samchain/econo-pairs-v1 huggingface dataset:
Given these responsibilities, the banking institutions therefore need to play their role effectively and efficiently to contribute to the overall stability of the financial system, and the growth and development of the economy. Visioning for the Islamic banking system In charting the future development of the Islamic banking system, due consideration would therefore need to be given to the role of the banking system in the economy. The ultimate goal is to enhance wealth creation, and promote sustainable and balanced economic growth. The vision is, therefore, to develop a progressive and robust Islamic banking and financial system, rooted in the Islamic core values and principles, that best serves the needs of our economies. By indicating the destination in the journey, to developing the Islamic banking industry, the Master Plan would provide a road map to drive convergence towards the common vision among countries in the development of an Islamic financial system. While collective efforts can be directed to achieve this common vision, consideration needs to be given to the stage of development of the respective economies. In particular, the expected role that the banking system needs to fulfill can be identified accordingly. This could range from the development of an Islamic banking system to efficiently intermediate funds in the economy, to having in place a sophisticated Islamic banking and financial system that is internationally integrated and that is in itself, an engine of growth.

I regret this somewhat as it would have been useful for us. Is the French banking system still sufficiently robust? In fact, French banks are increasingly robust as they are reducing their risks and increasing their capital. The reduction of risk has resulted from the selling-off of business lines, often abroad, and a scaling-back of some market activities; the increase in their capital reflects the setting aside of profits that remain substantial thanks, in particular, to the resilience of retail banking in the face of the economic slowdown. Their core tier 1 capital grew by 0.5 percentage point in the second quarter and they have exceeded the target set by the EBA. In terms of liquidity, they have managed very well the withdrawal of US money market funds last year by adjusting their assets, as well as the rebalancing of their sovereign bond portfolios. This goes to show that, if it is based on a sound internal model, the universal banking model works well. 2  BIS central bankers’ speeches  Do you remain opposed to the separation of investment and retail activities? I really do not understand the benefit of this principle of separating activities. The only thing I wish to see is the outright prohibition of speculative activities and stronger internal controls for the risks associated with market activities. Otherwise, banks should be able to serve their customers, whether they are private individuals, companies or institutions, in all of their operations – on bond markets, forex and hedging operations, and creating savings products.
To illustrate this point: Lowering the policy rate is not the only thing a central bank can do to ensure financial stability in the short run; a central bank has other efficient instruments at hand, which, depending on the situation, may be equally or even better suited to safeguarding financial stability. Also, these instruments do not affect the stance of monetary policy and thus the economic stability and price stability objective, or only do so to a lesser degree. The difference between liquidity management operations and changes in the stance of monetary policy has been poorly understood by many observers. Liquidity injections, as large as they may have appeared, have in general not resulted in significantly higher levels of reserve money, because they were only of a temporary nature. The liquidity management operations have thus not resulted, as is sometimes claimed by analysts, in huge amounts of excess liquidity, nor can they necessarily be equated with a more expansionary monetary policy stance. Many of the recent central bank liquidity management operations have not affected the monetary policy stance. However, there have of course been changes in the monetary policy stance during the financial market crisis: the Federal Reserve has significantly lowered interest rates, and in some other countries, the path of the (partly realised, partly expected) monetary policy rate is lower now than last August, which is equivalent to an expansion in the monetary policy stance.

Central bank action is a first-aid kit to ensure that the patient does not die on the site of the crash from a loss of blood, but the subsequent healing process is up to the patient. Taking moral hazard into account The final lesson concerns the moral hazard problem arising from liquidity management operations. Roughly speaking, moral hazard is the name we give to the situation in which, financial institutions and investors incur higher risks than they would otherwise because they expect the central bank to intervene in times of crisis. This, in turn, may increase the likelihood of future crises. Moral hazard is relevant both at the level of systemically relevant market players and at the level of markets as a whole. Market participants that are “too big to fail” or “too interconnected to fail” may automatically factor in the help from central banks when deciding about their business strategy. However, smaller players and investors that cannot count on individual help may also take the expected central bank reaction to financial market crises into account in their investment decisions. BIS Review 71/2008  7  Because of moral hazard, central bank intervention in order to safeguard financial stability in the short term may be destabilising in the long term. Therefore, when reacting to a financial crisis, the benefits of central bank intervention in terms of short-term stabilisation must be weighed against the long-term cost in terms of moral hazard.
Moreover, the relatively close co-movement between finished manufactured goods import prices and consumer goods prices (excluding energy and food) over the past two years is suggestive of relatively high and rapid pass-through (Chart 2). The faster adjustment of prices relative to that implied by the evidence from the Great Stability may partly reflect the fact that much of that evidence for the UK is based on the  2  For example, see Section 4 and the box on pages 48-49 of the August 2010 Inflation Report, Fisher (2010) and Sentance (2009). 3  Much of the recent analysis of exchange rate pass-through is based on evidence taken from the Great Stability period (see for example Campa and Goldberg (2006) and Ihrig, Marazzi and Rothenberg (2006)). The results from these studies pick up the average lag structure of the past, and are sensitive to the window in which exchange rate effects are identified. It may be that the lag structure following sterling’s depreciation was quicker. To the extent that businesses adjusted more quickly, pass-through in the current period might appear larger than suggested by the econometric techniques used in previous studies, when in fact the adjustment was only faster. BIS Review 122/2010  3  behaviour of prices following sterling’s appreciation in 1996. It is quite possible that those businesses whose margins were squeezed following the recent exchange rate depreciation responded more quickly than they did to the increase in margins associated with the mid1990s appreciation.

Assets are managed on behalf of end-investors, whether institutional (such as pension funds and life insurance companies) or retail, the former typically through Separately Managed Accounts, the latter through Collective Investment Schemes. The industry’s Assets Under Management (AUM) are currently estimated at around $ trillion globally (TheCityUK (2013)). 1 This is large. It is equal to around one year’s global GDP or around three quarters of the assets of the global banking industry. It has also grown fairly rapidly, with AUM roughly doubling over the past decade in dollar terms. The longer-term picture is more striking still. In the United States, AUM have risen almost fivefold relative to GDP since 1946, from around 50% of GDP to around 240% of GDP (Chart 1). In the United Kingdom this pattern has been replicated, but over a much shorter time period since around 1980 (Chart 2). Across most OECD countries, the patterns are similar. The asset management industry has, it appears, come of age. The drivers of this growth are reasonably well-understood. The pool of prospective global savers has become larger, older and richer, each of which tends to be a boon for the asset management industry. Since 1950, average life expectancy has risen by nearly 50%, world population has risen by a factor of three and world GDP per capita has risen by a factor of nearly 40. There is a strong cross-country correlation between GDP per capita and AUM relative to GDP (Chart 3).
We are all eyewitnesses to the tremendous economic impact of the integration of hundreds of millions of people in China, India, and the former Soviet Union into the world trading system. Globalisation has magnified world supplies of manufactured goods and capital as well as the labour force. Prices of all three have changed, and we have not been immune to those changes. Between 1995 and 2005 the prices of consumer goods imported into Britain fell by around one-third relative to the average price of other goods and services. But the greater supply of manufactured goods from newly-industrialised countries has come at the cost of a greater demand by those same countries for energy and raw materials of all kinds. The prices of oil, steel, copper, lead and nickel have all more than doubled. And in a buoyant British labour market it is not just foreign-born footballers who have been in demand. Over the past two years, around half a million migrant workers (or possibly considerably more, we simply do not know) have arrived from the new member countries of the European Union and elsewhere in the world. It is unlikely that migration on that scale has had no effect on wages, or, indeed, on rents and house prices. Some of you may be tempted to think that because the growth of the Chinese economy has affected key prices in our own economy, inflation in Britain is now largely determined overseas. Low inflation in industrialised countries, it is argued, is made in China.

Have an effective resolution regime that allows such firms to fail without threatening to take down the rest of the nation’s financial system, and without requiring taxpayer support. Preserve the important structural changes put in place since the financial crisis that make the financial system more resilient to shocks. These include the centralized clearing of over-the-counter (OTC) derivatives, better supervision and oversight of key financial market utilities, and the reforms of the money market mutual fund industry and the tri-party repurchase funding (“repo”) system. In contemplating changes to the regulatory regime, the good news is that the U.S. financial system is much sounder today than it was on the eve of the financial crisis. The quantity and quality of capital and liquidity for U.S. banks have markedly improved, meaning that the banking industry can support the economy even under considerably more adverse economic conditions. And, although returns on equity have dropped as balance sheet leverage has declined, banks remain profitable enough to cover their cost of capital and continue to serve their household and business customers. Much of this progress is due to regulatory changes enacted since the crisis. In addition to buttressing the capital and liquidity standards for major banks, the regulatory community has made significant strides in many other areas. We developed a resolution framework for systemically important banks that better enables a failing bank to recapitalize with less risk to the rest of the financial system, and in a way that should not require taxpayer assistance.
This is the worrying trend that we are seeing at the moment with respect to housing loans: margins on housing loans – veritable loss leaders – are being compressed in order to attract customers who become captive due to their borrowing. In these circumstances, the level of margins may not be sufficient to cover the cost of the risk, or even the cost of the funding. * *  *  I would like, finally, to underline the need for accurate traceability of funding flows. From this perspective, improving the management of liquidity risk linked to OTC-traded derivatives requires stronger supervision of markets and market participants. That is why the Banque de France supports all of the initiatives taken to this end: –  the clearing through central counterparties (CCP) of all products deemed sufficiently standardised. The management of margin calls and collateral is more robust here than in OTC-trades;  –  the recording of trades by dedicated infrastructures (trade repositories) in order to identify all of the systemic players;  –  extending the scope of regulation to include players that are part of the unregulated or “shadow banking” sector. Several reforms are already well under way as they correspond to G20 guidelines. The United States adopted the Dodd-Frank Act in July 2010. At the European level, the draft EMIR regulation should be adopted in summer 2011. * *  *  By way of conclusion, I would like to stress the persistence of a number of warning signals that are still present.

The international recovery is progressing It is natural to begin a survey of inflation perspectives by touching upon the international economy. At the end of 2002, the Riksbank and other forecasters expected world economic activity to embark on an upturn. However, during spring 2003, we gradually had to revise down our growth forecasts. While a recovery in the world economy was still expected, it was now judged to occur at a later stage. The weak growth, however, prompted a shift to more expansionary economic policy in many countries. Both the European Central Bank (ECB) and the US Federal Reserve, as well as the Riksbank and other central banks, continued to cut key interest rates to historically very low levels. However, most factors now indicate that both the Riksbank and other forecasters were somewhat overly pessimistic in connection with the Iraq war, particularly regarding the view of economic developments in the US. During the second half of 2003, we have had reason to again revise up our growth forecasts for the world economy. What has happened then since December, when the Riksbank published its latest Inflation Report and forecasts? The most apparent and perhaps the single most important change in the world economy has been the sharp depreciation of the dollar, mainly against the euro. It is likely that the dollar’s weakening against both the euro and the yen is an effect of the US current account deficit, coupled with a growing deficit in the US federal budget.
Usage to date across these facilities has not been particularly high. But as I have explained more fully elsewhere, their impact has been large and sustained, and I continue to attribute much of the 3 2/4  BIS central bankers' speeches  facilities' initial success to the size, scope, and flexibility of these backstops.3 We've seen encouraging progress from these policy actions in recent months. As Chair Powell has noted, though, full recovery will take some time.4 Moreover, the timing for fully achieving our goals will depend on more than just our monetary and financial policies. Most important will be our public health authorities' success in containing the virus itself. And fiscal measures, which helped many smaller firms, the unemployed, and lower income households weather the initial stresses of the crisis, will continue to play a critical role in promoting sustained recovery. The Fed's Policy Response: How We Implement Also Matters I'd like to shift away from the Fed's policy actions and explain why their implementation can also make a difference in addressing the unequal impact of the pandemic. Recall that as we launched the facilities, the principles of transparency, governance, and accountability were at the forefront of our execution strategy. Why? The Fed, together with Treasury, has been entrusted to deploy large sums of public resources, and transparency is fundamental to our credibility. In practice, this requires clarity in the terms and conditions of the facilities, timely reporting on facility usage, and publication of vendor contracts, just to list a few aspects.

Smaller and midsize firms participating in the facilities can offer additional services to their clients, and more broadly, these firms may develop new business relationships and skills and deepen their expertise when operating in the markets for these facilities. With this as the motivation, let me review how we are broadening access to the facilities for two primary types of service providers: vendors and counterparties. Starting with vendors, in our effort to contain the damage from the pandemic and speed the launch of the facilities, the Fed directly negotiated with several outside vendors to accelerate the rollout of various facilities and to supplement our areas of internal expertise. Our initial vendor selections prioritized scale and, in many cases, the ability to dedicate a large team of personnel behind a wall of confidentiality. This approach proved successful in launching our facilities at maximum speed, but our strategy from the beginning has been to diversify our vendor base in the post-launch phase. Importantly, all of the contracts the New York Fed has signed are short term; each has a provision to cancel with 30 days' notice. Given this flexibility, we are evaluating all contracts after 90 days, with 3/4  BIS central bankers' speeches  priority on re-bidding those that were not competitively bid. The New York Fed will shortly commence a competitive bidding process for some of these vendor roles.
There are no guaranties that levels of income in the CESEE countries are going to converge towards those of the developed Western economies. No guarantees that these countries are not going to form one, or more, of the so-called convergence clubs at a lower level of per capita income compared to their developed peers. However, it is our job to dare to introduce reforms even if we are not a 100 percent sure about the timing and the scale of the effects, as these are often not under our direct control. But if history teaches us anything, and if we follow the best practices from around the world, not only the EU, then the path we have to follow becomes much clearer. And the closest thing to a recipe for reducing the probability of being caught in the middle income trap (of low growth and slow or no convergence) would be to dare to reform. Be it the education system with an aim to increase the quality of human capital, be it liberalising product and labour markets controls, be it the reform of justice or public administrations systems, or anything else that is proven to enhance the business environment in the country. It is as simple or as difficult as that. But, and this is my final thought – we have to keep in mind the political economy dimension of the process, and there things do not look encouraging.

In terms of data, however, this is the best we have at the moment. So, notwithstanding substantial data issues, the question is how can we, as policymakers, influence these unobservables? 5  While we can expect a re-launch of capital investment growth, I am quite certain that growth rate that we have witnessed in the 2000s, with strong inflow of FDIs and real estate bubbles in some countries will not be seen again in the near future. That is why so much focus is on the total factor productivity, ultimately seen as the only source of long-term growth. Of course, the TFP is an unobservable variable, usually measured by the Solow residual. What drives the TFP growth is a much trickier question. Is it innovations, technology advances? For us as policy makers, understanding the determinants of technology adoption, the TFP growth, is key, as this gives us the channel to act through. There is an increasing number of theory and empirical papers linking development and the adoption of technologies to the role of institutions defined in a very broad way. And data seem to be supportive of the link – there is a strong positive relationship between the quality of institutions and human capital on one side, and growth on the other. But then, when it comes to the quality of institutions, or human capital, there has been little or no convergence of the CEE.
And stretching it or infringing it until it is no longer credible would undermine confidence and, in the end, be counterproductive for growth. In other words, flexibility without damaging the credibility of the rules. Q: Germany does not seem to share this need for fiscal stimulus. A: Our measures will be much more effective if we see structural reforms and a fiscal position appropriate for the euro area. This should be discussed and evaluated at the euro area level. It is normal for the ECB to say this because it monitors the situation across the euro area and is interested in its stability and growth. Q: Its measures have flooded the market with liquidity. But it will be difficult to have a demand for credit if there are no jobs or if employment is at wage levels of the 1980s. A: People will end up getting work if companies manufacture good products and provide good services and there are customers to buy them. Monetary policy can help by providing sufficient liquidity and by steering that liquidity to where it is most needed. This is what the targeted longer-term refinancing operations adopted in June and the measures announced last Thursday, namely the programme to purchase asset-backed securities from the private sector, are aimed at. We want there to be sufficiently ample liquidity and for the ECB’s balance sheet to move back towards previous levels [note from the editor: to go up to € billion from the current € billion].

The euro area faces risks to its economic growth on such a scale that it’s necessary to use all available tools to support the economy. And that means using the instruments on the demand side and the supply side. On the demand side, you have monetary policy. And what the ECB has announced shows that we are committed to taking steps and that we have instruments we are ready to use. You have also fiscal policy, in those countries that have space to expand it. But what matters  BIS central bankers’ speeches  1  most are the structural reforms, because without them no supply or demand measure will have an effect. Q: Is that message aimed at France and Italy? A: We are not asking anything from anyone in particular. There is nothing of a give and take here. The ECB is independent and does not enter into this kind of bargaining. We do what we think we have to do and we expect others to do their job. We are just highlighting the conditions for it to be effective. For example, in our view, the countries that want flexibility in applying the Stability Pact should announce reforms beforehand, because flexibility is useless if it isn’t backed by reforms. Fiscal policy should be used to support aggregate demand – but within the framework of the Stability Pact, and that’s an important “but”. The Pact creates confidence.