samchain/econo-pairs-v1 huggingface dataset:
Measured by the trade-weighted index calculated as a monthly average, the krone touched a record low level earlier this summer. We can derive indicators of market expectations concerning future exchange rate movements and inflation. Implied forward rates can be interpreted as the expected nominal interest rate between two future dates. For a given expected real interest rate, the forward rate provides some indication of inflation expectations. Chart 6 3  E Alberola, S Cervero, H Lopez and A Ubide (1999): “Global Equilibrium Exchange Rates: Euro, Dollar, “Ins”, “Outs” and Other Major Currencies in a Panel Cointegration Framework”, IMF WP/99/175. 7  BIS Review 67/2000  Nordic forward rate differentials against DEM 16 August 2000 In the long term, ie up to ten years ahead, it is highly unlikely that market participants have specific expectations about the economic situation. If the equilibrium real interest rate is the same between countries, the differential between Norwegian and foreign long-term forward rates may be interpreted as the differential in expected inflation plus any risk premium. The risk premium may be partly attributable to the limited volume of Norwegian financial markets. As such, the long-term forward rate  differential between Norway and Germany may be interpreted as the expected inflation differential between Norway and the euro area in the future - plus any risk premium. Chart 7 shows that the forward rate differential between Norway and Germany, ie the differential between short-term interest rates at future dates, is gradually narrowing, and is not much greater than for the other Nordic countries.

At the other end of the spectrum, there is an important question of whether the macroprudential authorities should be able to require changes in initial margin levels in the face of market exuberance. In the UK, there will be a debate about whether the Bank of England’s Financial Policy Committee should have that power. The Basel Committee of the Global Financial System has already produced a report on it.1 In a different dimension, there is an important question about whether clearing houses should adopt what is called Gross Margining rather than Net Margining. What this means is that a clearing member – ie a dealer – could not net off positions of their various customers and their own house position when the amount of margin they have to hold with the clearing house is determined. That would affect the incentives of clearing members to collect minimum margin amounts from their customers. And, more generally, it would probably reduce the amount of leverage in the system and simplify the chain of credit. In terms of public policy objectives, this is, therefore, about more than investor protection through the segregation of client moneys, and so needs to be debated against the goal of preserving stability without impairing efficiency. The resolution of CCPs If CCPs can do a lot of good by simplifying the network of counterparty exposures and imposing standard valuations and margin requirements, conversely it is an understatement that it would be a disaster if a clearing house failed.
Our journey officially began with the establishment of the first Islamic bank in 1983 and in the year that followed, the first Takaful operator. We have never looked back since then to evolve a comprehensive domestic Islamic financial system operating alongside the conventional financial system, comprising the Islamic banking institutions, the takaful industry, the Islamic money and capital markets. These respective components have been progressively liberalized over the years, allowing for more foreign presence in the market to become internationally more integrated. This has led to diversity in market players, and the increased competitive forces now provide the impetus for increased innovation in the market. The dynamism in the market has been supported by a robust regulatory and supervisory framework, reinforced by the legal and Shariah framework, the payment and settlement systems. Our Shariah framework in particular is distinctively robust, through the consultative role of the Shariah Advisory  BIS Review 102/2010  1  Council of Bank Negara Malaysia and Securities Commission, complemented by the Shariah board of individual Islamic financial institutions. This strategy has served us well, as it had nurtured innovation whilst ensuring stability in the marketplace. Collectively, the strategies that we had adopted have brought about significant progress on several fronts, in the areas of institutional structure, diversity of players, operational efficiency and the wide range of products and services. Several global players have chosen Malaysia as their regional base for Islamic finance.

Accordingly, they need to scale down consumer spending and investments over a relatively long period of time in order to service outstanding loans and reduce their excessive debt burden. In addition, such an environment usually leads to greater uncertainty, which also impacts on economic agents that are not directly confronted by payment difficulties. Under such circumstances, they, too, tend to show less appetite for consumer spending, investments and risk. 10 Cutbacks in consumer spending and investments are even more pronounced when, at the same time, banks are busy cleaning up their balance sheets. They then become very restrained in  9  Cf. Boissay et al. (2016), Jorda et al. (2013), Reinhart and Reinhart (2010) and Taylor (2015). 10 Cf. literature on debt overhang, e.g. Buttiglione et al. (2014) and Koo (2011). Page 6/16  their lending. 11 This can even affect fundamentally profitable investments and borrowers with a high credit rating. All this places a burden on the economy not just during the acute phase of the crisis, but over a prolonged period. Lower investment also results in lower growth potential. Because less investment means less innovation, and less innovation leads to lower productivity growth. To put it in a nutshell, and to come back to the analogy of food: When, during an upturn, economic agents have taken excessive helpings from the credit pot, they will, in the wake of a debt crisis, be forced on a necessary, but long and painful diet.
Unemployment rates in some parts of the UK, such as the North East and Northern Ireland, remain several percentage points above the national average. And those unemployed for more than one year remain above their long-term average. •  Even among those with a job, there remains a sizable number who wish to work longer hours than are currently available to them. Surveys suggest three and a half million people would like to work for longer, or around 10% of the working population (Chart 5). On average, they wish to work an extra 11 hours per week. These people are not unemployed, but they are under-employed. •  Another dimension of under-employment is the extent to which people are using their skills in the workplace. Under-utilised skills are as much an economic waste as under-utilised time. At present, there are around 5 million people whose skills are mismatched, or are over-qualified, for the job they are doing. This number has increased by two percentage points since the start of the crisis. •  Even for those who have found work, levels of job security appear to be lower than in the past. Around 6.4% of all employees in the UK are on temporary contracts. Rates of self-employment have risen from 12% a decade ago to around 15% now. For some firms and workers, those trends are a welcome sign of job flexibility. But not for all. Around a third of temporary contract workers would prefer a permanent contract.

Although such a euro area stance is prevailing, the contribution of individual Member States to the aggregate outcome is suboptimal. Some of them need to take additional measures to ensure compliance with the fiscal rules, while others have scope to use available fiscal space. In addition, all euro area countries should strive for a more growth-friendly composition of fiscal policies by prioritising public investment and reducing the tax burden on labour. The current political and economic momentum in Europe also provides an opportunity to strengthen our Economic and Monetary Union (EMU). Further integration needs to be achieved 2/3  BIS central bankers' speeches  above all by implementing what has been agreed and by completing the common projects we have started. This includes completing the banking union and building a capital markets union. A more complete EMU, with further steps towards a deeper financial, fiscal and economic union, will be the foundation for a stable, flourishing and resilient euro area economy. That is the best contribution which Europe can make to global economic growth and financial stability. By delivering on its mandate, the ECB will continue to play its part in this endeavour. 3/3  BIS central bankers' speeches
It’s doubtful any of these would have had the same impact had they been seen as permanent changes. I’ve gone through this because I think there’s a clear parallel with the pandemic and its effects on consumer demand. A jump in the prevalence of the illness acts like a big rise in the cost of particular things, activities that expose you to the risk of infection. The cost isn’t a monetary one (which is why a better analogy is a compensated tax hike). But it very clearly deters spending on riskier activities. By the same token, it also increases the incentives either to switch spending immediately to other, less risky things, or to defer it to the future (i.e. to cut aggregate consumption and save more). And the factors that determine the balance of these responses are the same as for the hypothetical tax hike. If either there are close substitutes for the riskier activities, or if you expect the jump in infection rates to persist for an extremely long time, there will in theory be more limited effects on aggregate spending and a greater degree of switching across categories2. Employing the economists’ jargon, substitution from the risky activities will be more “intra-temporal” than “inter-temporal”.

As long as economic resources are mobile this is  Chart 8a: In the short run there are diminishing  probably a reasonable thing to do. When thinking  returns to scale  about what determines supply capacity at the level of an individual sector we generally think the process exhibits what are called “constant returns to scale”. If you double all the resources involved you double potential output. So in Chart 8a the response of output to demand looks like a straight line. And the nice thing about this is that, if we add up demand across a lot of sectors it doesn’t matter what the distribution of that demand looks like. Demand in individual sectors can move anywhere along that straight line and all that will matter for total output is the total amount of spending5. But economic resources aren’t perfectly mobile, not in the short run at least. Even if people can move relatively quickly from one job to another, it takes time to repurpose a building and to retrain an employee. And when some of those capital resources are slow to move supply looks more like the curved line in Chart 8a: there are “diminishing returns to scale”. This implies that shifts in demand can, even for a given aggregate, lower aggregate supply. Chart 8b is meant to get this across. Suppose two sectors start with the same level of demand D and that they each have the right level of resources.
Indeed the financial sector, with the help of financial innovation and loose regulation fostered unsustainable growth and asset price bubbles, and if trade linkages have contributed to spread the crisis across countries, financial integration has fostered the contagion. So, yes finance matters and is the heart of the real economy. “Rebalancing the world economy”, next. In the years leading to the crisis, the global economy was growing at unprecedented speed: above 5% per annum in 2006 and 2007, far above the average recorded in the decade from 1992 to 2001, at 3.1%. Yet, this growth was unbalanced, both internally and across countries, such that it was, as it turned out, unsustainable. In fact, the global policy agenda in the mid- to late 2000s was dominated by the issue of global imbalances: current account positions widened to unprecedented amounts (at least by modern standards), reflecting strong saving-investment gaps: to many observers, household saving was strikingly low in the United States, while emerging Asia was characterized by a “global saving glut”, in the words of Chairman Bernanke. These global imbalances have adjusted markedly in the wake of the financial crisis, but this rebalancing has been mostly cyclical and the issue remains. Let me now turn to the third important keyword of this session, the G20 Road map. With the intensification of the crisis, it has become obvious that the G20 was the right, – because the most legitimate – forum to prepare the policy response.

BIS Review 69/2010  3  At a crisis meeting on 8–9 May, EU finance ministers therefore agreed on a EUR 500 billion European Financial Stabilisation mechanism to support countries unable to borrow in the market. The largest portion will be provided through loans guaranteed by individual euro area countries. The IMF will provide support in the form of loans upon application from an individual country, perhaps up to a total of EUR 250 billion. Several countries announced sharper spending cuts. The ECB will buy government and other bonds and offer extra loans to banks to promote the smooth functioning of markets. Moreover, the Federal Reserve has entered into agreements with other central banks to re-establish temporary dollar swap facilities to avoid failure in dollar funding markets. 3. Norwegian economy  To mitigate the effects of the financial crisis, central bank key rates were cut sharply in 2008 and are still close to zero in a number of countries. The key policy rate in Norway was also reduced from autumn 2008. Norges Bank also implemented a number of extraordinary measures to improve credit flows. Banks were provided with longer-term liquidity and direct access to US dollar liquidity, and collateral requirements for loans from Norges Bank were relaxed. On the advice of Norges Bank and a proposal from the Ministry of Finance, the Storting decided that banks would be entitled to exchange covered bonds for government securities.
30/09/2020  The LIBOR Countdown Has Not Stopped - FEDERAL RESERVE BANK of NEW YORK  SPEECH  The LIBOR Countdown Has Not Stopped September 29, 2020 Michael Held, Executive Vice President and General Counsel Remarks at the IMN Virtual Investors' Conference on LIBOR Thank you for that kind introduction, and for the opportunity to speak to you all today. As always, my remarks reflect my own views and not necessarily those of the Federal Reserve Bank of New York or the Federal Reserve System.1 The last time I spoke publicly about LIBOR transition was almost 18 months ago,2 when the end of LIBOR still seemed reasonably far away and the world in general seemed much more predictable. I said then that what kept me up most at night was whether my daughter would get into a good kindergarten in Brooklyn, but that reference rate reform was only a little further down the list. You’ll be relieved to know that my daughter is now in a great school, and it’s very close to home. In fact, it’s in our living room. A year and a half ago, I never could have anticipated how different and uncertain every single part of our lives would become. Now, there’s a whole host of new worries atop the list of things that keep me up at night. I’m sure that’s true for all of you as well, as individuals and families but also as leaders of institutions dealing with the bizarre and uncertain times we find ourselves in.

At the same time, our policies are creating the most favourable conditions for the full impact of structural and fiscal policies to be felt. The Parliament’s calls for an ambitious European response were heard by European leaders. It 3/4  BIS central bankers' speeches  will now be important to ensure that the Next Generation EU funds are used not only in a timely fashion, but also in a way that enhances long-term growth and supports common EU objectives. If we get it right, Next Generation EU could be just the game changer that Europe needs – in terms of modernisation, resilience and prosperity. 1 Dossche, M. and Zlatanos, S. (2020), “COVID-19 and the increase in household savings: precautionary or  forced?”, Economic Bulletin, Issue 6, ECB. 2 ECB staff macroeconomic projections for the euro area, September 2020. 3 Fraccaroli, N. et al. (2018), “The evolution of the ECB’s accountability practices during the crisis” , Economic  Bulletin, Issue 5, ECB. 4 Introductory statement by Christine Lagarde, President of the ECB, at the ECON committee of the European  Parliament, Brussels, 6 February 2020. 5 Available on the ECB’s website. 6 See “ECB proposes to reduce reporting burden for banks and increase data quality”, press release, 21  September 2020. 4/4  BIS central bankers' speeches
In such a disastrous situation, it was very important that people could perceive the security, at least in the financial aspect, regarding their deposits with banks and continuous access to their funds to meet their basic needs. Under these circumstances, not only did all banks generously contribute to recovering from earthquake consequences, but they also supported their clients in alleviating their pain and offering adequate solution, while ensuring continued operations and activities. Beyond this event, overall, the Albanian economy in 2019 performed in positive terms. Its growth pace continued to trend upward, employment increased, internal and external balances strengthened, and main indicators of the banking sector’s soundness have been improving. All the above reasons boost the optimism on the outlook of economic growth in the medium-term horizon. Among others, Albania has reached an important milestone on its path to development and integration: the expected opening of accession negotiations with the European Union. These negotiations should be definitely considered as an important development anchor and an additional guarantee for both domestic and foreign investors. Year 2019, as I stated above, affirmed the stability of the Albanian banking system. All structural changes that started in 2018 were successfully completed in 2019, driving to the targeted consolidation of the banking system. The activity of the banking sector grew in terms of the volume of assets and deposits. Meanwhile, the quality of the credit portfolio improved by around 3 percentage points during 2019 (the NPL fell from 11.1% to historical low 8.36%).

But this should be compensated to some extent by the banks becoming more secure and thus a fall in risk premiums on loans to banks. Although our calculations show that the costs of the new regulations are limited, it is unavoidably the case that stricter regulation entails various forms of cost. It is in the nature of the regulation. The important thing is that these costs are seen in relation to the gains in the form of a more stable bank system. And there is no doubt that the gains are substantial, after what the world has gone through since the financial crisis began. Here I refer to the severe economic downturn I mentioned at the start. But it is nevertheless important not to tighten the screws too much. This would mean that the banks only wanted to lend money to the most secure customers and investments. A lot of good investments would be missed. A lot of people would be unable to buy homes. Longterm economic growth would be slowed down and our total welfare would decline. We must quite simply ensure we do not put a spanner in the works so the banks reduce their lending too much. When I first worked at the Riksbank, in the 1970s and 1980s, the credit market was severely regulated and this is not a situation we should wish to return to. Nor should we ignore the fact that banks have an ability to circumvent regulations and make use of loopholes in the law.
Such parallels would paint far too simple a picture of monetary policy and would give the impression that there is a precision and exactness in monetary policy – a possibility  18  For a slightly older, but still very readable article, see Rogerson, Richard (1997), “Theory Ahead of Language in Economics of Unemployment”, Journal of Economic Perspectives 11 (1), pp. 73–92. A more recent reference that is also relevant in this context is Carlsson, Mikael (2012), “Monetary policy and unemployment: A conceptual review”, under publication in Sveriges Riksbank Economic Review 2012:3. The problems with basing economic policy on estimated trends and long-run equilibria are illustrated in, for instance, Orphanides, Athanasios (2004), “Monetary Policy Rules, Macroeconomic Stability and Inflation: A View from the Trenches”, Journal of Money, Credit and Banking 36(2), pp. 151–175 and Orphanides, Athanasios and Simon van Norden (2002), “The Unreliability of Output-Gap Estimates in Real Time”, Review of Economics and Statistics LXXXIV (4), pp. 569–583. 19  There is support for this view in research, see for example Blinder, Alan S. and John Morgan (2005), “Are Two Heads Better Than One? Monetary Policy by Committee”, Journal of Money, Credit, and Banking vol. 37, pp. 789–812. BIS central bankers’ speeches  9  to “fine tune” – that simply does not exist. This would possibly give an illusion of “clarity” but would, as I see it, merely be a chimera.20 The Riksbank is hardly unique in this respect.

It will lay down minimum standards for banks to hold some resiliently liquid assets and about the funding of illiquid assets. To date, much more prominent has been the work on capital. Although there has been some dilution of the proposals from a few months ago, real substantive progress is being made in reforming the minimum standards and in introducing various buffers, taking into account credit cycle conditions and the circumstances of SIFIs. The key element of the overall package is that “capital” will mean capital. The world of hybrid instruments – pretending to be so-called capital instruments but which in fact cannot truly absorb losses in a going concern – should become more or less a thing of the past. The Bank of England would like it to be completely consigned to the past. Only equity can absorb losses. For that reason, in calculating regulatory capital, deductions from capital should really be from equity. As part of the emerging compromise, there will be some derogations from that, but the derogations should be transparent. Markets should learn to evaluate bank’s capital adequacy on the basis of what is made transparent about the makeup of that capital. The other really key change will come in stages – partly in the package this autumn and partly during next year and beyond – which is reducing the pernicious regulatory arbitrage that has existed between “banking book” capital requirements and “trading book” capital requirements.