samchain/econo-pairs-v1 huggingface dataset:
First, in a financially integrated world it has been argued that it is global monetary liquidity rather than domestic liquidity which affects domestic interest rates and domestic economic activity, mainly – though not exclusively – through its effects on liquidity premia. Second, it has been claimed that the level of longer-term domestic real interest rates is likely to be determined by global savings and investment rather than its national components. These influences can be expected to be more pronounced for smaller economies. Therefore, a smaller country which cannot affect the global supply of liquidity to any significant degree could then lose effective control of inflation. This reasoning, however, is dubious, and not supported by theory or confirmed by empirical evidence. For example, in a two-country new Keynesian model, it has been shown that, provided exchange rates are flexible, global monetary factors can affect the domestic price level only through their potential short-term effects on global output. 1 Interestingly, the sign of the spill-over effect is the opposite of what would be expected from the global liquidity hypothesis. A comparatively loose foreign monetary policy induces a depreciation of the foreign currency and has a negative impact on domestic demand and prices in the home country. The main conclusion of rigorous theoretical analysis is that monetary policy can affect domestic demand even in a fully financially integrated world and even in a small country, as long as exchange rates are flexible.

Causes of the financial market turmoil What have been the underlying main causes of the financial market turmoil? What have been the key weaknesses in the functioning of the financial system that have been revealed? And what are the appropriate further responses of market participants and policy-makers? A full diagnosis of the causes and weaknesses is not yet complete and, indeed, not possible as the  19  8  See ECB (2007b), Box 7, on the propagation of the sub-prime shock to other markets. BIS Review 9/2008  market adjustment is still ongoing. Nevertheless, I would like to highlight four areas that are also pertinent to the issues of financial integration and development we are discussing. •  First, the underlying causes and triggers are to be found in the price dynamics of the US housing market and the excesses and shortcomings (in the practices) in the US sub-prime mortgage market. So, a main determining factor of the financial market turbulence is that same one – property price overvaluation – that characterised previous episodes, as emphasised by Kenneth Rogoff. •  Second, weaknesses in the functioning of the market for structured finance products. These included valuation uncertainties due to the complexity of many products, the imperfect information available about the underlying asset characteristics, inadequate appreciation by investors of the embedded risks, and excessive reliance on the ratings of such products by credit rating agencies.
Weighing all these factors, on July 14th we announced an FX intervention program, completely sterilized, very similar to the one conducted in 2019 consisting in spot and forward sales and a preventive liquidity program through FX swaps. These interventions are exceptional tools to provide a backstop on destabilizing dynamics on financial markets. As a result of the intervention, we saw a moderation in all metrics of volatility and reduced frictions in the process of price formation. It is important to appreciate that coincidentally with the FX intervention announcement, the winds in the global markets became more constructive. Given this more favourable outlook, the program ended in September as planned. Regarding inflation, as stated before, its high level is the main challenge the Central Bank is facing. Beyond its high level, since June’s 2022 Monetary Policy Report there was an assessment that inflationary persistence was on the rise, amid constant and significant upside surprises in inflation and rising expectations in different timeframes. For these reasons the central bank could not stay still. Beginning early in July 2021 the Board decided to raise rates from the ELB at 0.5% to 11,25% in October of this year. This has been done swiftly and decidedly helping to resolve the macroeconomic imbalances that the economy accumulated. In fact, spending is slowing, the exchange rate has appreciated in recent weeks and after a very long period of higher-than-expected inflation private agents start adapting to the environment by adjusting expectations downwards.

If necessary, it will therefore remain active in the foreign exchange market to influence monetary conditions. Thank you very much for your attention. I will now be happy to answer your questions. BIS central bankers’ speeches  1
The combination of your forecasting models, a forward-looking capital regime and business models built around short-term policies means general insurers are well-placed to manage physical risks in the near term. 14  See Met Office research into climate http://www.metoffice.gov.uk/media/pdf/t/r/UK.pdf. 15  A Lloyd’s report (“Catastrophe Modelling and Climate Change” - 2014) looks at factors that influence the impact of hurricanes. It notes the importance of sea-level changes – in addition to wind speed and tides – in the impact of Sandy on New York. See www.lloyds.com/~/media/Lloyds/Reports/Emerging%20Risk%20Reports/CC%20and%20modelling%20templa te%20V6.pdf. 16  As the PRA’s report to Defra notes, major catastrophe events have often driven innovations in risk management. For example, following Hurricane Andrew (1992, $ billion uninflated insured losses) and the associated insolvency of eight insurance companies, the industry developed a more sophisticated approach to assessing catastrophe risk, and became more resilient to similar events. BIS central bankers’ speeches  observations,  projections  and  impacts  –  5  But further ahead, increasing levels of physical risk due to climate change could present significant challenges to general insurance business models. Improvements in risk modelling must be unrelenting as loss frequency and severity shifts with: –  Insurance extending into new markets not covered by existing models;  –  Previously unanticipated risks coming to the fore; and  –  Increasingly volatile weather trends and hydrological cycles making the future everharder to predict. For example, the extent to which European windstorms occur in clusters 17 could increase the frequency of catastrophes and reduce diversification benefits.

The BIS has the long tradition of being a very good avenue for global central banks and regulators to address common issues like these. And it is clear the visionary decision to set up the BISIH will serve to provide a valuable focal point for the central banking community in the many years to come. 20. In this regard, we would like to express our full support to the BISIH to continue promoting collaborations among central banks and delivering ideas and insights that would help the global banking system move with technological developments in an efficient, secure and sound manner for the benefit of the community at large. Lastly, I wish this Summit a great success. Thank you very much. 3/3  BIS central bankers' speeches
National balance sheets and the crisis Recently, when events have centred on the euro area, the focus has been on the risk of sovereign default. The underlying issue is the cumulative loss of competitiveness of some economies, and the consequent strains in government balance sheets resulting from their attempts over the years to use fiscal policy to sustain growth. A look at Spain’s external balance sheet reveals (net) liabilities of around 100% of GDP (Chart 1). Italy’s net external liabilities are, perhaps, rather smaller than that (Chart 2). But in terms of total government debt, Italy’s new administration inherited the greater burden. Put those two facts together and it becomes clear that Italy’s fiscal problem is partly about the distribution of debt and resources within the country. Japan is, perhaps, not dissimilar. Go back four-five years, to the beginning of the crisis, and the problem was the mortgage obligations of US households – subprime households in particular were hugely over borrowed. The commercial real estate sector too. Defaults there triggered the crisis. Every set of defaults and problems around the world has reverberated through the UK, due to London’s role in intermediating international capital flows. We have one of the largest gross external balance sheets (Chart 3). Although much of it is accounted for by foreign banking activity, the City is not an entrepôt. UK banking is linked to the wider City’s fortunes via complex counterparty-credit exposures and investments.

The spot nominal interest rate on a ten-year zero-coupon government bond can be thought of as the average of the short-term interest rates expected to prevail over the ten year period, plus a term premium (which is often thought of as compensating investors for uncertainty around those short-term interest rates). Comparisons between yields on government bonds of different maturities can be used to identify a sequence of forward rates (ie the expected short rates at each point in time plus a forward term premium associated with that maturity). Using the information from the yields on inflation-linked government bonds, expectations of nominal short-term interest rates and forward premia can be broken down further into the expected future inflation rate (and an associated forward inflation term premium) and the expected future real interest rate (together with the associated forward real term premia), equation (1). ftnominal(n) = (Et[rt+n] + RPtReal) + (Et[πt+n] + RPtπ) ; where ftnominal(n) denotes the n-period ahead forward interest rate prevailing at time t; Et[rt+n] and Et[πt+n] the expectations for the real interest rate and the rate of inflation at that point and RPtReal and RPtπ the corresponding forward real and inflation term premia. In principle, then, there are two broad channels through which a decision by monetary policy makers to change their policy rate could affect longer-term interest rates, such as the 10-year government bond yield. First, the decision could change market participants’ expectation of either real interest rates or inflation. It is worth noting two standard bedrocks of monetary economics here.
The conventional central banker approach is to build trust through a track record. In recent decades this has been supplemented by greater transparency. But trust is also grounded in familiarity. People trust individuals, places and things that they know. Better reflecting the diversity of the people we serve can reduce misperceptions that we are experts making esoteric decisions in an ivory tower for the benefit of others. Broader outreach to all strata of society across the country can reinforce these benefits. Diversity can make our communication more effective. Homogenous organisations are more likely to fall afoul of the ‘curse of knowledge’, where people assume that their audience has the same information and base level of understanding as themselves. By drawing on alternative perspectives, we can craft our messages so that they resonate with more people. 2  All speeches are available online at www.bankofengland.co.uk/publications/Pages/speeches/default.aspx  2  Third, greater diversity leads to better decision making. Homogenous groups are vulnerable to over-optimism, bias and groupthink. They easily become rigid. In contrast, diverse teams can adapt better to change. Such resilience is particularly important in a world where information is super abundant and certainty is absent, and it is especially relevant in finance where most decisions are taken under uncertainty. But diversity alone is insufficient. For its benefits to be realised fully, diverse teams must be supported by the right frameworks.

Our currency did not mark a notable change against emerging market economies competing with Turkey in the exports markets. In this respect, the relatively stable course of the real exchange rate index compared to developing countries underpinned the maintenance of Turkey’s competitive power in foreign trade. As is the case across the world, the Central Bank’s decisions on monetary and exchange rate policy also affects the economy as a whole in Turkey. Under a fixed exchange rate regime, it is possible to control the nominal level of the foreign exchange rate. Nevertheless, under free market conditions, whatever the exchange rate regime and exchange rate policy are, it is impossible to control the real exchange rate level. The real exchange rate level will ultimately move towards the long-term balance level according to the structural features of the economy. In an environment of pressurized nominal foreign exchange rate, this movement will emerge by the changes in the prices of goods and services; i.e. inflation. In countries like Latvia, Estonia, Lithuania, Bulgaria, where a fixed exchange rate regime was implemented, this was experienced before the global crisis and these countries faced the problem of high inflation. We foresee that the distinguishing characteristics of countries will come to the fore in the upcoming period and currencies of those countries with lower risk, stronger economic and financial fundamentals and high growth potential are expected to perform better. Should macroeconomic stability be maintained and structural reforms be put into effect, Turkey will also have a place among these countries.
SPEECH DATE:  26/03/2019  SPEAKER:  Deputy Governor Cecilia Skingsley  VENUE:  Entreprenörskapsforum, Stockholm  CLASS:  SVERIGES RIKSBANK SE-103 37 Stockholm (Brunkebergstorg 11) Tel +46 8 787 00 00 Fax +46 8 21 05 31 registratorn@riksbank.se www.riksbank.se  The effects of digitalisation on the economy* Thank you for the invitation to come here and speak at Entreprenörskapsforum. I cannot imagine a better place to talk about digitalisation and its potential effects on the economy. One example of technological advances and the effects of digitalisation is right here – in our mobile phones. Four out of five Swedes in the age range 16-85 had access to the internet via a mobile phone in 2018.1 It is difficult to imagine, but today's smart phones actually have greater processing power than the computers that enabled the Apollo moon landing in 1969!2 Smart phones also give us access to inconceivable amounts of information and entertainment that did not even exist in 1969. The answer to a question is only a few clicks away. As a consumer it is easy to see the value of these technological advances, although we do not in our daily lives use the capacity for anything comparable to the giant leap for mankind the moon landing entailed… The new technology provides us with entertainment, but not only that. It also affects our working lives and the economy in general.

Of course, size and influence need not necessarily be negative from a competition perspective. The problems arise when new companies experience difficulty starting up their operations and are forced to deal with various entry barriers to be able to “challenge”14 the established players on the market in question. Both economies of scale and network effects can function as entry barriers, however. Starting up a new Facebook would be difficult and require major investments, but it is not impossible.15 A further problem that can arise from digitalisation is that companies can use the different price comparison sites to observe one another’s pricing. One often claims that these platforms are really good for consumers trying to find the lowest prices, but they also make it easier for companies to monitor one another’s prices and coordinate their prices with one another.16 This can be a problem from the point of view of competition. Challenges can be tackled The short-term challenges I have described should not be underestimated. They are real problems that affect real people. And problems experienced now are not helped by knowing that humanity will benefit in the long run. But what is the best  13  Stefan Fölster replicated a study by Frey and Osborne (2013) using Swedish data and found that more than 50 per cent of all jobs could be replaced by digital and automated technology in the coming 20 years.
(a ) Le ve ra ge ra tio de fine d a s to ta l a s s e ts divide d by to ta l e quity e xc luding m ino rity inte re s t. (b) Due to da ta lim ita tio ns , the c ha rt o nly pre s e nts info rm a tio n o n A&L, B &B , B a rc la ys , HB OS , HS B C , Llo yds , No rthe rn R o c k a nd R B S . (c ) The re is a bre a k in the s e rie s due to the intro duc tio n o f IF R S in 2004.

Such demand shocks can be triggered by structural changes in the behaviour of economic agents or result from portfolio shifts or financial innovations in the context of financial globalisation. There are indeed some signs that a money demand shock occurred at the beginning of the 2000s in the euro area, as illustrated by an apparent structural shift in the trend velocity of money, which summarises the relationship between money, output and the price level. (see Figure Annex page 8). A tentative explanation is that our economies are becoming more and more "financial" in the sense that the ratio of financial wealth to GDP is constantly increasing. Since economic agents – especially financial intermediaries and corporates – need to keep part of their total financial assets in liquid holdings, there may be a structural increase in the demand for money (everything equal). The euro and the integration of European capital markets may have accelerated this evolution. As an illustration of the uncertainties facing euro area monetary policy makers, one possible consequence of current events in credit markets may be to trigger a re-intermediation process, i.e. an expansion of banks' balance sheets which may further complicate our reading and interpretation of monetary and credit dynamics in the months to come. As you can see there is a need to continuously reassess and diversify the tools used in our monetary analysis. 4. Predictability and frequency of policy actions  Contrary to some preconceptions, most monetary policy decisions have been perfectly anticipated by the markets.
Let me also say a few words about how we work to be able to carry out these tasks in a good way. 5 Riksbank's Annual Report 2009, Figure 11;  http://www.riksbank.se/Upload/Dokument_riksbank/Kat_publicerat/Rapporter/2010/ar2009_en.pdf 6 https://www.riksgalden.se/en/aboutsndo/Guarantees-and-lending/Our-guarantees/  6 [12]  Regular analysis of the stability of the financial sector and good crisis preparedness To be able to fulfil our liquidity supporting role in a crisis, we must have good knowledge of the financial system and its participants. We therefore analyse financial companies, infrastructures and markets, as well as the links between them, both under normal circumstances and in times of crisis. In the initial stage of a crisis – when the Riksbank needs to make a decision on liquidity support of several billion in the course of a day or so, or in the worst case a few hours – it is not possible to start analysing the bank that is in distress and what links it may have to other participants in the financial system. Being a slow starter does not work, as the course of a crisis can be very rapid. A regular analysis of banks and other financial companies even during normal circumstances is needed also to ensure that the institutions that are members of RIX have good risk management, so that they are stable and do not subject the system to major risks.

But before the minutes are published it is the majority line that applies when we Executive Board members make speeches outside of the Riksbank. After that we members are each free to describe our personal differences of opinion regarding the interest rate decision. Constant assessment means that we are always prepared for change Let me round off. Today I have talked about the major changes in recent years in the way we produce material used as a base for our interest rate decisions. Some of these have come about because the methods of making forecasts in general have developed, something that also affects other central banks. Other changes have been shaped by the specific conditions that apply in Sweden. The Riksbank’s independent position makes demands on us to be open and clear, what economists usually term transparency. The Riksbank’s decision to begin publishing its own forecasts for the repo rate is a step in the work on increasing transparency and further improving our analysis. 10 The new assumption for the repo rate has led to the Executive Board becoming more involved in the forecasting process. We are constantly evaluating our forecasts to see how successful they are at capturing developments. This also means we are constantly striving to improve our ways of working. If we make any major changes that have significance for our forecasts we will of course let you know.
In poor and vulnerable countries where financial development is weak and sovereign indebtedness with the banking sector is predominant, the feedback effects between the deterioration in public accounts and rising debt, on the one hand, and liquidity, or even solvency of the banking system on the other, also foster the propagation and amplification of shocks. The current terms of trade shock thus highlights the excessive dependence of vulnerable and poor countries on commodities. 2. How to mitigate terms of trade shocks? On this subject, it seems essential to distinguish two types of objectives: the objectives of economic and financial stabilisation on the one hand, and the objectives of prevention and better resilience to terms of trade shocks on the other. As regards economic and financial stabilisation, macroeconomic policies, in particular fiscal policies, play a central role in this field. Of course, in order for these to be implemented, it is necessary to have sufficient countercyclical room for manoeuvre. Consideration should also be given to how fiscal consolidation policies can preserve investment priorities for sustainable development, based on the development of infrastructure and human capital (health, education). The effects of fiscal consolidation can thus be mitigated by changes in the composition of government revenue and expenditures, more favourable to long term growth. As regards the exchange rate, the optimal policies to be put in place in developing countries facing exogenous shocks are the subject of debate.

Countries such as Australia, Hong Kong, the UAE, the UK, Singapore, and Malaysia have issued discussion papers, introducing a sandbox approach which allows fintech solutions to be tested in a controlled environment, with appropriate risk mitigation in place. BIS central bankers’ speeches  3  Dedicated resources have been allocated to collaborate with private sector innovators and assess the feasibility of technology. Jointly, these efforts serve to build public-private consensus on how to deploy financial technology, by: a.  Conveying national-level support for fintech innovations that place the customer firmly at the centre;  b. Providing clarity to the public on the applicability of regulations to fintech solutions; and  c.  Supporting regulators and supervisors in understanding technologies function, as well as the benefits and risks. how  underlying  Third, it is important to address the role of Governments in national financial inclusion strategies. This is particularly relevant in encouraging e-payments as a key lever to expand the outreach of formal financial services. A clear commitment by Governments can secure the political capital needed to create the infrastructure and policies to accelerate financial inclusion such as unique identifiers and mandatory electronic G2P payments. Policymakers should also seek opportunities to promote the interoperability of supporting infrastructure for new financial innovations. This will preserve healthy competition and strong incentives for providers to continue innovating value-add solutions that meet the real needs of consumers.