samchain/econo-pairs-v1 huggingface dataset:
It is sometimes pointed out that one of the problems with make-up strategies is that their strict symmetric application may create problems for the credibility of the strategy. For example, if there is a commitment by the central bank to react equally to both inflation undershooting – which, as we have seen, are the really problematic deviations in the current context – and overshooting, we could find that, following a period of above-target inflation the central bank would have to reduce inflation below the target, which would require depressing economic activity and employment. Given that such a commitment may not be entirely credible, it has recently been proposed that such strategies be temporary. In other words, the central bank operates normally within a traditional inflation targeting framework, but, in the event of a low inflation crisis driving  12  See Banco de España (2020a) for a detailed discussion of make-up strategies. 16  interest rates close to their lower bound, it commits to a make-up strategy to recover the “lost inflation” over that period in the future.13 Against this background, in late August 2020 the Federal Reserve announced the main findings of its strategic review. Among other changes, it has adopted a new asymmetric average inflation targeting strategy, albeit without specifying some of the parameters of this strategy, such as the length of the period over which the average inflation to be stabilised is calculated.

For instance, after a strong pick-up in 2020 Q3, the GDP growth rate returned to negative territory (-0.6%) in Q4 as a result of the pandemic containment measures being reintroduced in most countries. Thus, at end-2020 GDP was still 5% below the level recorded in 2019 Q4. Drawing on the ECB projection exercise conducted prior to the spread of the pandemic (published in  2  See, for example, the October 2020 bank lending survey (BLS). See Menéndez-Pujadas and Mulino (2020) for a summary of the results of the survey for participating Spanish banks. 3  See Alves et al. (2020) and Alves et al. (2021) for further details on the developments in financing granted to firms and households in the context of the COVID-19 crisis. 4  December 2019), at end-2020 GDP was 6.3% below the level forecast for the end of that year. By country, among the four largest euro area economies, the output loss was more pronounced in Spain (9.1%) than in Italy, France and Germany (down 6.6%, 4.9% and 3.6%, respectively). Also of note is the heterogeneous cross-sector impact of the pandemic, which is mainly affecting services. Much uncertainty also persists regarding the intensity of the recovery in the early stages of 2021, in view of the recent course of the pandemic in Europe. The available short-term indicators signal a slowdown in activity so far this year. Should the additional health crisis containment measures endure across the board, a fresh contraction in some countries or sectors cannot be ruled out.
One form of exchange rate target familiar to Icelanders is a declared target of an exchange rate index with a defined fluctuation band. Such an arrangement prevailed in Iceland before the inflation target and floating exchange rate were adopted in March 2001 (see Chapter 12). The original fluctuation band was rather narrow, at ±2½%. It was then widened to ±6%, and again to ±9%, after it proved more difficult, and in some ways riskier, to hold the exchange rate within a narrow band once restrictions on capital movements were lifted. But it was also  6  BIS central bankers’ speeches  growing imbalances in the domestic economy that contributed to the demise of the exchange rate target. Those imbalances were due in part to excessively accommodative demand management, which provided insufficient support for the exchange rate policy. An exchange rate peg of this type has an advantage in that, in the long run, inflation will tend to converge on inflation in the anchor currency area and exchange rate volatility will be reduced. However, Iceland’s experience in this area – and that of many other countries – shows that it is difficult to maintain such a unilateral exchange rate peg when movement of capital is unrestricted and the exchange rate policy receives inadequate support from fiscal policy and other aspects of demand management (see Chapter 18). Thus it is not a given that this would be a viable option for Icelanders, as such a policy might lack credibility because of previous experience.

We all are aware from our own history that some kind of instrument and mechanism has always existed to  BIS Review 36/2007  1  facilitate trade and other endeavours. What is abundantly clear, however, is that given the increased mobility of the citizens within the respective SADC member countries between cities and rural areas and at times between member countries, the need for payment instruments and the attendant mechanisms to facilitate safe and efficient remittances is arguably the relatively newer phenomenon. It is therefore the expectation of the Bank of Zambia that the 2007 SADC Payment Systems Regional Conference will discuss some of the most important trends and other strategic priorities confronting banks, payment system businesses, merchants and other service providers involved in the delivery channel for payment and other financial services. This is imperative as it would facilitate the drawing up of a development agenda of future priorities and contextualise the future of payment system oversight. Ladies and Gentlemen, since the establishment of the CCBG a decade ago, methods of effecting payments and other financial transactions have quickly become sophisticated with a trend towards execution in real time electronic media. All this is taking place because consumer confidence is growing in these instruments and mechanisms, which have been supported by growing confidence in SADC member countries’ economies in general and stability of the national financial systems in particular.
Anita Angelovska-Bezoska: Macedonia – current macroeconomic developments, medium term outlook and challenges ahead Speech by Ms Anita Angelovska-Bezoska, Vice-Governor of the National Bank of the Republic of Macedonia, at the Ministerial Dialogue on the Preaccession Economic Programs on EU Candidate Countries, European Commission, Brussels, 9 July 2013. *  *  *  Dear Ministers, Dear representatives of the European Commission, European Central Bank and Eurostat, At the beginning, let me express our gratitude to the European Central Bank, European Commission and Eurostat for their contribution in assessing our Preaccession Economic Program for the period 2013–2015. Within the PEP we already presented the proactive role of the National Bank of the Republic of Macedonia in dealing with the global crisis consequences, by undertaking a mix of conventional and unconventional measures, aimed at maintenance of the price stability, financial stability, as well as stimulating economic activity. I will use this opportunity to point out several issues regarding the current macroeconomic developments, medium term outlook and challenges ahead. The latest available data on Macedonian economy for the first quarter of 2013 indicated a gradual revival of the economy with real annual GDP growth of 2.9%, slightly higher than our expectations, being mainly driven by the investment and net export.

In general, the current macroeconomic developments and the expected future outlook indicate a moderate recovery of domestic economy (considering expected developments for the economies of the most important trading partners and domestic drivers of growth), inflation rate in line with the expectations, a balance of payments position that ensures a comfortable level of foreign reserves and still slow credit flows. These assessments created an environment for monetary relaxation, as a contribution to higher credit growth and thus, support to the domestic economy. On that basis, in January, we reduced the key interest rate on CB bills from 3.75% to 3.5%, which is the historically lowest level. Since January 2013, the changes in the reserve requirement instrument came into force, through reduction of the base of banks’ reserve requirements by the amount of newly approved loans, but only for credits to sectors whose growth reduces the external vulnerability of the economy (net exporters and energy sector). This non-standard measure will be in effect until the end of 2014, when the need for further application will be examined. These changes in reserve requirements have already started to contribute to higher lending to previously mentioned sectors in the economy. Just last week, we have done yet another change in the reserve requirement by reducing the reserve requirement ratio on Denar deposits from 10% to 8% and simultaneous increase of the reserve requirement ratio on foreign currency deposits from 13% to 15%, as well as introducing 0% reserve requirement ratio on banks’ long term liabilities to nonresidents.
Well, we do aim to achieve a level playing field. But we do not seek to flatten the landscape. We do take into account country-specific circumstances that warrant specific supervisory treatment. And this is the case not only when we act as macroprudential overseers, but also when we act as microprudential supervisors, in particular when we assess the business models of banks. Here, we are even bound by law to “have full regard to the different types, business models and sizes of credit institutions”.1 We understand the value of diversity, and for good reason. Imagine that all banks had the same uniform business model. What would that do to innovation? What would happen to progress? And, equally importantly, what would it mean for financial stability? If all banks had the same business model they would all be exposed to similar risks. If that model was faulty, or were to be hit by an external shock, all banks would suffer. So, as any risk manager will tell you: diversification pays off. For that reason, we value diversity and account for it. We follow the principle of “same risks, same rules, same supervision” – which also means that different risks have to be treated differently – and we take a proportionate approach to supervising banks. So, the banking union is not at all about centralising power or doing away with diversity.

And they can be sure that their business partners are as well supervised as they themselves are. So, the playing field has become more even, which is essential if we are to achieve a truly European banking market. And that is our vision: a banking market that seamlessly covers the entire banking union; a market in which banks can offer their services to customers from all over Europe; a market in which they can compete on even ground. The benefits of such an integrated market are well known: it is more efficient, it is more innovative, and it is better able to support growth. This is true for the entire union as well as each country. Are we there yet? As I said, this is the vision. But are we there yet? No, not quite, but we are getting closer. The banking union has brought its members closer together; it has lowered some of the barriers that were standing in the way of a potentially seamless market. But it has not entirely removed them. While supervision has been harmonised, the regulatory framework in Europe remains somewhat fragmented. And this applies not just to minor details but also to big things. It runs counter to the idea of a single market and fosters regulatory arbitrage; and it violates the principle of same business, same risks, same rules.
It would be naïve to think we can ever entirely prevent crises - and indeed it may be undesirable to attempt to do so. But it is realistic to think that the incidence and severity of crisis can be mitigated through appropriate public policy actions. This is the grandly-titled “new international financial architecture” about which you have no doubt heard. I want to discuss some of the efforts of the official sector in redesigning the international architecture achievements to date and, importantly, challenges for the future. While a lot has been achieved, much remains to be done. I will also suggest where I think the official community’s future efforts might best be directed. 5  BIS Review 70/2000  Dealing with financial crisis The first priority of the official community must of course be crisis prevention. And on this front good progress has been made. For example, we now have a substantial array of codes and standards of best practice covering public policy issues: transparency in macroeconomic policies; core principles for the supervision of banks, insurance companies and securities firms (including the changes to the Basel Accord which I have just discussed); principles for corporate governance, insolvency and market integrity; and standards for data, auditing and accounting. Implementation of these codes of best practice is now the key - ensuring that crisis-prevention principles are put firmly into practice, in both developed and emerging economies.

There is no other way to forecast future developments intelligently than to examine the indicators from the recent past, apply to them the metrics that the copious experience from Iceland and abroad has taught us to use, and to use both indicators and metrics as a guideline in projecting future developments. If we didn’t use this method, there would only be one left: to pour tea into a cup, turn it upside down, and read the tea leaves when the saucer is dry. The Central Bank has no comment to make on those who wish to pursue that course, but it isn’t likely to be terribly successful. When the Central Bank announced its interest rate decision, it stated that several factors that have made inflation harder to control could change over time. Sooner or later, higher mortgage interest rates will affect the real estate market. Global financial market conditions have changed for the worse. Those changes are already being felt, and sooner or later they will be felt in Iceland as well. In its forecasting, the Bank takes these factors into account, and it does not rule out the possibility that their actual impact will be greater than projected. Many people hoped that the unrest in the financial markets, which stems largely from the subprime mortgage market in the US, would blow over rather quickly. Some even seemed to believe that a modest drop in US interest rates would be sufficient to coax everything back into place once again.
But, more than this, the digital consumer also demands choice and personalisation, transacts with a swipe of their fingers at any time of the day 24/7, and judges products based on peer reviews. Digital consumers are set to grow in significance, especially in Asia. In China, the online insurance market doubled in 2014 to $ billion, representing over 4% of total insurance premiums.1 The Boston Consulting Group estimates that the online insurance market in India will grow by more than 20 times to hit $ billion by 2020.2 Second, data analytics. Advancements in technology have allowed insurers to unlock new data and greatly improve their ability to assess and price risks. Motor insurance is a case-inpoint. In the past, insurers have traditionally relied on historical accidents and claims data to establish premiums and policy conditions. Today, telematics3 technology has allowed insurers to use real-time data to differentiate between drivers’ behaviours and better price risks. However, even as we shift from using historical data to using real-time data today,  1  China: Regulator says online insurance mart lacks variety, Asia Insurance Review eDaily (2015). 2  Insurance @ Digital-20x by 2020, The Boston Consulting Group (2014). 3  Telematics is the technology integrated with computers and mobile communications technology in automotive navigation systems, which allows efficient real-time transmission of information over networks. BIS central bankers’ speeches  1  driverless vehicles are already under trial in Singapore4 and elsewhere, with the help of environmental sensors and navigation systems.

I understand LumenLab already has an existing relationship with NUS, and aims to seek more partnerships across industry sectors such as data analytics, market research, pharmaceutical, and technology, to explore new business opportunities. LumenLab is a prime example of how a large enterprise can create an environment like this within its  4  The LTA and A*STAR has been working on the Singapore Autonomous Vehicle Initiative (SAVI) since August 2014, and has successfully rolled out Autonomous Vehicle (AV) trials in One-North in March 2015. 5  Telemedicine is the use of telecommunications and IT to provide remote clinical healthcare. 6  Oscar Health is a New York-based start-up that provides policy holders with telemedicine tools, enables drug and doctor searches, price comparison for healthcare services, and rewards policy holders for hitting activity goals. Obamacare start-up Oscar Health hits a $ billion valuation, Forbes (2015). 2  BIS central bankers’ speeches  structure, to foster a culture of innovation and entrepreneurship, and partner with organisations across industry sectors and academia in Singapore to identify opportunities for innovation and growth. Singapore as a smart financial centre Singapore, too, needs to position ourselves for this new future.
Firstly, ASEAN has enabled SMEs in the region to gain access to a larger and more extensive marketplace. The realisation of ASEAN into an integrated economic community means that the potential benefits for SMEs in the region are no longer constrained by national borders. With easier cross-border flow of goods, services, capital and people, ASEAN offers significant market opportunities for SMEs. Given the large consumer base in ASEAN, SMEs can also utilise ASEAN as a platform to strengthen competitiveness before entering into the global market. Secondly, the lowering of regulatory barriers to trade within ASEAN has further increased the potential for SMEs. The standardisation of trade procedures, the removal of tariff and non-tariff barriers and the improvement of regulatory frameworks across the region has been an additional enabling factor. This will not only provide SMEs with a level playing field in conducting businesses across the region, but will also maximise the competitive advantage of the individual ASEAN economies. This is evidenced by the emergence of regional supply chains, where reductions in tariffs on imported raw materials have resulted in lower production costs, while the removal of tariffs on a wide range of finished products for export within ASEAN will also benefit SMEs that trade within the region. Thus, the lowering of tariffs within the region and the large regional market will provide an environment for SMEs to grow and achieve the production scale and efficiency required to compete in the global marketplace.

I would also like to thank the faculty and administrative staff for their sterling work, and to congratulate the students of the class of 2023 of the Master in Economics and Finance, for whom I wish the very brightest of futures. Thank you very much. 2/2  BIS - Central bankers' speeches
That is, that we know the range of outcomes that might happen and how the economy works and, insofar as is possible, given uncertainty, that we correctly analyse the available information to weight the probability of those. A famous corollary of this is the efficient markets hypothesis – that it is not possible to systematically ‘beat the market’. The stronger form of the hypothesis posits that market prices fully reflect all available information – that the price reflects the likely future revenue streams. But even if the price does deviate from that fundamental level, it may be rational for investors to remain in the market – as Chuck Prince famously put it, to keep dancing so long as the music is playing. The rewards of the game may be worth the risk of being stuck without a proverbial chair at the end. And even if they are not, sitting on the sidelines may not be a winning career move if promotions and funding flow to those with a reputation for high returns. It may be rational to stay with the herd, as Keynes said “it is better for reputation to fail conventionally”.11 Rational expectations do not mean that the future matches expectations and corrections are avoided – when new information arises, agents react to that. If the information is material for a financial asset, for example a change in Roman property ownership laws in AD 33, the adjustment can be large.

The economic model they have developed – of ‘diagnostic’ expectations – is appealing because it starts from research on how humans form beliefs about the future, and how they act on those. The way in which investors and markets form expectations of the future is clearly an area that merits further research. As I will go on to discuss, it is important to those of us responsible for financial stability to understand what is driving the expectations of the future that underlie risk-taking And what drivers kick in when those expectations meet the future and have to be adjusted. Macroprudential Policy As I said at the outset, I expect the next ‘crisis’ to involve some form of over-valuation of assets, over-extension of credit and losses when this corrects. While infrequent, significant adjustments seem to be a feature of the system. The more important question, in my mind, is whether those adjustments destabilise the financial system and lead to very disruptive economic impacts. Will adjustments lead to ‘great financial crises’ as they did 10 years ago or will the system be able to absorb the adjustment and perhaps even dampen its impact? In the first instance, it does not matter whether expectations are rational and are then significantly adjusted because of ‘news’ or whether they are irrational and extrapolative and get adjusted because reality has caught up. Either way, the costs of financial crises can be minimised and perhaps avoided if the system is resilient to shocks that are possible even though they are very unlikely.