samchain/econo-pairs-v1 huggingface dataset:
Discernible rises in living standards are a very recent phenomenon. If the history of growth were a 24-hour clock, 99% would have come in the last 20 seconds. Technological roots of industrial revolution So what caused this phase shift in growth? Explaining even historical growth patterns is far from easy. Even now, there remains an active debate among economic and social historians about the deep sources of growth. Without doing it justice, let me offer some reflections based on that literature. Linking them is a common theme: patience. Neo-Classical economics explains why patience matters for growth. It supports saving which in turn finances investment, the accumulation of capital. That capital accumulation, in combination with great leaps forward the efficiency of its use, is what Neo-Classical growth theory tells us drives growth. Today’s investment is tomorrow’s growth. 19 Growth in the Neo-Classical model is “exogenous” – determined by external forces. The two key such forces are, first, the patience of individuals which is assumed to be fixed over time and across states of nature. And, second, by technological progress, which is assumed to vary over time but in unpredictable ways. Innovation arrives as manna from heaven, a surprise gift that keeps on giving. On the face of it, this simple story does a decent job of explaining the phase shift in growth after the Industrial Revolution.

Those charged with managing the major financial institutions need to continue to make the investments necessary to stay abreast of change and to get as close to the frontier as possible. This reality makes it even more important that we in the supervisory community continue to look for ways to address aspects of the existing supervisory regime that impose unnecessary costs and burdens or that pull resources and attention away from potential sources of risk to the financial system. Thank you. 4  BIS Review 54/2006
All this, combined with pillar II capital requirements, could lead to over-calibration: each individual decision may be warranted; but 3/4  BIS central bankers' speeches  their somewhat disorderly accumulation is not. And obviously, we must not jeopardise the level playing field between euro area banks and their international competitors. Third, in the interaction between authorities, which should be improved: the case of Banco Popular, although it was a success, has also demonstrated the importance of swift and close cooperation between supervisory and resolution authorities, both at European and national levels. In this respect, there is still a need to better coordinate the roles of the different European authorities – SSM and ECB, SRM, Commission, and EBA – in order to have a clearer “pilot in the plane” in crisis management. At a later stage, we could even consider establishing a single banking authority for our single Banking Union, acting to bolster the robustness of the European banking sector. The second challenge is to support cross-border bank consolidations in the euro area. The head of the SSM too, Danièle Nouy, insisted on this point a couple of days ago. We still lag far behind the American market in this respect: the market share in the United States of the top five banks is more than 40% whereas the market share in the euro area of the top five banks is less than 20%.

In addition to this commitment, I also suggest creating a Stabilisation Lending Instrument at the euro area level, and I would like to detail some key aspects regarding its objectives and operational efficiency. I will then talk more broadly about a possible European Monetary Fund. Let me start with the objectives. The SLI would provide loans to euro area Member States faced with an asymmetric economic shock, in order to support their countercyclical policies. Finland for instance was faced with a triple asymmetric shock in the late 2000s, due to the collapse of Nokia, the decline of the paper industry and the aftermath of the Russian crisis – real GDP contracted by 9% in 2009. Such a shock could also stem for instance from temporary political uncertainty – as long as it is not fuelled by inadequate economic policies – from natural disasters or from an irrational loss of confidence in the financial markets resulting in excessive pressure on the sovereign spread. The SLI would be a complement to and not a substitute for national stabilisers. It would help Member States not to abandon their long term investments, especially by preventing an unwarranted widening of their financing conditions. Beyond this Stabilisation Lending Instrument, the creation of a “rainy day fund” with fiscal resources could be considered at a later stage once confidence and economic convergence between Member States have increased. On the operational efficiency of the SLI, access to the instrument should be simple, subject to carefully chosen macro-financial criteria.
Although developments in Iceland showed many of the same characteristics as those in some of the other Nordic Countries during the post-liberalisation rapid expansion, such as credit expansion, current account deficit, exchange rate depreciation and so on, Iceland escaped the difficulties suffered by banking systems in some of the other countries. Icelandic bank credit grew very rapidly in the late 1990’s and into the year 2000 and a sizable portion of the credit expansion was financed with credit from abroad. The capital adequacy ratios of banks fell for a while but nevertheless remained comfortably above the minimum required and internationally recognised levels. The year 2001 also turned out to be quite favourable for the banks, a development which continued by and large into the current year. Consequently, the capital position of the banks has improved and all the major banking institutions have relatively strong capital adequacy ratios at present. Loan losses have increased, as was to be expected in the wake of the credit expansion, but nowhere on the scale experienced in some of the other Nordic Countries a decade ago and very much less than they did during the downturn in the Icelandic economy around and after 1990. The conclusion to be drawn is, therefore, that the Icelandic banking system weathered the relatively turbulent post-liberalization boom period of 2000 and 2001 pretty well and is well poised to meet new challenges, including continued rationalisation and intensified competition from foreign banking institutions. In the most recent decades, the Icelandic economy has also seen structural shifts.

What do you think are the qualities that a central banker needs today? Jean-Claude Trichet: It seems to me that in periods that are marked by turbulence, unexpected events, a high level of uncertainty – and I’m afraid that a large part of the reasons for this are structural – central banks are the institutions that have a mandate for price stability, a sense of direction, a stake in overall stability in a medium and long term perspective. They are independent. They can be precisely those anchors of stability that I would say an economy and society need even more in times that are very demanding and very turbulent. That would perhaps be the best way to sum up the responsibility of central banks. Financial Times: Are you concerned, in the wake of this crisis that there’s been any weakening of support for the concept of central bank independence? Jean-Claude Trichet: If I take a global perspective, it seems to me that one of the lessons that has been drawn from the crisis, or taken into account, is that the concept of independent central banks having a stake in stability, and a medium to long term perspective, has been recognised as the right concept. Financial Times: Very soon, you’re going to be chairing the new European Systemic Risk Board, which will take an EU view, so you will actually be including the United Kingdom in your work, your daily outlook, I suppose. To what extent do you think the UK should fear or embrace this process?
This brings us to the fundamental question - to what extent has the crisis affected the potential growth in the region, and what needs to be done to lift it to speed up the convergence which remains low in the region – just 37% of the EU average. Clearly, macroeconomic policies - fiscal and monetary, can play a growth supportive role, especially in the short-run, but they cannot be a substitute for structural policies needed to address structural bottlenecks across all long-term determinants of growth - labor, capital and total factor productivity. Now let me quickly reflect on the state of play of these long-term determinants of growth. Concerning labor, the region has been facing constant shrinking of working-age population - 0.5% on average, per year in the last nine years, mostly due to unfavorable demographics and emigration. If we take into account estimates that 1/3 of the emigration is high-skilled labor, then obviously, this is not only an issue of quantity, but quality as well. In this context, Global Competitiveness Report points to a large human capital gap of the region with an index rank of 62.2, compared to 16.7 for EU15. The health crisis emphasized even more the long-standing and burning issues that need to be tackled such as increasing participation rates (that currently hover around 54%), rising life expectancy, skill mismatches, and in particular digital skills and "jobs skills of tomorrow", although given the structural nature of the problem it will continue to weigh on the medium-term growth dynamics.

Concerning capital stock, data reveals that the capital stock in the region constitutes only one third (35%) of the capital stock in the countries of the European Union. This calls for raising investment ratio and closing investment gaps. These gaps are particularly wide in infrastructure, looking at the average rank of 70.5 for the region compared to 16.7 for EU152. However, there is also a great scope for improvements in ICT infrastructure, as a cornerstone of the new economy, in order to accelerate digital transformation of the economies. As for productivity, it remains low, about 1/3 of the EU average. In the last five years before pandemics, the average GDP growth of the region was 3%, with TFP  2/3  BIS - Central bankers' speeches  contribution of merely 0.3 p.p. To increase productivity, the region must tackle structural and institutional obstacles that inhibit efficient allocation of resources. The evidence suggests that institutional reforms in emerging economies are associated with about 1 p. p. a year higher total factor productivity growth compared to "normal" years3. So far, FDIs in the tradable sectors are one of the traditional venues that increase productivity that implies not only tapping additional external sources for growth financing, amidst low domestic savings, but also transfer of know-how and technologies. However, pandemics led to significant deceleration of FDIs and trade flows, flagging up many vulnerabilities of international trade and production that caused dilemmas about future globalization trends that are of key importance for small WB economies.
This means that no shock that the economy will face in the future is incorporated into both the forecast and the decision. In other words, there is no way of avoiding the last-mentioned uncertainty connected with future shocks and neither the central bank nor the markets have any superior information about them. The uncertainty surrounding the first two mentioned points – the current state of the economy and future monetary policy – will be the heart of my remarks tonight. Being forecasters we all face uncertainty surrounding the knowledge about the current state of the economy. This current state should be thought of as a shortcut to all the inflationary determinants brought from the past, but due to the transmission lags having an impact on future developments. Every forecaster, and of course also the central bank, has his own opinion about the economy’s current state. One question arises immediately: Should the central bank look at market forecasts and use them as a source of information about the economy’s current state and for its decision-making? My answer is: Market forecasts should not be neglected. On the other hand they cannot be the core for decision-making and the central bank must rely primarily on its own structural modelling. This implies that despite all the transparency and communication, the central bank will – from time to time – have to surprise other forecasters and the market. BIS Review 10/2005  1  Let me now briefly explain why this is the case.

I will explain why in this era of globalisation, it makes sense to strengthen the linkages between Southeast Asia and India, and how Singapore, a small and open country whose survival is totally dependent on globalisation, can play a role in deepening these linkages. ASEAN since the early 90’s For more than a decade until 1997, Southeast Asia enjoyed remarkable growth. As governments opened up economies, investments flowed in, exports grew, and prosperity was everywhere. People talked about the Asian Miracle and the Pacific Century. Then we met the darker face of globalisation. Euphoria turned to gloom when the Asian Financial Crisis struck. A seemingly minor problem in Thailand rapidly developed into a widespread panic in the region. One country after another succumbed as investors stampeded out, stock markets and currencies crashed, and economies nearly collapsed. In Indonesia, the Crisis triggered deep political and social changes, resulting in a very difficult transition. A new and very different dispensation is only now recrystallising. Even though the Crisis has passed, we have not returned to the status quo ante. The world has changed permanently. Globalisation has advanced even further, and competition is now fiercer. India and China are major new players which totally alter the landscape. From the point of view of other  BIS Review 3/2004  1  Asian countries, they are formidable competitors for investments, but also offer immense new opportunities.
John C Williams: Monetary policy - a "data dependent" approach Remarks by Mr John C Williams, President and Chief Executive Officer of the Federal Reserve Bank of New York, at the New Jersey Bankers Association's Economic Leadership Forum, Somerset, New Jersey, 18 January 2019. * * * As prepared for delivery  Introduction Good morning everyone. I wish every conference I went to had such an incredible opening— Joe’s certainly a hard act to follow. I have a son who’s a very talented artist, but he didn’t get those genes from me. So I’m going to stick to what I know—monetary policy. Today I’ll talk about the economy, how I’m assessing the outlook, and what that means for monetary policy. It’s early in the day, so I’ll try and keep the recitation of facts and figures to a minimum. But I know there are a lot of bankers in the room and that the direction of interest rates plays a vital role in your business, so, rest assured, I won’t skimp on that topic. Given that I’ve promised to talk about interest rates, before I say another word I’ll give the standard Fed disclaimer that the views I express are mine alone and do not necessarily reflect those of the Federal Open Market Committee or anyone else in the Federal Reserve System. The Dual Mandate I want to start this morning by reminding everyone what the goals of the Federal Reserve are.

And finally, wealth management  3  Data from the SNB’s Swiss Balance of Payments 2011 report shows that international receipts from bank financial services stood at CHF 15.1 billion in 2011, equivalent to 43% of the total value added in the banking sector in 2011 (CHF 35 billion as reported by the Swiss Bankers Association). The Swiss Bankers Association reports that in 2011, around 51% of assets under management at Swiss Banks originated from foreign customers (cf. “Der Finanzplatz Schweiz und seine Bedeutung”, Swiss Bankers Association, 2012). 4  It is important not to underestimate the economic importance of international transmission of financial shocks via bank linkages. Goldberg and Cetorelli (2010) document the fact that global banks transmitted the international shock during the 2007–09 financial crisis to emerging market economies, leading to both cross-border lending contraction and contraction of domestic lending. BIS central bankers’ speeches  3  will have to adapt to changing international standards and international tax agreements. In such an environment, it is hard to maintain profit margins and retain clients. The second challenge for the Swiss financial sector relates to signs of overheating in the Swiss residential real estate market. Over the past two years, the SNB has repeatedly drawn attention to these risks. Residential mortgages are very important in Switzerland since they account for around 70% of the assets of domestically oriented Swiss banks. There are signs that residential properties are overvalued in the Geneva, Zurich and Zug regions, for instance, as well as some tourist areas.
The debate about putting more activity through central counterparties is an example. Frankly, it could have taken place a decade ago, and it is a crying shame that it didn’t. The reason it didn’t was that no one came into work thinking that it was their job to think about that and that they had a responsibility for taking a system wide perspective and actually doing something. 2  See Tucker, P M W (2010), “Shadow Banking, Financing Markets and Financial Stability” at BGC Partners Seminar, London, January 2010. 4  BIS Review 145/2010  Institutions are now being created around the world – the Financial Stability Oversight Council in the US, the Systemic Risk Board in the EU, the Financial Policy Committee in the UK – which I earnestly hope will bring that kind of perspective to our work. And the final area is leaning against the credit cycle when it threatens stability. The zeitgeist embraced the seductive idea that either there wasn’t a bubble or if there was a bubble that there was nothing you could do about it. Which was dangerous nonsense, as events have proved. This is not about fine tuning the credit cycle. But we do need to be prepared to take the punchbowl away before the party gets completely out of control. That was the view 50 years ago. Forward to the past.

There seems to be a reluctance, perhaps just about understandable in some respects, to share information amongst home and host authorities and to co-operate when regulated firms are distressed, which of course is when it matters most that they should co-operate. The FSB needs to ensure that we confront and fix this. But a solution cannot emerge without political leaders making space for – indeed, without them positively encouraging – officials to cooperate properly. 2  BIS Review 145/2010  Capital markets: the financial network The second key plank of the FSB’s existing programme has been to mitigate the complexity of the financial network. We do not just live within a world, a financial system of massive but independent firms; we work in a financial system where everything is connected to everything else. That has been the case for long as I can remember. Central counterparties The use of central counterparties in over-the-counter derivative (OTC) markets is long overdue. But we will also need to ensure that these counterparties are robust. If ever a central counterparty fails, it will be a gigantic mess. Two have failed significantly over the past 30 years: a relatively small one in Paris, but the other was a significant one in Hong Kong during the 1987 market crash, which caused the Hong Kong equity and futures market to close. They were hard to reopen. And their securities markets and regulatory regime had to be completely overhauled as a result.
The time-variation of lambda is illustrated in part by the fact that the regression estimating the MPC’s lambda leaves around two-thirds of the variation of inflation over the output gap unexplained, even in expectation and over the post-crisis period. So why isn’t the estimated lambda fixed, and what considerations inform its value in practice? 19  Yellen, J (2012), “Revolution and Evolution in Central Bank Communications”, November. Converting this to an equivalent value for the weight on the output gap depends on the Okun’s law coefficient one assumes, estimates for which vary. 20 Ilbas (2012) estimates the Smets-Wouters model under optimal commitment policy for the Volcker/Greenspan era and find a value of lambda on output growth of around ½. Dennis (2006) uses a semi-structural model and finds a weight of around 3 on the output gap, whereas Givens (2012) estimates a value of around 0.1 over a similar sample. Givens and Salami (2015) estimate a small New Keynesian model on post-Volker data and find a lambda on the output gap of around ¼. Sack (2000) finds a weight of around 0.8 on the unemployment gap over the period 1984-1998 using a VAR to describe the economy’s dynamics. Lakdawala (2016) allows for time variation in central bank preferences and finds that the weight on inflation relative to the output gap to have fluctuated over time, falling to low levels in the 1990s and early 2000s (implying a high relative weight on the output gap), before rising in the period leading up to the financial crisis.

Figure 1: A stylised depiction of the monetary policy trade-off  The blue line in the figure is the Phillips curve, which summarises the structure of the economy and, in particular, how changes in demand, via the output 9  gap, affect inflation. The economy’s equilibrium is at the intersection of these two lines. In the case of an inflationary shock that induces a trade-off, the Phillips curve shifts up, as shown in the figure. Monetary policy needs to tighten to lower pressure on resources and reduce inflationary pressures, such that the economy ends up on the  9  Originally formulated by Phillips (1958), albeit as a relationship between wage growth and unemployment. See: Phillips, A. W. (1958). "The Relationship between Unemployment and the Rate of Change of Money Wages in the United Kingdom 1861-1957". Economica, 25 (100): 283–299. 5  All speeches are available online at www.bankofengland.co.uk/publications/Pages/speeches  5  red line, consistent with the policymaker’s preferences (as shown by the dotted arrows in the figure). The slope of the Phillips curve is crucial in determining in the size of the fall in output needed to reduce inflation to an acceptable level – the sacrifice ratio. Figure 2: Stylised policy responses  Frequently, the economy experiences shocks that drive inflation and output in the same direction. These shocks to aggregate demand can include variations in government consumption, households’ desire to consume, or business’ desire to invest. Increases in demand put pressure on the use of resources, causing prices to rise.