samchain/econo-pairs-v1 huggingface dataset:
However, if households believe that house prices could decline further, the expected capital loss adds to the financing cost of owning a home and prospective buyers will be reluctant to buy even if mortgage rates are low. That said, it should also be recognized that the factors that affect demand and home prices are not immutable. They depend, in part, on policy choices. Consider, for example, the fact that most home purchases are financed with long-term mortgage credit. This means that the demand for housing is highly sensitive to the availability and cost of that credit. Outcomes in housing are also affected by the legal and operational infrastructure of the mortgage market. This apparatus has been wholly inadequate for dealing with a systemic shock to housing and employment, and is amplifying bad outcomes. A flawed resolution regime – very different from the more efficient regime for resolving excess debt in private commercial property – exacerbates the risks of under-shooting. 6  In Las Vegas, for instance, the ratio of house prices to replacement costs is now 0.7, having peaked at about 2.0 during the boom. 7  The supply curve is fixed and vertical at the post-bubble stock of housing so the entire adjustment to changes in demand takes place via prices rather than quantities. BIS central bankers’ speeches  3  Conflicts of interest are embedded in mortgage securitization structures and between first and second lien-holders. There are challenges to how the industry records and transfers interests in these mortgages.

This is important because residential mortgage lending terms tightened significantly during the crisis, and have not eased subsequently.12 Indeed, over 50 percent of all new loans – and 70 percent of new prime conforming loans – go to borrowers with FICO scores of 760 or above, compared with about 30 percent before the crisis. Borrowers with credit scores of 720 or less now make up less than 30 percent of new originations, although they represent 52 percent of the population with credit scores. Steps should be taken to improve households’ access to credit. Currently, lenders are discouraged from making new prime conforming loans due to excessively stringent put-back rules on these mortgages. Such rules give Fannie Mae and Freddie Mac broad scope to force the originator to repurchase at par loans that go delinquent if there are any errors in the mortgage loan paperwork – even if the error has no direct link to the delinquency. It is essential that lenders are accountable for the representations they make and are appropriately penalized for any misrepresentations. However, doing this via a blanket  10  “The National and Regional Economic Outlook,” October 24, 2011, and “Securing the Recovery” November 17, 2011. 11  Board of Governors of the Federal Reserve System. 2012. White Paper, “The U.S. Housing Market: Current Conditions and Policy Considerations,” January 4. 12  According to the Senior Loan Officer Opinion Survey.
7 Forecasts are of course subject to uncertainty at the best of times. In the present period of renewed crisis, the risk to the projections is clearly on the downside, mainly because of the clouded outlook for demand in Malta’s main trading partners and the likely spillover from the deflationary fiscal policies being adopted in many countries. The recovery in Europe is also constrained by the deleveraging process currently underway in the banking sector and in the private sector generally. Together with the fiscal tightening, this balance sheet consolidation largely explains why the EC is forecasting only a modest recovery in the euro area and the EU this year, with growth rates of 0.9% and 1.0%, respectively. Lessons learned and the way forward Several lessons can be drawn from the crisis, but two come to mind more readily. The first is that those countries which entered the recession already burdened with imbalances – both internal and external – have performed more poorly than those with sounder economic fundamentals. The second is a universal law that often tends to be forgotten: like individuals, countries cannot afford to live beyond their means indefinitely. Sooner or later, the excesses of the past have to be paid for, often at a high economic and social cost. The recent proposals by the EC to strengthen economic policy coordination and fiscal discipline are grounded in precisely such thinking.

4 The third source of resilience in the face of the global downturn was the ongoing diversification of the economy towards higher value-added services such as financial services and various business-related activities. The combined share of these services in total gross value-added has increased from 25% in 2004 to 35% in 2009. 5 Success has also been registered in attracting new manufacturing activities such as pharmaceuticals and aircraft maintenance, although these have not reversed the declining role of manufacturing, as traditional sectors like textiles and clothing continue to shrink in the face of competition from low-cost producers. 1  European Commission Malta: Macro Fiscal Assessment: An analysis of the February 2010 update of the Stability Programme, April 7, 2010, pages 6, 10. 2  For example, the voluntary redundancy schemes offered to the workers of Malta Shipyards Ltd.  3  Latest figure, for March 2010. 4  Flash Euro Barometer No. 271. 5  These services include NACE categories J (financial intermediation), K (real estate, renting and business activities) and O (other community, social and personal service activities). 2  BIS Review 73/2010  Finally, the provision of direct budgetary assistance to manufacturing companies that found themselves in difficulty helped to limit the impact of the weaker external demand on the labour market. This approach was deemed more appropriate than a broad-based fiscal expansion, which would have mostly leaked out through imports. This stimulus was complemented by the initiation of a number of infrastructure and environmental projects.
Indeed, the Lord Mayor’s Green Horizon Summit in London this week is a great example of this sort of activity. Our commitment to those mechanisms of international coordination, including working closely and cooperatively with our European colleagues, will not waver with Brexit – indeed we will double down on them. Still, it is reasonable to ask: what will be different? I have a strong interest in this but ultimately it’s for the government and parliament to decide, and the Treasury already has this question firmly in its sights in the 2  form of its Future Regulatory Framework consultation, which was published last month. But as one very small contribution to that debate, I would like to suggest three lodestars to guide us:   first, high regulatory standards – no surprise to find that on my list! More seriously, for the reasons I just gave I do think that is a vital ingredient of our future success;    second, responsible openness. By international standards the UK is very open to financial services, and we will continue to put a huge effort into making this work safely for us and the rest of the world, including those in the EU who want to do business with the UK; and    third, dynamism.

And on benefits, these may be relatively higher for large firms whose resilience the Basel Committee has had mainly in mind when designing regulation – indeed research by our PRA team suggests that some Basel metrics are more effective for large firms than small ones, whereas supervision of their governance seems to be even more important for small firms than for large ones (See Figures 1A and 1B). At the same time, in addition to the “proportionality” problem we face the “barriers to growth” problem – that if we strip parts of the regime away for small firms this will create new barriers for those firms as they grow out of the “small” category and need to take on additional regulation. 5  4 See: https://www.gov.uk/government/publications/solvency-ii-review-call-for-evidence 5 Another piece of simplification work that we are quietly progressing is a rationalisation of the various regulatory thresholds a deposit taker may find themselves subject to. 5  All speeches are available online at www.bankofengland.co.uk/news/speeches and @BoE_PressOffice  5  Ideally, therefore, and with our competition objective in mind, we should want to move towards a graduated regime in which firms can migrate from a very simple regime, up through a series of steps towards the full Basel regime as they become larger and/or involved in more complex activities (See Figure 2). Strong and simple  Moving to a fully graduated regime of this kind would be a major undertaking.
Our own study further suggests that, contrary to popular intuition, a devaluation of the renminbi might actually provide a stimulus to the Hong Kong economy: this is because the positive impact on demand arising from the complementarities between the two economies would outweigh the negative impact of any loss of competitiveness in those relatively few activities where the two economies remain in competition with each other. Such complementarities are in part reflected in Hong Kong’s role as a major entrepot for mainland exports. For any renminbi devaluation, while Hong Kong’s own direct trade balance with the mainland will deteriorate, our re-exports of mainland origin should rise. Indeed, with the surge in mainland re-exports activities since the early 1980s, the margins earned on such re-exports are now larger than all other components of Hong Kong’s trade with the mainland combined. Conclusion I have suggested in this address that China’s accession to the WTO will bring benefits to Hong Kong on a number of fronts. WTO entry will see a vast and rapid increase in China’s external trade. Not all of this additional trade will go through Hong Kong, but nor will it all avoid Hong Kong. More important still, the stimulus to liberalisation, globalisation and better corporate governance will expand and deepen Hong Kong’s well-established role as a fund of professional expertise, a centre of international experience and a source and channel of investment.

There will be some similarity in functions, but there will also be scope for each city to develop its own characteristics as a financial centre. The logical trend in financial services, given the continuation of exchange controls on the mainland, in contrast to the free flow of capital in and out of Hong Kong, as enshrined in the Basic Law, seems to be for Shanghai to develop as China’s domestic financial centre and for Hong Kong to develop as its international financial centre. But there is no reason why they should be deliberately constrained to these roles. China has room for at least two global cities. Nor is there any reason why, in the event the mainland attains the financial and other freedoms enjoyed in Hong Kong, Shanghai should not have a go at the business of international finance, or why Hong Kong, with its highly sophisticated financial infrastructure, to facilitate efficient international as well as domestic financial intermediation, should not have a go at the RMB business. A little competition is no bad thing, as long as it is fair competition, and Hong Kong’s free enterprise is very good at it. The only residual worry is that the playing field might be a tilted one, involving subsidies and other forms of support or protection from the authorities. But WTO entry is thankfully conditional upon the removal of many of these obstacles to free and fair competition, to the advantage of those that are good at this game and are prepared to embrace it.
Oversight of the infrastructure concentrates on the systems that are vital for the functioning of the financial market in Sweden. Besides RIX, the system for large-value payments provided by the Riksbank, these are primarily the central securities register (VPC), the Stockholm Stock Exchange and the clearing system for retail payments (Bakgirocentralen or BGC). BIS Review 53/2003  3  The Riksbank has also chosen to work on practical matters to do with risk management. These issues are invariably complex. Financial crises can arise at very short notice, not least on account of the massive payment flows and because banks tend to have a large element of short-term funding. The ongoing integration may have made things even more difficult. The Riksbank has therefore built up an internal crisis organisation and clearly documented who does what in the event of a crisis, including those who are to be contacted and put in the picture, how the press is to be informed, and the legal consequences of various measures. Another important element in the work on readiness is regular crisis exercises. Crisis management has also come to feature prominently in Sweden’s international profile. This has to do with our experiences as well as our basic stand on the importance of transparency. The Riksbank is leading Nordic and European working groups in this field. One of the articles in the latest Financial Stability Report that was published yesterday deals with the role of the Riksbank as lender of last resort.

The forecast for the repo rate that we presented last week agrees fairly well with the market expectations in October. But this does not mean that we will not need to revise our assessment in the future. I would once again like to emphasise that the path for the interest rate is a forecast and therefore uncertain. It is not a promise. But nevertheless it is our best current assessment of how the repo rate will need to be adjusted in the near future. It is reasonable that we report it in a similar manner to the way we talk about what we think will happen with production growth and the labour market and a number of other variables. Summary I have today emphasised that our decision to publish our own forecast for the interest rate should be regarded as a further step towards greater openness and clarity in monetary policy. When looking back, I observed that inflation in 2006 was held down by, among other things, the strong development in productivity. This has contributed to a high GDP growth without any significant rise in prices. Gaining a deeper understanding of the driving forces behind productivity growth is a difficult task. It is also an important one, to which we devote considerable effort. I have also described the background to our decision to raise the interest rate by 0.25 percentage points and to our assessment that a further increase is necessary over the coming six months before we probably pause before making another increase.
Speed of resolution is paramount in these procedures so as to minimise the losses in asset value that would materialise if they were to drag on, especially in a context in which the economic policy response in the short term means that the liabilities of ailing businesses to general government will foreseeably be much higher than in previous crisis periods. The introduction of more appropriate procedures and incentives would also avoid suboptimal levels of business liquidations and destruction of the productive system that would weaken the longterm economic growth and recovery potential. The impact on the financial situation of households As in the case of firms, after the last global financial crisis, the financial situation of households improved significantly, and mortgage lending standards were far more prudent. However, consumer lending has posted high growth rates in recent years and groups of vulnerable households have continued to exist. In any case, this crisis is also having a significant impact on households. It has led to a reduction in the wage income of individuals who have lost their jobs or been furloughed, and in their wealth, given the adjustment to the valuation of most financial assets. Thus, social security registrations, after stripping out workers subject to furlough schemes, that is, the series which might be called “actual registrations”, is estimated to have shown a year-on-year decline of 22% at end-April, with much sharper reductions in some of the services segments hardest hit by the restrictions on movement associated with the state of alert, such as the hospitality sector.

In the same vein, allow me, on behalf of the Bank of Zambia and indeed on my own behalf, to wish the Government, and people of the Republic of Zambia a happy 50th birth year which we will be celebrating on 24th October 2014, and one which has been attained under a tranquil environment and economic progress. Fellow Staff and Invited Guests, I would most likely be in breach of all moral standing if I did not, at this stage, emphasize the Bank of Zambia’s deep commitment to the welfare and well-being of our employees. I implore all of us to aim at leaving a legacy of professionalism and excellence in all that we do. I further encourage all the sportsmen and women participating in today’s events not to despair should they not emerge victorious for one reason or another. Rather, I strongly urge you all to walk away after the games feeling immensely proud that you have been an integral part of a truly momentous and historic occasion. Remember, one can only turn 50 years of age once! Ladies and Gentlemen, allow me to further extend my sincere gratitude to the commercial banks that have sent their representatives to come and attend this event. The support we have received to date has been unflinching throughout the years. We shall continue to work together in order to ensure that the levels of service delivery to our customers is raised and maintained at high standards. Distinguished Guests, this really, is not an occasion for long-winded speeches.
Overall, this underlines the importance of transparency – from banks and from the macroprudential policymaker. Conclusions: The implications of reform for the shape of finance Cyclical fluctuations in credit conditions and macroprudential interventions to influence them will not play out in an unchanged financial system. In fact, it would be surprising if the  8  BIS central bankers’ speeches  market’s own response to the crisis and the regulatory reforms did not drive structural changes in the credit system. The shape of some can perhaps be discerned. Too-Big-To-Fail effectively subsidised longer-term bond finance for banks. Combined with lax liquidity regulation, this probably left the sector as a whole with larger and longer-maturity asset portfolios than otherwise. A few decades ago we used to talk about government crowding out the private sector from the capital markets. Well, the bloated balance sheets of TBTF firms essentially crowded out other long-term investors from parts of the credit markets. Unlevered sources of funds struggled to compete with the banks, but instead held lots of bank paper, thinking it risk free. Competitors to the banks had to lever up: fragile shadow banks were one result. Actions to remove the subsidy from banking will, amongst other things, create conditions in which the relative role of unlevered capital market investors can grow. Some of that might come through securitisation, although a mature and resilient market in ABS of loans to SMEs might well require initiatives to produce rich data sets on credit histories.

At the other end of the debate there are those such as Jeremy Stein who argue for the active use of monetary policy to lean against the wind because it “gets in all the cracks.” Or Jaime Caruana and his colleagues at the BIS who argue that it would be appropriate for advanced economy monetary policy to begin to normalise in order to head off emerging macroprudential risks. •  I will aim to show that there are merits to elements of all of these arguments. But where the institutional set up and full spectrum of macro-prudential tools are available, there is strong case for using monetary policy only as a last resort for tackling financial stability risks. I will try to illustrate this argument with experience from the UK. •  Let me start with a simple question: can monetary policy be used to lean against the wind? The answer to that question is “yes”, because monetary policy and macroprudential policy both affect financial conditions and clearly have implications for one another. •  To illustrate the implications of monetary policy for macroprudential policy, consider the example of Hong Kong, where the unusually low interest rates since 2009 (as a result of their peg to the US dollar) have fuelled sharply rising prices across a range of residential and commercial properties (He 2014).
In times of crisis, central banks shall be able to lend money to banks that are considered systemically important and solvent, but which have liquidity problems. This is known as being ‘lender of last resort’, and it has been shown that central banks strengthen confidence in the banking sector in this way, which reduces financial stress and the risk of financial crises. 5 Another important way of building confidence in the banking sector is to ensure that the banks are under sufficiently strict financial regulation and supervision – a responsibility that is divided between different authorities in Sweden. This ensures that the banks have sufficient capital and liquidity and that they limit their risk-taking. 6 By ensuring that one can rely on the Swedish krona in all its forms. As bank deposits are redeemable for central bank money, one can rely on one krona always being one krona. In earlier times, when private banks could issue their own banknotes, it was sometimes the case that banknote from different banks were traded at different values. 7 By ensuring there is sufficient safe money. The Riksbank supplies as much cash as is in demand and contributes to the stability of the banking system's supply of other means of payment. In future, the Riksbank may need to supplement cash with an e-krona, to secure the general public’s access to central bank money. 4 Kocherlakota (1996) has written an essay called “Money is memory”. 5 Walter Bagehot wrote about this as early as 1873.

Sources: National central banks and the Riksbank  Figure 8. Rising housing prices in relation to disposable income Index 1995 Q1 = 100 250 200 150 100 50  95  00  05  10  Sweden  Denmark  Norway  USA  Finland  UK  15  20 Canada  Note. Quarterly data. The index shows nominal house price index in relation to nominal disposable income per capita. Source: The OECD  32 [35]  Figure 9. Household liabilities an increasing part of disposable income Index, 1995 =100 250 200 150 100 50  95  00  05  15  10  Sweden  Denmark  Norway  USA  Finland  UK  20  Canada  Note. Index shows household debt as a percentage of disposable income. Sources: OECD, Statistics Sweden and the Riksbank  Figure 10. Size of the Riksbank’s balance sheet has varied substantially over time Per cent 30 25 20 15 10 5 0 1800  1825  1850  1875  1900  1925  1950  1975  2000  2025  Note. Riksbank’s total balance sheet as a share of GDP. Source: The Riksbank  33 [35]  Figure 11. Many central banks’ balance sheets have grown Per cent of GDP 140 120 100 80 60 40 20 0  16  17  18  19  20  The Riksbank ECB Federal Reserve  21  Bank of England Bank of Japan  Note.