samchain/econo-pairs-v1 huggingface dataset:
In this regard, any measures that discourage early retirement and allow people to extend their working lives beyond the age of 67 would have a positive bearing on the financial sustainability of the system. Some countries have opted to build in an automatic link between life expectancy and the permitted retirement age in their sustainability mechanisms. Others have undertaken a broader change, adopting a notional definedcontribution accounts system, which has some advantages in terms of increasing the transparency of the system. Moreover, against the background of a significant rise in the dependency ratio and future reductions in pension replacement rates, it might make sense to extend the role of retirement saving to complement the resources of the public contributory system with the accumulation of financial assets supplementing future public pensions. In any event, implementing a funded system is complex and requires detailed prior analysis of issues such as the length of time needed to implement it, whether it is voluntary or compulsory, the returns it can offer in a scenario of demographic stagnation and sluggish productivity growth, and how the costs associated with implementing this change are to be shared out intergenerationally. 2) As regards new sources of funding, the alternative is to raise social contributions or other taxes, or permutations along these lines. Increasing social contributions may have adverse consequences for employment, since their weight in overall taxation is already higher in Spain than in other comparable countries.

15.02.2017  Appearance by the Governor of the Banco de España Parliamentary Committee for the Monitoring and Assessment of the Toledo Pact Agreements Luis M. Linde Governor  Ladies and Gentlemen, I appear before this Committee for the Monitoring and Assessment of the Toledo Pact Agreements to present the Banco de España’s analysis of the current status of and outlook for our public pensions system and its reform. The analysis is in a paper recently published by the Banco de España and takes a technical approach. This means we have attempted not to enter into political considerations, though these prove difficult to avoid when it comes to choosing one or more of the different reform options available. I shall begin with some thoughts on the recent developments in our public pensions system, moving on to the medium- and long-term outlook, and concluding with some general comments on possible reforms. Drawing on the final annual figures for 2015, the Social Security System deficit stood at 1.5% of GDP, in contrast to the surplus of 1.4 % of GDP posted at the start of the crisis. The information on the budget outturn for last year, 2016, suggests that this deficit will have increased. Analysing the source of this deterioration, we can conclude that it came about essentially owing to the increase in expenditure, which rose as a proportion of GDP by 3.9 pp from 2007 to 2015 to 13%, while revenue expressed as a proportion of GDP increased by 0.9 pp.
Not just because that is how one safeguards the purchasing power of our fellow citizens, in particular of the most vulnerable amongst them, who have the least protection against price increases. But also because price stability allows us to create the conditions for sustainable growth and dynamic job creation, and to combat unemployment effectively. In today’s world, however, financial stability, for which price stability is a prerequisite, is of great value. We must unremittingly endeavour to create conditions for the international economy that minimise misalignments in asset prices, excessive volatility, purely speculative phenomena and dangerous herd behaviour. This is the underlying message in central banks’ repeated calls for prudence and caution. Nothing is more conducive to economic euphoria than ample monetary liquidity, but the after-effects can be very painful, with the formation of speculative bubbles, sharp swings in asset prices, and the herd behaviour of huge capital flows. A monetary policy based on stability is the indispensable complement to the remarkable efforts undertaken these past years to improve the international financial architecture. *  *  3  *  BIS Review 115/2000  The economy of the euro area has the favourable monetary, financial and competitive conditions necessary to contribute to the pursuit of growth that is sustainable because non-inflationary. But as the Monetary Policy Council has indicated these past years, monetary policy needs to be relayed by the other main components of economic policy. Four conditions would appear necessary to preserve and reinforce the complete success of the single currency.

Before the euro, national economic policies were based on the close monitoring of several indicators such as the trade balance, the balance of payments, the exchange and interest rates. Policymakers thus constantly received information on the markets’ main reactions to shifts in economic policy and were strongly encouraged to take them into account where relevant. With the introduction of the euro, some of these indicators have either disappeared at the domestic level or their impact has been severely limited. Of course, the indicators continue to exist for the euro area as a whole, hence the importance of the Treaty's provisions on the co-ordination of fiscal and economic policies. Nevertheless, the rules of the market economy continue to apply to each Member State of Monetary Union as well as to the Union as a whole. At the national level therefore, economic policymakers need to be even more vigilant than before regarding the indicators of competitiveness. These data, which focus on trends in unit labour costs, the quality of the regulatory and tax framework and, more generally, an economic, legal and tax environment conducive to the creation and dynamism of companies, represent the main indicators shaping monetary domestic policies in the Monetary Union. The level of unit production costs is of primary importance. It would be a serious mistake to forget this in the context of a buoyant economy.
There is every reason to expect that these activities – all of which require banking services at a variety of levels – will continue to be channelled through Hong Kong. 8. But there are also potential diversion effects, which Hong Kong’s banks will need to address if they wish to make the most out of their natural competitive advantages. Size is perhaps the greatest problem. Quite apart from the obvious economies of scale, and the momentum for expansion that larger operations can enjoy, there seems to me little likelihood in the near future of any relaxation of BIS Review 114/2000  2  the size criterion of $ billion for entry into the Mainland’s banking market. Hong Kong banks that do not currently meet this criterion will have to find a way of dealing with this. The obvious solution is consolidation, which already has many other advantages to commend it. And for those who are fortunate enough to have been admitted before the introduction of the size criterion, they can alternatively lobby and hope for a favourable outcome of Beijing’s consideration of the “grandfathering” proposal that we have already put on the table on their behalf. On this I am hopeful, given that the grandfathering arrangement in relation to a change in policy is internationally accepted practice and that such an arrangement would apply to banks from Hong Kong as well as other jurisdictions. But I also do not wish to understate the complexity of the matter when considered in the context of WTO negotiations. 9.

New legal provisions and new institutions are needed to build the banking union or the fiscal union. For more than two decades I have been one of those who promoted democracy and market economy in Romania. Therefore I have to believe that Western civilization will continue to be democratic, applying the rule of law in market economies. With these institutions in place, we can look backwards to draw some lessons on the future of the banking sector. I will do this through the eyes of a central banker. A central banker is always interested in the way the banking system works. If the banking system moves away from being sound and shock-resilient, monetary policy becomes inefficient. When many changes are to be implemented, the risk of making mistakes cannot be ruled out. BIS central bankers’ speeches  1  One way to look at the banking system is to see its history as a succession of financial crises. In a nutshell, from the Great Depression to this day, the banking system faced two major financial crises: the one in the `30s and the current one. In between, there were some more or less mild financial crises. From this perspective, as a central banker, I see two trends. First, some financial crises, whether major or not, have led to in-depth reassessments of the regulation paradigm over time. Second, a cross-border approach to regulation policies has been developed gradually. However, it has recently accelerated as a prerequisite for the envisaged banking union. II.1.
The empirical evidence on this subject is mixed, but generally it has been found that inflation targeting does lower inflation and reduce its volatility. 5 There is some evidence for emerging economies that inflation targeting also reduces growth volatility (Gonçalves and Salles, 2008). Bad luck is back: the risks of inflation Recently, the world has faced one of the worst inflationary shocks in the last 60 years. First, it happened with oil prices, which started rising sharply at the beginning of the decade, and has climbed to record-high levels (figure 4). However, even with this shock, inflation and output have been much less volatile than in previous oil price cycles. Lower oil-dependence and countercyclical fiscal policy explain part of the milder effects. Better monetary policy has also contributed to substantially reduce the impact of oil shocks on output and activity. 6 However, the price of oil has kept increasing, and although its effects are smaller than in the past, the shock is becoming so large and persistent that it may have noticeable effects on inflation and output over the coming quarters. On the bright side, however, the better monetary policy frameworks that are used today limit these effects. On the other hand, more recently, we have seen an impressive increase in food prices (figure 5), with serious inflationary effects in many countries. Food prices have reached in some cases their highest levels in history.

I will close with some thoughts on the challenges ahead for monetary policy. The Great Moderation The substantial decline in macroeconomic volatility we have witnessed in the US and the world during the last decades has been widely documented by a substantial body of empirical research. Kim and Nelson (1999) and Blanchard and Simon (2001) were among the first to point at this phenomena which later became known as the Great Moderation. These latter authors found, for the US, that the variability of quarterly growth in real output had declined by half since the mid-1980s, while the variability of inflation had declined by about two thirds. Similar declines in the volatility of output and inflation occurred in most other G-7 countries roughly around the mid-eighties (Stock and Watson, 2003). BIS Review 74/2008  1  While we know that the control of inflation was achieved by the actions of monetary policy in the US, there is still an ongoing discussion regarding what caused the persistent decline in both output and inflation volatility. In general, the different reasons can be separated into three groups: •  The first argument is that the Great Moderation is the result of smaller and less frequent shocks hitting the economy. This would imply that the observed reduction in macroeconomic volatility would be the result of good fortune and would thus only last until bad luck or larger shocks were to re-appear. Several studies have provided support for the “good-luck hypothesis” (Ahmed, et al., 2002).
It is timely, therefore, for you to consider what type of leader you want to be, what type of firm you want to lead, and what type of industry you want to work in and influence. I have some views on all three, which we will get to in a moment. I am encouraged that members of the industry have convened here today to engage on these issues. I think it is important that the industry tackle this together. You can learn from one another. And, given the scandals of recent years, you really do have to sink or swim together. Before the recent spate of conduct problems, there were times when one might be secretly happy when a competitor stumbled through some sort of misconduct. All the better if such a stumble generated negative publicity and headlines. Today, the situation is vastly different. When each new scandal emerges, the industry is painted with the same broad brush. This underscores the importance of taking both individual and collective responsibility for reform. You have a personal stake in improving bank culture. Your firms have a stake too. And so does the industry. There are three messages I am going to focus on today: First, stay in banking and be good role models of the behaviors and conduct that we all want to see. It’s important. The banking industry needs your talents. And, if done the right way, it will result in a fulfilling career.

The second example based on asymmetric information is moral hazard. While adverse selection stands in the way of the closure of deals, moral hazard occurs after a contract was concluded. If these contracts are insufficiently structured counterparties have an incentive to adopt a behaviour which is undesirable to their partners. Moral hazard thus refers to the negative effects of the behaviour of the contract-taker on the contract-issuer. The textbook example here is the one where the holder of a fire insurance contract does not take enough precautions to prevent the outbreak of a fire since he trusts in the insurer’s cover. Only by introducing a certain degree of co-insurance in the contract can these negative effects on the contracting partners behaviour be mitigated. In the field of securities clearing and settlement systems, the design and implementation of various mechanisms may contribute to overcome the problem of moral hazard. Let me give you some examples. An obvious mechanism is to forbid uncovered (or unpriced) overdrafts since such overdrafts might encourage exaggerated risk taking. Some form of collateralisation usually provides the correct incentives. Another means to create the right incentives to avoid moral hazard is for CCPs to set up margining mechanisms to collateralise participants’ open positions. Lastly, market utilities  2  BIS Review 28/2003  may design and implement default funds to which both the defaulting and the surviving participants have to contribute, thereby reducing the occurrence of moral-hazard-like behaviour among them. The second imperfection that typically affects a financial system are externalities.
I would like to add a few words on the bad controversy that had surrounded the Sapin II law, and which now luckily seems to be behind us. Much has been said about the measure which gave the possibility to the Haut Conseil de stabilité financière (HCSF) to limit life insurance withdrawals in the event of a crisis, and which was, according to some, an impingement on French citizens’ freedom to dispose of their savings. These allegations were, perhaps, temporarily detrimental to life insurance; it would therefore be in your interest as professionals to point out, against certain populist excesses, the truth, which you know: these powers are only intended to be used in serious and exceptional circumstances, to better protect the rights of policyholders. Here again, our concern is to preserve stability. II. The essential role of insurers in the financing of our economy The insurance sector is the largest institutional investor in the euro area, with total assets of close to EUR 7,800 billion in the second quarter of 2017, of which more than EUR 2,600 billion for the French market alone. Better steering these flows to sectors that need long-term financing 1/3  BIS central bankers' speeches  is essential for our economy. What comes to mind are infrastructures, of course, but also companies, which need more equity financing to be able to innovate more: as innovation is more risky, it is financed through capital rather than debt.

Therefore, the free funds were invested in non-resident assets against a background of lower return on investment in the global market. The deteriorated loan quality, the obligation to increase the reserve funds and the lower average rate of return were followed by the decline in the banking sector net profit. BIS Review 174/2010  1  For some banks, this situation needs careful monitoring by the governing structures and shareholders in order to identify those operations that would improve the expenditure and income structure and maintain its capitalization levels. With regard to lending, the Bank of Albania has continuously called for greater banking sector commitment in this regard. This has not been a rhetorical-like request considering that we have taken all the necessary actions to meet the banking sector needs with ample liquidity and we have cut the key interest rate several times. These measures, coupled with lower Government borrowing, have provided room for lower interest rates on ALL lending. Nonetheless, their decrease still seems insufficient to push credit demand higher. Loan quality remains a challenge both for ALL and foreign currency-denominated loans. Against this setting, it is essential that banks do not only create in a prompt and rigorous fashion reserve funds according to the regulatory requirements, but they should also complete and improve the procedures and human and financial capacities that enable following-up insolvent borrowers. Complete acknowledgement of loan quality-related concerns and the full commitment of governing structures and shareholders allow for its more rapid and ultimate handling.
The second crisis occurred in banks founded after changes in the economic system that were not able to remain viable, because of either weak management and/or increased competition in the market as the transition period progressed. Croatia followed that pattern. The first banking crisis, the crisis of the old banks, as they were called, started with the beginning of the transition process (and even before it), and is even now ending with the sale of the rehabilitated state banks to foreign strategic investors. The costs of this crisis, brought about by the legacy of the past and as is too often forgotten, by the enormous consequences of the war, can be estimated at about 23% of GDP. These high costs are typical of countries caught up in a war, like Kuwait and Israel in parts of their histories. During the first half of 1998 the second banking crisis became visible in Croatia. The then government made a decision to rehabilitate two banks which represented about 7% of the total banks’ balance sheet. Bank rehabilitations are payed out of the budget. The Croatian National Bank required that bankruptcy proceedings be started in nine banks and four savings banks, while it withdrew the operating permit from one branch of a foreign bank, one bank and six savings banks. This has imposed high budgetary costs for the payment of insured savings deposits in banks in which bankruptcy proceedings have been started. The total costs of the second banking crisis could be estimated at about 4% of GDP.

Therefore, in my view, policymakers have to ask themselves constantly the following three questions: a)  whether they have consistently checked progress in transition against what must be the ultimate goal of the transition process;  b)  whether they have done enough to nurture human and social capital, as without those ingredients economies will grow slower than they might; and  c)  whether they have anticipated and tried to overcome the obstacles to transition, since one should expect resistance to change and one should not expect broad understanding for every measure taken. Finally, ladies and gentlemen, in honour of Monsieur Jacques de Larosière, I have chosen to conclude this lecture with a French saying: “Le bonheur, disait M… n’est pas chose aisée. Il est très difficile de le trouver en nous, et impossible de le trouver ailleurs.” (Sebastien Roch Nicolas dit Chamfort - 18th century French Philosopher.) Applied to transition economies Chamfort’s words can mean that we of the transition economies must realize that our happiness lies within us. We must look inside our respective countries and find specific answers to our problems for the better future. Naturally, we should not neglect looking outside as well.
The financial system is also exposed to such external effects, which we could perhaps call pollution. The external effects can be classified by the resulting symptom; excessive risk or excessive credit. Moral hazard arises when a bank’s owners take a big gamble with creditors’ money. While the owners might earn a huge profit by investing depositors’ savings, depositors will never earn more than the interest on their deposits. As long as the owner takes the upside and the depositor is left with the downside, the bank has an incentive to take greater risk than socially desirable. The distortion is amplified by deposit guarantees or public guarantees. When many banks or big banks play moral hazard, risk in the financial system becomes excessive. 4  Thomas Kuhn uses in his book The Structure of Scientific Revolutions (1962) this statement from Max Plancks Scientific Autobiography and Other Papers (1949). 5  Jorda, Oscar, Moritz Schularick, and Alan M. Taylor, “When Credit Bites Back”, Journal of Money, Credit and Banking, 2013, 45, pp 3–28. BIS central bankers’ speeches  3  Contagion effects between banks can also lead to a vulnerable financial system. Banks lend each other money in interbank markets and can become more closely intertwined than is socially desirable. Losses at one bank can spread through the system, creating a domino effect. The contagion effect can also be indirect. When a bank has to sell assets to redeem debt, the value of equivalent assets of other banks decline, as many experienced during the financial crisis.

“Happiness is a time without debt and reading the end of a book when in bed Happiness is ours in a prosperous nation with a just appropriate level of inflation» Odd Nordstoga sings on.” Nordstoga reminds us that happiness is not only about little debt, but also the other areas of Norges Bank’s operations. A prosperous nation is also dependent on the sound management of the Government Pension Fund Global, which is operated by Norges Bank Investment Management. An appropriate level of inflation is also the objective of monetary policy. We call it inflation targeting. By just appropriate we mean that inflation should be not too high, nor too low. A balanced economic policy must first be in place in order to provide a sound basis for financial stability. Macroprudential policy can then make an important contribution to reducing the sizeable costs associated with financial crises. 6  BIS central bankers’ speeches