samchain/econo-pairs-v1 huggingface dataset:
Foreign investors still enjoy only very limited access to the onshore Chinese bond market, however, as the renminbi is not freely convertible and capital flows are still subject to controls. Notwithstanding this, the Chinese government has been working towards a gradual opening-up of its domestic capital market for several years now. As part of this, China’s central bank, the People’s Bank of China (PBC), launched a so-called Interbank Market Programme in 2010, enabling central banks, sovereign wealth funds and insurance companies to request an investment quota for the onshore Chinese interbank bond market from the PBC. Provided they do not exceed this quota, these entities may invest freely in the (onshore) Chinese government bond market. More than 20 central banks – including those of France, Austria, Japan, Australia and Singapore – have now received a renminbi investment quota. In July this year, the SNB signed a renminbi investment quota agreement with the PBC. The SNB’s investment quota amounts to CNY 15 billion (in excess of CHF 2 billion). While this quota represents a very  4  Swiss National Bank. 2013. 106th Annual Report. 5  Measured against a standard market index. 6  IMF. 2014. Fiscal Monitor October 2014. Includes central and local government debt as well as governmentbacked debt. BIS central bankers’ speeches  3  small proportion of our foreign exchange reserves, it allows the SNB to gather some experience of this market. We intend to make use of this quota in the foreseeable future.

On matters of vital interest to the state, however, it must be recognized that even in the absence of some such formula as the British or the Australian, it would be impossible for the Central Bank to adopt a policy or pursue a course of action contrary to the policy of the Government of the day. No agency which is a creature of the Government can be entirely independent of the Government. While the Government may be prepared to give an independent regulatory agency rather wide discretion in a field such as that of money, there is no gain-saying that in the last analysis the Government must assume responsibility for monetary policy as for other policies. The Governor and the appointed member of the Monetary Board cannot help being acutely conscious of the fact that, since no Parliament can bind its successors, their independence and tenure in office under the proposed legislation is limited by the ultimate power of the Government to change the law. The exact degree and independence of the Central Bank is likely to vary from time to time. For example, central banks can ordinarily act more independently in stable, peace-time economic conditions than in time of war or other national emergency. They also tend to take stronger stands on issues which are primarily monetary in character than on related issues which may simply have monetary repercussions.
Zeti Akhtar Aziz: Metamorphosis into an international islamic banking and financial hub Special address by Dr Zeti Akhtar Aziz, Governor of the Central Bank of Malaysia, at the ASLI’s World Islamic Economic Forum, Kuala Lumpur, 1 October 2005. *  *  *  Distinguished guests, Ladies and gentlemen, I am honoured to deliver this luncheon address on the occasion of the inaugural World Islamic Economic Forum organised by the Asian Strategy & Leadership Institute (ASLI). Allow me to take this opportunity to share with you Malaysia’s experience in evolving a comprehensive domestic Islamic financial system that has now become an increasingly more internationally-integrated financial system, thereby strengthening our economic and financial inter-linkages with the rest of the world. In evolving the Islamic financial system, important considerations include the development of a system that is able to meet the changing requirements of the consumer and business community, that is efficient and competitive, that is safe and sound and that is robust and resilient and able to withstand a more challenging and uncertain world environment. These considerations are vital to ensure the sustainability of the system not only as a form of financial intermediation in the domestic economy but also as an integral component of the international financial system. Evolving a robust islamic financial system Malaysia has adopted a holistic approach in developing its Islamic financial system. Our initial focus was to develop a comprehensive domestic Islamic financial system.

Nevertheless, the latest forecasts provided by the ECB last Thursday continue to point to a gradual rise in inflation over the coming years: 0.1% in 2016, 1.3% in 2017 and 1.6% in 2018. 2  BIS central bankers’ speeches  II. This brings me to my second point: how effective are our non-standard measures? 1) Since the summer of 2014, we have implemented a series of monetary policy measures, dubbed “non-standard”, to complement cuts to key interest rates, which now stand at 0.00% for main refinancing operations and-0.40% for the deposit facility. These measures include: 2) Targeted longer-term refinancing operations, conditional on the provision of bank lending to the real economy. The new series of TLTROs that we decided to launch on 10 March - TLTRO 2 - will allow banks to borrow at highly favourable rates, depending on the amount of new credit they provide; 3) Purchases of private and public sector securities, to further ease monetary and financial conditions in the euro area. The Eurosystem buys asset-backed securities, covered bonds and investment grade bonds issued by euro area sovereigns, agencies and institutions. On 10 March we decided to expand this programme further by including corporate bonds among eligible assets, and increasing the amount of monthly purchases to EUR 80 billion from EUR 60 billion previously; 4)  Indications on the future path of key interest rates – or “forward guidance” – in order to influence agents’ expectations.
However, due to the forces that underlie it, it is evident that this  BIS central bankers’ speeches  3  trend can be mitigated but not reversed by just a unilateral measure. In January, the CBC launched a substantial process of reserve hoarding, by announcing the purchase of 12 billion dollars, the equivalent of around 5 points of GDP, the largest since the mid-1990s (figure 7). This intervention is sterilized, that is, the pesos issued to buy the dollars are withdrawn through debt issuance. Not doing this would mean that the increase in liquidity would be inconsistent with monetary policy, which would then be oriented to a forex objective and would divert away from its inflation target. I don’t need to explain why this would be terribly damaging to our economy. The purpose of the intervention is twofold. On the one hand, it allows having more reserves which, despite their costs, are a good hedge against sharp movements in capital flows. Although most economies did not significantly deplete their reserves during the crisis, their sole existence prevents destabilizing capital movements from occurring. On the other hand, the forex intervention mitigates exchange rate adjustments. As we have said before, without the intervention the peso would have appreciated further. Still, it is worth pointing out that the appreciation of the Chilean peso is not so different from that of the currencies of a large group of emerging or commodity-exporting economies, whether they have intervened their exchange rates or not.

Benign economic and financial conditions in recent years have kept credit losses at low levels. Combined with buoyant returns from capital market activity, the profitability of major financial institutions has been strong. And capital levels are high. But as highlighted in Financial Stability Reports by the Bank of England and others, this benign environment has encouraged an increase in risk-taking and a “search for yield” which has lowered the compensation for bearing credit risk and market risk to very low levels. The vulnerability of the system as a whole to an abrupt change in conditions has consequently increased. Against this background, I would like to focus my comments today on some of the implications for the management and reduction of risks to the financial system as a whole. More specifically, how can the public policy goal of promoting systemic financial stability be best achieved? I will not provide a fully comprehensive answer to this question but will touch briefly on four aspects; improving the assessment of vulnerabilities that might threaten stability; developing appropriate buffers for capital  1  Financial System Risks in the UK – Issues and www.bankofengland.co.uk/publications/speeches/2006/speech280.pdf  BIS Review 77/2007  Challenges  (John  Gieve)  (July  2006)  1  and liquidity within the financial system that take due account of the changing nature of risks; strengthening the core market infrastructure; and lowering legal uncertainty.
Growing challenges in the Current IMFS Chart 3: Volatile capital flows amplify domestic imbalances in EMEs Net private capital flows to emerging market economies and incidences of crises % of GDP  Number of EM crises (rhs) Net private capital flows to Non-China EMEs (lhs)  6  Number 6  Crises tend to occur when capital flows slow  5  5  4  4  3 3 2 2  1  1  0 -1  1980  1985  1990  1995  2000  2005  2010  2015  0  Source: IMF. Notes: Excludes China  18  All speeches are available online at www.bankofengland.co.uk/news/speeches  18  Chart 4: Greater reliance on foreign investors increases capital flow volatility Correlation of capital flow volatility and the share of FX-denominated corporate debt Volatity of capital flows 2.0 ZAF  RUS 1.5  KOR THA MYS ISR  POL CZE CHN  IDN  CHL TUR ARG BRA  1.0 MEX  COL  IND  0.5  0.0  0  10  20  30  40  50  Share of non-financial corporate debt denominated in USD Sources: IMF and IIF. Notes: Measured as coefficient of variation of gross inflows scaled by external liabilities.

In these circumstances, the Committee can extend the horizon over which it returns inflation to target if doing so achieves a better balance between the scale and duration of the deviation of inflation from target and the variability of output. This same framework can be used to think through the implications of the dominance of the US dollar in international trade and invoicing. In particular, in a DCP world with sticky dollar prices, a depreciation driven by strength in the dollar will tend to result in additional imported inflation. Rather than tightening monetary policy to offset fully that exogenous increase in imported inflation through lower domestic inflationary pressures, policymakers would do better to trade off inflation and output volatility, accepting some increase in imported inflation to achieve a smaller reduction in domestic demand below potential. The ability of new exporters to benefit from the depreciation by undercutting existing dollar contracts would provide some boost to exports and help lessen the trade-off facing the monetary policy maker. A similar strategy could be pursued in the face of large financial spillovers. The ability to do this depends heavily on the credibility of the monetary policy framework and the transparency with which the strategy is pursued. As I will go on to discuss, both can be reinforced by explicit recognition of the spillovers of the IMFS, particularly if recognised in IMF surveillance.
Several broad economic forces substantially complicate an already difficult set of political challenges: the long-term increase in income inequality, the slow pace of growth in real wages for the middle quintiles of the population, the increase in the volatility of income that is a reflection of the greater flexibility of the U.S. economy, and the greater exposure of households to the risk in financing retirement and the burden of paying for health care. More generally, the global financial system and the monetary arrangements that underpin it are in the process of a delicate and consequential transition as the major emerging market economies particularly in Asia - move toward more mature monetary policy frameworks, more flexible exchange rate regimes and more open capital markets. This transition will require careful management, and the economic dimensions of getting it right would be complicated even without the political pressures those governments face. One final note on the financial system. The global financial system is in the process of very dramatic change. The changes of even just the last five years are extraordinary, in terms of the size, and strength, and scope of the major global firms, the role of private leveraged funds, the extent of risk transfer and the increase in the size of the derivatives market, the change in the structure of the credit market, the increase in and changes in the pattern of cross border financial flows.

Volatility in inflation and growth Standard deviation per decade  14  CPI inflation  12  1910  10  1920  8 6  1950 1860 1960 1990 1880 1980 1970  4 2 0 0  1  2  1940  1870 1890  1900 1930  3  4  5  6  7  8  9  GDP growth  Finally, I should like to illustrate the fact that the transformation of the economy in the 20th century has not always taken place in calm and harmonious forms. There have been some large ups and  5  BIS Review 137/1999  downs. The situation was most turbulent in the early 1910s and the 1920s. A period of high inflation and rapidly growing demand was followed by deflation and a large fall in total production. Otherwise, development has been relatively uniform and stable since the breakthrough of industrialism in the mid-19th century apart from the 1870s and also the early 1930s, which is not so clearly visible in the diagram. Challenges on the threshold to a new millennium At the end of the 20th century, the new information technology is making rapid progress. As far as we can see today, it will affect production and distribution processes as well as consumer behaviour. That in turn makes the environment more competitive and calls for further change in Sweden’s corporate sector.
The famous economics author Neil Irwin, in his book titled “The Alchemists: Three Central Bankers and a World on Fire”, called the Governor of the German Reichsbank at the time, the “worst central banker in history”! Let us also look at the other extreme case of price movements, namely deflation. The example that will come to anyone’s mind is Japan, which underwent what was known as the “lost decade”. Now it is termed the “lost 20 years”! Since early 1990s Japan experienced deflation, a continued decline in prices of goods and services. One may think that this is great! But what could be considered good for a consumer in the short-term may not be good for the entire economy, as evidenced by the experience of Japan. Since then, the Japanese economy had experienced negative economic growth, a drop in nominal GDP, declining wages and negative interest rates! Some indications of sustained growth in Japan are seen only now. Fortunately, Sri Lanka has never experienced such episodes in the past, and clearly we want neither hyperinflation nor deflation even in the future. But what about double-digit inflation hovering around 10-20 per cent, as experienced in Sri Lanka for several decades from 1970s? Empirical evidence clearly shows that this kind of double digit inflation is bad for sustained growth.

This was an overnight 7  devaluation of the basic exchange rate by 120 per cent! The rupee was then allowed to float under a managed exchange rate regime. Accordingly, compared to the end 1976 exchange rate of Rs. 8.83 per US dollar, the exchange rate was recorded at Rs. 15.56 at end 1977. This sharp devaluation addressed the overvaluation of the rupee observed under the fixed regime. The subsequent managed exchange rate regime allowed some flexibility to determine the value of currency largely on the basis of market demand and supply, while attempting to prevent the overvaluation of the rupee by maintaining the real value of the rupee against movements of a basket of major currencies. The Aftermath of the Managed Float The introduction of the managed floating exchange rate was a welcome move from the perspective of a liberal macroeconomist. However, this resulted in new challenges to the conduct of monetary policy, particularly as the exchange rate was no longer available to anchor inflation expectations like in the past. The Central Bank also had to face a new challenge, as the government started to run extremely large fiscal deficits funded mainly by concessional external funding to develop public infrastructure such as the accelerated Mahaweli scheme. Annual fiscal deficits averaged 13.3 per cent of GDP between 1978 and 1983, External current account deficits averaged 10.8 per cent of GDP between 1979 and 1983. Year-on-year inflation averaged 15.6 per cent during February 1978 and January 1985, with a peak of 32.5 per cent in August 1980.
Cumulative exemption thresholds come to some CHF 300 billion. When negative interest came into effect in January, thresholds were 88% exhausted. Since then, this percentage has steadily increased and is now just over 98%. There are two principle reasons for this. First, a redistribution of sight deposits between banks has taken place. Institutions whose sight deposits exceeded the exemption threshold have transferred money from their SNB accounts to banks which had not exhausted their threshold and were prepared to accept these funds at somewhat less negative interest than –0.75%. This redistribution of sight deposits can be observed, for instance, on the Swiss franc repo market. Chart 3 shows how, on that market, turnover was considerably higher than that recorded for the whole of 2014. Most of the turnover was accounted for by transactions with very short terms. This is likely to include many transactions aimed at exhausting remaining thresholds. The second reason for the higher exhaustion of the exemption thresholds is that banks’ sight deposits at the SNB have increased overall. Since negative interest came into effect in January, sight deposits have risen from approximately CHF 440 billion to some CHF 470 billion at present. The interest burden increases overall when the SNB feeds more liquidity into the system, in particular in the event of further foreign exchange market interventions. This, in its turn, makes it even less attractive to hold Swiss francs. Now that almost all exemption thresholds are exhausted, every newly-created Swiss franc is subject to negative interest.

In addition, concerns about growth in China recently slipped into the background again. The stock markets of the advanced economies, which have since been able to partially recoup their losses, were the main beneficiaries of this recovery. By contrast, in the emerging economies, the wave of selling has had a lasting impact. In the most recent period, the MSCI Emerging Markets Index – calculated in local currency – was still approximately 12% below its level at the end of June. Stronger signals of diverging monetary policy stances between the euro area and the US were also reflected on the foreign exchange markets. On the one hand, the prospect of higher interest rates in the US boosted the US dollar. On the other, it put the currencies of emerging economies under pressure. Since mid-year, the US dollar has appreciated by 4.5% on a tradeweighted basis. The euro initially gained ground at times as a result of uncertainty in the emerging economies. However, after the ECB had held out the prospect of further monetary policy easing measures, the single currency came under downward pressure. By the beginning of December, the expectations of financial market participants had not been fulfilled and the euro gained in value again. By comparison with its mid-year level, the euro has appreciated only marginally on a trade-weighted basis. Demand for secure investments remained high worldwide. On the bond markets, yields on longer-term government bonds declined further.
However, there is a concern that this approach is judgemental and lacks a coherent framework; i.e., how can we control both the price of credit through monetary policy and the quantity of credit through macroprudential measures. Another unsettling issue is whether monetary policy should lean against the wind of asset price boom and credit expansion at a cost of somewhat weaker growth and lower inflation. On this, I think our default position should be that we should because the cost of getting it wrong by not doing enough can be very costly. Finally, information on money and credit aggregates can be made more useful in the formulation of monetary policy. Up to now, a widely shared so-called “best practice” in monetary policy did not pay enough attention to monetary aggregates partly because of the belief that there exists no stable relationship between quantity of money and economic activity. As a result, prior to the crisis there was no attempt to counteract the rapid credit  2  BIS Review 8/2010  growth even though, in most if not all cases, asset price bubble was a direct result of sustained excessive credit expansion. This issue in my view is most relevant for emerging markets where the financial sector is typically bank-based, with credit being the major source of funding for businesses, and credit risk being the most important risk to banks. Such factors make the credit channel an important transmission mechanism of monetary policy in emerging markets.

And certainly, the design of reform package did not anticipate the effect of the contagion spreading to the rest of Asia and our trading partners. The key lesson is that, even in our best effort to get the reform right, we may still fumble. So, how should Asia think about the impact of the global regulatory reform? For Asia, although the banking system has been quite resilient to the crisis, these regulatory reforms carry high stake for us, especially for our future developments. BIS central bankers’ speeches  1  The reforms such as Basel III are, to a large extent, designed to correct major weaknesses in Basel II that allowed the crisis to emerge in western countries. These weaknesses were such as undercapitalization, over-leveraging, inadequate liquidity, and procyclicality of the banking system. So, in so far as Basel III would make these banks safer, it would contribute to stability of the global economy. However, the weaknesses that were targeted by Basel III did not cause damage in Asia. This is mainly because the banking model here tends to be simpler, understandable, and traceable. The western system, on the other hand, is so complex that no one, not even the CEO, could understands the bank’s structure and activities. The value of this simpler model is that bankers know what is going on in their banks. Supervisors can keep very close eyes on their activities.