samchain/econo-pairs-v1 huggingface dataset:
92 fe b. 93 fe b. 94 fe b. 95 fe b. 96 fe b. 97 fe b. 98 fe b. 99 fe b. 00 fe b. 01 fe b. 02 fe b. 03  0  Annual return Standard deviation  8  Oil 3.3 % 40.5 %  Petroleum Fund 9.9 % 8.9 %  BIS Review 13/2003  7. Return and risk: oil vs Fund - with the Fund’s current equity portion (40 %) Return and risk for combinations of oil and Fund 1 February 1986 – 1 February 2003. Measured in USD. Per cent  Return (geom.annualised)  14 12  Today (80 % oil)  10 100 % oil 0 % Fund  8 100 % Fund 0 % oil  6 4 2 0 0  10  20  30  40  50  Risk (standard deviation, annualised)  8. Annual return in the US Per cent 60  60  40  40  20  20  0  0  -20  Fixed income instruments  Equities  -40  -40  -60  -60 1925  -20  1935  1945  1955  1965  1975  1985  1995  Source: Ibbotson Associates og Datastream  BIS Review 13/2003  9  9. Average return in the US Rolling 10-year periods.

The chart illustrates developments in the labour force and the number of pensioners in the period up to 2050. The blue line shows that the labour force is projected to increase by about 150 000 from 2000 to 2030. Old-age and disability pensioners will increase by some 500 000, shown by the grey line. This means that the number of persons in the labour force relative to the number of pensioners will fall from 2.6 to 1.8. These rough estimates are among other things based on the assumption that labour immigration remains at the present level. The increase in the number of pensioners will result in a sharp increase in the obligations of old-age and disability pension funds. Expenditure on old-age and disability pensions is expected to more than double as a share of total GDP in the course of the next 30 years. The increase in the number of elderly, especially those over the age of 80, will in time require an increase in resources for nursing and care services. Welfare reforms that have been adopted will also contribute to increasing the need for resources in the public service sector in the years ahead. BIS Review 13/2003  1  With an ageing population and strong growth in expenditure on pensions and nursing and care services, our petroleum wealth will be a welcome source of revenues. This is why it is particularly important that it is managed in a sound manner. Petroleum activities are a substantial component of the Norwegian economy.
21  Reciprocity has also been raised by Alistair Darling in response to SWFs, see, for example, "Chancellor backs G7 move to get tough on sovereign wealth funds", The Guardian, 20 October 2007. 22  Germany's Handelsblatt newspaper, 19 October 2007. 23  Larry Summers on SWFs, Financial Times, 30 June 2007. See also Summers (2006). 24  Statement by G-7 Finance Ministers (http://www.mof.go.jp/english/if/g7_071019.pdf)  25  The US policy stance has been relayed to the public by US Undersecretary for International Affairs, David H. McCormick, in testimony before the Senate Committee on Banking, Housing and Urban Affairs on 14  BIS Review 150/2007  and  Central  Bank  Governors,  Washington,  DC. 5  the most extensive set of proposals for best practices for SWFs. 26 He calls it a “standard to guide the activities of SWFs". The standard sets out norms for transparency and accountability with respect to four different aspects. They are: objectives and investment strategy, governance, actual investment portfolios and fund management behaviour. The effort by the authorities of the largest industrialised countries and the leading SWFs to develop jointly a set of “good governance guidelines” is timely and clearly sensible. There is a risk, however, that these efforts will fail, or will prove to be counterproductive if the demands from the industrialised countries are too ambitious, or if such guidelines are ultimately motivated by the desire in mature markets to impose veiled barriers to foreign investments.

A second explanation is the decline in real rates, that is to say nominal rates of interest adjusted for inflation. Chart 2 shows 10-year government bond yields in Switzerland, Germany and the US adjusted for consumer price inflation in those countries. The decline in real interest rates worldwide is attributable to various reasons that have been studied and analysed extensively. In simple terms, we can for example say that the demographic shift has played a key role, with an ageing population tending to save more in light of longer life expectancy. Moreover, the slowdown in productivity growth is curbing the potential return on real investment, thus diminishing the appeal of investments in fixed assets such as factories and equipment. If intentions with regard to saving outstrip investment plans, the real rate of interest has to come down to restore the equilibrium between supply and demand for capital. Monetary policy amid low interest rates What does the lower level of interest rates worldwide mean when it comes to conventional monetary policy? If interest rates are already low, monetary policy is less able to respond to shocks. If the economy and inflation weaken, a central bank will normally stimulate economic activity by lowering interest rates. This mitigates the slowdown and stabilises prices. If interest rates are already low, however, a central bank only has a few moves at its disposal before rates reach zero. And once that happens, conventional monetary policy ends.
Of the remaining 773 billion baht of NPL in the banking system at end-June 2003, over 400 billion are either in the court process or have completed the court process and in the legal execution process with assets awaiting to be liquidated. To speed up the process of asset sales and liquidation, we have proposed to the Ministry of Finance to carve out this portion of the NPLs from the banks by an independent body that would be assigned the task of asset sales and liquidation. This proposal could become effective by early next year and the approach would greatly assist a speedy resolution of NPL problems. The remaining NPL of approximately 350 billion baht would not be a difficult problem for banks to handle, given the current low interest rate environment, the ongoing economic recovery, and improving bank profitability. As for the longer term, it is important that the banking system diversifies its services and reaches out to meet the needs of the rural population currently considered under-serviced by the industry. This will ensure that financial constraints will not remain as an obstruction to a broad-based economic prosperity of Thailand. The Financial Sector Master Plan, which has been drafted by the Bank of Thailand and is currently under the Ministry of Finance’s review, has looked closely at this important issue. And last but certainly not least, even when the Thai economy can manage to sustain growth, we are not immune from new challenges and risks brought about by globalization.

These facts oblige us to realize that challenging the status quo means in the end challenging mentalities, both those of policymakers and of citizens. It is a very complex process, but we see it as an opportunity as well. We can transform education and awareness in very effective policy tools, to everybody’s benefit. We can surpass the objective limits of our policy actions, by making people more aware of these very objective limits. Bridging the knowledge gap can lead to more financial inclusion, to more access to finance, which is good news for banks, companies, citizens and public authorities alike. Ladies and gentlemen, My conclusion and my message for you, distinguished participants to this conference, and I do not want to sound old fashioned, is that we need research and economic analysis that is practical and can fill the real deficits of our society. And if you really want to challenge the status quo, my advice is to have in mind also the way your research will be disseminated and materialized in real life. On the other hand, let’s not forget to preserve what is valuable in the current establishment. As an old word of wisdom is saying, we need courage to change the things which should be changed, serenity to accept the things that cannot be changed, and the wisdom to distinguish the one from the other. I wish you success with the debates! 2/2  BIS central bankers' speeches
Chart 8 constructs a fan chart for female life expectancy at birth in the United Kingdom derived from the latest forecast published by the Government Actuary’s Department. The width of the fan chart shows how forecasts of life expectancy are likely to change in the future, as new information and ideas about mortality evolve,  12  To understand the concept of independence consider the example of a church spire that is struck by lightning several times. Is this just coincidence (implied by the assumption that the strikes are independent of each other) or does the spire have certain characteristics that lead it to be struck regularly? Given our knowledge of spires and lightening the latter is more plausible. Similarly, there may be characteristics, genetic or other, and still largely unknown, that make particular families more likely to experience cot deaths than others. 13  Hill (2002) and (2004). See also Dawid (2004) and Eggleston (1978) for a discussion of the difficulties courts find with the concepts of conditional probability and Bayes’ theorem. 14  The forecast for inflation is based on the assumption that interest rates follow the path expected by financial markets over an average of the fifteen days prior to the finalisation of the Inflation report. 6  BIS Review 73/2004  causing forecasts to be revised - assuming that news about life expectancy arrives in the future at about the same rate as in the past.

Starting from this premise, I would like to specify what kind of challenges oversight authorities face and share with you some ideas on what the role of an institution like the Swiss National Bank should be. But first of all, I would like to clarify a fundamental point. Some people claim that the oversight authorities’ objective of promoting the stability of the financial system hides an undue interventionist activism. Well, these claims are beside the mark. Let me quote Andrew Crockett, BIS General 7 Manager and Chairman of the Financial Stability Forum : “[…] systemic stability is critically determined by the collective behaviour of individual market players. […]. And supervisors need to analyse the interaction between individual incentives and systemic outcomes.” In other words, systemic stability depends on how negative externalities, which are not priced or internalised by the market, are dealt with. Thus, we should not waste our time discussing whether regulatory intervention is necessary or not, but rather how oversight authorities, focusing on systemic risk, should shape the process. Keeping this in mind, the challenges oversight authorities face are numerous and well-known. The Giovannini Group lists no less than 15 barriers to efficient cross-border and settlement procedures within the European Union. These barriers are categorised according to their technical nature, their fiscal implications and their legal aspects. A remarkable feature of this report is the distinction between what market forces can achieve and what regulatory authorities should do. In particular, there are several issues that cannot be tackled by the private sector, e.g.
In oilproducing economies, foreign asset accumulation stems from oil royalties reflected in large government budget surpluses, so that their management by public entities is a natural outcome. The funding of commodity SWFs stems from a domestic resource that is most of the time owned, exploited or taxed by the government: in this respect it is genuine sovereign wealth, and the result of public savings. By contrast, foreign reserves and SWF accumulation that is not commodity related might be seen as primarily a diversion of excess private savings. Commodity funds The set-up of stabilisation funds by oil-exporting countries was first motivated by the desire to smooth oil revenues, which are highly volatile, with a view to maximizing the overall rent from oil extraction. To the extent that commodities are non-renewable resources, standard economic theory suggests that part of extraction revenues should be saved in order to smooth the nation’s inter-temporal consumption, very much like an individual saves over the lifecycle for his retirement, but also possibly in order to leave a bequest to his offspring. Commodity SWFs were indeed equally motivated by an attempt to optimise the intertemporal benefits of natural resources beyond the exhaustion horizon, as well as on the grounds of fairness to future generations. As such, oil funds are far from being a new phenomenon: the earliest funds were thus created in the aftermath of the first two oil shocks.

Strategic or industrial goals can also be pursued, such as facilitating the access of domestic firms to new foreign technologies, or more generally bolstering national industries. One such example is provided by the new Chinese State Investment Company, which could possibly use a large fraction of its assets to recapitalise the Chinese banking sector. In a word, sovereigns are also in charge of economic policy and it is intrinsically difficult for them to maintain schizophrenia between their actions as policy-makers and their decisions as managers of public assets. The strategic allocation of their risky assets can therefore be expected to be used, in some cases, as another policy instrument. Given these specificities of sovereign holdings of risky assets, it is legitimate to wonder whether the growth of these holdings raises new challenges for central banks and the international community. Transparency I will conclude on the issue of the appropriate transparency level for SWFs. Should SWFs be more transparent than other institutional investors? This question must be addressed from two different perspectives: accountability and financial stability. As a public institution, an SWF should disclose a minimum set of information because of its fiduciary responsibility. Over the recent past, public institutions have responded more and more favourably to the arguments in favour of transparency. In particular, the benefits of greater accountability and the benchmarking of sovereign institutions tend to outweigh arguments in favour of secrecy. For instance, most central banks nowadays report their FX reserves holdings to the IMF under the SDDS and publish a detailed annual report.
I would like to point out that the assessments and values expressed here are my own and that they are not necessarily shared by my colleagues on the Executive Board of the Riksbank. Public finances have deteriorated In 2008 and 2009, public expenditure in most industrial nations increased while revenue declined. Expenditure in the OECD area as a whole increased as a percentage of GDP from 40 per cent in 2007 to 45 per cent in 2009, while revenue as a percentage of GDP fell from 39 per cent in 2007 to 37 per cent in 2009. 1 (Slide: Public finances in the OECD countries). The situation with regard to general government net lending, that is the relationship between public-sector revenue and expenditure, has therefore deteriorated. The deficit in public finances in the OECD area has increased from 1 per cent of GDP to 8 per cent of GDP. (Slide: General government net lending in the OECD countries). This has in turn led to a substantial increase in public-sector indebtedness. The gross debt of the public sector in the OECD area has increased from 73 per cent of GDP in 2007 to 90 per cent of GDP in 2009 and will continue to grow rapidly as long as the large deficit remains. (Slide: Gross public debt in the OECD countries). The problem is largely the same for all the established industrial countries. However, there are significant variations. For instance, the public-sector deficit has increased more in the USA during the crisis than in the euro area.

Peter Pang: The SME sector – an important pillar of many economies Statement by Mr Peter Pang, Deputy Chief Executive of the Hong Kong Monetary and Head of Delegation, at the 44th Asian Development Bank Annual Meeting, Hanoi, 5 May 2011. *  *  *  I would like to thank the Government and the people of Viet Nam for their warm hospitality in hosting this year’s Annual Meeting of the Asian Development Bank. I would also like to take this opportunity to express my deepest condolences to the people of Japan affected by the recent tragic events. The global recovery has gained traction, with emerging Asia in particular rebounding strongly from the global financial crisis. Compared with the last Asian financial crisis, the damage to the real economy of the region was much more contained this time. This is in large part attributable to the reforms taken by regional economies over the years to strengthen economic fundamentals and improve the resilience of their banking and financial systems. In addition, a number of regional economies have also promptly taken temporary extraordinary measures to support their economies and cushion the impact on employment. A number of these supportive measures were targeted at assisting the small and medium-sized enterprise (SME) sector, which is an important pillar of many economies. SMEs play a crucial role in the economic growth and job creation of both developing and advanced economies.
How could the US car manufacturers expect to compete in the motor car market in Hong Kong if the US cars were oversized and, more importantly, had virtually no post-sale service in Hong Kong, which is so crucial in the motor car market? Of course, since then the US manufacturers have gone a long way in improving the product types and quality, and have now become much more competitive than they used to be. BIS Review 116/1997  -3-  7. For Hong Kong to remain competitive under the linked exchange rate system, prices, including land costs and wages, will need to adjust. This adjustment process is already taking place, as we have seen in the correction in property prices and, in due course, rentals. With the slowdown in consumer spending and easing of the demand for labour, the pressure on wage increases for next year should also reduce. I am confident that the flexibility of Hong Kong’s economy will enable us to cope with external shocks effectively and to regain competitiveness. In the last 13 years, Hong Kong’s manufacturers have managed to keep the unit value rise of Hong Kong’s exports to 3% per annum, which is marginally much lower than the inflation rate of 3.5% in industrial countries, and well below the domestic inflation rate in terms of CPI of 8%.

Mr. Chan reports on the Hong Kong dollar post-July 1997 Speech by the Deputy Chief Executive of the Hong Kong Monetary Institute, Mr. Norman T.L. Chan, at the Hong Kong Business Summit ’97 organised by The Hong Kong General Chamber of Commerce on 4/12/97. I am honoured to have been invited by the Hong Kong General Chamber of Commerce to attend Business Summit 1997. This year’s Summit carries special significance because this is the first Summit after the return of Hong Kong’s sovereignty to China. As Hong Kong enters into a new era under the framework of “one country, two systems” and “Hong Kong people ruling Hong Kong”, our attention has recently been focused on the financial turmoil in the region and its effects on Hong Kong. In view of the limited time available, I do not propose to go into the background why this financial turmoil has occurred. I would instead like to take this opportunity to clarify a few points which have been the subjects of extensive debate recently. 2. Firstly, I should reiterate that the Government’s resolve in maintaining the linked exchange rate system is absolute. Given Hong Kong’s small and open economy, the link has been and will continue to be the most suitable arrangement for Hong Kong.
I have talked about early, coordinated supervisory intervention to activate a recovery plan for a systemically important firm and of a coordinated resolution process. Is there an opportunity between those two stages to intervene more forcefully, but not incur the potential asset markdowns and administrative costs of resolution? Considerable interest has been expressed in developing a “bail-in” mechanism to provide that intermediate step. Let me comment by stressing that what I am expressing is strictly my own view. And let me start by saying that a bail-in mechanism cannot substitute for the national resolution tools and resolution planning called for by the CBRG. There must be a last stop where systemically firms can be resolved, because we will inevitably need it and we must work to make cross-border resolution possible at acceptable cost. Where can bail-in fit? I’ve described a process in which supervisors deal first with a troubled financial firm by encouraging its board of directors and management to activate its recovery plan and develop a private restructuring. In my personal view, the possibility of a restructuring prior to insolvency with potentially more forceful outside supervisory or contractual intervention is interesting and deserves more study. Given the number and range of stakeholders in a large financial company, such a mechanism could help solve a coordination problem that can be costly in terms of time and sub-optimal in terms of ensuring the equitable treatment of stakeholders for a financial company on the threshold of, or in, distress.

Those stylized facts were:   The value of the firm’s assets and its business lines tends to decline with time as the firm’s financial weakness becomes more apparent and market pricing of its assets takes on a “fire sale” character;    The funding capacity of the firm declines as its troubles become more evident, counterparties cut lines and limit maturities and the quality of counterparties declines; and    The value of the firm’s franchise decays as customers migrate to other providers. This three-part program of identifying all problems, replenishing capital and liquidity and recasting the business plan was designed around loan exposures, but continues to be relevant today. The challenges are to adapt such a program to the many financial institutions strongly oriented toward capital markets activities with the resulting volatile balance sheets and income streams and to apply the program timely. Time also plays an important role when a financial firm is subject to an insolvency process. Another stylized fact is that the market value of the assets and business lines often suffer a substantial markdown when a financial institution enters insolvency and may decay further thereafter. The Federal Deposit Insurance Corporation (FDIC), the resolution authority for banks in the United States, routinely experienced losses in resolving banks in the 1980s, when it was required to wait until the bank's book value had reached zero. That led to the provision in FDICIA 1991 that a bank can be declared insolvent when its tangible equity falls below 2 percent of assets.