samchain/econo-pairs-v1 huggingface dataset:
David Aikman, Pavel Chichkanov, Graeme Douglas, Yordan Georgiev, James Howat, Benjamin King, ‘System-wide stress simulation’, Bank of England Staff Working Paper, forthcoming. 11 For more on developments in hedge funds and prime brokers since the financial crisis, see Frank Kenny and David Mallaburn, ‘Hedge funds and their prime brokers: developments since the financial crisis’, Bank of England Quarterly Bulletin, 2017 Q4. 12 See ESMA Annual Statistical Report on EU Alternative Investment Funds 2019. 10  16  All speeches are available online at www.bankofengland.co.uk/news/speeches  16  However, funds can face cashflow pressures from their use of derivatives to create synthetic leverage. When they do, market moves can mean more collateral – often cash – needs to be posted against a derivative position. In the simulator, without the cash on hand, such margin calls could mean further forced sales of assets, leading to a tightening of credit conditions. Our work suggests that funds today have stocks of liquid assets to meet the margin calls on their interest rate swap positions even after very severe market moves. They would not be forced sellers of corporate credit assets. However, there is nothing to guarantee that will remain the case. So the potential for derivative margin calls and the ability of funds to meet them smoothly has to be monitored. 13 The sorry fact is that such data just aren’t currently reported to market regulators.

Chart 2 Highly indebted companies cut investment  Chart 3 UK current account balance as a  and employment more than unleveraged  percentage of GDP since 1955  companies in the global financial crisis Investment  Employment  Percentage change in crisis  % of GDP 6  15 10 5 0 -5 -10 -15 -20 -25 -30 -35 -40 No leverage  4 2 0 -2 -4 -6  High leverage  -8 1955  Sources: S&P Global Market Intelligence and Bank calculations. 65  75  85  95  05  15  Source: ONS  Notes: Change in investment and employment in the financial crisis for unleveraged companies and companies with high leverage ratios. Percentage change reflects the average log change in investment and employment between 2007 and 2009. High leverage companies are those with net debt/EBITDA ratio higher than four in 2006. See, for example, Olivier Blanchard and Gian Maria Milesi-Ferretti, ‘(Why) Should Current Account Balances Be Reduced?’, IMF Economic Review, April 2012 and Julián A. Caballero, ‘Do Surges in International Capital Inflows Influence the Likelihood of Banking Crises?’, Economic Journal, March 2016. 5  5  All speeches are available online at www.bankofengland.co.uk/news/speeches  5  Recent developments  What, then, has been happening in the UK to these drivers of underlying economic vulnerability? Developments are summarised in the ‘heat map’ below (Chart 4). The colours represent how high each indicator is relative to past outcomes.
The relationship between growth and inflation is a question that has occupied us at the Riksbank in recent years. Our inflation forecasts, as well as those of other observers, have almost consistently been above the outcome. The difficulty lies, however, in determining to what extent the lower outcome is attributable to transitory factors rather than to more fundamental behavioural changes in the Swedish economy. In the simplest type of model, inflation is explained in terms of resource utilisation (however measured) and expected inflation. One reason why the analysis of the relation between growth and inflation is complex is that the actual level of total resource utilisation is so difficult to assess. One approach involves estimating the long-term level of potential output and use the difference between this and actual production (the output gap) for conclusions about the relationship with trend inflation. In recent years the Riksbank, along with other observers, has revised its assessment of potential growth. We believe an improvement in the productivity trend has helped to raise the potential growth rate so that this is now somewhat 5  BIS Review 111/1999  above 2%. We have also altered our assessment of unutilised resources; the largest revision was made during 1996, partly in the light of new information and better estimation methods. The Riksbank’s assessment of resource utilisation is appraised continuously as new information is obtained about, for example, shortages in various sectors, prices and wage formation.

The Riksbank’s picture of what this could mean for inflation is partly based on empirical studies that have been presented in earlier Inflation Reports. These results likewise suggest that the economy is somewhat less inflation prone, though the picture should not be over-interpreted. In a world with low and stable inflation, it is conceivable that wage demands may be formulated differently. A given level of real wages can be attained with considerably smaller nominal wage increases and perhaps with greater precision. Another factor that is often mentioned in the discussion is the concept of a new economy, that is to say, how the trade-off between growth and inflation may have been modified by increased global competition and information technology. This theme has been stimulated not least by the example of the United States, where high growth has been achieved year after year without boosting inflation; but that is a topic for a separate address. Today I shall simply make two points. One is that effects of this type can enable the economy to cope with higher resource utilisation without an acceleration of inflation, that they can raise potential growth or they can lower the inflation propensity. Thus, the so-called new economy can conceivably affect the inflation assessment in the ways I discussed earlier. The other point is that demonstrating effects of this type on inflation empirically is presumably even more difficult in Sweden than it is in the United States.
While national supervisory authorities are free to decide on the technical transmission specifications to implement the new reporting frameworks, CEBS considers that XBRL can be a helpful tool in constructing a harmonised European reporting mechanism, and is therefore developing an XBRL platform which will be available free of charge to national authorities and supervised institutions. XBRL taxonomies are being developed for both frameworks. Of course, we all recognise that it is not cheap to develop these technologies. But I do believe that the benefits will greatly outweigh the costs in the medium to longer term, and I would encourage every effort to be made to harness those benefits. Conclusions Let me finalise my intervention by briefly recapitulating the five elements that I believe are important for progress: First, convergence of the underlying regulation that affects financial institutions and markets. Second, convergence of reporting requirements on the basis of this more harmonised regulation. Third, increased use of internal information, generated for business purposes, for external reporting purposes. Fourth, increased feedback and information to the reporting institutions. And finally, the use of new technologies. I think the examples I have given from the banking perspective show that we are already making some good progress, although there is of course more that could, and should, be done. In closing, I would like to thank you for your attention and wish you a productive and enjoyable time here in Madrid. BIS Review 47/2006  5

For example, the 10-year real rate beginning in 10-years’ time implied by current government bond yields is -¾%. The comparable number over 2000-2006 was +1⅔%. And even during the height of the financial and euro area crises over 2008-2012 it was +¾%. (Chart 7) In the long term, the most important determinant of potential output growth is productivity growth, which is in turn determined by the rate at which new ideas are generated and implemented. And given the very disappointing productivity performance of the UK over the past 7 years, it would perhaps be understandable were financial markets to have lost hope that productivity growth would ever return. Perhaps they agree with those who argue that recent innovations cannot contribute as much to productivity growth as historical ones such as the electric light bulb, the internal combustion engine and indoor plumbing once did. 14 Human history has had many periods in which pessimism about innovation and technological progress has been proven wrong, dating at least back to Malthus. There is much by way of exciting innovation that has yet to be fully exploited. 15 3D printing is transforming the R&D process by vastly increasing the capability to produce prototypes. Advanced robots are being developed that will allow increased precision and safety in their use, thus increasing our ability to automate many routine activities. Firms are learning how to harness the power of Big Data, which will allow them to personalise their products better and reduce waste.
Although the correction started with a bursting property bubble in the US, it has expanded into a global financial crisis and brought on recession throughout the advanced economies and a sharp deceleration of growth elsewhere. The immediate priority is to deal with this downswing. The extraordinary measures we have taken in this country and others are having a positive impact but we may need to do more. We must also learn  6  BIS Review 145/2008  some lessons for policy in the medium term including the need for far better coordination of policy internationally and the need for some new policy instruments alongside interest rates to dampen the financial cycle. Chart 1: GDP and employment  Source: ONS (including Labour Force Survey)  BIS Review 145/2008  Chart 2: House prices and earnings  Source: Halifax, Nationwide, ONS and Bank calculations  7  Chart 3: Major UK banks’ customer funding gap, household saving ratio and foreign interbank deposits  Source: Bank of England, Dealogic, ONS, published accounts and Bank calculations. Chart 4: CPI and households’ inflation expectations for the year ahead (scaled to match CPI on average)  Sources: The AlphaMonitor: consumer, YouGovAlpha, Bank of England, Barclays Capital, Citigroup, GfK NOP, research carried out by GfK NOP on behalf of the European Commission and YouGov.

In short, the balance of risks between inflation being above or below target in the medium term shifted decisively to the downside. That was the background to the internationally coordinated reductions in interest rates in early October and the aggressive cut of 150 basis points in Bank Rate in November, the largest reduction in official interest rates since 1992 (indeed I believe it was only the third time Bank rate had been cut by 150bp since the Bank was founded over 300 years ago). Even so, our latest medium term projections for inflation show inflation remaining below target in the medium term and suggest further reductions may be necessary (Chart 7). Of course, there are large uncertainties around that projection; more so than usual. In particular, they take no account of any fiscal measures that the Government may announce next week. Just as we had to change gears on monetary policy, so we needed to change our approach to the banking sector. The tripartite authorities – the Bank, FSA and Treasury – were criticised for the handling of Northern Rock and for being slow off the mark when the crisis started in 2007. But we learned from that experience. We have established new ways of providing the market with the liquidity that it needs. And, as the crisis has widened, we have dealt with vulnerable and failing banks, such as Bradford and Bingley, more speedily and cleanly.
Andrew Bailey: Financial reform Remarks by Mr Andrew Bailey, Executive Director for Banking Services and Chief Cashier of the Bank of England, at the Lord Mayor’s City Banquet, London, 21 September 2010. *  *  *  My Lord Mayor, Ladies and Gentlemen. Can I thank you Lord Mayor on behalf of the Bank of England for inviting us to contribute to your regulatory Banquet. Adair and I first met in our current roles when he was literally I think in his first day on the job, which was incidentally the weekend of the resolution of Bradford and Bingley. It is a great relief that the experience of that weekend did not cause him to have second thoughts, because we have all benefited from the leadership that he has provided since then. On the subject of the time of year, I should add that being here in September, enjoying your hospitality Lord Mayor is a distinct improvement on some recent Septembers when we were recovering banks. An evening at Mansion House beats the pizza and all night session at the Bank of England by a very long way. I am going to speak tonight about why the public interest in the stability of the financial system matters to all of us. Calmer times are the necessary environment for the task of rebuilding financial stability. It is a task that belongs to all of us, and it is certainly not just the task of regulators, central banks, or the authorities more generally.

We can only achieve this if the case for financial stability is well understood. There is a very clear parallel here with monetary policy. The success of monetary policy is founded on public acceptance of the benefits of sustained low inflation. That did not come easily, as the experiences of the 1970s taught. But once that public acceptance and interest started to become embedded, the task of monetary policy became easier – not easy, but easier. In this important sense, no such policy making apparatus can be independent of the will and interest of the public. And nor is the task of ensuring public acceptance ever finished. Monetary policy has demonstrated that a firmly established and lasting institutional framework for policy making is a necessity. But exactly what is the public interest in financial stability? This can be a harder question to answer than for monetary policy, because financial stability cannot be so readily summarised in a statistical series. There is a temptation to generalise that you certainly know it when it isn’t there. I think there are at least four things that the public should want as part of the overall stability of the financial system. First, that they can have confidence in the safety and soundness of the institutions that hold their money and savings and write policies to protect  BIS Review 121/2010  1  them against risks. Second, that those institutions have the capacity to undertake the stable and sound provision of financial services to the economy, including of course lending.
This vicious circle also works in the opposite direction: problems in the banking sector spill over into lending and growth, which weakens public finances and the state’s ability to back up the banking system when necessary. Incidentally, this pattern of interaction between problems in the financial, real and public economies recurs throughout history. Reinhart and Rogoff have described how economic problems and bursting speculation bubbles have led to financial crises and subsequent sovereign debt crises time and again over the last 800 years. Developments in the banking system, 2007 and on So far, the European banks have not regained their credibility in the same way as the US banks did in 2009 and the Swedish banks did in 1992 and 1993. A great deal of uncertainty still prevails over which European banks are robust in the long-term. According to one estimate, the total decline in the value of assets on the European credit markets amounted to EUR 184 billion by the summer of 2011. The same publication made the assessment that losses over the years to come could amount to over EUR 200 billion, of which EUR 125 billion would derive from losses linked to government securities.6 The IMF has calculated that the effects of the sovereign debt crisis may amount to EUR 300 billion.7 Even so, the European banking sector was reported to have a larger balance sheet total in 2010 than in 2008. This reflects the fact that the problem assets have still not been addressed.

Luis M Linde: Profile of Professor Nicholas Bloom – winner of the XII Germán Bernácer Prize Opening remarks by Mr Luis M Linde, Governor of the Bank of Spain, at the XII Germán Bernácer Prize Ceremony, Madrid, 24 September 2013. *  *  *  Ladies and Gentlemen It is a great pleasure for me to introduce this award ceremony for the 12th Germán Bernácer Prize. First of all, let me once again thank the organizers and sponsors of the Prize. They have established an excellent programme to support economic research in the fields of macroeconomics, monetary policy, and financial economics. This is the 10th time that the Bernácer Prize award ceremony has taken place at the Banco de España. The continued support and backing of this initiative of the Observatory of the European Central Bank by the Banco de España is justified by its conviction of the importance of macroeconomic research, insofar as it concerns the functions to be performed by the European System of Central Banks. By recognizing the relevance of a prize like this, which has been awarded, in every instance, on the basis of academic excellence, the Banco de España reaffirms its commitment to economic research. As many of you know, this Prize commemorates a distinguished Spanish macroeconomist who worked at the Banco de España, as director of its Research Department, during the 1930s. Despite the isolation of the Spanish economics profession at that time, Germán Bernácer obtained substantial international recognition for his research contributions.
2 See IPCC (2018), “Global warming of 1.5 °C”, an IPCC special report on the impacts of global warming of 1.5 °C  above pre-industrial levels and related global greenhouse gas emission pathways, in the context of strengthening the global response to the threat of climate change, sustainable development, and efforts to eradicate poverty, 6 October. 3 7/9  BIS central bankers' speeches  3 See Stern, N. (2007), “The Economics of Climate Change: The Stern Review”, Cambridge University Press. Estimating the economic damage requires assumptions on society’s time preference which are controversial. Discussing these assumptions is beyond the scope of this speech. 4 See Nordhaus, W. D. (2007), “To tax or not to tax: Alternative approaches to slowing global warming”, Review of  Environmental Economics and Policy, 1(1), pp. 26–44. 5 See Carney, M. (2015), “Breaking the tragedy of the horizon – climate change and financial stability”, speech  given at Lloyd’s of London, 29 September. 6 The global financial crisis of 2008 is a good example. As house prices fell and firms struggled to access  external finance, consumption and investment collapsed while unemployment rose, pushing down prices and wages. 7 See also McKibbin et al. (2017), “Climate change and monetary policy: Dealing with disruption”, CAMA Working  Paper, No. 77/2017, December. Some climate-related shocks may also turn into adverse demand shocks. Rising sea levels, for example, could lead to abrupt repricing of real estate prices in some exposed regions, causing large negative wealth effects that, if uninsured, may weigh on demand and prices.

We delegated proxy voting for equity investments to investment managers that have signed up to the United Nations Principles for Responsible Investment, requiring them to incorporate environmental, social and corporate governance (ESG) standards into their voting policies. And, together with our external asset managers, we are considering broadening the options for ECB staff to invest in sustainable financial products. For our own funds portfolio, which consists of the ECB’s paid up capital and general reserve fund, we have started an internal investigation on how ESG criteria could be implemented in the future.28 Purchasing green bonds from a number of eligible issuers could be an option, as long as the markets are deep and liquid enough. And we could potentially expand our investment universe to other asset classes where the ESG-compliant investment space is broader. Work conducted under the first work stream – that is, the development of a clear and transparent taxonomy – will help accelerate progress on this front. Now, when it comes to our policy portfolios, our objectives are different. The main purpose of our foreign reserves is to ensure that the ECB, at any given point in time, has sufficient liquidity in foreign currency to conduct foreign exchange operations if needed. Our portfolio is therefore composed of the most liquid and creditworthy fixed income assets in a few major currencies, leaving little room for climate-related objectives.29  6/9  BIS central bankers' speeches  This much is probably uncontroversial.
13  All speeches are available online at www.bankofengland.co.uk/speeches  13  Chart 11: Majority of long-horizon variation in UK equilibrium rates explained by international factors  Notes: Forecast error variance decomposition from a vector error correction model, share not explained by domestic R*. Sources: Holston, K, Laubach, T and Williams, JC (2016), ibid. Global factors also influence domestic financial conditions and therefore the effective stance relative to the shorter-term equilibrium rate of monetary policy, r*. The presence of borrowers and lenders operating in multiple currencies and in multiple countries creates multiple channels through which developments in financial conditions can be transmitted across countries. 35  For example, changes in sentiment and risk aversion can lead to international co-movement in term premia, affecting collateral valuations and so borrowing conditions. Work by researchers at the Bank of England, building on analysis by the IMF,  36  shows that a single global  factor accounts for more than 40% of the variation in domestic financial conditions across advanced economies. For the UK, which hosts the world’s leading global financial centre, the relationship is much tighter, at 70%. Highlighting the openness of the UK economy and financial system, a third of the business-cycle variation in the UK policy rate can be attributed to shocks that originate abroad. 37  One important channel of global spillovers is of course monetary policy.

27  28  Chart 7: Global long run real interest rates have fallen over the past 30 years  Source: Rachel, L and Smith, T (2015), ibid. 26  Rachel, L and Smith, T (2015), ‘Secular drivers of the global real interest rate’, Bank of England Working Paper No. 571. It is sometimes claimed that the equilibrium real rate depends on the (expected) rate of growth, but this is an oversimplification. The entire distribution of growth rates matters: not only the mean, but also the volatility, asymmetry and fatness of the tails. See ‘Real interest rates and risk’, speech by Gertjan Vlieghe at the Society of Business Economists’ Annual conference, 15 September 2017. 28 For a discussion of the wider implications of these forces, see ‘Debt, Demographics and the Distribution of Income: New challenges for monetary policy’, speech given by Gertjan Vlieghe at the London School of Economics, 18 January 2016. 27  11  All speeches are available online at www.bankofengland.co.uk/speeches  11  Chart 8: Secular drivers pushing down long-run equilibrium real interest rate  Bank research estimates that the increased retirement savings as a result of global population ageing and longer life expectancy have lowered the global real interest rate by around 140 basis points since 1990 and they could lead to a further 35 basis point fall by 2025. 29  The crucial point is that these effects should persist  after the demographic trends have stabilised because the stock, not the flow, of savings is what matters.