samchain/econo-pairs-v1 huggingface dataset:
In addition, changes in the market, specifically increasingly complex relationships that firms have with hedge fund counterparties, suggest the need for higher standards in some areas relative to what seemed appropriate in the wake of the events of 1998. Let me emphasize a few specific areas that my colleagues and I believe should be the focus of attention by market participants: First, firms need to give greater attention to the full range of exposures they face in the different, and often multiple, relationships they have with hedge funds - including those related to prime brokerage and counterparty credit extensions, proprietary investments in hedge funds, the provision of structured hedge fund products, and the offering of external funds of funds and in-house managed hedge funds as investment products, among others things. An important part of this involves managing the potential conflicts that arise from these multiple relationships and the legal and reputational risks entailed. Hedge fund-related activities need to be integrated into the broader compliance discipline. Second, improving the overall discipline of the stress testing regime is critical. This is an area where we see the greatest divergence in practice across firms and the greatest gap relative to the achievable frontier of best practice. Potential future exposure measures produce what can be misleadingly low overall measures of counterparty credit risk.

What monetary policy can do is to maintain stability without unnecessary fluctuations in output and employment. Overall employment is also influenced by wage formation. If wages increase at an unsustainable pace, employment will decline and unemployment will gradually increase. Monetary policy cannot prevent an increase in unemployment that is due to a wage-driven cost shock. When there is confidence that monetary policy will contribute to low and stable inflation over time, it can contribute in the short term - under certain conditions - to smoothing fluctuations in output and demand. In the short term, there is a trade-off between the objectives of inflation stability on the one hand, and output and employment stability on the other. An aggressive monetary policy will rapidly bring inflation to the target. This will cause wide fluctuations in the real economy. The interest rate can also be changed more gradually, which will have less impact on the real economy but cause more pronounced fluctuations in inflation. By influencing inflation over time, we can ensure that an overly aggressive monetary policy does not in itself cause unnecessary disturbances to the economy. The impact of monetary policy occurs with considerable and variable lags. Our analyses indicate that a substantial share of the effects of an interest rate change will occur within two years. Two years is thus a reasonable time horizon for achieving the inflation target.
Of course, one could argue that central banks are doing their job in taking over foreign exchange positions: naturally, holding foreign assets would expose private agents to currency risk exposure, and in that respect the public holding of foreign assets may be seen as relieving domestic agents from that risk. However, this reasoning raises two objections: -  as taxpayers, domestic private agents are still indirectly exposed to the realisation of the large currency risk that public managers of foreign assets bear, which entails fiscal costs;  -  if the capital account regime had not resulted in the public sector management of these savings in the form of foreign assets, in principle, corporates (and possibly households) would have directly invested their savings in financial instruments of their choice abroad. More realistically, they would probably have unwound their currency exposures and saved in domestic assets. In the absence of official intervention, the exchange rate would have adjusted. However, the fact remains that foreign reserve holdings belong to the nation that has accumulated these assets, hence indirectly to private domestic agents (admittedly including future generations). The public intermediation of these savings naturally leads us to the question of the appropriate manner in which to manage such large holdings. The management of international reserves The facts High current account surpluses mechanically reflect an excess of domestic (private or public) savings, which must be invested abroad. But in East Asia and commodity-exporting countries, these accumulated excess savings appear to be largely held by sovereigns.

Its key conclusions were: 1) when closing a multinational bank, supervisors should pay attention to the nature and timing of communications among themselves and of their communications with creditors, shareholders and management; 2) the nature of liquidation rules may be relevant to the manner in which multinational banks are supervised; 3) differences in liquidation rules across jurisdictions in a windingup can affect returns to depositors and other creditors and the operations of deposit protection schemes; and 4) coordination and cooperation between liquidators can affect the returns to creditors in a liquidation and can be affected by the role of supervisors in a liquidation. BIS Review 83/2009  7  adopted the Credit Institutions Reorganisation and Winding-Up Directive, albeit after quite a delay in 2001, under which a single-entity regime was introduced for the resolution of any bank incorporated in the EEA, applying to the parent bank and also to all its branches throughout the EEA. A little less than a decade after the BCBS’s report on the lessons from BCCI, the FSF/G10/BCBS produced a joint report on the orderly wind down of large and complex financial institutions. It was a good report. It called for a range of things, including Factbooks on key firms; contingency funding plans; wider crisis management plans; and so on. Perhaps most important, it underlined that, at that time, no one really knew how to wind down an LCFI. Quite a conclusion. A good one. It is a pity that the report wasn’t published.
An independent regulator for utilities is the norm throughout mainland states. By leveraging the expertise and reputation of existing independent regulatory agencies, Puerto Rico may improve the efficiency of its public corporations while reassuring investors. As a fifth step, the Commonwealth could benefit from adopting fiscal institutions more like mainland states. Balanced budget rules are far from perfect, but by following the states’ model – splitting the budget into an operating piece that must be balanced and a capital piece that can be financed with debt – Puerto Rico could better align financing methods with its spending priorities. A sixth step is for the Commonwealth to implement a framework to help ensure that budget targets are met. A key aspect of such a framework would require that the authorities implement multi-year budgeting, in which revenue and expenditure plans are articulated over a three to five year horizon. Such a framework should also incorporate a review of the central government’s macroeconomic and fiscal forecasts by a non-partisan independent entity, the views and analysis of which could be published in coordination with the Commonwealth’s proposed budget for any given fiscal year. New York City, for instance, uses this type of framework. The steps should be viewed as potential ways to improve Puerto Rico’s finances over time and I present them to you for consideration and discussion. The decisions are obviously up to you. Other countries, U.S. mainland states and municipalities facing similar fiscal issues have been able to overcome them.

But, for my part, I think it is more likely that we will achieve our employment mandate before inflation is clearly headed back to 2 percent. Conceptually, this could raise a policy dilemma – achieving our inflation objective would call for strong accommodation, while achieving our employment target usually would call for earlier policy normalization. However, the story is even more complicated than that because important risk factors also come into play. In some ways the insights from Nobel laureates Lars Hansen and Tom Sargent regarding robust control evaluations help form my assessment. 14 I see two important and divergent ways my forecast could go wrong. One is that I may be overestimating the underlying strength in the real economy and its ability to exit from the ZLB. Guarding against this risk calls for a more patient removal of accommodation. The second is that I may be wrong about the inflation outlook, and we could be poised for a much stronger rise in inflation than I am forecasting. This risk calls for more aggressive rate hikes. 12  Krueger, Cramer, and Cho (2014). This same result appears for the price Phillips curve, as shown, for example, by Gordon (2013). 13  Aaronson and Jordan (2014). The medium-term unemployed are those unemployed five to 26 weeks. Persons involuntarily employed part time for economic reasons (such as slack work or unfavorable business conditions) are those who want and are available for full-time work but have had to settle for a part-time job. See also Kiley (2014).
Today, I will also share some of our developing views on the form that regulation and supervision may take in light of our work on Solvency II reform. This reform is expected to have implications for all insurers but is particularly important for annuity writers given the areas under consideration. I would like to start by thanking those of you here today who have been providing both input and feedback on the areas for Solvency II reform. The UK life insurance sector is vital to the security of millions of policyholders’ income, and important to the wider economy via its long-term investment; so the direction that the industry and its regulation takes matters. Your engagement is an essential part of making the right choices as we reform the regulation of the UK life sector. Regulation is unsurprisingly one of my Rs today; but first I’ll recap on the growth of the BPA sector in recent years and its potential trajectory. Then I will talk about the foundations  Page 3  for sustainable growth on which regulation needs to be based. So let me begin with what the BPA market looks like today and how we got here. Bulk Pension Annuity market developments Starting with growth, Chart 1 of the slides (in the Annex) shows the growth in the BPA market over the last decade or so, highlighting that insurers have taken on around £ of pension scheme liabilities over that period.

In parallel, it will continue to regularly reassess the need for an adjustment of the CCyB. Page 3/3
Most of the evidence suggests, however, that since the inflation report, an outcome which is appreciably weaker than the main scenario has become less likely. The forecasts for all the demand components are naturally uncertain. It is, however, particularly worth discussing the forecast for private consumption, since this component represents about one-half of total demand. Some factors suggest that the growth of private consumption could become stronger than most observers count on today. The background here is that for a number years the growth of household disposable income has been held back by fiscal consolidation. After 1998, however, the direct restrictive fiscal impact on household finances is expected to diminish. But in spite of the weak or negative income trend, private consumption has already been rising for a number of years, albeit rather slowly. The reason is that, besides the effect of income on private consumption, spending by households, as well as their view of the future, is influenced by the increase in wealth. Households have recently become appreciably more optimistic about the future. House prices and share prices have been rising markedly for some years. The realised and latent capital gains of households in 1997 add up to the equivalent of about 25 per cent of their income, a figure that is as high as in the late 1980s. It would be surprising if such an increase in wealth did not contribute sooner or later to higher consumer demand. The key question, however, is how rapidly private consumption will grow.

The above applies provided the increase in asset prices is maintained. Since share prices turned upwards in the autumn of 1992, the increase on the Stockholm Exchange has been one of the largest since the early 1920s, which is as far back as the statistics go. The overall valuation of corporate profits is also historically high. The present level of share prices calls for a further rapid increase in profits for several years to come. Minor changes in this picture of the future could affect current share prices. Another element of uncertainty concerns the economy’s supply side. We cannot be sure of just how much the economy can produce without an increase in inflation. Moreover, it is not only the total reserve of resources that may affect inflation. The rate at which resource utilisation rises may also be important. A rapid activation of the unutilised resources could generate stronger inflationary impulses even if surplus capacity still exists at total level. CPI inflation has moved up sharply during 1997. The 12-month change was down around 0 per cent for a couple of months last spring but after that it moved up fairly quickly to 1.9 per cent for September. In September alone the CPI rose 0.9 per cent, which was more than most observers had expected. The figure also aroused some uncertainty among savers and investors. The question is whether the increase in inflation represents a new and unforeseen tendency. The main features of this development are not unexpected.
With financial data captured in a homogenous fashion across financial firms, the stage would be set for mapping much more comprehensively the contours of the financial world – an atlas of financial complexity to mirror Hausmann’s atlas of economic complexity. Technologically, there is no reason why tracking the financial web should be any more complex than tracking global supply chains or the web. Monitoring global flows of funds, as they ebb and flow, should be possible in close to real time. To get a sense of the possible, consider the case of meteorology. It operates within a huge, interconnected global network, with cross-border information pooling. The logistics are eye-watering. Forecasting the weather involves massively large-scale data sampling of over 100 million observations per day, across hundreds of thousands of locations scattered across the globe, measured along multiple dimensions. The result is a very high-dimension information grid, similar in some respects to the web. The information embedded in this high-dimension web is then aggregated, filtered and used to forecast weather patterns in close to real time. These weather predictions can be telescoped to any level of geographic granularity, from the smallest town to the largest continent. And the forecasts are made for timelines ranging from minutes to decades ahead. 40  G20 (2008). BIS central bankers’ speeches  13  There is no reason why, with the right data infrastructure captured in a common language, technology could not be used to map and simulate the risk contours of the global financial system.

For example, it is clear that the governance of risk at many financial firms was defective. Risk committees lacked clout. But underlying these high-level problems was a set of lower-level deficiencies in data and risk capture. IT infrastructure was often ill-suited to capturing these risks. As new products or business lines emerged, new bespoke systems were simply added to the legacy IT estate. A Tower of Babel was erected. Like product codes of the 1960s, or computer operating systems of the 1970s, banks’ data networks became fragmented and unable to communicate effectively with one another. A fragmented data infrastructure has a number of nasty side-effects. One is a reliance on manual intervention to operate data and risk management systems. Complete automation of business processes - second nature along the product supply chain – is a rare bird in banking. As well as improving efficiency, automation reduces the possibility of misreporting of exposures through human error. Piecemeal data capture also complicates aggregation of risk exposures. That in turn undermine effective consolidated risk management. In its 2010 report, the Senior Supervisors Group found that some firms could take weeks to aggregate exposures across their balance sheet.34 Even the best-run firms took several hours or days. This, too, contrasts starkly with the real-time inventory management systems operating along manufacturing supply chains, not only among the Wal-Marts but among the corner stores.
This new set of powers has been introduced rather quickly –over a few short years – and this leaves us with a number of questions still awaiting answers. We need to better understand the effectiveness of the new instruments in improving the resilience of the financial system, in reducing systemic risks, and the trade-offs between different policy options. We also need to understand how macroprudential policies can affect risk-taking attitudes by different agents and to what extent the provision of credit to the real economy may be affected, especially during difficult periods. After a thorough analysis, it might be the case that the current macroprudential toolkit is still insufficient or incomplete. The European Union’s macroprudential framework is currently under review and different possibilities are being contemplated to fine-tune the applicable legislation and to introduce additional instruments. Over the last decade we have observed that bank-like activities are increasingly being undertaken by non-banks, in particular the so-called shadow banks. There is a debate about expanding the scope of the macroprudential instruments beyond the banking system. Another area of discussion is whether it will be necessary to introduce borrower-oriented instruments in order to address in a more effective way misalignments in real estate markets. For all these issues, your analyses and new insights are, indeed, important. So, we have ahead of us a large amount of work and avenues for research. As regards the Conference programme, some of the topics I referred to will be discussed today and tomorrow, as well as the interaction with other policies.

Turkish inflationary expectations have been following the behavior of the US dollar. Under these circumstances, inflation outcomes have lagged above the targeted level. In addition, due to the preannounced depreciation path of the Turkish lira against the currency basket, the continuous depreciation of the euro against the dollar has resulted in a loss of competitiveness of Turkey vis-à-vis Europe. Due to this chain of events, the total value of Turkey’s imports from the EU countries has risen 29.6% in the first half of the year, while the value of Turkey’s exports to EU countries has grown by only 3.4%. In other words, the depreciation of the euro has contributed to Turkey’s growing trade deficit, which was initially mistaken for a side effect of the disinflation program. In this situation, the correction of the euro’s value against other major currencies will have a beneficial effect on Turkey’s current account balance, in addition to the offsetting of the negative effects of the weak euro provided by the high productivity of our manufacturing sector and the diversified nature of our exports. The weak euro has also led to a portfolio shift in the Turkish economy. At the end of September, total foreign exchange deposits in Turkish commercial banks amounted to $ billion. Of this 27% consisted of euros, which have decreased in value by 38.5% since the end of 1998. The share of US dollars gradually increased during the same period from 58% to 71%.
And although at this stage it is difficult to define the magnitude and scope of these changes, it is essential they be identified promptly, since economic policy cannot provide indefinite support for firms that are headed for a structural reduction in their activity. Rather, it should aim to encourage and support the adaptation of the productive system to the new reality and the efficient cross-sectoral and cross-firm reallocation of resources. Moreover, the outlook for the Spanish economy and, therefore, for the business sector remains very dependent on the still highly uncertain course of the pandemic. Since the beginning of July, the strength of the recovery has been adversely affected by the fresh outbreaks of the virus in our country and, more recently, by the worsening of the epidemiological situation both in Spain and in most of Europe. This has prompted the relatively widespread introduction of new restrictions on mobility and activity in certain sectors. Accordingly, economic activity in this final stretch of the year and in early 2021 will foreseeably be less dynamic than was anticipated in the baseline scenarios published a few months ago by the Banco de España and the ECB for Spain and the euro area, respectively.2 By contrast, the latest news on the availability of a vaccine for early 2021 is clearly positive and, if confirmed, should help raise confidence and rule out the most adverse economic scenarios, even though the effects on activity will not be immediate.

Emerging markets can do a great deal to increase these by adopting modern accounting standards, a transparent legal framework, and a stable market-friendly environment to which foreign investors will be prepared to commit long-term investments. Second, ways must be found to reduce the volatility of short-term flows of bank finance. The key is to avoid maturity and currency mismatches on the national balance sheet. That is easier said than done, and similar mismatches on the balance sheets of domestic financial institutions have caused financial collapses on a regular basis in the industrialised world. Before turning to the question of how such mismatches might be limited if not prevented, let me mention two other contributory factors to recent crises. The first was overvalued real exchange rates, reflecting attempts to maintain fixed nominal exchange rates beyond their economic shelf life. Not  3  Obstfeld, M (1998), “The Global Capital Market: Benefactor or Menace?”, NBER Working Paper 6559, mimeo. 3  BIS Review 95/1999  only did such attempts contribute to a crisis when the nominal peg could no longer be sustained, but they also contributed to the illusion that it might be profitable to borrow at lower interest rates in foreign currency and invest at higher rates domestically, thus exacerbating the balance sheet mismatches. The second is that capital outflows do not result solely from the actions of overseas residents. Capital flight by domestic residents has been a factor in increasing the scale of outflows from a number of emerging markets.