samchain/econo-pairs-v1 huggingface dataset:
They promote a form of moral hazard that can sow the seeds of instability and of costly fluctuations in the real economy”. In practice it is difficult to know whether an “imbalance” does contain the seed of a future negative demand shock on a scale that would leave inflation below the target for some considerable time, or whether it will unwind of its own accord. The fact that growing imbalances might cause sharp deviations of inflation from target at some point in the future, raises the possibility of a trade off between deviations of inflation from target over the next  BIS Review 68/2002  15  year or so and deviations of inflation from target further ahead. That, I believe, is the right way to think about the challenge to monetary policy posed by asset price movements. Although there are no simple answers I hope I have shown that inflation targeting is enough, provided that one thinks carefully about the horizon over which policy can hope to affect inflation. The second challenge for monetary policy over the next decade is the possibility of deflation. That prices are now rising at the slowest rate for decades is, of course, a positive achievement of which the Bank is proud. But is the real threat now deflation? It is important to recognise that falling prices of manufactured goods is not the same as general deflation.

Britain has now experienced 41 successive quarters of positive economic growth. And unemployment in this country is lower than in any other G7 country. This greater stability is no accident. It is the product of a commitment to price stability as reflected in an institutional design encompassing a clear inflation target and a transparent and accountable process for reaching decisions on interest rates embodied in the Monetary Policy Committee. At the beginning of my lecture I referred to the frescoes of Good and Bad Government by Lorenzetti. If today you go to the Palazzo Pubblico in Siena to see these wonderful paintings in the Sala della Pace, which I translate as the Room of Stability, you will see the results of allowing daylight to fall on the walls. Yes, greater transparency - more daylight - has damaged the paintings. But if you look carefully, you will see that whereas daylight has caused no harm to the paintings of Good Government, it has indeed damaged Bad Government on the opposite wall. Even today, Lorenzetti’s frescoes tell us about the benefits of transparency and the importance of careful institutional design. Five years ago I delivered, again in this room, a lecture on the inflation target five years on. I argued that the new requirement on the Governor to write an open letter to the Chancellor whenever inflation deviated from target by more than one percentage point would provide ample opportunity for the Bank to restore the lost art of letter-writing. No letter has so far been required.
Figure 1 Gold per Capita as of December 1998 in Grams 30.5  United States  45.1  Germany  54.3  France  45.0  Italy  365.5  Switzerland 68.9  Netherlands Japan United Kingdom  6.0 12.3 29.1  Belgium Sweden Canada  16.6 2.6  Source: I WF, OECD  BIS Review 31/2005  5  Figure 2 Gold Holdings in Percent of Annual Imports as of 1998 United States  6.5%  Germany  6.3%  France  9.0%  Italy  8.9%  Switzerland  25.4%  Netherlands  5.2%  Japan  1.8%  United Kingdom  1.6%  Belgium  1.7%  Sweden  1.6%  Canada  0.3% Source: IWF, OECD  Figure 3 Gold Price since 1996  500  450 Announcement of Swiss Foundation for Solidarity  USD/oz  400  Experts propose the sale of 1300 t gold  Parliament vote new federal law on Government's approval currency to experts plan  350  End of the sales  Beginn of the sales  300  250  Swiss approve revision of federal constitution UK sales announced  200 01 96  6  01 97  01 98  01 99  Washington Agreement  01 00  01 01  01 02  01 03  01 04  01 05  BIS Review 31/2005  Graph4 SNB’s Quotas under the Washington Agreement in Tonnes  283  283  284  200  130 120  1999-2000  2000-2001  2001-2002  2002-2003  2003-2004  2004-2005  Graph5 SNB’s Cumulative Gold Sales  1400 1200  in Tonnes  1000 800 Direct Sales  600 400 200 Sales through BIS 0 May-00  BIS Review 31/2005  May-01  May-02  May-03  May-04  7

The Basel Core Principles are part of the "Key Standards for Sound Financial Systems" laid down by the Financial Stability Board (FSB) that warrant priority implementation, depending  1/3  BIS - Central bankers' speeches  on country-specific circumstances. Moreover, implementation of these principles is generally assessed through the IMF/World Bank Financial Sector Assessment Programs (FSAP). Allow me now to make four general points on the topic of policy coordination in a globalised world, focusing again on the financial stability domain. First, I think it is helpful to take a step backwards to review the rationale for international cooperation and global standards when it comes to the financial and banking system. The history of banking crises has painfully illustrated that financial stability is a global public good, with the costs of systemic banking crises often exceeding 100% of a country's GDP. Yet, if each jurisdiction is left to itself when it comes to safeguarding financial stability, the cross-border spillovers of financial distress can result in individual jurisdictions "underinvesting" in financial stability. That is why global cooperation is needed. Another way to think about this is to build on Hélène Rey's seminal work on the monetary policy dilemma/trilemma, which has an analogy in the area of financial stability, as pointed out by Dirk Schoenmaker. In short, any two of global financial stability, financial integration or national financial policies can be achieved, but not all three at the same time.
Because this cost both time and money, it took a while before these changes were implemented. 10  Conclusion – most indications point towards a slowdown Historical averages are usually a fairly good starting point for forecasts of future developments, particularly in the slightly longer term. But in the case of productivity, history gives us different answers. The reason for this is that the trend in productivity growth has varied so substantially over time. The average increase in productivity growth in the business sector was around 4 per cent a year during the past five years, but only around 3 per cent a year if one instead looks at the past fifteen years. If one goes further back in time, one can find both higher and lower rates of increase. During the 1960s the rate of increase was around 6 per cent a year and during the 1980s it was only 2 per cent a year. It is thus not history giving us the answers, but the two parts I mentioned just now – changes in the economic cycle and structure. The cyclical factors indicate a slowdown. Productivity has been unusually strong in recent years during the initial phase of the economic upturn, but will probably be weaker in future when economic activity slows down. The structural factors also indicate a slowdown. While globalisation will continue to contribute to stiff competition and IT will in future contribute to continued rationalisation.

Andrew Bailey: Recovery and resolution plans Remarks by Mr Andrew Bailey, Executive Director for Banking Services and Chief Cashier of the Bank of England, at the Santander International Banking Conference, Madrid, 17 November 2009. I am grateful to Victoria Cleland, Chris Daniels, Iain De Weymarn, Andrew Hauser, Andrew Hewitt, Tony Lomas, Orla May, Maggie Mills, Sally Reid, Paul Tucker and Andrew Wardlow for their comments and advice. *  *  *  It is a pleasure to be in Madrid today, not least because finding time to reflect on the future of the banking system means that we are at some distance from the urgent fire-fighting that has characterised the past two autumns. But I would not wish thereby to downplay the importance and urgency of the rebuilding task. The past two autumns were in many ways taken up with doing what had to be done in crisis conditions. And what had to be done involved the use of public money on a scale that has been unprecedented and was previously unimaginable. There was nothing easy about that task, and from the perspective of resolving the problems of the system too often we have had to grit our teeth, accept that “we are where we are” and get on with the job in hand. Fire-fighters don’t get to choose the fires they fight, or even sometimes how they fight them. But fire prevention is better than fire-fighting.
The recession after the credit bubble burst and oil prices fell in 1986 was deep. The recession was deeper than would have been the case if we had maintained a larger and competitive manufacturing sector. Norwegian industry lost export market shares in the late 1980s in spite of the booming conditions abroad and substantial capacity slack at home. It was recognised that a substantial revision of economic policy would be necessary and that the problems created by inflation had to be taken seriously. The exchange rate was chosen as the nominal anchor in 1986. A fixed exchange rate was an intermediate target for achieving low and stable inflation. Inflation fell gradually to 2-3 per cent in 1991-1992. We had to abandon the fixed exchange rate policy in 1992. An important reason was the weakness inherent in the fixed exchange rate regime in a world with free capital flows and deep financial markets. The krone exchange rate showed, however, little change to begin with and rapidly found a new range. A formal inflation target for monetary policy was introduced in the spring of 2001. The operational target of monetary policy as defined by the government is inflation of close to 2.5 per cent over time. Many countries had already gained many years’ experience in operating such a system. New Zealand was the first in line towards the end of the 1980s. Canada followed shortly thereafter.

Another practical example on how to reduce the regulatory burden would be for countries to agree on a common and centralised reporting standard for large cross-border groups. The home-host relationship… The home-host relationship is the underlying theme running through a number of issues in the regulatory debate. Broadly speaking, the home-host relationship is about how we should divide tasks, powers and responsibility between different countries when it comes to supervising, monitoring and, in the worst case, sorting out financial institutions in distress. Formally, the home-host relationship only refers to the division of responsibility between supervisors, which currently is based on the principle of home country control. The home country is the country where the bank is licensed. For a bank, this means that the home country is responsible for supervising the bank and its foreign branches. The home country’s deposit insurance also covers its banks’ foreign branches. In the case of a group, it means that the home country is also responsible for supervising the entire group on a consolidated basis, while the host countries are responsible for their respective subsidiary banks and deposits. At this very moment, the CEBS is drafting the so-called home-host paper giving guidance on how the home-host supervisory relationship should be arranged given existing EU legislation. Even if there are no legally binding rules regarding the relationship between countries in crisis management or crisis resolution, these aspects of regulatory involvement have borrowed the terminology of the supervisory home-host concept.
Bandid Nijathaworn: Rethinking procyclicality – what is it now and what can be done? Presentation by Mr Bandid Nijathaworn, Deputy Governor of the Bank of Thailand, at the Bank for International Settlements/Financial Stability Institute-Executives’ Meeting of East Asia-Pacific Central Banks (BIS/FSI-EMEAP) High Level Meeting on “Lessons Learned from the Financial Crisis – An International and Asian Perspective”, Tokyo, 30 November 2009. *  *  *  First, let me thank FSI and the EMEAP Working Group on Banking Supervision for the invitation, and also a special thanks to our host, the Bank of Japan and the Financial Services Agency, for the excellent arrangement. The topic of this session is procyclicality and macroprudential supervision. As the first speaker, I have been asked to give an overview of the issue. A good starting point to discuss the issue is to remind ourselves that the issue of procyclicality, especially procyclicality of the financial system, is not new. Discussion about interactions between the financial system and the real economy, especially the idea that the financial sector can amplify economic activities and business cycles, has been well documented by economists, for example, in the financial accelerator model. Here in Asia, the issue of procyclicality had been brought to the fore during the Asian financial crisis, after which the issue was extensively discussed. Two important conclusions emerged from those early discussions.

It is only when confidence improves, typically following a major policy intervention, that the downturn both in the business and financial cycles begin to stabilize. With reference to the current crisis, there were at least two specific features of the financial structures in the advanced economies that amplified the procyclical tendencies in the three cycles I have just described, thereby making the situations worse than might have been. First, the duration of the upswing in the financial cycle was made longer by changes in the financial structures that resulted from financial innovation, misplaced incentives, and the way businesses had expanded by circumventing financial regulation which allowed risk to be underrecognized for a long period. A case in point is the originate-to-distribute model, the CDO derivatives, and the use of SIVs as a vehicle for taking risk out of banks’ balance sheets. Second, in this crisis the downturn of the cycles were particularly damaging partly because of the interactions or feedbacks within the financial system, as opposed to the interactions between the financial system and the real economy. These within-the-system interactions took the form of positive feedback loops in various market segments that were set in motion in the downturn as market participants responded to the emerging problems and distress. Such feedback loops included the SIV shutdown and its compounding effects on CDO losses, the asset fire sales driven by risk management response by banks, and heightened concern about counterparty risk that precipitated the hoarding of liquidity.
Having a leverage ratio to complement risk-weighted capital requirements has many advantages. Some of them I have already alluded to. Most significantly, a leverage ratio can operate fully independently of any complex modelling assumptions and calibration procedures. As such, it serves as a complementary instrument to risk-weighted requirements when assessing banks’ capital adequacy. This is of considerable value. During the recent crisis those banks and supervisors, which took several instruments into account, including volume limits and restrictions on asset growth, clearly performed better. 18 More generally, research has shown that risk-weighted capital ratios and leverage ratios contain complementary information about banks’ condition. 19 Hence, by looking at both risk-weighted capital ratios and leverage ratios, supervisors and banks can be expected to make better judgments in a systematic way. Moreover, it is much more difficult for banks to arbitrage around two capital ratios than around just one. Can we say anything about the role of leverage ratios in the recent credit crisis? While a rigorous analysis would reach beyond the scope of my comments today, it seems clear that the leverage ratio has helped protect the US banking system from even greater calamity. This is not necessarily because the leverage ratio encourages more prudent behaviour, but because the leverage ratio ensures a minimal buffer to absorb the negative consequences of imprudent behaviour. I leave it to your imagination what would have happened if the US banks had entered the current crisis with leverage ratios of only 2 percent instead of well over 5 percent.

Then I shall look in a more principled way at what the new economy may imply for monetary policy. In this context I shall mainly consider the consequences in terms of higher productivity growth, but I shall also be touching on the new economy’s impact on demand, which has attracted less attention in the public debate. This will be followed by a look at Sweden and the conditions for a new economy and the inflation process. What is the situation here as regards, for example, the use of IT and competition? Has the new economy led to changes in the inflation process? Finally, I shall be saying something about what the Riksbank has to consider in the context of the new economy’s existence or non-existence. My review today obviously will not result in definite answers either way. The questions are too complex for that. Economists are finding it difficult in general to arrive at sound explanations for technical development and growth. The discussion about the new economy is therefore welcome on that account. It can inspire studies of the driving forces behind the technical progress we are aware is so important for our prosperity but about which we unfortunately do not know enough. 1. Starting point: experience in the United States  The American discussion about the new economy was instigated by a generally good economic performance that combined high growth and employment with low inflation. A variety of factors contributed to this achievement.
That means that the UK has three times as many assets from overseas banks as a share of GDP as does the US from all banks operating there. In addition we supervise in the UK more than a third as many assets from US banks as do US regulators from US banks operating in the US. Furthermore we have almost twice as much international banking activity booked in the UK as anywhere else. Understanding the benefits and risks of international banking matters a lot to us. We also have a unique perspective given the range and nature of business undertaken in the UK. We are host to the largest investment banks, and to global capital markets trading activities in particular. This makes us and the US one of the most interconnected countries in the global financial system. Given the inter connectedness and potential complexity of the UK’s part of the financial system, its health undoubtedly matters a lot for global financial stability. But in addition we are host also to a great many firms which are neither focused on the domestic UK economy nor are they globally systemically important. These banks instead use the UK as a base for wholesale banking activity and trade finance whether their roots are in Europe, the Middle East, Africa, Asia or the Americas.

As host supervisors we learnt all too clearly the need to get sufficient detail on the significance of overseas banks’ branch activities to understand their potential impact on UK financial stability, the need to understand the major risks run by a global parent and the impact that might have on UK operations, and the potential need for early supervisory intervention. In the immediate aftermath of the crisis, and reflecting these lessons, there was a change in approach from this fragmentation to regulatory balkanisation. This approach is aligned with the pure host-led model I described earlier and is based on the premise that host entities should be clearly separable and separated from their parent group. At the extreme, this treats local subsidiaries in isolation from the parent group, with a sufficient local pool of capital and liquidity so that it is self-sustainable in the event of failure, ensuring that the entity can be resolved on its own. On the face of it, this provides for domestic financial stability. However, it is not without cost. The benefits of international trade and capital flows are reduced. Total global capital requirements are higher since the benefits of diversification in international banking are not recognised. And how realistic anyway is the premise of self-sustainability at the individual country level for businesses that are inherently global and closely integrated – as opposed to groups that represent in effect a collection of standalone retail banks.
At the Central Bank we are following closely these new developments in the financial sector locally and globally to understand potential benefits and to identify potential risks that need to be mitigated. We will keep monitoring these developments, to incorporate them in the regulation issued by the Central Bank on payments, as well as in the analysis of emerging risks in the financial sector that we provide in our Financial Stability Report as well as in the new Report on Payments and Infrastructures that we started publishing this year. Challenges ahead I started this presentation explaining the measures taken by the Central Bank to reduce macroeconomic imbalances in pursue of its mandate of price stability and the main elements of the financial regulatory agenda which certainly has contributed to financial stability and will continue to do so in the next years. Before concluding, I would like to refer to some of the challenges that lie ahead for our financial sector. A deep capital market is critical to support economic recovery and a play a relevant role to the resilience of the financial system and its ability to accommodate external financial pressure. Therefore, it is imperative to recover our capital market. Pension funds 16  withdrawals affected this capacity and brought back our capital market some years in terms of size and depth. Getting back on track is not an easy task and it requires a shared effort from the public and private sectors.

(iv)  More efficient retail payments  Given its legal mandate, one of the priorities of the Central Bank is to contribute to the development of the retail payment system in a manner that strikes a right balance between security and innovation, efficiency, and inclusion. The Central Bank will continue with an active agenda in this area, just as in previous years, although the focus might shift from “traditional” issuers and acquirers of payment cards towards fast or instant payments. In the near future, it is urgent to solve frictions that affect the market of payment cards, which may affect incentives of market participants to continue the path of development that we have seen in recent years after changes in regulation made by the Central Bank. Recently, new acquirers and issuers of prepaid cards have entered the market bringing competition and alternatives to persons and merchants, and the use of digital payment instruments has had a huge increase. This is the result of long-standing efforts, and momentum gained during the pandemic with a wider use of digital payments. 12  Regarding fast or instant payments, there is an international trend to implement systems that allow funds to be received by the final beneficiary as soon as it is triggered by the payer. In Chile, this has been the standard for a long time for electronic transfers of funds, but we believe that there is still room to improve.