samchain/econo-pairs-v1 huggingface dataset:
But transmission through the exchange rate channel is uncertain and volatile, as the exchange rate is also an asset price that fluctuates with speculative capital flows and can deviate from equilibrium over time, only to correct quite suddenly. Unless the financial system is that much better protected, this process can interact negatively with financial stability, as was the case in Iceland during the financial crisis. This is at the heart of the problem faced by small countries that pursue independent monetary policy and permit unrestricted capital flows simultaneously. The problem can be solved by adapting monetary policy to that prevailing in large countries even though it is not suited to domestic conditions, or by placing restrictions on cross-border capital flows, particularly those related to carry trade. The need for such restrictions is likely to surface earlier and more strongly in countries with shallow financial markets. But capital flow management measures that aim to restrict both carry trade and destabilising capital movements cannot be used as the first line of defence in the fight against inflation and macroeconomic imbalances, except under extraordinary circumstances. Such instruments will have adverse side effects and could push international obligations to their limits. But some sort of tools must be available for use if the need arises. In general, the first line of defence must be conventional management of the monetary-fiscal policy mix, supported by structural reforms and sound economic incentives.

This indicates that the countries which are still below that level have an enormous potential for further growth. But the question posed has been whether such growth would be sustainable or not in the long run. In other words, whether it could continue to create wealth and improve the standard of living of the people. It has also been observed that countries which generate a share of 60 percent and above from the services sector have been able to record a sustainable GDP expansion over the years. The larger share of services, as claimed by critiques, has in no way contributed to retard their growth. In fact, the preponderant growth in the services sector has helped them to improve both agriculture and the industry sectors on efficiency grounds, infusing sustainability to those two sectors as well. Hence, it can be safely concluded that a share of about 65 to 70 percent in the services sector would provide a country with immense prospects for wealth creation, provided it gains competitive advantage in the production of such services. In this context, the future growth prospects available to China are enormous, since its services sector still accounts for only 35 percent of its GDP. Both India and Sri Lanka too stand to gain on account of the leeway available for them to push the services sector’s contribution to above 65 percent. Hence, it is important that they should exploit this growth potential without further delay.
Finally, Japan and the euro area should continue on the path of structural reforms geared to increasing their flexibility and adaptability and, ultimately, their potential growth rates, giving particular priority to reforms bearing on the services sector. Turning to the international financial system, banks have gained in soundness and are now in a position to face a correction of the global imbalances, even if this were accompanied by some adjustment of financial conditions and a moderate increase in volatility. However, further headway must be made in improving the measurement of the risks implicit in the complex financial linkages present in some segments of the international financial system. Although they provide for greater risk diversification, greater financial integration, new participants on the markets and the emergence of new financial instruments all make it more difficult to determine on which agents and sectors the risks finally fall. It is also more complicated to evaluate, where necessary, the risks of excessive concentration in segments where supervision by regulatory bodies is lighter. It is thus important to foster awareness in companies, and in households too, of the risks they assume, and for regulators to exercise effective surveillance of financial intermediaries and markets. All the more so given that the uncertainty over the effects arising from future bouts of turbulence on the markets will be exacerbated by the fact that this relatively new financial structure has not so far been tested in less favourable phases of the business cycle.

These securities, such as mortgage-backed bonds, are linked to credits guaranteed by property assets. However, the fact that the external deficit is easier to finance within a monetary union should not conceal the factors of uncertainty derived from the losses in competitiveness and the growing indebtedness of households and firms underlying the deficit, because they may ultimately affect the sustainability of medium-term growth. In the short run, forecasts are for the continuity of the expansion. The central scenario for the coming quarters is set against the substantial buoyancy of the world economy, the smooth adjustment of monetary and financial conditions and the gradual re-absorption of the overvaluation of housing. And it continues to point to a gradual rebalancing of spending, with a slowdown in domestic demand and an improvement in the contribution of external demand. We are thus before a scenario that offers, in principle, sufficient room to face the vulnerabilities that have emerged and to address the measures needed to consolidate the continuity of the expansion. But there is a risk that the restructuring of spending will not be of sufficient intensity or that it will not increase the responsiveness of supply to the extent needed, meaning that the imbalances will continue to grow deeper, thereby raising the probability of a more marked adjustment in the medium run. Economic policy challenges Given the situation described, an economic policy commitment to rebalancing demand and, in particular, to containing domestic expenditure is particularly necessary.
As usual, this scenario reflects the events that are believed to be the most likely to occur with the information at hand at the Report’s statistical cutoff date. There are risks that, if materialized, will shape a different macroeconomic scenario than the one described here. On this occasion, after thorough evaluation of the alternative scenarios, the Board estimates that the risk balance is downward biased for output, and unbiased for inflation. As I mentioned first, the main risks have to do with the complex global economic situation. It cannot be ruled out that the recent episodes could happen again or intensify, affecting the financial system and confidence of economic agents. The little room for maneuvering of monetary and fiscal policies in the developed world complicates the response to such a scenario. Another part of external risks is associated to developed countries’ growth beyond the projection horizon. The forecast in the baseline scenario is less than market consensus, but an even stronger than foreseen impact cannot be ruled out. Doubts persist about the strength of the recovery of developed economies, and there is still the possibility of these economies’ potential growth having dropped as an aftereffect of the crisis. Such an occurrence could have consequences on the level of interest rates, the speed at which leverage problems will be resolved, and growth in emerging economies. In this scenario, the world economy will grow less than in the past.

The economy was already closely integrated with the EU through trade and finance; it had close similarities with the euro area in the sectoral composition of output and employment, as well as in terms of business cycle synchronisation; and it also enjoyed a relatively high level of development (the price level and per capita GDP both stood at around 70% of the euro area average). Furthermore, the large euro area countries had long been among Malta’s most important trading partners and sources of foreign direct investment. As for the Maastricht criteria, the only serious doubts centered on the fiscal criteria. As noted previously, exchange rate stability was never an issue and the strong presence of the euro in Malta’s currency basket had also fostered convergence in interest rates. In fact, the interest rate criterion had been met long before EU accession. Fulfilling the inflation criterion was not considered an obstacle either, as the inflation rate had been generally below the EU reference value, and the upward risks were largely related to the impact of the VAT increase planned for January 2004. Although inflation continued to exceed the EU limit for most of the period from the second half of 2004 until the autumn of 2006, this mainly reflected the introduction of measures aimed at aligning energy and fuel prices more closely with market rates at a time of spiralling oil prices. Malta is totally dependent on oil, not only for electricity generation but also for water production.
Not only can one expect that a particular economy meeting the five criteria is clearly eligible to belong to a currency area composed of other economies with the same fiscal, monetary and financial features but one can also expect that the business cycles in these economies are likely to be largely synchronized. Convergence from the very beginning of the single currency is a necessary condition to create an optimum currency area. But convergence is not only necessary at the moment of the selection of member economies. It is also necessary afterwards in what we could call the permanent regime of the euro. And then the stability and growth pact is of the essence. It calls for each country to remain in a sound position as regards its fiscal behaviour. There is a paradox enshrined in the stability and growth pact: implementing the Maastricht Treaty provisions, including sanctions vis-à-vis past behaviour, it places more power BIS Review 63/1997  -8-  in the hands of the „centre“, which is in that case the Council, say Brussels, vis-à-vis member states than is the case, for example, for the US government vis-à-vis Texas or California. The absence of a significant federal budget and the absence of a federal government have driven the Europeans to embark upon a direct coordination of their national fiscal postures, through direct peer pressures and decisions within the Council of Ministers.

And it should comprise (i) an agreed path for the reduction or increase of net exports relative to domestic demand; (ii) an agreed framework for allowing real exchange rates to support the path for unwinding the imbalances; (iii) a set of rules governing the circumstances in which countries would be able to limit short-term capital flows; (iv) macro-prudential policies to limit the build-up of imbalances and add to the instruments available to pursue financial stability; and (v) structural policies, including fiscal measures, to raise national savings in deficit countries and to lower savings in surplus countries. Some combination of all of these elements will be necessary in order to chart a path back to sustainability. There are pitfalls to avoid. Too often the policy response to a sharp adjustment to an unsustainable position starts and ends with the provision of liquidity. Rarely, however, is the  4  BIS central bankers’ speeches  problem a temporary shortage of liquidity. As we have seen since 2007, and on many occasions before that, most players – whether financial institutions or countries – would like others to believe that greater provision of liquidity is the answer. Almost always the provision of liquidity works only when it is the bridge to a more fundamental solution. Once rebalancing has been achieved, there will be the longer-term question of how we prevent a recurrence. There is no world government to impose “rules of the game” to internalise the externalities. So the solution can be found only in cooperation between nations.
In 2009, the penetration of deposit accounts and loan accounts in Malaysia are 3,300 deposit accounts per 1,000 adults and 1,100 loan accounts per 1,000 adults respectively, which is amongst the highest in the world. This high level of financial inclusion is the result of conscious policies to build a progressive and inclusive financial system. The strategies implemented have generated six characteristics of the financial system. First, a business environment that allows a diverse range of financial service providers to thrive and compete. This environment has led to the creation of commercial financial institutions with differentiated strategies based on their strengths and the delivery of a broader range of products and services that meet the diverse needs of consumers and businesses. The financial system also includes foreign financial institutions through a series of sequenced liberalisation measures as well as development financial institutions, cooperatives and Government agencies that complement the domestic commercial banking institutions. This approach leverages on the innovation and the implementation capabilities of the private sector and the diversity and dynamism of competitive markets. At the same time, it has allowed the Government to have a complementary role in serving the segments that are under served by the private sector. Second, basic banking products and services that are made available at reasonable costs. In February 2005, Bank Negara Malaysia issued a guideline that required all banks to provide such basic banking services.

This guideline provided the definition of the features of basic savings and basic current accounts that had to be made available by the commercial banking institutions. This was aimed at ensuring that all segments of society had access to basic deposit and transaction services at a reasonable cost. Further, a framework for microfinance was also formulated to enable the provision of micro financing by financial institutions to micro enterprises. Micro financing rates are not capped to allow for it to be commensurate with the higher administrative costs involved in providing such services to micro borrowers. This is to allow financial institutions to remain viable and to remain sustainable. Third, a diverse set of delivery channels have been introduced to ensure widespread access to financial services. The Central € branching policy has encouraged financial institutions to establish an extensive branch network across the country to ensure widespread physical access to financial services. In 2008, there were 9 bank branches per 1,000 square kilometres and 24 ATMs per 1,000 square kilometres in Malaysia. In comparison, the global median is 7 bank branches per 1,000 square kilometres and 15 ATMs per 1,000 square kilometres respectively. Financial institutions are also encouraged to apply technology to further enhance the delivery of financial services. The increased usage of internet and mobile banking has also accelerated the migration to electronic payments and has widened the access of financial services in the more remote areas. Fourth, is the enhanced financial literacy and consumer protection.
Alternatives to the Libor are being developed by the private sector group, which also includes Swiss representatives. The Financial Stability Board plans to present the results of its work in the middle of next year. At the international level, activities are also under way to regulate the interest rate benchmarks as well as other important reference variables on the financial markets. In  2  BIS central bankers’ speeches  London, the Libor is already now subject to a supervisory regime. In Brussels, a bill has been proposed which would regulate all interest rate benchmarks used in the EU. In Switzerland, too, a need for regulatory action is likely to emerge in this area. At the national level, the SNB and FINMA are talking to financial market participants about ensuring a more robust construction of the interest rate benchmarks which are fixed in Switzerland. The aim is to widen the data pool and improve the calculation methods, and the focus is on reference interest rates for very short-term Swiss franc transactions, specifically one-day terms. These transactions form the basis for the Swiss franc yield curve. The two benchmarks involved are, first, the TOIS fixing, which is used for interest rate derivatives in the Swiss franc money market, and second, SARON, which serves as the basis for the yield curve on the Swiss franc repo market. Progress has already been achieved on both interest rate benchmarks.

The debt levels were possibly motivated earlier, when productivity, expected profits and wealth were continuously improving, but now that wealth stocks have collapsed, this is more difficult. There is a risk that instead of investing, firms use every cent they can find to strengthen solvency. A similar risk is that heavily mortgaged households will not be prepared to take advantage of lower interest rates. It is also conceivable that if activity slackens more than expected, the federal finances will not develop as favourably as many people believe at present. That could deliver another blow to confidence in the future. Which of these scenarios seems most probable is debatable. But they are not mutually exclusive. The outcome may well consist of features from more than one of them. What looks at first like a V, for example, can change into an L. But some variant of the U scenario does seem most likely today. That would call for a clear downward revision of international economic activity in relation to the assessment in our main scenario in December. Conclusions for the Swedish economy In this situation it is a great help that after a number of years of good growth and low inflation, the Swedish economy now stands on firm ground and that the public finances are in a much better state than at the time of the previous economic downturn. A series of years of effectively combating inflation and a restrictive budget policy have created a good initial position that makes an economic slowdown easier to handle.
SPEECH DATE:  31 January 2017  SPEAKER:  First Deputy Governor Kerstin af Jochnick  VENUE:  Centre for Business and Policy Studies, Stockholm  S V ERI G ES RI KS BA NK SE-103 37 Stockholm (Brunkebergstorg 11) Tel +46 8 787 00 00 Fax +46 8 21 05 31 registratorn@riksbank.se www.riksbank.se  The completion of Basel III – the start of something new* The work of the Basel Committee is important and affects Sweden Good morning. Thank you to the Centre for Business and Policy Studies for inviting me here to talk about Basel III and what it may entail for Sweden. Recently there have been several attempts by different parties to analyse how the Basel Committee’s completion of the Basel III Accord may affect the global financial system. Some people question whether it is really necessary for the regulation of banks’ capital requirements to be amended yet again, and wonder how this will affect, for instance, the Swedish banks. As I have recently, in my capacity as member of the Basel Committee, been involved in discussing various parts of Basel III, I would like to give my own views on the subject today. I hope this will answer some of the questions now being raised. However, I would like to point out from the start that no final agreement on the finalisation of Basel III has yet been achieved.

The most famous of these is probably the West German bank Herstatt, which I expect many of you have heard of. As a result of the ensuring financial unease, the central bank governors of the G10 countries agreed to form what would later be known as the Basel Committee. This committee had its first meeting at the beginning of 1975 and its purpose was then and still is that the representatives of the member countries shall cooperate on issues regarding the supervision and regulation of internationally active banks. This is to reduce the risk of global financial crises occurring. Sweden has been a member of the Basel Committee since its start. I myself have been the Riksbank's representative in this context for some years now . Finansinspektionen also takes part in the Basel Committee meetings. Smoothly-functioning international cooperation between central banks and financial supervisory authorities is very important to financial stability in a small and open economy like Sweden’s. We know from experience that other countries’ problems can soon become our own. It is thus extremely important that we are involved in influencing the work in these international contexts in the right direction. It also creates good conditions for the banks to conduct their operations in several countries, if the regulation in these countries meets certain minimum standards and the supervisory authorities are in tune with one another.
One of the key reasons for embarking on the policy of Quantitative Easing was to reverse this downward shift in money spending, which would have pulled down inflation sharply if it had continued. As Chart 3 shows, this trend in nominal demand has indeed reversed. GDP and domestic demand measured in money terms rose at an annualised rate of around 5.5% in the last 3 quarters for which we have data, and total final expenditure – which also includes export demand – grew by nearly 7%. On all the three main measures of nominal demand, growth is now back to or above the pre-recession average rate. This is a rapid turnaround from the sharp falls seen in late 2008 and early 2009. 4  BIS Review 99/2010  Chart 3: UK Nominal Demand Growth Percent 8  1997 Q1 - 2007 Q4 average  7  2009 Q3 - 2010 Q1 average (annualised)  6 5 4 3 2 1 0 GDP  Domestic Demand  Total Final Expenditure  Note: Domestic demand defined as public and private consumption and investment spending Source: Office for National Statistics  Business surveys are also showing a generally positive picture. Chart 4 shows the latest responses from the British Chambers of Commerce’s survey – which points to a particularly strong rebound in manufacturing, with a slower recovery in the services sector. But both manufacturing and services are showing a return to growth, alongside positive expectations that the recovery in demand will continue.

Dear ladies and gentlemen, The new agreement, similarly to the previous one, enables the Bank of Albania to be part of a rich, deep and diverse programme of bilateral assistance and capacity building for central banks. Through qualifications and capacity building, the goal of the cooperation agreement is to perfect the analysis, the decision-making and, consequently, the policy-making processes at the Bank of Albania. I think that we have already established firm foundations that guarantee an even stronger partnership for the second phase. Expected outcomes from the implementation of the second phase include: monetary policy decision making sustained by improved forecasting capacities, macro-prudential policy formulated based on a larger body of knowledge about various risks; and research further enriched with the best research methodologies and practices. These goals form the core of our medium-term strategy. The Bank of Albania aims to increase the impact of research results on decision-making, extend research to other departments, and adopt highest standards on ethics and rigorous research, which renders it one of the priorities of the cooperation. Many of the current developments and challenges in certain countries or regions may appear as distant and alien to us, but globalisation and economic integration disregards borders and their effect and impact may spill over into our economy. The problems that persist from the financial crisis, the continuation of quantitative easing programmes and the new normal for the monetary policy affect the functioning of the central bank.