samchain/econo-pairs-v1 huggingface dataset:
To give you a brief background on the central bank legislation, since its inception in 1964 the Bank has operated under 3 different Bank of Zambia Acts; the BoZ Act of 1965, the BoZ Act of 1985 and the current BoZ Act of 1996. Each of these Acts has responded to the era of its time. For example, the Acts of 1965 and 1985 were characterised by high Government involvement in the operations of the Bank. The Bank administered exchange control regulations. It also determined and regulated the frequency and rates of fees, commissions and interest rates etc charged by financial institutions. The economic reforms that swept the country in the 1990’s saw the ushering in of the current BoZ Act of 1996 which supported the Government’s free market policies. The Bank’s mandate was made clearer, exchange control regulations were suspended and the Bank’s regulation of interest rates etc was removed. There was also improved transparency and accountability. Since the enactment of the BoZ Act of 1996 two issues have precipitated the need to have the Act reviewed again; 1. In 2002, the IMF and the World Bank conducted a joint assessment of Zambia’s financial sector under the Financial Sector Assessment Programme (FSAP). The result of this assessment raised awareness of various weaknesses in our financial system which needed to be addressed. For this purposes, the Government approved the establishment of the Financial Sector Development Plan (FSDP) in 2004 to address these weaknesses and implement recommendations.

Tukiya Kankasa-Mabula: Stakeholder’s workshop on the draft Bank of Zambia Act Opening remarks by Dr Tukiya Kankasa-Mabula, Deputy Governor of the Bank of Zambia, at the Stakeholder’s Workshop on the Draft Bank of Zambia Act, Lusaka, 21 September 2010. *  *  *  Chief Executive Officers and Representatives of Stakeholder Institutions; Distinguished Invited Guests; Directors and Staff of the Bank of Zambia; Members of the Press; Ladies and Gentlemen. On behalf of the Bank of Zambia, and indeed on my own behalf, I welcome you to this workshop which is entitled “the Stakeholder’s Workshop on the Draft Bank of Zambia Act”. As the name rightly suggests, it is a workshop facilitating the meeting of minds of key stakeholders affected by the Bank of Zambia Act. On the one hand we have those administering the Act, the Bank of Zambia representatives and on the other hand those whose operations stand to be affected by the administration of the Act, the Financial Service Providers. We have also cast the net wide to include other key stakeholders such as Government ministries, other regulatory entities and professional bodies representing lawyers, accountants and economists. The Bank of Zambia is charged with the responsibility of formulating and implementing monetary and supervisory policies that achieve and maintain price stability and promote financial system stability in the Republic of Zambia.
Any shock could lead banks to fail through a domino effect. The superstructure of complex transactions within the financial sector (in derivatives for example) greatly increased this interconnectedness. The time-series aspect is the pro-cyclical behaviour of risk-taking in the financial system that I described earlier. Optimism feeds on itself until the occasional setback changes the mood to one of pessimism. And individuals are reluctant to accept that success may not be the  BIS Review 32/2009  3  result of superior wisdom, which should naturally be reflected in compensation, but the shortrun outcome of a risky strategy. To deal with the “cross-section” problems we need to reduce the exposure of the system to domino effects. For some, especially over-the-counter, markets this could be achieved by increasing the role of central counterparty clearing houses. Much good work on this is going on, led by the Federal Reserve Bank of New York. But a clearing house should not be an excuse for allowing flawed financial instruments, such as many of the mortgage-backed securities, to be treated as high quality assets. We also need to improve the regulation of the liquidity of banks. After the crisis began, the most striking feature of the regulatory system, as embodied in the Basel arrangements and implemented in the UK, was the absence of any effective regulation of liquidity. The FSA is acting to remedy the situation, and the Bank is in active discussion with FSA about how such regulation should best be implemented.

Take a simple example of an investment that provides a long, regular stream of profits interspersed with occasional large losses, such that on average you would expect it to have the same return as a safe investment – not an unreasonable characterisation it would now appear of many of the investment strategies of recent years. Over short time periods, where it is unlikely that disaster will strike, it is more likely than not that investors will come out ahead, with a high return. But over long periods, where the risk that disaster will strike at some point is higher, it is likely that the overall return will be worse than the safe investment. And, because charges are often structured so that investment managers receive more of the upside from risky behaviour than they share in the downside, they have an incentive to promote the risky investment strategy. That, allied to a massive increase in the complexity of financial products and instruments in recent years, has meant that investors have, perhaps unwittingly, aided an enormous increase in the risks being run in the financial system. Given these problems, it seems to me that regulation should aim to be simple and robust. Overly complex measures of risk and capital adequacy are rarely robust to developments that are easy neither to anticipate nor calibrate. And robust rules for regulation will of necessity need to be simple or supervisors will be lost in a morass of unnecessary detail. For the same reasons we should not expect too much of regulation.
12  By contrast, they contain no significant information about future inflation beyond past inflation itself. In other words, in regressions of inflation on lags of itself and lagged expectations, the estimated coefficients on the latter are typically statistically insignificant. 13  David Miles made this point in a recent speech (Miles (2015)). To take a few of many studies, see also Hansen and Singleton (1982), Campbell and Mankiw (1989) and Canzoneri et al (2005). 14  Bachmann et al (2015). 8  BIS central bankers’ speeches  International experience: proper deflations are rare, especially in countries with floating currencies That doesn’t mean we can rest entirely easy. In particular, it would be wrong blithely to assume that positive nominal income growth will continue, come what may. Deflations have to start somewhere and there is a risk that falling prices will beget yet weaker or even negative wage growth – that today’s “good” deflation will metastasise into something a good deal worse. Bordo classifies “bad” disinflations as those that coincide with recessions, “ugly” episodes as steep and generalised falls in nominal quantities, all the uglier in the presence of large gross debts. However, my own view is that the chances of such an outcome are relatively low. I say that partly because base effects will naturally give a big positive impetus to annual inflation in early 2016.

In practice people may take time to react to real income shocks; it’s also possible they expect some of the recent declines in energy prices to be reversed 10. But, in the data, there’s no correlation between household saving rates and changes in real energy prices, either here or elsewhere in the OECD 11. This suggests their effects on income are in general matched by equivalent shifts in real spending. Note that the UK is not the only place where consumer confidence has risen in recent months (Chart 10). 9  This point was made in a recent speech by the Governor (Carney (2015)) and, in an article, by Kristin Forbes (2015). 10  Forward markets discount an oil price of $ at the end of next year, quite a bit higher than the current spot price though still well below where it was in mid-2014 $ and $ respectively). 11  In regressions of changes in saving rates on the contribution to real income growth of energy and food prices, the estimated coefficient is close to zero and statistically insignificant in all 17 OECD countries for which we have data. BIS central bankers’ speeches  7  Nor is it unusual to see stronger demand at a time when these survey measures of household inflation expectations are falling. Typically, these near-term expectations surveys track actual inflation 12.
The third issue is whether the rise in commodity prices will turn out to be persistent and, if so, how this might impact the inflation outlook. Recently, commodity prices have risen sharply. For example, the spot GSCI – a broad measure of commodity prices – has risen more than 35 percent over the past year. This was in train before the upheavals in the Middle East raised market concerns about potential disruption to oil supplies, pushing energy prices – though not other commodity prices – still higher. Commodity price pressures are pushing measures of headline inflation above measures of core inflation, which exclude food and energy prices. How worried should policymakers be about this development? Although there have been commodity price cycles in the past, commodity prices have not consistently increased relative to other prices, and indeed have declined in relative terms over the very long term. Historically, if commodity prices rose sharply in a given year, it has been reasonable to expect that these prices would stabilize or fall within a year or two. This property has been important because it has meant that measures of current “core” inflation, rather than current headline inflation, have been more reliable in predicting future headline inflation rates. In contrast, over the past decade, commodity prices generally have been on an upward trend. For example, as shown in Chart 25, fuel prices have generally been in a rising trend since 1999 and non-fuel prices since 2001 – both trends interrupted temporarily by the financial crisis.

In this way, the Federal Reserve can drive up the rate at which banks are willing to lend to more risky borrowers, restraining the demand for credit and preventing credit from growing sufficiently rapidly to fuel an inflationary spiral. For this dynamic to work correctly, the Federal Reserve needs to set an IOER rate consistent with the amount of required reserves, money supply and credit outstanding needed to achieve its dual mandate of full employment and price stability. If the demand for credit were to exceed what was appropriate, the Federal Reserve would raise the IOER rate – pushing up the federal funds rate and other short term rates – to tighten broader financial conditions and reduce demand. 2 If the demand for credit were insufficient to push the economy to full employment, then the Federal Reserve would reduce the IOER rate – pushing down the fed funds rate and other short term rates – to ease financial conditions and support demand, recognizing that the IOER rate cannot fall below zero. While the mechanism is different, the basic approach is very similar to the way the Federal Reserve has behaved historically. Although our ability to pay interest on excess reserves is sufficient to retain control of monetary policy, it is not bad policy to have both a “belt and suspenders” in place. As a result, we have developed means of draining reserves to provide reassurance that we will not – under any circumstance – lose control of monetary policy.
In work at the Riksbank on monitoring prices in the Swedish economy, we could not fail to notice some positive changes in competitive conditions and pricing in recent years, as well as some more negative patterns that seem to be persisting. BIS Review 47/1998  -4Let me take the positive aspects first. One is the favourable price trend for imported goods in recent years. This is particularly notable in that for much of this period the exchange rate has been comparatively weak, which by itself should push import prices up. A favourable price trend has also been observed for food products, for example; this seems to be a consequence, at least in part, of Sweden’s membership of the European Union. Today, moreover, there are many indications that the combination of European monetary union and increased IT-based trade, for instance, will make competition even stronger. There is a general difference between the development of administered prices and market prices for goods and services. The administered prices have risen faster. This may be a result of increased fee setting in the public sector in recent years, both in connection with structural moves away from tax financing and to fill existing “holes” in public finances. Then there is the classic explanation that it is not so easy to raise productivity growth in some parts of the services sector. This no doubt applies in particular to a number of the services that are mainly provided under public auspices, such as medical care and care of the aged.

The deterioration was particularly significant in countries in which: (1) pre-crisis growth had been of an unsustainable and unbalanced nature – typically as a result of an over-reliance on the expansion of private credit and the contributions of housing-related sectors (notably construction and housing finance) – and (2) in which governments had failed to take advantage of favourable developments in the years of booming growth in order to consolidate their public finances. Over time, concerns about the size of government deficits and soaring debt-to-GDP ratios – combined with uncertainty about the ability of governments to design and implement consolidation plans in the context of reduced potential growth and massive implicit liabilities towards the financial sector – developed into uncertainty about the sustainability of government debt. Although the initial problems primarily concerned the Greek government debt market, contagion and spillover effects meant that the crisis quickly spread to the sovereign debt of other so-called “peripheral” countries and other market segments. In particular, financial markets turned their attention to the solvency of some “peripheral” economies that were perceived to have been hit particularly hard by the crisis because of long-standing structural and institutional weaknesses. The deterioration of public finances in some euro area member States has impacted negatively on investors’ confidence in government bonds issued by these countries, and thus led to further turbulences in the financial markets. This is also reflected in the sharp increase in the yields on the government bonds issued by those countries.
Unlike most other banking systems in the region, we have had the luxury of being able to look ahead without being distracted by the need to cope with a banking crisis. Of course, the banking sector here has had its ups and downs over the last few years. But the results of the banks for the year 2000 showed that they have consolidated their recovery from the Asian Crisis. Pre-tax operating profits of the local banks rose in aggregate by 38% in 2000. Admittedly, this largely reflected the decline in bad debt provisions. But even if we strip this out, profits still rose by a reasonable 10%. This recovery should however not disguise the fact that a banker’s job is not an easy one at present. This is shown in two main features of current market conditions. The first is that domestic loan demand has not yet shown a sustained recovery. This reflects continued sluggishness in private sector investment, recourse by the corporate sector to other forms of financing such as the equity and bond markets and the lack of revival in the residential property market which has reduced the demand for mortgage loans. Related to this is the fact that the banks are flush with liquidity. A recent study by Goldman Sachs concluded that the surplus deposits in the banking system had tripled since 1997 to reach $ trillion. According to the study, this represents 124% of GDP, the highest percentage in the world.

Closed to 80 partners have joined the IFFO platform since its launch and today, I am pleased to welcome the City of London as the newest partner to IFFO. I believe City of London will serve as the linkage to foster partnership between the financial institutions of London and Hong Kong to leverage on the tremendous opportunities in infrastructure financing and investment. Being an investor itself, the HKMA is aware of the challenges when it comes to infrastructure investment. I think there are currently two salient gaps on which IFFO is focusing its work. First is the funding gap. According to an estimate, there would be a funding gap of over $ trillion in the coming 15 years in infrastructure investment. There is no way the public sector or multilateral development banks can shoulder this funding responsibility alone. More private capital is needed. Three months ago, the HKMA signed an agreement in London with the International Finance Corporation under the World Bank Group, committing $ billion to the innovative Managed Co-Lending Portfolio Program, which is a debt mobilisation platform for emerging markets. Meanwhile, we are working with some likeminded institutional investors to identify suitable opportunities. The aim of all these initiatives is to create a demonstration effect to encourage more private investment in infrastructure. The second gap is what I would call a language gap. In considering infrastructure pipeline, institutional investors talk more about the risks and how they can be mitigated, whereas project developers may be relatively more opportunity-driven.
As the boom persisted, investors grew more confident in the relative stability of macro and financial conditions and in the high levels of liquidity of the recent past, and projected that stability into the future. That confidence in a more stable future led to greater leverage and a larger exposure to the risk of a less benign world. The interaction of these forces made the financial system as a whole more vulnerable to a range of different weaknesses. The models used by issuers to structure these products and by credit rating agencies to assess risk and assign ratings turned out to be much more sensitive to macroeconomic assumptions than was apparent to investors at the time. Assumptions about home price appreciation and the correlation of defaults within the underlying collateral pool were particularly critical in this context. The proliferation of credit risk transfer instruments was driven in part by an assumption of frictionless, uninterrupted liquidity. This left credit and funding markets more vulnerable when liquidity receded. Banks and other financial institutions lent substantial amounts of money on the assumption that they would be able to distribute that risk easily into liquid markets. A sizable fraction of long-term assets – assets with exposure to different forms of credit risk – ended up in vehicles financed with very short-term liabilities and was placed with investors and funds that were also exposed to liquidity risk. As is often the case during periods of rapid change, more significant concentrations of risk were present than was apparent at the time.

Banks and investment banks sold insurance against what seemed like low probability events, but did so at what even at the time seemed like low prices. And on the assets they retained, these same institutions purchased insurance from financial guarantors and other firms that were exposed to the same risks. The crisis exposed a range of weaknesses in risk management practices within financial institutions in the United States and throughout the world. Today, a group of the primary supervisors of the largest banks and investment banks in the world released a comprehensive assessment of risk management practices in these institutions. This assessment will help lay the foundation for consensus on changes to supervision going forward in the major financial centers. The report examines a range of practices that helped determine relative performance during this crisis. Banks and investment banks with stronger risk management practices and cultures did substantially better. The most common failures were in how firms dealt with uncertainty about the scale of losses they would face in a less benign economic and financial environment; the scale of the cushion they built up against that uncertainty; how well they managed the internal tension between risk and reward; and how quickly they moved to mitigate risk as conditions deteriorated. The typical arsenal of risk management tools relies, by necessity, on history and experience, and as a result has only limited value in assessing the scale of potential future losses.
Around 200 of our colleagues studied for degrees or professional qualifications in 2016 and 670 re-skilled through internal job moves across directorates. And since new skills can also be acquired outside the day job, we are increasing our support for community volunteering and engagement. We are encouraged that at the last count, over three quarters of our staff believe that the Bank offers good opportunities for learning and development. That’s a six percentage point improvement on the previous year and 20 percent higher than the UK average. xxii  We can’t take this progress for granted, however, and need to redouble our efforts to build a more inclusive culture at the Bank. Inclusive culture  Having attracted a diverse workforce, we must enable and encourage participation. We are striving to create a more inclusive environment where different working patterns are accommodated, people can debate, challenge and present ideas, and are supported when undertaking new and innovative work. Inclusion Fortnight, with 21 events over ten days across three sites, attended by almost 1700 people is the latest example of this commitment. 6  All speeches are available online at www.bankofengland.co.uk/speeches  6  An inclusive culture is essential to realise the benefits of our aim to be ‘One Bank’. We are working to create a more agile work environment, which encourages cross-disciplinary and cross-team working further supporting the development of new ideas and approaches.

Increasingly we are asking ourselves whether we are communicating messages in accessible language. xv  Whether we’re using the right media channels to reach the widest possible audience. And most fundamentally, whether people from different backgrounds deduce the same things from our policy messages. Diversity can help. The more homogenous an organisation the more likely it will fall foul of the ‘curse of knowledge.’ This cognitive bias occurs when people assume that their audience has the same background information and base level of understanding as themselves. xvi  It’s assuming that everyone has the same  narrow view of humanity as the representative agent at the heart of a DSGE model. 4  All speeches are available online at www.bankofengland.co.uk/speeches  4  To communicate to both the City and the country, the salon and the suburb, we need to create content that engages different audiences. The problem is that they don’t teach you this in Grad school (or at least the ones where we traditionally recruited). We need alternative perspectives to craft our messages so that they make sense and resonate with more people. The more people can recognise themselves in us, the more we can stand in their shoes and speak their language, the more likely the Bank is to be trusted. xvii  The how The Bank’s approach to increase diversity and foster inclusion is three-fold:   through inclusive recruitment,    developing an inclusive culture, and    creating inclusive communications.