samchain/econo-pairs-v1 huggingface dataset:
10  If only the G20 would  11  But such cures are prescribed in the abstract where policy space is unconstrained – a situation far removed from current realities. 8  Caballero, J. (2014) ‘Do surges in international capital inflows influence the likelihood of banking crises?’ Economic Journal. For example, the IMF estimate that the output cost in Mexico following the Tequila Crisis of 1994-96 was around 14% (Laeven, L. and Valencia, F. (2012), ‘Systemic banking crises database: an update’, IMF working paper). For the global financial crisis, the cumulative loss of global output, when compared to its pre-crisis trend, is of the order of 25% of global output, while for the Lawson boom it is close to 10% of UK output. 10 More recently, attention has been paid to the need to maintain appropriate macroprudential policies as well as monetary and fiscal. See, for example, the IMF policy paper (2011) ‘Macroprudential Policy: An Organizing Framework’. 11 See speech by Mervyn King at the University of Exeter, 19 January 2010, available at http://www.bankofengland.co.uk/archive/Documents/historicpubs/speeches/2010/speech419.pdf. 9  6  All speeches are available online at www.bankofengland.co.uk/speeches  6  Monetary policy is still challenged by the lingering risks of a global liquidity trap, with a very low global equilibrium interest rate, r* – the interest rate central banks must deliver in order to balance demand with supply and so achieve stable inflation.

And it would be all too easy to give into protectionism. But as we learned in the 1930s, that road leads neither to equity nor prosperity. Raising barriers to trade disproportionately hurts the least well off through higher prices and fewer opportunities. 27  27  Fajgelbaum, P.D. and Khandelwal, A.K. (2016), ‘Measuring the Unequal Gains from Trade’, Quarterly Journal of Economics, Vol. 131, Issue 3, shows that past episodes of trade liberalisation have disproportionately benefited poor households, in every country, through reductions in consumer prices and increases in product variety. 13  All speeches are available online at www.bankofengland.co.uk/speeches  13  Escaping the low inflation / low wage / low growth trap requires more than a textbook rebalancing of macro policies across the major regions. It demands comprehensive structural reforms and a new approach to trade policy. Such changes could more than make up for the dramatic fall in the real incomes that UK households have experienced in the decade since the crisis. 28  The Brexit negotiations will be the test. May the hundreds in this room pass it by working towards innovative, cooperative and responsible solutions to the benefit of the tens of millions outside. 28  As my colleague Andy Haldane noted in his speech ‘Productivity Puzzles’(available at http://www.bankofengland.co.uk/publications/Documents/speeches/2017/speech968.pdf), if productivity growth in the second, third and fourth quartiles of the distribution of UK firms’ productivity could be boosted to match the productivity of the quartile above, then arithmetically that would deliver a boost to aggregate UK productivity of around 13%.
Insured depositors might not have lost that much - although this is questionable - but the situation for borrowers might have been serious if they had been forced to repay their loans early. Given the state of the Norwegian economy at that time, finding a new bank willing to extend sufficient credit would no doubt have been difficult - we would most probably have experienced a severe credit crunch that deepened the recession8. The main purpose of the rescue operations was to prevent such a scenario from becoming reality. Banks receiving a capital injection from the government were able to continue their normal bank lending and other banking operations. Empirical studies indicate that the credit conditions of firms borrowing from these troubled banks were no worse than for borrowers at non-crisis banks.9 In 1994, the government started to sell its shares in the banks. At present the government has a substantial share in only one of the three banks it took over during the crisis. The two others are now subsidiaries of a Danish and a Nordic banking group respectively. Fears of a foreign take-over, also of the largest commercial bank, has - at least so far - led the government to opt for remaining an important owner. When the government as part of a crisis resolution steps in as an owner of last resort, the intention is usually to get out of this position once the bank has proved to be profitable again. This is probably  4  Cf. Kane and Klingebiel (2002).

By and large most scholars seem to agree that the resolution of the crisis in Norway was fairly successful. But even if it was, right there and then, there is no guarantee that the same recipe will be successful in future or in other countries. In recognition of this and to avoid moral hazard, the law establishing the Government Bank Insurance Fund has now been repealed and the Fund has ceased its operations. Even if government capital injections in the large problem banks were the right resolution method in the early 1990s, it is far from evident that such a rescue operation would be the right method should a large bank fail in the future. However, I think it is possible to identify some principles that should be adhered to in order to increase the chances of success. The focus must be on saving the financial system, not the individual bank. With regard to the way failed banks are handled, the division of responsibilities between various parts of government must be clear, as it was ten years ago. As then, owners should be the first in line to shoulder losses. Similarly, the board and top management responsible for the failure of a bank should not be allowed to continue. Hopefully we have all, bankers and authorities alike, learnt from the crisis. At the central bank, we have strengthened our surveillance of the soundness of our financial system (macro-prudential supervision).
Banks felt that they had to keep on dancing while the music was playing. Regulators could never prove that the risks they identified would crystallize, and the “top down” and “bottom up” dimensions of prudential supervision were not married. Central banks and the IMF discussed the imbalances for so long that some came to believe that they were crying wolf. And no one country could prevent the world wide increase in asset prices. Christopher Fildes’ law of the financial cycle says that “disasters happen when the last man who can remember what happened last time has retired”. Periods of euphoria and panics in the financial system are inherent features of a market economy. They are the cost we pay for the benefits of a market economy – long-run increases in our standard of living which other systems have failed to deliver. After another twenty years or so, memories of the Panic of 2008 will have faded, and the regulations put in place in its wake will no doubt be seen as old-fashioned, inhibiting of the potential of the City, and as ripe to be swept away as was the Glass-Steagall separation of commercial and investment banking in the United States a few years ago. A lesson of history is that few generations have been able to avoid a repetition of earlier banking crises. The essential problem is that we can no more bind our successors than our predecessors were able to bind us.

Even the safety valve of a floating exchange rate cannot insulate an economy from its trading partners. World trade fell by around 5% in the final quarter of 2008. 54 of the 56 nations for which data are available for the fourth quarter registered falls in industrial output. 7 of those suffered double digit declines. For many years trade has been the route to faster growth. Now trade is leading the world down as the economies most adversely affected by the current downturn are those most dependent on exports, such as Japan and some of the other Asian economies, not those with the worst banking problems. Sharp changes in sentiment, confidence, animal spirits – whatever words you care to use – are capable of wreaking havoc on the world and our own economy. I shall turn later to our immediate response to the crisis. I want first, however, to ask whether central banks have the right instruments and the right policy frameworks to deal with a world in which some of the biggest risks are of the type I have discussed earlier, namely events which occur very infrequently but when they do so have large adverse effects; events such as those through which we are living. In other words, was our framework suitable for a world of stability but inadequate for preventing or responding to large adverse shocks?
Given this situation, in 2013, the SNB made a proposal to the Federal Council, after consultation with the Swiss Financial Market Supervisory Authority (FINMA), that the sectorial countercyclical capital buffer (CCB) be activated for the first time, at 1% of riskweighted mortgage loans financing residential property located in Switzerland. The Federal Council acted on the proposal. Since last September, banks have therefore been required to provide more capital backing for residential mortgage loans in Switzerland. Certainly, momentum on the mortgage and real estate markets was dampened somewhat in 2013. However, the measures introduced by the beginning of 2013, such as the activation of the CCB as well as those taken by the industry itself, were insufficient to prevent a further build-up of imbalances. Therefore, the volume of mortgage lending was still rising at a substantially stronger pace than national income. As a result, in Switzerland as a whole, debt was increasing significantly faster than people’s capacity to offset this debt with income. This  BIS central bankers’ speeches  3  development is particularly critical because the correlation between mortgages and national income is very high, both in historical terms and compared with other countries. In addition, in an environment of persistently low interest rates, coupled with banks’ undiminished appetite for risk, the danger remained considerable that imbalances would build up further unless additional countermeasures were taken. In January 2014, therefore, acting on a proposal by the SNB, the Federal Council increased the CCB from 1% to 2% of risk-weighted positions financing residential property in Switzerland.

By contrast, our monetary policy decisions as well as other measures aimed at stabilising the financial system are reflected in the composition and size of the balance sheet. Accordingly, it is of key importance for the effectiveness of our measures in the fields of monetary policy and financial stability that we have the option of making flexible use of our balance sheet. There are therefore no statutory limitations with respect to the size or composition of our balance sheet. This flexibility played a major role in ensuring that we remained capable of acting during the crisis, even in very difficult conditions. It enabled us to fulfil our mandate of ensuring price stability and also of making a contribution to financial stability as part of this mandate. Let me give you two examples of the way in which we make flexible use of our balance sheet. For topical reasons, I would like to start by talking about the creation of the stabilisation fund. The stabilisation fund, as we called it, was an undertaking which commenced in 2008 and was successfully concluded last year. What was involved? You will recall that in October 2008 a Swiss big bank, UBS, was in substantial difficulties. Financial stability was threatened and intervention by the authorities was absolutely necessary. Consequently, the Federal Council, the Swiss Federal Banking Commission (predecessor of FINMA) and the SNB decided on measures to stabilise UBS and thereby strengthen the Swiss financial system.
Next steps to deliver meaningful change  Due to strong interdependencies between the building blocks, the most significant enhancements will arise if over time all building blocks are advanced and implemented in a coordinated way, and appropriate monitoring and governance will be needed to ensure that this work progresses. The Stage 3 roadmap for change has set out the goals, actions, milestones and actors needed to deliver the building blocks. While all actions for 2021 are committed deliverables, those beyond 2021 are necessarily more indicative to allow for adjustment in response to new information and developments. The roadmap also acknowledges that  9  https://www.bankofengland.co.uk/bank-overground/2020/legal-entity-identifiers-the-code-to-a-digital-economy Bank of England, 12 March 2020, ‘Central Bank Digital Currency: opportunities, challenges and design’. https://www.bankofengland.co.uk/paper/2020/central-bank-digital-currency-opportunities-challenges-and-design-discussion-paper  10  7  All speeches are available online at www.bankofengland.co.uk/news/speeches and @BoE_PressOffice  7  different countries might need to introduce the building blocks at different times, reflecting different starting points and legislative frameworks. The involvement of the private sector, sharing their insights and practical expertise, as well as delivering change, will be key to support the practical implementation of the roadmap. I believe that the timelines and actions in the roadmap and the fact that the pace of this work has been maintained during what has been an unprecedented year for us all, underlines the importance and urgency placed on improving cross-border payments.

Building block 15 calls for harmonised API data protocols and the Bank will support this objective in its development of an API layer. The Bank is also involved in the more exploratory building blocks in Focus Area E. In the light of the continued decline in cash for transactional purposes, and great technological advancement, many central banks, including the Bank of England, are considering whether introducing a CBDC would be appropriate. In March this year, the Bank published a discussion paper10 to explore the benefits, risks and practicalities of a retail CBDC in the UK. We have received valuable feedback from across the payments industry, technology providers, academics and public authorities and we look forward to setting out more information in due course. The Bank’s Financial Policy Committee also set out regulatory expectations for payment stablecoins in 2019 and 2020, which is feeding into our work on designing appropriate regulation and requirements for firms proposing these. As set out in the building blocks it is important that as these issues are debated it is also done with an eye to how they could support cross-border payments. These examples provide just a taste of the areas that the Bank of England is involved in and we will be working closely with other central banks and relevant organisations to address the building blocks as a whole.
The government will play a leadership role, evaluating and adjusting the educational system on an ongoing basis at all levels to attune it to the needs of the business world, but, at the same time, firms must become involved in the training of their employees, particularly young workers in their first job. Technological capital Technological capital  In the field of technological capital, there is a broad consensus on the positive effect which research and development and innovation (R&D&I) have on the productivity of firms.8 In this respect, the available indicators of the degree of intensity of these activities suggest that Spain ranks poorly in the international comparison. Specifically, according to Eurostat, the proportion of innovative firms is 33.6% in Spain, compared with 53.4%, 56.1% and 66.9% in France, Italy and Germany, respectively. 7  See G. Zamarro, C. Hitt and I. Méndez (2016), When Students Don't Care: Reexamining International Differences in Achievement and Non-Cognitive Skills, EDRE Working Paper No. 2016-18. 8 See, for example, U. Doraszelski and J. Jaumandreu (2013), “R&D and productivity: estimating endogenous productivity”, Review of Economic Studies, vol. 80, pp. 1338–1383. 13/18  Similarly, the investment in research and development activities in Spain is, in aggregate terms, still very low in both the public sector (0.54% of GDP in 2017) and the private sector (0.66% of GDP in 2017), which makes Spain’s R&D spending 26% and 54% lower, respectively, than the European average.

Conclusion To sum up, in the last few quarters we have witnessed a deceleration of the global economy, particularly sharp in the euro area and affecting also the Spanish economy. As a result, the macroeconomic projections have been revised downward in most countries, including Spain, and the diagnosis as to the balance of risks also remains on the downside, mainly as a result of the geopolitical uncertainty over developments in trade tensions and Brexit and, in the case of Spain, over the future course of economic policies. Against this background, the Spanish economy, despite the improvements achieved during the recovery, continues to face significant imbalances, including most notably the high unemployment, government debt and external debt. In addition, Spain’s capacity for future growth is constrained by its very weak productivity dynamics and the foreseeable impact of population ageing. 15  See D. Acemoglu and D. Autor (2011), “Skills, Tasks and Technologies: Implications for Employment and Earnings”, Handbook of Labor Economics, 4, pp. 1043-1171. 17/18  Given this setting, the government resulting from the coming elections must urgently take the initiative and marshal sufficient support to push through reforms to resolve the vulnerabilities still persisting in the Spanish economy and enhance its growth capacity. It is, therefore, time to put our headlights on high beam and forge a broad consensus to protect the well-being of the coming generations. Thank you. 18/18
But then you have to compare like with like. In the euro area there are countries of a comparable size to the UK, like Spain, which have had even stronger growth during these years. Others though have grown less. The euro area and the US are often compared, and these two monetary areas are of a size that can be compared. This type of comparison is often based on false impressions. Even David Marsh might have fallen into this trap, when he comments that “Measured against the world’s largest economy, the US, Europe’s performance as a whole has stalled since the heyday of post-war reconstruction.” Looking carefully at the data, over the last decade the US has recorded higher average GDP growth than the euro area only because of its higher population growth. GDP per capita has increased at exactly the same pace in the two areas. You might have expected growth to have been stronger in the euro area, as the starting point was lower. But comparing levels is not so easy, and depends very much on the exchange rate used as well as other variables. As for employment growth over the last ten years, it has been stronger in the euro area than in the US, and the rate of unemployment has decreased to a substantially greater extent. Of course, the last few months of this decade have been different. I will come back to this issue later.

The type of auction for the injection of liquidity changed to fixed-price auctions, the collateral base for repo agreements expanded, the use of the required reserve increased from 20 to 40 percent, and the spread between the Bank of Albania’s key interest rate and overnight loan dropped from 175 to 75 basis points. Third, through a special act, the Bank of Albania required higher capitalization of banking activity from the banking sector, adding to the guarantee of the banking sector’s financial soundness. Making a generalization, I deem that the measures adopted over this period are unusual, extraordinary and contrary to the “constitution” of modern central banks as regards the liquidity, money market and monetary policy transmission channels. However, we well  BIS Review 146/2009  1  understood the philosophy that “the purpose justifies the ways”. For the sake of financial stability, all the measures taken are justifiable and have proved effective. So far so good. However, I think that the current situation makes the central bank more vulnerable from the viewpoint of monetary policy independence and efficiency. Liquidity by all means, whatever the size, whatever the maturity, and whatever collateral for an indefinite period of time, would damage irremediably the monetary policy and the financial stability in a second round. Preserving balances is more complex, if we take into consideration even the other major vulnerability related to high degree of euroisation (high share of foreign currency component to money supply structure) and lack of convertibility of our national currencies.
BIS central bankers’ speeches  7  Figure 3 Output gaps (*) (percent) 4  4  2  2  0  0  -2  -2  -4  -4  -6  -6 97  99  01  Developed economies  03  05 Emerging Asia  07  09 Latin America  (*) OECD estimates are used for output gaps in developed economies. For the other regions, output gaps are obtained using an HP filter. Sources: Central Bank of Chile based on Bloomberg, Consensus Forecasts, OECD and the respective country’s statistics institute. Figure 4 Current-account balance (billions of dollars) 1.500  1.500  1.000  1.000  500  500  0  0  -500  -500  -1.000  -1.000  -1.500  -1.500 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10  Rest of the world  Oil exporters  Emerging Asia  China  Japan  United States  Eurozone  Source: International Monetary Fund, April 2011's WEO.

It is therefore that much more important that the reforms are well-planned and credible, and that they are implemented consistently, but also prudently. There is also the threat that pressure will build on central banks to compensate a failure to reform with monetary policy measures. Central banks can and must resist this pressure, in order that they can continue to focus on ensuring price stability. Governments, on the other hand, should embrace this deep crisis as an opportunity to implement urgently needed structural reforms. Only then will we be able to say, with certainty, that the end of the financial crisis is in sight. BIS central bankers’ speeches  1