samchain/econo-pairs-v1 huggingface dataset:
Similarly, the bank may be thought to be too important to be allowed to fail, in which case people might expect an injection of capital by the state to make good abnormal losses. In any of these cases, there is an incentive for the bank to raise leverage. Moreover, the lower is the perceived uncertainty associated with the loans, the more the bank can afford to leverage up, while maintaining the same uncertainty over the return on its capital. So the environment of the Great Moderation would have been particularly conducive to intermediaries increasing the leverage of their positions. The incentive distortions here are intrinsic to the process of financial intermediation. The next set of distortions is more specific to the present conjuncture and relates to securitisation. Securitisation is attractive because selling on the loans and the attendant risks enables a bank to leverage more loans off its capital. And, as noted earlier, such distribution of risks should in principle be beneficial for the economy. Unfortunately, it transpired that this model, or at least its application in the past few years, suffered from a number of incentive problems. First, there is the obvious one that if a loan originator can sell a loan on at par, then he has less incentive to take care who he lends to.

From a general point of view, volatility is a kind of genetic signature of the price setting mechanism in a competitive market. Prices hover around the equilibrium through successive adjustments. When market participants express widely different views on this equilibrium price, or when the volume of transaction shrinks, volatility usually increases. In this respect, there is a close correlation between the occurrence of crises –such as the revealed insolvency of an emerging country, supply shocks on commodity prices, bursting of equity bubbles– and excessive volatility. Volatility is not an indicator of market inefficiency. However, excessively high volatility has adverse effects on the behaviour of market participants and the real economy. From a corporate management point of view, volatility on capital markets lowers the predictability of the cost of capital. When reviewing investment  10  Source : Report on financial structures – ECB - 2002  11  estimation in « Central banks and financial stability – exploring an intermediate land » – Second ECB central banking conference - 2002  12  BRI – Economic aspects of regional currency areas and the use of foreign currencies – 2002 – document non publié. BIS Review 71/2002  5  opportunities, managers may want to avoid relying too heavily on external finance because of the uncertainties surrounding the cost, or even the sheer availability, of financing. This may lead companies to postpone or downsize investment projects.
BIS Review 69/2010  3  At a crisis meeting on 8–9 May, EU finance ministers therefore agreed on a EUR 500 billion European Financial Stabilisation mechanism to support countries unable to borrow in the market. The largest portion will be provided through loans guaranteed by individual euro area countries. The IMF will provide support in the form of loans upon application from an individual country, perhaps up to a total of EUR 250 billion. Several countries announced sharper spending cuts. The ECB will buy government and other bonds and offer extra loans to banks to promote the smooth functioning of markets. Moreover, the Federal Reserve has entered into agreements with other central banks to re-establish temporary dollar swap facilities to avoid failure in dollar funding markets. 3. Norwegian economy  To mitigate the effects of the financial crisis, central bank key rates were cut sharply in 2008 and are still close to zero in a number of countries. The key policy rate in Norway was also reduced from autumn 2008. Norges Bank also implemented a number of extraordinary measures to improve credit flows. Banks were provided with longer-term liquidity and direct access to US dollar liquidity, and collateral requirements for loans from Norges Bank were relaxed. On the advice of Norges Bank and a proposal from the Ministry of Finance, the Storting decided that banks would be entitled to exchange covered bonds for government securities.

Monetary policy has only one instrument by which to achieve the objective of low and stable inflation, and the interest rate is a crude instrument. Hence, other objectives must be achieved by means of, for example, financial regulation and the tax system. In Norway, a number of arrangements functioned during the financial crisis. Banks’ capital adequacy ratios were at the outset fairly high, with high quality Tier 1 capital, and Norway had a bank guarantee fund financed, albeit only just, by capital paid in by banks. Norges Bank also holds ample foreign exchange reserves and was able to supply foreign exchange to banks. Norwegian banks felt the impact of the global financial crisis primarily as a result of reduced access to funding. Over time, banks have increasingly relied on fairly short-term funding in global markets to finance their lending. This is the main reason why Norwegian banks encountered problems when funding from foreign sources dried up in 2008. For Norwegian banks, the financial crisis essentially proved to be a funding and liquidity crisis. New and increased equity capital and liquidity requirements for banks can promote stability in the financial system. The requirements should probably be more stringent in Norway than the minimum requirement that is likely to be agreed internationally. It is also important to cooperate with the other Nordic countries to avoid a situation where more lightly regulated banks aggressively market loans in Norway.
This is especially supportive and important for the low income groups, which are hit harder by the negative effects of high and persistent inflation. However, the general public must understand that the outlook is subject to considerable uncertainty, and amidst such profound uncertainty, amplification mechanisms may arise from multiple channels, due to the close interconnections within the global financial system. I am happy to see that all these issues will be discussed in depth during this workshop. In fact, the agenda is quite rich and covers a vast variety of research topics related to monetary and fiscal policy, financial stability, policy coordination, risk assessment and management through macro-prudential policies, with a special focus on price dynamics and soaring inflationary pressures witnessed worldwide, and the associated challenges they poses to policymakers, at both macro and microeconomic perspectives. We are all waiting impatiently to hearing what the respective speakers have to say about the duration and the intensity of such pressures and any potential implications for monetary policy. I am sure it will provide an excellent opportunity to gain new insights from academic research. Looking forward, beyond the dramatic events we are currently witnessing, technology coupled with the transition to an economy with net-zero carbon emissions will continue to shape the evolution of markets and of both traditional and new financial service providers.

3/4  BIS - Central bankers' speeches  Before concluding, I would like to thank the Swiss Government and the State Secretariat for Economic Affairs (SECO) for their continuous support of research activity at the Bank of Albania. We have been cooperating together for 10 years to build and improve research activity to the best international standards and make it practical and useful in the context of the central bank. Our models and a significant part of research projects have been developed in cooperation or under the technical assistance of the State Secretariat for Economic Affairs as part of the Bilateral Assistance and Capacity Building Program for Central Banks. This project led, reviewed and commented research projects undertaken by our staff, and made substantial contribution to the credibility, reputation and prestige of our Research Workshop. Our cooperation has been truly productive and very useful not only for the development of research activity and state of the art forecast and policy analysis modes but most importantly, for their implementation in the mainstream policy of the Bank of Albania in the areas of monetary policy, financial stability, and the analysis of demographic and climate change issues. Beyond and above these, our successful collaboration with the State secretariat for Economic Affairs extends to the areas of payment systems and financial education. Your Excellency Ambassador Huber, we are grateful for your support and look forward to the successful implementation of our current projects. I hope we will have many other opportunities to continue our fruitful cooperation in the future.
Structural vulnerabilities and the need for reform A useful lesson that the Bank of Albania has learnt from the crisis is the need to continue and deepen the structural reforms in the economy. These reforms, not only will create a more appropriate environment for promoting the private entrepreneurship, but will also increase the economy’s resilience to shocks. They also help to absorb foreign direct investments, which are the best support to the country’s development in the medium and long run. However, as stipulated even in the EBRD’s report, Albania is among the few countries that have continued structural reforms even during 2009. In this regard, Albania has lagged behind the regional countries, attracting in total only about USD 1100 per capita of FDI during the 20 years of transitions. In the entire broad framework of reform-related problems, I would like to dwell today upon the need for investments in education and infrastructure. A well-known business maxim is that: Employees are a company’s most precious asset. To the Bank of Albania it signifies that the higher the professionalism, the higher our institutional independence. To a broader sense, this is also relevant for the national economy. Our country’s progress, the convergence with the developed countries of East Europe and even beyond, with the European Union countries, will depend on our level of education. Competition in national and international markets is above all based on the generation of ideas and their use in the final products.

As the global economy gains momentum, staying the course on these policies will be decisive to achieving escape velocity. The United Kingdom is at the centre of these decisions. Let me expand. 2. Financial reform  In recent years, protectionism has been the dog that didn’t bark. Although gently mocked, the G20 pledge to resist protectionism has been largely respected. In contrast, some major trade deals have been signed (such as between Canada and Europe), and other even more significant ones are in train. The UK can help spur on the Transatlantic Trade and Investment Partnership discussions on wide ranging free trade between the EU and the US. In tandem with keeping the global trading system working is the re-founding of an integrated, open global financial system. As the leading global financial centre, the UK will be central to completing the job of financial reform. The UK financial system is both a global good – it supports an open global system – and a national asset. To realise its potential, we need our system to be safe, fair and to act 2  BIS central bankers’ speeches  with integrity. Without those foundations, the innovation for which finance in the UK is renowned will be meaningless. A safe system means resilient banks and markets that together can absorb rather than amplify shocks. Much has been achieved in recent years to repair the core of the banking system. Minimum capital requirements for the world’s largest banks have been increased seven-fold.
•  A stable value of money combined with sustainable public finances makes an essential contribution to an economic development that is favourable and stable. •  A policy with this direction that is implemented consistently can, with the aid of certain direct cyclical measures, help to stabilise economic activity. As I have chosen to focus today on issues to do with cyclical activity and stabilisation policy, I have not said much about the first of these pillars but that does not imply a value judgement. On the contrary, the reforms of taxation, regulations and so on have presumably played a crucial part in the good development in the 1990s, both in Sweden and elsewhere. At the same time, recent developments bring out some of the problems we now face. Markets are evidently liable to malfunction in the sense that prices deviate markedly from what is reasonable in the long term. Stock markets have provided evidence of this in recent years and it is also very much the case with the krona’s exchange rate. The result can be considerable fluctuations not just in financial markets but in the real economy, too. It is here that I believe the major challenges lie today, both for economic theory and for us more practical decision-makers. I have already discussed the other two pillars. Attempts to raise demand and employment in the short term entail considerable risks, as we saw in the three decades before 1990.

The notion that government ought to intervene in a market economy in order to rectify imbalances permeated economic policy for many years. Diminishing confidence in the new approach Keynesianism and its analytical methods spread rapidly. Economists in the 1950s and 1960s devoted a lot of time to computing the multiplier effects of various government measures. For a time it looked as though the economy could be steered by pulling different levers and thereby overcoming the problem of a market economy’s instability. The Phillips curve, presented in the late 1950s, demonstrated a negative relationship between nominal wages and unemployment. This further boosted the belief that the economy could be adjusted at will, leaving politicians to opt for their preferred combination of unemployment and inflation. The significance for growth of a fixed value of money fell into oblivion. In the 1950s and 1960s, Keynesian stabilisation policy seemed to be successful in many countries, not least Sweden. Economic growth was high, supported for example by the post-war reconstruction of Europe, and it was also stable, with only small cyclical fluctuations. Growing budget deficits were  2  Berg, C & Jonung, L (1999), Pioneering price level targeting: the Swedish experience 1931–1937. J of Monetary Economics, 43:3. 2  BIS Review 81/2001  tolerated during downward phases but it then proved increasingly difficult for governments to balance the budget over the business cycle. In the early 1970s, the collapse of the Bretton Woods system for international exchange rate cooperation meant that the earlier constraints on economic policy no longer applied.
On a larger scale, uncertainties pertaining to the post-crisis international monetary and reserve currency system – the one in which dominant currencies are likely to grow weaker and newly emerging currencies grow stronger – will also pose important challenges to monetary, exchange rate, and reserve management policies. Ladies and Gentlemen, To tackle some of these challenges, we are very fortunate to have with us today many distinguished speakers from both academia and central banks. In the morning sessions, we will hear from the academic point of view the implications of the changing financial and regulatory landscape. During lunch time, our keynote speaker will share his insights on the future of the international monetary system and what implications entail for policymakers. BIS Review 146/2010  1  Later in the afternoon, we hope to bridge academic thinking with practical policy considerations. Let me conclude by saying that it is impossible to have answers to all the big questions in a one-day conference like this. But I am sure we can contribute to the better understanding of many difficult issues and come up with useful policy recommendations. Most of all, I hope that this forum will be followed by continuing discussions and cooperation among all participants, which would be a true measure of success of the conference. I wish you all a fruitful meeting and memorable stay in Bangkok. Thank you. 2  BIS Review 146/2010

The story is a clear example of how artificial intelligence can produce bad outcomes for all concerned. It also offers a case study for exploring the root causes that lead to bad outcomes - and so in turn offers insights for boards on how to govern the introduction of artificial intelligence. The art of managing technology is an increasingly important strategic issue facing boards, financial services companies included. And since it is a mantra amongst banking regulators that governance failings are the root cause of almost all prudential failures, this is also a topic of increased concern to prudential regulators. In my comments, I will provide a quick overview of the scale of introduction of artificial intelligence in UK financial services; then make three observations about it, and suggest three principles for governance derived from them. Artificial Intelligence Technological innovation is inevitable and welcome. As the Governor noted during this year’s UK Fintech Week,1 we are shifting towards a new economy, which is powered by big data, advanced analytics, smartphone technology and more distributed peer-to-peer connections. This new economy will go hand in hand with fundamental changes to the structure and nature of the financial system supporting it. Indeed some of the largest international investment banks are now declaring that they are technology companies with banking licences. Some of the most important recent developments in technology are associated with the introduction of automation – by which I mean the replacement of humans by machines for conducting repetitive tasks.
Our financial systems regulatory frameworks should be enhanced to ensure that what has happened else where does not visit us in the near future. Thank you and I wish you successful deliberations. BIS Review 44/2009  3

I should also like to reiterate that the prospects for a stronger potential for growth in the euro area will depend very much on progress made in enhancing the flexibility of labour and goods markets in the euro area. Although reform efforts in several countries have been heading in the right direction, there is still much to be done when looking at the area as a whole. Finally, let me also say a few words about recent exchange rate developments. I noted earlier that, from a monetary policy point of view, these developments are a cause for concern as they add to the upward pressure on consumer prices in the euro area. These concerns are compounded by the fact that the exchange rate of the euro does not appear appropriate when looking at economic fundamentals. As you are aware, we have been expressing this concern for some time. In the meantime, we have witnessed a considerable improvement in the economic growth prospects for the euro area. At the same time, owing to measures taken by the Governing Council, the outlook for price stability in the medium term in the euro area has remained intact. At present, inflation in the euro area is among the lowest in the world. The fact that the euro has continued to depreciate over recent months is not in line with these strong economic fundamentals in the euro area. Recent global exchange rate developments are also not in line with international balance of payments positions.
BIS Review 36/2005  9  Graph 8: Growth and Rates of Inflation* 15 140  Inflation (%)  100  5  80  0  60  -5  Growth (%)  10  120  40 -10  20  GNP (right scale)  WPI  2005  2003  2001  1999  1997  1995  1993  1991  1989  1987  1985  -15  1983  0  CPI  * The data for 2005 is the forecast value for growth and the target value for the CPI. Source. SIS, CBRT. Together with the fall in interest rates in recent years and the appreciation of the Turkish lira, the production of private firms has acquired a capital-intensive nature. Besides, firms resorted to a series of measures in the post-crisis period, to remedy the inefficiency of the production process. All these developments led to high-rated increases in productivity in recent years. Productivity increases not only raised the return on capital, but also encouraged investments. The positive impact of these favorable developments in productivity increase as well as the high growth performance of the last three years began to be seen in employment. Total employment increased by more than 5 percent in the last quarter of 2004 compared to the same period the previous year. The implemented stability program naturally enabled the share of the private sector to increase. As a result of this, the increase in employment is recorded mainly in this sector.

Figure 1: Credibility Gap (Rates of Inflation Expectations and Targets as of the Beginning of the Year)  60 50 40  Inflation  Targ 13,3 points credibility gap  48.3  4,9 points credibility gap  35.0  (% 30 )  0,4 points Credibility gap 1,1 points credibility gap  24.9 20.0  20  13.1 12.0 8.4  10  8.0  0 2002  2003  2004  2005  Source: SIS, CBRT. In 2004, there were high increases in world commodity prices; mostly in oil and primary metal prices and in April and May there were fluctuations in the financial markets. Despite these developments, the fact that the inflation target was realized is owing to coherent implementation of disciplined monetary and financial policies. In addition, there are four other main factors that contributed to the steady  BIS Review 36/2005  3  decline of inflation; the controlled recovery of domestic demand, the continual increase of productivity in the economy, income policies almost coherent with inflation, and relative stability in FX rates. The inflation figures of the first quarter of 2005 indicate that the positive outlook in price developments continues. In the new index with a 2003 basis year, the tendency to decline persists in the special CPI aggregates which were formed by adjusting inflation according to external factors- such as raw material prices around the world, prices affected by natural causes or determined by the public. In the first quarter of 2005 cumulative inflation figures remained historically low.