samchain/econo-pairs-v1 huggingface dataset:
So we are seeing many different effects emerge at the same time across the whole world. The likelihood of a recession has thus risen considerably. What is your expectation for economic growth? Our latest projections put euro area growth at 0.8% for this year. But that is now out of date. We will certainly have to adjust our projection significantly downwards. Below 0%? We don’t know yet. The greatest uncertainty is how long the crisis will last. Originally, many economists thought that there would be a short, sharp crisis and that things would subsequently pick up again quickly. It very much depends on how quickly the spread of the virus can be contained, but also on the economic policy reaction. You have done intensive research on financial crises of the past. Is there any crisis that was similar? The current situation cannot be compared with the 2008 financial crisis. That crisis originated in the financial system. Today we are looking at a shock to the real economy that is affecting many countries at the same time and for that reason is so devastating for the global economy. If we want to draw a comparison, we should look at other pandemics. The Spanish flu? Yes, for example – that pandemic was indeed devastating. The precise figures are not known, but between 20 and 100 million people died back then. Now we are in a much better situation. First, medicine is much more advanced.

We monitor all financial market data: equity prices, interest rates, capital flows. Corporate and sovereign debt markets are also important. What is going on there? We have seen a sharp increase in the risk premia that firms have to pay when raising debt on the markets. For high-risk firms in particular, these risk premia have shot up. Yields for countries such as Italy have also increased signficantly. We see a broad increase in risk premia. Another question that arises is whether the markets are still functioning. Is supply still matching demand? The central bank should intervene if liquidity dries up, that is if the markets suddenly seize up because of a lack of available liquid funds, or if the transmission of monetary policy is endangered, that is if our measures are not reaching the real economy. And that is exactly what we have been doing in greater measure since last Thursday. Our bond purchases have a stabilising effect on the market. US Treasuries have seen some severe temporary disruptions. There was a series of short intervals in which the trade in US Treasuries was disrupted. That’s a sign of considerable nervousness in the markets. Besides the markets, we are closely monitoring the situation of banks in Europe. We have taken measures to prevent banks from having to overly restrict their lending during the crisis. But the pressure on banks will intensify if economic conditions deteriorate. We are also closely watching investment funds. What is happening there?
Corporate bonds and securitised loans account for only 7%. Chart 5 shows that in each of the US, UK and Europe, the period since the crisis has seen the stock of outstanding bonds move towards the stock of outstanding bank loans. 9  See FSB (2014e). 10  Chart 6 shows the post-crisis collapse in European securitisation issuance, which has been particularly concentrated in residential mortgage-backed securities. 11  Bank of England and ECB (2014) is a consultation paper on the development of such a model of securitisation. The EBA is also consulting on the same issue, see EBA (2014). 12  Menon 2013. 13  Shanmugaratnam (2013). 6  BIS central bankers’ speeches  times. There is a disconnect between developments in real economies and the degree of financial risk taking. It is particularly notable how the search for yield has compressed liquidity premia across markets. This is unlikely to be sustainable over the medium term because it exists against a backdrop of much-reduced market-making activity.14 Fundamentally, liquidity has become more scarce in secondary fixed income markets. It just appears that it hasn’t. The reasons for the changes are clear however. New prudential requirements have reduced incentives for banks to warehouse risk positions. Dealer inventories in fixed income have declined by 70% since the pre-crisis period, while the stock of fixed income assets outstanding has doubled. And the Value-at-Risk in banks’ trading books has retreated to 2002 levels.

For the G20 as a whole that is $ By eroding these costs, financial reform alone can therefore more than deliver the G20 commitment to raise GDP by more than 2%. The Basel Committee found these costs to be minimised only if risk-weighted bank capital ratios were raised above 15%.28 The Basel III requirements did not go this far, in part because they anticipated the additional requirements for loss absorbing capacity that G20 Leaders have just endorsed. Once implemented, the combined effects of the reforms will take the system much closer to the degree of safety needed to minimise the costs of financial crises. That authorities have reached this point in a measured way – allowing both equity and forms of debt to qualify as loss absorbing capacity – shows our sensitivity to the potential costs of greater safety. What are those costs? Three points are worth emphasising. First, the Basel Committee study judged that each 1% increase in capital ratios could reduce output by just 0.1% as higher bank funding costs were passed through to borrowers. However, even that small number seems an upper bound. It fails to take account of the fact that monetary policy can offset the impact of higher lending spreads on effective borrowing rates.29 In fact, the need to offset the impact of higher lending spreads is one reason why some advanced economy central banks, such as the Bank of England, are so clear now that interest rate increases, when they come, will be gradual and limited.
By many measures, nations and people are closer than ever in terms of trade, investment, information exchange and physical mobility. Despite the weakness in growth and trade activities, global flows of goods, services and finance is still more than one-third of global GDP, 150% the level in 1990. Yet, social disparities, most noticeably inequality in the distribution of income, have worsened considerably. Income inequality has risen in many OECD countries since the 1980s1; we in Asia have not fared well either, with an average Gini coefficient that is higher than the rest of the world 2. The distance between the reality that we live in and our idea of an ideal construct of society is thus at once both closer and further than it was in our parents’ generation. The issues underlying this paradox are complex and different for every nation. In many ways, it is 3/8  BIS Central Banker's Speeches  driven by the very forces of globalisation that have brought our economies closer together, but at the same time undermined the welfare of the middle-class in advanced economies and driven the ‘haves and have-nots’ further apart in the emerging economies. The problems confronting us today are different from the past. The implications for policymakers and social thinkers are therefore, immense. These new challenges require more nuanced understanding and approaches, and because of this, our frameworks need to adjust accordingly. For a start, it is important to recognise that new challenges can arise as a by-product of a genuinely positive development.

The engineering industry began to doubt the quality of their order books. Prices for oil, gas, aluminium and ferro-alloys fell, as did freight rates. The fragility of the Norwegian krone was illustrated when investors fled the currencies of small countries, and the krone weakened considerably. When speculators withdrew, daily fluctuations increased and hedging against exchange rate volatility became more expensive. On Christmas Eve, the krone fell to its lowest level in ten years. We are now in the deepest downturn in OECD countries in the postwar period. The US economy may already have shrunk by around 2½ per cent since the crisis erupted in September. Output has fallen at the same rate in many European countries, and perhaps by twice that rate in Japan and Korea. For a long period there were hopes that growth in China and other emerging market economies would hold up. But they are also now severely affected by the crisis. Output is also contracting in Norway, but so far probably somewhat less so than abroad. What is happening now is more than a normal fluctuation in the business cycle. The world is facing a crisis of confidence, with faltering faith in the future and a loss of confidence in banks, counterparties and contractual partners. The authorities have taken extraordinary action, as in a state of emergency, deploying a wide range of established and new policy instruments.
Whilst we would not expect all assets to achieve the same MA, these disparities do give rise to questions as to the extent to which MA benefit is excessively influencing investment choices: and whether those behaviours are prudent and delivering the best outcome for the UK economy. Furthermore – Chart 5 shows a relatively small proportion of firms’ asset holdings are driving the majority of their MA benefit[4]. Whilst firms are expected have a diverse range of assets matching their liabilities, this raises the question of whether the current MA framework adequately captures the risks and uncertainties associated with the unique and innovative assets that tend to be the most MA-efficient. Naturally, investment in new asset types with some bespoke and novel features raises new and important questions for the prudential regulator: Do firms have the right risk management capabilities and the governance to apply them rigorously and robustly? Is the regulatory solvency regime suitable for them or is a square peg being forced to fit a round hole? The PRA has always focused on ensuring that investments in these new asset types do not break the link between risk exposures and their valuation and capital requirements. The most notable example of this is the extensive work we have undertaken on Equity Release Mortgages. The assessment of valuation and risk in assets with more bespoke features inherently requires more judgement, and relies much more on firms’ own internal assumptions and much less on public information. Firms argue that they are good at making these assessments.

Chart 2 shows that the BPA market is projected to have opportunity to grow at significant pace over the next ten years. The decline of Defined Benefit (DB) pensions and the desire to secure future scheme member benefits continues to create demand from DB pension scheme sponsors and trustees for de-risking or exit solutions. These should provide their members with a wellmanaged and cost-effective delivery of their outstanding pension benefits as they fall due over the coming decades – some extending more than 50 years into the future. Life insurers also have the capability to use the relatively stable and long-term annuitant liabilities entrusted to them, to invest in productive assets for the benefit of future generations, including in the transition to net-zero carbon. While I talk about growth, overall this is really a transfer of promises - specifically promises made by a large number of employers converted to promises made by a smaller set of insurers. It is important to remember that this is not all new investment or credit creation. But in making this transfer there is a change in investment strategy that backs those promises. And, given there is still a much larger pool of DB pension liabilities potentially available, as prudential regulator we need to know that the right package of incentives – and constraints – are in place for this transfer to be soundly managed in both the short and longer term.
And the reason for this optimism is the euro. The single currency has the potential to bring enormous benefits to European nations, which they can use to achieve a high degree of stability and prosperity, in the interest of all countries in the world. 4  BIS Review 43/2007

19(2), pages 04-77 -Woodford (2018), Monetary Policy Analysis when Planning Horizons are Finite, NBER Working Paper No. 24692  i  I would particularly like to thank Matthieu Bussière, Stéphane Dupraz, Mark Deen, and Olivier Garnier for their help in preparing this speech. ii On the measurement of the natural rate of interest and the uncertainty surrounding its long-term component, see e.g. Holsten, Laubach and Williams (2017), Hamilton et al. (2019), and Brand, Bielecki and Penalver (2018). iii On the opportunity of relying on fiscal policy in a low-rate environment, see e.g. Blanchard (2019). iv On the issues surrounding the measurement of potential output and natural unemployment, see e.g. Orphanides and van Norden (2002), Coibion, Gorodnichenko and Ulate (2019) and Aiyar and Voigts (2019). v For early research on firms’ expectations, see e.g. Coibion, Gorodnichenko and Kumar (2018) and Coibion, Gorodnichenko and Ropele (2018). vi On the forward-guidance puzzle and possible solutions to it, see e.g. Del Negro, Giannoni and Patterson (2012), Nakamura, Steinsson and McKay (2016), Gabaix (2019), and Woodford (2018). vii See e.g. Bernanke, Kiley and Roberts (2019). viii Monnet (2014) and Monnet and Vari (2019), among others of his work. ix Stein (2013). x Protocol on the Statute of the Eurosystem and the ECB, Article 3.3. xi For recent historical accounts of the ECB’s monetary policy in general, and monetary pillar in particular, see Hartmann and Smets (2018) and Rostagno et al. (2019). Page 12 sur 11 xii  See Svensson (2017) and Ajello et al.
In this regard it is worth mentioning the activities of the Instituto de Crédito Oficial (ICO) in Spain as a key provider of venture capital, either directly or indirectly, through FOND-ICO Global, a “fund of funds” whose goal is to promote the creation of private venture capital funds that invest in Spanish companies. At the European level, the European Investment 6  For recent evidence in the euro aera, see ECB (2018): “Investment in intangible assets in the euro area”. ECB Economic Bulletin, Issue 7/2018 7 C. Corrado, J. Haskel, C., Jona-Lasino and M. Iomni (2018), “Intangible investment in the EU and US before and since the Great Recession and its contribution to productivity growth”, Journal of Infrastructure, Policy and Development, Volume 2 Issue 1. 8 Cotec Foundation for Innovation-Ivie (Instituto Valenciano de Investigaciones Económicas). Intangible assets: database for Spain and its autonomous communities (1995-2014). April 2017. Database available at: http://informecotec.es/activos-intangibles/. 9  Brown, J. R., Fazzari, S. M. and B. C. Petersen (2009): “Financing Innovation and Growth: Cash Flow, External Equity, and the 1990x R&D Boom”, The Journal of Finance, Vol. LXIV, No. 1 4/6  Bank Group also supports innovation through different instruments such as guarantees, SME loan securitisation and venture capital. The public sector can also play a relevant role in supporting innovation through the education system since a key element of innovation is the supply of high-skilled workers. An improvement of the quality and functioning of the education system can therefore have a positive contribution to innovation.

Evidence from Eleven Countries over Twenty-Five Years”, Review of Economics and Statistics, 96(1), pp. 60-77 2  2/6  costs for certain groups of workers. Third, cybersecurity threats pose another challenge, given the vast amount of valuable information created and stored in the digital economy. Digitalisation may potentially lead to significant changes in the structure of most sectors of the economy. Among them, the possible impact on the financial sector is especially relevant for the Banco de España given our role as banking prudential and conduct supervisor and central bank. In particular, new technologies may imply efficiency gains and may also facilitate the entry of new companies offering financial services. For customers this may entail benefits in terms of cost savings and financial inclusion. For the incumbent banks technological change involves both challenges and opportunities. On the one hand, the entry of new competitors such as Fintech or Bigtech companies may threaten the market shares of incumbents. But on the other hand, innovation may lead in the long run to efficiency gains in the provision of financial services for incumbent banks, although in the short term it probably implies an increase in costs necessary to adapt to the new technologies. Given our limited understanding of the impact of digitalisation on the economy, the use of surveys to firms can be a useful tool to enhance our knowledge of specific aspects of digitalisation such as adoption rates, barriers and impact on firm performance.
William C Dudley: Transcript of the Cornell College of Business Annual New York City Predictions Event Transcript of a discussion between Mr William C Dudley, President and Chief Executive Officer of the Federal Reserve Bank of New York, and Ms Maureen O'Hara, Robert W Purcell Professorship of Management, at the Cornell College of Business Annual New York City Predictions Event, New York City, 15 February 2017. * * * Maureen O’Hara: Bill, let me start off with kind of the low-hanging fruit. The post-Trump economy has been confusing, with low Q4 growth, yet record-setting stock market levels. So let me just throw you an easy one here. What does the Fed see as the outlook for the next year? President Dudley: For the near-term I think more of the same. I mean, we think the economy is going to continue to grow, a little bit above-trend. That’s going to generate job gains that put, you know, more pressure on the labor market, and as a consequence of that, we think inflation’s going to move back towards our 2% objective. So, you know, we could be completely wrong, but that – the data that’s come out over the last couple of months, is very consistent with that pattern. A lot of uncertainty in the outlook. I mean we don’t know what’s going to happen with the whole host of policy choices: healthcare reform, immigration policy, trade policy, tax policy, fiscal policy.

You could probably do the Volcker Rule in a more efficient way to achieve the same objectives without the burden of regulation that you have right now. You know, right now, if you’re an equity trading desk and the equity market falls very violently, you really aren’t supposed to go in and buy equities unless you actually have customer orders. So, you actually have this crazy situation where the equity desk can’t actually buy equities to support the market. So, I’d like to see the Volcker Rule looked at to see if there’s a way of doing it in a way that – if you’re a client-facing business, and you’re trading your own asset class, you have a little bit more freedom to buy and sell when markets are volatile and maybe provide actually a little liquidity support in the market. But also make it a lot easier, I think, to enforce the Volcker Rule. The other thing I would say is relief for smaller banking institutions. The financial crisis was not about small banking institutions. It was about large banking institutions and particularly it was about large broker-dealers. And so I think the Dodd-Frank Act imposed a lot of compliance and regulatory costs on smaller banking institutions. And I think – we have about 6,500 smaller banks in the United States plus a lot of credit unions and other financial intermediaries.
Giannone, D., M. Lenza and L. Reichlin (2007), “The Equilibrium Level of the World Real Interest Rate”, paper presented at the First Annual Risk Management Institute Research  12  BIS Review 9/2008  Conference “Capital Flows and Asset Price: The International Dimension of Risk”, Singapore 6-7 July. Hartmann, P., F. Heider, E. Papaioannou and M. Lo Duca (2007), “The role of financial markets and innovation in productivity and growth in Europe”, ECB Occasional Paper No. 72, September Ihrig, J., S.B. Kamin, D. Lindner and J. Marques (2007), “Some Simple Tests of the Globalization and Inflation Hypothesis”, International Finance Discussion Papers, Board of Governors of the Federal Reserve System, No. 891. Kose, M.A., E. S. Prasad, K. Rogoff and S.-J. Wei (2006), “Financial Globalisation: A Reappraisal”, NBER Working Paper 12484 Kose, M. A., E. S. Prasad and M. E. Terrones (2005), “Growth and Volatility in an Era of Globalisations”, IMF Staff Papers, vol. 52, pp. 31-63 Kose, M. A., E. S. Prasad, and M. E. Terrones (2006), “How Do Trade and Financial Integration Affect The Relationship Between Growth and Volatility?”, Journal of International Economics, vol. 69, pp. 176-202. Kroszner, R. S. (2007), “Globalization and Capital Markets: Implications for Inflation and the Yield Curve”, Remarks at the Center for Financial Stability (CEF), Buenos Aires, Argentina,16 May.

This should be done not by measures that stifle financial innovation and market efficiency, but by actions and an institutional framework that encourage prudent behaviour and adequate risk assessment and management. More specifically, the securitisation of bank loans and other assets and the “originate and distribute” model should not be abandoned. Securitisation and the new bank model do entail economic and social benefits as they contribute to a better allocation of financial resources and a wider diversification of risks across markets and frontiers. At the same time, it is evident that this bank model and the securitisation process should be strengthened by improving incentive structures, risk assessment and management practices, and by increasing transparency. Similarly, the structured finance market, in order to be revitalised, will require actions that address the valuation problems and increase transparency and disclosure, so as to enhance the understanding and assessment of the embedded risks and to improve the practices of agencies and financial entities involved in their creation, rating and distribution of such products. Standardisation of some of the structured finance products could facilitate the market’s functioning. More generally, the risk management systems and practices of banks and other financial institutions should be further improved. This will require better and more extensive stress-testing in order to enable them to better assess the potential impact of tail risks and correlated risks.