samchain/econo-pairs-v1 huggingface dataset:
When we are feeling our way in trying to assess the pressure of demand in the economy, it can often be sensible to move rates gradually so that we can gather more information as we go on the effect of past rises. But, of course, we all know that if we get behind the curve, gradualism could compound the problems. The pace as well as the direction of any change is therefore a matter for discussion in most MPC meetings. Looking at the economy today there are as wide a range of uncertainties as ever, for example about the level of slack in the labour market, the pricing pressures in companies, the future path of oil prices and the strength of monetary growth. I want to discuss three which arise from developments in financial markets, and which are relevant to both the Bank’s core purposes: monetary stability and financial stability. 2  BIS Review 84/2007  Sub prime and the credit markets Let’s start with the credit markets. The backwash from defaults in the US sub prime market has been seen not just in the recent problems faced by some hedge funds 1 exposed to this sector but in credit markets more widely. Credit spreads have widened especially for riskier bonds (Chart 3), the covenant lite loans on offer a few weeks ago are off the table, and the leveraged loans in the warehouses are reported to be moving more slowly. And this has happened at a time when long term interest rates have been rising.

It takes many forms, and should extend across all areas of central banking. Few of the materials that will be discussed today and tomorrow illustrate this initiative very well. I hope there will be more similar examples in future workshops. The presentations and discussions today and tomorrow address a wide range of issues, reflecting the nature of problems that our economies are facing. I understand from the programme that our guests’ focus of research is similar to the one at the Bank of Albania. During the past year, we have focused on financial stability and monetary policy, trade integration and trade relations, and the modelling of stochastic economic process. But above all, the crisis, its implications, the channels of transmission, and policy response have become the focus of empiric and theoretic research in the central banks and academia during the last 4 years. The results of this research and analysis have taken central banks and their monetary and regulatory policies beyond what was considered sacred limits of monetary policy. However, this has not proven very helpful for the economy. It is now five years since the crisis began and the more authorities deal with short-term problems of growth and unemployment, the more they reveal long-term imbalances and structural problems of national and global scale. In the meantime, we still cannot fully define, understand and model the economy in its true stochastic form.
Marzunisham Omar: Fintech & entrepreneurship Opening remarks by Mr Marzunisham Omar, Assistant Governor of the Central Bank of Malaysia (Bank Negara Malaysia), at the Islamic Fintech Dialogue 2017 "Fintech & Entrepreneurship, Kuala Lumpur, 11 October 2017. * * * The financial industry today is confronted with a new normal – rapid advances in technology and an increasingly tech-savvy demographic are presenting both opportunities and challenges to the industry. Indeed, as financial technology or fintech is disrupting the industry, it is also emerging as a major game changer with unique value propositions. The nascent yet growing fintech space has large ambitions. At the fore is its aim to revolutionise the entire value chain of financing. Globally, fintech start-ups are making large inroads and openly challenging the traditional financial players in their own space. Significantly, fintech is reshaping consumers’ expectations of financial services. And yet, fintech does offer tremendous opportunities to financial institutions. There is no doubt in my mind that the financial institutions that fully embrace the advancements in technology will be the future winners. What is required is for us to face up to the reality of fintech – what it is, how it works and how to benefit from it. I am pleased to be here with you today and to speak at this inaugural Islamic Fintech Dialogue. The theme of the dialogue opens up an avenue for interesting discussions to take place on two key emerging trends – the expansion of fintech and the rise of entrepreneurship.

We can thus expect a decrease in ROE, but this only reflects the decreased risk premium associated with the decreased risk-taking. Similarly, the cost of debt decreases and this drop in the cost of funds perfectly offsets the effect of the greater use of the more expensive source of capital in the firm’s financing structure. The essence of the Modigliani-Miller theorem is that the cost of capital and thus the firm’s value are unaffected. Of course we do not live in a perfect world, and the Modigliani-Miller equivalence does not hold. Financing matters. The relevant literature typically puts forward a number of factors to justify the higher cost of equity financing: the fiscal advantage of debt, the cost associated with bankruptcy and the differential liquidity and issuing cost between debt and equity. These arguments apply to pure equity financing, not in the case of Cocos. As debt instruments, Cocos offer the fiscal advantage of other debt instruments. As hybrid instruments, they substitute for other hybrids that are already part of the financing structure of banks and that have proved relatively inexpensive for banks to issue. Finally, it is not clear that bankruptcy costs are relevant in the context of the TBTF problem where precisely those costs are never really incurred. For all these reasons, we may hypothesise that the total cost of bank financing will not materially increase as a result of higher capital requirements, in particular if the latter can take the form of Cocos.
A significant development relating to the Zambian financial sector was the decision to relocate the function of the Registrar of Banks and Financial Institutions to the Bank of Zambia from the Ministry of Finance and National Planning where it was previously located. This decision was taken in an effort to enhance regulatory oversight of banks and financial institutions starting from the licensing stage. Currently, all applicants have to be evaluated in line with relevant provisions of the Banking and Financial Services Act (BFSA) and international best practice such as the Basel Core Principles on Effective Banking Supervision. The intention is to ensure that only applicants who meet these stringent criteria enter the financial system in Zambia. This is crucial for fostering confidence and stability in the financial system. Mr Chairman, you may be aware that in the early stages of the reforms, a number of commercial banks faced serious problems and were subsequently liquidated. The closures were in part a consequence of the reforms. The reforms also highlighted some weaknesses in corporate governance arrangements at most failed banks. However, following improvements in the regulatory and supervisory frameworks, no bank closure has been recorded since 2002 and the banking sector has recorded significant growth. The growth in the sector can also be attributed to prudent fiscal and monetary policies aimed at achieving sustainable macroeconomic stability. This has been accomplished under a stable political environment and liberalised market conditions.

The entry of new players in the market is testimony of the confident that Bank’s supervisory oversight of the sector has instilled in both the general and investing public. We remain committed to executing our mandate and in ensuring that the financial system is properly regulated in order for economic agents to undertake their activities in a safe and sound environment. Distinguished guests, we note that financial intermediation is still very low in our economy and as such a lot of work still remains in this area. The Bank of Zambia encourages and supports market initiatives aimed at the financially excluded in order to achieve the objective on financial inclusion. It is therefore my view that promoting the initiative of reviving the operations of a Co-operative bank is important. As you are all aware, in a co-operative bank, shareholders and customers are the same group of people whose dominant purpose is to provide customer value by offering tailored-made products and services cost-effectively and close to home. Through their membership structures, Co-operatives are known to have a firm foothold in local communities and a sound knowledge of people’s overall financial situation. This enables accurate decision making and risk control which in turn, fosters regional development and social cohesion. Co-operative banks are also known for pioneering sustainable development and corporate social responsibility, through continuous engagement to fight unemployment and eradicate social exclusion. In fact, if properly managed, Co-operative banks can make the financial system more competitive.
Well, paradoxically, what we do is argue that we need to regulate more and better. There is now a version III of the Basel rules, which have grown from 37 to 616 pages.11 Andy Haldane, Executive Director of Financial Stability at the Bank of England estimates that, all together, the rules – once they are fully incorporated in national legislation in Europe – will number 30,000 pages.12 Is this really the way to go? Has the pendulum swung too far?13 Are we facing a new paradigm shift? In spite of lessons learned: back to square one The philosopher Henrik Syse has reminded me of this very phenomenon. Truths we took to be eternal often prove to bear the stamp of their time. We then find new truths and throw out the old ones. Following the policy failures in the 1970s, many economists believed that Keynes and his disciples were wrong, and “Keynesian” almost became a term of abuse, referring to irresponsible government spending. But to draw such a conclusion is to go to  10  Experience shows that governments routinely bail out banks on the verge of failing. Of course, this sort of implicit government guarantee makes lending to these banks safer, and their borrowing costs fall. The difference between the rate they actually pay and what they would have had to pay without the implicit government guarantee amounts to a subsidy.

23  1.25-2.25 1.0 0.8 -1.0  2.0-3.0 2.1 1.9 2.3  2.0-3.0 2.0 1.9 2.2  1.5 1.5 4.4 2.2 -4.0 18.7 23.0  1.8 1.9 2.2 0.5 -4.0 19.2 23.2  1.8 1.8 2.5 0.6 -3.9 19.2 23.2  (annual change, percent) GDP Demanda interna Domestic demand (w/o inventory change) Gross fixed capital formation Total consumption Private consumption Goods and services exports Goods and services imports Current account (% of GDP) Gross national savings (% of GDP) Nominal GFCF (% of GDP) (f) Forecast. Source: Central Bank of Chile. 17  Figure 18  Growth forecasts for selected economies  (annual change, percent)  8  2013-2019 average  2023 (f)  United States  Eurozone  2024 (f)  2025 (f)  7 6 5 4 3 2 1 0  China  Trading partners (*)  (f) Forecast. (*) For definition, see Glossary. Source: Central Bank of Chile. Figure 19  Commodity prices (1) (2)  (dollars/lb; dollars/barrel; index)  Copper  Oil (3)  4.5  Foods (FAO) 150  110  140  4.0  90  130  3.5  120  70 3.0  110 50  2.5 2.0  100 90  30 15  17  19  21 23(f) 25(f)  15  17  19  21 23(f) 25(f)  15  17  19  21 23(f) 25(f)  (f) Forecast. (1) Actual price/index refers to average of each year.
A characteristic and important example is the set of institutions, fiscal rules and provisions enshrined in the Treaty on European Union which lay the foundation for the maintenance of price stability and the pursuit of sound fiscal policies. The preservation of price stability in a modern economy with fiat money is the responsibility of central banks. Their monetary policy can ensure control of the price level over the medium and longer term. The effectiveness with which monetary policy can attain and maintain price stability depends on various factors pertaining to the way monetary policy is formulated and conducted. An essential condition for the effective conduct of monetary policy is the central bank’s independence so that it can take decisions on the appropriate policy to achieve its objectives without being subject to any pressure or interference by the government and any other political authorities. There are strong theoretical arguments why the central bank should be independent. But the most convincing reason, which has led many governments to de-politicise monetary policy and grant independence to the central bank as an economic institution, is past experience and the empirical evidence.

(2006), “Economic Culture and Economic Performance: What Light Is Shed on the Continent’s Problem?”, CCS Working Paper No.17, Center on Capitalism and Society, Columbia University, New York, July. Sapir, A., P. Aghion, G. Bertola, M. Hellwig, J. Pisani-Ferry, D. Rosati, J. Viñals, H. Wallace (2003), An Agenda for a Growing Europe: Making the EU Economic System Deliver, Report of an Independent High-Level Study Group established on the initiative of the President of the European Commission, Brussels. Sapir, A. (2005), Globalisation and the Reform of European Social Models, BRUEGEL Policy Brief No.1/2005, BRUEGEL, Brussels. Schumpeter, Joseph Alois (1911), Theorie der wirtschaftlichen Entwicklung, Vienna/ Leipzig, Humboldt, translation by R. Fels, Theory of Economic Development, Cambridge, Mass., Harvard University Press, 1932. Van den Noord, P., N. Girouard and C. André (2006), Social safety nets and structural adjustment, Economics Department Working Papers no. 517; OECD, Paris. Weber, M. (1905), “Die Protestantische Ethik und der “Geist” der Kapitalismus”, Sozialwissenschaften und der Sozialpolitik, 20 and 21. Trans. Talcott Parsons, Foreword by R. H. Tawney, The Protestant Ethic and the Spirit of Capitalism, London: Allen and Unwin; New York: Scribner, 1930. BIS Review 43/2007  11  12  BIS Review 43/2007  BIS Review 43/2007  13  14  BIS Review 43/2007  BIS Review 43/2007  15  16  BIS Review 43/2007  BIS Review 43/2007  17  18  BIS Review 43/2007
So the central bank’s mandate needs to permit a temporary undershooting of its inflation target if it thereby reduces the risk of a subsequent painful bust. The past few months have, however, seen questions asked of our inflation-targeting framework for other reasons. According to some, the framework has constrained the ability of monetary policy to support the recovery; an objective giving higher priority to growth or employment might have produced a better outcome. A particular, and increasingly popular, variant of this involves combining growth and inflation into a single target for nominal income. The first thing to be said is that the MPC’s mandate already incorporates a growth and employment objective. While our primary objective is to maintain price stability, subject to that we are also expected to support the Government’s policies for growth and employment. The Chancellor’s annual remit letter puts flesh on those bones, by specifying not only the 2% target for CPI inflation but also the Government’s desire for high and stable growth and employment. And the letter goes on to note “that the actual inflation rate will on occasions depart from its target as a result of shocks and disturbances (and that) attempts to keep inflation at the inflation target in these circumstances may cause undesirable volatility in output.” If we had tried to offset the impact on consumer prices of, say, sharp movements in import prices, then we would need to engineer countervailing movements in domestically generated costs, in particular pay.

Moreover, it is worth noting that since the MPC’s mandate dictates that we should support growth and employment provided that it does not conflict with achieving the inflation target, we are in any case charged with seeking to eliminate that part of the shortfall in nominal demand that is associated with an output gap, or that can be eliminated without generating inflationary pressure. Second, hard-wiring in higher inflation for a while is not without risk. In many economic models – including the one I used earlier – it is only the real interest rate that matters: it is irrelevant whether a lower real interest rate comes about through a lower nominal interest rate or a higher inflation rate. In the real world, inflation erodes the real value of cash, nominal bonds and fixed-interest debts. In itself, that may reduce the impact on demand of the promise to keep policy loose for long. But it is also apt to breed suspicion of a deliberate attempt to inflate away debt burdens, and may thus lead to inflation expectations becoming de-anchored. This is a serious risk: we should not forget the high levels of unemployment in the 1970s and 1980s associated with bringing inflation expectations back under control. Third, maintaining low interest rates even after the economy has recovered carries financial stability risks. My baseline simulations suggest that the period of very loose policy is already quite extended.
Aiming at positions of budget surplus and reducing debt to GDP ratios should free resources, which could be used by the private sector to finance new initiatives to create employment. I am confident that the first decade of the new millennium could, if all parties concerned take their responsibilities very seriously, mark the beginning of a prolonged period of price stability, growth and employment creation. Inflation rates are currently among the lowest levels observed after the war, and we are determined to maintain this very substantial achievement. Fiscal policies have already made good progress in correcting the serious mistakes of the 1980s and early 1990s and they are encouraged to continue on the path of fiscal consolidation. These favourable conditions for a period of growth are clearly better now than at any time over the last ten years and this should both foster and facilitate structural reforms. 2. Other activities of the Eurosystem  From among the other activities of the Eurosystem over the last few months, I should like only briefly to report on a few specific issues, which might be of particular interest to you. BIS Review 25/2000  2  At present, the ECB is preparing this year’s Convergence Report. As you will be aware, the Treaty requires the ECB and the Commission to present such a report at least every two years.

It is more interesting to look back on the reasons for this success, which, to my mind, was built on three founding principles: the Eurosystem’s mandate of maintaining price stability; the means employed to carry out this mandate, i.e. independence; and the spirit that drives its action – general European interest. A - The mandate: price stability The Eurosystem has been entrusted with a very clear mandate by the European treaties:1 its primary objective is to “maintain price stability”, in other words to avoid prolonged periods of excessive inflation – as seen in Germany after World Wars I and II – or deflation – seen following the crisis of 1929 –, which have consistently negative effects on the economy. Price stability preserves household purchasing power; and more than that, it builds confidence in the value of the currency and consequently reinforces the confidence of economic players in all their decisions for the future, from investment to contract conclusion. Some observers would have preferred a “dual mandate” to target both inflation and growth or full employment, as is the case with the US Federal Reserve (the Fed), for example. However, this would be politically unattainable given German culture and not particularly different in economic practice. In 1998, the ECB established a quantitative definition of price stability that it went on to clarify in 2003: to maintain inflation rates below, but close to, 2% over the medium term.
The Fourth Industrial Revolution has reached almost all sectors and all regions to some degree, even as the productivity problem in the UK as a whole has perpetuated. So how have these upper tail companies been able to buck the UK trend? The short answer appears to be because the UK is, on many dimensions, a global innovation hub. At a headline level, various indices of countries’ innovation status have been constructed. The UK has appeared in the top 5 of the Global  9  These numbers control for differences in the sectoral composition and sizes of firms between the countries in question. Further detail of the method used here is set out below Chart 7 in the annex. 10 Data refer to non-financial business sector. 4  All speeches are available online at www.bankofengland.co.uk/speeches  4  Innovation Index for each of the past five years, ahead of France and Germany. 11  It also ranks ahead of  them on the European Innovation Scorecard; it describes the UK as an “innovation leader”. Digging a little deeper, the UK scores particularly highly on research and development and start-ups. For example, it tops the charts among rankings of the world’s top universities, with 5 of the world’s top 25 universities according to The Times rankings for 2018, including the top two slots. And it also ranks first globally in categories such as citable scientific publications, e-commerce and ICT. It ranks fourth globally for its creative outputs.

The UK is the largest magnet for tech talent in Europe. This creativity and entrepreneurship is reflected in business start-ups. Over 1,100 new businesses start up in Britain each day – roughly, one every 75 seconds. 12  And when started, a disproportionately large number  succeed, with the UK home to half of the top 10 fastest-growing companies in Europe. 13  Financing them is a  venture capital industry which, in 2017, invested more in the UK than in Germany and France combined. The upper tail of UK companies, then, is large and thriving. It more than holds its own relative to international competitors. Although there is ample scope for improvement, the upper tail is fairly well-spread, sectorally and geographically. Its success is built on world-leading education, innovation and research. The UK is, genuinely, an innovation hub, with companies to match. Let us now reduce altitude and take a closer look at the lower tail. As Chart 7 also illustrates, there is a materially larger lower tail of UK companies, productivity-wise, than there are in Germany and France. 14  The  bottom 25% of UK companies have levels of productivity around 80% or more below the UK median. Their Germany and French counterparts have productivity around 60% or more below the median. If we look more closely at this lower tail, what is striking is both its scale and longevity. Table 1 shows growth in average productivity among the bottom 99% of the productivity distribution.