samchain/econo-pairs-v1 huggingface dataset:
Caleb M Fundanga: Third quarter 2010 media briefing Presented by Dr Caleb M Fundanga, Governor of the Bank of Zambia, Lusaka, 8 November 2010. *  *  *  Executive summary This brief examines monetary policy implementation and its outcomes in the third quarter of 2010. The brief also reviews other economic and financial sector developments. In the conclusion, it provides an inflation outlook for the fourth quarter of 2010. Monetary policy The focus of monetary policy during the third quarter of 2010 continued to be the achievement of the end-year annual inflation target of 8.0%. Consistent with this inflation outturn, annual overall inflation was programmed at 7.3% for end-September 2010. To achieve this, the Bank of Zambia utilised largely Open Market Operations and Government securities auctioning to maintain reserve money within the programmed growth path. This was to be complemented by prudent fiscal management. Inflation Quarterly overall inflation increased to 1.6% in September 2010 from the 1.0% recorded in June 2010, but was slightly lower than the 1.7% recorded in the third quarter of 2009. This outturn was mainly attributed to the rise in food inflation to –0.1% from the –1.7% recorded in the previous quarter, as non-food inflation slowed down to 3.2% from 3.7% during the same period. However, the annual overall inflation rate was largely unchanged at 7.7% in September 2010 compared to the 7.8% recorded in June 2010, but was above the projected 7.3% for the period.

It shed off 1.3% value against the euro and depreciated by 1.9% vis-à-vis the rand ending the quarter at an average of € and  8  Lusaka, Livingstone, Mfuwe and Ndola. 9  South Luangwa, Mosi-oa-Tunya, Lower Zambezi, Kafue, North Luangwa, Blue Lagoon. BIS Review 148/2010  9  K677.45/ZAR, respectively. The rate of depreciation against the pound sterling was relatively lower at 0.6% with the Kwacha trading at £ With regard to the volume of foreign exchange transactions, a total of $ million was exchanged in the domestic interbank market. From the rest of the market, commercial banks purchased a net of $ million compared to net sales of $ million the previous quarter. Similarly banks made net purchases of € million Euros during the review period. Conversely, banks’ net sales of the South African rand amounted to ZAR729.3 million, higher than ZAR645.3 million recorded in the second quarter. Transactions involving the pound sterling followed a similar trend, with commercial banks recording net sales of ₤2.5 million depicting a reduction over the previous quarter’s net sales of ₤1.7 million. Balance of payments Preliminary data show that Zambia’s overall balance of payments (BoP) recorded a surplus of US $ million during the third quarter of 2010 compared to a deficit of US $ million in the previous quarter. This was driven by the improvement in the performance of both the current account and the capital and financial account balances.
Of course, this is because the financial system is constantly changing – new instruments and markets arise and technology develops. And, as the financial system changes, the risk outlook changes too. What at first seems to be uncomplicated and “risk-free” need not be so in reality. This suggests that a broad set of macroprudential supervision instruments is needed to tackle systemic risks. … suggest a broad toolkit for macroprudential supervision So what should we bear in mind when selecting and designing tools for macroprudential supervision? Firstly, we need to be able to counteract different types of systemic risk and, for this, we clearly need different types of tool. The principle used in dealing with problems involving a tendency towards exaggerated cyclical behaviour is to variously make it more expensive and less attractive to allow risks to build up when times are good, at the same time as buffers are created that can be used when times are bad. Problems caused by the financial system’s structure should instead be approached by managing individual institutions’ contributions to total systemic risk, for example by way of specific requirements for capital buffers, strengthened requirements for transparency, or limitations on certain types of activity. Secondly, there is probably a need both for tools with a wide area of effect and for those aimed at a particular sub-market or activity. Countercyclical capital buffers are an example of a tool with a relatively wide area of effect. These are based on the total expansion in credit and cover all banks.

It is well-known that I have advocated a lower repo rate to push down unemployment faster and to push up an inflation rate that is currently below our target of two per cent. As there is a broad opinion that low interest rates form a risk to financial stability, it may seem as though I am taking the risk of a financial crisis breaking out in Sweden too lightly. But I am not. I share the opinion that economic policy needs to focus on counteracting financial crises. But I do not think that this is primarily a task for monetary policy. On the contrary, it is a task for macroprudential policy, and it is this topical policy area that I will be talking about today. I have previously spoken on how macroprudential supervision could be organised in Sweden, and on how responsibility for the tools in question could be allocated. 1 The question of the allocation of responsibility and mandates is also being investigated just now by the Financial Crisis Commission. In my opinion, it is important that there are clear targets and mandates for macroprudential policy in the same way as there are for monetary policy. If this is the case, each policy area can take the other for granted. Macroprudential policy is aimed at counteracting risks in the financial system as a whole, and is a policy area for which many countries are now trying to set the framework.
The task might however be easier for commodity exporters: their macroeconomic risks are clear, highly concentrated and hedging products are readily available on financial markets. Issues Impact on asset prices Under what conditions can sovereign asset management go hand in hand with orderly functioning of the financial markets? Large foreign reserve holdings are already seen to have an impact on asset prices. The strong preference for safety and liquidity in official reserves, combined with the fast increase in reserve assets, has often been given as an explanation for what Alan Greenspan first called a conundrum, namely the persistently low level of long-term interest rates. For instance, Warnock and Warnock 5 estimated that, under the hypothesis of “no foreign official flows into U.S. government bonds in 2005”, the 10-year Treasury yield would have been 90 basis points higher. Several alternative estimates exist and there are significant differences between them. But they consistently conclude at least some impact on long-term interest rates. As SWFs hold portfolios with higher risk/return profiles than the usual FX reserve management funds, many market economists predict that their development will result in additional demand for high-risk asset classes like equities and lower demand for low-risk assets classes like short-term government securities. This could in theory lead to an increase in bond yields (partly reversing the prior impact of official reserve accumulation) as well as a decrease in the equity risk premium.

Recently, Jeanne and Rancière 2 provided a “quantitative normative framework” to infer an optimal level for foreign exchange reserves in order to mitigate the impact of sudden stops of capital inflows. Their model, based on welfare criteria, suggests that the build-up of reserves has been excessive in Asian countries since 1997-1998. To be sure, the Asian crisis may have prompted emerging economies to reassess the magnitude of potential sudden stops and the subsequent output loss. Under widespread uncertainty, assessing an optimal level for foreign reserves confronts us with the problem of catastrophic events. In other words, even if the likelihood of a financial crisis may be very small, the potential consequences may be so dramatic that emerging countries could rationally accumulate very large reserves. 1  Dooley, M., Garber, P., and Folkerts-Landau, D. (2003) – An Essay on the Revived Bretton Woods System, NBER working paper ; (2007) – The Two Crises of international Economics, NBER working paper. 2  Jeanne, O. and Rancière, R. (2006) – The Optimal Level of International Reserves For Emerging Market Countries : Formulas and Applications, IMF working paper. 2  BIS Review 119/2007  Nonetheless, Jeanne and Rancière’s standard approach suggests that the level of reserves is in some countries excessive with respect to the self-insurance motive. Domestic monetary implications Excessive accumulation of foreign assets may lead to domestic financial imbalances. These can be caused by incomplete or ineffective sterilisation 3 .
In some countries, like the U.S. and the U.K., stigma appeared to be sufficiently strong that banks did not use the central bank’s liquidity facilities at their disposal as much as would have been socially desirable. 12 During the crisis, the Federal Reserve encouraged banks to borrow at its discount window, to little effect. 13 As can be seen in Figure 5, much activity in the fed funds market took place at rates above the discount rate. 9  Another way to reduce the balance sheet cost faced by the banking sector is to allow nonbanks to hold some of the central bank’s liabilities directly. For example, every dollar invested in the Federal Reserve’s overnight reverse repo facility decreases the amount of reserves held by banks and, thus, the aggregate size of the banking system’s balance sheet by a dollar. 10  Keister (2016) shows that it is optimal to commit to providing liquidity to a bank that faces a run. Moral hazard is addressed ex ante, by setting a Pigouvian tax that gives incentives for the bank to invest in the optimal amount of liquid assets. The tax can be interpreted as liquidity regulation and supervision. Goodfriend and Lacker (1999), however, argue that neither constructive ambiguity nor extended supervisory and regulatory reach can effectively overcome the fundamental forces that cause a central bank to lend. They propose that the only way for a central bank to credibly limit lending is for it to build a reputation over time for restraining lending.

A number of idiosyncratic factors could influence the terms of that trade, such as how desperate the borrower is at the end of the day, which could add unnecessary noise to market rates. Figure 3 illustrates this change. 6 Turning to market discipline, Ulrich notes that the interbank market may perform this function particularly well because it is a peer-to-peer market. I would like to see more empirical research before I can feel comfortable that money markets provide much market discipline, especially in overnight markets. If the monitoring was so good pre-crisis, why did we have a crisis? One reason to question how much money market participants monitor the counterparties to which they lend is that it is hard to appropriate the value from such monitoring. Money market “freezes” may affect financial institutions somewhat indiscriminately, and, for that reason, lenders may prefer to withdraw short-term funding indiscriminately when they fear other lenders might do so. If money market participants provide some market discipline, we could expect nonbank lenders in U.S. money markets to do this effectively. They are sophisticated financial institutions that have established relationships with the banks to which they lend. And, because they lend to these banks on a consistent basis, they have strong incentives to monitor their counterparties. 7 While my assessment is necessarily preliminary, I don’t see a reason why one type of money market activity should be preferred over another.
As emphasized by the Director of the State Statistical Office, Mr. Apostol Simovski, the Republic of Macedonia has long been integrated into the system of the so-called IMF’s Data Standards Initiatives. This system is extremely dynamic and started to develop since the mid-1990s, in response to the then international financial crisis, in order to promote transparency of both economic and financial data. I say dynamic, given that its construction blocks have been continuously changing and increasing. Its last, third construction block is the SDDS plus which reflects the weaknesses identified in the statistical data infrastructure that surfaced with the latest global economic and financial crisis from 2008. It is a fact that the genesis of the crisis was not located in the lack of data, but fact is also the identified need for an enriched data set for conducting more effective economic policies. This crisis has clearly shown how inadequate regulation and excessive risk-taking can lead to a collapse of the financial system. It has shown how the underestimation of the strength of the links of the financial system with the real sector, as well as the underestimation of cross-border exposures of economies and financial integration, could lead to inadequate assessment of macro-financial links and underestimation of risks. The SDDS plus is actually a response of the international financial community to these statistical gaps. This initiative means enrichment of statistics, in both scope and quality, in order to timely recognize and appropriately react to vulnerabilities that may arise in an economy.

I conclude that an exchange cross rate between Hong Kong and the Mainland which varies, or has the potential to vary, is not a problem for us, and this seems set to remain the case for the foreseeable future. The corollary to this is that there would be no advantage in attempting to hitch the HK dollar to the renminbi in some formal or permanent fashion. Other options? There are of course other alternatives which might be explored. For example, in a perfect world, if we were to set ourselves the narrow objective of sustaining our price competitiveness index at a particular level and we possessed a nicely calibrated model of the economy, and if we then applied suitable methodology, we could derive some formula for the optimal exchange rate, which would doubtless be different from that determined by the present regime, and we could then devise an operational strategy to deliver that exchange rate path. But this sort of desktop solution could be a nightmare in reality. Even if the empirical basis of the formula was entirely reliable (a wholly unrealistic assumption), imagine the possible consequences for interest rates or foreign reserves, and the practical problems in terms of operability, comprehensibility, transparency, credibility, financial market confidence, and so on. Such problems could be particularly acute, and the risks of such a strategy therefore correspondingly high, in such an open economy and open financial market-place as Hong Kong. I have deliberately exaggerated in order to make the point.
The essence of the problem is in the highly leveraged and very large hedge fund flows that move around the world rapidly and without any regulation. They are subject to no disclosure rules. They dart from market to market, seizing on weaknesses and contradictions, particularly in the smaller, more malleable markets that are frequently carried away by euphoria or panic. By distorting or manipulating markets in search of profits they are capable of throwing many smaller, vulnerable economies into chaos. They have become, in the words of Ian Macfarlane, the Governor of the Reserve Bank of Australia, “the privileged children of the financial scene, being entitled to the benefits of free markets without any of the responsibilities”. By exploiting the weaknesses of free markets they threaten the very survival of these markets. No small and open jurisdiction can do much on its own to resist their disruptive effects, and their powers for spreading chaos have threatened to disrupt even the strongest economies. In my opinion, no recent case better illustrates this than the dramatic ordeal that we passed through in Hong Kong in the summer of last year. The Hong Kong experience: sound fundamentals threatened by speculative disruptions Hong Kong’s experience over the last eighteen months shows how even a sound economy can be put under severe strain by manipulative attacks from outside.

I am very confident that this Conference will be a great platform to catalyze open discussions among market players on the key issues relating to risk management. It will also provide good opportunities for business networking. On this note, it is my pleasure to declare open the International Risks and Risk Management Conference for Insurance Sector 2010. 4  BIS Review 76/2010
Facilitating also means helping players in the ecosystem to engage with each other and find solutions without necessarily resorting to regulatory measures. It is in this spirit that we run the ACPR-AMF FinTech Forumand that we have created working groups or task forces in order to make concrete progress on important issues for the ecosystem, such as the access of digital asset service providers to the bank accounts and banking services they need. Admittedly, dialogue does not solve everything, but we very often find that many difficulties can be ironed out through improved dialogue and a better understanding of the practices and technologies used by the various stakeholders. Second objective: experiment. Here I would like to give two different illustrations of this approach. The exploratory workshops conducted by ACPR on the use of artificial intelligence in the financial sector are an example of what experimentation can bring not only to a supervisory authority but also to the entire ecosystem. Indeed, these concrete experiments have enabled the ACPR, based on specific use cases, to examine the code of the algorithms, their intrinsic performance, their integration into operational processes, and their control and governance environment. Drawing on this experiment, in order to share widely the lessons it has learned, the ACPR published astudy last June outlining what the framework for the proper use of these future tools could look like.

Sabine Lautenschläger: Digital na(t)ive? Fintechs and the future of banking Statement by Ms Sabine Lautenschläger, Member of the Executive Board of the European Central Bank and Vice-Chair of the Supervisory Board of the Single Supervisory Mechanism, at an ECB Fintech Workshop, Frankfurt am Main, 27 March 2017. * * * We will never know who did it and when exactly it was done – all of that is lost in the mists of time. But about 4,000 years ago, one of our ancestors invented the wheel. It was one of the most important inventions in the entire history of humanity. Ever since, our lives have been shaped by innovations. Some of these innovations have made our life better – just think of vaccines or the telephone. Others have had more ambivalent impact – think of nuclear power. In any case, it is always hard to guess where an innovation will take us. And it is all too easy to get it wrong. As the President of IBM said in 1943: “I think there is a world market for maybe five computers.” He got it wrong, it seems. And so did Robert Metcalfe in 1995. As the founder of a tech company, he predicted that “the internet will soon go spectacularly supernova and in 1996 catastrophically collapse.” The internet did not collapse. Instead, it has changed our lives. Could you live without the internet? Could you live without a mobile phone? Our entire life has become digital, and this includes the way we do banking.
The high level of investment and activity in the oil and gas industry, coupled with the general boom, continues to generate strong growth impulses to the region. Growth is broad-based and there are good prospects of continued growth in the next few months. BIS Review 34/2007  3  A good half of the enterprises report difficulties in accommodating demand growth. This is a little lower than in the previous round. Capacity remains tight in manufacturing supplying the petroleum industry, building and construction and business services. The investment level is expected to rise in all industries. Profitability varies somewhat between sectors. It is solid in the supplier and export industries, retail trade and services, and stable in building and construction and manufacturing supplying the domestic market. Employment has risen in all industries in Hordaland and Rogaland over the past three months. Employment has increased over several years in the business sector. In recent months, employment growth in the public sector has also picked up. Unemployment in the region is now a little lower than 2 per cent, which is lower than the average for Norway as a whole. Unemployment began to fall earlier in this region than in the country as a whole. Demand for labour is expected to increase in manufacturing and services in the next three months. In other industries, employment is expected to be relatively stable. The tight labour market is reflected in continued high wage growth. Capacity utilisation in the Norwegian economy is expected to remain high through 2007.

Complementary steps could include creating pan-European venture capital funds and leveraging on the development of FinTechs, while maintaining a high level of consumer protection and efficient conduct of business rules in a digital environment. ** Let me conclude with a general remark. After Brexit and Mr. Trump’s election, many expected a euro area crisis. So far, exactly the opposite has happened: European growth is accelerating, at close to the pace of US growth. The French election gave a fresh political impetus to stability and reforms; public support for Europe has significantly increased: up 18 percentage points in France from last year (56% in spring 2017) according to a recent survey by the Pew Research Center; and the same trend can be observed in a number of countries. Most importantly, we in the EU-27 should not devote all our energy to Brexit, at the expense of investing in our own future. In this regard, it is the right time to move up a gear. To boost European growth, financial levers are of the essence, but economic levers play a role too. This is the reason why I often speak of Europe’s “growth triangle”. In my view, Europe needs to activate three levers: the Financing Union for Investment and Innovation that I have just described, but also implement national structural reforms on the one hand and a better euro area policy mix on the other. National structural reforms are a prerequisite for each country to unleash our collective growth  Page 5 sur 5  potential.