samchain/econo-pairs-v1 huggingface dataset:
Another example of problems with CPI is as follows: If the Government tightens fiscal policy with a VAT increase, CPI rises, as VAT has a direct effect on inflation measured in this way. The effects of  BIS Review 59/1999  4  such measures, interest rate changes and tax changes are temporary. These normally result in one-off effects on the price level. However, it cannot always be right to tighten monetary policy and increase the interest rate because inflation has been increased by a VAT increase which in time will dampen demand and lower the level of activity and capacity utilisation. In time, inflation will be dampened by the VAT increase, although this takes place by means of an increase in prices – bear in mind though that this depends on inflationary expectations not being affected. A different situation arises then. This shows that CPI movements must be interpreted and analysed when deciding on monetary policy. Temporary effects on the price level should not initiate changes in monetary policy. The Riksbank is therefore studying a number of other indexes that do not have the weaknesses of CPI in the aspects taken up here. A harmonised index, HICP, is being designed for the entire EU area. This is used by the European Central Bank, ECB, and this measure does not include interest rate changes, although it does include indirect taxes and subsidies. Another index, UNDIX, measures the “underlying” inflation by excluding the direct effects of indirect taxes, as well as interest effects.

It can therefore be said that employment and capacity utilisation directly affect the Government’s monetary policy to the extent that compliance with the inflation target only takes place gradually within a period of two years. This is to avoid too great fluctuations in the real economy – in employment and capacity utilisation otherwise. However, unemployment and capacity utilisation affect inflation and are therefore included as components of inflation forecasts. These circumstances therefore also play an indirect role for the Riksbank’s monetary policy. The exchange rate is not an objective for Riksbank policy although it also has a direct and indirect effect on inflation. An appreciation of the exchange rate will have, all other things being equal, an immediately dampening effect on import prices. As import prices are included in CPI, inflation will be reduced. The exchange rate will affect inflation indirectly by affecting demand. A higher real exchange rate reduces exports and thereby reduces the level of activity with some time lag. This indirect effect tends to reduce inflation in the somewhat longer run. Supply is also affected by the exchange rate in time by (initially) affecting import and export prices, which eventually spreads to other prices and wages. By the direct and indirect effect of the exchange rate on inflation, the exchange rate plays a role for the Riksbank’s policy in those cases when a change in the exchange rate is expected to be, or proves to be durable.
The press conference is webcast live and usually broadcast on TV. People can subscribe to receive an SMS message about interest rate decisions, and Norges Bank was apparently the first central bank to publish its interest rate decisions on Twitter. International developments have made it prestigious for central banks to be as open as possible. But transparency cannot be a goal in itself. Our responsibility is to conduct an effective monetary policy in line with the objectives laid down by the political authorities. Transparency beyond that necessary to ensure democratic accountability is a goal derived from the main goal of conducting an optimal monetary policy. 18  Lars E. O. Svensson, Deputy Governor at Sveriges Riksbank, has argued that it is possible to evaluate monetary policy actions ex ante. See Lars E. O. Svensson (2009): “Policy Expectations and Policy Evaluations: The Role of Transparency and Communication”, address at the conference “Tio år med självständig Riksbank (Ten years with an independent Riksbank)” 11 September 2009. 19  See Nergiz Dincer and Barry Eichengreen (2009): “Central bank transparency: causes, consequences and updates”, NBER Working Paper 14791 and Petra M. Geraats (2009): “Trends in Monetary Policy Transparency”, in International Finance, 12, no. 2, pp. 235-268. 20  The new legal text establishes the so-called principle of free access to public records which provides public access to central and local government documents and the right to be present at sittings of the courts and of administrative bodies elected by the people.

It was written in 1992, just before we began the long upswing in the financial cycle that ended with a bang in 2007: “Whenever the recovery starts, there will be new participants, who will be less constrained by the experience of this recession than those who lived through it. They will repeat many of the mistakes of the 1980s, as many of the companies repeated the mistakes of the 1970s. The market will then be driven to levels which will prove unsustainable.” He was writing, of course, about the UK property market rather than the sub-prime market in the US or over-leveraged international investment banks. But I doubt he would have been that surprised; the subject of Bricks and Mortals is but one example of the self-reinforcing dynamics of powerful financial cycles which, if left unchecked, often end in tears, not just for investors but for the economy as a whole. I hope also that he would have thought the changes to the Bank of England’s responsibilities following the crisis – and the establishment of the Financial Policy Committee (FPC) in particular – were a major step forward in how we manage and mitigate the risks of the financial cycle. I want to talk a little today about the FPC’s role and how the Committee sees the current conjuncture in terms of risks to financial stability. I will focus on the UK property sector. That is not simply because today’s lecture is supported by the Investment Property Forum and the Cambridge University Land Society.
This will equip supervisors to deal with the future evolution of Basel II in a constructive and coordinated way. I also foresee greater transparency surrounding the risks faced by banks, and in how banks are measuring and controlling them. In the future, I expect banking supervisors to place greater emphasis on the techniques of securities regulators by requiring more information to be disclosed to the markets and the public. We will likely place even greater reliance on market processes and corporate governance to ensure that banks are soundly managed and well capitalised. Sound precepts of risk management and prudential supervision While there will inevitably be ongoing challenges to the vision of capital adequacy embodied in the new framework, particularly to its more technical aspects, I have no doubt that the sound precepts of risk management and prudential supervision that underpin the new framework will be an enduring feature of future versions regulatory capital requirements for banks. Alas, the requirements and modeling of certain types of risks may get excruciatingly complex. Indeed, for some of us, they have already reached that point. But in selecting and imposing such requirements, supervisors will be practical, and will look to the best risk management practices of banks and other financial institutions as the basis for setting risk sensitive capital requirements. And as supervisors become confident that the risk management processes of an institution are appropriate to match its risk appetite and operations, minimum capital requirements will edge downward.

But with more autonomous units, an internationally-active and  BIS Review 42/2004  1  complex bank has to expend more effort to identify, measure, and control the risks arising from its diverse and far-flung activities. Traditional rules of thumb used by management and supervisors to assess risks and to ensure the adequacy of capital to buffer risks are no longer adequate. And continuing financial success depends critically on how a bank responds to the risk management challenges. In response to these challenges, the successful banks have developed enhanced tools for measuring risks. These can be grouped into two broad categories. The first category of tools are those that give a bank the ability to discriminate among risks by differentiating the riskiness of customers, and of various banking facilities and products. The second category of tools includes those that give a bank an enhanced capability to quantify risks. The end of the road for Basel I In and of itself, the enhanced capability of institutions to differentiate and measure risks has been a welcome development. But, the increasing sophistication of institutions in risk management meant that the crude system of risk weights under Basel I became less meaningful in ensuring the adequate capitalisation of large, complex banking institutions. By the mid-1990s, less than five years from the official implementation of Basel I,1 it was apparent that Basel I was becoming less relevant for some banking institutions.
Mario Draghi: ECB press conference – introductory statement Introductory statement by Mr Mario Draghi, President of the European Central Bank, and Mr Vítor Constâncio, Vice-President of the European Central Bank, Frankfurt am Main, 3 November 2011. *  *  *  Ladies and gentlemen, welcome to our press conference. Today is the first time that I have had the privilege and pleasure of chairing the meeting of the Governing Council of the ECB. I am delighted to proceed now with our well-established practice of real-time communication and to report on the outcome of our meeting, together with the Vice-President. Based on its regular economic and monetary analyses, the Governing Council decided to reduce the key ECB interest rates by 25 basis points. While inflation has remained elevated and is likely to stay above 2% for some months to come, inflation rates are expected to decline further in the course of 2012 to below 2%. At the same time, the underlying pace of monetary expansion continues to be moderate. After today’s decision, inflation should remain in line with price stability over the policy-relevant horizon. Owing to their unfavourable effects on financing conditions and confidence, the ongoing tensions in financial markets are likely to dampen the pace of economic growth in the euro area in the second half of this year and beyond. The economic outlook continues to be subject to particularly high uncertainty and intensified downside risks.

Such tools would allow participants to fine-tune the amount they want every day in response to changes in supply-and-demand conditions in the market and their cash management needs. In either the fixed-rate or fixed-quantity case, tools offering the ability to transact directly with either bank or non-bank counterparties would enhance the Desk’s operational capacity and strengthen the transmission of monetary policy in the face of some of the rates wedges currently seen in markets. I should note that the operations described above are all temporary liability management tools that don’t reduce the size of the Fed’s balance sheet; they shift one liability item – reserve balances – into another – a reverse repo with the New York Fed, for example.11 In recent years, the Federal Reserve has developed and tested several tools, including term and overnight reverse repos with an expanded set of counterparties and the Term Deposit Facility, or TDF, available to nearly all depository institutions, that together with IOER represent most of this broad toolkit.12 IOER and the TDF represent unsecured overnight and term tools, respectively, in which only depository institutions are eligible. I’ve already discussed IOER. The TDF is a program through which Federal Reserve Banks offer interest-bearing term deposits to eligible banks through an auction subscription that could be either fixed in quantity or fixed in rate with full allotment. An increase in term deposits outstanding temporarily reduces reserve balances because funds to pay for them are immobilized away from reserve accounts of participating institutions for the life of the term deposit.
With this motivation, I would like to talk now about the main characteristics of the period of transition to inflation targeting regime in this country, a period that indeed lasted longer than planned, and about the main issues that we have faced during this period. I am strongly convinced that there are important lessons that can be drawn from the Turkish experience. Distinguished guests, The Turkish economy has lived through 30 years of high and volatile inflation rates and massive dollarization together with financial sector instability, high public sector debt burden and unstable and low growth rates. Living with such weaknesses for such a long period of time has created a strong inertia in inflation dynamics. Besides, in the latter half of that period, the currency crisis of 1994, contagion effects of Asian and Russian crises in 1997 and in 1998, and finally our own financial crisis in 2001 have been among the many events that increased the vulnerability of the economy. All these developments that negatively affected economic and social life, highlighted more and more the importance of price stability as the primary goal of monetary policy and made all of us realize the importance of a transparent framework for monetary policy that has a clear nominal anchor. Accordingly, the macroeconomic policy framework has undergone major changes and some institutional arrangements have been introduced after and since the financial crisis in 2001.

Equally important are the continuous efforts to safeguard transaction security and enhance user confidence in order not to undermine the role of e-payments as a key enabler for financial inclusion. Since there are participants from around the region especially from the ASEAN countries, I hope that one day we would have one card for ASEAN, where ATM cards issued by any bank in the ASEAN countries can be used to transact within the ASEAN region. I hope you will benefit and be inspired from the discussions, debates and sharing of best practices during this forum. I also hope there would be a change in the mindset of the industry in driving financial inclusion via e-payments. On this note, I wish you all an engaging and productive forum. 6  BIS central bankers’ speeches
As the banking system becomes more concentrated and complex, that just increases the financial stability risks, making the too big to fail problem even more acute. So what should we do about it? Today, I will evaluate three broad sets of choices: 1) Building a credible resolution regime and more resiliency in the financial system that together reduce the systemic costs of failure sufficiently so that large, complex firms can be allowed to fail; 2) taking steps, such as tougher prudential standards, that further reduce the probability of failure of such firms; and 3) breaking up the too big to fail firms so that no firm is so large that its failure would threaten financial stability in the first place. To summarize, I conclude that building a credible resolution regime is necessary but not sufficient. Even if the single-point of entry resolution framework proposed by the Federal Deposit Insurance Corporation (FDIC), which I very much endorse, is fully perfected, the costs of resolution for the largest systemically important financial institutions (SIFIs) will still be significant. I will argue that at least as much effort should be made to lower the risk of failure of such large, complex firms. Not only does this include higher capital and liquidity requirements, which we are implementing, but also building incentives into the system so that firm managements will act more forcefully and much earlier to put their firms on more solid ground before they encounter greater difficulties.

But I would urge you instead to look at the reports of our annual medical check-ups conducted by the IMF since 1990 in the form of what are known as the Article IV Consultations. The IMF team was in fact in Hong Kong for this year’s Consultation in the second half of October, when the short-lived but somewhat intense attack on our currency occurred. It was the best time for any diagnosis of financial problems. But after observing us closely over the period the team again gave us a clean bill of health. Let me give you a few relevant quotes from the Concluding Statement of the Consultation, which has already been published.
The greater use of RMB in international transactions will be closely related to China’s financial reforms and liberalisation, with new fund flow channels being opened up in RMB. For example, the RMB QFII scheme allows offshore institutions to use RMB funds to invest in Chinese capital markets, and it is a new channel in addition to the US dollar-based QFII scheme. And further to a recent relaxation, outflows under the QDII scheme can also be made in RMB. Such developments, in turn, will bolster the use of the RMB in trade, foreign direct investment and international transactions, thereby supporting the further development of the offshore RMB market. 13. While recent developments in RMB have been exciting, given the possible scope of future expansion, we are probably still only at the early stage of what could be more significant changes in the years to come. After all, RMB deposits and bonds outstanding in the offshore market only account for about one percent of onshore deposits and outstanding debt respectively. The possibility for expansion remains substantial. 14. One of the aims of the Hong Kong-London Forum is to assess what all this means to the financial institutions and to corporates — many of whose representatives are gathered here today. 15. For corporates, especially those already having business links with China, it is important to get prepared for the increasing use of RMB as a currency for transaction, financing and investments.

A key initiative in this regard is the Financial Sector Assessment Program (FSAP), a health check-up of national financial sectors made in collaboration with the World Bank. Switzerland volunteered to undergo such a check-up in 2002. Once more, it was a useful and gratifying experience to interact with outside experts. And the reason I am saying this has nothing to do with the fact that the Swiss financial center came out of this surveillance exercise with very high marks. 3. Financial crisis resolution  Let me now turn to the second part of my presentation, the Fund’s role in crisis resolution. Here I have no direct Swiss experience to report on since my country, fortunately, never had to resort to financial support from the Fund. I will therefore speak from the perspective of a medium-size shareholder that believes that financial crises are market failures with potential systemic risks and that the Fund can and should play an important role in resolving them. The nature, scale and spread of financial crises have changed dramatically since the Tequila turmoil in Mexico in 1994. Financial integration and capital account liberalization brought about a huge increase in financial flows. Emerging economies did benefit from this new reallocation of international savings and some staggering economic results were obtained (annual GDP growth between 1986 and 1996 for countries in South-East Asia averaged close to 8 percent). However, the new financial setting also made emerging countries particularly vulnerable to sudden changes in market sentiment.
Goh Chok Tong: Sharing some perspectives on growth Speech Mr Goh Chok Tong, Senior Minister and Chairman of the Monetary Authority of Singapore, at the Group of Thirty(G-30) International Banking Seminar and Lunch, Singapore, 18 September 2006. *  *  *  The good, the bad and the ugly Let me first bid you a warm welcome to Singapore. I was recently invited by the World Bank to be a member of the Growth Commission chaired by Professor Michael Spence. So today's topic "Sharing Some Perspectives on Growth" fits me like a glove. In offering my perspectives, I shall draw heavily on the experience of Singapore. Forty years ago, soon after I started work in the Economic Planning Unit of the Finance Ministry, I was sent to do a post-graduate course in Development Economics at Williams College in the US. The course was designed for young officials from developing countries. There were 20 of us from 16 countries spanning four continents - Asia, Europe, Africa and Latin America. The countries included the Philippines, Pakistan, India, Yugoslavia, Egypt, Tanzania, Liberia, Honduras, Colombia and Mexico 1 The 1960s was dubbed the "Decade of Promise". An unprecedented number of colonies had just gained independence. My fellow students and I were taught the latest development theories. Brighteyed and bushy-tailed, we were full of hope. But 40 years later, history tells a different story. Only a few had our hopes fulfilled; most had their dreams dashed.

Good institutions help to accumulate experience, knowledge, expertise and resources to further build capacity, thereby sustaining growth. Poor institutions, on the other hand, could be exploited by those in power for their own benefit. Corruption can easily shave off a country's potential growth rate by a few percentage points. I should emphasise that having good institutions does not presume or argue for any particular political system. What is important is that the political system must work for the country based on its own history, cultural context, national conditions and the support of its people. 2  BIS Review 86/2006  The third pillar of effective implementation is ensuring social cohesion and forging social consensus. As policies impact on the people directly, it is important that there is social consensus and trust between the government and society, and between different ethnic and social groups. This can be achieved only if people are given equal opportunities to learn and work, progress according to merit and rewarded based on performance and contribution. The government and the more able must also help those less able, so that no one is left behind. Sustained growth often requires trading short-term pain for long-term gain. Even the best policies can be undermined if the people are not united behind their leaders. When there is social cohesion, the different groups in a country look beyond their immediate differences and co-operate to achieve their shared vision.