samchain/econo-pairs-v1 huggingface dataset:
Given the uncertainties, it should not surprise you that the Committee members disagree more often than not, but usually at the margin, on what should happen in any particular month to interest rates. I regard that as a strength rather than a weakness of the process. It should not surprise you either that even though we consistently aim to hit the target, we rarely achieve it precisely. As a matter of fact, I have been genuinely, and agreeably, surprised that the outcome over the past few years has been as consistently close to the target as it has been. The best we can realistically hope for is that we come close on average and over time. And to achieve that, when we identify developments which are likely to move us away from our target on one side or the other, we must be ready symmetrically to adjust our policy to bring us back on track. That is why, even though the economy as a whole continues to perform relatively well on the data, we have moved interest rates downwards this year, to reflect the emergence of the new downside risks; and it is also why we indicated, in our recent press release, that we will continue to monitor those downside risks. That is not a promise of further interest rate reductions, but it is a promise that we are prepared to move further if we have evidence that those risks are increasing.

Coming to the current NBR governance framework, I would like to start by pointing out that it ensures a complete separation as regards the coordination of the relevant departments: while the Governor is in charge of the monetary policy area, the First Deputy Governor coordinates the Supervision Department; one Deputy Governor takes care of financial stability and the other, of bank resolution. The nine-strong Board of Directors runs the central bank, but the process of preparing its decisions in the areas of monetary policy and prudential supervision takes place in two distinct structures: the Monetary Policy Committee and the Supervisory Committee, respectively, which comprise members of the executive management and experts in the relevant areas. As separation is not the same thing as complete isolation, I have to add that both committees are chaired by the Governor... Pursuant to the NBR Statute, the Board is tasked to act as a first appellate forum for sanctions on credit institutions. In order to avoid conflicts of interest that may appear, the following institutional arrangements are in place: separate Board meetings, a certain degree of autonomy of the Supervision Department and recusal from the proceedings of the First Deputy Governor, in his capacity as coordinator of the Supervision Department. 2  BIS central bankers’ speeches  I would like to add a special remark regarding the new role of the NBR as the resolution authority, arising from the provisions of the Bank Recovery and Resolution Directive.
Third, there is also an urgent need to improve the functioning of the current fiscal policy framework, so that it delivers an aggregate stance that is consistent with national constraints and the needs of the euro area as a whole. On the one hand, the current fiscal policy coordination device, the Stability and Growth Pact, has not stood the test of time very well. Our fiscal rules have proven to be hard to enforce in a timely manner, not least because of their complexity, and have also been unable to avoid procyclical fiscal policies at the national level. On the other hand, and more importantly, the past decade has shown us that lacking a centralised fiscal tool to target an appropriate euro area macroeconomic policy stance is a serious limitation for the functioning of our monetary area. I strongly believe that a central fiscal capacity at euro area level could contribute, in particular, not only to tackling asymmetric, country specific shocks, but also to macroeconomic stabilisation. In this respect, monetary policy would not become overburdened, as it might be in the current economic juncture. Finally, let me advocate the need to explore the introduction of a common safe asset for the euro area. In my view, a well-designed safe asset would contribute significantly to addressing some of the root causes of the euro area’s institutional weaknesses. In particular, it could increase the effectiveness of monetary policy, improve financial integration and complete the Banking and Capital Markets Union, by breaking the banksovereign doom loop and facilitating diversification.

I am referring here to the large domestic sovereign debt holdings of national commercial banks and the lack of incentives for them to act differently under the current legal framework. Solving this problem would certainly make a broad agreement on EDIS more likely and vice versa. To create adequate incentives for commercial banks to move away from domestic sovereigns, some proposals support the introduction of risk weights or concentration charges on banks’ holdings of domestic sovereign debt. In my view, this is an issue that has many facets and requires thorough analysis. The literature has shown that, if implemented in isolation, such measures could have significant side effects. In particular, while pure diversification reduces exposure to the domestic sovereign, it could increase aggregate risk, as banks’ portfolios become more overlapped and interconnected.4, 5 In addition, risk weights may have unwarranted distributional effects, by giving the bonds of specific sovereigns a regulatory advantage.6  2  Aggarwal, R., J. Bai and L. Laeven (2016), The Role of the Government Bond Lending Market in Collateral Transformation. 3 Estimated by the ECB as 110 basis points, as compared to 160 bp in the US. See: ECB (2019), The International role of the euro. 4 Craig, B. R., M. Giuzio and S. Paterlini (2019), The Effect of Possible EU Diversification Requirements on the Risk of Banks’ Sovereign Bond Portfolios. 5 Acemoglu, Daron, Asuman Ozdaglar and Alireza Tahbaz-Salehi (2015), “Systemic Risk and Stability in Financial Networks”, American Economic Review, 105 (2): pp. 564-608.
While this list is clearly not exhaustive, it does include some of the main sectors that have historically been most subject to over-exuberant credit growth. The final tool is the ability to set and vary a minimum leverage ratio. A leverage ratio is essentially just (a transformation of) the ratio of capital to unweighted assets. Such a measure fails to allow for the varying riskiness of different forms of lending. However, the wide variation in risk weights across banks raises questions about the reliability of those risk-weight models. Moreover, as my colleague Andy Haldane (Haldane and Madouros, 2012) recently documented, a simple leverage ratio measure does a somewhat better job of predicting which banks were more likely to get into difficulties during the crisis than does a  BIS central bankers’ speeches  3  risk-weighted capital ratio 2 (see Chart 2). Given the imperfections of risk-weighting, the ability to impose a minimum leverage ratio provides a useful additional instrument that can backstop the usual risk-weighted capital ratio. International discussions about the implementation of a leverage ratio are still continuing and this instrument is only likely to become part of the FPC’s toolkit after 2018. The application of these so-called macroprudential policies is still very much at the developmental stage. When the Bank gained operational responsibility for monetary policy in 1997, there was a long history of practical experience, together with a vast theoretical and empirical literature for us to draw on. That didn’t make setting monetary policy easy, but it certainly helped.

Second, the imposition of such an additional capital requirement may also inhibit the expansion of banks’ balance sheets, so dampening the upswing of the credit cycle. This second mechanism obviously requires the Modigliani-Miller theorem to fail, in the short run at least; if it doesn’t then there is no reason for a bank’s management to prefer debt finance to equity finance. Now the most obvious reason why the Modigliani-Miller theorem fails for banks is the implicit subsidy to debt finance that comes from being “too big (or too complex) to fail” so that taxpayers, rather than creditors, pick up the tab if capital is insufficient to absorb losses. Recent and prospective regulatory reforms seek to reduce the too big/too complex to fail problem, but eliminating it entirely may be an aspiration too far. Moreover, there are likely to be other frictions to raising capital which mean that raising capital requirements will inhibit balance sheet growth, providing traction for the countercyclical capital buffer. However, this is an area where empirical evidence is in relatively short supply (though for some examples, see: Macroeconomic Assessment Group, 2010; and Aiyar et al., 2012). The second tool is the ability to vary capital requirements by type of asset, allowing the FPC to target excessive exuberance in specific sectors. The EU will permit national authorities such discretion in regard to residential property, commercial property and intra-financial sector exposures.
Indeed, while in the initial consolidated State budget for 2013 these three items accounted for around 18.2% of GDP, in 2014 they are expected to represent around 18.5% of GDP and close to 55% of total consolidated public spending. The budgetary adjustment will therefore continue to focus on government consumption, for which a real-terms reduction of 2.9% is projected in 2014 for overall general government, based partly on the civil servant wage freeze and on the extension of austerity policies in relation to public-sector employment; and, moreover, on the reduction in public investment. A further expenditure-containing factor will stem from the envisaged revision of pensions, set at 0.25%, in line with the floor established in the draft law defining the sustainability factor. BIS central bankers’ speeches  5  How do these figures compare with those for the euro area as a whole? In terms of GDP, the weight of unemployment benefits continues to stand far above the euro area average, as a result of our high unemployment. Interest payments on debt in Spain are also expected to exceed the euro area average, while spending on pensions would continue to be below the average, given that demographic developments in our country remain more favourable. On the revenue side, a 2.4% increase in total tax receipts (including the share of regional and local government) is forecast, with very few tax changes. These are concentrated in the broadening of corporate income tax bases approved last June.

Just as in the mature economies, there is room for emerging market economies to boost potential growth through structural reforms, such as measures to improve the investment regime for infrastructure, improve public services and the business climate, and overhaul tax systems. Having said all that, it is completely understandable that there is uneasiness in much of the emerging world with what is going on in the developed economies. Over the years, the emerging markets have learned about financial stability the hard way, from their own crises and those of their neighbors. They have had too much experience with the aftermath of excessively loose fiscal and monetary policy, and political gridlock. Those experiences have engendered a cautious approach to fiscal and monetary management and financial sector oversight that has served countries well during the volatility of recent years. It has also made them understandably uncomfortable with the risks they perceive in the developed economies. The fact of the matter is that the potential spillovers do pose risks for everyone, developed and emerging. The large and volatile capital flows encouraged by accommodative financial conditions in the developed economies, and the attendant pressures they put on credit markets, asset prices,  4  BIS central bankers’ speeches  and currency values do add to the challenges countries face in containing external vulnerabilities. And the failure to address underlying vulnerabilities in the developed economies does expose the EMs to the risk of sudden reversals in capital flows.
The IMF does not only envisage risks of a poorer development than expected – it may also be worth pointing out that they also see the possibility of an even more positive development. The Riksbank’s overall assessment is that international economic activity will enter a calmer phase over the coming two years, but at the same time global economic developments are very good right now. Sweden: Continued strong economy leads to slightly higher inflation The situation in the Swedish economy is also good. Last year growth was over 4 per cent. For instance, strong global growth has meant that exports have developed strongly for several years. Domestic consumption is also increasing rapidly now, at the same time as employment is rising. But the slightly weaker international economic activity means that activity in Sweden will also be dampened somewhat in the coming years. Inflation is the Riksbank’s particular responsibility. The Riksbank’s objective is to maintain inflation at around 2 per cent a year. We measure inflation as a change in consumer prices. Last year inflation was over 1.4 per cent. Over the past twelve months the main contribution to the increase in the consumer price index, or CPI, came from increased interest costs. However, higher electricity prices, rents and food prices also contributed to the increase in price levels. Price reductions on post and telecommunications had a dampening effect on inflation, as did falling prices for computers, DVDs and TVs.

The minutes from the monetary policy meetings will now include the names of the Executive Board members in relation to the discussion and not merely if they enter a reservation against the majority decision. In this way it will be easier and clearer to examine the motives behind the monetary policy decisions and therefore also to form an impression of future decisions. These and all of the other changes we have made in recent years are intended to create the best possible opportunities to understand, evaluate and debate monetary policy. The debate on monetary policy is important and useful for us. It contributes to developing the way we work. The Riksbank’s openness, which we are now increasing further, enables a qualified public debate, which in turn is a part of how we can ensure accountability in a democracy. Thank you! BIS Review 54/2007  5
Productivity growth usually slows down when economic activity slows down, but in recent years productivity growth has been unusually low. It is also unusual that productivity growth falls as long as eight quarters in a row, as it has now. It is difficult to find a simple explanation for the low productivity growth in recent years. The National Institute of Economic Research has studied the composition effects, to put it simply, if the composition of industries with different rates of productivity has changed, and it finds no great effect on productivity. 13 Another possible explanation could be that the recent increase in employment has meant that new groups with a lower productivity than others have entered the labour market. For instance, it can take time to train new employees. It may also be the case that companies have prepared for coming retirements by employing additional staff so there are currently two to a job in some cases. When productivity slows down, unit labour costs increase, and this puts further pressure on companies to raise prices. There is thus risk of higher inflation. We are currently facing a situation where it is difficult to predict how companies will adjust to high unit labour costs. It is always difficult to dismiss staff, but indicators such as job vacancies, redundancies, companies’ employment plans, etc. point towards an adjustment having begun. At the same time, a general decline in demand makes it difficult for companies to pass on cost increases to consumers.

In that case, national authorities would licence domestic banks that would face significant restrictions on the type and magnitude of cross-border activities they would be allowed to undertake; for instance, by limiting the size of foreign currency balance sheets and maturity mismatches and not allowing collection of foreign currency deposits in foreign branches. These banks would then be supervised by the national supervisor, their deposits would be insured by the domestic deposit insurance system, and the national central bank would be their LOLR. Those banks that want a European passport would be licensed and supervised by an EU authority, however; they would be part of an EU-wide deposit insurance system, and in most cases, their LOLR would be the ECB. Let me now say a few words about the national level. The key issue here is that, as long as global risks and EU flaws are not dealt with, individual countries are forced to take action to protect themselves: action that might contribute further to the retreat of cross-border banking. These might take the form of restricting international activities of home banks and placing much more strict prudential limits on foreign currency maturity mismatches. For example, when Iceland lifts its current capital controls on outflows, it will probably impose restrictions on both the size and composition of foreign currency balance sheets of home-headquartered banks. Some might see such restrictions as capital controls in another form, but I see them as prudential rules.
The MPC is conscious that the continuing high level of inflation poses the risk that inflation expectations may move up. And it may be some while before inflation returns to target. But at present, there is also a risk – at least as large – that once the temporary upward influences on inflation dissipate, the influence of spare capacity in the economy will push inflation below the target. Consistent with that possibility, a range of other indicators – growth in broad money, pay, and the pressure of demand on supply, that together are likely to be a more reliable guide to inflationary pressure looking ahead – all remain extremely subdued. So not only can monetary policy play a role in smoothing the rebalancing process, it needs to do so if the outlook for inflation is to remain in line with the 2% target in the medium term. Because there are risks on both sides of the outlook, reasonable people can disagree about the monetary policy judgement. In recent speeches, different MPC members have emphasised upside and downside risks to inflation. After the event, no doubt whichever risk has crystallised will be described by the critics as inevitable. Unfortunately, we do not have a crystal ball. So in setting policy today the only coherent approach is to balance those two risks. The next decade will not be nice. History suggests that after a financial crisis the hangover lasts for a while.

It is therefore understandable that when the reversal of capital inflows came, it caused the damaging financial turmoil that we have seen in a number of Asian economies. 10. Financial liberalization encourages greater financial intermediation, domestically and internationally, and this obviously is beneficial to economic growth and development. But clearly the risks arising from this worthy process must be identified and managed properly before the long term beneficial effects could be realized. The risks are, nevertheless, not well appreciated, simple as they may be, particularly with the benefit of hindsight. 11. There is, as always, credit risk. Yet it is such a common feature that undue exuberance on the part of investors would push price to earning ratios well beyond fundamentals. Bankers also fail to assess the impact of interest rate hikes on the value of collateral or on cash flows. The result is therefore the usual over exposure of investors and lenders to asset losses. Then there is maturity risk. To say that it is risky to finance illiquid non-tradables, such as property, with short term capital inflows is, I suppose, teaching grandmothers to suck eggs, particularly in this company, but this again has been a common feature underlying financial shocks, not just in Asia but also in other parts of the world. The same with currency risk. Many borrowers, in both the private and public sectors, were keen to borrow foreign currency funds to finance investments that do not generate sufficient foreign exchange to repay the debt. Such debts were also unhedged.
A systematic review of the international literature by Casiday et al (2008) assessed 43 longitudinal, cross-sectional and qualitative studies of the impact of volunteering on mental health. It found that volunteering reduced the incidence of depression, stress, hospitalization, pain and psychological distress. It is difficult to put precise numbers on those benefits. But Fujiwara et al (2014) find that, on average, the well-being benefit from relief from depression or anxiety is worth around £ per year. And New Economy Manchester (2014) estimate that the average cost of treating those suffering from depression or anxiety is around £ per year. 19 Even a small effect from volunteering on mental health could deliver large benefits. (c)  Increased skills and employability  The evidence on the impact of volunteering on employability is more mixed. Ellis Paine et al (2013) find a significant, but weak, effect of volunteering on the probability of finding a job. Not all types of volunteering will lead necessarily to better employment outcomes. And it is important not to overlook the potential benefits from volunteering felt by employers, as well as their employees. A recent poll by YouGov found that nearly all managers believe that workplace skills can be gained from volunteering. 20 And recent research suggests a link between the emotions induced by volunteering (like confidence and self-esteem) and factors important in the workplace (like performance ratings and efficient problem solving). 21 Oswald et al (2014) provide evidence that happiness makes people more productive.

News conference  Berne, 13 December 2018 Andréa M. Maechler  Introductory remarks by Andréa M. Maechler  I will begin with a review of developments on the financial markets and look at the status of the Swiss franc. After that I will say a few words about the upcoming transition from Libor to SARON as the new reference interest rate in Switzerland and inform you about progress being made on this front. Situation on the financial markets  So let me start with developments on the financial markets. In the second half of the year, sentiment on the financial markets darkened considerably at times, despite the fact that the economic situation in many countries remained sound. Nonetheless, the economic data did weaken slightly in some regions. This caused investors to focus on a number of risks – most notably, ongoing concerns about protectionist tendencies, but also the currency crises unfolding in several emerging economies and Italy’s budget dispute with the EU. As a result, volatility on the financial markets has increased significantly since mid-year (cf. chart 1). This is particularly true of the equity markets, where prices fluctuated substantially at certain points. Thanks to strong economic data and solid corporate earnings growth, US stock exchanges performed better than their counterparts in Europe and the emerging markets (cf. chart 2). Despite suffering sizeable losses in October, the S&P 500 recently closed only moderately lower than it had at the end of June down 3%.