samchain/econo-pairs-v1 huggingface dataset:
7 The 2007-2008 food price shock was partially considered to be a one-off change in global relative demand and supply, such as the increased use of biofuels that should have no severe medium-term inflationary implications. However, with inflation rising, the monetary policy rate (MPR) was raised by 125 basis points in the second half of 2007, in order to mitigate undesirable second-round effects of the supply shocks (Figure 5). 8 By early 2008, the inflationary situation was still a complex one, but risks had decreased, and inflation was expected to reach its target thanks to the monetary policy actions already in place, lower world growth and a strengthened peso. Trend inflation tempered and monetary policy remained unchanged. During this period we decided to initiate a process of reserve accumulation. Nevertheless, halfway through the second quarter of 2008, the inflation path radically changed; the inflationary trend resumed, unexpectedly, with monthly inflation reaching more than 1%. The risks of inflation remaining above the target beyond the policy horizon also grew strongly. Consistently, monetary policy also had a strong reaction. The MPR was increased by 200 basis points in just four months. By September 2008, before the collapse of Lehman Brothers, the Central Bank estimated that it would be necessary to raise the MPR further, even above market expectations. Finally, inflation reached its 9.9% peak in October.

Then, this argument claims that the housing bubble was caused by monetary policy, which failed to act opportunely and permitted severe imbalances to accumulate. Nonetheless, one must bear in mind that soaring asset prices do not necessarily end up in a crisis like this one. Closer attention must be paid to the financial fragility that accompanied this process, whose main culprit was the unrestrained financial innovation that generated deep distortions that neither markets nor regulators were able to predict. An expansionary monetary policy can undoubtedly induce an excessive increase in the prices of assets and credit. The ultimate role of monetary policy is to smooth the business cycle and control inflation. 1 Therefore, it is possible to think that a very expansionary monetary policy, more so than that needed to reach the inflation target, can exacerbate an economic boom. Moreover, such a policy will have serious consequences on output once the monetary impulse is withdrawn. However, an expansionary monetary policy could not explain by itself the severity of the financial collapse and the global recession the world is seeing today. There are countries where monetary policy was expansionary, with interest rates at their minimum, and no housing bubble nor financial collapses occurred. A couple of examples are Canada and Chile, two inflation targeters where, consistently with this policy framework, interest rates hit very low levels not so different from the Fed Funds rate (Figure 1). Still, housing prices generally did not experience increases comparable with those of other economies, and their financial systems have remained sound.
In 1986, the General Banking Law introduced limitations on currency mismatch, constraints on related party lending, and restrictions for banks to receive goods instead of liquid resources; all of them, elements that were common practice before the 1982 crisis. Paradoxically, what could be considered harsher regulation did not hamper financial deepening. Instead, it fostered solvency and credibility of the banking system and allowed its healthy development in the ensuing decades. At the core of this development was the creation of a funded pension system, and subsequent capital market reforms, together with capital market openness, which dramatically changed the size, composition, depth, and strength of the financial sector in Chile. Now, during the transition toward fully implementing the current policy framework, Chile experienced a period of capital control that have been highly reviewed in the literature. The unremunerated reserve requirement (URR) implemented in Chile during the 1990s helped to change the composition of capital flows toward longer terms but was less effective in terms of reducing the aggregate level of capital flowing into the country. After removing the URR completely by the end of the 90s and allowing the exchange rate to fluctuate freely, the banking and corporate sector learned to operate in a completely different environment, characterized by an extensive used of the derivative market. In In particular, corporations have learned to operate in a flexible FX environment by using both, natural and market-based FX risk hedging instruments.

International Capital Flows in the Post-crisis World, September 2019  Banking sector  CENTRAL BANK OF CHILE  The Banking sector in Chile looks solid Bank Financial Strength Index  Chilean financial development (*)  (percent, Moody’s weighted average long-term banks rating)  (relative percent) Banking sector  Saudi Arabia Chile China Malaysia Poland Mexico Peru Thailand Indonesia Philippines Colombia Uruguay Panama South Africa India Romania Hungary Paraguay Bulgaria Russia Brazil Turkey Vietnam Nigeria Argentina Ghana Egypt Ukraine  100 75 50 25 0  CAR  ROA  ROE  Cap./Assets  1-NPL/L Market Cap 100 75 50 25 0  Financial sector  1/CDS  Domestic credit OECD Chile  Derivatives  0  2  4  6  8  10  12  14  16  18  LAC  Branches  EME  (*) Data are relative to the maximum on each dimension at the end of 2016 or to the latest availability. Sources: Moody’s and Central Bank of Chile based on information from BIS, WB, IMF and Bloomberg. Over time, markets have developed adequate FX hedging mechanisms having lower currency mismatches, inflation expectations have become firmly anchored at the monetary policy target level, the CBC has overcome fear of floating and the economy exhibit one of the lowest FX pass-through to domestic prices, financial markets have deepened and the labor market has gained some flexibility.
Moreover, third-country effects are unlikely to be major, because the European currencies as a whole are already somewhat over-represented in their share of world trade transactions relative to their countries’ weights in world trade -- not as much so as the dollar, but certainly more so than the yen. Finally, changes in trade invoicing practices have a direct economic impact only on the two parties involved in the transaction, and these effects are limited to determining who ultimately bears the exchange rate risk. In fact, because of the wide variety of risk-hedging instruments that are available to traders exposed to exchange rate fluctuations, the impact of exchange rate risk on trade patterns is likely to be secondary. This conjecture is confirmed by a substantial amount of empirical research. In short, the economic impact of the euro in international trade transactions is likely to be limited. The same cannot be said of the euro’s potential role in international financial transactions. Partly because of their sheer magnitude -- some estimates place the volume of international capital transactions at more than 40 times the volume of international trade transactions -- growth in the use of the euro as the currency of choice in global capital markets will have much more significant repercussions for the United States than will increasing use of the euro in global product markets. To a large extent, these repercussions reflect the well-known gains that stem from increasing returns in the use of a currency as a store of value.

In the process, I think we have learned to appreciate the complexity of this enormous undertaking. One conclusion I have drawn from my observations over the years is that many of the reforms Europe is pursuing on its path to monetary unification -- including fiscal stabilization, tax harmonization, welfare and labor market reform, trade liberalization, and capital market integration -are goals that are worth pursuing in their own right and for which EMU provides a consistent frame of reference. Continued progress toward furthering these broad-based goals is in the interest not only of Europe but also of the United States. There can be no question that the United States has benefited greatly in the past two decades from Europe’s deepening integration. Europe has provided a steady opening of markets for American products and served as a source of an increasingly efficient supply of goods to U.S. households and firms. Europe’s growing participation in international capital markets, which a successful EMU and a strong euro are intended to further, has also encouraged an increasing flow of savings between Europe and the United States in response to changing macroeconomic conditions in our two regions. We in the United States have much at stake in Europe’s and EMU’s future and we stand ready to work with you and support you in the furtherance of your historic efforts. BIS Review 109/1997
I believe that the requirements were the outgrowth of at least four major considerations: 1. What type of losses could banks expect to occur in a crisis? In other words, how thick a buffer was needed to absorb shocks? This is represented by the 2.5 percent capital conservation buffer. Although this is not thick enough to protect every bank in every crisis, it does create a loss-absorbing cushion so that banks will retain their ability to access the capital markets even after incurring significant losses. 2. How much common equity must a bank hold to be viewed as viable by financial market participants? This is important because beyond a certain point banks lose their access to the capital markets, and this makes failure much more likely. The 4.5 percent minimum common equity requirement is set at a high enough level so that a bank operating above this level would very likely still be able to access the capital markets to replenish its capital base after large losses. 3. What was achievable internationally? It is important to have international convergence in terms of standards. This is necessary to minimize competitive inequity and to avoid creating incentives for a race to the bottom. If standards differed markedly around the world, then the conversation would inevitably shift to “what will help my banks competitively” from “what levels of capital do we need to have a sound financial system”. 4. What is the appropriate tradeoff between benefits and costs?

Such targeting requires co-ordination between donors and must be in response to the real needs of a country. To this end we see it as imperative that there is effective follow up to the IMF’s FSAP missions to channel technical assistance to where it is most needed. It is also important for individual regulators in developed markets to contribute to capacity development elsewhere. The growing interconnectedness of the financial system means it is in our interests to do so. Sometimes bilateral links can be valuable, especially where the legal and regulatory systems are similar, in former colonies or territories perhaps. At the FSA we have a practice of receiving secondments from other regulators, which is valuable for us, and we hope for them. Perhaps more relevant for Singapore is ensuring that Emerging Markets’ concerns and experiences are heard. A thousand different voices can be lost in the clamour so it is important that objections are  6  BIS Review 25/2003  raised in an organised way, for example through regional organisations. Then the international committees themselves must ensure their consultation processes are meaningful and wide-ranging. Though this combination of adjusting committee structures, and membership, enhancing technical assistance and encouraging effective consultation we can ensure that regulatory standards are truly global and fit for purpose in countries at all stages of financial market development. Conclusion So to return, finally, to my introductory question – is the global regulatory system fit for purpose in the 21st century?
Some of us made it clear that, so far as our individual decisions were concerned, we expected, other things being equal, to vote for a gradual withdrawal of monetary accommodation if/as demand recovered and the slack in the economy was gradually absorbed. 17 Crucially, those statements were state contingent. Some policy strategy issues Against that background, I should like briefly to review, without reaching firm conclusions on, four issues that feature in the recent literature. Whether central banks should publish an expected (optimal) path for their policy rate. Second, whether stabilisation policy is subject to a bias, meaning that a central bank will find it optimal not to deliver on promises and that, in consequence, its policies to offset shocks will be less effective than they could be if it could commit itself. Third, whether stabilisation policy could be more effective if the central bank targeted a path for the price level rather than an inflation rate. And, fourth, how central banks should respond to asset price inflation. (a)  Should central banks publish an expected policy path? 16  For a discussion of some implications of different loss functions, see Vickers, J., 1998, ‘Inflation targeting in practice: the UK experience’, Bank of England Quarterly Bulletin, November, pages368-75. 17  For example, Tucker, P.M.W., speech at the National Association of Pension Funds Annual Investment Conference, March 2004, Bank of England Quarterly Bulletin Summer 2004, vol 44, number 2; and ‘Bank’s market man is ready for rate rises’ P.M.W.

Anita Angelovska Bezhoska: Enabling environment for capacity building Opening speech by Mrs Anita Angelovska Bezhoska, Vice-Governor of the National Bank of the Republic of Macedonia, at the Center of Excellence in Finance (CEF) coordinators meeting, Skopje, 1 December 2010. *  *  *  Dear ladies and gentlemen, Dear CEF coordinators, distinguished representatives of central banks and ministries of finance in the region, dear representatives of the International Monetary Fund, International Labor Organization and, last but not least, dear organizers of this event, representatives of the CEF (Center of Excellence in Finance), I wish you all a warm welcome. I am delighted that this year the traditional meeting of the CEF-coordinators takes place in the Republic of Macedonia and it is focused on a very important topic: “Enabling environment for capacity building”. No doubts that the knowledge does not have boundaries. All of us, during our lifetime do try to compile as much wisdom as possible, to broaden our knowledge horizon and augment what we already know. In our professional life, we face a constant intellectual and public debate, which tries to challenge the existing paradigms, to offer new insights and to establish new norms. All of this, of course, for the purpose of building stronger intellectual and analytical capacity for efficiently coping with forthcoming professional challenges. Sometimes, unprecedented events are needed to reveal the deficiencies in the currently accepted system of knowledge. These types of events underscore the weaknesses and pinpoint the missing parts of the puzzle.
See CBI (2016) 6  All speeches are available online at www.bankofengland.co.uk/publications/Pages/speeches/default.aspx  6  The greater those skills, the more productive workers are likely to be. Measuring human capital, as with measuring physical capital, also has its problems. But Chart 7 shows one measure of skills – the proportion of the workforce with at least NVQ Level 4 qualifications, roughly-speaking undergraduate degree level. It points to sharp regional differences. The percentage of the workforce with higher-level qualifications is 20 percentage points higher in London than in Northern Ireland, Yorkshire and Humberside and the North East. These regional skill differences have, predictably, a high correlation with regional productivity. Human, as well as physical, capital accumulation appears to be a significant part of the regional productivity story. One downstream consequence of lower levels of skills and investment is likely to be higher levels of unemployment. Chart 8 shows that this is true, with higher rates of unemployment in regions with lower levels of productivity and skills. This relationship appears to be particularly strong for levels of youth unemployment among those aged 16-24 (Chart 9). More generally, higher levels of productivity are often associated with higher levels of employment, not lower. It is not just standard economic metrics, such as incomes, that show a high degree of regional variation. So too do measures of social well-being, such as mortality rates. The mortality rate among working age males in London is around half that of those living in Scotland and the North-East (Chart 10).

That’s part of the political discussion; that’s not for us to decide. Very finally, the Eurozone budget – which is an idea wanted by the French President, Emmanuel Macron – seems to face a lot of opposition. Do you think it’s a good idea? Is it necessary and what could overcome this opposition? It is not an easy discussion. It’s a fundamentally political discussion that’s about sharing money, that’s about sharing sovereignty. It’s good the discussion has started. It’s good that ministers and leaders are discussing ways to make the Eurozone more resilient and to make the Eurozone stronger. Given the amount of uncertainty that we see around us in the world, all of us in Europe, in the Eurozone, have a duty to make our system stronger. It’s good that that the discussion has started, finally. 3/4  BIS central bankers' speeches  Even if it’s being delayed, even if it might not happen in this mandate of Emmanuel Macron? No one expects that discussion to be easy, so there is lower-hanging fruit such as completing the banking union. We would certainly hope that the capital markets union would feature more prominently on the agenda and also that the rules, the fiscal rules and the macroeconomic rules we’ve been working with, can be improved, can be made more credible. Fiscal union is not lowhanging fruit; it is difficult, it will take time, but it’s good that that discussion has started. 4/4  BIS central bankers' speeches
Inferior European management practicesxii seem to explain 30% to 50% of the Total Factor Productivity gap between European countries and the United States. Along with improvement in education, stronger competition and open labour markets could help Europe close this management gap. Capturing the full potential of our single market  To compete with the American or Chinese economies and their companies, scale is obviously of the essence. We are not that bad at start-ups, but the number of scale-up companies in Europe has to be dramatically increased. And this requires two strategic arrows targeted at size and money. Size: As I said, Europe has the advantage of having a single market, the largest in the world. But we need to be bolder and take full advantage of the size effect. We must revive the single market, above all because we can optimise its power by combining its various components much better: free movement of goods, naturally; but also regulatory power. We must use the power of standardisation, notably to direct innovation, as illustrated by the GDPR and data where Europe is taking the lead. We must have the courage to develop an industrial policy with public-private partnerships, as in the case of artificial intelligence and batteries. To achieve this, the European competition policy could be more strategically orientatedxiii. As such, Europe should (i) rethink what is the relevant market for mergers, (ii) not facilitate the market penetration of foreign firms. In the digital sector, network effects should be assessed to take into account monopoly positions.

It is difficult to completely capture a sequence of events where changes in different variables tend to reinforce one another in economic calculations. If the households have also been overly optimistic - irrational - in their expectations, it becomes particularly difficult to capture these effects. It is therefore important for forecasters to make more “qualitative” assessments in addition. Another reason for not trusting solely to formal models based on historical data is that the effects of structural changes that have taken place fairly recently can easily be underestimated. Let me give an example that to some extent captures these problems. During the years from the mid-1980s to the beginning of the 1990s, substantial changes were made in the economic structure and there was a clear correlation between the change in house prices and the change in household borrowing. The decline in house prices during the financial crisis at the beginning of the 1990s was largely due to an unfavourable combination of changes of both a structural and a cyclical nature. In connection with the deregulation of the credit markets during the second half of the 1980s, household borrowing increased substantially and the loans were largely used to buy houses. The fairly high and fluctuating inflation rate contributed to real interest costs after tax often being low, sometimes even negative, which in practice meant that one could at times make a profit from borrowing.
Productivity growth should pick up bringing the higher, sustainable pay rises that British workers deserve. 18 Specifically, the Bank’s latest forecast expects real wage growth to resume around the middle of next year and then to accelerate as the unemployment rate continues to fall to around 5½% over the next three years. By the end of our forecast, we see 4% nominal pay growth on average across the economy. This is consistent with our inflation target and the economy’s potential. I will touch at the end of my remarks on how workers and employers can raise that potential. But first let me turn to the implications of all these labour market developments for monetary policy. 17  Oreopoulos et al (2012) estimate that a rise in unemployment by 5 percentage points implies an average initial loss of earnings for new college graduates of around 9 per cent, an effect which fades only after a decade. The persistent effects from adverse labour market conditions are much larger for individuals in the first year of their careers than for those with a few years of experience. And losses are magnified for those whose earnings are predicted to be lower, based on their college major. See Oreopoulos, P, von Wachter, T and Heisz, A (2012), “The short- and long-term career effects of graduating in a recession”, American Economic Journal: Applied Economics, 4(1), pages 1–29.

This can be achieved by the further harmonisation of national procedures for supervision and crisis management, and by preparing for joint actions in one way or another. This of course requires better and more extensive cooperation across national borders. Because cross-border banking has a strong geographical component, enhancing cooperation on a regional basis can be an effective way of proceeding. We have in fact already taken some steps in this direction. Regarding supervision, EU leaders have been able to agree on an extensive set of reforms that will enhance coordination across member states, including the creation of European supervisory agencies and of a European Systemic Risk Board. In parallel, the EU has set up a number of colleges of supervisors for large cross-border banks, which will ensure that relevant national bank supervisors meet regularly, share information and expose or deal with any cross-border problems. In the field of crisis management, the attempts to enhance cooperation within the EU can be summarised in a set of non-legally binding Memoranda of Understanding (MoU). The latest MoU, which was signed in 2008, aims at improving cross-border cooperation between all the 27 EU Member States. Obviously, signing a non-legally binding document is not a solution to the complex trilemma discussed here. Nevertheless, the fact that representatives from supervisory authorities, central banks and finance ministries across the entire EU have agreed on a common set of principles for crisis management and resolution is an important starting point for more intense cooperation. But obviously more has to be done.