samchain/econo-pairs-v1 huggingface dataset:
BIS Review 16/2004  3  Simultaneously with the need to contribute to the promotion of economic convergence within the EMU parameters, our central banks are engaged in the task of integrating themselves into the European System of Central Banks (ESCB). The challenge here is multifaceted in that it involves infrastructural and organisational changes that profoundly affect not only the central bank and the financial markets, but also the players in those markets. The technical aspects of ESCB membership represent a special challenge for small acceding countries like Malta. The domestic financial markets in most of our countries are small and less liquid that those of existing EU members, and typically less sophisticated. And yet, upon membership we will be expected to function on the same level as the long-standing and, in most cases, larger members of the System. Ensuring that the transition takes place with the least possible disruption has entailed a comprehensive reform of institutions and operating systems. For example, a real time gross settlement payment system (RTGS) has been put in place instead of the existing payment infrastructure. The standards of the securities settlement system have been upgraded to a fully ESCB-compliant ‘delivery versus payment’ system, which ensures the risk-free transfer of collateral and, where necessary, of securities. Cross-border payment systems have been adapted to ensure that they meet today’s ‘straight through processing’ standards. Similarly, with regard to statistics there has been an overhaul of methodologies and databases.

This also means that the main cost of joining the euro area - the loss of monetary policy independence has already been largely incurred as the euro carries a 70% weight in the currency basket and the progressive lifting of exchange controls has reduced the central bank’s ability to set interest rates independently of world markets. Second, the Maltese economy is already closely integrated with the euro area. This is borne out not only by trade patterns, but also by the similarity of Malta’s sectoral distribution of value added and employment. Our business cycle, too, has become increasingly correlated with that of the euro area. BIS Review 16/2004  1  This synchronization is likely to grow further as exchange rate volatility declines and transactions costs fall and, if the correlation between business cycles is indeed endogenous in a monetary union, as our trade with the euro area intensifies. In addition, differences in productivity levels between Malta and the euro area in the traded goods sector appear to be minor, which suggests that the BalassaSamuelson effect is unlikely to be strong. Similarities are also to be found in the financial system. For example, the degree of financial intermediation in Malta is comparable to that of the euro area, and the long-term interest rate is well within the Maastricht reference value. Further evidence that the economy seems well prepared to join a monetary union is the fact that nominal wages have been sufficiently flexible to carry the burden of adjustment implicit in a fixed exchange rate regime.
Macroprudential is no longer the policy that dares not speak its name. To safeguard these hard-won reforms, Europe now has a Single Supervisory Mechanism and European Systemic Risk Board. The Bank of England now houses the Prudential Regulation Committee and the Financial Policy Committee. The independence of these committees and their accountability to the people they serve through their respective parliaments are essential bulwarks against the inevitable recidivism that follows a financial crisis. The longer we go without disruption the more important it is to remember, remember that when it comes to financial stability, success is an orphan. Since the crisis, macroeconomic outcomes have been much less benign. Growth in both the euro area and the UK has been, on average, a percentage point lower; and inflation has been twice as volatile. There has been a persistent margin of spare capacity, with unemployment, on average, 1-1½ percentage points higher. But there have also been important differences. While the euro area has continued to experience ‘divine coincidence’ the UK has not (Chart 1). In the euro area, inflation has averaged half a point below target, reflecting in part the drag from persistent slack in the labour market. In contrast, UK inflation has been above target, averaging 2.3%, during a period where the economy was operating well below potential. That reflects the inflationary impacts of two large exchange rate depreciations and weak productivity that have offset a major positive shock to labour supply.

Average MPC vote includes both decisions on Bank Rate and QE, with every extra £ of asset purchases (gilts and corporate bonds) treated as equivalent to a 25bp cut in Bank Rate (see Joyce, Tong and Woods, 2011). Six years ago, the MPC recognised that past should not be prologue. The MPC was pretty certain there was a large amount of slack, although it had questions over how much productive capacity had been destroyed following the crisis; how quickly productivity growth would recover; and whether labour supply would change in the wake of reforms and a heavy burden of household debt. Such uncertainties about supply meant that knowing what was happening to demand was no longer sufficient for gauging the appropriate policy response. That is why the Committee provided forward guidance that explicitly linked any potential change in interest rates to the unemployment rate – a clear and widely understood indicator of the degree of slack. The message the Committee gave UK households and businesses was simple: the MPC would not even think about tightening policy at least until the unemployment rate had fallen below 7%, consistent with the creation of around three quarter of a million jobs. What we – and others – learnt as the recovery progressed was that the UK economy had substantially more spare capacity than previously thought. The MPC could be patient.
Household debts peaked in 2008, at which point the sector’s balance sheet was weak. Households were highly-leveraged, with many underwater on their mortgages. This was particularly the case for younger and lower- and middle-income households who, besides being more leveraged, were disproportionally affected by job loss and other income shocks, and had little experience managing debts – especially in times of stress. Consequently, delinquency, foreclosure and bankruptcy rates reached very high levels. Beginning in 2008, households began a new phase to repair their balance sheets by paying down outstanding debt. During this “Great Deleveraging,” which lasted five years, households reduced their overall liabilities by 12 percent or $ trillion. House prices began to rise again in earnest in 2012, and by mid-2013 household deleveraging appeared to have come to an end. Net household borrowing resumed, and household debt has risen over 8 percent during the last couple of years. But, this recent period of credit expansion looks very different from the early 2000s, and I believe that the household sector today is in much better health. There are several reasons for my confidence. Let me begin with the situation in the residential mortgage market, which plays such a dominant role in household finance and was such a problem the last time around. Currently, house price growth is running nationally at around 5 percent per year. But this time, households appear to be much more cautious in how they are responding to the rise in home values.

This raises the question of whether this expansion has already entered its twilight years, with the risk of recession edging higher with each passing month. As I have said before, expansions do not simply die of old age. 1 Rather, expansions end either because a significant inflation risk emerges that requires a sharp tightening of monetary policy, or the economy is adversely impacted by a large shock that cannot be offset by monetary policy in a timely manner. While the sample of post-war U.S. expansions is still too small for reliable statistical analysis, the evidence suggests that after an expansion’s first few years its likelihood of ending is mostly independent of age, and depends mainly instead on the level of inflation. Since the possibility is low that a significant inflation risk would emerge over the near term, this means that the main danger facing the current expansion is the risk of large, adverse shocks. Given that the labor market still appears to have some excess slack and inflation is below the Federal Reserve’s objective, monetary policy is appropriately still quite accommodative despite the advancing age of the expansion. While this limits to an extent the degree to which monetary policy can aggressively respond to any adverse events, the good news is that the economy is more resilient to any shocks. Key sectors of the U.S. economy, such as the household sector, seem to be in good shape.
This topic might be less familiar to some—the terms are newer and the assessment frameworks are less developed—but I believe it is critically important. Both the official sector and many of your firms have put considerable emphasis on improving corporate cultures and reducing misconduct risk, but we continue to see striking cases of misconduct both in the U.S. and abroad. Clearly, more needs to be done. Many of the insights I will share today are drawn from interactions with industry participants and members of the official sector through outreach and industry conferences and workshops on the topic, including events hosted by the Federal Reserve Bank of New York. 2 I am confident that continued commitment and collaboration will contribute to better outcomes in this vital area. Before proceeding, I’ll emphasize that I am speaking for myself and not the Federal Reserve Bank of New York or the Federal Reserve System. Influencing Culture from Multiple Perspectives Prudent risk management is a fundamental aspect of the business of banking, which means it is a critical factor in the effective oversight of banks. Supervisors focus on financial resilience by requiring firms to maintain sufficient capital and liquidity and emphasize operational resilience by promoting effective corporate governance, risk management, and recovery planning.3 In my view, misconduct risk—defined as the potential for behaviors or business practices that are illegal, unethical, or contrary to a firm’s stated beliefs, values, policies, and procedures—is an integral part of an effective risk management framework.

First prize The first prize was awarded to PEGI MYSHQERRI, a student at the Goethe University, Germany, for the study on the Master's theme: The effects of ECB Asset Purchases on European Corporate Bond Markets)". In her work, Pegi has assessed the impact and channels of the European Central Bank's quantitative easing policies on the interest rate of corporate bonds. The author has also analysed the behaviour of firms toward these programs of the European Central Bank, and whether they have affected or not in the issuance of an acceptable (adequate) debt. More specifically, Pegi has employed the econometrics methods to assess that both programs - the purchasing program in the corporation sector (CSPP) as well as the emergency purchasing program during the pandemic (PEPP) - have had an effect on the interest rate of corporate bonds, but the scale of the impact of each program has been different. Furthermore, results show that quantitative easing programs have had a considerable role in mitigating the lending conditions to corporation in the Euro area, affecting thus the increase of both the number and volume of corporate bonds issued. First, I would like to commend the winner of the first prize for choosing this theme; a rather interesting and relevant theme for banks in advanced economies, but which has been gaining traction in emerging countries.
2  BIS Review 27/2001  Modified capital requirements Let me begin by explaining what we are doing to ensure that the capital held against loans made to small and medium-sized companies is truly reflective of risk. The Committee has on two occasions over the past year asked banks to assess the impact of the revised Accord. The data gathered have enabled us to evaluate the level of capital that our proposals would generate and to consider several modifications. As you may know, our early findings suggested that the internal ratings-based approach as outlined in the Second Consultative Paper would have required banks to set aside too much capital. Contrary to the Committee’s clear intent, banks would not have received a capital incentive for adopting this more sophisticated approach to capital adequacy. As a result, we had to adjust the capital requirements to provide banks with the right incentives under the new framework. The Committee’s aim is to avoid unintended consequences stemming from the new proposals. That’s why we are taking additional time to make sure our proposals are right. To this end, we published in November a change in the IRB formulas for calculating bank capital requirements. This change – based on the Committee’s internal research as well as additional input by bank risk management experts – reduces the extent to which capital will vary with the internal ratings banks assign to their exposures.

Its main objective is to manage assets and distribute wealth between generations. It also serves as a buffer against shocks: changes in petroleum revenues are absorbed by the Fund, not by the domestic economy. This reduces the need for structural adjustments and thus promotes exchange rate stability. The Fund invests only in foreign markets. Investments are spread between equities and fixed income instruments, as well as across countries. The net annual inflow to the Fund equals the net fiscal surplus plus the return on the Fund’s capital. In March 2001, a broad majority in the Norwegian parliament (the Storting) adopted a new set of guidelines for fiscal and monetary policy. According to the new guideline for fiscal policy, petroleum revenues are to be phased in approximately in pace with the expected real return on the Government Petroleum Fund. The guideline makes fiscal policy predictable and anchors it in a long-term strategy. It also makes policy robust to changes in oil prices and ensures that petroleum wealth will be of benefit both today and in the future. The guidelines imply that the structural non-oil budget deficit will equal 4 per cent of the total value of the Fund. The non-oil deficit is thus financed by the return on the Fund, ensuring both long-term fiscal balance and a continued phasing in of petroleum revenues. The use of petroleum revenues will accordingly increase as long as the Petroleum Fund is expanding. Fiscal policy will contribute to stimulating aggregate demand in the Norwegian economy every year.
The primary objective of the European System of Central Banks (made up of the European Central Bank and national central banks) will be price stability. The ECB Council of Governors (only those of countries participating in monetary union) will decide independently the level of official interest rates. Representatives of the European Council may attend the ECB Council meetings, but they will not participate in the voting procedure. Monetary union will be characterized by a single monetary policy and national fiscal policies. In this context, the issue of fiscal discipline and coordination is crucial. Sound fiscal policies will help the ESCB to maintain price stability. Coordinated fiscal policies will contribute to a balanced policy mix in Europe. Fiscal discipline will prevent free-rider strategies by countries running large deficits and raising funds at low interest rates, thanks to the credibility and stability of other countries. This question of European fiscal discipline is important in the context of the main criticisms which are presently enumerated, particularly from outside Europe, in the analysis of the concept of EMU. Without being exhaustive in this listing, I personally see four major criticisms: First, it is sometimes argued that EMU will lead to greater rigidity, in diverting attention from the necessary structural reforms and inducing an inward-looking posture over Europe at the very moment when global competition is of the essence.

In advanced economies, this was 6 times the level of exports and imports as a % of GDP. This helped to drive unprecedented growth and poverty reduction in the global economy, with the share of the world population living extreme poverty falling over 60% since the 1980s. But financial globalisation also gave rise to a series of regional capital and financial crises that exposed the risks; and the international governance structures did not keep up. It took the great financial crisis and the near-death experience of the global economy to bring home the lesson that a step change in governance was needed. And to create the political will to make it happen. 3  All speeches are available online at www.bankofengland.co.uk/news/speeches  3  The response to the great financial crisis has been the largest, most comprehensive set of reforms to the governance of the international financial sector that we have seen. New international standards ensure that banks engaged in cross border activity are far more resilient. They have more and better quality capital to absorb losses and much greater reserves of liquidity to withstand stress. The development of resolution regimes and an international standard for loss absorbency in resolution makes it far more possible for international banks to fail without endangering the whole financial system. OTC derivatives, a key amplifier of the stress and largely unregulated and unreported before the crisis, are now transparent and collateralised – an additional $ is now held globally against all derivatives trades.
The UK was one of the first countries to embed in legislation a commitment to achieve net-zero greenhouse gas emissions by 2050.4 Meeting that goal will require an unprecedented structural shift in the economy, particularly on the supply side. Everything from the way we produce and consume goods and services will need to change for this economy-wide transition to take place. The primary levers for driving that transition rest not with central banks, but with governments through setting climate policy, with industry through innovation and investment, with private finance through allocating investment, and with consumers through the choices they make. These important and difficult decisions bring both social and economic consequences.5  Role of central banks 1/5  BIS central bankers' speeches  So what then is the role of central banks? Let me start by emphasising what it is not. We are not here to “solve” climate change or drive the transition. Those with the mandate and the tools to lead this fight sit elsewhere. But central banks do have a role to play, and an important one at that. Our economy and financial system are not immune to planetary-level changes or society’s response to them, indeed it would be absurd to suggest otherwise. Elon Musk aside – we cannot diversify away from our exposure to the planet. In that sense climate change is the ultimate systemic risk.

Otherwise, a durable single currency would not be feasible. Yet given that political union in Europe over the short term is inconceivable, will a monetary union not be able to survive without political union? In my view, the most important lesson we’ve learned in this crisis is that it is possible to enjoy the benefits of a single currency without political union, but only if strong divergences between the member countries are avoided. This has been understood by the European Union and is what has prompted the changes to the Stability and Growth Pact and to economic governance, which are intended precisely to correct divergences before they become so great that they are difficult to redress. And it must be acknowledged that here a good deal of progress has been made over the past year. The unfolding of the crisis has shown that the governance model in place to date in the EU has been of no use in ensuring economic policy consistency or in managing crisis episodes flexibly and effectively. It’s now clear that public finances were not sufficiently restructured in the upturn, that macroeconomic divergences were excessive and that we need a well-designed financial aid mechanism to assist ailing countries swiftly and effectively. Mindful of this, European governments and institutions have taken major steps towards correcting deficiencies in three fundamental areas: the strengthening of fiscal discipline, closer surveillance of macroeconomic maladjustments and the creation of a permanent crisis-management framework.
Banks have become more vulnerable to distortions in the credit markets. Historically, our 4 banks primarily obtained funds through deposits by households and enterprises. In recent  1  Folketrygdfondet will manage the new Government Bond Fund. 2  The Government has increased the capital of Kommunalbanken Norway (the local government funding agency), it has increased the scope of GIEK (the central government export credit agency) and Innovation Norway, and has offered state loans to Eksportfinans Norway (the credit institution for export financing). 3  Figures for banks’ equity capital before 1918 are based on: Jan Tore Klovland (2007): “A reconstruction of the balance sheets of savings banks in Norway 1822-1875” and “A reconstruction of the balance sheets of commercial banks in Norway1848-1900” in Øyvind Eitrheim, Jan Tore Klovland and Jan F. Qvigstad (Ed.) (2007): “Historical Monetary Statistics for Norway – Part II” Norges Bank’s Occasional Papers, No. 38, Oslo. Statistics Norway is the source for figures from 1919 to 1995. Norges Bank is the source for figures from 1996. 4  Figures are taken from the sources in footnote 3 and Hege Imset Matre, H. I. (1992): Norske forretningsbanker 1848-1990: En tilbakeføring av forretningsstatistikken (Norwegian commercial banks 1848-1990). Report No 41 from the research programme Det nye pengesamfunnet. 2  BIS Review 37/2009  years, banks have borrowed in both domestic and foreign markets. When credit markets dried up, this proved to involve high liquidity risk for banks.

To facilitate the funding of banks operating in Norway, a swap arrangement was established allowing banks to exchange covered bonds for government securities for up to NOK 350 billion. A number of banks have made use of this facility, so far in an amount totaling NOK 80 billion. The arrangement provides banks with Treasury bills. Banks have used these as collateral for loans, sold them or kept them as liquidity reserves. Norges Bank has also expanded its use of its ordinary instruments. We have supplied additional liquidity through our loan facilities and made arrangements for banks to furnish a greater range of securities as collateral for the loans. We have also provided loans with longer-than-usual maturities. The longest maturities have been two- and three-year loans, which have been geared to small banks. Norges Bank has also supplied Norwegian kroner through currency swaps and offered USD loans to Norwegian banks. Norges Bank entered into a swap agreement with the Federal Reserve, authorising a loan of up to USD 15 billion. The measures have been effective. Money market rates, which for a period were above 8 per cent, are now approximately 3½ per cent. In this period Norges Bank reduced the key policy rate by 3.75 percentage points to 2 per cent on 25 March. Banks’ lending rates have decreased considerably. Credit flows have improved, but access to credit is still difficult for enterprises. Money market premiums have fallen. In the first quarter of 2009, premiums on three-month interest rates in Norway stood at 1.2 percentage points.