samchain/econo-pairs-v1 huggingface dataset:
In contrast, in the later downturn the previously accumulated provisions provided 5.5 percentage points of additional credit to non-financial firms and they also had a positive impact on employment and firms’ survival probabilities (see Macroprudential Policy, Countercyclical Bank Capital Buffers and Credit Supply: Evidence from the Spanish Dynamic Provisioning Experiments (G. Jiménez, S. Ongena, J. L. Peydró and J. Saurina), Journal of Political Economy, 125 (6), 2126-2177, 2017). 3  Bank capital, lending booms, and busts. Evidence from Spain in the last 150 years. M. Bedayo, A. Estrada and J. Saurina. Banco de España Working Paper No. 1847. 6/11  the expansionary phase. In fact, the cyclically varying nature of the elasticities signals that the cost of tardy activation can be much higher than the cost of an excessive anticipation. Moreover, this evidence also shows that the capacity of the CCyB to control the expansion of credit could be low, reinforcing the view that its main objective should be, on the basis of this evidence, to create resilience for the downturn. As I mentioned earlier, the current regulation makes this possibility perfectly feasible. Moreover, although it grants a preponderant role to the credit-to-GDP gap (the so-called "Basel gap"), which would tend to capture the existence of excessive credit dynamics only, it also allows the use of other complementary indicators along with expert judgement. Indeed, in Spain we complement the Basel gap indicator with another four indicators. They have been selected on the basis of their ability to predict systemic banking crises.

The activation of the macroprudential tools in order to create a buffer to be used in bad times incorporates a new dimension into the interactions with monetary policy. That is an issue which, in my view, should be analysed further. At a minimum, in these cases, monetary policy and macroprudential policy should take into account their respective decisions when calibrating the use of their instruments. As for fiscal policy, it is also important to emphasise that the creation of shockabsorption capacity through macroprudential decisions should not be used as an argument for relaxing fiscal policy. In other words, fiscal policy should also 7/11  create buffers in good times to be used in bad times, through automatic stabilisers or discretionary action, in particular in countries belonging to a monetary union. Another key issue related to this discussion is that the capital buffer built up in good times is expected to be released when the phase of the cycle changes. Significantly, this decision can be even more complex than those made in the activation phase. In this respect, and given the empirical evidence we have, there is a clear issue of timing. If it is released too early, it may even accentuate the expansion of the financial cycle. If it is released too late, it may entail a significant cost to the real economy. It is also necessary to assess whether the release has to be once-and-for-all or gradual. The release of the buffers may induce negative market reactions or generate conflicts with the microprudential supervisor.
And recently, it was reported that North Korea was able to illegally transfer monies from a Bangladesh account at the Fed to an account at the Philippines. What’s being done to protect funds that are held not only at the Fed but also at other financial institutions? President Dudley: Well, that’s a good question. Cybersecurity is a really important activity for us at the Fed. We want to make sure that not only is the Federal Reserve well-protected but also the banks that we supervise are also well-protected against cyber-risk. This is a particularly hard risk to evaluate on any given day because we’re trying to improve our defenses, but the bad guys are also improving their capabilities. So, we do a lot of different activities within the bank to make sure that we’re secure from a cyber-perspective. For example, we phish our employees, and we send them emails that sort of suggest that if you’ll click on this, and if you click on this you get a message from our Information Technology Department that you’ve been phished and you learn that you have to be a lot more careful about what you actually click on. That’s important because a threat can both come from outside, but it can also come from within. The other thing we’ve done is we’re spending a lot of time internationally to try to make the financial system safer by making sure that the payment executer, their systems are secure.

I said, “Tim, that’s a great job. I really like you, I’d love to work with you, but what do I do the 39 other hours of the week besides advise you?” And then a couple of weeks or months later, I can’t remember exactly how long it was, he called up again and said, “Well, how would you like to come to the New York Fed and run the Markets Group?” Markets Group at the time had about 230 employees. They executed monetary policy for the 14 / 15  BIS central bankers' speeches  Federal Reserve Bank of New York. I wasn’t sure I was going to have any time to talk to Tim Geithner in that role. And so I said yes immediately. Dr. Olajide Oladipo: You have a question? Are you a student? Audience Member: Yes, I am. Dr. Olajide Oladipo: Thank you. Audience Member: I am a student. Thank you so much for taking the time and speaking to us. My question was, being from a younger generation, I’m definitely interested in investing, but what would be your biggest piece of advice. Especially for us, the younger generation, with a limited budget, what would you – how should we go about it? President Dudley: Well, I don’t think I’ve ever been asked for investing advice before now. It’s probably not appropriate for the Federal Reserve to give out investing advice. I think the first thing is you want to get knowledgeable.
Forecasts for inflation, output, the interest rate and other variables are based on an assessment of the current situation and a perception of how the economy functions. Disturbances to the economy may result in changes in the forecasts. Our ambition must be to reduce uncertainty with regard to our own response pattern. That actual interest rate developments will deviate somewhat from Norges Bank's forecast must be expected to be the rule rather than the exception. There is, in other words, substantial uncertainty associated with future interest rates. I would draw your attention to the fact that the Executive Board, when providing a more precise indication of where the interest rate level should lie over the coming four month period, operates with an interval of around one percentage point. Uncertainty does not of course diminish as we look further ahead. This is a familiar situation for financial market participants, who are constantly changing their expectations concerning future interest rates as the economy is exposed to disturbances. Market participants’ interest rate expectations can be calculated on the basis of observed money market rates. The deviation between market expectations and the actual interest rate has been substantial in periods. One important reason for this is that the Norwegian economy has been exposed to  7  For more about these criteria, see Qvigstad, J.F.Q. (2005): “When does an interest rate path “look good”? Criteria for an appropriate future interest rate path - A practician’s approach”, Staff Memo 2005/6, Norges Bank, se www.norges-bank.no.

1 In addition to these changes in choice of interest rate assumption, Norges Bank has on some occasions commented on market expectations. In December 2000, the Bank stated in its editorial in the Inflation Report that market participants had a different view of the future interest rate. Communication following monetary policy meetings sometimes contained information concerning probable interest rate developments in the near future. After the inflation target was introduced in March 2001, monetary policy assessments had a more prominent position in the Inflation Report. In some cases, the Bank has indicated that it would prefer an interest rate path that differed from the path on which the projections were based. For example, Inflation Report 2/04 stated that “the most appropriate alternative now seems to be that the interest rate should be kept unchanged for a longer period than indicated by market expectations”. In other words, the interest rate considered by the Bank to provide a better balance was lower than the rate factored in by market participants. The chart illustrates what happened in summer 2004. The broken blue line shows the interest rate path underlying the projections. The line was consistent with interest rate expectations in the market as measured by forward rates. Norges Bank indicated in the Inflation Report that a lower interest rate than expected by the market would provide a better balance. What the appropriate interest rate level should be, however, was not stated explicitly, but the shaded area can perhaps provide an illustration.
37 38  25  All speeches are available online at www.bankofengland.co.uk/news/speeches  25  That said, greater use of unconventional monetary policy could increase the risk that the Bank’s core mission is co-opted in the pursuit of other public policies goals. Perhaps reflecting the success of inflation targeting in achieving price stability, in recent years a host of issues have been laid at the door of the Bank of England from increasing housing affordability to improving poor productivity. There have also been calls for asset purchases to address policy goals not directly related to monetary policy, such as people’s QE or MMT – which essentially equate to fiscal policy – and green QE to support the transition to a net zero carbon world by supporting green finance. In my view, these should be resisted. While carefully circumscribed independence is highly effective in delivering price and financial stability, it cannot deliver lasting prosperity and it cannot address broader societal challenges. Calls for the Bank to solve broader challenges ignore the Bank’s carefully defined objectives. And they often confuse independence with omnipotence. That is not to suggest that in a liquidity trap, fiscal policy would not have an important and powerful role. But even if that unfortunate circumstance were to come to pass, those decisions are best taken by governments. Central banks are fiscal price takers; the government is the Stackelberg leader.

Another example is the construction and engineering firm Odebrecht SA using its subsidiaries and shell companies in the British Virgin Islands and Belize to facilitate at least $ million in kickbacks to government officials and political parties. The schemes involved paying consulting and agency fees to shell companies who then facilitated payments to government officials. The most prominent scheme involved Petrobras, the energy company majority owned by the government of Brazil. The U.S. government worked with law enforcement in Brazil and brought criminal charges against Odebrecht and was able to recover billions from Odebrecht and related entities to help offset the theft of national resources. And the FIFA Scandal put a spotlight on corruption in sports – there was a global cabal of FIFA officials directing corrupt payments to executives around the globe controlling “futbol” clubs, or media companies with broadcasting rights to futbol events. Although these payments did not steal government funds, they did impact nonprofit schools and futbol clubs that were supposed to be the recipient of much of these funds. Multiple officials from clubs around the globe were prosecuted in the U.S. for those violations. One common theme in cases like these is that they tend to occur in countries where the powerful can easily take advantage of limited or immature internal controls. As is typical with most classic fraud triangle schemes, these people had the motivation (greed or perceived financial pressure), opportunity (powerful positions with weak internal controls), and rationalization (they deserved the kickback for years of hard work).
There was a great deal of surplus capacity, particularly in the major iron and steel sector. Together with the oil crisis and the collapse of Bretton Woods, the post-war international currency system, this plunged many industrial countries into an acute structural crisis. The extent of the crisis was, of course, influenced by economic policies; I say that as a reminder that the development I have described is not predetermined. The crisis for this former development cluster is sometimes seen as being connected with what we could accordingly call the third industrial revolution, namely the coming of the microprocessor. This has launched a new phase of transformation as the emergence of a new development cluster leads economic developments in new directions. Temporary setbacks not unusual when times are changing The setbacks, however, are not necessarily confined to traditional industries. Other types of economic reversals may also occur in periods of structural change. They may take the form of financial problems of varying severity. During the transformation process, investors and creditors perceive new profitable opportunities. Share prices rise and banks are willing to lend to new enterprises and novel projects. However, as share prices and the supply of credit are governed by expectations of future gains, undue optimism may sometimes cause them to rise too fast. Sooner or later, such bubbles based on expectations will burst and this tends to be associated with problems in the banking sector. The years 1907, 1920 and 1990 are three examples of this.

The bank crisis in the early 1990s is still such a recent event that I shall not dwell on it here. But it is worth noting that there was a similar crisis in the 19th century. As early as 1857 the government was obliged to intervene to safeguard the payment system in connection with a bank crisis: Skånes Enskilda Bank was threatened and finance minister Gripenstedt came to its rescue. Barely two 4  See Lennart Schön, ibid. BIS Review 10/2001  3  decades later, in 1878, another bout of excessive optimism and unduly strong credit growth led once more to a bank crisis when the boom was over. On that occasion the crisis hit Stockholm in particular. Stockholms Enskilda Bank was most vulnerable, having increased its commitments in private railroad construction in the 1870s. Government efforts saved the bank by establishing a fund in the National Debt Office so that the bank could mortgage its illiquid railroad bonds. These examples illustrate how excessive optimism is liable to lead to things getting out of hand and resulting in imbalances. The course of economic developments may then be checked for the time being but once the problems have been overcome, a new expansive phase begins. I leave you to draw your own parallels with the previous rapid price rise for IT shares and last year’s subsequent correction. The bursting of what some have called an IT bubble in the stock market is thus not the end of the new information technology’s era.
BIS Review 91/2001  1  growth in the interest rate swap market has also been associated with the continuing development of the Hong Kong dollar bond market, where well-rated names may combine issuance of longer-term fixed-rate paper with a swap to secure floating-rate Hong Kong dollars at sub-HIBOR, or, particularly in the case of some international borrowers, link this also with a currency swap to obtain US dollars at sub-LIBOR. As regards exchange traded products, there has been a recent surge of activity in HIBOR futures. This may owe something to the steep downtrend in interest rates this year, which could have prompted both those who expect it to continue and those who are content to lock in borrowing at current low rates, to enter the futures market in order to speculate or hedge on their respective hunches. All in all, as these various examples illustrate, the derivatives infrastructure in Hong Kong has developed well to meet the evolving requirements of the business and financial communities. Supervision Despite for the most part providing a beneficial service, derivatives trading also has the potential to bring disaster. Mere mention of the word Barings is no doubt sufficient to make the point. It is for this reason that the relevant authorities exercise supervision of derivatives activity. In the Hong Kong context, HKMA supervises the banks and other deposit taking institutions to ensure suitably prudent behaviour, while the SFC regulates exchange trading and the other players.

Tony Latter: Derivatives from a Central Bank perspective Speech by Mr Tony Latter, Deputy Chief Executive of the Hong Kong Monetary Authority, at the Seminar Programme of the FOW Derivatives Expo, Hong Kong, 5 November 2001 *  *  *  Introduction Why may central banks be interested in derivatives? Although it is dangerous to generalise, and no two central banks may see them in precisely the same light, there are certain aspects of derivatives in which central banks, including the Hong Kong Monetary Authority, probably have a common interest. I should like to review some of these today. For present purposes one does not need to be too precise as to what is meant by derivatives, save to note that the focus here is only on financial derivatives, although these do of course share many of the same basic characteristics as commodity or other derivatives. The textbooks give various definitions of a financial derivative: for instance, that it is a contract the value of which depends on or derives from the value of some underlying financial asset or index; or that it is an instrument which does not constitute ownership but only a promise or option to convey ownership. At its widest, the definition could embrace all futures, forwards, swaps, options, warrants, convertibles, asset-backed securities and so on, and all combinations or variations of those.
Global integration of trade and finance has followed roughly similar patterns. Both rose prior to World War I during the heyday of the classical Gold Standard, when trade and capital liberalisation were last at their peak. Both then fell during the interwar years, as national protectionism led to trade and financial barriers being erected. Then, from around 1960 onwards, trade and finance once more began to rise due to the lifting of restrictions on crossborder trade and capital flows (Broadbent (2014)). Despite this close historical correlation, the undulations in global finance are far greater than those in world trade. In 1960, global finance was around one third of its value in 1914, measured relative to world GDP. By 2010, it had risen to three times its value in 1914. Put differently, in 1980 global trade and global finance were on a broadly equal footing, at around a quarter of world GDP. By 2010, global finance was nine times global trade. At the same time world trade has flat-lined, global finance has come of age. Today, cross-border stocks of capital are almost certainly larger than at any time in human history. We have hit a new high-water mark. The same is probably true of cross-border flows of goods and services and is most certainly true of cross-border flows of information (Haldane (2013)). We are accustomed to talking of the information technology revolution. Yet the revolution in global finance has in some respects been every bit as striking.

Unlike currencies, the value of gold does not depend on a national sovereign. Moreover, payment transactions with gold are fully under a central bank's control. These are two important reasons why gold, more than any other type of investment, serves to ensure the capacity to act in extreme crisis situations. From an investment viewpoint, the price of gold often moves in the opposite direction to other financial assets, in particular to the US dollar. The price for this 'insurance function' is reflected in the fact that gold is less profitable in the long term than other financial assets. It is not surprising that Switzerland, a small open developed country with a highly integrated financial sector and an ageing but relatively wealthy population, continues to invest a significant proportion of its reserves in gold. At present, the SNB holds 1,290 tonnes of gold or roughly 30% of its assets. Price fluctuations in both directions are to be expected and may be strong and sustained. As was the case in the past, such price fluctuations will modify the proportion of gold on our balance sheet from year to year. These short-term fluctuations should not give rise to great concern. Experience has shown that extreme movements in markets tend to level out in the long run. BIS Review 61/2006  5
In view of our unique location as the gateway to Indochina, with a population of about 160 million, we have the strength of a potentially much bigger market. Within ASEAN, there is greater progress on the ASEAN blueprint, which lays out the strategic plan to achieve further trade and financial integration within 2015. In fact, with the AEC blueprint, we and the entire region stand to gain more from further trade and financial integration. Soon, Thailand will also be an integral part of the ASEAN Community under the new ASEAN Charter. Indeed, while we continue to wait for the resolution of WTO negotiations, Thailand and ASEAN have made progress on a number of free trade arrangements with Japan, China, Korea, Australia, and New Zealand. Ladies and Gentlemen, I hope that I have left you with some food for thought for the two days that you will hear directly from eminent experts of various fields. As a veteran central banker, I believe that over-optimism is just as dangerous as complacency in policy-making. Therefore, in today’s world of uncertainties and volatilities, vigilance and caution are crucial elements because the road ahead is likely to be a rocky one. But this should not prevent us from having a pleasant journey toward the more prosperous future for the Thai economy. The central bank is the only institution that has the legal responsibilities to preserve monetary and financial institution stability.

Today, more than half of the Thai labour force is in the non-agricultural sector (including services), which is more averse to changes in global competition for trade and investment. Moreover, to maintain competitiveness, our economy needs the labour force that possesses higher and more flexible skill sets to move up the valued added chain of production and trade. In reality, Thailand, just like other countries, has weakness in the mismatch of skills produced through formal schooling from those which firms find useful. Government policies need to address this weakness quickly, by finding ways to align formal education with training through vocational schools and apprenticeship programs organized by private businesses. Key questions will be on designing appropriate incentive structures for players in the education and business sectors, while being mindful of social safety net considerations when businesses close. This is especially important because the agricultural sector now accounts for about 10 percent of the overall economy and cannot provide social-safety support for the non-agricultural sector should a downturn hit. In addition to government policies, investors and firms can play their parts in helping to improve labour skill and quality development. This can be achieved through building more experience in the workplace by investing in the best technology and capacity to use that technology efficiently. Importantly, we also need to focus on the quality of investment that will help build skills and enhance production techniques that adds higher values and saves costs. Ladies and Gentlemen, To close, let me highlight another important underlying strength of the Thai economy.