samchain/econo-pairs-v1 huggingface dataset:
That influence tempted 1  See Tobin (1972), “Inflation and unemployment”, American Economic Review, 62. Inflation can have large redistributive effects. Volatile inflation arbitrarily re-distributes wealth across borrowers and savers. And most recently, there has been a debate about how the stance of monetary policy has affected the distribution of wealth and income. In a series of recent analysis and speeches, members of the MPC have shown that, while distribution is not an objective of monetary policy, the evidence strongly suggests that policy since the crisis has been associated with better outcomes. 2  2  All speeches are available online at www.bankofengland.co.uk/publications/Pages/speeches  2  authorities to promise low inflation in the future, but then to renege in order to boost activity. Electoral cycles 3  reinforced this predisposition. Firms and households began to anticipate these incentives, however, and eventually pre-empt them. The economy ended up in a worse equilibrium with higher inflation and 4  unemployment. Such time-inconsistent policies contributed to excessive inflation and higher structural unemployment in the UK during the 1970s and 1980s (when inflation averaged 9.5% and unemployment over 7.5%). In light of similar experiences, many societies came to recognise that macro outcomes can be improved by having society first choose the preferred rate of inflation and then delegate operational responsibility to the 5  monetary authority to take the necessary monetary actions to achieve that objective. By “tying the hands” of authorities, time inconsistency is resolved and better outcomes for both inflation and unemployment become possible.

32  An expression equivalent to the IS curve above can then be used to define  the natural interest rate, 𝑟𝑡∗ , which is the interest rate that would prevail in the absence of any nominal rigidities: ∗ 𝑦𝑡∗ = 𝐸𝑡 𝑦𝑡+1 −  1 ∗ 𝑟 𝜎 𝑡  Using this, the IS curve can be re-written in output gap form, using the output gap definition 𝑥𝑡 ≡ 𝑦𝑡 − 𝑦𝑡∗ and the definition of the natural interest rate to give:  (2)  1 𝜎  𝑥𝑡 = 𝐸𝑡 𝑥𝑡+1 − [(𝑖𝑡 − 𝐸𝑡 𝜋𝑡+1 ) − 𝑟𝑡∗ ]  31  In other words, the simple model here abstracts from all channels of monetary transmission other than the inter-temporal substitution channel. Of course, building in addition frictions and model features, like borrowing constraints and open economy features, can restore the roles of the other channels. 32 In particular, in the simple model, one can show that 𝑦𝑡∗ = 𝜓𝑎𝑡 , where 𝑎𝑡 is the log-level of TFP, assumed to follow an exogenous process. 18  All speeches are available online at www.bankofengland.co.uk/publications/Pages/speeches  18  This says that the output gap is negatively related to the sequence of “real rate gaps” (𝑖𝑡 − 𝐸𝑡 𝜋𝑡+1 ) − 𝑟𝑡∗ delivered by monetary policy. For example, when monetary policy delivers real interest rates equal to the natural rate, so 𝑖𝑡 − 𝐸𝑡 𝜋𝑡+1 = 𝑟𝑡∗ , the output gap is zero at all times.
That is one reason the Committee is placing so much importance on an effective Basel II implementation process, which brings me to my next point. Implementation issues From the outset, one of the key objectives of both Basel II and, indeed, the current Accord, has been to maintain a level playing field across jurisdictions. Since experience has shown that this was difficult to achieve even under the fairly rigid Basel I rules, the challenge will be even greater in the more flexible Basel II regime. One of the key lessons we have learned in this whole process is that having similar national rules, which are based on common international agreements, does not of itself create a level playing field. What is essential is how the rules will be applied. The success of Basel II will depend to a large extent on our ability to achieve greater convergence in our supervisory practices in implementing these rules. This will require a much higher level of cooperation among supervisors than hitherto. Home country and host country supervisors will need to work closely with each other and with banks to provide effective supervision while minimising burden and duplication of effort. Although changes in financial markets mean that these efforts would in any case be necessary, Basel II has raised the stakes. To promote convergence, the Committee has established an Accord Implementation Group, or AIG, which is chaired by Nick Le Pan, Superintendent of Financial Institutions in Canada and ViceChairman of the Basel Committee.

In just under a year, we have raised the policy rate five times. This means higher interest expenses for two out of three households. Both in terms of hard cash and as a percentage of disposable income, interest expenses will increase most for households with the highest incomes, which is also the group with the highest debt to income ratios. As things stand now, the rise in prices will be notably higher than wage growth this year. Indebted households will face both higher interest expenses and higher electricity and food prices. Many households will be facing a tighter financial situation, and I am fully aware that some of them will also be facing a financial struggle. Most households will be able to cope with higher interest rates on their loans. Unemployment is very low. Many will be able to cut down on other expenses or draw on their savings. Chart: Monetary policy meeting on 17 August We could have decided to raise the policy rate more gradually. But then we would have run the risk of inflation becoming entrenched at a high level. That would have made it more difficult to bring inflation down and could have required a sharper tightening of monetary policy somewhat further out, increasing the risk of an economic downturn. Inflation has surprised to the upside in recent months. This is why the policy rate has been raised somewhat more rapidly than signalled earlier. And the economy might evolve differently from what we have envisaged. The level of uncertainty is high.
CHAPS has historically had a small number of Direct Participants and a much larger number of indirect participants which access the system through a sponsor bank. This arrangement (known as ‘tiering’) introduces credit, liquidity and operational risks, which were brought into sharp focus by developments including the financial crisis. With heavy tiering, if a large direct participant was to encounter financial or operational issues, this would also impact the ability of the indirect participants that rely on it to make payments – causing issues to spread further across the financial system. These risks are best addressed by increasing direct access to the CHAPS system to reduce concentration in a small number of large sponsor banks. As a result, the Bank has worked for several years, initially with CHAPS Co and more recently as the operator of CHAPS, to implement a strategy to mitigate the risks arising from tiering in CHAPS. This includes engagement with large indirect participants, as well as new CHAPS rules that presume organisations responsible for more than 2% of CHAPS value will join directly. The last decade has seen a significant reduction in financial risks associated with tiering, with the addition of a further 19 Direct Participants including two further FMIs. Despite this, CHAPS remains highly tiered relative to other high value payment systems such as Fedwire Funds and TARGET2. The renewed RTGS service will help to change this. It will be able to support several hundred direct participants and make it easier, quicker and cheaper to join CHAPS.

This is an opportunity for us to discuss the success of Bulgaria’s monetary policy regime in the broader context of the lessons from the current crisis. The speakers and discussants from the BNB today and tomorrow will share the knowledge we have acquired, based on our rich institutional experience. The experience of the Bulgarian central bank is unique. We are one of very few central banks in the world which have both practiced “conventional” monetary policy (involving setting of policy rates and conducting open market operations) and then operated a currency board after that. We have had a track record, during the last two decades, of monetary policy under two remarkably contrasting regimes. Thus our legacy is very different from that of the other similar monetary policy regimes in Europe (such as Estonia, Lithuania, or Bosnia and Herzegovina), where the currency boards were adopted by newly-established central banks in newly-independent states as a means of bringing confidence in a new national currency, promoting political emancipation and national identity. That was not our case, however. The currency board arrangements were introduced in Bulgaria exactly 15 years ago with the very same motivation that stays behind the current reform agenda in the euro area. We did it in order to achieve a much more efficient macroeconomic management and to bring in credibility in the whole policymaking process. Furthermore, the case of Bulgaria demonstrates the importance of maintaining wide consensus among politicians and the society at large, on the key principles of economic policy.
For that, we can boast two major achievements, while acknowledging that each of them poses two challenges that we will discuss today: Thanks to international cooperation including the IMF, we successfully responded to the Great Financial Crisis (GFC). But, today, we are being challenged on monetary policies, and on the safeguarding of financial stability. Along with the World Bank and the IMF, we have well supported the prodigious development of globalisation. But today, we are being challenged by the calling into question of free trade, and by aspirations for other “global public goods” – starting with climate change and social inclusion. A. Two challenges after managing the GFC I. Monetary policies, ten years after There is no doubt that monetary policies played a key role in helping to overcome the GFC, thanks to two major differences compared to the 1930s, innovations and cooperation. However, they are now being challenged, on the “upside” – by ever increasing demands – and on the “downside” – by criticism of prolonged low interest rates and non-standard policies. Today, it seems all the more important to me to restate three principles: Monetary policies cannot do everything, and cannot perform miracles. They cannot repair the damage caused by protectionist uncertainties; they can neither replace reforms conducive to long-term growth, nor more growth-enhancing fiscal policies. Monetary policies in the major advanced economies are guided by their sole domestic mandate: price stability and contracyclical demand management. They are not targeting exchange rates.

This is the fruitful paradox of recent years: the coexistence of “domestically focused” policies that results in a “globally-cooperative” monetary environment. And for this purpose, monetary policy must be conducted in full independence. That is, independently of political powers, of course, and we regret to have to say it again. But also 1/3  BIS central bankers' speeches  independently of short-term pressures or any particular economic interests. So we take account of market indications, but we must not be market dependent; this includes not relying too exclusively for inflation expectations on market-based measures. We are data dependent and I say this in particular for the ECB: in our coming Governing Council meetings, we will assess actual economic data and we will act accordingly if and when needed. II. Financial stability issues and crises On financial stability issues, the Bretton Woods system has undergone numerous disruptions and crises since its inception, including its quasi break-up in 1971. And a decade after the GFC, we still have to define the future of our current international monetary system, or “non-system” as many describe it. Today we will discuss financial stability risks caused by the growth of cross-border flows and financial assets. Over the past few years, international capital flows have been too abundant in good times, – potentially fueling domestic bubbles and destabilising national financial systems – but also prone to “sudden stops” in bad times.
Zeti Akhtar Aziz: Building a progressive Islamic banking sector - charting the way forward Speech by Dr Zeti Akhtar Aziz, Governor of the Central Bank of Malaysia, at the Seminar on 10-Year Master Plan for Islamic Financial Services Industry, “Building a Progressive Islamic Banking Sector Charting the Way Forward”, Putrajaya, 22 June 2005. *  *  *  "The Islamic financial services industry is now at the threshold of its next stage of development. This decade has seen significant progress being achieved. Islamic finance has now gained wide acceptance as a form of financial intermediation. The sustainability of this progress, however, demands due attention to the future - to look beyond the near term, and to take a longer-term perspective into the needs of the future and to evolve an Islamic financial system that will best serve these needs. An essential part of this process is the clarity of the vision and the objectives that are to be achieved. This provides the starting point for the formulation of a Master Plan which defines the blueprint for the future development of Islamic finance. While envisioning the future will provide the strategic focus and the common goal to be achieved, of greater importance will be the actions that need to be taken to make it happen."

Several insurers and FA firms recognise the risks of associating with representatives who may be distracted by other commitments and remuneration opportunities outside the realm of financial advisory services. These companies accept only representatives who are fully dedicated and committed to providing quality financial advice to their customers. This is how it should be. But practices vary across financial institutions, and it may not be practical to ban representatives from undertaking other activities that earn an income. MAS will work with the industry to push for a consistent industry-wide approach to representatives who engage in multiple activities. Role of introducers FAIR will also review the current practice of FA firms and their representatives making use of “introducers” to reach out to customers. An introducer may be another representative, but may also be any man-on-the-street. Introducers are typically paid a fee to refer customers to financial advisers, or they get a cut of the commissions generated from sales to the customers. The use of introducers means customers risk dealing with individuals whose credentials have not been vouched for by any financial institution. It also means that customers may not receive proper advice when introducers go beyond introducing and pressure customers to buy products. Financial advisory activities in insurance broking firms Making sure that the financial advisory role is the primary focus of FA representatives is only one side of the coin. The other aspect to ensure, is that firms whose primary activity is not financial advisory services, are fully capable of managing this part of their business.
The benefits of developing more aggregated measures of risk across diverse business lines are especially appealing to complex financial organisations whose activities span many kinds of activities. As a result, it is not surprising that large, mixed financial conglomerates have tended to invest most in the development of economic capital estimates. Using the concept of economic capital and its elements, banks can develop sound policies for monitoring exposure limits, risk-adjusted pricing policies and sound provisioning practices based on the inherent risks of the portfolios. They can also measure returns and assign capital on a riskadjusted basis. Let me add a word of caution. Despite the significant progress made in the banking industry in the use of models and new technologies, banks still depend largely on risk managers’ expert judgement. Quantifying risk involves making assumptions and judgements. And no model, and no software package, no matter how sophisticated, can ever replace the skills of a trained, experienced and conscientious risk manager. That is why we have made sure that the Basel II framework is much more than numbers and models. Such judgement should be reinforced, however, with the best possible information, techniques and tools for processing that information. To the extent that risk assessment and control methods become more formalised and rigorous, this will lessen the likelihood of making bad decisions. It will also contribute to the prompt detection of errors and deviations from targets, allowing banks to implement corrective measures at an early stage.

I do not claim that Basel II covers all the areas and refinements needed to complete the framework for financial stability, but it does make a landmark contribution by incorporating a new forward-looking approach, to banking regulation and supervision, which is, at the same time, consistent with the lessons of the past. 3. Framework for financial stability. Beginning with my first topic - the framework for financial stability - allow me to make a final reference to the hypothetical book that might be written in 2046. I would not be surprised if the author of that future book noted an interesting contrast that existed at the beginning of the twenty first century. Although we have a well-developed framework for debating and conducting monetary policy, our thinking on financial stability is less advanced. 2  BIS Review 8/2005  As an example, in the monetary field we have agreed on a definition of monetary stability – namely price stability. We have a framework of analysis that allows the causes and consequences of price instability to be studied. And, moreover, we have a highly developed decision-making framework for pursuing monetary policy, which has almost universally adopted the principles of central bank independence and primacy of price stability as the goal of monetary policy. In comparison, and despite significant progress during the last decades, we are not nearly as far along with financial stability, and there are areas where we still have something to learn.
The Americans present things in a different way, but they too consider that price stability is a necessary condition for sustainable economic growth and job creation. Most Finance Ministers of the euro area countries and the European Commissioner for Economic and Monetary Affairs Joaquín Almunia want regular discussions with the ECB. Does that bother you? The Treaty already arranges for precisely that. I myself invite Jean-Claude Juncker and Joaquín Almunia twice a month to attend the meetings of the Governing Council at the ECB, and I am invited to attend the meetings of the Eurogroup. As I have always said, we have to apply the whole Treaty and nothing but the Treaty. Is there really no political pressure? Everyone in Europe and the rest of the world knows that the ECB is independent, even on the major financial markets of New York, Tokyo, Singapore and Hong Kong. There is no doubt about that. The ECB's credibility, which stands at a very high level, relies on its independence. It is that independence which allows us to solidly anchor inflation expectations. Our credibility is reinforced by the strong team spirit within the Eurosystem – including our excellent relationship with the Bundesbank and its President Axel Weber – and within the ECB's Executive Board, which features of course my colleague Jürgen Stark. But in the view of many consumers, the introduction of the euro actually pushed up inflation. At the level of the euro area, we have had inflation under control since the introduction of the euro.

•  China growing at 6% today adds $ billion of GDP compared to $ billion that a smaller China growing by 10% added 10 years ago. •  China contributed to more than one-third of world GDP growth last year, more than the combined contributions of the US, Europe and Japan. Addressing vulnerabilities Against this backdrop of moderating growth, China is also faced with the task of addressing vulnerabilities in its economy and financial system. The chief risk is leverage – both its level and its growth. •  According to the BIS, China’s credit-to-GDP ratio stands at around 250%, having risen by 100% points since end-2008. Nearly 70% of that increase is attributable to corporate debt. •  There are concerns that part of the corporate borrowing has been used to pay off existing loans, rather than being channelled towards productive activities. •  Many of the Chinese firms having difficulty servicing their debt are from the heavy industry sector facing excess capacity. China has the fiscal resources to backstop its financial sector’s liabilities and thereby stave off a systemic financial crisis. But the debt overhang will weigh on corporate investment and present a further headwind to growth. Indeed, with continuing producer price deflation, the real debt burden will keep rising, even as profitability falls. In a good scenario, the debt ratio stabilises at the current level, and then gradually declines as nominal GDP rises faster than credit; in other words, China grows out of its debt problem.
The interest rate r is set to minimise fluctuations in the economic cycle and inflation E∑  [(  −  ∗  ) +  (  −  ∗  ) ],  while c is set to stabilise the financial cycle E∑  [  −  ∗  ]. A theoretical result is that coordination, that is, alternative A, is in general preferable to separating the two types of policy. The reason is that alternative B is a special case of A. A policy-maker who can choose both r and c to stabilise both economic activity and inflation as well as the financial cycle (or two policy-makers who can fully coordinate their decisions on r and c) always has the possibility to separate the decisions, that is, to go from A to B. A should therefore not reasonably be able to lead to a poorer result than B. This does not necessarily mean that coordination is always a good idea in practice. It may be the case that, in reality, there are costs linked to coordination that can be reduced or avoided if one separates the decisions on monetary policy and macroprudential policy. For instance, it may be more difficult to evaluate and forecast economic policy if different instruments are used at the same time to try to attain different targets.8 A related argument in favour of separating both types of policy concerns the risks of a decline in confidence in monetary policy.

The crisis gave rise to a new policy area – macroprudential policy – which partly works by influencing the volume of credit in the economy, in roughly the same way as monetary policy. To me, it is fairly obvious that these two policy areas need to interact. If monetary policy is to carry out its tasks well, then macroprudential policy must function properly and most likely also vice versa. The crisis also made necessary a monetary policy that was in many leading countries more expansionary than ever before, and which was conducted in ways not previously tested. Given this, the debate that has arisen on international monetary policy spillover effects is perhaps not particularly remarkable. We do not yet know what our final conclusions will be with regard to these two areas. These are a couple of the loose threads that I am not able to tie up here today. However, a certain amount of new thinking will probably be required, both with regard to monetary policy and financial supervision and the regulation of the financial markets – but also concrete  31  See Ostry and Ghosh (2013). 32  A further possibility that I will not take up here, but which has been tested in emerging markets in particular, is to use capital regulation. For a detailed and partly critical review of the efficiency of capital regulation, see Klein (2012). BIS central bankers’ speeches  15  measures.