samchain/econo-pairs-v1 huggingface dataset:
Overall, the improvement in banks’ funding situation, has not led to increased lending to the non-financial private sector, which has declined in recent months. Admittedly, part of this weakness is due to low demand factors. And here also, some fragmentation can be observed. Among countries: credit distribution is more active in Germany or France than in Italy or Spain. And among borrowers: big corporates can issue at very favourable rates while at the same time, too many SMEs are deprived of necessary financing. This divergence is a source of concern, especially since, in our economies, SMEs play a dominant role in fostering innovation and employment. This situation may not reflect a weakness specific to the euro area. In all advanced economies, banks are engaged in a process of balance sheet repair and deleveraging. Recent numbers show major advances for European banks in their efforts to strengthen their capital base, in line with Basel III requirements and, in particular for big international banks, quite comparable to capital strengthening in US banks (when differences in accounting standards are neutralized). To put it simply, in the euro area, banks are responsible for 80% of total financial intermediation, twice as much as in the US. Consequently, the impact is much stronger on the real economy. What can central banks do? Our actions are guided by the following elements. Inflation is firmly under control. Policy rates are very low. In practice, most central banks today are operating close to the zero lower bound.

And we believe that growth will remain resilient, despite all the uncertainties. But trade disputes and, more generally, declining support for the multilateral order make strengthening Europe an urgent task. And strengthening Europe includes strengthening the euro area. So do we need a eurozone budget, for example, as Merkel and Macron have suggested? Germany and France have put forward interesting ideas in this respect. If properly designed (that is, if it complements sound national fiscal policies), a common euro area budget could help to dampen the impact of large economic downturns and make the economy less dependent on the ECB’s monetary policy. But it cannot and should not be the only way to make the euro area stronger. What needs to happen first? First of all, we need responsible fiscal policies and economic reform in all Member States. Many euro area countries still don’t have the fiscal space to support their economies in the event of a crisis, and their economies are not well prepared to long term challenges. So in my view, reform at the national level is the first line of defence. Second, we need to complete the banking union and the capital market union to strengthen our single market and better fund innovation and growth. A common fiscal capacity is a useful complement, but it only comes third. What is still missing from banking union is a shared deposit insurance scheme. But this is a controversial topic in Germany.
The balance of these effects has lead overall UK growth to slow in the first half of 2017, even as growth in the rest of the G7 was picking up, and UK growth looks set to remain weaker than the G7 average until mid2018. The UK has experienced underperformance only twice in the past three decades: once in the depths of the financial crisis and once following the collapse of the Lawson Boom of the late 1980s. 22  All speeches are available online at www.bankofengland.co.uk/speeches  22  On the supply side, the process of leaving the EU is beginning to be felt. Brexit-related uncertainties are causing some companies to delay decisions about building capacity and entering new markets. Prolonged low investment will restrain growth in the capital stock and increases in productivity. Indeed, if the MPC’s current forecast comes to pass, the level of investment in 2020 is expected to be 20% below the level which the MPC had projected just before the referendum. Net migration has also fallen by 25% since the Referendum. As a result of these factors and the general weakness in UK productivity growth since the global financial crisis, the supply capacity of the UK economy is likely to expand at only modest rates in coming years. The latest indicators are consistent with UK demand growing a little in excess of the diminished rate of potential supply growth, and the continued erosion of what is now a fairly limited degree of spare capacity.

External trade expanded considerably in 2004 with an increase in both exports and imports, benefitting from the fastest global economic growth recorded in the past few decades. Trade deficits have been mitigated by increased worker remittances, and inflows from services, mainly tourism and port services. The flexibly managed exchange rate regime has helped to maintain Sri Lanka’s external competitiveness. Throughout the post liberalization era, fiscal deficits have been high due to heavy public investment in the early eighties and high defence expenditure from the mid eighties until the signing of the ceasefire in 2002. This has led to the public debt rising to over 100 per cent of GDP, a cause for concern. Recognising this, the government made a commitment to strengthen the fiscal consolidation process with the enactment of the Fiscal Management (Responsibility) Act (FMRA) in 2002, designed to reduce the budget deficit and outstanding debt in the medium term. The Economic Policy Framework of the new government emphasises the need to increase government revenue, in the fiscal consolidation effort, while maintaining an adequate public investment programme to improve the quality of the infrastructure in the country. The framework of monetary management has continued to be improved since 1977 to increase the effectiveness of monetary policy. Indirect policy instruments are now the primary means of monetary management. In order to make the operations of the Central Bank more focussed, the twin objectives of economic and price stability, and financial system stability, were designated as the primary objectives of the Bank in 2002.
We should thus acknowledge that, unlike the single market or the adoption of the euro, the Banking Union was not the outcome of a view shared by EU leaders about the need to improve banking supervision and resolution across the euro area; rather, it was the result of bold – though defensive – reactions to preserve the single currency in the setting of the financial and sovereign debt crisis threatening to break the euro. As a result, 2014 saw the official launch of the Single Supervisory Mechanism (SSM), while the Single Resolution Board (SRB) commenced operating in January 2015. So far, these bodies are the key components of this Banking Union.3 Today, the reasons behind the creation of the SSM and the SRB appear obvious. Yet before the European sovereign crisis broke, few had signalled the risks arising from a fragmented euro area banking supervision environment. These institutional shortcomings are perfectly reflected in the so-called “Five Presidents’ Report”4 published in June 2015, in which the measures still needed to bring about the completion of European economic and monetary union are laid out. The report correctly asserts that, given that most money is created through bank deposits, the currency can only truly be single if confidence in the safety of such deposits is the same irrespective of the Member State in which a bank operates.

in the area of the provision of professional services, meaning we cannot consider the single market to be complete. In addition, the creation of the single currency has been another key transformation on the road to greater integration. The euro constitutes the world’s most ambitious economic integration process since the Second World War ended. It was in Maastricht, in 1992, just before the entry into force of the single market, when 12 Member States decided to exceed this initial economic objective and plan a monetary union. Like the single market, the euro was also the result of lengthy debates, negotiations and preparatory phases, which were not always fully successful. Indeed, opt-out clauses from the Economic and Monetary Union had to be provided for the United Kingdom and Denmark. Despite these difficulties, the euro was introduced in 1999 and, following the euro banknote and coin changeover in 2002, it has since been a tangible reality for all citizens. Indeed, according to the latest Eurobarometer, its popularity is at a height in the 19 euro area countries.1  1  74% of citizens are in favour of the euro. 4/10  Creation of the SSM and the SRB. But while the introduction of the euro was deemed a success, its institutional design evidently had specific problems which the crisis that broke a decade ago clearly highlighted. Twenty years ago, Christian Noyer said that the introduction of the euro should act as a catalyst for new reforms and greater integration.
As I said at the outset, non-bank finance is not intrinsically a bad thing. We will need effective surveillance of what is going on and what concentrations of risk are emerging – through outfits like the FSB’s committee on vulnerabilities and, in the EU, through the European Systemic Risk Board. And we will have to make discerning policy judgments that are explained and consulted upon. That is exactly what the EU, alongside the FSB, is now embarked on. 6  BIS central bankers’ speeches

Persistent below-target inflation is very costly, especially when it is accompanied by debt overhang, substantial resource slack, and weak growth. In the United States, the challenge of below-target inflation continues to be underappreciated in public commentary. Mistakenly, many greatly exaggerate the risks of overly high inflation. Before turning to inflation risks, let me mention one reason for some confusion. That is, some commentaries minimize the current below-target inflation experience by citing the slightly higher increases of the Consumer Price Index, or CPI. The CPI is the best-known single measure of inflation, and its underlying trend currently is running at a bit above 1–1/2 percent. Many commentators compare the CPI against our 2 percent inflation objective. Unfortunately, this is an apples and oranges comparison: The CPI tends to run about a quarter to a half of a percentage point higher on average than the PCE index because of its different market-basket composition and statistical construction. Accordingly, it is much more accurate to describe the Fed’s inflation objective in terms of the CPI to be roughly 2–1/2 percent. So, against this 2–1/2 percent benchmark, CPI inflation also is quite low relative to target. In any event, the PCE price index is the preferred inflation measure on a number of theoretical grounds and the one chosen by the FOMC as its policy target; therefore, we should judge the Committee’s ultimate inflation performance using that index relative to its 2 percent goal. So, what is the inflation outlook in the current environment?
The result was therefore greater volatility in financial markets, and a dramatic increase in the vulnerability of economies to financial shocks. This contraction in credit supply was thus a powerful channel through which the financial sector hit economies. The result was the largest contraction in real economic activity since the Great Depression. In the better times, securitisation and the shadow banking system appeared to have reduced the sensitivity of the aggregate supply of lending and thus the sensitivity of the real economy to transitions in bank funding conditions. But they did not do so at the point it would have been most valuable, during the global crisis. As Stanley Fischer has recently put it: “when non-banks pulled back, other parts of the system suffered. When non-banks failed other parts of the system failed.” (Fischer (2015)). The originate to distribute model created tradeable assets – the securities in securitisation. The success of the model depended on there being liquid secondary markets for these securities. In its broadest sense, market liquidity refers to the ease with which one asset can be traded for another, and thus different markets can be more or less liquid. The level of liquidity in financial markets depends on among other things the amount of arbitrage or market making capacity and whether specialised dealers (market makers) will step in as buyers or sellers in response to temporary imbalances in supply and demand (Fender and Lewrick 2015).

This means positions that are less liquid under stress conditions will receive larger shocks. And, we have developed a new approach to stressing counterparty credit risk, which focusses on capturing losses from exposures that would become large under the stress scenario and for counterparties that would be most vulnerable in the stress scenario. Second, the Bank of England, working with the FCA and HM Treasury has set up the Fair and Effective Markets Review to restore trust and confidence in the fixed income, currency and commodity (FICC) markets in the wake of the serious wave of misconduct seen since the height of the financial crisis. The Review is taking a fundamental look at the root causes of these abuses, the steps that have already been taken by firms and regulators to put things right, and what more is needed to deliver less vulnerable market structures and raise standards of behaviour in future. The Review will publish its recommendations in June 2015. Out of this assessment, and based on consultations to date, will I believe come priorities on market structure “standards” and transparency, effective competition, professional culture within firms and effective, pre-emptive supervision which reduces the drama of ex-post enforcement. The third area of action concerns initiatives to improve the functioning of markets to support activity in real economies. Resilient market-based financing will help to support sustainable economic growth.
Currently, it crops up 10 times more often than the word “customer” and almost 7 times more often than the word “staff” in proximity to uncertainty. 24  Chart 2 plots a time-series of the incidence of the words “uncertainty” and “Brexit/referendum” in Agents’ company write-ups. The two, unsurprisingly, are positively correlated after the referendum. Indeed, mentions of Brexit have outnumbered mentions of uncertainty by a factor of around 3 since the referendum. While mentions of Brexit have fallen from their referendum peak, it is notable that they have picked up sharply over the past few months, with measures of uncertainty following suit. This new research strengthens the case for improving public understanding of the economy. An improved understanding could result in better-informed popular narratives, and more stable expectations, among the general. And that, ultimately, would make for a more stable economy and financial system. In practice, there may be structural factors which could be acting in the opposite direction. The great trust shift may mean people are less willing than in the past to trust expert opinion (such as through mainstream media) and more willing to trust non-expert opinion (such as some parts of social media). Around half of those in the EU use social media as a news source and, among those aged 18-24 in the UK, around a quarter use it as their main news source. 25  Yet we know that information from social media sources is typically filtered and personalised. 26  That fits  people’s (personalised, localised) preferences.

The common theme in all of this research is the importance of the public’s “narratives” in shaping their behaviour. That is true individually but especially collectively – hence “popular narratives” – with shifts in collective expectations helping account for the width and depth of macro-economic fluctuations. As well as contributing to this research, the Bank has begun using these “narrative” approaches itself to help understand behaviour. Let me give you a topical example. The Bank’s Agents around the UK have a wide network of company contacts who they visit regularly to discuss the economy. These visits are then written up. These write-ups enable a semantic search to be carried out to identify the key themes or narratives emerging in companies’ conversations. You will be unsurprised to hear that a key theme among companies over recent quarters has been uncertainty surrounding Brexit. 19  Shiller (2017). Baker, Bloom and Davis (2016), Bloom (2009) and Bloom, Bond and Van Reenen (2007). 21 For example, Tuckett (2011) and Tuckett and Nikolic (2017). 22 Bailey et al (2016). 23 Akerlof and Shiller (2009) and Shiller (2017). 20  9  All speeches are available online at www.bankofengland.co.uk/speeches  9  Figure 1 plots a word cloud extracted from those company write-ups. The size of each word connotes the frequency of its use in relation to mentions of “uncertainty”. For a word that did not exist as recently as five years ago, it is striking how Brexit is now dominating companies’ conversations.
This pattern is suggestive of a structural trend in the underlying global trend real interest rate, in other words Global R*. This concept can be estimated, using a variety of statistical methods, all of which extract an underlying slow-moving trend from the more volatile data. Some of these estimates, from a range of different academic papers, are shown in Chart 3. The teal line shows a new estimate by Bank staff, based on data for 31 high-income countries. Though there are relatively wide error bands around this central estimate, and alternative estimates from the literature exhibit different patterns, the direction of travel has been clear. In other words, a decline in Global R* over recent decades is common across estimates. Page 6  Chart 3: Empirical measures of Global R* have fallen in recent decades  Source: Consumer prices indices, short-term interest rates and government bond yields for the calculation of Cesa-Bianchi et al. (2022)’s global measure of R* from the Jordà et al. (2017) Macrohistory Database and Eikon Refinitiv. Other estimates from Del Negro et al. (2019), Hamilton et al. (2016), Holston et al. (2017). While these statistical estimates help us to understand the dynamics of the trend real rate, they do not tell us why it has been falling. The dynamics of the trend real rate are determined by slowmoving structural factors that affect the balance between the demand for capital for production and the stock of wealth available to finance it.

In any event, the FOMC’s latest policy statement in March recognizes this possibility of lower real rates, as the Committee stated it currently anticipates that “even after employment and inflation are near mandate-consistent levels, economic conditions may, for some time, warrant keeping the target fed funds rate below levels the Committee views as normal in the longer run.” 12  9  Taylor (1993), p. 197. 10  Taylor (1979). 11  See Summers (2013) and Krugman (2013). 12  Federal Open Market Committee (2014a). 8  BIS central bankers’ speeches  Conclusion During Ben Bernanke’s eight years as Fed Chair, the FOMC worked hard to make the Fed’s policy intentions clear; and I am confident that the FOMC under Chair Yellen will continue along this same path. When the federal funds rate got stuck at zero and goal-oriented monetary policy said to do more, we did more! We implemented the following: the first quantitative easing program, or QE1, in March 2009; 13 QE2 in fall 2010; the initial forward guidance on the federal funds rate in August 2011; Operation Twist in fall 2011; the openended QE3 in fall 2012; and the enhanced threshold forward guidance in December 2012. All of these were ways to go beyond the policy inaction that was the prescription of simple constrained policy rules, and do something to meet our policy mandates. In conclusion, let me ask again, what is the accountability test?
BIS Review 78/2001  1  utilises the "Okun relation" - at approximately 8 per cent rather than roughly 4 per cent. It is doubtful, however whether the Okun relation is relevant over such a long period of time. The greatest part of the difference would probably have resulted in lower real wages, i.e. our disposable incomes would have been substantially lower. It is possible to make many calculations of this nature, all of which illustrate how differences in the growth rate provide very strong effects over a number of years. There is therefore good reason to discuss which factors have contributed to this favourable development. It will probably not be possible to agree on a definitive answer, but I believe it is likely that the structural reforms implemented even before 1993 (in particular the tax reform of 1990/91) and the proposals by the Economics Commission that were implemented have all contributed. A more efficient economy One interesting condition is that total factor productivity really took off in 1993 and that it thereafter developed more strongly than it had during the previous decades. Total factor productivity concerns the quality of available resources and how efficiently we utilise them, and in this respect developments show a marked improvement. From the mid-1980s up to 1993, there was in general terms no increase at all in factor productivity, which means that the limited increase in productivity that arose was due to investment, i.e. to an increase in capital intensity. From 1993 onwards, the relationship has been 2 reversed.

A number of studies have shown that countries, which are more open have a greater capacity to imitate technological progress. The capacity to renew regulatory frameworks and institutions to enable the country to embrace change is an important part of this openness. Obstacles to ideas, goods, services and production factors moving freely across borders have declined during the 1990s, partly thanks to our membership of the EU, and it is reasonable to assume that this has had a positive effect on factor productivity. For a small country like Sweden, internationalisation and increased international competition are expected to lead to particularly favourable productivity effects. Various measures indicate a marked increase in the degree of internationalisation in the Swedish economy. Both the import share and the export share have risen, which means that trade and the degree of specialisation have increased. Moreover, foreign direct investment in Sweden has multiplied and it is mainly direct investment from EU countries that has increased. Although the increasing international openness has been pronounced in Sweden with, for instance, a rise of 13 percentage points in the export share of GDP during the 1990s, there are several smaller countries that have shown an even more rapid increase in the equivalent figures. This reflects the globalised world in which we live, and does not reduce the significance of openness for the development of factor productivity. Internationalisation has thus contributed to ensuring that an increasing percentage of trade and industry is exposed to competition.