samchain/econo-pairs-v1 huggingface dataset:
However, a number of observers, including the IMF, now believe that there is scope for more flexibility. But, while most observers regard full convertibility as a desirable long-term goal, few believe that any significant moves will be made in that direction in the near term. This means that, even if the renminbi were to be given more flexibility, it would probably still be subject to the existing exchange rate controls. The immediate consideration for policymakers on the mainland and markets is whether, with greater flexibility, the renminbi would go up or down. China’s persistent current account surpluses suggest that it should appreciate. But the market does not seem to feel this way. The non-deliverable forward exchange rate for the purchase of US dollars is continuously at a significant premium. The difference in views may have two explanations. One is the large amount of negative errors and omissions in the balance of payments, which many presume to indicate unidentified capital outflows. The second is the concern that many have that WTO accession will precipitate, at least initially, a surge in imports that is greater than the surge in exports. Why, then, should flexibility be a matter for consideration? There could be a number of advantages from the perspective of the mainland. For example, allowing more interaction of supply and demand of foreign exchange for current account transactions may serve as a kind of market smoothing mechanism, especially as the short-term volatility of trade flows may increase with the WTO accession.

There is therefore a strong need for China’s banks to gear up and gird themselves for the challenges that will be posed by their sophisticated foreign competitors. For foreign banks, the opportunities brought by financial liberalisation on the mainland, in the context of WTO, are immense. In two years’ time, foreign banks will be able to conduct RMB business with Chinese enterprises in Shanghai, Shenzhen, Tianjin and Dalian. Within five years, they will be able to deal with all Chinese enterprises without any geographical restriction. The obvious advantages for Hong Kong’s banks in this process are the same advantages that have taken Hong Kong’s other industries into the mainland. Hong Kong’s banks were among the first to open branches on the mainland, especially in the southern cities: they know China well, speak the language, have extensive branch networks, and maintain strong relationships, some of which have grown up over more than a generation. There are niches in which Hong Kong’s banks should maintain and extend their competitive advantage. For example, they should be able to continue to derive substantial business from the extensive involvement of Hong Kong companies in the manufacturing and retail sectors in China, in the form of private or joint venture enterprises. Given also that about 40% of the mainland’s trade is routed through Hong Kong, Hong Kong’s banks will have an unrivalled advantage over other banks in capturing the increased demand for trade and related financing services.
The opposite approach – to ignore the relative riskiness of a bank’s assets in setting its capital requirements, and hold them only to a leverage ratio – is equally dangerous. This is not a difficult point to grasp – it does not make sense to make a lender hold no more capital against a 100% LTV mortgage than it has to hold against a 50% LTV one. The answer to this is to use both metrics on a ‘higher of’ basis – and this is where the post-crisis debate has settled both in Basel and here in the UK. I know this is a sensitive topic with the building societies sector given its concentration in mortgages and the implications for bail-in firms – but I think it makes sense. Although the leverage ratio is sometimes presented as a simple measure, and indeed is often simpler than the risk-weighted side, it is not totally straightforward and there are some important judgements which go into calculating what banks’ exposures actually are for leverage ratio purposes. One area we should pay close attention to is where similar forms of financing – specifically repo, collateral swaps and synthetic prime brokerage – are captured differently in the leverage exposure measure. Of these I think the most important one to watch is collateral swaps. Under the Basel framework, following extensive debate it was agreed that repo transactions would be captured in the leverage exposure measure by including the cash leg of the repo plus an add-on for counterparty credit risk (CCR).

Neither is it unusual, if they do swallow the medicine, that the countries blame any side-effects on the IMF whether they were a result of the medicine or not; that the ownership – to use IMF vocabulary – is weak. At the same time, there may also be scope for the IMF itself to become better at operating in an environment where strong political considerations are present. •  Nor are groups of countries always willing at IMF meetings to raise questions of crucial importance to the world economy as a whole. Larger countries do not want to run the risk of coming under the spotlight. As a result, the big industrial countries normally prefer to discuss imbalances and exchange rates in a narrower circle, if at all. •  Also when dealing with financial crises, political considerations are constantly present. Everyone that follows IMF’s work in this area the last 10-15 years, has been able to see that geopolitical considerations sometimes play an important role when defining the conditionality – with mixed results. What can be done to strengthen the IMF? There is every reason to approach this question with humility. Many people have reflected on it and plenty of suggestions have been put forward in the debate. Since the crucial problems are political, they are also likely to require political solutions. In recent years, the discussion has focused on matters to do with quota, voice and representation (QVR). Many countries consider themselves to be underrepresented under the current structure.
However, many theories indicate that monetary policy in itself can affect the banks' setting of interest rates over and above the channel that goes via the interbank rate. One theory is that when interest rates are at a high level, the percentage of unreliable borrowers increases – borrowers who are aware that they will not be able to repay their loans and are therefore insensitive to high interest rates. To compensate for this, the banks can raise the interest rates on all loans more than is motivated by the monetary policy steered rates, or they can reduce the amount of credit they supply. Another theory suggests that borrowers' creditworthiness via their balance sheets is affected by changes in interest rates. The idea is that a company that has, for instance, a high level of debt, will be less creditworthy if the interest rate rises. Actually profitable investment projects may thus not get off the ground because the company applying for a loan for the project is already heavily in debt and therefore has to pay a high credit risk premium, or is refused a loan. Yet another theory indicates that a hike in the interest rate increases the banks' financing costs when the general public's deposits decline. A larger percentage of the financing thus has to be obtained in the bond market. The banks are also assumed in this case to have a motive to raise the interest rates more than the central bank does.

The Monetary Policy Committee has needed to provide monetary stimulus not only to contain the short-term economic weakness but, even more important, to reduce its longer-run costs – social and economic. But we cannot do that at the expense of price stability – or, more technically, of allowing medium-term inflation expectations to drift away from the target of 2%. Were the anchor to slip, our ability to support recovery would be undermined. It is sometimes suggested that independent central bankers are more averse to inflation than to periods of low growth and increased unemployment. I hope the past few years have demonstrated that, in fact, it is the credibility of the Bank of England’s commitment to price stability that enabled us to provide such exceptional monetary support to help the recovery. It is unimaginable that, prior to Bank independence in 1997, any government would have been able to hold the policy rate at effectively zero and make a further monetary injection of £ without inflationary expectations – and government financing costs – spiralling out of control. But credibility is not to be taken for granted. Even we cannot provide stimulus without limit, without a wary eye to inflation expectations. Nor has it been at all easy to judge just how much stimulus has been needed to secure recovery given the extraordinary uncertainties about what is going on in the real economy.
Our higher level of interest rates we explain as a reflection of the fact that we continue to operate closer to capacity than elsewhere and with a tighter labour market. I'm not sure that our critics are convinced, let alone mollified! But I do find it encouraging that they continue for the most part to support the policy objective of continuously low inflation even if from their perspective we are too rigorous in our pursuit of that objective! We have in fact reduced interest rates by ¼% on four occasions so far this year. What is disappointing - both to us and our critics - is that while we have been able to compensate for the dampening effects  4  BIS Review 76/2001  of external factors - the exchange rate and the global economic slowdown - by encouraging stronger domestic consumption, we have not been able to alter the external environment itself, which is what our critics in the suffering sectors would really like to see. We have in effect increased the sectoral imbalance rather than reducing it. That may seem like second best but it is as much as anyone can reasonably ask of monetary policy. Mr Chairman, I have gone on for too long and perhaps you will think that I have been overly-defensive both of myself and of my central banking colleagues. That was not my intention. My intention rather was to explain what can and what cannot reasonably be expected of monetary policy in the present world economic situation.

That criticism in my view was wholly unjustified. It was a classic example of expecting too much from monetary policy. The role of a central bank is - as I said earlier - essentially to maintain overall macroeconomic stability, and the measure of its success is consistently low inflation. On that criterion the ECB has been substantially successful. The Euro area economy grew at above trend with core inflation nevertheless remaining within the ECB's tolerance range of 0-2%, even though the headline measure of inflation, influenced by rising energy and food prices which were essentially shocks on the supply side, and by the weakness of the exchange rate, moved above that range. Had the ECB attempted during this period to target the exchange rate, presumably by raising interest rates, it is not at all obvious to me that it would have succeeded; and even if it had, the likelihood is that it would have put the internal stability of the euro-zone economy at risk. More recently the ECB has sometimes been criticised as slow to respond to the weakening of the US economy. Implicit in that criticism no doubt is a strong conviction about the extent and duration of the US slowdown and its likely impact on the euro area. As I have said there is in fact a great deal of uncertainty about that.
Stefan Ingves: Monetary policy, openness and financial markets Speech by Mr Stefan Ingves, Governor of the Sveriges Riksbank, at Skandinaviska Enskilda Banken, Stockholm, 24 September 2007. *  *  *  "Say as little as possible and say it cryptically". 1 This type of communication strategy is probably quite unthinkable for most central banks today. But this is how US professor of economics Alan Blinder describes central bank communications not so long ago. And I believe that this description is a pretty good one of how things actually worked, say 15 to 20 years ago. I would also guess that those of you here this evening who either monitored or worked in the financial sector at that time would agree with me. But since the beginning of the 1990s the Riksbank as well as most other central banks has taken considerable steps towards greater openness and clarity – both with regard to what we are trying to achieve and how we are going about it. Constantly working towards more efficient communication has been high on the Riksbank’s priorities list ever since the inflation target was introduced. But the pace of this work has varied as conditions for monetary policy and demands on the central bank have changed. So sometimes we have had fairly long periods without any major changes in our methods of communication, sometimes we have made many changes in a fairly short period of time.

Another objection to central banks publishing their own interest rate forecasts is connected to the functioning of the market. This means that in principle the financial market agents could stop looking for other information if they have access to the central bank’s forecasts for interest rates in the slightly longer term. How the market views economic prospects is normally reflected in the long-term market rates. This source of information could thus be lost and this would impair the functioning of the market. But as I perceive it, there have not been any such signs so far. In addition, I find it very difficult to imagine that the market agents would stop making independent assessments because we are publishing our own view of interest rate developments. They if anyone know that the interest rate path is a forecast and they therefore have strong reasons for continuing to search for information via other channels than the Riksbank. So far it has been clear that we and other market agents have actually had slightly different views regarding how the interest rate will develop in the future. And this is actually a sign that things are as they should be. It is quite natural that forecasters make different judgements, particularly in the slightly longer term. In the long term, there are also more factors than expected monetary policy that have significance for interest rates.
Nominal convergence about which we, central bankers, speak the most, is consisted mainly of convergence of price levels, but also of exchange rate changes, interest rates and budget deficits to EU levels. As an empirical fact, rises in relative CPI usually move together with rises in relative GDP, and emerging Europe was not immune to this trend. The CPI level in the new EU member states in 1995 ranged from 29.2% of the EU-15 level in Lithuania to 44.9% of the EU-15 level in Poland. In 2006, the CPI level ranged from 42.7% in Bulgaria to 71.8% in Slovenia, which clearly shows fast price rises in these countries. 5 It is obvious that the parallel processes of real and nominal convergence of countries in transition pose numerous challenges for their economic policies in general and particularly for their monetary policies. The process of real convergence creates inflationary pressures through a number of channels, thus making it difficult to fulfill one of the Maastricht criteria for entering the monetary union, and also the higher inflation generates negative effects on the competitiveness of the domestic economy. The BalassaSamuelson effect is one of the most frequently indicated channels through which real convergence leads to higher inflation rates. According to this concept, the faster productivity growth in the tradables sector compared to the non-tradables sector of a country will cause a positive inflation differential and afterwards real appreciation – through the rise of marketdetermined prices of non-tradable goods.

In such circumstances, the only way to maintain the competitiveness of the Macedonian producers was the specialization and exports of lower quality products. These developments did not generate inflationary pressures, which caused absence of real appreciation that was evident in the other transition countries. In the past several years, Macedonia is quickly moving closer to the more advanced transition economies. Several years in a row we have achieved positive and stable growth rates, equaling 5.1% in 2007, which is the highest growth rate since independence. Even though economic growth rates are lower than the ones in Baltic countries as well as some of the countries in the region, this is a sure sign for the acceleration of the process of real convergence. This process is also supported by the foreign direct and portfolio investments (6.3% of GDP in 2007) and the faster credit expansion, with annual growth rate of 39% in 2007. As far as nominal convergence is concerned, Macedonia is facing challenges that are common for most of the economies in the region and elsewhere. Since the last quarter of 2007, we are having an acceleration of the inflation rate, which is mostly caused by the global rise of food and energy prices. Therefore, the uncertainty regarding the movement of these prices, as well as the expectations for pressures initiated by the process of real convergence are the main challenges for monetary policy in the medium term.
We need to improve our ability to identify catalysts for potential crises, whether those catalysts manifest themselves in the form of asset price bubbles or reside elsewhere. Perhaps most critical among the challenges facing policymakers and lawmakers is how to ensure that we have a more effective regulatory structure going forward. This is a complex subject that I do not have time to do justice here tonight. However, I believe it is important to explain why the Federal Reserve’s monetary policy, lender of last resort and supervisory functions should remain in place. These functions are interrelated so that the execution of one of these responsibilities helps the Federal Reserve in its conduct of the others. For example, consider the Fed’s lender of last resort function. For the Fed to perform this role effectively, it is important that it have first-hand knowledge about banks, the capital markets, and payment and settlement systems. To perform this role safely, it must know its borrowers, which is why a supervisory role is essential. Put simply, if supervisory and other financial oversight responsibilities were taken from the Fed, it would make it more difficult for us to perform our lender of last resort function. To do that well and safely, it is important that we understand banks, the financial system and all its interconnections. One instructive example in this context is the Northern Rock experience in the United Kingdom, where banking supervision and the lender of last resort functions were separated.

At the risk of oversimplifying, Central Banks associated with – or responsible for – financial stability may find themselves with:   two separate missions: price and financial stability    two different accountability regimes: full independence for monetary policy; coordination or subordination mode for financial stability    two interacting sets of instruments: interest rates and macro prudential tools (a situation made even more complicated when unconventional monetary policies are implemented)  The potential for confusion is real. It is not difficult to imagine situations where actions that Central Banks take on pure monetary policy grounds are nevertheless contested in the name of financial stability. To some extent, this has always been a possibility. The difference, now, is that institutional frameworks exist through which – implicit or explicit – challenges to Central Banks operational independence can materialize. It might be tempting to conclude, then, that Central Banks should stay away from financial stability and concentrate exclusively on ensuring price stability. This, unfortunately, is impossible, if only for reasons that Charles Goodhart has well explained in a previous paper: ultimately, Central Banking is about providing liquidity and liquidity provision is an essential and central component of financial stability. What can we conclude?   First, central banking is not only about monetary policy but also involves an essential component of financial stability. This seems to me a broad consensus coming out of the crisis.
At the same time, the scope for budget policy will be curtailed in a sense by the Stability and Growth Pact, though this need not be so much of a restriction in practice as long as the objective of medium-term balance or surplus is met. A stronger challenge is to be expected from the ongoing integration in the European Union, which BIS Review 50/1998  -5-  EMU may accentuate. This process can be rather rapid, not least in financial markets. In markets for goods, pricing in a single currency may accelerate the existing trend towards smaller differences in consumption taxes, for example. Structural and labour-market policy Finally some words about structural and labour-market policy. This policy field is much less clearly defined than the two I have already considered. It is affected by many different rule systems at both national and EU levels, besides belonging to the competence of many different ministers and commissioners. The common agricultural policy and tax harmonisation are two examples. The components of structural policy that concern the internal market - competition laws, the whole of the market for goods and services, the mobility of capital, and labour market mobility - are largely regulated at EU level. The competition laws are one example here. Another component of structural policy is the regulations and other matters that apply to the labour market. Many initiatives here have recently been taken at EU level in order to speed things up and comply with political requirements in the Union.

A forum, such as this, is one good example of how as a community, we recognise companies that have done well in their CG disclosures and practices. Companies with good CG are characterised by a sense of mission to hold themselves to high standards of accountability, transparency and sustainability, which are in turn critical to a thriving capital market. Good CG in companies stands for doing right and doing good so as to do well over the long run. Conversely, companies that fall short in their CG practices will hurt investor confidence. Failings in larger institutions can also undermine system-wide financial stability. There have been recent public commentaries on companies flagged for corporate transgressions. Some reports are accompanied by calls for more forceful regulatory actions, or further tightening of CG standards. So allow me to briefly describe the regulatory framework for CG in Singapore. The MAS, as the statutory regulator, is responsible for a sound framework within which market discipline and enterprise can thrive. In regulating and developing the capital markets, we seek to be balanced. On the one hand, to allow for growth and appropriate risk-taking and on the other hand, to curb potential abuses and wrongful acts. The Singapore Exchange (SGX), as the frontline market regulator, administers the SGX Listing Rules. The SGX is responsible for ensuring that the market operates in a fair, orderly and transparent manner.