samchain/econo-pairs-v1 huggingface dataset:
In return, the p2p lenders will refer borrowers who have completed two successful rounds of fund raising to DBS for larger commercial loans and other financial solutions such as cash management. The road to financial inclusion is neither short nor easy. But it is an important one. Broadening access to financial services will offer Asian banks – and FinTechs – the opportunity to grow their business while serving a social purpose. Financial inclusion will be a key priority in the economic co-operation agenda when Singapore assumes the chairmanship of ASEAN next year. Conclusion You will be discussing many of these issues in the days ahead. I look forward to hearing your insights. It leaves me now to hand over to John Williams for his keynote address. He will speak on US monetary policy – a subject of evergreen interest to the financial industry and central banks around the world. I look out for John’s speeches not so much for clues to what the Fed might do next – though that is of course of great interest too – but for the original insights John provides on some of the deep, conceptual issues in monetary policy. John has made thought-provoking contributions in areas such as the natural rate of interest, or r*, and nominal GDP or price level targeting for monetary policy. It is my pleasure now to invite John to share with us his insights on how we should view monetary policy in a changing world.

In France, credit to the private sector continued to advance at a sustained pace, posting a year-on-year increase of 9.3% in October. The annual growth rate of total domestic debt was 5.7% in October. In the course of the year, the various components of the second pillar signalled upside risks to price stability. This was true for the indicators for supply and labour markets, the continuing rise in oil prices and the protracted depreciation in the euro’s exchange rate, which have exerted or continue to exert upward pressure on import, production and consumer prices. As regards the exchange rate of the euro, which is an important monetary policy indicator, both the Monetary Policy Council and the ECB Governing Council are convinced that the external value of the euro does not reflect the euro area’s favourable situation and future prospects. This sentiment is shared by the Eurogroup, which agreed with the European Central Bank in Versailles that "a strong euro is in the interests of Europe". This phrase is the most concise and clear statement of Europe’s position with respect to the external value of the euro. Moreover, the G7 also concurs with the Eurosystem’s analysis. On 23 September, following the concerted intervention on foreign exchange markets on 22 September, the G7 expressed "the shared concern of the Finance Ministers and the Governors about the potential implications of recent movements in the euro for the world economy". Financial stability In Europe, price stability is the statutory responsibility of the central banks, that is, the Eurosystem.
For such situations, the following could usefully apply:   Shadow banking vehicles or funds that are sponsored or operated by banks should be consolidated on to bank balance sheets  Consolidation might require changes in accounting rules. That could take time. These vehicles and funds should nevertheless be treated as consolidated in the application of Basel 3 regulatory capital requirements etc. If necessary, Pillar 2 should be used to achieve that. (The Basel Supervisors Committee will, I hope, consider this in its contribution to the FSB work). Banks’ provision of committed lines of credit to independent shadow banks Even where a shadow bank is not de facto or de jure part of a banking group, many are fundamentally dependent on banks – through committed lines of credit. Anyone running a maturity mismatch is exposed to liquidity risk – liabilities being called before assets fall due or before they can be sold in an orderly way. Banks can provide insurance against such liquidity risk because their deposit liabilities are money; they can lend simply by expanding the two sides of their balance sheet simultaneously, creating (broad) money. But, for the system as a whole – ie taking a macroprudential perspective – providing committed lines to shadow banks is riskier than providing such lines to non-bank businesses. Shadow banks are liable to call on their lines just when the banking system is coming under liquidity pressure itself. That should be reflected in regulatory policies on banks’ liquidity exposures.

I suggest that:   the draw-down rate assumed in the Basel 3 Liquidity Coverage Ratio should be higher for committed lines to financial companies than for lines to non-financial companies. That is, banks should hold more liquid assets against such exposures. Without a policy of that kind, there will be a strong incentive for maturity-transformation to be undertaken off bank balance sheets but with an umbilical cord back to the banking system. It should apply not only to vehicles used for securitisation but more generally. Money funds Money funds do not use committed lines of credit from banks. Claims on money funds have, in effect, become monetary assets in the hands of savers. In parts of the world, especially the US, they are treated like current accounts. Given the restrictions on their asset holdings, they resemble narrow banks, in mutual-fund clothing. But for a normal mutual fund, as an open-ended investment vehicle, the value of investments in it fluctuates with the value of the vehicle’s asset portfolio. By contrast, most money funds hold themselves out as offering par under any circumstances; when they “break the buck”, they must unwind. Their investors run at that prospect; and so the funds themselves are flighty investors. Compared to most types of shadow banking, money funds do not borrow – in the usual sense. But by promising par, they are in effect incurring debt-like obligations. And they can be exposed to leverage.
The borrowing terms that a country’s Treasury enjoys from foreign creditors generally serve as a floor for the interest rate offered to the private sector. This makes it crucial to restore the Treasury’s good credit rating. Not only will this pave the way for domestic enterprises to external financing, it will also significantly reduce the likelihood of a fire sale of domestic assets once the capital controls are lifted. The principal task of the economic recovery programme drafted in co-operation with the IMF is to restore confidence in the Treasury’s ability to meet its foreign currency obligations. How can this be done? First, by practicing sufficient fiscal restraint to convince financial markets that, despite a temporary spike in indebtedness in the wake of the banks’ collapse, the Treasury will be fully capable of meeting its international obligations; i.e., that its debt position is sustainable for the long term. Second, the Treasury has to demonstrate that it has access to sufficient foreign currency reserves to repay, if it comes to the crunch, loans maturing over the next two years. We still are just short of reaching this position, as efforts to achieve it have been delayed for reasons known to all of us. Here it is important to bear in mind the  2  BIS Review 64/2010  common saying that banks, domestic as well as international, are ready to offer you an umbrella on a sunny day, only to demand it back promptly once the rain starts to fall.

In recent years weak growth in import prices and rapid productivity growth have been such factors. On the other hand, it may also be the case, if inflation is high and held up by special factors for a fairly long period of time, that interest rates must be maintained at a high level even when economic activity is not so strong. This means that it is also very difficult in practice to determine what is a "normal” level for the policy rate. It is possible to use different methods to calculate an approximate interval for what can be regarded as a normal repo rate. However, this type of interval will of necessity be fairly broad – in a box in the June Inflation Report it was estimated at 3.5-5 per cent. Experiences also show that the repo rate can fall outside of this rather broad range for fairly long periods of time. Given this, it can be observed that estimates of the normal level for the repo rate have a fairly limited value when assessing interest rate developments in the near future and that interest rate decisions cannot be justified merely because the repo rate is deviating from a level regarded as normal. 1  See Monetary policy in Sweden”, Sveriges Riksbank, 2006 (can be downloaded as a file from the Riksbank's website, www.riksbank.com, or ordered in booklet form). 2  Memorandum “Riksbankens inflationsmål – förtydligande och utvärdering”, 4 February 1999, registration no.
This reduction in the perceived riskiness of the environment is also likely to encourage financial market participants to increase their holdings of riskier assets and to drive up their prices. A key piece of evidence suggesting that excessively loose monetary policy might have had a part to play in generating the preconditions for the crisis is provided by comparisons of policy rates with the policy settings generated by a benchmark Taylor rule (Taylor, 2007). Chart 1 shows the difference between the policy rate and benchmark estimates of the appropriate policy rate derived from a Taylor rule for the United States, the euro area and the United Kingdom. Notwithstanding the usual caveats about the construction of such benchmarks, the very low level of the Federal Funds rate relative to the Taylor rule from 2001 to 2005 in the aftermath of the collapse of the dot-com bubble is striking. Of course, the Federal Open Market Committee (FOMC) set its target Federal Funds rate at unusually low levels for a reason, namely concerns that the United States might find itself mired in deflation of the sort experienced by Japan during its “Lost Decade”. Bernanke (2010) provides a vigorous defence of Federal Reserve policy over this period, arguing that evidence from a comparison of guideline policy rates from conventional Taylor rules with actual policy rates is unpersuasive.

Prospective members of the euro area are in fact also required to satisfy the other four Maastricht criteria, which relate to inflation, the interest rate, the fiscal deficit and the public debt. I propose to focus on the ERM II criterion for two reasons. First, the timing of EMU membership is conditioned by the two-year period embedded in the exchange rate criterion. In Malta’s case, if it is part of the next enlargement in May 2004 and even if it fulfils the other Maastricht criteria, the earliest that it will be technically able to participate in EMU is mid-2006. Earlier adherence to the other criteria, therefore, becomes almost irrelevant. Second, the obligation to participate in ERM II has implications in terms of the preparations which a national central bank has to make in view of its eventual entry into EMU. This is because it impinges directly on some of the central bank’s main functions – such as the formulation of monetary and exchange rate policy and the management of external reserves – something which is not true, for example, of the fiscal criteria. ERM II is thus of particular interest to central bankers. Against this background, I will now review some issues which eventual participation in ERM II, and later in EMU, raises for policy makers in Malta. No significant change in the parameters governing monetary and exchange rate policy EMU entails the adoption of the euro and the surrender of autonomy in the area of monetary policy to the European Central Bank (ECB).
The renminbi exchange rate should also be able to respond more to the underlying trends in external trade. Greater flexibility may also permit exchange rate adjustments in pursuit of other macroeconomic objectives. Should greater flexibility in renminbi be pursued, I believe that there would be advantages, in the interests of transparency and market confidence, for the mainland to set out clearly what it expects to achieve by the measure, especially in the absence of any move towards fuller convertibility. If the benefits are in doubt, or if the underlying motivation is misunderstood, 5  BIS Review 68/2000  there could be an adverse impact on general sentiment, which would be manifested in the financial markets. We all know how sensitive financial markets can be, and this sensitivity somewhat blurs the Hong Kong response to the prospect of greater flexibility in the renminbi’s exchange rate, in particular its impact on the Hong Kong dollar exchange rate. Together with the confusion between the convertibility of a currency and the flexibility in an exchange rate, this sensitivity perhaps explains the rather excited off-the-cuff response given earlier this year by the group of Hong Kong businessmen to Premier Zhu Rongji when the subject was raised in a meeting among them. As a result, there was this message to me that we in the HKMA should examine the matter carefully. We have since done so and I have, in July, provided Premier Zhu with a response, through Governor Dai Xianglong of the People’s Bank of China.

Hong Kong’s banking sector, with its strong reputation and long involvement in mainland business, stands to benefit greatly from the liberalisation in this area, providing that it can position itself to make the best out of the opportunities. In the monetary sphere, the various predictions about the future development of the renminbi in the light of WTO membership - which include the possibility of greater exchange rate flexibility - would most likely have positive implications for Hong Kong’s economy as a whole, and should create no difficulties for Hong Kong’s entirely separate and soundly based currency. The role for Hong Kong in the context of a WTO that includes China, would, I believe, give even fuller scope for the qualities that, in the assessment of the Cato Institute, make Hong Kong the freest economy in the world. All of this therefore leaves a small question in my mind about the title of this BIS Review 68/2000  6  conference, and I hope the organisers will forgive me for raising it. The phrase “Hong Kong’s Legacy, China’s Future” has a bit of a morbid ring about it. It suggests that we in Hong Kong are bequeathing something to China before we breathe our last, and that you are assembled here for a funeral, or at least a deathbed scene. This cannot, surely, be the intention behind the conference.
One solution could be to create more flexible groupings within the Fund to discuss particular topics. For example, the Managing Director’s powers to initiate bilateral consultations about the policy choices of individual members could be expanded to cover multilateral issues discussed by the relevant group of members. If this does not prove practicable, other mechanisms will need to be found to introduce the requisite flexibility in how countries come together under the auspices of the Fund. The institution itself, though, also needs to change. The IMF has the great merit of being a universal institution. But it needs greater focus, independence and legitimacy. In terms of focus the members of the Fund, through the IMFC, could usefully restate the Fund’s mandate in terms of global economic and monetary stability. If it is to be able to meet its remit then surveillance should focus at least as much on balance sheets as on exchange rates. The mandate should make clear both what the IMF is responsible for and what it is not responsible for. But producing more focussed surveillance cannot be achieved in isolation from more fundamental reforms of the Fund. In terms of independence the responsibility for the delivery of a new mandate should be placed more firmly in the hands of the management of the IMF. At present, the Board involves itself in every aspect of the Fund’s activities.

The continuing shift of resources to meet the demand for better public services means that private demand must grow much more slowly over the next few years. In turn, that would enable the trade deficit to stabilise and eventually fall back. The second uncertainty facing the UK is the slowdown in the world economy, and, in particular, the downturn in the United States. In 2000, the world economy grew by 4.7%, the highest rate for twelve years. And, stimulated by an increase in productivity growth, the US growth rate had reached almost 6% a year in the first half of 2000. Such a rate was unlikely to have proved sustainable. Over the past five years productivity growth in the United States has risen markedly. Labour productivity growth rose by more than 1 percentage point a year to an average of 2½%-3% between 1995 and 2000. Some of this rise was the impact of new technology on efficiency, and some was the result of greater investment in IT – capital deepening – which added significantly to the amount of capital with which each employee was working. But demand rose even more rapidly than the supply of output, leading to a large current account deficit. The external imbalance was the mirror image of the internal imbalance. So a slowdown in the US was not only unsurprising, it was desirable. But the speed of the turn-round in the US has taken most commentators by surprise.
In large part this recovery was underpinned by unusually strong growth in the US, averaging some 4½% over the past 4 years and surging to a peak of some 5½% at an annual rate in the first half of last year – compared with an average rate of 2¾% over the preceding decade. This remarkable strength of the US economy was possible, without overheating, against the background of unusually rapid productivity growth as investment in IT spread through the US economy improving its supply-side capacity. These developments together implied higher corporate earnings growth in the US pushing up the stock market and at the same time attracting massive direct and portfolio capital inflows into the US – substantially from the Eurozone – which comfortably overfinanced a burgeoning US current account deficit and underpinned the strong dollar. However helpful all this was in supporting the world economy it clearly could not continue for ever or without limit. At some point – and no-one could know at all precisely at what point – demand in the US would begin to outstrip supply and the growing external imbalance between the US and the rest of the world would become unsustainable; relative asset prices – including the dollar’s exchange rate – would over-discount prospective US corporate earnings growth and both equity and foreign exchange markets would then become vulnerable to abrupt correction.

Zdeněk Tůma: Statistics – investment in the future Welcome address by Mr Zdeněk Tůma, Governor of the Czech National Bank, at the International Conference “Statistics: Investment in the Future”, organized by the Czech National Bank together with the Czech Statistical Office and the Prague University of Economics, Prague, 14 September 2009. *  *  *  Dear Prime Minister, distinguished guests, ladies and gentlemen, dear colleagues, I am very pleased that the Czech National Bank can host this conference in its premises. It is also our great pleasure to co-organize the conference together with the Czech Statistical Office and the Prague University of Economics – it is the evidence of good, I even would say, above-average relationships between these three institutions. The international conference “Statistics: Investment in the Future” we are opening by this plenary session is the second conference of this kind, organized five years after the first one. But this year’s venue is held in a rather different economic and financial environment compared to the previous conference. The whole world has been affected by the global financial crisis. Let me say a few words about the impact of the financial crisis on our economy. In autumn last year the first signs of the global financial crisis were detected in the inter-bank market. The main cause was a lack of confidence among banks spreading from abroad, resulting in their preference to keep more liquidity than usual.
Let me discuss these scenarios in turn. The Phillips curve provides a useful framework for assessing the impact of growing economic slack and inflation expectations on price developments. In its most basic form, this theory posits that the inflation rate depends positively on the expected rate of inflation and negatively on the degree of slack in the economy, as measured, for example, by the difference between the supply potential of the economy and aggregate output, in other words the output gap. With euro area GDP falling at an annual rate of 4.8% in the first quarter of 2009 and unemployment rising to 9.2% in April, there is little doubt that spare capacity is high. This should exert downward pressure on prices. But how strong is this downward pressure, and can it determine deflationary risks for the euro area? Precise estimates of the Phillips curve for the euro area are subject to controversy. They vary depending on the specification, the precise measures of the output gap and expectations used, and the time frame considered. However, the general indication from the existing studies is that, on average, relatively large and persistent changes in the output gap are needed to affect euro area inflation. 5 In comparative terms, these changes are much larger than, for example, in the US and the UK. A simple plot (slide 9) of the evolution of various measures of the output gap against that of inflation for the euro area confirms that  5  See, for example, Musso, Stracca and van Dijkx (2007).

It plots the latest HICP inflation forecasts from the Euro Zone Barometer – a publication that produces macroeconomic and financial forecasts every month from a number of major economic forecasters in Europe. In this month’s edition, forecasters expect the spell of negative inflation in 2009 to last on average for a few months. Looking at the range of individual responses (which is shown as a shaded area), there is some disagreement between the highest and lowest forecast. But even in the lowest forecast, the period with negative inflation rate is expected to last no more than two quarters. Furthermore, according to the same survey, inflation projections for 2010 have been gradually revised downwards since January 2009 as economic conditions have deteriorated. This phenomenon is illustrated in slide 8, as a month-to-month shift to the left of the inflation forecasts. Nevertheless, the median projection still remains above 1%. So, if there is no evidence of a generalised and persistent fall in the price level in the latest inflation outturns, what is underpinning current deflationary fears? As I see it, when people think about deflation, they have in mind two possible scenarios. The first is that the accumulation of economic slack due to the recession may exacerbate downside risks to price developments, which in turn may lead to outright deflation as monetary policy loses traction in stabilising output. The second scenario is that a spell of negative headline inflation rates – perhaps due to the temporary impact of energy and food prices – might dislodge inflation expectations.