samchain/econo-pairs-v1 huggingface dataset:
Both production and investment are determined by fundamental factors such as demography, households’ preferences and institutions, as well as regulatory systems. These factors in turn determine the development of production factors such as labour, capital and production techniques. The long-term sustainable growth rate is also very important to households’ and companies’ expectations of future growth in income and profits. Willingness to consume and to produce - both supply and demand - are in the long term determined by the same fundamental factors. It is reasonable to assume that the variations in factors such as demography and institutional conditions are relatively limited in the short term. However, demography is likely to become a constraint on economic growth to an increasing extent throughout Europe. Deviations between actual and potential production can arise. When consumption or production exceeds the long-term sustainable growth rate, the level of resource utilisation rises, which may exert inflationary pressure in the economy. The fact that deviations can arise between actual and potential production is due to a number of slowmoving factors in the economy. Market imperfections, such as a lack of competition and transaction costs make both prices and production factors slow-moving, and mean that it takes time for actual production and consumption to adapt to changes in supply and demand in the economy. When adapting to changes in the fundamentals that determine growth or to disturbances, the rate of price increase often increases or declines during a period of time.

It is probably also easier if inflation is not too far from the target to start with, as inflation expectations are to some extent affected by the current rate of inflation. Also, a deviation from the inflation target is in itself more costly the larger the deviation is. Lack of practical experience So what is the current status of the debate? For natural reasons, an important dividing line here is the view of macroprudential policy and how well it can function as a first line of defence. Can it efficiently manage to counteract imbalances arising, or is it doubtful whether it can do so alone? This is essentially an empirical question, so the route taken by the international debate in the coming period will to a great extent be determined by the practical experiences from macroprudential policy and the tools at its disposal. So far, these experiences are relatively limited. Another important dividing line in the debate is the view of monetary policy as a tool to counteract financial imbalances. One argument that is often put forward against using monetary policy as such a tool is that it is far too blunt for this purpose and has limited effects  4  The arguments for and against that were put forward in the debate are summarised in Roubini (2006) and Posen (2006) respectively. 5  See, for example, Billi and Vredin (2014) and Woodford (2012). 6  See, for instance, Sveriges Riksbank (2013).
The legacy  Let me now briefly turn to the legacy of Albert Gallatin’s extraordinary life. It seems to me that there are two major achievements to point to. First, there is Gallatin’s singular success in his pursuit of debt reduction. Gallatin took advantage of prosperous and relatively peaceful times to reduce the public debt of the emerging United States. The second key legacy of Albert Gallatin’s efforts is the way in which he reinforced the financial institutions set up by Alexander Hamilton and made skilful use of them. Hamilton’s financial system consisted of newly established institutions, which encountered fierce political opposition. They lacked the robustness that only the test of time can provide. Gallatin spent the next 13 years successfully using Hamilton’s system to ensure fiscal prudence and continuous sound financial management. Without this, it might not have survived its infancy. This is particularly true of the Bank of the United States. It is possible to argue that Gallatin’s strong support for Hamilton’s bank furthered the process of setting up its successor, the Second Bank of the United States, in 1817. Two recent authors have gone further. They refer to Gallatin as the “Savior” of Hamilton’s financial system. 27 This second legacy is remarkable, given the long-standing animosity between Alexander Hamilton and Albert Gallatin. How are we to explain Gallatin’s transformation from a prominent critic of the Hamiltonian system to its guardian and perhaps savior?

One reason why we look ahead in this way is that monetary policy’s effects are exerted with a time lag. But the two-year horizon is also motivated by considerations to developments in the real economy. This creates some scope for trade offs in the inflation-targeting policy. Let me explain. If we were only concerned with inflation, we would always want to bring inflation back on target as quickly as possible. On many occasions it would be possible to attain the target sooner than within two years. But we would then need to change the interest rate in larger stages and more often. This type of policy would risk leading to unwanted fluctuations in the real economy. This applies in particular to the situations where inflation has deviated from target as a result of supply shocks. These could be, for instance, sudden increases in companies’ production costs due to soaring commodity prices and/or energy prices. The result could then be that inflation would rise above the target, while economic activity would be weak. The reverse can also occur - a fall in production costs could lead to inflation being lower than the target, while capacity utilisation was higher than is sustainable in the long term. If monetary policy were to aim at bringing inflation back on target as quickly as possible in these situations, it would further reinforce the fluctuations in the real economy.
Macroprudential tools such as the countercyclical capital buffer are an additional means of strengthening our financial system. But a liberal economic system entirely devoid of crises is an illusion. To prevent crises altogether would ultimately mean to constrain the economy to such an extent that our prosperity would be significantly impaired in the longer term. However, it is possible to limit macroeconomic risks to an acceptable level using appropriate regulatory measures. This is where we have directed our efforts since the financial crisis and we are continuing to work closely on this with other parties at national and international level. ‘Debt-free’ payments to the Confederation, cantons or citizens  The initiative is likewise not able to deliver on its second promise to reduce the burden on citizens through ‘debt-free’ payments by the SNB to the Confederation, the cantons or the people. Although ‘debt-free’ payments seem attractive at first glance, they will not bring any financial benefit to the people in the long term, despite what the initiative’s authors would have us believe. A sovereign money system will not turn the SNB into a cash cow. Page 4/8  Switzerland’s prosperity is determined not by the way money is created but by the output the country generates. What is meant by ‘debt-free’ payments? In the current system, the SNB creates money by purchasing foreign currency and investing it, or by granting banks loans. Every franc of central bank money which enters circulation in the economy in this way therefore has a countervalue that yields profit over time.

Just how difficult that would be – and how far sovereign money would complicate our work – can be illustrated by taking the example of our monetary policy during the last financial crisis. Over a very short space of time, we created a vast amount of money; initially to ensure liquidity in the banking system, and thereafter to counter the massive upward pressure on the Swiss franc. This led to a significant expansion of our balance sheet. How would we have proceeded in a sovereign money system? We would probably not have reacted so decisively given the difficulty of reducing liquidity once it has been created in a sovereign money system, which can therefore lead to higher inflation further down the line. A weaker monetary policy reaction would have exacerbated the negative consequences of the crisis for the real economy. Quite apart from that, it is doubtful whether we would even have been able, in a sovereign money system, to react as we did because the initiative limits the number of tools we would 2  As regards the SNB’s shift from monetary targeting to interest rate targeting, cf. Meyer, Hans, On monetary policy in the new year, speech held at the University of St. Gallen, St. Gallen, 20 January 2000. Page 6/8  have available. Interventions in the foreign exchange market, which have played a central role in combating the overvaluation of the Swiss franc, would not actually be allowed under a sovereign money system.
Higher growth, a steady reduction in spare capacity in the economy and continued stability in inflation expectations should also slowly begin to reverse the recent decline in core inflation. Inflation was quite low during the second half of 2010, but we expect that to be the low point of the cycle. In short, viewed through the lens of the Federal Reserve’s dual mandate – the pursuit of the highest level of employment consistent with price stability – the current situation remains unsatisfactory. However, we appear now to be moving in the right direction. Regional economic conditions (update since the October regional press briefing) Now, how is our region doing? Overall – in contrast to the pick-up in the nation – the regional economic recovery appears to have paused in the fourth quarter. More similar to the nation, joblessness in the region has retreated somewhat from the peaks recorded toward the end of 2009, but remains unacceptably high. As attendees at previous regional press briefings may recall, the New York Fed produces Indexes of Coincident Economic Indicators to help monitor the performance of the regional economy. Based on these measures, the upturn in economic activity that we saw for much of 2010 in both New York State and New York City has paused. To be sure, activity in both the state and the city is higher than a year ago, but we saw no increase over the prior quarter. This pause is particularly evident in New York City where the economic recovery had been relatively strong.

Clearly, deleveraging has not been particularly consequential for many upstate New York households. The deleveraging process  BIS central bankers’ speeches  5  in other parts of New York and New Jersey, while quite severe by historic standards, has proved milder than elsewhere in the nation. Nevertheless, many families in the region have had to make painful adjustments to their spending in order to pay down debts. These families tend to be concentrated in neighborhoods where households took on more debt during the run-up or sustained more severe income losses during the crisis. These factors contribute to delinquency rates that run well above average in certain areas, including certain parts of New York City and Long Island. In fact, some neighborhoods in these areas now have delinquency rates two to three times the national rate. Looking forward, we see some signs that the region is turning the corner on the credit cycle. After declining during the crisis, credit applications have begun to increase, suggesting that the demand for credit is rising. Although housing debt is still declining and delinquencies are still high, households in many parts of the region have sought and taken on some new debt in recent months. In particular, auto debt has been rising over the past year across New York, northern New Jersey and Puerto Rico – a signal that households in the region once again want to increase spending on durable goods, and are willing and able to borrow to do so.
In the case of Asia, the sharp devaluation and swift recovery in exports led the Asian economies to become addicted to large volume of export at low prices. And, in the case of Thailand, with little incentive to invest in research and development to raise the products’ value and enhance human capital, the average growth of labor productivity3 had trended down from the 1990s to 2000s. Ladies and gentlemen, This brings me to my third part on the lessons from the Asian financial crisis. I would like to offer three reflections that may not necessarily pertain to Europe but may provide food for thought for policymakers. First, conventional policy prescriptions may not be appropriate for unusual circumstances and there is no one-size-fits-all solution. Asia was a case in point of ill-timed austerity measures. Public sector debt in Thailand then was less than 15% of GDP; yet the policy prescription for Thailand was to tighten fiscal policy and maintain tight monetary policy, resulting in (interbank) interest rate rising from 10% at the beginning of 1997 to over 20% at the end of 1997. With large private external debt beyond the ability of the country to service, a way out should have been debt restructuring with international creditors to give the country a breathing space and avoid the painful shock from the sharp reversal in capital.

Going forward, I view that there is a need for international institution that oversees all finance-related conducts to ensure strict compliance of rule, implementation of ethical codes and avoid double standard across nations. Lastly, continuous and collective reforms are vital. Crisis is a recurring phenomenon and no lessons from previous crisis will ever fully prevent the next one. But through the process of reform after each crisis, the market grows and becomes more efficient. Crises provide a window or “political feasibility” to undertake needed structural changes that  3  International Labor Organization (ILO). BIS central bankers’ speeches  3  may be hard to sell to the public in normal circumstances, so one should not waste a good crisis. I am pleased to see numerous improvements in key areas of finance and supervision such as the use of macroprudential measures to complement traditional monetary policy tools. It is also more acceptable to require banks to provision in good times against losses in bad times, for after all most bad loans are made in good times. In addition to structural reforms, change in “mindset” is probably the most important. In order to keep up with the dynamic global environment, we may need to challenge and correct some of our old beliefs.
In the second quarter of 2008, core inflation indicators also showed an upward trend. The rise in core inflation in the second quarter should be viewed as a temporary movement arising from the exchange rate pass-through, rather than deterioration in the general price setting behavior. Ongoing difficulties in global credit markets coupled with domestic uncertainties have led to a depreciation of Turkish Lira vis-à-vis major currencies in the first four months of the year. As a consequence, first round effects of exchange rate pass-through  BIS Review 100/2008  3  have been significant on the headline inflation as well as on core inflation figures during the March-May period. Yet, the recent rebound in Turkish lira and weakening domestic demand has limited the overall pass-through and consequently core inflation showed signs of easing in June. Currently, annual rate of increase in CPI excluding food, energy, tobacco and gold items stands at 6.4 percent, confirming that the inflation can be mostly attributed to factors beyond the control of the Central Bank of Turkey (Figure 5). Figure 5: Main Inflation Indicators and Policy Rates 18  18  16  16  14  14  Policy Rate H  12  12  I  06.08  03.08  12.07  09.07  4 06.07  4 03.07  6  12.06  6  09.06  8  06.06  8  03.06  10  12.05  10  H: CPI excluding unprocessed food, energy, alcoholic beverages, tobacco, and gold. I: H excluding processed food.

(2) Considers implicit volatility on option from US S&P 500 index. Sources: Bloomberg and JP Morgan Chase. 4  BIS Review 97/2007  However, even if this is a normalization process, the dynamics, deepness and extension of market adjustment are difficult to foresee. As with earlier episodes of sharp increases in risk premiums and market volatility, some market segments and specific agents have found themselves unexpectedly in weaker financial positions, which generate tensions and doubts about particular entities’ risk vis-à-vis their counterparties. In this sense, beyond the slow recovery of the past week, the risk remains being a worsening of the international financial scenario if this correction deepens, with more severe implications on the functioning of the principal markets and global financial intermediaries and, ultimately, on world economic activity. Although this correction was triggered by the deterioration of sub-prime mortgage debtors’ payment capacity in the US, what is surprising is that the exposure to such deterioration has spread to financial entities elsewhere, causing tension in the trade securities market and even in the global interbank market. These mortgages were originated by companies specializing in mortgage loans; then they were sold to institutions that packed them as bonds collateralized by payment flows associated to these mortgages, to higher quality mortgages and to other credits. These bonds are known as ABS. With the increase in sub-prime mortgage delinquency rates, widespread uncertainty arose regarding the value of the ABSs because of lack of clear information on their content of sub-prime mortgage credits and the increase in payment delays.
Ravi Menon: Financial regulation – 20 years after the Global Financial Crisis Keynote address by Mr Ravi Menon, Managing Director of the Monetary Authority of Singapore, at the Symposium on Asian Banking and Finance, Federal Reserve Bank of San Francisco, San Francisco, 25 June 2018. * * * Mr Mark Gould, Acting President, Federal Reserve Bank of San Francisco, Ladies and gentlemen, friends and colleagues, good morning. And welcome to the Symposium on Asian Banking and Finance 2028. It was 13 years ago, in 2015, that the Federal Reserve Bank of San Francisco and the Monetary Authority of Singapore (MAS) began this collaborative journey of organising this Symposium. Let me, on behalf of MAS, thank Mark and his colleagues at the San Francisco Fed for the fruitful partnership and warm relationship over the years. This Symposium began in 2007 to consider the lessons learned from the 1997 Asian Financial Crisis. Since then, we have lived through two other major crises – the Global Financial Crisis of 2008 and the Global Cyber Crisis of 2023. Today, I would like to take stock of the evolution of financial regulation over the last 20 years, since the Global Financial Crisis. I think three broad themes characterise this journey: first, fixing the fault lines that led to the Global Financial Crisis; second, managing the risks posed by FinTech while harnessing its benefits; third, defending against systemic cyber risk.

Algor Bank was successfully resolved with minimal disruption. Thanks to efforts by the FSB after the Global Financial Crisis, the major jurisdictions that Algor Bank operated in had robust resolution regimes. With a clear resolution plan formulated, tested and discussed at the bank’s annual Resolution College prior to the crisis, home and host regulators were able to resolve Algor Bank in a smooth and timely manner. But the fact that a cyber attack could bring down the 20th largest bank in the world with a Tier 1 capital adequacy ratio of 16% revealed significant gaps in the global regulatory regime for technology risk. It was ironic that in an industry where there were detailed internationally accepted standards for capital, liquidity, and a range of prudential norms, there were no standards for cyber risk management. The FSB and standard-setting bodies swung into action and in 2025 produced a two-track set of reforms to deal with cyber risk, which is essentially borderless. 7/9  BIS central bankers' speeches  First, the FSB’s Cyber Security Standards, building on its Cyber Lexicon of 2018, established a minimum level of cyber hygiene for internationally active financial institutions. They set out harmonised standards for authentication, implementation of cryptography, intrusion detection, and incident reporting. Higher standards were set for G-SIFIs. G-SIFIs were required to put in place 24/7 cyber surveillance of all Internet-facing systems, undergo annual cyber vulnerability assessments by internationally certified cyber specialists, and carry out military-grade penetration tests.
We can learn from our mistakes Let me now say something about forecasting errors. It is sometimes argued that monetary policy was well balanced at a certain point in time given the information that was available at that time. Such a stance seems to be based on the attitude that at the time of the decision the decision-makers were guided by the best conceivable forecasting model and that any forecasting errors were only due to entirely unforeseen events. It is normally not quite as simple as this, however, and forecasting errors are usually a combination of unforeseen events and shortcomings in the assessment of the economy. Allow me to be a little self-critical and to go back the autumn of 2008 when the Riksbank raised the repo rate in September but then changed direction and adopted a highly expansionary monetary policy when the crisis got dramatically worse. Even later in the autumn, when the financial risks were increasingly apparent, we underestimated the seriousness of the situation. We, like most other analysts, simply lacked the ability to fully assess the incredible impact that the crisis would have on the global economy and on the Swedish economy. Even though I entered a reservation against the repo-rate increase in September I can honestly admit that I also underestimated the risks on the international financial markets. With hindsight, it is possible to identify several areas where the Riksbank could have made a better analysis.

And an ambitious reform of overall economic governance has been launched, strengthening the mechanisms to align national economic policies with the aims of the Union as a whole and designing a plan to move towards a deeper and sounder union in four stages: banking union, economic union, fiscal union and, finally, political union. Highly significant progress has already been made in the first of these four areas. In November next year the new Single Supervisory Mechanism will begin to operate within the ECB, and it should be complemented by a single bank resolution system and, later, a Single Resolution Authority and a Common Resolution Fund although, as is known, these latter steps pose complex legal and political problems that might delay their effective start-up. National governments, too, have reacted within their remit. On one hand, to contain the worsening of public finances, one of the main imbalances underlying the European strand of the crisis. And on the other, to make markets more flexible and to promote investment, growth and employment. Since late last year the quantitative and, above all, the qualitative indicators have improved markedly. In the second quarter this year, there was a year-on-year increase of 0.3% in euro area GDP. This positive figure has put an end to six consecutive quarters of contraction. The rise in output has been across the board, spanning both domestic and external demand.