samchain/econo-pairs-v1 huggingface dataset:
What is the conceptual framework for the performance of central bank functions today? That is to say, how do they decide on their monetary policy stance given the economic situation? Although there are differences between central banks, I believe it is possible to generalise by saying that the prevailing framework is based on the idea that, as a result of various economic frictions, including notably price and wage rigidities, the economy may deviate from full employment and stable prices. The central bank is capable of influencing the state of the economy through changes in the nominal interest rate. These changes affect in turn the real interest rate, i.e. the interest rate adjusted for inflation, which is the relevant one for the investment and consumption decisions of firms and households. 4/7  Thus, by indirectly affecting the spending of economic agents, the central bank exerts influence over inflation, attempting to stabilise it at moderate levels. With this objective, the central bank attempts to ensure that the real interest rate is as close as possible to the economy’s “natural” interest rate, i.e. the rate that would prevail if the economy did not suffer from the frictions that I mentioned. The natural rate, which in recent years has given rise to endless debate among economists, depends on structural parameters, including most notably demographic developments and technological innovation. If the actual interest rate is above the natural rate, the monetary policy stance is contractionary, leading to an excessive decline in prices and economic activity.

For the first year, the Plan managed to trigger around EUR 76 billion of investment in Europe. The action plan on the “Capital Markets Union project”, launched in September 2015, aims at diversifying the way the European Union economy is financed. The objective is to achieve a better balance between bank credit and market-based financing. France is a euro area frontrunner in this field, with markets providing 40% of the financing for its economy. Various initiatives are already well underway, like the framework for simple, transparent and comparable securitisation instruments, or the revision of capital requirements for investment in infrastructure by insurance companies. The Juncker Plan and the Capital Markets Union should complement each other and the Banking Union, which is already in place, to fully deliver their results in terms of growth and investment. Therefore, I prefer the concept of a “Financing and Investment Union” rather than a “Capital Markets Union”, as it better reflects the ultimate objective which is growth, thanks to a better mix of financing instruments including, but not limited to, capital markets [Slide 8]. Significant amounts of savings are available in the euro area and these should be directed towards long-term assets, as well as to those projects and countries that need them. Innovative schemes need to be developed at European level, such as European venture capital funds, in order to support the creation and growth of new businesses. The composition of investments is equally important, as too little money is devoted to R&D and long-term investments.
As was the case in the early 1990s, a crisis can arise mainly from an inappropriate domestic policy; it can also result from an external shock that hits Sweden more strongly than the average euro country; a third possibility is the failure of one or more Swedish companies of vital importance for our economy. There are other ways in which the conditions for economic policy can be affected. As a euro participant, a country has somewhat more room for manoeuvre in fiscal policy. This is really only the other side of the arguments behind the Stability and Growth Pact. Financial markets would have less reason to follow developments in Sweden, with the attendant risk that fiscal and budget policies become less sustainable. Another question concerns the effect on wage agreements. Views differ on this. Some count on a more disciplined approach if Sweden adopts the euro; otherwise a failure could then be very costly, with years of unduly weak competitiveness and growth. Others argue that as things are, the connection between wage outcomes and the interest rate in Sweden is more direct. They sometimes refer, for example, to the outcomes of the latest round of wage negotiations and the effect on them of interest rate policy in autumn 1997. This undoubtedly warrants a closer look at what the framework for stabilisation policy should consist of. A major problem in this context is clearly that, for a number of familiar reasons, it is more difficult to use fiscal than monetary policy for active economic stabilisation.

But they also alter the conditions for stabilisation policy and reduce the need for ‘insurance’. BIS Review 6/2002  1  In this context it may be worth recalling that the overheating that led up to the crisis in the early 1990s was by no means primarily due to the growth of demand being notably strong, though demand was certainly too high in relation to the economy’s productive capacity. Annual GDP growth from 1985 to 1990 was actually no more than 2.4 per cent. What really mattered was poor conditions for growth; productivity rose only 1.1 per cent and employment in hours only 1.3 per cent. If productivity growth in the late 1980s and early 1990s had been half or one percentage point higher, things could have been very different. Our tendency to concentrate the EMU discussion on stabilisation policy means that a number of important points about EMU cooperation are overlooked. They concern the longer run and aim precisely at improving conditions for growth and employment in this horizon. EMU has an important role here. Trade will be facilitated along with other cross-border activities such as investment. Simplified price comparisons can led to stronger competition. We will also have a broader and deeper capital market. Moreover, EMU implies better conditions for a stable development in the Union as a whole. Good examples are the crises in Asia and Russia around 1998 and last year’s abrupt slowdown in the American economy; had it not been for EMU, Europe’s financial markets would have been more turbulent.
Bandid Nijathaworn: Thailand’s economic outlook – an update Speech by Mr Bandid Nijathaworn, Member of the Board of the Bank of Thailand, at the Australian-Thai Chamber of Commerce dinner talk, Bangkok, 14 July 2010. *  *  *  First, let me thank the Australian-Thai Chamber of Commerce for the invitation. This year has been a particularly challenging year for Thailand, on account of both developments in the global economy and the political situations at home. So, what I want to do today is to give you an update on Thailand’s economic outlook, particularly to see what these challenges have meant for the Thai economy, as well as for the outlook going forward. A keyword this year is “uncertainty”. As you well know, the market does not like uncertainty because it raises risk and costs. For the global economy, this year has been an exceptionally “complicated” year because of the two major uncertainties that have contributed to an unusual degree of volatility in global financial markets. The first is uncertainty surrounding the strength of global economic recovery which has been weighed down by the high levels of unemployment and slow bank-lending growth in the advanced economies, as well as prospect for higher long-term interest rates in the major economies linked to the financing of public sector deficits. This is the first uncertainty. The second uncertainty is policy.

Another consequence of the new economy - perhaps the least controversial - is the direct effect on inflation from the steep price fall for IT-related products, which are not a negligible item in the CPI basket. The falling prices are explained in turn by the very strong productivity growth and high rate of innovations in this product area. The result may be what is commonly known as a positive price shock, which in many respects resembles the effects of a marked price fall for some other specific CPI component. So far I have discussed the monetary policy implications solely in terms of a notional new economy’s consequences for supply. New techniques and strong productivity growth leave their mark on profit  3  BIS Review 18/2000  expectations and capital formation, for example, and thereby add to the forces that are raising potential growth. With rising share prices, however, increased household wealth adds to demand. This raises questions to do with dynamic aspects. One risk is that demand grows faster than supply despite an improvement in potential output. That could lead to stronger price pressure and accordingly motivate a tighter monetary stance in the traditional way. Another risk is that investment activity becomes unduly optimistic and leads to financial imbalances. This problem is more difficult to handle in monetary policy’s normal analytical framework, where undesirable changes in price pressure are parried with the interest rate.
Bandid Nijathaworn: Macroprudential policies and capital flows – managing under the new globalization Remarks by Mr Bandid Nijathaworn, Deputy Governor of the Bank of Thailand, at the Conference on Macroprudential Policies, organised by the People’s Bank of China (PBC) and the International Monetary Fond (IMF), Shanghai, 18 October 2010. *  *  *  Thank you Chair, First, let me thank the PBC and the IMF for the invitation. It is an honour to be here, and to be given the opportunity to share my view on this panel. Given time limitations, and the fact that capital flows are important developments in the region at this time, I want to use this opportunity to discuss three issues. The first is the context of the current capital flows to Asia. The second is managing capital inflows and the role of macroprudential policies, where I will draw on Thailand’s recent experience. And the third is my view on what we need to do to deal more effectively with the capital flows challenge. At this time, capital inflows to Asian emerging markets have been large and persistent, posing challenges for policy. The first challenge involves a macroeconomic dilemma that centres around the tension between appreciation pressures, inflation development, and growth prospect. The second stems from financial stability concerns associated with potential build-ups of macroeconomic imbalance, risk of asset price bubbles, and the possibility of an abrupt reversal of inflows.

In the absence of negative shocks, that normally tends to  3  BIS Review 108/1999  generate GDP growth above the rate that is sustainable in the longer run. If such a situation is left to continue for too long, various bottleneck problems arise that may push inflation up. Such a course of events has to be prevented by the Riksbank, which the Riksdag (Sweden’s parliament) has made accountable for maintaining price stability. So in order to counter an acceleration of inflation in an upward cyclical phase, sooner or later the level of the repo rate has to be normalised. It is generally true to say that a repo rate increase should not be postponed unduly. If a central bank waits too long, the increase has to be larger in order to arrest the overheating and inflationary tendencies. That would run the risk of the next slowdown being deeper and more severe than otherwise. A higher repo rate does not necessarily impede the continuation of a favourable economic trend; it may even be required for a good and sustained development of employment and growth, as is illustrated by how the Federal Reserve has acted in the United States. This shows what a forward-looking monetary policy can do for sustained growth. The formulation of monetary policy in the United States, with timely restrictive measures, has contributed to the American economy now being in its longest post-war period of growth.
This has contributed to the banks’ net claims on the Riksbank having increased by almost SEK 50 billion over the past ten years, which has means that we have gone from having a monetary policy claim to a monetary policy liability. The Riksbank has reintroduced a portfolio in Swedish krona On the asset side, we now also have a portfolio of Swedish government bonds in Swedish krona. Let me just comment here on why we have once again acquired a securities portfolio in Swedish krona. Most central banks have a securities portfolio in their own currency. The Riksbank also had such a portfolio during the 1990s and this consisted mainly of government bonds, as well as a minor holding in treasury bills and mortgage bonds. In 4  BIS central bankers’ speeches  2001, the portfolio was transferred to the Swedish National Debt Office. In autumn 1999, The Riksbank’s market commitment repo facility was transferred to the Swedish National Debt Office and the assessment was made that a domestic securities portfolio at the Riksbank would not fulfil any important monetary policy function. However, the experiences of the financial crisis 2008–2009 show how important it is to be able to quickly implement measures beyond the ordinary measures used by a central bank to implement monetary policy. During the crisis the Riksbank took several extraordinary measures to improve the functioning of the financial markets and the monetary policy transmission mechanism. Other central banks implemented similar measures.

I have also tried to show how this affects the bank’s capacity to make a profit. Some changes are the result of active decisions by the Riksbank. Decisions the Riksbank has made as a preventive measure to be sufficiently prepared to manage a changed situation. I am of course mainly thinking of the reinforcement of the foreign currency reserve here, but also the decision to acquire a portfolio of Swedish securities again. Other changes, such as the decline in the use of cash and international interest rates, are beyond the Riksbank’s control. BIS central bankers’ speeches  9  Changes in the Riksbank’s balance sheet will lead to the bank’s profits slowly shrinking. We must therefore consider more carefully than before how we can best fund our assets. The expected rise in interest rates has a much greater effect on the bank’s profits in the short term, but on the other hand the effect is temporary. Although there is no lack of challenges, the Riksbank is financially strong. This is important to be able to perform our task in the best possible way. The bank has substantial equity, which may well be needed if the Riksbank is forced to adopt unconventional methods to bring up inflation. Finally: Does the Riksbank have to make a profit? Yes, it does actually. We must be able to cover our costs. And we must be able to build up buffers.
Working level committees have also been formed to undertake the task of considering new proposals and monitoring the implementation of the MIFC recommendations. To take into consideration global trends and to provide insights on the strategic direction, an International Advisory Panel (IAP) comprising industry leaders and experts from the global community is also being established. Conducive environment for business In continuously creating an enabling environment for the efficient functioning of the MIFC, the Government has identified several key strategic objectives. T he Government has also granted an attractive tax package to promote Malaysia as a competitive international Islamic financial centre. The objective is to build the base - that is, to create the necessary critical mass of participating financial players and to increase the scale of activity. Malaysia aims to attract global players as well as to enhance the capacity and capabilities of the existing financial institutions.

To this extent, our recent reorientation of monetary policy stance will serve towards ensuring the needed safeguard of economic stability, whilst not detracting from the underlying growth potential. And because in an economic cycle upturn, risk of imbalances building up in some sectors of the economy may emerge. Even though there is no current sign of imbalances or bubbles, the Bank of Thailand will need to be alert and be vigilant in looking out for signs of imbalances to prevent economic instability at an early stage. At the same time, we have made significant progress in strengthening our financial institutions. This progress has now allowed us to move forward to the phase of upgrading the efficiency and continued adoption of evolving international standards, which in turn, will serve to enhance financial system competitiveness, stability, und credibility in the period ahead. Thank you. BIS Review 58/2004  3
It has also become necessary to evaluate whether the exercise of parate powers by commercial banks has achieved its objectives. According to banks and financial institutions, the very threat of parate action and publicity prompt defaulters to pay the debt. After fourteen years of the application of the debt recovery laws, it is therefore, fitting that an objective assessment be made to the recovery of debts through this legislation. The moderate development in the Sri Lankan economy in the past decade, saw a heavy demand for credit and the expansion of loan portfolios of banks. As banking is known to be a risky business, the monies placed on trust by depositors have to be prudently invested, but with a firm commitment to return funds to depositors when they call for it. In the circumstances, banks are duty bound to ensure the safety and soundness of their institutions by prudently deploying funds they mobilize. Loan defaults and non-performing advances are quite common in our part of the world. They have contributed to the maintenance of high interest spreads which in turn translate into high lending rates as banks tend to cover the cost of carrying large volumes of non-performing loans in their balance sheets. The cost of non-performing advances is therefore a charge on profits by way of provision to be made for these losses. Banks lose out on interest income that is rightfully theirs. Effectively therefore, the good borrowers pay the price for defaulting borrowers.

1/2  I am aware that banks have their own methodologies to evaluate risks when granting loans and advances and recently, they have been adopting modern methods of credit risk mitigating techniques based on the Basle Principles. To begin with, the lack of adequate knowledge of the industry, poor credit assessment skills and ineffective follow-up and supervision of loans are the key to non-recovery of debt. A banker who lends only against collateral without looking at the viability of the project is obviously imprudent. Sometimes, banks are not familiar with the industry to which a loan is granted - it is imperative that they are conversant with yields, markets and prices to be able to assess the viability of the project. In others, follow-up and monitoring is virtually non-existent. The close monitoring of a project during the gestation period or grace will often leads project to fruition and in turn will bring in repayment according to the repayment plan. These areas call for special attention by banks and financial institutions. The banks try to mitigate these lapses by the use of modern technology and intensive evaluation processes in granting loans and advances. Even these attempts can be beaten by unexpected eventualities and by willful defaulters. While credit discipline and culture are of paramount importance for financial institutions’ viability and the stability of the financial system as a whole, we need to strike a balance between the system viability and revival of enterprises/industries, in a manner that they can be going concerns and repay their debts.
José Manuel González-Páramo: How will historians judge our handling of this crisis? Speech by Mr José Manuel González-Páramo, Member of the Executive Board of the European Central Bank, in the occasion of the presentation of the book titled “Un Siglo de Historia del Sistema Financiero Español”, Bank of Spain, Madrid, 10 June 2011. *  *  *  Ladies and Gentlemen, It is a great pleasure to have the opportunity to speak today at the Bank of Spain about the Spanish financial sector. The book being presented today consists of a distinguished collection of essays providing a wealth of information on Spain’s financial sector over the last century. Not only does it summarise the key data and the main developments, but it also provides deep analyses. It will definitely become the work of reference on the history of the financial sector in this country in the 20th century. Let me then congratulate the contributors and the editors, José Luis Malo de Molina and Pablo Martín Aceña for their excellent work. Reading the book, notably the chapter by Raimundo Poveda, we can draw some interesting parallels between the current crisis and the banking crisis in the late 1970s and early 1980s. In particular, given the current circumstances, the main message I would like to emphasise today is that certain changes in the banking sector that are implemented in response to crises are essential to guarantee a strong, robust banking sector in the future.

The market for information and statistics There are market based statistics-producers in developed countries. The market agents are ready to pay a price in order to acquire such statistics. The producers of statistics conduct frequent market surveys, analyse results, supply them on line at a price and help market agents to create wealth. Unfortunately, in Sri Lanka, we do not have such market based statistics-producers. The collection and analysis of vital data that are useful to market agents are being done by a few governmental organisations. Like any other product supplied by the government, such data are also supplied as a public good free of charge. Even when the governmental agencies could sell statistics at a price, they do not venture to do so, because they are guided by such principles as “doing utmost benefit” to people as a social service. The country too, therefore, expects free goods from these governmental organisations. But this creates a problem known as “the agent-principal problem” in economics. The agent-principal problem The agent-principal problem is typical to any government service. It says that the agent who is a government bureau or a department or even a university does not have incentive to produce its output at its best. The principal who is the user of the service, on the other hand, is scattered and not in a position to influence the agent to improve quality.