samchain/econo-pairs-v1 huggingface dataset:
First, the international economic outlook has deteriorated markedly, impacting heavily on forecasts for the Swiss economy. Second, the financial market crisis has intensified since midSeptember. Finally, prices for raw materials and oil have plummeted and this, combined with the worsening of the economic outlook, has led to a marked improvement in the inflation outlook. I will deal with these three points in turn. Global economic outlook In September, our main focus was the possibility of sharply contracting growth in the most advanced economies. Now, we know that economic activity will decline simultaneously in the US and Europe, while it will slow appreciably in emerging economies. Whether one can call this a recession or not depends on the definition used, and is now merely a question of semantics. In the US, GDP is likely to decline substantially during the current quarter, following its slight contraction in the third quarter. Industrial production, which had hitherto been remarkably stable, fell sharply by 4% between July and October. Moreover, unemployment, which had also been stable for some time, rose rapidly, reaching 6.7% in November – a level not seen since 1994. The sudden worsening of the situation is above all due to the fall in household spending. Households saw their financial situation deteriorate sharply due to the loss in value of their real estate and financial assets, while also suffering – until recently – a progressive erosion of their purchasing power through the continuous rise in fuel prices.

By contrast, the inflation outlook has improved appreciably. This has increased the SNB’s room for manoeuvre. Finally, there is a risk that the financial crisis will cause a deterioration in financing conditions for the economy as a whole. These are the considerations that have prompted today’s decision to cut the three-month Libor target range by another 50 basis points. Given the expected deterioration in the Swiss economy and the imponderables linked to the long and variable monetary policy transmission lags, a further rate cut appears appropriate. With this action we are reducing, to the extent possible, the risk of an even more pronounced economic downturn. Inflation forecast chart How has our inflation forecast been revised? The dashed red curve on the chart represents the new forecast. It covers the period from the fourth quarter of 2008 to the third quarter of 2011, and maps the future development of inflation on the assumption that the three-month Libor remains unchanged at 0.5% over the forecasting period. For purposes of comparison, the dash-dotted green curve shows the inflation forecast of the September monetary assessment, based on a three-month Libor of 2.75%. The new forecast shows a rapid fall in inflation over the next few quarters. It drops back below the 2% mark as from the fourth quarter of this year.
As to liquidity risk, the fact that depositors prefer shorter terms, while investors, driven by expectations of high inflation and uncertainty, prefer longer terms, has caused a mismatching of the maturity structures of the assets and liabilities of the banking sector. As a result, banks become more vulnerable to liquidity risk. Financial distress and global financial crisis were the main ingredients of the conjuncture of 1998. Following scattered failures in the emerging financial environment, almost all emerging economies began to be treated as risky, due to growing uncertainty about the near-term outlook for the financial markets. In this situation, international investors became more cautious about investing in the emerging markets and became reluctant to provide them with credit. Turkish banks slowed their disbursements of credit, preferring to be liquid in the marketplace. We also checked using different ratios for the liquidity in the system. Interest rate risk is another important form of systemic risk. Since the maturity structure of interest-sensitive liabilities in the Turkish banking system tends to favor the relatively shorter maturity segments, external funds are repriced at shorter intervals than assets. This mismatch in the pricing structure at various periods increases the sensitivity of assets and liabilities to changes in interest rates. Banks manage the degree of interest rate risk to which they are exposed during times of rising interest rates by converting their low interest bearing securities into high interest bearing securities by means of repurchase transactions. Interest rate swaps and some other derivative instruments are also used to hedge interest rate risk.

This step was necessary at this time to stop the turmoil in Turkey’s financial markets and calm depositors’ nerves. Now, as we all know, the 100 percent coverage may subject both bankers and depositors to moral hazard in the form of willingness to take greater risks to earn higher returns. Depositors may encounter moral hazard when they ignore greater risks associated with their choice of a depository institution which offers them higher rates for their deposits. But even though all the drawbacks of the present system of deposit protection are well known, current conditions in the world financial environment and their effects on the Turkish financial system have prevented us from making the necessary changes in the existing deposit insurance scheme just now. Once we manage to stabilise the macroeconomic environment, we will be able to reduce the 100 percent coverage to internationally acceptable levels. BIS Review 31/1999  4  How a powerful and effective supervision could be implemented for the Turkish banking system was foreseen many years ago. The system in effect during the 1930s had revealed its inadequacies, but the first step was not taken until 1959 with the establishment of the Board of Sworn Bank Auditors. The system was first applied to the Turkish economy under the direction of the Ministry of Finance. The Board recruited many valuable employees, trained them, and gained the power to supervise the system.
I have also noted that by 1996 net interest payments on the external debt had dropped to 6.7 as a percentage of exports of goods and services. The comparable figures were 12% in 1994 and as high as 17% in 1990. It is useful to point out that the sizeable decline of the net external debt was made possible by the substantial decline of the public sector deficit from 8.2% of GDP in 1994 to 4% in 1996, while at the same time the share of public sector expenditure in GDP declined from 62% to a more bearable 51%. “Growing out” of the debt service burden is no longer wishful thinking. It is beginning to become a reality. 4. The fact I find most noteworthy is that the $ billion switch of resources towards external use, amounting to some 7% of GDP, took place without a recession, which is unusual for such a large switch. It was even accompanied by a small increase in GDP. This would not have been possible without the fast growth of exports. The remarkable growth of labour productivity in industry - of close to 60% between 1992 and 1996 - played a major role in this respect. This growth, together with the changing composition of exports, suggests that the structural transformation of the Hungarian economy has gone quite far. The growth of net services exports points in the same direction. 5. So much for the bright side of the picture, which is a good thing but should not be overstated.

CHALLENGES FOR THE HUNGARIAN BANKS As I said right at the outset, it is now time to look ahead and begin to address some major issues for the Hungarian banks - issues which, thanks to the progress made over the past few years, are no longer totally dissimilar from those facing banks in western Europe. I intend to make a few comments on these, since they are issues on which I can possibly throw some light on the basis of my own professional experience. 1. The first is about the specificity of banking, i.e. about the possibility or desirability of clearly distinguishing banks, through rules and regulations, from other financial intermediaries. I noted that the recent changes in Hungarian banking law have implied a movement towards the de-specialisation of banks, notably in the field of securities transactions. I believe that a development towards the universal banking model is justified - on certain conditions. It is justified for two groups of reasons. First, because financial innovation in general, and securitisation in particular, are breaking down the traditionally neat distinction between banks and other financial intermediaries, indeed even between financial intermediation and financial markets, all over the world. Some time ago, banks were defined as financial intermediaries whose liabilities (mainly sight and short-term deposits) were equivalent to the money supply, and the money supply was defined as the total sum of bank liabilities.
The target set in the draft State Budget for 2008 for the general government surplus is 1.15%, in a macroeconomic scenario characterised by a mild slowdown in GDP. The projected decrease in the surplus is based essentially on tax cuts mainly affecting personal and corporate income tax, whereas on the spending side the draft Budget sets a growth rate for the State in line with expected nominal GDP growth. This entails strict compliance with the ceiling established in the Budget Stability Law in June. In any event, it should be kept in mind that the Budget is based on a projection for end-2007 that is very prudent on the revenue side. The strong buoyancy of receipts in the year to date, particularly in direct taxes, might enable the latest official projection of the surplus for 2007 to be exceeded. Should this occur, under a macroeconomic scenario similar to that assumed in the Budget, this improved result in 2007 should be carried over to the budget for 2008 and thus enable another surplus in excess of projections. What is most important is that, as in previous years, the additional revenue that may arise should not lead to increased spending, but rather to a higher surplus. Regarding the size of the budget surplus, I wish to underline that the current situation of public finances is, in part, temporary.

Miguel Fernández Ordóñez: Recent developments in the Spanish economy Testimony of Mr Miguel Fernández Ordóñez, Governor of the Bank of Spain, to the Parliamentary Budget Committee, Madrid, 9 October 2007. *  *  *  Ladies and gentlemen, My appearance before this Committee as part of the Parliamentary discussion of the State budget for 2008 comes at a time when shocks are still reverberating through some of the major international financial markets, and the attendant uncertainty inevitably bears on the analysis of the economic situation. In my appearance before the Parliamentary Committee on Financial Affairs on 17 September, I examined in detail the origin and the main implications for ECB monetary policy and for the Spanish economy of these shocks, which emerged last summer against a background of marked momentum of the economy and of world trade. A significant part of this dynamism – reflected in growth rates above 5% for world output and above 6% for trade – derives from the sound performance of the emerging economies in recent years; indeed, they seem to have been less affected by the shocks than the more developed Western economies. This is, in fact, a significant feature of the present bout of turbulence which, if I may briefly recall, originated in a financial market of a developed country (the US sub-prime mortgage market).
If a credit squeeze were to occur, it would become a recession amplifier, as on other occasions, pulling the economy out of its expected trajectory. This would create greater demands on monetary policy, which may or may not be possible to satisfy. 6  The Board will continue to apply a highly expansionary monetary policy, keeping the Monetary Policy Rate at its technical minimum for an extended time span, complemented by unconventional measures, and will keep a watchful eye to prevent risks to financial stability. III. Central Bank of Chile — Advances and Challenges  The Central Bank of Chile’s LOC establishes the obligation to present to the Senate, on or before September 30th of each year, “an appraisal of the advancement of the policies and programs of the current year, as well as a report on those proposed for the next calendar year, which shall state the general economic projections on which they are based and the effects that may occur on the main entries of the Bank’s financial statements projected for that period” 2. For some time now, this has translated in more than just submitting the September MP Report to the full Senate, introducing issues related to the Bank’s performance as a state-run organization. Thus, in the two previous MP Reports we have included our 2018-2022 Strategic Plan and the external evaluation to the policies implemented by the Bank.

Several of these measures have had an impact on the Bank’s assets, either by reducing them (sale of foreign currency) or increasing them (purchase of bonds and loans to commercial banks). The adjustments on the asset side have counterparts on the liabilities side, either by active measures (repurchase of long-term bonds from the Central Bank), or by monetary sterilization or liquidity absorption, or finally, to respond to changes in the demand for cash. The net effect of these operations and portfolio revaluations has an impact on the Bank’s net worth. On aggregate, these operations have involved an 86% growth in the balance sheet in one year, the equivalent of almost 10 points of GDP. At the same time, there have been significant changes in the composition of the balance 6 For further detail on these measures, their operating margins and effective execution, visit https://www.bcentral.cl/web/banco-  central/medidas-excepcionales. 8  sheet (Figure 16). Now the Bank records on the assets side internal credit items (FCIC-LCL) and local securities. The latter yield more than international reserves, although with a somewhat higher credit risk compared to the sovereign securities that make up the former. On the liabilities side, the counterpart has implied an increase in short-term debt placements (PDBC) and the use of permanent facilities that drain the system’s excess liquidity. There has also been an increase in the monetary base, explained by an increased cash demand from the population.
As its influence on the economy is subject to a time-lag, monetary policy has to be conducted in a forward-looking manner. Consequently, forecasts play a decisive role in analyses and decision-making. At the same time, the exchange rate, like other prices set on financial markets, is very difficult to forecast.11 Nevertheless, due to its significance for the development of small, open economies such as Sweden’s, it is important to form an understanding of exchange rate developments. The Riksbank tries to analyse and forecast the development of the trade-weighted exchange rate, which is to say the value of the Swedish krona against a basket of the currencies of Sweden’s most important trading partners. Due to the volatile nature of the exchange rate, no attempts are made to capture short-term variations in it. Instead, the focus lies on the more long-term trend. The starting point for this a statistical model in which the real exchange rate is related to relative GDP, the terms of trade and net foreign assets.12 However, the final forecast for the exchange rate considers the fact that the exchange rate both influences and is influenced by a multitude of other variables, including the interest rate differential in relation to other countries.13  10  See, for example, Ekholm et al. (2008). Pressure on firms to improve productivity can be seen as a positive aspect of a strong real exchange rate. A weak real exchange rate is otherwise frequently seen as being advantageous for a country as it benefits its exporting firms.

This is probably ascribable to cyclical divergence more so than a divergence in assessments and response patterns. In recent years, many of our trading partners have pursued an accommodative monetary policy with the aim of preventing the downturn from becoming deeper and longer and staving off falling inflation expectations. In the euro area and the US, low interest rates have probably contributed to improving the balance sheets of banks, households and firms. Financial stability considerations have thus pulled in the same direction as inflation and employment considerations. This may change as the economic outlook changes. As the Chair of the Federal Reserve, Janet L. Yellen, put it: “There may be times when an adjustment in monetary policy may be appropriate to ameliorate emerging risk to financial stability.”6 The quote reflects to a large extent the assessments we have made in Norway in recent years. In order to illustrate this, we can construct a simple analytical framework. Chart: Framework The point of departure is a central bank with a flexible inflation targeting regime. The central bank weighs deviation from the inflation target against deviations from potential output. The future paths for inflation and output are included in the assessment. We have included a variable that captures the transmission of financial stress to the wider economy. This framework thus differs from the normal one presented in the monetary policy literature. In the stylised model, we have called this stress impulse zt. First, the size of the effect on the real economy depends on the level of financial stress.
It is essential to realise that for the most part, the financial system is not an end in itself but a means to an end and the measure of the success of the financial system must relate to its success in accomplishing broader societal functions. Innovations in the financial system that help it perform these tasks better and at lower cost almost surely lead to increased societal well-being, and to the extent that our GDP measures capture these benefits, in higher measured growth. Notwithstanding the benefits of innovation, it is important to note that the opening up to new activities and products, particularly the expansion of the credit portfolio, brings in a myriad of new risks associated with the new activities. Studies have shown that increasing financial innovation and deepening of financial markets brings with it challenges and risks, which if not well addressed, can threaten the health of the financial system and may cause havoc to the stability of a financial system. 2  BIS central bankers’ speeches  4.0  The role of the Bank of Zambia in promoting innovation and competition  The Bank of Zambia (BoZ) acknowledges that a stable, sound and efficient financial sector has to be underpinned by infrastructure development. The BoZ achieves this by creating an enabling environment through the legal and regulatory frameworks that promote financial systems stability and development.

And, of course, our interest in low and stable inflation is not just to create Monetary Stability but more widely to create a stable macroeconomic environment in which firms of all sizes have the confidence to plan ahead with some certainty. Thus there is a strong overlap between our monetary role and our second core purpose, which is to ensure that the financial system remains stable and sound. Our MOU with the Treasury and the FSA provides us with a responsibility for the financial system as a whole, requiring us to look for possible shocks, emanating internally or from overseas, that might disrupt the stability of financial markets. The third of our core purposes is to ensure that the UK financial system works as efficiently and effectively as possible in meeting the needs of the wider economy. One dimension of this is to try to ensure that small and medium-sized businesses in the UK can obtain funding on a competitive basis. In creating an entrepreneurial economy, small companies continue to be one of the vital engines of innovation and growth. The background environment Today you will have heard a great deal about what underpins an entrepreneurial economy. It involves both the public and private sectors, and most importantly successful partnership between the two. A prime example of this is the nurturing of an enterprise culture through an alliance of the higher education system with initiatives, like business incubation, which often involve the private sector.
I’ll begin with an overview of the market’s basic structure, including some historical perspective on how that structure has evolved over time. I’ll then turn more specifically to the subject of electronic and automated trading – a topic that has become increasingly important across many markets, including the market for U.S. Treasuries. I will then review the intraday volatility witnessed on October 15 of last year. As you all know, October 15 was a highly unusual day in the Treasury market, particularly given the very sharp round-trip in yields that took place mid-morning with no obvious immediate trigger. I will conclude with a few words on the updated best practice recommendations from the Treasury Market Practices Group (TMPG) in light of the changing market structure, and some observations on how you, as primary dealers, are expected to help promote the market’s efficiency and integrity. As always, the views I express are mine alone and do not necessarily reflect those of the Federal Reserve Bank of New York or the Federal Reserve System. Background The Treasury market is the largest and most liquid sovereign debt market in the world. There are about $ trillion in marketable securities outstanding, and primary dealers trade an average of around $ billion every day with their clients and with other parties.2 Treasury securities play a variety of roles in the U.S. economy. They are, of course, the federal government’s primary vehicle for financing the federal deficit and refinancing maturing debt.

Zeti Akhtar Aziz: The development of Islamic finance Welcoming address by Dr Zeti Akhtar Aziz, Governor of the Central Bank of Malaysia, at the Global Islamic Finance Forum 2010, Kuala Lumpur, 25 October 2010. *  *  *  These are defining moments in the development of Islamic finance. In this current global economic environment of extraordinary challenges and uncertainties, Islamic finance is becoming very much a part of the journey to bring the world towards a new level of stability, prosperity and international integration that is inclusive. Whilst Islamic finance has come a long way and is set to continue its growth trajectory, new capabilities and strategies are needed to tap the immense opportunities from the growing internationalization of Islamic finance. It is my great pleasure and honour to welcome you this morning to this Global Islamic Finance Forum (GIFF) 2010. Allow me to express our gratitude to Duli Yang Teramat Mulia Raja Dr. Nazrin ibni Sultan Azlan Shah for gracing and addressing our gathering today, and to the Honourable Prime Minister of Malaysia, Yang Amat Berhormat Dato’ Sri Mohd Najib bin Tun Haji Abdul Razak for officiating this important forum. Since the dawn of this 21st century, Islamic finance has undergone the most dramatic transformation to its landscape. This period in the history of Islamic finance is remarkable for its many significant milestones and for the rapid growth that has been sustained.