samchain/econo-pairs-v1 huggingface dataset:
We have recently conducted a survey of the financial institutions to check their readiness to conform to the credit risk guidelines under the New Accord. I have been reported that many plan to be ready for the standardized approach, while others are working towards the IRB approach, this is a welcome news. More importantly, financial institutions have all started the effort to strengthen risk management in their respective institutions with some notable progress so far, and we look forward to more progress to come. I would like to take this opportunity to commend all of you for such efforts. After all, the BIS capital requirement only serves as a cushion of losses or failure of an institution whereas it is the risk management that reduces the chance of failure. The significant progress you have made in the area of risk management deserves our full support and commendation, particularly so as this is a very difficult time for the financial industries. Ladies and gentlemen, Coming back to the issue of preparation for the New Accord, one can see that significant challenges remain ahead. I will now turn to these challenges. First, the technical and infrastructure aspects. It is important to build up a deep understanding of the technicality of approaches and methodology underlying the New Accord. Moreover, it is critical to achieve in-depth knowledge of risk management and the impact of such developments on business model of the financial institution. Therefore the task ahead is very challenging, far beyond just acquiring software that would crank out numbers.

Commercial banks around the world have begun to find the technology to tackle such challenges profitably. However, there must be rewards to financial innovation and risk management capability that encourage financial institutions to address these segments of the markets profitably since a financial undertaking which looses money over time is not sustainable. The adoption of the New Accord, therefore, must ensure that the financial need of the dual economy is served. Secondly, while the Bank of Thailand can help foster the infrastructure for risk management, we must avoid the problem of taking away the incentive for, and accountability of, the private institutions to manage their own internal database that could be used for their own models in the long run or to manage their own risks. If a regulator oversteps the bound, there may be risk of moral hazard. Much difficulty will go into walking the thin line in overseeing safety of a system and to avoid "approving" the risk model or risk management system. I hope that this seminar will shed light on the experience in other countries. These challenges are complex and difficult in nature, but we must tackle them successfully to ensure that the Thai financial institutions are strong members of the global financial community. The market risk seminar today is a strong indication of this intention to meet the challenges. Back in 1996, the Bank of Thailand had already embarked on the study and preparation for the adoption of the '96 Accord on Market Risk.
And contrary to common perceptions, this is not only about bringing general government deficits under the 3% line, but it is also about bringing them closer to balance or to surplus in the medium term so that fiscal space can be used in the event of a recession. But even ex ante solvent governments can come under pressure in the face of very large shocks. Absent national stabilisers, such as an autonomous monetary policy and exchange rate, such shocks have already tested the cohesion of the currency union as a whole. This is why a common monetary policy needs a complement in the form of a common fiscal instrument that can support – under proper democratic control – aggregate demand if need be. Many of the Economic and Monetary Union (EMU) reform proposals that are currently being discussed would help bolster these three lines of defence. Enhancing national ownership of structural reform efforts, for example, could help make our economies more agile. A true capital markets union, leveraging the benefits of fintech innovation, would significantly boost the capacity of our financial markets to diversify and reduce risk, while the ECB has often argued that a European deposit insurance scheme is a precondition for a truly integrated banking system and safe money. And the Single Market still has a lot of untapped potential, in particular in the field of services. These should be priorities. More credible fiscal rules and greater market discipline would strengthen the second line of defence.

These characteristics of the crisis shape the two principal challenges that financial systems face today: reviving the flow of credit to economic agents, and the orderly restructuring of the financial system. Let us analyse these two issues separately. The first and most immediate aim is that credit and liquidity should once again flow unimpeded towards companies and consumers. The resolute action of European central banks and governments since October has meant that illiquidity strains have largely been resolved in the financial sector. However, credit to companies and consumers has been checked by banks' mistrust, by the increased risk profile of borrowers and by the sharp decline in demand resulting from the slowdown in economic activity. The deceleration is proving particularly acute and credit growth has fallen from a rate twice that of nominal GDP before the crisis to around 5%. And the prospect is that this trajectory will continue on the immediate horizon, with credit growth dipping to a zero or even negative rate. That generates a perverse effect which feeds back into the difficulties of both those demanding and supplying financing, making a global approach necessary: just as it is inconceivable that the current difficulties of the financial sector may be resolved if the downward spiral of the Spanish economy is not curtailed, nor may it be assumed that the current situation can be plausibly overcome if the flow of credit were to seize up.
Carry trade-related inflows into the bond market did cause some disruption of monetary policy transmission in summer 2015 and last winter and could have posed risks for financial stability further ahead. For this reason, and also to prevent the development of a new “overhang” following the offshore króna auction in June 2016, it was considered appropriate to take action to mitigate these inflows. Since then, they have largely stopped. However, there has been no let-up in foreign currency inflows in recent months, and by the end of last week, the Central Bank had bought foreign currency in the amount of 160 b.kr. since the beginning of July and the exchange rate had risen by nearly 12% over that same period. The available data indicate that foreign currency inflows are to a large extent related to the trade surplus, which has been quite large, owing partly to growth in tourism and positive terms of trade, plus foreign investors’ increased interest in direct investment in the Icelandic economy. The banks’ and other Icelandic firms’ improved access to foreign credit could play a role as well. On the other hand, speculative  7  flows related to the interest rate differential appear to account for only a small part of the inflows. Another important factor is that liberalisationrelated outflows are still limited. It should be noted, though, that balance of payments figures for Q3/2016 could change the picture somewhat, but they will not be available until the beginning of next month.

This will depend on developments, including exchange rate developments and the stance of other economic policies. In addition, nominal interest rates could change in response to developments in inflation and inflation expectations. Under current conditions, however, it must be borne in mind that the economy is not in balance but in the boom part of the cycle. Furthermore, the contribution from other economic policies is uncertain at the moment because a new Government has yet to be formed after the Parliamentary elections and next year’s fiscal budget proposal has yet to be presented. Moreover, it is too early to say what the impact of capital account liberalisation is. One thing is certain, however: if steep interest rate cuts are made without being warranted by economic conditions, it is clear that the real rate would decline for a while. But because credibility would undoubtedly suffer as a result of poorly grounded measures of this type, it would have to rise again, to a higher level than before, and for a longer period than would otherwise have been needed to bring inflation and inflation expectations back down to target. Is it a lost cause, then, that Iceland’s interest rates might with time become similar to those in trading partner countries? Not at all. First, we must hope, for their sake, that neighbouring countries will not need to  6  maintain such abnormally low interest rates for the long term.
Uruguay, for instance, has already carried  5 As the payment market is a natural monopoly with network externalities, it has a strong tendency towards con-  centration. For a more detailed description, see Ingves (2018). 6 See, for instance, Engert and Fung (2017), Davoodalhosseini (2018), Kumhof and Noone (2018) and Meaning  et.al. (2018). 7 See, for instance, Rogoff (2016) for a more detailed discussion on problems associated with cash usage. 3 [9]  out a successful pilot project with a digital peso. In Canada, Singapore and the Eurozone, prototypes have been produced and tested in limited environments to learn more. 8 The pilot version of the e-krona will be simple, but we are still some time away from a possible launch Now that I have explained why we think it is worth analysing an e-krona, I would like to move on to talk a little more about what form it might take. If we construct an e-krona, there are in principle two models we could base it on. In one of them, the e-kronas would be held in an account with the Riksbank and in the other the e-kronas would be in the form of digital units of value (tokens) stored locally, for instance on a card or in a mobile app. Both models would mean that the general public had the opportunity to hold money with the Riksbank, so the difference between the two possible e-kronas is not really so great.

If the central bank fails to do this, the market will certainly come up 3/4  BIS central bankers' speeches  with some alternatives for this purpose. In this connection, you are no doubt aware that the HKMA has just launched the Faster Payment System a few days ago. Once the system goes live on 30 September, people in Hong Kong will be able to enjoy almost instantaneous P2P payments, making use of either mobile phone number or email address, free of charge to the users. While the Distributed Ledger Technology used in crypto-assets creates many issues, the technology has shown great potential in many other applications. For example, the HKMA and the banks in Hong Kong will soon launch a digital trade (d) finance platform using DLT. We are also in the process of developing a DLT interface that can link the domestic trade finance platform with those of other trading partners, such as Singapore, on a bilateral basis. This new interface is expected to be launched sometime next year. Despite some improvements made in the past few years, cross-border payments, especially retail or small value, remain inefficient and costly. This is unsatisfactory as it is not conducive to financial inclusion in relation to remittances by SMEs or (e) individuals. In this connection, I am pleased to note that progress is being made recently, as some banks and non-bank e-wallet operators are now developing new cross-border payment channels, making use of DLT in some instances, that would result in faster and cheaper services for users.
The Government calculates that in 1997 the deficit will be 2.1 per cent and that the target of eliminating it in 1998 will be achieved. •  With the improved confidence in budget and monetary policy, together with the tighter interest rate policy from the second half of 1994 up to the end of 1995, it has been possible to check the earlier inflationary tendencies and bring inflation expectations down appreciably. Sweden is now among the countries in Europe with the lowest inflation rate regardless of which measure one uses. This, in turn, paved the way for a gradual lowering of our main instrumental rate - the repo rate - in 1996. •  What used to be an almost chronic deficit on current account has now been turned into a substantial surplus. This is reducing Sweden’s external debt, which also contributes to greater financial stability. •  Many structural measures have been implemented since the late 1980s. There are signs that, together with economic policy’s focus on stability, this has reduced the economy’s inflation propensity and raised potential output. Against this background, the direction of Sweden’s economic policy contrasts sharply with the unstable, inflationary path we experienced in the 1970s and ’80s and which contributed to the recession in the early ’90s, which was the worst for over sixty years.

Average life expectancy continued to rise sharply over the period, however. When it then became increasingly obvious during the 1990s that the ATP system was also going to be under-financed, a number of years of political debate passed before a majority of the Swedish parliament could agree on a new pension system that would be sustainable in the long term. With the implementation of the premium-reserve pension reform of 1998, a system was created that indeed is not guaranteed to result in high pensions for pension savers, but that at least will enable the public finances to bear the costs as an increasing number of people retire. However, Sweden is not the only country to be facing a difficult demographic challenge, quite the reverse. In the euro area, some countries will have a considerably larger frequency of retirement in the coming decades, which means that in 30 years there will be twice the number of pensioners per worker compared with today. Nevertheless, until recently pension reforms in most euro area countries have been conspicuous by their absence. In addition, the majority of these countries have only used a system whereby current pensioners are paid directly by current workers, and no funds have been reserved. The fact that this is unsustainable in the long run has been obvious for a long period. Yet, it has been politically impossible to bring about the kind of reforms that we in Sweden succeeded in introducing through political accord.
Global economic growth has slowed as European activity has stagnated and this is capping the demand for U.S. exports. On the brighter side, some of these headwinds appear to be subsiding. Employment growth has picked up somewhat (Figure 3), which should eventually lead to faster household formation and more demand for housing. U.S. banks are healthier so that credit conditions, while still tight, are gradually easing. And, households appear quite far along in the deleveraging process by a number of important measures. For example, the ratio of household debt service relative to income is back to levels last seen in early 1990s (Figure 4). For these reasons, I expect that growth will gradually strengthen over the next few years. Nevertheless, significant downside risks remain, especially those related to the challenges in Europe and how the potential “fiscal cliff” in the United States will be resolved after the fall elections. Even if these risks do not materialize, I anticipate only slow progress toward full employment. On the inflation side, in recent years our forecasts have been noticeably more accurate than on the growth side, and we have succeeded in delivering inflation very close to our 2 percent price stability objective. Through March, as measured by the personal consumption expenditures deflator, overall consumer prices have risen 2.1 percent over the past 12 months, and prices excluding food and energy have risen 2.0 percent (Figure 5). But price trends have been a bit stickier than one might have anticipated given the large amount of slack in the economy.

If private sector economic agents – workers, businesses, investors – thought we would implement a particular policy rule regardless of changes of these kinds, policy would not be effective at stabilizing private sector expectations in ways that promote the dual mandate objectives. This is particularly relevant in the unusual environment that we find ourselves in – the aftermath of a housing bust and a financial crisis. In the current context, there is an additional complication that is extremely important. Simple policy rules implicitly assume that monetary policy is unconstrained and that the Fed can always achieve the federal funds rate policy setting the rule proposes – even if it is negative. By extension, they also assume that it is as easy to ease policy as it is to tighten policy if certain risks materialize. In practice this is not the case. Because our traditional tool, the federal funds rate, is already at its effective zero lower bound, we may want to react differently to a given economic outlook and set of risks than we would if policy were unconstrained. We are certainly not completely constrained: we have additional tools such as the balance sheet and forward policy guidance that we can use to provide additional monetary policy stimulus. But these tools have costs as well as benefits. Moreover, we can only imperfectly translate the impact of these policy instruments into interest rate equivalents for the purposes of evaluation using simple rules.
Inadequate or inconclusive data in areas such as measuring financial literacy, consumer awareness and financial education means that it is difficult to assess the cost and benefit of the proposed policy framework and its impact on financial inclusion. Conclusion Allow me to now conclude my remarks. The successful implementation of policy work in the area of financial inclusion requires the availability of quality data. The fact that this area still remains relatively unexplored, compared to the availability of data for corporate business, financial markets and other more sophisticated aspects of finance, clearly suggests that much work remains to be done. The magnitude and scope of the topic also requires a diverse group of policymakers to collaborate on a long-term basis. The establishment of a working group to improve the quality of financial inclusion data is therefore most timely, and will benefit policymakers in making better and more informed policies, as well as tracking the outcome of policy initiatives. In addition, it may also serve to increase the visibility new issues areas which are currently not being given sufficient priority by policymakers. I would also like to encourage the working group to consider, in the longer term, the development of some form of a composite financial inclusion index. The composite index will  2  BIS Review 88/2010  benefit everyone by providing a broad measure of trends, facilitate comparisons between distinct segments and create a benchmark for policy work in financial inclusion.

It can eventually help to popularize the notion of financial inclusivity, and in that way help garner more global support for financial inclusion initiatives the world over. Finally, on behalf of Bank Negara Malaysia, I would like to thank the participants who have come here from many countries and institutions to contribute their ideas and knowledge to this workshop. I also would like to thank the Alliance for Financial Inclusion for their leadership and support in managing this initiative. I trust that the working group will be able to contribute towards the global agenda for a more inclusive financial system, and look forward to the fruits of your work in the months ahead. BIS Review 88/2010  3
A situation whereby we shift from fiscal policy guidelines that aim at neutrality to a long-term, gradual phasing in of petroleum revenues, while maintaining nominal stability, will entail some adjustment mechanisms that will be controversial. This applies not least to the effects on Norway’s industry structure. Increased spending over government budgets and/or reductions in direct and indirect taxes will result in an increase in total domestic demand. A substantial portion of this increase in demand will be focused on private and public services. The sheltered sector will have to lay claim to a higher share of available labour. In an economy with full capacity utilisation, this can in practice only take place if resources are transferred from the exposed to the sheltered sector. Independent of the phasing in of petroleum revenues, employment in the sheltered sector is expected to rise in the period ahead. It is not difficult to imagine that the phasing in of petroleum revenues will amplify this trend. The expected reduction in manufacturing employment will be amplified with an increased use of petroleum revenues. Adjustments may come about through deteriorating competitiveness and profitability in internationally exposed industries. Monetary policy cannot influence these adjustments in the long term. In the short and medium term, however, a monetary policy reaction may still have temporary effects on developments in the real economy. The phasing in of petroleum revenues may swiftly translate into pressures on economic resources, which in turn may generate pressures that lead to higher domestic wage and price inflation.

And it will be most relevant to look at such an adjusted index when we wish to evaluate the success of monetary policy. The guidelines for monetary policy may be formulated as follows: If it appears that inflation will be higher than 2½ per cent with unchanged interest rates, the interest rate will be increased. If it appears that inflation will be lower than 2½ per cent with unchanged interest rates, the interest rate will be reduced. There is symmetry here, so for us, it is just as important to avoid an inflation rate that is lower than 2½ per cent as it is to avoid an inflation rate that is higher than 2½ per cent. BIS Review 7/2002  1  A number of factors influence the interest rate’s effect on demand and inflation. These include debt and assets in the private sector, capacity utilisation rate in the economy, the situation in the foreign exchange market, the expected duration of a change in interest rates and the formation of expectations. 1  We have analysed the effect of a change in the interest rate in the light of different scenarios. The chart summarises these analyses and shows the range of outcomes for the effects of an interest rate increase on inflation. An interest rate increase of one percentage point over two years is estimated to curb inflation by 0.20-0.35 percentage point after two years, and by 0.30-0.40 percentage point after three years. GDP growth will be reduced by 0.25 percentage point the first two years.