samchain/econo-pairs-v1 huggingface dataset:
Indicators Relating to Risk Premium JP Morgan EMBI+ Turkey Index  5 Ye a r C DS R a te s 1450  1100  1250 1050 850 650  900 700 500  450  300  27-Dec-05  27-Aug-05  27-Apr-05  27-Dec-04  27-Aug-04  27-Apr-04  27-Dec-03  27-Aug-03  27-Apr-03  100 27-Aug-02  50  27-Dec-02  250  Source: Bloomberg. Interest rates remained unchanged in the first quarter of 2006. However, a reduction by 25 basis points was made in April. The consistency of data relating to inflation and economic activity, which were released in the first four months of the year, with Central Bank forecasts specified in the first  12  BIS Review 67/2006  Inflation Report allowed us to act in compliance with the policy perspective that was shared with the public. The benchmark interest rate in the ISE, which has been realized under the overnight borrowing rate since October 2005, displayed a slight increase in March due to the stagnation in interest rate reductions, global liquidity conditions and domestic uncertainties (Graph 19). Graph 19.

In the meantime, while the high global growth tendency pushes metal prices upwards, the increase in the interest of investment funds to the sector investment tools becomes the determinant in the upsurge in metal prices above expectations. In the light of these developments, crude oil prices continue to be a risk factor with respect to inflation. BIS Review 67/2006  11  Graph 17. Chosen Indicators Relating to Crude Oil Prices 220  70 65  190  60  160  55 50  130  45 40  100 05-01  05-03  05-05  05-07  05-09  05-11  06-01  06-03  IMF-IFS Metal Price Index (2000=100), left axis Import Unit value Index (2003=100), left axis Crude Oil Prices (Brent, Barrel/USD), right axis  Source: IFS, TURKSTAT, Bloomberg. Financial markets and financial intermediation Distinguished Guests, The course of international liquidity conditions and the risk premium in the first two months of the year has been in favor of developing countries. In March, the favorable course in risk premium came to a halt because of the deterioration in the global risk appetite and the increase in the perceptions of uncertainty about the interest rates of the Bank of Japan. Nevertheless, the ongoing successful conduct of budget performance became the most significant development that limited the tendency of deterioration in expectations (Graph 18). Graph 18.
It reduces the possibility of unsound investments and bubbles in the financial and property markets. Nominal stability will also reduce the risk of sudden changes and shocks that may lead to cyclical turnarounds. Historically, economic growth has generally been strong in periods with relatively low inflation and weak during periods with especially high inflation. Hence, during the last 20 years, real wage growth, which over time reflects productivity trends, has been strongest when inflation was low. In the 1980s, nominal wage growth was strong without a basis for this in the real economy. The result was inflation and weak real wage growth. In the 1990s, more moderate nominal wage increases until 1998 coincided with strong real wage growth because inflation was low. It takes considerable time before monetary policy has an impact. The effects of interest rate changes are uncertain. The key rate is set on the basis of an overall assessment of the inflation outlook. If it appears that inflation will be higher than 2½ per cent with unchanged interest rates, the interest rate will be increased. If it appears that inflation will be lower than 2½ per cent with unchanged interest rates, the interest rate will be reduced. It is equally important to avoid an inflation rate that is too low, as it is to avoid an inflation rate that is too high. The expression "it appears that" refers to our best estimate of inflation two years ahead.

We will do whatever is necessary to ensure that this pandemic, which is having a massive economic impact, does not turn into a debt crisis or a crisis of the financial system. We will not allow this to happen. We are dealing with a situation which requires us to act with extreme intensity. You have said that the measures taken by the Spanish government and other European governments are appropriate. But you have also hinted recently that the European Union has perhaps not responded quite as effectively. Are you afraid that a crisis of this kind could take its toll on the European project? Let’s hope not. The ECB has already acted. Basically what remains is for Member States also to act and continue to act through their fiscal policies. And we need a pan-European response. We need a coordinated EU fiscal policy response. I am sure that this is what will happen in the end. The ECB cannot be the only policy tool used from an economic standpoint. Monetary policy cannot be the only instrument employed. I am certain that Member States will do something about this and they will adopt a coordinated position in terms of the fiscal policy instruments employed by the EU in response to this huge crisis. The economic impact will be enormous. We just hope that it will be temporary.
Empirical evidence based on the Phillips curve, which I shall discuss in greater depth in a minute, confirms that inflation in the euro area is less reactive to the 6 degree of resource use than it is in the United States. The euro area’s greater inflexibility in price formation has an impact on the mechanism for the transmission of monetary policy. Empirical analysis confirms that, if the European economy were as flexible as the US economy, a given interest rate hike would have a 7 greater impact on inflation. This has a direct implication for the desirable level of monetary policy activism. First of all, according to neo-Keynesian economic models, the greater the degree of price inflexibility, the higher the impact will be of a drop in the interest rate. Thus, for a given variation in the interest rate, the impact on economic activity tends to be greater in the euro area than it is in the United States. In other words, to achieve the same impact on economic activity as that achieved in the euro area, the Federal Reserve has to change the interest rate to a larger extent. Several studies have shown that in the negative phase of the cycle, even though the interest rate in the euro area is changed to a lesser degree than it is in the United States, the impact of monetary policy on economic activity is nevertheless stronger.

It is important that we continue reducing the cost of doing business, in conjunction with the private sector, in order to improve investments in various sectors of the economy. The agriculture sector, for instance, remains underdeveloped despite the country possessing large tracts of arable land, adequate water and relatively good weather. This is one sector where the country can easily take advantage of its comparative advantage. The achievement and maintenance of a low and stable inflation rate, preferably single digit, therefore remains key to promoting investment, enhancing business planning and confidence in the economy, maintaining external competitiveness and stabilising people’s incomes. In the medium-term, Government continues to pursue market and structural reforms in partnership with the private sector with the view of consolidating the gains so far attained for sustained economic growth and development. Despite the adverse effects of the global economic meltdown, there are still prospects for appreciable economic growth in 2009 and the years ahead. GDP growth is expected to be led by growth in agriculture; construction; financial services; manufacturing; transport and communication; and wholesale and retail trade. Conclusion In conclusion, we all agree that Zambia remains vulnerable to effects arising from the ongoing global financial crisis, particularly if it is prolonged. We hope that the actions that most affected countries, led by the US and the EU, have taken would help cool down the financial crisis and bring back the much needed confidence in the financial systems.
A key expectation continues to be that the board collectively ensures that it has the requisite knowledge and competencies represented on the board to discharge its role effectively. Our demands of insurers will increase in this respect. Given its responsibility for financial statements, and for ensuring a sound system of internal controls, the audit committee will be a point of some focus as financial reporting standards as well as insurers’ operations become more complex. This Forum and your participation provide great encouragement to the Bank that continuously raising the level of board competence is an important priority that is shared by those who have primary charge of ensuring that insurers operate in a prudent and responsible manner. 4  BIS central bankers’ speeches

We are currently discussing the results from these questionnaires directly with firms. You will appreciate that I cannot go into specifics. But overall the responses did not reveal any immediate critical shortcomings in the cyber resilience of the firms involved. But they did point to areas for improvement that we will be following up on with firms. Let me list some common themes. 1. Cyber has changed the rules: existing operational resilience arrangements are often geared to dealing with physical threats. These still matter. But cyber changes the game. Cyber is a dynamic, intelligent and adaptive threat. In the cyber arms race, costs are stacked in favour of the attacker, not the defender. To meet the challenge, organisations need to have policies and processes that are dynamic, intelligent and adaptive too. This means investment in capability to identify threats and detect cyber attacks. Without this situational awareness it is hard to determine and achieve appropriate maturity levels for cyber defence and to allocate resources effectively to meet the threat. 2. Cyber is not a minority sport for technologists only: Of course the first line of defence is critical and we still need IT specialists who understand the technical challenges cyber presents. But good cyber resilience is about much more than technology. It is about culture too and this means people and processes. When Morgan Stanley reported recently its customer information had been breached, this wasn’t due to sophisticated hackers, rather an employee who stole data from over 350,000 customer accounts.
That is explained by a late adjustment in the key rate relative to the growth of inflation expectations. Clearly, this is not a path we want to follow. We currently expect that our monetary policy stance will ensure that inflation returns to 4– 4.5% in the second half of next year. We recently outlined our approaches to monetary policy for the next three years and our outlook, as well as our scenarios in the draft Monetary Policy Guidelines. The second problem for us to address and keep in check is the consumer debt burden. This has always been a top priority issue for both the Federation Council and the Bank of Russia. It is on the agenda each time we meet at the Federation Council, and I am grateful to you senators that the issue never escapes your attention. Considering the need for many changes to legislation, improvements in this area would be impossible without your strong support. Our aim is to ensure that credit enables people to solve their problems but does not drive them into a debt hole. We have introduced a borrower’s debt burden indicator to discourage banks from issuing loans to borrowers who would find it difficult to service new debt — those who already have difficulty servicing existing debt. The Bank of Russia has enacted so-called macroprudential add-ons to make it less profitable for banks to issue new consumer loans and check excessively fast growth in consumer lending. In microfinance, caps have been introduced on interest and fines on loans.

Fritz Zurbrügg: The financial crisis in its sixth year – an end in sight? Speech by Mr Fritz Zurbrügg, Member of the Governing Board of the Swiss National Bank, at the Money Market Event, Zurich, 21 March 2013. The complete speech can be found in German on the Swiss National Bank’s website (http://www.snb.ch/en)  *  *  *  In this, the sixth year of the financial crisis, the situation on the financial markets has eased considerably. Is what we're seeing the prospect of an end to the crisis, or is this just a flash in the pan? Measures by central banks made a major contribution to stabilising the financial sector. This sector, however, is just a part of the whole, and while its stability is a precondition for sustained global economic growth, it is by no means a guarantee. The positive mood in the financial markets and leading economic indicators raise hopes that a recovery is underway. If these hopes are to be realised, however, structural reforms need to be implemented. The three most significant challenges for the global economy are increasing the resilience of the financial sector, improving the flexibility of labour and goods markets (especially in Europe), and consolidating the public finances of the advanced economies. Progress has been made in all three areas. The way ahead, however, is still both long and difficult. Due to the relatively lengthy period of weak growth, there is considerable danger that reform fatigue might spread in those countries most severely affected.
I would be delighted to listen to your comments or reply to your questions afterwards. *** The crisis: where do we stand? Epicentre No.1: The United States between 2006 and 2008 In order to fully understand the current crisis, it is important to realise that it is in fact a new episode of the acute crisis that has been with us since 2006. Why 2006? Because it was the year in which the US property market started to fall after several years of continued, strong growth. It is perhaps hard to imagine but the turnaround in this market and the problems we are currently experiencing are closely linked. Indeed, this downturn greatly affected many low-income households in the United States, who had taken out residential adjustable-rate mortgage loans (the famous subprime loans). When the value of their property plummeted, monthly repayments rose sharply, meaning that households were unable to repay their mortgages. This generated losses, albeit very limited at the outset. But how did these limited losses cause the most serious financial crisis since 1929? In fact, subprime loans were packaged into extremely complex financial products, along with other debt securities and sold to insurers and investors. These securities, known as “CDOs”, developed exponentially in the 1990s and 2000s, and came to represent colossal sums on the balance sheets of many financial institutions worldwide. These instruments were intended to disperse credit risk.

Greece, Ireland and Portugal are the three countries that have benefited from EU and IMF rescue packages. I will return to this in greater detail in a minute. The financing conditions of a number of other euro area countries have been extremely tight for the past few months, but they have not required bail-outs. This is particularly the case of Spain and Italy. Here too, certain economic or political weaknesses along with deteriorated public finances are stoking fears in financial markets, which – I should say in passing – have the unfortunate habit of lumping all players together and always expecting the worst. I would like to stress one point: the current crisis is not a crisis of the euro but a sovereign debt crisis. Moreover, we can see that all the turmoil that has been affecting the economy for the past few years is ultimately due to indebtedness: first, US household indebtedness and then sovereign indebtedness. Nevertheless, since end-2009, the crisis has revealed major shortcomings in the implementation of fiscal discipline and, more generally, in the economic governance of the euro area. The founders of the single currency had put in place the Stability and Growth Pact because they knew that a monetary union could not work without a common fiscal discipline. Its principles were sound, aiming to achieve a long-term balanced budget. But its implementation was greatly lacking.
Such instruments could have reduced the likelihood of failure of large, systemically important institutions, reducing the significance of the “too big to fail” problem and its associated moral hazard problems. Harmonized standards The Financial Stability Board and the Basel Committee are working hard and are making important progress on all these issues. But for these efforts to bear fruit, it is critical that the requirements that are imposed in terms of capital adequacy, liquidity and compensation be harmonized across regulatory regimes and applied in a consistent fashion. The absence of a level playing field would be a recipe for disaster. A lack of harmonized standards would inevitably lead to balkanization and protectionism as different countries took steps to protect their particular banking champions. Potentially, this could lead to countries requiring capital and liquidity to be segregated locally. This would have a number of negative consequences. First and foremost, it could disrupt the ability for capital to flow freely across borders, interfering and inhibiting globalization in terms of financial intermediation. Second, it would reduce the diversification benefits that stem from banks that operate in different geographic locations. Third, it could undermine the safety and soundness of the financial system. In particular, the lack of harmonization in terms of regulatory regimes could lead to a “race to the bottom” as firms and businesses migrated to the most lax regulatory regime. So what does this mean for my audience today – foreign banks operating in the United States?

Creation of off-balance sheet funding vehicles, structured products and complex corporate structures to minimize regulatory requirements and tax obligations reduces transparency, introduces new risks and limits the effectiveness of resolution regimes. Other examples of reinforcing mechanisms in our system are: •  Collateral tied to credit ratings. Credit downgrades lead to increased collateral calls, which drain liquidity, forcing asset sales, further weakening the firm subject to the collateral calls. •  Collateral and haircuts. When volatility rises and that leads to increased haircuts, the result can be a vicious cycle of forced asset sales, higher volatility and still higher haircuts. •  Compensation tied to short-term revenue generation, rather than long-term profitability over the cycle. This causes risk-takers to take on too much risk because they are compensated on the upside. This risk-taking extends the boom, setting the stage for a bigger bust. Although some of these practices might appear sensible from the narrow perspective of an individual firm or market, this crisis has shown us that when all firms or market participants simultaneously take an action that appears to be in their immediate, narrow interest, the  2  BIS Review 125/2009  collective impact on the system as a whole can be disastrous. We need to find ways to weaken or eliminate these reinforcing mechanisms and we need to introduce new dampening mechanisms into the financial system.
That is why banking operations need to be safeguarded. One safety measure is the possibility, in exceptional circumstances, of the central bank intervening as the lender of last resort. This is a matter of providing liquidity—as long as the banks are fundamentally solvent—when the stability of the entire financial system is threatened. In that way it is BIS Review 81/1998  -4possible to avoid more serious economic consequences and, provided the problems underlying the crisis are managed, stabilise the situation in the banking system and the economy in general. However, a central bank’s unique possibility of providing liquidity is restricted to the national currency. If a country has an external deficit and revenue from exports does not cover imports, to make up the difference it has to borrow in foreign currency. The vulnerability this involves increases if the loans are short-term, sizeable and have been channelled via the banking system to long-term investment projects. If a country in this situation encounters problems with the renewal of foreign loans, the central bank will have limited opportunities of coming to the rescue with liquidity unless it happens to have sufficient foreign exchange reserves or borrowing facilities. That is more or less what has happened in the countries that have recently been hit by problems. Sudden shifts in confidence as to a country’s real economy, the value of its assets or its political system are examples of factors that have triggered crises in economies that have been highly vulnerable.

In my address today I shall be pointing out discernible trends in the development of the financial system and how this process is being reinforced by the coming European Monetary Union. In conclusion I shall consider what this requires of economic policy, its decision-makers and various authorities. A financial revolution It is hardly an exaggeration to say that a revolutionary process of financial transformation and development has got under way in the past decade, with consequences that we probably cannot yet fully foresee. Deregulation, globalisation, advanced information technology and new methods for valuation and risk management have initiated a dynamic process in which financial markets, institutions and instruments are interacting. There are clear similarities with the expansion of real economies in the past hundred years; a stream of new, more efficient and specialised production processes and new communication facilities are leading to a growing volume of trade. Basically, the financial trend and its internationalisation are a natural development of the market economy, a logical consequence of persistently rapid economic transformations that call for new financial solutions for households and firms. Challenges for banks The foreseeable developments will alter or at least affect the future role of banks. New trends in traditional banking are already discernible. Competition for bank deposits is growing in that people are increasingly choosing to place assets in securities, either directly or via mutual funds. Specialised agents of various types, such as niche banks, have also entered this field.