samchain/econo-pairs-v1 huggingface dataset:
BIS central bankers’ speeches  17  Liu, Y, Slotine,J and Barabási, A.L (2011), Controllability of complex networks, Nature 473, 167–173 (2011) . Minoiu, C. and Reyes, J.A. (2013), A network analysis of global banking: 1978–2010, Journal of Financial Stability 9 (2013) 168–184. Newman, M E J (2005), “Power laws, Pareto distributions and Zip’s law”, Contemporary Physics, 46 (5), pp. 323–51. Newman, M. E. J. (2011), “Complex Systems: A Survey”, Am. J. Phys. 79, 800–810. OECD (2013), Interconnected Economies: Benefiting from Global Value Chains, OECD. Perrow, C (1984), Normal Accidents: Living with High-Risk Technologies, Basic Books, NY. Pozsar, Z, Adrian, T, Ashcraft, A and Boesky, H (2010), “Shadow Banking”, Federal Reserve Bank of New York Staff Reports, No. 458 Roger, S and Vlcek, J (2011), Macrofinancial Modeling at Central Banks: Recent Developments and Future Directions, IMF Working Paper 12/21. Shakir, T and Tong, M (2014)The interaction of the FPC and the MPC, Bank of England Quarterly Bulletin Q4, available at http://www.bankofengland.co.uk/publications/Documents/quarterlybulletin/2014/qb14q403.pdf. Simon,H (1962), The Architecture of Complexity, Proceedings of the American Philosophical Society, Vol. 106, No. 6., pp. 467–482. Simplicity consulting (2012), “True Cost of complexity in the banking sector” available at http://www.simplicity-consulting.com/wpcontent/files_mf/1340875856BankingTrueCostofComplexity2012.pdf. Smets, F (2013), “Financial Stability and Monetary Policy: How Closely Interlinked?” Sveriges Riksbank Economic Review. 18  BIS central bankers’ speeches

On the one hand, the recovery of developed economies goes on, but only moderately and insufficiently to reduce the high rates of unemployment (figure 1). Risks are substantial. In fact, the intensity and velocity of the events we saw in Europe in early November are proof of the fragility of the world economy. On the other hand, growth prospects in emerging markets are still positive; commodity prices are still high, with copper standing out recently at record highs, and external financing conditions are good. The sustainability of this imbalanced scenario for the global economy is one of the primary risk factors for next year. Some of the questions we must try to answer and monitor closely are: How fast can emerging economies grow if the advanced economies are further weakened? How can advanced economies grow without incurring in unsustainable current-account deficits? How will the financial tensions in Europe be resolved? Is it possible for expenditure in Chile to grow excessively while ignoring the risks coming from abroad? In this context, the Board has continued to gradually normalize the monetary policy interest rate (MPR), setting it at 3.25% in its December meeting. In the most likely scenario, it will continue to gradually withdraw the monetary stimulus, which will depend on the unfolding of internal and external macroeconomic conditions. Let me now take a closer look at the scenario we believe is the most likely for the next two years and its implications for inflation and monetary policy. Macroeconomic scenario I will begin with the world economy.
3  Preliminary estimates. 4  BIS central bankers’ speeches  Foreign exchange market 31. The Kwacha was firm against major traded currencies, backed by consolidation of macroeconomic gains and improved liquidity in the foreign exchange market. A sustained increase in the international price of copper to an average of US $ per ton provided further support to the local currency. Thus, the Kwacha appreciated by 2.1% against the US dollar to an average of $ at the end of the fourth quarter. 32. The Kwacha also appreciated by 2.4% against the pound sterling to an average of £ and by 1.1% against the euro to an average of € These gains were partially attributed to the lingering European debt crisis despite the bailouts extended to Ireland and Greece. In contrast, the Kwacha depreciated by 2.0% against the rand to an average of K691.22/ZAR. The South African currency was broadly stronger on account of higher price of gold and lower policy uncertainty after the Government clarified speculation on privatisation of public enterprises. 33. In terms of volume of transactions, commercial banks made spot purchases of US $ million from the non-bank public against sales of US $ million. This translated into net purchases of US $ million in the fourth quarter. Commercial banks also made net euro and pound sterling purchases € million ₤0.3 million, respectively. However, banks recorded net sales of ZAR853.1 million in the fourth quarter, underpinning the continued demand for the South African rand. 34.

During the same period, the net income account deficit widened by 3.2% to US $ million from US $ million in the third quarter. This was largely on account of an increase in income on equity payments and interest payments. The current account transfers, increased to US $ million from US $ million recorded the previous quarter, explained by the disbursement of budget grants amounting to US $ million. 43. The capital and financial account deficit widened to US $ million from US $ million recorded in the third quarter. This was largely due to the unfavourable performance of the financial account arising from a surge in short-term deposits abroad by the private sector, despite the increase in foreign direct investment. Developments in the financial sector 44. The overall financial condition of the banking sector for the quarter ended December 2010 was satisfactory. On aggregate, the banking sector’s capital position, asset quality and liquidity were satisfactory. However, the earnings performance of the sector declined largely on account of an increase in the non-interest expenses (due to increases in staff emoluments, reorganization costs and additional tax provisions). 45. Overall financial condition and performance of the Non-Bank Financial Institutions sector was rated fair during the quarter under review. The sector was adequately capitalised with “fair” asset quality, while earnings performance was rated “satisfactory”. 46. As part of the overall objective to enhance financial inclusion, the BoZ undertook provincial sensitisation tours on savings and credit covering all the nine provinces of Zambia.
Third, to increase our prudence towards the financial system stability, we adopted new techniques for a more comprehensive systemic risk assessment, enriched stress test exercises with the “bottom up” approach and improved models for the indirect credit risk assessment. The twinning project concentrated most of its resources on supervision and financial stability. In addition to constant motivation for improving the regulatory framework, supervision activities and risk administration, this priority becomes even more necessary given added challenges related to specific developments over the past years. The Bank of Albania has undertaken a number of actions to face and overcome these challenges. For the fourth consecutive year, the Albanian economy has been under the influence of the global economic and financial crisis. Its latest stage, the sovereign debt crisis and its interrelation with the balance sheets of the financial system have placed us on the frontline. Our two main trading and financial partner countries, Greece and Italy, have been severely hit by the crisis. Against this unfavourable landscape, the Albanian economy has grown and has maintained its financial soundness. Private agents have an overall sound financial position, relatively low debt levels and positive savings rates. In contrast to other countries in the region, the Albanian financial system has continued to lend to the economy, although at slower pace and somewhat tighter terms. Building on an appropriate and flexible regulatory framework, this response has been determinant to encourage the restructuring of the economy and guide it towards profitable sectors.

Therefore, I would like to invite all other stakeholders to be open-minded and very cooperative to boost lending to the economy. First, I would suggest to the business community to be more creative, transparent and formal in its operation. It should comply with all obligations arising from the contractual relations with the banking system. This should be broadly understood and accepted. A correction is necessary in the economy, first of all implying a rebalancing of prices. There may be no reduction in non-performing loans, increase in lending to the economy, improvement in business and bank balance sheets, unless collaterals are executed and, subsequently, fix asset prices are corrected. This process would release huge financial resources that would be a vital serum of fresh money injected back into the economy. With this fresh money we must encourage the creation of new and effective initiatives that yield swift return on investment. One of the lessons learned from the crisis is that any new healthy money should go to a healthy business initiative. We need to encourage highly productive sectors of the economy. This is the only way to ensure revitalisation of the economy and make it a dignified European partner. Second, I would like to encourage the banking system to be more dynamic, by looking continuously for worth-funding opportunities. Offer reliable funding packages by assigning priority to economic health of the country, which would, in turn, guarantee the long-term success of your business.
Employment instability has multiple adverse economic effects. Specifically, it negatively affects the accumulation of human capital by workers and can thus have very persistent effects on their working lives. In particular, a recent Banco de España paper finds that the employment stability afforded by a permanent contract in Spain can lead to cumulative wage differences of up to 16 pp compared to a temporary contract, over 15 working years. 14  Such instability also entails greater uncertainty about future income. And this greater uncertainty has a direct bearing not only on spending decisions, but also on emotional wellbeing, the formation of new households and the birth rate. In this setting, one of the main objectives of the labour market reform enacted in 2022 is to combat the high proportion of temporary employment. Since the approval of this legislation, permanent hiring has quickened significantly and temporary hires have slowed. Thus, according to social security registrations for April, the year-on-year growth in permanent employment stood at 12.9%, compared with a 9% fall in the number of workers with temporary contracts. Permanent contracts increased most among permanent seasonal workers (84.9%) and permanent part-time workers (17.1%). It is, however, still too early to assess the impact of the labour market reform, and any such evaluation will have to consider multiple issues. Notable among them is the impact on employment because, in principle, the reduction in temporary contracts might stem from both temporary employment being replaced by permanent employment and from the destruction of temporary jobs.

And on the subject of history, I would like to make some observations. Europe's single currency has ancient roots: apart from the single currency of the Roman Empire, two thousand years ago, I could mention George of Podebrady, a king of Bohemia in the 15th century, who called for a common currency for Europe, or Victor Hugo's call for a single market with a single currency in Europe in the 19th century. By implementing the Economic and Monetary Union enshrined in the Werner report 38 years ago, we have also achieved a much older plan, an ancient vision of a unified continent, including monetary union. This historic vision has always been closely associated with the search for prosperity and the preservation of peace. Voltaire's remark: “En effet l’histoire n’est que le tableau des crimes et des malheurs” – “Indeed, history is nothing more than a tableau of crimes and misfortunes” – from the perspective of the mid-twentieth century could not have been more apt . It is no surprise that it was at that point in time that Europeans decided to accelerate the march towards European unity. The single currency is the most advanced feature of European unity and in many respects its emblem. We owe it to the lucidity of the founding fathers and to the determination of a series of visionary leaders. We saw these founding fathers a moment ago on the screen. To them we owe an immense debt of gratitude.
In 2003, three economists presented a hypothesis that an informal Bretton Woods regime had been reactivated 8 . The original Bretton Woods system was created after WWII and consisted in a formal obligation of its participant countries to maintain foreign exchange rates, determined against a gold parity, on a specific level, with acceptable deviations not exceeding 1 percent. The system ceased to exist in 1971 after president Nixon had taken a decision that the USA would no longer exchange dollars for gold according to the parity determined. The nature of the reactivated Bretton Woods, often called Bretton Woods 2, is well conveyed in the motto used by the authors of this concept: “(…) if I made an agreement with my tailor that whatever money I pay them, it returns to me on the very same day as a loan, I would have no objection at all to ordering more suits from him” (Jacques Rueff, 1965, after Dooley et al. (2003)) The hypothesis of the existence of an informal Breton Woods 2 says that a system has been established in which it is profitable for the Asian countries to finance the US current account deficit, because it allows them to increase their exports to this market. Thus, it supports the economic development of the Asian countries and allows them to create new jobs, which is particularly important in China, where - according to various estimates - each year between 10 and 20 million of jobs should be created, due to migration from rural areas to cities.

19% of jobs in EU15 have been threatened by offshoring 24 . It should be noted, however, that for the developed countries this process does not mean losses of jobs. Mankiw and Swagel 25 cite research results, according to which relocation of jobs abroad may be positively linked to an increase in employment in the home country of the relocating company. It stems from the fact that foreign branches do not compete but rather complement the hitherto activity of companies, and thus help to improve effectiveness and quality, and lower costs, which may lead to an increased market for products or services of the given company, what may in turn result in an increase in employment in the home country. It is first of all the countries capable of manufacturing products and rendering services at a competitive price that gain a major advantage in acquiring new investments and creating new jobs. It is worth adding that the growing significance of offshoring has an impact on the distribution of remuneration in the countries, whose participation in the globalisation process is increasing. The wages of unqualified workers from the developed countries are falling, while workers with higher qualifications from countries with lower labour costs are being better rewarded. Labour costs remain an important, although not a sole, factor of investment attractiveness of a given country. In A.T. Kearney’s research 26 countries from our region, i.e. the Czech Republic, Poland and Hungary, are in the top eleven offshoring locations.
Conversely, banks whose reserves fall short of their thresholds have an incentive to borrow reserves up to their thresholds at an interest rate below 0.5%, and to deposit these reserves at 0.5% at the SNB. Such a trade, depicted on Slide 7, is beneficial for both types of banks – the bank lending the reserves earns the positive interbank interest rate on its excess reserves, while the bank borrowing the reserves earns the difference between the SNB policy rate and the interbank interest rate. Reserve tiering thus creates an incentive for interbank trading, and thereby supports activity in the interbank money market; this, in turn, ensures a robust basis for the calculation of SARON. 10 To frame this slightly differently: If we did not apply reserve tiering and, instead, remunerated all reserves at the same interest rate, market participants would have little incentive to trade with each other and activity in the Swiss franc money market would decrease drastically as a result. There are two reasons for this. First, most market participants are still flush with reserves. Second, all institutions that have access to the repo market can hold reserves at the SNB. Taken together, there would be little incentive for market participants to attract reserves by engaging in repo transactions, and hence interbank activity would be low. Why does the SNB use reserve absorption? Let us now take a closer look at the second new element of our implementation approach – reserve absorption. Why do we absorb reserves and how do we perform this task?

As we just noted, in our reserve tiering system, banks with excess reserves have an incentive to lend those reserves to banks whose reserves fall short of their thresholds. Unless the borrowing capacity of these banks is substantial, there may still be excess reserves in the system even after all interbank trading is accounted for. This is precisely what we see in the 9  For each bank that is subject to the minimum reserve requirement, the individual threshold corresponds to the moving average of the minimum reserve requirements over the preceding 36 reference periods, multiplied by the applicable threshold factor. The instruction sheet governing interest on sight deposits provides further information. 10 We gained the insight that reserve tiering promotes interbank trading during the time when our policy rate was negative. As we applied a negative interest rate to reserves that exceeded bank-specific exemption thresholds, we were essentially making use of reserve tiering during this period. Fuhrer et al. (2021) investigate monetary policy implementation via reserve tiering both theoretically and empirically. Page 5/10  case shown on Slide 7. Even after factoring in interbank trading, there are still excess reserves, here depicted in light blue. In such an environment, the equilibrium interest rate that would prevail in the interbank money market would be relatively close to the lower remuneration rate on reserves, which is currently 0%.
“Forward rates minus Prospera inflation expectations” shows nominal forward rates from 28 April for the coming year minus inflation expectations according to Prospera for the corresponding period. 9  See the box “What is a normal level for the repo rate?” in the Monetary Policy Report, February 2010 for a discussion of a normal level for the repo rate. See also Björn Lagerwall “Real interest rates in Sweden”, Economic commentary no. 5, 2008, Sveriges Riksbank, for a discussion of real interest rates. BIS Review 85/2010  9  Concluding thoughts Publishing our own repo rate path was a further step towards openness and transparency in the Riksbank’s monetary policy. Our forecast for the repo rate is reported in the same way as other important forecast variables. We can also use alternative scenarios to illustrate how the Executive Board may respond with its monetary policy if economic developments deviate from the main scenario. When the Riksbank introduced the repo rate path there were fears that many analysts would stop making their own forecasts and slavishly follow the Riksbank. The merit of having many different assessments would be lost. However, this has not been the case. There was also concern that we would avoid changing the repo rate path, even when this was motivated by changed conditions. This has not happened either. “The repo rate path is a forecast, not a promise”, this has been a message that the Riksbank has communicated all along.

The alternative scenarios for the repo rate show different monetary policy alternatives. What would happen to the economy if the Riksbank followed a repo rate path that was higher or lower than that in the main scenario? The consequences of various monetary policy alternatives can thus be compared. This can systematically justify the repo rate path chosen by the Riksbank. Introduction of repo rate path not entirely uncontroversial Many people welcomed the Riksbank’s decision to introduce its own repo rate path. However, there were also some misgivings. For example, there were fears that confidence in the Riksbank might be harmed if the actual repo rate in the future deviated from the earlier forecast. This was also the type of misgiving expressed when the Riksbank began publishing forecasts for inflation and growth. In addition, there was concern that the Riksbank might hesitate to change the repo rate forecast for reasons of prestige, even if circumstances indicated this was necessary. If there were fears that the Riksbank might be unwilling to change the repo rate path when the situation required, this fear has come to nought. Autumn 2008 is a very good example of this. Now, three years after its introduction, I believe I dare say that the repo rate path is regarded as a natural part of the Riksbank’s policy. I also believe that the discussion outside of the Riksbank is characterised more by long-term discussions on monetary policy than on individual decisions.
It must dispel the image of takaful as being an overly-complicated form of insurance suitable only for Muslims. Market positioning should have broad appeal. Products should be easy to understand and live up to public expectations of fair treatment, transparent and efficient service. In operational terms, this means using plain and simple language and always seeking to do what is right for the customer, rather than only what is legally required. Over 50% of insurance and takaful complaints that we received in 2017 were of mis-selling or misrepresentation. Remember, when our staff or agents misinform or mistreat a customer, they harm the institution and industry’s reputation, undoing all the hard work that went into building the system that we have today. As a society we need to take care of our own, specifically for the B40 group. There is a lot of work to be done. As at end-2016, insurance and takaful penetration in the B40 segment of working age stood at 30.3%, compared with the overall penetration rate of 46.8%. The roll out of affordable, accessible and easy to understand products under Perlindungan Tenang is a start in meeting the needs of the underserved. Unfortunately, to date, only three takaful operators have developed products under this initiative. Given the importance of financial inclusion for the nation and takaful being a product with pseudo-social leanings, we should expect much more from takaful operators.

What’s going on? Speech given by Dave Ramsden, Deputy Governor for Markets and Banking, Bank of England  Barclays Inflation Conference, London 7 June 2018  I am grateful to William Abel, Harvey Daniell, Bianca Ginelli Nardi, Raf Kinston, Simon Kirby, Elliot Luciani-Kane, Rebecca Maule, Sanjay Odedra, Tom Smith, Pawel Smietanka and Brad Speigner for their assistance in preparing this speech, and Clare Macallan, Michael Saunders and other Bank staff for their helpful comments and suggestions. 1  All speeches are available online at www.bankofengland.co.uk/speeches  An unusual position UK GDP growth has slowed following the Brexit referendum, and it slowed even more in the first quarter of this year. In the MPC’s May Inflation Report we are forecasting that it will remain subdued over the forecast period. If our forecast materialises, annual growth will have been between 1¼ and 2% for five consecutive years from 2016 to 2020. To give some context, annual average GDP growth has been in this range in only eight of the 50 years before that period, and three of those were since the financial crisis. It’s been said before but it bears repeating: the UK economy is in an unusual position. Over the past few years, meanwhile, unemployment has fallen from a high of 8.5% to a forty year low of just 4.2%. Employment has similarly picked up to record highs.