand for reserves during the process of balance sheet normalization. In addition, the FOMC will need to decide what type of operating regime it wishes to run in the future—namely, whether it believes it will be efficient and effective continuing to use a reserve-abundant operating system (albeit with less abundance than seen at present) or returning to a reserve-scarce system, as the Fed used before the crisis. In sizing up the balance sheet, policymakers will also need to take into account several important non-reserve liabilities that are largely outside the immediate direct control of the Fed.15 On the asset side of the balance sheet, the normalized size of the securities portfolio is one whose level is consistent with the balance sheet’s longer-run trend.

Gent Sejko: Address to the Parliamentary Committee on Economy and Finance Address by Mr Gent Sejko, Governor of the Bank of Albania, to the Parliamentary Committee on Economy and Finance, Tirana, 23 February 2022. * * * Honourable Chair, Honourable Members of the Committee, Thank you for this public hearing organised in the framework of my nominee for the renovation of the term as the Governor of the Bank of Albania. At the beginning of my address, please allow me to highlight that I am very honoured that the Parliament of Albania re-affirmed the confidence to continue to contribute in the field of Albanian economic and financial area management, as a member of the Bank Albania’s Supervisory Council. In the same spirit, I would like to point out that my nomination for the position as the Governor is motivated by an internal incentive: finalising the thoroughly transformation of the Bank of Albania and turning it in a modern central bank. In my vision, the Bank of Albania should converge towards the conjures of a modern central bank, suitable to be part of the European System of Central Banks; able to deal with the challenges lying ahead in the path of the sustainable economic development, for the comprehensive modernisation of the financial system, for the European integration, and in its function as a reliable partner of Albanian public, civil society and academic world.
If, without  3  Detken C and F Smets: Asset price booms and monetary policy. Paper presented on 11 December 2003 at the Workshop on “Asset prices and monetary policy”, European Central Bank. BIS Review 40/2004  5  being certain, we judge that developments might lead to substantial disturbances, the choice lies between attempting in time to avoid the accumulation of large imbalances and waiting until the situation turns. Many within the central bank world believe that interest rate policy should not react to asset prices and credit expansion over and above their estimated implications for inflation and real and financial stability.4 The reasons are that it is difficult to evaluate correctly the price of an asset and that it is uncertain what level of interest rates would be necessary in a given situation to correct asset prices. Those that advocate a more preventive strategy meet this criticism by arguing that, firstly, models for asset prices exist and that it should not be more difficult to use these than to estimate the output gap, for example, which the majority of central banks make use of today. Secondly, by raising interest rates at an early stage when asset prices are starting to accelerate and before the expansion in credit has become too sharp, the central bank can indeed achieve somewhat lower inflation than is desirable in the short term. But one avoids a subsequent collapse in asset prices that could lead to considerably lower output and inflation in the longer term.

Other measures such as so-called moral suasion, whereby the problems are pointed out to the banks and the financial sector, could then also come into question. It is also reasonable for central banks to take some responsibility for real economic developments in addition to those that are judged to affect inflation in the medium term, even if financial stability is not under immediate threat. As I mentioned, the Riksbank has decided to take account of this by disregarding temporary effects on inflation. We also discuss developments beyond the target horizon that normally governs monetary policy. A successful, flexible policy of inflation targeting leads to lower fluctuations in output without giving rise for that reason to higher average inflation. And that is the essential aim of the price stability target. The second question, however, is considerably more difficult to answer. Forecasts of resource utilisation and inflation can be systematically inaccurate because the models and assessments used do not take account of the independent role that asset prices and debt can play. Also, as a result of structural changes, historical relationships may have changed, thus causing the central bank, for example, to come to incorrect conclusions about the output gap and potential growth. This could, for instance, result in a monetary policy that pushes up asset prices and debt too high. For example, the traditional models, which are grounded in an analysis of the real economy, are based on assumptions of rationally behaving households and firms, efficient capital markets and linear relationships.
To better understand how that happened and what it portends, it is useful to think of inflation in terms of three distinct layers of an onion. In this analogy, the onion's outer layer consists of prices of globally traded commoditiessuch as lumber, steel, grains, and oil. They have experienced a surge in demand as the global economy has rebounded from the pandemic downturn. In addition, Russia's war on Ukraine and the resulting actions have caused energy prices to soar. These higher costs get passed on as higher prices for consumers. I am sure everyone in this room has been forced to manage skyrocketing costs on important supplies over the past two years. The middle layer of the inflation onion is made up of products-especially durable goods like appliances, furniture, and autos-that have been affected by severe supply-chain disruptions. Many of you have also had first-hand experience with the impact of shutdowns and supply-chain bottlenecks. There haven't been enough inputs to produce products, and not enough products to sell-all at a time when demand has been skyhigh. Many of you have also had customers lining up at your doors-but not enough products in stock. This imbalance between supply and demand has contributed to large price increases. To give some examples, prices for furniture rose over 13 percent last year, new cars were up nearly 12 percent, and used vehicles skyrocketed an astounding 50 percent. The innermost layer of the onion consists of underlying inflation, which reflects the overall balance between supply and demand in the economy.

Since August, the short- and medium-term outlook for inflation have both improved somewhat, as world oil prices have fallen back very sharply, and sterling has risen. The odds of inflation rising above 3% have lengthened. There are still no real signs of pressure in the labour market. And while it never does to be complacent about pay, in today’s labour market there is quite a difference between asking for higher pay and getting it – even in sectors not exposed to the full blast of global competition. There are, of course, still some risks. But insurance is never costless. In the case of monetary policy, taking out insurance against risks that don’t materialise can inject unnecessary volatility into the economy, with consequences for jobs as well as demand. That is why we have the remit we have. It gives the MPC scope to exercise its judgement. But those are precisely the sort of judgements about which reasonable people can – and probably - should disagree. So it was this month. One judgement about which reasonable people could disagree is how robust the Committee’s treasured credibility might be, if it ever came under real pressure. It is often said that it takes decades to build a high reputation but only a moment to lose it. And there are plenty of business horror stories that seem to prove the point. What moral should a member of the MPC draw?
These arguments make it difficult to specify strict regulatory rules for all seasons. They point to the need for a forward-looking, horizon scanning approach with scope for supervisory judgement and macroprudential discretion (BCBS (2017)). This does not, however, obviate the potential benefits from seeking, over time, to specify clearer mandates and regulatory reaction functions, especially on the macroprudential front. Incentives and Arbitrage  The empirical exercise in the previous section looked at how a set of regulatory standards, applied counterfactually, might have done in spotting stress among a set of banks. Plainly, any such counterfactual 27  All speeches are available online at www.bankofengland.co.uk/speeches  27  exercise is subject to significant caveats. The most important of these is that it cannot take account of how changes in the regulatory regime might themselves have reshaped risk-taking incentives at the time. This Lucas Critique plainly looms large in the field of financial regulation. Financial regulation, like any tax, is very likely to change the behaviour of the party subject to it. This is neither surprising nor, necessarily, undesirable. Indeed, sometimes it is the precise purpose of the regulation in the first place. For example, average risk weights on assets held in the trading book have increased by 45% across a sample of major UK banks between 2006 and 2013. Partly in response, trading books have shrunk by, on average, 24% across these banks and by 45% across the world’s G-SIBs. This was an intended, and probably desirable, behavioural response to a necessary recalibration of regulatory standards.

I try to sum up these principles which guide us not only in weathering this storm, but also in sunnier days, when the role of crisis prevention cannot be overlooked. The first and foremost principle rests upon the authorities’ ability to carry out prompt and preemptive actions with the best set of available information in dealing with changes in the market conditions and practices. Of course, we all know that to be able to identify where the risks are is no longer a simple task in this current environment. But once any significant sign of imbalances in the economy is detected, central banks need to be vigilant and act in a timely manner. True, it is difficult to counter the sentiments of the government, investors and  BIS Review 120/2008  1  the public alike if central banks play their role of “taking away the punch bowl when the party gets going”. In a nutshell, this implies that we central bankers need to be watchful and decisive, not to be swayed by these voices. Second, we also need to maintain flexibility in the conduct of central banking policies. By this, I mean flexibility in terms of policy instruments and also in terms of using innovative methods to deal with the evolving challenges. For example, we may not be able to just rely on, say, using traditional solutions of raising interest rates to address rising inflation, but we may also have to resort to a mix and match of the toolkit available to us.
Andrew Gracie: LAC and MREL – from design to implementation Speech by Mr Andrew Gracie, Executive Director of Resolution of the Bank of England, at the BBA loss absorbing capacity forum, London, 23 July 2015. *  *  *  Thanks for the opportunity to speak. In many ways, resolution is the last major piece of the financial reform agenda and ensuring banks have sufficient loss-absorbing capacity is central to that. Rules in this area remain to be finalised, but the components are coming into place. The binding requirement for European resolution authorities is, from early next year, to begin setting a minimum requirement of own funds and eligible liabilities (MREL) for all EU banks in line with the Bank Recovery and Resolution Directive (BRRD) requirements and European Banking Authority (EBA) Regulatory Technical Standards (RTS). You will have seen that the RTS have recently been published in an “EBA final” version. This will be a binding EU regulation once formally adopted by the Commission. For European G-SIBs, MREL requirements will need to be set consistently with the FSB’s Total Loss-Absorbing Capacity (TLAC) standard. Consultation responses on this are being considered alongside the results of the impact assessment. The standard will be finalised by the time of the G20 summit in November. So no definitive statements today, but I want to address some recurrent issues, including some points that have cropped up in the FSB and EBA consultations.

All these (monetary, fiscal and structural) policies may be especially effective is they are adopted jointly, thus harnessing the positive complementarities that exist between them. As I discussed at the beginning of my speech, profitability has a direct and indirect effect on the Spanish banking sector’s resilience to adverse shocks and, therefore, on the extent to which these intermediaries can contribute to amplifying or smoothing the impact of these shocks on the economy. Consequently, it is essential for Spanish banks to address the challenges which will mark their profitability in future, such as technological change, the reduction of non-productive assets, the strengthening of capital and the improvement of their reputation. Thank you for your attention. 13/13