25  All speeches are available online at www.bankofengland.co.uk/speeches  25  Chart 18: Sensitivity of UK 3-year government spot interest rates to economic surprises Rolling 1-year sensitivity 95% CI  0.8  UK 3-year  0.7 0.6 0.5 0.4 0.3 0.2 0.1 0.0 -0.1 2004  2007  2010  2013  2016  Source: Bloomberg and Bank of England calculations. Notes: The chart shows the rolling 12 month beta coefficient of a regression of the UK Economic Surprise Index (ESI) on daily changes of UK 3-year interest rates, with a 95% confidence interval. The ESI is calculated as the weighted sum of data surprises across the UK, US, euro area, Japan and China. The data series included in the ESI, and the estimated weights are based on their historical relationship with daily changes in UK interest rates. The axis shows the impact of a 1 standard deviation data surprise on UK 3-year interest rates. The dashed line shows the 2004-2017 average for the beta coefficient. 26  All speeches are available online at www.bankofengland.co.uk/speeches  26  References Abel, W, Burnham, R and Corder, M (2016), ‘Wages, productivity and the composition of the UK workforce’, Bank of England Quarterly Bulletin, Q1, pp. 12-22. Bank of England (2016), ‘Factors affecting the prospects for long-term supply following the EU referendum’, Bank of England Inflation Report, August, pp. 29. Blanchflower, D (2007), ‘Entrepreneurship in the UK’, speech at the Max Planck Summer Institute on Entrepreneurship Research.
These banking reforms, like all the others now under way (on public spending, pensions and the labour market), should surely have been carried out during the years of expansion, when everything seemed to be going well and the problems that would eventually surface because of the imbalances that were building up were blithely ignored. Unquestionably, we would not now be facing the problems then being incubated and which have now emerged with the crisis. Regarding what has been done so far, it would be unfair not to mention the contribution of the EU authorities, since although there were initially some serious communication and coordination problems, the fact is that subsequently they took appropriate measures aimed at imposing greater economic discipline and improving confidence, such as the reform of economic governance and the Stability and Growth Pact and the recent “Pact for the Euro”. And, of course we cannot overlook the ECB’s contribution with its policy of providing unlimited liquidity and its programmes to purchase covered bonds and the government bonds of the countries hit hardest by the crisis. In short, at this stage it can now be said that both the authorities and private agents have made considerable efforts in the right direction and that, as a result, the process of adjustment of the banking sector and of the Spanish economy as a whole is progressing reasonably well.