samchain/econo-pairs-v1 huggingface dataset:
The mainland of China continues to see impressive growth under an economic system that is to a great extent insulated from the turmoil, while Hong Kong, the world’s most open economy, is passing through a sharp but hopefully also a short recession. While they vary from place to place, the effects of the current crisis are clear enough. What we see throughout the region, in differing degrees, is a sharp wealth loss, manifested in sudden capital flight, asset price collapses, and threats to currency and banking stability. These in turn have had macroeconomic consequences, such as declining or negative growth, growing unemployment, and deflation. They have, in economies as different as Thailand and Japan, brought to the surface severe structural weaknesses in financial systems. Quite why this should all have come together within the few months that followed the sudden collapse of the Thai Baht almost exactly eighteen months ago is something of a conundrum. There was no dramatic change in underlying economic fundamentals, which were, by conventional measures, healthy. Indeed, the financial turmoil in Asia erupted so quickly and unexpectedly that economists found it necessary to put forward special explanations. The explanations fall into two main schools of thought: their differences derive more from the emphasis they place on different factors than from any fundamental contradiction, but the logic of their conclusions points to different solutions.

One thing becomes clear from the profusion of explanations and theories that continue to appear in the newspapers and journals: we are unlikely to be able to produce a definitive and comprehensive explanation of the causes of the recent financial turmoil in the very near future. The turmoil and its effects on our region are still being played out: indeed, although encouraging signs of recovery continue to appear, the word “recent” in the title of our symposium may well be wishful thinking. We are still on shifting ground when it comes to finding adequate explanations and it will be some time before we can stand back and take a cool and dispassionate look at what has happened. Economic historians, after all, are still debating the causes and consequences of the 1929 Wall Street Crash. BIS Review 2/1999  –2–  The much more complex causality of present turmoil is enough to bewilder even the most talented economist, more especially since it includes a fair measure of irrational behaviour that falls more strictly within the province of the psychologist. The diverse effects of the turmoil are equally perplexing: they present an interesting reflection of the great variety of economic regimes that we have in the region and of their different stages in the economic cycle. The Philippines, for example, though not entirely unaffected, has passed through the turmoil with considerably less damage than many other economies in the region. In contrast, its immediate neighbour, Indonesia, has been set back years, if not decades.
Kevin Stiroh: Introductory remarks at 2017 Community Bankers Conference Introductory remarks by Mr Kevin Stiroh, Executive Vice President of the Financial Institution Supervision Group of the Federal Reserve Bank of New York, at the 2017 Community Bankers Conference, Federal Reserve Bank of New York, New York City, 6 April 2017. * * *  Introduction Good morning. I’d like to welcome you to the 2017 Community Bankers Conference. The Federal Reserve Bank of New York is pleased to once again host this conference and to continue to foster a robust dialogue on key industry trends and supervisory issues affecting community banks. In addition to about 130 representatives of community and smaller regional banks in the Second District of the Federal Reserve System, we are happy to welcome fellow supervisors from the states of New York, Connecticut and New Jersey; representatives of the FDIC and the OCC; and colleagues from the Board of Governors and Philadelphia, Cleveland, Chicago and Atlanta Federal Reserve Banks. In all, we have record attendance with 178 participants. As in past years, our goal for this conference is to promote a constructive dialogue between senior managers and directors of smaller financial organizations in our District and federal and state supervisors. This type of constructive engagement helps us reach our shared objective of resilient financial institutions operating in a safe and sound financial system that supports the growth and stability of the U.S. economy.

Rates of inflation expected to prevail in 5 or 10 years may not increase, but inflation expectations 2, 3 and 4-years ahead may well do. This risk is almost impossible to monitor since information on the term structure of inflation expectations, especially for households and companies, is very sparse. But it could have profound implications for the inflation outlook and the performance of our economy. If companies and households expect inflation to return to target quickly they will set their prices and pay demands accordingly. And in so doing, monetary policy has less to do – in terms of varying the level of demand in the economy – to ensure that it does. Inflation credibility is self reinforcing. The credibility gains associated with the move to inflation targeting and an independent policymaking committee in our country led to a reduction in the persistence of inflation. Inflation came back to target more quickly and the cost of it doing so in terms of output volatility was reduced.14 If companies and households begin to expect that  11  Brazier, Harrison, King and Yates (2008). 12  Carroll (2003). 13  Mankiw and Reis (2002). 14  There was a reduction in the persistence of UK inflation without an increase in the volatility of output. Benati (2006) found that the inflation targeting period has been the most stable macroeconomic period in UK history.
Our fiscal deficit, now between 3 and 4 percent of GDP, is in the zone of unsustainability. Our external imbalance - the current account deficit - is now between 6 and 7 percent of GDP, a level without precedent in U.S. economic experience. Each of these imbalances magnifies the risk in the other. One might be less troubled by a fiscal imbalance of this size if it was not accompanied by a substantial increase in our reliance on the savings of the rest of the world. The external imbalance might be less troubling if the government was in balance and those substantial capital inflows were going to finance private investment. Together, however, these imbalances raise the potential for higher risk premia on U.S. financial assets and more uncertainty about future returns on claims on the United States. This in turn could reduce expected future investment, productivity growth and U.S. growth potential. This could reduce the willingness of the world’s savers to put their capital to work in the United States. And this could mean lower growth outcomes and slower growth in future incomes. These are risks, not certainties. And there are a number of reasons why the probability of a destabilizing adjustment to these imbalances is likely to be low. These explanations are worth some attention. There is a reasonable case to make that the U.S. fiscal deficit, although a problem, is a problem of manageable dimensions for the medium term, provided we deliver modest changes to the paths of expenditures and revenues.

This decline in home bias - as Alan Greenspan has spoken about extensively - seems to have made it easier for countries to sustain larger current account deficits than might have been possible in the past. However, we don’t know much about how much further room there is to run in this phenomenon. We don’t know much about the present degree of concentration in the exposure of private savers to the United States relative to their longer term preferences, or how stable those preference are likely to be. And, therefore, we don’t know how likely it is that those outside the United States are going to be willing to continue to acquire claims on the United States at the recent pace. Finally, a number of observers have suggested that the present imbalances reflect what could be called a balance of interests, and that this balance is likely to endure for sometime. On one side of the balance is the substantial part of the world economy that has an interest in shadowing the dollar closely, as they absorb excess capacity, and that these governments are likely to continue to want to acquire dollars to make that exchange rate objective possible. On the other side of the balance is the United States, which is able to sustain higher rates of private spending and larger government deficits than it could if others were not willing to lend us their savings.
Even more, as the economy is undergoing major structural changes, particularly in the export sector, the regular monitoring of the newcomers provides a very clear vision of their impact on the economy in general. Even more, as some of the aggregate official statistical data, where the weight structure of the different sectors is revised at a predefined time interval, cannot capture the impact of the structural reforms, having satellite individual data on new companies is profoundly beneficial for policy analysis and decision-making. The granularity of the data available helps largely to improve the forecasting process in the Bank, which is the core in the anticipative monetary policymaking. Given the heterogeneity, in the external sector in particular, the probability that different segments behave and will behave differently is large. For that reason, as a complement to the model-based forecasting process, we regularly consult “soft” survey data on business plans of the main exporters and importers. Firm-by-firm data analysis is also used as a tool when screening the data on capital flows (FDI, external debt, portfolio investments where data are available on a security-by security basis), as a complementary to the analysis on the aggregate level. When discussing monetary policy and the data requirements, after the crisis, one of the important areas is of course the implementation of unconventional monetary policy measures. Does the unconventional monetary policy ask for unconventional statistics?

Chart: Isolated effect on GDP of an interest rate increase in two different VAR models In order to further explore the extent to which the estimation period has a bearing on the results, we have estimated VAR models with successive starting points from 1986 to 19968. Each model is quantified on quarterly data up to 2009. In the analysis, the interest rate increases by 1 percentage point and then gradually falls back. The increase in the interest rate will result in a temporary decline in GDP growth. The chart shows the effect in two of the models, one that is estimated from the mid-1980s and the other where the estimation period starts ten years later. The impact on GDP occurs somewhat earlier, but is a little smaller when we start the estimation period later. This may reflect the change in monetary policy regime during the period or structural changes in the Norwegian economy. Chart: Maximum impact of a 1 percentage point interest rate increase, different estimation periods If we only look at the maximum impact of an interest rate increase in each of the models, we obtain a picture of how this has changed over time. Each point in the chart represents the impact on the level of GDP and inflation when the effect of an interest rate increase is strongest in each model (estimation period).
One factor that could potentially depress global prices on a persistent basis is a shortfall in global demand relative to supply. As Chart 23 shows, the IMF estimates the global output gap currently to be around 2%. It is only forecast to close by 2019. This might be expected to exert global disinflationary pressure for the foreseeable future.13 A final factor, with particular relevance to the UK over the past two years, is the exchange rate. Sterling’s effective exchange rate has appreciated by around 15% over that period and by around 3% since the start of the year. A mechanical model treatment of the appreciation this year would imply inflation in the UK, at a two year horizon, would be around 0.2 percentage points lower. What explains sterling’s appreciation and might it continue? Over the past few years, there has been a positive relationship between countries’ effective exchange rates and news about demand relative to overseas competitors (Chart 24). Positive output surprises have increased the attraction of a currency relative to its competitors, including by increasing the chances of a rise in relative interest rates. 13  12  I discussed the longer-term global growth outlook in a previous speech (Haldane (2014)). BIS central bankers’ speeches  This is a plausible explanation for the recent appreciation of sterling and the dollar, with positive demand and interest rate surprises in the UK and US relative to the euro-area and Japan.

And US wage growth has  5  This result is also found when wages are adjusted for inflation expectations as discussed in Broadbent (2014). 6  BIS central bankers’ speeches  also been puzzlingly weak over the past few years.6 Despite unemployment falling around 2 percentage points, wage growth has remained around 2%. Chart 13: The US wage Phillips curve  Chart 12: The UK wage Phillips curve 1971-1997 2013-2014 Fitted 1998-2014  1971-1982 2012-2014 Fitted 1983-2011  1998-2012 Wage Fitted 1971-1997 inflation 40 35 30 25 20 15 10 5 0  0  5 10 Unemployment rate  Sources: ONS and Bank calculations  These Phillips curve surprises can be clearly seen in the Bank’s own forecast errors for wage growth and unemployment over the past few years (Chart 14). Since 2011, unemployment has come in consistently below the Bank’s expectations. Yet despite this unexpected strength in the labour market, wage growth has come in consistently and significantly lower than the Bank’s forecasts. In part, that reflects weak productivity, which has also been significantly lower than the Bank’s forecasts. But wage growth has been surprisingly weak even allowing for that. In response to this wage weakness, the MPC has dynamically adjusted its estimates of slack. For example, last year the MPC revised upwards its estimate of the so-called “participation gap” – the wedge between actual and equilibrium levels of participation in the labour force. By increasing the assumed drag from slack, that revision explained away part of the wage puzzle.
In the financial arena, for example, most of the most successful technology companies are headquartered in the United States or in Asian countries. The increase in public investment should focus on improving transport and communication infrastructures to maintain connectivity with business centres and to promote the development of European value chains and, thereby, regional cohesion. Moreover, we should not forget the impact that all the latest technological developments may have on income distribution, and nor that of education on employability. The Banking Union should be completed as soon as possible and a single capital market created17 Turning to European governance, in addition to the review of the fiscal framework and the creation of supranational macroeconomic stabilisation instruments, we should progress swiftly towards creating a single capital market and completing the Banking Union. These two initiatives are key both to the funding of investment and of business innovation, and to achieving a more robust and resilient monetary union in the face of adverse shocks. Capital markets in Europe are not only less developed than in other advanced economies (few companies tap the capital markets for funding); they are moreover fragmented as a result of differences in regulations (e.g. on insolvency proceedings) and in the tax treatment of debt versus equity. This has negative consequences for business financing, and for European countries’ capacity to diversify risks and withstand adverse shocks.

Once deposit interest rates began to vary with market rates, the demands for M1 and M2 - the primary guides to monetary policy - became unstable. So, by the early 1980s, the Fed had de-emphasized M1. And by the mid-1980s, M2 had met the same fate. In the 1990s, we continued to establish annual ranges for these aggregates, as we were required to do by law, but they played almost no role in our deliberations. The legal requirement to set ranges expired this year, and in late June we decided to stop setting ranges. This step was taken with some reluctance, because using interest rates as the main policy tool does pose well-known dangers. But in the absence of reliable monetary aggregates, the Fed has operated reasonably well in an environment of significant ongoing financial deregulation and sizable financial shocks. Let me give you some examples. In terms of deregulation, barriers to interstate banking were eliminated, and recently a new financial modernization law allowed depositories to expand into activities like insurance and investment banking. In terms of shocks, we dealt first with the so-called credit crunch in the late 1980s - which was due in part to the collapse of many savings and loans - then with the turmoil set off by the Asian currency crisis in 1997-98, and finally with the unexpected runup in equity values in the second half of 1990s.
In developing the financial sector, it contributes substantially to the growth of the professional services sector, that includes the network of supporting services encompassing software development, telecommunications, shared services, and legal and accounting services. Often, the ability of the financial sector to play this catalyst role depends on the sector having sufficient critical mass. Such a financial sector is able to play an important role in mobilising talent and business linkages to strengthen research and development efforts and spur innovation in other economic sectors. Through the channeling of productivity, the financial sector can drive endogenous growth in other economic sectors. Let me turn to two areas where Malaysia has strong competitive advantage. The first is in Islamic finance and the second is shared services and outsourcing (SSO). Malaysia is at the forefront in the development of Islamic finance, housing the world's largest sukuk market with 65.8% of the global outstanding sukuk as at end-March 2008. Building on our established foundation in Islamic finance in terms of experience, infrastructure and knowledge, the promotion of Malaysia as an international Islamic financial hub is expected to catalyse growth in other economic sectors. Positive effects are expected to spill over to the markets and related industries such as the property market and health, education and business services sectors, spreading the sector's growth momentum to the economy. Similarly, there exists potential for a greater mutually reinforcing relationship between the financial sector and the SSO industry in Malaysia.

However, a basic understanding of the concept of Islamic banking should provide a basis for determining an appropriate regulatory framework for Islamic banking. Of particular importance to Zambia is an arrangement where borrowers can borrow without paying interest. Lending rates are very high in this country, thus making borrowing for capital investments prohibitive. This is one issue we have been grappling with for a long time. Therefore, an arrangement where borrowers can access funds for investments without paying interest, offered by Islamic Banking is worth exploring. Mr. Chairman, over the past two years, we have noted with delight that financial institutions in Zambia are beginning to rise to the challenge by broadening the scope of their financial services beyond the traditional customers to include previously unbanked segments of society. Ladies and gentlemen, the need to foster an enabling environment cannot be overemphasized. In this regard, the Bank of Zambia will continue to ensure stable macroeconomic policies and development of appropriate financial sector regulations that will facilitate financial inclusion. Ladies and Gentlemen, the introduction of Islamic banking would come with its own challenges. For us at Bank of Zambia, this entails further strengthening of our supervisory capacity. We would welcome this challenge and hope to rise to the occasion by providing adequate supervisory infrastructure and an environment for conducting good business.
We can now benefit from the lessons we learned the hard way from the profound financial and real crisis we suffered in 1982-1983. Chile has steadily built throughout the years solid macroeconomic and financial institutions that, although they do not shield us from world events, do permit us to adjust to external shocks at substantially lower costs than we would have faced in the past. Therefore, as we have also said since the current crisis turned into chaos, Chile has never been better prepared to weather a shock like the one we are now enduring. Proof of this is the enormous countercyclical effort of macroeconomic policies carried out in the context of a solid, stable financial system. In fact, with respect to October of last year, and compared with the rest of the world, ours has been one of the greatest easing efforts of monetary policy, and our monetary policy rate (MPR) is at its historic low (Figure 2). Such an expansionary monetary policy has been implemented within the context of a credible inflation targeting regime, which ensures its effectiveness facing shocks of the magnitude we are seeing now. Chile’s inflation was among the highest between early 2007 and October 2008, a period that saw commodity prices soar. Also, Chile’s inflation has been one of the fastest to drop (Figure 3).

Opening Ceremony of Asian Financial Cooperation Association (AFCA) Keynote Speech by Dr. Veerathai Santiprabhob, Governor of the Bank of Thailand Beijing, July 24, 2017 Vice President Mr. Ma Kai, Vice Premier of China Mr. Guo Shuqing, Chairman of the China Banking Regulatory Commission (CBRC) Mr. Chen Yuan, Vice Chairman of the Chinese People's Political Consultative Conference Mr. Jin Liqun, President of the Asian Infrastructure Investment Bank (AIIB) Mr. Norman Chan, Chief Executive of the Hong Kong Monetary Authority (HKMA) Mr. Tian Guoli, Chairman of AFCA Excellencies, Executives of financial institutions, Ladies and Gentlemen. A very good afternoon to you all, Today’s opening ceremony of the Asian Financial Cooperation Association (AFCA) is a very auspicious occasion, and I am honoured to be a part of this historical event. I would like to congratulate the Chinese government for successfully establishing AFCA – a new forum, which I am certain, will play a significant role in enhancing financial connectivity and cooperation within Asia. I would therefore like to take this opportunity to share with you my thoughts on how we can further enhance financial connectivity to ensure sustained shared benefits – as stated in AFCA’s mission1. Ladies and gentlemen, People have long been connected by trade along the ancient Silk Road dating back more than 2,000 years ago. Today in modern times, many trade and investment agreements between China and other Asian countries have promoted close economic ties in the region.