samchain/econo-pairs-v1 huggingface dataset:
Together with the mutually reinforcing pillars II and III, of regulatory review and market discipline, Basle II represents a formidable tool to insulate banks against inherent risks in the highly leveraged business of banking. In this process, we must be mindful of the fact that Basle II has been built on the experiences and risk parameters of developed, sophisticated economies. Through customization to suit conditions and markets in emerging economies, which have fundamentally different characteristics, the principles of Basel II should be appropriately adapted to suit such conditions. The “one size fits all” solution of Basle I will not suit the complexities of Basle II. The markets in which we operate have their own peculiarities and their own cultures. Promoting international best practice in such a culture is, indeed, a challenge which demands a fundamental change in credit cultures, attitudes, and policies. The will to change is important and in the case of banking institutions, has to be mandated, if it is to be in the best interests of the major stakeholders, the depositors. Full implementation of Basel II is, indeed, demanding for banking institutions and regulators alike. Capacity building is an imperative on both sides, as is the framework for good risk management built on risk models. The supervisory capacity to assess and validate these models must be enhanced and developed. The magnitude of the investment in technology by the banks must be justified in a business sense. We must ensure that the cost of compliance does not outweigh the benefits from Basle II.

Therefore, the Basle Committee has quite rightly advised that regulators and banks should approach it with caution even with regard to the simplest approach to Basel II. We commenced our journey one year ago, together with the industry, and we will move slowly, but steadily, towards full implementation of the basic approach, hopefully in 2008. We will, however commence our test runs in parallel with Basle I in 2006, fine tuning our systems for full compliance as we go along. This would be in line with the widely accepted policy that countries should adopt the options and approaches that are most appropriate for the state of their markets, their banking systems, and their supervisory structures. In Sri Lanka, as in most countries, the banking sector enjoys predominance in our financial system. As is to be expected, the financial environment, domestically, is becoming more innovative and competitive to meet the sophistication of peer foreign banks and the needs of investors and consumers. This naturally increases their risk profile. Increasingly, therefore, our remit as regulators is to ensure an efficient risk management framework and the adequacy of resources to mitigate risk. Against this background, therefore, Basle II is synonymous with good risk management, not only of the core risk of credit default, but of a wider range of risks such as market risk and operational risk in Pillar I .
To give you another idea of what immigration has meant for the Spanish economy, let me tell you that foreign residents accounted for nearly the entire growth of the working age population between 2001 and 2006. What is more, as immigrants have a higher propensity to work, they have also helped to increase the aggregate employment rate through a composition effect. If we simply combine these two direct effects, immigration accounts for almost one-third of Spain’s notable GDP per capita growth since the turn of the century. This figure would be even larger if we took other indirect effects into account. For instance, immigrants’ readiness to take jobs caring for children and the elderly has pushed up the participation rate and the productivity of native female workers. Let me add, that despite Spain’s inflation differential with the euro zone, which is now standing at around half a percentage point over the euro area average, immigration has helped ease the inflationary pressure that results from buoyant domestic demand. How does immigration affect inflation? In two ways. First, an increasing labour force raises growth potential, which helps reduce the feed-through of strong demand pressures to inflation. Usually, any boost to output is followed by a rise in real wages and, thus, marginal costs, which translate into higher inflation. But this feed-through need not take place if rising labour demand is met with rising labour supply from abroad, as we have seen in Spain in the last few years.

Miguel Fernández Ordóñez: Immigration and the inflation moderation debate Speech by Mr Miguel Fernández Ordóñez, Governor of the Bank of Spain, at the Symposium “The Phillips curve and the natural rate hypothesis”, Kiel Institute for the World Economy, Kiel, 3 June 2007. *  *  *  Introduction It is a pleasure to be here today at this Symposium in such distinguished company. The organisers have put together an impressive programme on a key topic for policymakers and central bankers in particular. As you know, the relationship between inflation and economic activity has always been at the heart of the macroeconomics discipline. And theoretical developments in this field have had a significant and direct influence on actual monetary policymaking. We are currently in a unique situation. For an unusually long period, in the context of high global growth, inflation has remained low and stable. Many commentators – and not only central bankers – would agree that better-managed monetary policy has had a lot to do with this favourable inflation performance. And there is a lively debate about which specific aspects of monetary policymaking have been responsible for it. Let’s look at three questions this debate has raised. First, do central bankers now have better knowledge of the economy and of monetary policy transmission and, consequently, are adopting more effective decisions? Second, have monetary policy regimes shifted towards making price stability a more prominent target?
1323; and Angelini E., A. Dieppe, B. Pierluigi (2013), Learning about wage and price mark-ups in euro area countries, ECB Working Paper No 1512. 14  See Gomes S., P. Jacquinot, M. Pisani (2010), The EAGLE. A model for policy analysis of macroeconomic interdependence in the euro area. ECB Working Paper No 1195. 6  BIS central bankers’ speeches  studies done for other countries.15 The simulations exclude the reforms that enhance total factor productivity, which I mentioned earlier. These would further add to the impact on GDP and employment. To conclude, Portugal can already count on key achievements in labour and product markets that were thought impossible only a few years ago. The support of its European partners has been and will remain instrumental in this process. Structural reforms always take time to have their full beneficial impact on the economy. Having entered the second half of the adjustment programme, these benefits should increasingly become tangible. I do not underestimate the pain that these changes inflict. But they are necessary in order to lay the foundations for robust and sustainable growth. Growth-oriented policies are no substitutes for fiscal and external adjustment: they are mutually reinforcing. If designed in a way that reduces rents and fights vested interests, they will not only improve the efficiency of the adjustment process but also its equity, to the benefit of the poorest, the youngest, and of future generations. They will support medium to long-term growth and therefore employment and fiscal sustainability.

It falls if decisive and correct policies are applied and low inflation and permanent price stability can be continuous if only these policies are carried on. We should not forget that inflation was not only the most important problem of our country for years but also kept us from seeing the existing problems in the society and in the economy. Attaining price stability will repair the damage of the economy caused by high inflation and will help us see other unnoticed problems hiding behind inflation. The key to erasing the traces of past period high inflation and to solving other problems of our country is structural reforms. Today, the process of erasing these traces begins with operation of dropping six zeroes from Turkish lira. I would like to underline that an important issue here. In some countries that had dropped zeroes from their currencies this operation was conducted as a part of the disinflation policies. However, in our country it is the consequence of the successful implementation of the stability program that has already reduced inflation considerably. Within this framework, YTL to be issued as of January 1st, 2005, depicts both the decline in inflation and our determination to achieve price stability. Before I finish, I wish to repeat a remark I made two years ago at the start of the fight against inflation. “Above all, people deserve to live in an environment where price stability is achieved.” Thank you for listening. BIS Review 63/2004  5
The realisation of the true state of the banking system led to a collapse of confidence around the world and a deep global recession. Over 25 million jobs disappeared worldwide. And unemployment in Britain rose by over a million. To many of you this will seem deeply unfair, and it is. I can understand why so many people are angry. It’s vital that we learn from the crisis. A good place to start is to ask, as the Queen famously did, “Why did no-one see this coming?” The answer is extremely simple: no-one believed it could happen. Recessions were supposed to follow booms and high inflation, not periods of steady and sustainable growth with low inflation. There seemed to be no reason to expect the worst recession since the 1930s. After the ravages of inflation in the 1970s – younger listeners might need to be reminded that inflation hit 27% in 1975 – it was I think understandable that we focussed on the need to bring inflation down. But conquering inflation was not enough to ensure stability. Although inflation was under control, fragilities were building in the banking system. On all sides there was a failure of imagination to appreciate the scale of the fragilities and their potential consequences. No-one could quite bring themselves to believe that in our modern financial system the biggest banks in the world could fall over. But they did. That isn’t to say we were blind to what was going on.

Although far from clear at the time, the later decision to remove from the Bank of England the power to regulate banks would return to haunt us. Over the next decade, the new Monetary Policy Committee established a track record of low and remarkably stable inflation. In my first speech as Governor in 2003, I warned that this stability was unlikely to continue. And it didn’t. Within a few years, and despite low inflation, the advanced economies of the world were plunged into a financial crisis which led to the sharpest decline in world trade since the 1930s, recessions across the world, rising unemployment and the near collapse of our banking system. BIS central bankers’ speeches  1  So tonight I want to try to answer three questions. First, what went wrong? Second, what are the lessons? Third, what needs to change? Let me start by pointing out what did not go wrong. In the five years before the onset of the crisis, across the industrialised world growth was steady and both unemployment and inflation were low and stable. Whether in this country, the United States or Europe, there was no unsustainable boom like that seen in the 1980s; this was a bust without a boom. So what was the problem? In a nutshell, our banking and financial system overextended itself. That left it fragile and vulnerable to a sudden loss of confidence. The most obvious symptom was that banks were lending too much.
Analysis of cross-border investment banking 2000–2014. Journal of Economic Geography, 18(1), 1-33. 1 2  7  All speeches are available online at www.bankofengland.co.uk/news/speeches  7  But while financial markets and financial centres need to be supported and governed by the right regulatory framework, one cannot regulate deep capital markets into being, and certainly not global ones. The development of market-based finance in the EU has, in my view, more to gain than lose from access to the markets, expertise and concentration of financial activity in London – from partnership rather than rivalry with the global financial centre on its doorstep. We cannot, of course, read the future and predict how the financial arteries and veins now connecting the UK and EU will develop now the UK is no longer a member of the EU. What we can say, with some confidence, however, is that though the financial connections between us will change and adapt, they will not be severed. The UK, and the global financial centre we host, will remain open to access from the EU and its members as we are open to access from the US and Asia. And unless the EU and its members want to reverse their integration into the global financial sector – and I see no real signs of that - there will continue to be strong financial sector connections between us.

The package aims to reduce both the likelihood of crisis occurring at a systemically important bank and the costs to the economy in the event of such a crisis. 10  Group of experts on the further development of the financial market strategy (2014). The proposed supplementary measures include a quantitative and qualitative recalibration of the capital requirements, a review of the method for calculating risk-weighted assets (RWA), a timetable for the implementation of workable recovery and resolution plans, and the introduction of binding Total Loss Absorbency Capacity (TLAC) requirements. BIS central bankers’ speeches  7  Uncertainties regarding optimal regulation are likely more important here than in the case of the real estate and mortgage markets, as the probability of a big bank failing and the macroeconomic cost of such a tail-risk event may be less clear or not “objectively” measurable ex ante. Such fundamental uncertainties imply more substantial tensions with respect to the choice and design – size and scope – of further measures to contain the TBTF issue. Going too far could theoretically entail a cost to society that may not be warranted from a cost-benefit perspective. Not going far enough, however, creates the risk of ending up in a very costly crisis. Let me conclude: Sustainably improving the stability of the financial system is a difficult task. But it’s not an impossible dream. It is a fact that improving the regulatory framework entails a delicate trade-off between knowledge and prudence.
That is a counsel of despair, and it contradicts everything I said earlier about the benefits of free trade. How, therefore, should we think about, and act upon, this design challenge? A key issue here is bank resolution. Indeed, arguably it is the cornerstone of making progress. The reason is that without confidence in how we would in future resolve banks operating across borders – typically therefore the larger banks – we are unlikely to break down the trend towards fragmentation. This is because some of the most difficult legal and structural issues in bank resolution concern enabling cross-border solutions to take effect, and this is true whether the resolution plan involves holding the firm together – Single Point of Entry unitary resolution – or breaking it up under a Multiple Point of Entry resolution. For instance, either way it will be important to effect a stay on triggering default clauses in contracts. For me, the big point here is to achieve resolution planning which creates sufficient confidence among national authorities that there is greater trust, and therefore a greater willingness to assume, for instance, that capital and liquid assets are moveable and can be employed across countries when needed. It is an essential pre-condition for confidence in cross-border bank activity and likewise it provides an important counterweight to policies that trap capital and liquid assets in host jurisdictions. In turn this allows a more neutral stance on the subsidiarisation versus branching issue.

This trend will benefit from the Bloomberg AIBIM Bursa Malaysia Sovereign Shariah Index (BMSSI) developed by the Association of Islamic Banking Institutions Malaysia (AIBIM), Bursa Malaysia and Bloomberg that is also being launched today as part of the enhancement in the Islamic finance platform. The launch of this ringgit sukuk index marks another significant milestone in the Malaysian Islamic financial environment as it measures the performance of ringgit denominated Shariah compliant government securities in addition to the benchmarking purposes. This development has been part of the continuous support by AIBIM and Bursa Malaysia to further strengthen Malaysia’s position as a leading sukuk market in the world. The collaboration between AIBIM, Bursa Malaysia and Bloomberg is also expected to see a ringgit corporate sukuk index in the offing. Moving forward, efforts are underway between Bank Negara Malaysia and Bloomberg to broaden this initiative to develop a foreign currency  BIS central bankers’ speeches  1  sukuk index. The liberalization of our financial markets is expected to attract more such foreign currency sukuk issuance by sovereign entities, multilateral institutions and multinational corporations. In further strengthening the infrastructure for the sukuk market, the Malaysian Electronic Clearing Corporation or MyClear, a wholly-owned subsidiary of Bank Negara Malaysia that operates the country’s real time gross settlement system and securities depository system, is also undertaking an initiative to promote cross-border financial transaction that is efficient, reliable and secured.
We are in a situation in which there is hardly any conflict between inflation and real economic considerations in monetary policy. Our decision to lower the interest rate is guided by normal monetary policy considerations – in other words, "business as usual". BIS Review 140/2008  5  When we lowered the interest rate we also noted that the effect of the lower rate would probably be smaller than usual. This is because the confidence crisis in the financial system has led to high risk premiums whereby short-term market interest rates were disconnected from their normal relationship to the repo rate, as I described earlier. The reduction we implemented on 8 October did not lead to an immediate drop in interbank rates. Consequently the mortgage institutions' borrowing costs did not drop either, neither did interest rates for loans to end customers. This clearly illustrates how the impact of monetary policy is dependent on financial stability. Some closing thoughts The Riksbank has worked on two levels during the current crisis. Interest rates were cut to alleviate the effects of the financial crisis on the real economy. In addition, measures have been taken on an ongoing basis to improve the functioning of the financial markets and to support financial stability. The interest rate decisions have been based on essentially the same type of considerations as those on which monetary policy is usually based.

For example, afire sale of assets by one bank may have a mechanical amplifying impact on other banks through its effect on market prices, but could simultaneously affect other banks via confidence and beliefs, if people become less optimistic about valuations of other assets when one asset class is in distress. 5 The role of beliefs and behaviour in affecting outcomes means that there is a premium on understanding decision-making under uncertainty. In economics, broadly speaking there are two approaches to modelling decision making under uncertainty: the standard, “rational” approach of “homo economicus” which assumes that beliefs are based on an efficient processing of all available information, and the “behavioural” approach, informed by the psychology literature, which highlights psychological traits that violate the assumptions underlying the “rational” view. The two approaches yield different conclusions on both the desirability of policy intervention and the form it should take. In practice, the applicability of each approach depends on the context. Rationality may be a reasonable approximation when decisions are carefully considered (perhaps because the returns to a “good” decision are high). But behavioural economists and psychologists contend that people often make decisions using simple or “fast and frugal” heuristics because of limited time, information, and cognitive capacity (Gigerenzer and Todd 1999). 4  For example, Caballero and Krishnamurthy (2008) show how liquidity shocks in the presence of Knightian uncertainty can cause investors to hoard liquid assets.
The extent of the diversity of economies in Asia points quite clearly to one conclusion and this is that monetary integration is inappropriate, at least for the time being. One can perhaps get a better appreciation of this argument by attempting to apply the Maastricht criteria for European monetary union to Asia. Thus realistically Asian monetary co-operation will have to be pursued under a multi-currency environment. Asian monetary co-operation is not about monetary integration. The situation argues for monetary segregation, even to the extent, in the case of China, of maintaining two currencies in one country: the Renminbi for the Mainland of China and the Hong Kong dollar for the Hong Kong Special Administrative Region. Again apply the Maastricht criteria to the Mainland of China and Hong Kong and you will come quickly to the conclusion that the “one country, two currencies” arrangement is a sensible one. It is essential if Hong Kong is to continue to be stable and prosperous as an international financial centre, as provided for in the Basic Law of Hong Kong. 44. Moving along the spectrum for monetary co-operation from the extreme end of monetary integration, we could consider whether some form of monetary policy co-ordination in Asia is appropriate. So far, however, there seems to be a lack of interest amongst monetary authorities in Asia in promoting this. Perhaps there has been no such need identified. Monetary sovereignty has been carefully guarded in this region.

And we’ll work together to ensure that, if the safety of the system relies increasingly on them, the standards they meet reflect their systemic importance. Because none of these competitive trends are to be stifled. In fact, they are to be spurred. Our job is to enable and encourage, ensuring these developments achieve their full potential. Conclusion  Five years ago, few could conceive of this unbundling of banking. In the wake of the crisis, any return of borrowing seemed a long way off. And Brexit wasn’t even a word. The lesson: stuff happens. And because it does, we all benefit from a financial system that can serve in the bad times as well as the good; from a system that doesn’t disrupt the economy but can deliver for it. But no set of rules, however detailed, will deliver that for all time. The framework that’s now five years old reflects that by hard-wiring the duty to keep up. Keep up with the macro trends. So that, whatever happens, the Square Mile is regulated for the good of all 94,000 square miles of the UK. Thank you. 10  All speeches are available online at www.bankofengland.co.uk/speeches  10  Charts Chart 1: Annual growth rates of UK mortgage and consumer credit lending  (a)  Chart 2: Spreads between quoted mortgage rates and risk-free rates  (a)  Source: Bank of England. (a) Sterling net lending by UK MFIs and other lenders to UK individuals. Seasonally adjusted. Consumer credit series excludes student loans.