samchain/econo-pairs-v1 huggingface dataset:
It’s an argument which seems to say, we can’t value the firm, we can’t supervise it, and we can’t resolve it, so therefore let’s ensure it has a very large amount of equity financing, what I call the “Big Equity” argument. Honestly, it’s a nonsense. Large amounts of equity financing will not be available for such firms, so the best we can say is that this is a route to a radically different financial system, but in that world the risk goes somewhere else, and we shall still be worried. But this is not an argument against having non-risk based tools like the leverage ratio in the supervisors’ toolbox. They are very important, because to understand risks well, we need more than one view of the firm. And the leverage ratio is an important other view. But I want to emphasise that understanding risk is at the heart of supervision. BIS central bankers’ speeches  1  But this, of course, begs a very important question. Why did supervision go wrong in the period before the financial crisis, and what do we learn from that bad experience? Let me offer a number of thoughts on that. First, supervision was never given sufficient prominence and attention. It’s a very real skill. In my experience it demands not just high levels of technical skill but also interpersonal skills – to get very strong egos to change their thinking and actions – do things that they had not intended – to recognise the public interest.

In the financial system, this involves putting in place more comprehensive regulatory frameworks, complemented by enhanced surveillance arrangements and relatively more intrusive supervisory oversight. It also involves having wide-ranging policy tools, including macro-prudential policies, to mitigate and manage the risks emanating from excesses in the financial system. As the experience in the advanced economies has shown, the source of imbalances can arise in a number in segments of the economy, including from the household, the financial and the public sectors. This underscores the importance of prudence; to ensure that growth is underpinned by sustainability and not excesses. A further lesson is to build buffers during the good times to better position us to withstand future shocks. Equally important for policy in the emerging economies is to put in place the necessary foundations for long-term growth. This involves few areas of significance. The first is to create a competitive environment that allows for greater economic flexibility. This includes reforms for a sequenced and gradual removal of distortions prevailing in the economy, lowering the costs of doing business, and to streamline the involvement of the public sector in businesses. The second is to accord importance to investments in modern infrastructure, and to enhance technological readiness that will enable the economy to prepare for the changing economic and financial landscape. Another area of significance is to ensure balanced and inclusive development.
Interest payments, defaults and the proportion of households spending a very significant (>40%) proportion of income on servicing debts are all at historical lows. Interest rates would have to rise a lot – certainly by a lot more than financial markets expect – for this to change significantly. 3  All speeches are available online at www.bankofengland.co.uk/news/speeches  3  But underneath any aggregate, there are always more concerning stories. According to the Bank/NMG survey 7% of households say they are “very concerned” about their debts, even if they are able to service them. And we know from extensive research that financial worries can be an important contributor to poor mental health. High levels of debt are, for example, associated with anxiety and depression, and studies using changes in local house prices and foreclosures have found that changes in households’ financial situation can affect health.1  One thing we also know is that people are generally prone to over-concentrate on present, urgent needs, and neglect things that are more important for us over the longer term. Economists are naturally interested in how people trade off the future against the present. In standard models that seek to describe these choices, it is assumed that people discount the future at a constant rate: the extent to which we care more about things one rather than two months from now (say) is the same as between today and a month away.

I don’t think we have the evidence to say that better financial education is enough to escape such a trap. But it surely can’t hurt. A recent study using data from the OECD Programme for the International Assessment of Adult Competencies, or PIAAC, found that rates of financial literacy – defined as the ability to answer relatively straightforward financial questions4 – were lower here than in other advanced economies. According to a recent, UK-specific survey by a private-sector firm, less than half of adults and barely a third of teenagers actually know what an interest rate is. And we also know that the less financially literate tend to face higher debt costs than others and more often face financial distress.5 If financial education can make any difference at all to these problems we have a duty to try and improve it. Conclusion The Bank of England has a direct interest in improving and broadening the teaching of economics. There’s an appetite for it. According to a recent poll, three quarters of the public believe economics should be taught in schools.6 Yet only around a third of schools offer children the option to study economics from the age of 14.7 We hope our online teaching materials will help fill some of the gap. However, we also hope that our “EconoME” package can help with financial literacy. I think economics is fascinating and very valuable. But you don’t need to be an economist to understand the basics of personal finance and their importance for people’s lives.
While this share was around 8 percent in the early 1980s, it is expected to increase to 30 percent in the middle of this decade. Although the above evidence has indicated that Asia is on the rise, whether or not this rise will be sustained will depend on a number of factors. To do so, Asia needs to become a global innovation hub, and rely significantly more on our own domestic and regional demand. Moreover, we also need to assess whether prosperity will spread to all of the regional economies. BIS central bankers’ speeches  1  Ladies and Gentlemen, Against this hopeful background, we need to reflect on the positioning of Thailand. As longterm business partners in Thailand, I am certain that Japanese businesses have carefully assessed the prospects of Thai economy in comparison with our peers in the region. And, I think we share a common view that Thailand needs to climb up the value chain in order to benefit from the expansion of the regional production network. This is a very important challenge as competitiveness from low labor costs will evaporate, and there is a risk of being marginalized in the increasingly competitive environment. Recognizing that Thailand needs to come up with concrete plans and strategies to foster capacities and productivity, the Bank of Thailand has emphasized on various occasions that our economy needs to have a clear development strategy. In fact, several Asian countries have already announced goals ranging from becoming world leaders in science, technology or human resource development.

2  BIS central bankers’ speeches  This leads me to my final point, which is, how the Bank of Thailand plans to deal with these potential risks on both the external and internal fronts. For external risks, recognizing that sizeable capital inflows could be out of line with real developments, and that spillovers can persist in the near future, we need to closely monitor the external environment to capture these risks. It is also important to improve Thailand’s capacity to cope with international capital flows by developing a systematic capital flows master plan, and promoting the use of financial hedging instruments and the foreign exchange risk management capability of the private sector. The Bank of Thailand also stands ready to implement emergency measures of varying degrees to deal with volatile capital movements as appropriate. In addition, to prevent these inflows from causing economic and financial instability, the Bank of Thailand has prepared a toolkit of macro prudential measures to ensure the soundness of the macro economy and the financial sector. Measures to prevent overheating in particular segments of the property market are one example. Ladies and Gentlemen, It would be uncommon for a central banker not to mention inflation and monetary policy in any speech. I would therefore like to emphasize that the Bank of Thailand’s monetary policy aims to achieve domestic price stability and tighten to more normal levels consistent with Thailand’s macroeconomic fundamentals. Price stability helps foster a stable and predictable macroeconomic environment conducive to investment and growth.
All told, this means that in the face of foreign shocks, EMEs are forced to compromise their monetary sovereignty, temporarily diverting monetary policy away from targeting domestic output and inflation and instead using it to try to stabilise capital flows. While this strategy is the best EMEs can do given the current structure of the international monetary financial system, outcomes for them are a distant second best when compared to those advanced economies that are less exposed to international financial spillovers. See ‘Pull, Push. Pipes’, speech by Mark Carney, Institute of International Finance Spring Membership Meeting, Tokyo, 6 June 2019. Within the Bank’s Capital Flows-at-Risk framework, these actions are estimated to have Capital Flows-at-Risk (that is, capital outflows as a percent of GDP in the fifth percentile of the distribution) by 3% of GDP. 21 Within this, investment funds are growing, accounting for the bulk of the growth in asset management over the last decade. In parallel, investment fund flows to EMEs now account for around one third of total portfolio flows, compared to around one tenth precrisis. 19 20  8  All speeches are available online at www.bankofengland.co.uk/news/speeches  8  ------------------------------The deficiencies of the IMFS affect EMEs more directly than advanced economies, but their consequences influence everyone because they reduce the global equilibrium interest rate. Against the current backdrop of an inadequate and fragmented global financial safety net, EMEs have chosen to self-insure against capital flow volatility by accumulating reserves of safe assets, contributing to Ben Bernanke’s “global savings glut”.

Turning to reserve releases, our obvious concern is that these should reflect genuine reserve redundancy with the decisions taken by risk managers and actuaries using their best professional judgement and not in any way influenced by a desire to sustain reported profits. For long tail lines, such as casualty, a key assumption in setting reserves is the expectation of future claims inflation. In most cases this assumption is derived implicitly using the recent actual data and trending this forward. Given that the recent past has seen falling inflation in many sectors the obvious question is – is it reasonable to assume that these trends will continue? It does seem plausible that claims inflation has often been lower than expected against the background of the current low inflation environment. But our calculations suggest reserve releases have in some cases got to a point where implied future claims inflation looks very low. In an extreme case, we estimated past claims inflation for the class of business to be 5% per annum, whereas to obtain the particular insurer’s booked reserves would imply a future claims inflation assumption of –2%. If the future trend is in fact in line with past inflation, booked reserves would need to be 25% higher than currently assumed. Insurers that have sought to diversify and grow their business into longer-tail liability insurance classes have critical questions to answer about the future direction of claims inflation.
Letter from Sam Woods to Andrew Griffith MP, Economic Secretary to the Treasury  Appendix  Victoria Saporta Executive Director, Prudential Policy  ©2023 Bank of England  , 01 December 2022.

On the basis of these analyses, a strong real krone exchange rate and weak competitiveness will apply to a period from the beginning of the 1970s in which the petroleum industry is expanding and we are reaping the largest economic benefits. Main features of the economic situation Inflation is low. The rise in prices is being curbed by the appreciation of the krone in 2002, the fall in prices for imported consumer goods in foreign currency and strong competition in many industries in Norway. Monetary policy in Norway is oriented towards returning inflation to target. The sight deposit rate has been lowered to 1.75 per cent. Low interest rates and the global upturn are stimulating activity in the Norwegian economy. The output level will be somewhat lower than implied by the trend level. This means that the output gap is projected to approach zero, but will continue to be marginally negative in 2004. Growth in the Norwegian economy is projected to pick up markedly this year and remain relatively high next year. The most important contribution comes from private consumption, fuelled by low interest rates and high real wage growth. The global upturn will probably have a positive effect on the internationally exposed sector. Petroleum investment will continue to expand in the next couple of years. Mainland business investment is also expected to pick up gradually. In recent years, many enterprises have rationalised operations.
Such risks may be particularly relevant in the context of close ownership links between banks and funds. For example, banks in certain circumstances may feel a need to step in to protect their brand. To tackle this issue, the Basel Committee on Banking Supervision (BCBS) has published guidelines on step-in risk that would require banks to self-assess and report their material step-in risk exposures to supervisors, who should have the possibility for supervisory action if deemed necessary.8 We also need to work on the different layers of interconnectedness between ETFs and their counterparties. In our view, the rapid growth of ETFs, coupled with their potential to transmit and amplify risks to financial stability, warrants further evaluation of regulatory action. 9 This may include enhanced rules to limit counterparty risk exposure of ETF investors, and measures that provide more transparency around ETF liquidity provision. The enhanced microprudential framework for the European fund sector is a key element in boosting the resilience of the financial system overall. But the sector’s rising role in shaping the financial cycle, and the potentially systemic nature of its risks, require a more ambitious approach. We should aim at extending the macroprudential framework beyond banks to encompass the asset management sector.10 In particular, we need to equip macroprudential authorities with the necessary tools to address systemic risks both ex ante and ex post. The recent ESRB recommendation to address systemic risks related to liquidity mismatches and leverage in investment funds11 is a crucial step towards this goal.

With backing from the U.S. Treasury, the Federal Reserve established the commercial paper funding facility as a funding vehicle that can purchase new issuance of commercial paper from highly rated businesses and municipalities, and certain issuers that were downgraded after the virus shock. By providing assurances to issuers and investors that retiring commercial paper can be replaced with new issuance, the facility will promote confidence in the market and support the flow of credit to businesses and municipalities. Corporate Credit Facilities (CCFs) At the same time that short-term commercial paper markets were nearly frozen, so too were markets for longer-term corporate borrowing – at precisely the moment when companies most needed a financing buffer. Borrowing rates for investment-grade corporate issuers relative to Treasury securities increased by about 2.5 percentage points in the first half of March, while issuance for companies rated below investment grade came to a halt. In this context, the primary market corporate credit facility (PMCCF) was designed to provide funding for highly rated companies that need access to financing in order to maintain business operations during this period of dislocation. Again with backing from the U.S. Treasury, the Federal Reserve will create a funding vehicle to backstop eligible corporate borrowers for up to four years, at an interest rate that is better aligned with corporates’ underlying credit risk than was available through market-based financing during March.
In March 2001, the fiscal rule and new guidelines for monetary policy were introduced. The fiscal rule implies that the central government budget deficit shall be equivalent over time to the expected real return on the Fund, quantified as 4 per cent. The operational target of monetary policy as defined by the Government is inflation of close to 2.5 per cent over time. This establishes a clear distribution of responsibilities among the different components of economic policy. Monetary policy steers inflation in the medium and long term and can also contribute to smoothing swings in output and employment. The inflation target provides economic agents with an anchor for their decisions concerning saving, investment, budgets and wages. Fiscal policy – growth in public expenditure – influences the krone and the size of the internationally exposed business sector in the medium term. Government expenditure and revenues must be in balance in the long term. Wage formation, the structure of the economy and incentives determine how well and how efficiently we utilise our labour resources and other economic resources. BIS Review 80/2006  1  The transition to inflation targeting in 2001 may have appeared at that time, and in Norway, to be a transition to a new and unfamiliar monetary policy system. But today’s monetary policy system springs from an historical recognition of what monetary policy can in fact achieve. In collaboration with the Norwegian School of Economics and Business Administration, Norges Bank has compiled price data from the mid-1600s onwards.

We assume that fiscal policy will provide some stimulus to aggregate demand and output in 2008 and 2009. A gradual increase in the interest rate will curb demand growth after a period. Household debt and house prices have increased markedly over many years to historically high levels. House prices may now seem somewhat high in relation to developments in income, interest rates, unemployment and housing construction. The prospects of a gradual normalisation of interest rates may restrain credit growth and the rise in house prices. The interest burden is low, but will increase as interest rates rise. Intensified competition in the financial sector has contributed to lower interest margins on lending, which has curbed the rise in interest expenses to some extent. BIS Review 80/2006  5  Monetary policy assessments and strategy The Executive Board’s assessment in Inflation Report 2/06 was that the interest rate may gradually – in small, not too frequent steps – be brought back to a more normal level, and that the sight deposit rate should be in the interval 2¾ - 3¾ per cent in the period to the publication of the next Inflation Report on 1 November, conditional on economic developments that are broadly in line with the projections. In the first half of 2006, the interest rate was increased in two increments of 0.25 percentage point, and the Inflation Report announced that there were prospects that the interest rate would rise further at approximately the same pace.
While such ambitions are quite legitimate, most of them would find achieving this goal very challenging. Why? Because an IFC, by definition, serves not only domestic customers on its own turf, it also captures financial businesses and money-flows either from a large hinterland or the neighbouring areas or both. This is a big challenge because it entails serving customers from the other jurisdictions or cross border transactions. It also entails the need to deliver consistent and efficient financial services in order to be competitive in international financial business. The truth of the matter is that only a small number of cities can successfully become international financial centres because IFCs need a critical mass and market depth. It should be noted that international financial transactions and money tend to migrate towards those centres that provide the most efficient and competitive services to customers. In other words, domestic financial centres will need to go through very fierce competition before a few of them can emerge as successful IFCs. Given Hong Kong’s accomplishment as one of the region’s premier IFCs, there are many study groups from abroad coming here to learn the tricks that have helped achieve what we have today.

By way of introduction, I would just like to go back over the three collective hypotheses at the heart of today’s debate, before nonetheless going on to examine a few factors that are indeed specific to France. * * * 1. Does the problem lie in the measurement of growth? The first theory is that there is in fact no slowdown, as we are not measuring growth properly due to the rise of the digital economy. On 16 January this year, the Banque de France held a conference1 that notably discussed this issue in relation to the US economy. The main sources of measurement errors were: first, the estimation of quality-adjusted prices for new technology, as falls in prices tend to be underestimated in US national accounts; and second, product entry and exit, which makes it difficult to estimate changes in prices over time. This could lead to a significant upward revision to US productivity since 1983: by 1.1 percentage points per year at the top end of estimates, according to Philippe Aghion and his co-authors. Nevertheless, even allowing for these corrections, there has still been a slowdown since the mid-2000s. Indeed, the measurement errors were just as significant before this period. That said, this work does provide some grounds for optimism. First, growth in hi-tech sectors, and therefore technological progress, is stronger than we previously thought. Second, some of the gains in well-being linked to new technologies fall outside the scope of the market economy and, as a result, are not recognised in national accounts.