samchain/econo-pairs-v1 huggingface dataset:
One of the main pillars of policy implementations in this respect is to encourage economic units to borrow less and to use more equity capital (in other words to have lower leverage ratios). Recent implementations such as increasing required reserve ratios, the termination of remuneration of required reserves, the sustained fiscal discipline in the public sector as underlined in the  BIS Review 174/2010  1  revised Medium-Term Program, the increase in Resource Utilization Support Fund deductions imposed on consumer loans, the introduction of limitations to loan/value ratio in mortgages, the 12-percent target for banks’ capital adequacy ratios are deterring measures against an excessive rise in indebtedness ratios. Secondly, the extension of maturities regarding the borrowings of economic units is encouraged. Under the aegis of the Undersecretariat of Treasury, studies for extension of maturities in public borrowings are being carried out successfully. An important development is that The Banking Regulation and Supervision Agency has permitted the issuance of Turkish lira bonds so as to extend the maturities of liabilities in the banking sector. Additionally, the Central Bank decreased overnight borrowing by 400 basis points last month enabling short-term swap interest rates to go down when required. Besides, the Central Bank aims to encourage long-term deposits with the new arrangements to be made in required reserves. The third pillar of the policy framework is to encourage borrowing in terms of the Turkish currency and to strengthen the net foreign exchange position.

Global liquidity has increased significantly as central banks of developed countries, which eased policy rates rapidly, adopted quantitative easing policies. Recently, capital flows to developing countries such as Turkey have been accelerating owing to expectations that short-term interest rates in developed countries would remain low for an extended period, the decoupling in growth performances of countries and increased risk appetite. In the face of growing capital flows, some developing countries are introducing measures to prevent capital inflows. However, past experiences of countries show that restricting capital inflows is not really effective in terms of the volume of capital inflows while it is only partially effective in terms of the type of incoming capital. In other words, due to reasons such as financial innovation and the integration of markets, it is not possible to effectively prevent capital flows, unless they are fully controlled. The current conjuncture is conducive to benefiting wisely from capital flows and implementing policies that would reinforce financial stability and enhance financial depth. In this respect, the Financial Stability Report, which was prepared by the Central Bank of the Republic of Turkey and made public yesterday, is an important policy text delineating the strategy to be implemented in the upcoming period to maintain and reinforce financial stability in Turkey. Therefore, I suggest that the report be examined in detail. The policy framework, which the Report outlines in detail, has four pillars.
For example, we are working within the framework of the Swedish Retail Payments Council to survey the possibilities of making card payments and withdrawing cash in an offline situation, which is to 14 See Mancini Griffoli, T., Martinez Peria, M. S., Agur, I., Ari, A., Kiff, J., Popescu, A., and Rochon, C. (2018) “Casting Light on Central Bank Digital Currency”. IMF Staff Discussion Note. SDN/18/08. 15 It may, however, be difficult to know what the right price is in such a market. Theoretically, an efficient market is considered to be one in which no company makes excess profits. The price of one product should approximately reflect the cost of producing one more product, known as the marginal cost. But if the price were to reflect the marginal cost, the company would make a loss in these special markets. In normal industries, the marginal cost normally rises when production encounters bottlenecks. For natural monopolies, fixed costs dominate instead, so that a price corresponding to the marginal cost will be too low. 6 [8]  say when disruptions have made it impossible to check the balance of the account or credit to which a card is linked. 16 At present, certain cards do not function at all in an offline situation, while others do. If we were to be impacted by a complete breakdown of both the Internet and telecommunications, it would not be possible to withdraw cash. Consequently, we cannot, at present, rely upon cash being available in a crisis situation.

We are not out of firepower by any means, and to be honest it looks from today’s vantage point that we were too cautious about our remaining firepower pre-Covid. But, hindsight is a wonderful thing when you have it. In the decade ahead, I think we need to take on board the message the Covid crisis has reiterated, namely that our tools may be state contingent in their effects. And with that in mind, let’s not ignore the need to manage central bank balance sheets to enable such state contingency to take effect. There are times when we need to go big and go fast. Thank you. 6  All speeches are available online at www.bankofengland.co.uk/news/speeches and @BoE_PressOffice  6
I don’t want to get too sentimental, but it is clear that our centuries-long common and shared history is no mere accident and that without exactly this similarity and closeness maybe our shared history could never have been so long in the first place. Again, this does not mean that we do not have our differences. Yes, we are still not equally wealthy, for example. Our elites have different opinions on many issues. Logically, we have different historical national wounds and pains. But again, this changes nothing in our mental – and not just geographical – closeness. Ladies and gentlemen, we are in Vienna, and my favourite Czech philosopher Vilém Flusser once said that Vienna and Prague are just two halves of one, single city. I very much agree. Perhaps this is ultimately why Czechs feel good in Austria: they feel very much at home. Therefore allow me right here my last point: if you are looking for anecdotal evidence of the closeness I am talking about, here is one anecdote I like to give here in Austria. Because we have friends here at the central bank, it is good to realise that the governor of the Austrian central bank is named Nowotny, his vice-governor and my dear friend is named Duchatczek, and the head of the local financial markets authority is called Pribyl. All these are typical Czech names.

After several years spent within the Austrian financial group Erste and its Czech daughter bank, after many visits to Austria on business and on pleasure, and after many working meetings with Austrian partners on various occasions, I have become convinced that Czechs and Austrians have a very similar mentality and share many habits and customs. I would even go so far as to say that hardly any other nation is so similar to the Czechs than Austrians – maybe not even the Slovaks. There are many on either side who will not like this thesis, but I believe there is a lot of truth in it. Not only are Czechs and Austrians typical small savers with a conservative approach to money and debt, and not only do they have similar cultural attitudes to those many petty things important for our lives, from the culture of alcohol drinking to obsession with academic titles, from very similar attitude to clothing to shared mania with sometimes overly bureaucratic procedures here and there. And from comparable attitude to what we deem as the so-called status products in our lives to similar phenomenons and problems also in politics. Moreover however, there is a similar attitude to work. It was Jack Stack, the former head of Erste Group’s Czech subsidiary Česká spořitelna, who made me realise this. He once remarked that it was almost unbelievable how Czechs and Austrians as employees produce very similar outputs and results when given the same tasks to perform.
For example, the technology stocks associated with initial public offerings were very difficult to short because the available supply or “float” was small – a high proportion of the shares in the companies were held by the original venture capital investors and subject to lock-up periods before the shares could be lent out to short sellers or sold. Similarly, housing is notoriously difficult to short. The option of selling one’s home in order to rent is expensive not only in terms of time and effort, but also in terms of transaction costs. And, shorting complex structured finance products was difficult because there were no standardized instruments; the securities rarely traded and were very difficult to value. It was not until the development of the ABX indexes – which allowed investors to buy and sell credit default swaps on pools of structured finance obligations – that investors had a vehicle that allowed them to short subprime mortgagebacked securities more easily. 6 Asset bubbles often come to an end when the basic belief system is contradicted by events. This can happen very naturally as a matter of course because economic fundamentals deteriorate, or because there is a change in rules or regulations that disrupts the balance between supply and demand. In the technology boom, this might occur because each company cannot get to the market first. So even if there is a first-mover advantage, not everyone will be able to take advantage of it.

If China’s economy has a hard landing, there really aren’t many sources of strength left in the global economy. Let me move now to what this all means for Fed policy. As I noted earlier, our statutory mandate is to achieve maximum employment and price stability.5 We are far short of maximum employment. And I expect inflation to fall this year below the 2 percent level that we view as consistent with our mandate. This is clearly a situation in which we have to keep applying monetary policy stimulus vigorously. The Fed’s monetary policy body is called the Federal Open Market Committee, or FOMC. As you know, the Fed influences the economy through its ability to affect interest rates. In December 2008, when the recession was hitting with full force, the FOMC lowered the federal funds rate, the rate banks pay to borrow from each other on overnight loans, close to zero. It’s been there ever since. Given the weakness in the economy, standard monetary policy guidelines indicate that the federal funds rate should have gone deep into negative territory. But, of course, it’s not possible for interest rates to go much below zero. So the Fed has had to look for alternative ways to stimulate the economy. For example, we’ve purchased over one-and-three-quarters trillion dollars of longer-term securities issued by the U.S. government and mortgage agencies. This raises the prices on these securities, which lowers their yields. And lower yields on longer-term Treasury securities tend to push down other longer-term interest rates.
The idea behind the recent policy has been to avoid the exchange rate appreciating too rapidly and in this way to hold inflation up until economic activity takes over as the driving force. Thus, the plan has not been to try to permanently battle against fundamentals. 12 This has so far worked relatively well, but we are now beginning to approach the critical stage where economic activity is supposed to take over the baton. One cannot escape the fact that inflation outcomes have been somewhat worrying recently. It is now mostly the CPI that is showing a clear upturn. The more underlying rate of inflation measured by the CPIF excluding energy prices has over the year developed more or less sideways, or even shown a tendency to decline slightly. The inflation outcomes in coming months will be very important. 10 See, for example, Goodfriend (2016). 11 For a more detailed discussion of the problem of very negative policy rates, see Alsterlind et al (2015) and  Nessén (2016). 12 However, for my own part I am not convinced that fundamentals currently need to lead to a signifi cant krona appreciation in real terms, see the minutes of the Riksbank's monetary policy meetings in September and October. 10 [20]  The conditions for economic activity to soon take over as the main driving force behind inflation nevertheless look good, given the positive development we are seeing in the real economy.

References Alsterlind, Jan, Armelius, Hanna, Forsman, David, Jönsson, Björn and Wretman, AnnaLena (2015), ”How far can the repo rate be cut?”, Economic Commentary, no. 11, Sveriges Riksbank. Ball, Laurence M. (2014), “The case for a long-run inflation target of four percent,” IMF Working Paper, WP/14/92, International Monetary Fund. 13 Ekonomisk Debatt (1996). 12 [20]  Bernanke, Ben S. (2016), “Modifying the Fed’s policy framework: Does a higher inflation target beat negative interest rates?”, blog post, Brookings, 13 September. Blanchard, Olivier, Dell’Ariccia, Giovanni and Mauro, Paolo (2010), “Rethinking macro policy”, IMF Staff Position Note SPN/10/03, International Monetary Fund. Bäckström, Urban (2003), ”1990-talets väg till prisstabilitet” (the 1990s route to price stability), Chapter 6 in Jonung, Lars (ed. ), På jakt efter ett nytt ankare – från fast kronkurs till inflationsmål (Looking for a new anchor. From a fixed exchange rate to an inflation target), SNS Förlag. Ekonomisk Debatt (1996), ”Riksbanken och penningpolitiken” (the Riksbank and monetary policy), Proceedings at the Swedish Economics Association 21 February 1996, no. 4. Jansson, Per (2014), ”Swedish monetary policy after the financial crisis – myths and facts”, speech at SvD Bank Summit, 3 December, Sveriges Riksbank. Goodfriend, Marvin (2016), ”The case for unencumbering interest rate policy at the zero bound”, essay presented at the conference “Designing Resilient Monetary Policy Frameworks for the Future”, Jackson Hole, Wyoming, 25-27 August. LO (1994), ”Sverige har råd!” (Sweden can afford it), information paper, the Swedish Trade Union Confederation.
In addition, it also had to weigh carefully the advantages of providing lender-of-last-resort assistance to the banking system to avoid a drop in its revenue stream against the risk of lending to an insolvent institution and making a loss that could decrease its capital base and threaten its reputation as the supplier of the ultimate settlement asset. Similarly, central banks had a natural interest in ensuring the ability of the banking sector as a whole to meet the public’s demand for liquidity. The reason for this is that if it allowed a  1  For further details see Stephen Millard and Victoria Saporta (2005): Central banks and payment systems: Past, present, and future. See also Ben Norman, Rachel Shaw and George Speight (2006): The history of interbank settlement arrangements: exploring central banks’ role in payment systems. BIS Review 130/2007  1  solvent commercial bank to fail as a result of a bank run, it would only aggravate the situation and this could ultimately result in a more general run on the banking system and ultimately on itself. As a result, financial stability became a concern for central banks. Moreover, for the central bank as the provider of the ultimate settlement asset, it was also important to maintain monetary stability. In particular, if the central bank printed more and more of its banknotes without a corresponding increase in the demand for them, the notes would fall in value relative to those of other banks.

The recent developments were triggered by a perception of higher credit risk originating from a perceived deterioration of the credit quality of assets held both by banks and by special  BIS Review 130/2007  3  investment vehicles, with which banks were associated either through liquidity commitments or reputation issues. The situation deteriorated when liquidity buffers of banks were put under stress by the need to meet their liquidity commitments and to take on their balance sheet assets which had become illiquid. Then, banks also became unwilling to provide unsecured lending to other banks, in particular at longer maturities, because of uncertainty whether they would themselves obtain liquidity if needed. Once this stage was reached, the deterioration of liquidity conditions became self-reinforcing, and turned out to be painfully durable, as can be seen for instance from the still exceptional three-month EURIBOR spread relative to three-month repo rates. What could central banks do about this? First, they provided extra liquidity through open market operations. This not only contributed to bringing down short-term interbank rates to target levels again, fulfilling monetary policy implementation purposes, but may also have contributed to supporting the willingness of banks to lend. Second, accepting that availability of central bank eligible collateral is the ultimate line of defence against illiquidity for banks, many central banks widened the set of eligible collateral. For instance, the central banks of Canada and Australia took such actions, and also the US Fed clarified that it would accept certain instruments in its discount window.
Since then the degree of uncertainty, as measured by the width of our fan charts, has decreased significantly, while the balance of risks has shifted as I have set out to being two-sided. While the range of potential outcomes is, as I have described, a complex and multidimensional one, and is still beset with considerable uncertainty, I find it helpful to map out three broad scenarios which for me summarise how the risk factors may play out, and map across to what course the economy might take in future. 12  All speeches are available online at www.bankofengland.co.uk/news/speeches and @BoE_PressOffice  12  The first potential scenario I foresee is broadly in line with the MPC’s “central expectation” set out in the June minutes: that the economy will experience a temporary period of strong GDP growth and above-target CPI inflation, after which growth eases and inflation fall back towards the 2% target. Of course as I stressed earlier, “temporary” doesn’t necessarily mean ‘here today, gone tomorrow’, particularly for inflation. The supply side pressures and their interaction with demand might take some time to disperse. In the mean time we could see very high inflation in certain sectors and products, such that at a whole economy level I wouldn’t be surprised to see the whole economy CPI inflation rate potentially rising as high as 4% for a period later this year, before falling back towards the 2% target. That would not be an unprecedented event: we saw similarly high outturns in 2008 and 2011.

Developments since May The MPC’s next Monetary Policy Report is not published for another three weeks, and we have not yet begun to discuss what our updated August forecast might look like. What I am going to discuss today will be the MPC’s initial assessment, as set out in the minutes of our June meeting, of what we had learned about the economic outlook since our May MPR, as well as my own interpretation of the very latest data which have come out over the last three weeks since the June MPC meeting. Global growth appears to have been somewhat stronger than we expected in May, largely due to upside news in the euro area. Activity in the US so far looks to have been broadly in line with expectations; but CPI inflation in the US has now reached 5.4% - its highest level since 2008, and 0.5pp above market expectations at the time of release. Despite that, global yield curves, led by US Treasuries, have first risen and then fallen back in recent weeks; the ten year gilt yield is now 10bps lower than at the time of our May forecast, while ten year US Treasury yields are 20bps lower. Bank staff models suggest US factors have been the dominant driver of the movements in UK yields since May.
The low pay increases in this year’s wage settlement may indicate that the social partners are placing more emphasis on the negative effects of large pay increases on future developments in interest rates, the krone exchange rate and  BIS Review 50/2003  5  employment. We expect that in the light of the experience gained in 2002, public entities will exercise more caution in future wage settlements. Expectations of moderate wage growth are supported by the labour market outlook. The monetary policy easing since last December will boost demand, primarily through private consumption and gradually through business investment. The increase in petroleum investment will also contribute to higher demand for Norwegian products and services. As global demand picks up and excess capacity in service industries is reduced, demand for labour may rise in other sectors of the economy. Unemployment is expected to edge down again. The aim of monetary policy in the period ahead is to achieve a higher level of inflation. The key rate has been reduced with a view to bringing inflation back to target at the two-year horizon. Analyses in the October Inflation Report indicate that inflation will move up and stabilise around the inflation target at the two-year horizon. The real economy is projected to be approximately in balance, with an output gap, as we measure it, that is slightly positive.

For tail risks in particular, the dark corner where we shine the light may not necessarily be the place where those risks reside. Many of the risks inherent in Islamic Finance are similar to those of conventional finance, including credit risks, market risks, market conduct risks, operational and reputational risks. However, the exposure to those risks could differ between conventional and Islamic finance. For instance, Islamic banks are generally exposed to substantially more liquidity risk than their conventional counterparts, as the range of liquid instruments and hedging instruments are more limited. Islamic banks tend also to be more exposed to the property and infrastructure sectors, in part because these are the prevalent asset classes in the Gulf and also in part because Islamic finance has to be based on physical assets. Given the “large and lumpy” nature of such transactions and the tendency for asset bubbles to build up quickly, it is a risk that merits special attention. In addition, there are also risks unique to Islamic Finance such as Shariah-compliance risk. If products are later found to be non-Shariah compliant, the institutions not only face reputational damage, but also costly unwinding of such structures, with possible losses to investors. The third point is that to achieve a good outcome, an effective regulatory approach needs to embrace a tripartite approach. Regulators, financial institutions and investors all have a role to play. Allow me to share briefly the approach that MAS takes.