samchain/econo-pairs-v1 huggingface dataset:
In an environment of structurally low interest rates, like the one we are in at the moment, the adverse effects of very high levels of government debt are less visible in the short run. Indeed, the fact that interest rates are lower than nominal growth rates increases the possibilities of expanding government debt before it begins to rise exponentially, but there is a risk that the differential between nominal interest rates and the nominal GDP growth rate will at some point cease to be negative, in which case the unfavourable effect on the dynamics of the government debt ratio will be all the greater the higher the level of debt. In any event, the evidence regarding the adverse effects of running high levels of government debt is abundant. High government debt tends to lead to a decline in the financing available for private spending, as well as an increase in its cost, ultimately hampering the accumulation of private capital and hindering economic growth. High levels of debt, moreover, increase the likelihood of episodes of financial vulnerability, as in the global financial crisis and the sovereign debt crisis when rising funding costs and falling 27  volumes reached extreme levels. Finally, the greater the level of government debt, the less the scope for fiscal policy to respond to the downturns that may arise in the future. During the sovereign debt crisis, all these effects were apparent.

This figure reflects both a most significant decline in revenue and a notable increase in expenditure, of which more than 70% is directly related to the pandemic. The latest data, which exclude local government budgetary developments, are along these same lines: they show a budget deficit to August of 7.8% of GDP in cumulative 12-month terms, 4.9 pp up on the end-2019 figure. Besides the highly significant impact the pandemic has exerted on the main aggregate indicators of activity, its influence, and that of the measures implemented to contain it, has been extraordinarily asymmetrical across sectors, firms and workers. For instance, some services sectors linked to the hospitality industry and to transport, where activity habitually requires relatively high levels of social interaction, have since the start of the pandemic shown much more marked declines than those seen in the other sectors (e.g. manufacturing) across a wide range of activity, confidence and employment indicators. The regional distribution of the declines in activity and employment has also been very uneven.1 The crisis has also had a very uneven impact among workers.
Just like the successful public-private collaboration that is moving the world off of LIBOR, the private sector must do its part to enhance resilience as well. It means constructively and actively engaging in improving the resilience of the Treasury market and related markets. It also means planning to build resiliency for episodes of volatility that can impair market liquidity, and preparing for periods that have less certain funding, such as at year-end. And it means being a source of strength to the financial system and the economy, not a weak link. Conclusion Debates around financial stability and monetary policy have been longstanding and have tended to focus on unfavorable trade-offs. Central banks must avoid being a jack of all trades and master of none. The time is now to find solutions that strengthen our financial system without compromising our monetary policy goals. These issues are complex, but the need for meaningful progress on strengthening the resilience of core financial markets is clear. 1 Alternative Reference Rates Committee, ARRC Best Practice Recommendations  Related to Scope of Use of the Term Rate, last updated May 4, 2022. 2 John C. Williams, A Solution to Every Puzzle, Remarks at the 2020 U.S. Treasury  Market Conference (via videoconference) (September 29, 2020). 3 John C. Williams, Preparing for the Unknown, Remarks at the 2021 U.S. Treasury  Market Conference (via videoconference) (November 17, 2021).

Jaime Caruana: The implementation of Basel II - central banks and the challenge of development Remarks by Mr Jaime Caruana, Governor of the Bank of Spain and Chairman of the Basel Committee on Banking Supervision, at the "Central Banks and the Challenge of Development" conference organised by the BIS, Basel, 13 March 2006. *  *  *  Introduction and overview I am honoured to have the opportunity to share some brief remarks on the ongoing implementation of the Basel II capital framework. I realise that not all of our institutions are responsible for banking supervision, but, as central bankers, we all share a common goal of promoting financial stability. In that regard, I’m sure we can all agree that a stable banking system is critical to the long-term growth of an economy. Businesses and consumers need to have access to credit on fair and reasonable terms through all stages of the business cycle so that they can build and grow. And this access to financial services must be widespread, including all income brackets of the population, because it is one of the key elements that can help to improve living standards. We need an efficient and resilient payments system to maintain the flow of funds through the economy at all times. We need financial markets that remain active, liquid, and trusted regardless of events in the economy.
As regards national demand, a moderate slowdown in private consumption may be expected, against the backdrop of smaller increases in employment, following several years of strong growth as a result of pent-up demand during the crisis. Investment in housing will continue to grow notably, boosted by job creation and the availability of credit under favourable conditions. Also, business investment will remain robust, in line with the expected course of final demand, against a background of most notable headway in the ongoing restructuring of corporate balance sheets and of persisting easy financial conditions. Turning to external demand, the cumulative gains in competitiveness that I referred to and the sound outlook for the international economy as a whole and, in particular, for the euro area, are expected to continue making for a dynamic Spanish export performance. Risks This predominantly favourable scenario is subject to various sources of risk. For example, developments on global financial markets. In February we saw how the high valuations attained by certain financial assets can give rise to bouts of price corrections and notable rises in volatility. Any future intensification of these episodes, which to date have originated in US markets, might have adverse consequences for economic activity and for financial stability. 3  Furthermore, it is complicated to anticipate how Brexit, and its consequences in terms of trade in goods and services or in movements of people and capital, will unfold. But, in any event, protracted uncertainty over the final agreement intensifies the risks of an adverse impact on activity.

As in the case of activity, the results of the projection exercise under way will allow for calibration of the effects on the current price scenarios and, in particular, on the risk – flagged by the ECB Council at its recent meetings – that the area may become immersed in a prolonged period of too-low inflation. Turning to the Spanish economy, we are all mindful that the crisis that broke in mid-2008 was of unprecedented depth and extent in our recent history and caused acute losses in activity and employment. Fortunately, since the second half of 2013, the Spanish economy has perceptibly been experiencing a recovery, which began with positive, moderate quarter-onquarter rates of change in GDP as from 2013 Q3 and which has continued in 2014 to date. This recent improvement in activity rests on a broad set of factors: some, such as the drastic correction of the external imbalance, have been helping underpin production for some time; others, such as the progressive normalisation of the financial environment, are more recent. BIS central bankers’ speeches  1  Here, both the easing of grave uncertainty, which at one point threatened the current configuration of the euro area, and the restoration of confidence in our banking system following the restructuring and recapitalisation drive undertaken, which culminated in January, have proved decisive. Against this background, the contributions to activity of external demand and national demand are being re-balanced.
And it will further sharpen the dependence of the British economy on wider international movements in financial markets. I plan to return to these implications in coming months. 13  6  McKinsey Global Institute, McKinsey & Company's economics research institute. BIS Review 29/2007

Here we must show ability to take action, and I shall return to this at the end of my speech here today. Some of the difficult considerations to be made concern when and how quickly central banks, governments and other public authorities around the world will withdraw the strong economic stimulus they have been providing during the crisis. Now that the financial markets are more stable and the recovery in the economies has begun, it is time to move towards a more normal situation, not least with regard to monetary policy. We must make the transition from monetary policy during a crisis to monetary policy in an economic downturn. For the Riksbank and many other central banks, the question of when to begin raising the policy rate, and how quickly, is a fairly difficult balancing act. BIS Review 25/2010  1  I intend to begin by talking about the considerations behind our most recent policy rate decision and our forecast – the policy we consider necessary for inflation to be close to the target of 2 per cent, at the same time as providing support for production and employment. Transition from crisis interest rate to monetary policy in an economic downturn At the most recent monetary policy meeting three weeks ago the Executive Board decided to hold the repo rate unchanged at the historically-low figure of 0.25 per cent.
The problems started in the US mortgage market, but quickly spread to other financial market segments. Banks, funds and financial undertakings had to bring bonds back onto their own balance sheets, they began to doubt the financial position of their counterparties and held on to their money. As a result, premiums on interbank loans rose markedly. Norwegian banks rely heavily on international markets for their funding. The rise in money market premiums in the US and Europe therefore rapidly spread to Norwegian interest rates, even though Norwegian banks are profitable, enjoy confidence and have limited loss exposure. When banks would no longer lend to each other, many central banks provided liquidity with a longer maturity and lower collateral requirements than usual. Norges Bank has also, in periods, increased the volume of lending to Norwegian banks. We have provided extra shortterm liquidity, for example through currency swaps. We have also offered banks loans with longer maturities than earlier. We have not changed the collateral requirements for loans. This is because we already accepted a broad range of collateral than those central banks. This is because – for reasons we appreciate – the Norwegian government bond market is very thin. For a long time, nor did we have a well developed market for other bonds. At the same time, bank demand for loans from Norges Bank is considerable in some periods of the year.

However, some slowdown is foreseen, partly because of a weak international trend but also due to subdued consumption. The high level of equity prices has been cited as a risk to US economic development. US stock markets have recovered completely from last autumn’s fall and new all-time highs have been noted. Equity prices are considered by many observers to be unduly high in relation to the companies’ profit expectations and there has been talk of a future correction. Given the importance of the share price rise for the US economy’s upward trend, a price fall could by the same token lead to a slowdown. Prospects for the euro area as well as for the Japanese economy seem to have become somewhat poorer since the December Report, at least for the coming year. In the euro area, it is mainly manufacturing which has weakened, while the consumption trend still looks relatively good. At the same time, household sentiment is closely related to the development of employment, not least in Germany. Thus, the international outlook can hardly be said to have improved since the publication of the December Report and there still seem to be risks of a development that is weaker. Industrial activity weaker but domestic demand good so far Turning to the Swedish economy, the statistics suggest that industrial activity may go on weakening. But households’ expectations of their own economy indicate that private consumption may remain relatively strong.
And at times of heady growth, this entails very bad press and is difficult for the bank to assume, particularly if the competition is lax in its lending standards. Naturally, it is tempting to imitate the competition when a strategy produces short-term profit. Those banks that decide not to follow this path will undergo pressure from the market and shareholders to imitate their rivals and boost those business areas that are proving profitable at that time. Risk culture plays a crucial role in being able to withstand such pressure. 6/13  Let us not forget that runaway credit growth and the subsequent build-up of structural imbalances on the balance sheet do not produce evident negative effects during an upturn. On the contrary. Such growth enables banks to increase their profitability, entailing a false sense of security and of good times that – mistakenly – warrants growing risk-taking. Even the supervisor itself may succumb to this false sense of security. However, this strategy is heading for disaster if there is a change in cycle. The scale of potential losses will be directly proportionate to the volume of lending irresponsibly granted. Both supervisors and banks must be fully aware of the road ahead in this situation, looking always to the long term. As I said earlier, supervisors and supervisees have an interest in common: for banks to continue servicing their customers in the future.

There are a wealth of initiatives at present: the G20, the United Nations, the Financial Stability Board and the OECD are all involved. And notable within the EU, undoubtedly, is the European Commission’s action plan on sustainable finance. In the case of Spain, we should mention the Draft Climate Change Law. In the central banking and banking supervisory milieu, I would mention the work of the Network for Greening the Financial Sector (NGFS). We participate actively in this network, which has just published its second report. This includes best practices for boosting the role of the financial sector in complying with the Paris Agreement. Banks themselves are increasingly joining ethical or responsible banking initiatives, observing international principles that not only look at environmental sustainability aspects, but also at the social impact of investments. The development of so-called “sustainable bonds” is also being encouraged. These are much in demand by investors, for which a growing market is being created. We should be mindful that compliance with the Paris Agreement goals necessarily entails very substantial changes in our productive model. Clearly, too, to be successful, any transition of this type must include far-reaching measures and instruments that affect practically all economic agents, not only credit institutions. 12/13  However, banks can and should play a key role in this transition. At the start of my address I talked about the fundamental role of banks as a necessary filter for distinguishing between viable economic projects.
Andrew G Haldane: The Commercial Property Forum twenty years on Remarks by Mr Andrew G Haldane, Executive Director, Financial Stability, Bank of England, at the Bank of England, London, 18 December 2013. *  *  *  I would like to thank Oliver Burrows, Iain de Weymarn, David Gregory, David Learmonth, Varun Paul, Rhys Phillips, Laura Piscitelli, Martin Taylor and Jack Worlidge for their help and comments. Tonight marks an important birthday. We are here to celebrate the 20th anniversary of the Bank’s Commercial Property Forum. I am delighted to welcome members, past and present, back to the Bank. The Forum met for the first time on 28th July 1993. It was hosted by my predecessor Pen Kent. Its aim, to use Pen’s words at the time, was “to bring all sides of industry together” – developers, investors, lenders, occupiers, surveyors, auctioneers, researchers and regulators – to discuss developments in the commercial property sector. Since then, the Forum has met around 80 times. It has done so under three external chairmen – Clive Lewis, Chris Bartram and Ian Marcus – and I am particularly grateful to them for their efforts over the past 20 years. The Forum has drawn on around 300 experts from across various sectors. By my reckoning, they have drunk over 1500 cups of tea or coffee and eaten over 2000 biscuits. I cannot think of a Bank committee whose caffeine and calorific intake could surpass the Forum’s.

There is no doubt that these developments will have a dampening effect on the world economy. However, their precise impact is difficult to measure at the current juncture. On the one hand, economic and model-based analysis still suggests only moderate effects on prices and output in the euro area. This is due to the fact that, first, most of the crisis regions are quite small in economic terms, i.e. when compared with world GDP or their contribution to world trade. Second, trade links between these countries and the euro area are also of limited size. Third, the euro area itself is a very large economy, which is only directly exposed to variations in global trade to a certain degree. However, on the other hand, this analysis should not mislead us. We are perfectly aware that the risks associated with current global developments go beyond those effects which we can measure directly. In this respect one may think of indirect influences resulting from changes in confidence, saving and expenditure BIS Review 72/1998  -2-  within the euro area. We have to take these risks seriously and analyse the situation soberly, but we should also not dramatise. Let me now turn to the latest available data. These seem to indicate that economic expansion within the euro area has remained broadly on track, despite the worsening of the external environment. Domestic demand remains strong, while the contribution to growth from net exports has declined.
Cyborg supervision – the application of advanced analytics in prudential supervision Speech given by James Proudman Executive Director, UK Deposit Takers Supervision  Workshop on research on bank supervision Bank of England 19 November 2018  I am grateful to Sian Besley, David Bholat, Charlotte Bull, Stephen Denby, Ryan Lovelock, Clair Mills, Philip Sellar, Pete Thomas and Sam Woods for their assistance in preparing these remarks and conducting background research and analysis. 1  All speeches are available online at www.bankofengland.co.uk/speeches  I. INTRODUCTION  Recognising faces comes instinctively to humans. Until fairly recently, however, it proved beyond the ability of computers. Advances in artificial intelligence (AI) - the use of a machine to simulate human behaviour – and its subset, machine learning (ML) – in which a machine teaches itself to perform tasks – are now making facial recognition software much more widely available. You might even use it to access your bank account. Because it is so easy for us but so hard for computers, facial recognition is a good illustration of the challenges faced in developing AI. Enabling a machine to teach itself to recognise a face requires sophisticated algorithms that can learn from data. Advances in computational power and algorithmic techniques are helping machines become more human and super-human like. ML also requires lots of data from which to learn: data are the fuel that powers it – the more data used to train the algorithms, the more accurate their predictions typically become.

Hence advances in AI are often associated with Big Data and the recent huge advances in the volume and variety of data available (see Figure 1). As the sophistication of algorithms and volume of data rise, the uses of AI in every-day life are expanding. Finance is no exception. In this speech I want to explore the impact of AI and advanced analytics more broadly, on the safety and soundness of the firms we supervise at the PRA, and how we are starting to apply such technology to the supervision of firms. In particular, I want to explore the seeming tension between the PRA’s supervisory regime that is firmly centred on human judgment, and our increasing interest and investment in automation, machine learning and artificial intelligence. II. CHANGING THE NATURE OF THE RISKS WE SUPERVISE  Like many other firms, banks are looking to harness the power and speed of AI. If you were to take some parts of the media at face value you might be tempted to conclude that a revolution is underway. There are plenty of examples of innovation to point to – from the use of ML-driven financial-market trading algorithms; to the introduction of online banking platforms that generate alerts to customers on trends and irregularities in their spending habits; to new apps that suggest switching utility providers to the cheapest provider.1 On closer inspection, however, the situation seems rather less revolutionary and more evolutionary.