samchain/econo-pairs-v1 huggingface dataset:
To understand the handling of a crisis, it is useful to know which factors generated the problems. Hence, my narrative will include the events that led up to the crisis in Sweden. I will also comment on the developments in Asia, with some emphasis on Korea. Having sketched this background, I will turn to the actual handling of crises, explaining why we found certain types of solutions useful in Sweden - leaving it to you to consider whether the same might apply to some extent to your country. 2. Background The macroeconomy First, let me say a few words about the macroeconomic background to the crisis in Sweden. There are both similarities and differences between Sweden and Asia. In the following I will touch on some of them. It should also be remembered that substantial differences also exist between the Asian countries. One common factor is the fixed exchange rate. In Sweden this led to high levels of foreign borrowing, particularly in the private sector. In addition it made it difficult to counter the gradual overheating of the economy by applying contractive monetary measures - raising interest rates tended to increase capital inflows which, to the extent they were monetised, further contributed to the overheating. Following the deregulation of the domestic financial market, the crisis in Sweden was also preceded by a rapid expansion of credit; in the course of five years, private borrowing grew from 85 to 135 % of GDP.

In this context, allow me to mention that the concern of central bankers for achieving the price stability objective is not always consistent with the desideratum of fast economic growth. This sometimes gives the impression that central bankers are overconservative and limit the stepped-up development of national economies. The fear of inflation tends to be dwarfed by the desire for quickly-gained prosperity and the central banks’ “obsession with stability” may be seen as a refusal of progress. 2/4  BIS central bankers' speeches  Coming back to macroeconomic policies, in order to increase their effectiveness, they should go hand in hand with structural reforms aimed at providing for a more flexible economic environment, so that their combined usage paves the way for a smooth and long-lasting convergence of living standards. In other words, countercyclical policies and structural reforms are not at odds, but in a relation of complementarity. In general, structural reforms are critical for strengthening convergence, ensuring durable growth and making the economy more flexible in order to benefit from euro area entry, as the advantages of euro adoption are not unconditional. What exactly do we mean by structural reforms? As Draghi said in 2017, for many, they describe a pragmatic policy agenda to raise long-term growth and accelerate adjustment to shocks, which is essential for countries in a monetary union; but for others, the term is viewed as a “catch-all” for a wide range of policies, some of which have potentially negative short-run costs and adverse distributional effects.
Third, the extensive financial reforms and development of the domestic financial markets since the Asian financial crisis have significantly strengthened Asia’s financial systems to better manage the more volatile capital flows. In addition, rigorous surveillance is being undertaken. This has allowed several economies to introduce preemptive measures to preserve monetary and financial stability. The near term outlook for emerging Asia going into 2011 remains positive. For Malaysia, despite slower external demand, the overall growth is expected to remain strong, supported by the continued expansion in private domestic demand. Favourable employment conditions, firm commodity prices and an accommodative policy environment will continue to underpin growth in private consumption. Meanwhile, the positive outlook on the domestic-oriented sectors and the recently announced economic transformation programme has improved the  BIS Review 146/2010  1  investment climate. Intra regional trade is also expected to continue to provide support to the growth and development process. Transition to high value-added high income economy Beyond the near term horizon, the Malaysian economy is currently at a significant juncture in its development. The economic future of our country depends on the success in our transition to becoming a high value-added economy. For more than five decades, Malaysia has demonstrated its economic flexibility to adjust to the changing environment and to continuously enter into new areas of competitive advantage.

The Bank in this way provides a kind of ACAS for syndicated lenders, known as the London Approach. Like ACAS, the London Approach is voluntary, informal and by mutual agreement. It is also less active now than previously, certainly since my own first encounter with the Bank in the mid-1970s, hopefully a good sign for Financial Stability. Management of the Bank Having dealt with the policy implications of the changes announced by the Government in May 1997 the advent of the Monetary Policy Committee and the transfer of line supervision for banks to the FSA - I would now like to turn to the profound impact that the changes have had on the Bank as an institution and to the third part of my job, responsibility for day-to-day management of the Bank. With the new responsibilities for monetary and financial stability came a recognition of the need for less generalist and more specialist analytical skills, and in particular for highly trained economists. At the same time, in our banking and other operations, as in other financial organisations, the introduction of new technology brought increasing demands for staff with emphasis on IT and not purely clerical skills. These have presented huge challenges for the management of the Bank and its staff. Looking back over the last three years, we have made changes in many areas, but I would like to pick out four in particular. Increased efficiency First has been the move towards greater efficiency and a reduction in overheads.
Over the past five years, domestic demand has risen by over 6% more than output - slightly more than the excess of demand over output in the late 1980s. In turn, net trade has made a negative contribution to output growth for six years in succession. A continuation of that trend would be unprecedented in Britain's modern economic history. The strength of consumption and the weakness of net exports have led to an imbalance between manufacturing and services. Manufacturing profitability has fallen by more than half over the past five years, while in less easily traded services profitability has been broadly unchanged. We, on the MPC, understand the problems facing many of you. So, let me explain what we can and cannot do about them. The need to rebalance the British economy is clear. Domestic demand is likely to be able to grow at no more than the rate of growth of total output; indeed, if the trade position is to improve it will have to grow by less. And within that figure, we need to allow room for the growth of public services. How will this re-balancing of demand come about? That is not yet clear. There are four key prices that will determine the extent of the re-balancing that occurs. They are the sterling exchange rate, the oil price, real wages, and interest rates. It is these prices that will provide the incentives for the required shift in resources. Let me consider them in turn.

Has the ECB been successful in its monetary policy communication? Having talked about the objectives of transparency and modes of external communication, I’d now like to consider how successful the ECB has been in establishing credibility and predictability. Evidence can be gained from financial markets and economic surveys. A key indicator of the credibility of ECB monetary policy comes from expectations of inflation implied by the differences between the returns on index-linked and nominal bonds and inflation-linked swap rates. When looking at these market prices, one has to bear in mind that the spread between these nominal and real yields not only measures market participants’ inflation expectations, but also carries the inflation uncertainty risk premium which investors require as compensation for the risk of a loss in purchasing power. Keeping this in mind, and also looking at various measures of long-term inflation expectations in the euro area, such as Consensus Forecast and the ECB’s Survey of Professional Forecasters, one can say that long-term inflation expectations have been pretty well anchored by the ECB’s quantitative definition of price stability from the beginning of the Euro. This is a remarkable success that observers and markets considered quasi impossible before the euro was set up. This does not mean that there is any room for complacency. Continued vigilance is key to preserve credibility and some increases in long-term inflation expectations last year remind us how important it is to be permanently vigilant.
For example, PWC recently forecast that AUM would top $ trillion by 2020 (PWC (2014)). Simply extrapolating GDP per capita trends forward using the relationship in Chart 3, AUM could reach $ trillion by 2050. If these trends are even roughly right, asset management may not only have come of age – we may be about to enter the Age of Asset Management. As important as the absolute scale of the asset management sector is its composition. On the assets side, a number of important trends are at play. One is the rapid growth in specialist funds, often investing in less liquid asset classes. This is evident in the growth of so-called alternatives, such as hedge, private equity, real estate, infrastructure and commodity funds. These have risen from under $ trillion AUM in 2003 to over $ trillion by 2012, or from 5% to 10% of global AUM (Boston Consulting Group (2013)). Accompanying that, there has been strong growth in funds active in specialist, often illiquid, markets – for example, high yield bond funds and emerging market funds. Since 2008, these funds have grown at an annual rate of around 40% per year, outpacing growth in the global mutual fund industry by a factor of four (Chart 4). 3 Also rising rapidly have been flows into US mutual loan funds, which spiked to $ billion in 2013 having averaged $ billion in the preceding three years.

Table 1 Largest banks (by assets) and asset managers (by assets under management), end 2012 Bank  Country Assets $ % of total  Manager  Country AUM $ % of total  ICBC Mitsubishi UFJ Financial HSBC Holdings Deutsche Bank Credit Agricole BNP Paribas JP Morgan Chase & Co Barclays China Construction Bank Bank of America TOP 10  China Japan UK Germany France France US UK China US  BlackRock Allianz Vanguard State Street Fidelity AXA JPMorgan Chase Bank of New York Mellon BNP Paribas Deutsche Bank TOP 10  US Germany US US US France US US France Germany  2,789 2,709 2,693 2,655 2,649 2,516 2,359 2,351 2,221 2,212 25,154  2.5% 2.4% 2.4% 2.4% 2.4% 2.2% 2.1% 2.1% 2.0% 2.0% 22.4%  3,792 2,448 2,215 2,086 1,888 1,475 1,431 1,385 1,303 1,247 19,270  5.6% 3.6% 3.3% 3.1% 2.8% 2.2% 2.1% 2.0% 1.9% 1.8% 28.3%  Sources: The Banker Database “Top 1000 World Banks ranking” (2013), Towers Watson "The World's 500 Largest Asset Managers" (2012) and Bank calculations  BIS central bankers’ speeches  13  References Andonov, A., Bauer, R. and Cremers, M. (2013), “Pension Fund Asset Allocation and Liability Discount Rates: Camouflage and Reckless Risk Taking by U.S. Public Plans?” Adrian, T. and Shin, H. S. (2010), “Liquidity and Leverage”, Staff Report, Federal Reserve Bank of New York, No. 328. Amir, E., Guan, Y. and Oswald, D. (2010), “The Effect of Pension Accounting on Corporate Pension Asset Allocation”, Review of Accounting Studies, 15(2), p.345–366.
Lim Hng Kiang: Seeking new growth horizons Opening address by Mr Lim Hng Kiang, Minister for Trade and Industry and Deputy Chairman of the Monetary Authority of Singapore, at the 1st Annual World Islamic Banking Conference: Asia Summit 2010, Singapore, 14 June 2010. *  *  *  H.E. Governor Rasheed Mohammed Al Maraj, Central Bank of Bahrain, H.E. Governor Sultan Bin Nasser Al Suwaidi, Central Bank of the United Arab Emirates, Distinguished guests, Ladies and gentlemen Introduction 1. Good morning and a warm welcome to our overseas guests. First of all, let me thank Governor Rasheed and Governor Sultan for joining us at this inaugural World Islamic Banking Conference: Asia Summit (WIBC Asia). Your presence here today is testimony to the strong and long-standing ties that Singapore enjoys with the Gulf Cooperation Council (GCC) countries and warm relationships between MAS and your respective central banks. 2. The World Islamic Banking Conference has been held successfully in Bahrain for the past sixteen years. We are honoured that WIBC Asia is now anchored in Singapore. We hope that the Summit will become an important event on the Islamic finance calendar over time and catalyse even greater engagement between the Middle East and Asia. Hence, the theme: “Seeking New Growth Horizons” is highly appropriate for this inaugural Summit. Strengthening Asia-Middle East engagement 3. Uncertainty and fear from the financial crisis have abated somewhat, but risks still remain. Global economic output had begun to pick up from the second quarter of 2009.

With greater awareness and adoption in more financial centres, Islamic finance is poised to play a bigger and more central role in global finance. We look forward to WIBC Asia as a key platform that will buttress the development of Islamic finance as it takes root in the region. The industry, which is open to all participants, can only reach greater heights with your commitment and support. I therefore wish you a productive conference as you seek exciting new horizons for Islamic finance. 4  BIS Review 84/2010
But if there is great uncertainty about the fundamental value of an asset or there is a suspicion that the seller may have chosen to sell it because they know it is a lemon, then prices are likely to have to fall a long way before buyers step forward. That is particularly so if potential buyers are concerned about their own access to funding and therefore wish to remain in safe and liquid assets. But given the use of mark-to-market accounting to value trading books, the falls in asset prices then worsens the balance sheets of other institutions. That in turn reduces their capital ratios, aggravating their problems in raising funds and generating a further round of asset sales. Further amplifying mechanisms arise as a consequence of leveraged positions. The net worth of a leveraged investor deteriorates much faster than his gross worth when asset prices fall, as all of the loss is scored against capital. Thus even to hold leverage constant requires substantial asset sales, further depressing asset prices. For instance, an investor with $ million of assets financed by $ million of capital and $ million of debt who experiences a $ million loss in asset value would have to sell $ million of assets and redeem an equivalent amount of the debt to restore his original leverage ratio. Brunnermeier (2009) refers to this as a “loss spiral”.

And default itself amplifies losses in the network, most obviously through direct bankruptcy costs, but also through fire sales of the sort already discussed. Moreover, when entities are highly leveraged, they will have only limited capacity to absorb losses, making such a cascade of defaults more prone to occur. A similar network dynamic can occur when institutions are hit by a payment shock, such as the drying up of wholesale funding that occurred at the start of the crisis and again around the time of the collapse of Lehman’s. The analysis of the behaviour of such financial networks is still very much in its infancy 9 . But a key point material to regulatory design is that some types of network will be inherently more stable than others, depending on both the nature of the network and the obligations on its members. For instance, a network where all institutions are of similar importance and exposures are evenly spread is likely to be relatively stable, as the consequences of an adverse shock to any one institution will be spread widely and thinly. In contrast, as we saw with the collapse of Lehman’s, networks in which there are a relatively small number of key players are potentially very susceptible to the failure of a key player. By the same token, a network in which exposures are collateralised or can be netted across the system will be  9  For more discussion of this issue, see Haldane (2009).
However, as the Japanese experience has shown, monetary policy alone cannot place the economy on a sustainable growth track. Bold monetary policy measures may be effective in the short run, but they also bear the risk of reducing incentives for banks to restructure balance sheets. We are aware of these risks. Furthermore, even if central banks operate within their own specific circumstances and mandates, the policy measures may lead to unintended spillovers to other countries. To ensure that monetary policy is transmitted adequately to the economy and domestic  11  See, for example, Blanchard, O., Dell’Ariccia, G. and Mauro, P., “Rethinking Macroeconomic Policy”, Journal of Money, Credit and Banking, 42(s1), 2010, pp. 199–215. 6  BIS central bankers’ speeches  financing conditions are insulated from those prevailing in the global economy, sound macroeconomic policies and strong domestic institutions are vital. In addition, to place the economy back on track to sustainable growth, a medium-term fiscal consolidation strategy as well as structural reforms with productive investment are essential; these two elements combined with monetary policy form the three arrows identified by Prime Minister Abe. Monetary policy can buy time to implement structural changes and ease the deleveraging process, but it cannot cure the root causes of imbalances or be a substitute for structural reforms. Conclusion Allow me to conclude. Both our economies face large challenges to counter the risks from deleveraging. Preventing disorderly deleveraging will remain key to limiting possible adverse effects on the economic performance in the most indebted euro area countries.

Jaime Caruana: Making diligent preparations for Basel II Opening remarks by Mr Jaime Caruana, Governor of the Bank of Spain and Chairman of the Basel Committee on Banking Supervision, at the Thirteenth International Conference of Banking Supervisors (ICBS), Madrid, 22-23 September 2004. * 1. *  *  Welcome and overview  Distinguished guests and friends: as the Governor of the Bank of Spain, it is my pleasure to serve as your host at the Thirteenth International Conference of Banking Supervisors here in Madrid. I am also privileged to serve in a second capacity at this event as chairman of the Basel Committee on Banking Supervision. In that regard, it is my honour to launch our dialogue on the two main themes selected for this conference. As you know, the Committee reached agreement on an historic revision of the international capital framework just this past June. So naturally an important focus for this conference will be on preparing for its implementation. In addition, because Basel II relies increasingly on the quantification of risk exposures to understand a bank’s risk profile, it is more important than ever before to look behind the numbers and into the rules that define how exposures are measured. The second day of our conference will be devoted to the emerging issues in accounting and their relevance to banking supervision.
This volatility has subsided in recent months (see the right side of Chart 7). If we look beyond the aftermath of the pegged exchange rate regime, the financial crisis, and the capital controls regime, it cannot be seen that the short-term fluctuations of the Icelandic króna have been vastly larger than other Nordic krónur that have flexible exchange rates, or commodityexporters’ currencies. These currencies also have periods of peak volatility. Long real exchange rate cycles are a well-known phenomenon, also in countries with a fixed nominal exchange rate (Chart 8). As has previously been noted, exchange rate movements have been more effective as shock absorbers in recent years than they were previously. Although more effective and more credible monetary policy plays a part in this, what is probably more important is that the capital controls – and now,  8  the capital flow management measure – have mitigated volatile capital flows, which can undermine economic stability, as experience has shown. Chart 7  Chart 8  Review of the monetary policy framework and currency and exchange rate policy options In closing, I would like to focus on the ongoing review of Iceland’s monetary policy framework and currency and exchange rate policy options. In the recent past, I have emphasised how important it is that this discussion should take into account what monetary policy can and cannot do.

The inflation outlook is therefore favourable, as can be seen in the chart at the right, which looks past the changes in value-added tax that could possibly be implemented in the near future. Chart 3  “Missing” inflation Headline inflation has been below the Central Bank’s target for nearly four years, even though the negative output gap closed and then turned positive some time ago and wages have risen well in excess of what, in an average year, would be deemed consistent with the inflation target. This is not a unique case, however. In international circles, there is widespread discussion of “missing” inflation, which generally refers to the fact that wage rises are astoundingly small given the business cycle position in the country concerned. For example, countries as dissimilar as the US and Sweden are considered to be at full employment, yet wage increases are smaller than is consistent with the inflation target. In some countries, such as the US, this may be partly because the slack in the labour market is actually larger than conventional measurements indicate, as the labour participation rate is historically rather low. But this does not tell the whole tale, and in some countries it is not a very robust explanation.