samchain/econo-pairs-v1 huggingface dataset:
It should be borne in mind that this forecast entails an endogenous tightening of the  BIS central bankers’ speeches  3  monetary stance as the positive output gap widens and inflation rises. The Monetary Policy Committee’s decision to raise Central Bank interest rates by 0.25% must be viewed in this light. The final crossroads is the most important: the resolution of the balance of payments problem and the liberalisation of the capital controls. It has long been clear that taking this step would entail numerous challenges for monetary policy. Two in particular have been focused on. The first is that the banks’ liquidity position could deteriorate as a result of the liberalisation of the capital controls. The Central Bank has mapped out the potential scope of these effects, as was presented when the settlement of the estates on the basis of stability conditions was announced recently. The result is that the change in liquidity will be within manageable limits. This does not change the fact that the banks must proceed with caution in coming months and protect their liquidity position throughout the process. In support of this, the Central Bank recently increased minimum reserve requirements. The intention is to reverse the change in reserve requirements when the strain on liquidity is at its peak. The latter is that before capital controls on residents are finally lifted, we must implement a monetary policy framework different from that pursued before the crisis.

The dominant role of the household sector in the early stages of the recovery is not particularly surprising: businesses are likely to need a sustained pickup in demand before they have either the need or the confidence to increase capacity. But the durability of the recovery will depend on the baton of growth being handed over to the corporate sector, whose spending and investment will help to foster stronger growth in productivity and real incomes. And here the reduction in uncertainty may continue to play an important role. It’s perhaps easy to see how reduced uncertainty may help to prompt a one-off increase in business spending, as companies move away from defensive, wait-and-see strategies and blow the cobwebs off plans for deferred investment projects. But the impact of diminished uncertainty may stretch beyond simply a short-run boost. In part that reflects the possibility that the combination of reduced uncertainty and increased spending by households and companies may become self-reinforcing: reduced uncertainty helps to spur additional spending and investment, which in turn further reduces uncertainty about future demand and so on.7 Movements in uncertainty can amplify the recovery just as they amplified the downturn. This virtuous circle may be enhanced by the benefits reduced uncertainty can have for the supply-side of our economy. Increased investment will add to our productive capacity. A strengthening labour market may give employees confidence to move jobs, so better aligning available skills with vacancies.
Loss of confidence in a bank sets in when depositors fear that this may not happen. An asset management contract is quite different because the promise is at its simplest to return the proceeds of the investment strategy, which may be more or less than the amount invested. It is cruel to remember the Woody Allen jibe at this point that a stockbroker is someone who invests your money until it is all gone. Economists might call the deposit and asset management contract “corner solutions” in that they have a robust definition and lie at opposite ends of a range. If so, With Profits falls in between, and it is in this ground that issues can arise. The proposition was essentially to offer investors a blended exposure to cash, bond, property and equity return with some degree of smoothing of overall returns, essentially at management’s discretion, to reduce market timing risk. The marketing tended to make much of these products’ potential to earn above cash returns without the volatility of pure equity exposure; and this in turn conditioned policy holders’ expectations, a fact first acknowledged explicitly in the UK’s prudential solvency regime for insurers in 1967 (bear in mind that this was not the original prudential regime, which was introduced in 1870).

Let me turn to the third and final issue, namely how do we think about the issue of systemic risk, and systemically important status, for insurers? This is obviously topical in the context of the IAIS proposed policy measures for globally systemically important insurers. First of all, in my view the case for systemic importance for insurers has to be proved. It does not follow that because major banks are systemically important, the same must be true for insurers. And, second, if a case can be made, it does not automatically determine what the response should be; in other words, it does not follow that the same capital treatment of systemic firms and/or a statutory resolution regime are needed as for banks. The calibration of these responses will have to be proven, and the response will need to be consistent with mitigating the cause of the systemic risk. So, let’s put banks to one side, but only after making one important point, that whereas systemic risk in banking is dangerous in good part because that it is in the nature of banking that the confidence issue combined with a very high level of  BIS central bankers’ speeches  5  inter-connectivity of risk within the system creates systemic risk, this is not true to the same extent in insurance.
Meanwhile the largest investment bank from euro area ranks only ninth worldwide, far behind the top five ones – which are all American. More worrying still, EU banks are losing ground on their own soil: the market share of the six major US investment banks in Europe increased from 44% to 58% between 2013 and 2020. This question of size reaches far beyond the question of G-SIBs indicators and methodology, which should of course duly take into account the achievements of the Banking Union so far. More than anything else, our banks need economies of scale to have the means to invest properly – including in their digital transformation. Digital is mainly about IT investment, hence 2/4  BIS central bankers' speeches  fixed costs, hence size. It is high time to start thinking European, instead of national. Let us not fool ourselves: preventing our banks from growing will only make them less profitable and easier prey. We have to avoid a scenario where European G-SIBs would disappear or remain too few, because then we would have partly surrendered our strategic autonomy. Regarding the method, we obviously need to switch from a disappointing sequential approach to a more agile process. Raymond Chandler, author of The Big Sleep, once said: “There is no trap so deadly as the trap you set for yourself.” I therefore very much welcome Eurogroup President Paschal Donohoe’s recent statements. Without prejudging future proposals and discussions, I will briefly lay out what a realistic and pragmatic approach might look like.

François Villeroy de Galhau: Looking up to achieve a Financing Union Speech by Mr François Villeroy de Galhau, Governor of the Bank of France and Chair of the Board of Directors of the Bank for International Settlements, at the EUROFI High Level Seminar 2022, Paris, 23 February 2022. * * * Ladies and Gentlemen, It is a great pleasure for me to open this edition of Eurofi today in Paris, and I extend my warmest thanks to Didier Cahen and David Wright for their tireless efforts that allow us to gather in this beautiful Hôtel du Collectionneur. Today I will indeed be speaking about a collection – not of fine arts, but rather of national banking and financial systems. Unfortunately, such a collection is nothing to rejoice about, it is rather an Achilles heel. But let me start with a few words about Ukraine. We are obviously monitoring closely the geopolitical developments, and their possible economic and financial implications. Let me already stress that the direct exposure of French financial institutions to Russia remains limited, but the SSM called all European banks to enhanced vigilance on cyber risks. We will assess in our Governing Council in March the more indirect consequences on inflation and growth, and we will be facts driven: more than ever, optionality – about the right monetary stance – and flexibility – to guarantee the right monetary transmission – are the two names of the game for our policy.
No doubt at some point such perceptions will change - or the anticipated differences in future earnings growth be discounted by the change in asset prices, including the effect of exchange rates. There are some tentative signs that this may be beginning to happen. But in the meantime it is not at all clear that there is much that we could do - even if we wanted to - to weaken sterling against the euro by marginal changes in short-term interest rates. As it is our interest rate differential over the euro zone has halved since the euro started, while our exchange rate against the euro has appreciated by around 15%. We do already, of course, take full account of the exchange rate - and other prices - in both our forecasts and our policy decisions. Indeed, it was partly to avoid pushing sterling higher and so aggravating the imbalance within the economy, when we were not wholly convinced that we needed to take that risk in order to achieve the inflation target, that the Committee refrained from further monetary tightening over the past eight months. But looking ahead the risks and uncertainties are such that it would be unrealistic to suppose that we can altogether exclude the need for further tightening at some point.

Over time this should also be fostered by an improvement in employment and employment expectations. This is our assessment and it is supported by the available forecasts and projections. Obviously, any such forward-looking evaluation is conditional and subject to risks. At this juncture, risks are primarily related to the persistent imbalances in some regions of the world and the weakness of private consumption in the euro area. Concerning private consumption, European citizens who still perceive that inflation is higher than measured by official indices should be assured that the official measures are accurate and that we will continue to maintain price stability in the future. Moreover, the prevailing uncertainties surrounding fiscal policies and structural reforms in some euro area countries may have had a negative impact on consumer sentiment. Ensuring clarity about the content and timing of these reforms and a better understanding of their benefits to all citizens would make a very important contribution to supporting household confidence. Turning to price developments, we expect some short-term volatility in HICP inflation rates to continue. According to Eurostat’s flash estimate, annual inflation in the HICP was 1.6% in March, unchanged from February and down from 1.9% in January. However, over the coming months, annual inflation rates could edge up again, on account of less favourable base effects and increases in indirect taxes. BIS Review 20/2004  1  Looking beyond these short-term fluctuations, we expect price developments to remain in line with price stability.
To preserve, and even restore, their specific investment approach, these investors might be more shielded from excessive short-term pressures. This objective raises considerable difficulties, because it touches on the way in which the performances of medium and long-term funds (including pension  BIS Review 54/2001  3  funds) and life insurance companies are assessed. In other words, this objective concerns the accounting standards and practices they use. It implies that some rules and standards would be adapted to the medium and long-term horizon used by these entities. I have no answer at this stage. I am only asking the question. Diversify the risk management tools of financial institutions As I mentioned earlier, even the best techniques can have adverse effects when used by too many participants. To some degree, this is perhaps what has happened to value-at-risk based techniques, which have been massively adopted by the financial industry. Because they use more or less similar parameters and suffer from the same weaknesses – for example, they took inadequate account of market liquidity at the time of the 1998 crisis –, such tools tend to give converging signals to those that use them. They thus encourage the mimetic behaviour that I discussed previously. The fact that some market participants are more sophisticated than the average is a guarantee that standardisation will remain limited, since they will develop techniques that are little used by others.

Ensuring financial stability requires a multi-dimensional approach. There is no single instrument that has a stable and reliable relationship with financial stability or asset price stability. This is because financial risks emanate from multiple sources and manifest in multiple ways. We need to adopt a range of macro-financial tools to address the spectrum of potential financial vulnerabilities. As mentioned earlier, the macro-financial policy toolkit contains three broad categories. macroprudential measures to moderate credit demand and asset price inflation foreign exchange interventions to dampen exchange rate volatility capital flow management measures to directly curb capital inflows and outflows  Let me briefly describe how each of these components work. Macroprudential policy tools include counter-cyclical capital buffers and sector-specific measures. The latter, often targeted at the property sector, include loan-to-value limits and debt service limits. A few countries have introduced counter-cyclical capital buffers, but it is too early to judge their effectiveness. Targeted macroprudential tools work better than counter-cyclical capital buffers to address financial risks emanating from specific sectors like real estate. Macroprudential policy measures are most effective when used pre-emptively and in a coherent manner. A forward-looking or pre-emptive approach is appropriate given the long lags between policy actions and macroeconomic effects. An added reason is that financial cycles are viewed as being longer than standard business cycles. Both the IMF and BIS support the use of macroprudential measures in a pre-emptive manner, rather than in response to shocks.
We have made good forecasts for all variables, with the exception of productivity, one year ahead. This is reflected in the fact that we have made more accurate forecasts than the time series model and also in the fact that the correlations are relatively high between forecasts and outcomes. In addition, the bias is small for all variables one year ahead. We have a forecasting memory two years ahead for both employment and inflation. Although the correlations between forecasts and outcomes are weak one year ahead, they nevertheless show a clear relationship. On the other hand, the study implies poor forecasting memory for GDP and productivity two years ahead. The correlations between the forecasts and outcomes are also weak for these variables two years ahead. We have seen that the  6  BIS Review 138/2007  bias is larger for most variables two years ahead. GDP and inflation have been overestimated slightly during the period studied, and employment and productivity have been under-estimated. Our inflation forecasts, particularly those for CPIX, have good qualities such as high correlation with outcomes and long forecasting memories. It is worth pointing out that this is the variable that is most important for monetary policy. At the same time, the uncertainty band shows that probability that inflation will be within the Riksbank’s tolerance interval of 1-3 per cent two years ahead is only around 75 per cent, despite our forecast being that it will be two per cent.

GDP outcomes and forecasts Annual percentage change 6  6  5  5  4  4  3  3  2  2  1  1  0 mar-00  0 mar-01  mar-02  mar-03  mar-04  mar-05  mar-06  mar-07  Sources: Statistics Sweden and the Riksbank  BIS Review 138/2007  7  Figure 2. Employment outcomes and forecasts Annual percentage change 4,0  4,0  3,0  3,0  2,0  2,0  1,0  1,0  0,0  0,0  -1,0  -1,0  mar-01  mar-02  mar-03  mar-04  mar-05  mar-06  mar-07  Sources: Statistics Sweden and the Riksbank  Figure 3. CPIX outcomes and forecasts Annual percentage change 3,5  3,5  3,0  3,0  2,5  2,5  2,0  2,0  1,5  1,5  1,0  1,0  0,5  0,5  0,0  0,0  -0,5 mar-00  -0,5 mar-01  mar-02  mar-03  mar-04  mar-05  mar-06  mar-07  Sources: Statistics Sweden and the Riksbank  8  BIS Review 138/2007  Figure 4. Productivity outcomes and forecasts Annual percentage change 5,0  5,0  4,0  4,0  3,0  3,0  2,0  2,0  1,0  1,0  0,0  0,0  -1,0  -1,0  -2,0 mar-01  mar-02  mar-03  mar-04  mar-05  -2,0 mar-07  mar-06  Sources: Statistics Sweden and the Riksbank  Figure 5.
The damage to confidence – confidence in ratings, in valuation tools, in the capacity of investors to evaluate risk – will prolong the process of adjustment in markets. This process carries with it risks to the broader economy. Macroeconomic and supervisory policies have an important role to play in containing those risks. Let me mention several critical areas of policy. Monetary policy The Federal Open Market Committee (FOMC) has reduced the nominal federal funds rate target substantially in a relatively short period of time, with much of this reduction occurring ahead of the deterioration in confidence and the broader slowdown in spending that is now apparent. But even with those reductions in short-term interest rates in place, financial conditions have tightened as risk spreads on a wide range of asset classes and institutions have increased considerably. The critical risk to the economic outlook remains the potential for the strains in financial markets to have an outsized adverse effect on real economic activity, particularly by exacerbating the already significant weakness in the housing sector. It is important for monetary policy and liquidity instruments to be used proactively in addressing this risk. BIS Review 27/2008  3  But this is not the only challenge we face. Headline and core inflation have come in higher than anticipated, and inflation expectations have also moved up.

The second element is to encourage new equity capital raising, so that the burden for preserving capital ratios does not fall principally on actions, such as asset sales or reduced lending, that might exacerbate the credit crunch. We have seen a very substantial flow of new capital into the financial system much more quickly than has been the case in past crises. More will come. Those institutions that move more quickly will obviously be in a stronger position to deal with the challenges, and take advantage of the opportunities, ahead. Fiscal stimulus Monetary policy can, of course, play a powerful role in reducing the downside risks to growth, but overall policy will be more effective, particularly given the strains to the financial sector, if  4  BIS Review 27/2008  the full burden does not fall on the tools available to the Federal Reserve. Fiscal policy can play an important role. The stimulus program signed into law by the President will provide a meaningful level of support to growth, somewhere in the range of three quarters to one and half of a percentage point of GDP growth over the next few quarters. Targeted support for housing Policy can also play an important role in helping cushion the effects of the fall in housing prices and the rise in foreclosures in the United States.
Moreover, in the coming months the Iberian mechanism to cap the price of gas and lower that of electricity which was recently approved in Spain and Portugal, in agreement with the European Commission, will foreseeably exert downward pressure on energy prices in Spain. In any event, in the absence of any new shocks or an escalation of the war in Ukraine, such a revision of the April 2022 projections would still be consistent with the Spanish economy holding on a gradual recovery path – one that could see it reach pre-pandemic GDP levels in the final stretch of 2023 – and with inflation rates remaining high in the coming months and subsequently moderating gradually. The rise in inflation As I mentioned earlier, the rate of inflation rose significantly in 2021 worldwide and accelerated further in early 2022. Moreover, this surge is proving to be more persistent than initially expected. The underlying causes of this increase include, first, the rapid recovery in demand following the removal of the restrictions to contain the pandemic in an environment characterised by continued production constraints. Second, commodity prices, particularly those of energy commodities, have risen sharply on international markets. Energy prices have been affected by a decrease in the supply of gas for geopolitical reasons and a lack of infrastructure maintenance during confinement. The gradual reduction of investment in fossil fuel extraction as a result of green policies in recent years has also affected energy prices.

Several EU countries (such as Germany, Sweden, Italy and Portugal) have established a link between the level of benefits or retirement age and life expectancy or economic performance. Another important aspect is the role that private saving can play as a supplement to the benefits offered by the pay-as-you-go (PAYG) public pension system. In this respect, the recent legislative proposal to encourage collective pension schemes – which in general are less well developed in Spain than in other EU countries – essentially aims to increase the share of the population covered by these schemes. For this purpose, the reform establishes the creation of public occupational pension funds and facilitates the creation of occupational schemes in the collective bargaining framework. Tax relief is also envisaged to encourage occupational schemes, in keeping with the pattern observed in recent years where tax incentives have been focused on occupational schemes to the detriment of personal pension schemes. A recent Banco de España publication suggests that making contributions to occupational pension schemes may be a useful channel through which to generate new retirement saving. Specifically, it is estimated that total saving could increase by 31 euro cent for each euro contributed to such schemes, after subtracting the related tax credit. (vii) The challenge of the fight against climate change and the green transition The fight against climate change and the transition towards a more sustainable economy are, without doubt, among the most significant challenges facing Spain.