samchain/econo-pairs-v1 huggingface dataset:
Second, the financial tensions led to a disruption of domestic financial intermediation, with severe consequences for both private and public financing. In Greece, the banks – which were reasonably strong in a “stand-alone” sense – were undone by revelations about the weakness of public finances. In Ireland, causation ran in the opposite direction: the bloated and failing domestic banking system imposed an intolerable burden on what, prior to the crisis, had been a superficially strong fiscal position. Regardless of the causation, the consequences were the same: as confidence eroded, the inflow of foreign capital dried up. Subject to a “sudden stop” in external financing, 4 the European sovereign debt crisis – itself inextricably linked with problems in the financial sector – erupted, forcing Greece and Ireland to seek financial assistance from the European Union and IMF. 3. What can we learn from the emerging market crises of the past thirty years? The developments I have just described might give those of you living in emerging economies a sense of déjà vu. And indeed it has become commonplace to draw comparisons between recent events in Europe and the periodic financial crises seen in emerging market economies (EMEs) over the past three decades: Latin America’s debt crisis in the 1980s; the Mexican tequila crisis of 1994; the Asian financial crisis in the second half of the 1990s; and the Argentine crisis of 2001. Extensive economic literature has analysed these events and identified important roles for many of the phenomena I have just described.

For its part, the ECB has established a practise of making its policy transparent and in setting new benchmarks in the area of central banking communication. That being said, on each occasion, a central bank has to carefully assess the relevance, clarity and timeliness of the information. Transparency is a key ingredient of an effective monetary policy. Communication is an ongoing challenge and effective communication will always be characterised by a degree of flexibility and adaptability in order to respond swiftly to a rapidly changing economic environment. Thank you very much for your attention. BIS Review 160/2008  3
I then turned to monetary and fiscal policy, which are the main tools for managing the economic cycle, arguing that, at present, and for different reasons, they both have less freedom of action than in the recent past. Therefore, in my opinion, the fundamental conclusion is that it is necessary to take advantage of the current cyclical position in Spain, while conditions remain favourable, to build up budgetary leeway for future recessions and to introduce structural reforms to take over from recent years’ expansionary demand-side policies in order to prolong the current economic growth phase and boost the economy’s growth potential. In short, economic policy provides us with a national, European and global toolkit that, if we wish to avoid repeating the errors of the past, we should use properly to prepare ourselves for the next economic crisis, which will surely arrive. The anniversary of the collapse of Lehman Brothers ten years ago, and the economic and financial crisis we have suffered, particularly in Spain, should spur us to press ahead with the reform drive so that, paraphrasing the recent winner of the King Juan Carlos Prize in Economics, Carmen Reinhart, next time is different. 14/14

The meeting of the Heads of State and Government of the euro area, held at the Elysée Palace on 12 October, with the participation of the President of the ECB, provides Europe with a structured and coherent framework: •  possibility of recapitalising banks;  •  guaranteeing new medium-term bank debt (1-5 years), via, in France, a EUR 320 billion funding vehicle;  •  revisiting the accounting rules, with the recent reforms of the IASB – international accounting standard-setters – and introducing greater flexibility in mark-to-market accounting rules, allowing assets for which there is no longer a market to be valued at amortised historical cost. Moreover, the European Investment Bank will be mobilised to support European SMEs. Lastly, long-term discussions will commence on the best way to regulate finance and how it may better serve economic development. 2  BIS Review 129/2008  3. The position of French banks and credit  Our banks are not immune to the crisis. They have direct exposures, in particular through US monoline insurers. They have had to make sometimes substantial write-downs. They are also impacted indirectly by the seizing up of certain markets and the rise in their refinancing costs. That said, our banks are sound and profitable. It is worth recalling four facts that, in the current period of turmoil, are often overlooked: •  The solvency ratios of French banks are high, and much higher than the minima imposed by the prudential regulation.
But the difference between social and private costs also makes clear that many well-motivated social measures will meet with resistance from private interests. The global financial crisis illustrated these risks all too clearly The global crisis painfully demonstrated the risks of banking activities and financial instability. Of course, experience from the crisis lies behind the comprehensive agenda of regulations that has been developed in recent years. So I thought I would describe the course of the crisis, how authorities met it, and the lessons we believe we have learned. The risks were realised during the crisis of 2007–2009 The factor that triggered the global financial crisis was the increasing problems in the US mortgage sector in 2007. These problems then spread, as many mortgages had been repackaged into so-called structured products, sometimes to the point of being unrecognisable. These instruments were held by a number of agents – and the complexity of the instruments made it difficult to see which agents had major or minor problems. At the same time, many banks had low equity/assets ratios. When the problems spread in the financial sector, even relatively limited losses could thus lead to major problems. The lack of transparency and weak resilience led to an almost-total lack of confidence between financial institutions in the autumn of 2008. Banks became hesitant to lend to each other.

In combination with transparent processes, including recurrent evaluations by national parliaments or in other arenas, this could put pressure on politicians to act. Is the Stability and Growth Pact not sufficient in itself? After all, it is designed to ensure fiscal discipline in the member countries. The answer here is clear; it could have been had the Pact only been followed. But now the situation is different. As the Pact has not been followed by the larger euro countries, there is a risk that the newcomers will take the same attitude. However, this could be a dangerous conclusion. It would be wiser to look at the issue the other way round. Both Germany and France attained the 3 per cent mark for the public deficit criterion by the narrowest of margins despite what was a global upturn. But they clearly did not do enough afterwards in terms of consolidation, despite intense pressure from many of the smaller countries. Today, this is a significant problem not only for the euro area as a whole; the countries themselves are also paying the price in terms of a deeper and longer downturn. This, if anything, is a warning to new euro adopters. Conclusions Having raised these complex issues, let me be very clear about my sentiments. I do not wish to see any new obstacles or separate rules for the new member states; equal treatment is essential.
Andrew G Haldane: Financial arms races Speech by Mr Andrew G Haldane, Executive Director, Financial Stability, Bank of England, at the Institute for New Economic Thinking, Berlin, 14 April 2012. All speeches are available online at www.bankofengland.co.uk/publications/speeches  *  *  *  Elephant seals have got too big for their beaches. A large specimen might weigh over 8000 lbs (3700 kg).1 Their size has a simple evolutionary explanation. Large males fight for the right to mate with a whole beach full of females. For elephant seals it is, quite literally, winner-takes-all. And the key to winning is simple – size. No-one is going to argue with a male swinging around his proboscis on the beach. In that way, size has become the dominant gene in the evolutionary trajectory of the elephant seal. But size is not costless for the elephant seal. It makes them easy prey on land. At times in the past, this has threatened their very existence. In the 18th century, their main land predator – man – hunted elephant seals for their blubber and fur. In the 19th century, their numbers fell rapidly to below 100 and for a time they were believed to be extinct.2 Just in time, governments intervened to place restrictions on hunting, nationally and internationally. Today, elephant seal numbers have swelled to above 800,000. The hand of government has protected them from man – and from themselves.

Food price inflation edged higher to 14.1 per cent, as the past surge in the cost of energy and of other inputs for food production is still feeding through to consumer prices. Price pressures remain strong, partly because high energy costs are spreading throughout the economy. Inflation excluding energy and food remained at 5.2 per cent in January, with inflation for non-energy industrial goods rising to 6.9 per cent and  2/4  BIS - Central bankers' speeches  services inflation declining to 4.2 per cent. Other indicators of underlying inflation are also still high. Government measures to compensate households for high energy prices will dampen inflation in 2023 but are expected to raise inflation once they expire. At the same time, the scale of some of these measures depends on the evolution of energy prices and their expected contribution to inflation is particularly uncertain. Although supply bottlenecks are gradually easing, their delayed effects are still pushing up goods price inflation. The same holds true for the lifting of pandemic-related restrictions: while weakening, the effect of pent-up demand is still driving up prices, especially in the services sector. Wages are growing faster, supported by robust labour markets, with some catch-up to high inflation becoming the main theme in wage negotiations. At the same time, recent data on wage dynamics have been in line with the December Eurosystem staff projections. Most measures of longer-term inflation expectations currently stand at around two per cent, but these warrant continued monitoring.
There are still a sizable number of properties that are either in foreclosure or up for foreclosure sale, which has weighed down the local housing market. Yet, Fairfield County has not been the only place in the metro region to see a sluggish recovery – notably, both northern New Jersey and the Mid-Hudson Valley have yet to see employment return to their pre-recession peaks. This picture is in contrast with New York City’s economic performance, which has been exceptionally strong throughout this expansion, and has been a driver of growth for the whole tri-state region. Why is New York City seeing so much stronger job growth than Fairfield County? After all, it wasn’t so long ago that Stamford was attracting finance-sector jobs away from Manhattan. The answer lies in a mix of cyclical and secular trends. On the cyclical side, while finance employment has been sluggish in both New York City and Fairfield County, New York City is benefiting from strong employment gains in technology, construction, retailing and advertising – sectors that are not contributing to the same degree in Fairfield County. In addition, Stamford has had to deal with the relocations of UBS and RBS, while Fairfield faces the prospective relocation of GE. One potential long-term trend that is likely affecting the region is a renewed urbanization: that is, a gradual but broad-based shift of preferences to urban living, especially for younger generations. Throughout the second half of the 20th century, we saw a steady and widespread migration from cities to suburbs.

In contrast, manufacturing production – which had been a particular weak spot of the U.S. economy in 2015 – rose in the first two months of this year. Recent survey data, including our own Empire State Manufacturing Survey, indicate further improvement in conditions for the manufacturing sector in March. Through it all, the U.S. labor market has remained healthy. Payroll employment increased an average of about 229,000 per month over the course of 2015, and the gains in the first quarter of this year were nearly as high. Even though the unemployment rate ticked up in March to 5 percent, the amount of slack in the labor market still appears to be diminishing. Both the share of the population that is employed and the labor force participation rate have risen a bit over the past several months, with the employment-to-population ratio now at its highest level since the end of the recession. However, measures of aggregate wage growth have remained quite subdued, which suggests there is still some slack in the labor market. An important question is how to reconcile these cross-currents. I continue to anticipate that consumption and housing activity will expand at a moderate pace this year. Continued job and wage gains, combined with still-low energy prices, should sustain real disposable income growth and support consumer spending. The housing market should remain on a solid trajectory, supported by rising employment and low mortgage rates. In contrast to previous years, fiscal policy should also provide a moderate stimulus this year.
Later on, the two mainstreams merged in order to create the dynamic stochastic general equilibrium models based on which monetary policy has been conducted ever since the early 1990s. 10  BIS central bankers’ speeches  After practitioners and theoreticians agreed on the above mentioned issue, low and stable inflation became the main, and sometimes the only objective of monetary policy. Blanchard et al. (2010) showed that “this was the result of a coincidence between the reputational need of central bankers to focus on inflation rather than activity (and their desire, at the start of the period, to decrease inflation from the high levels of the 1970s) and the intellectual support for inflation targeting provided by the New Keynesian (NK) model”. According to the NK standard model, low and stable inflation is indeed the best policy to pursue, since the “divine coincidence”, as Blanchard and Gali (2006) called it, is assumed to hold, so that by maintaining a stable inflation, the output gap equals zero. Thus, within this framework, central bankers were able to take care of production without further debating the issue. Moreover, this suited the practitioners since, according to this model, the interest rate was the only instrument resorted to for attaining the inflation target, just like in practice. Nevertheless, preserving stable inflation does not ensure a zero output gap, where the economy also faces other imperfections than the nominal ones. Although both theoreticians and practitioners were aware of this, they maintained their view that low and stable inflation was beneficial for the economy.

4  BIS Review 116/2008  Indeed, the liquidity policy aided the transmission of monetary policy even in the turbulent times experienced over the past year, while monetary policy was left free to focus on its overriding objective of ensuring price stability. I strongly believe that especially at times of high uncertainty and rising inflationary pressures like the present, a stable and predictable central bank policy and the firm anchoring of inflationary expectations are of particular importance. There is no doubt that these are very challenging times for our economies. Some scientists argue that wildfires can be in the long run beneficial to wildlife as over time barren burned areas are covered by healthier new growth. Without pushing too far the analogy, let’s hope that the equivalent applies to the weakest segments of our financial systems. This will very much depend on the ability of all concerned parties – both public and private – to draw the right lessons and thoroughly implement them. Bearing this in mind, I look forward to the second day of this conference, during which the regulatory implications of the ongoing events shall be discussed. I wish you all a pleasant evening. BIS Review 116/2008  5
In asset management, an industry report 7 estimates the number of high net worth individuals and their financial wealth in Asia combined to be about the same as those of Europe and America, but growing faster. The number of Asian middle class has also surged with economic growth. While growth momentum may moderate in the next few years as the global economy recovers, the underlying trend remains. The growing interest in Islamic funds will provide opportunities for asset managers who can provide the right products. In short, my second reflection is that nature of financial services in the coming years will change, with a focus on deepening the symbiotic relationship between financial services and economic growth. This will be favourable for various segments of Islamic finance. Nature of financial regulation Let me move on to my third reflection, on the nature of financial regulation. This crisis shows that proper regulation of financial activities is difficult – it’s unpopular to take away the punch bowl when the party is going. But it is necessary. Equally important is the need to focus on the economic substance and underlying risks of the activities, regardless of its form. Prof. Rifaat provided a very timely reminder when he said recently, “Every financial institution requires close supervision, regardless of whether it is conventional or Islamic.” While Islamic Finance has features that make it robust, there are also risks such as liquidity and concentration risks that demand special attention.

2  The World Bank projected Developing East Asia (including China) to grow by 5.3% in 2009; South Asia by 3.7% and Middle East and North Africa by 3.0%. BIS Review 57/2009  1  force an acceleration of structural economic change in Asia. The drive towards greater domestic consumption, as well as greater Asia intra-regional trade, investment and consumption, will take on greater urgency. The growth of intra-Asia trade and investments will be driven by both bottom-up initiatives as businesses expand their ties, as well as top-down policy measures as governments enter into agreements on free trade and economic cooperation. A recent survey by the ADB Institute found that a higher than expected 22% of responding firms use preferences accorded by free trade agreement (FTA) and more are planning to do so. 3 China, Japan and Korea have implemented their FTAs with ASEAN. The ASEAN-Australia-New Zealand FTA was signed in February 2009. Singapore has signed FTAs with the GCC and Jordan, and we can expect more of such pacts within Asia in the future. Cross-border capital flows between the GCC and East Asia will grow significantly in the coming years. With this forced pace of global re-balancing, the relative economic weight of Asia will rise. This would be a positive development for the global economy, as more engines of growth provide greater resilience. Financial services and Islamic finance However, it is crucial that our optimism does not turn into hubris. Economies in our region face many important challenges.
The pace of food price inflation and capital inflows into Asia will moderate compared to the last two years. Much of the recent food price increases reflect the impact of supply disruptions, and these are largely expected to be of a temporary nature. Capital inflows are also unlikely to persist at the volumes seen in the last two years, as monetary policy settings in the advanced economies are normalised. 16. More importantly, policymakers in most Asian economies are not behind the curve, or at least not anymore. Central banks in ASEAN are deeply cognisant of underlying inflation risks. They have either hiked interest rates or allowed the exchange rates to appreciate over time or done both. Malaysia and Thailand have raised policy rates by four and six times respectively since early 2010. Key ASEAN countries are also relying more on exchange rate appreciation to dampen import price pressures. 2  BIS central bankers’ speeches  17. In Singapore, MAS preemptively tightened exchange rate policy as early as April 2010. Subsequently, exchange rate policy was tightened in October 2010 and again in April this year. Allowing the Singapore dollar to strengthen has had a dampening effect on inflation in Singapore, which would otherwise have been much higher. Headline inflation has probably peaked in Singapore and is expected to average 3 to 4 per cent this year. Core inflation – which excludes private transport and accommodation costs – is expected to be 2 to 3 per cent this year. 18.

Thanks to your hard work, and thanks to the cooperation and support from many supervisory agencies and central banks, we are confident that the New Accord will represent the best possible framework. In last summer’s consultations, the industry acknowledged the many improvements in the proposals that we have achieved to date. At the same time, public comments identified a number of technical concerns related to the treatment of credit-related losses and of some of the most sophisticated financial instruments and activities. We took these comments to heart and spent the next several months developing solutions. In October 2003, the Committee agreed in Madrid on a breakthrough plan to resolve these issues by the middle of this year. I must say that I have been pleasantly surprised by the progress the Committee has made in the extremely short period of time since then. Just three weeks ago, for example, we published three detailed technical notes outlining changes to the proposals. These covered revisions to the treatment of expected and unexpected credit-related losses and of securitisation exposures, as well as principles on the recognition of operational risk capital across home and host jurisdictions. I’d like to share with you the latest information on each of the areas addressed in the technical papers and in the press releases. EL/UL First, let’s turn to the New Accord’s treatment of expected and unexpected losses, or “EL” and “UL” as we say in Basel.