samchain/econo-pairs-v1 huggingface dataset:
These measures align financial market infrastructures for FX transactions with international standards and promote the development of the financial market and incorporate international standards The Central Bank has also been focused in improving the adequate functioning of the foreign exchange market, taking several steps in that direction. In terms of the “life cycle” of a transaction, we are interested in having a more competitive market, to which nondiscriminatory access to FX trading platforms is very important. Through a recent regulatory change, the Central Bank requested banks and other entities of the formal exchange market to verify that the trading platforms that they use fulfill basic conditions on risk management and access conditions. Lastly, advancing in the incorporation of the Chilean peso as an eligible currency in the Continuous Linked Settlement (CLS) international payment system remains a priority for the BCCh, so it continues to urge the necessary measures to materialize this initiative. Significant technical progress was made with CLS, and two commercial banks already showed interesting in participating. Next step is the implementation of correspondent accounts as previously mentioned. (ii)  More secure short-term funds availability  For quite a while now, access to and availability of short-term funding and the need to develop a private repo market (or lack thereof) has been a policy concern among local financial authorities. Historically, the main participants in the private sector repo market have been almost exclusively broker-dealers and their most sophisticated clients. However, repos are absent in other market segments, most notably the interbank market.

So, in short, in Sweden a situation has prevailed where subdued inflationary pressures have called for an expansionary monetary policy, while, at the same time, property prices have been surging in a fashion that in no way can be deemed as sustainable. How can, and should, a central bank in a small open economy with an inflation target deal with such a situation? The first thing a central bank can do is to engage in “open-mouth operations” and constantly remind everyone of the existence of the risks through speeches and documents. One publication that can prove particularly useful in this regard is the Financial Stability Reports, which are now published by an increasing number of central banks. By taking a systemic view of the financial system, the Financial Stability Reports investigate the collective impact stemming from the actions of individual financial institutions. By communicating these findings to market participants and the general public, the central bank can raise awareness of risks to financial stability, which might otherwise go unnoticed. BIS Review 101/2007  3  But, at times, all this may not be enough, and then the inevitable question begs to be answered – How, if at all, should a central bank let changes in asset prices influence its monetary policy? The Riksbank runs a flexible inflation target, which means that we also take the real economy into account when we set interest rates.
•  Campbell J.R. and Z. Hercowitz (2005), “The role of collateralized Household Debt in Macroeconomic Stabilization”, NBER Working Paper Series, 11330, May. •  Cecchetti S., A. Flores-Lagunes and S. Krause (2006), “Assessing the Sources of Change in the Volatility of Real Growth”, NBER Working Paper Series, 11946, January. •  Dynan K.E., D.W. Elmendorf and D.E. Sichel (2006), “Can financial innovation help to explain the reduced volatility of economic growth?”, Journal of Monetary Economics, 53, pp 123-150. •  Gerardi K., H. Rosen and P. Willen (2007), “Do Households Benefit from Deregulation and Innovation? The Case of the Mortgage Market, NBER Working Paper Series, 12967, March. 15  IMF, 2006  BIS Review 42/2007  5  •  Hirtle B. (2007): “Credit Derivatives and Bank Credit Supply”, Federal Reserve Bank of New York, Staff Reports, 276, February. •  IMF (2006), “How do financial systems affect economic cycles ?” World Economic Outlook, chap. 4, pp 105-138, September. •  Jermann U., V. Quadrini (2007), “Financial Innovation and Macroeconomic Volatility”, paper presented at the Bundesbank Spring Conference, 27-28 April. •  Noyer C. (2001), “Overview”, in Economic Policy for the Information Economy, Federal Reserve Bank of Kansas, pp 399-404. •  Noyer C. (2006a), “Financial systems for economic growth”, Speech at the 3rd Conference of the Monetary Stability Fondation, Frankfurt-am-Main, 6 July. •  Noyer C. (2006b), “Does money matter? A European perspective”, Speech at the 4th ECB Central Banking Conference, Frankfurt-am-Main, 9-10 November.

This new context has had several consequences: •  both inside and outside the euro area, the reputation of the euro as a solid currency has fostered the holding of euro-denominated banknotes, which has doubled in a few years, now representing the largest banknote circulation in the world;  •  the so-called “home bias” in asset holdings has decreased further, both inside the euro area vis-à-vis assets issued in other Member States and outside the euro area vis-à-vis assets issued in the euro area. This has increased globally the demand for euro-denominated financial assets;  •  the integration and competition in the banking and financial markets that has been fostered by the euro speeded up the development and the spreading out of financial innovation throughout the euro area, affecting money and credit developments in different ways. Let me just mention some of them. 6  2    One is the rapid pace of expansion in the activities of the so-called “other financial institutions” or OFIs. OFIs are not part of the money-creating sector and are neither insurance companies nor pension funds. In particular, they include financial vehicle corporations that purchase, pool and repackage as marketable securities loans that are “securitised” by banks, thereby reducing the growth rate of loans to the private sector. The expansion in OFIs’ activities is to a certain extent mirrored in the development of their monetary assets: which is now quite significant and amounts to around 10.5% of M3.
Relative to the baseline, there is an additional large and persistent boom in the middle of the simulation, followed by a period of below counterfactual fundamentals. The path of the economy is more volatile, with deviations from trend larger and more persistent. In other words, the credit cycle has real and adverse consequences. Chart 2 Model simulation with low reputational weight  Source: Bank calculations. Chart 3 Model simulation with high reputational weight  Source: Bank calculations. 8  BIS Review 168/2010  2.4  Empirical implications  Several empirical implications follow from the model. First, strategic complementarities incentivise banks to adopt risky strategies in a coordinated fashion during the boom. So the dynamics of the model predict that we should observe cycles in financial activity at a macroeconomic level. Initial productivity improvements are amplified into lending booms, which are followed by credit busts and, potentially, crises. Second, at a micro-economic level, the coordination of risky strategies during the boom should compress the dispersion of bank earnings, as low ability banks masquerade as high ability banks during good times. But during the bust, when the macro state turns bad, the dispersion of banks’ earnings should increase as low ability types crystallise losses while high ability types do not. We turn next to the macro and micro evidence. 3.  Credit cycle dynamics  To what extent are the macroeconomic credit cycle dynamics predicted by the model present in the real world? To assess that, we draw on a dataset recently developed by Schularick and Taylor (2009).

As a macroeconomist whose work is grounded in thorough analysis, and a profound knowledge of models and data, he also takes into account the policy implications of the findings of his research. This is an important factor as he is a pioneer who has done groundbreaking work, and his research frequently encourages others. In this respect his work on the global decline in labour’s share of income has prompted a number of papers from academia and different institutions so as to understand this change over time and its implications for income distribution and productivity. Similarly, his work on capital allocation and productivity in Southern Europe has been widely influential. Mr. Karabarbounis, congratulations on my behalf and on that of the Banco de España. 2
According to a simulation by the World Bank, if the number of immigrants in wealthy countries keeps growing by 2025 at a pace slightly lower than the average over the past three decades (which, being a very prudent assumption, means that over 14 million people will move from the developing to the developed countries, and even more taking into consideration their family members), the global income will increase by 0.6%, of which by 1.8% in the developing countries and by 0.4% in wealthy countries. Migration should also be analysed by central banks, as it may influence relative price developments and the general level of prices. According to estimates by the World Bank, migration causes a slight decline in the general level of prices in the developed countries, whereas the decline is larger in services (such as health services, services in the construction industry, and leisure), and the largest – in the economy sector for which no data is typically available, i.e. the domestic help (babysitting, cleaning, etc.). As opposed to other world regions, the flow of persons across the countries of the EU has been stable. Annual net migration to the EU15 has remained at a level below 5 persons per 1000 inhabitants over the past 40 years. Ca. 9% of the UE population was born in countries other than those in which they currently live, whereas in the US this figure stood at 12% and in Canada and Australia at 20%.

Not only because of the obligation arising from the Treaty of the European Union. Rather because euro area membership provides ultimate monetary and economic security for our nation that is already used to the “de facto membership”. Competitiveness in today’s world Ladies and Gentlemen let me now turn to the topic of today’s conference: competitiveness in today’s world. I would like to look at it from the perspective of a really small country. As we all know, globalization has changed the understanding of success factors for countries. Oldstyle economic policies and market protection are of no use any more, since today whole factories and industries are moved within a short time. How can a small country survive in this world at all? It is often said that real wages should be kept artificially low to attract investment and provide high returns on capital. I do not think this is the right way for a small country. We could never compete with major economies when it comes to mass production. Instead, we should make use of the fact that globalization creates also a huge spectrum of niche markets. Mass production cannot meet countless individual needs, as people all over the world demand more and more personalised products and services. This is the key to success for smaller economies. BIS Review 63/2007  1  The point of departure for a society to remain competitive is to get over the fear of globalization. The new world is after all an opportunity, not a cause for sorrow.
With the improved access of consumers and businesses to financial products and services, consumer education on financial matters is an important priority for the Central Bank. Consistent with the belief of the importance of instilling financial awareness at an early age, Bank Negara Malaysia introduced a pocket money book to inculcate smart financial management habits  4  BIS Review 64/2004  among students in 1996. The programme also included Household Account Books to assist families in the management of household income, savings and investments. This was distributed to cover a wider group, including women, teachers and workers. Following this, in 1997 together with the Education Ministry, the Central Bank embarked on a School Adoption Programme. Through this programme, more than 7000 schools have been adopted by banking institutions to play a leading role in educating school children on basic financial knowledge. In October this year, an online interactive version of the Pocket Money Book to be used in the School Adoption Programme was launched. The Central Bank of Malaysia has also laid out a blueprint known as the Financial Sector Master Plan that charts the development of the Malaysian financial system over a ten year period commencing in 2001. A key component of that plan is the 10-year Consumer Education Programme for the banking and insurance sectors. This programme is known as BankingInfo and InsuranceInfo, and was launched in 2003.

Also important are the requirements for complaints to be handled promptly by financial institutions. Ladies and Gentlemen, The Malaysian experience Let me briefly take a moment to share with you the experience of Malaysia in developing an enabling environment to promote financial literacy. For several decades, Malaysia has made significant economic progress. The economy grew by an average of 7% per year, while the per capita income has increased from USD 300 in 1970 to USD 4,236 in 2004. From a commodity-based economy, Malaysia now has a highly diversified economy, with significant contribution from the manufacturing and services sectors. Women account for about half of Malaysian population, and have played an important role in this economic transformation process. Women account for about 45% of the labour force, with increasing representation at the professional, managerial and technical levels. Such progress is achieved following increased educational opportunities that have been made available to women. Female primary and secondary students account for half of total enrolment, while at public universities, female students account for 55% of total enrolment. While women continue to play a major role in household financial planning, a new generation of women who are financially independent and sophisticated is emerging. The financial sector in Malaysia has also experienced significant progress, with greater diversity of players, products as well as delivery channels with extensive distribution nationwide. The widespread distribution of financial institutions has been a conscious and deliberate policy to ensure the widest reach of financial services to both the urban and rural areas.
4  “Debt and deleveraging: Uneven progress on the path to growth”, McKinsey Global Institute (January 2012). 5  IMF Fiscal Monitor (April 2012), “Balancing Fiscal Policy Risks”. 4  BIS central bankers’ speeches  finances. If one studies Figure 2, there appears to be a connection between good competitiveness and a lower public debt ratio. Figure 2 Relationship between competitiveness and public debt ratio 7  6  Sweden Denmark  5  Finland  Germany  Norway Spain  USA  Ireland  Italy  Portugal  4  Greece  3  2  1  0 20  40  60  80  100  120  140  160  180  Note. The public debt ratio is shown as a percentage of GDP on the horizontal axis. Sources: World Economic Forum 2011 and IMF Fiscal Monitor April 2012. The vertical axis measures the respective country’s competitiveness as defined by the World Economic Forum 2011, 6 while the horizontal axis measures the current level of public debt as a share of GDP. A higher value on the vertical axis means that a country has a better competitiveness. There may, of course, be many factors that affect the public debt ratio, but according to the figure it would appear that countries with good competitiveness also tend to have a lower public debt ratio.

If we look to the meetings organised with some of the regional banking authorities, the initiative on regional cooperation has been welcomed, but I also believe that time has come to carry out concrete measures towards this cooperation. Judging from my personal experience, not as governor but as a banker, I hold the opinion that it would be appropriate to establish a club of regional central banks. The regular meetings of this club would certainly enable the exchange of experiences and the further strengthening of our cooperation. 2/2
The period from the early 1970s up until 2007 marked another watershed. Financial liberalisation took hold in successive waves. Since then, finance has comfortably outpaced growth in the non-financial economy, by around 1.5 percentage points per year. If anything, this trend accelerated from the early 1980s onwards. Measured real value added of the financial intermediation sector more than trebled between 1980 and 2008, while whole economy output doubled over the same period. 2  BIS Review 95/2010  In 2007, financial intermediation accounted for more than 8% of total GVA, compared with 5% in 1970. The gross operating surpluses of financial intermediaries show an even more dramatic trend. Between 1948 and 1978, intermediation accounted on average for around 1.5% of whole economy profits. By 2008, that ratio had risen tenfold to about 15% (Chart 2). Internationally, a broadly similar pattern is evident. In the US, following a major decline during the Great Depression, the value added of the financial sector has risen steadily since the end of the Second World War. As a fraction of whole economy GVA, it has quadrupled over the period, from about 2% of total GDP in the 1950s to about 8% today (Chart 3). Similar trends are evident in Europe and Asia. According to data from the Banker, the largest 1000 banks in the world reported aggregate pre-tax profits of almost $ billion in fiscal year 2007/08 (Chart 4), almost 150% higher than in 2000/01. This equates to annualised returns to banking of almost 15%.

BIS central bankers’ speeches  3
regarding leave of absence or the establishment or extension of periods of leave). Lastly, financial independence means that an independent institution has sufficient financial resources to equip itself with material and human resources for the pursuit of its mission. In this respect, the Banco de España has sufficient financial capacity as a result of the revenue sources legally and statutorily assigned to it, and it is able to draw on such revenue to cover its functioning costs. The difference between each year’s revenue and costs is made over to the Public Treasury, bolstering State revenues. Accordingly, the Banco de España uses the resources available to it observing the principles of efficiency and effectiveness that should govern the use of all public funds. I believe the Banco de España’s legal framework and experience as a financially and organisationally independent institution can be a good benchmark for any future redesign of other economic supervisors in Spain which, in some cases, enjoy less autonomy. 4  Article 24 of the Law of Autonomy provides that the Governor of the Banco de España shall be appointed by the King following a proposal by the Prime Minister. Nominees must be Spanish and must have recognised competence in monetary or banking matters. Prior to the appointment of the Governor, the Minister for Economy and Finance shall appear before the relevant parliamentary committee under the terms envisaged in Article 203 of the Spanish Parliamentary Internal Regulations, to report on the proposed candidate.

In addition, Malaysia’s economic flexibility has allowed us to shift resources from industries in which we no longer have comparative advantage to new areas of growth. It is these factors that will continue to underpin the positive growth outlook of the Malaysian economy into the near to medium term. Key Imperatives to prepare for the new global landscape The changing global landscape presents significant new challenges for both the developed and emerging economies. Important is to be well-positioned to manage the new risks and to build the necessary capability and capacity to have the agility and flexibility to adjust to the rapidly changing conditions. As the emerging economies aspire towards achieving higher levels of income and living standards, a different path from that which led the way for the advanced economies will now need to be considered. The current global financial crisis and the Asian financial crisis have provided us with many important lessons that should form the underpinnings for our business models and our policies for growth and development. A key priority of policy should be to balance the need of ensuring sustained stability while having in place the necessary foundations to secure long-term development. Avoiding and preventing the build-up of excesses is a critical imperative. The recent crisis has forcefully shown that markets cannot be exclusively relied on to rein in excesses. Market discipline needs to be complemented by policy interventions to effectively manage the build-up of imbalances in the financial sector and in the economy.
Indeed, the solvency levels of institutions were not impaired by the faster credit growth because of the increase in Tier 1 and Tier 2 capital. The solvency of institutions was strengthened by the statistical fund, which has grown uninterruptedly since it was created in July 2000. The improvement in earnings and ROE was, as mentioned above, due partly to the high growth in the business volumes of Spanish institutions and especially to lending to mortgage borrowers and to construction and property development firms. In particular, the growth of credit to property developers in 2003 was notable, and was not attributable to just a small number of institutions. It should be taken into account that this lending is markedly cyclical and that in past recessions it has shown high default rates. Moreover, the strong credit growth is an additional cause for concern, basically for two reasons. First, because Spanish household indebtedness is already higher than the euro area average. And second, because the growth of credit extended by institutions is not being accompanied by a commensurate increase in deposits. This produces a greater need for recourse to international financial markets, which may raise the average cost of bank liabilities and hinder profitability gains. BIS Review 39/2004  7  It is therefore not enough to have a strong profit and loss account; instituions must also look particularly hard at the sustainability of their current business model based on strong growth in lending volume, and at the possible alternatives to this model.

These changes include most notably the increasing degree of internationalisation of institutions; the ongoing emergence of more sophisticated and complex new products; the increase in risk transfer processes and, finally, the growing importance of a whole set of risks that not long ago were difficult to quantify. Financial institutions have to respond to these challenges by improving their services to consumers and to society and simultaneously intensifying their efforts in two areas requiring a wide range of actions. First, they have to step up the efforts made to date in designing and implementing robust risk management systems firmly based on corporate governance best practices. In recent years, institutions have become fully aware of their importance and have made considerable headway in this direction, supported by improvements in calculation methods, available technical capabilities and databases, among others. At the same time, they must not neglect the need to invest in human capital, an essential factor in banking. But these investments in technical and human resources - and this is an additional challenge - must not involve any let-up in the pursuit of greater efficiency, which is the key competitive factor in a world of increasingly integrated markets. Financial institutions must therefore redouble their efforts to enhance their capabilities in relation to risk identification and the quantification of committed exposures. They need to design their strategies for managing risk, as well as their capital and liquidity, bearing in mind that economic and financial conditions vary over the cycle.