samchain/econo-pairs-v1 huggingface dataset:
It can be used to assess whether the letters convey a clear and consistent supervisory message to firms. For example, it is possible to compare the strength and content of these letters with the Bank’s internal assessment of firms’ strengths and shortfalls. Are the two, and the Bank’s supervisory messaging, consistent? In general, the research found they are. This approach can also be used to assess how the style of supervision has evolved over time. For example, how has it changed since the transition in supervisory models from the Financial Services Authority (FSA) to PRA? The research finds that supervisory messaging has become more forward-looking, formal, and content-rich comparing the two regimes, consistent with the PRA’s new supervisory model. This exercise is, I think, a good example of a new technique (random forests) being applied to an entirely new database (the Bank’s supervisory assessments) in a policy area virtually unexplored previously by researchers (financial firm-specific supervision). It reaches conclusions that have a direct bearing on policy questions. As such, I think it highlights nicely the promise of Big Data. 43 44 45  Notable examples include Schonhardt-Bailey (2013) and Goldsmith-Pinkham, Hirtle and Lucca (2016). Haldane and McMahon (forthcoming). Bholat et al (2017). 10  All speeches are available online at www.bankofengland.co.uk/speeches  10  My final example uses not newly-created but old data. Nonetheless, I think it provides a good illustration of how new techniques can also be used to understand the past.

To understand important economic concepts like full employment, financial security, productivity growth and the impact of education, it is vital to understand not just the average experience but rather how all cohorts of the population are faring. This understanding is important in and of itself, especially in evaluating the impact of critical trends affecting the economy, like technological innovation or demographics, as well as the policies intended to respond to the impacts of those trends. We cannot fully understand whether policies have improved social welfare unless we understand how the impact of those policies varies across individuals. But understanding heterogeneity is important even if we are just examining policy impact in the 1/2  BIS central bankers' speeches  aggregate. The most innovative macroeconomic models, those at the frontier of current economic work, recognize heterogeneity across consumers in assessing how monetary and fiscal policy changes are transmitted through the economy. These models incorporate individuals with different marginal propensities to consume, with different amounts of wealth or access to borrowing, or who face different risk exposures, such as the chance they become unemployed, over the business cycle. Incorporating these factors can yield quite distinct insights about how changes in monetary or fiscal policy can affect growth, employment, wages and inflation. For those who want to know more, we published a blog post on Monday of last week that describes the output of just such a model.
Since the upturn in 1993, annual GDP growth has averaged 3–4 per cent, while inflation has stopped at 1 per cent. This is impressive, not least compared with the 1970s and 1980s, when growth averaged little more than 2 per cent and inflation over 8 per cent. Moreover, open unemployment has fallen in just four years from 9 to less than 4 per cent. Today, when Sweden again faces an economic downturn, the initial position is considerably better than earlier. Inflation is low. There is no sign of large financial imbalances. Foreign trade is generating surpluses. The government budget is also in surplus and government debt has been reduced from about 80 per cent of GDP to 50–55 per cent. An economic policy synthesis This brief review clearly illustrates the interaction of theory and practice over the years. New features in economic development raise new questions. New theories provide answers that are sometimes incorporated in practical politics. This influences developments and raises new questions. In view of this, there is every reason to be humble. We are no doubt as far from the end of history in this field as in others. Perhaps one can discern the outlines of a synthesis between the classical approaches and the ideas of Keynes. As I see it, such a synthesis can rest on three pillars: •  The basic condition for a good economic development is markets that function properly, with rules that are clear and firm.

Built-in stabilisers did exist, for instance in the form of unemployment support, but the benefits were low in order to strengthen the incentive to search for new employment. This did work – when the upturn came in February 1922 the number of persons on relief work or the dole was over 100,000; by the end of 1923 the figure had dropped to 6,000 – but the flexibility did, of course, exact a price in the form of social hardship. Stabilisation policy’s emergence In contrast to the lack of an active economic policy in the period around 1920, decision-makers in the 1930s had high ambitions, underpinned by a nascent stabilisation policy theory. The course of economic events in connection with the crisis of 1930–33 partly resembled what had happened in Sweden a decade earlier. An international boom with unduly high hopes of future profits had led to markedly inflated asset prices. The party ended in a financial crash and Wall Street’s collapse in October 1929. A number of banks had to close their doors. On top of all this, the US Federal Reserve imposed credit restrictions. In Sweden, the depression was not as deep as the one in the early 1920s, though unemployment did rise to much the same level, about 25 per cent. The major difference was that the economy was successfully piloted past a steep price fall. Sweden left the gold standard in September 1931.
During this time, a multitude of financial misconducts have been uncovered that have deeply impacted the global financial sector and damaged its reputation. In many parts of the system, not only has the crisis sparked a rethinking of the economic architecture, the stability and resilience of the financial sector, it has also laid bare, the absence or lack of values and ethics in finance. This lack of moral compass and its role that contributed to the global financial crisis has resulted in a loss of trust in finance, prompting a need to restore integrity and trust in financial institutions and market players. This should not greatly surprise us. After all, the influential works of economic thinkers that came to shape many economic and financial policies before the crisis, had as its fundamental basis, that people who are driven by self-interest, would be able to produce the best outcome for the economy and society. This reminds of an earlier quote attributed to John Maynard Keynes; ‘Capitalism is the extraordinary belief that the nastiest of men, for the nastiest of motives, will somehow work together for the benefit of all’. Today, this lack of moral compass and base motivation for financial and economic decision making rings hollow. Society desires higher motives and a greater sense of purpose. Supporting this must be a stronger sense of ethics and values. In the mainstream or conventional financial system, many institutions and practitioners have latched onto sustainability, environmental and governance themes and standards as a manifestation of this.

However, such crimes are more common in counties that have weak security, or suffer from weak economy and weak judicial and supervisory systems. Among the most prominent negative effects of this phenomenon is the flight of money abroad, with production losing its most important element, namely, capital, hindering production of goods and services, raising unemployment and reducing savings. As a result, investors lose confidence in the economic system and the legislation governing it, creating an anti-investment environment. All this will be reflected on economic growth and the standard of living of society. Money laundering may also result in the availability of liquidity in quantities not commensurate with the increase in production of goods and services, thus increasing inflation and decreasing the purchasing power of the currency. Money laundering affects the country’s position and its reputation among international bodies, and may give misleading economic indicators. From the social point of view, it is significantly dangerous as it leads to non-productive classes acquiring illegal proceeds at the expense of productive classes, increasing the gap between social classes. Moreover, It increases the opportunities of spreading corruption and bribery. Dear Audience, I would like to commend the fruitful coordination and cooperation between the appropriate entities of ministries, security and judicial authorities, and financial and non-financial institutions for combating money laundering.
But nothing is certain when it comes to economic activity. One obvious source of uncertainty is the oil price, which has turned out much higher than we anticipated as late as in June. Forward prices, which reflect expectations of future oil prices, have also risen and judging by these, expectations in general seem to be set on a slowly falling, but nevertheless still high, oil price. Even though the oil price has dropped back recently we have revised up our forecast for the coming years. It is hard to judge what effects the high oil price will have on growth and inflation. Among other things, this depends on whether the high price reflects mounting demand or whether it has been caused by supply shocks. Pointing to the first explanation is the fact that the price rise in recent years has gone hand in hand with an increase in output. A dampening factor is that most industrialised countries are considerably less dependent on oil than they were a couple of decades ago. Against that background, we estimate in our assessment that the high oil prices will have limited effects on economic activity. But, of course, it is not possible to rule out either higher inflation or a more negative impact on demand. Signs of the former can be seen in the United States. Another source of uncertainty is the large savings imbalances around the world and how a correction might come about. Strong domestic demand in Sweden In Sweden, too, economic growth was strong last year.

The vigorous productivity growth has been another positive surprise in the performance (Figure 5). At the start of the 1990s there were no indications that this would be the case. Why then would the Government have appointed a productivity delegation? The firm productivity gains have, of course, been crucial for the increases in real wages. But they also have meant that companies have not needed to hire new staff on the same scale as before, which has contributed to the weak employment growth in recent years. We really do not know why productivity has improved so strongly even if there are a number of hypotheses according to which the IT explosion, deregulation and increased global competition are significant explanations. For the Riksbank, it is important to understand this better if we are to be able to produce accurate forecasts of inflation. Of even greater importance, of course, is to do what is possible through economic policy to ensure that the positive performance can continue. In the long run higher real wages presuppose increased productivity. Two problem areas However, not everything has been as positive. Labour supply has not developed as well as one might have hoped. There are currently large groups outside of the labour market and employment has increased at a slower rate than is desirable over the past ten years.
Stefan Ingves: Where to next? Priorities and themes for the Basel Committee Keynote address by Mr Stefan Ingves, Governor of the Sveriges Riksbank and Chairman of the Basel Committee on Banking Supervision to the Third BCBS-FSI High-Level Meeting for Central and Eastern Europe on “Strengthening Financial Sector Supervision and Current Regulatory Priorities”, 12 March 2013. As prepared for delivery  *  *  *  Good morning. It is my great pleasure to be with you again today. I would like to begin by extending my appreciation to the Financial Stability Institute and the Banking Supervisors from Central and Eastern Europe for their efforts in bringing us together again for another of these High-Level Meetings. Last year, I was pleased to have been able to be a part of what was a very interesting and enjoyable meeting in Warsaw hosted by our Polish colleagues. I hope we can replicate the success of that event this year here in Basel. I would like to take the opportunity today to reflect a little on what the Basel Committee has been doing since we last met. Then I will outline work currently in train as well as our longerterm strategic priorities. The Committee meets in this building tomorrow, and continues to have a very full agenda. Indeed, the key message I would like to leave you with is that our work, although changing in nature, shows no signs of easing off. What have we done?

Both borrowers and lenders need to be careful not to over-stretch themselves. In line with the recent FPC statement, we will be keeping a very close eye on developments, and the Bank has a range of tools that can be used in mitigation of those risks. Stage 4: the flow of credit Annual growth in the stock of lending to households and businesses has remained close to zero since mid-2012, similar to rates seen in the run-up to the launch of the FLS. But it is important to bear in mind that prior to the announcement of the FLS, the Bank judged that UK bank lending was more likely to decline than increase over the following eighteen months. The profile of lending seen to date has been broadly in line with our original expectations: the trend in household net lending has been somewhat stronger than expected before the launch of the FLS and net lending to businesses has been perhaps a little weaker. We were also conscious that the stock of credit depends on both supply and demand. We were sure that the FLS would shift supply but the demand effects were always less certain. The price elasticity for firms in particular is likely to be low. It is possible at the margin that some firms will be better able to repay or refinance loans if their borrowing costs are a bit lower, but this effect is probably small relative to the importance of expected demand for a firm’s products.
Chart: GDP per capita in China The march towards an ever more closely integrated global economy has been particularly fast in recent decades. The growth story that began in the British Isles has reached China, where we have seen a boom without parallel in world history. What took the West more than 200 years, China has achieved in just a generation. Chart: Global manufacturing production China’s economic rise has seen a labour force twice that of the US and EU combined entering the world market. A quarter of global manufacturing production now takes place in the Middle Kingdom. The land that brought us paper, gunpowder and the compass has become the world’s workshop. Chart: Persons living in poverty The benefits for the average Chinese have been immense. Worldwide, more than a billion people have been lifted out of poverty since the early 1980s. Three in four of them have been in China. Trade and technological progress together spell substantial economic gains. But not everyone is a winner. Greater international competition and new production technology also mean that jobs disappear and working conditions come under pressure. In many rich countries, parts of the population have been left behind. For many, the economic downturn following the financial crisis has made things worse. Chart: Income growth in the US The income distribution in the US can serve as an example.

Indeed, the major global custodians each posted growth in assets held in custody in excess of 20% in just the past year. 31 And differences between the regulatory regimes for incumbent providers of infrastructure and those for either commercial bank providers or smaller new entrants could tilt the playing field. For example, CLS is subject to close central bank scrutiny, operates as a narrow bank, and has to meet exacting – and costly – resilience standards. New clearing arrangements and bilateral netting schemes are now penetrating the foreign exchange markets, threatening the volumes passing through CLS. In messaging, too, SWIFT – which submits voluntarily to central bank oversight – is beginning to face competition in certain markets from new entrants not subject to oversight. Authorities must be alert to the challenges these competitive developments provide. 32 Other regulatory initiatives are contributing to a reshaping of the landscape. MiFID, in the EU, and RegNMS, in the US, have sought to encourage increased competition in trading; and the Code of Conduct, recently signed in the European Union, establishes terms under which infrastructures operating in one member state can clear and settle (initially equity) trades in another. More than 20 applications have now been made under the terms of the Code. 4  BIS Review 130/2007  33 Whether trading, clearing and settlement infrastructure markets can support a wide range of providers in the long-term remains an open question.
These steps include the necessity to accelerate the potential GDP growth in the European Union and Japan through reforms of the labour market and the product market, increasing savings in the US by curbing the budget deficit, and reforms of the financial sector in China and subsequent gradual floating of the renminbi exchange rate. The central bank must consider possible scenarios of developments in the global economy and possible adjustments of global imbalances, as they significantly impact the perspectives of a national economy, and so the monetary policy pursued. Moreover, the central bank, as an institution that manages foreign exchange reserves, must monitor changes on the global financial market, as these changes and investment decisions made by the central bank influence the return on foreign exchange reserves. 5  This thesis was advanced, among others, in the frequently quoted work: M.Dooley, D.Folkerts-Landau, P.Garber “An Essay on the Revived Bretton Woods System“, NBER Working Paper 9971, September 2003. 2  BIS Review 32/2006  Re 2) Globalisation changes the wage and price setting mechanisms in a domestic economy. This ensues from the increased international competition and the growing role of outsourcing and offshoring. Offshoring consists in transferring of manufacturing, services or orders abroad, where such transfer may be made within a single company or to another company. Outsourcing consists in renouncing manufacturing or services in a given company and obtaining such goods or services from another company that may be located in the same or another country.

The other option, described by Kohn as the “extra action policy”, allows for a deviation of current inflation from a level determined as stable in return for improvement of the perspectives of achieving price stability in the future. However, the extra action policy does not mean piercing the speculative bubbles by central banks, and means rather “taking out” of additional insurance against possible negative shocks, which may happen in the future. In Kohn’s opinion, the extra action policy may be run very rarely and only where the three conditions are met: •  the central bank must be able to identify asset bubbles in a timely manner and high certainty as to the correctness of analysis conclusions;  •  there must be a high probability that a slight tightening of the monetary policy will be able to stand against the speculative activity on a given assets market;  •  the expected improvement of the future economic situation resulting from a smaller speculative bubble must be significant and higher than the costs incurred by the economy in the aftermath of running the extra action policy. To recapitulate this train of thought, Kohn was very sceptical whether the three above-mentioned conditions can be sufficiently met; however, he did not preclude that in the future, the understanding of economic processes will improve as much as to enable running the extra action policy where reasonable.
Here is a rather pungent quote from a note he sent out on Jan. 2: “…QE [quantitative easing] puts beer goggles on investors by creating a line of sight where everything looks good…” For those of you unfamiliar with the term “beer goggles”, the Urban Dictionary defines it as “the effect that alcohol … has in rendering a person who one would ordinarily regard as unattractive as … alluring”. This audience might substitute “wine” or “martini” or “margarita” for “beer” to make it more age-appropriate, but the effect is the same: Things often look better when one is under the influence of free-flowing liquidity. This is one reason why William McChesney Martin, the longest-serving Fed chairman in our institution’s 100-year history, famously said that the Fed’s job is to take away the punchbowl just as the party gets going.2 … and the eye of the needle The other eye catcher for me was a cartoon in the Jan. 6 issue of The New Yorker. Sitting in a room are two businessmen who are apparently conversant with the New Testament’s book of Matthew. One says to the other, “We need either bigger needles or smaller camels”. Today, I want to muse aloud about whether QE has indeed put beer goggles on investors and whether we, the Fed, can pass the camel of massive quantitative easing through the eye of the needle of normalizing monetary policy without creating havoc. Free and abundant money changes perspective Boockvar is right.

Nina Stoyanova: Innovations Statement by Ms Nina Stoyanova, Deputy Governor and Head of the Banking Department of the Bulgarian National Bank, at the opening of the Financial Forum “Innovations”, organized by Association “Bank of the year”, Sofia, 9 June 2021. * * * Market developments today are driven by the new technologies. They provide a basis for increasingly diverse and innovative payment products. Digitalization of processes and services has led to development in the financial sector in Europe further stimulated by the policies of the European and national regulators. Payment services are getting more convenient, secure and accessible. Today, when consumers make on-line purchases, they expect the payments to be executed swiftly and smoothly, requiring no additional time or effort. The global pandemic increased the interest of different businesses to the payment sector. We witness a quick acceleration of digitalization in most of the spheres of life, such as work, shopping and administrative services. This has also generated a demand for alternative methods of payment. According to the latest public data, three out of four users worldwide have changed their method of payment owing to the Covid-19 crisis. Half of the consumers would opt to shop online, where possible. During the pandemic large part of consumers have tried for the first time a new shopping or payment method. Currently, we observe an enhanced activity of the innovative payment market players. These are FinTech companies that have proven themselves in other sectors but also the so-called “challenger banks”.