samchain/econo-pairs-v1 huggingface dataset:
Calomiris, C W and Mason, J R (1997), “Contagion and Bank Failures during the Great Depression: The June 1932 Chicago Banking Panic”, American Economic Review, American Economic Association, vol. 87(5), pages 863–83, December. Cecchetti, S, Mohanty, M and Zampolli, F (2011), “The real effects of debt”, BIS Working Papers 352, Bank for International Settlements. Cleary, E J (1965), “The building society movement”, Elek Books. Collins, M (1998), “Money and banking in the UK: a history”, Croom Helm. de Mooij, R A (2011), “The Tax Elasticity of Corporate Debt: A Synthesis of Size and Variations”, IMF Working Paper Fiscal Affairs Department, WP/11/95. Economist (1879), October 25, page 1224. Fahlenbrach, R and Stulz, R M (2011), “Bank CEO incentives and the credit crisis”, Journal of Financial Economics, Elsevier, vol. 99(1), pages 11–26, January. Farmer (Surveyor of Taxes) v Scottish North American Trust, Ltd (1912) AC 118. BIS central bankers’ speeches  15  Flannery, M J (2010), “Stabilizing Large Financial Institutions with Contingent Capital Certificates”, CAREFIN Research Paper, No. 04/2010. Flannery, M J and Sorescu, S M (1996), “Evidence of bank market discipline in subordinated debenture yields: 1983–1991”, Journal of Finance, Vol.51, No.4, pages 1347–1377. Goodhart, C (2011), “The Basel Committee on Banking Supervision”, Cambridge University Press. Gorton, G and Santomero, A M (1990), “Market discipline and bank subordinated debt”, Journal of Money, Credit and Banking, Vol.22(1), pages 119–128. Graham (2008) Handbook of Corporate Finance: Empirical Corporate Finance, Volume 2 (Handbooks in Finance Series, Elsevier/North-Holland), Chapter 11.

In England and Wales alone, over half a million individuals and nearly 100,000 businesses have found themselves in insolvency since 2007. Internationally, a growing number of sovereign states face a similar fate. This tells us that the risks from banking have been widely spread socially. But the returns to bankers have been narrowly kept privately. That risk/return imbalance has grown over the  16  Further refinement of voting rights might be possible. For example, some have argued that voting rights could be made conditional on the holding period of an investor (Aspen Institute (2009)). This would lean against short-termist tendencies which encourage rent-seeking. 17  An alternative way of aligning managerial and system-wide incentives is to remunerate managers not in shares or cash, but in CoCos (Haldane (2011)). This would sharpen managerial incentives to keep equity away from conversion and the “wolf away from the door”. BIS central bankers’ speeches  13  past century. Shareholder incentives lie at its heart. It is the ultimate irony that an asset calling itself equity could have contributed to such inequity. Righting that wrong needs investors, bankers and regulators to act on wonky risk-taking incentives at source. 14  BIS central bankers’ speeches  References Acheson, G G, Hickson, C R and Turner, J D (2010), “Does Limited Liability Matter? Evidence from nineteenth-century British Banking”, Review of Law and Economics, Vol. 6, Issue 2, Article 6.
A recent study 2 has in fact suggested that currency union approximately doubles trade. And specifically with regard to the euro, another study has concluded that in the case of Hungary, euro area membership may raise 3 the GDP growth rate by 0.6 to 0.9 of a percentage point in terms of a twenty-year average. The euro thus lies at the very heart of the EU and it is therefore no surprise that EU membership carries with it an obligation to participate in EMU and to adopt the single currency. Participation in EMU requires a number of preparations, relating to: •  the legal transposition of the acquis on EMU into national law;  •  fulfilment of the Maastricht criteria; and  •  the setting-up of the necessary institutions and mechanisms for the co-ordination of fiscal and economic policy, which remain at the discretion of national governments. While the Central Bank will be expected to play a leading role in the event of Malta taking up the offer of EU membership, the country’s eligibility to join EMU and its ability to participate on an on-going basis thereafter, without pressures arising in other sectors of the economy, also depend on the commitment of the other policy-makers. This is because the Maastricht convergence criteria include not only a fiscal dimension, which is clearly outside the remit of central banks, but also others that are only partly influenced by the actions of central banks.

The large majority of citizens, who had nothing to do with the errors leading up to the crisis, were made destitute because their small incomes and savings declined in value. Large parts of the growing middle class in the worst hit countries in South East Asia were wiped out. Conditional support was often provided with tough requirements of economic policy restraint. A tight fiscal policy would create scope for financing restructuring in the banking sector. Stringent monetary policy would counteract an overly severe depreciation of the currency. This can be criticised with hindsight, as in South East Asia the countries often did not have problematic deficits in public finances or high inflation rates. The IMF has admitted since that the restraint was too great, as they did not realise the extent of the financial crisis. The task for the BIS, the IMF, the World Bank and other international organisations should be to continue the work on finding rules and methods, both to protect innocent people from ruination and to put the risk for bad investments on those making the investments. Work on this is underway in the organisations I mentioned earlier. It involves capital adequacy rules for banks, but also reporting,  4  BIS Review 9/2002  auditing, financial supervision, bankruptcy legislation and transparency in conducting monetary and fiscal policy.
Dimitar Radev: Bulgaria on the road to the euro Speech by Mr Dimitar Radev, Governor of the Bulgarian National Bank, at the conference "Bulgaria on the road to the euro", Sofia, 24 February 2023. *** Dear Mr. President, Dear Mr. Prime Minister, Dear Mr. Dombrovskis, Dear Ministers, Dear members of the public, Dear guests, First of all, I would like to thank the Ministry of Finance and Minister Rositsa Velkova for organising this conference. A proper assessment of the current situation related to our path to the euro area will enable us to make the right decisions. For this reason, I will touch on three issues: 1. Assessment of the current situation; 2. Possible solutions; 3. The role of the Bulgarian National Bank (BNB). At this point of time we are rightly talking about inflation, which is one of the nominal criteria for accession, the only one we are currently not fulfilling. Process-wise, legislation is not an insurmountable obstacle. The genesis of the overall delay in the process, however, lies in the political framework and more specifically in the political crisis of the last two years. The ongoing problems with the legislative program and with the domestic factors for high inflation are largely a consequence of the political crisis. As a result of this crisis, the budget process in the country is seriously disrupted. For the past two years, we have not had a clearly defined law on the annual state budget or a realistic macroeconomic framework and medium-term fiscal program.

The first is the need for place-based policies to invest more in at-risk communities to improve their childhood environments. The second is to facilitate families to be able to move into areas with better childhood environments. 2  Piketty and Saez (2003) and Chetty, et al. (2014). 3  Chetty, et al. (2014). 4  Chetty and Hendren (2015), Chetty, et al. (2014). 5  Measured by income-adjusted test scores, drop-out rates, average class size and per-pupil spending. 2  BIS central bankers’ speeches  With respect to the first, I would initially like to talk about the importance of schools―and in particular, strong public education. Consistent with the findings by Chetty, there exists a large literature that has established the importance of high-quality education as a key determinant of economic mobility. While there are differences of opinions on the most relevant measures of school quality, there is ample evidence that children who attend better schools on average end up with better outcomes later in life – such as higher levels of educational attainment and higher earnings. It is also well known that there exist large disparities in the quality of education by geography and socioeconomic background. Compared to children born to lowincome parents, those born to higher-income families can better afford to move and live in areas with high-quality schools. The sorting of families by income and their desire for better educational opportunities leads to enclaves of higher-quality and higher-spending schools that are separated from areas of economically less-advantaged populations and lower-quality schools.
The most important indicator in this assessment is the credit gap, which is a measure of how much credit growth deviates from its long-term trend. The reason for the credit gap having gained a key role in the assessment is that it has proven to be the indicator that warns of an impending crisis best and sufficiently early. A pure mechanical application of the credit gap can provide a certain guide to when the capital requirement would have been activated (see figure 1).6 Figure 1. Time periods when countercyclical capital buffers should have been activated based on historical measures of the credit gap (per cent). 3  2,5  2  1,5  1  0,5  0 81  83  85  87  89  91  93  95  97  99  01  03  05  07  09  11  Countercyclical buffer Households Non-financial corporations  Note: The calculations are based on a mechanical application of the credit gap approach. We can see that the requirement would have been activated on two occasions. The first time would have been a few years before the banking crisis of the 1990s, and the second time around 2005, that is just before the global financial crisis. We can also see which lending makes the credit gap grow by applying the approach separately to different sectors. The driver of activation of the capital requirements in the 2000s is mainly the household sector.

In many countries the instrumental rate moved down from 10% in 1995 to Stage Three’s initial rate, which practice was set already on 22 December 1998 when all the future euro countries lowered their instrumental rates to 3%. To ensure that the fiscal goals enshrined in the convergence criteria would continue to guide policy in the monetary union, in 1997 the EU member states concluded the Stability and Growth Pact. This Pact’s best-known requirement is that a general government deficit is not to exceed 3% of GDP and that if it does, sanctions will be applied. I should like to remind you, however, that the Pact is also intended to promote a balanced development of government finances over the business cycle. All EU member states are required to present annual stability programmes (in the case of non-euro countries, convergence programmes) that are first discussed in the Economic and Financial Committee and later in the Ecofin Council. In addition to these processes for testing that every country adheres to the rules, Broad Economic Policy Guidelines are drawn up annually. This document can be said to represent a common general approach to economic policy - a budget statement for the EU area. Last but not least, there are processes for guiding countries along the road towards creating more efficient markets for goods, services, capital and labour. These are complex issues and the member states tend to differ considerably in their initial positions as well as their attitudes.
Less than a week ago we members of the Riksbank’s Executive Board decided to hold the repo rate unchanged at 4.25 per cent. What does this mean? How can we steer the short-term interest rate and thereby affect inflationary pressures in the economy? I shall begin with the formulation of the inflation target and then describe how the repo rate affects inflation. After that I will talk about the background material for monetary policy decisions. I will then go through the Riksbank’s monetary policy steering system, that is, how a decision on the repo rate is actually put into practice. Finally, I will mention a few words about the financial turmoil and why there has not been reason for the Riksbank to take any special measures, although the financial developments are of course one of many factors affecting our assessments of inflation and resource utilisation. I shall also partly use our most recent interest rate decision as an example. Inflation shall be low and stable The Riksbank’s statutory objective is to maintain price stability. We have specified this as an explicit inflation target according to which the annual change in the consumer price index, CPI, is to be 2 per cent. In addition, we have formulated a tolerance interval around the target of plus/minus 1 percentage point. The tolerance interval marks both the fact that monetary policy cannot achieve the target exactly all of the time and the fact that excessive deviations cannot be accepted if the target is to remain credible.

Normally, an increase in the repo rate leads to a strengthening of the krona. This is partly because Swedish assets appear more attractive than investments in other currencies. A stronger exchange rate affects inflation directly in that imported goods will become cheaper. Inflation is also dampened indirectly in that foreign goods become cheaper than domestically-produced goods. This leads to a rise in imports and a decline in exports. Lower demand for domestic goods contributes to a reduction in resource utilisation and dampens inflationary pressures. In addition, inflation expectations are important to how companies set prices and to wage formation, and thereby to inflation. If everyone trusts that inflation will remain low, the companies do not need to change their prices so often, and employees do not need to increase their wage demands. This makes it easier for the Riksbank to achieve the inflation target. Some of these mechanisms act on inflation fairly quickly, while others take longer to have an effect. Empirical research indicates that a change in the repo rate has its greatest impact on inflation after one to two years. This means that the Riksbank must base its actions on forecasts of what direction inflation will take. Such assessments are made six times a year, prior to the monetary policy meetings, and they function as a basis for the interest rate decisions.
And they are also  2  BIS Review 70/2004  motivated by the view that greater disclosure would act as a desirable restraint on risk taking, and make it possible for market discipline to work more effectively. There have been several significant efforts to induce greater disclosure since 1998, notably by the President’s Working Group on Financial Markets, by a committee under the auspices of the BIS, and by private sector groups in the United States. These efforts have fallen short of their objectives, in significant part because of the difficulties in designing a disclosure regime that would provide meaningful information about potential systemic concerns, without undermining the ability of hedge funds function profitably and provide the important benefits that I mentioned earlier. Thus, while the potential benefits of meaningful progress on hedge fund disclosures could be material, we must also be realistic about the inherent difficulties associated with such a challenge. Even if additional efforts are mounted in this area, progress is not likely to come easily or quickly. The most constructive avenues for mitigating concerns about systemic stability lie in the areas of comprehensive risk management of potential exposures to hedge funds, the overall strength of capital and risk management in the major financial institutions, and the resilience of the market infrastructure. And we believe there is room for some further strengthening of market practice in these areas.

Because they are based on value-at-risk (VaR) calculations, and reflective of recent historical market conditions and correlations, they do not necessarily provide an effective measure of vulnerability to loss under more severe conditions of market stress and illiquidity. Stress tests must be designed and applied to compensate effectively for these limitations. Designing an appropriate set of stress tests that can capture the underlying pressure points and concentrations across a broad range of relationships with many different hedge funds is not easy, but it’s necessary. BIS Review 70/2004  3  And, the results of these tests need to inform judgments by the firm on the scale of exposure that it is willing to take to individual funds, groups of funds with similar strategies, and to hedge funds as a whole. Moreover, firms need to find ways to consider assessments of their stress-level exposures to hedge funds in tandem with stress tests of their own market risks to inform an overall judgment on the extent of capital market trading-related risks that the firm is taking on - especially in relation to low probability but high impact events. Third, and especially in light of the current competitive climate, we believe it is appropriate for dealers to have more exacting standards for the overall due diligence process, and to adjust credit terms on the basis of those higher standards. This is particularly important in those cases where there has been innovation in the manner in which credit is extended.
Against a background of public and private sector deleveraging, there are heightened concerns about public debt financing, cost and sustainability. This phenomenon is a concern not only for the short but also for the long run, and moreover, it has spread across a number of euro area member states. Developments in global economy, and particularly the European one, in the recent years are as significant to the countries of our region as to Europe itself. The direct effects of this situation on personal business budgets and the economy in general have been in the spotlight of daily discussions of politicians, policymakers, central bank, analysts and the public. The short-term and direct concentration is justifiable in light of the hard time facing our economies and taking into account that the euro area is our main trading partner. The shortterm focus and problematic situation have shifted the attention away from long-term policies and reforms. The fact that the global crisis was perceived and interpreted with an escalating crescendo tone is indisputable. It was partly perceived from the moment it first hit and, little by little, it transformed from a mortgage crisis into the deepest global crisis since the Great Depression. The response to the crisis and the lessons drawn from it followed in a similar fashion. The approach and extent of response to the crisis was not uniform across the countries. The economies having fresh memories of the financial crises responded swiftly and more strongly.

An issue touched on earlier in the day was reporting and accounting, and one of the things the industry has done is to come up with something called the Enhanced Disclosure 2  BIS central bankers’ speeches  Task Force. The Taskforce proposed a set of recommendations for banks to develop highquality, transparent disclosures that clearly communicate banks’ business models and the key risks that arise from them, so that people who supply capital to the banks can follow how they make money, how they think about managing risk, and make judgments on the basis of that. The important point was that this was industry-led, and co-chaired by a London-based bank. There was some input from the authorities, but the industry led the initiative, and it’s a model we may use in other areas of finance. I mentioned Total Loss Absorbing Capacity earlier – I won’t use the acronym! I’m aware the full name doesn’t necessarily make it any more intelligible, but this is basically another layer of capital, and the ability to absorb losses in the event that a firm fails. It is more cost effective – so the cost is not passed on to borrowers. And the technology behind this was developed by the private sector, with the authorities contributing to ensure it could work effectively and on a global basis. But it was the industry, once again, that came up with the solution.
While the use of credit derivatives has substantially contributed to enhanced risk-sharing and is expected to have improved the resilience of the financial system, questions can be asked about the sustainability of the pace of growth in these markets as well as about their implications for the emergence of other forms of risk. Two issues in particular have surfaced in the course of the past year. First, the sheer complexity of many of the structured products introduced in the credit derivatives markets implies that there are potentially large risks for end-users who might not fully understand the time-varying risk profiles of such instruments. Indeed, as illustrated in several episodes of recent large corporate downgrades, the pricing of structured credit products might not adequately account for unanticipated changes in correlation structures among the assets incorporated in the underlying pools. Second, the rapid increase in trading volumes has stretched banks’ and dealers’ settlement systems and caused backlogs that could contribute to liquidity problems in a situation of increased trading activity. These problems could be particularly relevant for the European market, given the larger discrepancy in size between the cash bond market and the derivatives market than in the US. There are signs that, in accordance with the recommendations of the Counterparty Risk Management Group II report, many  BIS Review 50/2006  3  global banks have successfully worked towards solutions to these problems. However, it is rather widely acknowledged that pockets of vulnerability remain in these markets.

Spain, France and Italy have experienced the most rapid growth rates, but in Germany further declines or only moderate increases in prices have been reported. An evaluation of the risks to euro area financial stability stemming from the household sector depends on the balance sheet situation of households as this determines their resilience to adverse financial shocks. Both the households’ debt-to-financial assets ratio and the debt-to-liquid financial assets ratio have continued to grow, but more moderately compared with the rapid increase at the beginning of the current millennium. Although this implies a further deterioration of households’ financial position, the household sector’s liquid assets still exceed its debts. 5. Euro area financial system  5.1. Euro area financial markets  Let me now briefly turn to the euro area stock and corporate bond markets, both of which continued to develop dynamically until very recently. The Review points out that despite the favourable economic outlook, a risk of a slowdown in market dynamics cannot be excluded if risk-free interest rates continue to edge upwards and credit ratings and/or earnings growth surprise to the downside. On the positive side, structural developments in euro money markets, described in Box 6 of the Review, and the increased use of collateral in borrowing and lending transactions, discussed in Box 7, suggest an overall strengthening of the financial system’s resilience to a systemic shock.