samchain/econo-pairs-v1 huggingface dataset:
As the Swedish krona is judged to be undervalued at present, we also assume that the exchange rate follows a path that represents a gradual appreciation. The technical assumption of an unchanged repo rate and the presumed path for the exchange rate are then incorporated in the main scenario for inflation. As inflation’s future course is not a straightforward matter, we also include assessments of uncertainties. The overall picture of inflation prospects amounts in practice to an estimate of probabilities. The assessments in the main scenario imply favourable economic fundamentals: a growth rate between 2.5 and 3 per cent between 1998 and 2000, low inflation and a rising government surplus. Domestic demand in the main scenario is expected to generate a relatively limited increase in inflation’s underlying rate, from 1.1 per cent at present to 1.6 per cent at the end of next year and 2 per cent in the autumn of 2000. The 12-month change in CPI inflation is expected to be somewhat below the inflation target in one to two years time but the figure at the end of the period is judged to be approximately 2 per cent. All this means that at the end of the period under review, inflation is relatively well in line with the Riksbank’s target. It should be underscored, however, that the assessment of inflation prospects is more difficult than usual on account of the financial turbulence.

This naturally reflects the international unrest but the political situation after the general election in Sweden has also left its mark on price setting, above all in the currency market. Inflation prospects and the future path of monetary policy accordingly depend on two - contrary - factors: on the one hand, the international economic trend could be weaker than we have counted on and thereby lead to lower inflation; on the other, a sustained weak exchange rate that has no counterpart in a weaker real economy could generate increased inflationary pressure. Our monetary policy conclusion is that we will go on analysing the course of events and appraise monetary policy continuously in the light of new information. Hopefully, the analysis in the Inflation Report should give an indication of our line of reasoning about the  BIS Review 80/1998  -5-  inflation outlook in Sweden and the future path of monetary policy that is as clear as possible in the global economy’s present state of uncertainty. The unsettled situation in international financial markets has meant that investors are shifting to currencies which are historically secure. As a result, other currencies, particularly those of smaller economies, have weakened. This tendency has been evident for the Swedish krona in recent weeks and very clear in the last few days. The recent path of the Swedish krona is not consistent with the development of our economy’s fundamentals.
There are arguments, however, that call for specialization of some functions. So far, we have seen in Chile a banking supervisory agency that takes into consideration the macro-systemic aspects and a central bank concerned about both price and financial stability, arrangement that has permitted the necessary coordination in dealing with situations of financial distress. The role of capital flows In what follows, I will deal with the issue of capital flows as a source of financial instability within the framework of inflation targeting and flexible exchange rate. In particular, I am concerned with the interaction between price and financial stability when a small open economy, like Chile, is exposed to volatile capital flows. I have to start by emphasizing that in the current surge of capital inflows, Chile was not subject to massive inflows as was the case in the past. However, we cannot rule out this possibility, as prospects for advanced economies are very gloomy, while emerging markets offer very healthy returns to investment. First, the long history of emerging markets booms and busts has shown us that frequently in this type of economies the building up of risks is associated with periods of capital bonanzas that fuel credit booms, asset bubbles, and exchange rate misalignments, and that frequently end in sudden stops and reversals of capital inflows that wreak havoc in the financial system and the real economy.

Pillar 2 recognises that national supervisors may have different ways of entering into such discussions and provides flexibility to accommodate those differences. At the same time, Pillar 2 will ensure that supervisors share insight  2  BIS Review 42/2003  into their approaches with others and will foster a better understanding among supervisors and bankers about the differences in national regulatory practices. Over time, discussions among supervisors will undoubtedly improve our understanding of each other’s processes and promote information sharing and cooperation among regulatory agencies. Consequently, Pillar 2 should help us to reduce the supervisory burden on globally active banking organisations and foster more consistent supervisory approaches and practices across national borders. This corresponds directly to the mandate of the Committee’s Accord Implementation Group, or “AIG”. The AIG was set up at the end of 2001 under the Chairmanship of Nick Le Pan of the Canadian Office of the Superintendent of Financial Institutions, and Vice-Chair of the Committee. The group comprises high-level supervisors from member countries, who share planned approaches to implementation. The intention is that this exchange of information should enhance the consistent application of the New Accord and thereby promote a level playing field - which we all agree is an important objective. In this sense, the AIG has a practical focus, while policy issues remain the responsibility of the Committee itself. Home / host implementation issues on a world-wide basis. This brings me to the second topic on my list, which is home/host implementation issues.
One response to labour shortages was to bring in workers from abroad, which together with longer working hours has prevented wage drift from being felt on any great scale. Labour market surveys, however, show contrasting pictures in the Greater Reykjavík Area and regional Iceland. There is an obvious shortage of labour in various fields in the urban southwest, while availability of employment declined in the regions. Great pressure built up in the real estate market, largely reflected in a rise in real estate prices in the Greater Reykjavík Area. Prices peaked at the beginning of 2000 after increasing by almost 24% over a twelve-month period. This rate of increase has now begun to slow down, and by the end of December real estate prices had risen by 13.3% over the preceding twelve months. Credit expansion In the course of the growth period, generous wage agreements were made which boosted real disposable income. The greatest increase in real disposable income was in 1998, or 7.2%. Otherwise it rose by 4-5% annually until last year, when the figure was close to 2%. Over this period, Iceland Stock Exchange has gone from strength to strength. An important equities market has evolved in Iceland, and share prices followed an upward trend until last year. Greater real disposable income and rising share prices, which at least for a while increased shareholders' confidence in their own prosperity, fuelled growing optimism among consumers and investors.

They are also well above the levels generally seen in neighbouring countries. For example, European banks of a size similar to Iceland’s banks have capital ratios of just over 18% and gearing ratios of about 8%. Elsewhere in the world, capital ratios are higher than those in Europe in some cases. Furthermore, many observers consider the actual capital in the European banking system is too limited and that Europe is therefore not the best reference for Icelandic banks. Nonetheless, there is some scope to lower the banks’ capital ratios — and gearing ratios in particular — with dividend payments and changes in the composition of capital. On the other hand, the banks are being cautious in maintaining a so-called “management premium” over and above the Financial Supervisory Authority’s minimum requirement, as it could erode confidence in the banks if their capital ratios fall below the minimum were they to face only mild headwinds. Moreover, the banks must bear in mind that the countercyclical capital buffer is currently 1.25%, but the Financial Stability Council has signalled that it could increase it in stages to 2.5% as the financial cycle gets more wind in its sails. In assessing a desirable level for the banks’ capital, it is important to remain aware of the costs and benefits. At times, international discussion of this topic has been somewhat misleading and, to some extent, affected by bank executives’ interest in maximising their own remuneration through risk-taking, knowing that a portion of possible losses would be absorbed by taxpayers.
These advantages are an inevitable outcome of the presence of a large number of market participants and the further unfolding of the Financial Services Action Plan, which will enhance the tradability of euro assets in the euro area and beyond. Participation in the single currency area provides scope for further cost savings in the form of lower risk premia resulting from adherence to the EU’s strict macroeconomic policy framework. This aspect is particularly relevant in the Maltese context, as the small size of the country and the prevalence of micro-enterprises make the economy highly susceptible to developments abroad. Foreign banks and suppliers seek to cover this perceived risk by building a higher risk premium into the prices quoted to Maltese businesses. The insurance provided by the discipline of EMU, and the high level of intra-EU integration should reduce this perceived vulnerability and, with that, the risk premium. This is conducive to lower interest rates and to access to financing on more favourable terms. A related advantage is the improved marketability and acceptance of collateral. Maltese lira assets are not considered sufficiently liquid by foreign lenders in view of the thinness of domestic financial markets. Many SMEs are consequently either denied foreign financing altogether, or offered prohibitive rates. This constraint should ease considerably with the adoption of the euro, as the redenomination of domestic assets into euro will improve the marketability of the collateral offered by local businesses.

These incentives are offered in the context of the so-called "international headquartering" policy. According to the latest Central Bank of Cyprus forecasts of December 2022, the growth of the Cypriot economy is expected at 2,5% this year which compares well to the euro area average of 0,5%. Inflation is expected to decelerate in 2023, levelling at 3.3%, from 8.1% in 2022. Foreign investment in Cyprus, as I mentioned before, constitutes a significant driver for development. In recent years, major multinational firms in the Information, Communication and Technology industry (ICT), have relocated or expanded their activities in Cyprus, supporting Cypriot GDP and reinforcing the vision to transform Cyprus into an emerging technology hub in the Mediterranean. Cyprus' importance as a foreign investment hub is also reflected in the Greenfield FDI Performance Index1, created by FDI Intelligence, according to which in 2021, Cyprus was ranked in 18th place out of 84 countries included in this index (climbing by 50 places compared to 2020). Undoubtedly, the shipping sector is another important pillar of Cyprus' economic success. Limassol, Cyprus' maritime capital, is the home of influential names in the shipping industry, which boosted the country to the top ranks of the sector. Indicatively, Cyprus is the largest third-party ship management centre in the European Union, one of the largest in the world2 and is primed for further growth.
1  1  See for example Caballero and Kurlat (2009), “The ‘Surprising’ Origin and Nature of Financial Crises: A macroeconomic policy proposal”, paper presented at the Federal Reserve Bank of Kansas’ Jackson Hole Symposium. BIS Review 119/2009  1  Central banks around the globe cut key rates swiftly and forcefully, in some cases to levels close to zero. In Sweden, the central bank set the interest rate on banks’ deposits in the central bank at negative ¼ per cent. In Norway, it was not appropriate to use instruments as forcefully. But Norges Bank also reduced the key policy rate markedly and rapidly and more rapidly than the inflation and growth outlook alone suggested. Central banks have a long history of dealing with financial crises. The economist and journalist Walter Bagehot formulated as early as in 1873 the principles for central banks’ role in this area: “To avert panic, central banks should lend early and freely (without limit), to solvent firms, against good collateral, and at ‘high rates’.” 2 Bagehot’s principles describe central banks’ liquidity provision in the first phase of the financial crisis – from autumn 2007. Central banks responded swiftly and supplied an extraordinary amount of liquidity through their conventional instruments, i.e. loans against good collateral at a price close to the key policy rate. In most countries, banks also have access to liquidity through automatic drawing rights against the provision of collateral. These facilities are priced at a premium on the key policy rate in line with Bagehot’s advice.

While much has been made of the special relationship between the US and UK, it is not so special that the possibility of a reduction in the pace of additional stimulus in the US warrants a current reduction in the degree of monetary stimulus in the UK. 4  We are not alone in that belief – other major independent forecasters such as the OBR and NIESR share our view that unemployment will be above 7% in 3 years’ time. The MPC’s assessment of the outlook for unemployment and likelihood of hitting the threshold is described in the August Inflation Report, available on the Bank’s website at http://www.bankofengland.co.uk/publications/Pages/inflationreport/2013/ir1303.aspx. 4  BIS central bankers’ speeches  Movements in longer-term market interest rates are certainly relevant, but what matters most to you is what actually happens to Bank Rate, now and in the future. That is because the interest rates on 70% of loans to households and more than 50% of loans to businesses are linked to Bank Rate.5 And it is the Bank of England that controls that rate. We do not intend even to consider raising it before unemployment falls to 7%. When it does reach that point, we will control whether a rise is warranted, taking into account the strength of the recovery and the outlook for inflation. The upward move in market expectations of where Bank Rate will head in future could, at the margin, feed into the effective financial conditions facing the real economy. The MPC will be watching those conditions closely.
Will Big Data Keep Its Promise? Speech given by Andrew G Haldane Chief Economist Bank of England  Data Analytics for Finance and Macro Research Centre, King’s Business School 19 April 2018  The views expressed here are not necessarily those of the Bank of England or the Monetary Policy Committee. I would like to thank Shiv Chowla for his help in preparing the text. I would like to thank David Bholat, David Copple, Andi Joseph, Perttu Korhonen, Katie Low, Clare Macallan, Paul Robinson, Michael Saunders, Misa Tanaka, Silvana Tenreyro, Ryland Thomas, Arthur Turrell, Arzu Uluc and Michalis Vasios for their comments and contributions. 1  All speeches are available online at www.bankofengland.co.uk/speeches  I am delighted to be here to launch the Data Analytics for Finance and Macro (DAFM) Research Centre at King’s College Business School. I would like to congratulate Professors George Kapetanios and Georgios Chortareas, as Co-Directors (as well as former colleagues), for getting the centre to the launch pad and primed for take-off. To get my punchline in early, I believe the application of data analytic techniques to the many pressing questions in finance and macro holds great promise. That is the reason the Bank of England, around four years ago, set up its own data analytics division. And that is why I very much welcome the setting up of this new centre, as a means of realising that promise. But will Big Data keep its promise?

At home, the main risk has to do with the evolution of inflation, mainly because of the unrelenting exchange rate depreciation and its accumulated effects on costs. This, in a context of margins that seem to have narrowed because of the high annual growth in nominal wages and the limited pass-through of lower fuel prices in some sectors. Therefore, the materialization of an external risk scenario that triggers a significant additional depreciation of the peso may have substantial effects on the short-term inflation outlook, which will depend on the state of the business cycle. On the other hand, it is also possible that, despite a recent improvement in domestic expenditure and output compared with previous quarters, private expectations will not improve sufficiently to stimulate further spending, especially in investment. Conversely, a scenario where expectations recover more strongly than expected would allow for more dynamic economic activity. The same can happen if the increase in national income has greater effects on expenditure in a context of more comfortable external accounts. After evaluating these risks, we estimate that, although local risks have moderated, the risk balance is still downward biased for output, while the risk balance for inflation is unbiased. Let me share with you some final thoughts now. 4  BIS central bankers’ speeches  Final thoughts Lately, the Chilean economy has responded to the big changes in the local and external environment, by making a major adjustment.
This describes our assessment of the stability of the financial system, as well as various risks and threats to this stability. From an international perspective, the Riksbank’s work on stability analysis has been at the cutting edge.1 We were the first central bank in the world to publish a stability report, and we  1  See, for example, Allen et al. (2004), who have carried out an independent assessment of the Riksbank’s stability work. BIS central bankers’ speeches  1  were also among the first to carry out stress tests describing the banks’ resilience to various types of shock.2 Assessing the banks’ credit risk, which is to say the risk that the banks would not recover the money they had lent, was an important part of this analysis work. It was just this kind of risk that had led to such large losses for the banks in the banking crisis at the start of the 1990s. Consequently, the risks we emphasised in the stability reports were primarily associated with credit risk. We warned of the risks but missed the one that would give us problems In the years leading up to the financial crisis, we made overall assessments along the lines of “financial stability in Sweden is satisfactory” (Financial Stability Report, June 2008). The four Swedish major banks (Handelsbanken, Nordea, SEB and Swedbank) were profitable and hade enough capital to withstand possible shocks. However, we also pointed out risks, sharpening our tone when the risks became more apparent, just before the crisis.

The Swedish National Debt Office issued treasury bills to meet the demand that had arisen for liquid assets. Finansinspektionen amended the regulations for financial companies (to make it easier for them to strengthen their capital bases) and for insurance companies (to reduce shocks to the bond markets). The government and the Riksdag decided to extend the deposit guarantee scheme and to introduce a comprehensive stability plan. Important elements in the stability plan were a guarantee programme for the funding of banks and mortgage institutions, a stability fund, and principles for the management of capital contributions to credit institutions. The Swedish National Debt Office was given a central role in this work as responsible authority for the new guarantee system, the stability fund, and any capital contributions. The extraordinary measures were phased out The Swedish economy made a strong recovery in 2010 and the banks no longer needed to borrow from the Riksbank to manage their funding needs. The Riksbank thus phased out its comprehensive lending to the banks during the summer and autumn of 2010. This phasing out was comparatively simple because, unlike many other central banks, we had not purchased any securities. When the loans expired, the banks repaid their loans, with the whole process taking place comparatively smoothly. The repo rate started to be raised in July 2010.
The sectors trade with each other, and with the banking system, behaving in ways that we calibrate to known features of the system. That means behaviour in one part of the system affects decisions elsewhere. The system is more than the sum of its parts. The simulator, by its nature, does not capture the full diversity of the assets and participants in the system. It is a simplified version of reality, helping to guide us. Using it, we can begin to assess what different features of the system might matter for the resilience of corporate credit supply. In general, it highlights how financial institutions do not need to be at risk of failure for credit supply conditions to be fragile. I’ll highlight two features that stand out in the simulator, both centred on liquidity: cashflow pressures on leveraged investors like hedge funds, and redemption pressures on open-ended funds. Cashflow pressures on leveraged investors  Investment funds have grown in importance as holders of corporate debt in general, and they now hold around 25% of the global leveraged loan market – a quarter of which is in the form of CLOs, often the most risky slices. The relevant funds are not the super-financially-leveraged, dangerous institutions of some imaginations. 11 Even hedge funds take positions worth only about one and a half times net asset value – materially less than they did a decade ago.12 And financial leverage in funds other than hedge funds is generally limited.

Co-operation between regulators across jurisdictions is vital in containing potential systemic risks that have extended beyond the national and regional boundaries. In the case of Islamic finance, a rigorous and well developed legal, regulatory and Shariah framework is being put in place. Such a regulatory framework also needs to govern market practices by the Islamic financial institutions. This will involve the implementation of the prudential standards that have been issued by the Islamic Financial Services Board, the IFSB. The IFSB also has an important role in the harmonisation of prudential standards, in addition to contributing towards the consistent development of Islamic finance across different jurisdictions. Several parts of the world, including Malaysia , have implemented the prudential standards issued by the IFSB. These prudential standards which have been designed to take into account the unique features specific to Islamic finance will contribute towards ensuring its soundness and stability. British financial regulators are therefore encouraged to be members of the IFSB. Early this year, the IFSB in collaboration with the Islamic Development Bank (IDB) established a task force on Islamic Finance and Global Financial Stability. The task force is responsible to examine the resilience of Islamic finance in the current challenging global financial environment and to examine further the building blocks that need to be put in place to develop the international financial architecture to strengthen further the resilience of Islamic finance.