samchain/econo-pairs-v1 huggingface dataset:
Despite this progress, the causes and implications of the crises remain the subject of contentious debate. In fact, if you'd fallen asleep in early or late 1998, and awakened in the IMF boardroom yesterday, you would find officials discussing many of the same questions. Were the crises the result of fundamental economic and financial weakness at the national level, or the result of forces largely beyond the control of governments in emerging market economies? Can small open economies grow and prosper with open capital markets and floating exchange rates? Did moral hazard induced by the success of the Mexican package earlier in the decade cause the buildup in lending that led to crises that followed? Did the initial response of the IMF and its creditors make the crises worse? What level of insurance, in the form of reserves or debt structure, is adequate to protect against crises? How should the IMF differentiate between conditions of illiquidity and insolvency, and decide when it should help a member country restructure its debt obligations? Even among people who probably agree on the most important issues in economics and finance, you can still find stark differences in their answers to these questions. The diversity in the circumstances of the countries involved, and in the policy responses adopted, makes it easier for people to find evidence to support fundamentally different views.

The credit cycle and monetary policy The knock on effects of defaults in the US sub prime market and the impact of big investors on asset prices are factors we need to assess not just in trying to understand the financial sector and the stresses it faces but in gauging the state of the economy more widely. The story of the sub prime market illustrates a wider point. In traditional banking markets in the past there has been an observable tendency for banks to overshoot both in offering credit at the top of the cycle and retrenching afterwards. That feeds through into asset prices and can have an impact on the wider economy. Despite the sophistication of the new capital markets, a very traditional cycle seems to have been alive and kicking in sub prime. 3  The definition of the official sector in the US Treasury survey also includes public bodies such as oil stabilisation funds. 4  See ‘International capital flows and US interest rates’, NBER working paper 12560, October 2006. 6  BIS Review 84/2007  A similar story could be told about the credit card and other unsecured lending over the last few years. The growth rate rose in the late 90s until defaults began to build up over the last 2 years and the banks and other lenders tightened up terms and conditions sharply (Chart 13). The path of commercial property prices in recent years suggests the same has been happening there (Chart 14).
Speech  Embargo 31 October 2019, 4.30 pm  Challenges confronting the pension system – options and limitations of monetary policy PK-Netz conference  Thomas J. Jordan∗ Chairman of the Governing Board Swiss National Bank Berne, 31 October 2019 © Swiss National Bank, Zurich, 2019 (speech given in German)  ∗  The speaker would like to thank Nicolas Cuche-Curti, Peter Kuster and Inske Pirschel for their support in drafting this speech. He also thanks Claudia Aebersold Szalay, Simone Auer, Carlos Lenz, Susanne Mühlemann and Alexander Perruchoud as well as SNB Language Services. Page 1/8  Ladies and gentlemen I am delighted to be able to talk to you at this important event. It gives me the opportunity to explain our position in what is a difficult financial market environment for you especially as pension fund managers. The Swiss National Bank (SNB) is responsible for our country’s monetary policy and not for its social policies, nor for its pension schemes. At the same time, however, it is important for us as the central bank that the occupational pension system should be able to fulfil its constitutional mandate: together with Pillar 1 – the Old Age and Survivors’ Insurance scheme (AHV) – it is required to ensure that insured persons can maintain their previous lifestyle in an appropriate manner after retirement. Solid funding is crucial for this, as a pension system must be financially sound if the population is to have confidence in it.

This showed that the negative interest rate, and our willingness to intervene on the foreign exchange market as necessary, are still essential in order to ease pressure on the franc, thereby stabilising price developments and supporting economic activity. Only in this way can we fulfil our mandate – to ensure price stability while taking due account of economic developments – in the interests of the country as a whole. In September, we also adjusted the basis for calculating the exemption threshold, which defines the portion of a bank’s sight deposits at the SNB on which we do not charge negative interest. This adjustment reduces the overall burden imposed on the banking system by negative interest to the minimum required for monetary policy purposes, 6 while taking account of the possibility that the low interest rate environment may persist worldwide for some time to come. While negative interest rates are unusual and should only be temporary, moderately negative rates are not fundamentally different in terms of their economic effects from interest rates above zero. As the negative interest rate has brought about an easing of financing conditions in the economy, companies are able to take out loans for investments at lower cost. For us, however, this so-called ‘interest rate channel’ is not of prime importance. Rather, it is the effect on the exchange rate that is decisive for Switzerland as a small open economy. With the negative interest rate, we can ensure that the traditional interest rate differential versus other countries is not eroded excessively.
5 Today, I would like to discuss how we can balance today's challenges against tomorrow’s gains. In my opinion, we must adopt measures that can be seen as costly today to solve problems that could improve the housing market in the long term. And managing the problems on the housing market will require other/more measures than those falling within the framework of macroprudential policy. For the Riksbank, it is important to monitor the housing market: it is well documented by empirical studies that a rapid increase in debt increases the probability of financial crises and falling prices on the housing market. The economy can also become more sensitive to various shocks if households (and companies) are highly  4 See, for example, Bäckman, C, C Lutz (2018) and Cunliffe, J (2019). 5 See Finocchario et al. (2016). 2 [13]  indebted. The studies also show that, if the banking system has large exposures to the housing market, financial stability can be threatened. 6 In the Riksbank’s task of promoting financial stability 7, it is therefore important to ensure that the banks and their borrowers have resilience to shocks that could threaten financial stability. In addition, if financial stability should start to falter, there exists a risk that it would become more difficult to conduct monetary policy.

As far as we can see, these requirements have more or less had the effect that could have been expected: credit expansion has slowed down a bit and people who were previously taking very large loans are now taking smaller loans. 24 According to the random sample from 2018 upon which Finansinspektionen’s latest mortgage survey is based, the average debt-to-income ratio among new mortgage borrowers is 398 per cent, which is slightly lower than in the previous year. The proportion of new mortgage borrowers with mortgages exceeding 450 per cent of their annual gross income also fell between 2017 and 2018. The fact that many new mortgage borrowers are choosing to borrow amounts just below the stricter amortisation requirement indicates that this has affected households’ propensity to take out very large loans in relation their incomes and, ultimately, the kinds of objects they are deciding to purchase. 25 If a household has previously wanted to purchase a one bedroom flat in a metropolitan area at a price of just over 2,500,000 kronor, the macroprudential policy measures have made it more difficult for the household to purchase this object. However, it is important to use the terms correctly. Those households that have been affected by the amortisation requirements and that want to purchase a tenant-owned apartment have not been excluded from the housing market, but only from purchasing that one-bedroom flat for 2,500,000 kronor. Such households can, instead, choose to purchase another one-bedroom flat for a lower price.
Thomas Jordan: The Swiss economy in a weakened world Summary of a speech by Mr Thomas Jordan, Chairman of the Governing Board of the Swiss National Bank, at the General Meeting of the Federation of the Swiss Watch Industry, Lausanne, 25 June 2015. The complete speech can be found in French and German on the Swiss National Bank’s website (www.snb.ch). *  *  *  Since summer 2007, the global economy has been in a state of near-permanent crisis. What began as a subprime crisis triggered the banking and financial crisis, leading to a deep recession. This culminated in the European debt crisis. The current strength of the Swiss franc is a reflection of this global crisis, and highlights the franc's status as a safe haven, which is especially pronounced in times of high global uncertainty. The Swiss National Bank (SNB) has responded to the appreciation pressure by taking exceptional measures. In terms of Switzerland's economic activity and the SNB's balance sheet, no other country has seen its monetary policy so highly exposed. The decision to discontinue the minimum exchange rate was prompted by renewed changes in international conditions, particularly the growing divergence between the monetary policy stances of the world's main currency blocks. Had the SNB delayed its decision, it would have lost control of monetary policy and would have had to discontinue the minimum exchange rate at a later date under much less favourable conditions.

The end of the minimum exchange rate has major repercussions for the Swiss economy, and it was by no means an easy decision for the SNB. Yet this is not the first time that the Swiss economy has had to react to shocks and changes in the international environment, and the experience was often painful. The example of the watch industry shows that even a severe crisis can be overcome. Unfortunately, this example is not readily transferable to other export industries. Many companies currently find themselves compelled to seek cost reductions and efficiency gains. The economic outlook depends to a great extent on global economic developments. In its latest monetary policy assessment, the SNB is projecting that momentum in the global economy will pick up again. This should cushion the impact of the exchange rate shock somewhat, and allow Switzerland to return to positive growth in the second half of the year. While inflation has dropped well into negative territory, as things currently stand, a sustained price decline - or, indeed, a deflationary spiral - is not to be expected. Overall, the Swiss franc is currently significantly overvalued. Monetary policy is geared towards this challenging set of circumstances, and is guided by the SNB's willingness to take an active role in the foreign exchange market and apply negative interest rates. This twopronged approach is designed to ease the upward pressure on the Swiss franc. However, in the current climate there is, regrettably, no easy solution that would absorb all external disruptions.
Under the estimated distributions for economic and financial systems, such an event would occur every 10 to 15 years. Implications for policy design So what might this mean for the design of the policy architecture? Let me mention three areas where clear progress has been made since the crisis, but where more may be needed in the period ahead if we are to manage effectively this complex, macro-financial system of systems: data, modelling and policy design. (a)  Data  Monitoring risk in a system of systems requires data on each of the sub-systems, often at a high level of granularity. Often in response to crisis, efforts have been made over time to improve data on economic and financial systems. For example, there have been successive waves of improvement to statistics on international banking flows, starting in the 1970s. In response to the latest crisis, renewed efforts have been made to fill data gaps and to improve the degree of disclosure by banks of their balance sheet positions (FSB (2012)). As one example, data on banks’ cross-border assets and liabilities only distinguish between banks and non-banks. In practice, a richer sectoral decomposition of these data is often desirable to understand interactions between different parts of the financial sector and between it and the wider economy (Hills and Hoggarth (2013), Lane (2014)). For example, the dollar funding crisis which faced European banks in 2011/12 involved a complex string of cross-border financing.

If the world involves three layers of complexity, then missing a layer will lead to a significant underestimation of risk. This, too, has a parallel with the pre-crisis situation where the macroprudential layer was essentially ignored by both micro-prudential and macro-economic policymakers. This led both to under-estimate the policy risk they faced. Pulling this together, what are the public policy implications which follow from this complex system of systems perspective? First, it underscores the importance of accurate data, and timely mapping, of each layers in a system of systems. This is especially important when these layers are themselves complex. Granular data is needed to capture the interactions within and between these complex sub-systems. Second, modelling of each of these layers, and their interaction with other layers, is likely to be important, both for understanding system risks and dynamics and for calibrating potential policy responses to them. Third, in controlling these risks, something akin to the Tinbergen Rule is likely to apply. There is likely to need to be at least as many policy instruments as there are complex subcomponents of a system of systems if risk is to be monitored and managed effectively. Put differently, an under-identified complex system of systems is likely to result in a loss of control, both system-wide and for each of the layers. The architecture of macro-financial systems How, then, does this theory relate to real-world, macro-financial systems? These systems are likely to contain many moving parts.
It is clear that if residents were free to exit at the same time, they would participate in the run on the currency, and confidence would evaporate quickly, leaving us with a new currency crisis to grapple with. Of course, this is an extreme scenario in some respects, as the estates’ ISK assets, for instance, are not all liquid at this point in time, and a portion of the offshore krónur could be patient capital. But it gives an indication of the kind of problem we are dealing with. Therefore, we need other solutions that safeguard stability and prevent additional burdens from being placed on the sovereign or the Icelandic people. Such solutions do exist, and a large group of experts – foreign consultants; the task force for capital account liberalisation, which works for the steering committee on the capital controls; and experts from the Central Bank and the Ministry of Finance and Economic Affairs – has been working hard on developing them in recent months. I would like to take a moment now and thank all of these people for their tireless efforts and excellent work. It would be premature to publicise solutions at today’s meeting. Moreover, it is not within my purview to do so on my own.

Honoured guests: As the Chairman of the Supervisory Board mentioned in his speech, the Central Bank was relatively successful in working towards its goals in 2014. In addition, a great deal of work was done to ensure the efficacy of the capital controls, the smooth  BIS central bankers’ speeches  5  operation of financial system infrastructure, and the recovery of legacy assets from the crisis, among other things. This would not have been possible without the competent and hardworking people employed by the Bank. I wish to thank you all for your efforts. In this context, I would like to stress how important it is that, whatever amendments may be made to the Central Bank Act, the Bank must remain a strong institution capable of safeguarding monetary and financial stability in Iceland. In order to do so, it must have the independence to apply its policy instruments to this end. It must also be a professionally strong and vigorous workplace where senior management and staff members have a dynamic interactive relationship on matters relating to operations, analysis, and policy formulation. In closing, I would like to thank the Central Bank’s many collaborators for a successful cooperative relationship over the past year, in particular the Ministry of Finance and Economic Affairs and the Financial Supervisory Authority. I thank the financial institutions with which the Bank interacts for their cooperation. I would also like to thank the Parliament of Iceland, particularly the Economics and Commerce Committee, for their collaboration. 6  BIS central bankers’ speeches
Malaysia has an online bill payments model where merchants need to maintain multiple banking relationships in order to receive bill payments from customers who bank with different banks. Merchants, especially SMEs, find it difficult and costly to maintain multiple banking relationships. As a result, only about 1,000 merchants are currently registered to accept online bill payments via the individual banks’ proprietary bill payments system. Therefore, there is still tremendous potential for greater efficiency and cost savings through the consolidation and expansion of the online bill payments market in Malaysia. Enhancing the efficiency, accessibility and convenience of online bill payment via JomPAY JomPAY addresses the limitations of the current bank-centric model by establishing an open electronic bill payments platform which leverages on the combined infrastructure and network of the entire banking industry. With JomPAY, merchants only need to maintain a banking relationship with one bank, in order to receive bill payments from customers of all other banks. Likewise, customers only need to maintain an account with one bank in order to make bill payments to the entire network of merchants registered with JomPAY. The JomPAY model thus reduces duplication and facilitates the pooling of resources from the entire banking industry. This in turn will enable us to build a wider and more efficient network for online bill payments. Businesses should leverage on JomPAY to accept online bill payments from their customers. Handling cash and cheques is very costly.

If the financial system can be made more resilient, it will be better positioned to withstand the failure of a large and complex firm and continue to provide essential financial services to the real economy. I would highlight three areas of work that are critical to solving the TBTF problem. First, regulators and supervisors are pushing for changes in wholesale funding markets, a source of particular vulnerability during the crisis. This includes reforms to tri-party repo, which are underway, and necessary reforms to the money market mutual fund industry, which are being evaluated by the Securities and Exchange Commission (SEC) and the Financial Stability Oversight Council. Second, the financial market infrastructures are being strengthened to make them more robust to the failure of individual firms. The Committee on Payments and Settlement Systems and the International Organization of Securities Commissions (IOSCO) have published a set of standards for financial market infrastructures called “Principles for Financial Market Infrastructures” that will serve as minimum standards globally. 7  The FDIC’s “single point of entry” framework for implementing this authority envisages establishing a bridge company into which all the operating subsidiaries of the parent company would be transferred. The bridge company would be recapitalized by converting all or some of the parent company’s subordinated and senior unsecured debt into fresh equity in the bridge company. The parent company would be allowed to fail.
This means that the positive impulse from fiscal stimulus will abate over the next year. The third, and perhaps most important factor, is that the banking system has still not fully recovered. Bank credit losses lag the business cycle and are still climbing. Thus, while banks’ access to the capital markets has sharply improved, banks are still capital constrained and hesitant to expand their lending. Most importantly, some significant classes of borrowers – namely commercial real estate and small business – are almost wholly dependent on the banking sector for funds, and those funds are not easily forthcoming. The commercial real estate sector is under particular pressure because the fundamentals of the sector have deteriorated sharply and because the sector is highly dependent upon bank lending. In terms of the fundamentals, there are two problems. First, the capitalization rate – the ratio of income to valuation – has climbed sharply. At the peak, capitalization rates for prime properties were in the range of 5 percent. That means that investors were willing to pay $ for a $ of income. Today, the capitalization rate appears to have risen to about 8 percent. That means that the same dollar of income is now capitalized as worth only $ In other words, if income were stable, the value of the properties would have fallen by 37.5 percent. Second, the income generated by commercial real estate has generally been falling.

2  BIS central bankers’ speeches  Only three days ago, the capital markets provided the latest proof of the efficiency of the macroeconomic policies in Bulgaria and the resilience of our economy in the face of such a severe global crisis. Bulgaria’s global issue of 5-year euro-denominated bonds, marking our country’s return to the international bond markets after a decade, was a great success. The international investors’ orders oversubscribed the offered amount more than 6 times. Their strong interest has resulted in a very low annual yield of 4.436%. At present, only the highest-rated EU Member States can afford to pay a lower price for borrowing on the private capital markets. To conclude, we have achieved monetary and banking stability in Bulgaria during the last 15 years. They have been bolstered by the synergies of monetary and macroprudential mandates (including banking supervision) within the central bank, complemented by the prudent fiscal policies of several consecutive governments since 1997. The BNB representatives will be eager to discuss our knowledge today and tomorrow, while also looking forward to learning about the experiences of the other countries represented at this conference. I wish you a most fruitful exchange of views and ideas. Thank you very much for your attention. BIS central bankers’ speeches  3