samchain/econo-pairs-v1 huggingface dataset:
Finally, I would like to state that living and thriving within ecological limits is also about coming to terms with our own limits as human beings, and acknowledging our own mistakes. In an age of rampant ecological destruction and rising socioeconomic inequalities, we (policymakers, central bankers, economists, and so on) should also acknowledge the limits of the analytical frameworks and policy proposals that we have been using. In this context, The Green Swan reminds us that ecological risks (including but not limited to climate change) are so complex that we will never be able to accurately measure them, meaning that we should learn by doing. After centuries of economic development during which we did not care so much about the limits of the Earth (its resources and its ability to absorb pollutions such as carbon emissions), it is time to pause and think about what we have done. In ancient mythology Prometheus, who stole fire from the Gods ‐ i.e. encouraged energy consumption ‐ is severely punished, for eternity. Without envisaging such a punishment, we should react positively and decisively to the warnings we are receiving from scientists andfrom the authors of the Green Swan. Three underlying messages are enshrined in The Green Swan: acknowledging our multiple ecological crises beyond climate change; cooperating and coordinating our actions; and learning to live and thrive within limits.

The diversity in funding brought by market-based finance, as an alternative to retail banking, means that peer-to-peer lending has potential to provide some consumers and small businesses with affordable credit, when retail banks cannot. At the same time, this implies that borrowers in some segments may be placing increased reliance on this source of funding. How stable this funding will prove through-the-cycle is not yet clear, as the sector’s underwriting standards, and lenders’ tolerance to losses, have not been tested by a downturn. Due to its small scale and business models, the P2P lending sector does not, for now, appear to pose material systemic risks. That said, as a general rule, it always pays to monitor closely fast-growing sources of credit for slippages in underwriting standards and the promotion of excessive borrowing. Moreover, it is not clear the extent to which P2P lending can grow without business models evolving in ways that introduce conventional risks, including maturity transformation, leverage and liquidity mismatch, or through the use of originate and distribute models such as those seen in securitisation in the 2000s. Were these changes to occur, regulators would be expected to address such emerging vulnerabilities. In wholesale banking and markets, robo-advice and risk management algorithms may lead to excess volatility or increase pro-cyclicality as a result of herding, particularly if the underlying algorithms are overly sensitive to price movements or highly correlated.
To illustrate this uncertainty, the Riksbank is considering the use of a so-called variation band for the CPIF outcomes in its future communication. The variation band is +/- 1 percentage point around the target of 2 per cent, which captures almost three -quarters of CPIF outcomes since 1995. The design of the variation band is thus linked to the historical development of inflation and should therefore be reviewed as necessary. As I see it, the changes now being considered do not entail any change to the monetary policy being conducted. For some time, the CPIF has functioned as the Riksbank’s operational target variable. We are now considering formalising this practice by allowing the inflation target to be defined as an annual change in the CPIF of 2 per cent. The aim of monetary policy will continue to be the stabilisation of inflation at 2 per cent. In other words, the proposed variation band is not a socalled target range. 1 This means that the Riksbank will always strive towards 2 per cent inflation, regardless of whether inflation is inside or outside the variation band. Our deliberations are now being referred for consultation. If we adopt a new target variable and variation band, these changes are expected to be applied as from the autumn. Unusual times create new challenges The Swedish economy is going through unusual times. We have good growth, high resource utilisation and inflation is rising and approaching the target of 2 per cent. But despite good economic activity, monetary policy is still expansionary.

At the same time, we plan activities that should increase the awareness of the population about possible risks in the banking services domain as a very important aspect for the bank clients. We especially welcome the initiative for organizing the European Money Quiz for the youth of our country, which will be organized for the first time this year, hoping that it will become a traditional one. This way, we believe we will encourage greater commitment among young people on financial issues, and consequently, it will contribute to raise the level of their financial literacy. In 1/2  BIS central bankers' speeches  this context, I would like to emphasize that the National Bank supports the process of preparing students by supplying them with various educational materials, by holding today’s training for the teaching staff, and later by organizing special preparatory activities for the national winners. It is of great importance that the European Money Quiz, an initiative of the European Banking Federation, unites us all, the financial regulators and the banks, MES and the educational institutions in the country, in order to attain a very important goal, that is improvement of the skills of the youngest in the area of finance, which contributes to improving their knowledge and ability to face future working and life challenges. At the end, it certainly contributes towards having educated and capable youth, with wide knowledge in the contemporary era, ready to grow into a capable work force, a driver of the economy in the coming years.
And while the deficits are running, the policy is continuously evaluated with regard to how it relates to the target path and how effective it appears to be.22 Although a time contingent strategy may be somewhat less attractive to economists than a state contingent one, it could have some advantages: it would probably be easier to implement and manage politically, as it has a predefined clear sunset clause. As long-term sustainable public finances are, of course, still a basic precondition, once the period is over, or once the set goal has been achieved, a switch is made to keeping the debt stable in relation to GDP again. Of course, even if a time contingent rather than state contingent strategy is chosen, the risk exists that politicians will start to consider, over time, that the floodgates have been opened or that it will be too difficult to end the expansionary policy. However, if the rules are set out in advance in a formal and clear framework, these risks should be manageable. After all, in Sweden, we have shown for many years now that we are quite good at continuously evaluating and debating our economic policy and sticking to frameworks that we have set up to fulfil long-term economic objectives.23  21 Such a policy would have some similarities with automatic stabilisers. These are also state contingent in the  sense that they start to work when something special occurs, for example when unemployment starts to rise.

Vítor Constâncio: Implications of the Single Supervisory Mechanism (SSM) on the European System of Financial Supervision (ESFS) Speech by Mr Vítor Constâncio, Vice-President of the European Central Bank, at a Public Hearing on Financial Supervision in the EU, Brussels, 24 May 2013. *  *  *  Ladies and gentlemen, Thank you very much for inviting me to open this session on the implications of the Single Supervisory Mechanism (SSM) on the European System of Financial Supervision (ESFS). At present, the only answer that can really be given on this issue is, “it depends”. While the SSM will in principle be just another supervisor around the table, its impact on the ESFS will clearly depend on how many Member States eventually decide to join. In our view, the more Member States take part, the better it will be for the functioning of the ESFS and the single market more generally. First, having as many as possible countries in the SSM will reduce the scope for coordination failures. This will in turn facilitate the coordination function of the European Banking Authority. Second, a larger SSM is the best way to safeguard the single market in financial services. The more membership overlaps between the EU and the SSM, the more consistent will be the application of supervisory and regulatory practices.
Its behavior has been atypical compared to previous episodes following a recession. This fall was especially marked in the euro area, from 2.7% in 2011 to 0.8% in December 2013. Recently, developments in the euro area have started to diverge downward from some other advanced economies such as United States and Canada. The sources and reasons for such a low inflation are complex and multiple. There are many uncertainties. Temporary and global factors may be at play in the euro area with import prices going down. I also think there are more permanent and deep forces pushing inflation down both at the euro area and global level. Besides there is still an important unused capacity – commonly labeled as “slack” -in most advanced economies, as demand has not yet caught up with its pre-recession levels and firms, as a consequence, have not recovered their pricing power. Commodity price inflation has been trending down recently. This is true both for energy and food prices. Commodity prices have a global impact and react very amply to small changes in supply and demand equilibrium. They act as amplifiers and transmitters of disinflationary pressures. Powerful headwinds – and disinflationary forces- are coming from the deleveraging process especially in the euro area, due to the importance of the banking sector and the amplitude of its balance sheet adjustment. We are working very hard to repair the bank-lending channel in the euro area.

The Governing Council has made explicit in its communication that we expect the key ECB interest rates to remain at current or lower levels for an extended period of time. We have chosen not to be specific either about the date or the conditions. The euro area is composed of diverse and somewhat heterogeneous economies, as shown by the very different unemployment rates. And as I said, it is undergoing a phase of rapid structural change. The relationships between major economic variables are therefore very complex and uncertain and it may have been very confusing to tie monetary policy moves to any set of pre-specified dates or parameters. As it stands, forward guidance has been quite successful in stabilising the short-term part of the yield curve, thus bringing significant monetary accommodation. Some concluding remarks Let me end with two general remarks on the future and limitations of monetary policy. In the future, after many years of implementing non-conventional policies, one may wonder whether central banks will ever return to their pre-crisis framework. Is inflation targeting dead and non-conventional the “new normal”? I can only offer some conjectures. While the pre-crisis framework has been transformed, maybe irreversibly it has, in some aspects, also been strengthened: all central banks have now adopted a quantification of their price stability objective; everyone is aware that symmetry in implementing their mandate is crucial; everyone is putting increased emphasis on communication to impact monetary and financial conditions.
we can buy too few imported goods for what we export. This could be corrected by strengthening the krona through a stronger nominal exchange rate or by price increases on goods subject to competition being kept lower than those in other countries. It is sometimes claimed in the economic debate that non-recurring effects of deregulation and increased competition could be utilised by the Riksbank altering its price stability target from 2% to a lower figure. However, this would involve temporary effects influencing the target formulation, which would erase the stability in the target formulation that has an intrinsic value. It is still possible to strengthen purchasing power with an unchanged operational target formulation by a nominal appreciation of the krona. It has sometimes been claimed that the “new economy” could lead to completely new economic relations. I see no reasons for such a change. It is more likely that technological developments lead to reality approaching the simplified assumptions that form the basis of many economic models, such as a large measure of competition and low transaction costs. Thus, most of the models the Riksbank uses today would function equally well or better if structural changes were to occur more rapidly in the future. Nor do I see any reasons why the Riksbank’s intellectual framework on monetary policy would need to be fundamentally changed if we were to have a period of strong growth in productivity.

The low interest rate level is facilitating the servicing of high household debt and house prices are high. Households in Norway are more confident about the future than households abroad. Since October last year, the key policy rate has been raised by a total of 0.75 percentage point to 2 per cent. The low interest rate level will in itself contribute to pushing up demand. Inflation expectations are probably stable and real interest rates are very low. At the same time, the krone exchange rate is very strong in real terms. The projections published in the June Monetary Policy Report suggest that the key rate should be held at today’s level to around the end of the year and then gradually be raised to a more normal level. 2  BIS Review 113/2010  In our Monetary Policy Report we present our own forecasts for the key policy rate ahead. The central banks in New Zealand and Sweden communicate their interest rate expectations in the same way. Some central banks use more qualitative statements, while others do not provide any indication as to future interest rate setting. Interest rate forecasts as a monetary policy instrument When preparing our interest rate forecasts, we give weight to the following main criteria: 1. The interest rate should be set with a view to stabilising inflation at target or bringing it back to target after a deviation has occurred. 2.
[8] In many cases, this involves redefining or re-expressing the underlying problem in terms of more controllable (or at least measurable) outcomes or objectives. And, in association with this process or redefinition, responsibility for addressing the problem is often transferred from the political domain – where the complex interdependencies can lead to a ‘log jam’ in decision making owing to the impossibility of reconciling various competing interests – to supposedly dispassionate and independent experts or technocrats. The parallels with efforts to achieve price stability are obvious. As former Vice-Chairman of the Federal Reserve Board Alan Blinder once famously remarked, the economically meaningful definition of price stability is an environment where the economic decisions of firms and households are neither delayed nor distorted by the incidence of and/or concerns about inflation. [9] Judging whether this has been achieved is inevitably somewhat subjective. And, given the multitude of behaviours, shocks and policies that influence price developments in the shorter term, one can easily see how the achievement of price stability in a truly complex economic environment has the character of a ‘wicked problem’. Over recent decades, the policy design response to meet the challenges created by such complexity has been to ‘tame’ that wicked problem. Price stability is operationalised as an inflation target – an objectively achievable rate of inflation in a particular price index. Through the institutional mechanism of independent central banks and MPCs, technocrats are charged with solving the ‘puzzle’ of achieving the inflation target through employing the potentially powerful, but specific, tool of monetary policy.

Page 1  Inflation is a ‘wicked problem’ − speech by Huw Pill Introductory remarks given at the Warwick Think Tank, Warwick University  Page 2  Published on 16 February 2023  Speech Good evening everyone. It is a great pleasure to be here at the Warwick Think Tank today. Thanks to the organisers for the invitation to participate. I am sure that you have many questions about the outlook for the UK economy. We all do. I am looking forward to discussing those in a moment. But before we turn to that discussion, I thought I would kick-off with a few remarks about the framework within which monetary policy works. The first thing to say is that the objective of monetary policy in the UK is very clear. The Bank of England’s Monetary Policy Committee (MPC) has the objective of price stability. Through achieving price stability, monetary policy creates an environment in which firms and households can make the longer-term plans and investment decisions that generate the innovation, dynamism and productivity that ultimately drive growth and prosperity. Price stability has been operationalised in the form of an inflation target of 2% for the consumer price index (CPI). This target holds at all times. The MPC therefore needs to achieve this target on a sustainable basis: it is not a target for one moment or horizon, but must be achieved on an ongoing basis over the medium term.
In the UK, the Bank has to prepare resolution plans for around 200 banks and building societies, based on information provided by the firms. But it is a necessary business. Non-financial firms can fail and go into insolvency without widespread damage to the economy and financial system. Banks, once they get above a certain size, cannot. (iv) Loss absorbency The fourth plank is to ensure in advance that banks are financed in a way that supports resolution. This is perhaps the most difficult part of the puzzle as it goes to the heart of that ever difficult question of ‘who pays?’ Clearly, the shareholders stand first in the line. And by strengthening bank capital we have ensured that the shareholders can absorb a much greater amount of loss.10 But, unless we go back to the concept of unlimited liability we must assume that if a bank is unable to continue operating, the shareholders’ capital has effectively been exhausted. And clearly, the insured depositors – whose losses are covered by the rest of the industry – stand last in line. In between, there is an army of bank creditors, ranging from unprotected depositors, corporates, interbank liabilities, repos, and derivatives, to trade creditors, pension liabilities, contingent liabilities, tax liabilities, and, of course, the unsecured wholesale funders of the bank who have bought longer-term bank debt. 9  See Herring and Carmassi (2014). 10  See Brooke at el (2015).

The public authorities of 14th century Barcelona hit upon a novel policy approach to the liability of bank owners – not only would bankers who failed be publicly vilified by the town crier, they would be forced to live on bread and water until they repaid their creditors.3 How to deal with failed banks is of course only part of a much larger public policy issue – how to deal with the failure of commercial enterprises generally. Arguably, the development of the limited liability corporate body – in which the owners’ liability is limited to their  1  See Button et al (2015). There was a reluctance from banks and from depositors to limit shareholder liability. Unlimited liability, it was thought, reassured depositors and noteholders that their claims were safe. So hybrid solutions were established in which shareholders’ liability was capped at some multiple of the capital they had invested, or in which they were subject to a call for extra capital if the bank got into trouble. 2  3  See Usher (1943). BIS central bankers’ speeches  1  investment – and corporate insolvency, is one of the most important foundations of modern capitalism. But banks are different for two reasons. First, their underlying business of maturity transformation means they depend on confidence. Loss of confidence in one bank can quickly become a run on all banks. And given their leverage and interconnectedness, failure of one bank can lead to failures of others.
This means that more people have to change workplace or sector, which in turn requires considerable adaptability. More jobs have to be created in, for example, the services sector, perhaps in completely new firms. Consequently, high growth does not necessarily imply increased job security in the traditional sense. Instead, high growth may reflect rapid change and high productivity growth, and that more jobs are disappearing in some parts of the economy at the same time as new jobs need to be created in other areas. This pattern has been observed in the United States in the debate on jobless growth. 4  BIS Review 65/2004  This trend is reinforced by firms’ increased possibilities to outsource parts of their production to other countries, a phenomenon that has recently been getting more and more attention in the economic debate. Several studies from the United States, where outsourcing is considered especially extensive, show that the direct effect on employment is fairly small. However, there is an indirect effect since the pressure to change increases, i.e. the need for staff decreases in some sectors but rises in others. In such a time of rapid structural change, the cost of low labour-market mobility increases, while it becomes more important that new firms and jobs are created. More people will find themselves in a transition between companies and between sectors, and sometimes between residential locations.

He instructed bank regulators  1  These remarks were given at the Institute of Chartered Accountants in England and Wales Information for Better Markets conference on 19 December 2011, in response to a paper by Christian Laux. Both the paper and remarks are forthcoming in Accounting and Business Research (July 2012). 2  Simonson and Hempel (1993), Plantin, Sapra and Shin (2008), Haldane (2010). BIS central bankers’ speeches  1  to revert instead to what today would be called amortised cost. This was regulatory forbearance on a system-wide scale. And a suspension of fair value accounting rules lay at its heart. Fast forward half a century. During the 1970s, fair value principles began again to extend their reach. The United States Savings and Loans crisis in the mid-1980s provided further impetus. One of the major contributors to the downfall of the thrifts was amortised cost valuation conventions, which hindered the recognition of interest rate risk. This allowed systematic over-reporting of the health of the thrifts. In response, the United States developed and introduced a prompt corrective action regime, the Federal Deposit Insurance Corporation Improvement Act (FDICIA), with fair values at its core. But the wind was again about to shift direction in response to financial pressures. From the early 1990s, the United States was facing severe financial headwinds. A real estate crash placed US bank balance sheets under acute stress.3 Falling asset prices, marked to market, added to these financial pressures. Questions about fair values resumed.