samchain/econo-pairs-v1 huggingface dataset:
Banks’ balance sheets became overstretched. Off-balance sheet vehicles without any equity proliferated. Monoline insurers  BIS Review 143/2008  1  guaranteed volumes of structured products way beyond what their equity position could bear. As you know, leverage works both ways. It amplifies gains as well as losses. Amplified gains took the form of the US property boom. Amplified losses are with us now. The whole deleveraging process still underway has meant, since its start, that financial institutions unable to raise capital had to suffer very considerable depreciations on some products, which in some instance wiped out their net worth, bringing them to failure. Against this background, what about French banks? Of course, they are not immune to the crisis. Direct or indirect exposures to toxic assets implied that they too had to record writedowns; sometimes substantial ones. The liquidity shortage is also hurting and the prolonged market disruptions have raised their refinancing costs. That said, our banks are sound and robust. Indeed bearing in mind the following. First, French banks exhibit high solvency ratios. Indeed well above minimum prudential requirements and above ratios of many competitors. Second, overall, they remain profitable. It is so not least because they benefit from regular sources of income. They are universal banks; and as such much less susceptible to funding market conditions. Sound and revolving sources of profits are a vital asset at the current juncture. Fourth, French banks can “manoeuvre” and play an active role in the ongoing restructuring of the international financial sector.

I would also like to thank representatives from Aflatoun and CentiQ in the Netherlands and all the policymakers who are participating as speakers and experts at this forum. On that note, I wish all of you a productive forum over the next two days. BIS central bankers’ speeches  3
The 12-month rate of change of the harmonised index of consumer prices (HICP) fell by 0.8% in September, and underlying inflation, which excludes energy and food prices, stood at 1%. In fact, since 2013, average euro area inflation has also been 1%, less than half the rate observed during the first 10 years of EMU (2.1%). This absence of inflationary pressures and the weakness of demand, along with the deteriorating global environment, led to a further downward revision to the Eurosystem inflation projections, to 1.2% in 2019 and 1% in 2020. In 2021, inflation is forecast to stand at 1.5%, clearly below the monetary policy objective. In turn, the long-term inflation expectations derived from financial markets are at historic lows. In short, the euro area macroeconomic setting is characterised, first, by a downward revision to growth forecasts that were already relatively weak and remain subject to downside risks, owing to the persistence of trade tensions and other geopolitical uncertainties, such as those relating to the final Brexit outcome, and which in some countries of the area, such as Germany, even point to a risk of imminent recession; and, second, by medium-term inflation projections that have also been revised downwards and are well below levels that could be considered compatible with the ECB’s price stability mandate. This is the background to the measures adopted by the Governing Council of the ECB at its September meeting.

The medium term agenda We all have lessons to learn from the turmoil of the last fifteen months. I would like to pick out three in particular, two of which are international and one UK specific: •  the need to develop new “macro prudential” policies to bridge the gap between monetary policy and the regulation of particular institutions and markets;  •  the need to establish a more effective regime in the UK for handling failing banks; and  •  the need to improve the handling of cross border crises and bank failures. Central Banks have always paid close attention to asset prices and credit growth in deciding monetary policy but they are setting interest rates for the whole economy and there is no guarantee that the rate or the rapid changes in rates that could be needed to dampen asset price growth will be appropriate more widely. On the other side, regulation and supervision are focused on the resilience and conduct of individual institutions: their management, risks controls, capital and liquidity and so on. What we have found in the last few years is that the sum of what makes sense at the level of individual institutions does not necessarily add up to what is needed for the system as a whole. We need to develop what are called “macro prudential” policies to bridge that gap.
Something similar is observed in gross fixed capital formation in machinery and equipment. Discounting unusual purchases of transportation equipment, this investment component has tended to perform better in the past few months (figure 5). The labor market has continued to adjust. Salaried employment stands out with a fall of 2.1% annually in the December to February moving quarter, as does the moderation of annual wage growth. Plus the reduction in hours worked, at a time where a growing number of workers claim that they work fewer hours than desired. Anyway, selfemployment, while more precarious, has significantly cushioned the disturbances coming from salaried employment (figure 6). A constant concern in recent years has originated in the evolution of the labor market. In several Reports we have included boxes and research notes addressing various related topics, including the degree of working flexibility and how changes in labor conditions affect unemployment. Our last issue includes a box that explores the effects of the business cycle on workers' wages. Normally, wages are analyzed using aggregate data that, by their very nature, conceal the movements of individual wages. Using data per worker, we show that the dynamics of individual wages are much more correlated with the business cycle than what aggregate wages would suggest. In particular, because the wages of workers changing jobs—either voluntarily or involuntarily—are affected, for better or for worse, depending if the business cycle is favorable or not.

Furthermore, incoming data suggest that it will take longer than expected to recover. This, coupled with recent events that have considerably eroded mining activity, will pull down annual GDP growth in 2017. However, as can be seen in the outlook I will be sharing with you in a few moments, a number of elements will help the economy to regain momentum within the projection horizon. Worth noting among these are that no significant macroeconomic imbalances are observed, that the negative impact of the mining investment adjustment has diminished, that the external scenario has improved, and that monetary policy will remain clearly expansionary. Overall, capacity gaps foreseen for the next two years will be somewhat wider than we thought in December, toning down medium-term inflationary pressures. In this context, the Board lowered the monetary policy interest rate (MPR) by 50 basis points during the early months of the year, speeding up the cuts with respect to provisions made in December. At the same time, we considered that, to ensure the convergence of inflation to the target, it will be necessary to enhance the monetary impulse somewhat, which reflects in an MPR trajectory similar to the one implied by financial asset prices during the ten days prior to the statistical closing of this Report.
Our future actions will take into account these past decisions and their transmission lag to activity and inflation. And, of course, future decisions will be conditioned by the inflation outlook, including the economic prospects and, therefore, the higher probability of a recession that we are currently observing. Why did the ECB engage in asset purchases and TLTROs? To understand the next steps in our normalisation of monetary policy to combat inflation, it is helpful to step back for a moment and consider briefly how we arrived at the current monetary policy situation, characterised by a historically large Eurosystem balance sheet. Over the past 15 years, the euro area has been hit by a series of major recessionary shocks. First, in 2008-2009, we endured the great financial crisis. Second, as that crisis drove up public debt levels, several euro area countries were hit by a sovereign debt crisis. Recovery from those two major recessions was a slow process, and the euro area economy was only just beginning to return to normality in 2020 when the COVID-19 pandemic caused a worldwide economic shutdown. The main conventional tool in central banks’ policy toolkit are short-term policy interest rates. But following the sequence of huge negative shocks that have buffeted Europe and the rest of the world in recent years, interest rate cuts alone were insufficient for economic stabilisation, as the central bank cannot push its policy rates much below zero. 5 This was the conundrum facing the ECB around 2015.

Firstly, from being concentrated in Muslim populated regions, Islamic finance is now viewed as a competitive form of financial intermediation that has drawn significant participation by non-Muslims. For borrowers, it is seen as an alternative means of financing. For investors, it is seen as a new asset class. Islamic finance has thus witnessed exceptional growth, not only in the Muslim world, where its growth is premised on religious and business considerations, but also across the Western world where the growth is driven by commercial and business considerations. Today, the total assets of the Islamic financial system has surpassed one trillion US dollars, about fivefold of its magnitude five years ago. Islamic finance is now among the fastest growing financial segments in the world with an estimated annual growth of 20 percent. Secondly, the nature of the business of Islamic finance has also evolved, from being mainly focused on retail and trade financing to the financing of other commercial business activities. With the emergence of more diverse Islamic financial institutions and the development of the Islamic financial markets, the scope of Islamic finance business has been expanded to include private equity, project finance, the origination and issuance of sukuk, and fund, asset and wealth management activities. The pace of product innovation has also intensified with more sophisticated Islamic banking and takaful products as evidenced by the surge of structured products and investment-linked products. These products have become competitive both in terms of product structure and pricing.
That is why we are so careful in our inflation forecasts and in monitoring inflation expectations two years out: if the current high levels of inflation do not signal a deviation away from convergence within two years, they can be tolerated. Otherwise, they simply cannot. In other words, if inflation expectations over that term were above the target, they would call for immediate action in the form of a contractionary monetary policy. As previously shown, in Chile this has never happened, which is a significant difference with other countries. However, it is important to emphasize that it has not happened because the market clearly understands that the Central Bank will do whatever is necessary for that not to occur. The messages we have delivered, including the moderate withdrawal of the monetary stimulus, point precisely in that direction. In this context, a string of more intense and persistent shocks ended up causing a depreciation of the peso that was also larger and longer lasting, which via second-round effects has put more pressure on medium-term inflation. Also, the labor market proved more resilient, a sign of smaller gaps in the economy. This limited the downward correction of nontradable inflation. Thus, the Board of the Central Bank decided to downplay the monetary stimulus, at a pace that has obviously accommodated incoming news, especially their effects on the inflation forecast two years ahead.

The new information leads us to estimate that global growth will fall short of expectations, because of both downward corrections to projected activity in the developed world and a major adjustment in Latin America, which is headed to a contraction in 2016. At the same time, the external financial conditions relevant for Chile are estimated to be tighter, while the terms of trade will be lower (figure 2 and table 1). BIS central bankers’ speeches  1  The downscaling in output projections for 2016 is consistent with the lower base at the end of 2015, and with spot indicators suggesting that consumption and investment have remained weak this year to date. On the consumption side, in the last two years the real wage bill has been outgrowing private consumption, leading us to expect a somewhat stronger recovery of the latter during this year. This has not happened, however, which together with the sharper deterioration of the labor market in recent months, plus consumers’ expectations remaining pessimistic and low levels of imports of consumer goods in the first months of the year, mean that this component of growth has to be revised downward. However, by 2017 some recovery of this variable is expected, thanks to a gradual improvement in its fundamentals, particularly, moderate growth in the wage bill and a slight improvement in consumer expectations. Investment, on the other hand, has seen a significant adjustment in recent years, due primarily to the end of the mining investment cycle (figure 3).
Richard W Fisher: The limits of the powers of central banks Remarks by Mr Richard W Fisher, President and Chief Executive Officer of the Federal Reserve Bank of Dallas, on the Limits of the Powers of Central Banks (with metaphoric references to Edvard Much’s Scream and Sir Henry Raeburn’s The Reverend Robert Walker Skating on Duddingston Loch, at St Andrews University, St Andrews, Scotland, 5 June 2012. *  *  *  The views expressed by the author do not necessarily reflect official positions of the Federal Reserve System. Thank you, Professor Sutherland. I am delighted to be here at St. Andrews and very much appreciate your organization of this meeting today. To be at the site where John Knox preached an epic sermon about Christ’s cleansing of the temple and overthrowing the money changers’ tables, which was so powerful that it led to riots against the establishment of the time, the papacy, is daunting – nearly as much so as playing the Old Course on yesterday’s bank holiday with Professor Andy Mackenzie, the university’s great scratch golfer and noted physics professor.

The Federal Reserve Bank of Dallas is responsible for the Fed’s activity in the light green area – the Eleventh District – home to 27 million people in Texas, northern Louisiana and southern New Mexico. Roughly 96 percent of the district’s output comes from Texas. 2  BIS central bankers’ speeches  Here is a chart showing the disparate behavior of the economies in the 12 Federal Reserve Districts, as measured by employment growth. You will see that going back to 1990 – some 22 years – the Eleventh Federal Reserve District has outperformed the other Federal Reserve Districts in job creation. In terms of employment, the Dallas Fed’s district went into the recession last and was one of the first to come out. We have since punched through previous peak employment levels. Here is the job creation record of the so-called mega-states within the United States since 1990. And last, and just for fun, here is the record of Texas’ job creation over the past two decades versus resource-rich countries, such as Australia and Canada, as well as versus the major countries of Europe, the U.S. and Japan. BIS central bankers’ speeches  3  Indulge me for a minute here. I share these with you not to engage in stereotypical “Texas brag” or because St. Andrews has become a popular destination for recent generations of undergraduate scholars from Texas. I do so to illustrate a point, specifically the influence of fiscal policy on the effectiveness of monetary policy.
The Bank of Albania acknowledges and appreciates the importance of having a well-informed and well-educated public in the transmission of monetary policy to the economy, by taking timely, right and rational decisions. In this context, our activities in the area of public’s financial education intensified further in 2009 through the expansion of age groups and greater geographical coverage. In figures, for the period 2008–2009:   were distributed a total of 21 000 educational leaflets;    were held training seminars for around 170 teachers teaching Economics in Tirana, Vlora, Korça, Shkodra, Gjirokastra and Elbasan;    were held 20 meetings with different stakeholders in Tirana, Vlora, Korça, Gjirokastra and Shkodra;    the competition “The Real Value of Money” was organized in Tirana, Vlora, Shkodra, Korça and Gjirokastra, with a total of 100 high schools taking part;    were held seminars for 60 social workers in Tirana;  8  BIS Review 78/2010    were held full cycles of training seminars and lectures for the journalists;    the Governor held 7 lectures for students in Albania and abroad;    Bank of Albania Day was organized in four universities. Lastly, the redesign of the Bank of Albania website in the beginning of 2009 provides a more efficient portal for the provision of information, making it efficient, re-arranged and user-friendly.

House prices, after several years of increasingly more moderate rises, began to post small declines in some market indicators as from the second quarter of this year, while housing starts fell by almost half. This abrupt change in scenario, together with the tightening of financing conditions, which I shall address in greater detail later, meant that real estate companies had to restructure, with some of them even going bankrupt. This series of factors compounded the correction of the residential sector with adverse consequences for employment, which is acting as the main channel through which the adjustment of the sector is spreading to the rest of the economy. Household consumption is rapidly reflecting the deterioration in confidence, against a backdrop of considerable financial tensions, and the abrupt turnaround in the employment situation. As a result, a certain rise in the saving rate consistent with the current scenario of greater uncertainty and financing difficulties might be taking place. I should stress that this far-reaching slowdown in private consumption is the factor that is most contributing to the loss of dynamism in the economy. Business investment also slowed rapidly, in line with the changing financial conditions, the profile of domestic demand and the deterioration in business confidence. Nonetheless, exports are sustaining a relatively high growth rate, despite worsening world trade so far this year, and they are providing some support to investment in equipment.
Finally, by offering to borrow and lend overnight automatically, the Bank would relinquish day-to-day control over its balance sheet and the degree of risk associated with that. To summarise, there are different models for implementing the policy rate, each of which has its own merits and disadvantages. These reflect both monetary policy and financial stability considerations. A deeper exposition of the arguments can be found in Clews, Salmon and Weeken (2010).8 The Bank has carefully considered the differing systems and expects to return to a reserves averaging system in due course. Presumptively, that would be after increasing Bank Rate and before asset sales began – although the timing and sequencing will depend on the circumstances at the time. In the next section of this paper we explore more deeply some of the financial stability aspects of the Bank’s operations. The Sterling Monetary Framework: providing liquidity insurance Banks inherently engage in “maturity transformation” – borrowing on a short-term basis but lending on a long-term basis (eg taking deposits which can be withdrawn at short notice, and lending for mortgages). As a result, banks take liquidity risk – and even a well-run bank could suffer an unexpected shortage of liquidity. As part of their liquidity management, banks hold stocks of liquid assets that can be used to generate cash or make payments directly. Some assets are expected to retain their liquidity in all but the most extreme circumstances.

But the liquidity of other assets is less assured, and banks can suffer problems if the liquidity of their assets dries up. That could cause financial instability. The Bank of England can provide liquidity insurance to individual, creditworthy institutions and to the banking system as a whole, by accepting those less liquid assets as collateral, for a fee, in exchange for more liquid assets, including reserves.9 But such liquidity insurance must be provided in a way that takes account of the potential for “moral hazard” – the incentive for individual banks to undertake riskier activities because of the presence of a central bank backstop. The Bank’s operations must not undermine the incentives of private sector firms to manage their liquidity needs safely in the market, rather than turn to the Bank routinely. Moreover, although the Bank’s operations are collateralised, the value of the securities delivered to the Bank is always uncertain. We would never be able to protect ourselves perfectly against credit risk. 8  “The Bank’s money market framework”, Bank of England Quarterly Bulletin, 2010 Q4. 9  The Bank also stands ready to provide gilts via its permanent Discount Window Facility, introduced in October 2008. This facility is available to provide bilateral liquidity support to solvent and viable institutions, against a wide pool of collateral. BIS central bankers’ speeches  5  As well as implementing the policy rate, the SMF is also used to provide that liquidity insurance.