samchain/econo-pairs-v1 huggingface dataset:
While simple rules produce answers quickly, these answers may not be a proper response to the question we want to know the answer to. An analogy to this is substituting the fundamental question, “Am I driving safely?” with “Am I obeying the speed limit?”  20  Most countries have balanced budgets as a long-term strategy. However, the long-term intention of a balanced budget is often abandoned in practice. This is another example of the time inconsistency problem. Today, many European countries are forced to pursue fiscal austerity, even if their current economic situation makes such a policy undesirable. The most rational option would be if governments were able to approve credible tightening measures that cut spending and raised taxes in the medium term, but that had negligible short-term austerity effects. Pension reform would be such a measure. The problem is that investors, who will be lending money to governments in the meantime, have little confidence that governments will actually follow through on their plans. History shows that they have good reason for this lack of confidence. Thus, the OECD and the IMF are recommending measures intended to deal with the time inconsistency problem and bolster confidence that long-term plans will actually be implemented. Independent fiscal policy boards that monitor government budgetary policy and that speak up if plans are not followed is one such measure. These boards will also make recommendations for realistic economic forecasting, so that projections of future tax revenues are credible.

Perhaps one lesson to be learnt from history is that the simplest method can sometimes be the best, as Andy Haldane has argued. Friedrich Georg Nissen’s rule that budgets should always balance was not particularly sophisticated, but if his ideas had been followed before the crisis, many countries would now be better off. However, the principles behind Nissen’s ideas were not completely unfamiliar when European politicians drew up the Maastricht Treaty at the beginning of the 1990s. The Treaty contained simple rules for economic policy: budget deficits should be below three percent and government debt below 60 percent of GDP. The rules sparked debate, and academics the world over – including in Norway – ridiculed them as far-fetched and hopelessly rigid. And as so often before, the rules soon sank into oblivion, particularly after the major EU countries Germany and France had pushed them aside. 14  Georg F. Nissen was not alone in focusing on the fiscal balance. Nicolai Rygg wrote the following in 1948: “There is a tenet that is not difficult to endorse: in times of slow economic growth, when the private sector relaxes, central and local government should support the economy, initiate projects to sustain activity and to prevent a rise in unemployment.
Monetary policy easing through 2003 and the beginning of 2004, and low interest rates in 2004 brought capacity utilisation up to a normal level. The Norwegian economy seems to have experienced a fairly soft landing after a period of weak cyclical developments in the international economy and high domestic wage and cost inflation. There are nevertheless some clouds on the horizon. In spite of solid growth in the US economy last year and in the first quarter of this year and continued expansion in China, developments in the euro area are sluggish – unemployment remains high and consumer confidence is falling. There are substantial trade and balance-of-payments imbalances in the world economy. The deficit in the US is matched by surpluses in other countries, particularly in Asia. Strong demand in the US has underpinned growth in the world economy. Increased imbalances generate uncertainty as to economic developments in many countries. Moreover, high oil prices may curb international growth. Communication and implementation of monetary policy Interest rate developments in other countries have been an important factor behind interest-rate setting in Norway. Weak growth in the world economy in autumn 2002 and into 2003 led to lower international interest rates, which remained low for a considerably longer period than expected, as illustrated by actual and expected interest rate developments in the US. Combined with developments in international equity markets and the risk of lower oil supplies, this contributed to a strong krone in 2002. As we reduced interest rates, the krone depreciated considerably.

After reducing the key rate to 1.75 per cent, we indicated that the uncertainty associated with previous monetary policy easing and the unusually low interest rate implied that we should be cautious with regard to further interest rate reductions. At the same time, the prospect of continued low inflation for a period ahead implied that wide deviations from projected economic developments would be required before the interest rate should be increased. Economic developments in the latter half of 2004 were broadly in line with expectations. The interest rate was left unchanged in line with our statements. We gradually experienced that the monetary policy easing was effective. The uncertainty diminished. The krone exchange rate The first signs of the effects of the interest rate cuts appeared in the foreign exchange market. The interest rate differential against other countries narrowed. It became more attractive to borrow and less profitable to invest in the Norwegian krone. The movement in the krone exchange rate was reversed and the krone depreciated through 2003 and into 2004. The depreciation of the krone contributed to restraining the fall in prices for imported goods. The effect occurred gradually. Higher prices for oil and gas and other exports goods - an improvement in the terms of trade - have increased Norway’s disposable income. This may fuel expectations of higher demand for goods and services in financial markets and lead to a deterioration in competitiveness in the bid for economic resources.
Zeti Akhtar Aziz: Beyond the global crisis – implications for Asia’s future Welcoming remarks by Dr Zeti Akhtar Aziz, Governor of the Central Bank of Malaysia, at the ADB-BNM-EC Joint Conference: "Beyond the Global Crisis: A New Asian Growth Model? ", Kuala Lumpur, 19 October 2009. *  *  *  Bank Negara Malaysia is pleased to co-organise this conference together with the European Commission and the Asian Development Bank to discuss “beyond the global crisis and its implications for the future of Asia”. It is my honour and great pleasure to welcome you to this conference. This current global economic and financial crisis presents us with a time to reflect on strategies that will promote sustainable long-term solutions in a future where the economic and financial environment is going to be fundamentally different. Although the global economy has since begun to stabilize with signs of recovery, and indeed while an apocalypse has been averted, the road to a full global economic recovery will likely be long and arduous. The re-thinking by the global community on the wide ranging issues that are now confronting the world is taking place on several fronts.

Encik Abdul Rasheed Ghaffour: Revolutionising Microfinance Welcoming remarks by Mr Encik Abdul Rasheed Ghaffour, Deputy Governor of the Central Bank of Malaysia (Bank Negara Malaysia), at the Global Symposium on Microfinance, Kuala Lumpur, 22 May 2017. * * * In biology, the transformation of a species is said to happen in rapid bursts. Imagine an ecosystem of marine life along a shoreline. For millions of years, it can remain relatively unchanged. But an extraordinary event – such as a sudden move in sea levels – can alter everything quickly. Within decades, fishes, mollusks and plants alike can dramatically change in size and shape. Ultimately, those that adapt emerge as the stronger species in the ecosystem. We are gathered here today in the very different context of microfinance. Nonetheless, parallels can be drawn with the theme of this event, ”Revolutionising Microfinance”. Think of the incredible pace of technological change in recent years. In 2016 alone, machine prevailed over man in the world’s hardest board game. Reusable rockets became a reality. Twitter helped a nation elect their president. For microfinance, that rapid burst of change is already upon us. It is therefore a great honour for Bank Negara Malaysia to partner with the World Bank in hosting this Global Symposium on Microfinance. We are privileged to have so many learned speakers here with us to share their invaluable insights.
In my view, these are the core areas where transparency in monetary policy is most important and they are the areas that are being increasingly practiced by central banks around the world. The Bank of Thailand, if I may add, is transparent in all of these six areas. As I noted, although the areas for transparency are well identified, the details and the practices adopted by central banks do differ and are not uniform. For example, while most central banks would have low and stable inflation as an objective of monetary policy, practice differs on how that objective is defined. This is to say some central banks announce numerical inflation targets and some don’t. This, of course, depends on the underlying monetary policy framework. In our case, the Bank of Thailand adopts inflation targeting as its monetary policy framework, so the Bank announces a numerical inflation target - that is core inflation to be kept between 0 - 3.5 percent averaging over a quarter. Some central banks publish detailed economic and inflation forecasts to guide the markets about their understandings of the economies and the risks that the economies face. The others do this but not in great detail. On this, the Bank of Thailand is in the former group. We publish assessments of the economy, the economic forecast, and the inflation outlook in the form of a quarterly inflation report. There is increasingly call for central banks to provide data ex post on their market operations and intervention.

This is because uncertainty is reduced as market expectations are formed using a more superior set of information. And third, being more transparent also helps raise the quality of central banks’ own works which directly contributes to enhancing their credibility. However, despite the positive benefits, there are occasions when there would be arguments for central banks to go less than full transparency, especially with regards to their market operations. This is because transparency is not only about providing information as the academia normally assume. But transparency is also about how a central bank is being seen or being known in its operations in financial markets. Hence, for its operations to be effective, sometimes less-than-full transparency can be more efficient, for example, in the foreign exchange markets. Therefore, from practical considerations, the rationale for limiting central bank transparency includes: First, legal requirements and the risk of impinging on personal privacy, as well as for reasons of market or commercial sensitivity and public interest; Second, the risk of compromising the decision-making process; for example, saying too much or giving out too much information about what went on in the policy meetings; Third, too much information can also be tricky because of the risk of misinterpretation. This is because one cannot assume that all markets are efficient in processing the same information; Fourth, in central bank operations, elements of surprise can be useful on occasion; And fifth, central banks being what we are should reserve the right to act.
Transitional measures do not distort the solvency reality: they are designed to ensure a smooth transition to the new regime, avoiding disruptions in the market and allowing a certain period for companies to fully recognise the impact on old books of contracts that have been underwritten in a different regulatory framework’’. 2 I agree. For the benefit of investors, let me be crystal clear: when we consider whether or not firms are in a position to pay dividends, one of the main quantitative yardsticks we will use is capital levels after the benefit of transitionals. Now, investors taking a close interest may be concerned about the capital strain firms using the TDTP may face as the transitional benefit unwinds over 16 years. They are right to have an eye to that, but I would like to point out that there will be some off-setting benefit in the form of the release of the risk margin as the back book rolls off – it will be up to firms to set out this picture for analysts and investors, but it is the net adjustment we should be focussed on. For transitional measures to achieve their purpose there needs to be a shared understanding on some of the important practical details about how they will operate.

For the UK in particular, the move to a going concern regime represents a fundamental departure from the current set-up, in which a firm is required to calculate financial requirements under the assumption that, following a stress, it writes no new business and instead “runs off” its existing business over time. Solvency II looks at the insurance industry through a different lens and views insurers as “going concerns”, such that it is assumed that insurers will continue to operate after a stress. To achieve this, Solvency II introduces the concept of the “risk margin” which is intended to capture the cost of transferring a set of liabilities from one insurer to another. The risk margin is a fundamentally new component of our regulatory framework and we will ensure that firms meet it. 1. This is a source of some tension at the moment, because the construction of the risk margin is such that, in particular for life business, it becomes much larger when risk-free rates fall. So the current environment of low rates means that the risk margin is large – and when and if rates rise, it will become smaller. Reasonable people can debate whether or not it is sensible for this element of provisions to be so sensitive to risk-free rates, and it may be that once we are into a Solvency II world some firms will choose to hedge this exposure.
As a matter of fact, in order to fall to the German level of growth the income measures of most of the troubled “southern” countries would still need to decline by more than one tenth of the growth recorded during the eurozone’s existence, and in some of them it would need to fall by significantly more. As I have become accustomed to a rather more pragmatic interpretation of the benefits of the eurozone, I find it quite difficult to reconcile these two statements. The fact that German citizens are being asked to pay up for a second time makes this second payment a less clear moral imperative than many suggest. d.  BTW, talking about growth we have almost forgotten now that the major “marketing” point of the eurozone project was that it was supposed to speed up EU growth. We have forgotten this because we are, unfortunately correctly, too preoccupied with the fear of the consequences of a chaotic breakdown of this project to have a chance to pause to contemplate and remember. e.  Returning to Germany, one of the neglected features of its export patterns over the past decade is the fact that the eurozone now accounts for roughly 40% of its exports, whereas it used to account for the majority of them (I believe about 60%). f.  Even Germany’s debt is not so low. Its perceived sovereign risk is really low.

Thanks mainly to Fed swaps, EU savers and investors do not have to worry about the general liquidity position of the eurozone. I almost pray that forthcoming political events in the U.S. do not alter this situation. b. The solution to this crisis involves controlled de-leveraging and the restoration of European and eurozone competitiveness in the developed world. The need for deleveraging is clear, but the restoration of competitiveness in Europe is also a must, despite the fact that the CA of the eurozone and/or the EU is roughly balanced. Otherwise, the EU will not be able to restore the real growth rates necessary to stabilize eurozone sovereigns in the context of the chief mandate of the ECB, i.e., in a non-inflationary context. I am afraid this may involve quite a few of my fellow European citizens engaging in a bit of metaphorical trench-digging. Hopefully, they will also try other types of productive activities with more value added. I am fully aware of the pain this process is causing, as my country has undergone quite a similar process recently. c.  A lot of commentators have said that Germany has benefited the most from the eurozone, or at least has benefited more than the eurozone countries that are suffering now. However, quite a significant proportion of those observers have also noted that Germany has recorded the slowest growth in wage costs and other income measures in the eurozone throughout the existence of the latter.
The catastrophic impacts of climate change will be felt beyond the traditional horizons of most banks, investors and financial policymakers, imposing costs on future generations that the current one has no direct incentives to fix. Once climate change becomes a clear and present danger to financial stability it could already be too late to stabilise the atmosphere at two degrees. The longer adjustment is delayed, the more GDP-at-risk will grow. Catastrophic physical risks from the increased frequency and severity of climate and weather-related events will likely increase non-linearly. 30  All speeches are available online at www.bankofengland.co.uk/news/speeches  30  And late climate policy action could bring about a climate ‘Minsky moment’ when the scale of stranded assets dawns, bringing about sudden and sharp adjustments to asset prices. These risks to financial stability will be minimised if the transition begins now and follows a predictable path, thereby helping the market anticipate the transition to net zero and reducing the costs of adjustment. The policymaker’s discount rate is important to their assessment of the financial stability risks of climate change. 𝑇  min ℒ𝑡 ≡ 𝐸𝑡 {∑ 𝛽 𝑖 [𝑓(𝐺@𝑅𝑡+𝑖 ) − 𝜙𝑦𝑡+𝑖 ]} 𝜌𝑡  𝑖=0  Last year, the Government brought the horizon consistent with Parliament’s declaration of a climate emergency and the legislation of a UK Net Zero target for 2050.

25  All speeches are available online at www.bankofengland.co.uk/news/speeches  25  When there is an economic shock, the FPC can release the CCyB to 0%, reducing banks’ capital requirements. This frees up capital to absorb losses and preserve lending capacity. By continuing to lend, banks help to cushion the economic shock, and promote a quicker economic recovery. That is, the ability to cut the CCyB reduces GDP-at-risk, improving overall welfare.27 To give you some idea of scale, a cut in the CCyB from 2% to 0% today would preserve banks’ capacity to lend to UK households and businesses by £ By comparison, net lending was around £ over the past year. This is a stark departure from the pre-crisis framework. Banks’ capital requirements were determined by microprudential supervisors focussed on the safety of individual institutions. When shocks hit, this incentive created by a purely microprudential objective was more likely to motivate supervisors to conserve capital at all costs, with the consequence that banks restricted lending and exacerbated the macroeconomic downturn. The CCyB also supports the central GDP forecast by ensuring banks do not have to carry at all times sufficient capital for an elevated risk environment, with the associated knock-on to borrowing costs, investment, and output. For example, Bank of England work suggests that - had the current capital framework been in place before the crisis - the CCyB would need to have been between 3.5% and 5% to absorb losses.
Timothy F Geithner: Liquidity and financial markets Keynote address by Mr Timothy F Geithner, President and Chief Executive Officer of the Federal Reserve Bank of New York, at the 8th Annual Risk Convention and Exhibition, Global Association of Risk Professionals, New York, 28 February 2007. *  *  *  We have been in a period that market participants have characterized as one of exceptional liquidity. This is both a reflection of, and has contributed to, the ongoing expansion in the world economy. I want to focus my remarks today on the role of liquidity in markets, and what supervisors and market participants can do to make markets more robust against the shocks that we know will occur from time to time. These remarks are directed to a general phenomenon related to developments in the financial markets in recent years, and not to the specific conditions of the moment. Liquidity plays a central role in the functioning of financial markets. Structural changes in the financial system that have been underway for some time increase the importance of market liquidity. The allocation of capital increasingly relies on securities markets, where funds for investment in the real economy are raised through the direct issuance of securities to investors. A greater diversity of financial institutions, institutions other than banks, now play a more active role in the provision of credit and liquidity. Liquidity can mean many different things.

In the case of liquidity, the shortcomings of our analytical tools are magnified by the difficulty of measuring leverage or identifying potential concentrations in the financial system. This has always been challenging, but the growth in the overall size of private pools of capital and the degree of embedded leverage that exists in many derivative instruments makes this more challenging today. When market liquidity and funding seem abundant, this is likely to be observable in things we can measure, like interest rates and credit spreads. And when liquidity ebbs, the effect is conspicuous in a range of observable market prices and volumes. But we do not have, and probably never will have, a set of indicators that offers the promise of predicting when liquidity conditions will reverse, or when markets are particularly vulnerable to a more acute decline in liquidity. In this sense, liquidity is like confidence. And, like confidence, liquidity plays a critical role both in establishing the conditions than can lead to a financial shock, and in determining whether that shock becomes acute, threatening broader damage to the functioning of financial and credit markets. What role can policy play in reducing the vulnerability of markets to this type of dynamic? Of course, central banks have a range of instruments they can use in the event of a crisis. By injecting liquidity into the system, and thus strengthening confidence, they can reduce the risk that temporary liquidity problems will result in default by otherwise solvent institutions, or damage to the payment system or credit process.