samchain/econo-pairs-v1 huggingface dataset:
I think it is positive that the issue of capital flows is once again on the IMF’s agenda as it is an important issue that requires careful analysis as volatile capital can cause serious problems. …as clearly demonstrated by the crisis in our region The need to analyse capital flows became clear in connection with the crisis in our region too. If capital flows had been systematically analysed prior to the crisis, we would have seen that capital flows to the Baltic countries were dominated by bank loans from Nordic parent banks to their Baltic subsidiaries and not, for example, by more sustainable direct investments. Perhaps this would have led the alarm bells to ring sooner and louder. In our constituency we have carried out an empirical study of Iceland’s and the Baltic countries’ experience of capital flows and capital controls before and during the crisis. The aim of the report is to help the IMF to collect “best practices” but also to identify “bad practices”. According to the study, there were clear shortcomings in the policies conducted in Iceland and the Baltic countries and in the supervision of the financial system throughout the region. However, even if the countries had managed to conduct a much tighter fiscal policy, they would still not have been able to do anything about the major capital inflows. Other tools would have been needed for this, for instance various kinds of macroprudential-policy tools.

Although Sweden has always contributed financially to the IMF when this was needed, we were not allowed to  2  See IEO (2011), “IMF Performance in the Run-Up to the Financial and Economic Crisis, IMF Surveillance 2004–2007”. 3  Swap lines entail two parties agreeing to exchange currencies with each other. One example from the crisis is the Riksbank’s agreement with the Federal Reserve, through which the Riksbank was able to exchange Swedish krona for USD 10 billion. The aim of this was to increase the Riksbank’s ability to offer dollar loans to borrowers in Sweden. 2  BIS central bankers’ speeches  participate and influence the decisions this time; they filtered down to us from the G20 through the EU. The decisions were thus made by a small circle even though they affected all of the IMF’s then 186 member countries. In order for decisions that concern the global economy to have an impact and be implemented effectively, the countries affected by the decisions must feel that they can participate and that they are able to influence the decisions. Legitimacy is thus a precondition for effectiveness. The world cannot and should not be governed by only the largest and strongest countries. The cooperation between the countries of the world that is required to safeguard global financial stability should take place in strong and effective global institutions with a broad membership. This is why an institution like the IMF is important to small countries like Sweden.
Promoting sustainable innovation is part and parcel of our mandate for two main reasons: it is a driver of efficiency gains and an enabler of inclusion. 1- There is no need to go back to ancient times and payments with seashells but we just have to take a glance at the situation three decades ago to acknowledge that in the field of market infrastructures and payments, clearly, innovation has been synonym of efficiency progress. The trend towards the dematerialisation of financial assets and means of payment, which has been underway for decades, is a good example. Rooted in the current surge in digitalisation, shifts in consumption patterns such as the growth of e-commerce go hand in hand with an increase in the use of electronic payment instruments, along with the development of internetbased technologies and multi-functional electronic devices. As a result, payment services are  becoming more available, ignoring some of the physical borders and time constraints to satisfy customer demand for instant, continuous, uniform and safe payment services, as economic agents become ever more mobile. However, the ongoing technological transformation triggers possible side and adverse effects from an efficiency and safety standpoint. Let me mention for instance the fragmentation of solutions with limited interoperability, the growing number of interdependent players, the increased exposure to cyber threats and data protection issues, and the possible constitution of monopolies (including technology monopolies).

Ardian Fullani: Overview of Albania’s latest monetary and economic developments and outlook Speech by Mr Ardian Fullani, Governor of the Bank of Albania, on the Monetary Policy Decision of the Bank of Albania’s Supervisory Council, Tirana, 27 March 2014. *  *  *  Today, on 27 March 2013, the Supervisory Council of the Bank of Albania reviewed and approved the monthly Monetary Policy Report. Given Albania’s latest monetary and economic developments and discussions on their outlook, the Supervisory Council of the Bank of Albania decided to keep the key interest rate unchanged, at 2.75%. The Council deems that inflationary pressures on the economy remain subdued. Under these circumstances, the monetary policy will continue to be stimulating in the period ahead to provide the necessary conditions for compliance with our inflation target in the medium run. Let me now proceed with an overview of economic developments and key issues discussed at today’s meeting. *  *  *  Annual inflation stood at 1.9% in February, slightly up from a month earlier. The increase resulted from higher prices of agricultural products, tariffs of potable water in some regions of the country, and vehicle insurance premiums. Prices of other items of the consumer basket are stable and their inflation is low. New information obtained during the last month is limited. It does not alter our assessment that the overall economic and financial setting is characterised by low inflationary pressures. Our projections have remained overall unchanged, but near-term downside risks are assessed as high.
The challenge for EM policy makers in a globalised financial system is not that different from the one faced by a fisherman who lives by the sea, and that is, how to benefit from the riches offered by the sea while avoiding the dangers. So let me now turn to how I believe we can do that. Reaping the benefits and mitigating the risks The question I would like to pose and attempt to answer is: “What can EMEs do to strengthen their buffers and increase their resilience against the risks arising from integration with the global financial system?” I am going to frame my answers within three broad categories: one, in terms of reducing external vulnerabilities, two, in terms of improving policy frameworks; and three, in terms of strengthening domestic economic fundamentals. First, in terms of external vulnerabilities, I think storms in the global sea of liquidity are a source of concern, but for policy makers in EMEs, the consequential concern is how seaworthy is our own boat? Can it withstand a stormy sea? In my observation, capital flows often tend to accentuate domestic vulnerabilities and that can create the greatest risk of financial instability. For those who choose to borrow from the international financial markets, it is good to remember that even in a world of abundance, restraint is a virtue. Like the sirens of Greek mythology, the international banks may go around EMEs telling them how easy it is to get funding.

Among the EMEs, this period of low global interest rates has seen strong growth of credit in many economies, and while this has supported consumption and domestic demand, it has also led to increased household, corporate, and government indebtedness. The world today is even more indebted then it was before the crisis. I am sure that some of that debt went into productive uses, but it also the case that when something is cheap, it is used wastefully. It should also be obvious after the crisis, that economic growth fuelled by high credit growth is  BIS central bankers’ speeches  3  essentially growth borrowed from the future; higher growth today will be at the cost of lower growth tomorrow. Lastly, risks can also emerge from the current account of the balance of payments. It is important to understand that changes in the current account can be both the source, as well as an outcome, of changes in capital account. The traditional interpretation is that a country has a saving-investment gap that is reflected in its current account deficit, which then drives it to rely on foreign savings to fund that deficit. But, it is equally possible that countries can have large capital inflows resulting in excess domestic liquidity and low interest rates. Add to that an appreciating exchange rate, and you have the key ingredients for domestic consumption and investment booms, leading to higher imports and driving the current account into a deficit or a lower surplus.
We had to test the capacity to have such teleconferences at very short notice, in order to be sure that we could confront any new situation. We had a large number of teleconferences with the Governing Council. You see there…[points to telephones on table] If the situation were to demand now that we had in one hour and a half a teleconference with the Governing Council, we will then indeed have a teleconference in one hour and a half. The full continent would be there. That’s very impressive, because this would mean all members of the Governing Council from Ljubljana to Helsinki and from Lisbon to Dublin. FT: And as you say, an exceptional crisis, a global crisis. How much worse would it have been without the euro? Trichet: It is very difficult to reconstruct history with new assumptions. But my memory of what we experienced together in the old days is certainly that we would have had a situation which would have been very difficult, because on top of all of these global challenges that are without precedent, we would have had to cope with the intra-European tensions, the  BIS Review 159/2008  1  equivalent of the intra-ERM 1 tensions, and that would have been demanding. There is no doubt from that standpoint that the enormous challenges we had at the level of the euro area as a whole were, very fortunately, not the result of intra-euro-area tensions, and that is something which is important.

But to the extent that we are only ten years old, this test is of course particularly important for a young institution. FT: What was the most difficult moment for you at the ECB in terms of crisis management? Trichet: I would certainly say that these were the first hours at the outset of the financial turmoil. The Executive Board had to make a diagnosis of the situation in a very short time span, assess what kind of problem we had to deal with, and take decisions almost instantaneously. FT: …this is July/August 2007, yes…. Trichet: This was on 9 August 2007. We had a very important decision to take, which was in a way the first important decision that central banks had to take in order to confront these exceptional circumstances. I remember I was keen on thinking, “This is a grave situation that calls for appropriate responses”. And then we had a great number of important decisions to take in the subsequent months, which were largely “firsts”, in terms of supplying liquidity at fixed rates and even in terms of expanding our collateral framework which, from the outset, was already a very comprehensive collateral framework. It has been a big challenge. One of our challenges is that we had to take decisions very rapidly at the level of the Governing Council. And we again proved that, thanks to teleconferencing, in one hour and a half or two hours we could make a full judgment and take a decision.
5  I said in a talk earlier this year, I think this is because the foreign exchange market has decided that leaving the EU  Chart 5: Simple theory says the saving rate  will reduce productivity in the UK’s tradable sector or  should rise in anticipation of weaker income  raise its costs in some other way. But it’s far from clear that, as measured by their actual spending patterns, expectations among households are anything like as pessimistic. Chart 5 is an extremely stylised representation of how, in the simplest models used by economists, consumption responds to negative news about future income. In this set-up consumers are assumed to want to smooth their spending. Rather than responding to every temporary up and down, they match  3  This is also true of the supply effects I discussed earlier: if supply chains were to unwind or firms to relocate before 2019 this would be in response to their expectations of the new trading arrangements. 4 Ratio of prices to 12-month-ahead earnings forecasts. UK-focused defined as firms that generate at least 70% of their revenues here. 5 Broadbent (2017). 7  All speeches are available online at www.bankofengland.co.uk/speeches  7  their spending to what they expect their average income to be over the future. As a result, anticipated changes in long-run income should matter more than temporary fluctuations in current income.

If the currency market had been as sanguine as households sterling would not have fallen as far, if at all, and inflation of import prices and the aggregate CPI would not have risen to the same extent. If, conversely, consumers shared the currency market’s more pessimistic view of the future, domestic demand would have been weaker and inflationary pressure would again have been lower. 4  All speeches are available online at www.bankofengland.co.uk/speeches  4  Resource allocation and aggregate supply  Let me say a little more about these points, starting briefly with productivity. I want to offer a slight corrective to a view I often hear that, were there any wider supply effects from Brexit – things that either improve or impair the UK’s productive potential – these could only come through very slowly, too slowly to have any material bearing on monetary policy. The MPC typically concerns itself with policy horizons of 2-3 years. If only implicitly, it often has to form a view about the economy’s trend rate of growth over that period – its “speed limit”, in the language of the latest Inflation Report. But if any impact on potential output takes years to come through, it’s not clear that either the fact or the nature of Brexit should change those short-term estimates. If you accept the way macro-economists often think about aggregate supply, this view makes sense.
For example, we do not have a system where the private sector will share risks across borders, where capital and liquidity are fungible in pan-European financial institutions. A common deposit insurance would help, but it’s important to allow a European bank to be able to operate in the euro area as a single entity. Not all banks would be able to do that, but we need to have a timetable where we say, four or five years from now the banks that qualify in terms of quality and quantity of capital will get a European license. You need to put a very serious, technical, timetable for that, and announce it. That would create a new environment for banking. Is there a challenge to the ECB’s credibility because of the change of stance on the effective lower bound of rates? The story of the lower bound is a very simple one. For all non- standard measures there is not much historical experience, there was very little academic literature until recently. Many central banks thought the zero lower bound is zero, and when we initially decided to go for –0.1, we were not fully sure of the total impact on financial conditions in general and especially on banking. The negative deposit rate, like most non-standard measures – the forward guidance of July 2013, the LTROs starting in 2011, the TLTRO and the APP – delivered more than we expected in terms of their impact on financial conditions.

What surprised us more on the negative side was the slow transmission of easier financial conditions on current and future inflation. 2  BIS central bankers’ speeches  So what have you learned so far? Our own experience with a negative deposit rate was more favourable than we initially thought. We then went to minus 0.20. Since then we also have the experience of smaller countries which cut the rates to even more negative levels. We also reopened the discussion on the zero lower bound. There is no decision which has been taken but it is true that, given the experience that we have seen, we thought in the Governing Council that there was the case to re-discuss the lower bound. Have you looked at what other central banks have done? Yes but one needs to be very careful when looking at the experience of other countries. Each central bank works in a different environment, what you see in a small open economy is not necessarily applicable in a larger zone. Could the euro area tolerate minus 0.75 percent, like, for example Switzerland? In terms of level, I wouldn’t have any judgement in terms of ‘they can do it so we can do it’, that would be too simplistic. You have to look at the specificities of each one. What’s your thinking on how to avoid the so-called ‘Cliff Effect’ if QE were to come to a sudden end? We are very well aware of that.
That can be to the advantage of all of us if banks help to underwrite the economy through the agreed lending targets and government underwrites the balance sheet of the banks. The insurance policy will be most cost-effective for taxpayers if all the major lenders sign up to lending targets. Nevertheless, the problems in the financial sector mean that 2009 will be a difficult year for all of us. A pronounced contraction in spending and output is underway. As expected, output in the UK economy fell in the third quarter of 2008, but the downward momentum intensified in the fourth quarter. Manufacturing output is falling, and the key service sector surveys have reached record low levels in recent months. Total output in the fourth quarter is expected to have fallen sharply. In the first half of this year, the rate of contraction is likely to continue to be marked, and our trading partners are experiencing similar problems. But the very significant policy actions taken in recent months will eventually stimulate a recovery in demand, output and employment. Bank Rate has fallen from 5% to 1½%. And, as I have explained, the Monetary Policy Committee has a range of options to stimulate the economy further if required. Fiscal policy has been eased. The banking system is receiving massive support to cope with the need to restructure its balance sheet. That will take time, but time is a great healer, even of banks.

In addition to these conventional unconventional measures there are also unconventional unconventional measures. When credit markets are dysfunctional, as some are at present, targeted purchases by the Bank of England of assets may improve liquidity in markets for those credit instruments. The objective of such purchases would be not only to boost the supply of broad money but also to increase liquidity and trading activity in the markets for those assets. A reduction in the illiquidity premium for a particular credit instrument might help to stimulate issuance by corporate borrowers and the resumption of capital market flows, thus reducing reliance on bank lending. It could also raise the values of assets that are currently under-priced because of high illiquidity premia, helping to strengthen the balance sheets of banks and other financial institutions. Yesterday the Government authorised the Bank of England to conduct such operations, financed by the issue of Treasury Bills, in order to improve the flow of credit to companies. But at some point the Monetary Policy Committee might wish to adopt these unconventional measures as an instrument of monetary policy. In conducting such operations, it is important to choose the markets in which to intervene extremely carefully. There is a fine dividing line between helping to oil the wheels in markets which are temporarily impaired, and artificially supporting markets in which there is no underlying demand.
One industry that reports a very solid first half year is the fish farming industry. This industry is particularly important in Hordaland, which alternates with Nordland in being the county that produces the most farmed fish. Prices for fresh farmed salmon rose sharply at the beginning of the year, generating solid earnings in the industry. Prices have fallen somewhat since June but are still higher than they have been in recent years and far higher than unit productions costs. Our contacts in region South-West also report that the market outlook for the next six months is favourable in all sectors. Service industries are most optimistic about growth. In this year’s highestgrowth industries, oil and gas and building and construction, growth is expected to be slightly lower. Most sectors expect an increase in investment. In the local government and hospital sectors, the investment level remains relatively stable. Employment is rising in most sectors in this region. Seven of ten enterprises report that labour shortages are limiting their possibilities for expansion. The situation is particularly demanding for manufacturing and building and construction, as well as for some parts of the public sector. More than half of the contacts plan to increase their workforce during the next three months. The labour market is tightening further in the region. This is reflected in falling unemployment and rising wage growth. A number of sectors now expect higher annual wage growth in 2006 than indicated in the previous round of interviews.

It is made convenient for worldwide usage as it is an internet based platform – the first of its kind in the world with crude palm oil (CPO) as its underlying base commodity. Although Malaysia already has a well functioning and efficient Islamic inter-bank market, the CMH provides a further viable alternative using the commodity murabahah concept. While the CMH will provide another alternative to the already robust liquidity management infrastructure in Malaysia, it will also enable liquidity management in the global financial system. The CMH has a vast potential to facilitate liquidity flows from one financial centre to  BIS Review 98/2009  1  the other. The increased efficiency in the liquidity management across countries will also contribute towards sustaining overall stability of the Islamic financial services industry at the international level. In addition to enhancing liquidity management, the CMH will provide an environment for increased innovation in the Islamic financial industry whereby the financial institutions will be able to provide a wider range of new financial instruments including deposit, financing, investments and hedging. To evolve Malaysia into an international Islamic financial hub, Malaysia has under the MIFC initiative, put in place a facilitative framework for both ringgit and foreign currency denominated sukuk issuance. The recent issuance of the US dollar 1.5 billion 5-year Petronas Emas Global Sukuk on 12th August marks a new beginning for the foreign currency sukuk market in Malaysia.