samchain/econo-pairs-v1 huggingface dataset:
Despite the slight correction during the year, current account deficit remains high and one of the weaknesses of the Albanian economy. The Bank of Albania considers that the prioritized handling of the current account deficit requires the formulation of policies supportive to the long-term growth of savings in Albania, as well as measures to encourage production in those branches or industries that result competitive in the international markets. Trade balance narrowing was affected by the concurrent annual decline of exports and imports by 18 and 9 percent, respectively. The difficult situation in our neighbouring countries has been also reflected in the decline of remittances, which contracted 6.5 percent in annual terms, while their share to GDP was 9 percent. Capital and financial account surplus reduced substantially over the course of 2009, dropping by 35.6 percent compared to 2008. This performance owes to a large extent to the low increase in foreign direct investment and the reduction of private foreign borrowing. Unlike the previous two years when capital and financial account covered over 100 percent of the current deficit, in 2009 it financed only 77 percent. Total foreign inflows, albeit downward, were almost sufficient to cover this deficit in 2009. The country’s foreign reserve remained at similar levels as in 2008, sufficient to cover 4.2 months of imports of goods and services. 4  BIS Review 78/2010  The contraction of foreign inflows exerted depreciating pressure on the exchange rate, particularly in the first half of 2009.

Unfortunately in reality what may seem to be a perfect match does not exist in Asia. A large part of the savings in Asia have been channelled through the banking and other financial market channels to the advanced markets and then part of these savings are channelled back to Asia. This pattern of flows has created several problems. Most importantly, with the implementation of Basel III, banks no longer find it attractive to lend to long term infrastructural projects because of the higher capital charge required to hold these assets on their books. More specifically, many European banks, which were very active in infrastructural financing in Asia in the past decade, have reduced their exposures in this area and will continue to do so in the future. So many infrastructural projects in Asia are now finding it increasingly difficult to secure the necessary finance. At the same time, many bankers and fund managers have said that there is still ample supply of funds looking for investment opportunities, but lending or investments in Asia’s infrastructure has been greatly hampered by the shortage of “bankable” projects. So on the one hand Asia has a huge funding need for infrastructural projects but on the other bankers and investors sitting on huge amounts of savings complain that they cannot find sufficient “bankable” projects. Clearly there is a big gap here. There are many reasons why such gap exists, involving factors relating to legal, governance and political risks for investing in Asia’s infrastructure.
29  These percentages should be considered as the lower bound of the total impact of the interest rate rise, as this would also reduce agents’ income, through its negative impact on economic activity, and would curb the accumulation of wealth on account of the higher net interest burden. 30  Moreover, these were the households whose energy expenditure increased the most, as a proportion of their consumption, in 2020 and 2021. 15  High debt levels also mean that public finances are more sensitive to interest rate movements. However, the low interest rate levels of recent years have led to a continuous decline in the interest burden as a percentage of GDP, while at the same time, longer average debt maturities have limited the short-term impact of higher issuance costs. Under a scenario of gradual interest rate rises consistent with the latest projections, the debt burden is expected to stabilise as a percentage of GDP. Under that same scenario, an additional 100 bp increase in short and long-term interest rates, with all other variables remaining constant, will drive up interest payments by 0.4 pp of GDP by 2024. 16  In the Spanish banking industry stress tests, two potential stress scenarios – dubbed adverse and severe – were simulated for the period 2022-2023.

Joseph Yam: Building stability in unstable times Speech by Mr Joseph Yam, Chief Executive of the Hong Kong Monetary Authority, at the Hong Kong Institute of Bankers Lunch Talk, Hong Kong, 24 October 2001. *  *  *  Thank you for inviting me to speak today. It is a pleasure to see such an excellent attendance - a sure sign of the vitality of the Institute and the relevance of its work to the banking community. It is less of a pleasure to be speaking at a time when the international situation is a grave and unstable one, when our own economy is under immense strain, and when conditions are likely to get worse before they get better. What is the role of our financial community in times like this? And, more specifically, what should the regulator be doing to ensure that monetary and financial systems are conducive to stability and are an aid to recovery? The answers, I believe, are to safeguard the strength of our banking system, to ensure that our financial infrastructure remains sound, even under stress, and to maintain steady policies that are conducive to stable, robust and efficient markets. I shall, in this talk, give some examples of how, thanks to the hard work that has been put in over the years, Hong Kong is well equipped to deliver on these aims. The examples may provide reassurance.
In practice, housing costs for owner occupants based on the acquisition approach will move closely in line with construction and maintenance costs. They would probably be given a somewhat lower weight in an overall index over time than imputed rent in the CPI in Norway today. The chart shows developments in the construction cost index and developments in imputed rent in the CPI, which is based on developments in the rental market. The two indices have risen at about the same rate in recent years, but have diverged since summer 2006. Higher prices for both labour and building materials have pushed up the rise in construction costs. In August 2007, the 12-month rate of increase in construction costs was 7.9 per cent, while the 12-month rate of increase in imputed rent was 1.5 per cent. 6  See Eiglsperger, M. (2006) The treatment of owner-occupied housing in the harmonised index of consumer prices. IFC Bulletin 24, 68-79. 8  BIS Review 102/2007  A change from imputed rent to the acquisition approach may change the path for the CPI over the business cycle. While rents probably react with a lag, movements in the rate of increase in construction costs will be more coincident with cyclical developments. Prices for clothing can also be difficult to calculate. As measured by the CPI, clothing prices in Norway have fallen markedly over the past few years. This may reflect the removal of import quotas, reduced tariff rates, a shift in imports towards Chinese goods and improved efficiency in retail industry.

Large volumes of lending are being used to finance consumption and investment, among other things in housing. At the same time, the many positive supply-side conditions – with strong growth in real income in the household sector and in private and public enterprises – have probably made a more direct contribution to the sharp rise in house prices and debt accumulation. When capital – and increasingly labour as well – flows more freely across borders, prices for these factors of production will to a greater extent reflect global growth and competitive conditions. On the other hand, the price of fixed capital, such as property, will be influenced by expected future income in different countries. Even if construction costs have increased somewhat – and accelerated to some extent this year – it is primarily the price of land that has increased in Norway. Land is valued at a considerably higher level, while the price of the dwelling itself has not increased to the same extent. Norway is now reaping the gains of the strong expansion of Asian countries and changes in the division of labour between countries. The improvement in Norway’s term of trade, coupled with high growth in productivity, has delivered very strong, positive income shocks to the Norwegian economy. It follows that land prices will rise at a faster pace than other prices. This is a real economic effect, which monetary policy cannot eliminate.
The difficult thing about using the unemployment gap as an indicator of resource utilisation is to determine the sustainable rate of unemployment. However, this is not more difficult, in fact it is probably easier, than determining potential output and potential hours worked. On closer inspection, it can be seen that the sustainable rate of unemployment has several advantages compared to other measures of normal resource utilisation. The sustainable rate of unemployment can be expressed as a stable percentage – for example 5.5 or 6 per cent. It changes slowly and lies within a limited range. Estimating potential GDP is, in comparison, like shooting at a moving target. It grows over time, and in the view of many, can be seen as a random process, similar to a so-called random walk with drift. The sustainable rate of unemployment can be determined using several different methods – structural search models similar to those developed by the Nobel prize-winners Diamond, Mortensen and Pissarides, so-called UC-models, DSGE models and NAIRU estimates. The results of these different estimation methods can be compared and their robustness and reliability assessed. We can then calculate the average of the estimates and weight this with the assessed reliability of the various estimates. When estimating the sustainable rate of unemployment it is also important to include the assessed effects of labour-market reforms (Forslund 2008).

Strotz, R.H. (1955–56), “Myopia and inconsistency in dynamic utility maximization”, Review of Economic Studies 23, 165–180. Svensson, Lars E.O. (2005), “Monetary Policy with Judgment: Forecast Targeting”, International Journal of Central Banking 1(1), 1–54 Svensson, Lars E.O. (2010a), “Inflation Targeting”, published in Friedman, Benjamin M., and Michael Woodford, eds., Handbook of Monetary Economics, Volume 3, Elsevier. Svensson, Lars E. O. (2010b) “Some problems with Swedish monetary policy and possible solutions” speech held in Stockholm, 2010-11-24. Svensson, Lars E.O. (2010c), “Monetary policy after the financial crisis”, speech held in Tokyo, 2010-09-17. Svensson, Lars E.O. (2010d), “Why a lower repo-rate path? ", speech held at Umeå University, 2010-02-24. Svensson, Lars E.O., and Robert J. Tetlow (2005), “Optimal Policy Projections”, International Journal of Central Banking 1(3), 177–207 Sveriges Riksbank, (2010), Monetary policy in Sweden. Sveriges Riksbank (2011a), Monetary Policy Report: February 2011. Sveriges Riksbank (2011b), “Minutes of the monetary policy meeting”, no. 1, 2011-02-14. 10  BIS central bankers’ speeches  BIS central bankers’ speeches  11  12  BIS central bankers’ speeches  BIS central bankers’ speeches  13  14  BIS central bankers’ speeches
There is nothing that in principle prevents an inflation targeter from considering forecasts beyond a three-year horizon, but in practice there is usually little information about anything at longer horizons except the tendency to revert to the long-term average. What about “leaning against the wind” (as advocated by, for instance, Borio and White, 2003, and Cecchetti, Genberg and Wadhwani, 2002), the idea that central banks should raise the interest rate more than what appears to be warranted by inflation and resource utilization to counter rapid credit growth and rising asset prices? It has sometimes not been quite clear whether advocates of leaning against the wind mean that credit growth and asset prices should be considered targets and enter the explicit or implicit loss functions alongside inflation and resource utilization, or whether they mean that credit growth and asset prices should still be considered just indicators and are emphasized only because credit growth and asset prices may have potential negative effects on inflation and resource utilization at a longer horizon. In the latter case, leaning against the wind is a way to improve the stability of inflation and resource utilization in the longer run. Then it is completely consistent with flexible inflation targeting. 17 However, in line with the previous discussion, instruments other than interest rates are likely to be much more effective in avoiding excessive credit growth and asset-price booms, and should thus be used as a first best alternative.

The entire Executive Board and most of the members of the Monetary Policy Department take part in this meeting. In addition, a number of advisers to the Executive Board and employees of the Financial Stability Department usually take part. A summary of the new information and the current status of the economy in Sweden and abroad is presented at the meeting. We also run through the alternative scenarios ordered at the risk meeting a few weeks earlier and discuss whether they really capture the risks that we Executive Board members envisage. We also have the opportunity at this meeting to request more information on various issues considered important to the coming decision. The meeting usually takes around three hours. Monetary Policy Department establishes its forecasts At approximately the same time as the meeting with the Executive Board, the Monetary Policy Department establishes its view of macroeconomic developments over the coming three years. In a preliminary stage it focuses on around ten key variables such as inflation, interest rates, GDP, number of hours worked, exchange rates and resource utilisation. The forecasts are produced on the basis of the exogenous conditions, the international forecasts, the model forecasts for the Swedish economy conditional on the current situation and assessments. The forecast for the interest rate path produced by the Monetary Policy Department is meant to reflect the Executive Board’s normal, historical behaviour. It is not  6  BIS Review 77/2008  any form of recommendation from the Department.
Even over just the past two decades, we have seen a range of systemic events with a wide diversity in source and characteristics. We’ve seen credit booms and credit concentrations that resulted in substantial losses in the banking industry, in areas as varied as commercial real estate, energy, agriculture, and emerging market sovereigns. We have seen shocks reflected in sharp and substantial movements in interest rates, exchange rates, and asset prices. Some of these events were associated with a deterioration in macroeconomic performance. Some occurred in periods of relatively strong economic growth. Some were driven by abrupt changes in expectations about inflation or about monetary policy and the associated changes in the level of interest rates and the shape of the yield curve. Often these events followed periods of accommodative financial conditions, rapid credit growth, sustained rises in asset prices, and low volatility in the prices of financial assets. Many of these events had a self-reinforcing element, with initial changes in interest rates or asset prices being amplified by the subsequent actions of market participants in the face of unanticipated losses. Financial leverage was also an amplifying factor in many of these events. In some instances, there were unexpected patterns of correlation in the movement of asset prices and in credit losses across borrowers. These experiences led to changes in risk management practices, in supervision, and in our capacity as a central bank to contain systemic risk. These responses have reduced the overall vulnerability of the system to the types of shocks we’ve experienced.

The foundation is the development in Hong Kong of multi-currency clearing and settlement systems operated on a real-time gross-settlement basis: so far we have systems for the US dollar, the euro, and the renminbi, in addition to the Hong Kong dollar; there is the possibility of replicating this for any number of currencies, should the demand arise. To make these systems available in Asian time to the rest of the region, we are progressively linking them to other cities in China and with other countries in the region: we established a link with Malaysia in 2006 and have agreed with Bank Indonesia to establish a similar link with Indonesia in 2010. I have no doubt that other links will follow. In addition, through our Regional CHATS service launched in July 2007, we have made available Hong Kong’s own clearing and settlement services throughout the region and beyond for cross-border payments. By June this year, 30 banks in Hong Kong had registered as service providers for services covering over 2,000 payment beneficiary points in 42 economies. BIS Review 93/2009  1  These are examples of how we are helping to build the hardware, or – to use the transport comparison – laying down the roads, tracks, junctions and interchanges, for regional financial markets. For the software and the actual traffic, it is of course the case that in a free-market economy such as Hong Kong's there is a limit to how much the government should take the lead.
When repeal of Glass-Steagall brought investment and commercial banks together, it would appear from the events over the last decade or so that the investment bank culture came out on top. The prevailing business strategy becoming pursuit of the high returns that could be obtained only through increasing leverage and risk-taking. What has changed: commoditisation of banking relationships 15. As well as bolting together different businesses with different cultures to achieve growth at a much faster pace than would be possible “organically”, banks have over the past few decades expanded from serving more limited numbers of wealthy customers to covering the mass market. Where once the local bank manager might have expected to know a significant number of his customers personally, now customer numbers are so large as to render relationship banking (outside of specialist areas such as private banking) all but impossible. The result? Well a degree of commoditisation, and perhaps inevitably alienation. As a banker cannot possibly engage with the vast majority of his customers, personal bonds are much weaker or indeed no longer created, blocking off another avenue through which relationships built on trust might develop. At the same time, customers have increasingly regarded banking as a transactional relationship and are willing to jump from one bank to another just for the sake of a slight improvement in the interest rate received on deposits. What has changed: short termism of shareholders 16. And if banks’ customers and creditors have changed – what about their shareholders?

I was really encouraged by the implicit acceptance, in putting this on the agenda of a banker’s summit, that it is primarily for the industry to seek to regain the moral and ethical highground it once enjoyed. I wholeheartedly agree. This is not something which can, or should, be regarded as a “policing” or “enforcement” matter for the regulator. Getting caught out, taking the fine as a “cost of doing business” and moving on with making money, is just not acceptable as a sustainable banking business model going forward. I do not subscribe to the view that banks’ primary role is to generate maximum shareholder value, leaving the regulator to worry about the safety of deposits and the interests of the banks’ customers. Now, don’t get me wrong I am not thinking of banks as break-even utility operations but, making a reasonable return should be a result of what banks do – to quote Jack Welch when talking to the FT a few years ago “Shareholder value is a result not a strategy”.1 3. Having a licence or franchise to take deposits, which represent the hard earned savings of millions of people, and use these funds for private gain is a privilege conferred by society on a bank, which merits exemplary professional and ethical behaviour. Moral and ethical highground: trust and respect 4. Returning to the theme of the Summit “regaining the moral and ethical highground” – what do we really mean here? I think, in a word, “trust”. With “trust”, comes “respect”. 5.
In March this year, inflation rose to 3.1% and I wrote an open letter to the then Chancellor explaining why and what we were doing about it. Over the past 12 months, we have raised Bank Rate by one percentage point. And, notwithstanding some claims at the time of the open letter, inflation has since fallen back quite sharply, mainly as retail gas and electricity prices have stopped rising and, more recently, fallen. CPI inflation was, in August, a fraction below the 2% target. The challenge now for the Monetary Policy Committee is to keep it there. The current turmoil in financial markets is not over. Conditions have eased a little – share prices have recovered and interbank interest rates have fallen back. Indeed, spreads between interbank rates and anticipated central bank interest rates are now lower in the UK than in the euro area or United States. But for the moment, some markets remain virtually closed. And even as they re-open, there will not be a return, I hope, to the excessive risktaking – and associated rapid expansion of credit – of the past few years. With investors more wary of risks, banks will find it harder to raise funds. So credit will not be so readily or cheaply available to businesses and households. As we said in August, pressures on capacity mean that output growth needs to slow moderately over the next year or so if we are to continue to meet the inflation target.

At the same time, regulators have continued to bulk-up their own resources in the face of a rising tide of regulatory rules. Ultimately, these costs are borne not by regulators or regulated firms, but by general taxpayers and bank customers. These come in the form of higher taxes, lower savings rates and higher lending rates. If system stability can be achieved in simpler ways, these are deadweight costs to society. (b) The unlevel playing field A second unintended consequence of the move to a model-based regulatory framework is that it has tended to work in quasi-discriminatory ways. In particular, it has tended to discriminate both between small and large banks and between new entrants and existing incumbents in the amounts of capital they are required to hold even against identical exposures. The reason for this is that small or new entrant banks will generally adhere to Basel I or simple standardised approaches for measuring risk. In general, they will have neither the data nor the technology to support internal model approaches. But simpler, standardised approaches tend to require much higher amounts of capital than internal model approaches. Indeed, this was a design feature of Basel II. Chart 8 demonstrates those differences among the major UK banks for a selection of portfolios. For an identical corporate exposure, a small bank on Basel I or a standardised Basel II approach holds, on average, twice as much capital as a large bank using models. For retail mortgages, these differences are larger still.