samchain/econo-pairs-v1 huggingface dataset:
I see a risk in allowing monetary policy to continue to lean against the wind until one sees tendencies for  15  I n a long-run perspective, inflation below the target could lead to unnecessarily high unemployment if inflation expectations are firmly anchored around the target (see Svensson, 2013). In the same way that unexpectedly high inflation benefits those who borrow and is a disadvantage to those who lend as the real value of the debt becomes lower than anticipated, unexpectedly low inflation can benefit those who lend at the cost of the borrowers. BIS central bankers’ speeches  7  inflation expectations in the long run to begin to adjust downwards. That is a situation that might be hard to turn around. Target attainment is important for credibility One argument that is sometimes put forward is that the differences between what the majority of Executive Board members and the minority advocate are so small and that in practice it is not very important whether or not one cuts the repo rate a little more. And in a strictly “mechanical” sense, it is perhaps true that a policy rate that was 0.25 percentage points lower for a period of time would have a limited effect on the economy. But for the sake of credibility and target attainment in the long run, it is also important how households and companies perceive monetary policy. How seriously does the central bank view the inflation target?

Contrary to the approach taken by many during the recent crisis, Malaysia had further liberalised the foreign exchange administration (FEA) rules in our efforts to promote efficiency, reduce costs and create a more conducive environment for trade, business and investment activities. The accomplishments in financial sector reforms and the many policy changes made have augured well for the country, as evident by our ascent into the top-20 bracket in the World Economic Forum’s financial development index this year. As with other countries within the region, we have also been a recipient of capital flows. As a result of continuous effort to strengthen the financial sector, our ability to manage the volatility and other impacts of capital flows has been enhanced. The financial markets and banking sector have proven their ability to absorb and intermediate these inflows while the Central Bank is always monitoring the market on a daily basis and is also well positioned to manage the situation. The domestic economy stands resilient and inflation remains under control. Furthermore, the pace of ringgit appreciation also reflected the positive underlying fundamentals of the economy. Trends of investing by central banks and institutional investors i)  The concept of diversification  Let me now share some thoughts on portfolio diversification. Nearly 60 years since the proposition of Modern Portfolio Theory by Harry Markowitz, many investors are still grappling with the challenges of portfolio diversification. Among the sands in the wheel of a welldiversified portfolio are transaction costs and information asymmetry.
7  P. Aghion, P. Askenazy, N. Berman, G. Cette and L. Eymard, 2012. “Credit Constraints And The Cyclicality Of R&D Investment: Evidence From France,” Journal of the European Economic Association, European Economic Association, vol. 10(5), pages 1001–1024, October. 8  P. Aghion, D. Hémous and E. Kharroubi, 2014. “Cyclical fiscal policy, credit constraints, and industry growth,” Journal of Monetary Economics, Elsevier, vol. 62(C), pages 41–58. 9  A. Bergeaud and G. Cette and R. Lecat, 2016. “The role of production factor quality and technology diffusion in 20th century productivity growth,” Working papers 588, Banque de France. 10  C. Reinhart and K.S. Rogoff. 2010. “Growth in a Time of Debt.” American Economic Review, 100(2): 573–78; Lane, Philip R. 2012. “The European Sovereign Debt Crisis.” Journal of Economic Perspectives, 26(3): 49–68. BIS central bankers’ speeches  3  impediments to the flow of resources, in particular in the labour market and in the way credit was allocated between sectors, hence revealing that a malfunctioning of the financial sector can reinforce structural weaknesses. 11 In some cases both were present at the same time. Of the uttermost importance were the structural changes targeting an improvement in the monitoring and the resilience of our financial system. Arguably the financial crisis partly resulted from excess risk taking and overinvestment in low productivity sectors. 12 The Basel 3 framework worldwide and the Single Supervisory Mechanism in the euro-zone provide new supervisory and prudential tools to mitigate these risks in the future.

Similar decrease in reallocation was found in the United Kingdom by the Bank of England 6. Financing constraints also hit more particularly R&D financing: according to a Banque de France study 7, R&D investment share becomes procyclical when credit constraints bites and does not increase proportionally in upturns. As the Great Recession was global, years of R&D efforts lost cannot be recovered by the purchase of technology from abroad, as all countries have been hit. In the medium term, this will weigh on productivity growth, which is partly fed by technical innovation. Financing constraints may contribute to a depressed investment, especially in industries with heavier reliance on external finance or lower asset tangibility 8, which can slowdown capital stock and hence potential growth, but also lead to its aging and weigh on its productivity through the use of older equipment vintages. As we can see on this graph from a Banque de France study 9, both the great Depression and the great Recession led to a significant ageing of the equipment stock. The Governing Council of the ECB has been particularly conscious of the acute strains in the financial system over recent years and the impairment of the credit channel. In particular, it has been concerned that bank deleveraging could reduce the supply of credit and undermine the supportive effects of lower interest rates on firms’ balance sheets. This could have been a significant “headwind” for monetary policy and has reinforced the case for decisive action.
The agreement being drafted by global regulators is now under fire from banks who say it is convoluted, expensive, heavy-handed and poorly tested, and who now seek to stall or derail it. Not devoid of a dry sense of humour and with a shy smile, Caruana is known as a diligent and rigorous technocrat, a fan of teamwork who avoids showiness. “The core of the issue is whether Caruana will be able to demonstrate his leadership in the next couple of months,” said one committee member who works directly with Caruana, who spoke under the condition of anonymity. “It's not easy to guide such a group of self-confident people,” the committee member said. “He's just trying to fight his way.” Part of the problem is that Caruana's predecessor, New York Federal Reserve Chairman William McDonough, left large shoes to fill. McDonough's unexpected retirement in June left critics wondering whether his successor would be able to hold together a global project. “There were definitely advantages in having a superpower in charge of this committee,” said the Basel Committee member. Karel Lannoo, head of the Brussels-based think tank Center for European Policy Studies, said Caruana is a strong player with anti-establishment nuances who should be able to push through the  4  BIS Review 39/2003  accord and even impart some Spanish character to it. “Caruana is, in the Spanish context, very well regarded,” said Lannoo, a frequent adviser to the European Commission and a member of the academic European Shadow Regulatory Commission. “He was a broker.

He knows market risk. He worked on the trading floor,” Lannoo said. Lannoo and the shadow committee are critics of the accord, saying its overly complex nature may in fact heighten systemic threats by “capturing” regulators who would be required to take a more active role in banks' daily operations. Revolution in the making The new accord, now over five years in the making, represents a revolution for the banks who will adopt it. It leaves the first accord's simple dictates behind and offers a menu ranging from basic to complex. A second Basel Committee member, who also requested anonymity, said he had few doubts that the technocrat Caruana was the right choice for the job due to his expertise in such a complex field. “This is not new territory for Jaime,” he said. Indeed, some critics of the accord say a technocrat like Caruana is just who is needed to make sure that the byzantine draft is moulded into shape before being finalised by the end of this year. Caruana, a 51-year-old Valencian, studied telecommunications engineering and then qualified as a government economist. Those who have worked with him say he is a real technology fan, which given his studies is no surprise. The current controversy over the Basel reform is probably a source of discomfort for Caruana, who keeps himself to himself. “He is very simple and discreet, and shys away from limelight,” says a former colleague.
Whilst I recognise there is uncertainty, I urge firms to explore how different scenarios are relevant to their strategy, to test their specific vulnerabilities and to identify opportunities. Here at the Bank, we have helped create tools to support such analysis.5 And they continue to be enhanced. They include carbon prices consistent with different pathways to net zero to help you identify robust strategies. I encourage you to use them. 5/7  BIS - Central bankers' speeches  And the fourth challenge is that system wide change is complex as the actions of one are dependent on actions of others, so it is important to coordinate action throughout the supply chain. Each firm should be stretching its horizons – building capabilities now that enable action to drive long-term reductions in emissions through their value chain. That does not mean immediately ceasing to deal with high emission counterparties and suppliers. That does not necessarily remove emissions, perhaps chasing them into the shadows instead. Rather, economy-wide emissions reductions will come through proactive engagement with counterparties and suppliers, and decisions aligned to the transition over time. This means understanding the needs of firms up and down the supply chain and having difficult discussions about steps to reduce emissions. And smaller corporates will need help from larger corporates and their financiers to develop their climate expertise. The collaboration between GARP and Chapter Zero we see today shows how effective that can be in driving faster progress.

1/7  BIS - Central bankers' speeches  And I finished with a hope that we were fast approaching the third and final phase – with these tools actively used in financial and business decisions to progress an orderly transition to net zero. Since then, a global pandemic, a war and the fastest tightening in financial conditions in thirty years have meant that things have not panned out as we might have expected. Let's take stock of where that has left us. Taking stock My prism on this is as a central banker and regulator, where we have good sight of how the UK's banks and insurers are building their approaches to climate risks. These firms sit at the centre of the economy, and their responses matter. I have seen a step-change in their approach. They are making more serious investments in developing effective capabilities – both to manage climate-related financial risks and to identify opportunities. But are they enough? Let me explore this across four core dimensions: scenario analysis; firm risk management capabilities; disclosure; and green finance. Learning from scenario analysis I'll start first with scenario analysis - an essential tool for understanding the size and pathways of unprecedented and uncertain future climate risks. The Bank has delivered its first climate scenarios exercise, the CBES. In my view this was transformative, both in shining a light on otherwise opaque risks and in building capabilities.
It is one of the most robust interbank clearing systems in the world, and is a very important piece of financial infrastructure contributing greatly to financial stability in Hong Kong. But in running the system, the HKMA cannot avoid lending to the banks at the end of the day to effect what are really residual interbank payments. But in providing such liquidity money is created in the form of a larger overnight balance of the banking system that appears not to be directly matched by an increase in the holding of foreign reserves by the HKMA. BIS Review 19/1998  - 11 40. However, the manner in which this “last resort” liquidity is provided does not involve any real conflict with the discipline of the currency board system. Lending through the LAF is organized largely through a repo arrangement of paper issued by the HKMA22. Such paper, in the form of Exchange Fund Bills and Notes, are liabilities of the HKMA which are fully backed by foreign currency assets. The HKMA runs an Exchange Fund debt programme involving the issue of debt instruments of maturity from three months to ten years. The proceeds of such issues have largely been switched into foreign currency assets. In any case, with a real time payment system, overnight lending in the term of repos through the LAF, though essential, is infrequent and the money is to be repaid the first thing in the following morning.

It is obvious that, even after so many years of operating the exchange rate link under the currency board arrangement, the rationale behind the HKMA’s occasional presence in the foreign exchange and money markets, whether or not involving the exercise of discretion in the use of its monetary armoury, does not seem to be clearly understood. Certain of its actions in the markets have been subject to all sorts of interpretations. Yet there is a practical need for the HKMA to be in the markets performing its other functions which do not have any implications on the management of the exchange rate. One example is the investment management of the fiscal reserves. When fiscal surpluses are transferred from the Government’s accounts with the banking system to the HKMA, a shortage of interbank liquidity would be created if the money is not somehow recycled into the banking system. This is sometimes misinterpreted as the HKMA conducting open market operations of a discretionary nature, akin to a central bank engaging in discretionary monetary management, whilst the intention of the HKMA’s presence in the market in the performance of these other functions is, as a rule, to ensure that the monetary base is not affected. There is a need, therefore, to have the circumstances in which the clearing balance of the bank system, the crucial part of the monetary base, will be affected clearly set out for all concerned to see. These are outlined as an annex to this speech. Conclusion 46.
Gent Sejko: Including monetary policy and financial shocks and trends in modelling and policy analysis Address by Mr Gent Sejko, Governor of the Bank of Albania, to the Tenth South-Eastern European Economic Research Workshop “Including monetary policy and financial shocks and trends in modelling and policy analysis”, Tirana, 1 December 2016. * * * Dear participants, I am privileged to open the 10th South-Eastern European Economic Research Workshop organised by the Bank of Albania, and welcome all new and returning friends. I would like to congratulate Bank of Albania’ experts that present every year their research works for discussion. This year’s workshop will focus on the main topics that prevail in the economic, political and academic debates in the field of economy, finance and central banking. The topic of this workshop is: “Including monetary policy and financial shocks and trends in modelling and policy analysis". The focus was placed on these topics on the grounds that the central bank and policy decisions should take into account an increasing number of shocks that are arising not only as a consequence of economic, but also of political, legal and regulatory phenomena. The challenges that monetary policy and financial stability are facing reflect the problems of the society in the economic, social and geo-political aspects. These challenges are best reflected in the noneffective functioning of the pass-through mechanism that should transmit and amplify the positive effects of central banks’ decisions.

In the meantime, regulatory and adjustment processes that accompany monetary policy decision-making (especially those that will follow the return of the past to normality) may trigger temporary shocks with effects on both the European economy and the small economies related to it. Again, it is the duty of research to investigate potential shocks and model them in the framework of models corroborating central banks decision-making. This situation is not unique to Albania, but is a global-wide problem. Therefore, we are happy to see here participation from all the regions, whose research will introduce new experiences, of benefit to us not only from their conclusions but also from the methodologies they have applied. Fortunately, the topics that will be discussed address the whole spectrum of central banks’ interest and will enrich our experience with the opinion and focus of your scientific research. I hope you will find Bank of Albania’s experience interesting, informative and valuable for your current and future scientific research. I take this opportunity to thank the regional and European central banks for their high consideration and valuable contribution to the reputation of our research workshop. Finally, I wish you a successful and fruitful Workshop and hope to meet you again in future activities of the Bank of Albania. Thank You! 2/2  BIS central bankers' speeches
I want to say a little about the tragic events of September 11th, which have further underlined the complex nature of the world we live in. Second, I would like to look at some of the ways in which formal models of market and credit risk of the type you will be studying here have already influenced the design of our regulatory regimes. Much has been achieved here, but much also remains to be done, and the current state of the art by no means captures every type of risk run by financial firms. So, third, I want to talk about some other safeguards which will continue to be necessary to improve the chances of maintaining financial stability. The Bank of England's role in financial stability The maintenance of stability in the overall financial system is one of the Bank of England's three core tasks - the other two being responsibility for monetary stability, and promotion of the efficiency and effectiveness of the UK financial system. That concern for system-wide financial stability does not reflect a paternalistic belief that central banks know better than the markets - indeed market disciplines have a very important role to play in maintaining stability. Rather, it derives from the fact that some types of problem which initially affect only individual financial institutions may subsequently threaten the stability of the system as a whole.

To address these issues, the Basel Committee has proposed a new Accord which would allow firms to use externally or internally generated credit risk ratings to differentiate more precisely between different risks. There would also be a significant expansion in the recognition of collateral, credit derivatives and guarantees as means of reducing overall risks. These proposals are currently under discussion by central banks, regulators and market practitioners. Given our financial stability responsibilities, the Bank of England has been closely involved in this process. A team led by Patricia Jackson at the Bank has been providing technical and policy support to the Basel Committee, and we hope to have an agreement in the course of next year. The new Accord does not, however, go to the point of recognising VaR-type models for measuring credit risk on portfolios as whole. At present, these models are not judged to be sufficiently robust to form the basis of a regulatory regime. A central issue is the sheer lack of information. Many types of loan have no publicly visible price, so the models lack a large and reliable data base. The behaviour of loans under different scenarios, and the correlations between different assets - both key inputs to any VaR model - have in many cases to be assumed rather than measured. And testing the ex post performance of the models is difficult. Where credit instruments lack market prices, model predictions can only be compared to data in the event of defaults, which are relatively rare.
Moreover, banks in emerging markets vary in size, sophistication and systemic significance – some are small and domestically focused, while others have sizeable regional footprints. Most emerging economies are also hosts to global banks, and rely on them to provide trade and project finance, and cross border remittances. Let me emphasise that these differences do not detract from the need to have higher regulatory standards. However, it does mean that in calibrating the details of the rules, we have to take into account these differences, so that financial intermediation is not adversely affected. The Macroprudential dimension 12. Let me now say a few words about macroprudential regulations. Macroprudential regulations relate to the use of prudential tools to promote the stability of the financial system as a whole, and not just that of individual institutions. It recognizes that there are two sources of systemic risks. One, at any point in time, interlinkages and common exposures across institutions can multiply aggregate risks. Two, over time, boom/bust cycles can be amplified and destabilize the entire system. In good times, low volatility and low risk premia induce excessive credit creation and rising asset prices in a process which then feeds on itself. When confidence turns, the credit excesses and asset bubbles unwind quickly, with prices overshooting as they head down, feeding a downward spiral. 13. While macroprudential regulation is not new, the financial crisis has triggered a renewed interest in it.

As regards the economic effects, the recent crisis concerning Ukraine and the consequent imposition of sanctions on and by Russia has so far had limited spillover effects on the euro area economy, either via trade or financial links. However, the Baltic states and Finland are more likely to feel any negative effects than other euro area economies owing to the strong trade ties they have with their eastern neighbours. But on the economic risks, I would like to add that the European “family” provides safety nets to partly offset the negative effects of geopolitical tensions related to Russia and Ukraine. For instance, the European Commission announced support measures to protect food producers affected by Russia’s food embargo. The euro area is a large market that can help Lithuanian producers to make up for losses from the Russian market. Finally, euro area countries can use the emergency liquidity lines provided in euro by their national central banks, which in turn would receive euro liquidity from the Eurosystem, in the event of significant turbulences in the financial sector. Why is lending to the real economy in the euro area sluggish? What else needs to be done in addition to the mix of different measures that the ECB is applying, such as low interest rates (or negative interest rates for bank deposits at the ECB) and the planned asset-backed securities programme? It is true that credit dynamics remain weak. At the same time, recent trends show some positive changes.