samchain/econo-pairs-v1 huggingface dataset:
Firstly, the euro exchange rate and long-term interest rate will play an important role in shaping monetary conditions within the euro area, together with the level of short-term interest rates that will be steered by the ESCB. Secondly, although the degree of openness of the euro area will be much lower than is currently the case for any EU Member State, with “foreign” trade representing roughly 9% of GDP for the EU as a whole, the area will remain totally open to foreign capital flows. In that regard, I would like to stress that current holdings of French and German securities by non-residents, including cross-holdings, amount to 1,200 billion dollars. This highlights the importance of keeping a high level of confidence in the euro. Thirdly, in spite of the fact that the ESCB will inherit credibility from the participating national central banks, the ECB will have no track record of its own in targeting money or inflation. It will thus have to build up its reputation and pay due attention to those indicators that reflect most directly the level of confidence placed by investors in the euro. Of course, as underlined above, the external value of the euro will not have the status of an intermediate objective and the ECB’s strategy will not be based on exchange rate targeting.6 However, any depreciating trend of the euro would feed domestic inflation through a rise in import prices and, by undermining investors’ confidence, would contribute to the building of risk premia into the euro yield curve.

Since joining the EU and until 2018, Romania had accessed more than 21 billion EUR as EU funds that contributed to development and bridged the gap of convergence with developed economies in the EU. 1/2  BIS central bankers' speeches  NBR’s recent research on the impact of EU funds on Romanian economy shows that an increase by 1 percentage point of GDP in structural and cohesion funds has a short term eﬀect of up to 0.7 percentage points on economic growth and a medium-term effect of up to 3 percentage points1. Thus, significant efforts should be made to guarantee that Romania improves the efficiency of EU funds absorption. In order to achieve that, Romania needs sound policies oriented towards macroeconomic balance and safeguarding financial stability. Foreign direct investments are also essential for economic growth. The picture here is mixed. During the second half of the year 2018 and in 2019, persistent pressures on global economic growth and subsequent downward revisions of expected growth rate impacted the investments and the reallocation of capital. Constant trade tensions, terrorism and geopolitical uncertainties are causing a slowdown in economies across the world. At the same time, new technologies have disrupted global value chains and the classic employment model, while new climate change related risks have emerged in the financial sector. On the other part, investing in companies with strong environmental, social and governance (ESG) policies, in green bonds and in new technologies supporting the digital economy, will contribute to achieving the Paris Agreement objectives and a sustainable development.
So it might not have taken us much further forward in terms of clear guidance or greater legal certainty. I’m sure you will be revisiting these issues tomorrow afternoon, in your session covering legal systems. So, I won’t labour my point much further. But there is a vulnerability here which I think we would do well to try to understand better. We’ve got to enhance confidence that contracts straddling the two sectors can be relied upon to produce expected outcomes in a timely way and even in adverse conditions. Risk transfer My second observation relates to risk transfer more specifically. Alan Greenspan made the observation that the successes of the banking system in diversifying risk have increased its ability to withstand significant shocks in recent years, including the Asia crisis, Russia, LTCM, 9/11 to say nothing of Enron, the IT boom and bust, and the telecom write offs. A lot of people agree with him. So the development of markets for the transfer of credit risk is of real value. It allows institutions that are best placed to originate a loan to do so, without necessarily requiring them to continue to bear the risk. Having a market to transfer risk allows institutions to diversify their exposures across different sectors and regions. And of course it generates price information that would not otherwise be available. That means credit exposures can be marked to market in a way that had not previously been possible. But it raises other questions.

Andrew Large: Convergence in insurance and banking - some financial stability issues Speech by Sir Andrew Large, Deputy Governor of the Bank of England, at a conference in the Mandarin Oriental Hotel, London, 12 June 2003. *  *  *  Introduction In getting together my remarks, I found myself wondering why you asked me, a central banker and former investment banker, to address this illustrious gathering of the insurance industry. What is it that makes central banks so interested in insurance? Central banks typically have two major preoccupations. Monetary stability and financial stability. Clearly those of us with an eye on the macro economic drivers which impact monetary stability cannot fail to have taken an interest in the volatility of equity markets. And that volatility has real implications for the life assurance world. Secondly, the way catastrophe and other cover can be extended in a world where terrorism is a fact of life has its own significance for the workings of the real economy. But it’s from the point of view of financial stability that I’d particularly like to develop some thoughts this morning. After all financial stability is about identifying and countering risks and threats which could ultimately impact confidence in the banking or wider financial system.
Core inflation will hover around 3 percent throughout the same horizon (figure 7). 4  BIS central bankers’ speeches  The current account deficit of the balance of payments is forecast to stand at 3.6 percent of GDP in 2014, up a little from 2013, but below the December estimate. Behind it is the expected decline in the copper price this year, which more than offsets the lower growth foreseen in domestic demand and imports. This implies that, measured at trend prices, the deficit will narrow further, approaching 3 percent of GDP. As for GDP, the rate of total investment will go slightly above 23 percent in nominal terms (somewhat more than 25 percent in real terms), while national savings should amount to 19.5 percent (table 2). Aside from the already discussed trajectories foreseen for domestic growth and the world economy, this forecast uses as a working assumption that nominal wages will be adjusted in line with productivity and the inflation target. It also uses as a methodological assumption that the real exchange rate will remain stable, considering that it is now inside the range believed to be consistent with its long-term fundamentals. Finally, the baseline scenario uses as a working methodological assumption that the MPR will follow a trend comparable with the one that can be derived by the prices of financial assets prevailing at the statistical closing of this Report (figure 8).

The convergence of metal prices toward their production costs has been somewhat faster than thought a year ago. In the case of copper, the price forecast for 2014 in this Report has been lowered by more than 10 percent in one year. Other demand components, such as consumption, have posted a more gradual deceleration, in line with still favorable, yet moderating, fundamentals. International financial conditions have also been normalizing, which, while positive over the medium to long term, has caused increased volatility, higher risk premiums and capital outflows in emerging markets, together with a widespread depreciation of currencies vis a vis the U.S. dollar. BIS central bankers’ speeches  1  In Chile, contrasting with past episodes, the financial effects have been bounded. The risk premium, for instance, is the same or slightly higher than previous values. Unlike other emerging economies, Chile has seen a drop in interest rates in the recent past, and the Central Bank has not intervened in the forex market by selling reserves as have other countries. Nonetheless, consistently with our macroeconomic policy regime, we have seen a substantial impact on the exchange rate. Actually, the Chilean peso depreciation is in the upper half of the group of emerging economies (figure 1). The real exchange rate has also depreciated significantly and is above its averages for the last fifteen and twenty years (figure 2).
Indeed, policymakers regularly used to attempt to manipulate the yield curve in the Sixties and Seventies, for instance the Federal Reserve’s “Operation Twist” (though in that case the impact of the purchases on the money supply was sterilised). But in practice it probably makes sense to rely on a short interest rate as the primary instrument of monetary policy for three reasons. First, while the evidence that asset purchases do have the effect expected on asset prices is compelling, there is a wealth of evidence regarding the monetary transmission mechanism from movements in short-term policy rates. Central banks, moreover, have considerable experience in the operation of policy through short interest rates. Given that the impact of changes in a short-term policy rate is both more certain and better understood, it makes more sense to put the most weight on that instrument rather than asset purchases (Brainard, 1967). Second, and related to the above argument concerning the relative uncertainty of a short interest rate and asset purchases as monetary policy instruments, there are reasons to think  7  There is a substantial related literature attempting to uncover the effects of changes in debt maturity structure on relative yields. These studies have generally struggled to identify well-defined effects from variations in the supplies of debt of different maturities. Though the variations in asset quantities may be quite substantial, they usually take place slowly, necessitating controlling for a wide range of other factors affecting relative yields.

We also believe that central banks and supervisors must play their part as, in the long run, climate stability is one of the main determinants of financial stability, which is their mandate. This is a shared conviction. At the One Planet Summit in Paris in December 2017, the Banque de France, with the support of other central banks and supervisors, launched the Network for Greening the Financial System (NGFS), which now comprises some 30 central banks, supervisors and international organisations, including four Asian members, and will certainly attract more in the coming years. *** Let me now conclude by quoting Nassim Nicholas Taleb, the famous author of The Black Swan. He once wrote that uncertainties can be like the wind which “extinguishes a candle and energises fire”, and added the following: “You want to use them, not hide from them. You want to be the fire and wish for the wind”. My wish is that the ongoing uncertainties will become the wind that deepens our bilateral and multilateral cooperation. On that hopeful note, I wish you a very Happy New Year and for the time being an inspiring and fruitful conference. 3/3  BIS central bankers' speeches
Figure 4  CPI inflation (*) (annual change, percent)  CPIEFE inflation (*) (annual change, percent)  10  10 10  10  8  8  8  8  6  6  6  6  4  4  4  4  2  2  2  2  0  0  0  0  -2  -2 -2  -2  -4  -4 -4  -4  07 08 09 10 11 12 13 14 15  Dec.2012 Report  07 08 09 10 11 12 13 14 15 Mar.2013 Report  (*) Gray area, as from the first quarter of 2013, shows forecast. Sources: Central Bank of Chile and National Statistics Institute (INE). BIS central bankers’ speeches  9  Figure 5 MPR and expectations (percent) 9 8 7 6 5 4 3 2 1 0  9 8 7 6 5 4 3 2 1 0 07  08  09  MPR  10  11  13  12  FBS, March 2013.Q2  14  15  EES, March 2013  Source: Central Bank of Chile.

Chile)  1.8 1.4 -0.6 9.3 7.9 4.2 4.5  2.3 -0.5 1.9 7.7 5.6 3.5 2.8  2.2 -0.6 2.0 7.8 4.9 3.8 2.8  1.9 -0.3 0.5 8.0 6.6 4.3 3.3  1.9 -0.4 1.1 8.1 6.3 4.3 3.3  2.3 1.2 0.9 8.2 6.4 4.7 3.7  2.5 1.3 1.3 8.2 6.4 4.7 3.7  LME copper price $ Brent oil price $  400 111  361 112  361 112  (levels) 340 350 105 108  350 100  340 101  Terms of trade  -0.6  -5.0  -4.1  1.3  -1,6  (annual change, percent) -0,8  -0.4  (e) Estimate. (f) Forecast. Sources: Central Bank of Chile based on a sample of investment banks, Consensus Forecasts, IMF and statistics bureaus of respective countries.
Taking into account the capital conservation buffer and the surcharge for systemically important financial institutions, the Basel 3 minimum comes to around 10% for the largest banks. BIS central bankers’ speeches  5  That is on a risk-weighted basis. Policymakers need to be confident, therefore, that the risk-weights are determined robustly. Leaving banks completely free to choose risk-weights, using internal models, is not safe. It effectively allows banks to determine their own regulatory capital requirements, which hardly fits with society’s purpose in regulating banking in the first place. That being so, the introduction of mandated floors on risk-weights should be debated in Basel. They are already being introduced in the US. That would be one concrete step to contain the risks from complexity in the current Capital Accord. The planned Basel leverage limit should be viewed in the same light. This is not to say that it would be sensible to rely entirely on a simple regulatory constraint. History teaches us that they do not work on their own – just remember the 1980s’ Latin American and East European debt crisis, which left much of the Western banking system perilously close to bankruptcy, notwithstanding the leverage limits applied in the US and elsewhere. On its own, a simple leverage limit incentivises banks to increase the riskiness of asset portfolios.

For example, as a matter of simple arithmetic, the first round effect of higher capital requirements is probably to depress the headline return on equity. It has seemed to me quite likely that that will prompt shareholders to demand a larger share of the cake, with a smaller share going to managers. There have already been signs of this happening. This might help temper the gains available to managers in buoyant credit conditions, and so reduce the incentive to shield their eyes from the risks. But, most important of course, higher equity capital requirements provide a bigger buffer against losses – the increase is, perhaps, about an order of magnitude (around 1% of risk-weighted assets to around 10%), all things taken into account. 8  7  See, for example, Kent and Debelle (1999), “Trends in the Australian Banking System: Implication for Financial Stability and Monetary Policy”. 8  Basel 2 in effect required a minimum equity capital ratio of 2 percent. Under Basel 3 almost all regulatory deductions from capital come out of core tier 1 capital (ie equity) rather than being split equally across tier 1 and tier 2 capital or taken from total capital. Also, some risk-weights are increased, for example on counterparty credit risk exposures. Together those changes mean that the old Basel 2 core tier 1 minimum risk-weighted asset ratio is equivalent to around 1% on a Basel 3 basis.
The complication is that while most financial crises have been preceded by a credit boom, not all credit booms have been followed by a financial crisis. In fact, a credit boom has been followed by a financial crisis in only about 30 percent of the cases.6 Consequently, there are good booms, which don’t end in a crisis, and bad booms, or “booms gone wrong” that do end in a crisis. Given that credit booms often accommodate the real and pressing needs of a growing economy, simply preventing credit booms, if that were even possible, could have the effect of choking off desirable growth and thus be more costly for society over the longer run. Nevertheless, it is difficult a priori to distinguish good and bad booms, and, furthermore, to determine the mechanisms that generate crises when the economy has become vulnerable to one, that is, when the economy has high debt, a weakening macroeconomy, and other such elements. Even so, as previous studies have indicated, debt growth shifts the conditional distribution of economic outcomes to put more weight on events in which debtors must  5  See Borio, Drehmann, and Tstsaronis (2011), Schularick and Taylor (2012), and Reinhart and Rogoff (2011). 6  See Dell’Ariccia, Igan, Laeven, and Tong (2015), and Gorton and Ordonez (2015). BIS central bankers’ speeches  3  unexpectedly cut back their spending plans to repay debt, a vulnerability that is not present in the absence of debt.

For Thailand, the share of exports to CLMV countries to total exports volumes has risen steadily to be over 10 percent surpassing our exports to 27 euro-zone countries combined. This reaffirms the shared benefits from trade and investment connectivity. Owing largely to complementarities in various dimensions among CLMVT economies, the integration should continue to further strengthen in the future. Expanding trade and investment has been accompanied and supported by development of domestic service industries and enhanced connectivity in the service sector. A case in point is the burgeoning growth of the airline industry, both low cost and full service. Over the past few years, any frequent traveler would easily notice a marked increase in a number of flights within the region, particularly those operated by low-cost airlines. Prices have been much more affordable, attracting travelers who otherwise would not travel by planes. The development does not only benefit the airline industry itself, but also unlocks potentials of many other industries and serves the citizens of CLMVT. More seamless travel promotes the tourism industry, reduces logistic costs, and overcomes obstacles to transportation, thus allowing closer people-to-people connectivity and opening up opportunities for people to realize their fullest potentials. Ladies and Gentlemen, Improved airline service and connectivity might only be one aspect of enhanced regional connectivity. Nevertheless, it serves us well as a model to develop other domestic service industries and to promote regional connectivity in the service sector.
While growth in both the Asian and Latin American emerging economies remains below par, the latest indicators show that the United States and the United Kingdom appear to have picked up speed, following the weak first-quarter results this year. Economic recovery is also holding up in the euro area. GDP grew by 0.4% in the first quarter of this year and, on the latest preliminary estimate released last Friday, by 0.3% in the second quarter. For the year as a whole, projections envisage figures of around 1.5%, considerably up on end-2014 estimates. Private consumption continues to be the driving force here, while the contribution of private investment remains moderate. BIS central bankers’ speeches  1  Turning to inflation, both actual and projected euro area rates have now turned around from the declining trajectory marking their path throughout 2014, but inflation is still some way off the ECB’s reference level of 2% for the euro area. The favourable performance of euro area economic activity and prices is underpinned by certain external factors, such as the pick-up in the global economy and lower oil prices, but also by other factors whose origin lies in the economic policy decisions adopted by the national governments and the European authorities. These include most notably the reforms undertaken in different countries and the more neutral stance of fiscal policies.

In any event, mention should be made of the contribution of monetary policy and the significance of the decision adopted in January this year to enlarge the securities purchase programme with the inclusion of government debt securities. Since then, we have witnessed not only further monetary easing and the depreciation of the euro, but also a more uniform transmission of expansionary impulses to the various countries in the area and, in particular, to those such as Spain which were comparatively more affected by the fragmentation of European financial markets. The latest monetary policy measures have translated into a significant improvement in the Spanish economy’s financing conditions. This improvement is visible not only in the lower cost of new funds, but also in a progressive – but slow – normalisation of credit in Spain. Aggregate balances continue to post negative rates of change, reflecting the headway in the deleveraging of our households and firms; however, these rates are increasingly less negative and are compatible with the growth of new financing flows. Performance of and outlook for the Spanish economy On preliminary estimates in late July, the Spanish economy is expected to have grown by 1% in the second quarter of this year. This growth rate highlights the dynamism of the current recovery phase, now under way for two years. Recent indicators suggest this expansionary trajectory will hold in the second half of the year.
10  BIS Review 67/2009  Figure 17: Risk Premium Developments 5 Year CDS Spreads (29.06.2007=1)  41  900  36 31  700  Brazil  26  600  S. Africa  21  500  Hungary  16  400  S. Korea  11  300  6  200  1  06 07  10 07  EMBI+ Turkey EMBI+  800  Turkey  02 08  06 08  10 08  100 12 03 06 07  02 09  06 07  09 07  12 07  03 08  06 08  09 08  12 03 08 09  Source: Bloomberg. In the first quarter of 2009, the Turkish lira did not widely differentiate from the currencies of other developing countries in terms of changes in value. Having said that, the relatively low level of volatility in the Turkish lira – one of the currencies with the highest volatility historically and susceptibility to the global risk appetite – became more evident in 2009, the year during which the distinctive characteristics of the countries came to the forefront (Figure 18).

Trade deficit in the second quarter was 20% higher compared to a year earlier. Our exports shrank by about 2.8% year-on-year for this period, a reflection of reduced exporting of energy, which is a volatile component in exports. Despite this development, the core basis of exports continues to maintain more sustainable growth rates. On the other hand, imports continued their annual growth, albeit at a lower rate compared to the first quarter of the year. Aggregate demand performance triggered economic activity growth but was inadequate to fully utilise Albania’s output capacities. Developments in the labour market seem sluggish and do not have premises for emergence of stable inflationary pressures. Signals from economic information are confirmed also by the monetary indicator analysis. In June, annual growth of M3 aggregate was 11.8%, around average rates of the past 12 months. Our assessments show that the expansion of monetary supply is in line with the performance of the economy’s demand for monetary assets. In June and throughout the second quarter, the public sector demand for funding was high, in line with the intensity of the fiscal activity during that period of the year. Furthermore, the private sector demand for funding continued to be moderate. Lending to private sector posted annual growth of 11.6% in June, in line with the second quarter’s performance. Financial markets are characterised by a serene environment with contained risk premia. Interbank market experienced increased trade volume; interest rates were close to the key rate and had low volatility.