samchain/econo-pairs-v1 huggingface dataset:
The period from the early 1970s up until 2007 marked another watershed. Financial liberalisation took hold in successive waves. Since then, finance has comfortably outpaced growth in the non-financial economy, by around 1.5 percentage points per year. If anything, this trend accelerated from the early 1980s onwards. Measured real value added of the financial intermediation sector more than trebled between 1980 and 2008, while whole economy output doubled over the same period. 2  BIS Review 95/2010  In 2007, financial intermediation accounted for more than 8% of total GVA, compared with 5% in 1970. The gross operating surpluses of financial intermediaries show an even more dramatic trend. Between 1948 and 1978, intermediation accounted on average for around 1.5% of whole economy profits. By 2008, that ratio had risen tenfold to about 15% (Chart 2). Internationally, a broadly similar pattern is evident. In the US, following a major decline during the Great Depression, the value added of the financial sector has risen steadily since the end of the Second World War. As a fraction of whole economy GVA, it has quadrupled over the period, from about 2% of total GDP in the 1950s to about 8% today (Chart 3). Similar trends are evident in Europe and Asia. According to data from the Banker, the largest 1000 banks in the world reported aggregate pre-tax profits of almost $ billion in fiscal year 2007/08 (Chart 4), almost 150% higher than in 2000/01. This equates to annualised returns to banking of almost 15%.

All of these seemingly low risk activities appear to deliver above-average returns on equity, ranging from a high of around 50% on treasury and asset management services to around 20%+ on retail financial services. One potential explanation of these high returns is that the risk associated with these activities, and hence the capital allocated to them, may be under-estimated by banks’ models. Another is that the demand for these services is highly price inelastic – for example, because of information imperfections on the part of end-users of these services. Anecdotally, there is certainly evidence of a high degree of stickiness in the demand for retail financial services. Statistically, an adult is more likely to leave their spouse than their bank. In a UK context, there have been a number of studies by the authorities on the degree of competition within retail financial services, including by the Competition Commission (2005) and the Office of Fair Trading (OFT) (2008). The OFT market study found a very low rate of switching of personal current accounts between banks – fewer than 6% per year. By itself, however, this low switching rate does not necessarily imply a market failure. For example, it could be the result of a reputational equilibrium in which money gravitates to banks whose brand name is recognised and respected. A more obvious market friction in the UK retail financial services market derives from “free in credit” banking.
Over the last years and in order to face new challenges, the mutual sector, which historically comprised a large number of entities, has adapted and has successfully achieved the necessary concentrations. It is important that it continues to adapt, including at an international level, especially since the values of mutual insurance are essential to the stability of the insurance model based on risk-sharing. Thank you all for your attention. 8

Traditionally, Spain’s trade balance with our European partners has run a deficit. Two years ago, this deficit had already fallen to € billion, but the good news is that at the end of last year it ran a surplus of a similar amount, meaning that, last year alone, there was a favourable turnaround of € billion in terms of Spain’s trade balance with the countries of the Union. At a greater level of detail we can see how the non-energy goods balance improved from a deficit of € billion, i.e. 5% of GDP, in 2008 to a deficit of only € billion, i.e. 0.5% of GDP, at end-2011. And the balance of non-tourist services, which has traditionally run a deficit, moved into a surplus of € billion at end-2011 after posting a deficit of € billion in 2008. A further example of the progress made during these difficult years has been the restructuring of our credit institutions. The Lehman Brothers crisis forced many countries to adopt numerous measures during 2009 to repair their banking systems. As is known, in Spain’s case the direct effect of the international financial crisis – the sudden emergence of toxic assets on bank balance sheets – was minimal, thanks to the soundness of our regulation and supervision and to our banks’ business model. But the indirect effects of the international crisis, such as the decline in GDP and the drying up of bank funding, seriously affected our system.
Changes in bank profits, in turn, reflect the average spread between the loan rate and the deposit rate on changes on the deposit base, the average return on lending on changes in bank capital, positive shocks to the rate of return on current lending and negative shocks to the deposit rate. We assume that policy makers seek to minimise a loss function:   13)      L    j  t2 j   y yt  j  yt* j j 0     k 2  l  t j   k t* j   2  The addition of the arguments in kt is designed to reflect financial stability concerns. We assume equal weights of 1 on inflation and 0.01 on the output gap and capital gap. The starred variables are the levels of output and lending which would hold in a frictionless economy. Policymakers are set the nominal interest rate and the bank levy/subsidy. The model was calibrated with standard parameter values at a quarterly frequency (see, for example, Bernanke, Gertler and Gilchrist, 1999). Bank leverage was set at 10 in the steady state and the steady-state spread between the return on capital and the deposit rate is 1 percent.

Central Bank Assets (LHS) and Liabilities (RHS) United Kingdom  BIS Review 111/2010  37  Chart 6 Deviation of Price Level from Deterministic Target Path  38  BIS Review 111/2010  Chart 7a Simulation of a “Leaning Against The Wind” Policy 2003–6: US Policy rate  Real credit growth (ann %) 15  10 8  10  6 5 4 0  2 0  -5  -2 -10 -4 -6 2001  2004  2007  2010  2001  Real house price growth (ann %)  2004  2007  -15 2010  GDP growth (ann %) 5  10  4 3  5  2 1  0  0 -1  -5  -2 -3  -10  -4 -15 2001  2004  BIS Review 111/2010  2007  2010  2001  2004  2007  -5 2010  39  Chart 7b Simulation of a “Leaning Against The Wind” Policy 2003–6: UK  Policy rate  Real credit growth (ann %) 14  10  12  8  10 6  8 6  4  4 2  2 0  0  -2 -2  2001  2004  2007  -4 2010  -4 2001  Real house price growth (ann %)  2001  2004  40  2007  2004  2007  -6 2010  GDP growth (ann %) 30  6  20  4  10  2  0  0  -10  -2  -20  -4  -30  -6  -40 2010  2001  2004  2007  BIS Review 111/2010  -8 2010  Chart 8  BIS Review 111/2010  41  Chart 9  42  BIS Review 111/2010  Bibliography Adrian, Tobias, and Hyun S. Shin (2008).
Table 4  The 40 recommendations of the CBCh's Independent Evaluation Panel  Completed  Financial policy  1. Eliminate ±1% target range 2. Use flexibility regarding policy horizon 3. 3-year horizon in Economic Expectations Survey and Financial Traders Survey 4. Review relative reliance on judgment/models 5. Increase transparency of judgments made 6. Make the transfer of judgment from the Monetary Policy Division Director to the Board a routine. 7. Present to the public a broader picture of the diverse views of Board Members 8. Incorporate financial intermediation and frictions into XMAS model 9. Net foreign asset dynamics in XMAS model 10. ToT in MEP model 11. Prioritize new macro financial model 12. Informal labor market 13. Tools available for crises with very low rates 14. Role of BancoEstado in times of stress and crisis 15. Assessment of adequate level of FX reserves 16. Retain flexibility and tactics of FX intervention 17. Release the MP Meeting statement during financial market trading hours 18. Release the summary of the MPR together with the policy statement 19. Transparency in working assumptions 20. Key risks to MP Report's baseline projections 21. Evaluation of forecast errors 22. More accesible MP Report 23. Board members' presentations with greater emphasis on communicating uncertainty and risks 24. Social media  Public  Monetary Policy  (progress status)  A To be completed soon  25. Coordination with Financial Stability Council within co-responsibility context 26. Avoid inaction bias by disclosing recommendations and objections to the public 27.

Both projections are higher than expected in June, taking into account the actual increases of recent months and prospects for a somewhat faster recovery of the world economy (Table 3). Inflation will converge to 3% by 2022 and in the short term will not fall below 2% annually. Although in the short term this trajectory is somewhat higher than was forecast in June, largely due to the expected increase in consumption, in the medium term its main determinant continues to be the lower cumulative activity. The core measure will remain above 2.5% in the short term, to converge to 3%, also in 2022. Two-year-ahead inflation expectations remain at around 3% (Figure 14). Monetary policy will remain highly expansionary, combining the policy rate at 0.5% minimum and unconventional measures. The latter will be renewed or extended if the recovery of the economy and the convergence of inflation to the target so require. In turn, the Monetary Policy Rate will remain at its minimum level for much of the two-year monetary policy horizon. Thus, over the next two years, the Bank will provide a significant monetary boost to the economy (Figure 15). The macroeconomic scenario continues to show more uncertainty than usual. The projections recognize that social distancing will alter the ways to operate in areas where human interaction is key quite longer. However, it cannot be ruled out that these impacts will exceed estimates, which could be particularly harmful to the recovery of the labor market because of the many people employed in these activities.
Furthermore, the practical usability of crypto-assets relies to a great extent on identifiable intermediaries to act as “gateways” between the crypto-asset ecosystem on the one hand and the financial markets and the economy on the other. I have said before that we need to differentiate between “assets” such as bitcoin and the technology behind them, such as blockchain. Indeed, some of the technology is worth exploring 1/3  BIS central bankers' speeches  and could also be of interest to central banks. That said, our role is not to drive technological adoption by the industry and the general public, but to ensure that changing preferences can be satisfied in a secure way. While DLT is a necessary element of crypto-assets, it is not in itself their defining feature.3 The single distinguishing feature of crypto-assets such as bitcoin is the absence of an underlying claim, which makes it difficult for them to maintain price stability. Crucially, crypto-assets aren’t backed by any sovereign authority and, unlike financial instruments, they don’t give their holders ownership or contractual rights. Central banks provide confidence in money – as a store of value, unit of account and means of payment – by safeguarding the stability of the currency. By contrast with traditional currencies, bitcoin has been highly volatile over the past two years. Bitcoin’s average volatility in that period was close to 80 %, while many other crypto-assets showed even higher levels of volatility. This makes it impossible to use crypto-assets for anything but outright speculation.

Yves Mersch: Back to stable Speech by Mr Yves Mersch, Member of the Executive Board of the European Central Bank, at the Zahlungsverkehrssymposium, Deutsche Bundesbank, Frankfurt am Main, 29 May 2019. * * * The primary objective of the ECB is to ensure price stability. This is also the best contribution we can make to achieving sustainable growth.1 Since the launch of the euro, the ECB has delivered on this commitment and rendered price stability a reality, maintaining an average inflation rate of below, but close to, 2%. And that is why the majority of euro area citizens trust the euro.2 Their trust is contingent on the independence of the central bank. Independence is granted to central banks to prevent politicians from seeking electoral gain through measures which boost economic activity in the short term but damage the long-term health of the economy and the country. It is also recognised that legal tender needs to be issued by a public authority. In the case of the EU, it falls to the ECB to issue the euro and decide on the denomination of banknotes. We could not accept a situation in which, for anti-European or populist motives, certain euro denominations were not allowed to be used in some parts of the EU. This established consensus is being challenged by private initiatives triggered by technical innovation. We are seeing ever more solutions in search of a problem. Bitcoin and other crypto-assets claim to need neither trust nor the backing of a sovereign.
The persistence of difficulties in the term money market, despite the existence of sufficient aggregate euro liquidity, points to an important limitation for public policies (and expectations about such policies) in the current environment, namely that central banks cannot and should  1  I am very grateful to Ulrich Bindseil, Cornelia Holthausen, Isabel von Koppen-Mertes, Flemming Würtz and Alessandro Calza for their valuable input and contributions, and to Giacomo Caviglia and Pedro Teixeira for useful comments. BIS Review 143/2007  1  not be expected to solve the more fundamental problems of commercial banks and credit markets. Through their liquidity management policies, the ECB and other central banks can certainly ease some of the liquidity difficulties faced by banks, but they cannot certainly restore the efficient functioning of the term money market. The current difficulties in this market will subside only when banks regain confidence in each other and the uncertainty about their own liquidity needs diminishes. This is likely to occur only when enhanced transparency and more extensive disclosures are made available to market participants, investors and regulators by both banks and non-regulated entities, thereby dispelling the current state of perceived opaqueness and uncertainty. The market turmoil and available information Let me now address another key aspect of information during the recent turmoil. Policymakers normally work under conditions of partial and incomplete information.

This confidence is still – looking back in a long-term historical perspective – a relatively new element of the Swedish economy. The fact that shocks have been so common in the supply side of the economy in recent years has also made it more important to clarify our view of how monetary policy should deal with the trade offs that then arise. Events have included price effects from mad cows and shocks on energy markets as well as unexpected shifts in productivity. I do not wish to comment on whether supply shocks have in general been more frequent in recent years, but developments have nevertheless made it clear that changes in inflation that are not primarily due to traditional cyclical fluctuations are something that monetary policy has to face regularly, not merely in exceptional cases. The clarification from 1999 can be regarded as one step on the path towards more nuanced inflation targeting. At that time there was a fairly indirect discussion of the need to consider real economic developments. The argument was that monetary policy did not need to try to parry temporary price shocks. The fact that the Riksbank worked with a two-year perspective was then justified by the fact that monetary policy’s impact comes after a time lag. In the description of our method of working I have just given, I emphasised that monetary policy in the short run often concerns trade offs between stabilising inflation and the real economy.
Norges Bank, like other central banks in Europe, provided dollar liquidity to banks in periods. Banks’ access to funding at all but the shortest horizons has been very limited during the crisis. A key problem was that banks were heavily reliant on international market funding. When that source of funding seized up the Norwegian authorities had to intervene. Several instruments have been deployed. Loans have been offered at longer maturities than earlier, in some cases up to 2 and 3 years. The arrangement where banks and bank-owned mortgage companies can swap covered bonds (OMF) for government securities was introduced to facilitate banks’ access to medium-term and long-term funding, but also to ease money market conditions so that money market premiums could be reduced. In the mid-1980s Norwegian banks also relied heavily on foreign funding. In spring 1986 – following a sharp fall in oil prices – confidence in the Norwegian economy weakened and liquidity flowed out of the country, as was the case last autumn. Norges Bank had to purchase NOK and sell foreign exchange to maintain a fixed krone exchange rate. The krone liquidity that flowed into the foreign exchange market flowed back into Norges Bank as loans to the banks to avoid a liquidity crisis and a surge in money market rates. Bank lending continued to grow in 1986 and 1987, and in retrospect it might almost seem as though the central bank through its lending operations had played an active part in financing the credit boom.

Krone liquidity was provided through currency swap agreements, both in euros and US dollars. We also proposed the covered bond swap arrangement and a capital injection of core capital from the government to banks. 2  Walter Bagehot (1873), “Lombard Street: A description of the Money Market”. 3  Norges Bank’s automatic borrowing facility for banks is referred to as D-loans. The interest rate on overnight D-loans is one percentage point higher than the key policy rate and forms a ceiling for short-term money market rates. 2  BIS Review 119/2009  The Norwegian monetary policy measures have been effective Before the crisis the daily surplus liquidity in the Norwegian market of about NOK 20 billion was sufficient to keep short-term money market rates near the key policy rate. From autumn 2008, Norges Bank has supplied ample liquidity, bringing bank deposits in Norges Bank to well above NOK 100 billion in periods. The substantial supply was necessary to prevent short-term money market rates from rising too high above the key policy rate or from fluctuating widely. Risk premiums at shortest end of the money market fell. Through the currency swap agreements, under which Norwegian kroner were offered in exchange for US dollars or euros, we reached participants who were active in Norwegian kroner but who did not have access to loans from Norges Bank. The currency swap agreements helped to limit the risk premiums in Norwegian interest rates. Norwegian banks are dependent on US dollar liquidity, which was on occasion difficult to procure in the market.
Chart 14. Revisions to Oil and Import Price Assumptions Oil Prices (USD/bbl)  Import Prices (2003=100)  Source: Bloomberg, CBRT. Source: TurkStat, CBRT. Particularly due to supply-side developments, oil and other commodity prices remained considerably above our assumptions presented in the January Inflation Report (Chart 14). Hence, we revised our assumptions for oil and other commodity prices upwards (Table 2). As illustrated on the slide, these changes in assumptions led to an upward revision of about 50 basis points for the end-2011 inflation forecast and a slightly upward revision for the 2012 inflation forecast. BIS central bankers’ speeches  7  Table 2. Revisions to 2011 Assumptions  Oil (Annual Average, USD)  Prices  Import (Annual Percent Change)  Prices  Food Price (Year-end Percent Change)  Inflation  January 2011  April 2011  95  115  10.9  16.2  7.5  7.5  Another factor affecting 2011 inflation forecasts has been the tariff hike on fabrics and apparels. Although major uncertainties exist about how this development will be reflected on prices, we assumed that this would add to year-end inflation by about 50 basis points while revising our forecasts. Despite the recent benign course of food prices, we preserved our assumption regarding food inflation for end-2011 at 7.5 percent in view of the extreme volatility in unprocessed food prices and rapid increases in agricultural commodity prices (Table 2).

Moreover, in order to slow down credit expansion, we increased required reserve ratios (Chart 2). Meanwhile, in order to enhance financial stability by extending maturity of the banking sector liabilities, we differentiated reserve requirements across maturities, with higher reserve requirements for short-term liabilities. These measures led to a fall in net short-term capital inflows, stopped the acceleration of credit growth and extended maturities for deposits. Chart 2. CBRT Policy Mix CBRT Policy Rates  TL Required Reserve Ratios  (Percent)  (Percent)  Source: CBRT. Source: CBRT. In the first quarter of 2011, both the faster-than-expected increases in oil prices and the robust domestic demand required a more cautious stance regarding the inflation outlook. Specifically, oil prices hovering significantly above our January Inflation Report’s assumptions led to an increase in cost pressures. Moreover, the ongoing rapid growth in private consumption and private investment spending added to the need to contain domestic demand in order to avoid secondary effects of the increases in oil and other commodity prices. Notwithstanding historically low inflation at 4 percent in the first quarter, I would like to emphasize that we have acted with a medium-term perspective and started to highlight the upside risks to inflation since February. Accordingly, in order to eliminate the risk of deterioration in general pricing behavior, we have adopted a stronger monetary tightening than was envisaged in the January Inflation Report’s baseline scenario.