samchain/econo-pairs-v1 huggingface dataset:
A necessary condition, in my view, is for faultlines to exist within the financial system itself – and the deeper they run, the greater will be the threat to stability. The identification and mitigation of such faultlines requires engagement with the details of the system. Those who argue that it is all down to global imbalances and that we did not need to know about leverage via CDOs and the shadow banking system and so on are equally wrong. But the scale of the macroeconomic imbalances that were allowed to accumulate surely raised the bar for resilience of the financial system, and probably beyond what was reasonable. We need to quit pointing the finger, alternatively, at global macroeconomic and financial system causes, and accept that it was both. The Turner Report does that. A few points on micro regulation The Report and accompanying FSA Discussion Paper’s principal focus is, of course, micro regulation. I have just three points to add or emphasise on that this morning. Effective prudential supervision of individual firms relies on the line supervisors being prepared to substitute their views for those of management when they have good reason to believe that the viability or stability of a bank otherwise may be in peril. They need the confidence, when necessary, to face down management, and even boards; and also to be prepared to take the risk of being overruled on appeal.

First, there were too many large financial businesses for which an AAA rating was, fatally, more than a description of their credit standing; it constituted their business model. Examples include Fannie and Freddie; the Landesbanks; the US monoline insurers; the SIVs; and, if they can be thought to have a business model, the ABCPs. These institutions distorted the supply of credit across the global economy. (In the case of the monoline insurers, for structured finance they were effectively in the business of providing “end-of-the-world insurance with a settlement period of T+1”.) An even wider group of private-sector AAA institutions were not required to collateralise derivatives-related counterparty-credit exposures. The effect for the system as a whole was to introduce an extraordinary vulnerability to a ratings downgrade of any of these institutions or structures. There was, in effect, a potentially systemic cliff. A second serious faultline in global capital markets – arguably the greatest – was the firm expectation of “no break the buck” in the massive global Money Market Mutual Fund industry; c. $ in the US, more or less the same size as commercial bank deposits. The failure to pay par at a major US money fund when Lehman collapsed helped trigger the unravelling of confidence across global markets.
There are several structural challenges facing the global economy. I want to elaborate on two key driving forces that will shape the medium-term outlook in both the advanced and emerging economies: deleveraging and monetary expansion. Deleveraging 8. Let me begin with deleveraging. From around 1990, debt levels began to rise rapidly in most advanced economies. Governments ran persistent fiscal deficits that were financed by borrowing. Total government debt in the OECD economies grew relentlessly, from 58% of GDP in 1990 to 98% in 2010. Households went on a consumption binge, financed by easy borrowings on the back of rising property prices and housing equity. Household debt in the developed economies also climbed, from 62% in 2000, to 76% in 2010. Deleveraging is the process by which this excessive debt is brought down to more sustainable levels. This will be long-drawn, only because the build-up of leverage took place over such a long period of time. Synchronised deleveraging in the US and EU 9. The deleveraging process that is unfolding across the advanced economies is taking place across three fronts:   Governments in the US and EU    Households in the US    Banks in the Eurozone  10. First, deleveraging by governments. The public finances of the US, UK, and the Eurozone, have substantially deteriorated, due to pre-crisis fiscal profligacy and post-crisis discretionary stimulus. These countries have now embarked on fiscal adjustment programmes to varying degrees, primarily through austerity measures.

This significant strengthening of the trade relations with the EU member states is mostly a result of the intensified trade with Germany, and moreover, such development is fully conditioned by the increase in the exports of RM to Germany. Thus the share of the export of goods to Germany in the total export of goods of RM in 2008 equaled 14%, while in 2013 it climbed to high 36%, or in absolute amounts, from Euro 383 million, for only five years, it reached Euro 1,154 million. It is a significant increase, a triple increase. It means that, despite the crisis in the Euro area and its negative implications, the strong economy based on sound and solid economic fundaments – such as the German, proved to be our certain partner for placement of more than a third of the exports. Besides the traditional export products, i.e. the export of the domestic textile and metal manufacturing industry, in the last two years, Germany is important destination for export of the new capacities in the technological industrial development zones (TIDZs), i.e. for the export of machinery and equipment and equipment of automotive industry. Second, Germany is our significant investor, which in 2013 advanced on the list of the ten most important foreign direct investors (9th).
You can think of monetary policy as a large gear that is connected to smaller gears representing different sectors of the economy. But not all gears move at the same pace. Some turn more quickly, while others are slower, meaning they experience longer lags between policy actions and effects. These effects of monetary policy are showing up in prices at different speeds. For example, the prices of globally traded commodities have already declined and are now well below levels we saw earlier last year. This reflects in part the effects of lower demand resulting from tighter monetary policy here and abroad. Similarly, prices for many goods have started to plateau or even decline, reflecting weaker demand, lower import costs, and an easing of global supply disruptions that developed during the pandemic. For example, prices of used cars-a big driver of inflation during the first year of the pandemic-have been retreating toward more normal levels over the past few months. The combination of the general rotation of demand from goods to services and the effects of higher interest rates on demand for goods should contribute to further downward pressure on the prices of many goods this year. 2/4  BIS - Central bankers' speeches  One gear that is moving at a far slower pace is the price of non-energy services. The ongoing imbalance between supply and demand in this sector continues to contribute to inflationary pressures. But there is some good news on this front as well.

Inflation Indications and Implications I'll start by saying that although we are seeing some signs that inflation is moderating, it remains far too high, and it is my No. 1 concern going into 2023. Rapidly rising prices continue to have an immense impact on families and businesses, especially when it comes to essentials like food, utilities, and housing. High inflation is a new reality for many people. For the three decades preceding the pandemic, the inflation rate averaged almost exactly 2 percent, as measured by the personal consumption expenditures (PCE) price index. But that changed dramatically in the spring of 2021, when inflation suddenly soared, ultimately reaching a 40-year high of 7 percent last June. While the inflation rate has since come down to 5-1/2 percent, it's still higher than any pre-pandemic reading since 1982 and far above the FOMC's 2 percent longer-run goal. Persistently high inflation undermines the ability of our economy to perform at its full potential, so it is critical for the Federal Reserve to bring inflation back down to our goal . We are firmly committed to doing so. 1/4  BIS - Central bankers' speeches  Shifts and Realignment Those who have been following my speeches lately will know that I've been quite devoted to a recurring theme: using the layers of an onion to describe inflation.1 But with the new year, I thought I would switch gears. I didn't have to look too far, because the mechanism of shifting gears is exactly what's going on in the economy.
Our regulators agreed to enhance information sharing and cross-border supervision of futures exchanges and intermediaries, as well as the substantive areas for cooperation in supervising exchange-trade derivatives. A MOU on staff exchange was also signed. c . Just two weeks ago, Chinese Premier Li Keqiang visited Singapore for the 33rd ASEAN Summit and related meetings. A key outcome of the visit was the signing of the Protocol to Upgrade the China-Singapore Free Trade Agreement (“CSFTA”). As part of the visit, MAS signed a FinTech Cooperation Agreement with the People’s Bank of China (“PBC”), and a MOU for the Cooperation and Exchange of Information on Regulation of Derivative Activities with CSRC. 3 To celebrate the success of China-Singapore financial cooperation over the last five  years and to tie-in with the commemoration of China’s 40 years of reform and opening up, we will be releasing an infographic during my visit here in Shanghai. This is a reflection of the close bonds with our partners in China, which MAS greatly values. In the next five years, we look forward to broader and deeper financial cooperation with China, reaching more milestones in a range of areas including Belt and Road collaboration, capital markets connectivity,  RMB internationalisation, and FinTech cooperation. 1/5  BIS central bankers' speeches  Singapore – Shanghai Economic Relations  Against this backdrop, we expect Shanghai-Singapore cooperation to grow from strength to strength, building on the strong economic and financial relations between both cities. 4  a .

In 2017, Shanghai-Singapore trade amounted to $ 17.5 billion1, an increase of 33.8% from 2016. On the investment front, Singapore has been China’s largest foreign investor for five consecutive years. Shanghai was Singapore’s second largest investment destination in China while Singapore was also Shanghai’s second largest foreign investor in 2017. With growing affluence of Shanghai’s resident population, Shanghai continues to be an attractive investment destination for Singapore companies. b. Similarly, Shanghai companies view Singapore as an important Asian commercial and financial hub as they expand internationally. As of end 2017, there were close to 110 Shanghai companies in Singapore, with more than $ 6 billion in investments2. c. Notably, Singapore Minister for Trade and Industry Chan Chun Sing visited Shanghai  from 4 to 6 November 2018 for the inaugural China International Import Expo (“CIIE”), which allowed Singapore companies to take part in business matching sessions and explore collaborations with Chinese partners to enter and expand into China. d . During Premier Li’s recent visit to Singapore, both sides welcomed the discussion  between Singapore and Shanghai to establish a comprehensive mechanism for cooperation. The new platform will focus on Belt and Road Initiative (“BRI”), modern and financial services, urbanisation and sustainable development, technology and innovation, and people-to-people exchange. This new strategic, progressive and comprehensive platform will expand and deepen China-Singapore engagements.
Banks have no choice but to leverage up and take bigger risk in order to meet the targets that the shareholders demand. Modern banking at crossroads 17. So where do we go from here? As I mentioned earlier, while bank regulators clearly play an important role in influencing banking operations, it is really up to the industry to decide what it can and should do to regain the trust and respect that banks once enjoyed. We should bear in mind bank regulators are a consequence of the emergence of modern banking. However, as discussed earlier, the modality and incentive system for banking were very different in the old model of banking : there was a high degree of alignment of interest between bank owners, bank management and bank customers, which has over the years been significantly eroded. 18. Again, don’t get me wrong. I am not advocating that we should go back to oldfashioned banking. It is far too difficult, if not impossible, to turn the clock back this far and to do so might mean the loss of some beneficial innovations over the years. However, there is considerable public interest in ensuring that banking, which remains the predominant channel of intermediation between savers and borrowers in our society, functions efficiently and effectively, with a high degree of professionalism and strong ethical standards. 19. It is against this backdrop that the international community, through G20, Financial Stability Board (FSB), Basel Committee on Banking Supervision (BCBS) etc.

This caused the average interest rate level in those countries of the future euro area to be lowered considerably before the beginning of Monetary Union. The close cooperation which had always existed between the European central banks was increasingly stepped up in the final months of 1998 between those countries participating in Stage Three of Monetary Union. The coordinated reduction of central bank rates in December 1998 to 3% made it perfectly clear that, de facto, Monetary Union had already begun before the start of Stage Three. Looking at economic developments, in the first few months of this year there have been an increasing number of indications that the negative effects of the crises in Asia and Russia on growth and employment in the euro area could be more serious than was first expected. With the apparent slowdown in economic growth in the euro area, the risks that the 2% threshold for the tolerable rate of inflation would be exceeded in the foreseeable future evaporated. This forecast was also reflected in the revisions to the inflation forecasts of international organisations. At the beginning of April 1999, the Governing Council of the ECB therefore decided to reduce the interest rates on the main refinancing operations by 50 basis points to 2.5%, as well as the rates on the standing facilities to 1.5% and 3.5% respectively. The M3 monetary aggregate did expand such that it was slightly above the reference value at the beginning of 1999.
Businesses and governments are looking for best response strategies to ensure smooth expansion of their enterprises and the economy in general. Tonight, I would like to focus on 3 related and timely subjects. I will begin with my view on the outlook of the Thai economy and the risks surrounding its prospects. Then, I would like to outline what I think is necessary for monetary and exchange rate policy going forward. And lastly, I would like to talk about how we can foster private investment and what Japanese businesses can do, in your role as investors and employers, to help make Thailand an even better place to invest. Ladies and gentlemen, As you well know, the Thai economy had to weather through a host of challenges over the past 2 years. To my mind, and from the view of the Monetary Policy Committee, domestic political uncertainty, high and rising energy prices and sharp US dollar decline were at the top of our concern. Indeed, political uncertainty, coupled with rising retail oil prices, took a toll on private sector confidence and consumers’ purchasing power. These negative developments dented domestic demand during the first 9 months of 2007. The fall of the US dollar, while widely anticipated, had been a major risk that could disrupt Thailand’s robust export activities. In fact, the risk was even greater after the extent of the US financial crisis became clearer during the second half of 2007.

As regards information technology, we are well to the fore, although it is first recently that statistics indicate some increase in productivity growth. Expectations for a continued strong increase in productivity in the USA have also been a basis for the strong rise on the American stock exchange. The high share prices and the positive expectations have stimulated demand and the debt ratio in the private sector has increased. It is not possible to write off the risk of financial imbalances being built up in the USA, which risks having negative effects on the macroeconomy. However, many analysts consider that the long-term growth rate has in fact increased in the American economy and that the expectations that have served as the basis for investments and increased indebtedness will therefore be realised. Even if there are some indications that point to the Swedish economy undergoing a similar development to the American, the structural differences cannot be disregarded, which probably create greater inertia in the Swedish economy than in the USA. The labour market is one such area. As I mentioned earlier, considerable barriers to competition also remain in the Swedish economy. Another difference is that the cyclical upswing we are now experiencing is taking place at the same time as growth is increasing in the surrounding world and resource use is increasing. The American upswing could benefit from a surrounding world with a lot of free resources and low price pressure and with few competing investment alternatives for international investors. Should monetary policy counteract financial imbalances?
Examples of such factors are, internationally determined raw material prices, changes in taxes and subsidies and interest expenses for housing. An increase in value-added tax would, for instance, temporarily lead to increases in CPI. To counteract such price increases, monetary policy would be forced to dampen the real demand in the economy regardless of the level of resource use in the economy. To avoid such unnecessary fluctuations in production, we disregard from factors which we assess only temporarily affect consumer prices, for example interest expenses, taxes and subsidies. The inflation target regime tested in a strong upswing! Before the economy had adapted to the new inflation target regime and inflationary expectations still remained at too high a level, it was not as evident that monetary policy in the short term could contribute to maintaining the growth of its long-term growth track. In order to bring inflation expectations down, higher interest rates were required and thus lower demand than if inflation expectations had immediately been adapted to the new regime. Although the economy is now approaching balance, all parts of the low inflation regime have still not been tested. During the entire 1990s, the use of resources has been under its long-term growth track. It is first during the few years to come that we will have a real test of how well the new regime has penetrated in Sweden. In earlier speeches, I have developed my ideas around the mode of functioning of the labour market.

The argument was rather that the economy could suffer a deep recession in the long term if developments led to a bubble arising which then burst. 9  ECB (2009). 10  IMF (2009). 11  Borio and Lowe (2004). 6  BIS Review 162/2009  The economists Francesco Giavazzi and Frederic Mishkin expressed concern in their assessment of Swedish monetary policy between 1995 and 2005 that the Riksbank had given too much consideration to house prices. 12 However, monetary policy that entails flexible inflation targeting – like that conducted in Sweden – has the aim of stabilising inflation around the inflation target and also resource utilisation. This means that temporary deviations from the inflation target may be motivated if the inflation target is attained in the longer term. This was also the assessment made by the Riksbank. House prices in Sweden rose by 3 per cent between the second and third quarters of this year, after a slowdown in 2008 and the average price increase since 1996 has been around 8 per cent a year. The question is whether this is a sustainable long-term development. There may be risks with this, even if the upturn is not as large as in some other countries which have recently experienced downward adjustments. Developments in the housing market in Sweden also differ in that new construction has been considerably lower than in a number of other countries.
And the results slip reads pretty well. In particular, the inflation target was instrumental in anchoring the credibility of policy, without which the MPC would not have been able to respond so aggressively. Without credibility, there can be no flexibility. And the MPC has used that flexibility to the full, providing extraordinary levels of stimulus to support growth and jobs. But the nature of the inflation targeting framework meant that it dropped a few marks in terms of helping the MPC to communicate the role monetary policy played in supporting the recovery. That risked undermining the democratic legitimacy of inflation targeting. Likewise, the inflation target on its own was less suited to explaining the MPC’s view of the appropriate trade-off between the speed with which inflation is returned to target and the support provided to the fledgling recovery. The forward guidance announced by the Committee retains the primacy of the inflation target while allowing the Committee to more effectively tackle these communication challenges. In so doing it enhances the transparency and accountability of monetary policy. The guidance also provides a robust framework in which the MPC can explore the scope for economic expansion and helps to provide greater clarity about the likely path of monetary policy as the economy recovers. The inflation target remains front and centre in the conduct of UK monetary policy. Price stability remains the primary objective of monetary policy.

The forward guidance provided by the Committee in August can be seen as a response to these challenges. To retain the clarity and credibility of the inflation target but to augment the framework so that monetary policy is better equipped to address the exceptional challenges currently faced by the UK economy. In this talk, I will provide a post-crisis report card for the UK’s inflation targeting regime and explain how the MPC’s forward guidance responds to some of the areas exposed as having ‘room for improvement’. I will also show how a threshold for monetary policy defined in terms of the unemployment rate is particularly helpful in addressing two other challenges currently facing the MPC: the uncertainty surrounding the future path of productivity; and the need to provide greater clarity concerning the setting of monetary policy as the economy recovers. A bit of background Before doing so, it is worth highlighting three features of the UK’s economic performance over the past five years which should be borne in mind when evaluating the performance of the UK’s inflation targeting framework and understanding the Committee’s decision to provide forward rate guidance. First, CPI inflation has been above target for almost this entire period (Chart 1). Fifty four months out of the past sixty to be precise. Over this period, CPI inflation has averaged 3%. And, on the basis of the MPC’s central projection in the August Inflation Report, it is expected to remain above target until the second-half of 2015.