samchain/econo-pairs-v1 huggingface dataset:
However, experience has shown that when a country requests such assistance, the national authorities tend to blame European institutions, including the ECB, for having pushed them to do so. “Europe” thus becomes a scapegoat and this may fuel strong – although unjustified – anti-European sentiment in the countries concerned. So governments have a natural inclination not to request financial assistance at an early stage. The second thing that has gone wrong has been the implementation of the Greek programme of reforms. Reform fatigue set in at an early stage and it probably went unnoticed for a while. Member States adopting IMF/EU programmes have to remain firmly committed to very specific measures, which need to be acted upon from the outset. Monitoring has to be strengthened. I will not elaborate on these two first issues but – being here in Berlin today – I would like to focus on the third issue which has not gone well, in my opinion, namely the whole discussion about private sector involvement. The point I would like to make is that having the private sector actively involved in preventing and resolving sovereign crises is a good idea. However, the practical implementation of this idea is fraught with complications and, if done unwisely, may actually be very damaging, and turn out to be more costly for taxpayers. The events of recent months seem to confirm my views.

Renewed public comments about a possible “soft restructuring” or “reprofiling” of the Greek debt in April this year produced an immediate spike of the spreads on Greek bonds, with strong contagion effects to other euro area countries (see Chart 1). To sum up, private sector involvement, if pursued imprudently, i.e. automatically rather than as the last resort:   does not help save taxpayers’ money; indeed, it may cost them more money;    favours short-term speculation over long-term investment, which is certainly undesirable;    discourages and even delays any new investments in a country implementing an adjustment programme. 8  4  See FT, 24 April 2011. BIS central bankers’ speeches  Given that such a system – of preventive PSI – does not exist elsewhere in any other parts of the world, the euro area would be seen by investors as handicapping itself and it would feel the effects of discrimination. The euro area, in terms of both sovereign and private investments, would become less attractive. The financial system in particular would be highly exposed to sovereign restructuring. It would also put the euro area at odds with the rest of the international community. Given the damage that such a system would inflict on other investors and countries, the other shareholders may be discouraged from supporting IMF programmes in the euro area. This is how a good idea can turn into bad practice. Continuing to pursue it suggests strong masochistic tendencies. How should the problem be solved?
Potential drawbacks of the new framework on a small open economy  But would the introduction of the euro be only good news for the Swiss economy? A revolution is always associated with risks and uncertainties, thus it should not surprise you that we were concerned about potential negative developments. In the mid-1990s, as the European monetary construction was under way, we tried to imagine the potential negative effects of the euro introduction on the Swiss economy. Our goal was to be prepared to face difficult situations. This is what central bankers are paid for, after all. We had identified three main challenges: (a)  First, the major risk was that the introduction of a European currency would destabilize the Swiss franc. In the past, the Swiss franc, along with the German mark, played the role of a safe haven currency whenever monetary crises occurred. With the disappearance of the German currency, the Swiss franc would find itself first in line of fire in case of a dollar crisis, for example, or even worse, in case of doubts about the stability of the European currency. (b)  Second, we risked seeing the euro being increasingly used as a means of payment in Switzerland. As the common currency was about to become the main unit of account for our exports, we feared that domestic firms might adopt the euro as well, so as tominimize exchange rate risks. Some were even imagining wages being paid in euros.

Experience has taught us, however, that bold visions hardly ever have a chance of being realised. It seems to make more sense to implement what has been recognised as appropriate in small, purposeful steps. Reform of the monetary constitution A monetary constitution comprises all regulations concerning the currency on a constitutional and statutory level. Our present monetary constitution still dates largely from the time of the establishment of the Swiss National Bank almost a hundred years ago. We are currently in the process of adapting it to modern requirements. These endeavours bear a direct relation to the reform of our fundamental law, the Federal Constitution, which was recently brought to an end. A central issue of these reform efforts, to which I shall restrict myself in the following remarks, concerns the severance of the Swiss franc’s link to gold. In actual practice, this link has been outdated for decades. It is, moreover, in direct contradiction to our commitments as a member of the International Monetary Fund. With the severance of the gold link, we will be free to act according to our own discretion with respect to the evaluation and utilisation of our gold holdings. The question therefore arises how to use this freedom of action. In attempting to answer this question, one must bear in mind that monetary reserves are of course indispensable for a central bank in fulfilling its tasks. This is particularly true in the case of a small, open economy with a significant financial sector.
Yet the stability and growth pact, which helps to ensure budget discipline in Euroland, imposes restrictions on the fiscal policy of the individual members. By contrast, interventions in the field of fiscal policy on a European level would hardly be in contradiction to the stability and growth pact. For a long time to come, however, the Union's budget is still likely to be too modest to bring about the desired effects within the Union by means of a stabbility-oriented fiscal policy. For the time being, fiscal policy is therefore not a realistic option. Finally, one should take into account that by its very nature a monetary union promotes the division of labour between the participating countries. Instead of being evened out, differences between countries may thus become more acute. In fact, regional specialisation in the United States is more pronounced than it currently is in Europe. Major industries have joined together in national clusters - car manufacturers in Detroit, software producers in Silicon Valley, the film industry in Hollywood. One might argue, in this context, that the Fed in Washington faces the same problems as the ECB in conducting a common monetary policy that fits economically diverging regions. However, there are two remarkable differences between the United States and Euroland. First, the US labour market exhibits a higher degree of flexibility, and second, the United States are a federal state with a large budget and fiscal policy power of its own. The European Union (EU) is still far removed from all this.

There has also been some concern that the euro would make the Swiss franc obsolete as a means of payment, but this is very unlikely. These are, in a nutshell, some of the main conclusions from a Swiss perspective, on which my remarks today will focus. Moreover, I will address the consequences for the SNB’s monetary policy. In the light of current experience, the SNB will undoubtedly continue to conduct an independent monetary policy. But before turning to the implications for Switzerland in more detail, let me briefly recall the principal pros and cons of creating a monetary union. 2. Benefits and costs of a monetary union  The launch of a common currency promises benefits and causes costs. Since the benefits are mainly the result of structural improvements and the costs are due largely to the greater difficulty in steering inflation and economic activity, it is difficult to offset the advantages of a monetary union against its disadvantages. Whether a monetary union on balance creates benefits or causes costs depends on a whole range of factors, not least among them the characteristic features of the common currency area. What is theoretically uncontested is the following: in order to form a so-called optimal currency area, the member countries must be structured along similar lines or exhibit a high degree of flexibility.
The second issue concerning resolution I want to say something about is the allocation of losses to creditors and to the official sector from support operations. The formal position varies between support for insured deposits and for other creditors. Deposit insurance, and risk-based premia Insured deposits are, of course, insured. It is often assumed that governments stand behind such schemes. But governments do not have pick up the final tab. Such schemes are ultimately paid for by the banks themselves. Whether schemes are funded or not, governments have a legal right to make recoveries from the residual banking industry over the succeeding years. There is, still, a question of the basis of the levy. This arises most clearly in a system which guarantees 100% repayment up to some meaningful amount (now £ in the UK). While it has many merits, complete cover affects the dynamics of the market place in a potentially unhelpful way. It makes it easier for banks to pay up for deposits. The implied signal that a bank offering a high return would be taking greater risk than others, as it would have to, does not matter to the depositors. They are covered, and so are induced to place their money wherever they can achieve the best returns. That is a recipe for imprudent risk taking. One possible way of addressing it would be to make such risk-taking banks pay a higher levy into the insurance scheme.

Table 3 Household debt  (real annual change, percent) 20022008 2007 (1) IV  2009 IV  2010 I  II  III  2011 I  IV  Contribution to growth (2)  Share in debt  Mortgage Bank Non-bank (3)  14.1 15.3 8.2  12.9 13.1 11.7  7.3 8.6 -0.5  7.7 9.2 -1.6  8.6 10.0 -1.0  9.0 10.4 -0.5  7.0 9.0 -6.0  7.6 9.3 -4.3  4.2 4.5 -0.3  55.8 49.3 6.3  Consumer Bank Non-bank Retail stores CCAF (4) Cooperatives Other (5)  17.9 16.0 20.7 27.6 19.9 25.2 13.5  3.9 -0.3 9.1 9.3 9.6 11.6 7.6  1.8 2.2 1.4 -7.9 8.3 5.6 6.7  2.3 2.7 1.9 -6.4 7.5 3.3 7.6  4.7 5.1 4.3 -1.2 6.9 9.5 6.8  5.8 7.5 3.8 3.6 1.3 5.2 5.2  8.1 8.6 7.6 11.9 2.9 1.9 8.8  9.5 11.8 6.8 10.4 6.2 0.8 6.1  4.2 2.8 1.4 0.7 0.3 0.0 0.4  44.5 24.3 20.2 7.0 4.4 2.6 6.3  Total  15.8  8.7  4.8  5.3  6.8  7.6  7.5  8.4  8.4  100.0  (1) Average. (2) Percentage points. (3) Includes securitized mortgage debt. (4) Clearance houses (family). (5) Includes new car loans, college debt and insurance companies. Sources: Central Bank of Chile based on information from SBIF, SuSeSo and SVS.
But also intergenerational concerns, uncertainty and considerations about political processes may favour a more cautious spending rule. I will address these issues in turn in more detail in the following. Graph: Arguments for higher saving 3/6  BIS central bankers' speeches  Resource movement As described in the seminal paper by Corden and Neary, a resource economy is affected by strong structural changes also due to increased demand for labour and capital from the extraction industries. Eventually, demand from the oil-related sector will decline, and it will be necessary to reverse a downsizing of manufacturing. To avoid “Dutch disease” effects, spending should be well below the permanent income level during the extraction period. Let me shed some light on the direct demand from the companies that operate on the Norwegian continental shelf. Graph: The Norwegian Troll A platform and some other structures Crude oil and natural gas are extracted from large depths below the sea level. In particular, capital expenditure is high. The platform “Troll A” provides a striking example. If most of it was not covered by water, it would dwarf some other, well-known structures. In the years prior to the recent oil price fall, oil companies invested about as much as all businesses in the mainland economy combined. Total oil-sector demand 4 amounted to more than 13 percent of mainland GDP in 2014. This is well above current government spending of oil and gas revenues, and also more than the estimate of the permanent income.

So our focus is on non-banks; on insurance companies, pension funds and investment funds of all sorts. The jury is out here too. I do not start from the presumption that there is an iceberg here. Our duty is to assess whether they could be one. 16  Carney, M. (2013), ‘The UK at the heart of a renewed globalisation’, available here. Even a user of derivatives to hedge another exposure – and thus having limited ‘VaR’ – could find themselves with significant ‘CaR’. It is the potential mismatch in liquidity, between the collateral called for and the assets held that is a source of firesale risk. In addition, as the IMF reports for a sample of funds, the majority of derivative exposures are entered into in order to boost returns rather than hedge existing risks. This would boost both VaR and CaR. 17  9  All speeches are available online at www.bankofengland.co.uk/speeches  9  But in order to assess properly the risks in this area we need much better diagnostic tools. So we are developing them. We are fortunate in being able to draw on data from Trade Repositories which now record all new derivative trades between counterparties and report each day on the outstanding positions between them. We are fortunate that these issues are the topic of international collaboration, with the International Organisation of Securities Commissions leading work to develop consistent measures of leverage – that incorporate derivatives usage – for investment funds.
This is called in academic literature Delphic forward guidance, with reference to the Oracle of Delphi, who was  8 Yellen (2018). The expression “lower-for-longer” is usually ascribed to Reifschneider and Williams (2000). 9  For more detailed reasoning, see for instance Söderström and Westermark (2009). 10 This follows on from the so-called expectations hypothesis, which briefly says that longer interest rates are de-  termined by expectations of the future policy rate. 11 Yellen (2018) has proposed, for instance, that this could be done in the United States by means of a revision to the Federal Open Market Committee’s “Statement on Longer Run Goals and Monetary Policy Strategy” or by publishing a separate supplement, “Committee Guidelines for Implementing Policy at the Zero Lower Bound”. 6 [24]  thought to be able to see into the future. How well this strategy will function depends on how successful the central bank is at predicting its future interest-rate policy. If the forecasts for the policy rate are often correct, then it will be common for economic agents to believe in the central bank's forward guidance. But if the forecasts for the policy rate are not so accurate, then the forward guidance will be taken less seriously. And unfortunately it seems to be quite difficult to forecast policy rates. If the economy is hit by shocks, which is often the case, then the forecasts will not be very accurate. Our experiences in Sweden illustrate this problem clearly.

Each of the concepts poses a serious threat to the reputation and credibility of the Facility. a. Excessive leverage is now regarded as one of the causes of the financial crisis. b. The proposals for protection and a first loss tranche of 20% of the nominal debt are also laden with problems. The example of Greece demonstrates that the losses may run to 60%. There is great uncertainty about who would pay for the difference between the insured loss and the actual loss if the Greek  BIS central bankers’ speeches  1  scenario was to be repeated in other countries. Likewise, it is not clear how freely tradable protection certificates would be traded, priced, settled and, in the event of default, enforced if they were to be introduced. Such certificates would de facto be quasi CDS instruments underwritten by the official institution of a community of countries that are simultaneously waging a campaign against credit derivatives because they regard them as one of the causes of the crisis. c.  The signs of a gradual shift towards short-term funding of the EFSF are a worrying signal. The risk arising from financing assets that are by definition long-term and illiquid (primarily rescue loans) through a programme of shortterm debt instruments (liability rollover risk) is more than clear. This ALM model proved to be extremely risky during the financial crisis when the commercial paper market dried up. 4. Another uncertainty is related to the project of purchasing bonds in the secondary market.
Conclusion To conclude my remarks, allow me to resurrect a quote from a speech by President Kennedy in 1966, which I thought is apt even in current times. [quote] There is a Chinese curse which says ‘May he live in interesting times’. Like it or not we live in interesting times. They are times of danger and uncertainty; but they are also more open to the creative energy of men than any other time in history. [unquote] Many will agree that we are living in interesting times; and a forum like this will be useful in bringing together the constructive and creative energy of experts like yourselves to share, to understand and to co-operate. Ultimately, it falls on all of us to do our part to make the future 4/5  BIS central bankers' speeches  more promising and enriching for this and the generation that follows. Thank you 1 Federal Financial Supervisory Authority in Germany 2 McKinsey & Company, “The Phoenix Rises: Remaking the Bank for an Ecosystem World”, McKinsey Global  Banking Annual Review 2017, October 2017. 5/5  BIS central bankers' speeches

Although the international money markets have now calmed somewhat, we have not yet seen the end of the turmoil on the financial markets – neither for the financial institutions involved nor for the international economy. After four years of strong growth and low inflation, this means more difficult times ahead for the Swiss economy. Due to the turbulence on the financial markets, the economic outlook has become more uncertain while, at the same time, inflationary pressure has heightened over the past few months – not such a comfortable position for a central bank. A positive element remains the achievements of the past few years, which have laid the foundations for a higher long-term growth trend. These need to be further improved in order to retain Switzerland as a dynamic business location. BIS Review 21/2008  1
Timothy F Geithner: Some perspectives on U.S. monetary policy Remarks by Mr Timothy F Geithner, President and Chief Executive Officer of the Federal Reserve Bank of New York, at the New York Association for Business Economics, New York City, 11 January 2006. *  *  *  Thank you for giving me the opportunity to speak to you today. The craft and the discipline of the business economist have long had a special place in the Federal Reserve System. And I am pleased to have the chance to meet with this distinguished group in the profession. My remarks are my personal views and do not attempt to represent the views of the FOMC. The U.S. economy has entered its 17th quarter of economic expansion. As has been the case throughout history, this expansion has features that distinguish it from past expansions, and I’ll begin my talk today with a review of some of these features. Growth in real GDP has been remarkably stable over the past two years, even when compared with the moderation in growth that has occurred over the previous two decades relative to the earlier part of the post-war period. These steady growth rates have hovered in the vicinity of 3.5 percent, which is close to most estimates of the rate of potential growth in the U.S. The robustness of growth is a testament to the resiliency and flexibility of the U.S. economy in responding to adverse shocks. A key feature of this expansion is the continued strength in productivity growth.

We shall continue to take all of the necessary action to fulfil our mandate and contribute, within this framework, to the success of this tricky but necessary period of transition towards a more coherent, stable and dynamic economic and monetary union. Thank you for your attention. I shall be pleased to answer your questions. 4  BIS central bankers’ speeches
Some proponents of reorganisation would like to begin by making all financial regulation the responsibility of a single Government Department - the Treasury. They suggest that this would clear up accountability for the legislative framework, and for the powers and sanctions in the regulatory regime and create consistency of regulatory approach across sectors. Straightforward administrative tidiness may also be a factor. While there may be merit in both these arguments, such machinery of Government questions are for the Government to determine, and I happily leave such matters to them. Most of the discussion about regulatory structure in the UK has concentrated on the area covered by the SIB and the front-line financial services regulators. It is in this part of the system that the arguments about duplication of function, unnecessary cost and poor communication are most often heard. The various alternative models all feature some degree of consolidation, and some would go as far as to fold all the main financial services regulators into a single body. Others propose two bodies, each reporting directly to the Treasury, with one covering wholesale business and one covering retail, acknowledging the different regulatory imperatives, especially in the conduct of business field, of the two sectors. The aim would be to reduce the number of domestic regulators large institutions would have to deal with, and to improve the match of regulation to function. Even more radical changes have been proposed, encompassing not only the SIB area, but the prudential supervision of banks and insurance companies as well.

Secondly, my prejudice is to believe that regulatory structure should follow market structure, rather than the other way round. Regulators should seek to respond to changing markets which, in turn, respond to changing customer demand and new product availability, rather than seeking to dictate either. So we should always ask ourselves whether the regulatory framework we adopt makes sense to market participants, rather than requiring them to structure their business to fit in with some governmentally imposed view of the way product delivery should be organised. But I recognise that, in practice, we cannot avoid constant attention to the maintenance of the regulatory framework. Firstly, because while good structure will not necessarily generate effectiveness, a faulty, out of date framework will certainly make it very hard for regulators to do their jobs well. And, of course, the market is not in an ‘original condition’. The financial markets we have now are heavily conditioned by the legislative and regulatory framework within which they have grown up. That is particularly true in the United States. It is hard to imagine that, absent Glass-Steagall, regulation Q and all the rest, the financial landscape in North America would look as it does today. So I conclude that the debate on regulatory structure should be a constant dialogue between the markets and the regulators, but with a prejudice in favour of the former. Our ultimate task as regulators is to ensure that markets work efficiently, and in the interests of consumers.