samchain/econo-pairs-v1 huggingface dataset:
This is no easy task, because the future cost is unknown and far away, while an ongoing financial market crisis is a clear and present danger. Recent events have clearly shown that moral hazard is not just a textbook phenomenon, but is in fact a serious problem. Market players do indeed rely on the implicit insurance granted by central banks and other authorities, and central banks and authorities, having no choice, do indeed step in to support markets in a crisis. There is no easy way to address the moral hazard problem. However, the right time to tackle it is probably not primarily during a financial crisis, but during the preceding calm. Since a strict declaration of no intervention by a central bank may not be fully credible, regulation must aim to neutralise the distortion of incentives which financial market participants face because of moral hazard. Larger capital and liquidity requirements are probably a robust means of countering that distortion. Larger capital and liquidity requirements do not eliminate moral hazard, but they limit the risk of an accident and thus the cost to the public in the event of a rescue. Related to the moral hazard issue is also the issue of the risk-bearing capacity of a central bank. A central bank can only act as a lender of last resort if it has the means to act as one. This is especially important if the banking system has relatively large liabilities in foreign currency.

While in many other countries the policy rate is an overnight rate, the SNB has an operating target for the 3month Swiss franc LIBOR (London Interbank Offered Rate). Without going into detail, I would like to stress two important points with respect to the transmission from the monetary policy instrument to the economy. First, monetary policy works primarily through financial markets. By setting the policy rate, monetary policy affects exchange rates, interest rates, risk premia and asset prices in general, and is thus  1  This is due, first, to uncertainties about the current state of the economy and its future evolution, and second, to long and variable lags in the transmission from monetary policy to the real economy. Therefore, monetary policy can and should only react to large and persistent deviations from equilibrium. Attempts at fine-tuning the economic cycle may even be counterproductive, in that they are procyclical. 2  Obviously, central banks also have some long-term influence on financial stability, first because of moral hazard induced by actual or expected central bank action, second, by affecting asset prices, and third, due to the involvement of central banks in banking regulation and banking supervision. Furthermore, one can also argue that price stability and economic stability are also conducive to financial stability. 3  To the best of my knowledge, this idea was first put forward by J. Niehans (1978), The Theory of Money, chapter 12, and was designated the “three frequency approach to monetary policy”.
One fundamental factor is that households endeavour to make realistic calculations of how much interest expenditure and amortisation they can manage in the long run, not only when interest rates are as low as they are now. Something that can be said to be the flip side of the same coin is that the banks make responsible credit assessments when lending money. If these two basic components are in place, there is a good chance of avoiding an out-ofcontrol situation further ahead, although as I said before there are many other factors that may be important. Finansinspektionen (the Swedish Financial Supervisory Authority) carries  4  BIS Review 138/2009  out very important work here in that they monitor developments in the banks and credit institutions and are prepared to take action if they consider it necessary. Underlying inflation stable around target of 2 per cent The impact of monetary policy on households’ living costs is something that creates large fluctuations in CPI inflation during the forecast period (Figure 5). The fact that the repo rate has been cut heavily over the past year has contributed to a rapid fall in CPI inflation, as changes in households’ mortgage expenditure are included in this index. With effect from autumn 2010, however, the repo rate is expected to rise relatively quickly, which will correspondingly mean that CPI inflation will be close to 4 per cent at the beginning of 2012.

The mechanism is largely the same for the loans in Swedish kronor at longer maturities, which are offered at the repo rate plus a certain premium. By regulating the premium the Riksbank determines how attractive the loans will be compared to the conditions prevailing in the market. The diagnosis that a measure is no longer needed may be difficult to make. Although, for instance, the demand for a particular type of loan may have disappeared, the fact that there is still a possibility to borrow may have a stabilising effect. We will not be in too much of a hurry. And there are at least two items we need to be able to cross off the list before we begin phasing out the measures. We must be able to say with a good degree of certainty that the situation in the financial sector is stable and that it can function normally without support. We must also be in a situation where we expect to be able to attain the inflation target and stimulate the economy sufficiently without the unconventional measures. 8  BIS Review 138/2009  There are other measures that require more active decisions by the Riksbank to be phased out. For instance, the number of counterparties allowed to participate in fine-tuning operations and the list of securities accepted as eligible collateral for credit from the Riksbank. However, it is not self-evident that these measures will actually be phased out.
The trend of increasing debt among households, combined with a large share of mortgages at variable rates, may also have meant that households’ sensitivity to fluctuations in house prices and interest rates has increased over time. Several international studies imply that a high level of debt in itself can aggravate the negative effects of a fall in house prices on consumption.2 Since we published the inquiry into the risks in the Swedish housing market, house prices have levelled off, and household debt has increased at a slower rate. It is important to remember that this development is probably partly explained by the monetary policy conducted; for instance, the repo rate was raised in connection with the strong recovery after the financial crisis, and as I mentioned, we have taken into account the risks linked to household debt in our repo-rate decisions over the past year. Another possible reason for the slower developments is the mortgage cap, to which I will return later. As household debt in Sweden is still high, and higher than in many of the countries that have suffered major problems, I still consider the risks to be substantial (see Figure 5). 1  See, for instance, Sveriges Riksbank (2011), The Riksbank’s inquiry into risks in the Swedish housing market. 2  See, for instance, IMF (2012), World Economic Outlook, April, and also R. Glick and K.J. Lancing (2010), “Global Household Leverage, House Prices, and Consumption”, Federal Reserve Bank of San Francisco Economic Letter 1.

Monetary policy would then be able to focus fully on the inflation target, while more precise tools could be used to counteract the build-up of financial imbalances. Household debt and housing prices have been taken into account in the repo-rate decisions… Monetary policy in Sweden in recent years can be summarised roughly as follows. The debt crisis in Europe has hampered the conditions for Swedish exports. The Swedish economy has developed relatively well, but there was a clear slowdown towards the end of last year (see Figure 1). Domestic demand showed good resilience for a long time, but has now also begun to weaken. Low cost increases for companies and a stronger krona have also meant that inflationary pressures have declined (see Figure 2). Given this, monetary policy has gradually become more expansionary over the past year, and in December we cut the repo rate even further (see Figure 3). Over the past year, we have also lowered the forecast path for the repo rate. This has been necessary to meet the inflation target and support economic activity. But in our monetary policy we have also given some consideration to household debt and housing prices – and for good reason, in my opinion. Let me explain this in more detail. …as there are considerable risks The financial crisis has made the risks linked to the housing market and high household debt crystal clear. The most well-known examples are the United States, Ireland and Spain.
I could also see signs of stabilisation in important forward-looking indicators, particularly orders in the purchasing managers’ index. However, the picture is not clear-cut and never is when economic activity is in the balance. But, as I mentioned at the meeting, if the signs of stabilisation become clearer they may affect the mood more permanently, not least on the stock market. This can in its turn have a positive effect on households’ undermined wealth and help increase consumption. Further ahead it may be possible to reinforce a positive cycle and for investment to pick up. I also mentioned that a large part of the economic policy stimulation, particularly investments in the US infrastructure, would have its greatest effect in 2010. Having said this, I would like to point out, as I did in the discussion at our most recent monetary policy meeting, that it might very well be the case that the signs of stabilisation I mentioned then were delusive. And it is definitely not the case that I fail to see the  4  BIS Review 73/2009  seriousness of the economic downturn we are in. Nevertheless, the recovery could as I have said be quicker or slower than expected. Inflation outlook may change quickly Falling resource utilisation and inflationary pressures have meant that we could conduct a strong, expansionary monetary policy to alleviate the effects of the economic downturn and at the same time ensure that inflation does not undershoot the target very far.

This outturn was attributed to the decline in both annual food and non-food inflation. BIS Review 57/2010  1  In the external sector, Zambia’s external position showed remarkable improvement as reflected in the build-up of gross international reserves to 5.1 months of import cover in 2009 from 2.1 months of import cover in 2008. Zambia’s overall balance of payment position is expected to remain favourable in 2010 due to the rebound of copper prices on the international market as well as the expected increase in copper production as some mines increase production to full capacity and the resumption of production at some mines. The rebound in the international price of copper in the second half of 2009 and the return of foreign portfolio flows resulted in an appreciation of the exchange rate of the Kwacha by 4% at the end of the year. However, fiscal performance in 2009 was weak, mainly due to the global economic crisis, which reduced domestic revenues. Despite this, Government remained within the programmed domestic financing for the year. Ladies and Gentlemen, the financial sector has remained resilient despite the adverse effects of the recent global financial crisis. Currently, the Zambian financial sector is characterised by high liquidity levels, reflecting tighter lending standards in the wake of the lessons from the global financial crisis leading to marked decline in private sector lending. As a result, the demand for the relatively risk free Government securities has increased causing a decline in yield rates on Government securities.
The restraining influence of low economic activity will begin to fully impact inflation dynamics in the second half of 2015. By this time, the effect of temporary factors, such as the depreciation of the ruble and foreign trade restrictions that have led to acceleration in consumer prices growth, will be exhausted. As we have already noted, inflation will reach its peak in 2015 Q2, and afterwards it is forecast to fall. In March 2016, inflation will approximate to 9% before falling down to 4% in the medium run. Such inflation dynamics will be accompanied by economic recovery. The bottom of economic recession is expected in 2016 Q1, later on the economy will start growing on a quarterly basis. By that time the initial adjustment of the economy to the new environment will be over. Higher global oil prices, the economic recovery of trade partner countries, and the formation  BIS central bankers’ speeches  3  of new sources of financing will also contribute to this growth. In 2017, economic recovery is expected to exceed 6%. We shall continue to regularly update our forecast by monitoring movements of a wide range of indicators taking into account not only annual inflation dynamics, but also quarterly, monthly and weekly ones. If new pro-inflationary factors do not appear and inflation decelerates according to our forecast, we shall continue cutting the key rate.

It should be noted, that under existing circumstances, this effect will be reinforced by accumulated high consumer debt level of certain households. 2  BIS central bankers’ speeches  Decline in investment activities is driven not only by reduced profits and lower accessibility of other financial resources, but primarily by high uncertainty with regard to future economic development. It is expected to be the highest in industries which have not benefited from the ruble depreciation and which suffer from increased debt burden. For reference: According to forecasts, household final consumption expenditure will fall by 5.5–5,7% and 1,5-2% in 2015 and 2016. Fixed capital investment will decrease by an estimated 10–12% and 0,5-1,5% respectively. As for the labour market situation, we do not expect any considerable increase in the unemployment numbers in comparison with the existing level. This is due to both the demographic factors and the specifics of the Russian labour market which normally adjusts through changes in wages and partial employment, rather than by changes in the number of those employed. For reference: According to our estimates, the unemployment will not exceed 6.0%-6.2% in two coming years. In comparison with December, we revised the balance of payment forecast. The expected fall in imports saw the most considerable change (almost by 30% in 2015 compared with 2014 instead of previous estimate of 10%). Therefore, the current account surplus estimate has been revised upward to 64 billion US dollars in 2015 and to 90 billion US dollars in 2016.
Mr. Erçel reports on medium and long-term prospects for the Central Bank of the Republic of Turkey Address by the Governor of the Central Bank of the Republic of Turkey, Mr. Gazi Erçel, before the 66th Shareholders’ General Meeting, in Ankara, on 28/4/98. A detailed account of economic developments during 1997 is given in our annual report for that year which has already been delivered to you. We are keeping the public informed of our expectations for this year through the quarterly announcements of our monetary programme. Today, instead of repeating these short-term perspectives, I would like to speak of the medium and long-term prospects of the Central Bank. For the last two years, my discourse has touched on what kind of institution an ideal central bank should be. Today, I want to consider this matter in a more detailed way. In recent years, there has been a worldwide trend towards simplification of the goals of central banking. This has led to a reduction of the responsibilities they take on. Funding their governments, for example, is no longer the main purpose of central banks. There is none among the western central banks that aims at achieving full employment of the highest level of production. Today’s modern central banks have only one aim: to maintain price stability.

It is not surprising that the Central Bank of Turkey, one of the most important institutions of the Turkish economy, which hopes to become integrated with the western economies, is affected by these trends in modern central banking as it maps out its medium and long-term strategies. Accordingly, the main goal of the Central Bank of Turkey, like that of other central banks, should be to maintain the stability of prices in the economy. At this stage I would like to clear up two points with respect to the price stability target. First, the Central Bank’s price stability target and its responsibility for price stability are two different issues. The price stability target assumes a stability which exists under conditions of low inflation. Therefore, the economy has to undergo a “ disinflationary process” before the Central Bank assumes responsibility for price stability. It is well known that in Turkey, which has been experiencing high inflation for years, reducing inflation to the levels of the western economies will require a comprehensive effort and is not a process which can be accomplished by the Central Bank alone. The Central Bank can track the price stability target as a part of the larger disinflationary programme. I believe that once low inflation rates have been achieved by means of such a programme, it will be a rational decision to make the Central Bank responsible for maintaining price stability. The second point I want to stress concerning the price stability target concerns microeconomic functions of central banks.
Through a potentially much greater contribution from Islamic finance, progressed by our discussions and learnings today, we can better achieve the G20 Indonesian Presidency aim to "recover together, recover stronger". I would like to thank Zish Jooma, Amy Lee and Rupal Patel for their help in preparing the text and Arshadur Rahman, Timothy Rawlings and Christopher Worthington for their comments and contributions. 4/5  BIS - Central bankers' speeches  1 I am indebted to my colleague Andrew Hauser for this speech reference, which was  included in his December 2020 speech 'Why Islamic finance has an important role to play in supporting the recovery from Covid – and how the Bank of England's new Alternative Liquidity Facility can help', at the launch of the ALF. 2 International Energy Agency (2021), World Energy Outlook 2021 3 Glasgow Financial Alliance for Net Zero, GFANZ (2022), Financial Institution Net-zero  Transition Plans 4 Rahman, A. (2018) Chapter 9: The Case for GDP-linked sukuk. In Shiller, R, et al.,  Sovereign GDP-linked bonds: Rationale and design(pp. 79-88), CEPR Press, London. 5 Fitch Ratings (2022), Special Report: Global ESG Sukuk Market 6 Refinitiv (2022), Sukuk Perceptions and Forecast Study 2022: Navigating a New  Environment  5/5  BIS - Central bankers' speeches

Zeti Akhtar Aziz: Islamic finance in a challenging economy – moving forward Opening address by Dr Zeti Akhtar Aziz, Governor of the Central Bank of Malaysia, at the 2nd International Shari’ah Research Academy for Islamic Finance (ISRA) Colloquium 2012 “Islamic finance in a challenging economy – moving forward”, Kuala Lumpur, 27 November 2012. *  *  *  Islamic finance has experienced its most rapid pace of development and growth in this decade, signifying its dynamism and resilience as a form of financial intermediation. This has taken place in a highly challenging international financial and economic environment. It is estimated that the global Islamic finance industry will remain on this growth trajectory, with the continued expansion of Islamic financial institutions, including in new jurisdictions, and with the growing significance of financial markets in the Islamic financial system. Increased liberalisation and greater foreign participation in the Islamic financial markets are reinforcing this trend and resulting in increased cross border financial flows. This is contributing to increased international financial and economic linkages between nations, particularly among emerging economies. During the recent global financial crisis and its aftermath, the international financial system has experienced a series of unprecedented financial meltdowns and disruptions. During this period, the Islamic financial industry has generally weathered these challenging financial and economic conditions. In relation to this, Islamic finance highlights the importance of basic banking and the need to have a clear separation from higher risk-taking activities.
Chart 10: Equity and bond yields moved  Chart 11: Negatively correlated in recent years  together during the 1990s  Source: Thomson Reuters Datastream  Source: Thomson Reuters Datastream  What might have caused this? In principle, the gap between the yields on equities and bonds depends positively on the risk premium and negatively on expected growth. So you’d expect this divergent pattern if investors revise down their central expectation of future growth, or if they see more risks (particularly downside risks) around that path. Collectively, you might refer to the sorts of things that benefit bonds and penalise equities as “pessimism” shocks. As I attempted to explain in a talk a couple of years ago, a rising downside skew to the perceived prospects for global growth could help to explain not just the divergence in yields but more specifically why it’s occurred via a decline in the real interest rate (Chart 12). 9  This is true if you think of the deficit in proportionate terms (i.e. relative to the value of the fund). It’s also true in absolute terms if a fund is in balance to begin with. It’s not true, however, of the absolute value of the deficit for a fund that begins in deficit. In that case, and measured in absolute terms, deficits would grow in response to a uniform rise in all prices.

We have been getting more and more dependent on electricity incrementally, in small steps, for many, many years now. So an electricity blackout now – in 2016 – would cause more harm and damage than it would have done say forty or fifty years ago, as many more devices, processes and productions are partially, or even fully, dependent on a continuous supply of electricity. And this continuous supply in turn incentivises the use of electricity as a tool of production and a source of power for various devices etc. This phenomenon of incrementally increasing dependence is also typical for financial services, or the banking sector as such, due both to state regulation (such as compulsory cashless transfers above certain thresholds) and to the markets and technological progress (such as credit cards, smooth money transfers, contactless payments etc.) All this is happening on-line in small steps, incrementally, and all this means banks might in bad times be seen as utilities, much less resolvable due to the complex services they provide, than in the past. And the complexity of the services of a utility is sometimes visible only very shortly before its potential collapse. So “utilities” providing products with incrementally increasing dependence will be able to exit the market in a much more complicated way, if at all. The same applies to the financial sector, all the more so if we go down the road to a lesscash economy (which is, of course, a slightly different concept than a cashless economy.