samchain/econo-pairs-v1 huggingface dataset:
Typically, when the source of an inflationary shock is stemming mainly from demand, monetary policy will respond proactively to prevent the economy from overheating. And when faced with supply shocks, to the extent that such shocks are seen to have no lasting impact on inflation, central banks will “look through” and extend the medium-term policy horizon if necessary. But such a neat categorisation does not adequately capture the situation we are facing in the euro area today. We are not seeing the type of demand-led overheating that is visible in the United States and, despite a tight labour market, the risk of a wage-price spiral so far seems to remain contained. Instead, the euro area is seeing an increase in inflation driven by two unprecedented shocks. These shocks have constrained global supply, but they have also shifted demand and led to a large and persistent inflation response. The first shock was the pandemic. Pandemic-related supply bottlenecks and rising prices have reinforced each other, with firms reacting to the threat of shortages by ordering more and earlier. This “bullwhip effect”[1] has driven up prices along the pricing chain. At the same time, the fiscal and monetary policy response to the pandemic has succeeded in protecting nominal incomes, thereby supporting a fast recovery of demand when our economies reopened. The resilience of incomes has, in turn, triggered large swings in demand across sectors. During the lockdown period, and thanks notably to e-commerce, consumption was concentrated on durable goods.

Headline inflation – which was negative as recently as December 2020 – has risen by 9.4 percentage points from its trough during the pandemic to its peak last month. Core inflation has risen by 4.1 percentage points. In the recent past, elastic global supply has meant that shocks to production or energy have dissipated eventually. Following the Iraqi invasion of Kuwait in the 1990s, for example, oil prices fell below their pre-war level after around five months. And following the Japanese earthquake and nuclear disaster in 2011, production is estimated to have returned to normal after only seven months for Japanese firms. [4]  But the shocks triggered by the pandemic and the war have also created what I have previously called a “new global map” of economic relationships. [5] The economic turning points on this new global map imply that supply constraints are likely to last longer than in the past. And this means, in turn, that it is taking longer for the inflationary effects of those shocks to fade out. Two issues are worth considering here. First, geopolitics have shaken up European energy markets. The cut in gas supplies owing to the Russian invasion has become a major structural change which will have ramifications for several years. For example, following the two oil shocks of the 1970s – the OPEC embargo and the Iranian revolution – the effect on oil prices was still persistent after three years.
Muhammad bin Ibrahim: Future of Islamic finance - delivering actions today for a sustainable tomorrow Keynote address by Mr Muhammad bin Ibrahim, Governor of the Central Bank of Malaysia (Bank Negara Malaysia), at the Global Islamic Finance Forum 5.0 "Future of Islamic Finance: Delivering actions today for a sustainable tomorrow", Sasana Kijang, Kuala Lumpur, 11 May 2016. *  *  *  It is my pleasure to be here today to speak at the Global Islamic Finance Forum 2016. The forum which was conceived in 2007 has now become a hallmark event for the Islamic finance industry – where the best minds and leaders of the industry come together to address the issues, opportunities and imperatives that are shaping the current and future path of Islamic finance. The fact that this event has attracted more than a thousand participants from all over the world is a testament to the growing global significance of Islamic finance. Today, Islamic finance is one of the fastest growing segments of the financial industry in many parts of the world. It registered double-digit growth rates in the past decade despite challenging circumstances globally. Its reach and influence has expanded beyond the traditional Islamic markets, with increasingly strong footholds in banking, takaful and the capital market. Global sukuk issuances, for instance, increased by 13% in the first quarter this year despite less favourable market conditions. This positive growth continues to be supported by the progressive development of market infrastructures, strengthened regulatory and supervisory frameworks and active industry participants.

The Bank and its staff will have to be good at risk assessment, due diligence, assets valuation, good at project financing and management, a good landlord, skillful in project monitoring and have the necessary expertise on specific areas such as construction, agriculture, manufacturing, fishing and other industries. Under this model, the banks created are very specialized with a set of expertise that they are not trained and possess. Its an entirely new “ball game”. Currently 71%, the bulk of financing in Islamic finance is fixed, only 29% is on a floating rate. In conventional, only 26% is fixed. This gives rise to the issue of mismatching. For as long as source of funds for Banks is floating and its asset gives fixed return, the risk of funding cost being more expensive than income is a very real possibility. Rate of Return Risk and DCR will become a challenge to overcome. Would an equity based approach significantly remove such risk? Most likely, it is an area of where the practitioners can develop and explore. Or whether the benefits of equity-based financing would outweigh the risks associated with the obviously higher risks posed by the structure. The shift from asset based financing to equity based financing does not mean that Islamic banks will operate without any risks. Whilst the risk of mismatching between floating and fixed will be greatly reduced, it does also mean that Islamic banks will be taking the unprecedented step of actually owning the assets for which they are financing.
In pursuit of that New Horizon, let me briefly discuss progress and prospects in three critical areas reporting, risk and return. First, reporting Three years ago in response to a call from G20 leaders, the FSB began addressing the financial stability risks associated with climate change by ensuring the market had the right information to price climate risk and reward climate innovation. The FSB established the Task Force on Climate-Related Financial Disclosures (TCFD) led by businesses from a wide range of industries across the G20. Eighteen months later, the TCFD delivered to the Hamburg G20 Leaders Summit its recommendations for voluntary disclosures of material climate-related financial risks. Since then there has been a step change in both demand and supply of climate reporting. On the demand side, current supporters of the TCFD include three-quarters of the world’s globally systemic banks, 8 of the top 10 global asset managers, the world’s leading pension funds and insurers, major credit rating agencies and the Big Four accounting firms.2 In total, these financial firms manage almost $ trillion in assets. 1 Carney, M. (2015). Breaking the Tragedy of the Horizon. Available: https://www.bankofengland.co.uk/speech/2015/breaking-thetragedy-of-the-horizon-climate-change-and-financial-stability 2 Full list of current TCFD supporters available on: https://www.fsb-tcfd.org/tcfd-supporters/  2  All speeches are available online at www.bankofengland.co.uk/publications/Pages/speeches/default.aspx  2  As a consequence, the incentives for companies to disclose and manage climate-related risks have increased dramatically.

Thomas Jordan: Macroprudential instruments and balance sheet risks Introductory remarks by Mr Thomas Jordan, Vice-Chairman of the Governing Board of the Swiss National Bank, at the end-of-year media news conference, Zurich, 16 December 2010. *  *  *  In my following remarks, I will address two issues in depth. I will start by detailing the set of instruments which the Swiss National Bank (SNB) should have at its disposal for the prevention of financial crises. I will then take a look at the risks on our balance sheet. Macroprudential instruments at the SNB More than three years have passed since the outbreak of the international financial crisis. The crisis made two things very clear. First, the capital and liquidity buffers in the financial system were far too low. Second, systemic risks had been grossly underestimated prior to the crisis or had not even been identified. Almost nobody suspected that the risks were so closely interlinked, nor that problems in a small segment of the US mortgage market could rock the global financial system and the world economy. In order to make the financial system more resilient, one thing that needs to be done is to strengthen the capital and liquidity buffers. Significant progress has already been made in this regard with the approval of Basel III and the new “too big to fail” (TBTF) regulations. These measures should help ease the problems in connection with the TBTF issue significantly. But there will be other crises in the future, too.
However, as development in this area progresses it is probable that the number of specialised macroprudential-policy tools will increase. 10  10  The Bank of England recently carried out an inventory of the tools that could be used to conduct macroprudential policy, see Bank of England (2011): Instruments of Macroprudential Policy: A Discussion Paper prepared by Bank of England and Financial Services Authority staff, December 2011. BIS central bankers’ speeches  5  But do we really need any new tools in this area? Isn’t it enough that the supervisory authority can introduce a mortgage cap for consumer protection reasons and that the central bank can raise the interest rate to stabilise inflation and resource utilisation when credit growth is high? No, I don’t think so. Referring to consumer protection seems to be an overly narrow approach in the face of a rapid growth in lending to households and rising housing prices. On the other hand, the impact of the interest rate is too wide-ranging to be effective and risks doing more harm than good. A tool such as the countercyclical capital buffers may seem to be so wide-ranging that it should be able to work in approximately the same way as the interest rate. Both tools affect the price of credit in the economy. When the banks are forced to hold more capital their funding costs increase, as they do when the interest rate is raised, and the price of credit also increases.

Last summer, sparked by the debate about a possible reduction in the US Federal Reserve’s bond purchase programme, long-term interest rates rose across the globe. Switzerland was no exception. The most recent interest rate reduction by the European Central Bank (ECB), by contrast, had little effect on Switzerland. One possible reason for this is that money market rates in the euro area were already at a very low level before the ECB’s decision and did not fall any further. Since October 2011, inflation rates in Switzerland have been predominantly negative. The introduction of the minimum exchange rate in September 2011 prevented a more severe deflationary trend, however. Lower price levels in Switzerland reflect, on the one hand, the impact of the past appreciation of the Swiss franc on import goods prices. On the other hand, price developments show clearly that domestic companies are lowering their costs so as to improve their price competitiveness. More than two years after the introduction of the  2  BIS central bankers’ speeches  minimum exchange rate, both effects have weakened considerably; this is also reflected in the current path of inflation. At the same time, inflation abroad is receding, especially in the euro area. The inflation differential between Switzerland and the euro area has thus decreased significantly. Inflation differentials play an important role in the valuation of the Swiss franc. This decreased inflation differential means that the real effective exchange rate will hardly change from now on and will remain considerably above its long-term average.
The intermediaries and infrastructure that are required depend on which means of payment is chosen. It is therefore very relevant to talk about payments as a consumption of payment services. An efficiently-functioning market for payment services assumes that payment services meet certain important requirements. Three important requirements of retail payment services Firstly, the payment service must be safe, but this is not enough. It must also be perceived as safe. Both the payer and the payee must feel secure, otherwise the payment service will not be used. If banknotes are easy to counterfeit, shops will not want to accept them. If cards can be easily hijacked, consumers will not want to pay with them.1 When we pay by other means than cash, security also means that we rely on the mediator of payments that we have actually entrusted with our money. Secondly, the payment service must be useful. It must be simple and convenient. You may remember when a card payment was made using a paper slip, with carbon in between, where you filled in the amount and signed it and showed your ID. This was not as simple and easy as the chip and PIN code in today’s card terminals. Thirdly, payment services must be accessible to households and accepted by companies and public authorities.

Trends and changes Sweden is in the forefront I said earlier that Sweden is in the forefront with regard to using other payment services than cash, and this is illustrated in this chart, which summarises the situation in a few selected countries.5 The picture that appears is that use of cash is much lower in Sweden than in most other countries and that the use of cards, primarily bank cards, is higher. The situation is roughly the same in our Nordic neighbour countries. I mentioned earlier that Sweden is a technology-friendly country. We have an extensive infrastructure for telecommunications and a high percentage of households have Internet in their homes, are familiar with technology and have smart phones and tablets. Moreover, there is a high degree of confidence and trust between households, companies, payment intermediaries and public authorities. This chart shows an aggregate of all of these factors. It is the World Economic Forum’s ranking of countries according to how well they are situated  5  If we look at cards and cash, it is unfortunately difficult to find good and comparable statistics. The information on other countries than Sweden is often a few years old, and the exact percentages should be taken with a pinch of salt. BIS central bankers’ speeches  3  with regard to utilising possibilities offered by information and communication technology. We can see that Sweden is highly placed and has been for a long time. Of course, this creates the right conditions for the payments market to develop.
This success shows that regulation of crypto players and  Page 3 sur 5 crypto assets and more broadly of payments is one course of action where a “pragmatic” or “focused” multilateralism can, and must, still deliver. To avoid further payments fragmentation, there are two imperatives: (i) let us keep coordinated. I am sometimes impressed by the growing number of international bodies which play in the “crypto-regulations” orchestra; we need a strong, single conductor, and that should be the FSB (ii) let us implement in all jurisdictions. The current moment calls less for further global reflection or ever refining of taxonomies of financial tokens, and more for decisions and the monitoring of basic, consistent and robust national regulations. II. Central banks have their own driver’s seat in innovation Digital technologies are profoundly transforming finance: from artificial intelligence, API and mobile apps for the development of open banking and of the “banking-as-a-service”, to distributed ledger technology and smart contracts. We are certain to see a significant development of tokenised and decentralised finance. In such a context, our stance at the Banque de France is both to support regulatory reforms and to play an active innovative role. The Banque de France has been using blockchain for several years now. In 2017, we were the very first central bank worldwide to implement a blockchain solution to manage, together with commercial banks, a repository of creditors.

Over the past two years, the Banque de France has therefore been looking into a wholesale CBDC with a view to contribute to Eurosystem’s efforts in designing and developing it when the time comes. And this time could come sooner than expected, with the upcoming entry into application of the European Pilot Regime  Page 5 sur 5 in early 2023 - only six months from now. This new regulation provides a framework for market players to experiment the use of blockchain in real-life conditions to issue and trade tokenised securities. It also offers a unique opportunity for the Eurosystem to conduct its own “pilot regime”, in close cooperation with private players. Without overpromising on that pilot wholesale CBDC, we have to seize the opportunity to try out various solutions from 2023 onwards. Learning by doing is the best way to acquire knowledge. In that spirit, since 2020, the Banque de France has been conducting experiments with a wide range of partners to develop its expertise, with the aim of providing that expertise to the Eurosystem. Our first nine experiments have already delivered key insights, shared in a report published in November last year. Considering these promising results, we have decided to launch a new series of three experiments. You will learn more on them in the coming weeks, but let me already give a few insights today.
In this respect, I note that the banking industry has drawn up a communication strategy to raise consumers awareness of its convenience, speed and efficiency and to encourage its use. A smooth functioning payment system is critical to the effective functioning of the economy. As the payment systems continue to evolve, Bank Negara Malaysia, will continue to facilitate and foster the safety and efficiency of the payment systems to safeguard public interest. To enhance the efficiency of the payment systems, Bank Negara Malaysia has recently reviewed the legal and regulatory framework of the payments system. A comprehensive legislation on the payment systems is being put in place to provide the mandate for Bank Negara Malaysia to effectively oversee and facilitate greater development of the payment systems. The legislation would also promote a conducive and liberalised environment for the modernisation of the payment systems in Malaysia. Several policy decisions have also been made. Access to the payments system has been broadened with the relaxation of the policy on the offering of payment gateway services and issuance of credit cards. Banks are allowed to operate their own payment gateways and non-banks are permitted to issue credit cards if they have established line of credit mechanism from the banks, or have set up a joint venture company with the banking institutions.

It does however claim that there is a discrepancy between word and deed that raises questions regarding what status the stabilisation of the real economy really has in relation to stabilising inflation. I should perhaps underline here that this criticism, as I understand it, does not say that there has been greater clarity in countries that do not have specific targets for inflation. In my opinion, the assertion that the communication of inflation-targeting central banks generally tends to focus a lot more on the stabilisation of inflation than of the real economy is essentially correct. Inflation forecasts undeniably have the leading role in the reports published by these central banks, and it is usually on the basis of these forecasts that the banks explain their policy decisions. So why have central banks that pursue a flexible inflation targeting policy chosen to concentrate on inflation in their communication and often been rather vague as regards how they look upon the trade-off between stabilising inflation and stabilising the real economy? One important explanation, which I already have touched upon, is probably that many of the economies that have adopted inflation targeting policies were previously beset with high, sharply fluctuating inflation. The task, accordingly, was to create broad understanding and credibility for a new policy focused on price stability.
Two possible strategies have been selected by the EMI Council as potential candidates to be recommended to the ECB, namely monetary targeting and direct inflation targeting.2 In the case of direct inflation targeting, the inflation forecast made by the central bank can be viewed as fulfilling the role of the intermediate target.3 Let me dwell a moment on the choice the ECB will have to make between direct inflation targeting and monetary targeting, unless it chooses to combine elements of both strategies. Inflation targeting stresses the responsibility of the ESCB for achieving and maintaining price stability. However, there are some difficulties in the process of forecasting inflation over the medium and longer term. As Mervyn King recently stated, “such a forecast cannot be a single number. It must be presented for what it is, namely a probability distribution”.4 Furthermore, inflation targeting could imply more formal cooperation with the Government since the latter is in a position to influence price developments. Finally, inflation targeting has admittedly proven useful in progressing towards price stability, as the experience of the United Kingdom has shown. Nevertheless, the track record of inflation targeting is fairly short and has mostly taken place in a context of world-wide disinflation. Monetary targeting (in concrete terms, targeting a broad money aggregate such as M3) clearly indicates the responsibility of the central bank for developments that are more directly under its control and would therefore correspond better to the independence of the ECB. Moreover, it is based on observed information, which makes it more transparent.

To reach this objective, three conditions need, in my view, to be fulfilled: •  firstly, the monetary strategy should be set in a medium-term framework. More generally, the European policy mix should consist both of a medium-term stability-oriented monetary policy and of a medium-term fiscal policy aiming at a balanced budget (or “close to balance” as stated in the Stability Pact).1 This medium-term stability-oriented policy mix is the best we can do to create the conditions for durable growth in the euro area. And it is now widely agreed in the European Union that the policy mix should not give the illusion that it can fine tune the economy;  1 By urging governments to aim for a fiscal position close to balance or in surplus in the medium term, the Stability Pact enables them to let automatic fiscal stabilizers come into play during recessions without exceeding the 3% reference value. In short, it allows them to create a fiscal buffer during normal economic periods that can be drawn on if an asymmetric shock occurs. BIS Review 112/1997  -2-  •  secondly, the strategy pursued should provide a clear anchor to inflation expectations. This implies the public announcement of a quantified definition of the final objective of price stability; for instance, the Banque de France aims at an inflation rate not exceeding 2%;  •  thirdly, the strategy should be based on a forward-looking approach.