samchain/econo-pairs-v1 huggingface dataset:
If you think about the expansion of markets in which banks participate, both as principals and as intermediaries, and the fact that at times of stress investors would be likely to place a premium on “safe” assets and ultimately on cash, then it soon gets you back to thinking about the robustness of arrangements that enable banks to satisfy unexpected spikes in cash demand, perhaps in unexpected locations. Markets rely on this in order for them to function with confidence. 2. How has the world changed? I said that Bagehot would recognise the modern role of central banks. However, the firms that comprise the financial system are much altered since his day. So I should like to make a few observations both about how this has affected firms’ own liquidity management, and crucially how the public authorities might react. Firstly, concentration in the global financial system has increased, with a relatively small number of global firms—banks and non-banks—representing a significant fraction of the system. These firms often employ centralized liquidity management. And they are increasingly strongly interconnected, within and across borders, and via new markets for risk transfer as well as more traditional channels. Participation in risk transfer markets does more than just create new links between firms: it also creates a new potential demand on firms’ liquidity in the form of margin calls. Moreover, this additional demand may be positively correlated with other liquidity risk that firms face in the event of market stress.

A tolerance interval of 1 percentage point on either side of the target was included mainly to make it clear that deviations would probably occur but also that they should be limited. The target was tied to the consumer price index, the measure of inflation that was most familiar and reliable, besides being published regularly. There is a great deal to say about this — the choice of the target’s level and the choice of index — in the light of our experience and the academic literature that accumulated in the 1990s. I shall have to be brief, however, because otherwise there will be no time for the more practical issues about our procedures, which is today’s theme. So here are three short comments: •  The appropriate level of inflation is one debatable point. There are arguments for a somewhat higher level as well as a somewhat lower. With our present knowledge, this is ultimately a matter of judgement and so far there has been nothing to persuade me that there are any grounds at present for changing our target. As I see it, the most important thing is to set up a distinct target so that a given rate of inflation is anchored among all economic agents, be they households or firms, employers or employees. In this we have been very successful. •  The choice of an index is a complicated matter.
As you know, Switzerland, like Israel, is a small open economy, and I emphasize both the words small and open. Indeed, we are widely open. Nearly half of our national income is generated abroad, and the European Union is by far our largest foreign partner. About two thirds of our exports head in that direction, and we are one of the best customers of the EU. We are also very small, meaning that although we have no significant impact on the rest of Europe, we are very exposed to foreign shocks, whether they are real or monetary in nature. Our activity is highly correlated with that of the eurozone. Under these conditions, would the SNB still be in a position to conduct an independent monetary policy? Would it be realistic to expect the SNB to follow a course that deviated from the one set by the European Central Bank, or would the SNB be forced to shadow the actions of the ECB? The question of an independent monetary policy is not just a matter of safeguarding the appeal and the prestige of our jobs as Swiss central bankers. The stakes are much higher. For one thing, even if Swiss activity and economic conditions more generally are highly correlated with events in Europe, the correlation is less than perfect. Our economy, although offering many similarities with those of Germany, France, and Italy, also has its specific features. Thus, Switzerland is very well endowed with physical and human capital.

If investors have doubts about the dollar, there is no need any longer to rush into the Swiss franc, the euro will do just fine. Second, the eurozone, although not quite to the extent of the United States, is largely a closed economy. Movements in the euro are far less devastating than movements of similar magnitude in the Swiss franc or in the German mark. The euro is much more capable than any other currency to take on the role of shock absorber against the U.S. dollar. The eurozone, in some ways, is the large closed economy that the world needed as the counterweight to the U.S. economy. Be it by intent or by chance, the new, two-headed international monetary system, far from being a freak of nature, is a harmonious and balanced construct that should benefit all small open economies, not least Switzerland. There is a third reason why the arrival of the euro has changed the landscape and should fundamentally prove beneficial to the stability of the international monetary system, and that is competition. Even though the U.S. monetary authorities do not have a mandate that is as specifically directed at price stability as the ECB does, investors now have a choice and can vote with their feet. Thus the pressure is on the United States to deliver price stability as well.
For these reasons, markets have seldom, during living memory, considered a large fiscal deficit in the US as presaging monetary laxity or signalling a weaker dollar. Indeed, the contrary often seems to have been the case: with the fiscal deficit providing some circumstantial evidence of a deficiency of domestic  2  BIS Review 70/2002  savings, the prospect that interest rates might need to rise to bring savings and investment into equilibrium – or the reality of such a rise – may actually have contributed to the strength of the dollar on occasions, as noted already. A similar trait was apparent with the deutschemark in the early 1990s in the wake of German reunification: the prospect – and subsequent emergence – of a substantial budget deficit, and hence higher interest rates than otherwise, was accompanied by a strengthening of the exchange rate. By contrast, however, and as discussed below, the more recent deterioration in the fiscal outlook in Germany has not been a positive factor for the euro. At the other extreme lie examples of countries where budgetary indiscipline has plainly been a factor behind the collapse of the currency. It would be invidious to mention names, but the story can be caricatured as follows. The government is running a deficit which it is unable or unwilling to correct. Domestic savings are in short supply and savers do not have abundant faith in the government from the credit-risk perspective.

Hong Kong How does the present situation in Hong Kong match up against these various considerations? Hong Kong is in several respects exceptional, if not unique. It has no specific central bank law of the type common in other jurisdictions (although a number of laws, such as the Exchange Fund Ordinance and the Banking Ordinance, govern particular aspects of the Monetary Authority’s functions). It has no mainstream government debt. It operates a currency board rather than a discretionary monetary policy. And it has only quite recently become familiar with the idea of a budget deficit persisting for longer than an isolated year or two. Although the absence of a law to explicitly prohibit monetary financing of the budget deficit – of the sort which has been adopted in many economies, both new and old, in the course of the past couple  BIS Review 70/2002  3  of decades – may be thought a weakness, it need not be so in reality. Whether or not it has a formal legal basis, the proscription of monetary financing has nowadays become so firmly established as part of the policy landscape in the developed financial economies, that any of them which dared breach it would be immediately crucified by the markets, the world media, the IMF and so on. One could class this as a sort of de facto law of nature, which is likely to be at least as effective and durable as any law passed by a legislature, if not more so.
Unit wage cost defined as whole economy AWE divided GDP per worker  BIS central bankers’ speeches  9  Chart 5: Companies’ investment intentions are above average Differences from averages since 2000 (number of standard deviations) CBI  3 2 1 0 -1  BCC  -2 -3 2004  2006  2008  2010  2012  2014  -4  Source: Bank of England, BCC, CBI, CBI/PwC and Bank Calculations  Chart 6: Corporates are increasing the amount that they invest relative to the amount that they save £ millions 25000 20000 15000 10000 5000 0 -5000 -10000 -15000 1988  -20000 1993 1998 2003 2008 2013 Private Non Financial Corporates Financial Balance Source: ONS  10  BIS central bankers’ speeches  Chart 7: The 10 year real rate beginning in 10 years is very low by historical standards Per cent 6 5 4 3 2 1 0 -1 1991  1995  1999  2003  2007  2011  -2 2015  Source: Bank of England  Chart 8: The availability of credit to firms has improved  2011 Oct  Dec  2012 Aug  Dec  2013 Jun  Sep  2015  2014 Dec  Mar  Jun  Sep  Dec  Mar  Small  Medium  Large  Overall  These cells indicate Bank’s agents’ national assessments of corporate credit availability. The greater the intensity of red, the tighter credit availability; the greater the intensity of green, the looser credit availability.

The move was part of a global trend which reflected large macroeconomic forces, including: an increasing share of the global population being of prime working age; the rise of global inequality; the adoption of inflation targeting over the course of the 1990s; and the global imbalances that emerged in the early 2000s in which a glut of savings from emerging economies flowed to advanced economies. 1 Pension reforms in the UK – also over the course of the 2000s – created a further incentive to invest in long-dated bonds to better match defined-benefit liabilities. Of course since then we have had the global financial crisis and its aftermath, during which long yields declined further, reaching new lows in the first months of this year. More recently we have seen some quite sharp moves higher. But on any historical comparison long term interest rates are still at exceptionally low levels. How should we interpret them? A starting point is the pure expectations hypothesis, which says that the long term yield should reflect the market’s expectation of the average short term yield over that period. If that is true, then it suggests that Bank Rate is expected to average 2½% over the next 20 years (about half of its pre-crisis average of 5%). From that it would be easy to infer that financial markets are expecting either very low investment and growth, or very low inflation, or both.
Bank of Japan balance sheet data: end-year. Japan GDP: annual data (nominal). Between 1914–51 National Income is used as a proxy for Japan’s GDP. The National Income data point for 1945 is unavailable and estimated by the average of the 1944 and 1946 data points. BIS Review 21/2010  Source: Bank of England. (a) Wider measure of UK broad money is M4 plus: resident foreign currency deposits; cross-border sterling and foreign currency deposits by non-banks; and local government deposits. 13  Chart 14: World money growth(a)  Chart 15: Lending to UK PNFCs by domestic and foreign lenders(a)(b)  Percentage changes on a year earlier 12 Broad money (a)  Foreign resident foreign-ow ned banks (b) UK resident foreign-ow ned banks UK-ow ned banks and building societies Total  10  £ 70 60 50  8  40 30  6  20  Wider measure of broad money (b)  4  10  2  -10  0 -20 0  2000 2001 2002 2003 2004 2005 2006 2007 2008 2009  Sources: Bank of England, Bank of Japan, Board of Governors of the Federal Reserve and ECB. (a) Global broad money comprises: UK (M4), US (M2), euro area (M3) and Japan (M2). (b) Wider measure of global broad money also includes (if not already in the standard measure): resident foreign currency deposits; cross-border local and foreign currency deposits by non-banks; and local government deposits.

In this regard I would like to call upon other corporate entities and business houses in Lusaka and other cities around the country to emulate the efforts of the financial sector and help keep Zambia a beautiful, clean and healthy place to live in. I must hasten to mention here that, by undertaking such initiatives, we are in no way trying to take over the responsibility of the local authorities but merely supplementing their efforts of keeping the country clean and healthy. BIS Review 112/2009  1  Hon Minister, allow me to make an earnest appeal to the local authorities through “His Worship the Mayor” to assist in the maintenance of the islands by providing security to minimize the rampant vandalism, theft and destruction of plants and other essentials that occur on a daily basis. We also make a humble request to the Lusaka City Council to consider working on the water reticulation system, as this is one area posing a great challenge in the maintenance of the islands. Furthermore, there are still a number of places, which require urgent attention in the City. Your Worship, we have observed that a number of incomplete buildings have been abandoned posing a danger to the lives of many while others remain without a colour wash for years giving an unattractive sight to our beloved capital city.
However, a strengthening of the krona weakens inflation. As inflation is expected to be slightly below the target over the coming years – and now I am referring to inflation adjusted for the effect of interest rate changes on housing costs – this is something that in itself could be an argument for a more expansionary monetary policy. The brighter economic prospects thus point towards a tighter monetary policy, while the stronger krona points towards a more expansionary monetary policy. I believe that there is more uncertainty about the development of the krona in the period ahead than about the development of economic activity. I therefore attach relatively little importance to the krona when assessing what would be a well-balanced monetary policy. 6  BIS Review 111/2009  This means that I instead place greater importance on the improved economic prospects. However, despite the fact that prospects now seem a little brighter, it is still the case that resource utilisation is expected to be significantly below normal over the next few years. This means that there is still a need for monetary policy stimulation to stabilise the real economy. Nor does it appear that such stimulation will conflict with the inflation target. Inflation measured in terms of the CPIF is expected to be slightly below the target of 2 per cent in the next few years. All in all, there is therefore nothing at the moment that calls for a tightening of monetary policy at a faster rate than in our assessment in July.

Broken lines refer to the Riksbank’s forecasts. 10  07  08  09  10  11  12  Sources: Statistics Sweden and the Riksbank  BIS Review 111/2009  7.High unemployment throughout the forecast period Unemployment, per cent of labour force, seasonally-adjusted data 14  14  12  12  10  10  8  8  6  6 Unemployment 16-64 years Unemployment 15-74 years September July  4 2  4 2 0  0 80  85  90  95  00  Note. Broken lines represent the Riksbank’s forecast, 15-74 age group. 05  10  Sources: Statistics Sweden and the Riksbank  8. CPI and CPIF Annual percentage change 5  5 CPI  4  4  CPIF  3  3  2  2  1  1  0  0  -1  -1 -2  -2 00  01  02  03  04  05  06  Note. Broken lines represent the Riksbank’s forecast. BIS Review 111/2009  07  08  09  10  11  12  Sources: Statistics Sweden and the Riksbank  11
So let me move forward 50 years to the events of 2008, and describe the nature of the financial crisis, the steps that governments and central banks have taken to deal with it, and, most important, the implications of recent events for the UK and world economies. Since August 2007, the industrialised world has been engulfed by financial turmoil. And, following the failure of Lehman Brothers on 15 September, an extraordinary, almost unimaginable, sequence of events began which culminated a week or so ago in the announcements around the world of a recapitalisation of the banking system. It is difficult to exaggerate the severity and importance of those events. Not since the beginning of the First World War has our banking system been so close to collapse. In the second half of September, companies and non-bank financial institutions accelerated their withdrawal from even short-term funding of banks, and banks increasingly lost confidence in the safety of lending to each other. Funding costs rose sharply and for many institutions it was possible to borrow only overnight. Credit to the real economy almost stopped flowing. In financial markets, confidence in others fell to a point where investors sought refuge in government instruments such as US Treasury Bills, which at one point yielded a negative return. Central banks around the world were providing enormous amounts of liquidity to some institutions while at the same time taking large deposits from others. Eventually, on 6 and 7 October even overnight funding started to dry up.

Ongoing financial sector reform will also build financial sector resiliency. Thailand’s financial master plan, now in its second phase, continues, and focuses on liberalization through increased competition, raising efficiency, and strengthening the financial infrastructure. On the third issue, global current account imbalances remain problematic, as they did before the global crisis. As long as structural problems remain in the US and Euro economies and China retains its present economic policies, it is likely global imbalances will persist into the medium term with the risk of a disruptive correction down the road. Such a correction may be particularly painful for small open economies. Firmer policy coordination between large economies is needed to ensure a smooth resolution of global imbalances. Ladies and Gentlemen, I am close to the conclusion of my talk today. I have given you my assessment of the global economy, my thoughts on our policy options going forward, and how monetary policy should be poised, pre-emptive and perceptive. One theme I emphasized today was the global environment of fluid capital and its attendant risks. As a point of departure, let me address how you, as the investor, can thrive in such a world of risk while investing in Thailand. There is no easy answer. Different investment strategies face different risks. Investors themselves are the most qualified for evaluating and managing their own risk exposures given their investment opportunities.
v Deloitte (2015) vi Farmer, H, McKay, R, Tsakiris, M, Trust in Me (2013): “Trust in Me: Trustworthy Others Are Seen as More Physically Similar to the Self”, Psychological Science vii See OECD (2009) viii OECD (2009) ix Kahneman, D (2012) “Thinking Fast and Slow”, London. See also Sunstein, C.R, Hastie,R (2014), “Making Dumb Groups Smarter”, Harvard Business Review, December. x See e.g. Page, S (2007) Hewlett, Marshall,M and Sherbin,L (2013), “How diversity can drive innovation”, Harvard Business Review, December; Rock, D., Halvorson, H.G. and Grey, J (2016), “Diverse Teams Feel Less Comfortable – and That’s Why They Perform Better”, Harvard Business Review, September; Sunstein, C. R. and Hastie, R (2014), “Making Dumb Groups Smarter”, Harvard Business Review, December. xi See Page (2007). xii See e.g. Page, E (2011), “Diversity and complexity”, Princeton University Press. xiii See e.g. Jansen, R and Aelen, M (2015), “Biases in supervision: what are they and how can we deal with them?”, DNB occasional studies. xiv See e.g. Sibert, A (2006), “Central Banking by Committee”, De Nederlandsche Bank Working Paper 91, February; Ball, L (2012), Ben Bernanke and the zero bound, NBER working paper 17836, February; Warsh, K (2014), Transparency and the Bank of England’s Monetary Policy Committee, December. xv See Haldane, A (2016), One Car, Two Car, Red Car, Blue Car, speech given in Redcar December and Bank Underground Blog for examples.

Increasingly we are asking ourselves whether we are communicating messages in accessible language. xv  Whether we’re using the right media channels to reach the widest possible audience. And most fundamentally, whether people from different backgrounds deduce the same things from our policy messages. Diversity can help. The more homogenous an organisation the more likely it will fall foul of the ‘curse of knowledge.’ This cognitive bias occurs when people assume that their audience has the same background information and base level of understanding as themselves. xvi  It’s assuming that everyone has the same  narrow view of humanity as the representative agent at the heart of a DSGE model. 4  All speeches are available online at www.bankofengland.co.uk/speeches  4  To communicate to both the City and the country, the salon and the suburb, we need to create content that engages different audiences. The problem is that they don’t teach you this in Grad school (or at least the ones where we traditionally recruited). We need alternative perspectives to craft our messages so that they make sense and resonate with more people. The more people can recognise themselves in us, the more we can stand in their shoes and speak their language, the more likely the Bank is to be trusted. xvii  The how The Bank’s approach to increase diversity and foster inclusion is three-fold:   through inclusive recruitment,    developing an inclusive culture, and    creating inclusive communications.