samchain/econo-pairs-v1 huggingface dataset:
As with an independent central bank that houses supervision and liquidity provision under one roof, there are advantages to combining country surveillance and lending in one global institution, with an impartial and experienced staff. And risks are most efficiently pooled at a global level. This is the raison d’etre for the IMF. 8  4  Bank of England staff estimates based on the spread between returns on reserve assets and those paid on domestic bonds. BIS central bankers’ speeches  Unfortunately, signs of fragmentation of the global financial safety net are obviously in part a reaction to the failure to implement the 2010 quota and governance reforms to bolster the IMF’s resources and the representation of emerging market economies. The priority must be to implement those. But we also need to consider whether and how the temporary resources collected by the IMF in the form of bilateral loans when it passed the hat around in 2012 could be put on a more permanent footing. One possibility is to extend these bilateral loans further. Another possibility is for the IMF to borrow directly from capital markets 9 during a systemic crisis which would create safe assets when demand for them is high, allowing funds to be recycled to those parts of the world with temporary liquidity needs. A more reliable and flexible resource base would allow the IMF to more credibly perform a crisis prevention role of providing committed lines of credit to sound sovereigns through its Flexible and Precautionary Liquidity lines.

It would be foolish to declare categorically that the Bank of England has eliminated stigma or moral hazard. But we can say that these regulatory reforms have made it easier for the Bank of England to provide liquidity insurance to solvent institutions. In turn, this has allowed us to increase the availability and flexibility of our liquidity facilities and to give more clarity around the circumstances under which that insurance would be provided. These changes should help to reduce the stigma attached to the use of central bank liquidity facilities, and encourage earlier take-up to limit contagion and protect financial stability during future crises. 4  See Hume (1758). 5  See Carney (2013) and Shafik (2015). 6  See Hauser (2014) and Tucker (2014). 2  BIS central bankers’ speeches  3. Are sovereigns like banks? Attention more recently has turned to sovereign rather than banking vulnerabilities and two issues in particular have brought this into sharper focus. First, do fundamentally sound emerging market economies have access to the right form of liquidity insurance to deal with the challenges posed by lower growth, falling commodity prices and potential spillovers from the possible exit of exceptional monetary policy in advanced economies? And second, how can we manage the tension between the need to recognise when one sovereign’s debt has become unsustainable and the need to avoid contagion across countries in times of stress? There are many ways in which sovereigns are like banks in terms of the liquidity risks they face.
One of the challenges involved in replacing the Libor with an overnight rate such as SARON is how to determine forward rates that would, for example, allow the calculation of quarterly payments on contracts. At the moment, the derivatives market is not liquid enough to provide a prospective forward rate (i.e. one that is known in advance). This is why the working group, at its meeting last week, opted for a backward-looking calculation method based on the average of daily SARON rates over the period concerned. As co-chair of the NWG, the SNB is supporting the process by providing coordination at national level and encouraging dialogue at international level. Ultimately, though, only the market participants themselves can ensure a successful transition. It is thus critical that they become involved, keep themselves informed about the working group’s recommendations, and put them into practice. Participation in the working group is open to all those operating in  Page 8/9  the market. I should add that an information session on the working group’s latest activities and on future challenges will be taking place tomorrow in Geneva. 7 Before finishing, I would like to emphasise that the SNB retains its ability to steer interest rates even without the Libor. For instance, it is currently doing so by means of the negative interest rate on the sight deposits which the banks hold at the SNB. The disappearance of the Libor or the transition to another interest rate would change nothing in that respect.

On the other hand, some evidence appears to suggest that digitalisation in the retail trade leads to faster pass-through – that is to say, it increases the responsiveness of prices to shocks affecting the economy, such as the strong appreciation of a nation’s currency. Studies show that the growth of online trade in recent years may have helped to almost double the speed of price adjustments in the US retail industry. 4 Switzerland too has seen a trend towards faster price adjustments over the last few years. 5 Thus, shocks such as strong appreciation or depreciation of the Swiss franc could feed through to inflation more rapidly in the future. The SNB is therefore analysing the repercussions of digitalisation in depth, in order to understand the impact on inflation as thoroughly as possible and ensure that it is able to take action where necessary. 1 For a discussion about the causes and implications of low inflation, cf. Constâncio, Vítor (2017) ‘Understanding and overcoming low inflation’; remarks at conference on Understanding inflation: lessons from the past, lessons for the future? Frankfurt am Main, 21–22 September. 2 BAK Economics AG and Swiss Association of Distance Selling. 3 This term describes the impact of booming online trade on the traditional retail trade as well as on economic growth and inflation. 4 The costs to companies of price changes (‘menu costs’) are generally lower for online traders as they only have to modify their prices online; traditional traders on the other hand have to produce new labels, brochures, etc. Cf.
Today, the medium-term growth and inflation risks are unbiased, although in the short-term there are greater inflation-related risks. Our monetary policy is based on an inflation target two years ahead, so it requires having an opinion with respect to the most likely evolution of the macroeconomic scenario and associated risks. We are continually on the lookout for news about the local and international economic environments, checking them for consistency with our vision of the most likely or other alternative scenarios. To do so, we need to permanently adapt our vision on the economy and conduct monetary policy with flexibility, being careful not to overreact to onetime news that could trigger excessive pessimism or optimism that occasionally affect the expectations of consumers, businesses or investors in the financial markets. This prudence  BIS central bankers’ speeches  1  in our assessment of the state of the economy and related risks is vital for us to properly meet our obligations. At the same time, it is our job to provide grounds for our vision about the macroeconomic scenario and its consequences on the orientation of our monetary policy. The developments of recent months exemplify this. Many market agents’ opinions pointed at the Chilean economy being severely hit by the external situation. However, incoming data have shown us, as I said, that the risks coming from abroad are smaller than we thought before.

In trend prices, in 2012 the current account would post a deficit of somewhat less than 6% of GDP, not very different from that of 2011. We foresee y-o-y CPI inflation hovering around 4% well into the second half of this year, to later converge to 3% and remain there until the end of the projection horizon, this time the first quarter of 2014. Y-o-y changes in core measures will continue to rise in the coming months, and will converge to 3% more slowly than the CPI (figure 1). BIS central bankers’ speeches  3  This foreseen trajectory is based on the assumption that the propagation of supply shocks to other prices will occur according to historic patterns. It also assumes that wages will be adjusted on the bases of productivity and the inflation target, and that the RER will not change much. On the fiscal side, the baseline scenario estimates that the structural deficit will converge to 1% of GDP towards the end of the current Administration, as announced by the authority and in conformity with the Fiscal Responsibility Act. Finally, it uses as a working assumption that the MPR will follow a path comparable to the one that can be derived from the prices of financial assets observed at the statistical cutoff of this Report (figure 2). The baseline scenario reflects the events that the Board believes to be the most likely to occur with the information at hand at the statistical cutoff date of the Report.
In balance sheet terms, the younger buyers were acquiring housing assets and debt; and the older sellers were swapping free equity in houses for financial assets. In consequence, for a while, the ratio of aggregate household debt to assets remained fairly stable; and the ratio of financial and housing assets-to-income rose steadily. Taken as a whole, households were vulnerable to falls in asset prices. Households now face lower asset prices, somewhat lower house prices, tighter credit conditions, a lower path of demand and output, rather less job security, and a much greater sense of uncertainty. Younger households in particular have a strong incentive to save more (Chart 7) to repair indebted balance sheets, or to accumulate the deposits that are once again needed to buy a home (given banks’ policies on loan-to-value ratios). By contrast, taken as a whole, the corporate sector has been running a cash surplus throughout – in the run up to the crisis, and since. Some of that is no doubt down to firms having learned lessons from flirting with excessive leverage during the “telco” boom nearly a decade ago. But quite a lot of the cash surplus has resided in oil companies and, since the crisis, in financial firms, which face the task of gradually deleveraging and reliquifying.

And that’s part of what the econoME materials will teach young people. 3  All speeches are available online at www.bankofengland.co.uk/speeches  3  To really bring the Bank’s work to life and give students a chance to hold us to account, colleagues below director level from around the Bank are heading into classrooms across the country. These Bank Ambassadors will visit over 200 state schools over the next twelve months. The feedback from the first 30 visits to state schools has been terrific. Central banks are not often associated with the words “positive”, “appreciated” and “inspiring” so you can imagine how invigorated our Ambassadors are when they hear them. They’ve also been challenged with the length and quality of the questions they have had to face from some students who appear to be candidates for future Treasury Select Committee membership. Our third reason for creating an education strategy is to inspire economists of the future and thereby improve diversity in finance, business and economics. We hope to convince young people of the value of studying economics. We may be a bit biased but we know it’s a fascinating subject and one that teaches skills that can open doors to a huge range of rewarding careers. And it’s achievable. As Keynes observed “the study of economics does not seem to require any specialised gifts of an unusually high order.” Yet, economists are still a rare breed. Last year, less than 0.1% of all GCSE students and 4% of A-level students studied economics.
Despite these positive effects, the presence of foreign banks in the country instigates improvements in the institutional framework, by pushing the application of international accounting, reporting and supervision standards, which does not only help the commercial banks’ decision-making process but also the central bank’s. Therefore, the FDIs are expected not only to promote the production activity in the country, but also to have a direct and indirect impact on the Albanian financial system. Foreign production companies will directly need financial transfers and services (channel payrolls through the ATMs, POS), which will be executed through the domestic financial system. The international companies investing in the country will make use of commercial banks’ funding sources in order to prevent exchange rate and interest rate risk. There have been many property-related developments in the Albanian banking system. Since its establishment, the domination of state-owned banks has been reducing and today, foreign commercial banks’ assets account for over 90 per cent of the banking system. The increase in the number of foreign banks in the system has been also favoured by the fact that such investments have not been penalized in Albania; the requirements for establishing a bank are similar for both domestic and foreign-owned banks. 2  BIS Review 102/2007  The current ownership is diverse; there are foreign investors from Austria, Italy, Greece, USA, Turkey, Germany, Bulgaria, Malaysia and some Arab countries.

But now that the fence is up, we need it to do its job. It is of course a twenty-first century, modern fence – not a medieval stone wall, and as part of this it was electrified by Parliament in order to discourage attempts to  2  All speeches are available online at www.bankofengland.co.uk/speeches  2  climb over it: the legislation empowers the PRA to use a group restructuring tool to require a banking group to sell its ring-fenced bank or other parts of its group. Hopefully the prospect of electrocution will discourage any blatant attempts to climb over the fence. But there is still perhaps the possibility of wicked burrowing under the fence, passing things through it or even perhaps using a drone to create mischief. We are therefore setting up a border patrol of PRA staff who will police the fence. The patrol will ensure there is compliance with restrictions on activities performed by the ring-fenced entities and independence from the rest of the group. In particular, we will closely monitor governance arrangements, seeking evidence that ring-fenced banks can identify conflicts of interest and are able to make decisions on their own. We will set capital and liquidity for the ring-fenced banks, and more generally keep an eye on the risks they face. Let me move to my second example: accountability. As with the ring-fence, we and firms have gone to great lengths to bring in the Senior Managers Regime here in the UK.
Instead, robust cross-border cooperative oversight arrangements are essential to ensure that they take fully into account the implications across jurisdictions and currencies in their on-going risk management, as well as in crisis situations, and that effective cross-border arrangements for the recovery or potential resolution of central counterparties in a crisis situation can be put in place. We should not wait for a potential emergency to remind us of the urgency of this problem. It would be too late to address it then, as the cross-border upheaval in the banking sector in the context of the 2008–09 financial crises amply demonstrated. And the consequences in the case of central counterparties would be even more devastating than what we have seen in the banking sector. Cross-border application inconsistencies Finally, let me briefly mention another area of concern: the cross-border application of different rules. I leave entirely aside the question of whether or not we are finished with the  BIS central bankers’ speeches  5  standard setting. There are areas where additional work would be beneficial: think of collateral transformation and settlement cycles, and of the success of Target2-Securities in fostering harmonisation around T+2 settlement in Europe. But this would require another conference and I will focus here on the application of existing rules. It is clear to all of us that due to the global nature of the OTC derivatives markets, international coordination is absolutely indispensable to avoid inconsistencies, gaps or overlaps, or conflicting rules.

Mr. Carse reports on the initiatives taken concerning financial industries in Fujian, Hong Kong and Taiwan Speech by the Deputy Chief Executive of the Hong Kong Monetary Authority, Mr. David Carse, at the Symposium on the Financial Exchange and Cooperation of Fujian, Hong Kong and Taiwan, held on 8/8/98. I am pleased to be here this morning to welcome you to this Symposium. The Chinese Banks’ Association is to be congratulated for organizing this important initiative with the co-sponsorship of the Fujian Provincial Government and Chinatrust Commercial Bank. The idea of the Symposium, as I understand it, is to facilitate the exchange of ideas concerning the financial industries in the three regions and the exploration of cooperative opportunities between them. 2. Such an initiative could not have come at a better time. The current financial crisis is creating havoc among the Asia economies. Initially, the damage was felt in the financial sector. But the full impact is now being seen in the real economy as output and trade are crippled by higher interest rates, the burden of foreign currency borrowing and the credit crunch. The Mainland of China, Hong Kong and Taiwan have survived the crisis in better shape than most other economies in the region. But they have not been unaffected as events of this week have demonstrated in Hong Kong where we have witnessed further speculative pressure on the Hong Kong dollar. 3.
I mean that quite literally: the weakness in productivity that we have witnessed means that much of the growth so far has been generated by increased hours worked rather than an increase in output per hour worked. Participation in the labour force has increased in recent years, as has average hours worked per week. Having demonstrated such flexibility, it is fitting that people are now beginning to enjoy the benefits of an increase in real wage growth. For comparison, following the 1990s recession Bank Rate stayed at its trough for 7 months before being increased again, and the equivalent number following the 1980s recession was only 6 months. Indeed were one to look solely at measures of the real economy relative to their value when previous tightening cycles began, you would have expected the MPC to have already begun raising rates by now (Chart 2). And I must admit to getting a gentle ribbing at the dinner table when I come home after each monthly MPC meeting to say that I have voted for no change in Bank Rate once again. “All that work to decide to do nothing!” say my children. BIS central bankers’ speeches  1  But there are good reasons for Bank Rate to have remained lower for longer this time.

Whatever the outcome, it will be important to maintain flexibility to respond to new data and events. The flexibility the MPC has had to pursue its target independently since 1997 has brought great benefits. The MPC has also shown flexibility in developing new instruments such as QE to achieve its goals. Similarly, as monetary policy begins to tighten, the MPC will be focussed on Bank Rate as the marginal tool of monetary policy, given it’s more flexible in nature than QE. And occasionally, we might also consider tyre tread depth, just to see if the post crisis economy reverts to pre-crisis patterns or whether we need to think about the future a bit differently. 6  BIS central bankers’ speeches  BIS central bankers’ speeches  7  8  BIS central bankers’ speeches  References Alesina, A. and Summers, L. (1993) “Central Bank Independence and Macroeconomic Performance: Some Comparative Evidence,” Journal of Money, Credit and Banking, Vol. 25, No. 2, pp. 151-162. Brainard, W. (1967), “Uncertainty and the effectiveness of policy”, American Economic Review 57, 411–425. Broadbent, B. (2015) “The MPC’s forecasts and the yield curve: predictions vs promises,” Speech given at Reuters. Dison, W. and Elliot, D “Mean and modal Bank Rate expectations,” blog available on http://bankunderground.co.uk/ Evans, C. Fisher, J. Gourio, F and Krane, S (2015) “Risk Management for Monetary Policy Near the Zero Lower Bound.” Brookings Papers on Economic Activity.
During the forecast period, we expect CPIF inflation to first fall to around 1 per cent, but then to rise again to around 2 per cent at the end of the forecast period. CPI inflation fell dramatically during the crisis as a result of our repo rate cuts, but it will increase to a level higher than CPIF inflation as we increase the repo rate to a more normal level. When we compare various measures of resource utilisation with the forecasts we make for inflation in the latest Monetary Policy Update, the following picture emerges. Underlying inflation measured in terms of the CPIF begins to rise in 2011. By that time, resource utilisation measured in terms of variables such as the RU indicator, shortage of labour in the business sector, capacity utilisation in the manufacturing industry, the employment rate and the HP trend-based measures the employment gap and the hours gap will probably already have risen to above-normal levels. Underlying CPIF inflation will then rise to 2 per cent at the end of the forecast period. Resource utilisation measured using the GDP gap based on HP trends will then have reached a normal level. The HP gap will then be more or less zero. My own assessment is also that the GDP gap will then have reached the zero level. However, even by the end of the forecast period, unemployment will not have reached the average level in the years before the crisis. Our forecasts thus paint a rather complex picture.

That, in our context, is I think now much easier to understand than a more consensual approach would be, but there was certainly a learning period. It has been suggested to me that the arrangements I have described somehow diminish the position of the Governor. Well if that’s true this Governor at least welcomes it! I am sure that all of you are well aware of how finely balanced monetary policy decisions are at the margin, and that all of you have agonised, just as I have, over the right thing to do and the right time to do it. I find the cross-bearings on those decisions provided by the other Committee members - and they are I remind you all highly qualified experts in their own right - immensely reassuring. If a majority of them argued for a particular decision, that would certainly weigh heavily with me, although - as a matter of personal integrity - I always reserve the right to take a different point of view from that of the majority on those occasions when I am particularly confident of my own judgement. That has not so far happened but it almost certainly will; people should not be unduly surprised. Finally, in relation to monetary policy, let me say a few words about accountability.