samchain/econo-pairs-v1 huggingface dataset:
But when the US investment bank Lehman Brothers filed for bankruptcy in September the uncertainty over borrowers' credit ratings increased dramatically. Access to credit in the financial markets around the world declined and the interbank rates, that is, interest on loans between banks, rose substantially in Sweden, too. In a couple of days we went from a situation where Swedish financial markets were functioning fairly well to one where some sub-markets were in principle at a standstill. We also went from expectations of a fairly smooth slowdown in economic activity, to significantly more gloomy economic prospects. I myself was sitting in a meeting in Frankfurt when I was told over the telephone that the Swedish treasury bill market had been put on hold. This was on 18 September and it was now clear that events had put a spanner in our otherwise well-oiled financial works. This changed the conditions for our policy. Although monetary policy and financial stability have always been closely linked, under the circumstances that have prevailed since September one can say that the dividing lines between our two main tasks have in many ways been erased. Financial stability affects monetary policy… Our most important tool in conducting monetary policy is normally the repo rate. By adjusting it we can influence, by means of the banks and the rest of the financial system, the interest rates faced by households and companies when borrowing money. In this way we try to influence activity in the economy and ultimately inflation.

The labour market is also expected to strengthen, with the unemployment situation improving for the rest of the year. Against this backdrop, MAS shifted to a policy of modest and gradual appreciation of the $ in April 2004. This policy stance was assessed to be supportive of economic growth, while ensuring low and stable inflation over the medium term. Let me now turn to other aspects of MAS’ work during the past year. II  Regulation and supervision  First, in the area of regulation and supervision, we issued the “Objectives and Principles of Financial Supervision in Singapore” monograph earlier this year. This will help the financial institutions we regulate and supervise better understand the desired outcomes of our supervision. Let me say a few words specifically on risk-based capital. We issued details of changes to the capital adequacy requirements for Singapore-incorporated banks in May 2004. We believe the new requirements are prudent but competitive, and more sensitive to the banks’ actual risk profiles. These changes will give the banks greater flexibility to manage their capital while maintaining a prudent buffer against future shocks. The Basel Committee on Banking Supervision finalised the New Basel Capital Framework last month. We intend to adopt the New Framework at the same time as the G10 countries. We will continue to work closely with the Singapore-incorporated banks to assess the impact of the New Framework and determine how best to adapt the proposals for Singapore.
10  All speeches are available online at www.bankofengland.co.uk/news/speeches  10  FIGURE 4: Haircut schedule for LIBOR-linked collateral  This graduated approach reflects the clear feedback we received from firms on our discussion paper last year. It is intended to give firms the incentives, certainty and time they need to prepare for LIBOR transition, replacing LIBOR-linked collateral with risk free rate alternatives and maintaining drawing capacity throughout. Careful analysis suggests that this should be a manageable task in the time available, but we will monitor this closely and continue to work with impacted firms on their plans. Concluding remarks  I began my remarks by comparing LIBOR transition to a motor race. For some, I know it may have felt at times more like a Le Mans endurance race than a Grand Prix. But dawn is at last approaching – and the finish line is drawing nearer. For sterling markets in particular, 2020 is a critical year. The announcements we have made today, coupled with the huge efforts going on right across the private and public sectors, demonstrate I hope that, working together, we can keep sterling markets at the forefront of LIBOR transition. Thank you. 11  All speeches are available online at www.bankofengland.co.uk/news/speeches  11

If they seem to be highly elevated in relation to before, or are difficult to justify through established economic arguments, the risk is greater. The risk of problems is also connected to other economic developments. If these are stable, there is a smaller probability that those who have borrowed to buy a house will have made their decision on what later proves to be the wrong grounds. An example can illustrate the latter form of reasoning. Interest rates are currently at an all-time low. This indicates that they will rise, which is an assumption that most households ought to have taken into account. However, many of them may also have been counting on rising income, as this is the normal situation; interest rates usually rise at the point when economic growth and thereby income in society increases. There is of course a risk here. A couple of decades ago we experienced a long period of both low growth and high inflation. If this should be repeated - although it does not at present appear likely - it is quite possible that many households would encounter difficulties. To sum up, one can say that the Riksbank in its normal work process does take into account, as far as is possible, the effects of indebtedness and house prices on inflation via effects on, for instance, consumption and general demand. These effects are taken into consideration in our inflation forecasts.
In periods, this has given rise to unrest among local authorities and employees, for example in the traditional manufacturing city of Trollhättan. In Norway, many large multinational companies have closed down operations at home and established their main offices and warehouses in the Stockholm or Malmö/Copenhagen area. Both the Norwegian costs level and population density have been of disadvantage to use with regard to these structural developments. Sweden has partly responded to strong international competition by continuing to develop new and improving existing products and processes. The country has also become a Nordic financial centre by being the home country to four large financial conglomerates. As mentioned the Norwegian economy has benefited from good prices for our export products and proximity to petroleum activities provide Norwegian manufacturing with advantages. However, our oil dependence and a lack of diversification in our industry structure are a source of concern as regard long-term developments  Conclusion Monetary policy’s most important contribution is to provide the economy with a nominal anchor. Today, inflation targeting is the norm for small and medium-sized economies. Exchange rates fluctuate, but there are several ways of hedging against fluctuations. After Sweden switched to inflation targeting, the country has experienced solid output growth and low and stable inflation compared with the previous decades. Since 2002, inflation has fallen sharply both in Norway and Sweden. Between December 2002 and March 2004, the key rate was reduced by a total of 5.25 percentage points in Norway.

Tarisa Watanagase: Inflation targeting – a reflection on Thailand’s experience Opening remarks by Dr Tarisa Watanagase, Governor of the Bank of Thailand, at the Bank of Thailand’s International Symposium on “Challenges to Inflation Targeting in Emerging Market Countries,” Bangkok, 13 November 2006. *  *  *  Honorable Guests, Distinguished Participants, Ladies and Gentlemen, First, I would like to extend a very warm welcome to all of you here today. This is the second time that the Bank of Thailand organizes a symposium at an international level. Our first international symposium, “Practical Experiences on Inflation Targeting,” was held in October 2000, a few months after we had adopted inflation targeting as a new monetary policy framework for Thailand. But this symposium today is the first one that brings together central bank governors, senior central bank executives, world-renowned academics and policy experts from leading international organizations. Many of you have extremely tight schedules and some have to travel a very long distance. I would like to express our great appreciation for your presence and very much hope that what we will learn together in this symposium is beneficial to all of us. Ladies and Gentlemen, Thailand formally adopted inflation targeting as a monetary policy framework on May 23, 2000. The change in policy regime was a result of our search for an appropriate nominal anchor after the floating of the Thai baht in July 1997. In the interim period, we used monetary aggregates as our policy target.
The amount of this annual allocation to the provisions is based on a set rule. We review this rule from time to time, and then usually apply it unchanged for five years. The rule is based on the growth in equity capital regarded as being necessary over that period. The amount of the provisions for currency reserves on a given balance sheet date therefore corresponds to the amount of equity the SNB seeks to have at that point in time. By applying a rule-based approach, the SNB also transparently communicates to the general public how much of its earnings are being used to build up equity capital. This is important given that the allocation to the provisions reduces the potential for distributions. How much equity capital does the SNB need over the course of time? It is difficult to define the ideal amount of equity for a central bank. However, the following basic principle applies: the larger the balance sheet and the higher the proportion of foreign currencies, the greater the risks and the more equity capital is required. In the current circumstances, it is clear which direction we have to take: we have to continue to build up capital. Since the outbreak of the financial crisis nearly 15 years ago, the provisions have no longer kept pace with the marked increase in our balance sheet (Slide 3).

At the same time, changes in the interest rate and exchange rate may influence developments in the real economy in the short run. This means that fiscal and monetary policy have a combined effect on the overall level of activity in the economy. With large and to some extent varying budget revenues, the basis for determining central government expenditure and taxes from one year to the next may easily be impaired. If budget expenditure fluctuates to a large extent in step with oil prices, the result will be abrupt shifts and instability in the Norwegian economy. Changes in oil prices may then quickly influence wage and price expectations, the exchange rate and long-term rates. In that case it will be very demanding to achieve nominal stability. Short-term interest rates will have to be changed frequently and sharply, and long-term rates will reflect a high risk premium for the Norwegian krone. It is therefore important that the annual budgets are anchored in a long-term strategy that takes sufficiently into account that oil revenues can fluctuate from one year to the next. It is advantageous if fiscal policy can also be used to counter fluctuations in demand and production. The political assessment has also been that a countercyclical fiscal policy provides the best basis for sound developments in the distribution of income and wealth. If fiscal policy is used to smooth fluctuations in demand and production, it will also contribute to stability in the krone exchange rate and in the competitive conditions for the business sector.
As banks and other financial institutions seek to strengthen their balance sheets and avoid future credit losses, they may keep credit conditions tighter than normal. In addition, many consumers’ borrowing options may be limited by their impaired credit histories, and the recovery is not getting the strong boost from home construction that most previous recoveries have benefited from. Furthermore, as I will discuss later, households are still feeling the financial impact of lost wealth and jobs, which makes some cautious about spending and investing. The economy is healthier, but it is not yet well. In order to reduce joblessness significantly over the coming quarters, the economy needs to grow at a considerably faster rate than we have seen so far in this recovery. I am happy to say that we believe that conditions are in place for such higher growth in 2011 and 2012. We entered this year with a fair amount of momentum. Business and household spending has strengthened, presumably reflecting greater confidence in the economic outlook and progress in the repair of household balance sheets. Businesses are expanding their investments in equipment and software at a healthy pace. And, their spending on nonresidential structures, such as office and factory space is no longer contracting as sharply as it was a year ago. Further support comes from the agreement by Congress and the administration to postpone some tax increases, to reduce payroll taxes temporarily and to extend unemployment benefits. In addition, our exports continue to expand, supported by strength in demand abroad, particularly in Asia.

Higher growth, a steady reduction in spare capacity in the economy and continued stability in inflation expectations should also slowly begin to reverse the recent decline in core inflation. Inflation was quite low during the second half of 2010, but we expect that to be the low point of the cycle. In short, viewed through the lens of the Federal Reserve’s dual mandate – the pursuit of the highest level of employment consistent with price stability – the current situation remains unsatisfactory. However, we appear now to be moving in the right direction. Regional economic conditions (update since the October regional press briefing) Now, how is our region doing? Overall – in contrast to the pick-up in the nation – the regional economic recovery appears to have paused in the fourth quarter. More similar to the nation, joblessness in the region has retreated somewhat from the peaks recorded toward the end of 2009, but remains unacceptably high. As attendees at previous regional press briefings may recall, the New York Fed produces Indexes of Coincident Economic Indicators to help monitor the performance of the regional economy. Based on these measures, the upturn in economic activity that we saw for much of 2010 in both New York State and New York City has paused. To be sure, activity in both the state and the city is higher than a year ago, but we saw no increase over the prior quarter. This pause is particularly evident in New York City where the economic recovery had been relatively strong.
Then, just as these bottlenecks were easing as the pandemic receded, UK energy prices rose dramatically following the Russian invasion of Ukraine and the resulting dramatic increase in wholesale European natural gas prices. And now, just as those wholesale gas prices have fallen substantially in recent months, we are seeing another inflationary impulse coming from rises in food prices driven, at least in part, by unexpectedly weak crop yields in southern Europe and north Africa. [10] Understood in this way, the persistence of UK inflation is largely a manifestation of ‘bad luck’ – a ‘series of unfortunate events’. It reflects a sequence of fundamentally transitory shocks – each of which monetary policy can do little about, for reasons I have already explained – that have cumulated through time into a more long-lasting elevation of headline inflation. There is much truth in that narrative. But we have to guard against complacency in interpreting recent inflation developments in this way. I recognise that this is potentially both a self-serving and an incomplete view of recent inflation developments in the UK. For one thing, we need to assess whether the surprises we have been confronted with over recent years could have been anticipated by better analysis and research: for example, could we have forecast the vulnerabilities in global supply chains once the pandemic had struck? Or could we have foreseen the dynamics in food prices given agricultural commodity prices?

The case for monetary policy makers to focus on the persistent component of inflation is therefore clear. But implementing this approach in practice inevitably faces a number of practical problems. In real time, identifying the character and magnitude of the underlying shocks is difficult. The propagation of these shocks to consumer price inflation is uncertain and possibly changing through time, as is the transmission mechanism of monetary policy itself. The lags in monetary transmission are not just long and variable, but also not fully predictable. I address these issues in the remainder of this talk. Nevertheless, the MPC’s focus on the persistent element of CPI inflation is consistent with both its remit – which emphasises that the inflation target ‘holds at all times’ – and with the medium-term orientation of its policy strategy – which emphasises that the Committee seeks to reach the inflation target ‘sustainably in the medium term.’ Underlying these two elements of the framework is recognition that the lags in monetary policy transmission (and the uncertainties surrounding them) rule out controlling inflation on a short-term month-to-month basis. Attempts to control inflation at that higher frequency risk becoming a source of additional volatility, rather than a contribution to containing it. A well-designed policy will focus on the medium term and thereby emphasise the persistent components of inflation that threaten to cause deviations from the inflation target at that horizon.
They face the same set of risks as the HFT market-maker – inventory and information risk. But persistence and fat tails in short-term price movement amplify these risks. From equation (1), the greater the holding period, T, the greater the potential dispersion in future prices. Intuitively, with fat-tailed persistence, a large shock is both more likely and its effects will linger longer. Slower trading increases the distance prices can travel once de-anchored. Chart 12 illustrates this. The distribution of returns observed at a low frequency has far greater variance and kurtosis than that at a higher frequency. For example, the variance of prices faced by a LFT firm (trading at T=50) is around nine times greater than for a HFT firm (trading at T=1), for H=0.9. 23 Given these price dynamics, HFT aggravates the market-making problem for LFT firms by magnifying the market risk they face. 24 And it is not just that LFT firms are slower to execute. In situations of stress, they may not even be able to see the prices at which they can trade. Co-located traders may have executed many thousands of trades before LFT firms have executed their own. LFT firms face intrinsic uncertainty about prices. When volumes and  21  Clark (2010). 22  CFTC-SEC (2010). 23  Even once an adjustment has been made for the degree of time scaling associated with a standard Brownian motion. 24  Indeed, with fractal price dynamics the variability of prices will potentially grow without bound over time.

Many of Basel II’s advanced methods for quantifying risk were first explored in research units within individual financial institutions, but also in central banks, supervisory agencies, and universities. Our contacts with researchers, the work of the Research Task Force, has helped us to gain access to some of the best research being done in risk management. Equally important, it helped to translate the results of some of the most sophisticated technical advances into tangible tools for implementing public policy objectives. Applied research cannot be conducted in a vacuum, and good research is rarely achieved alone. In that vein, I look forward to continuing a vigorous dialogue with researchers from many institutions as we explore ways to safeguard depositors’ savings, to ensure prudent risk management in banks, and to secure more stable growth in the economy. I hope that you find tomorrow’s sessions to be equally stimulating and enjoyable, and I thank you for your attention this evening. 4  BIS Review 29/2004
Today, we see technology firms actively entering the banking space, most recently with the introduction of the Apple Card from Apple or the planned launch of Libra, a crypto-currency from Facebook. Banks could find themselves sidelined by the Big Techs if they fail to actively adopt and fully utilize the available technologies. To prevent this from happening, banks will need to go back to basics and revisit the core utility of their institutions rather than becoming constrained by existing processes and legacy systems. iii. Consumer Expectations Thirdly, the industry needs to meet the challenge of rapidly shifting customer needs and expectations. Today, we live in a world where digitally empowered consumers expect ‘on-demand services’ that allow them to access products and services wherever and whenever they desire. This is particularly true of the growing number of millennials who will soon become the largest customer segment for the banking industry. Even in Kuwait, approximately 58% of the population consists of millennials and younger. Their behavior and characteristics can be very different to those of previous generations.8  Central Bank of Kuwait - Public ‫ عام‬- ‫بنك الكويت المركزي‬  -7-  9 10 11  . Around 57% of millennials say they would change their banks for a better digital platform. But it is not just millennials who are using digital platforms to access banking services. In 2018, 72% of all bank contacts from customers were digital, and 82% of consumers first go online if they are looking to buy a new product or service.

Another example is the execution of payments; transactions that used to take 3 to 5 days to process can now be completed in 3 to 5 seconds, and for less than one-tenth of the original cost. Although banks have generally been slow to innovate, they have sought to stay ahead of the game by partnering with or acquiring FinTech firms. According to a recent PwC report, over 54% of banks surveyed have already established partnerships with FinTech firms, and 82% expect to increase such partnerships in the next 3 to 5 years.7  Central Bank of Kuwait - Public ‫ عام‬- ‫بنك الكويت المركزي‬  -6-  While banks can potentially manage the onslaught by the FinTech firms, the real challenge will be posed by the Big Techs. What would happen when the likes of Facebook, Amazon, Whatsapp, and Alibaba start competing with banks to provide financial services? These technology giants come with large and captive user bases, low online acquisition costs, and a better understanding of their customers through their utilization of big data. Moreover, they don’t face the same regulations and associated costs that banks do. Tech firms have had their eyes on the banking industry for quite some time. Over 20 years ago, Bill Gates compared banks to dinosaurs that could be bypassed and argued that “we need banking, but we don't need banks anymore.” That was an early warning for the industry.