samchain/econo-pairs-v1 huggingface dataset:
This would fully cancel out the positive impact of domestic reforms in EMEs over the past two decades: the shift left in the distribution when there is a push shock (grey distribution, Chart 16) is likely to be at least as great as the shift right that we have seen over the past two decades because of improvements in pull factors. While these calculations should be taken with a grain of salt, they suggest that in a new world order that combines growing market-based finance with a deepening asymmetry at the heart of the international monetary financial system, fast reforming EMEs could be running to stand still in their quest for higher sustainable capital flows. Chart 16: Emerging market economies could be running to stand still in the future Average 2009-18 Average 1996-06 Probability density Impact of push factors Impact of push factors with 2030 amplification due to shifting composition (col 3, chart 15) 0.12 0.10 0.08 0.06 0.04 0.02 0.00 -8 -6 -4 -2 Capital flows as a % of GDP  0  2  4  6  8  10  12  14  16  18  Sources: IMF, EPFR, IIF and Bank staff calculations. Notes: The green and red distributions in this chart are the same as in Chart 11. The dotted grey distribution results from increasing the sensitivity of the distribution to push shocks in line with the scalar in the third column of chart 15, assuming they apply through the distribution (rather than only to 5th percentile).

by Martin Feldstein, Chicago: University of Chicago Press. 7 Rose (2007), A stable international monetary system emerges: Inflation targeting is Bretton Woods, reversed, Journal of International Money and Finance, Elsevier, vol. 26(5), pages 663-681, September. 8 See Chapter 3 of the October 2018 IMF World Economic Outlook. 9 Cesa-Bianchi et al (2015), Global Liquidity, House Prices, and the Macroeconomy: Evidence from Advanced and Emerging Economies, Journal of Money, Credit and Banking, show that for AEs flexible exchange rates dampen the impact of push shocks, whereas for EMs they can amplify the impact of push shocks via a collateral valuation effect 10 See Chapter 2, IMF April 2016 World Economic Outlook. 6  All speeches are available online at www.bankofengland.co.uk/speeches  6    An effective macroprudential policy toolkit to curtail the damaging extremes of domestic financial cycles. Macroprudential policy can guard against rapid credit growth, which is amongst the best early warning indicators of an impending downturn. 11 And higher domestic bank capital ratios reduce the sensitivity of capital inflows to changes in global volatility.12    And deep domestic capital markets to reduce the reliance on foreign investors and the need to issue in foreign currency, which dampens capital flow volatility (Chart 6).
As you can see in Figures 1 and 2, Switzerland held more than five times the amount of gold on a per capita basis than the second-ranked Netherlands. Similarly, its gold holdings as a proportion to imports also far exceeded those of any other G10 country. In light of this extreme position, it is legitimate to ask why the issue of gold sales did not arise much earlier in Switzerland. For one thing, public opinion in Switzerland generally held gold in high esteem as a symbol of monetary stability. More importantly, however, a reduction in the gold stock required a fundamental reform of the legal framework of the Swiss monetary system. The process leading up to this reform was lengthy and complex. As you know, Switzerland is proud of its political system of direct democracy and consensual government. On the whole, these traditions have served the country well. Comprehensive legal reforms, however, often require substantially more time than in other democratic traditions. Despite the fact that Switzerland had been under a flexible exchange rate regime since the breakdown of Bretton Woods, the Swiss franc remained legally linked to gold. For practical reasons, this legal link of the Swiss franc to gold had lost its monetary policy relevance. Nonetheless, it prevented the Swiss National Bank from buying or selling gold at any other price than the official parity of CHF 4’595 per kg. In the late 1990s, this parity was three times lower than the price of gold in the open market.

The fifteen central banks furthermore agreed not to expand their gold lending and gold forward transactions during this period. While the U.S. and Japan were not part of the joint statement, they declared that they had no intention of changing their “passive” gold policy. Furthermore, the IMF announced that it would abandon its plan to sell some of its gold reserves in the market. These declarations had a big impact on the market for two reasons: First, they removed the uncertainty about the behaviour of the holders of 85% of the world’s official gold reserves. Second, the planned annual total sales (400 tonnes) compared favourably with the sales and increases of gold lending activity of the previous years (700 tonnes). 1  The idea of a Swiss Foundation of Solidarity was suggested to the President of the Swiss Confederation by the then President of the Governing Board of the SNB. 2  BIS Review 31/2005  The Washington joint statement on gold was a coordinated effort aiming at clarifying the intentions of the participants in a market prone to rumours and secrecy. Of the 1,300 tonnes of gold which the Swiss National Bank intended to sell, 1170 tonnes were included in the 2000-tonne total sales quota of the Washington Agreement. In other words, the SNB ended up being the main beneficiary of the agreement. Formally, the initiative for the Washington Agreement did not come from the SNB.
In the case of Spain, yields decreased by 70 bps, while in Italy, they decreased by 30 bps. This is the first time in three years that a major crisis in one euro area country has not affected others. This sends an important message. The euro area is more robust today than it was a year ago. While challenges remain, the actions taken have increased our resilience to internal and external shocks. Before I move on to other areas of progress, I would like to say a few more words on Cyprus. First, the financial support provided by the euro area countries and the IMF was very substantial, up to EUR 10, 000 for every Cypriot citizen. This should put to rest the claims that the country was unfairly treated and discriminated against. Second, the commitment to protect insured depositors has been maintained in the euro area and, in fact, is strengthened as a result of recent events. Last but not least: Cyprus is a unique case. This was an extreme situation of moral hazard with big depositors looking for abnormal yields in the domestic banking system. And it justified an exceptional treatment. Cyprus is neither a precedent nor a template for future crisis management. It is also important to state that such a banking model has no place in the euro area. And such a situation would not have existed had the banking union been in place.

Expectations of a global recovery have boosted stock markets over the last year. The Norwegian stock market index, OBX, has increased more than US, German and Japanese stock market indexes. Oil prices and other commodity prices are also high. Normally, higher growth expectations are accompanied by higher interest rate expectations. This has not been the case lately. On the contrary, market expectations have fallen. The red line shows that in October last year, the market expected that the economic recovery would lead to higher interest rates. The green and yellow line shows the fall in expectations, and that the market now expects interest rates to remain low for a period ahead. The reason behind the change in expectations is the absence of inflationary pressures. In Norway, inflation is low. In February, annual core inflation fell to minus 0.1 per cent. It is particularly prices for imported consumer goods - the yellow line in the chart - that have fallen sharply. But prices for goods and services produced in Norway have also declined. Increased competition and productivity growth have probably contributed to low inflation. Higher productivity growth is a global trend and in particular in the US the phenomenon has been the subject of lively debate. The current economic recovery has in fact been labelled the “jobless recovery”, an indication that companies can increase production without new recruitment.
For instance, some recent figures for the euro area, and Germany in particular, as well as China seem to show that over time the contribution of the external sector may be decreasing. The ability of global trade to sustain growth and contribute to global recovery also seems to have been stronger than expected. The implications for global finance Let me now turn to the second issue, namely the implications of rising public indebtedness in advanced economies. Although deficits are expected to start narrowing gradually next year, the fiscal burden remains huge. Government debt levels among advanced economies are expected to increase further and approach 100% of GDP. The International Monetary Fund estimates that by 2015 the general government gross debt will reach 110% of GDP in the United States and 95% of GDP in the euro area. This amounts to an almost doubling in the United States and an increase of around 40% in the euro area. Looking forward, the issue of the sustainability of the debt in several industrial countries is looming. This raises several analytical problems, which in my view have not been fully examined in the literature, but which are very important for policy-makers and financial market participants. Here I will consider two of them. The first analytical problem relates to the assessment of a country’s solvency. This task is not as simple as assessing the solvency of a company, a household or a financial institution.

Higher solvency risk also increases other risks at the macro level, such as the risk of “financial repression”. 5 As public debt rises to unsustainable levels, domestic financial institutions may be “encouraged”, if not forced, to hold domestic sovereign debt in their portfolios. This would lead to inefficient allocation of capital, high costs of financial intermediation and thus lower growth. 6 Finally, in the case of reserve currencies, higher solvency risk would potentially hamper the stability of the international financial system. These questions are just a few examples of the issues on which we need further work. To conclude, it is clear that current and increasing levels of public debt in advanced economies raise problems which are not only of a macroeconomic nature, but affect many other dimensions of the global economy. On the other hand, our ability to understand the complexity of the issue is still limited. This situation is worrying, to the extent that our societies may take decisions on the basis of imperfect models and wrong assumptions. Not everybody agrees with the concerns I have just raised, and many take the current very low yields on some government bonds as a comforting sign. My impression is that they may be confusing relative and absolute concepts of risk. And such a mistake could entail very high costs for our societies. Thank you for your attention. 2  Reinhart, C. and K. Rogoff, 2010, “From Financial Crash to Debt Crisis”, NBER Working Paper 15795.
1  1 [8]  need a broad discussion of what it means when central government’s presence on the payment market’s supply side risks disappearing along with cash. Introducing an e-krona would entail taking a new step and the consequences of this must be analysed carefully. But accepting a situation in which the general public no longer has access to any form of central bank money would also be a step into the unknown. Issuing digital Riksbank money, an e-krona, as a complement to cash would be one way of avoiding this situation. The alternative to an e-krona would be for central government to intervene with more detailed regulation of the market to ensure society’s different interests are met. But this too would have its problems, as I shall discuss in more detail. The largest and smallest payments: the Riksbank’s role today and in the future Traditionally, the Riksbank has been responsible for the underlying system in which all payments in Swedish kronor are settled, the RIX system. This system was created to manage large-value payments in a highly secure manner. In addition, the Riksbank’s banknotes and coins have been used for the very smallest payments. The payment market is currently undergoing a large number of major changes that are affecting both of these ‘systems’. As cash usage declines, almost all consumer payments in shops are now made by card. This market is completely dominated by Visa and Mastercard and much of the infrastructure is located outside Sweden’s borders.

Given these challenges and potential shocks to the economy, it is important that as a nation we build resilience and fortify the foundation of the economy. Towards this end, it is critical for us to be able to transform our economy. Less than 50 years ago, the Malaysian economy was primarily based on agriculture and commodities such as tin and rubber. Today, we are a well-diversified nation, with the services, manufacturing, and mining sectors as key growth engines. Most notable, Malaysia has established itself as a key hub for the electrical and electronics (E&E) manufacturing industry, playing an important role in the global supply chain. Looking to the future, we aspire to become an innovation-based and high valueadded economy by leveraging on technology and high skilled talent. Similarly, at individual level, Malaysians must build financial resilience by equipping themselves with the necessary knowledge and tools to manage their finances. This is where you, as practitioners, play a vital role by professionally advising, educating and guiding your clients to ensure they are on the right track to secure a better future for themselves and their loved ones. 1/4  BIS - Central bankers' speeches  A comprehensive and effective financial plan is crucial to help an individual or a family build financial resilience. Financial resilience is critical in a time of economic uncertainty and in a shock-prone world. It provides households with the ability to withstand the negative financial impact in periods of shocks.
It appears in a song sung by Ariel, to Ferdinand, a prince of Naples, after Ferdinand's father's apparent death by drowning: Full fathom five thy father lies, / Of his bones are coral made, / Those are pearls that were his eyes, / Nothing of him that doth fade, / but doth suffer a sea-change, / into something rich and strange, / Seanymphs hourly ring his knell, / Ding-dong. / Hark! now I hear them, ding-dong, bell. 2  All speeches are available online at www.bankofengland.co.uk/news/speeches  2  Long-term government bond yields have fallen sharply in tandem (Chart 2), with US 10-year yields their lowest in two and a half years, 10 year gilt yields their lowest since the immediate aftermath of the referendum, and German 10-year bund yields their lowest ever. $ trillion of global investment-grade debt is now trading at negative yields. Lower discount rates have provided substantial support to equity prices, which are near all-time highs in the US despite an economic outlook that is becoming less robust and more uncertain. Chart 2: Long-term bond yields sharply lower too 10-year nominal government bond yields Per cent 3.5 US  3.0 2.5 2.0  UK  1.5 1.0 Euro area  0.5 0.0 -0.5  Jul. 18  Oct. 18  Jan. 19  Apr. 19  Sources: Bloomberg Finance L.P., Tradeweb and Bank calculations. The global outlook These market developments reflect a sea change driven by growing concerns over the impact of rising trade tensions and policy uncertainty.

6  All speeches are available online at www.bankofengland.co.uk/news/speeches  6  Chart 6b: But households still optimistic about their own prospects Differences from averages since 1985 (number of standard deviations) 1.4 1.2 General economic situation expectations  1.0 0.8 0.6 0.4 0.2 0.0 -0.2 Personal financial situation expectations  -0.4 -0.6  Jan. 16  Jul. 16  Jan. 17  Jul. 17  Jan. 18  Jul. 18  Jan. 19  Sources: European Commission, University of Michigan consumer sentiment index, and Bank calculations. Notes: The chart shows the median across the G7 euro area countries (France, Germany and Italy) and the US. Reconciling market moves with global developments All in all, the risks to the global economy have shifted to the downside. But to what extent? Does the sea change in financial markets presage a sea change in the global economic outlook? And what does the UK experience suggest? A lot will rest on the scale and breadth of the trade effects. Traditional trade models suggest that the direct effects of the tariff measures implemented so far4 are likely to be small. The Bank estimates that these measures will reduce global GDP by only around 0.1%, and the further US-China tariffs that took effect in May and June will roughly double that effect (Table 1).5 But that may not be the end of the story.
Iceland’s macroeconomic balance is good, but fragile. On this score, we face three relatively important risks: first, that the interactions between labour market unrest and the turnaround from output slack to a positive output gap could undermine price stability and turn the current account surplus into a deficit; second, that lifting the capital controls could turn out badly, with negative implications for exchange rate stability, inflation, and financial system stability; and third, that the global economic situation could turn against us. Therefore, we must avoid complacency, and we must be vigilant if we are to safeguard our recently achieved stability and face down the three challenges that I have mentioned just now. In some respects, formulating monetary policy is complex at present, as it has been at times in the past. The Central Bank’s interest rates were lowered by 0.75 percentage points in the final two months of 2014, in response to rapidly falling inflation and the decline of inflation expectations to the target. Since then, inflation has dropped still further, falling below 1% in December, triggering the submittal of a report to the Government on inflation below the deviation threshold. Even though inflation is now below 1%, the Central Bank’s key interest rate has been unchanged at 4.5% so far this year. There are a number of reasons for this. First of all, the extremely low inflation rate is due partly to the abrupt drop in global oil and commodity prices in the second half of 2014.

It also explains in part why unemployment among young people is – fortunately – much lower in Iceland than in many of our trading partners. When full employment is achieved, productivity growth will become more important, however. If attempts to ease the tension in the labour market are unsuccessful and wages rise far more than is consistent with the inflation target, it will be unavoidable to respond by tightening the monetary stance; i.e., by raising interest rates. Even if inflation rises early on, the Monetary Policy Committee has the tools it needs to bring it back to target over the medium term. Higher interest rates will have a negative effect on GDP growth and employment over time, however. Real wages and the real exchange rate will rise because of the interactions between rising nominal wages and a tighter monetary stance. In addition, firms would probably respond by slowing down recruitment – perhaps even by cutting back on staff. There is the risk that such a turn of events would be most harmful to labourintensive sectors and workers whose position in the labour market is weakest. It is therefore important to find ways to channel the desire to improve standards of living towards measures  BIS central bankers’ speeches  3  that are likely to generate more lasting results without jeopardising stability and the economic recovery that has brought us this far. Honoured guests: The time for decisive steps towards lifting the capital controls is rapidly approaching. Some may think this step comes rather late.
Could our road system cope with trucks hauling containers all over the territory? And is this what we want for Hong Kong? 5. In fact, Hong Kong’s position as an intermediate trading hub for Mainland China’s external trade has become more prominent over the past decades. In 1979, our trade intermediation activities (including logistics industry) accounted for about 15% of GDP and rose to 20% in 1990. Since China’s accession to the World Trade Organisation in 2001, direct competition from the Mainland has increased, but the pie has also grown much bigger. The total trade volume of the Mainland surged from $ billion in 2001 to $ trillion in 2013. And, while the percentage of trade being directly processed in Hong Kong has been trending downwards (from 30% to 10%) during the same period, the value of goods has risen  BIS central bankers’ speeches  1  sharply from $ billion to more than $ billion. Taking into account the fastgrowing offshore trade, the total value of trade in goods handled by Hong Kong would jump from some $ billion to $ billion during the same period. This shows that the trade creation effect is much greater than the diversion effect. Hong Kong’s trade intermediation activities (including logistics industry) amounted to $ billion in 2012, accounting for 25% of our GDP and employing 770,000 workers (21% of the total workforce).

Indeed, there is even a feeling among some that Hong Kong will inevitably be marginalised no matter what as Mainland China’s reform and liberalisation gathers pace and other Mainland cities bypass Hong Kong to establish direct trade and financial links with the world. 3. These people believe our future is doomed and would be eclipsed by the Mainland’s reform and liberalisation. They tend to look back with fond memories of the “good old days” in the 1980s and 1990s when Hong Kong was the sole gateway between Mainland China and the rest of the world. So, I pose this question – Is their reasoning sound? Will Hong Kong become irrelevant as Mainland China opens up? 4. First, let’s look at the changes in the role of Hong Kong as an intermediate trading hub for Mainland China over the past few decades. In 1979, Mainland China’s external trade amounted to a mere $ billion and container throughput amounted to just 30,000 to 40,000 TEUs, which were mostly processed at the Kwai Chung Container Terminal in Hong Kong. By contrast, in 2013, the Mainland’s external trade ballooned 140 times to $ trillion with container throughput up to 190 million TEUs. The throughput at Hong Kong’s container terminals increased more than 20 times from around 1 million TEUs in 1979 to 22 million TEUs in 2013. However, if the majority of the Mainland’s imports and exports continue to be routed through Hong Kong, how many additional container terminals would need to be built?