samchain/econo-pairs-v1 huggingface dataset:
Yet there was almost no perceptible response of nominal pay and domestic prices. Economists attributed this decline either to the change in monetary regime itself, or – more often – to greater flexibility in the labour market. Chart 7: Lower sensitivity of wages to real income shocks during inflation targeting period  Rolling coefficient on wedge between consumer and output prices using 18-year regressions. Dotted line shows coefficient estimated by Layard, Nickell and Jackman (LNJ) on 1956-85 sample. Source: Layard, Nickell and Jackman (1991), ONS and Bank calculations. But it was hard to be confident about these estimates. Labour-market flexibility isn’t set in stone. In a speech in 20066, Charlie Bean suggested that increased ease of migration, in both directions, might have reduced the sensitivity of real wages to shifts in labour demand. It’s possible that, by adding a degree of friction to  5 Layard, Nickell & Jackman (1991), ‘Unemployment: Macroeconomic Performance and the Labour Market’. 6 Bean (2006), ‘Globalisation and Inflation’. Bank of England  Page 14  the inflow and outflow of migrant workers, the combination of Brexit and the pandemic have made the labour market less adaptable than it was a few years ago. There may be other reasons why susceptibility to second-round effects can vary. During the one period in which higher import prices seriously impinged on real incomes, following the financial crisis, unemployment was also much higher than it is today.

In the data, there does appear to be a degree of “smoothness” in the way official interest rates behave. Rather than jumping from one level to another, factoring in all the news at once, the policy rate usually seems to respond to it over time. Two explanations have often been suggested. One is uncertainty about the impact of changes in official interest rates. If there’s a degree of imprecision in estimates of policy multipliers there’s a case for moving a little more gingerly than otherwise. Another, offered by the economist Michael Woodford, is that smoothing the spot interest rate gives the central bank better control of medium-term interest rates, which may matter more in the transmission of policy. In this case I think a third factor may be at play, namely the need to learn about the extent of these “second-round effects”. We have inevitably had to learn about them and, therefore, to respond to signs of more persistent domestic inflation as and when they emerge. Bank of England  Page 15  The response to demand shocks This is less the case when it comes to plain-vanilla shifts in aggregate demand. These are more common and the appropriate response is well understood: an inflation-targeting monetary authority has to lean against them. Indeed, one additional reason for caution, in the face of these big rises in import prices and their impact on domestic inflation, has been the likelihood that they will also weigh significantly on domestic demand.
Over the Christmas holidays I read a book by the former US Treasury Secretary Robert Rubin.1 He takes up this issue and motivates why he strongly advised President Clinton against holding public opinions on monetary policy, advice followed by the President. According to Rubin, there is always a risk that the bond market will be affected if there is the slightest suspicion that the central banks' actions are governed by political pressure.2 I think that the fact that he - with his decades of experience on Wall Street - brings up this argument and that he does so despite the widespread respect enjoyed by Greenspan's Federal Reserve, shows that the argument cannot be waved aside. One could object that the Riksbank's legal independence is greater than that of the Federal Reserve. On the other hand, the low-inflation regime is relatively new in Sweden and our market is also small and influenced to a large degree by external agents, who often lack in-depth knowledge of how our system works. At present, the economic and political developments in Sweden are so stable that political manoeuvring of the type we have seen hardly has any effect on the markets, although some concern has been expressed by foreign analysts. However, politicians who enter the discussion with strong opinions in a stable situation should probably reflect over how they might act in future in more problematic situations.

  The dispersion of real GDP growth rates across euro area countries is comparable with the equivalent dispersion across U.S. states. For instance, the difference between the fastest and slowest-growing U.S. states is not of a markedly different order of magnitude as that between euro area countries.   Overall employment in the euro area increased by 14 million during the first twelve years, compared with a rise of about 8 million in the United States.   And the overall yearly public finance deficit in the euro area is presently about half that in the United States or in Japan. The IMF projects indeed the euro area’s fiscal deficit to reach 4.4% of GDP this year, against 10.8% of GDP in the U.S. and 10.0% in Japan. The euro’s international status is the outcome of market forces. But one of the particular characteristics of the euro’s international role is to be markedly regional and strongest in economies with close geographical and institutional links to the euro area. The euro’s international role also displays a high degree of stability. And the available factual evidence suggests that it has remained broadly unchanged since the outbreak of the global financial crisis, in particular. For instance, the euro accounted in 2010 for about one-quarter of disclosed foreign exchange reserves globally (against around 60% for the US dollar and 4% for the yen). It also accounted for about one-quarter of the stock of international debt securities and for roughly 20% of foreign exchange turnover.
We reason backward, “if the program were effective, this would not have happened.” I think this is natural and understandable for the enforcement community, but it is not necessarily good policy. To borrow an observation from Senator Ted Kennedy concerning the Federal sentencing guidelines, this creates “a risk that companies without substantial compliance programs will get a free ride, and those with strong programs will not receive the credit that they deserve.”3 Alternatively, if there were a reliable and acceptable measure of program effectiveness, this kind of backward reasoning would be replaced by reliance on the effective measure. Institutions could use the measure when making arguments for leniency, again assuming that the measure demonstrated that their programs were effective. It might, of course, show just the opposite. And there are other, perhaps even more important, benefits. If an industry and its regulators came to have great confidence in a particular effectiveness measure, this might provide a foundation for building a program that could be used to on-board risk. Put differently, a particular organization could have confidence that its ethics and compliance program would be protective because the program had been validated by a well-accepted measure of effectiveness. Some of the skeptics will say “you are dreaming”. When I hear them, I am reminded of the words of George Bernard Shaw, and specifically the reminder to dream things that never were and ask “why not”.4 4.

Indeed, the PRA has found that despite the sophistication of insurers in modelling climate risks, there are still gaps in their own risk management. The PRA is increasingly focused on cognitive dissonance in some insurers whose careful management of climate risks on the liability side of their balance sheets is not always matched by similar considerations on the asset side. And the PRA’s banking survey last September found that, although almost three quarters of banks recognised the risks of climate change, only one in ten were taking a long term, strategic approach to them. With that in mind, we expect firms to consider scenario analysis as part of their assessments of the impact of climate risks on their balance sheet and broader business strategy. An important question is the form these scenarios should take. Climate scenarios aren’t forecasts, but datadriven narratives that help companies think through different possible futures. The scenarios should be comprehensive, rigorous and challenging. The assumptions and methodologies in the models – such as the assumed global temperature rise, the energy mix, or whether the transition happens smoothly or abruptly – should be sufficiently transparent to allow for comparisons and external challenge. And finally, scenarios should be implemented consistently across the business, linking identification of risks and opportunities to both strategy and disclosure. To do this, firms will need either to develop their own transition scenarios or build on commonly available models.
I do strongly believe that our efforts will persist in the future as well, enabling a smooth shift of the operational target and optimal functioning of their new form. Interbank market development Dear colleagues, Bank of Albania’s role in promoting the interbank market is indisputable. However, we are fully aware that the development of this market mostly reflects the results of the banking system’s own development and efforts. Therefore, the Bank of Albania requires your utmost attention in this regard. More precisely, in our discussion today we would like to have your opinion on the three steps we consider will boost the development of the interbank market. First, setting the prime rates in the functioning of commercial banks. These rates can and should serve as a guide to setting prices on banking products, both on the assets and liabilities’ side. Second, the functioning of the collateralized market through repo or reverse repo contracts. Although in its classical concept the interbank market is an uncollateralized market, its enhancement with the abovementioned instruments would open the way to its thorough development, ensuring a more efficient distribution of liquidity among the market operators. Third, banks can and should be active in quoting the liquidity in the Albanian lek, keeping the same stance as in the foreign exchange market. The constant quotation will encourage a more active liquidity management and it will enable its continuous price setting.

All this should lead to a more harmonised regulation and supervision across countries, and as a result also foster financial integration. 2  BIS Review 47/2010  For central bankers, the part of the reform which directly concerns them is the establishment of the ESRB, a new independent body that will for the first time carry out a comprehensive macro-prudential oversight of the financial system of the EU. The ESRB will also issue risk warnings, and, where appropriate, recommendations, and follow up their implementation. This body will bring together the central bankers, the heads of the three supervisory authorities, the Commission together with the supervisors of the 27 EU Member States to regularly discuss and assess the financial stability conditions in the EU. In that respect, the ESRB shows some keen similarities with the Financial Stability Council in the proposed financial reform in the United States. The ESRB is expected to support financial integration through its contribution to financial stability in the EU. Indeed, if market participants are confident that the authorities take properly into account the interdependencies between countries and the various components of the financial system, they are likely to fully exploit the possibilities offered by cross-border activities in the EU.
I can assure you that we are not doing so, and we should not because that would go against the will of Parliament. But, sensibly, the regime sensibly allows for a degree of flexibility in how the requirements are implemented, recognising the differences in business models, legal structure and strategy of various firms. That was essential and sensible because a rigid definition of the fence would not work well for all firms. To ensure balance, I should say that I also get the opposite commentary, that the implementation is too rigid. One particular form of this commentary is that our rules on the governance of the ring fenced bank within a group mean that it will be independent in all respects, and that, proverbially, it will be able to stick two fingers up at its parent. No. The ring 4  BIS central bankers’ speeches  fenced bank will have to observe the law in respect of the requirements of ring fencing, not more than that. This is not really different from the position for banks that have subsidiaries operating in other countries, they have to respect the laws of the country in which they operate.

So, it should be no surprise that our focus is on three things: first, full, consistent and prompt implementation of the already agreed reforms across the financial system, and here I would note that the largest single activity for the PRA this year is to complete the implementation of Solvency 2 for insurers for the end of this year, something I believe we are on course to do; secondly, finalising the design of the remaining post-crisis reforms and thus providing the much needed clarity around the future regulatory system; and thirdly, scanning the horizon for new risks and vulnerabilities that appear on our landscape, ones such as the risk of cyber disruption. I think there is solid evidence of progress in all of these three areas. Internationally, there is plenty of evidence of shared objectives and effective co-operation among national authorities to solve common problems and “own” and thus implement the resulting reforms. An example  BIS central bankers’ speeches  1  over the last year has been the building of strong working relations between the PRA and our colleagues at the Single Supervisory Mechanism of the ECB. This can only be for the good, and represents the much needed close working of people who are on the front line supervising the system. We also want to encourage sound market-based finance and we are, for example, strong supporters of the EU initiative on simple, transparent and standardised securitisation.
Andrew Bailey: Meeting the challenges of a changing world – the view from the Prudential Regulation Authority Speech by Mr Andrew Bailey, Deputy Governor of Prudential Regulation and Chief Executive Officer of the Prudential Regulation Authority at the Bank of England, at the Association of British Insurers Biennial Conference, London, 9 July 2013. *  *  *  Thank you for inviting me to speak today. It is just over three months since the new system of financial regulation in the UK came into being. There are over 700 insurers in this country now subject to prudential supervision by the PRA and conduct supervision by the FCA (in addition, insurance brokers are entirely supervised by the FCA). Today, I want to talk about how the PRA is going about the prudential supervision of insurers. There are good reasons to argue that the insurance industry has been relatively little affected by the financial crisis in terms of instability in the industry, but of course that does not extend to arguing that the industry is unaffected by the consequences of the financial crisis, that could never be the case. So, there are very real challenges for insurers. Why do we single out banks and insurers for prudential supervision by the PRA?

More importantly, it is to avert a sharp slowdown in economic activities. Financial liberalisation Bank Negara Malaysia has also remained committed to the objectives of the Financial Sector Master Plan (FSMP) issued in 2001. The recently announced liberalization measures, for example, forms part of the concluding phase of the FSMP which is to liberalise the banking sector by allowing for the increase in operational flexibilities, product offering and, the issuance of new licenses by 2011. But, as capacity and institutional building efforts continue to be pursued, it must be complemented by enhancements in regulatory, supervisory and surveillance framework to preserve the integrity and resilience of the financial system. Clearly this is the distinction which must be made with de-regularisation per se. Islamic banking Islamic banking also remains as one of the key agendas under the FSMP. Also in the recently announced liberalisation measures, we will issue up to two new licenses given the growing demand and the need to give further boost to the MIFC initiative. As we have more than two decades of experience in this area, Bank Negara Malaysia will continue to build on this competitive advantage to ensure Malaysia remains at the forefront of global Islamic banking. It is therefore encouraging to note that Islamic finance has continued to demonstrate its evolution and strong growth as assets have expanded by 22% to RM192 billion in 2008 alone and now accounts for 15.0% of the total assets in the industry.
In any event, it is worth mentioning again that at no point in the crisis did non-performing mortgage loans exceed 6% of the total. Consequences of the application of the law on access to housing The crisis has also reminded us again that the worst business to do is to grant a mortgage to a person who, a priori, is unlikely to fulfil their payment obligations. In economic terms this is bad business for the customer concerned, but also for the institution, which will have to deal with an irregular loan and, possibly, following a lengthy and difficult judicial process, assume the cost of having a property on its books, managing it and paying all the attendant costs. Finally, given the painful situations we have lived through recently, there is no need to spend much time discussing the social effects of such business. Precisely because of the asymmetric positions of the lender and borrower in the contractual relationship, the new law provides that incorrect assessment of solvency will not entitle the lender to terminate, rescind or modify the loan agreement. That is to say, the responsibility for analysing the ability to pay falls entirely on the institution, and not on the customer. The law also protects the debtor who is unable to make payments, by making enforcement of mortgages in the event of default more complicated. Naturally, all these legal provisions reinforce the idea that extreme caution must be exercised when granting new loans.

21.03.2019  Closing remarks Event on the “Impact of the new law on real estate credit”/PWC Margarita Delgado Deputy Governor  Good afternoon, I would like to thank PWC for kindly inviting me to speak at the close of today’s event on the new real estate credit law. I shall try to speak about the most innovative features of the new law from the supervisor’s standpoint, not dwelling too long on the details of the legal changes introduced, as I am sure that they have been widely discussed over the course of the morning. Specifically, I shall focus on the three features of the new law that strike me as particularly important from a supervisory viewpoint: (i) the emphasis given to customer protection, (ii) the need to ensure legal certainty for the mortgage market to function properly and (iii) the growing importance of credit conditions. I shall also refer to the potential short and mediumterm consequences of this law for access to owner-occupied housing, and shall conclude with some thoughts on how the new macroprudential tools may shape the way we supervise certain banking businesses, notably real estate lending. Introduction  As we know only too well, access to home ownership is an issue of great concern to Spanish society. Worldwide, Spain has traditionally been among the countries with the highest owner-occupancy rates. Although this rate has declined from the peak reached in 2002, it is still higher than in other European countries.
7  All speeches are available online at www.bankofengland.co.uk/news/speeches and @BoE_PressOffice  7  In the case of energy markets there are probably specific factors to blame. A prolonged period of cold weather last winter had reduced inventories of gas in Europe. Interruptions to the supply of renewables further increased the demand for gas, as did efforts to shift away from coal in Asia. And there have been supply problems too in Norway and Russia. More generally, there are several possible reasons why these trends have continued, despite the worldwide easing of Covid restrictions. The substantial fiscal easing in the United States gave a renewed and significant impetus to spending on consumer durables, both in that country and therefore the world as a whole. In some cases – notably cars – supply problems meant this demand couldn’t be met. But US spending on other durables nonetheless rose significantly further between the first and second quarters of this year, as fiscal transfers started to come through, and in 2021Q2 was almost 30% higher than immediately before the pandemic (Charts 8 and 9). Chart 8. US accounts for much of the growth in global demand for durable goods Percentage points  US  Chart 9. Large increase in durables consumption in the US, now partly easing back  24 Consumer durables excl.

In the spring of next year, when the next rise in the Ofgem cap on gas and electricity bills comes through, it will probably climb comfortably through 5%, a long way north of the MPC’s 2% target. Given the origins of this inflation – just about all the overshoot reflects unusually rapid rises in prices of tradable goods (including energy) – monetary policy could never have done anything about the consequences of the current inflation for real incomes. If global demand pushes up the price of something  8  Based on the Labour Force Survey, it is reasonable to assume that approximately 10% of those on the CJRS could be added to estimates of slack in the labour market. On that basis, the dots for 2020 and 2021 might be shifted to the right by 1.2 and 0.9 percentage points respectively. 14  All speeches are available online at www.bankofengland.co.uk/news/speeches and @BoE_PressOffice  14  we buy, and the price of our imports therefore goes up, that reduces real national income come what may9. Even assuming these shocks had been foreseeable, the only way to prevent the near-term consequences for inflation would have been to ensure that nominal wage growth was lower to at least the same extent. And because that, in turn, would have required much higher unemployment, real incomes would actually have been lower.