samchain/econo-pairs-v1 huggingface dataset:
However, in many high income countries central banks had centered on regulating and providing liquidity facilities for deposit banks, leaving out large fractions of the financial sector that saw substantial developments in non-bank liquidity transformation, such as SIVs, money market mutual funds and investment banks. When trust in the value of the underlying assets held by these intermediaries evaporated, many saw themselves suddenly unable to service their obligations, forcing central banks in many countries not only to expand the terms and collateral of liquidity provision but also to seek ways to extend liquidity to non-banking agents. I am not suggesting that the optimal solution is simply to expand the liquidity safety net. This would entail serious moral hazard problems. I do think, however, that we need to be aware of which agents carry out this role, and consider prudential regulation and ex-post liquidity provision if they are deemed to be systemic (and if we have the mandate). In many emerging market economies (EMEs) we are well aware of the risks of liquidity transformation – in particular when it is done in foreign currency. As a precautionary tool, most EMEs have built up significant stocks of international reserves. Nor am I arguing that monetary policy cannot play a role in the creation of bubbles. It can, although not so much through the level of the interest rate as through the broad monetary policy strategy with which financial turmoil is addressed. I am referring to the popularly known Greenspan put.

In the first two cases (2001 and 2002) events in international financial markets led to rapid depreciations, unrelated to country fundamentals. In the last case – 2008 – we considered it prudent to build up reserves in a period in which the exchange rate was below fundamentals and global financial markets were under extreme stress. Let me now refer to the interaction between financial and price stability from an ex-post perspective, i.e. once a financial shock (crisis) has hit the economy. From an ex-ante point of view I discussed that there are occasions in which these two objectives may not be completely aligned. From an ex-post perspective, these objectives are in general consistent, which will reinforce the need for strengthening the ex-ante dimension of financial stability. Suppose that a shock in financial markets (of a domestic or external nature; based on fundamentals or simple contagion) hits the economy. This shock will result in an increase in the cost of capital, bringing down investment and aggregate demand. The reduction in aggregate demand reduces output and therefore also reduces inflationary pressures. This example shows that dealing with this “financial shock” is usually – and I will be explicit regarding this conditionality – consistent with pursuing price and output stability. From this ex-post perspective, financial and price stability can be addressed simultaneously. The instruments that monetary policy can use to deal with these financial shocks will depend on the nature of the financial shock.
The exemption thresholds take account of the very high level of liquidity in the banking system, which is due to the SNB’s past interventions on the foreign exchange market. The exemptions are calculated to ensure that they remain virtually unchanged over time. This means that the interest burden increases as soon as the SNB feeds more liquidity into the system – in particular in the event of further foreign exchange interventions. Consequently, the SNB’s readiness to remain active in the foreign exchange market and the negative interest rate are two mutually reinforcing measures. By imposing negative interest on sight deposits that exceed a given exemption threshold, we set incentives for the entire financial system to give preference to investments in foreign currencies over those in Swiss francs, thereby limiting new inflows into the Swiss currency. Since the exceptional demand for Swiss francs is not only foreign but also domestic, there is no economic argument for differentiating by origin of investor. What is more, we have reduced to a minimum the number of exceptions from the obligation to pay negative interest. Impact of negative interest Six months after the announcement of negative interest, we can see that the measure is having the desired effect on the money and capital markets. The money market is working well, even with negative interest. Money market interest rates have reacted rapidly, and the three-month Libor has settled in the middle of the range we targeted.

With both this development and the introduction of negative interest, yields on Confederation bonds declined over the entire spectrum of maturities. However, since midApril, the government bond markets have suffered substantial losses, with yields on ten-year German government bonds, for instance, rising within a very short period from about 0.1% to, most recently, 0.8%. In Switzerland the increase in interest rates was significantly smaller. Yields on ten-year bonds are currently around 0.1%, compared with –0.2% in mid-April. Since the beginning of the year, numerous central banks have adopted more expansionary monetary policy stances. They include, in particular, the European Central Bank, which in January announced an asset purchase programme in excess of market expectations as regards both the amount and duration. In the US, by contrast, monetary policy continues to point in the opposite direction. Thus, most market participants expect that the US Federal Reserve will initiate a reversal in interest rates before the end of the year. For over a year, this monetary policy divergence has been a major factor behind the depreciation of the euro against the US dollar. As chart 2 shows, since mid-2014, the European currency has declined some 18% in value and has also weakened on a trade-weighted basis, by around 9%. The trade-weighted US dollar, by contrast, has gained approximately 15% in this period. Another important issue on financial markets has been the increased uncertainty due to the unresolved debt problem in Greece.
Heng Swee Keat: Monetary Authority of Singapore’s initiative to develop Singapore dollar sovereign-rated sukuks Speech by Mr Heng Swee Keat, Managing Director of the Monetary Authority of Singapore, at the 5th Annual Islamic Financial Services Board Summit, Amman, Jordan, 13 May 2008. *  *  *  Introduction It is my honour this afternoon to join my IFSB colleagues in discussion of this very current topic. I am very glad that we are addressing this issue of regional integration of Islamic Financial Services at this point. This is very timely and relevant to both the soundness and vibrancy of Islamic Finance. Let me explain. The global Islamic finance industry has grown rapidly – it is estimated that total assets are now over $ billion. This is impressive. Still, this is a small proportion of conventional finance. The potential for growth is hence very large. While each country is taking measures to promote Islamic Finance, we can grow much faster as well as increase the scope and depth of the industry if we work towards integration at an early stage. Integration increases market size, efficiency and liquidity. This in turn provides for more competitive cost of capital, spurring further growth. Second, having service providers from different regions allow risks to be distributed across a wider group of players, and can improve the overall stability of the financial system. Regional integration between Middle East and Asia, which may have different business cycles, provides a cushion for financial institutions and investors from country specific shocks.

Chart: Marked fall in oil prices 1/4  BIS central bankers' speeches  On top of this, there has been a substantial fall in oil prices as a result of a sharp fall in global oil consumption. Despite production cuts, total oil production is substantially higher than consumption, with little spare storage capacity. Against this background, oil prices are likely to remain low in the coming period. Futures prices indicate that oil prices will pick up, but to a markedly lower level than the level we have been used to seeing in recent years. There were already prospects at the beginning of the year that petroleum investment would decline. Owing to the fall in oil prices, oil companies have cut their investment plans. Low oil prices affect the outlook for the Norwegian economy. Chart: Substantial krone depreciation The fall in oil prices and general uncertainty in the wake of the coronavirus outbreak have weakened the krone exchange rate. On 19 March, the krone hit record-weak levels against a number of currencies. At that time, uncertainty in the NOK market was particularly high, and limited liquidity contributed to amplifying NOK movements. Against this background, Norges Bank announced that there could be a need to intervene in the NOK market. In order to support a wellfunctioning NOK market, Norges Bank has made extraordinary NOK purchases totalling NOK 3.5 billion in the foreign exchange market. Chart: Money market turbulence Financial market volatility also led to high credit premiums.
10  All speeches are available online at www.bankofengland.co.uk/news/speeches  10  Arrangements for shared supervision, therefore, need to be worked out carefully, subject to agreed procedures and, crucially, recognise the primacy of the lead supervisor. And, given the systemic importance of global infrastructure to many jurisdictions, they must above all be stable. And finally, these arrangements need to be reciprocal and proportionate. This means as I have said, the degree of assurance depends on the degree of risk. In areas for example where there is no cross-border activity, there is little need for assurance on cross border risk. In the end, both sides will need to make a balanced assessment. It is perhaps human nature on either side to want maximum control and minimum responsibility. But a stable and effective regulatory and supervisory relationship cannot be built on those lines. I am an optimist in this area. Of course, I expect some change. But I also believe we have a very solid foundation on which to build the broad supervisory and regulatory relationship necessary for the UK and the EU economies to continue to benefit from our cross border financial connections and from the integration of global and European markets that this encompasses. I am here talking, with our responsibility for financial stability in the UK, about the management of financial stability risk on both sides. I am not, to be clear, talking about trade negotiations.

We can have governance of the global financial system even though we do not have global government. Governance can mean legislation, regulation and the institutions of government. But it also encompasses broader frameworks of standards, norms and conventions, international organisations and agreements that fall short of hard law. Indeed, in a world of nation states and national legislatures and governments, it is on these broader frameworks that we need to depend for the governance of financial globalisation, and the management of cross border risk. This challenge is not of course confined to the financial sector. International governance structures are required in many economic and non-economic spheres. But since the liberation of global capital flows and liberalisation of international financial markets which began 50 years ago, financial authorities in multiple jurisdictions have sought together to build the necessary governance frameworks to enable the benefits of financial globalisation while managing the risks. The first Basel Banking Accords of the early 1980s were motivated by the need to ensure that banks involved in cross border services were made subject by their home authorities to minimum standards. In other words, to ensure that the benefits of cross border flows were accompanied by assurance on the risks that might be imported. Financial globalisation accelerated through the last decade of the last century and up until the great financial crisis. External financial assets and liabilities increased from 60% of GDP in the 1980s to 400% of GDP in 2008.
By maintaining a smoothly functioning payment system and an efficient credit market, the Riksbank thus contributed to both general financial stability and to the narrower monetary policy targets of price stability and stable resource utilisation. In other words, it is seldom meaningful – particularly in a crisis or in times of financial unrest – to make a distinction between measures taken for reasons of financial stability and measures taken to improve the impact of monetary policy. The Sveriges Riksbank Act is narrow with regard to the areas of use for different tools, but the preliminary works to the act make it possible to extend the areas of use in a crisis. This meant that the Riksbank could take the necessary measures in the crisis. However, it would be desirable for the actual text of the law in future to provide the Riksbank with a broad and clear task of promoting financial stability and flexibility to take the necessary measures in a crisis. As no two crises are the same, and experiences show that different crisis situations require different measures, I am doubtful about linking the tools available to the Riksbank to specific purposes. Another aspect speaking in favour of flexibility in the use of the various tools is the fact that there is a lot of work under way in the central banking world to develop new liquidity instruments. These often have a monetary policy purpose, but several central banks are now also developing tools that have a clearer link to financial stability.

To be able to carry out this regular analysis in a good way, the Riksbank cooperates with Finansinspektionen, which in its capacity as financial supervisory authority has good access to information and in-depth knowledge of the individual financial companies. In addition to the regular analyses, we at the Riksbank need to practice our crisis management capacity in various ways. We do this regularly, together with other public authorities in Sweden and in other countries. In other words, crisis preparedness is high on our agenda, as it is for other central banks. It is quite clear that Sweden, with a large bank and payment system, could be destabilised through the payment system. In addition, to our own exercises and preparedness, it is also important that we have the possibility to require that the participants in the payment system have a high level of crisis preparedness. I hope that the Riksbank will be given greater power of authority in this field. 7  Monetary policy is closely related to financial stability Now I have talked at length about the concrete tasks the Riksbank has to contribute to a stable and efficient financial system. But how does monetary policy, which is what my colleagues and I most often talk about, relate to financial stability? There are several links, both operational and analytical ones. Essential that the Riksbank can use its tools flexibly in a crisis Let me begin with the operational work – that is, the tools that we at the Riksbank have at our disposal.
It is a natural part of the economic debate that the Riksbank is being criticised, isn’t it? Wouldn’t it then be better to ignore the criticism and look ahead instead? No, I don’t think so. One important reason is that in the wake of the financial crisis there has been a discussion on the activities and tasks of central banks, what central banks should do and how they should do it. It is, of course, important that our debate on this here in Sweden is anchored in reality and based on how monetary policy has actually been conducted and what it has actually achieved. But meeting the criticism is important not just for the discussion here in Sweden. The debate on Swedish monetary policy also has an international interest and has been followed abroad, not least by other central banks.1 The reason is that a central issue in the international discussion has been to what extent central banks’ policy rates should be used as a complement to macroprudential policy, to counteract the build-up of financial imbalances, for instance, by trying to prevent lending and housing prices from rising too quickly.2 This is what is often called a policy of “leaning against the wind”, and I will hereafter use this expression for the sake of simplicity. Monetary policy in Sweden has in this context been regarded as particularly interesting, as the Riksbank is one of few central banks that, at least this far, has been explicit about taking such considerations into account in its policy-rate decisions.

The mandate: price stability The Eurosystem has been entrusted with a very clear mandate by the European treaties;1 its primary objective is to “maintain price stability”, in other words to avoid prolonged periods of excessive inflation – as seen in Germany after World Wars I and II – or deflation – seen following the crisis of 1929 –, which have consistently negative effects on the economy. Some observers still advocate a “dual mandate” to target both inflation and growth or full employment, as is the case with the US Federal Reserve, for example. This would have been politically unattainable given the traumatic history of inflation in some European countries. Besides, let me recall two elements: price stability is to be maintained “over the medium term”. As stressed inter alia by F. Smets, there is an “equivalence between the length of the policy horizon and the weight on output gap stabilisation”,2 and hence employment. as stated by the treaty, "without prejudice to the objective of price stability”, the Eurosystem should support “the general economic policies in the Union” Let me add that the more precise and focused the mandate, the more accountable the ECB can and must be. Yet, those who advocate a broader mandate are often the same people who quite inconsistently are quick to criticise the lack of accountability of the ECB. In 1998, the ECB established a quantitative definition of price stability that it went on to clarify in 2003: to maintain inflation rates below, but close to, 2% over the medium term.
Do you recall how innovative topical communities of practice seemed as they emerged at the turn of the 20th and 21st century? They gained momentum at the end of the first decade of our era, when it became self-evident that most innovations are developed outside organizations. For that very reason, it became necessary to develop relations between practitioners in a given field. As a consequence, self-organizing networks of knowledge experts were first formed. As a matter of fact, this was roughly how Web 3.0 was developed, a fact described in a book written by Thomas Friedman in 2005 and entitled The World is Flat: A Brief History of the Globalised World in the 21st Century. One of the underlying principles operating in networks of experts is voluntary participation and the willingness to cooperate, just as is the case with diasporas. There are no geographic limitations, as they have been eliminated by the Internet. There are no language barriers, either, as Web 3.0 offers automatic translation live among several dozen world languages. There are no constraints in expert knowledge, as specialists in a given field provide inspiration for one another – ornithologists, chemists, biologists, engineers, economists and IT specialists can work on one project. This fosters creativity and innovation. Currently, John Global is working on a number of projects, including organization of expert networks in public government bodies. These networks could operate effectively in the global market of public services.

They also pay little attention to the traumatic experience of the Asian financial crisis of 1997-98 and the natural inclination to build up ammunition, in the form of foreign currency reserves, ever since. After all, most of us are small, in terms of our economies and our political influence, and the reality of this world is that, when you are small, you are more likely to be tossed around. So we need to be more cautious in our finances. 6. We find ourselves being held, at least partly, responsible for the dilemma currently surrounding the global imbalance, which has been interestingly described as a "stable disequilibrium". The description begs the questions as to how long the disequilibrium will remain stable and whether the eventual adjustment path to equilibrium is likely to be an unstable one. The answers to these questions remain elusive. 7. This obviously is not a very comfortable position that we find ourselves in. One solution to this structural problem in Asian finance, at least to us in the HKMA, is greater Asian financial integration to promote the stability, integrity, diversity and efficiency of financial intermediation across jurisdictions in Asia. At the micro level, an obvious, non-controversial initiative that Asian jurisdictions support, although not necessarily for the same macro reasons that I have described, is the development of the domestic and the Asian bond markets, hence the EMEAP ABF initiative. BIS Review 79/2005  1  Asian Bond Fund 8.
A classic example is the tulipmania in the Netherlands, which ended in 1636 with the collapse of the market for tulip options. From the tulip crisis it is also clear that derivative instruments are not a recent innovation in financial markets. The world also saw numerous financial crises in the nineteenth century. As for the present century, what first comes to mind is the crisis in the wake of the stock-market crash in New York in 1929, with effects that left their mark on the global economy in the 1930s. There are various explanations for the Great Depression but it clearly involved widespread financial turbulence and the failure of many banks. In Sweden, too, there were serious bank crises in the early 1920s and ’30s; on both occasions they were accompanied by a deep economic depression and serious deflation. The drop in output and the price level reached two-digit figures before the problems could be overcome. In recent years the pace of financial market development has been rapid. As a result of innovations in communications and information technology, with the new instruments and methods they provide for risk management, the financial system is now more extensive and globalised than ever before. The system channels savings more effectively to those activities in the global economy that need them most. The rapid pace of financial developments and their internationalisation are a logical consequence of arrangements for the production and international exchange of goods and services in the world economy.

Investment projects amounting to more than USD160 billion to be financed by the Gulf states in Asia have been announced since 2005 2 . In 2006 alone, mega-deals 3 involving corporate acquisitions and real estate purchases from the Gulf to Asia, are estimated to total more than USD18 billion, including multi-billion dollar IPO purchases in financial institutions in China, large oil refineries and telecom companies. The value of such investments are expected to increase to between USD20-30 billion in 2007. For economic regions with high savings and surpluses such as Asia and the Middle East, the challenge is to recycle part of these surplus funds to productive investments in the region. The supply of savings in Asia and the Middle East is by far higher than in any other part of the world. Savings rates here in Asia are expected to remain in the region of 30-40% of GDP for some years to come. 1  The Gulf Cooperation Council represents Saudi Arabia, UAE, Bahrain, Qatar, Oman and Kuwait  2  "A route to riches on the new Silk Road", Financial Times, 21 Dec 2006  3  Worth more than USD1 billion  BIS Review 31/2007  1  Similarly, savings in the Middle East economies have been rising in the recent decade and is expected to average about 30-35% of GDP in the coming years. In 2006, the current account surpluses as percentage of GDP for Asia and the Middle East were about 5% and 23% respectively 4 .