samchain/econo-pairs-v1 huggingface dataset:
Variables such as inflation expectations, wages, output, unemployment, the exchange rate, commodity prices, and so on, have important effects on inflationary forecasts and must be taken into account when deciding the future path of monetary policy. However, it is also important that investors, wage and price setters understand and share the importance of these variables for the inflation process. Communication is essential, and that is the role of Monetary Policy or Inflation Reports, monetary policy statements, minutes, projections, speeches, and so forth. A key question during the financial crisis was to which extent central banks should react to asset prices, such as housing or stocks prices. The answer from the perspective of inflation target should be: as long as they affect the forecast of inflation, they should be considered in the reaction function of monetary policy. Asset price bubbles or distortions that may threaten financial stability should be considered when evaluating financial vulnerabilities, but not influence monetary policy if they do not have an impact on inflation. It is not clear that an increase in interest rates will be capable of stopping an increase in asset prices. The required adjustments might be so large that they could end up unnecessarily generating high unemployment and an undesired drop in inflation. Under inflation targeting, any interest rate movements that is inconsistent with inflation converging to the target may undermine the credibility of monetary policy, destabilizing inflationary expectations and weakening the effectiveness of monetary policy.

Passporting rights have been well availed of in this sector, too, and the total number of Notifications for European Insurance Undertakings to carry on business in Malta under the Freedom to Provide Services directive now stands at 204. The other reflection I would like to share with you is inspired by an interview given recently by the CEO of Mediterranean Bank to a local economic magazine, in which Malta was referred to as ‘a secure EU jurisdiction’. In this same context it was stated that ‘Malta’s stability is an important part of its appeal as a banking location’. While such accolades are indeed welcome, they do not come entirely as a surprise. For when Malta’s financial legislation was overhauled in 1994, and when EU legislation was later transposed in anticipation of EU membership, an intended by-product was indeed the incorporation of the highest international standards and best practices into Maltese financial laws and regulations. This was accompanied by a strengthening of the institutional framework for the regulation and oversight of the financial system. In 2002 the Malta Financial Services Authority (MFSA) became the single regulator for financial services when it took over the responsibility for the banking sector from  BIS Review 92/2006  1  the Central Bank of Malta (CBM). The Bank then assumed responsibility for ensuring the stability of the entire financial system. A year later Malta volunteered to undergo a Financial Sector Assessment Programme (FSAP) by the IMF and the World Bank.
The reports issued by the Counterparty Risk Management Policy Groups I and II both make the important observation that the financial system is likely to be more resilient under conditions of stress when counterparties set initial margins at levels that are likely to be sustainable in less benign conditions. When margin levels are set more conservatively, firms are likely to have more flexibility in responding to stress and are less likely to take action that might amplify the market shock and exacerbate the reduction in liquidity. When competitive pressure drives margins down, markets may be less resilient. Third, we believe the major financial institutions need to continue to improve their capacity to measure their exposure to risk in a less benign market and economic environment than we have experienced in recent years. The discipline of stress testing and scenario analysis that is designed to measure tail risk is at the frontier of this challenge. Senior management and the boards of directors need to understand the limitations of the tools we use to assess these risks, to try to better understand the potential scale of losses the firm may face, and to carefully examine how well risk exposures reflect the overall risk appetite of the firm, and the size of the capital and liquidity cushion maintained in relation to those exposures. BIS Review 54/2006  3  I want to conclude with the observation that the requirements of effective risk management and control regimes are likely to become more rather than less demanding over time.

All three layers – national, regional and global – must complement and reinforce one another. Well-designed, they can operate as a package, offering a comprehensive suite of financial options to countries in need. AMRO – The focal point of regional surveillance 20. Let me now turn to AMRO, the emerging focal point for regional surveillance underpinning the CMIM. AMRO was set up to perform three important functions:   to conduct surveillance and contribute to the early detection of risks in the region;    to facilitate the implementation of remedial action; and    to inform the decision making of the CMIM. 21. These functions help to ensure that any activation of the CMIM mechanisms will be predicated on informed and independent judgement. 22. AMRO will give ASEAN+3 authorities a new and vital perspective as it considers the impact of global developments on ASEAN+3 as a region. AMRO’s surveillance toolkit will be based on its own in-house capabilities, access to policymakers in ASEAN+3, and regular dialogue and exchange of information with the IMF and other international financial institutions. We envision AMRO emerging over time as an authoritative interpreter of economic and financial developments in the Asian region. 23. AMRO’s progress since its establishment in May 2010 has been remarkable. It commenced operations just a year later, in May 2011. It has since conducted a number of surveillance visits in the region.
The purposes of the Pension Fund and the foreign reserves are similar; they are both essentially national savings funds, except for that part of the reserves that we may need for policy purposes. The current asset allocation is thus effectively the same for both funds. At present they have 40 per cent in equities and 60 per cent in fixed income. The investments are widely diversified across international markets. The investment strategy has so far aimed at low return volatility, perhaps to a larger extent than is reasonable for a fund that is meant to be permanent. The strategy is currently under review by the Ministry of Finance, and there may be changes under way. 6. The Ministry of Finance acts as owner of the Pension Fund, on behalf of the government. The management of the Pension Fund is delegated to Norges Bank. The key feature of the model is the  BIS Review 86/2006  1  division of responsibilities between the two institutions. The Ministry takes the high-level decisions and defines a clear mandate for Norges Bank. In accordance with that mandate Norges Bank makes all investment decisions without interference from the Ministry. The benchmark portfolio for the Fund is defined by the Ministry. The benchmark determines most of the asset allocation in the actual portfolio, but the Ministry also leaves some leeway for the manager. NBIM shall deviate from the benchmark in order to obtain a higher return. Active management has become a very important part of our investment operations.

Svein Gjedrem: Wealth management in a public setting Introductory statement by Mr Svein Gjedrem, Governor of Norges Bank (Central Bank of Norway), to panel discussion on “Problems of Plenty? Challenges and Opportunities from the Accumulation of Large Exchange Reserves and Windfall Revenue”, arranged as part of the seminar program of the 2006 Annual Meetings of the IMF and the World Bank, Singapore, 18 September 2006. Please note that the text below may differ slightly from the actual presentation. *  *  *  1. Thank you for this opportunity to discuss the challenges that arise when managing financial wealth in a public sector environment. Norges Bank now has eight to ten years of experience of this task, and I shall try to describe in brief the strategies adopted by Norges Bank, and what we believe we have learned. 2. We have a large amount of money under management. Our foreign reserves are probably larger than needed for financial stability and monetary policy operations. But the most important fund is the Government Pension Fund, formerly the Petroleum Fund. We have been responsible for managing that Fund since its inception in 1996, and it has been a major task for us since 1998. 3. The value of the petroleum resources in the North Sea is currently estimated at about USD 700 billion. The government receives the bulk of the revenues generated from petroleum extraction as sales revenues and taxes. The government channels these revenues into the Pension Fund as financial assets.
In the words of the authors: “This evidence, together with recent experience during the financial crisis, leads us to conclude that there is a pressing need to reassess the relationship of finance and real growth in modern economic systems. More finance is definitely not always better.” Last month, the IMF released a paper that essentially reaches the same conclusions. It identifies Ireland, Japan and the US as countries that have “too much finance” for their own good. In Malaysia, the Financial Sector Blueprint clearly recognises the role of the financial system in serving the real economy. The economy is not subservient to the needs of the financial sector. 6  BIS central bankers’ speeches  Regional cooperation The final thing I wish to mention with respect to reaping the benefits and mitigating the risks of financial globalisation is regional cooperation. During the Asian Financial Crisis, we found out that contagion can occur when our neighbours experience difficulties, even if our financial systems are not closely linked. More recently, the European countries, even those that are not in the euro area, have found themselves in a similar position. The key factor is whether a country’s financial system is linked to the global financial system. Herding behaviour and generalisation among international investors and lenders will make the crisis in one country transcend borders and also affect neighbouring countries.

Policymakers have expressed concern about the low level of productivity. There are questions about whether these are new trends or trends that existed even before the crisis but were glossed over by policies aimed at sustaining consumption and growth. Structural weaknesses in economies are regularly discussed, but less regularly addressed. But despite this uncertainty, I will briefly mention two trends with respect to the global economy and financial markets that are relevant in terms of their impact on Malaysia. First, there is better growth in the AEs but the growth remains weak and uneven. The U.S. economy is showing the strongest signs of sustained economic growth, The EMEs are continuing to experience growth but that growth is now slower. Second, the monetary policies of the AEs remain very easy and are not likely to change significantly in the near term. This condition of sustained low interest rate continues to spur investors to frantically search for a few extra basis points in yields, undertaking larger and larger risks. This has fuelled the upward momentum of global financial markets and asset prices, which have risen to historical levels. Many market participants know that they are indulging in very risky behaviour, but feel that “As long as the music is playing, you’ve got to get up and dance” as one financier famously put it. But they are nervous and this nervousness is causing them to react to short-term developments and any sign that could signal that the music is about to stop.
6 Such thinking had an important bearing on the design of the institutional framework for Monetary Union in Europe. The ECB has been assigned the primary objective of maintaining price stability in the euro area, establishing a clear hierarchy of goals with price stability at the fore. The clarity of this objective bolsters the credibility of the single monetary policy: it  5  See H. Theil (1964). Optimal decisions for government and industry, Amsterdam: North Holland. 6  See: M. Goodfriend and R. King (1997), “The new neoclassical synthesis and the role of monetary policy”, NBER Macroeconomics Annual 12, pp. 231–296; and J.J. Rotemberg and M. Woodford (1999), “Interest rate rules in an estimated sticky price model”, in ed. J.B. Taylor Monetary policy rules, Chicago University Press, pp. 57–126. BIS Review 45/2010  3  supports the institutional independence of the ECB and helps to stabilise private longer-term inflation expectations at levels consistent with price stability. At some other central banks, monetary policy has been given a dual mandate, with objectives such as economic activity, employment, financing conditions or financial stability in addition to the goal of price stability. I do not want to give the impression that we are indifferent to such concerns at the ECB: on the contrary, I will discuss in a moment how we can help to attain them. But monetary policy should not be over-burdened with additional objectives. It is too blunt an instrument to be effective in achieving all the goals I have just listed.

At the global level, the incorporation of emerging markets into the world economy weighed down on price developments (especially of manufactured goods). In response to the resulting benign inflation developments, the prevailing inflation targeting orthodoxy led to the adoption of an accommodative monetary policy stance. In retrospect, such accommodation was probably inappropriate, at least to the extent that it supported the financial imbalances and asset price bubbles that underlay the recent financial crisis. Failure to take into account financial factors and channels of transmission led to a mis-calibration of the monetary policy response to the impact of globalisation. A simplistic account of the financial sector may have had other, adverse implications for the conduct of monetary policy in recent years. Within the canonical New Keynesian model, financial markets are “perfect”. On the basis of arbitrage considerations, long-term interest rates and other yields and asset returns all derive from the expected path of short-term interest rates determined by the central bank. Such a construct suggests that monetary policy-makers can steer long-term rates closely by simply making pre-commitments about the future path of short rates. No doubt there is an  16  See: E. Fahri and J. Tirole (2009), “Leverage and the central banker’s put”, American Economic Review 99(2), pp. 589–93. 17  See: D.W. Diamond and R.G. Rajan (2009), “Illiquidity and interest rate policy”, NBER working paper no. 15197. 18  See: T. Adrian and H.S. Shin (2009), “Financial intermediaries and monetary economics”, Handbook of Monetary Economics, forthcoming; R.G.
In the scenario where all credit is the economy is provided by banks (the blue line), the policymaker can use this tool in response to a 15pp increase in credit growth in the domestic economy over three years to reduce the probability of a crisis to well below 1% before the cost (in the form of lost output) becomes material. However, if 25% of credit in the economy is provided by market-based finance (red line), the policymaker struggles to reduce the probability of a crisis significantly below 2.5% as tightening the countercyclical capital buffer does not reduce the provision of market-based finance. Acting locally to address the risks of market-based finance  So how can we address risks emanating from global, market based finance? This is the subject of several panel discussions over the course of this conference, and indeed major international workstreams including of the FSB. So rather than pretend to have the answers, I will limit myself to two simple observations about how policymakers acting in their own best interest can help reduce these risks. The first is that by building strong domestic institutional frameworks and deepening domestic capital markets, recipients of global flows can reduce their susceptibility to volatility in those flows. Central bank credibility, a robust macroprudential framework, and fiscal stability all reduce the risk of a sudden stop, and liquid domestic capital markets make it easier to absorb larger inflows. As such they are prerequisites to being able to enjoy the benefits of open capital markets sustainably.

As Arthur Cecil Pigou (18771959) put it: “The social enthusiasm which revolts from the sordidness of mean streets and the joylessness of withered lives … is the beginning of economic science.” One may have chosen economics to find out how to become wealthy. Woody Allen said: “Economics is the study of money and why it is good.” Or one may have chosen economics to find out how society functions. Economics certainly offers a good starting point for this endeavour. Let me quote Alfred Marshall (1842-1924): “Economics is a study of mankind in the ordinary business of life; it examines that part of individual and social action which is most closely connected with the attainment and with the use of the material requisites of wellbeing.” Or one may have chosen economics because it is so hopelessly difficult and therefore enormously attractive to, and here I quote Robert Solow, “the overeducated in pursuit of the unknowable”. In the process of studying economics, every student sooner or later will have to decide whether do drop out or to continue. Most of the students opt for the practical application of what they have learned and quit university after their final exams. Some, however, will opt to stay on. In practice, this means to teach, to do research and increasingly to administrate since the universities have become large and slow-moving institutions. Let’s forget the latter and talk about the former. In teaching and in research lies most of the professional fulfilment of a university economist.
Whilst non-performing loans in the banking sector rose from around 5% in July 2008 to their current levels of around 10%, they remain within the prudential ceilings above which concerns of systemic risks would be warranted. The increase in non-performing loans thus reflects the deterioration in the real sector of the economy. It is in this sense, i.e. the absence of a significant volume of impaired assets in the financial system, that I describe “financial markets” rather than the “financial system” as bearing the brunt of the crisis. The weight of adjustment was reflected in exchange rates and the Balance of Payments – reflected in a marked draw down of international reserves. However, the ramifications of the crisis on the real sector of many sub-Saharan African economies are real and potentially far reaching, and it is to these that I now turn. In my reflections on the impact and implications of the global economic crisis on Africa, I wish to emphasize four key points: The first and perhaps the most significant effect of the global financial and economic crisis has been the marked slow-down in real GDP growth in SSA, to a projected 1.5% in 2009 from an estimated 5.5% in 2008. This slow-down in growth has occurred after a significant period of strong economic growth and investment that had laid the platform for sustained and significant reductions in poverty across the continent.

Caleb M Fundanga: Africa and the global financial and economic crisis – an opportunity or a curse? Speech by Dr Caleb M Fundanga, Governor of the Bank of Zambia, at the Forum “Developing Africa – an opportunity for Europe, Italy and Sicily”, Taormina, Sicily, 1-2 October 2009. *  *  *  Chairperson, Distinguished Participants, Today we gather at a time when the world economy has gone through a tremendous economic and financial shock, which may well have long lasting social consequences. When we met last year, we were on the eve of disaster although we did not, and perhaps could not, appreciate the depth and severity of the crisis that we faced. In many ways we were in the calm before the storm. What subsequently transpired in September and October 2008, when financial markets froze and stock markets collapsed, was the greatest macroeconomic challenge that many of us, as practicing economists, are likely to face in our lifetime. As we all know, trade and output contracted sharply across the globe particularly in the fourth quarter of 2008 and first quarter of 2009, the downward trend in commodity prices witnessed since the historic highs of July 2008 accelerated, and perhaps most significantly confidence and trust in the market economy was severely impaired. In this regard, estimates from the International Monetary Fund (IMF) are that in the fourth quarter of 2008 global exports contracted by an average of 15.1%, whilst global output contracted by 6.5%.
Jarle Bergo: Oil prices, cyclical developments and monetary policy Speech by Mr Jarle Bergo, Deputy Governor of Norges Bank (Central Bank of Norway), at Vest-Norsk Sparebanklag’s autumn conference, Bergen, 12 November 2004. The text below may differ slightly from the actual presentation. The address is based on the assessments presented at Norges Bank’s press conference following the Executive Board’s monetary policy meeting on 3 November, Inflation Report 3/04 and on previous speeches. The references and the  Charts in pdf-format can also be found on the website of the Norges Bank. *  *  *  The objective of monetary policy is to safeguard the value of money in the long term. In the short and medium term, monetary policy can also contribute to stabilising production and employment. Historically, the experience of Norway and other countries is that high inflation has resulted in unstable output and employment. A fall in the price level will often occur in tandem with a downturn. The objective of low and stable inflation provides an anchor for economic agents’ expectations concerning future inflation. We have a very open economy with free capital movements. Stable inflation expectations also contribute to more stable krone exchange rate expectations. I will discuss this aspect in more detail later. Inflation targeting has proved to be particularly appropriate in very open, small and medium-sized economies such as the Norwegian economy.

1 Includes Southeast Asia, Greater China, India, Australia, New Zealand, South Korea and Japan 2 “Asia-Pacific Private Equity Report 2019”; Bain & Company 3 “Southeast Asia PE & VC: Investment Activity May 2018”, SVCA 4 “World Population Prospects 2019”; United Nations, Department of Economic and Social Affairs  7/7  BIS central bankers' speeches