samchain/econo-pairs-v1 huggingface dataset:
I believe the SSM mechanism is going to have a positive impact on central bank (and regulatory authorities) in the region discharging their responsibilities with regard to supervision and macro-prudential policies. Regulators in the region will now talk to a single “home” supervisor, and this is expected to bring more attention to their supervisory concerns. This process could be strengthened further if the central banks in the region improve their own cooperation and are able to identify common position in their communication with the European Central Bank. This could address better the concern that the single supervisor could be more distant to worries of regulators coming from small countries in the region. Being able to cooperate with a single “home” supervisor, will be instrumental in achieving faster progress in the process of regulatory convergence, and establish a more level playing field for financial institutions in the region. This is something that is being closely guided by the Vienna II Initiative. In addition to preparing implementation of various regulatory standards related with countercyclical macro-prudential tools, with particular short term importance is the issue linked with recognition and the treatment of the NPL. In the recent past, some of the countries in the region have been affected by the deleveraging process started in the EU financial system. This was mostly felt during 2012, following the higher capital requirements associated with EBA stress test of November 2011 and relevant steps taken by national “home” authorities to comply with capital requirements.

2  BIS Review 121/2007  inflation expectations from becoming entrenched below the operational target of 2.5 per cent was one of the main reasons the interest rate was lowered to a very low level in 2003 and 2004, when inflation receded and approached zero. Low interest rates have stimulated demand and output and gradually led to the prospect of higher inflation, which we are addressing by increasing the interest rate. Consumer price inflation is still fairly low, but capacity utilisation is now at such a high level that inflation is projected to move up gradually to 2.5 per cent. Higher interest rates will contribute to a gradual decline in capacity utilisation, thereby preventing inflation from becoming too high. In the long term, monetary policy cannot influence real economic variables such as output and employment; it can only influence nominal variables such as inflation, the nominal interest rate and the nominal exchange rate. When monetary policy serves as an anchor for inflation expectations, it allows the interplay between monetary policy and other components of the economy to function. A good result can be achieved if the social partners take the role of "leader" and the central bank the role of "follower". Wage growth can then be determined in the knowledge of the monetary policy response. Flexible inflation targeting provides a fixed framework for monetary policy and gives a clear indication of how the central bank is to respond in different situations.
Minister, this Loan Scheme being launched today provides a real opportunity for human capital development, which is necessary for national development. It enables children who would otherwise be excluded from the educational system have decent opportunities to receive education, as their parents can now access loans specifically targeted at meeting their educational expenses. Ladies and Gentlemen, a nation’s development depends on the levels of skills among its people and it is our expectation that the launch of this Scheme will contribute towards this noble cause. To this end, I would like to encourage parents and guardians to use the Student Loan Scheme in order to realise the vision of educating their children. Chairperson, what we are witnessing today represents an initiative by banks to respond to the needs of the community. As the Central Bank, we commend your bank for this initiative, which was borne out of the identified need to develop financial products that address problems in our society. Chairperson, Ladies and Gentlemen, let me end by reminding players in the banking sector that as new products and services emerge, different or heightened levels of risk also emerge. The challenges that financial innovation poses for public policy and the regulatory framework in ensuring financial stability are enormous and cannot be over looked. In this regard, let me call upon the management of Indo-Zambia Bank to not only look at the benefits, but more also on the risks that accompany financial innovation.

From the Bank of  BIS Review 50/2009  1  Zambia’s point of view, the objective of financial stability remains key in all our activities. Financial stability depends to a large extent on the existence of robust risk management systems of financial institutions. It is therefore, important that risk management systems should keep pace with financial innovation. I have no doubt that the banking sector will rise to this challenge. Once again, thank you for the opportunity to witness this important event. 2  BIS Review 50/2009
The second source of resilience comes from the strength of our prudential and supervision of financial institutions. In this regard, the Bank of Thailand’s capacity and performance in supervising financial institutions has been assessed against international best practices in the context of the joint IMF/World Bank Financial Sector Assessment Program or FSAP. 2  BIS Review 63/2008  Indeed, the outcome of the FSAP assessment was very satisfactory, validating our observance of international best practices. Moreover, the assessment results also strongly endorse the policy-making frameworks and transparency. As you may be aware, the new Financial Institutions Business Act (FIBA), which governs the framework and conduct of financial institution supervision, is designed to capture the international best practices of financial institution supervision according to Basel Core Principles (BCP). With this law, the BOT can undertake consolidated supervision of financial conglomerates, together with prompt preventive and corrective actions, macro-prudential measures, and measures to improve consumer protection. Overall, our goal is to ensure that our regulatory and supervisory responses keep pace with the financial intermediaries and the products they offer. In this endeavor, the Bank of Thailand has put emphasis on robust stress testing, enhanced counterparty risk management, and safe and efficient market infrastructures. This leads me to the third source of resiliency. This is the continuous improvement in our financial infrastructure, legal as well as information, and the intermediary functions of financial institutions within the economy.

Andres Sutt: Emerging energy markets – key issues Introductory remarks by Mr Andres Sutt, Deputy Governor of Eesti Pank (Bank of Estonia), at the GIC/MKM/Eesti Bank Conference on emerging energy markets, Tallinn, 21 August 2008. *  *  *  Mister Minister, Excellencies, Ladies and Gentlemen, Dear Guests, It is a great honor to welcome you here in Tallinn. The issues of our conference on emerging energy markets are of great importance in today's world. We are very lucky to have an excellent lineup of highly distinctive speakers from both the public and the private sector, so our discussions will no doubt be interesting and useful. I also have to admit that that interest in the conference exceeded the organizers' most optimistic expectations. Energy issues and related policy choices have come forward forcefully and en masse for policy makers and public at large. Indeed, there is hardly any other area where choices that are made today will have a direct impact on the way of life of the generations to come. In this regard, I would like to briefly outline the key issues that will be discussed also today. First and foremost, human activity and energy consumption are, in all likelihood, having a direct impact on climate and, ultimately, on living conditions on the Planet Earth. While the direct effects of climate change on growth and prosperity vary, it is beyond any doubt that the challenges ahead are formidable.
The Boskin Report (1996) discovered that the US CPI overestimated the actual cost of living increase by 0.8-1.6 percentage points annually. Statistics Norway has assessed the measurement error in the 4 Norwegian consumer price index. The conclusion is that the Norwegian index also overestimates developments in the cost of living but that the deviation is probably well below one percentage point annually. National consumer price indices are constructed in various ways. For example, there are differences in the goods and services included, the relative weights assigned to the goods and services included and the frequency with which the weights are adjusted. In addition, the method of weighting the various sub-indices – ie whether the arithmetic or geometric average is used – may also affect the growth rate. Eurostat’s Harmonised Index of Consumer Prices (HICP) represents a standard that facilitates the comparison of countries. 4  B. Koth and L. Sandberg: "Kilder til målefeil i konsumprisindeksen" (Sources of measurement errors in the consumer price index) Økonomiske analyser 5/97. Statistics Norway Oslo 1997  4  BIS Review 51/2001  The national index in the UK is calculated by using arithmetic averages, whereas geometric averages are used in the harmonised index. Several items in the national index are not included in the harmonised index, for example costs related to housing (house depreciation, council tax and building insurance).

In exceptional circumstances, like Brexit, when the economy is facing profound structural change, the MPC can extend the horizon over which it returns inflation to target from above in order to balance the effects on jobs and activity. After all, even though monetary policy cannot prevent the weaker real income growth likely to accompany the transition to new trading arrangements with the EU, it can influence how this hit to incomes is distributed between job losses and price rises. This flexibility cannot be used without limit of course, and the MPC has set out its framework for managing the trade-off including guidance for its tolerance of the overshoot of inflation.3 Developments in monetary policy In response to the challenging post-crisis environment, the conduct of monetary policy has made important advances that have helped to shape the expectations of both market participants and the public we serve. 2  The ECB also has flexibility to pursue its inflation target, but given the absence of trade-off inducing shocks has not yet had cause to use it. The ECB General Council adopted a quantitative definition of price stability in 1998 as a year-on-year increase in the Harmonised Index of Consumer Prices (HICP) for the euro area of below 2%; and from 2003, they clarified that this objective was to maintain inflation rates below, but close to, 2% over the medium term. 3 See Carney M (2017), Lambda, speech given at the London School of Economics, 16 January 2017.
Moreover, we have seen a common theme running through incidents that have occurred – the dash for cash in 2020, the Archegos Collapse, the LDI pension fund issue, the nickel metals case – namely that for firms to understand and respond to the  4/6  BIS - Central bankers' speeches  full risk implications they would have had to observe and respond to a much larger picture of risks than they did observe, and from that came potentially larger risks. There is a challenge of breadth and depth in the NBFI world. It is a very large and disparate landscape with many activities and entities. As a result, we have to survey a lot of ground to look out for risks. But in order to understand these risks, we need to get into the detail, hence the depth issue. LDI was a good case study of this. The LDI fund world comprised 85% of the larger so-called segregated funds, and 15% of the smaller pooled funds. Our stress testing work focussed on the 85%, but the problem arose in the 15%. In some ways the issues around NBFI bear a striking resemblance to ages old challenges in finance, such as leverage, and inter connectivity with other parts of the financial system, creating the scope for spill-overs and systemic consequences. But the heterogeneity of the landscape means that there is no single magic number for leverage as we have with banks, and the inter connectivity can be hard to map, reflecting the recent incidents.

Will the next 25 years see as large a metamorphosis, from sleepy caterpillar to winged butterfly, as the last? It is impossible to know for sure. But it is interesting to attempt a bit of futurology and sketch some hypothetical evolutionary central  BIS central bankers’ speeches  3  bank paths. For the sake of illustration, let me consider two – one descending the stairs from whence central banks came, another ascending them to a whole new level. One possible future path is that central banks simply retrace their steps, going back to basics. Extra-ordinary times – from great moderation to great recession – necessitated extraordinary measures. But extra-ordinary should not become the new ordinary. What might the new ordinary look like? For monetary policy, it would probably mean a return to plain-vanilla inflation-targeting using conventional short-term interest rate tools – the one instrument, one target world. Direct use of central banks’ balance sheets, to affect quantitative or credit easing, would return to being an emergency room measure, for use only when the zero lower-bound on interest rates bit tightly. Active monetary policy would mean small, infrequent touches on the tiller, perhaps accompanied by small, infrequent explanations. Former BoE governor Mervyn King aspired to make monetary policy “boring”. In this scenario, his wish would be granted. Regulation would follow a similar path. While not returning to their pre-crisis norms, regulatory rules would move to a more settled pattern. The very definition of a resilient financial system is one that does not require active intervention.
To put this into perspective, consider the case of a large US automobile manufacturer. Often cited in the fields of organisational ethics and industrial psychology, this case was seen as a prime example of how conformity and group-think led to costly outcomes. In 2014, the motor company was forced to recall nearly 30 million cars worldwide as faulty ignition switches were found to have led to a loss of electrical power and sudden engine shutdown. 1/7  BIS central bankers' speeches  This malfunction also caused the airbags, power steering and power brakes to become dysfunctional, risking the safety of drivers. As the scandal was uncovered, it was found to have caused an estimated 124 deaths. What is particularly harrowing, was the fact that this faulty ignition switch was known by the company’s employees for at least a decade before the recall. An independent probe subsequently pointed to a corporate culture, which the then new CEO, described as “a pattern of incompetence and neglect". Various case studies on the crisis highlighted that the tight financial position in the early 2000s festered a corporate culture that was heavily focused on cost-cutting, shaping employees’ mindsets, conduct and ultimately values. Internal email transcripts revealed that it would have cost an extra 90 cents per unit to modify the ignition switches. An internal probe reported that the problem was misdiagnosed and dismissed as a “customer-satisfaction” issue, rather than a safety problem.

Within a short span of time, the popularity of this new framework spread widely in both the advanced and emerging economies. It is quite understandable. The framework is theoretically attractive, easily understood and simple to communicate. Deviating from the norm: Malaysia’s approach The theoretical elegance of inflation targeting appealed to many central banks to tread on the same path. In Malaysia we had considered this approach but decided to forge our own route. While the broad framework was appealing, we concluded that adopting an explicit inflation target would have the unintended effect of ‘straitjacketing’ our policy flexibility. We believed that the inflation targeting framework was not ideal for an open and small economy with a sizeable financial market like Malaysia. An economy such as ours is susceptible to real external shocks and could also face problems such as large and volatile capital flows and exchange rates. Therefore, we did not adopt the inflation targeting framework. We adopted what we characterised as ‘inflation anchoring'. The policy outcome is similar, stable inflation. But the process and focus are different. There are several reasons for this approach. First, we did not believe in confining ourselves to a single overarching target for price stability, especially not when the economy is complex and consists of many moving parts. We wanted to 2/7  BIS central bankers' speeches  avoid a situation where too much focus on achieving a single target could lead to potential blind spots.
History suggests that there are periods in which credit in the economy builds up and periods in which it declines – often after an explosive turning point. But these are not I suspect something a physicist would be prepared to accept as proven to be cyclical. And though they are associated with the economic cycle (which also, I suspect, would be thought of as unproven in the world of physics), the relationship between the two is unclear and much disputed. The build-up of credit in the economy is not always associated with higher growth nor does it always match the economic cycle. The long build-up of credit in the UK economy between 2000–2007 – from 125% to 170% of GDP – does not seem to have much affected economic growth which was little more than its long-run average. We do know, however, that a build-up of credit that ends explosively can trigger a rapid reversal – a spiral of “deleveraging” – that drives the real economy into a very deep decline, more severe and more persistent than the usual business cycle. Not only is this a lesson from the empirical literature. GDP in the UK fell around 6% in the crisis and the recovery since has been slower than our recovery from the 1930s recession. Policy makers in the UK have spent much of last 8 years trying to halt and reverse headwinds to the recovery, including from disorderly deleveraging.

Allow me to take this opportunity to invite you to join this exchange of experiences in one of the aspects that is increasingly relevant to our institutions. The theme of this Conference, Economic Policies, Trade Integration and Sustainable Job Creation, is particularly timely at this current juncture of the world economy. The world remains in an expansionary phase although there are some signs pointing to a gradual change in the global economic landscape. Some of the risks that had been the focus of our attention are beginning to materialise. In particular, we are witnessing a re-emergence of protectionist measures with pernicious effects on international trade. Beyond the impact that this can have on growth in the short term, its potential impact on the diffusion of technological advances and on improving the welfare of individuals is more worrisome. In 3/4  order to preserve the benefits derived from globalisation and technological innovation, it is now more important than ever to work towards a fairer and stronger global trade system. To this end, it is necessary to work on the reform of the rules governing international trade to ensure that all countries compete on a level playing field. But also, and not least, domestic policy-makers have a responsibility to design the right policies for stimulating innovation and job creation, and creating opportunities for all.
In many parts of the world banking laws were passed for the first time and the central bank often became the bank supervisor. In this process the distinction between the micro- and macro- perspectives became blurred. What has changed in the past ten to fifteen years is that central banks have started to give much more explicit emphasis than in the past on their macro prudential responsibilities and have distinguished it more clearly from the micro-supervision perspective. This renewed emphasis has several different sources. One of them was undoubtedly the financial crises that hit Asia in 1997. This experience showed that even if the individual banks in a financial system appear to be sound, the system itself can still be overwhelmed by financial shocks. For example, the system can be exposed to a common risk that isn’t obvious from looking at each bank individually. In the Asian crisis countries the exposures of banks to foreign exchange risks didn’t show up on bank balance sheets. The risks were instead in the balance sheets of their major borrowers, who had borrowed heavily in foreign currencies even though they had domestic currency cash-flows. And this also points to another feature of macro prudential concern – it cannot stop at the traditional boundary of the banking system, but must look at the risks in the nonbank financial sector and at the structure of household and corporate balance sheets. There are also two other factors worth mentioning.

16  As Rogerson (1997) points out, there are different definitions of “the natural rate of unemployment”, but he convincingly claims that the only definition of equilibrium unemployment that is well-specified and unambiguous is the one corresponding to unemployment in steady state. Academic literature contains different definitions of short-run and time-varying equilibrium unemployment, such as short-run NAIRU (shortrun Non-Acceleration Inflation Rate of Unemployment – the rate of unemployment that will lead to a constant rate of inflation in the short run) and flexi-price unemployment (the rate of unemployment that would arise if prices and wages were flexible). These definitions are very dependent on models and not very robust, as they rely on such a large number of assumptions. Blanchard and Gali (2010) give some theoretical support for why monetary policy should be aimed at stabilising unemployment around a steady-state level, in addition to stabilising inflation around the inflation target. 6  BIS central bankers’ speeches  composition of the population. If these structural conditions change over time, the long-run sustainable rate of unemployment will also change. There is evidence that the labour market reforms, tax deductions for those who work and changes in the sick pay and unemployment insurance in recent years have contributed to reducing the long-run sustainable rate of unemployment (Swedish Ministry of Finance 2011, Sveriges Riksbank 2012a). As the long-run sustainable rate of unemployment is determined by the functioning of the economy and structural conditions, but is not directly observable, it must be estimated using various econometric and statistical methods.