samchain/econo-pairs-v1 huggingface dataset:
Considering the performance of the economy in the second quarter, the gradual withdrawal of the most stringent sanitary measures and the temporary boost from income support policies, the projection scenario limits the economic contraction foreseen for 2020. Thus, it is estimated that this year GDP will fall between -4.5 and -5.5% (between -5.5 and -7.5% in the June MP Report). This range remains wider than usual, reflecting the greater uncertainty surrounding the impacts of the pandemic. By 2021, GDP will grow between 4 and 5% (between 4.75 and 6.25% in the June MP Report), and in 2022 it will grow between 3 and 4% (same as in MP Report), respectively. 1 Fondo de Garantía para Pequeños Empresarios (Guarantee Fund for Small Entrepreneurs). 4  The evolution of activity will be determined by progress in controlling the pandemic and the ability of businesses and households to overcome its adverse effects. The projection assumes that the sectors where human interaction is most important will continue to be affected as long as there is no vaccine, so it will take several quarters for them to return to pre-pandemic activity levels. At the same time, both businesses and individuals will be able to recover their income levels as activity recovers, a process in which monetary policy support will be critical. Greater global control of the pandemic will also allow the external momentum to improve significantly next year compared to 2020.

Nor is direct and immediate settlement between two parties, without the involvement of a third party, possible without cash. In the future, new payment solutions may be able to offer these possibilities. Private digital currencies providing anonymity are already on the market. These currencies can also be used even if banks’ systems fail – as long as the Internet is still functioning. The same applies to platform currencies and e-money. However, there are other crucial characteristics missing from these solutions – they are not backed by any authority and the level of foreign exchange and credit risk can be high. One alternative currently being discussed is the introduction of electronic central bank money. There are several ways of achieving this: consumers can have an account either at the central bank itself or in a system controlled by the central bank. Another possible solution is for Norges Bank to issue a payment card or develop an app for consumers to use for anonymous 7/9  BIS central bankers' speeches  payments. Which brings us to another question: which means of payment should be the statutory form of legal tender in Norway if we introduce electronic central bank money? Should it be banknotes and coins, or Norges Bank’s electronic money, or both? We must also ask ourselves what the consequences will be for the banking system. For many consumers, electronic central bank money could provide an alternative to deposit money in a bank, as cash does today. Banks can attract deposits through the interest rates they offer.
Macroeconomic scenario As I said earlier, in the past several months the differences between the performance of the global and the domestic economy have deepened. The external scenario remains complex, and the growth outlook has weakened somewhat with respect to June’s forecasts. In contrast, Chile grew more than foreseen in the second quarter, intensifying the utilization of installed capacity. Headline inflation has been lower than expected and is currently at the lower part of the tolerance range, as are core measures. Within core inflation, the difference between the behavior of goods inflation and services inflation stands out. The latter, more closely related to the state of the output gaps, is still near 5% annually, reflecting that medium-term inflation risks are still present. In this context, the Board has held the monetary policy interest rate (MPR) constant at 5%. Internationally, the biggest news has concentrated in the performance of the emerging world, shaping a scenario where deceleration exceeds forecasts. The reduced strength of Brazil, China and India stands out. Several elements are behind this slowdown, including the effects on their exports of the global deceleration, especially from Europe, and the stringent policies applied in the past. This has driven the notorious drop in these countries’ manufacturing growth rates. In Latin America the outlook is still quite heterogeneous. As I just said, the sharp deceleration of Brazil is worth noting. Given its size, it explains a large part of the downward revision of growth figures for the region this year and next.

Time will shed more light on the true effects of developments abroad on Chile’s external position and the evolution of domestic balances. For now, it is important that we take the opportunities we have to preserve and enhance the soundness of our economy, but bearing in mind that there are risks and that they are significant. Thank you. 8  BIS central bankers’ speeches  Figure 1 Real exchange rate (*) (index, 1986=100) 120  120  110  110  100  100  90  90  80  80  70  70 88  90 92 RER  94 96 98 00 02 1997-2011 average  04 06 08 10 12 1992-2011 average  (*) August figure includes information up to 30 August 2012. Source: Central Bank of Chile. Figure 2 Nominal exchange rate (index, December 2010=100) 110  110  105  105  100  100  95  95  90  90  85  85  Dec. 10  Jun.11 Chile  Australia  Dec.11 N. Zealand  Jun.12 Canada  Source: Bloomberg.
We’ve already seen a small example of this. The big jump in US lumber prices through the winter (Chart 9 again) encouraged greater supply which in turn led to a  11  All speeches are available online at www.bankofengland.co.uk/news/speeches and @BoE_PressOffice  11  significant correction in prices. Lumber prices are now two-thirds below their peak in May, implying that annual inflation rates are likely to be negative next spring. In the data, many non-oil commodity prices seem to exhibit the same “mean-reverting” tendency9. Chart 14: Areas of consumption hit hardest last year have grown more strongly in the recovery  Sources: Barclaycard and Bank calculations. Data weighted by pre-Covid consumption share. 2y growth from March 2021 and 1y growth before that due to Covid base effects. This is perhaps an extreme example. It’s rare that increasing supply is as straightforward as chopping down another tree and cutting it up (and even lumber production isn’t as simple as that). Producing a micro-controller for a car, for example, is a much more complicated process and it takes significantly longer for supply to respond. Many analysts have said they expect the chip shortage to persist into next year. Even here, however, many also believe that we may already have passed the period of maximum strain.

There is evidence that the stimulus cheques sent to US households, as part of the new administration’s fiscal expansion, have been spent disproportionately on durable goods (as one might expect of any one-off source of income). The semiconductor sector may represent the starkest example of this collision between stronger demand and weaker supply. Chart 12, for example, plots shipments of PCs by the major five global producers against exports of semiconductor components from Japan. The first rose significantly through the course of last year, boosted by the general shift away from consumer services to goods, and in particular the necessity of working more from home and, for firms, of moving activity online. But semiconductor production contracted in Japan and other major producing countries through the latter part of last year and the result was a marked drawdown in inventories and a sharp rise in prices. Chart 12: Demand for PCs rose steeply last year but supply of components declined  Source: Goldman Sachs, see Goldman Sachs (2021, see footnote 6) for further detail. Changes on a year ago. Semiconductor components include wafers, flash memory and DRAM memory, weighted by 2017 shipment values.
Traditional surveys of market participants or the general public tend to be biased in their sampling and framed in their responses. As in quantum physics, the act of observing can itself alter behaviour. These realities may call for exploring non-traditional means of revealing people’s preferences and sentiments. To give one recent example, data on music downloads from Spotify has been used, in tandem with semantic search techniques applied to the words of songs, to provide an indicator of people’s sentiment. Intriguingly, the resulting index of sentiment does at least as well in tracking consumer spending as the Michigan survey of consumer confidence. 51  And why stop at music? People’s tastes in books, TV and radio may also offer a window on their soul. So too might their taste in games. Indeed, I am interested in the potential for using gaming techniques, not just to extract data on people’s preferences, but as a means of generating data on preferences and actions. Existing models, empirical and theoretical, often make strong assumptions about agent behaviour. Theoretical models are based on axiomatic assumptions. Empirical models are based on historical  49  Rotemberg (1984), for example, discusses the statistical rejection of rational expectations models for consumption and labour demand. 50 Tuckett and Nyman (2017), Shiller (2017) and Nyman et al (2018). 51 Sabouni (2018). 12  All speeches are available online at www.bankofengland.co.uk/speeches  12  behaviours. These restrictions may, or may not, be borne out in future behaviour.

If so, I think there are high returns to economics and finance making a further intellectual investment in Big Data and accompanying analytical techniques in the period ahead, the path less followed. The Definition of Big Data If Big Data holds promise, it is probably useful to start by defining just what it is. This is not entirely straightforward. Like beauty, what counts as Big Data lies in the eye of the beholder. It is also a fluid concept. For example, it is clear that data no longer means just numbers; it means words too. Indeed, growth in research on semantics has taken off over recent years, including in economics and finance. What is less contentious is that there has been the most extraordinary revolution in the creation, extraction and capture of data, broadly defined, over the course of the past decade or so. This has been, in part, the 12  Bacon (1620) summarises this well: “Those who have handled sciences have been either men of experiment or men of dogmas. The men of experiment are like the ant, they only collect and use; the reasoners resemble spiders, who make cobwebs out of their own substance. But the bee takes a middle course: it gathers its material from the flowers of the garden and of the field, but transforms and digests it by a power of its own.” 13 Carney (2015). 14 Obstfeld and Rogoff (2001) discuss six major puzzles in international macroeconomics, such as the excess volatility of exchange rates relative to fundamentals.
They meet all of the functions that money shall have: they make use of the same arithmetical unit, their value is guaranteed by the Riksbank’s monetary policy mandate and, as technological advances continues, these account-based systems offer increasingly efficient mediation of payments. Account-based means of payment have since come to replace payments with banknotes and coins to an increasing extent right up to the current situation. Nowadays, some account-based payments can also be made in real time, a property that only cash payments could boast once upon a time, when the payment was made after banknotes changed owners. 4 [6]  Without cash, the general public loses access to central bank money If cash were to disappear completely, the general public would only have access to account-based private bank money. The banks, on the other hand, continue to have access to central bank money as they have accounts in the Riksbank. So is this a problem? We return here to the central element of the monetary system mentioned earlier – confidence in the system. During normal times this is not a problem. The banks can normally offer a sufficiently high interest rate to attract investors. But in times of financial stress, which unfortunately occur with some regularity, both banks and the general public want access to the central bank’s money, which is free from credit risk. The deposit guarantee alleviates the problem of a lack of confidence but does not entirely resolve it.

Is it a problem if cash disappears? This is of course a valid question. There are some groups in society who for various reasons find it difficult to accept, use or gain access to digital technology and different solutions need to be found for these groups. But for the majority of the population, the market appears able to supply payment solutions on its own. The question does require some careful thought, however. What is money, and what is required for money to function as such? What is the difference between various types of money? Why have central banks gained such a central role in the monetary system? These are practical but nevertheless almost philosophical questions that cannot be fully dealt with in a short speech. But allow me to nevertheless develop these questions a little further. Can “new money” function as an arithmetical unit, store of value and means of payment? It is difficult to define what money actually is. Put simply, one can say that it is an agreement or convention between individuals in a country or region that “something” will function as money. That “something” can be stones, shells, gold, pieces of paper or something else. What has been used as money has varied over time and between countries and cultures. But for money to function as such, it must be 3 [6]  able to guarantee three basic functions. Firstly, it shall function as (1) an arithmetical unit, that is, all prices shall be expressed in terms of this unit.
In part, this translates into well-anchored inflation expectations, which give monetary policy more room for maneuvering. On the other hand, Chile is committed to a free-float exchange rate that is more comparable to the situation of developed economies than other emerging economies, with fairly stable long-term rates along with the aforementioned depreciation of the currency. Even so, exchange rate adjustments can have significant effects on the local economy in as much as economic agents exhibit significant mismatches in their balance sheets. In the same way, exposure to interest rate and refinancing risks can amplify the economic impact of even mild changes in lending standards. In other words, not only the level of indebtedness is important, but also its composition and its relationship with financial assets. This helps explain why a floating exchange rate regime is the more effective in cushioning external shocks the more developed the local financial system is. In this sense, the data available for Chile indicate that the main Chilean economic agents (i.e. companies, banks, households and government) have moderate levels of exposure to exchange rate and financial risks, as a result of either its regulations or the development of financial products. In the case of banks, the stress tests we perform regularly in the context of our Financial Stability Report show that market risk, which includes interest rate risk, is low compared to credit risk. Similar results are found for the corporate sector, where a shock to the interest rate has a low impact on performance.

The reduction of the liability margin was offset by an increase in the asset margin, and by taking on greater interest rate risk. Third, domestically focused banks were able to maintain their level of resilience compared to the previous year, despite the increased risk exposure. Overall, their capitalisation is well above regulatory minimum requirements, and is also adequate according to SNB stress tests. The currently available capital surpluses at most banks would be sufficient to cover the losses projected in these stress tests. Given the level of prevailing risks, this is positive. However, the risks to financial stability could increase further. As we saw in 2015, even a lower momentum on the Swiss mortgage and residential real estate markets can cause imbalances on these markets to increase. This can happen, for instance, when combined with comparatively weaker developments in fundamentals such as GDP growth. Moreover, in a sustained period of low interest rates, real estate prices will remain subject to upward pressure. Another rise in prices or decline in yields could occur particularly in the residential investment property segment. This would increase the risk of a substantial correction in the event of an interest rate rise, which would put pressure both on leveraged investors and on the banks who finance their investments. At the same time, in an environment of persistently low interest rates, the pressure on interest rate margins would continue. Such pressure creates powerful incentives for banks to take on more risks.
A related question is whether the observed productivity miracle was reflected in returns to the factors of production in finance. Chart 12 decomposes total GVA of financial corporations into income flowing to labour (defined to include employees only) and income flowing to capital. Broadly speaking, the rise in GVA is equally split between the returns to labour (employee compensation) and to capital (gross operating surplus). The miracle has been reflected in the returns to both labour and capital, if not in the quantities of these factors employed. For labour, these high returns are evident both in cross-section and time-series data. Chart 13 shows average weekly earnings across a range of sectors in the UK in 2007. BIS Review 95/2010  7  Financial intermediation is at the top of the table, with weekly average earnings roughly double those of the whole-economy median. This differential widened during this century, broadly mirroring the accumulation of leverage within the financial sector (Chart 14). The time-series evidence is in some respects even more dramatic. Philippon and Reshef (2009) have undertaken a careful study of “excess” wages in the US financial industry since the start of the previous century, relative to a benchmark wage. Chart 15 plots their measure of excess wages. This shows a dramatic spike upwards which commenced in the early 1980s, but which exploded from the 1990s onwards. The only equivalent wage spike was in the run-up to the Great Crash in 1929. Philippon and Reshef attribute both of these wage spikes to financial deregulation.

Finally, since wage growth is generally very fast at the start of a person working life, and then quite steady towards the end, it will tend to lessen as the share of the employed population approaching retirement age increases. These deflationary pressures may be strong, although, admittedly, the empirical evidence on the effects of demographic change on the inflation rate is not yet conclusive. 8  As for the implications of demographic changes on structural change, the link is also clear. We do not demand the same basket of goods and services over our entire life cycle. Moreover, our comparative advantage at performing across different productive tasks also changes with age. Thus, it will not be surprising to see changes in the sectoral and occupational distribution of economic activity, both through demand and supply channels. The most cited example is the increase in the demand for health and other non-market services, which in Europe are typically provided by the public sector. But there is also a negative association between the weight of the old population and the share of the manufacturing sector, both in GDP and in employment terms. This negative association can be observed across countries and also over time, and does not disappear when other factors, such as stage of development or female labour force participation, are taken into account. Thus, we should be prepared to witness significant changes in the sectoral and occupational composition of economic activity as demographic changes (and the associated technological transformations) accelerate in the coming decades.
In the case of households, employment creation and wage growth might decline. As to non-financial corporations, the rise in their profits might diminish. The public sector would also see its balance of revenue and expenditure affected by the operation of the automatic stabilisers. That would all mean that both private and public levels of debt might ultimately be higher than expected, with further implications both for spending decisions and financial markets’ perception about the debt sustainability path. Logically, the deteriorating macroeconomic context would also affect deposit institutions. Compounding the fall in the value of some of their assets would be lower demand for credit. Moreover, asset quality might worsen, given that the ability of their borrowers to pay would be negatively affected. They would also face greater difficulty in continuing to jettison their non-earning assets. As a result, their income statements would be subject to downward pressures. This is particularly significant in a context, such as the present, in which banks are posting low profits. Against this background, it would be desirable in economic policy terms that, after the elections, a stable government were formed. That would lessen uncertainty over the future course of economic policies, give fresh momentum to structural reforms and see a resumption of fiscal consolidation, with the aim of improving potential growth and reducing the main sources of vulnerability in the Spanish economy, in particular high public and external debt levels.

The technical analysis assesses the recent trend of the indicators, their current status and also their expected behaviour in the coming quarters consistent with the macroeconomic forecasts prepared quarterly by the Banco de España. The forward-looking analysis is particularly relevant in this context since, in the event of the CCyB being activated, banks have 12 months to comply with the requirement. According to these indicators, the credit cycle continues to show values below the activation thresholds (having regard to the credit-to-GDP gap, which remains below its long-term trend value), although it is progressively converging on the long-term equilibrium level. In fact, forecasts as to how it will trend in the coming years indicate that this indicator will turn positive towards 2021 Q1 and might exceed the activation threshold in 2021 Q2. Some complementary quantitative indicators are along the same lines. This is particularly the case for credit intensity, which shows the weight of the change in credit relative to GDP, and the overvaluation of house prices currently show values close to equilibrium, with an upward trend that is forecast to continue over the next two years. Non-financial privatesector debt service, for its part, has maintained the reduction that marked its path at the start of the global financial crisis. Foreseeably, this reduction will continue, albeit more moderately so over the coming two years, given that the process of debt reduction has eased significantly and interest rates have less margin for further cuts.