samchain/econo-pairs-v1 huggingface dataset:
The heterogeneity of emerging economies, together with regional trade interdependence may require a more nuanced interpretation. However, that very interdependence raises the stakes of possible trade tensions. Such tensions at the regional and international level create genuine risks of a protectionist backlash, with potentially very high welfare costs. A protracted accumulation of foreign assets in one form or another will likely be associated with negative externalities; whether domestically or at an international level. More generally, the emergence of such large holders of foreign assets contributes to shaping a new “world financial order”, the stability of which remains to be tested. Foreign reserves and the allocation of savings At this point, it is useful to reflect on the savings motives in Asian economies at a more fundamental level, i.e. to explore why people save so much in emerging economies. Besides potentially powerful demographic factors, the precautionary motive is an obvious candidate: it is likely that some emerging economies record high savings rates due to the underdevelopment of their social insurance systems (be it health insurance or pension schemes). Self-insurance against idiosyncratic risks at the household level (as opposed to self-insurance at the central bank level) may cause households to accumulate large quantities of precautionary wealth. 3  Mohanty M. and Turner, P. (2006) - Foreign exchange reserve accumulation in emerging markets: what are the domestic implications?, BIS Quarterly Review. 4  Aizenman, J. (2007) – Large Hoarding of International Reserves and the Emerging Global Economic Architecture, NBER working paper.

This initiative, along with others related to a general improvement of standards and practices in several areas, would contribute to the better functioning of financial institutions and markets, leading ultimately to a full harnessing of the benefits of financial integration. I trust that, with fluent dialogue between regulators, institutions and market participants, we may be able to improve the combination of sound regulation and flexibility that would ultimately lead to a more robust and efficient financial system. I am convinced that this is a most important contribution to the smooth functioning of the world economy. Thank you. BIS Review 31/2003  3
36  All speeches are available online at www.bankofengland.co.uk/speeches  36  (c) Models of Financial Stability: In a world of monetary, macroprudential and microprudential policy, all having an impact on the economy and on the financial system, there is an increased onus on developing quantitative frameworks which enable us to understand their impact, individually and collectively, and their interaction (Bank of England (2015b)). That calls for models able to capture quantitatively monetary, financial and regulatory channels of transmission and the feedback mechanisms between them. Progress has been made, in particular since the crisis, in developing macro-models with an explicit financial sector which can capture rich, two-way feedbacks between the economy and financial system (for example, Brunnermeier et al (2012), Brunnermeier and Sannikov (2014)). There has been progress, too, in developing models of systemic risk which assign macroeconomic factors, and within-system feedbacks, a prominent role (Greenwood et al (2014), Cont and Schaanning (2017)). Yet we are still probably in the foothills when developing a unified framework for bringing these factors together in one place, a framework that could capture the rich feedback and amplification mechanisms that operate in practice and a model which could then serve as a test-bed for each of the three arms of policy. Indeed, it could be that a single, Holy Grail, framework is infeasible or indeed undesirable. (d) Future of Stress-Testing: Bank stress testing has evolved considerably since the financial crisis and is now a cornerstone of the regulatory regime in many jurisdictions.

Here we adopt a somewhat different approach. Specifically, we consider how effective various combinations of regulatory constraints would have had been in identifying banks which subsequently failed during the crisis (the “hit rate”), while at the same time avoiding incorrectly signalling stress among banks which survived (the “false alarm rate”). To do this, we exploit a dataset on the pre-crisis balance sheet characteristics of global banks developed by Aikman et al (2014). The dataset includes almost all global banks which had more than $ billion in assets at end-2006 – 116 banks in total across 25 countries. A range of balance sheet metrics are proxied at consolidated (group) level for each of these banks at end-2006. Restricting attention to those banks for which data are available to compute all of risk-weighted capital ratios, leverage ratios and NSFRs reduces the sample to 76 banks. If we focus on risk-weighted capital ratios, leverage ratios and loan-to-deposit (LTD) ratios (as a simplified proxy for the NSFR which captures the ratio of retail loans to retail deposits) the sample size is 96 banks.20 These banks can be divided into those that ‘survived’ and those that ‘failed’ between 2007 and the end of 2009.
So what can we do? An economic policy that is credible in the long term is, as I said earlier, a very important ingredient in this context. But it is not enough. Rules and institutes that contribute to financial stability are also necessary. This is why international organisations such BIS, IOSCO and the OECD are working to  4  BIS Review 26/2001  strengthen the financial system in various ways. In total, the work covers a dozen different areas, from overseeing and supervising the financial system to observing individual countries' economies and regulations for credit institutes. Allow me to briefly mention, in this context, the capital adequacy regulations worked out by the Basel Committee, as I feel this is a good example of how we can work internationally to create regulations and institutes that contribute to stability, without preventing the important, healthy risk taking. The Basel regulations mean in principle that the greater the risk a bank takes, the more capital it should hold. As capital costs money, the Basel regulations lead to the banks reducing their risk taking. This in turn reduces the risk of bank crises and other disturbances that would have a negative effect on economic growth arising in the financial system. If this is to function, it requires a broad geographical support, which it has. The Regulations from 1988 are applied in more than 120 countries. The Basel Committee has proposed new regulations, which are an extension of the current ones.

And central to the assessment of the outlook for monetary policy, it increases the risk that the inflation that has come to us from abroad gets embedded in more persistent domestic inflationary pressures. Let me draw all of this together, and pull out the implications for monetary policy. The big external shocks – from Russia and supply chains – account both for a large part of the inflation overshoot above target and for the squeeze on real incomes. My sense of the latest data is that the supply chain/goods shock has started to ease, but the Russian impact – particularly on natural gas prices in Europe is going the other way as we look ahead to the winter. The effect of these shocks has been to increase the cost of things we import relative to things we produce domestically. This is a very large shock to our national real income. I think we can already see the effects, with the economy slowing (I would urge caution in interpreting the May GDP number as strong – given  Page 5  the changed pattern of public holidays). Monetary policy has to be set taking into account the scale of this shock to real income, while keeping our focus on inflation and inflation expectations. Returning inflation to its 2% target sustainably remains our absolute priority. But we recognise a trade-off in a situation of high inflation and weakening growth.
Source: Financial Services Register Staff total correct as at end-September 2016. 2  All speeches are available online at www.bankofengland.co.uk/publications/Pages/speeches/default.aspx  2  In financial services here in the UK we have a mixed economy. The aim is that firms are owned privately (by their shareholders or members) and run for private interests, but within a framework of regulation which makes them internalise our objectives and therefore accommodate the public interest. This system is based on the premise that a healthy element of risk-taking in the financial system is an essential part of a well-functioning economy, but that such risk-taking may become excessive without some kind of check. Few people I know seriously contest that basic premise. But firms frequently contest how we are going about securing the public interest. That tension is natural, given the system we have chosen. There inevitably are and will be significant frictional costs, as the objectives of supervisors, employees, shareholders, members, creditors and customers jostle alongside one another. This means there will be disagreements. But we shouldn’t disagree without having made a real effort to understand each other’s perspectives. I am convinced that this system (including the judgement-based, forward-looking supervisory model we have adopted for the PRA), while imperfect, is much better than the alternatives of a financial sector owned by the taxpayer or a laissez-faire, tick-box regime – especially because history teaches us that the latter may well lead to the former.

Rather, it may be dangerously procyclical. So in the immediate aftermath of the referendum, we invited – indeed encouraged – firms to apply for transitional measures to smooth the impact of the risk margin during a time of market turbulence, and I also very much welcome the European Commission’s request for EIOPA to review the risk margin’s role more broadly. Take the leverage ratio as another post-referendum example of steps we are taking to put a smoother finish on the reforms. The framework was originally introduced to mitigate the risk to financial stability of excessive leverage. In August we decided to exclude central bank reserves from the exposure measure. They do not expose a firm to additional risks: as the ultimate settlement asset, central bank reserves are a unique asset class. Leaving reserves in scope would have obstructed the effective implementation of monetary policy. But neither did we want to take them out only to see a reduction in the nominal amount of capital required to meet the UK leverage ratio standard. So in making the change, we made clear that we will recalibrate the standard to offset this impact. The policy intent of our framework is preserved, while the unintended consequence is addressed. In a similar vein, let me say a quick word on the reforms currently being discussed in Basel – specifically the review of the use of firms’ own internal models for calculating risk-weighted assets and therefore their capital  7  All speeches are available online at www.bankofengland.co.uk/publications/Pages/speeches/default.aspx  7  requirements.
Eric S Rosengren: Two key questions about the economic recovery Remarks by Mr Eric S Rosengren, President and Chief Executive Officer of the Federal Reserve Bank of Boston, at the New England Mortgage Expo, hosted by the Connecticut Mortgage Bankers Association and The Warren Group, Boston, Massachussetts, 14 January 2011. *  *  *  I’d like to thank the conference organizers for inviting me to speak with you today. The beginning of a new year is a good time to discuss the outlook for the economy. I will also try to answer a couple of the key questions that most everyone seems to be asking about, in relation to this recovery.1 As I’m sure you know, over the past several weeks we have been getting economic data consistent with a somewhat happier new year. A recovery that has been anemic for the past year and a half looks to be increasingly supported by private spending as 2011 begins. The Blue Chip forecast for 2011 has increased 4 tenths over the previous month, to 3.3 percent. And I am slightly more optimistic than the Blue Chip; my own forecast is for growth of 3.5 to 4.0 percent over 2011. This is certainly an improvement, but – soberingly – would still leave the unemployment rate close to 9 percent at the end of this year, a rate far above anyone’s estimate of full employment.

When we say that we are “withdrawing our money” from an ATM – what we are actually doing is converting our IOUs from our bank, ie commercial bank money, into banknotes issued by the Bank of England. So even though we don’t think about it, we’re already using private money all the time. Ninety-five percent of the funds households and businesses hold that are typically used to make payments are now held as commercial bank deposits rather than cash2. The pandemic has prompted a further decrease in cash usage, accelerating a longer-term decline that is likely to continue3. 1/5  BIS central bankers' speeches  Private Money: Why do we care? Today in the United Kingdom we don’t generally pay attention to whether we are using private or public money. We can assume that the value of the money we use will be more or less stable. Shops don’t need to scrutinize which bank holds your deposit before you pay – and they are generally as willing to receive private money in the form of card or smartphone wallet payments as they are cash. The fact that commonly used private money is interchangeable with cash anchors it to national currencies and, as a result, promotes financial stability. The fact that bank deposits can be exchanged for cash on demand guarantees uniformity – ensuring that bank deposits from one bank can be used interchangeably with cash and with bank deposits from another bank. While banks do fail, regulation and liquidity backstops makes that relatively rare.
Q: Would you be in favour of the binding agreements proposed by Angela Merkel? A: Binding agreements are one way of achieving this. However, in my view, it is better to stay within the Community framework. It should be a multilateral discussion and not a bilateral one between the Commission and each Member State. There should be shared sovereignty as far as structural reforms are concerned, because there is a common interest. Q: The stress tests are nearing completion. Can we expect many failures and are there likely to be any surprises? A: We are checking the results, which will be available in the second half of October, so I cannot make any comments on them at present. Q: Will the tests be credible after what happened with Portugal’s Banco Espirito Santo (BES)? It collapsed despite the fact that the ECB and the rest of the Troika had been supervising Lisbon for the past three years. A: In the BES case, it appears that information was being kept from the supervisor, which was the Banco de Portugal and not the ECB. The ECB, the European Commission and the IMF were in Lisbon to analyse financial stability and macroeconomic outcomes. The ECB had neither the instruments nor the mandate to supervise banks, as this was the role of the national supervisor.

I want to pause here to acknowledge that, as an overnight rate, SOFR has been the subject of criticism for sometimes being volatile from day to day, especially near quarter- and year-end. I think such criticism is misplaced. Most users of SOFR don’t use a single day’s rate to determine their payments; they use average rates, which are not much affected by daily volatility. Parallel work has been going on in other jurisdictions whose currencies are used in major benchmarks. Working groups for sterling, euro, Swiss franc and yen IBORs11 have all endorsed overnight rates as their preferred alternatives to those rates.12 Three of the alternative rates are (or will be) administered directly by central banks, reflecting the recognition that crucial interest rate benchmarks are a public good, and their integrity and sustainability are key to financial stability. I’ll note that, at the outset of these reform efforts, the idea was not to completely replace LIBOR. LIBOR was being reformed to address its weaknesses as far as possible in the expectation that it could continue to be used. Efforts to “fix” LIBOR proceeded alongside the program to identify better alternatives. The idea was that if there were a more attractive alternative, firms would gradually move away from LIBOR of their own accord, with a minimum of disruption, and that LIBOR then would be seldom, if ever, used. LIBOR could still be inherently unstable despite the 2/8  BIS central bankers' speeches  reform efforts.
Banks are probably aware of the potential cost-saving effect of implementing more cost-reflecting prices. Banks might, however, be locked into a situation where they would benefit from a joint shift to more cost-based pricing, but no bank wants to be the first to make such a move. Being the first mover can be costly in terms of lost customers and market shares. An alternative explanation can be that banks view payment services as complementary to other business areas that are more profitable, such as saving products, mortgage loans, etc. Finally, we have to bear in mind that for the time being, we have considered banks’ costs only, so we confine our results to potential cost savings within the banking sector. In order to be able to draw conclusions on potential efficiency gains for society as whole, we need to consider all costs associated with payment services; the costs for all the parties involved, ie the retail sector, banks and private consumers. This could be one important area for future research. Thank you for your attention. 3/3

For instance, the volume of cocoa exports more than doubled from 1,178 metric tons in 2002 to 2,752 metric tons in 2003, while diamond exports as valued by the Government Gold and Diamond Office (GGDO) increased by 155 thousand carats or by over 44 per cent in 2003. Not surprisingly, the problems associated with fiscal management in a post-conflict environment have exerted enormous pressures on government finances. In an effort to strengthen its revenue base, government has established the National Revenue Authority to unify the Income Tax and Customs and Excise departments into a single unit. As a result, there was a significant increase of 20.52 percent in domestic revenue collection in 2003. Nevertheless, the fiscal out-turn, excluding grants, resulted in an overall deficit of 16.7 percent of GDP. This represents a 3 percentage point reduction over the level recorded in the preceding year. As a result of the high credit expansion to both Government and the Private Sector, there was a large injection of liquidity into the economy as broad money growth accelerated to 21.9 percent against the planned target of 14 percent. Consequently, inflation reared its ugly face in 2003, crossing the doubledigit threshold for the first time in five years. The case for a legislature/executive partnership Distinguished Ladies and Gentlemen, I am informed that this is the third in the series of special Forums for Legislators and senior officials of the executive arm of government organized by WAIFEM.
The challenge with this approach is to prevent the costs associated with the activity of maturity transformation from gravitating to another set of institutions – the “shadow” banking system. Whatever solution is adopted, the aim must be to align private and social costs. 5. Why Basel III is not a complete answer  Lauded as a new standard, Basel III is seen by some as the answer to the failure of regulation to prevent the financial crisis. It is certainly a step in the right direction, an improvement on both Basel I and the ill-fated Basel II, and we should all welcome it. But if it is a giant leap for the regulators of the world, it is only a small step for mankind. Basel III on its own will not prevent another crisis for a number of reasons. First, even the new levels of capital are insufficient to prevent another crisis. Calibrating required capital by reference to the losses incurred during the recent crisis takes inadequate account of the benefits to banks of massive government intervention and the implicit guarantee. More fundamentally, it fails to recognise that when sentiment changes only very high levels of capital would be sufficient to enable banks to obtain funding on anything like normal spreads to policy rates, as we can see at present. When investors change their view about the unknowable future – as they will occasionally in sudden and discontinuous ways – banks that were perceived as well-capitalised can seem under-capitalised with concerns over their solvency.

Nevertheless, there are benefits to this maturity transformation – funds can be pooled allowing a greater proportion to be directed to long-term illiquid investments, and less held back to meet individual needs for liquidity. And from Diamond’s and Dybvig’s insights, flows an intellectual foundation for many of the policy structures that we have today – especially deposit insurance and Bagehot’s time-honoured key principle of central banks acting as lender of last resort in a crisis. If the only problem is one of illiquidity leading to fragility, then central banks can easily act to ward off problems. By demonstrating a willingness to step in to provide temporary liquidity support, then the likelihood of problems arising in the first place is dramatically diminished. It was wholly appropriate that this was the focus of Bagehot’s writings – at the time, the structure of the banking system meant that illiquidity was often the key problem. And central banks did not appreciate the importance of the role that they could play. Bagehot’s whole purpose was to convince the Bank of England to fulfil this role. But the changes in the banking system over the past fifty years mean that a much more diverse range of problems can strike today. In September 2007, everyone thought that the crisis was one of liquidity and as a result there was an expectation central banks could provide the solution. But it quickly became clear that it was in fact a crisis of solvency.