samchain/econo-pairs-v1 huggingface dataset:
But in a balance sheet recession there is also a risk that the policy rate will reach its lower limit. 9 The consolidation of the balance sheets may take a fairly long time, in some cases perhaps several years, and during this period there is a risk of the economy as a whole weakening. It is only when the participants in the economy are satisfied with their balance sheets that they will begin consuming and investing again, and everything returns to normal. Developments in the United States similar to Japan In Japan the policy rate was close to zero in 1995, but the private sector continued paying off its debts and it was not until around ten years later that balance sheets had been consolidated. It was primarily the corporate sector that paid off its debts and held back demand. Many analysts are now saying that the United States is undergoing a similar  7  See, for instance, Financial Stability Report 2005:1. 8  Koo, R. C., Balance Sheet Recession: Japan’s Struggle with Uncharted Economics and its Global Implications, Wiley, 2003. 9  Normally, an expansionary fiscal policy is considered the best recipe in a balance sheet recession, see for instance Eggertsson G. and P. Krugman, “Debt, Deleveraging, and the Liquidity Trap: A Fisher-Minsky-Koo Approach”, unpublished paper, Princeton University, November 2010. 4  BIS Review 164/2010  process, but there it is mainly the households that are struggling with balance sheet problems.

06  07  08  Sources: The NIER, Statistics Sweden and the Riksban  Figure 8. Repo rate with uncertainty bands Per cent, quarterly averages  7  7  90% 75% 50% Outcome  6  6  5  5  4  4  3  3  2  2  1  1  0 Jun-02  0 Jun-03  Jun-04  Jun-05  Jun-06  Jun-07  Jun-08  Jun-09  Jun-10  Source: The Riksbank  BIS Review 111/2007  9  Figure 9. Expectations of the repo rate according to implied forward rates Per cent  8  8  Repo rate Implied forward rates  7  7  6  6  5  5  4  4  3  3  2  2  1  1 0  0 99  00  01  02  03  04  05  06  07  08  09  10  11  12  Source: The Riksbank  Figure 10.
Inflation has been brought down to, and maintained at, the lowest rate we have seen in a generation; but, even more important, we have also seen relatively steady growth over this period and a sustained and very welcome fall in unemployment. But it has to be recognised that the going is now becoming more difficult, for two main reasons. The first is that we began the present period of expansion in 1992 with a good deal of slack, or spare capacity, in the economy - following the recession - and that slack has now been more or less reabsorbed. In the past year, in particular, the pace of expansion has picked up, to close to 4%, under the impact particularly of strong domestic demand, and that is well above any realistic estimate of the sustainable rate - the underlying rate of growth of supply-side capacity. And this is showing up in the labour market in evidence of skills shortages and in some signs of higher pay settlements and earnings. If we are not now to run into a period of excess demand and accelerating inflation, the rate of growth of the overall economy needs to moderate - quite soon and quite sharply. And it almost certainly will moderate during the course of this year, and may indeed have begun to do so.

Mr. George discusses macro-economic sustainability in the United Kingdom Speech by the Governor of the Bank of England, Mr. E.A.J. George, at the Chemical Industries Association: Business Outlook Conference Dinner in London on 14/1/98. I am particularly pleased to be associated with your conference theme of sustainability. The central banker’s mantra, with which we start our daily prayer meetings, is: “Price stability is a necessary condition for sustainable growth” And sustainable growth we see as effectively synonymous with the long-term macro-economic prosperity which is what we are, of course, all seeking to achieve. Now I suspect the same is true at the micro-economic level - the level of the individual firm. There are certainly differences between your perspective and ours. You, in the chemical industry, for example, know what you are doing! I mean you know precisely what you are doing at least in your production processes - where our business is much less precise - a behavioural rather than an exact science, if it is a science at all. And you are properly concerned with - indeed responsible to shareholders for - the long-term prosperity of your individual businesses. Whereas we - much as we would wish to see you all succeed individually - are concerned with stability and sustainable growth, leading to long-term prosperity, in the economy as a whole. Even so, I’d find it surprising if, at the micro-economic level, you, too, did not also see sustainability and long-term profitability as necessarily complementary objectives rather than conflicting objectives.
How can we avoid the temptation to see model output as the only crystal ball for the future? How can we equip management, board members and regulators and supervisors to overlay model output with informed expert judgement which can look to surrounding circumstances, be more forwardlooking and take into account possible behavioural responses to events? 9. Tomorrow one of the panel sessions will be on stress-testing and the work in this area I think offers a significant opportunity, both at the bank and supervisory level, to examine risk and test the “what if” scenarios which the models cannot reach, and to “think the unthinkable”. Adding complexity to the financial markets and regulation? 10. Apart from the widespread use of models in risk management, the financial innovation of the past two decades and the globalisation of our markets have greatly increased the complexity of financial markets and their inter-linkages. The Global Financial Crisis demonstrated all too clearly that certain types of financial innovation, resulting in the emergence of a vast variety of highly complex and opaque financial derivative instruments (even if originally designed to repackage and diversify risk), in fact led to greater, rather than less, financial instability that neither the firms nor their regulators fully foresaw or understood. 11. To address the risk arising from this increasing complexity in the financial system, the regulatory framework has also become more complex. For example, the Basel I Capital Accord has about 80 pages in total.

***  This action programme is ambitious: in the fight against global warming, the Eurosystem would thus target the direct effects - better conducting its monetary policy and reducing its own risks - as well as the indirect effects - steering the behaviour of companies and financial institutions, through its disclosure policy, as well as its asset purchase and collateral policies. And this programme is demanding: it requires in-depth work on our macroeconomic models as well as on the climate assessment of assets. But we can make this decision quickly by the end of this year - and then implement it in three to five years. Then the Eurosystem, together with the European Central Bank, under the impetus created by Christine Lagarde, and the Banque de France, will be the pioneers in this global fight. We must do so, in the very name of our mandate. Page 8 sur 8 However, the central banks alone will not be able to do enough. Let us transform this fight into an opportunity, that of a combination of fiscal, monetary and structural policies within the framework of a genuine green policy-mix combining carbon prices, public investment, sector-specific rules and monetary action. “The future is not what will happen to us, but what we are going to do. It calls us, or rather it pulls us to it," said Bergson. There is still time to prove him right.
The ongoing work of the Committee The ongoing work of the Committee is noteworthy. It includes an evaluation of the scientific bibliography on financial literacy, as well as a review and assessment of international initiatives for the promotion of financial literacy. The Committee, with the help of CBC staff, has also conducted an in depth econometric analysis of the results of the CBC's sampling survey in order to representatively assess the level of financial literacy in Cyprus, as well as to identify the groups that are in greater and urgent need of financial education. For instance, people who studied financial subjects at high school scored higher in the survey than those who focused on classical studies with 5.2 out of 7, compared to 4.5 out of 7 in knowledge questions; 5 out of 7 being the minimum score for adequate knowledge as set by the OECD. The CBC had carried out a sampling survey in 2018 to better identify the extent of the financial literacy problem, covering all groups of the population at a national level. This survey followed another similar survey, which focused on university students, namely, a survey by Andreou and Phillips (2018)1 which showed that the low level of financial literacy among university students appears to be a major problem in our society. The CBC survey, which as I mentioned covers all segments of the population, is instrumental in deriving useful results on financial literacy in Cyprus.

Ladies and Gentlemen, The history of economic thought in the twentieth century has seen macroeconomics evolve through a series of intellectual transformations from the Keynesian Revolution to Monetarism, and finally to the New Classical or Rational Expectations paradigm. Likewise, monetary policy has shifted through successive frameworks. From the system of fixed exchange rates under Bretton Woods, to monetary targeting during the Great Inflation in the 1970s, to inflation targeting in the context of the Great Moderation, and finally to an assortment of unconventional monetary policies in the wake of the Great Recession. Today, as we navigate our way through the Great Transition, the search for a new framework is ongoing. The limitations of prevailing approaches focused on short-term stabilization of output and inflation gaps has become clear. The onus on our generation is to ensure that the transition leads us to a new and better place, rather than to more of the same. My contribution to that end today has been to hopefully steer you towards the relevant and pressing questions. At an institution of learning as esteemed as this, it is your role to undertake meticulous scholarship that moves us towards the right answers. Thank you very much. 10
At the beginning of the pandemic, we launched a preferential refinancing programme for banks lending to SMEs. Now Mr Aksakov has suggested that we review these decisions. But I would like to remind you that we needed to ensure that small businesses had access to funding as fast as possible during the pandemic. 409 billion rubles were taken out of the limit. But I would like to say that this program will be phased out gradually over the course of a year. However, at the same time, we are extending the operation of this instrument (it will be possible to obtain preferential refinancing until September 30). Why? Because rate cuts after the transition to a loose monetary policy and measures of government support for SMEs bring about sufficient lending potential in this segment. It really was a rapid-response anti-crisis measure. How do borrowers feel now? The restructuring programmes have helped them withstand the shock of Q2. Undoubtedly, it is important to understand that some borrowers may not cope with the repercussions of the epidemic, and we can see that banks have already been carefully evaluating borrowers’ business and loans have been available for more efficient businesses. And despite the stress, there has not been significant loan impairment as was the case in 2014– 2015. The share of non-performing and bad loans in H1 2020 in the corporate portfolio increased slightly (by 0.1 p.p. to 11.1%).

We are proposing this as the first step in collaboration. I hope that the Association will actively participate in this. Specifically, by expressing the interests of smaller, regional banks. Incidentally, I support the idea that we look separately, systemically at approaches for the development of banks with a basic licence. A certain period has passed, we met regularly, and discussed this topic. Certainly, I support the initiative that Mr Aksakov expressed. Another important issue that I want to mention, in fact, cannot help but mention is cyber security. Yes, the epidemic has accelerated digital transformation both in customer service and, actually, in the internal processes of financial organisations. This is certainly linked with increased cyber risks. Risks are posed not only by attacks by fraudsters but by the acceleration of digital transformation due to the pandemic: practice shows that inobservance of information security, often due to the fact that the bank wants to launch a new service onto the market, can lead to vulnerabilities in technology and the theft of customers’ funds. A recent example of one of the banks once again confirmed this. Also, it is clear that, when deciding to go online and expand their online services, banks need to take into account information security issues and the costs involved. As we see it, security should be a priority equal to profit. This should be the same KPI as, for example, industrial and transport safety. The role of information security in the financial sector should be just as key.
900 Broadbent, B (2012), “Productivity and the allocation of resources” Chartered Institute of Personnel and Development (2020), “Home working set to more than double compared to pre-pandemic levels once crisis is over” Cominetti, N, Henehan, K, Slaughter, H and Thwaites, G (2021), “Long Covid in the labour market: The impact on the labour market of Covid-19 a year into the crisis, and how to secure a strong recovery”, Resolution Foundation, February 2021 Decision Maker Panel (2021), Panel data – February 2021 Felstead, A and Reuschke, R (2020), “Homeworking in the UK: Before and During the 2020 Lockdown”, WISERD Report, Cardiff: Wales Institute of Social and Economic Research Haldane, A (2020), “Is home working good for you?” Haldane, A (2021), “Inflation: a tiger by the tail?” Kim, H and Kung, H (2017), “The Asset Redeployability Channel: How Uncertainty Affects Corporate Investment”, The Review of Financial Studies, vol. 30(1), pages 245–280 Ramsden, D (2020), “The potential long term effects of Covid” Tenreyro, S (2020), “Monetary policy during pandemics: inflation before, during and after Covid-19” Vlieghe G, (2020), “Assessing the Health of the Economy”  14  All speeches are available online at www.bankofengland.co.uk/news/speeches and @BoE_PressOffice  14

In 1900, about 24 per cent of GDP was generated by manufacturing and other goods production. If the economists of the time had projected developments in these three industries, they would have estimated that primary industries’ share of total GDP would fall to below 5 per cent. Manufacturing and other goods production would increase its share to 30 per cent and service industries to 66 per cent. Value-added in primary industries fell somewhat more than economists in 1905 would have projected and service industries increased somewhat less. They would have been less accurate in their projections for developments in manufacturing. Although manufacturing’s share of total GDP increased up to the beginning of the 1950s, growth in private and public services gradually bypassed manufacturing, and the petroleum sector held an increasingly important position from the 1970s. The expansion of the petroleum sector and the use of petroleum revenues contributed to maintaining high growth in Norway, while other countries experienced a slowdown. Are there lessons to be learned from the pitfalls of projecting or trend-extending economic variables? Lessons to learn First, one lesson to learn is that it very difficult to predict developments in the real economy. If we were to extend the historical growth trend today to predict the future level of income, we would probably also be considerably wide of the mark. Today, we know nothing about the technological innovations that might appear in the future.
Firms should also pay closer attention to how they and the industry are broadly viewed by the public. Internally, one important marker for progress is the frequency of problems, and whether small problems stay small, or instead, grow into large problems. A healthy culture is one where problems are identified early and promptly addressed. In addition to a strong compliance function, firms need to foster an environment that rewards the free exchange of ideas and views. Individuals should feel that they can raise a concern, and have confidence that the issues will be escalated and fully considered. This is a critical element to prevention. A firm’s employees are its best monitors, but this only works well if they feel a shared responsibility to speak up, expect to be heard and their efforts supported by senior management. Let me give you an example to take this from the abstract to the more specific. As I noted in a speech a few weeks ago on the issue of reference rate reform, in the case of the LIBOR setting process, the information barriers between the traders and LIBOR submitters were paper thin and porous. 5 At times, traders and LIBOR submitters colluded to manipulate LIBOR for the gain of the traders and the firm. 4  Supervisory Letter SR 12–17. 5  Restoring Confidence in Reference Rates. BIS central bankers’ speeches  3  What should have happened instead goes like this: A trader asks the LIBOR submitter to adjust the submitted rate.

The probability of realization of credit risk would grow particularly in an economic slowdown or a situation less favourable than the one observed in the recent years. Presently, we see growing indications of possible problems and increased uncertainty – globally and in the euro area – which could, through certain channels, bring negative effects domestically. From the perspective of the sector, 2019 will also be dominated by the asset review and stress test in several banks. We are at the stage of finalising the preparations for the practical implementation of these processes. They are under the lead of the European Central Bank, but with the active cooperation of the BNB. The asset review, stress test and synchronization of our supervisory practices with the European Central Bank are a very important, though not the only, element of the efforts associated with Bulgaria’s plans for entry of the Bulgarian Lev in the Exchange Rate Mechanism (ERM II) and Bulgaria’s accession to the Single Supervisory Mechanism. These strategic steps should be made simultaneously, according to the plan and the agreements reached with our European partners. In 2019 we expect the positive trends in the banking sector to continue altogether, however with possible increased challenges associated with the general economic environment banks operate in. Concurrently, in the coming months we will evidence processes of potentially long-term consequences directly impacting the sector, aimed at achieving a qualitatively higher degree of integration of Bulgaria into the European financial and institutional infrastructure. 1/1  BIS central bankers' speeches
5  All speeches are available online at www.bankofengland.co.uk/news/speeches  5  In the banking sector, lower interest rates across the cycle reduce the net interest margins (NIMs) that banks earn from liquidity and maturity transformation. Moreover, NIMs would come under greater cyclical pressure more frequently and for longer because a proportion of banks’ liabilities pay no interest and cannot therefore come down to match a reduction in lending rates when the policy rate is cut.8  It is also possible that the yield curve will be flatter in a low for long environment as greater proximity to the zero lower bound of interest rates will mean less interest rate variability on average across the cycle leading to lower term premia. If so, this would further reduce banks’ earnings from maturity transformation. In Japan, a prolonged period of low interest rates has contributed to falling NIMs for over a decade. More recently, we’ve seen a similar – albeit smaller - effect in other advanced economies9. The impact of lower NIMs on bank profitability is currently reflected in lower price-to-book valuations of banks.10 Arguably, in ‘steady state’, once expectations of returns have adjusted downwards to a low for long environment, target returns on bank equity will adjust accordingly, though there is no evidence of this happening so far. We should expect, even if only for a transitional period if expectations of returns do adjust, greater pressure on banks to search for yield and move further out on the risk curve.

Moreover, it was difficult to communicate how “appropriate” the forward rate path was as an interest rate forecast, and the logical consequence of this was to quite simply go on to publish our own interest rate forecast. The period with implied forward rates as a forecast assumption can therefore be  1  See Irma Rosenberg’s speech “The Riksbank and monetary policy” in September 2005, on the reasons for changing over to implied forward rates in the forecasts. BIS Review 85/2010  1  regarded as a learning process on the road towards publishing our own interest rate forecasts, which has several advantages compared with using forward rates. 2 When we began publishing our own repo rate path, this was the start of a learning process for us at the Riksbank, but also for market participants. I believe that we have made a lot of progress in this direction. Monetary policy through “management of expectations” The established view today is that a large part of the monetary policy effect is through influencing expectations among participants in the economy. By publishing our own repo rate forecasts we improve the opportunities to influence rates with longer maturities by influencing the general public’s expectations of future repo rates (“management of expectations”), something that proved very useful during the financial crisis. Figure 1 shows the development of the repo rate and market rates with different maturities. We see that the Riksbank has considerable influence over developments in market rates with maturities of up to six months.