samchain/econo-pairs-v1 huggingface dataset:
In addition, the sharp rise in stock prices led to a re-assessment of the appropriate equity risk premium. The higher that stock prices rose, the more people thought that equities had little risk. Everyone could become a millionaire with little risk or effort. 4 Similarly, in the subprime/structured finance boom, there were several important positive feedback mechanisms. In particular, the surge in credit availability drove up the demand for housing and pushed up housing prices. This increase in demand caused the default  4  In fact, one book, Dow 36,000, which was published in 1999 shortly before the stock market peaked, argued that “fair value” for the Dow Jones Industrial Average should be 36,000 because the appropriate risk premium for the equity market versus Treasury bonds should be zero. BIS Review 43/2010  3  experience associated with such lending to be very low, reinforcing the notion that subprime lending was not very risky. It also reinforced the demand for the complex CDOs secured by such assets. During the boom, the structured finance models appeared to be sound because losses on the underlying subprime mortgage loans were low and because the correlation rates in performance across different assets in the pools were low, just as the models had assumed. Fourth, the proportion of market participants who believe that a particular episode of asset price increases are justified by the innovation tends to rise as the boom persists.

The next step is for the policymaker to evaluate what tools might be available to curb the imbalances that have been identified. The idiosyncratic nature of the innovations and belief systems associated with particular bubbles implies that the tools used to respond to each bubble will likely have to be different and tailored to the features of the particular bubble in question. 7  See Eli Ofek and Matthew Richards. 2003. “Dotcom Mania: The Rise and Fall of Internet Stock Prices.” Journal of Finance LVIII, no. 3 (June): 1113–37. BIS Review 43/2010  5  Finally, the policymaker needs to conduct a careful cost-benefit analysis, weighing how successful a particular policy might be in restraining the rise in asset prices versus how costly it would be to remain passive, letting the bubble grow and then potentially burst disruptively. Many factors will affect the outcome of this analysis including the magnitude of the potential asset bubble and whether the potential asset bubble is occurring in the equity or debt markets. In this analysis, the policymaker is likely to find that compared with equity market bubbles, credit market bubbles are more prone to generate higher costs when they burst. Thus, the benefits of preventing credit bubbles from forming and collapsing are likely to be higher. Credit bubbles that burst threaten the stability of the financial system much more directly than equity bubbles. 8 That is because much of the debt is held by banks and securities dealers that are highly leveraged.
Since July last year, inflation expectations have risen by around 40bp in the UK and around 25bps in the US and euro-area (Chart 15). The downside skew in inflation expectations appears to have dissipated. And not just among market participants. The shift in inflation narratives among the public has been every bit as striking. Google searches for the word “deflation” are at their lowest level in several years, having been particularly elevated in 2015. Searches for the word “reflation” have risen fourfold comparing the first quarter of this year with last (Chart 16). Hopes of reflation have displaced fears of deflation as the popular narrative about global inflationary trends. 13  All speeches are available online at www.bankofengland.co.uk/speeches  13  This shift in inflation expectations has important implications for monetary policy. One of the concerns about below-target inflation was that any negative shock to demand could dislodge inflation expectations, requiring further stimulus at a time when the zero lower bound on interest rates potentially made this less effective. This asymmetry of risks can justify holding interest rates lower for longer, on “risk management” grounds. 24  With inflation expectations now having adjusted upwards, the need for such monetary policy insurance is now lower than nine months ago. Fourth, closer to home, some of the worst of the post-referendum fears about UK growth have failed to materialise. Growth has been more resilient than expected. The Bank’s Inflation Report forecasts for UK growth in 2017 have been revised up by over a percentage point since last August.

22  All speeches are available online at www.bankofengland.co.uk/speeches  22  Chart 13: World trade in goods and euro-area and US capital goods orders Percentage change on a year ago 6 5 4 3 2 1 0 -1 2012  2013  2014 World trade in goods  2015 2016 Capital goods orders  2017  Sources: CPB Netherlands Bureau for Economic Policy Analysis, European Central Bank, Thomson Reuters Datastream, US Bureau of Labor Statistics, US Census Bureau and Bank of England calculations. Notes: World trade in goods is a volume measure; capital goods orders is defined as US new orders for non-defence capital goods excluding aircraft, deflated by the private capital equipment producer price index, and euro-area volume of new orders for capital goods, weighted together using 2014 US and euro-area manufacturing value-added data. Adjusted to match the mean and variance of annual growth in world trade in goods since 2012. Chart 14: VIX and media references of uncertainty Annualised standard deviations  Number of references per month 700  70  600  60  500  50  400  40  300  30  200  20  100  10  0 2000  0 2002  2004 VIX (RHS)  2006  2008  2010  2012  2014  2016  Media references to uncertainty (LHS)  Sources: Bloomberg, Financial Times, Daily Telegraph, Guardian and Independent.
1  Daníel Svavarsson: International investment position: market valuation and the effects of external changes. Central Bank of Iceland: Monetary Bulletin 2008/1. BIS Review 52/2008  3  Focusing again on developments this year, the attention of the outside observer is easily arrested by the depreciation of the króna. I mentioned earlier that it was overvalued for a rather extended period to the extent that the Central Bank warned that it would at some stage have to depreciate. The depreciation came earlier and faster than we would have hoped, partly and perhaps most importantly because of the radical changes in global financial markets after the middle of last year and the associated reassessment of risk. These changes meant that the access of Icelandic banks to foreign financing was seriously curtailed. Additionally, questions were raised about the viability of the Icelandic economy in light of the large imbalances and all of this led to an erosion of confidence. Subsequently, the exchange rate depreciated significantly. By the end of March it had fallen to a historically low level in real terms, a level that was clearly below its long-term equilibrium value. The Central Bank responded to the developments in March by raising its policy rate by 125 basis points on Tuesday morning after Easter, followed by a further 50 basis points increase on April 10, bringing the policy rate to the 15.5% which I have already mentioned.

It will be even worse, according to the banks advocating this level playing argument, if their national supervisor imposes capital or liquidity requirements that exceed the international standards. 14. Pillar 2 of the Basel Accord was of course introduced, at least in part, to do just this by enabling supervisors to make adjustments in minimum required levels of capital to reflect individual bank risk profiles, but even here we are met with “level playing field” arguments – complaints that other jurisdictions don’t use Pillar 2 to the same extent – or at all – and so we should not use Pillar 2 aggressively or else we will “damage” or “ham-string” our banks. But if this is the case, then if all banks seek to maximise their profits, by pushing down or “optimising” their capital and liquidity levels and taking on more risk – focused on the Basel standard as the ultimate benchmark – then do we not risk the standard actually encouraging a “race to the bottom”? Is it a race that may lead to higher profits or RoE for banks and their shareholders only in the short term? Is it a race that could create, in the longer term, serious problems for the safety and soundness of the banks concerned and financial vulnerabilities for society as a whole? 15. I don’t profess to know all the answers to the questions I have just raised. No matter what, there is a clear and indisputable need to enhance the resilience and robustness of the global financial system.
On the basis of developments in the Norwegian economy and the future outlook, Norges Bank raised its key rates by 0.25 percentage point as of 13 April, by 0.5 percentage point as of 15 June and by 0.5 percentage point as of 10 August. As already mentioned, this represents a substantial step in the adjustment of the interest rate that is appropriate on the basis of the analyses in the June Inflation BIS Review 67/2000  10  Report. However, in the light of recent trends in the economy and the balance of risks, the probability that the next change in interest rates will be an increase is greater than the probability of a reduction. Coordination of economic policy The experience of the 1970s and 1980s shows that, in the long term, monetary policy is not suitable for influencing competitiveness or the size of the internationally exposed sector. Any attempt to do this through the use of monetary policy instruments will inevitably lead to instability. However, fundamental real economic forces of this kind can be shaped through the use of fiscal policy. Although monetary policy is not suitable for influencing competitiveness, exchange rate fluctuations may provide an early warning that the internationally exposed sector is on the verge of losing or gaining strength in the contest for economic resources. A sound basis for exchange rate stability is a fiscal policy which manages to smooth fluctuations in domestic demand and production, coupled with well functioning income determination.

This would enable us to surprise market participants, and in the short term this might allow interest rate changes to have a greater impact. But enterprises and financial operators would gradually learn from experience and take positions to guard their interests. The long-term results would be weaker confidence in monetary policy, higher interest rates and risk premia, lower investment and an unstable exchange rate. Economic developments Chart 4 Effective exchange rate for EUR Nominal and real. Index 1995=100  There have been substantial fluctuations between the major currencies since the introduction of the euro. In general, the euro has depreciated against other currencies. Some academic papers suggest that the euro is undervalued. For instance, calculations in a working paper published by the IMF indicate  BIS Review 67/2000  6  that the nominal equilibrium exchange rate at the time of the introduction of the euro at the beginning of 1999 was USD 1.26 per euro.3 Forecasts Norwegian krone Market makers’ estimates  Expectations in money and foreign exchange markets seem to suggest that the euro is also considered to be undervalued in relation to the Norwegian krone. Estimates from market-makers indicate that the krone is expected to weaken against the euro over the next three to twelve months. Chart 5 Other exchange rates Index. January 1999=1000  The krone has depreciated against other currencies since the beginning of the year. It has weakened considerably against, for instance, the US dollar and pound sterling, but less against the Swedish krona.
Specifying all the circumstances that have to be considered so as to obtain the best picture of underlying inflation and doing this in advance is not a simple matter. Using underlying inflation also has the drawback that essential information about the inflation process may be overlooked. For example, changes in import prices are a part of the domestic inflation process because they affect price setting in trade. In the present state of our art, the drawbacks of changing to a measure of underlying inflation for the Riksbank’s monetary policy are greater than the advantages. As I have indicated, however, the CPI may be markedly affected by transitory effects. It is therefore important to monitor measurements of underlying inflation that have been stable over time. The path of the underlying inflation process is an important factor in the Riksbank’s monetary policy decisions. Gradual recovery In growth terms, 1996 was weaker than 1994 and 1995. The slowdown mainly came from marked stock reductions and a contraction of public sector operations. But even the growth of final demand in the private sector tended to slacken in 1996. There are now clear signs of an economic recovery; the volume growth of exports remains high, along with indications that a stronger increase in private consumption is on the way. What, then, will be inflation’s path in the years ahead?

MAS’ monetary policy stance since 2010 has underpinned the gradual improvement that we are seeing in Singapore’s inflation-growth trade-off. •  MAS is committed to ensuring that recent improvements in inflation are sustained. •  The current policy stance of modest appreciation of the Singapore dollar is appropriate in containing the re-emergence of strong cost and price pressures in a restructuring economy. Strong Singapore Dollar impacts MAS profits despite good investment returns Let me now move on to MAS’ financial results. MAS made investment gains of $ billion for the FY ended March 2013. •  This is lower than the $ billion earned in the previous FY, due primarily to lower interest income as interest rates continued to decline in FY 2012/13. 2  BIS central bankers’ speeches  But MAS recorded an overall loss of $ billion after taking into account translation effects from an appreciating Singapore dollar. •  In FY 2012/13, the Singapore dollar appreciated against all major currencies  •  In particular, the Singapore dollar strengthened 5% against the Euro, 6% against the Sterling, and 14% against the Yen during FY. •  It also appreciated against traditionally strong currencies like the Aussie Dollar and the Canadian Dollar. In short, we made good investment returns, but when measured in Singapore dollars, these gains more than offset by strength of the currency. •  This is an issue of reporting currency. If we had reported our profit and loss in international currency, it would show healthy profit.
Norman T L Chan: Hong Kong as a private banking hub – a regulator’s vision Speech by Mr Norman T L Chan, Chief Executive of the Hong Kong Monetary Authority, at the HKAB – HKIB Distinguished Speaker Series and HKIB Fellowship Conferment Ceremony, Hong Kong, 12 June 2012. *  *  *  Peter (Wong), Anita (Fung), Patrick (Fung), Julia (Leung), Ashley (Alder), distinguished guests, ladies and gentlemen, Good afternoon. I am most honoured to be conferred a Fellowship by the Hong Kong Institute of Bankers (HKIB) and would like to thank HKIB for recognising my contributions, which are in effect contributions of the HKMA, to the banking sector. The achievements of Hong Kong’s banking industry are attributable to the efforts of many stakeholders. Among them is HKIB, which has been providing quality education and training to the banking industry for decades. Many industry practitioners, and the banking industry as a whole, have benefited from the good work of HKIB. On this special occasion, I am also honoured to be invited to speak in HKAB-HKIB Distinguished Speaker Series. I will be speaking on “Hong Kong as a private banking hub – A regulator’s vision”.

In advancing the Islamic financial inclusion agenda, crucial criteria such as injection of innovation and enhancement of products and services as well as distribution channels to reach targeted groups especially the rural areas are essential:  4  BIS central bankers’ speeches    One of such example in Malaysia is the introduction of profit and risk sharing investment accounts, where savings are matched with funding required by SMEs for financing specific projects.   Greater outreach to microenterprises and SMEs can also be achieved through the wider application of equity-based structures in financing for Islamic microfinance and SMEs. This contributes towards the overall objective of generating inclusive growth that enhances job creation.   Other financial products such as microtakaful and waqf can also provide a financial solution for lower income groups and small businesses.   Through Islamic finance, we can also further explore the concept of agent banking or branchless banking to leverage on the role of traditional community centres such as mosques. This would harness more efficient means of outreach amongst Muslims, which is of particular relevance in many OIC Members.   Another important sphere that has not been explored exhaustively, Islamic financial institutions may also leverage on its large distribution network to facilitate the collection and mobilisation of zakat and waqf. Fifth, proportionate regulation can achieve objectives of inclusion, stability and integrity Proportionate regulation ensures that the costs of regulation do not outweigh the benefits of regulation and that regulation is commensurate to risks.
Even in countries that are not contemplating new compensation regulations, financial institutions need to carefully consider the higher expectations of regulators for compensation and incentive systems to be more closely aligned with prudent risk-taking. Talent strategies must reinforce a strong and enduring ethical foundation of the organization, while developing the individual and organisational agility to deal with external forces of change, including changes induced by economic and financial cycles. And an increased emphasis on leadership effectiveness and succession planning will be key to sustaining long-term value and confidence in financial institutions going forward. The issue before us is then, how can the talent be prepared for this new environment? And how can the changing nature and character of the new generation of talent be effectively managed to produce the best results for the organisation. Let me venture to elaborate some thoughts on the preparation of talent for increasingly complex positions in organisations. The best universities, in particular, the business schools from around the world have come under great scrutiny regarding their ability to produce the right kind of talent that organisations now require in this changing environment . The reviews have not only been on the curriculum to reflect the new demands of organisations but also on the balance between theory based education and the education  BIS central bankers’ speeches  3  that actually produce high performing practitioners. This included not only the development of new skills and capabilities but also the values and attitudes.

BIS central bankers’ speeches  1  Following the financial crisis, of course, the developed world has been in exactly that position: the neutral real rate of interest has been extremely depressed, official interest rates have been pushed to the zero lower bound and central banks have employed unconventional means of easing monetary policy. Were it to occur right now, sustained deflation would therefore pose more of a risk than at times when the neutral real rate was higher. But, in my view, those risks are nonetheless relatively contained. For one thing I think the evidence suggests that unconventional policy is effective: even if they don’t circumvent it entirely, asset purchases help soften the constraint of the zero lower bound. Second, with the financial system gradually improving my guess is that the neutral real rate of interest is more likely to rise than fall over the next couple of years. Third, and most importantly, I think the chances of a sustained and widespread deflation are in any case low. That’s certainly what the international experience suggests. That experience is substantial: we have annual CPI data since 1960 for over 70 countries, a total of over 3,000 data points. In only 70 cases (barely 2% of the sample) have consumer prices actually fallen and in the majority of those inflation was positive the following year.
Page 2 sur 5 The Euro-system staff projections of economic growth of 2.1% in 2018, 1.9% in 2019 and 1.7% in 2020 remains consistent with an ongoing solid and broad-based recovery; the French economy, which is sometimes considered to be a good proxy for the Euro-area average, is likely to follow a similar growth path with 1.8%, 1.7% and 1.6% in 2020 according to the Banque de France. On the inflation outlook, as part of the SAPI criteria, recent ECB and Euro-system staff projections have become more and more stable giving us increasing confidence that the improving economic growth we have seen will translate into rising wage and price inflation. In other words, whilst we might be a bit less certain precisely where we are in the cycle, we are more confident that we are heading in the right direction on inflation. Monetary policy decisions When would the Governing Council end the net asset purchases? When would it announce this decision? These were questions left hanging and the subject of market speculation before our meeting in Riga. Besides the famous and important three “Ps” – perseverance, patience and prudence - the Governing Council’s decisions were also guided by three “Cs”: credibility, consistency and clarity. Each element is important.   Credibility: Our actions are credible because they stick to our mandate and our economic forecasts, in particular with respect to the inflation outlook.

Goh Chok Tong: Developments in Singapore within the last 10 years Speech by Mr Goh Chok Tong, Senior Minister of the Republic of Singapore and Chairman of the Monetary Authority of Singapore, at the Singapore International Chamber of Commerce's (SICC) 170th Anniversary Dinner, Singapore, 25 May 2007. *  *  *  Distinguished guests Friends and Fellow Singaporeans I congratulate the SICC (Singapore International Chamber of Commerce) on your 170th Anniversary. You are one of Asia’s oldest chambers of commerce, and have contributed much to Singapore’s development. Ten years ago, in May 1997, I spoke at your 160th Anniversary Dinner. Little did I know then that within months, the Asian Financial Crisis would erupt and devastate many countries in Asia, plus a few outside. Singapore suffered collateral damage but our economy was relatively unscathed. What was the big lesson learnt? It was not just about having a flexible exchange rate or better supervision of the financial industry. It was: get your fundamentals right, build a strong economy with good governance. Then, you will better survive any unexpected financial or economic earthquakes. Following the Asian Financial Crisis, the world was hit by the dot.com bust and the September 11 attacks in 2001. The global economy slowed down and ours went into recession. Within one year, 23,000 jobs were lost. Just as we were recovering, we were hit by SARS (Severe Acute Respiratory Syndrome).