samchain/econo-pairs-v1 huggingface dataset:
A diversified portfolio of loans and investments limits expected losses. Losses on one project may be more than offset by gains on another. Economic growth is cyclical. During an upswing most projects fare better than expected. A deep recession can lead to heavy losses, insolvency and financial crisis. Banks may address this risk by building up sufficient buffers during upturns. Often, this is not done in practice. Instead, financial enterprises tend to place special emphasis on increasing market shares while times are good and allow their capital ratios to fall. It is during an upturn that the basis for the downturn is laid. Financial crises are often characterised by a first phase when optimism predominates, risk assessments weaken and the willingness to borrow and asset prices increase. When negative news starts to spread, investments fall short of expectations and the mood shifts, asset prices fall and debt-servicing problems accumulate. A financial bubble can first be identified with certainty after it has burst. There are a growing number of examples of this. After the Asian crisis, which started in 1997, and gradually had global spillover effects, there have been national financial crises in Turkey and Argentina. During much of the 1990s, the US experienced extensive restructuring and high economic growth. The gap between the US and the rest of the world widened. Investment expanded sharply, particularly in the technology sector. This was made possible by dynamic credit and capital markets. Developments led to a broad expansion in other sectors of the economy and other countries.

Emerging Market Spreads: Then Versus Now. IMF Working Paper. BIS Review 86/2001  3  The next financial bubble occurred during World War I. During the first half of the war, in particular, there was strong growth in the Norwegian economy. This provided the foundation for a boom that is unparalleled in history. Banks’ lending rose sharply. The build-up of risk in the financial system was far more pronounced than in previous episodes. A strong inflow of gold led to uncontrolled growth in the money supply and inflation at the beginning of the war. In addition, the constraints implicit in the gold standard gradually broke down, and the money supply expanded sharply. The banking crisis came in the wake of a cyclical downturn in the early 1920s and can largely be attributed to the build-up of risk 5 during the boom period. The bulk of bank losses occurred before the introduction of parity policy. The authorities’ response In response to the extensive banking crises in the interwar period, a financial safety net for banks was introduced in most developed countries. In Norway, guarantee funds were introduced for savings banks in 1921 and for commercial banks in 1938. There was also a need for separate rules on public administration of banks. These arrangements helped to dampen the effects of the crises and prevent new ones. Commercial banks were subject to separate legislation and supervised by the newly established Banking and Savings Bank Inspectorate.
Challenges for Monetary Policy in the current IMFS Figure 1: The US dollar continues to be as important today as it was during the Bretton Woods era  Chart 1: Trade war is the top tail risk affecting global investors July 2019 June 2019 March 2019  Trade war Monetary policy impotence China slowdown Bond market bubble A credit event Iran Populist policies US politics Market structure Equity market bubble European elections Brexit 0  10  20 30 40 Percentage of respondents  50  60  Sources: Bank of America Merrill Lynch Global Fund Manager Survey. 17  All speeches are available online at www.bankofengland.co.uk/news/speeches  17  Chart 2: Global economic policy uncertainty has reached record highs Index 375 350 325 300 275 250 225 200 175 150 125 100 75 50 25 2019  US implements first China-specific tariffs Paris attacks  Iraq invasion 9/11 Madrid bombings  USS Cole bombings  1997  1999  London bombings  2001  2003  Ukraine / ISIS  Transatlantic aircraft plot  2005  2007  2009  2011  2013  2015  2017  Source: Baker, S, Bloom, N and Davis, S (2015), ‘Measuring economic policy uncertainty’, NBER Working Paper No. 21633. II.

Given the importance of the US dollar in trade, debt issuance by the non-financial corporate sector in EMEs, and funding for their domestic banks, most of these reserves are dollar-denominated. As well as coming at a domestic high cost to EMEs,22 this vast accumulation of safe assets has pushed down the global equilibrium interest rate – the rate that central banks must deliver in order to balance demand with supply and so achieve stable inflation.23 More fundamentally, by making the world a riskier place, the flaws inherent in the IMFS are reinforcing the downward pressure on global r*. The IMFS is not only making it harder to achieve price and financial stability but it is also encouraging protectionist and populist policies which are exacerbating the situation. This combination reduces the rate of global potential growth, increases its downside skew, and bolsters the likelihood of an extreme downside event (a fatter left tail). As my colleague on the MPC Jan Vlieghe has illustrated, such a change in the distribution of economic outcomes reduces the global equilibrium rate of interest.24 Past instances of very low rates have tended to coincide with high risk events such as wars, financial crises, and breaks in the monetary regime. Whether the last happens is still within our control, but for now the lower global equilibrium interest rate is reducing monetary policy makers’ scope to cut policy rates in response to adverse shocks to demand, and increasing the risk of a global liquidity trap.
But this task can only be performed in cooperation with the Government and other constitutional institutions. Today we can acknowledge that regardless of the fact that both the central bank and other state institutions employ Estonians who are known as great individualists, our cooperation in the field of economic policy has been smooth and yielded results. •  Five years ago I also spoke about the essential developments and necessary reforms facing Estonia. Today, many structural reforms under discussion at the time have been successfully launched, including the pension system reform, which has given a completely new dimension to the saving patterns of the Estonians. As regards the changes that the financial system was facing, my anniversary speech mentioned the plans to set up a universal financial supervisory body, which has also successfully materialised. Today we have a banking sector that is very up-to-date and successful on the international banking scene as well. •  According to the World Economic Forum, Estonia is the most competitive country today among the new European Union member states with its competitiveness index of 4.64 points. With this score Estonia is also ahead of four ‘old’ member states (Spain - 4.47, Italy - 4.38, Portugal - 4.25, and Greece - 4.00), while narrowly falling behind Ireland (4.69). Our open market economy, development of the information society and the financial sector  BIS Review 26/2004  1  as well as the quality of our business environment have been considered Estonia's strongest areas.

We, at Banque de France, firmly support the current focus on reducing the scope of mark-to-market accounting and moving from an incurred loss model to a forward-looking model for provisioning. We expect that accounting standards will converge but this should not come at the expenses of these two dimensions. 22. Thirdly, the crisis also raised questions about the nature of our regulatory frameworks. There is a trend towards complementing the micro-prudential supervision with macro-prudential oversight. In Europe we are putting in place a Systemic Risk Board at the European Union level that will combine expertise from Central Bank Governors and supervisors in charge of banks, insurance companies and securities markets. In the US, the Financial Stability Oversight Council is also a landmark in the overhaul of the financial supervision architecture. 23. Soon, the European Council will grant the ECB a special assignment regarding financial stability with the responsibility to run the European Systemic Risk Board. This should not be seen as constituting an additional objective of monetary policy. Rather, the creation of this Board does not change the clear allocation of responsibilities enshrined in the Treaty. The international initiatives about to be finalized will strengthen prudential frameworks and make financial systems less prone to systemic shocks. 24. One such initiative is the commitment by all G20 jurisdictions to implement Basel II by 2011 and to finalize this year a new package aimed at strengthening bank capital and liquidity standards. This is a great achievement.
BIS central bankers’ speeches  5  Chart 2 Longer-term measures of option-implied volatility GBP/USD 3m option volatility GBP/USD 2y option volatility 3m S&P variance swap rate 2y S&P variance swap rate 3m10y normalised imlied vol on USD IR (LHS) 2y10y normalised imlied vol on USD IR (LHS)  Basis points 160  Per cent 45  140  40  120  35 30  100  25  80  20  60  15  40  10  20 0 Jan 10  5 Jul 10  Jan 11  Jul 11  Jan 12  Jul 12  Jan 13  Jul 13  Jan 14  Jul 14  Jan 15  0  Sources: Barclays Live, Bloomberg. Implied volatilities are “normalised” by the level of interest rates, so the data show the volatility of absolute (rather than percentage) changes in swap rates. 6  BIS central bankers’ speeches  Chart 3 Impact of asset price news on volatility in UK equity and debt markets Conditional daily volatility (%)  Pre-crisis credit (Jan 2001 - Jun 2007) Post-crisis credit (April 2009 - Jan 2015)  1.8  Pre-crisis equity (Jan 2001 - Jun 2007)  1.6  Post-crisis equity (April 2009 - Jan 2015)  1.4 1.2 1.0 0.8 0.6 0.4 0.2  -3%  -2%  -1% 0% 1% Unexpected daily change in price (per cent)  2%  0.0  Sources: Bank of American Merrill Lynch, Thomson Reuters Datastream and Bank calculations.

M R Pridiyathorn Devakula: How the central bank sees monetary policy in the new world economic environment Speech by Mr M R Pridiyathorn Devakula, Governor of the Bank of Thailand, made at the Shangri-La Hotel, Bangkok, 29 November 2001. *  *  *  Your Excellencies Distinguished Guests Ladies and Gentlemen,  Introduction I would like to thank the Thailand Board of Investment, the Department of Export Promotion and Tourism, as well as the Nation Group for inviting me to speak at this conference. I believe that it is important in these times of increased global uncertainty for the Bank of Thailand to share with you and the public our assessment of the current economic situation and outlook, as well as our thinking on the future course of monetary policy. The opportunity to do so today is therefore timely and greatly appreciated. In short, today I would like to discuss what I see as the challenges facing Thailand in the period ahead and what we, at the Bank of Thailand, are prepared to do to meet those challenges. In so doing, I will briefly review the progress of the past few months, and say a few words on the appropriate policy mix which needs to be implemented to help steer the Thai economy through these difficult times. The new world environment Let me begin by outlining two key aspects of the current world economic environment that I think are important.
In terms of addressing the external position, there are two, admittedly stylised, ways in which countries can do this: they can pay down debt or they can grow out of debt. Yet given the size of the net liabilities involved, each option taken in isolation has challenges. Paying down external debt would require very large surpluses coupled with sizeable nominal adjustments. As rebalancing towards the tradable sector has not yet been completed, it is difficult to see how this could happen without depressing incomes and employment. Further still, the scale of the required adjustment would create prolonged disinflationary expectations, which would raise expectations of future real interest rates, depress demand and hinder internal rebalancing.9 At the same time, growing out of debt through boosting nominal GDP – a so-called “beautiful deleveraging" – is also not feasible on its own. Reducing NIIPs solely through the denominator would require unrealistically high rates of growth, beyond even the most heroic assumptions for structural reforms and/or fiscal and monetary stimulus. What is more, a large growth spurt without structural change might simply suck in imports and lead to new external imbalances emerging. Incidentally, a third option would be to aim to change the composition of net external liabilities – that is, to replace debt with equity and foreign direct investment. This would not alter the level of NIIPs, but it would reduce vulnerabilities by improving risk sharing. In this context, the Capital Markets Union project could be powerful. However, this has to be considered a longer-term goal.

The only way ahead over the medium term, then, is for crisis-hit countries to find a combination of current account surpluses and nominal GDP growth that can produce both external and internal balance. So how can that be achieved? Further action on the nominal side is clearly necessary, in particular to support employment and resource reallocation. And, within limits, that would not necessarily be inimical to growth: a recent modelling exercise by the IMF shows that wage moderation may have a positive economic effect on crisis-hit countries, especially if accompanied by more dynamic wage growth in surplus countries.10 The structural reforms undertaken since the crisis would also allow such adjustments to be made more quickly and with less employment cost than in the past. However, at some point nominal adjustment leads to a change in dynamics – that is, the positive substitution effects of relative price changes are dominated by the negative effects on incomes and real rates. That is why any effective adjustment strategy also has to be based around productivity growth. Productivity growth both lowers ULCs, supporting exports, and lifts permanent income and potential output, supporting debt reduction through real GDP growth. And though this might lead to higher investment, that would not necessarily be contrary to current account adjustment. If new investment occurs in the tradable sector it should lead to a stronger exporting base in the future.
Chart 11: Alternative scenarios a) GDP growth Percentage changes on a year ago 4.0 3.5 3.0 Stronger investment scenario  2.5 2.0 1.5  May 2018 Inflation Report central projection  Weaker consumption scenario  1.0 0.5 0.0 -0.5 -1.0  2012  2013  2014  2015  2016  2017  2018  2019  2020  2021  b) Inflation Per cent 4.0 3.5 May 2018 Inflation Report central projection  3.0 Stronger investment scenario  2.5 2.0  2% target Weaker consumption scenario  1.5 1.0 0.5 0.0 -0.5 -1.0  2012  2013  2014  2015  2016  2017  2018  2019  2020  2021  18  In this scenario, consumers increase saving rates back towards pre-crisis levels, so that quarterly consumption growth is only around 0% – ¼% compared with ¼% – ½% in the May 2018 Inflation Report projections. 17  All speeches are available online at www.bankofengland.co.uk/speeches  17  c) Excess supply / demand Projections 2018 Q2  2019 Q2  2020Q2  2021 Q2  May Inflation Report central projection  -¼  0  0  ¼  Weaker consumption scenario  -¼  -½  -¾  -¾  Stronger investment scenario  -¼  ¼  ½  1  Notes: Per cent of potential GDP.

Prices of owner-occupied apartments also fell during the autumn, but have since stabilised. Employment and household incomes are of the utmost importance when it comes to movements in the property market. According to the Riksbank’s most recent forecast, employment is expected to continue rising this year, albeit at a slower pace than last year. Following a strong rise last year, around 4 per cent, households’ real disposable incomes are expected to increase by a good 2 per cent over the coming years. Given this outcome, there is little risk of a fall in house prices to the same extent as is happening in the United States, for example. In Sweden savings are also high to start with, unlike the United States where they have fallen to historically low levels. There is always a risk that house prices, and also other asset prices such as shares, which have been pushed up by exaggerated optimism or speculation, could plummet. It would appear that Swedish price movements can be explained by fundamentals, and that the speculative element has happily been conspicuous by its absence. As property often functions as collateral for loans, a large fall in prices would affect the banks. In addition, developments in the property market affect demand in the economy. Rising house prices mean that households can take on new loans to increase their consumption. Correspondingly, falling house prices can contribute to subduing demand in the economy.
The two objectives of monetary policy Let’s start with the objectives of monetary policy and the mission of the MPC to hit the 2% inflation target but to do so in a way that supports growth and employment. Those twin objectives were highlighted starkly only last month by the Committee’s reaction to its updated forecast for inflation contained in the February Inflation Report. Inflation was projected to rise further in the near-term – to above 3% in the second half of this year – and to remain above the 2% target for the next two years or so. But rather than tighten policy, we issued a statement explaining that, in present circumstances, we thought it appropriate to bring inflation back to target more slowly than usual. Our reaction was partly driven by the judgement that this protracted period of above-target inflation would, for the most part, reflect higher university tuition fees and domestic energy  BIS central bankers’ speeches  1  bills. Importantly, these price rises are largely the consequence of regulatory decisions, rather than market forces. In contrast, costs and price pressures resulting from the balance of demand and supply in the domestic economy looked to be well contained. Although the inflationary impact of these higher administered and regulated prices is likely to persist for several years – as is the impact of the recent weakening of sterling which is also pushing up on inflation – they are likely to wane over time.

We may be more familiar with “less is more”, which is the mantra for designing friendly user interfaces or cool technology products. But new platforms in retail payments, data infrastructure and cross-border payments tend to be more successful and sustainable when they achieve widespread adoption and leading to strong network effects. 23. Just think about FPS. Would you still use it every day if your friends and family were not on the platform? From the design stage, we aimed to include more currencies and payment institutions, so as to attract a rapid build-up of users. The result is the world’s first multi-currency instant payment system connecting banks, e-wallets, and customers. With this strong network effect, FPS adoption in Hong Kong is perhaps one of the fastest in the world. We are strengthening this network effect further by introducing FPS payments for merchants and government bills. 24. Or think about why we launched CDI. Data is an essential nutrient to technological development. Currently, commercial data is scattered across isolated data islands built bilaterally between banks and individual data providers. The idea of CDI is to provide a common data infrastructure that will replace these compartmentalised, one-to-one connections with an efficient many-to-many connection. Banks will have common access to a sea of data which allows them to compete on innovation in service delivery. For this to happen, we need scale. We need to connect as many data providers, data consumers and data owners as possible in order to create the network effect. 25.
In conclusion let me briefly focus on a few issues that will probably need to be discussed carefully, both in Sweden and on an international level. One lesson that can be drawn already is the need to develop and improve the rules for supervision and management of liquidity risks. More stringent demands for transparency in the financial sector will provide customers and investors with better opportunities to assess the risks associated with companies. Similarly, transparency in the structured credit instruments should be improved so that their associated risks can be assessed. More effective trading with these products is also important; the financial infrastructure needs to be strengthened. This discussion and any resultant changes in regulations should aim to ensure that this part of the credit market can work efficiently once again. Developments in the American investment banks in particular have made us aware that even financial companies that do not accept deposits from the general public, and which therefore are subject to weaker supervision and regulation, may have a crucial impact on financial stability. We should therefore consider how to design regulations and supervision of financial companies that do not accept deposits from the general public. Due to the global scope of the crisis, countries must coordinate measures to solve it. Separate national solutions could result in higher crisis management costs than would otherwise be the case. In all of these areas where supervision and regulation need to be improved, they must be coordinated and harmonised internationally.

Moreover, it is quite possible that pass-through may exceed 100% if companies making domestically produced goods and services are able to use the increased competitiveness associated with sterling’s depreciation to widen their margins.10 So there are a number of potential channels through which developments abroad may affect domestic inflation. But to repeat a point I made up front: inflation is home made. If we think that global price pressures are likely to push up on CPI inflation for an extended period, UK monetary policy will need to be set in such a way as to reduce domestically-generated inflation, and so leave room for these external price pressures. And to respond to an argument I have seen made by a number of commentators in recent months. No: raising Bank Rate will not directly dampen global inflation. But it can ensure that it does not lead to high and persistent domestic inflation. The second upside risk to inflation that I would highlight is if the prolonged period of above target inflation erodes the public’s confidence that the MPC will keep inflation close to target. Inflation has been above target for 49 out of the past 60 months. Over that 5 year period, inflation has averaged 2.8%. Inflation is likely to remain above target for the next year or so. This suggests that by mid 2012, inflation is likely to have been above target for the best part of six and a half years.