samchain/econo-pairs-v1 huggingface dataset:
Globally interconnected markets have resulted in a situation in which financial institutions everywhere have been hit, even if not exposed to the institutions or assets at the core of the crisis. My home country Sweden is a good example of this. What we have witnessed in recent months, since the default of Lehman Brothers, is the acute phase of a global financial crisis. To respond, authorities have taken action to prevent a systemic break down of the financial system. Both the US and the EU have delivered financial support plans committing governments and central banks to providing the necessary support to the financial industry. BIS Review 134/2008  1  These plans are now being implemented and we cannot yet be certain of their success. However, in my view, the support plans contain the necessary measures to solve the most critical issue right now, namely to restore market confidence by providing guarantees to creditors that their money will be repaid. Therefore, the prospects for restoring financial stability and enhancing the availability of credit for firms and households should be good. That the support plans also provide measures for government capital injections and takeovers is obviously good, but for the purpose of getting markets to function properly ownership issues really are of secondary importance. After all, what creditors are looking for is to get their money back. To them it should not really matter from where or from whom that money comes.

So transposed to Swedish conditions, around SEK 2 000 billion is at stake. This happens to be in the same order of magnitude as the balance sheet total of three of the four major Swedish banking groups. And, of course, this kind of shock to the national economy would not spare the country’s citizens in their role as taxpayers. Financial crises impact severely on the public treasury. A recently-presented British investigation – the so-called Vickers report – shows how the  BIS central bankers’ speeches  1  financial crisis, since 2007, has increased the United Kingdom’s public net debt by about 100 per cent of GDP. Basel III is strengthening the system’s airbags… The crisis of recent years has made us painfully aware of the financial system’s vulnerability and its importance for the real economy. The need for bigger and better airbags is obvious. These lessons lie behind the global Basel III agreement. The most important areas of Basel III deal with the quantitative requirements for capital and liquidity being placed on the banks. …with a substantial amount of equity… The Basel Committee’s analysis has concluded that the banks need substantial resilience. The crisis has shown the risk of considerable losses. So capital requirements are being increased in Basel III, above all for Common Equity Tier 1.1 The minimum requirement for the banks’ equity is being set at 4.5 per cent of riskweighted assets – more than double the requirement under Basel II.
This commission, which was led by Professor Lars Calmfors, came to the conclusion that Sweden should postpone a possible membership. Four arguments for this standpoint were presented: The high level of unemployment risked becoming worse if the Swedish economy were to suffer disturbances. The weak central government finances comprised a restriction for fiscal policy and risked bringing about restraint in a possible economic slowdown. Poor popular support for membership of the union risked creating political tension. Finally, the commission made the assessment that the EMU would initially consist of a small group of countries, which indicated that the political costs would of not joining would not be very great. When this was referred to the Riksbank for comment, the General Council replied that "the General Council finds that on balance Sweden should participate in the economic and monetary union from the 2 start.” The General Council played down the risks that Sweden might be exposed to economic disturbances that did not affect other members of the union, i.e. asymmetric disturbances. The General Council felt that the disturbances Sweden had experienced since the 1970s could largely be regarded as selfinflicted, mainly as a result of errors in economic policy. One example is the economic slowdown at the beginning of the 1970s that affected Sweden more than the rest of Europe. The cause was the vigorous fiscal policy restraint brought in, which contributed to developments in Sweden coming out of synch with the rest of Europe.

2  The General Council of the Riksbank's comments 1997-02-06  BIS Review 9/2002  3  With regard to the labour market, it should be clear that the functioning of the labour market and the high level of unemployment no longer comprise as strong a restriction as they did in the mid-1990s. Unemployment in Sweden has fallen. Several factors have played a role in the decline. One of these is probably the fact that the wage formation system has been changed in a way that contributes to better concordance between productivity and wage growth. Nevertheless, there are clear signs that the labour market still comprises a problem area. A clear majority of the EU member states has now joined the monetary union, which was not evident when the Calmfors Commission made its assessment. The political cost of remaining outside of EMU has thus become greater, and public opinion has become more positive towards membership. I personally think that there are also new arguments that should be considered with regard to the costs of remaining outside the union. For instance, the economists Andrew Rose and Torsten Persson have made in-depth analyses of the effects on trade of a monetary union. There could be reason to believe that the positive effects are slightly greater than was assumed in connection with the Calmfors Commission's report.
They were also given a monopoly on issuing banknotes and coins, which gained a special status as legal tender. The fact that banknotes and coins now have less significance as means of payment does not means that the need for a state guarantor for the payment system has disappeared. I shall return to this shortly. I shall now describe in more detail what the Riksbank does in more concrete terms and how I view our responsibility for financial stability. Promoting a stable and efficient financial system – the Riksbank’s role The Riksbank has three core tasks that contribute to an efficient and stable financial system: issuing banknotes and coins, responsibility for the system for large-value payments and providing emergency liquidity assistance (being lender of last resort). Moreover, there is a close link between monetary policy and financial stability, which I will return to later. Let me discuss the different core tasks one at a time. 3 Jonung, L. (1989), “The Economics of Private Money. Private Bank Notes in Sweden 1831 – 1902”, Research  Report 282, EFI, Stockholm School of Economics. 3 [12]  Issuing banknotes and coins One fundamental function that must work if a financial system is to be regarded as stable is payments. And a first important central bank task to facilitate payments is to issue banknotes and coins.

History has shown that it is socioeconomically efficient that the government authorities have a monopoly on issuing cash, as this then becomes a risk-free asset that can be used both as an arithmetical unit and for saving and for making transactions. Almost all countries now have central banks that issue banknotes and coins. In Sweden, we are now facing a historical milestone with regard to cash. The use of banknotes and coins has declined at a very rapid pace in recent years and the general public are increasingly using digital means of payment instead. However, there still remains a fundamental requirement for a safe instrument that can be used as an arithmetical unit and to make payments and as a store of value. A critical issue, in light of this development, is what the role of the state should be on the payment market. This is an important issue to society that contains many dimensions, including consumer issues, financial stability perspectives, contingency planning and competition aspects. The Riksbank is therefore investigating whether we should issue a digital krona, or e-krona, so that there will continue to be a means of payment issued by the Riksbank. In addition, the position of cash in the economy and the Riksbank's responsibility for the handling of cash need to be investigated further and specified. Responsibility for RIX – the Riksbank's system for largevalue payments The Riksbank can already be said to issue digital money, but this can only be held by banks and some other financial institutions.
Finally, if we are to use dispersion as a yardstick for the efficacy of monetary policy implementation, we should make use of individual transaction-level data to see how effective our tools are at uniformly affecting traded rates within each money market. Because transaction-level data are not publicly available, Darrell and Arvind’s index is based on “average” or “market” rates for each asset class. This means that they can assess only dispersion across money markets, rather than both across them and within them. Evaluating efficacy using transaction level data In my view, the difference between dispersion within markets, and dispersion across markets, is revealing about the nature of underlying changes in money markets. If competition were to become impaired, I might expect to see greater dispersion in rates within each individual market, as the decline in competition might allow for greater market power by individual borrowers and lenders, and therefore permit more price discrimination. In contrast, if intermediation were to be impaired, I would expect to see higher dispersion across money market rates, and more variable dispersion over time, even for very similar investments. This is because impairments to intermediation could result in greater market segmentation. Of course, such changes in dispersion either within or across markets could also result from other changes, such as movements in risk premia. One way of reducing the impact of movements in risk premia is to focus on overnight transactions only.

Accordingly, when we were at the zero lower bound, we weren’t able to rule out the possibility that initial increases in the policy target might not translate one-for-one into increases in money market rates, as reduced uplift from the zero lower bound could have offset some of the policy tightening. In addition, one might have also worried that various money markets might not move together as rates rise, meaning that, for example, a larger spread might emerge between secured and unsecured rates, or between overnight and term instruments, than had historically been the case. I will discuss some evidence on these issues later on. The second development, in October 2016, was the entry into force of new SEC rules for money market funds. These new rules require, among other things, a floating net asset value for institutional prime money market funds, provide for liquidity fees and redemption gates for prime funds, and establish more stringent rules for portfolio diversification and financial reporting for all money market funds.11 Many of these reforms are aimed at least in part at enhancing financial stability, and in particular at addressing the potential for runs on prime funds to intensify financial stress. They could also make prime funds, which can hold a broad spectrum of money market 3 / 13  BIS central bankers' speeches  assets, less attractive to investors who desire an investment opportunity with a fixed net asset value or who are concerned about redemption fees or gates.
Innovations indeed move the world with financial technology, transforming the financial services industry as we know it – moving it towards the digital arena. In such an environment, building and maintaining close cooperation becomes essential for sustaining financial stability and protecting consumers from security threats. The Conference will cover various topics related to the latest developments at global, European and national level. The emergence of FinTech – financial technology marked the global developments in recent years by attracting financial institutions attention to its implementation for improving the present financial products and new products development. On the other hand, FinTech companies started offering their own financial services, thus entering into competition against banks. Moreover, digital technologies pose challenges to financial institutions, including the central banks, in the context of digital banking and digital transformations. Implementation of Distributed Ledger Technology, particularly Blockchain, could cause disruption to financial market infrastructures and furthermore, to worldwide financial system. Theoretically, it could facilitate cross-border payments, improve the efficiency of back-office operations, eliminate the need of data reconciliation, facilitate financial inclusion and information sharing, but also, it could reduce the need or completely replace some financial market intermediaries. DLT strongly emphasizes the questions about effective regulation, prudential supervision, oversight and cyber security issues, but it could also catalyze the issuance of digital currencies backed by the central banks and facilitate the implementation of monetary policy. In the European context, the Second Payment Services Directive (PSD2) is fundamental part of the European payments regulation and significant step towards single digital market in Europe.

I understand that the EU Code on remuneration would already be consistent with this. What I am describing is not a scary prospect. It should, in fact, be liberating to establish a financial system based more firmly on the principles of the market. But it is a prospective world in which our capital markets will be at least as important as they were over recent decades. That underlines the necessity of the work on, for example, standards for central counterparties, on shadow banking, and on transparent and resiliently liquid markets. This is a world in which securities regulators will play a vital role in underpinning stability. In the UK, the new Financial Conduct Authority under Martin Wheatley will be a member of the new macroprudential body, the Financial Policy Committee, for just that reason. Thank you again to AFME for providing a forum through its book for this public policy debate to continue. 2  BIS central bankers’ speeches
The post-crisis Phillips Curve and its policy implications Liviu Voinea, Deputy Governor, National Bank of Romania Keynote address to the National Asset- Liability Management Europe, 2019 Summit, London, March 14th  Summary           The post-crisis Phillips curve makes 3 fundamental changes to the wage Philips curve: it uses observable variables only; it changes the paradigm from flow to stock; and it allows the curve to be non-stationary. We introduce the concept of a cumulative wage gap – meaning the cumulative gap between current wage and a peak reference wage value in the past. People relate to their peak gains in the past rather than to uncertain future gains. They judge their consumption decisions based on the relation between their current wages and their past wages, adjusted for inflation. The shape of the post-crisis Phillips Curve expresses the theoretical assumption that the inflation rate stays below its target until the cumulative real wage gap closes, and that it increases above its target when the cumulative real wage gap becomes positive. We test our hypothesis using data for 35 OECD countries for the period 1990-2017. We are able to confirm our hypothesis, as the coefficients have the expected sign and are statistically significant for the OECD panel as well as for most of the individual countries. Bottom-line, inflation depends on the cumulative wage gap: it does not increase close to or above its target level until the cumulative real wage gap is closed.

Back in 2001 the Governing Council of the ECB, on the basis of a proposal coming from Tommaso Padoa-Schioppa, issued a short paper lining up the arguments for having supervision in a central bank. And if you read that paper, you will see that the set of arguments is heavily tilted towards favouring giving supervision to central banks. So it’s a long-standing position.1 There are many advantages, including one that is not mentioned in the paper: supervision is not just about micro-supervision these days; it now has a macro-financial perspective, for which central banks are much better prepared than any other institution to handle. Central banks monitor developments in all segments of the financial system. From reading your most recent speech, I had the impression that you thought austerity went much too far and the effects have been too drastic. Is that right? 3/8  BIS central bankers' speeches  Yes. And the main example of that is of course the case of Greece. No institution, not the Commission, not the ECB, not the IMF, ever thought possible – let alone planned for – a 25% drop in GDP in Greece. The first and second programmes for Greece were designed with a much more optimistic view on the cost of the adjustment. So the adjustment programme was indeed too harsh. And also perhaps too mechanical, because what the programme didn’t foresee was the total collapse of hope and expectations. Then, at the same time, all countries in the euro area were reducing deficits, consolidating.
And they will fail in circumstances that, at least with – and possibly without – hindsight, could have been prevented. So it has been a mistake, over recent decades and in a number of countries, to claim to have a regulatory framework that is not premised on zero failures when we lacked a resolution regime that could cope with failures of even quite simple banks. In the UK, this was cruelly exposed in August 2007 when Northern Rock failed, denting confidence in UK mortgage banks generally. That is the backdrop to the suggestion, stressed by the Governor earlier this week, that the market should explore whether banks can raise contingent capital from private sector investors. Beyond that, we need an effective resolution regime. The UK does now have a decent resolution regime for small and medium-sized banks, which we used directly for the Dunfermline Building Society and indirectly in getting a few cases satisfactorily worked through. More important for today, it is the origin of the Bank pushing the “Living Wills” idea, which dovetailed with international conclusions about the horrendous problems of managing cross-border crises. The G20 heads of government have made it clear that something must be done about this. It is being pursued by the Financial Stability Board, a grouping of regulators, central bankers and finance ministry officials drawn from the G20 countries and a few other key centres.

For example, in an assessment of monetary policy, this becomes an issue of whether the central bank attaches a reasonable relative weight to the stabilisation of resource utilisation and whether the central bank is reasonably consistent over time.10 The numerical inflation target has signified great progress for practical monetary policy and made it possible to measure and evaluate the target achievement of monetary policy in a much more effective manner than before. However, the fact that monetary policy is not just directed towards stabilising inflation, but also towards stabilising resource utilisation has, in the absence of quantitative measures of stability in these variables, made it difficult to measure and evaluate target achievement in this stability dimension. However, the quantitative measure implied by the mean squared gaps makes it possible to measure and evaluate this target achievement. Using the mean squared gap may entail a progress similar to the earlier introduction of the numerical inflation target. Following the introduction of published policy rate paths, this is another step towards a better and more effective monetary policy and better opportunities to evaluate monetary policy’s target achievement. 10  According to Bergo (2007) and Holmsen, Qvigstad and Røisland (2007), an optimal policy of  = 0.3 is compatible with the monetary policy forecasts published by Norges Bank (with a discount factor of 0.99 and a weighting in interest rate smoothing of 0.2). The steeper straight line in Figure 3 corresponds to  = 0.3, while the flatter line corresponds to  = 1.
Specifically, France has recently lengthened the period  BIS Review 51/2009  3  for calculating the pension entitlement from 10 to 25 years, while Austria has extended it from 15 to 40 years and a significant number of countries (Finland, Poland, Portugal and Sweden) have extended it to cover the entire working life. This reform would be in line with the recommendations of the Toledo Pact and would increase the system’s proportionality, i.e. the relationship between pensions received and contributions made. Connected to this issue, there would be a possibility in Spain of furthering the reforms in recent years aimed at bringing the different Social Security schemes onto a more equal footing, so as to ensure that the contributions made under the different schemes are similar. Thirdly, some countries have lowered the income replacement rate, defined as the net pension divided by net income prior to retirement, by reducing the percentage of the regulatory base received after having contributed for the minimum period (currently set at 50%), by extending this minimum period or by reducing the rates with which this initial percentage increases for each additional year of contributions. A more novel alternative has involved linking pensions to life expectancy. Insofar as part of the problem arises as a result of the rise in life expectancy, adjusting pension amounts more or less automatically to these increases would be conducive to the sustainability of the system. Currently, this type of measure has been proposed or applied, to differing degrees, in almost half the OECD countries.

And, above all, it significantly improves individuals' perception of this relationship, which may lead to incentives systems and their impact on agents' decisions in the labour market working more appropriately, reducing individuals' uncertainty over future income. In my address I have referred to the projections of various organisations on the sustainability of the system and to the reforms being applied in other European countries, summarising the content of the Research Department document that I shall send you this week. But let me conclude by highlighting the importance of the work entrusted to this Committee, especially at this current juncture where, for other reasons, economic agents are under a cloud of uncertainty. The agreement reached in Toledo whereby pension sustainability may not be used as a political battering ram is an achievement of which you should all be proud. This agreement, moreover, does not mean you should not react to the problems that may emerge in the pension system as a result of future demographic changes. On the contrary, the agreement obliges us all to examine the problems and seek solutions. I am sure you will be able to convey to the general public that these problems can be resolved if the appropriate  4  BIS Review 51/2009  measures are taken and that, moreover, if they are taken without delay, they need not be traumatic.