samchain/econo-pairs-v1 huggingface dataset:
But there is also significant uncertainty about the average length of life of a generation as a whole collective risk. Longevity has changed markedly over time. Chart 2 shows female mortality in England and Wales in both 1902 and 2002. It shows the remarkable reduction in infant mortality during the twentieth century as well as the fall in mortality in middle age. Of particular relevance to decisions on pensions is the expectation of life conditional on reaching retirement age. That is directly relevant to the purchase of an annuity on retirement. Over the past century the normal retirement age in public service in this country has been constant at age 60. Chart 3 shows the distribution of deaths by age conditional on having reached the age of 60 in England and Wales in both 1902 and 2002. A woman who was 60 in 1902, and subject to the mortality rates of that year, would have expected to live for another 14½ years. By 2002 that expectation had increased to 23½ years. Individual risk - that we die either earlier or later than the average for our cohort - can be insured by taking out life insurance against early death or by purchasing an annuity to insure against a later  3  Among recent discussions of misperceptions of probability are Gigerenzer (2002) and Taleb (2001). 4  There is a large literature on uncertainty about earnings and productivity growth; see, for example, MaCurdy (1982), Abowd and Card (1989) and Meghir and Pistaferri (2004).

This is derived from the Shariah principles, the key pillar of Islamic finance. The Shariah injunctions require that Islamic financial transactions be accompanied by an underlying productive activity resulting in a close link between financial and productive flows. Under the risk sharing concept, there is an explicit risk sharing by the financier and the customer. In this arrangement, the real activity is expected to generate sufficient wealth to compensate for the risks. Parties to the transactions would thus be insulated from excessive risks exposure given that the Shariah prohibits the excess leverage and involvement in speculative financial activities. The intrinsic principle of profit and risk sharing thus provides an in-built check and balance to the Islamic financial transactions. A combination of these distinct features together with the implementation of prudential risk management standards and practices would contribute to the robustness and resilience of Islamic financial system. Mutual respect on Shariah matters This decade has thus been a phase of innovation in the global Islamic financial system with a number of breakthroughs and major milestones in innovative deals and structures. The advancement of sukuk, Islamic securitization, Islamic private equity, Islamic real estate investment fund and other financial instruments in terms of sophistication and product range has widened the international market reach of Islamic finance, particularly in the cross border transactions. At the same time, this phase is also seeing a number of key issues being raised, particularly in respect of divergence of Shariah views underlying a number of the Islamic financial transactions.
I would also like to remind you of the relatively long journey that you have taken together with the Bank. The quantity and quality of your work has increased and improved throughout this journey. Therefore, I would like to challenge you to reach beyond this particular event and present your work more frequently in similar activities in the region or in the EU. I would like to encourage you to spend more time and efforts to disseminate and implement your research findings within the institution. BIS central bankers’ speeches  1  Results and conclusions should not be your last station. Organize activities that focus on explaining and disseminating results and research techniques to the rest of the bank. Raise the awareness on research developments and extend your cooperation with your colleagues within the bank. I invite you to extend cooperation beyond borders. Benefit from this wonderful network that we have created and extend the spirit of cooperation beyond workshop participation by engaging in joint research projects with national and regional focus. You will be amazed by how much you can learn. Finally, I would also like to encourage the others economists of the bank to crush the monotony of repeated dull analysis and frequent reliance on untested hypothesis. Enrich your work with results of recent research, engage in research work yourself. Devote more efforts and energy to the study of economic phenomena and the way they affect your work. Research is not and should not be an exclusive monopoly of monetary policy and financial stability.

They are complexity on the one hand, and homogeneity on the other. In essence, the financial network has over time become progressively more complex and less diverse. Why? And what have been the consequences? In the 1987 film Wall Street, the financial sector mantra was “greed is good”. The stock market crash of the same year put paid to that doctrine, at least temporarily. By the early part of this century, both the circumstances and the individuals had changed. So too had the mantra. It had become the rather gentler “diversification is desirable”. Risk-taking became less Gordon Gekko and more Merton Miller. Diversification came care of two complementary business strategies. The first was “originate and distribute”. Risk became a commodity. As such it could be bundled, sliced, diced and then re-bundled for onward sale. Credit became, in the jargon, structured. Securitisation was one vehicle for achieving this. Derivatives, such as CDS, were another. As these marketable instruments passed between participants, the network chain lengthened. In principle, these instruments delivered a Pareto-improving reallocation of risk. Risk would flow to those best able to bear it. They had deep pockets which they sought to line with higher yield. For the system as a whole, this sounded like the land of milk and honey. For a risk shared was a risk halved – perhaps more than halved, given the magic of diversification. The network chain, meanwhile, just kept on growing. 1  Federal Reserve Bank of New York (2007); May, Levin and Sugihara (2008); Allen and Gale (2000).
On the one hand, some have argued that the Fed’s monetary policy is driving a global financial cycle.10 On the other hand, others have argued that the key driving forces of capital flows are global risk and uncertainty, with a much looser connection to US monetary policy.11 Another example of diverging views concerns the question of whether emerging economies have the tools to neutralise the spillovers originating from other parts of the global economy. As a result of our poor understanding of the types of shock and their transmission, establishing which policy responses are the best for each country seems to be rather difficult. Internalising the effects of one’s monetary policy on other jurisdictions would be even more challenging. Suppose the Fed had a mandate to internalise the global impact of its decisions, which it does not have, would the financial stability impact of cheap dollar funding in emerging market economies have called for a later, or for an earlier, normalisation of US monetary policy? Ultimately, there is necessarily a high degree of subjective judgement involved. As I already suggested, crisis times such as 2008–2009 are the exception, since the spillovers are at the same time less ambiguous and more visible. The scope of coordination This does not imply that regular dialogues between central banks as well as exchanges of views during meetings at the IMF, the BIS, the G20 and at regional level, are not useful. In fact, I believe that it is quite the contrary.

I would like to outline these shifts in the global economic landscape, and then elaborate on the implications for the IMS and monetary policy coordination. Three structural shifts in the global economy Globalisation, home bias and regionalisation Clearly, the defining feature of the last three decades has been the dramatic strengthening of globalisation in both trade and finance. Cross-border trade in goods and services as well as investment has soared, driven by trade-liberalising policies, the lifting of capital controls as well as innovations in transport and information technologies. The global financial crisis has led to a halt in this trend, perhaps only temporarily. But there is also the possibility of a step backwards, i.e. a re-emergence of financial home bias and a stronger drive towards regionalisation. Early evidence of this is the resurgence of the so-called “Feldstein-Horioka puzzle”, that is, a sharp rise in the correlation between savings and investments.1 European banks have retreated from dollar-denominated lending.2 Banks from emerging economies also have a stronger regional orientation, in particular in SouthEast Asia, Central America and the Commonwealth of Independent States.3 Regulators have been tempted to ring-fence their domestic financial systems. Restrictions on intra-European  1  For euro area countries the cross-country correlation between the savings and investment-to-GDP ratios fell continuously from 0.6 in the early 1990s to essentially zero in 2005; similarly, for non-euro area OECD countries it even fell from almost one to zero over the same time span.
As became evident in the previous crisis, financial fragmentation problems will adversely affect not only the economic development of countries penalised in the financial markets, but also that of the EU as a whole. Therefore, joint action enabling the crisis to be tackled on comparable terms by all European countries will help shorten its duration and protect the productive system for each and every one of the countries in the area. This is also essential to ensure a uniform and robust recovery. 1  Such common action is particularly justified against the backdrop of this crisis, whose origin is a fully exogenous shock that is not related to the existence of prior macroeconomic imbalances. To some extent, this asymmetric impact is the result of the pattern of productive specialisation among countries, itself a product of the workings of the single market. In this regard, protecting the single market also means preventing excessive economic disparity among the members. These arguments justify the forceful response given by the area’s economic authorities, at national and European scale, in the face of the economic challenge deriving from the pandemic. Another particularly important and positive aspect has been the high degree of coordination (in many cases implicit, albeit effective) between the different policies and decision-making spheres at global, European and national level. I will now briefly describe this response in the fields of monetary, prudential and fiscal policy.

See V. Ramey (2019), «Ten Years After the Financial Crisis: What Have We Learned from the Renaissance in Fiscal Research?», Journal of Economic Perspectives, vol. 33(2), pp. 89-114, for a review of the existing evidence. Nevertheless, the estimates are subject to a particularly high degree of uncertainty. Thus, for instance, A. Abiad et al. (2016), The macroeconomic effects of public investment: Evidence from advanced economies, Journal of Macroeconomics 50: 224240, estimates a public investment multiplier of 1.4 after four years for a group of advanced economies. Further, the estimated value could nearly double if the investment is made in highly efficient projects or during periods of low economic growth. Conversely, other studies find that the public investment multiplier cannot, in the short term, exceed a value of 0.6, especially in cases of short-run fiscal stimuli (see M. Alloza and C. Sanz (2020), Jobs Multipliers: Evidence from a Large Fiscal Stimulus in Spain, forthcoming in the Scandinavian Journal of Economics). 9 This multiplier effect largely depends on the degree of complementarity between public and private investment. See Box 5.2 of the Annual Report 2019 of the Banco de España for a detailed analysis of the channels through which public investment supports medium and long-term growth. One of the channels accounting for the high public investment multiplier, even in the short term, rests on the idea that, as it is more powerful in the medium and long term, rational agents consider it in their decisions.
4  BIS central bankers’ speeches  The background to this policy is that debt in the Swedish household sector has shown a rising trend over the past 15–20 years and now appears high, both from an historical and an international perspective (see Figure 2). Unlike many other countries, housing prices in Sweden have not shown any significant fall. In terms of Figure 1, it can be said that in many other countries, heavy falls in housing prices have led to a downturn in the credit cycle, which has then pulled down the economic cycle. This has not been the case in Sweden, where the slowdown we have experienced in connection with the crisis has so far largely stemmed from the weak developments abroad. If we were also to experience a severe fall in housing prices and a rapid decline in the credit cycle, the consequences would be much greater and probably about as difficult to manage as they have proved to be in other countries.

Paper presented at the Columbia University Center on Capitalism and Society Annual Conference “Microfoundations for Macroeconomics”, New York. Bank for International Settlements (2011), Central Bank Governance and Financial Stability. A Report by a Study Group. May 2011. Bernanke, Ben S. (2004), The Great Moderation. Speech at the Eastern Economic Association, Washington, 20 February. Blanchard, Olivier, Dell’Ariccia, Giovanni and Mauro, Paolo (2013), Rethinking Macro Policy II: Getting Granular. IMF Staff Discussion Note 13/03, International Monetary Fund. Borio, Claudio (2012), The Financial Cycle and Macroeconomics: What Have We Learnt? BIS Working Papers No. 395. Bryant, Ralph C., Henderson, Dale W. and Becker, Torbjörn (2012), Maintaining Financial Stability in an Open Economy. Sweden in the Global Crisis and Beyond. SNS Förlag. Cagliarini, Adam, Kent, Christopher and Stevens, Glenn (2010), Fifty Years of Monetary Policy: What Have We Learned? In Kent, Christopher and Robson, Michael (ed) Reserve Bank of Australia 50th Anniversary Symposium. Proceedings of a conference held in Sydney on 9 February 2010. Reserve Bank of Australia. Carney, Mark (2013), Monetary Policy After the Fall. Speech at the University of Alberta 1 May 2013. Bank of Canada. Financial Crisis Committee (2013), Att förebygga och hantera finansiella kriser [Preventing and managing financial crises] (only in Swedish). Interim report of the financial crisis committee, SOU 2013:6. Geanakoplos, John (2009), The Leverage Cycle. Cowles Foundation Discussion Paper No. 1715. Goodhart, Charles och Rochet, Jean-Charles (2011), Evaluation of the Riksbank’s Monetary Policy and Work with Financial Stability 2005–2010. Reports from the Riksdag 2010/11:RFR5.
Most of all, they must – by word and deed – make clear to their staff that meeting revenue targets must never be at the expense of treating their customers with fairness and honesty. Enhance transparency of products A key aspect of fair dealing is to make insurance and investment products more transparent. MAS has enhanced safeguards for consumers who buy investment and insurance products that are complex. For example, for consumers investing into unit trusts via their investment-linked life insurance policies, we now require insurers to provide a Product Highlights Sheet or “PHS” on the underlying funds. The PHS should be written in plain language, in a “Question & Answer” format prescribed by the MAS. It describes the profile of customers the fund is suitable for, what the fund invests in, and what the risk areas are that could cause a customer to incur a loss. We also require FA representatives to conduct a Customer Knowledge Assessment to assess whether a customer has the relevant knowledge or experience to understand the risks of products which are more complex or have innovative features which customers might not understand. FAIR – the next steps MAS recognises that FAIR will have a significant impact on the industry and on the public. We will take a consultative approach and engage all stakeholders. A review panel will be formed, with representation from industry associations, the investment community, academia, media and consumer bodies, to review and propose recommendations on the five areas I have outlined.

With greater transparency, a customer can decide if he is getting his money’s worth for the service and advice provided by his FA representative. Benefit illustrations also do not include a detailed breakdown of the split between the protection and investment components in an investment-linked insurance product. Customers often assume that the insurance policy they bought covers only insurance to their dependants, when in fact the product may contain a substantial savings element. Insurers should strive to provide greater disclosure on how the premium is split between protection and investment on bundled insurance products to enable customers to better understand what they are buying. 6  BIS central bankers’ speeches  Promoting a culture of fair dealing The fifth thrust in our approach to instilling customer trust in life insurance and financial advisory services is through promoting a culture of fair dealing by financial institutions. Dealing fairly with customers goes beyond mere compliance with regulatory requirements. It is an attitude that springs from the ethos and values of the institution. It is about a culture that places the consumer first, that is focused on doing what is right for the consumer, and that places a premium on integrity. It is the responsibility of the Board and Senior Management to forge this culture of fair dealing throughout the organisation. The Board and Senior Management must set a clear strategy to achieve the fair dealing outcomes, monitor its implementation, and train their staff and representatives to treat customers fairly.
Figure 11 Gold and foreign currency reserve SEK billion 400  400 350  Foreign currency reserve Gold  350  300  300  250  250  200  200  150  150  100  100  50  50  0 Jan--08  0 Apr--08  Jul--08  Oct--08  Jan--09  Apr--09  Jul--09  Oct--09  Source: The Riksbank. The gold and foreign currency reserve the Riksbank held prior to the crisis was not sufficient to cover the lending and the increased commitments occasioned by the crisis. During the crisis there arose, for instance, a global shortage of dollars. To safeguard the banks’ funding in foreign currency the Riksbank – like other central banks – entered into a swap agreement for USD 30 billion, corresponding to around SEK 200 billion, with the US central bank (Federal Reserve) to enable it to borrow US dollars in exchange for Swedish kronor. Prior to this the Riksbank had entered into a similar swap agreement for EUR 10 billion, corresponding to just over SEK 100 billion, with the European Central Bank (ECB) in December 2007, to be able to borrow euro in exchange for Swedish kronor. The Riksbank also has the opportunity to borrow currency from the Bank for International Settlements (BIS) in Basel (Figure 12).

This meant that it became expensive and difficult for the banks to fund themselves. In this situation the Riksbank began to lend money to the banks at longer maturities to secure their funding. During three months in autumn 2008 the Riksbank increased its lending to the banks by more than around SEK 450 billion. To begin with the Riksbank granted loans in kronor at three-month and six-month maturities, but gradually the maturities were increased to twelve months. Lending at a variable interest rate has declined over the past six months, but has been supplemented by the previously-mentioned lending at a fixed interest rate of almost SEK 300 billion (Figure 7). Figure 7 The Riksbank’s lending in SEK and USD SEK billion 600  500  600  SEK, Commercial paper USD SEK, variable rate SEK, fixed rate  500  400  400  300  300  200  200  100  100  0 Jul-08  0 Oct-08  Jan-09  Apr-09  Jul-09  Oct-09  Source: The Riksbank. The Riksbank has also granted loans in US dollars. During the crisis there was a shortage of dollars around the world and the banks experienced difficulty in obtaining funding in dollars. At most, lending in dollars corresponded to around SEK 250 billion in spring 2009. Since then the banks’ interest in borrowing dollars from the Riksbank has declined.
The country may, therefore, be better off announcing some form of renegotiation or restructuring of its debts with private creditors. Of course, such a step should not be taken lightly, since it may be tantamount to a sovereign default, and the economic literature suggests that the costs of defaults can be both multiple (reputational loss, exclusion from financial markets, trade sanctions, and so on) and substantial. However, some empirical studies focusing on emerging economies have fortunately found that the  6  BIS central bankers’ speeches  impact that an inevitable – rather than a strategic – default has on the defaulting country’s economy is typically smaller and less persistent than is commonly believed. 2 ” Let me stress that I am rather surprised to see the flippancy with which some commentators recommend that the government of an advanced economy should infringe its legal and contractual obligations, as though breaching the trust of investors and citizens were the simplest and least costly solution to the deeply-rooted structural problems in Greece. Far from being a convenient means of minimising economic losses and dissipating uncertainty, a default would have extreme adverse consequences, many of an irreversible nature, for the Greek economy – particularly for its banking sector and for the welfare of its citizens.

In the case of trust structures, this would include an assessment of whether: (i)  adequate information on beneficial ownership of the trust is being collected;  (ii)  such information is available to law enforcement authorities; and  (iii)  regulated entities, such as trust companies and banks, are doing their part in complying with the relevant AML/CFT regulations to collect beneficial ownership information. Singapore’s approach to increased transparency on Beneficial Ownership 14. Let me now share with you Singapore’s position on increased transparency on beneficial ownership. 15. We believe that increased transparency on beneficial ownership is consistent with continued strong growth in the trust industry. Conversely, Singapore’s reputation as a dynamic trust centre could easily be tainted by just one or two incidents where proceeds derived from illicit activities are found to be linked to trust companies or trusts in Singapore because of inadequate due diligence. 16. There are several ways to enhance transparency of beneficial ownership for trusts. Singapore’s approach has been to strike a balance between protecting the legitimate need for confidentiality, while ensuring that this protection is not abused for illegitimate purposes. This is consistent with our approach taken with regard to tax crimes. Let me elaborate. 17. Besides the current framework we have put in place for the regulation of trust companies, MAS also regularly reviews our AML/CFT regime. We issued in July 2014 a public consultation on proposed amendments to the MAS Notice on AML/CFT for Financial Institutions.