samchain/econo-pairs-v1 huggingface dataset:
Monetary policy in Singapore is centred on the management of the exchange rate. As an international financial centre with open capital markets, we are exposed to large and sometimes, volatile capital flows. To facilitate the effective conduct of our monetary policy and to avoid large swings in our $ exchange rate, we have a policy of discouraging the internationalisation of the $ However, we recognised that the trade-off was a less vibrant capital market, particularly the debt market. So we have progressively relaxed the specific restrictions over the past six years, while maintaining the intent of the policy. The results have been positive. The non-internationalisation policy is now down to two basic safeguards to discourage speculation in the $ - banks may not lend $ to non-resident financial institutions in order to speculate on the $ and non-resident borrowers who raise $ through bank borrowings or on our capital markets must swap or convert these $ to foreign currencies before remitting them abroad. This stance remains appropriate, and continues to underpin the effective conduct of our monetary policy. Nevertheless, there is scope for further fine-tuning. We have decided that non-resident, non-financial issuers of $ bonds and equities will no longer be required to swap or convert their $ proceeds into foreign currencies before remitting abroad. Non-resident, financial issuers of bonds and equities will still have to do so. This will give the issuers greater flexibility in managing their $ funds.

Even though the region saw quite notable bond fund outflows since the Fed began to raise rates in March, such outflows have yet to cause any significant disruptions. That being said, there is no room for complacency. For one, as the global economy is heading towards a growth slowdown, if not an outright recession, Asian EMEs may be less able to look for support from external demand to cushion the effect of tighter global financial conditions. Moreover, capital outflow pressures faced by the Asian region may persist, leaving EM Asian currencies and FX reserves to bear the brunt of global tightening. 4. Unfortunately, there are limits as to how much these shock absorbers can shield the domestic economies from tighter global financial conditions. In particular, even though exchange rate flexibility can be a useful shock absorber, research suggests that currency depreciation is not a panacea for cushioning the impact of US rate hikes. As a few papers in today’s Workshop would argue, given the centrality of the US dollar in the international financial and monetary system, a US monetary tightening shock and an appreciation in the broad US dollar index can still induce a widening of EMEs’ sovereign credit spreads. Worse still, for more vulnerable EMEs with significant FX mismatches, allowing their currencies to depreciate is not an appealing option; instead, their central banks may actually have to tighten monetary  policy even when global financial conditions are already tightening, in order to support their currencies and prevent their FX liabilities from spiralling out of control.
Kahneman, D (2012) ‘Thinking, Fast and Slow’ Penguin See Carney (2015) ‘Three Truths for Finance’, Remarks given at the Harvard Club UK Southwark Cathedral dinner, London. http://www.bankofengland.co.uk/publications/Pages/speeches/2015/843.aspx 5  7  All speeches are available online at www.bankofengland.co.uk/speeches  7  It has been bolstered by two important institutional innovations since the crisis. The first is the handing of responsibility for the supervision of individual banks and building societies to the Bank of England. That has meant a change in approach to supervision, to one that’s prepared to make judgements about risks and act pre-emptively. The second is the creation of a new authority in the Bank – the Financial Policy Committee – with new powers, tasked by Parliament with monitoring risks in the financial system that could cause problems for the wider economy and with doing something about them. This has been christened ‘macroprudential policy’. Macro because it’s focussed on the wider economy; prudential because it’s about protecting that wider economy from excesses in the financial system. It is the institutional memory of the financial crisis; designed to hardwire into the system the vigilance to growing risks and the imagination of their consequences that were so dangerously absent before the crisis. In short, someone has the job of worrying intelligently. Is the same movie already playing again? Now let’s turn to the movies. The old classic, Debt Strikes Back, in which the spiral of complacency upends the economic galaxy, has been seen many times before.

Is the strategy of benign neglect the right one in times Asia is holding down its currencies? Trichet: On Asian emerging economies’ currencies we have a very clear message which the Central Banks of the G7 together with the executive branches have confirmed this spring. We all say the Asian emerging economies as well as the global economy would be better off if these currencies would be more flexible. DIE ZEIT: Markets are worried about the crisis of the sub-prime credit market in America. Are you worried as well? Trichet: In a number of segments in the global finance system we have observed in the past a certain under-appreciation of risks. That was visible in the low level of volatility, the low level of spreads, the low level of risk premiums. During the last weeks we saw a correction. At the moment I would say it has been a healthy correction. But I remain cautious: it is no time for complacency. DIE ZEIT: At the moment there's a lively debate in- and outside the ECB whether the second pillar, the monetary analysis, matters anymore. The first revision of the ECB strategy came 2003, five years after its implementation in 1998. Will the next revision come 2008, five years after the last one? Trichet: No. The two pillar strategy has been very effective.
We will discuss these matters in more detail at one of the upcoming sessions with Minister of Economic Development 3 / 11  BIS central bankers' speeches  Maxim Oreshkin. The second area of ? ?our activity is maintaining financial stability. Here, our focus is also shifting: from reversing the negative consequences from earlier risks to preventing new systemic risks. On this, I would like to highlight three main points: First. The systematisation of macroprudential regulation. We already have experience in cooling the consumer lending market and staving off bubbles (in 2013), in driving a shift away from bank balances in foreign currency, and implementing de-dollarisation. However, we typically introduced such measures by way of changes to our standard regulatory acts. We are planning to prepare stand-alone regulation as early as this year, encompassing all macroprudential policy measures. In our opinion, this will allow us to streamline the system, foster a countercyclical approach, and make it clearer and more transparent for the market to use these tools. Second. The introduction of the “payment-to-income” ratio in order to influence the consumer lending market more effectively. The corresponding advisory report we published has already been discussed with the market. We will soon produce solid proposals. Third. The new regulations related to the credit history bureau. It is the credit history bureau that comprises the key infrastructure for collecting information on borrowers’ aggregate debt. Here there is a fork in the road.

Higher competition, in its turn, improves the efficiency, which ultimately leads to higher quality and lower prices for consumers. Indeed, this is one of the main ideas underpinning the European single market. This idea is undoubtedly true also for the banking industry. There is increasing evidence of the positive link between the efficiency of the financial system, of which banking is the most important part, and the wealth and growth of the real economy. Thus the potential benefits of a more efficient financial system are substantial. Considering that most financial services bought by consumers (private individuals and SMEs) are bought from their bank, the low integration (and in many cases low efficiency) of European banking is a significant hindrance to creating an overall efficient market in financial services. Barriers to integration Why then is integration of European retail banking not happening or only happening very slowly? The first and second bank harmonisation directives and more recently the many initiatives within the Financial Services Sector Plan, FSAP, have set the legal framework for cross-border expansion. In principle, any European bank can easily set up or acquire a subsidiary in another member state. More importantly, a bank only needs one single banking licence in one member state to be able to offer banking services in all EU member states. So why are we not seeing serious integration of European banking? A number of possible reasons have been cited. These could roughly be divided into three kinds: economic, regulatory, and political.
For medium-term maturities, so-called “breakeven inflation rates” – derived from the difference between the yields on conventional and inflation-indexed gilts – have stabilised over the past few months. Given the frictions that many believe distort indexed-linked yields, 15 I also like to look directly at nominal forward rates. The underlying thought is that, relative to fluctuations in bond yields brought about by past shifts in inflation regimes, longer-term risk-free real rates may not move around a great deal, so that any systematic inflationary impulse would be quite likely to show up in nominal yields. Consistent with that, following the UK’s disinflation in the early-1990s, medium-term nominal forward rates fell by around 400bp. Since the new monetary regime became established in the late 1990s, they have been more or less stable, and currently remain within the range prevailing over the past decade or so. Surveys of household inflation expectations tell a broadly consistent story. For near-term horizons, they have picked up sharply. What limited information we have on the public’s  14  Broad money (M4) can be adjusted using Bank estimates of banks' intragroup business with other financial corporations, as well as banks' repo activity with LCH.Clearnet's RepoClear service. Such estimates are based on anecdotal information provided by a small sample of banks. Work is under way within the Bank to improve the basis of these estimates, see Burgess, S and Janssen, N (2007), “Proposals to modify the measurement of broad money in the United Kingdom: a user consultation”, Bank of England Quarterly Bulletin, vol.

12  BIS Review 112/2008  Chart 1: Premium on unsecured interbank lending (Libor-OIS)  Chart 2: Selective effective rates and Bank rate  Basis points 140 1 month  3 month  6 month  Per cent 9.0  PNFC overdraft rate  120  8.0  100  7.0  80  6.0 5.0  60 Bank rate  40 20  3.0  Household mortgage rate  2.0  0  1.0  -20 2002  2003  2004  2005  2006  2007  2008  0.0 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008  Chart 3: Credit condition survey(a)- large corporates  Chart 4: CPI and the capital goods deflator  Net percentage balances(b)  Cheaper credit  Percentage changes on a year earlier 10  80 Spreads  Loan covenants  4.0  8  60  6  40 20  CPI  0  4 2  -20  0  -40  -2  -60 Dearer credit  -80  Capital goods  -100 Q2 Q3 Q4 Q1 Q2 Q3 Q2 Q3 Q4 Q1 Q2 Q3 2008 2007 2008 2007  -4 -6  1989 1991 1993 1995 1997 1999 2001 2003 2005 2007  (a) The blue bars show responses over the past three months. The red diamonds show expectations over the next three months. Expectations balances have been moved forward one quarter so that they can be compared with the actual outturns in the following quarter.
Revisions to the official data and the volatility of measured productivity - reflecting the business cycle - make it extremely difficult to infer changes to long-term growth rates. The absence of any compelling evidence for a rise in underlying productivity growth suggests that this is an unlikely explanation for consistently low inflation over the past decade. Third, the new monetary policy framework - a symmetric inflation target and the transfer of interest rate decisions to an independent Bank of England - has helped to anchor inflation expectations to the target. It is less likely now that a shock to inflation would lead to a further and persistent deviation of inflation from target. There is a belief that inflation will soon return to target. As a result, a surprise movement in inflation is expected to be temporary and so less likely to lead employers and employees to adjust their desired prices and wages. And there is convincing evidence that changes to inflation are much less persistent under the new monetary policy arrangements. So there you have it: three possible explanations for the recent low and stable level of inflation despite falling unemployment and rapid output growth. But this is no time for complacency or hubris. Part of the improved short-run trade-off between growth and inflation may reflect temporary factors. Inflation may have been close to target because of one-off explanations, such as increased competition that temporarily depressed retail prices relative to costs, or larger flows of migrant workers that have temporarily held down wage inflation.

What is clear, however, is that the combination of low and stable inflation and continuously falling unemployment must come to an end at some point, and may already have done so. Starting, as we do now, with little if any spare capacity, it is unlikely that we can expect unemployment to fall indefinitely. From time to time shocks will hit our economy, as we have seen with oil prices and world trade, and so  2  BIS Review 61/2004  there will be fluctuations in growth and unemployment, as well as in inflation. Unemployment can be maintained at lower rates than in the past, even though there will inevitably be times when it will rise because no monetary policy can hope to prevent all fluctuations of demand, output, and hence employment. The nice decade we might expect to be followed by the not-so-bad decade.1 Moving from a nice to a not-so-bad decade would still represent a significant improvement in our economic fortunes compared with the period of high inflation. We must be conscious of the dangers of hubris. After all, starting from the Garden of Eden there can be only a fall from grace. ENDS  1  For those looking for a suitable acronym let me suggest that the degree of stability to which we can reasonably aspire, in comparison with the nice decade, will be not of the same order but also desirable, or not-so-bad. BIS Review 61/2004  3
Birgir Ísleifur Gunnarsson: Update on Iceland’s economy Address by Birgir Ísleifur Gunnarsson, Chairman of the Board of Governors of the Central Bank of Iceland, at its Annual General Meeting, Reykjavík, 27 March 2001. *  *  *  On behalf of the Board of Governors of the Central Bank of Iceland I welcome you all to the Bank's 40th annual meeting. This year marks the Bank's fortieth anniversary after it was made completely separate from Landsbanki and transformed into an independent institution. The Bank's financial statements for the year 2000 have been ratified today by the Prime Minister. The Bank's annual report has also been published. As usual it includes a survey of the Bank's activities and performance, along with a detailed report on the Bank's monetary policy and actions, the financial system and financial markets, and the main features of economic developments in the course of last year. I shall now address several aspects of economic issues and the present prospects, in particular those most closely connected with the Central Bank's field of activities. Overheating of the economy Iceland has distinguished itself from most other industrialised countries in recent years by the strong economic growth it has enjoyed, or 4-5% per year. The closest comparison in this respect is with the USA, where growth is in fact on a downward path now.

This prediction did not materialise in full. During the second half of the year it seemed clear that there would be some lag between the depreciation and its effect on the price level. This prompts questions about the correlation between prices and exchange rate developments. The short-term relationship of these factors appears to have weakened, which is undoubtedly explained in part by market competition. A more flexible exchange rate policy is also unquestionably at work. In earlier times, when devaluations were made amid extensive announcements, the change was in general rapidly reflected in the price level, since it was fairly certain that it would be permanent. After the exchange rate was made more flexible, it can be assumed that uncertainty about the permanence of changes has led buyers and sellers of goods to take more short-term exchange rate risk than before,  2  BIS Review 27/2001  since high costs are involved in making frequent alterations to prices. However, it is imprudent to ignore the eventual impact of a depreciation on prices, since research offers no support for such a view. This is one of the assumptions on which the Bank bases its forecast from this February, where inflation is expected to run at 4.3% between 2000 and 2001 and 4.6% from the beginning to the end of the year. Next year it is forecast to slow down to 2.7% from the beginning to the end of the year.
Not only are populations growing older. People are also living for longer. All of these considerations have led to greater attention to retirement planning and to an increase in the size of the pension fund portfolio. Although Asia as a whole lags behind the rest of the world in the development of pension schemes, the numerous pension reforms undertaken to facilitate pension and other retirement schemes have stimulated considerable growth in the size of funds. In some economies, such as Malaysia and Singapore, the pension asset-to-GDP ratio is as high as 50 to 60%. For a number of good reasons, pension funds tend to involve large bond allocations. This has already added to the demand for bonds, and, as with public sector funds, this demand is likely to grow in the future. But, as we are all aware, there is lack of a deep bond market in the emerging Asian economies and therefore much of the increased demand, from both the public and private sectors, has been satisfied by investments in bonds denominated in the major foreign currencies. Indeed the net portfolio outflows from nine emerging markets in Asia (including both public and private sectors) have increased sharply over the past five years - from $ billion in 1998 to $ billion in 2003. Emerging Asia as a whole is now a large net exporter of portfolio capital. The growth in demand for bonds arises from what is surely a positive process - the increase in public and private wealth in our region.

Conclusion I have outlined in this address the case for an Asian bond market and the role being played by the public sector in promoting the development of such a market. Collectively and individually, central banks and governments are making good progress on a variety of initiatives aimed at reducing barriers, building infrastructure and encouraging interest in the market. In the end, however, there is only so much that the public sector can - or should - do, particularly in a region where there is traditionally not a lot of public debt. Central banks and governments have a responsibility to facilitate and promote development, and to provide an environment that is conducive to both supply (the issuers) and demand (investors). It is, I have argued, in the public interest that a healthy bond market should develop in our region. However, it is for the private sector to provide the great bulk of supply and demand. Happily, it appears that the private sector is playing its part with enthusiasm. 4  BIS Review 40/2004
Notably, the 1994 cycle was associated with a large increase in U.S. long-term bond yields, and appears to represent a case in which there was a considerable gap between what the Fed did in terms of monetary policy tightening relative to initial market expectations. A similar gap was apparent during the taper tantrum in the spring of 2013, when our attempts to provide guidance about the potential tapering of asset purchases ended up confusing market participants, causing many to anticipate an earlier start and more rapid rollout of actual policy rate hikes. These episodes are reminders of the importance of transparency and clear messaging in how the Fed is evaluating the evolving economic landscape, a point I’ll return to shortly. Third, the stance of Fed policy will be far from the only factor affecting external financial conditions for EMEs. Even as the FOMC considers the appropriate timing and pace of moving to a less accommodative policy stance, the ECB and the Bank of Japan are implementing additional easing measures. As a result, external conditions will remain more supportive than would be indicated by a narrow focus on Fed policy alone. Finally, EME fundamentals are likely to be the most important determinant of how their financial conditions respond to Fed policy normalization. This was one of the key lessons of the taper tantrum. At first, market pressure was somewhat indiscriminant across countries.

The winter weather was quite severe in the eastern two-thirds of the United States and bottlenecks at the West Coast ports disrupted both sales and production. More important in assessing the growth potential of the U.S. are the improved underlying fundamentals. The firming of growth in 2013 and 2014 reflected several important developments that, in my view, are likely to continue to support growth over the remainder of this year and into 2016. Those developments include the fact that the household deleveraging process has largely run its course and the imbalances in the housing market have been largely worked off. In addition, federal fiscal consolidation appears to be over for BIS central bankers’ speeches  1  now, and employment and spending are again increasing at the state and local government level. My outlook for 2015 as a whole is that economic growth will be close to the pace of the past two years, supported by continued solid fundamentals and accommodative financial conditions. If I am correct, then this would lead to a further reduction of labor market slack, with the unemployment rate approaching 5 percent by the end of the year. An important underpinning of this outlook is that, after a lull in the first quarter, household spending will move back toward the kind of growth path it was on over the second half of 2014, when real PCE grew at about a 3¾ percent annual rate.