samchain/econo-pairs-v1 huggingface dataset:
The FinTech Adoption Index for services offered by fintech organizations, divided into five broad categories – money transfers and payment services, financial planning tools, savings and investments, borrowing and insurance, indicates that money transfers and payment services are continuing to lead the fintech charge with adoption standing at 50% in 2017 and 88% of consumers anticipating of doing so in the future. This rapid rise in fintech organizations has posed many dilemmas: What are the benefits that fintechs bring to the society, on the one hand, and what are the risks that they create, on the other? Is it the end of banking or are banks going to team up with the newcomers? One of the main concerns in this regard is that while fintech companies increase financial inclusion, facilitate the access to finance and lead to more competitive markets, they can also be conducive to cutting costs and rising risks in the traditional banking segment. Against this background, the FinTech topic has received an increasing attention in the central banking community, including our central bank. We have been closely monitoring the fintech developments, evaluating the benefits and risks that they bring and trying to strike a right balance given the local context. An important step in this direction is the draft law on payments that is expected to provide impulse for new companies with innovative, but safe financial services.

It is perhaps not a great surprise then that their central projections tend to cluster in a remarkably narrow range. For example, take the forecasters who were surveyed by Reuters prior to the July MPC meeting last year. At that point there were only two out of 47 who expected interest rates to rise above 5% by now and only one expected them to be below 4.25%. Fast forward to the most recent survey and you will see that none of the 52 expect rates to go above 6% in the next year and only two expect rates to go below 5.5%. To gauge the real range of uncertainty you need to look beyond the central forecasts at the full probability distribution of possible outcomes. The fact that most forecasters agree on the prospect does not mean it is likely to happen. Central banks need to be particularly cautious in putting weight on market expectations and outside forecasts because they are based at least in part on judgements about what we will do. In my view it is sensible for independent forecasters to assume that we will do our job and keep inflation low; but we can’t take comfort from the fact that most external forecasters therefore expect inflation to return and stay around target – its our job to justify their faith and keep their confidence. We must avoid chasing our own tail. Of course, the uncertainty of the future and of the past is a factor in our decisions on interest rates.
But of course don’t expect a central banker to answer this question, one year in advance. I will just mention the Banque de France view on the rationale that should be behind the determination of the starting level of the euro area short-term rates. As you know, we currently observe interest rate differentials between the “core” and more “peripheral” currencies participating in the exchange rate mechanism. Although these spreads have been dramatically reduced in the past two years, due to the remarkable convergence of inflation rates throughout the European Union, some interest rate differentials still exist. They can be attributed partly to differing positions in the business cycle, and partly to differences in credibility. Cyclical differences within the potential euro area should not be overestimated. There is, all in all, a relatively high degree of synchronisation in the business cycle in continental Europe. The convergence criteria laid down in the Maastricht Treaty certainly played an important role in fostering this synchronisation. Moreover, in the future, differences in cyclical developments will gradually be reduced as policies, structures and behaviour will become more and more similar. Lastly, some persisting differences may well be tolerated as is currently the case between the various regions of the same country or, for instance, between the various member states of the USA. Credibility differences between “core” and “peripheral” currencies result from the different lengths of the track records in terms of stability-oriented policies.

These guidelines will include prior approval by the ECB for transactions exceeding thresholds to be specified and will also apply to member states’ transactions with their foreign exchange working balances. The ESCB will have the technical capacity to conduct, if need be, foreign exchange intervention in order to counteract excessive or erratic exchange rate fluctuations of the euro against the major non-EU currencies (e.g., the US dollar). The need for intervention could also arise either in the context of G7 concerted operations or within the framework of the ERM II. To this end, the ESCB will use the pool of foreign assets transferred from the NCBs to the ECB. The framework that has been designed for domestic as well as foreign exchange operations allows the ESCB to build on the expertise that NCBs have acquired over the years and to make an extensive use of existing operational capacities in NCBs (dealing room, front office, back office). Common sense dictates making use of equipment, human resources and expertise currently available at NCBs. 2.4. A decentralised execution of operations A key feature of the single monetary policy is indeed that it will be decided in a centralised manner, by the Governing Council of the ECB, and executed in a decentralised manner, by the national central banks.
In my view, the task could be easier achieved if the focus of EWE is narrowed down to the really important systemic issues i.e, the issues that have high-global impact but are beyond the capabilities of market and individual economies to monitor and make assessment. For example, instead of trying to spot vulnerabilities in all the possible key risk, in all markets, and in all economies, EWE should narrow its focus instead on the systemically-important issues, especially the known-unknowns. This include the robustness of the key global financial markets and infrastructure, risk relating to the systemically-important large economies and the operations of the internationally-important financial institutions. Such focus will make the whole EWE process more valuable and complements well with the surveillance that are done elsewhere at the country or regional level. With regards to the nature of future crises, a few realities have emerged from the current global financial turmoil. First, it is clear from recent experience that nobody is above crisis. Crisis can happen in any economy regardless of whether it is large or small, developed or emerging, with or without a sophisticated financial system, and regardless of whether the country adopts a fixed or flexible exchange rate system. And once happens, the impact is large because of the  BIS Review 19/2010  1  globalized nature of markets that drives the spillover or contagion. For emerging markets, this means the risk of future crises are wide-ranging and can be both externally and internally induced.

But it is really for the governments to see whether these assumptions remain likely. Any debt restructuring is always very costly in terms of confidence. It is really something that you want to only use as a last resort instrument and do so in the friendliest possible way with lenders. We could wonder whether  BIS central bankers’ speeches  1  the repayment schedule is appropriate, but this is really a matter for negotiations between the lenders and the borrowers. Given that debt levels are above 170 per cent GDP, isn’t debt restructuring inevitable? C.N. It very much depends on the assumptions on Greek growth in the future, which in turn will be dependent on the pace of Greek reforms and the growth in the euro area as a whole. Is it even possible for the ECB to decide on further monetary policy easing with a possible bond purchase programme just a few days before the Greek election? C.N. Nothing has been decided yet at the ECB but we will have to take these uncertainties into account. But the Greek bond market is extremely small and so the question maybe difficult in theory but in practice it doesn’t really apply. Just to make it clear, the negotiations with Greece won’t block the ECB, will they? C.N. No, they won’t. The problem of Greece is rather minor compared to the question of whether or not and when to step in with action on further market segments in our unconventional monetary policy.
For me, the explanation lies in a second “i” – institutions. I will argue that it was the emergence of institutions that explains the rise in the other capitals that were essential pre-conditions for growth (human, social, infrastructural, intellectual etc.) It was the emergence of these same institutions which also cushioned the damaging effects of recessions. As with sight, to gain a true perspective on growth you need two “i"s.  This is, in one sense, not a new story. A number of distinguished economists have, over the years, placed institutions centre-stage in explaining secular trends in social and economic development. They include classical economists such as Adam Smith and John Stuart Mill and, more recently, Nobel Laureates such as Ronald Coase and Douglass North. 21  Broadberry and Wallis themselves conclude that the most likely cause  of fewer downside growth surprises since the Industrial Revolution has been the rise of institutions. 21  Smith (1776), Mill (1848), Coase (1960), North (1991). 7  All speeches are available online at www.bankofengland.co.uk/speeches  7  Empirical work supports the institutional hypothesis. Cross-country growth regressions suggest nations with high-quality institutions out-grow those without. 22  Detailed country case studies reach a similar conclusion. For example, institutional quality has been used to explain the very different economic fortunes of North and South Korea after separation. The absence of institutions is, for some, Why Nations Fail. 23  If institutions hold the key, what exactly do we mean by them and how exactly do they come about?

And the global population scarcely budged, held in check by unchanged food supplies, as th  7  predicted by Thomas Malthus in the late 18 century. Not for nothing was this called the Malthusian era. Another example of this secular stagnation, a favourite of mine, is provided by plotting heights from excavated skeletons records. These are a diagnostic on levels of health and nutrition. Male skeleton heights were essentially unchanged, at 160-170cm, for at least 2,000 years prior to 1750. Humans grew neither physiologically nor financially. And neither, then, did the societies in which they lived. That makes the contrast with developments in the last quarter of the millennium all the more striking. From around 1750, GDP per head suddenly took off and has kept on rising ever since, growing by around 1.5% per year. The magic of compound interest means these growth rates have transformed people’s living standards. The time it takes for living standards to double has shrunk to less than 50 years. The impact on people’s well-being, financial and psychological, has been transformational. It has meant each generation has been around 50% better off than its predecessor. After 1750, generational progress suddenly became visible, children to parents to grandparents. Growth in living standards became a social norm, in a way never previously true in human history. Life’s travellator turned into an escalator. And not just for GDP. Broader metrics of well-being tell a similar tale.
Clearly, in economic terms, the cost of litigiousness and its terrible effect on the reputation of the entire sector more than exceeds any hypothetical benefits that individual banks might have obtained through questionable practices. Society has clearly evolved and, in tandem, so have demands regarding the transparency, diligence, rigour and integrity expected of banks. I believe the sector is responding to this challenge, which involves achieving a significant cultural change in the way banks relate to their customers. I have pointed out that it is premature to analyse the results of this Law in terms of potential improvements to legal certainty, but we can see a change in the number of complaints submitted to the Banco de España. As you will know, in recent years the problems related to mortgage loans have led to the change in the number of complaints lodged with the Banco de España. This is due in particular to two issues: the above-mentioned floor clauses and mortgage loan arrangement costs, which saw a record number of complaints submitted in 2017. However, mortgage loan complaints made last year fell to levels of a decade ago. We expect this trend to continue. But apart from one-off changes in the time series, I wish to emphasise the fact that the problems behind these complaints stem from operations entered into prior to the enactment of the Law in question.

The ESRB approach uses the concept of residual risk, which is the difference between the level of risk and the current resilience of the financial system.12 In setting up the framework, policymakers need to establish the level of residual risk that they consider acceptable. Regular macroprudential policy decisions would then follow a two-stage process. Policymakers assess the level of residual risk in the system, and if that diverges from the acceptable level, they then assess the policy tightening or loosening required to realign it. Conclusion Let me conclude. Over the past eight years, the implementation of macroprudential policy in Europe has substantially improved, and the ESRB has played a valuable role in facilitating that process. The ESRB’s success derives from its broad membership. Systemic risk takes different forms over time, so discussions incorporating a wide range of viewpoints and experience are vital if policymakers are to successfully safeguard the stability of the financial system. 1 See, for example, European Commission Staff Working Document, Coping with the international financial crisis  at the national level in a European context, p.11, which shows that even in 2015 the contribution of the state to financial sector repair represented more than 10% of total public debt in many countries. 2 ESRB (2014), ESRB Flagship report on macroprudential policy in the banking sector. 3 Kelber, A. and Monnet, É. (2014), “Macroprudential policy and quantitative instruments: a European historical  perspective, Financial Stability Review, Banque de France, April, 18: 151–160. 4 Some discussion had certainly taken place prior to the crisis.
Alternatively, that can be thought of as being equivalent to a fall in the real risk-free rate of interest that would equilibriate supply and demand. 11 Taken on its own, this rather leans against the proposition, advanced by a number of commentators, that monetary conditions are loose on the grounds that deducting CPI inflation of between 4 and 5% from a Bank Rate of 5% leaves a “real rate” close to zero. First, as I have been arguing, it is vital to take into account the possibility that the real rate warranted in the current conjuncture has fallen. Second, headline CPI might not be the best deflator for calculating the relevant real rate of interest. CPI may not necessarily be the price – the “own real rate” – relevant for individual households’ and businesses’ spending decisions. 12 For example, firms’ investment might be more dependent on the price of capital goods. Despite the pickup in oil prices, the pace of inflation for capital goods has been much lower than for CPI. So that might suggest a correspondingly higher real rate for businesses than one based on CPI (Chart 4). A similar question could be posed about the real rate facing households, given that the CPI currently excludes the costs of owner occupation. So one can safely conclude that it is not all straightforward at present to calibrate monetary conditions. For researchers, that underlines the importance of renewing work directed at gauging monetary conditions.

If the channel is thought to work through broad money, as transactions balances, 22 then of course it is the supply of bank lending that matters. Essentially, when “liquidity” is plentiful, it may be undervalued. That may build a bridge to the literature on how the supply  18  See Cochrane, J, “Financial Markets and the Real Economy. 19  See Tucker, PMWT “Reflections on Operating an Inflation Target”, Bank of England Quarterly Bulletin, 2006 Q2 pp 212-224. 20  See Tucker, PMWT (2007) “A perspective on recent monetary and financial system developments” Bank of England Quarterly Bulletin 2007 Q2 pp 310-316. 21  Including the current G of the BofE and myself; see King, M (2002) “No money, no inflation – the role of money in the economy” Bank of England Quarterly Bulletin 2002 Q2 pp 162-177. 22  See Thornton, D. L, (2008) “Monetary policy: Why monetary matters and interest rates don’t”, Federal Reserve Bank of St Louis Working paper 2008-011. 10  BIS Review 112/2008  of credit from the banking sector can influence the liquidity of asset markets. 23 This echoes my earlier discussion of the potential utility, as indicators, of the data on money and credit quantities when the degree of credit rationing shifts. We’d do better at making sense of those issues if we had a better understanding of the determinants and macro-significance of risk premia in the first place.
Another source of “drag” has been at work.3 Identifying those drag factors is important when accounting for disinflationary trends in the past, but also when assessing whether these trends will persistent in the future. The drag If you consider the traditional determinants of inflation, there are at least three plausible sources of disinflationary “drag”: slack in the economy, a weaker relationship between slack and wages and lower levels of inflation expectations. These explanations are not mutually exclusive. Higher levels of slack, or a weaker relationship between slack and wages, could lower inflation expectations – for example, if demand is weak today, people may expect lower inflation tomorrow. And lower wage and inflation expectations could themselves depress demand – for example, by raising levels of real interest rates. Nonetheless, it is worth considering these explanations in turn. (a)  Slack and the Phillips Curve  The short-term relationship between unemployment or the output gap and wage growth or inflation – the Phillips curve – is one of the most intensively studied in macro-economics.4 Despite that, empirical estimates of the Phillips curve have tended to be poorly-identified. That may reflect the effects of structural and behavioural shifts, which have the potential to alter historically-estimated Phillips curve relationships. For example, changes in the credibility of the monetary policy regime can cause inflation and wage expectations to alter, causing the Phillips curve to shift around over time for a given level of slack.

Chart 30: Simulation of Bank rate and CPI inflation, if the starting level of slack is 2% Path for Bank rate  Per cent 1.5  Per cent 3  CPI inflation  2.5 1 2 1.5  0.5  1 0 0.5 2013  2014  2015  2016  2017  -0.5 2013 2018  February IR Simulation with a lower bound at 0% Simulation with a lower bound at 0.5%  2014  2015  2016  2017  0 2018  February IR Simulation with a lower bound at 0% Simulation with a lower bound at 0.5%  Source: ONS and Bank Calculations. Simulations show optimal policy under full commitment. Of course, there are good reasons why monetary policy is not set by algorithm. These simulations ignore a number of important practical uncertainties. For example, they assume that this policy path is fully credible and effective in stimulating demand and inflation expectations. In practice, the effects of a policy easing cannot be known with certainty and 18  BIS central bankers’ speeches  policy credibility cannot be guaranteed. Moreover, there are upside as well as downside risks to the inflation outlook. Nonetheless, these experiments are in my view the right baseline when assessing the appropriate policy stance today. Conclusion Inflation has dropped like a stone over the past year, to close to zero. This largely, but not wholly, reflects external forces.
While at one end of the spectrum, the case is being made that there is no other alternative to the market to generate an efficient functioning financial system, at the other end of the spectrum the call is for a more interventionist regime. The solution lies in a balance between these, and the avoidance of an over reaction in addressing weaknesses and excesses that have been built over an extended period of time. Equally important is to recognise that for markets to function efficiently, institutional and market infrastructure need to be well developed. The incentive structure, the rules of the game, the transparency and the levels of financial literacy also needs to be in place. When these elements are still yet to be developed, as in many emerging economies, it increases the risk to financial stability. For advanced financial systems, however, when the institutional structures and rules became deficient and less relevant, it is necessary for them to be changed. In essence, the environment has become highly dynamic requiring regular regulatory reinvention. Let me turn to the approach adopted by Bank Negara Malaysia. The recent global developments will not fundamentally alter the main tenets of our approach to the regulation and supervision of financial institutions in Malaysia. It will continue to be a balance between rules-based and principles-based regulation. The principles-based approach is more likely to produce more efficient market outcomes, better risk-alignment and socially responsible behaviour.

Zeti Akhtar Aziz: Key issues confronting the financial sector in Malaysia Keynote address by Mrs Zeti Akhtar Aziz, Governor of the Central Bank of Malaysia, at the Financial Industry Conference 2009, Kuala Lumpur, 17 November 2009. *  *  *  It is my great pleasure to welcome you to our financial industry conference for this year. This conference takes place at a time when the global financial landscape is experiencing fundamental change. Even as we meet, events continue to unfold in directions that are likely to fundamentally alter the way in which financial institutions conduct their business. Reforms to strengthen the foundations of financial stability are wide-ranging to improve the supervision and regulation of financial institutions, and the institutional arrangements for coordination and cooperation in the area of surveillance and crisis management within and across jurisdictions. This Conference is organised by Bank Negara Malaysia to engage in constructive dialogue with the industry on developments affecting the international and domestic financial industry, focusing in particular on implications for financial institutions in Malaysia. Economic developments and outlook After a challenging beginning to this year, Malaysia is now gradually moving on a path of recovery supported by strong macroeconomic fundamentals and a sound financial sector. Economic activity has continued to show a marked improvement in the third quarter, with positive growth expected in the fourth quarter.