samchain/econo-pairs-v1 huggingface dataset:
Bilateral investment is also gaining importance, notably with the two recent Government-to-Government agreements, involving the establishment of an industrial park in both countries. The cornerstone to the strength of our bilateral economic relations is the ability to continually harness the synergies and economic complementarities that exists between our economies. The use of renminbi for trade settlement provides a natural hedge for businesses with renminbi obligations. It also generates cost savings and minimises exchange rate risks, in particular, it reduces the exposure to exchange rate fluctuations of a third currency. While the dollar will continue to remain an important currency for settlement of trade obligations, the availability of renminbi would provide companies an additional currency for such trade settlement. BIS central bankers’ speeches  1  The benefits to be gained can be significant given the large and increasing trade base with China which stood at RM167 billion in 2011. By undertaking the transactions in local currency, exporters and importers in China would be able to eliminate the hedging and conversion costs. The reduction in transaction costs for the exporters and importers will contribute towards more competitive pricing for both exporters and importers. The full potential benefits are however expected to be realised in stages. The benefits will rise as the trade volume settled in renminbi increases and reaches a critical volume in terms of size which will in turn allow for the realisation of economies of scale.

On the other hand, there are those who reject these arguments and argue that the reduced effectiveness of monetary policy at the ZLB and during a credit crisis makes this the only effective macroeconomic policy weapon at the current juncture. Whatever the resolution of this debate, however, the traditional arguments against activist fiscal policies seem likely to still obtain once normal times return. 2. The choice of monetary instrument. Given the above, monetary policy is likely once more to take on the primary role in short-term aggregate demand management once normal times return. But the apparent effectiveness of asset purchases at altering longer-term yields opens up the possibility that they could become part of the monetary toolkit in normal times. We argued in Section 3 that despite its apparent effectiveness, there were good reasons to return to exclusive reliance on a shortterm policy rate in normal times and after any asset purchases during the crisis have been appropriately unwound. 3. The monetary transmission mechanism. The crisis has brutally exposed the limitations of conventional macroeconomic analysis ignoring the role of financial intermediaries. While the existing literature contained a strand focussing on the role of financial frictions – including those on the broad credit channel – they generally focussed on those that arose from the behaviour of borrowers. The crisis has illustrated the need to take seriously the incentives facing the intermediaries themselves.
The level of mistrust among US investors towards new instruments with collateral in property in small, distant countries should not be underestimated. BIS central bankers’ speeches  7  So, in terms of risks for an acute liquidity crisis, it is important how the banks borrow, in particular which proportion of the borrowing is short-term. And this brings the problem back to just how to get hold of dollars. However, the problem is also related to that of how the borrowed dollars are used. In principle, there are three options. One way is to purchase US government bonds to use as a liquidity reserve. Borrowing for this purpose (and this has been significant for a couple of banks, at least) does not form a problem. Government bonds can always be sold on the market when the loans fall due, as they are highly liquid and remained so throughout the entire crisis. Another way of using the borrowed money is to exchange it immediately into Swedish kronor, but at the same time to enter into a forward contract where these kronor are exchanged back to dollars on the same date as the loan falls due. This entire process – borrowing in dollars, the immediate exchange into kronor and the exchange of these back again into dollars when the transaction falls due – is generally combined into a single transaction known as a currency swap.

Zeti Akhtar Aziz: The nature of risks involved in dealing with OTC financial derivatives Keynote address by Dr Zeti Akhtar Aziz, Governor of the Central Bank of Malaysia, at the 4th Banking and Financial Law School Seminar, Kuala Lumpur, 19 February 2004. *  *  *  It is my great pleasure to be here at this 4th Banking and Financial Law School in light of developments in the global and domestic financial markets. We are in a period of great change. As the pace of globalisation intensifies the global environment has been marked by greater volatility and uncertainty. As a consequence we are often dealing with probabilities. The process of globalisation has resulted in international capital movements and developments in the global financial, and regulatory arena that have had significant implications on domestic financial institutions. There is therefore a need for a global perspective in effectively managing these risks. The universal application of ISDA Master Agreements is a demonstration of the need for globally oriented solutions. This morning my remarks will focus on the need to appreciate the nature of risks involved in dealing with OTC financial derivatives, both by the market and the regulators. I will also touch briefly on the opportunities emerging in terms of developing derivatives within Islamic banking and finance. Financial institutions, as the linchpin for the process of financial intermediation, have a crucial role in facilitating the flow of capital to areas where it can be most productively used.
This has enabled the government to borrow at low cost and no longer be penalized for opportunistic behaviour of irregular issuance schedules. The Ministry of Finance now issues on a regular basis Government bonds with a maturity of up to a maximum of 20 years to establish a benchmark rate for medium to long-term debt securities. This has allowed a risk free benchmark to be constructed, and the Thai Bond Dealing Center publishes a yield curve on a daily basis. The BOT has appointed 10 financial institutions as primary dealers for bilateral repurchase (repo) transactions. This set of primary dealers will be counterparties for bilateral repo transactions with the BOT and act as intermediaries in forwarding liquidity adjustments resulting from bilateral repo transactions with the BOT to other market participants. To further enhance trading in the market and ensure that financial institutions have sufficient liquidity for their day-to-day operations, the Bank of Thailand is in the process of phasing out the repurchase market that BOT currently operates and introduce a full-fledged private bilateral repurchase market. Future challenges would center around improving the clearing and settlement system. These markets require a minimum turnover in order to function smoothly and cost effectively. A regional perspective: risks from currency and maturity mismatches In addition to developing local bond markets, Asian countries have also embarked on a regional initiative to promote the development of the Asian bond market. Asian countries have long enjoyed the highest saving rates in the world.

However – with the spirit of regional financial cooperation for development of Asia as a whole in mine – countries with more advanced financial systems may decide to offer these guarantees for a limited period of time. Proposals for development and integration: enhancing market infrastructure Currency arrangements Issuing bonds under a basket of Asian currencies may achieve a slightly lower cost of funding, given that the currency risk of a basket is lower than the sum of the risk of the underlying currencies. This lower risk should be reflected in a lower cost off capital for borrowers. With regards to liquidity, if bonds in the region were to be issued in a basket of currencies that could be traded in many Asian bond markets, liquidity of such a bond should be better than that of any individual bond. In this regard, deep and liquid bond markets should also reduce transaction costs, making the regional market more attractive than issuing locally. Such a basket of currencies may enhance the natural hedging ability of market participants in each country in the region. Given the importance of intra-regional trade, exporters cold better match the currency exposures of their assets with their liabilities. Cooperative actions needed to facilitate growth of regional bond markets The use of these mechanisms to promote development of bond products must not detract countries from taking serious steps to developing their bond markets.
So is it fear of stigma about breaching buffers, or is it precautionary capital raising in the face of uncertainty and/or concerns about capacity to rebuild depleted capital? For the UK, we can disentangle these effects in two ways. First, unlike some other studies, the Bank team’s analysis controls both for banks entering the pandemic with differing levels of headroom to minimum requirements, and for the profitability of banks when entering the crisis. Each of these should go some way to mitigating this concern. Second, the stress tests run by the Bank in May 2020 projected major UK banks’ CET1 ratios to fall but remain well in excess of minimum capital requirements. And, ‘reverse stress tests’ carried out by the FPC in August 2020 showed that the economic outcome from Covid-19 would need to be much worse than the central projection in order for it to deplete regulatory capital buffers.21 So while uncertainty was high, banks appeared resilient against scenarios that were materially more adverse. Moreover, the empirical results reported under the second approach on the value of releasing the CCyB, both from the UK and abroad, should not be affected by this challenge as this action converts a regulatory buffer into a management buffer. This would not have altered banks’ concerns about breaching minimum requirements. Taken together, these all point more to fear of stigma from breaching regulatory buffers being the main driving factor. Policy implications Effective regulators are forward looking, looking ahead to the next crisis.

The forward exchange and options markets have expanded in recent years. A deeper market reduces transaction costs and it is easier to find counterparties. This has provided companies with greater scope for hedging against exchange rate risk. Instruments that reduce the risks associated with a floating krone are increasingly being used, also in Norway. Hedging against fluctuations in the krone involves costs for businesses. A krone that is stable - but too strong - also entails costs to the economy in the form of low activity. Similarly, a krone that is stable but weak - is a source of high inflation. Petroleum revenues generally provide substantial, but uneven currency inflows into Norway. The currency flows might have resulted in a strong krone and large variations in the exchange rate. This tendency is countered, however, when the annual use of petroleum revenues over the central government budget is predictable and independent of annual revenue flows, and the remaining revenues are saved and invested abroad. The capital outflows through the Government Petroleum Fund contribute to both curbing the appreciation of the krone and maintaining its stability. Higher oil prices have resulted in higher current account surpluses. In isolation, this contributes to strengthening the krone. However, higher surpluses are being offset by higher long-term capital outflows through the Government Petroleum Fund. In addition, the oil companies primarily invest their cash surplus abroad. Foreign trade figures indicate that mainland imports have increased sharply in recent months. This increases demand for foreign currency.
This may be a scandalous misrepresentation of the true state of affairs, but there are many readers who would, I am sure, have sensed a grain of truth there. Another cause of possible scepticism over the euro relates to what I would like to call popular acceptability. Let me explain what it is. No one has yet seen the euro in the form of cash. From Hong Kong we cannot witness as closely as you can here in Euroland the extent to which the euro has already become part of economic life. The separate national currencies are still quoted in Hong Kong and any traveller knows that he can only take those and not the euro in banknote form on his journey. There is a feeling that, whatever the law says, the euro will not really have arrived until it is there in your pocket. The sceptics will go on to suggest that poor performance of the euro to date, coupled with nationalistic resentment of the imminent loss of one’s own banknotes - to many an emotive symbol of national identity and sovereignty - might yet cause a wave of popular opposition to the euro at the eleventh hour. I should stress that this may not be a widely held viewpoint, and most international businessmen and bankers have long since discarded the national currencies from their minds and books in favour of the euro. But it is possible for just a few vocal doubters to have a disproportionate effect on the overall mood.

In its latest report the International Monetary Fund lowered its estimate for world growth for 2015 by 0.3 pp to 3.1%, with the developed and emerging economies expected to perform differently. The pick-up in activity continues in the advanced economies, underpinned by favourable financing conditions and low commodities prices, while inflation is running at very low rates. In most of the emerging economies, activity continues to fall, owing not only to conjunctural reasons in the international environment, but also to more structural factors, such as lower productivity gains and demographic factors. Activity continued to slow in the emerging Asian economies, while in Latin America it is stabilising at very low rates, albeit with notable differences from country to country; in turn, in some cases, inflation stands above the authorities’ targets, due partly to the depreciation of their currencies. Of particular significance for the world economy are the developments in China, which posted an annualised rate of GDP growth of 6.9% in the third quarter. That entails a slowdown, but one milder than anticipated. However, uncertainty over its medium-term growth rate persists bearing in mind the authorities’ intention to lead the Chinese economy towards a more sustainable and more domestic consumption-led model. The consequences of the slowdown on the world economy, mainly via the effect of the decline in commodities prices on exporting countries’ economies, are so far projected to be limited.
Internal workshops were held where our staff participated, as well as planning workshops with the active involvement of the Bank's board members and chief officers, all with continuous communication of the progress and results of the process. 10  This process was concluded a few days ago with the approval of the Strategic Plan 20182022 by the Board. This plan, which is based on the Institution's strengths, recognizes future opportunities and risks and identifies a number of strategic initiatives to realize the Bank's vision as a reliable institution due to its technical nature and excellence in achieving the objectives that have been entrusted to it by law. In particular, our 2018-2022 Strategic Plan identifies five focal points: 1) to strengthen the response capacity and the intellectual leadership of the Bank to comply with the institution’s objectives defined in its Constitutional Organic Law, incorporating the reality of an increasingly complex environment. 2) to enhance understanding and dialogue of the Bank with its environment through strategic management of communications. 3) to strengthen the Bank's corporate governance in order to balance out risk tolerance and business process efficiency, thereby speeding up decision-making and encouraging innovation. 4) to improve the ability to understand, manage and incorporate technological changes to the Bank's integral work, both in the area of its own management and in the dimensions relating to its institutional objectives.

However, these efforts depend on the approval of the bill. Institutional advances A year ago, when I presented these same reports before this Committee, I emphasized how important it is for a central bank to have the capacity to face new challenges. On that occasion, I stressed that the accumulated achievements of the Central Bank of Chile over the years did not suffice to take charge of the transformations that occur in the economy, markets, technology and society. Every central bank has the obligation and responsibility to anticipate these changes and respond to them in an organized, efficient and timely manner. Accordingly, since 2004, and every time a new Governor assumes, the Bank prepares a strategic plan that accompanies it throughout his term and culminates in the first year in office of his successor. Early this year we began preparing the strategic plan for the next five years. This time, we have sought to give our strategic plan a consultative, participatory and inclusive character. The aim is to reflect that the Bank is not an isolated entity, but works for the entire country and depends on the cohesive team of people that make it up. All this has translated into this new Strategic Plan being devised after completing more than 100 interviews with people from different areas that are external references for the Bank. Surveys were applied to regional and international reference groups and other central banks.
Moreover, the output gap forecast, which was revised upwards owing to the better-than-expected growth outlook for 2013 compared to the figures presented in the July Inflation Report, added 0.1 percentage points to the year-end inflation forecast. Developments in the exchange rate and oil prices were also influential on the revision in the inflation forecast for 2014. When evaluated together with output gap forecasts, we expect these cost-side factors to push the inflation rate in 2014 up by 0.3 percentage points. 4  BIS central bankers’ speeches  Although inflation is estimated to fluctuate in the short term due to the base effect on energy prices, we expect it to remain on a downward track. As the effects of the hike in tobacco prices in January 2013 on annual inflation taper off, we expect inflation to plunge in early 2014, and come down to levels consistent with the target by the last quarter of 2014. In addition to these forecasts, alternative scenarios on the inflation outlook and the global economy are discussed in the Risks section of the Inflation Report. You can examine the Report for details. While concluding my remarks, I would like to thank all my colleagues who contributed to the Report, primarily those at the Research and Monetary Policy Department as well as the members of the Monetary Policy Committee, and thank every one of you for your participation. Chart 1  Chart 2. Global Risk Appetite  Portfolio Flows to Emerging Economies (12-Week Moving Average, Billion USD)  Source: Bloomberg, Credit Suisse.

Also, as Panel A in Figure 2 shows, the shape of the yield curve moves similarly, with a flattening of about 150 basis points between the 10‐ and 2‐year US government bonds in the first year.5 In a related phenomenon, shown in panel B, the term premium implicit in the valuation of the 10‐year US government bond also dropped between 1 and 2 percentage points in the two years after the start of the cycle. Essentially, the monetary policy shock and the shift in the yield curve were comparable in both episodes. Indeed, the lack of response of long term rates to short term hikes in the mid 2000s, labeled as the “conundrum” phenomenon by Alan Greenspan was, to some extent, also present in the mid 1990s.6 However, in many dimensions, these two episodes show very distinct features. (See panels C to E in figure 2.) First, during the 1994 one, there was a sharp increase in credit spreads to emerging economies, which contributed to their difficulties in the balance of payments. In less than a year, the EMBI credit spread increased, on average, more than 1,000 basis points. A decade later, Fed Funds increases were followed by secular decline in EMBI spreads for emerging markets. This contrast strikingly with the episode a decade later, when Fed Funds increases not only did not generate an increase in credit spreads but rather it was accompanied by a secular decline in EMBI spreads. A year later, EMBI spreads had fallen about 150 basis points.
Under the Basic Law, however, there appears only a corresponding general requirement. Article 76 states that once a bill has been passed by the Legislative Council, all that is required for it to take effect is signing and promulgation by the Chief Executive. In addition, Article 17 states that “laws enacted by the legislature of the Hong Kong Special Administrative Region must be reported to the Standing Committee of the National People’s Congress for the record.” But this article also states that “the reporting for record shall not affect the entry into force of such laws.” 4. On the other hand, unlike the Royal Instructions, the Basic Law also prescribes in considerable detail the financial systems to be practised in the HKSAR. For example, Article 109 provides that the HKSAR government shall maintain the status of Hong Kong as an international financial centre. Article 110 provides that the HKSAR government shall, on its own, formulate monetary and financial policies. Article 111 prescribes that the Hong Kong dollar, as the legal tender in the HKSAR, shall continue to circulate. Article 112 states that no foreign exchange control policies shall be applied in the HKSAR and that the Hong Kong dollar shall be freely convertible. Article 113 stipulates that the Exchange Fund of the HKSAR shall be managed and controlled by the government of the HKSAR.

To further enhance the competitiveness of our banks and step up our supervisory efforts, the HKMA commissioned a large-scale consultancy study of the local banking sector. The study was completed in 1998 and the recommendations contained in it are being carefully considered by the HKMA. (E) Hong Kong continues its participation in international financial activities in accordance with the provisions in the Basic Law  BIS Review 39/1999  4  19. The Basic Law provides that the HKSAR may, using the name of “Hong Kong, China”, maintain and develop financial ties with different countries and regions. This includes entering into and implementing multilateral and bilateral financial agreements, setting up overseas official and quasiofficial financial representative offices, and handling external financial relations. 20. Following the handover, Hong Kong has become even more active in the international financial scene. In addition to further developing co-operation with regional central banks, the HKMA has strengthened its ties with multilateral and international financial institutions. In September 1997 the Annual Meetings of the International Monetary Fund/World Bank were staged with great success. As the first major international event in Hong Kong after the handover, the Meetings became an important landmark in Hong Kong’s financial history. In 1996 both HKMA and the PBOC were admitted to the Bank for International Settlements (BIS) in their own right.