samchain/econo-pairs-v1 huggingface dataset:
Since the compilation of report, moreover, the political reasons for participating from the start have grown in that more countries than expected will now be members from the beginning. 2. The euro’s stability The euro will exist as an account-based currency as of next January. While banknotes and coins denominated in euro will not yet be in circulation, it will be possible to make transactions in euro. So what will be the euro’s role in currency markets? Will it be stable? And will it compete with the dollar as an international reserve currency? As we all know, predicting exchange rate movements is difficult. In general, one can say that a currency’s nominal exchange rate is determined by the real exchange rate together with differences in inflation with the rest of the world. A currency’s real exchange rate can be described as the price of goods and services in that country relative to the rest of the world. If a difference in inflation grows, a corresponding depreciation of the currency is needed to keep the real exchange rate stable. The current exchange rate is also influenced by expectations of future rates. The credibility of economic policy’s commitment to long-term price stability is thus important for exchange rate tendencies. The value of a currency is also susceptible to influences of a more temporary nature. Cyclical factors may play a part. When the economy is in an upward phase, a country may need a tighter monetary policy, which normally leads to an appreciation of its currency.

The members of the Council are jointly responsible for making the ECB a success and establishing price stability in the euro area. In this sense they are all in the same boat and nothing is more likely to capsize the boat that a national preference. That, I believe, will characterise what happens in practice. In any event, a distinct, transparent policy right from the start is vital in order to avoid unnecessary uncertainty that could result in exaggerated movements in exchange rates and interest rates. Other components of economic policy  BIS Review 68/1998  -4-  In the long term it is the construction of monetary policy that determines the rate of inflation. In the shorter run, however, price movements are also influenced by other economic factors. Other components of economic policy - that is, fiscal, labour-market and structural policies - therefore have to be constructed so that they support the policy drive for sustainable price stability. If these components do not work, the burden on monetary policy becomes additionally heavy. Economic policy apart from monetary policy will continue to be a national matter in the euro area, even though it is the subject of agreements at Community level. Fiscal policy will still be constructed by the national governments, though to some extent its scope is restricted by the Stability and Growth Pact, to which all the EU countries subscribe. This Pact requires each country to conduct a responsible fiscal policy, defined as achieving a general government budgetary balance or surplus over the medium term.
A longer time horizon can contribute to clarifying monetary policy considerations and thereby enable us to better explain the way we work. If, for example, we see that inflation is slightly above two per cent at the end of the forecast horizon, our policy rule says that we should raise the repo rate to hold back demand and thereby inflation. However, if demand nevertheless falls and inflation beyond the forecast horizon is below the two per cent level, the conclusion is not so obvious. Then it may be time to discuss lowering the interest rate. Extending the forecast horizon may in some situations explain why increased flexibility is needed in monetary policy. These are some reflections on the time aspect and the monetary policy operational framework. However, there are also other important factors indicating that the inflation target and the policy rule must be interpreted with a measure of flexibility. It is easy to have a blind faith in monetary policy’s scope for economic fine tuning, but we should be sceptical of this for at least two reasons. One is that our forecasts and other reports on which the interest rate decisions are based contain a large measure of uncertainty, because of gaps in statistics, information lags regarding economic trends, incomplete knowledge of how companies and households will react and structural changes, such as increased globalisation. Reactions to monetary policy may also vary considerably over time, partly, but not completely, due to economic activity.

Prasarn Trairatvorakul: Global challenges, global solutions – IMFC issues Statement by Dr Prasarn Trairatvorakul, Governor of the Bank of Thailand, at the International Monetary and Financial Committee (IMFC) Twenty-Third Meeting, International Monetary Fund, Washington DC, 16 April 2011. * * * On behalf of Brunei Darussalam, Cambodia, Fiji, Indonesia, Lao P.D.R., Malaysia, Myanmar, Nepal, Philippines, Singapore, Thailand, Tonga and Vietnam. Introduction 1. We thank Mr. Youssef Boutros-Ghali for his contributions to the IMFC, especially his leadership in completing the 2010 Quota and Governance reform. We congratulate Minister Tharman Shanmugaratnam on his appointment as the new Chairman. With his rich experience in understanding the interests of advanced and emerging market countries, we have full confidence that Minister Tharman will be able to make significant progress in fostering a global consensus on many challenging policy issues. 2. Although the global recovery has gained strength since the last IMFC meeting, its prospect remains fragile as several downside risks continue to prevail. Having been successful in coordinating policies to contain the catastrophic damage from the global financial crisis, policymakers are now facing a more difficult task in forging a consensus on multilateral commitments for countries to take into account the impact of their policies on other members and the international monetary system (IMS). Such an agreement will not be easy to reach against the current backdrop of a multi-speed recovery and asymmetry in domestic policy requirements.
4  BIS Review 40/2008  Table II Access to Finance – 2006 Indicator  Pakistan  Bangladesh  India  Nepal  Demographic branch penetration (branches per 100,000 people)  4.73  6.37  1.73  4.96  7.69  9-28  Demographic ATM penetration (ATMs per 100,000 people)  0.29  1.93  0.28  1.25  5.67  39-167  Deposit accounts per 1,000 people  255.23  442.87  110.40  171.14  1117.82  976-2418  Loan accounts per 1,000 people  61.11  78.00  10.83  31.78  364.22  248-776  Geographic branch penetration (branches per 1000 sq. km.) 44.53  23.46  2.97  9.67  15.81  1-57  2.71  7.11  0.48  2.44  11.65  3-252  Access to Finance  Geographic ATM penetration (ATMs per 1000 sq. km.) Sri Lanka  Benchmark  Source: Getting Finance in South Asia Phase IV – 2008 World Bank  Visible areas of financial exclusion Financial exclusion and denial of access to credit exists in two clear areas, in particular, in formal credit markets and the payment system. According to available data, in Sri Lanka, at least 40 per cent of the farm households do not have access to formal sources of credit or bank accounts. The reliability of this number depends on the type of survey done and the source of information. Nevertheless, it is a significant number to work with.

Following the efforts made by the Central Bank of Sri Lanka, cheques/bank drafts are now being cleared on t+1 or t+2 in most parts of the country, and that has clearly enhanced access to finance through retail transactions. The receipt of remittances through non-bank sources or various money transfer systems has also been enhanced following  BIS Review 40/2008  5  countrywide IT and payment system advancements. In more recent years, therefore, financial exclusion in Sri Lanka has been greatly reduced. Initiatives for financial inclusion of women There are some initiatives taken, not only by Sri Lanka, but also in the South Asian region towards financial inclusion. By 2005, micro finance institutions covered at least 35mn of some 270mn people in the South Asian region and met around 15% of the overall credit requirements of low-income families. In Sri Lanka, the coverage is particularly high at 60%. The high outreach in Sri Lanka is based on an extensive network of community-based organizations that receive considerable government subsidies. Almost all rural financial institutions in Sri Lanka have provided easy access to women, particularly in the villages, estates and among fishing communities. Financial institutions that are directly involved in this area, are the licensed commercial banks, licensed specialized banks, micro finance institutions, cooperative rural banks, the SANASA Thrift and Credit Cooperative Movement, SEEDS and other non-governmental organizations.
Annual securitisation is about 3 trillion US dollars a year in the US and about 500 billion euro in Europe. In both areas, mortgage-backed securities account for the bulk of the total. With respect to credit risk transfer instruments, the increase in the notional value of global credit default swaps has been phenomenal, from 90 billion US dollars in 2001 to 34 trillion US dollars in 2006. Over the same period, the share of credit default swaps in the overall derivatives market increased from 1 to 11% [Chart 10]. Collateralised debt obligations (CDOs) are another major type of security used to transfer credit risk. The global issuance of CDOs more than tripled between 2004 and 2006 [Chart 10]. One prominent feature of the development of the financial system is that it has become much more “leveraged”, as indicated by the ratio of total monetary and financial assets relative to the monetary base (central bank money). Financial globalisation and economic growth What have been the effects of financial globalisation and development on the efficiency and stability of the financial system, on trend economic growth and on output and financial market volatility? Let me first examine the impact on efficiency, growth and output volatility. The available empirical evidence supports the view that the development of the financial sector, as measured by financial market size and other indicators of its features and sophistication, has had positive effects on the efficient functioning of product markets and has fostered (total factor) productivity gains and output growth.

However, it is difficult to evaluate the extent of these structural changes and to gauge how quickly their impact will be felt on medium-term growth, particularly at an early stage. In addition to the specific factors resulting from the introduction of the euro, the rapid change in information and communication technology is likely to add further potential for structural changes in the economy. The possible emergence of a "New Economy" may raise the economy's productive capacity temporarily or on a more permanent basis. Much faster data transfer and the increased transparency of information in a knowledge-based society could enhance efficiency. Even if some of the euphoria surrounding the start of a new economic era has dissipated, as could be seen in stock market developments over the last few months, there remains a remarkable potential for economic change in the future. To date, however, clear evidence of positive effects on the supply side, which may lead to a temporary or even permanent higher potential output growth, is still lacking for the euro area. In addition, it should be borne in mind that the expectation of higher growth and positive wealth effects may also lead to inflationary pressures from the demand side of the economy. Therefore, the implications of the "New Economy" for monetary policy are far from clear. Monetary policy-makers, whose aim is to maintain price stability, need to exercise particular caution in such an environment of change.
Our central projection was for inflation to continue to rise during the second half of this year to a peak close to 4% and then – assuming that oil prices stabilised – to fall back towards the 2% target as the growing margin of spare capacity in the economy held back pay and price increases. Since May, inflation has turned out higher than expected and oil prices have risen further, notwithstanding some moderation in the past week or so. But the news on activity has not been very good either, with some distinctly downbeat business surveys, including yesterday’s Industrial Trends survey, further weakening in the housing market and continued fragility in the financial sector. All this points to a worse near-term prospect for both growth and inflation. The net impact of this on the outlook for inflation in the medium term is less clear, though for our considered view on that, you will have to wait until our August Inflation Report is published in a couple of weeks time. 6  BIS Review 95/2008  Moreover, there are considerable risks surrounding the central outlook. A particular risk on the upside is that the extended period of elevated inflation leads to an acceleration in pay and causes inflation expectations to rise. That could lead the higher inflation to become embedded. But on the downside, there is a risk that the credit crunch leads to a deeper and more prolonged slowdown, leading to greater slack in the economy and causing inflation to undershoot our target.

BIS Review 95/2008  5  I hope that this gives you a sense of the use we make of business surveys, and business intelligence more generally, in making our regular assessment of the state of the economy each month, before taking our decision on the appropriate level of Bank Rate. The timeliness of this information is particularly important at the current juncture, when the economic climate is changing rapidly. The global and UK economies have been subject to two large shocks of uncertain magnitude, duration and impact. The first is the continuing de-leveraging in the banking system and the attendant squeeze on the terms and availability of credit. The second is the fairly relentless rise in commodity prices, especially that of oil, driven in part by the robust growth in demand in the emerging economies. These two shocks both depress output growth, though they have divergent effects on inflation. In our May Inflation Report, our central expectation was for four-quarter GDP growth to slow markedly through this year, reflecting both subdued real income growth and tighter credit supply (see Chart 7, which also includes the same backcast information as Chart 6). It was then expected to gradually recover through 2009 as credit conditions slowly improved. The corresponding projection for CPI inflation is shown in Chart 8 (note that no uncertainty is shown for the past, as the data for CPI inflation are rarely revised).
Realised real rates – calculated as observed nominal rates minus the realised inflation rates – have also declined, and have been substantially lower in the 2000s than in the 1980s (chart 3). There are several potential explanations for this development. A first explanation is the “global savings glut” hypothesis, which states that the decline in real interest rates was the result of an increase in savings from emerging economies and oilproducing economies. It is argued that this increase was driven by, among other things, an accumulation of foreign exchange reserves, elevated oil prices and precautionary savings (chart 4).2 But the decline in real rates could also result from a decrease in growth prospects – itself caused, for instance, by a decline in the growth of productivity or population, or by demographic shifts, particularly a reduction in the working population relative to the nonworking population (charts 5 and 6).3 None of these possible explanations for the reduction in real interest rates has been fully confirmed, and therefore they do not constitute a sound basis for forecasting future interest rate developments. But the discussion highlights the fact that, in order to understand longerterm trends in real interest rates, we have to rely on low frequency changes in fundamental economic factors, while monetary policy does not play a primary role here. The cyclical downturn Let us now turn to more recent interest rate developments. As mentioned, since the financial crisis and the global economic slump that followed, we have seen a further fall in rates to very low levels.

In the analysis of potential future paths, we have to distinguish between policy rates and market rates. Market rates, in general, respond faster to changes in the economic situation and outlook than policy rates. The low inflation environment, subdued economic outlook and downside risks that prevail all warrant the continuation of a very accommodative monetary policy with low interest rates. Given the fragile state of the global economy, a premature increase in policy rates would carry the risk of choking off the recovery. In Switzerland, specifically, the subdued inflation outlook (chart 17), the highly valued currency and the fact that a recurrence of financial market tensions cannot be excluded warrant a continuation of the minimum exchange rate policy. In the current situation, the minimum exchange rate remains an essential instrument for preventing an undesirable tightening in monetary conditions should the upward pressure on the Swiss franc intensify again. Market rates are still determined by the current cyclical weakness of the global economy. Once the global economy gets back on a stronger and broader-based growth path and uncertainty wanes, rates should return to more normal levels. For Switzerland, this would mean that safe haven forces would become less relevant, removing some of the additional negative pressures on domestic interest rates. Conclusion In sum, given that we expect a slow, but continued improvement of the world economy, market rates are set to gradually recover to more normal levels over time.
This model is supportive of Asia’s new growth model of a regional production hub and increasing intraregional trade. Moreover, it is a key development strategy for ASEAN to ride with rising Asia as part of an even bigger economic hub of ASEAN+3 and ASEAN+6. The +3 include China, Japan, and Korea, with the+6 expanding to cover India, Australia, and New Zealand. In addition to trade liberalization in goods, liberalization in services will also spur competition. This in turn would lead to lower prices and increased quality of services, as well as better transfer of know-how from outside and within the region, in areas such as business  BIS central bankers’ speeches  1  organization and management, and risk management capacity through foreign participation in financial services, for example. But, since services liberalization can involve short term adjustment costs, its progress has been subject to domestic regulations as a country’s institutional and regulatory environment needs to be strengthened before and during liberalization in order to reap eventual benefits. A single market and production base for ASEAN cannot be complete without the free flow of skilled labor. It is also complementary to other freedoms, such as freedom of capital flows (particularly FDI) and services, and together they have important implications for productivity growth and investment. Indeed, it is logical to expect that ASEAN integrated business organizations would be more effectively run by regional than local managers.

Moreover, as people become global citizens, we cannot always rely on rules and regulations, or market rules of the game to bring about their right behavior. In this regard, the educational curriculum needs to embrace elements on transparency, accountability, governance, and ethics. This will help lessen the corruption problem which ranks high in the list of factors that can undermine competitive strength of any economy. While the role of public investment in education is vital, I see increasing financial constraints in this area, as well as in public health and social safety nets, because of short-term fiscal limits and lack of long-term fiscal planning in a number of countries. For education, in particular, while in the short term private sector initiatives for in-house training or vocational educational support may help bridge skill mismatch, this is unlikely to be a sustainable solution. Faced with fiscal limitations, the public sector will need to explore creative publicprivate partnerships to avoid undermining necessary developments in this important area. Ladies and Gentlemen, I would like to conclude by emphasizing that in the era of global citizenship, we should capitalize on the major driving force in advancing toward full global citizenship. For Thailand and ASEAN countries, we have the AEC as a natural stepping stone to embrace regional citizenship. Looking ahead, much work remains to be done for a number of countries to improve the readiness of human capital to evolve toward global citizenship.
8 A spread of this size between the Federal Reserve’s two administered-rate tools is expected to be narrow enough to provide sufficient interest rate control but wide enough to preserve a reasonable volume of trading in the federal funds market and to keep the Federal Reserve’s footprint in the nonbank financial sector from growing too large. As suggested by operational guidance in the March minutes, policymakers may adjust either side of the spread between these two rates, as needed, once normalization is under way. Fourth: Qualifications around the use and settings of an ON RRP facility. The FOMC intends to use an ON RRP facility only to the extent necessary and will phase it out when it is no longer needed to help control the federal funds rate. But what is necessary, and how can the facility be phased out? As the minutes of recent FOMC meetings show, Committee participants differ in their answers to those questions, but all agree that demonstrating sufficient control over money market rates during the critical early stages of policy normalization is a priority. Against this backdrop, the Committee has noted that it plans to allow the aggregate capacity of the facility to be temporarily elevated to support policy implementation at liftoff, but also expects that it will be appropriate to reduce ON RRP capacity fairly soon after policy firming commences.

The record of the past indicates that the temptation to “let the good times roll” is deeply embedded in the political economy of regulation. Macro-prudential regulation can also lean against the tendency otherwise of micro-prudential regulators to toughen up their regime in the teeth of the storm. At the heart of this new approach to making policy is a very simple observation, namely that changes in regulatory intensity in this area can have an impact on credit availability and thus the performance of the economy. There are two legs to this argument, and it is important to understand both. The first leg involves the simple proposition that a well capitalised banking system is more likely to support credit creation in the economy. We see evidence today of better capitalised banks tending to see more rapid growth in lending. It is with this objective in mind that the Bank of England’s Financial Policy Committee has recommended that the major UK banks as a group should increase their equity capital resources. The whole point of this action is to enable forward-looking judgemental regulation to take effect in a system where balance sheet strength  4  BIS central bankers’ speeches  is a necessary pre-condition of stronger lending to the economy as a whole. In the same vein, last summer the Bank of England and the FSA took steps to implement a clearly counter cyclical response to a situation which was a problem to for the economy as a whole.