samchain/econo-pairs-v1 huggingface dataset:
The arrival of the euro also had a positive effect on growth, in spite of the serious difficulties during the crisis. Since 1999, GDP per capita has been growing at 1.2%, which is 0.1% higher than in the other euro area countries and much higher than during the early years of our democracy. Recently, some people have tried to blame the euro for the length of the financial crisis in Spain and have advocated control over monetary policy interest rates and exchange rates. What they 1/2  BIS central bankers' speeches  often forget is that being a member of the euro area enables Spanish households and businesses to benefit from lower real interest rates, lower inflation rates and reduced macroeconomic volatility, all of which boost productive investments and make a vital contribution to the sustainability of public finances. Furthermore, it is not true that structural currency devaluations solve economic crises. Devaluations are short-term measures. In the long term, the competitive boost they provide is eroded by the higher inflation they cause. And, in a complex system of global production chains like the one we have today, devaluations can make it harder for businesses to plan. The euro is also the second-most important currency in the international monetary system3, which strengthens Spain’s credibility in a global context. It’s true that the crisis revealed significant institutional shortcomings in the structure of the monetary union, but it’s equally true that European countries have taken this on board and carried out substantial reforms.

At the same time, solid domestic savings rates rationalize the needs of the economy for external funding, which means reduced exposure to sudden changes in the capital flows dynamics, i.e. reduced sensitivity to shocks from the external sector. The latest economic crisis clearly illustrates the risks of excessive indebtedness and excessive dependence on external financing, which further emphasizes the importance of domestic savings, which has proven to be a more stable source of funding. Having in mind all the benefits of saving, it is my pleasure to conclude that Macedonian citizens are cultivating a savings culture in the banking sector. In the last 10 years, total deposits have grown at a rate of around 8%, on average, on an annual basis, which contributed to an increase in savings1 by about 10 p.p. at the level of 55% of GDP in 2017. The fact that the deposit growth was registered in conditions of the global crisis and more economic and political shocks proves the high confidence of the citizens in the banking sector, which remained stable, sound, highly capitalized and liquid throughout the entire period, showing high capability for successful handling of shocks. Higher growth in the denar deposits and the acceleration of growth of the long-term savings is especially positive, which strengthens the banks' capacity for long-term placements and the support for investment projects. The deposit growth provided a solid basis for increase in the lending activity and deepening of financial intermediation2 by around 8 p.p.
For example, proposals such as prohibiting foreign branches from doing business domestically or extending home-country responsibility have been discussed. My take on this, as I said in the beginning, is instead to gradually move towards the creation of a common international body with a mandate to conduct supervision of banks with substantial cross-border activities. The simple rationale is that the creation of such a body is the only way to fully manage the conflicting national interests. Also, such a body would have several other benefits. A single authority supervising cross-border banking groups instead of several would most certainly increase the comprehensiveness and the effectiveness of the supervision. For the firms subject to supervision, it could mean that the regulatory burden would eventually be reduced considerably. In a European context, the idea of a European Organisation for Financial Supervision (EOFS) may at a first glance seem overly idealistic, and to be honest, in some respects it is. One can argue that it would be virtually impossible to make countries give up parts of their sovereignty to a supranational authority. However, looking at this from a European perspective, there is hope. Within the European Union there is already a framework for supervisory and regulatory cooperation, based on the common legislative process in the form of EEC-directives and regulations. Moreover some institutional arrangements for supervisory cooperation are in place, even if they do not have any legal powers. It may therefore be easier to reach some progress in Europe than elsewhere in the world.

In practice, of course, for accounting purposes many pension fund sponsors use an investment-grade corporate bond rate to discount their liabilities; an annex shows what things look like in this case. Chart 4 shows how the deficit of this fund evolves, decomposed into the cumulative contributions of the liabilities (green bars) and assets, comprising equities (red bars) and bonds (blue bars). Note that the deficit rises as high as 30% of initial liabilities in early 2009, reflecting the sharp fall in equity prices during the worst of the financial crisis and subsequent recession. The deficit then falls back as equity prices rally strongly. It then re-emerges in late 2011 and early 2012, reflecting the fall in gilt yields coupled with the more modest movements in equity prices during this episode. Now consider what the picture might have looked like if the MPC had not undertaken any QE. In constructing this counterfactual experiment, I take the estimates of the asset-price impact for QE1 from the work that I discussed earlier, namely that it reduced gilt yields by a percentage point and raised equity prices by 20%, and then simply pro-rate those effects for QE2. I emphasise again that these are only estimates of the effect of QE and are subject to considerable uncertainty, so the results of this exercise should be treated as illustrative rather than definitive. Chart 5 shows the result.
Naturally, the spread of connected objects that is triggering an exponential rise in the amount of data available on insurance policyholders represents an opportunity for the business of insurance, which consists precisely in collecting and exploiting data in order to quantify and put a price on risk. Nonetheless, insurers should take a responsible approach: we need to strike the right balance between segmentation and the sharing of risk between policyholders. The basic principles of solidarity and risk-pooling that are intrinsic to insurance are at stake. And we must not lose sight of our collective values regarding individuals’ right to privacy. To conclude, I wish to stress that all these innovations require some creativity, on the part of both supervisors and insurers. John Maynard Keynes, who profoundly renewed economic thinking, was well aware of this need to think “out of the box”. He wrote in the preface of The General Theory: “The difficulty lies, not in the new ideas, but in escaping from the old ones, which ramify, for those brought up as most of us have been, into every corner of our minds.”2 Let’s have the courage to think differently. In this respect, as insurers, it’s up to you to shape the insurance of the future and, as I said, a lot has to be done. As supervisors, we also have to demonstrate enough flexibility so as to foster your innovations, while ensuring that the key principles that I mentioned earlier are respected.

But the important point here is that financial innovations, coupled with technological advances in communications, helped to link financial markets across the globe. This globalization of financial services allowed the collapse of major financial centers to spread to the rest of the globe so efficiently. In fact, these very financial instruments which had been earlier used to diversify risks turned out to be the very means for spreading contagion. The spread of the impact of the financial crisis onto the global real economy through the trade channel changed the world’s economic outlook rapidly and dramatically. This had a drastic impact on the inflation outlook, and the threat of inflation has rapidly shifted to one of possible deflation. At the same time, central banks are running out of traditional monetary policy ammunition to fight the slowdown in growth and potential deflation – namely cutting interest rates. Given the increasing influence of external factors on global inflation dynamics, traditional monetary policy which focuses on domestic dynamics of inflation needs to be reconsidered. As a result of globalization, the prices of important commodities and goods tend to move together, making external price shocks a more and more important determinant of domestic inflation. Fluctuations in oil prices and other commodity prices, or even a sustained period of cheaper or dearer exports, can change global inflation dynamics.
After months of turbulence, the hope was that markets would unclog and financial institutions would be quite unscathed by the credit losses and liquidity strains. When it became clear that this script was wrong, the new hope was that the real economy would be largely unaffected, and de-coupling would spare Asia. All these hopes have been dashed. Confidence is at an all-time low, uncertainties at an all-time high. The key lesson here is that we cannot base our actions on sequential responses that underestimate the severity of the situation. Policy actions have to be decisive and coordinated. Policymakers, financial institutions, businesses and the general public, especially in those economies most severely affected, will have to make significant adjustments. Those better able and faster to adopt the right mindset to confront the new environment will fare better for it, and reduce the prospect of a long period of malaise. Even with the right mindset, there is no simple solution to resolve these enormous challenges. But let me suggest three dimensions that need to be tackled: first, take decisive action to arrest the negative spiral; second, in doing these, keep an eye on medium term sustainability; third, consider the global dimension and impact on others. Let me touch on each of these in turn. Overcoming present difficulties First, political consensus has to emerge quickly, so that authorities can take decisive action to arrest the negative spiral between the financial system and the real economy.

Once growth resumes, the wealth that is generated has to be properly deployed. In this regard, global financial institutions, whose commitment and capacity are being tested by this crisis, need to take a medium-term view of their businesses in this region. Singapore’s response and commitment Let me now briefly say a few words on Singapore’s responses. Like everywhere else, Singapore has experienced tightening credit conditions. We have taken action to address both the inter-bank money markets, as well as the flow of credit from banks to corporations. In the inter-bank money markets, MAS remains focused on ensuring that both the Singapore Dollar and the US Dollar markets continue to function smoothly. For the Singapore Dollar market, we have and will continue to ensure sufficient liquidity, through our monetary operations and standing facility. For the US Dollar market, we established a $ billion swap line with the US Federal Reserve. This line is alongside other swap lines that the Fed has with 13 other central banks, including several in Europe and Asia. As a major funding centre, we took precautionary measures to ensure that global financial institutions operating here continue to have access to US dollar liquidity. The Federal Reserve on its part recognised the importance of providing US dollar liquidity to financial institutions through central banks in sound, well managed and systemically important financial centres, so as to improve global US dollar liquidity conditions as necessary. We have not had to use the swap line, nor do we see any impending need.
While the regulatory and supervisory frameworks are generally recognised to be strong in these countries, 8 they will have to withstand increasing stress over the next few years arising from the growing internationalisation of financial markets and the complexity of the global financial architecture, as well as from domestic macroeconomic dynamics. In the run-up to the adoption of the euro, most NMS will also continue to face the challenge of maintaining acceptable fiscal positions. Current expenditures in many of these countries are high relative to GDP, and in a number of them demographic profiles are casting doubts on the mediumterm sustainability of public finance. This is a concern not only from the viewpoint of nominal convergence in terms of the Maastricht criteria, but also from the perspective of the need for flexibility in the area of fiscal policy in order to be able to counter the effects of asymmetric shocks. Requisites for the successful adoption of the euro In this scenario, the successful adoption of the euro by the NMS requires efforts on two fronts, namely the implementation of economic policies designed to meet the Maastricht criteria on a sustainable basis, and the mobilisation of strong support for euro adoption so as to endow the project with the necessary credibility. With regard to the former, a continued emphasis on fiscal consolidation, with deficit and debt levels that would be even lower than the threshold values of the Maastricht criteria, would seem to be called for.

The current reference value for the HICP inflation criterion is influenced by countries whose energy needs are satisfied in varying degrees by non-oil fuels. At the same time, of the NMS that would not have satisfied the inflation criterion on the basis of the March 2006 data, some are more heavily dependent on oil imports, so that price levels generally in these countries have been reflecting the higher cost of oil and energy to a much greater degree than is the case in the reference countries. This argument could also apply to Malta in the future since not only is oil the sole source of electricity generation, but a high proportion of drinking water needs are also met by the transformation of sea water, a process that involves a high consumption of electricity. The difficulty of controlling inflation in current circumstances is indeed also reflected in the fact that three of the present euro area members exceed the inflation reference value by an average of 1 percentage point, and there is evidence pointing towards a divergence in inflation rates between these countries over the past five years. 9 Moreover, the NMS have registered rates of inflation between 2002 and 2005 that were around one half those recorded during the preceding four-year period. This is indicative of the significant degree of macroeconomic stabilisation taking place, at the same time that progress continued to be registered in terms of real convergence.
Figure 1: Credibility Gap (Rates of Inflation Expectations and Targets as of the Beginning of the Year)  60 50 40  Inflation  Targ 13,3 points credibility gap  48.3  4,9 points credibility gap  35.0  (% 30 )  0,4 points Credibility gap 1,1 points credibility gap  24.9 20.0  20  13.1 12.0 8.4  10  8.0  0 2002  2003  2004  2005  Source: SIS, CBRT. In 2004, there were high increases in world commodity prices; mostly in oil and primary metal prices and in April and May there were fluctuations in the financial markets. Despite these developments, the fact that the inflation target was realized is owing to coherent implementation of disciplined monetary and financial policies. In addition, there are four other main factors that contributed to the steady  BIS Review 36/2005  3  decline of inflation; the controlled recovery of domestic demand, the continual increase of productivity in the economy, income policies almost coherent with inflation, and relative stability in FX rates. The inflation figures of the first quarter of 2005 indicate that the positive outlook in price developments continues. In the new index with a 2003 basis year, the tendency to decline persists in the special CPI aggregates which were formed by adjusting inflation according to external factors- such as raw material prices around the world, prices affected by natural causes or determined by the public. In the first quarter of 2005 cumulative inflation figures remained historically low.

Transactions on the Turkish Derivatives Exchange are expected provide more forward-looking and quantitative information for Central Bank reports, especially with the transition to explicit inflation targeting after 2006. Hence, if we bear in mind that derivatives markets act as a “catalyst” in the economy, all kinds of arrangements concerning the operation of these markets should be handled carefully. In this context, orientation programs and training should be conducted in order to encourage banks and companies to operate in this market. Central bank independence In conclusion, I would like to say a few words about the maintenance and reinforcement of Central Bank independence. In addition to the points I will deal with here, you can also refer to the speech “Central Bank Independence” on our website, in which this issue is covered in detail from both economic and legal perspectives. In democratic societies, the term ‘independence’ is used to define the institutions establishing that society, for instance, the independent central bank. This issue occasionally raises questions such as ‘Independence from what or whom?’ However, when looking at the historical background, it can be seen that “independence” was granted to institutions by the societies themselves as the consequence of a democratic process and their ultimate goal is to maximize social welfare. Central Bank independence becomes even more significant, not only as a concept, but in terms of its consequences.
Maybe the major dealers will not standardize as many trades as is desirable or, perhaps, CCPs will develop in too fragmented a manner so that the netting of risk doesn’t occur to the extent potentially feasible. Or the development of global CCPs could have unanticipated negative consequences for market structure, competition and/or efficiency. We must be open-minded about the potential need for mid-course corrections. We will need to ensure that the incentives are right to get the greatest amount of risk reduced in the most efficient manner. Currently, for example, we are evaluating how the changes in terms of the Basel capital and liquidity standards for banks will interact with the changes in the OTC derivatives regime in terms of influencing the incentives for standardizing OTC trades and mandatory clearing through CCPs. But we shouldn’t kid ourselves – we’ll be off in our forecast. Thus, we must be ready to make adjustments as this process unfolds and we learn more. As long as regulators, FMIs, and market participants make the effort, we should be able to make the financial system much safer, resilient, and transparent. The changes in train, if properly executed, should, over time, significantly reduce the shortcomings in the OTC derivatives market that exacerbated the financial crisis. Properly enacted and implemented, net exposures should be smaller because of the netting that occurs through the CCP process.

Luljeta Minxhozi: Covid-19 - the impact on the economy and central bank policies Welcome address by Ms Luljeta Minxhozi, First Deputy Governor of the Bank of Albania, to the Virtual Conference of the Bank of Albania “Covid-19: The Impact on the Economy and Central Bank Policies”, 29 October 2020. * * * Dear Guests, Ladies and Gentlemen, For a few years now, the Bank of Albania and the Institute of Global Affairs (IGA) of the LSE have been co-organizing a series of joint conferences. These annual events are aimed at encouraging an open discussion amongst academics and policymakers, in order to promote new thinking and policy-based approaches to the most pressing challenges we face. The Bank of Albania is proud to associate itself with the Institute of Global Affairs, an institute which is positioned as a leading academic center for exploring research-based strategic approaches to policy challenges. On its behalf, the Bank of Albania strives to adopt the emerging academic consensus, while tailoring it to the idiosyncrasies of the Albanian economy and its financial markets. Being said that, it is a special my pleasure to address this conference, focused on “Covid-19: The Impact on the Economy and Central Bank Policies”. The ongoing pandemic has the undoubted potential to re-shape our way of life for the foreseeable future. As the health emergency is still unfolding, its implications might have far-reaching impacts in our social and economic fabric.
3 The effective federal funds rate is calculated as a volume-weighted median of overnight federal funds transactions reported by banks on the FR 2420 Report of Selected Money Market Rates. The New York Fed publishes the EFFR for the prior business day, along with volumes and rate percentiles, on its website daily at approximately 9:00 a.m. Eastern Time. The EFFR is used as a measure of the typical fed funds transaction and is the way the New York Fed’s Open Market Trading Desk (the Desk) measures its success in meeting the directive on interest rate control from the FOMC. 1  confidence in its ability to appropriately control overnight interest rates over the period of normalization. I will then conclude with some comments on recent developments in broader money market rates, in particular U.S.-dollar LIBOR. U.S. term money market rates are of global significance, owing to the heavy use of the dollar outside the United States and the large stock of dollar-LIBOR-linked debt issued abroad. 4 The spread of LIBOR to overnight indexed swaps has fluctuated in recent years, along with similar term unsecured dollar borrowing rates, driven in part by the same factors influencing overnight rates but also by specific past regulatory and legislative changes that have impacted flows in term markets. Evidence, such as from the FX swaps market, suggests that dollar borrowing markets continue to function well. Policy Normalization Continues As Expected I’d like to start by taking stock of where we are with the normalization of monetary policy in the United States.

Stock Markets enable firms to acquire the much needed capital at relatively lower cost, hence facilitating capital allocation, investment and growth. The stock market also plays a resource mobilisation role by encouraging savings through the purchase of equities that meet investors risk preferences and liquidity needs. The provision of information on the stock market and its activity such as contained in the CASE handbook is therefore one way of promoting investor awareness and participation on our local market. This will no doubt enhance the development of the stock exchange and its contribution to our economy. Chairperson, as you may be aware, the Government of the Republic of Zambia has been implementing a comprehensive Financial Sector Development Plan (FSDP) since 2004, whose main objective is to broaden and deepen the financial sector in Zambia. Under the FSDP, the need for a well-developed capital market as an engine for economic development is emphasised as it among other things would enable investors have access to a wide range of investment options. It is for this reason that the Bank of Zambia together with stakeholders introduced a number of initiatives aimed at further developing the capital market. This includes the introduction of long term Government bonds, which among other purposes, was aimed at providing an appropriate platform for pricing corporate bonds. Furthermore, the Bank of Zambia in collaboration with LuSE and Bankers Association of Zambia is in the process of extending the services of RTGS to settle stock exchange transaction.