samchain/econo-pairs-v1 huggingface dataset:
Surveillance and penalties  However successful we may be in introducing stronger standards, and incentivising people to follow them, attempted misconduct will still occur. So the Review also wants to consider whether more needs to be done to monitor for, and where it is found punish, misconduct. Firms should be at the frontline of these efforts. Underdeveloped monitoring systems and poor procedures for dealing with internal misconduct undoubtedly played a role in recent years. Though approaches to these issues have since improved, the Review is keen to identify examples of best practice, and ways in which the authorities can catalyse further progress. Questions we raise include the scope for stronger firm-level whistleblowing regimes, the role for electronic surveillance tools, penalties imposed by firms for staff breaching internal guidelines (and ways to publicise such cases), and the extent to which firms can punish poor behaviour by other firms by shifting business and reporting such behaviour to the authorities. Conclusion Let me come to a conclusion. We are slowly emerging from the worst economic crisis in living memory. Much has been done to strengthen the financial system since then: banks hold much more capital, they have more effective liquidity support, major progress has been made on ending Too Big To Fail on the global stage, and in the UK we have transformed the way that we regulate banks and how we set policy to deliver financial stability. But some of the benefits of these advances are being offset by a long tail of outrageous conduct cases.

At the same time, individual investors, immersed in chat rooms and message boards, are exchanging questionable and often misleading tips. Yet, despite all this available information, investors find it increasingly difficult to profit. … Stock prices skyrocket with little reason, then plummet just as quickly, and people who have turned to investing for their children’s education and their own retirement become frightened. There appears to be no rhyme or reason to the market, only folly.” This is a quote from the preface to a recently published biography about the well-known and long term 1 value oriented investor Warren Buffet. Buffet began his career forty-five years ago with only 100 U.S. dollars and has over the years built himself a multibillion-dollar fortune. I quote the passage to illustrate a view held by some of what was going on in the stock market during the end of the 20th century and the beginning of the 21st. Learn from new theories From experience we know that investors may temporarily pull financial prices away from their trend level. Over-reactions can occur so that excessive euphoria drives prices unduly high, just as undue pessimism can push them down too far. New theoretical and empirical arguments have been put forward against the notion that financial markets are efficient. According to the efficient market hypothesis, it is only changes in fundamental factors, such as profits or dividends, that ought to affect share prices.
As you know, the globalisation of the world economy and the development of financial markets were driven by two key factors: ·  firstly, financial deregulation -reinforced in Europe by the setting up of the single market and subsequently of the Economic and Monetary Union- which liberalised capital flows and enhanced competition among financial sectors;  ·  and secondly, technical and financial innovation, which simultaneously paved the way for the creation of financial markets that are deep, liquid and interconnected. What is interesting to stress regarding financial globalisation is that the interaction of free capital movements within interconnected markets, increasing integration of market segments and hedging opportunities provided by new financial instruments have allowed a better fit between the financing capacities and borrowing requirements of governments, households and companies. The use of market interest rates, which represent the markets’ consensus on the risk incurred at a moment, as a driving force is fully beneficial to an efficient allocation of capital. Lowering the barriers to entering the financial sector, the free circulation of information and fiercer competition have also brought financial markets closer to a situation of pure and perfect competition, which is beneficial to all consumers. Last but not least, the growth of market financing has allowed savings to be channelled directly into investment. Reducing the share of bank financing, and consequently that of money creation, has enabled a less inflationary financing of the economy.

Some market participants have become more inclined to engage in "short-termism", that is, they might be too preoccupied with their short-term results. This trend might result, in particular, from growing pressure to yield immediate financial results that are not necessarily sustainable. Marking-to-market all assets and liabilities has also contributed to this widespread focus on immediate financial performances. This focus on short-term performance can translate into additional volatility in the price discovery process: the shorter the investment horizon of market participants, the bigger the impact of any new information on prices. Mimetic behaviour is by no means a new phenomenon on financial markets. However, technological developments on markets may have gradually reinforced this type of behaviour. The spread of benchmarking, which allows fund managers and clients to measure performance against that of other funds, together with the growing competition within the sector, appears to have increased such mimetic behaviour. Some operators have come to the conclusion that it is better to be wrong along with everybody else, rather than take the risk of being right, or wrong, alone. A striking example of rational mimetic behaviour is the influence that hedge funds enjoyed, a few years ago, as "opinion leaders" and trend makers. By its nature, trend following amplifies the imbalance that may at some point affect a market, potentially leading to vicious circles of price adjustments and liquidation of positions.
Another relevant issue beyond the economic conjuncture is the need for the economy to recover the buffers that allowed macroeconomic policy to operate countercyclically. Chile's macroeconomic policy framework proved especially effective in the current cycle. One example of this is that monetary policy was able to accommodate a significant rise in inflation caused by a depreciation of the currency, by favoring a reduction in interest rates. This, because it was evaluated that the effect of the cyclical weakness of the economy on inflation would weigh more than the effects of the exchange rate increase. In the past, a similar situation would have been solved with a rate hike that would have had negative effects on activity. This has been made possible by our economic policy framework that was built based on a low level of public indebtedness, a high degree of capitalization of financial institutions, the financial solvency of companies and households, the credibility of fiscal and monetary policy, and an adequate level of international reserves. However, the slow growth of the economy over the past several years has partly used up these buffers. The level of public indebtedness has increased, banks have reduced their capital gaps and household debt has grown, while employment, having moved to more self-employed occupations, has less room to sustain itself without an increase in mean productivity (figure 11).

The continuous liquidity injection through transparent and time consistent operations has managed to relieve pressures in financial markets. The key interest rate cut was followed by an overall decline of interest rates in the financial market. Bank lending costs, government borrowing costs, and business and consumer borrowing costs have dropped rapidly. All these factors have laid a sound foundation for economic and financial stability in Albania. Stability is a precondition for sustainable and long-term growth, financial system development, functioning market economy that generates growth, employment and welfare for the country. I take this opportunity to emphasise that this philosophy of prudence and BIS central bankers’ speeches  1  stability will guide our decision-making in the future, as well. The businesses, consumers and financial system will find in the Bank of Albania an institution determined to maintain economic balances of the country, uphold the value of the national currency, encourage financial markets and support sustainable and long-term development for the country. However, the monetary policy has not been transmitted in full to the real sector of the economy. We are aware of the causes of this phenomenon, which is not an isolated case in Albania, but a global-wide one. Economic agents’ uncertainties, economic and financial problems in the euro area, and problems with the balance sheets that characterise a part of the economy are objective obstacles to the monetary stimulus transmission to the economy.
However, these effects can to a large extent be disregarded. Assuming that weather conditions remain fairly normal over the next year, the rise in prices at the same time next year will be that much lower. Electricity prices will then make a comparable negative contribution to overall inflation. Conclusion In retrospect, developments over the past decade feature several elements of a normal business cycle. Following a long period of expansion in the 1990s, the economy is stagnating as a result of overheating in the labour market, high wage growth and high borrowing in the private sector. The new guidelines for monetary policy were introduced in March 2001 when there were pressures in the economy, expectations of increased use of petroleum revenues and growing divergence between cyclical developments in Norway and abroad. Today, after close to two years of inflation targeting, experience shows that monetary policy has an impact on inflation. In this respect, the experience has been uplifting. Future developments are uncertain. Our internationally exposed sectors may be hard hit because this time the tightening has to a large extent been the result of a strong krone and a downturn in our export markets. It may take time to address the problems associated with wage formation after last year’s wage settlement. The oil market is volatile, influenced by fears of war in Iraq and political unrest in Venezuela. Our main impression is nevertheless that the economy will grow in the period ahead, albeit at a somewhat slower pace.

After the wage settlement last year, we projected annual wage growth in 2002 of between 5½ and 6 per cent. Wage growth in 2002 was far higher than expected. Substantial pay increases were also agreed on for 2003. The various groups achieved very different results, increasing the risk of wage-wage spirals. The outcome of last year’s wage settlement may be an indication that the social partners considered the labour market to be very tight this spring. Annual wage growth in 2002 Projections published at different points in time. Per cent  6  6  5  5  4  4  3  3  2  2  1  1  0  0 Fe b  De c  01 Ap r0 1 Ju n 01 Au g 01 O ct 01 De c 01 Fe b 02 Ap r0 2 Ju n 02 Au g 02 O ct 02  7  00  7  Source: Norges Bank SG Gausdal 31.01.03  There is little new information about wage developments since the wage settlement last year. Agreements have been concluded awarding high pay increases to seamen and doctors. We may have underestimated the growth in salaries for white-collar workers last year, but there is also some anecdotal evidence to suggest that during the autumn large companies and law and consultancy firms tightened cost control.
Coordination between monetary and fiscal policy  An occasional criticism of the new arrangements is that they impede proper coordination of monetary and fiscal policy. Two main reasons are usually advanced. First, the monetary and fiscal authorities may have conflicting objectives which they are free to pursue. Second, even if they have the same objectives they may be uncertain of each other’s intentions. Neither concern is, I believe, well-founded. The first stems from a line of academic thinking which assumes that the central bank attaches more importance to the control of inflation than the Government, which in turn gives greater weight to output and employment. Hence when setting interest rates and fiscal policy, the two authorities could be pulling in opposite directions, and, realising this, might pull harder to offset the actions of the other, resulting in a distorted policy mix. Although such an outcome is possible in principle elsewhere, this problem does not arise in the UK. The reason is simple. The Chancellor sets the objectives for both fiscal and monetary policy. It is the Chancellor who sets the inflation target and then delegates the responsibility to achieving that to the Monetary Policy Committee. So no conflict arises. Nor are the two authorities unaware of what the other is doing. A Treasury representative attends meetings of the MPC, and one of his duties is to brief the Committee on fiscal policy developments. This may take the form of advance notice of the overall fiscal stance to be announced in the Budget.

As Rabbie Burns wrote, “O wad some Pow’r the giftie gie us To see oursels as others see us!”  1  BIS Review 111/1999  The real test of the MPC is whether it aims continuously to meet the inflation target. For that reason, the Monetary Policy Committee must be setting a policy for all seasons. Some of you may say that it is all very well to set a policy for all seasons, but what about a policy for all regions, or parts of the UK? Many critics disapproved of the recent increase in interest rates. Indeed, the Scottish Council Development and Industry (SCDI) itself described the decision as “disappointing”. It also described the rise as “premature”; we would describe it as pre-emptive: prompt action to head off inflationary pressures in the future and so lower the level at which interest rates might otherwise need to be set. The SCDI said that “Scottish business is regaining confidence after a tough period, but this announcement [of a rate rise] will dent that confidence”. Yes, it has been tough – indeed remains tough – for some industries, especially agriculture, tourism and parts of manufacturing. But there has not been an overall recession. GDP growth in the UK, over the previous twelve months, reached a trough of 1.3% in the first quarter of this year, and has been rising since then.
If the provisions for improving stability do not suffice and a crisis occurs anyway, the mechanisms that guarantee the continuation of systemically important functions will kick in.4 In their entirety, these measures help to ensure that the banks are again able to bear more of their risks themselves. What are the objections to the package of measures? So why are there still objections to the Swiss package of measures from various quarters, if the advantages are so obvious? Do these measures have any harmful consequences? 2  The proposal of the committee of experts and the message of the Federal Council can be downloaded at www.efd.admin.ch. 3  The new capital adequacy regulations for systemically important banks are to apply to risk-weighted capital and to the leverage ratio. Furthermore, they are designed to be progressive. In other words, the bigger the bank, the higher the requirement. Given the current size of Switzerland’s two big banks, the requirement would be 19% total capital of the risk-weighted assets, of which 9% can be held in convertible capital (cocos) and 10% must be held in common equity. 4  If common equity falls below the threshold of 5%, the cocos will be converted and the emergency planning for separating the systemically important functions from the rest of the bank will be initiated. 2  BIS central bankers’ speeches  Objections and doubts before the introduction of new regulations or laws are part and parcel of a thriving democracy.

Indeed, having enough capital and hence being considered robust is – undoubtedly – also in the interest of the banks themselves. Although we dealt with the crisis competently – here, I am referring to the successful bail-out of UBS in autumn 2008 – there is unfortunately no guarantee that our country will come off so lightly in future crises. The Swiss TBTF proposal As the above remarks make clear: big, interconnected financial institutions can destabilise the financial system and an entire economy, with dramatic consequences. How can they be made more secure? And how can the problem of the implicit state guarantee be reduced? The package put together by the Federal Council in Switzerland is precisely targeted at these two questions.2 A central component of the Swiss approach is that systemically important banks should markedly improve their capital base and liquidity positions, both qualitatively and quantitatively, and reduce their risk exposure to other banks.3 This will make systemically important banks more stable in future and reduce the likelihood of them running into difficulties. Furthermore, organisational measures aim to ensure that systemically important functions can continue to be performed during a crisis, while simultaneously liquidating the big bank in an orderly manner. This reduces the need for state intervention. These measures may have different starting points and goals, but they all harmonise with each other.
How a neutral monetary stance translates into the short real rate is difficult to determine precisely but it can be said that the current rate is comparatively low, with an impact on total demand that should be stimulatory. In addition, the level of the real exchange rate is weak in relation to a reasonable long-term equilibrium. This means that its effect is stimulatory, too. The combined effect of the short interest rate and the exchange rate is therefore tending to support the economic upswing. All else equal, an expansionary monetary stance leads to a successive acceleration of demand. In time, this may generate a growth rate that exceeds the economy’s long-term potential. The ability of the economy to cope with a high demand trend is not unlimited. As unutilised resources are activated and the output gap closes, bottlenecks of various kinds arise in the labour market or in real capital. It is in such a situation that inflation may accelerate. In order to avoid the occurrence of shortages and accelerating inflation, the monetary stance must not remain too expansive for too long in an upward phase. Instead, a timely adjustment -- bearing in mind the lag associated with monetary policy -- must be made to a more neutral position before the output gap closes. This promotes a continued growth of demand at a rate the economy can absorb -- for instance with the help of new investment, improved efficiency and labour supply -- without generating inflationary bottlenecks.

Conclusion  Let me conclude by first emphasizing the positive global influence that the euro has had since its introduction in 1999. Not only does the common currency contribute to the integration of the European market, but the appearance of a counter-weight to the US dollar has helped stabilize the international monetary order. Exchange rates around the world can thus evolve closer to their economic fundamentals, and the impact of exchange rate fluctuations on capital flows and foreign trade are dampened. Developments in the financial markets over the past 5 years have shown us that although highly integrated in international markets and despite the emergence of a bipolar currency environment, the SNB can keep its monetary autonomy and follow an independent monetary policy that is adapted to the needs of the Swiss economy. As a result of our independent and successful monetary policy, together with the global character of the Swiss economy, the Swiss franc has retained its own profile. However, as we have experienced, this particular profile is not without risks. Extreme volatility of exchange rates cannot be excluded, but our experience with the euro/Swiss franc exchange rate has shown that currency markets are not as irrational as some people believe. With a relatively stable exchange market, low inflation and lower interest rates than the rest of Europe, the monetary situation of Switzerland is relatively comfortable. Things would evolve in a completely different way if Switzerland were to set its mind on joining the European Union and entering the euro zone.
While the debt issue does not look to be serious for now, a build-up of household debt stock could imply that private consumption would likely to become more sensitive to interest rate changes. This would have a direct implication on monetary policy because even a small change in the policy rate could now have a large impact on GDP when households are highly leveraged. It is therefore prudent for us to monitor household debt closely and ensure that the rise in household leverage is manageable. The second challenge is posed by the slow recovery of commercial bank credits. Despite some positive development, it is clear that credit expansion has not kept up with economic growth, and the intermediary process between depositors and investors is still clogged up. While it is true that many companies can now resort to other means of financing such as issuing debentures or drawing from their retained earnings, the banking sector is still by far the largest source of funds for the corporate sector and is likely to remain so for many more years. Thus, a dysfunctional banking sector can surely threaten to undermine the strength of the economic recovery. In the near term, non-performing loans (NPL) as well as non-performing assets (NPA) must be reduced more speedily, and indeed this has been one major focus of my work at the Bank of Thailand.

In terms of market destination, in the past, our export performance relied heavily on the market conditions of the G3 countries, with our export growth usually deteriorating when these economies were in recessions. However, the situation has changed in recent years with intra-regional trade quickly gaining a more significant role. With this, our export has enjoyed greater market access in China and other East Asian countries. The intensification of intra-regional trade, which is likely to continue, has made Thailand’s export cycles less dependent on the G3 economies, and Thailand’s strong export performance over the past year amid G3 economic slowdown is just a reflection of our more well-balanced export market base. On this note, I would like to emphasize that the EU is indeed an important export market for Thailand, and export to the United Kingdom in particular comprises around 3-4 percent of Thailand’s total export value. The good news is that even with keener competition in the world market, Thailand’s export growth to the EU remains quite high at around 18 percent in the first half of this year, thanks in part to the contribution of chambers of commerce like yours. Regarding export of services, we are all aware that the Thai tourism industry was hit hard by the outbreak of SARS in the second quarter. The number of foreign tourists in May dropped by as much as 50 percent year-on-year, a magnitude that dwarfed the impact of 911 by comparison.