samchain/econo-pairs-v1 huggingface dataset:
These are more acute where the event – for example, a credit default or a windstorm – being modelled happens infrequently and historical data is therefore scarce, where events cluster rather than occur independently or where the underlying process behind the event – for example the structure of the economy or the natural environment – may have changed, so that history is an unreliable guide to the future. In such circumstances, significant uncertainty about model outputs may call for a more prudent approach. And the temptation to add additional parameters, making models more and more complicated, can often have the perverse effect of weakening model performance. This is why, in addition to scrutinising the technical components of models, we also look at the way they are used within firms. Only a good model can play an important role in a firms’ system of governance. Our expectations of their quality are high as Solvency II specifies that they become an embedded part of the risk management system of a firm. It is therefore not only important for us to rigorously assess them but that senior management have ownership of these models and continuously do the same. The Bank of England takes model approval very seriously indeed and we will not hesitate to hold back approval for the use of models where there are risks that cannot credibly be modelled or data are insufficient.

Thomas Jordan: Real estate, mortgages and monetary policy Speech by Mr Thomas Jordan, Member of the Governing Board of the Swiss National Bank, at the IAZI, Schweizer Immobilienkongress 2009, Zurich, 10 November 2009. The complete speech can be found in German on the Swiss National Bank’s website (www.snb.ch). *  *  *  There is a close interrelationship between real estate, mortgages and monetary policy. On the one hand, monetary policy impacts on the real estate and mortgage market. When the central bank reduces interest rates, this eases the burden on household and company budgets and fosters the demand for real estate. On the other hand, monetary policy also takes account of developments on the real estate market because these can affect economic growth, inflation and financial stability. Once again, the current financial crisis has thrown these interrelationships into sharp relief. Problems in a number of mortgage and real estate markets – in particular in the US and the UK – triggered the financial crisis and plunged the global financial system into a systemic crisis. This impacted on Switzerland’s financial stability and made it necessary to create the StabilisationFund for the transfer of illiquid UBS assets. The Swiss real estate and mortgage market played a positive role in various measures adopted by the SNB to handle the financial crisis. Swiss mortgages played a role in securing Swiss financial stability in the Limmat Pfandbrief transactions, whereby big banks improved their refinancing situation by issuing covered bonds.
Furthermore, while the structure of the domestic financial sector has evolved considerably over time, its level of development still falls short of that of the more advanced EU Member States. Thus, for example, although in the past few years the number of players in the non-bank sector has increased in terms of both number and variety, financial intermediation in Malta remains largely bank-based. Within the domestic banking sector, moreover, two banks together account for around 90% of total loans and deposits. A similar picture emerges in the capital market where the degree of capitalisation, the number of market participants and the volume of turnover are still relatively low. In 2003, for example, the ratio of stock market capitalisation to GDP stood at 37%. While this was higher than in most of the other new Member States, it was only around half of the euro area average. Annual turnover was even lower, hovering around 4% of GDP and 12% of stock market capitalization.

Launch of new non-standard measures and their impact Faced with this critical situation, the Eurosystem adopted a two-pronged strategy. First, it offered ample liquidity at very long maturity to prevent funding issues from igniting a potentially destructive deleveraging process. Second, it widened the eligible collateral to facilitate access to the liquidity and the provision of credit to SMEs. Specifically, on 8 December 2011, the ECB announced the following initiatives. First, the ECB said it would launch two longer-term refinancing operations (LTROs) with a maturity of 36 months. The LTROs were to be conducted as fixed-rate tender procedures with full allotment, with the interest rate fixed at the average rate of the main refinancing operations over the life of the respective operation. To increase the flexibility of the operations and to cater for different liquidity needs, counterparties were offered the option to repay after one year any part of the allotted amounts. Second, the ECB decided to increase collateral availability by allowing national central banks, among other things, to accept as collateral additional performing credit claims (i.e. bank loans) that satisfy specific eligibility criteria. As an example, the Banque de France has accepted real estate residential loans with a mortgage or first-rank privilege, credit claims denominated in US dollars and export credit claims guaranteed by Coface.
Mark Carney: Prospects for the UK labour market Speech by Mr Mark Carney, Governor of the Bank of England and Chairman of the Financial Stability Board, at the 146th Annual Trades Union Congress, Liverpool, 9 September 2014. *  *  *  President and Congress. It is a pleasure to be in Liverpool today to discuss the prospects for the UK labour market. The growth and distribution of jobs and incomes matter to everyone. Employment does much more than provide the means to support workers and their families; it is essential to personal fulfilment and human dignity. Part of that dignity is being paid a living wage. Over the past year, the Bank of England has ensured that it pays all of its 3,600 staff at least the living wage. And we have recently brought all our contracted service staff in central London up to the London living wage. We are in the process of our final review. But I can announce today the Bank’s intention to become an accredited Living Wage employer by the time of the next TUC conference. Of course, the Bank of England’s responsibilities for promoting the good of the people of the United Kingdom go much further than being a responsible employer. We manage monetary policy to achieve price stability: low, stable and predictable inflation. And we promote financial stability by regulating and supervising financial institutions as well as by taking targeted actions to insure against unsustainable indebtedness, as we did earlier this year for the housing market.

The number of additional people wanting to work overwhelmed the longer-term effects of population ageing, which, all else equal, would have been expected to have removed around half a million people from the labour force (Chart 10). This expansion of the workforce is being driven mainly by women and older workers. Before the Great Recession, between 46% and 83% of those in the 50- to 64-year-old age cohort were active. Now it is between 60% and 89% (Table 1). In part this reflects a continuation of past trends within age cohorts, but it goes much further. 8 The greater risks and financial burdens that many are now facing are likely to be important drivers of the recent increase in the labour force. Changes to pension arrangements have encouraged people to work longer. 9 State pension ages are rising, and the default retirement age has been abolished. 10  6  The average of European Commission, OECD and IMF estimates of structural unemployment have increased from 8.8% in 2008 to 10.3% in 2013, reported in Draghi, M (2014), “Unemployment in the euro area”, Speech at the annual central bank symposium in Jackson Hole, August. 7  There is evidence of there having been an increase in skills mismatch both in the rightward shift of the euroarea Beveridge curve and as indicated by skills mismatch indices. See Draghi (ibid.).
If the participants were to provide confidence bands around their paths, they probably would be very wide because the economic outlook is uncertain and the linkage between the instrument of monetary policy – the federal funds rate target range – to financial market conditions is loose and variable. In conclusion, I believe that the FOMC is continuing to make progress towards our dual mandate objectives. However, I have become somewhat more uncertain about the growth outlook given the lack of a sharp rebound in economic activity in recent months from the weak first quarter. With respect to inflation, as long as we see further improvement in the labor market and anchored longer-term inflation expectations, I am somewhat less worried that inflation will stay too low. Thus, I continue to expect that monetary policy normalization is likely to begin later this year. 4  Thomas Laubach and John Williams (2003), “Measuring the Natural Rate of Interest,” Review of Economics and Statistics 85(4), 1063–70. The FRBNY DSGE model also estimates that the natural rate of interest is currently close to zero. See Marco Del Negro, Marc Giannoni, Matthew Cocci, Sara Shahanaghi and Micah Smith, Why Are Interest Rates So Low? Liberty Street Economics blog, May 20, 2015. 5  With the benefit of hindsight, one could argue that the Federal Reserve should have raised short-term interest rates more aggressively over this period. 6  BIS central bankers’ speeches  Longer-term, I expect that the trajectory of short-term interest rates after lift-off will likely be relatively shallow.

This combination of slow output growth and continued job gains has meant that productivity growth has been unusually weak, with non-farm business productivity declining significantly during the past two quarters and rising by only 0.3 percent over the past year. It also implies that the future path of productivity growth will be important in determining the outlook for employment growth and the prospects for further progress in U.S. labor market conditions. Because it is unclear exactly why productivity growth has slowed recently, it is difficult to be confident about what it will do in the future. One reading of the data is that some of the slowing seems likely to be persistent. For instance, the weakness in capital spending evident during much of this economic expansion means that the contribution to productivity from capital deepening has dropped sharply in recent years. 2 Also, the U.S. labor market appears to have become less dynamic – perhaps due, in part, to an older workforce. Less movement of workers across jobs could lead to a less efficient allocation of workers’ skills, which would hurt productivity growth. That said, it seems unlikely that productivity growth will remain as weak as it has been over the past year. There is considerable evidence that technological progress continues at a healthy pace. Just look at the advances that have occurred in health care, oil and gas extraction and the development of smartphones.
Such transparency would also allow regulators to monitor and identify concentrations and trading patterns that might be related to market manipulation. In addition, if the public had more detailed information about the OTC derivatives positions of market participants, market discipline would be enhanced by providing market participants with information that would help assess risks during times of stress. Uncertainty about the valuations of complex derivatives due to the lack of price transparency was a factor that exacerbated the financial crisis. Large financial institutions became less willing to engage  BIS Review 28/2010  3  with one another because of an inability to assess the size of the exposures or to value the opaque positions held by their counterparties. My third regulatory reform concern is that the Federal Reserve’s role in regulatory oversight will be excessively constrained going forward. This threatens to throw the baby out with the bathwater. The Federal Reserve made mistakes, as did others, in the run-up to the crisis. We are fully cognizant of that, which is why we are revamping how we oversee the financial system and supervise large, systemically important institutions. To cut back our bank supervisory role significantly would be a mistake because macroprudential supervision is important; the Federal Reserve is particularly well suited to this role; and because bank supervision helps inform the Fed in its lender-of-last-resort role and in the conduct of monetary policy.

Macroprudential supervision, which I characterize as the top-down assessment of risks throughout the financial system, is essential because it addresses the problem of gaps in the regulatory regime and the regulatory arbitrage that such gaps can encourage. In addition, macroprudential supervision is needed because the financial system is interconnected. As amply demonstrated during the crisis, siloed regulatory oversight is problematic. Supervisory practices must be revamped so that supervision is also horizontal – looking broadly across banks, nonbanks, capital markets, payment and settlement systems and geographies. In the United States, the Federal Reserve is well suited to play a major role in such oversight because it alone has the expertise in three major aspects of the financial system – banking, capital markets, and payments and settlement systems. It also currently has oversight responsibility for most of the firms that one would view as systemically important. In evaluating what the Federal Reserve should do, it is important to recognize that the Federal Reserve’s three primary roles – monetary policy, the lender of last resort function, and supervision – are closely interlinked. Each one of these activities helps the Federal Reserve perform the others. For example, the information we collect as part of the supervisory process gives us a frontline, real-time view of the state of the financial industry and broader economy. Monetary policy is more informed as a result. Only with this knowledge can a central bank understand how the monetary policy impulse will be propagated through the financial system and affect the real economy.
Strong productivity growth and low wage growth led to a sharp increase in corporate profitability. Expectations of a continued rise in profits spurred sharp growth in investment. At the same time, advancing equity prices boosted household wealth. Households could reduce their current saving and still increase wealth, allowing them to use a growing share of income for consumption. BIS Review 19/2001  3  But imbalances heightened. The fall in the household saving ratio was based on gains in the stock market, which after a time reflected unrealistic expectations of future earnings. Corporate debt increased sharply and current account deficits grew larger. In spring last year, equity prices declined. The Nasdaq index showed a particularly strong decline. The index continued to fall through autumn and winter, with the overall decline nearing 60 per cent. The more broad-based stock indices have also shown a decline, albeit a more moderate one. Growth has been expected to slow this year for some time. In spite of this, the turnaround in the US economy was surprisingly strong and came faster than expected. Consumer and business confidence indicators have shown a marked fall. The Federal Reserve has sought to counter the downturn. Interest rates were lowered by 1 percentage point in January. The Government has announced substantial tax cuts. This may moderate the downturn, but hardly bring it to a halt. Consolidation in the household and business sector may imply lower consumption and investment for a period.

Research, including the PRA’s own analysis of survey responses from UK firms, suggests that the fixed costs of implementing new requirements can be proportionally higher for small firms than for large ones when measured as a fraction of a firm’s assets.7 What this tells us is that there are economies of scale when it comes to compliance costs and that some costs fall relatively heavier on small firms than on large firms. At the same time, separate research by Bank staff shows that prudential requirements that are well-matched with the risks that cause large banks to fail are not so well-matched with those that cause small banks to fail.8 Putting this evidence together, we can ask whether there are requirements which are relatively more costly for small firms to implement but which deliver fewer benefits than when they are applied to large firms. And that is what we do in this Discussion Paper. Having identified requirements which do not make a material  6  Amadxarif et al.
Page 15 sur 14 i  Delors J., Speech on the occasion of the opening of the academic year at the College of Europe, “50 ans Collège d’Europe”, September 1999 ii European Commission, Eurobarometer 93, October 2020 iii De Tocqueville A., Democracy in America, 1840 iv Blanchard O., “In defense of concerns over the $ trillion relief plan”, Peterson Institute for International Economics, February 2021 v Gordon R. J., “Is U.S. Economic Growth Over? Faltering Innovation Confronts the Six Headwinds”, National Bureau of Economic Research, August 2012 vi PatentSight vii Hanushek E. A. and Woessmann L., “The Economics of International Differences in Educational Achievement”, Handbooks in Economics, Vol. 3, 2011 viii Spain and Italy have the lowest PIAAC scores (respectively 252 and 250) in terms of adult literacy with France third but slightly above (262) vs. Netherlands (284), Norway (278) and Sweden (279). France has a 22% share of low-skilled workers, Spain and Italy around 27%, Sweden and Norway around 13%. Share of high-skilled workers: France 8 %, Spain 5 %, Italy 3 %, Sweden 16 %, Norway 14 %. Based on PIAAC 2012 and OECD 2013. ix The share of high-skilled adults among the population in the Netherlands, or in Finland, is more than twice as large as in France (17% and 19% respectively vs. 8% in France).

Therefore, HKMA’s efforts to build a strong banking sector, including the distribution of maturity risks through the mortgage corporation and the creation of an efficient RTGS payment system are all necessary efforts to prevent an external shock from affecting the banking system. In particular, the RTGS system allows the HKMA to monitor closely banks’ settlement transactions on a real time basis. Banks would also have to fund their settlements and provide ample liquidity on a more prudent basis. All these are in line with our objective of making the markets more efficient to enable the free market to clear aggregate supply and demand at an equilibrium price quickly. 36. But we should always remember that there is no free lunch. The fixed exchange rate regime implies a flexible economy to adjust to the exchange rate. Hong Kong has high flexibility, attributable to a high savings rate, entrepreneurial spirit and high labour productivity. A fixed exchange rate is a discipline on both the private and public sectors: the economy adjusts to the exchange rate, not the other way around. We do not pretend to say that a fixed exchange rate is the perfect system, because even the IMF admits that there is no perfect system. But it is the best system for Hong Kong. The linked exchange rate system is here to stay. Conclusion 37. As one of the contributors to the World Bank study on the Asian Miracle, I have never considered the Asian growth story as a miracle. Paul Krugman called it perspiration, not inspiration.
However, in contrast to the uncertainties created by securities valuations in 2008 and 2009, banks should largely be in good positions to forecast the loan losses facing them, using their internal models, and they should thus be in a better position to manage the potential future write-downs without unexpected capital shortages. The second risk that we have identified within the euro area financial system relates to vulnerabilities of financial institutions associated with concentrations of lending exposures to commercial property and to Central and Eastern European (CEE) countries. You may recall that, in the December issue of the FSR, we drew your attention to these two types of exposures. Since then, in the commercial real estate sector, prices and rents have continued to fall in most euro area countries, although at a moderating pace. Reflecting this deterioration, estimates of losses facing banks on their commercial property loan portfolios had been revised upwards by almost 50% over the past six months, as shown in Chart 7 on slide 12, and concerns remain about concentrations of such exposures among some euro area banks. This increase in estimated losses on commercial property loans is expected to more than offset the recovery in the valuations of commercial mortgage-backed securities held by banks in the euro area. As regards banks’ exposures to the CEE region, since December, the economic outlook in the region has improved.

We will continue to make Singapore an attractive city where foreign talent will want to come to work and live and where they will feel at home. Conclusion Let me conclude. ASEAN is entering a new and exciting phase. Individually, each ASEAN country possesses unique strengths and offers unique opportunities. Together, an integrated and revitalised ASEAN holds great promise to become the third engine of growth in Asia. Singapore will contribute to the power of this engine. I wish you a pleasant evening and hope that you will have a fruitful stay in Singapore. Thank you. BIS Review 47/2007  3