samchain/econo-pairs-v1 huggingface dataset:
In particular, fiscal spending will evolve in accordance with the fiscal rule and the consolidation objectives set forth by the Administration, which has pledged to reduce the structural deficit by about one quarter of a point of GDP per year. The worsened external scenario relevant for Chile is the main factor behind the downward revision to 2016 growth. This phenomenon is shared by all emerging and commodity-exporting economies, mainly because of the substantial drop in the terms of trade and less favorable external funding conditions. Commodity prices fell again in recent months, influenced by the steady appreciation of the dollar and slower global growth. In the case of copper, one must add prospects that the Chinese economy’s recomposition by sectors will continue to erode the demand for the metal. Thus, at the statistical cutoff date for this Monetary Policy Report, copper was trading at under 210 cents per pound, accumulating a drop of nearly 30 percent in the year. This, combined with a discouraging short-term outlook, has prompted a significant reduction in our copper price forecast for 2016 and 2017. We now estimate that it will trade at an average of 225 dollar cents per pound, compared with the almost 250 cents we anticipated in September. The price of oil has also dropped in recent months, to less than 40 dollars per barrel as of the closing of our Monetary Policy Report, around 30 percent with respect to the beginning of the year.

BIS central bankers’ speeches  13  Figure 11 Housing price indicators (*) (index, base 2008=100) 160  160 Metropolitan Region, CBC  140  140  120  120  CBC CChC  100  100  80  80 10  11  12  13  14  15  (*) CBC indicator calculated by the Central Bank of Chile using stratified methodology. CChC indicator calculated by the Chilean Chamber of Construction using hedonic methodology. Sources: Central Bank of Chile and Chilean Chamber of Construction (CChC). Figure 12 Vacancy rates and rental prices (percent; UF per year / m2) 12  7 Rental prices(*) (right axis)  8  6 Vacancy rate  4  5  4  0 10  11  12  13  14  15  (*) Values for class A and class B, weighted by surface. Source: CBRE. 14  BIS central bankers’ speeches  Figure 13 Household indebtedness (DTI) and financial burden (FIR) (percent of disposable income) 80  20 FIR (right axis)  60  15  DTI  40  10  20  0  5  06  07  08  09  10  11  12  13  14  15  0  Source: Central Bank of Chile based on SBIF, SuSeSo and SVS data.
I don’t think Romania would have looked the way it does today had we remained outside the European project. I have already mentioned how important it was to have an anchor for domestic policies in a country where drifting from the set course tends to be the rule rather than the exception. If we add the contribution of EU membership to securing a more solid business environment, which allowed us to reap more fully the benefits of our competitive advantages, I guess it is pretty clear why I believe it was an inspired choice. Foreign investors started to look more confidently at the local economy, which became the destination of increased capital inflows – the flood I mentioned previously. Granted, part of them were volatile in nature or directed towards the non-tradable 2/4  BIS central bankers' speeches  sector. Still, some of these inflows were aimed to create or enhance production capacities or to set up businesses in tradable services, which were essential to securing welfare through job creation and increased income, the type of welfare that is more resilient when faced with worldwide volatility such as that seen during the crisis. These positive developments continued to produce effects in the aftermath of the crisis as well, when Romania experienced an export-driven recovery, to which sectors on the receiving end of FDI inflows made a significant contribution, and which enabled progress in terms of income per capita.

The indicator, expressed as a ratio to the EU28 average (the UK still included), currently stands at close to 57 percent (after around 41 percent in 2007 and just over 25 percent in 2000). There is still very much room for progress. I say this having in mind the GDP per capita gap that is still substantial (and larger than those of most regional peers). In a scenario where Romania experiences constant 5 percent growth each year, while the EU grows on average only by 2 percent, it will take us 20 years to achieve full convergence. Under more pessimistic scenarios, I guess you don’t want to hear how long it would take to catch up. At this point, some of you may wonder why would anyone be pessimistic if local output currently grows at over 5 percent, at 6 percent in fact, in the second quarter of 2016, the highest rate in the EU? Well, as the effects of the recent fiscal stimulus wear off, GDP dynamics will come down, while additional stimulus, if implemented, will put even more at risk the already weaker fiscal position. Above all, growth needs to be achieved in a sustainable fashion, backed by productivity and while keeping fiscal and external deficits in check. The lessons taught by the most severe teacher of all, the economic crisis, should not be wasted… When I am talking about much room for progress, I am also referring to developments sometimes overlooked, especially if one has in mind only the aggregate figures.
14 / 19  BIS central bankers' speeches  The medium term refers to a time span that is long enough to be consistent with a central bank’s capacity to control inflation, taking into account the typical transmission lag. The horizon should be short enough for the public to be able to assess the performance of the central bank in delivering its inflation goal. At the same time, too long a span of time obstructs accountability. However, the definition of the medium term cannot be reduced to a fixed interval: it must be interpreted as state-dependent. A demand shock that pushes inflation away from its desired level and output away from potential in the same direction calls for a policy horizon as short as the typical transmission lag: the policy response to such a shock is faster and stronger than otherwise. By contrast, if the economy is hit by persistent supply-side shocks, for example, the medium-term interval can stretch well beyond the standard transmission lag of monetary policy. Furthermore, a medium-term orientation implies that inflation can deviate from our aim in both directions, so long as the path of inflation can be expected to converge back to the objective. Maintaining a medium-term orientation is facilitated by a credible commitment to the inflation goal, such that inflation expectations remain well anchored even during a prolonged phase of inflation deviation.

Overall, the transmission of our suite of measures to the financial system has been very effective. This is in no small part due to the strong complementarities between instruments, which ensure that all segments of the yield curve are influenced, thereby easing financial conditions more broadly (see Chart 7). Let me give two examples to illustrate the role played by complementarities in our policy design. First, the negative interest rate policy has supported the portfolio rebalancing channel of the APP 10 11 / 19  BIS central bankers' speeches  by encouraging banks to lend to the broad economy instead of holding onto liquidity. 10At the same time, the extra liquidity from the APP has dampened volatility at the short end of the curve. Second, the APP and its reinvestments have supported our enhanced forward guidance via the signalling channel.11 Asset purchases provide a strong signal that policy rates will remain low for an extended period of time. This effect is reinforced by the sequencing of our instruments, which is embedded in the structure of our forward guidance. At the same time, our forward guidance on rates reinforces the APP and reinvestments, since it anchors the short end of the risk-free curve and thereby ensures that the stimulus from the APP and the reinvestments is not offset. The improved financing conditions have made a considerable contribution to the macroeconomic performance of the euro area.
An important element of Islamic finance is the strength and soundness it derives from its Shariah principles. Islamic finance has an inbuilt dimension that promotes soundness  2  BIS Review 121/2007  and stability, underpinned by the Shariah injunctions. These Shariah injunctions essentially interweave the financial transactions with genuine productive activities. The soundness and viability of Islamic finance as a form of financial intermediation is premised on the fundamental requirement that Islamic financial transactions need to be supported by an underlying productive activity. There is therefore always a close link between financial and productive flows. The financial transaction has to be accompanied by genuine trade or lease-based and business related transactions where interest is eliminated and profits or rentals are the economic rewards. Alternatively, the Islamic financial institution may enter into a joint venture as a means of financing, in which it becomes a joint partner in the economic activity based on a pre-specified profit sharing arrangement. In addition, there are also explicit restrictions on unethical and speculative financial activities. The intrinsic nature of Islamic finance also encourages risk management and provides confidence through explicit disclosure and transparency of the roles and responsibilities defined in the contract. In Islamic finance, strategies to minimize and manage the risks involve integrating the risks in the real activities. The real activities thus need to generate sufficient wealth to compensate for such risks. In contrast, conventional instruments generally separate the risks from the underlying assets.

A key past case is the boom in issuance of Collateralised Mortgage Obligations (CMOs) in the run up to the 1994 mini-crisis, an episode that I tried – too timidly – to highlight in 2006.3 Of many examples from the run up to the recent bust , a great one is the late-cycle CPDOs – constant proportion debt obligations – which were rated AAA, paid around 200bp over money market rates, and had a big exposure to tail risk.4 And on the great awakening, Shleifer himself gives the example of a realisation about ABCP, ABS and so on in mid-2007 after subprime delinquencies had risen and faith – note, faith – in rating agency ratings of structured finance securities had evaporated. This exactly chimes with the market intelligence that the Bank was picking up in August 2007. I well remember Stuart Gulliver, now CEO of HSBC, saying to me very early on something to the effect of “anything with “ABS” or “securitisation” in the label is now toxic”. Indeed, Shleifer’s story, and the broader one told by Adair this evening, fits with the thrust of the Bank of England’s strategy towards Market Intelligence, framed in around 2002/03. This amounted to saying that we needed to think about markets somewhat differently when we are doing monetary policy and financial stability. For monetary policy, in most circumstances a reasonable default assumption is that core markets are more or less efficient most of the time.
The only conclusion to be drawn is that with their operational reforms, strong communication, successful financing arrangements, building of liquidity and ongoing strong business performance, the banks have largely reclaimed their former position in the eyes of global investors. The authorities, and the Central Bank in particular, focused their efforts on communication about the character and structure of the economy, the current position and outlook, and other relevant information. The Central Bank’s regular Monetary Bulletin includes inflation and macroeconomic forecasts and a detailed analysis of economic developments. Once a year the Central Bank publishes a separate Financial Stability report and a more detailed and comprehensive edition than otherwise was produced in spring 2006 in response to prevailing conditions. It sought to address as many points as possible that had been raised by foreign analysts in the preceding months. The Bank’s financial stability analysis has been described by international reviewers as professional and transparent. It strove to fulfil such expectations a year ago in difficult circumstances. In the Bank’s view this aim was achieved and the report played an important role in explaining the position of the Icelandic financial sector at that time. Another crucial factor was that the Central Bank tightened the monetary stance sharply by raising its policy rate by 3.75 percentage points during the year and signalling clearly to the markets a firm commitment to bring inflation back to target after it had risen substantially as a result of the króna depreciation.

The bulk of the medium-term impact from the asset purchases should come from the stock of purchases not the flow. There will be approximately £ extra money stimulus in the system, until the MPC decides to withdraw it (or to increase it). When the time does come to unwind the purchases, the MPC will face a number of difficult decisions. First, it will have to decide at what point monetary policy should be tightened. That decision will, as with any decision to expand the purchases further, be judged on a month-bymonth basis, taking into consideration developments in the economy, and the outlook for our mandated target, CPI inflation. As the Governor said in June 13 , when the MPC does want to tighten policy, it is most likely to raise interest rates first. Gilt sales would be started later and conducted in an orderly programme over a period of time. That would leave Bank Rate as the active or “marginal” instrument of monetary policy. Second, the MPC will have to decide how fast to sell the gilts. Again, that would depend on the outlook for inflation at the time, so we cannot commit now to any particular scale or pace. But it is not in the interests of the UK economy to generate unnecessary volatility in the gilt market.
In envisioning the future direction of the industry in our own region, it would be constructive for us to reflect on the evolution of the modern insurance industry and contextualise it to our own prevailing and prospective environment. The modern insurance industry came with the maritime expansion which accompanied cross-border trade activity, and the rapid urbanisation which saw significant human and economic losses experienced during the Great Fire of London. This led to the establishment of the first fire insurance company and the invention of the building blocks for life insurance as we know it today. Then, as societies became more affluent, endowment and with-profit policies grew in significance as instruments for savings. As industrialisation and urbanization intensified, the break down of traditional systems of social protection prompted the expansion of insurance products that covered retirement, accident, medical care and unemployment. Throughout the 20th century, business models have continued to evolve in tandem with the higher levels of financial literacy, rising consumer expectations and advancements in  BIS central bankers’ speeches  1  technology. As competition compressed margins, there was a migration beyond tied-agency and commission-based distribution models to include fee-based financial advisors and direct marketing. Bancassurance and the participation of retailers in insurance distribution have also allowed insurers to significantly expand their reach with lower cost structures, while specialisation along the value-chain enabled even greater efficiencies. This more diverse landscape has enabled a much wider and deeper penetration of insurance in the advanced economies.

With a clear view of the important role that insurers have in serving and supporting the economy, there is every potential for this to be realised. 4  BIS central bankers’ speeches
In view of the large and persistent shortage in rupee liquidity, the Monetary Board decided to reduce SRR applicable on all rupee deposit liabilities of commercial banks to 6.00 per cent from 7.50 per cent in November 2018. The reduction in SRR released a substantial amount of rupee liquidity to the banking system, which could have led to a reduction in interest rates and excess aggregate demand. Therefore, in order to neutralise the impact of the SRR reduction and maintain its neutral monetary policy stance, the Central Bank raised policy interest rates simultaneously. Since the announcement of the transition towards FIT, we have broadly maintained low levels of inflation in spite of some occasional upticks and downturns due to various demand and supply shocks stemming from the external and domestic fronts. Benefiting from prudent and proactive monetary policy measures that were also supported by several macroprudential measures, monetary expansion was contained at desired levels, thereby supporting the maintenance of low levels of inflation during 2018. As you all know, the Central Bank has an unblemished track record of maintaining single digit inflation continuously for a decade. This also shows the Central Bank’s strong commitment to price stability, which it considers to be of utmost importance to create an enabling environment for the economy to 13  achieve an accelerated trajectory of economic growth, to uplift the standards of living of the people.

Implications to BNM as a regulator These scenarios I have painted are drawn to show the distinct characteristics of a financial sector across four possible scenarios. It could be one of them, a combination or none of the above. Regardless of which scenario might eventually emerge, perhaps the most important realisation for stakeholders today is to be aware, ready and prepared for all the scenarios. In reality, what is even more likely though, is that the dynamic interplay between these scenarios will end up shaping the future of finance in ways that we cannot even fathom today. Interestingly, we are already seeing some elements of all four scenarios in our financial system today. To my mind, scenarios one and four are remotely possible, while scenarios two and three are considerably probable. For regulators, as the four scenarios highlighted, it is not beyond the realm of possibility that banks, in its current form, might no longer exist. This phenomenon not only negates the main intermediation channel of central banks’ monetary policy, it will also challenge central banks in terms of rethinking the means to regulate, supervise and safeguard overall financial stability and the manner in which scarce economic resources are allocated and intermediated. As data becomes the driving force of financial services, the central bank must keep abreast with 4/5  BIS central bankers' speeches  the latest thinking to harness the power of big data.
And from next month, as previously announced, the Bank of England will begin publication of a freely available compounded SONIA index to support use of the rate across a wide range of sterling products. Avoiding the problem won’t make it smaller or change the need to transition. The answer is for us collectively to confront the challenge and make the necessary progress over the next 18 months. In September, the Working Group on Sterling Risk-Free Reference Rates will begin a further program of public communications to help those with Libor linked exposures navigate onto more robust alternatives. But well done is better than well said, and from October UK banks should all be offering alternatives to Libor. Indeed, a number of the largest UK lenders are already doing this. I’d suggest if you are borrowing past the end of 2021 you consider seriously the greater certainty that those alternatives offer. If you do decide to borrow linked to Libor then your bank should discuss how that contract will change from Libor to an alternative rate ahead of the end of 2021. We would not expect to see any further sterling Libor linked lending after the end of March 2021. Regulated firms in the UK should expect their supervisors to monitor and discuss their progress with these important milestones.

6  All speeches are available online at www.bankofengland.co.uk/speeches  6  On a personal note, I will greatly miss your deep technical expertise, open-mindedness, wisdom, good humour and friendship. Today isn’t really goodbye but au revoir. Because, whether it is the financial system or as colleagues, we know the future will be better if we stay connected. 7  All speeches are available online at www.bankofengland.co.uk/speeches  7
The limited development of equity markets and sizeable home bias in portfolios have significant consequences for the appropriate functioning of the monetary union. Indeed, they set a limit to the capacity of risk-sharing mechanisms in the euro area, compared for instance to the United States. 12  Conceptually, risk-sharing is closely linked to the capacity of EMU to withstand shocks. It can be seen as the ability of countries to diversify the impact of idiosyncratic shocks among other Member States through private channels (i.e. savings and capital markets) and public channels (i.e. fiscal transfers). In Europe, in the absence of a significant public budgetary instrument and of well-developed and integrated capital markets to diversify the impact of idiosyncratic shocks, the credit channel is the only way of cushioning shocks across the euro area countries. Nevertheless, this channel is not strong enough to offset the weakness of other channels. Despite the initial expectation when the euro was launched that many banks would provide retail services across the euro area, firms and households rely mainly on their domestic banking systems. Cross-border wholesale banking flows rose notably from the onset of EMU until the start of the crisis, but reversed abruptly afterwards. Finally, the fact that the ultimate backstop for deposit insurance still depends on national governments -implying a fundamental misalignment between liability and control- does not contribute to achieving greater integration.

The volatility of key variables for economic agents such as the interest rate, inflation or the exchange rate has diminished. But growth has continued to be unbalanced in those aspects I have already mentioned, such as household and corporate debt, and continuing price and cost differentials. At issue here are imbalances posing risks to growth sustainability within an area with very high stability requirements by Spanish standards. Yet while such risks are very important for the Spanish economy, the biggest risk of all is complacency. It is vital to maintain the attitude of non-complacency which has driven economic agents, governments and other players who have sustained the Spanish dynamism of recent decades. A change in attitude which were to convert the satisfaction with the current situation into an excuse to detain the drive to innovate and reform would, sooner or later, bring the ongoing process to a halt. We must continue striving to discover how we can improve the performance of our institutions and companies. This is the main idea I wish to share with you today: let us not fall into complacency. However much we have progressed, let us not stop. There are examples of developed countries which, having achieved very favourable income and wealth levels, lost their reforming dynamism and, as a result, entered lasting situations of slackness and sluggishness with serious employment problems and a deterioration in confidence at all levels. It is therefore important to identify the specific policies we should foster in the future.