samchain/econo-pairs-v1 huggingface dataset:
Most central banks in small, advanced economies instead have completely self-financed foreign exchange reserves in the magnitude of 10–12 per cent of GDP. Our borrowing of foreign currency has been criticised from time to time for raising the official measure of national debt, as well as the measure known as Maastricht debt, which is often used in international comparisons. This borrowing thus leads to a conflation of the Riksbank’s foreign exchange reserves and the public finances. Large-scale borrowing for the foreign exchange reserves is also a disadvantage from the perspective of preparedness. As foreign exchange reserves funded by loans involve refinancing risks, self-financed foreign exchange reserves could strengthen the Riksbank’s ability to act in a financial crisis. In light of this, it is reasonable to review the available alternatives for funding the foreign exchange reserves. One possibility would be to replace currency loans via the National Debt Office with self-financing through purchases by the Riksbank of foreign currency, paid for in Swedish kronor. In this case, however, it would have to be done in a way that minimises the effect on the krona exchange rate. 11 [13]  Equipping ourselves for the future Let me now round off. These days, monetary policy does not only involve adjustments of the policy rate but also changes to the Riksbank’s holdings of various financial assets and the composition of the liabilities held by the Riksbank.

Our job is to make sure that both moves are properly managed and capitalised in the firms we regulate. This is much easier said than done for another type of corporate lending, largely carried out by investment banks. This type of lending is secured against equity holdings of the borrower, often in a related entity – so-called “margin loans”. The first observation about this is that it will often create wrong-way risk because the value of the collateral may well be linked to the credit-worthiness of the borrower, which can cause problems in times of stress even though collateral haircuts tend to be 30-50%. Largely due to this, we estimate that banks in London lost more than € in a single deal in 2017. But the broader observation is that this type of lending is not well captured by today’s capital framework for banks – in part because it tends to sprawl awkwardly across credit, market and operational risk requirements. I don’t ask you simply to accept this statement at face value – our analysis (presented in anonymised form in Chart 8) of the capital held against one such recent exposure by a range of banks illustrates it well: even allowing for differentiation in terms across firms, this level of variation simply cannot be right.
But if we were to find a single factor that has brought the crisis to a head and magnified its damaging effects, we should be looking, not to ‘crony capitalism’ or ‘Asian values’, but to a more specific and more universal phenomenon: the swift flow of large amounts of heavily leveraged capital into and out of the region through an international financial system that is globalised, liberalised, technologically advanced, but, from an international point of view, largely unmanaged and unregulated. 3. The freedom of capital flows is, of course, essential to effective financial intermediation in the international dimension, which has played a vital role in promoting economic development in this region. But, as the current crisis has shown, it also has the potential to distort, disrupt or even destabilise domestic financial markets: this applies not just to ailing economies, but also to sound ones. Being small and open, with predictable policy responses, their markets are susceptible to manipulation. As you know, last summer Hong Kong was exposed to this problem in an extreme form, and we took radical and controversial measures to address it. We remain convinced not only that what we did preserved our financial system 1  BIS Review 35/1999  from a serious threat to its stability at a time of stress and uncertainty, but also that our actions were entirely consistent with our responsibilities as a government mandated by law to safeguard the free operation of financial business and the free flow of capital within, into and out of Hong Kong.

But this does not mean no government. In a free market, a government has a number of specific and limited functions to address well-known areas where the unregulated functioning of markets can result in outcomes that are undesirable from the perspective of society as a whole. In general, these areas involve some form of what economists call ‘externalities’ – spillover effects of one person’s behaviour on others that are not incorporated in the market prices that people pay and receive. Public goods are an example, where the benefits to society as a whole of, say, police protection are not easily captured by unconstrained market forces. Protection against monopoly practices is another – situations in which individual market participants can take prices away from levels consistent with free competition. All countries are involved in correcting instances of market failure in one form or another: indeed, from a philosophical perspective, it would not be too strong to say that that is what governments are all about. Many countries, of course, have become involved in the economy in ways that go well beyond such cases of market failure. In general, the experience has been unsatisfactory, and there is a worldwide trend towards limiting government involvement in the economy. 17. Here it may be helpful to turn from theory to practice, and to our experience in Hong Kong as an economy long acknowledged to have one of the freest markets in the world. In Hong Kong, government is probably as small as it can get in the modern world.
26  All speeches are available online at www.bankofengland.co.uk/speeches  26  Chart 21: Impact of QE, across the income distribution  Chart 22: Impact of monetary policy on welfare, across the income distribution  Impact as of 2012-14 (% of annual income)  Utility Total income  50 House prices Inflation effects Financial asset prices Macro effects on labour income Total  0.035  Total wealth 0.03  Unemployment effect  40  Total  0.025  30 0.02 20 0.015 10  0.01  0  0.005 0  -10 1  2  3  4 5 6 7 8 9 Income decile in 2012-14  10  1  All  2  3  4  5  6  7  8  9  10  All  Income decile in 2012-14  Sources: ONS and Bank calculations Note: Chart shows average cumulative real impact of QE since 2007 as of 2012-14 as a percentage of annual income.

We do not know how long this development will continue. The long-term requirements for improving the balance between wage growth and productivity growth may become apparent at an early stage. Developments for Norwegian enterprises do not, however, have to be negative. Some enterprises could be at the forefront of technological developments and increase efficiency more rapidly than the relatively high rate of growth in real wages in Norway. Many enterprises move large portions of their production abroad. Norwegian manufacturing companies could still be profitable even if the significance of the manufacturing sector in the Norwegian economy is reduced. However, scaling back manufacturing involves a risk. It makes the economy more vulnerable. The growth potential of the economy – the basis for learning, innovation and development – may be impaired when less of the business sector is exposed to intense foreign competition. 1  Akram, Q.F. (2000): PPP despite real shocks: An empirical analysis of the Norwegian real exchange rate. Working Paper 2000/7, Norges Bank, Oslo. BIS Review 20/2002  3
This raises the expected inflation in the short term with respect to what we estimated in the IPoM. In this context, the BCCh Board raised the Monetary Policy rate (MPR) to 11.25%, and estimates it has reached its maximum level of the cycle that began in July 2021, and that it will remain there for as long as necessary to ensure the convergence of inflation to the target over the two-year policy horizon. The macroeconomic scenario presents high risks whose short- and medium-term implications must be evaluated carefully. The Board will monitor closely the unfolding of these events, and hereby reaffirms its commitment to conduct monetary policy with flexibility, in order for projected inflation to stand at 3% annually in the policy horizon. The corridor for the MPR delivered in the September IPoM considered scenarios that might require a somewhat different monetary policy action. The ceiling of the corridor corresponds to a scenario where foreign financial conditions tighten more following a need of greater monetary adjustment in the U.S. Events after the September IPoM were published are consistent with that scenario although the magnitude of the changes have been smaller. And with last Wednesday's move, the MPR remains in the corridor. It should be noted that, the real monetary policy rate is around 4.5 pp above neutral, if we consider its current level minus expected one-year inflation according to market expectations. This is one of the most contractionary rates in the region 1.

Bilateral Meetings  Remarks on the Chilean Economy since September Monetary Policy Report Rosanna COSTA, Governor of the Central Bank of Chile 2022 IMF/WB Annual Meetings Thursday 13 to Saturday 15, October 2022  Recent Inflation Developments  Currently, inflation is a major concern for most economies and Chile is no exception. In Chile, although with a slight moderation in the last figure —September 2022—, total inflation reached 13.7% yoy, while core inflation —measured by the CPI excluding volatiles— continued to rise to 11.1% yoy. The sum of the August and September data — both figures known after the release of the last Monetary Policy Report (IPoM)— reveals somewhat higher inflation than expected with the surprise coming from food prices, both volatile and non-volatile. •  Inflationary factors  Behind the evolution of inflation there are some common elements to the rest of the world and some others more idiosyncratic. Among the former, there is the increase in external costs since the end of 2021, explained by the increase in the price of raw materials and food due to Russia's invasion of Ukraine, and the disruption of supply chains. Among the internal factors, one of the main elements identified is the domestic spending imbalances accumulated during 2021 —as a result of fiscal aid and pension fund withdrawals, that reached almost 33% of GDP—, and which is especially evident in the still high level of private consumption. Added to this is the increase in wage costs associated with the tight of labor market.
One hard-won lesson was particularly important: the central bank must keep the crown and government at arm’s length and must not extend credit to government. Control of the printing press would promote economic stability and prevent unrestrained money printing to finance spending by the crown. Two hundred years later, safeguarding the value of money remains monetary policy’s main task. Responsibility for monetary policy rests with Norges Bank, but today policy is geared towards maintaining stable inflation rather than a stable currency backed by a precious metal. The Bank’s role has also changed in other areas. From being the country’s only bank, Norges Bank took on the role of the bankers’ bank, with the new responsibilities that entailed. The central bank also has a responsibility to promote robust financial markets. The core of Norway’s payment system is housed in this building. Two hundred years as a central bank in a small open economy The Norwegian economy has changed over the past 200 years. In the early 1800s, eight in ten Norwegians worked in agriculture, forestry and fisheries compared with one in forty today. But some important features have not changed. Norway is a small open economy and developments abroad have an impact at home. Our foreign trade is largely based on natural resources. In the early 1800s, fish, timber and shipping were the mainstays of our economy. In recent times, oil and gas sales have accounted for a large share of Norway’s export revenues.

While pull factors actually improved, and rating upgrades by Moody’s outnumbered downgrades by three to one in 2005, they cannot fully account for the magnitude of capital flows to emerging markets in that year. For example, BIS provides a measure of an average sovereign credit rating for emerging markets based on long-term foreign currency Standard & Poors ratings. While credit spreads fell to an all-time low, at the same time emerging markets sovereign ratings remained below their highest levels recorded in 1997. Therefore we may conclude that push factors have been playing an important role in emerging markets. For example, the hedge fund community came to a view that in early 2004 the Polish zloty was an obvious “no-brainer” trade, partly because it had depreciated significantly in previous years and partly because EU accession resulted in a significant and permanent drop in the country’s risk premium. In early 2005, hedge funds were telling me that the Brazilian real was another “no-brainer” trade, as the central bank would have to keep high rates to control inflation and a good external balance indicated that the exchange rate could appreciate. In both cases, the Polish zloty in 2004 and the Brazilian real in 2005 were star performing currencies, and hedge funds pursuing carry trade and momentum strategies were important players on these markets. Such a situation poses a true challenge for many central banks in emerging markets.
Legal framework has been established to facilitate the activities of non-banking financial institutions. Last but not least, restrictions on nonresidents’ access to domestic financial markets have been reduced or removed. However, the factor of the greatest significance from the point of view of globalization of financial markets was the liberalization of capital flows. First and foremost, it consisted in the removal of restrictions that impaired free capital flow among countries, including in particular: 2 •  removal of restrictions related to FDI and trade in goods and services with non-residents,  •  transition of the developed countries to the floating exchange rate regimes, establishing of the euro area, and other supranational integration initiatives,  •  reduction of tax on cross-border transactions (Chart 8). In some countries, liberalization of capital flows and financial markets ensued from the implementation of stability programmes recommended by the World Bank and the International Monetary Fund. As a consequence, a group of countries named emerging markets have appeared on the world economic map. These countries play a vital role both in the global financial system and in the global economy. Chart 8  Customs tariff rates in the developing countries, applicable to Most-FavouredNations (MFN) 25 % 22.2 20  15  19.7 17.9 14.1 11.4 9.9  10  11  5  0 1980-1983 1984-1987 1988-1990 1991-1993 1994-1996 1997-1999 2000-2001 Source: UNCTAD. 2  Ariyoshi A. “Country Experiences with the Use and Liberalisation of Capital Controls”, International Monetary Fund 1999, p. 7.

Ardian Fullani: Recent economic and monetary developments in Albania Speech by Mr Ardian Fullani, Governor of the Bank of Albania, at the press conference on the Monetary Policy Decision of the Bank of Albania Supervisory Council, Tirana, 29 September 2011. *  *  *  Today, on 29 September 2011, the Supervisory Council of the Bank of Albania reviewed and approved the monthly Monetary Policy Report. Based on the analysis of Albania’s latest economic and financial developments and following discussions on the performance outlook, the Supervisory Council of the Bank of Albania decided to cut the key interest rate by 0.25 percentage points. Following this decision, the interest rate for one week repurchase agreements is 5.00 per cent. This cut in the key interest rate reflects contained inflationary pressures, anchored expectations of economic agents, and a more prudent fiscal policy during the period ahead. The easing of monetary policy aims at providing appropriate monetary conditions to meet the medium-term inflation target and promote economic activity through stimulating consumption and investments in Albania. (Let me now proceed with an overview of economic developments and main issues discussed at today’s meeting of the Supervisory Council.) *** The month of August was characterised by a sharp decline in inflationary pressures. Annual inflation rate was 3.1%, or 0.4 percentage points lower than in July. In addition to decreased foreign price shocks, during this month, inflation contribution on regulated prices dropped and contribution of prices of bread and grains curbed.
But to acknowledge these complexities does not weaken the case for the importance of trying to make sensible judgments about how monetary policy should respond to asset price developments. Here are some considerations for how central banks should navigate through these challenges. 2  BIS Review 2/2006  First, in circumstances where the central bank observes a large realized movement in asset prices and is confident in its knowledge of the impact of those moves on the path of aggregate demand, monetary policy may need to follow a different path than might have seemed appropriate in the absence of those developments. In other words, when policymakers have already witnessed a significant move in asset values, and are confident in what that move means for the outlook, it should be prepared to adjust policy accordingly. Note that in order for this seemingly straightforward proposition to apply the central bank must be responding to its assessment of what an already observed movement in asset prices will mean for output and inflation. Of course central banks must always be prepared to respond when factors threaten to push aggregate demand away from aggregate supply and impact the inflation outlook. Movements in asset prices certainly have the potential to be one of those factors, and the implications of this approach apply in both directions.

Moving Thailand Towards a New Business and Financial Landscape Speech by Dr. Veerathai Santiprabhob Governor of the Bank of Thailand European Association for Business and Commerce (EABC) Dinner Event 23 January 2017 Your Excellencies, EU Ambassador Jesus Miguel Sanz, Ambassadors of EU Member States, EABC President, Mr. Rolf-Dieter Daniel, Distinguished Guests, Ladies and Gentlemen, A very good evening. It is a great honor for me to be here this evening and I would like to thank the European Association for Business and Commerce (EABC) for the warm welcoming arrangement of this event. I am very delighted to address this prestigious group of audience including ambassadors and leading businesspersons, among which many are Thailand’s beloved and longtime friends. I would also like to acknowledge the EABC Board of Directors and the President, Mr. Rolf-Dieter Daniel, for ongoing efforts and hard work to improve ThailandEU economic relationship. I hope this dinner has provided opportunity for all of us to exchange ideas and share perspectives. For myself, there is much to learn from the business community and I am grateful for all the feedbacks I received. Business partnership with foreign investors has always been important to Thailand’s economy. In fact, not only has Thailand gained much benefits from international trades and investments, including ones with the European Union (EU), we also have benefited from the “needs” to meet standards and requirements set by the international community.
The slowdown in demand will fall disproportionately on certain industries, starting with the house-building sector and related services and lead to falls in employment. Some households and companies are likely to be driven over the default threshold. Tighter credit conditions could also affect the potential output of the economy – reducing the capacity of the economy to produce goods and services. The economy’s supply capacity reflects not only the number of people who work and the number of machines at their disposal, but also how productive our companies are at using that labour and capital to produce output. And the innovations in new products and new processes which drive productivity growth are financed in part by bank lending. In short, the process of deleveraging that was designed to alleviate pressure on banks’ capital position can lead to an additional wave of credit losses, coupled with higher write-off rates, given the lower level of property prices (Chart 7). And, welcome though the reforms of Basel II and accounting rules are in many respects, they can accentuate the squeeze on capital because the requirements are based on risk weights which rise when arrears are increasing and collateral values are falling. House prices and consumption One important feedback is through the housing market which is continuing to weaken. The number of loan approvals for house purchases is at a record low, the ratio of sales to stocks is approaching the levels of the early 1990s, and prices are now down 12% on their peak of late last year.

We are concerned – as you are – with the health of every sector of the economy, we fully appreciate the interdependence of the different sectors, and we well understand the part that greater real exchange rate stability can play in promoting more balanced economic growth. But the harsh reality is that we could only seek to achieve a particular exchange rate in order to protect the internationally exposed sectors at the risk of destabilising the economy as a whole, and there would – as we have recently seen – be no assurance even so that we would be successful in achieving and maintaining a particular exchange rate. We do, as I say, take full account of the impact of world demand and of the exchange rate on the likely path of inflation, and, to the extent that these influences are exerting a disinflationary effect, interest rates are lower than would otherwise be the case. That was the reality behind the statement made after our last MPC meeting that if the  BIS Review 56/1999  4  exchange rate does not decline from its present high level, as we assume that it will, at least in line with interest rate differentials, then, depending on other developments in the economy, there might need to be further easing of interest rates to keep inflation on track. I stand by that today. But let me be quite clear. This does not mean that we have any particular target for the exchange rate.