samchain/econo-pairs-v1 huggingface dataset:
5 See Benos, E, Brugler, J and Hjalmarsson, E (2015), ‘Interactions among high-frequency traders’, Bank of England Working Paper, No. 523. 6 See Kervel, V, and Menkveld, A. J (2017), ‘High-frequency trading around large institutional orders’, Working paper. 4  All speeches are available online at www.bankofengland.co.uk/speeches  4  7  In equity markets, for example, there has been a shift away from trading on ‘lit’ exchanges (Chart 8). The market has moved more towards ‘off-book’ trading, where participants transact bilaterally, seeking not to 8  9  reveal information on their trading intentions, and to dark venues , such as broker-crossing networks and some multi-lateral trading facilities. 10  Meanwhile, FX markets have seen a move away from ‘exchange-like’  11  platforms toward trading methods offering a more restricted range of counterparties and/or offering visibility to participants on who they are trading with (Chart 9). The aim is to disclose less information to the broader market, while counterparty awareness allows monitoring of metrics such as fill ratios and market impact over time. Second, market participants’ desire to avoid revealing information on their trading intentions and seek the best price has led them to split up large orders, including via the use of algorithms. This can be seen in a reduction in trade sizes (Chart 10), as well as an increase in the rate at which orders in some markets are updated or cancelled. Here at the Bank we want end-users to both benefit from and be confident in the effectiveness of financial markets.

The changing distribution of risks for individual firms  Moving on to my second example, even in the absence of systemic spill-overs from flash episodes, fast markets alter the pattern of risks that individual market participants are exposed to. And there good grounds for concluding that more needs to be done to ensure market participants take account of this consistently. 14  See BIS (2017), ‘The sterling ‘flash event’ of 7 October 2016’, January. See Joint Staff Report (2015), ‘The US Treasury Market on October 15, 2014’. 16 In this spirit, the FPC concluded following the sterling flash event that “such disruptions underscore the concern that liquidity in some markets may have become more fragile in recent years”. See Record of the Financial Policy Committee Meetings held on 23 and 29 November 2016. 15  6  All speeches are available online at www.bankofengland.co.uk/speeches  6  Use of algorithms does not change the fundamental risks associated with trading in financial markets (e.g. market, counterparty and operational risks). But use of high-frequency trading algorithms does change their relative intensity and can materially increase the potential to build up significant intraday positions. This latter point is most obviously true for those bank and non-bank intermediaries that specialise in highfrequency trading. And though these firms should be expert in managing such risks, history shows this is not a given.
In doing so, it will also contribute towards enriching further the diversity of players and strengthening the institutional infrastructure of the Malaysian Islamic banking system. The continued growth of Islamic finance in Malaysia The international economic and financial environment is expected to remain very challenging with several major economies now in recession and continued uncertainties prevailing in the international financial system. In spite of this, the Asian economies are still growing, albeit at a more modest pace. The dominance of domestic demand and increasing regional economic integration have enhanced the prospects for Asia to sustain a modest pace of growth. In this challenging international financial environment, it is encouraging that Islamic finance has continued to demonstrate its evolution and strong growth. Islamic finance has now become a new vehicle contributing to increasing the financial linkages not only within Asia but also with the rest of the world thereby facilitating cross-border allocation of capital globally. Indeed, a number of international financial centres have recognised Islamic finance as an integral part of their financial system in order to complete the suite of financial products and services being offered, and therefore are actively developing this segment. The Islamic finance industry has not only continued to grow but it has also been able to present a higher level of dynamism. The key indicators of the Islamic banking sector continue to record a progressive pace of development. The Islamic banking assets have expanded by 23% to RM234.9 billion compared with a year ago.

From the regulator’s perspective,  2  BIS central bankers’ speeches  risk culture could be inferred and gauged based on the effective implementation and level of compliance by the risk takers and the frontline staff. To improve risk culture, Board and management must review the incentives and penalties in place and ensure that it is effectively implemented. Among the key questions that Board and management should be asking are; Does the performance management and compensation system reward good behaviour and punish bad behaviour? And how are audit and supervisory issues handled? As you already know, a weak risk culture may lead to staff resorting to “check the box” compliance exercise whilst a strong risk culture will judge the wisdom and decision of looking beyond the profit number and be able to see the medium and long term sustainability. On this note, allow me to share some of the key observations made by Bank Negara Malaysia during the recently completed AML/CFT Thematic Reviews on Banks and Insurance Companies. First, the good news. In general, we observed that there was greater awareness among Board and senior management on ML/TF risks and its potential implication to their reputation. From the AML/CFT policies and framework implemented, there was also shift towards risk-based approach. In most of the institutions reviewed, the management of AML/CFT was no longer viewed solely as a “Compliance” job but more aligned and integrated with the bank’s overall risk management function.
The FR 2420 data is used to support the implementation of monetary policy and the analysis of money market conditions. 5  The Board of Governors of the Federal Reserve System is responsible for setting the rate of interest on reserves. Since December 16, 2008, the interest rates on required reserve balances and excess reserve balances have both been ¼ percent, but the rates need not be the same. More information can be found in Regulation D. See http://federalreserve.gov/bankinforeg/reglisting.htm#D. BIS central bankers’ speeches  3  transaction I just described is not riskless. As a result, many lenders limit their risk exposure to any individual bank, reducing the force of competition in the market for funds. 6 In addition, while banks do not need economic capital to conduct this arbitrage, they do face regulatory balance sheet costs from expanding their assets, even in the form of excess reserves, that is, cash. Some of these costs are direct, such as the FDIC fees paid by domestic banks on their liabilities less capital and transactions costs in brokered markets, while others relate to the costs associated with regulatory requirements on capital and liquidity ratios. Even if the market for funds were perfectly competitive, these costs should drive a wedge between IOER and other money market rates. As a result, the IOER rate does not directly establish a firm floor under money market rates, but instead can be thought of as a magnet, with the strength of its pull determined by these balance sheet and competitive frictions.

Similar to IOER for banks, ON RRPs provide a risk-free overnight investment directly to a broad range of bank and non-bank counterparties. By reaching financial institutions that are ineligible to earn IOER, an ON RRP facility widens the universe of counterparties that should generally be unwilling to lend at rates below those available from the Fed. Such a facility could also enhance competition in money markets by offering an alternative safe investment and thus  6  Moreover, competition may be imperfect in some money markets currently, allowing spreads to persist longer than they would if markets were more competitive. For example, much money market activity is over-thecounter, potentially leading to search frictions and bargaining. Anecdotal evidence suggests that lenders typically interact directly with a relatively small number of counterparties, perhaps because a portion of the activity is derived from costly relationship lending. Finally, to limit counterparty credit risk, lenders sometimes seek to diversify their lending and apply concentration limits, which are often binding. 7  As I’ll explain, high-frequency variation in balance sheet costs could induce high-frequency changes in the pull of IOER and, in turn, the spread between the IOER and money market rates. We see this transitory dynamic around financial statement reporting dates. On these dates, balance sheet costs for some banks increase, and the fed funds rate and other money market rates fall relative to the IOER rate.
So despite the market analysts’ own interest rate expectations being in line with the Riksbank’s published interest rate path for the coming six months and higher further ahead, they were surprised by the Riksbank’s upward revision of the interest rate path. One might ask why market agents’ expectations of the Riksbank’s interest rate path differed from their own forecasts for the repo rate. One interpretation is that they believed they had weighed together information on inflationary pressures in the economy in a different way than the Riksbank. This is nothing strange in itself. Assessing economic developments is not an exact science and different forecasters may very well draw different conclusions regarding the underlying inflationary pressure in the economy. But what surprises me, if this is the  4  BIS Review 111/2007  correct interpretation, is that the market nevertheless reacted so strongly to the assessment we made in June. Another interpretation might be that some analysts thought the Riksbank’s assessment of inflation prospects and interest rate development did not differ significantly from their own assessments, but that the Riksbank did not want to revise the interest rate forecast made in February by that much, for reasons of prestige. I do not know whether this could have been part of the explanation, but I believe and hope that it was not. We Executive Board members have always been careful to point out that the interest rate path we publish is a forecast, and like other forecasts is reconsidered each time we make a decision.

During the years the interest rate has gradually been cut, expectations according to implied forward rates have substantially overestimated the level of the repo rate. After the interest rate raises began one and a half years ago, there has rather been a tendency for the repo rate path to be slightly underestimated. As the economy is constantly exposed to unexpected shocks, it is not at all strange that forecasters revise their assessments. This applies to the major banks, the National Institute of Economic Research, the Ministry of Finance and also to us at the Riksbank and our interest rate forecasts. The major uncertainty means that we forecasters should be very cautious when making statements about the future, but this should not restrain us from saying how we think the future will look. Secondly, it is difficult to determine what will be a normal level for the interest rate a couple of years ahead, that is, the interest rate that prevails in a normal phase of the business cycle. As we can see in the diagram, the paths for forward rates have flattened out and the view of what is a normal rate has gradually been revised downwards over time (Figure 9). The Riksbank has stated that a normal level for the repo rate is probably somewhere in the interval 3.5 to 5 per cent. But experiences show that the repo rate can lie outside of this rather broad range for fairly long periods of time.
In this regard, measures need to be developed to quickly put Africa’s high potential economic growth on a path that is environmentally sustainable. Deliberate actions need to be taken in successfully transferring environmentally friendly technologies to Africa. A case in point is the use of solar technology, for which achievements thus far are promising. Most of Africa is endowed with solar energy, and transforming it into usable energy would substitute the widespread use of wood fire energy by the majority of the continent’s population. In addition, because this is proven technology no more resources need to be devoted to Research and Development. Further, solar energy circumvents the costs related to the generation and distribution of yet another clean source of energy, hydroenergy. In addition to generation, distribution of hydroelectricity presents Africa with a unique challenge of supply network or grids due to the vast landscapes that constitute the rural setting where majority of the population resides. This is part of the wider infrastructural constraint that the continent is yet to overcome. 4. Africa and the world economy  In the real sector, a number of African exports experienced an overall increase in prices in 2003. International gold prices increased, much to the benefit of the continents top producers, South Africa and Ghana. Likewise, oil prices increased during the same period leading to higher revenues for countries such as Nigeria, Equatorial Guinea, and Chad (ADB, 2003).

This observation, which came to be known as Moore’s law, still holds. In other words, microchip capacity is being doubled every 18 months. What is perhaps even more relevant is that there does not seem to be any reason why Moore’s law should not continue to be valid a good way into the future. Computer manufacturers are accordingly achieving a rapid improvement in productivity that will last for a good time to come. Provided demand for computers is sufficiently strong, it looks as though the computer-producing sector will become successively larger and make a growing contribution to GDP, the indicator we use for a country’s total income. In simple terms one can say that if an economic sector expands rapidly and also achieves high productivity growth, it will generate an acceleration of the total economy’s average productivity growth. Put differently, the expanding sector weighs increasingly heavily in the measurement of total productivity, defined as GDP per hour worked, and all else equal, this raises average productivity. This is probably one explanation for the acceleration of productivity growth in the United States in the 1990s, which gave rise to the concept of a “new economy”. In time, moreover, as computers and the new technology are introduced in various ways in other parts of the economy, productivity growth will also pick up there. So it is not just the production of computers that becomes more efficient; computer applications in other fields heighten the efficiency of processes there as well. The effects spread through the economy.
8 See Anderton, R., Aranki, T., Bonthuis, B. and Jarvis, V. (2014), “Disaggregating Okun’s law − Decomposing the  impact of the expenditure components of GDP on euro area unemployment”, Working Paper Series, No 1747, ECB, December. 9 5/6  BIS central bankers' speeches  9 The fiscal stance is measured as the change in the cyclically adjusted primary balance net of government  assistance to the financial sector. 10 See Knotek, E. S. and Zaman, S. (2014), “On the Relationships between Wages, Prices, and Economic Activity”,  Economic Commentary, August; Bidder, R. (2015), “Are Wages Useful in Forecasting Price Inflation?”, FRBSF Economic Letter. 11 Bobeica, E., Ciccarelli, M. and Vansteenkiste, I. (2019), “The link between labor cost and price inflation in the  euro area”, Working Paper Series, No 2235, ECB, February. 12 Bobeica et al., op. cit. 13 See Head, A., Kumar, A., and Lapham, B. (2010), “Market Power, Price Adjustment, and Inflation”, International  Economic Review, 51(1):73–98; and Taylor, J. (2000), “Low Inflation, Pass-Through and the Pricing Power of Firms”, European Economic Review, 44:1389–1408. 14 Bobeica et al., op. cit. 15 See Hahn, E. and O’Brien, D. (2018), “Monitoring the exchange rate pass through to inflation”, Box 3 in Economic  Bulletin, Issue 4, ECB. 16 See Koester, G. and Guillochon, J. (2018), “Recent developments in the wage drift in the euro area”, Economic  Bulletin, Issue 8, ECB. 17 Andersson, M., Kok, C., Mirza, H., More, C. and Mosthaf, J.

While employment growth moderated in the second half of last year, in 2018 it was significantly higher than would be expected based on the static long-term relationship between employment and GDP growth.7 As a result, real disposable income has remained resilient and households’ assessment of their own financial situation, which is a good leading indicator of consumption, remains positive. The resilience of the employment-consumption relationship helps explain why, even as the manufacturing outlook has worsened, services have remained relatively robust. Services is the most labour-intensive sector and is associated closely with consumers’ expenditure.8 There are however lags between changes in GDP and in employment, and surveys on employment, while remaining in expansionary territory, have decelerated since the middle of last year. So should the growth slowdown turn into a more persistent phenomenon, employment and consumption are likely to be affected. All in all, the current data suggest that external demand has not yet spilled over significantly into domestic demand, but the risks have risen in the last months and uncertainty remains high. This is why our medium-term outlook remains that growth will gradually return to potential, but the risks remain tilted to the downside. That outlook is also being buttressed by the pre-emptive reaction of stabilisation policies.
The framework for interest rate control during normalization Now I’d like to talk in more detail about the plans and tools for influencing short-term interest rates that the FOMC will use when it becomes appropriate to raise rates. A target range for the fed funds rate As I noted, during normalization the Committee will continue to communicate the stance of policy through a target for the federal funds rate. The fed funds rate is an overnight, unsecured interest rate in the market for reserves – the rate at which banks and certain other eligible entities borrow or lend balances held at the Fed. 1 The Committee also agreed that it would continue to set a target range for the federal funds rate during normalization. When the FOMC begins to remove accommodation, the level of reserves in the banking system will be very high and the Federal Reserve will be employing new tools to implement policy. Against this backdrop, the Committee has chosen to establish a target range, rather than a point target, in order to provide an appropriate degree of flexibility in policy implementation. A key advantage to targeting the fed funds rate is that the Committee has done so successfully for many decades. As a result, it’s a familiar rate for the public in judging the stance of monetary policy, and its continued use simplifies the Fed’s communications. While the Committee has targeted the fed funds rate for many decades, activity in the fed funds market has changed considerably in recent years.

25.02.2021  Latin American economies: developments and challenges Consejo Empresarial Alianza por Iberoamérica (CEAPI) Pablo Hernández de Cos Governor  Ladies and gentlemen, good afternoon. First of all, I would like to thank the Consejo Empresarial Alianza por Iberoamérica (CEAPI) and its President, Núria Vilanova, for the kind invitation to participate in this event. I should also like to take this opportunity to acknowledge the role that the CEAPI plays to support the business and investment of Spanish, Portuguese and Latin American firms. As you all well know, Latin America is a very important region for Spain owing to our close cultural and economic ties. It is likewise important for the Banco de España, as evidenced by one of the initiatives in our Strategic Plan for 2020-2024:1 positioning the Banco de España as a leading central bank for Latin America. This objective entails engaging in a series of actions, such as organising events, entering into and implementing cooperative agreements with central banks and institutions in the region, and the provision of services and international cooperation, all with a medium and long-term strategic view. It also means working to extend and improve our institution's analytical capacity and its visibility vis-à-vis the region’s economies and financial systems. Fortunately, it is already viewed as a benchmark in this regard within the Eurosystem.
Hedging markets developed rapidly. All in all, financial engineering emerged as a new area of knowledge. Dear Guests, The aggressive capital movements among countries and developments in financial markets generated a number of economic benefits at the global level. When borders between countries have disappeared in favor of capital flows, funds flew to regions where capital had the highest return. So, it has been observed that competitiveness and productivity of capital in global scale increased considerably in the 90s. There has been also a substantial rise in the volume of global merchandise trade. However, all developments that I mentioned now represent only the front side of the medallion. The back of the medallion has not been as bright as the front. In the 90’s, not only the scope, timing and speed of the financial liberalization varied across countries, but also the consequences of economic policies had various effects on national economies, depending on the initial conditions and country specific factors. Hence, the rapid increase in capital movements among countries shook the financial markets from time to time, led to financial and banking crises in many countries and, even more importantly, caused the crisis in one country to spread to others. In 2003, Caprio and Klingebiel reported 117 episodes of systemic and highly costly financial crises in developed and emerging market countries since the late 1970’s1.

Interest rates were more and more determined in the markets, and some measures were taken regarding the supervision of the banking sector. However, before taking the necessary actions for strengthening the domestic financial markets, such as measures for more transparent balance sheets and more careful risk management in the intermediation process, the capital account was liberalized at the end of the 1980s. The Turkish economy with an inefficient banking sector became open to intensive capital movements. In my view, the Turkish economy turned into an open one before it became strong enough to cope with capital movements that would occur in the 90s. The sequencing of reforms for the Turkish economy in general and its financial system in particular should have been set differently. What went wrong in the Turkish economy in the 90s? Policies did not concentrate on ensuring and maintaining macroeconomic stability; different priorities, delayed reforms, loose fiscal policy and accommodative monetary policy led to dynamic instability throughout these years. As a result, inflation climbed to 79 percent on average, budget deficit widened so much that the public sector borrowing requirement reached 15.5 percent of the GNP by 1999, the output growth was very low on average and volatile compared to other emerging markets. So, poor macroeconomic fundamentals and a fully liberalized capital account brought about vulnerability of the economy to external shocks and the Turkish economy faced severe financial crises and turbulences in the 90s. Such an environment had also important implications on the financial system.