samchain/econo-pairs-v1 huggingface dataset:
Moreover, some definitions are also derived from the concept of instability. In recent years, globalization of financial markets, increased richness in financial instruments, financial deepening and structural changes have caused the system to become much more complicated, thus enhancing the significance of financial stability. Any fluctuation that may occur in foreign markets may rapidly spread to other countries. As a matter of fact, recent developments in international financial markets were also reflected on Turkey. I can say with great pleasure that the strengthened financial structure of Turkey has minimized the unfavorable effects of recent fluctuations. This case, once again, has proven the significance of a sound financial system with risk sensitive policies, which is reinforced by effective monitoring and supervision. It is a widely known and accepted fact that the primary objective of central banks is to achieve price stability. Monetary policy is conducted via operations carried out in financial markets and its success depends on the flawless operation of financial institutions and markets. Therefore, financial stability is a sine qua non for effective monetary policy. Besides, the responsibility of central banks for the operation and supervision of payment systems oblige them to monitor financial stability. The fact that financial instability may pose serious risks to macroeconomic targets such as sustainable growth and price stability enhances the significance of financial stability for central banks.

In 2005, while the maturities of assets of the banking sector were extended, the liabilities still had short-term maturities. This shows that the vulnerability against the interest rate risk and the maturity mismatch of the sector increased. In order to facilitate banks’ interest rate risk management, it is deemed necessary to make regulations that will also allow floating rate consumer credits along with the currently available fixed rate credits. In 2005, the ratio of liquid assets to total assets decreased as a result of the continuation of the upward trend in credits. Nevertheless, despite the short-term structure of deposits, especially the renewable nature of the major portion of term savings deposits, low condensation and the fact that the assets, which can be accepted by the Central Bank as collateral, comprise a significant part of the assets of the sector are considered risk-reducing factors with respect to liquidity management. Distinguished Guests, In a falling inflation environment, increasing fundamental banking activities along with banks’ narrowing profit margins, and the rise in net wages and commission revenues, which is a more stable source of income, make a positive contribution to the diversity of assets and income of the sector. Hence, they have a favorable effect on profitability performance, which has an important role in financial stability. The capital adequacy ratio of the banking sector is realized well above the legal limit of 8 percent.
Since 2010, it has run a programme to purchase government securities of countries in difficulty in order to support the market, ease pressure on interest rates and thus improve the efficiency of the transmission of its monetary policy to the real economy. In addition, cooperation between the world’s major central banks was stepped up, in particular for the provision of foreign currency liquidity. The rescue packages put in place for Portugal and Ireland are working well. Ireland in particular has considerably reduced its deficit, and implemented very extensive economic structural reforms approved by a broad political and social consensus. It is ahead on the execution of the programme and has even already returned to a path of growth. In Greece, unfortunately, the situation is less rosy. For several months, it has appeared that Greece would not manage to meet its targets for reforms and deficit reduction. This has exacerbated market concerns. To resolve this situation, the Heads of State or Government of the euro area and the IMF worked towards an agreement that was reached on 21 July 2011. This agreement allowed for major progress: –  First, it agreed to support a new rescue programme for Greece, better suited to its situation, with lower interest rates and extended maturities;  –  Second, it included, on an exceptional basis and solely for Greece, a voluntary contribution of the private sector to write down the country’s debt and enable it to recover;  –  Lastly, it considerably bolstered the EFSF’s scope of action.

Second, in the U.S., the banking system was recapitalized and deleveraging occurred quite quickly following the financial crisis. Capital from the Troubled Asset Relief Program, or TARP, was put into the large banks and soon many of them replaced this TARP capital by raising new equity. The SCAP stress test in 2009, and the annual CCAR stress tests that followed, worked to constrain the rate of bank capital distributions and, thereby, helped to build up bank capital ratios. And, U.S. banks worked hard to clean up their balance sheets. Poor assets were managed down or run off, and underwriting standards were tightened. Third, the Federal Reserve was particularly aggressive early on in its pursuit of monetary policy accommodation in order to keep inflation expectations well-anchored. This is a necessary condition, in my view, to maintain the efficacy of monetary policy. If inflation expectations were to get unmoored to the downside, then it becomes more difficult to pursue a stimulative monetary policy. Could things have been done differently in the U.S. in such a way that would have led to better outcomes? Absolutely. With the benefit of hindsight, we could have and should have been even more aggressive on the monetary policy side. While we made progress with some of the innovations on monetary policy that we eventually introduced – such as the openended purchase of $ billion of Treasury and MBS securities per month – it would have been better if we had done this sooner.
Especially important in this regard is to moderate and possibly reverse the course of public indebtedness, adopt a framework to capitalize the banking system and ensure a sustainable evolution of household borrowing. The signals of the government regarding the orientation of its fiscal policy, its backing of the new General Banking Act and the reactivation of its search for mechanisms to consolidate borrowers’ financial information are very 6  positive in this regard. Equally valuable in dealing with future turbulences seems to be to strengthen fiscal institutions by enhancing the status and autonomy of the Fiscal Advisory Council, as well as acknowledging the role of institutional investors in the Chilean economy in the face of future reforms. Dear senators, the Chilean economy is progressing in the recovery of growth and the closing of gaps. Rather than a result, this is a good start for a more favorable stage of the business cycle. Many challenges lie ahead. It is important to deepen the recovery of investment, that the labor market be strengthened and that competitive advantages be exploited to make this recovery more self-sustained and shared. Greater long-term growth calls for more structural changes that will help raise productivity. The Central Bank will be there to ensure that imbalances or vulnerabilities do not incubate in the process, which later may require more costly adjustments. Together we also have the responsibility to strengthen those factors that allow us to better withstand external shocks that will sooner or later be felt.

Hence, a front-loaded monetary tightening was implemented in the same period, which compensated for the distortion in inflation expectations. As of August, we decided to enhance the predictability of the Turkish lira liquidity policy in order to limit the impacts of global monetary policy uncertainties on the domestic economy. To this end, we adopted a strategy of reducing interest rate uncertainty by creating a framework where the relationship between global interest rates and domestic interest rates has largely weakened and market rates have become more sensitive to domestic macroeconomic developments as they should be. BIS central bankers’ speeches  1  In the third quarter, we continued to provide the market with foreign exchange liquidity via foreign exchange selling auctions, which fed into the growing Turkish lira liquidity deficit in the market (Chart 3). We cut the share of one-week repo in total funding in this quarter, which led to an increase in the share of funds from overnight and monthly lending facilities. Correspondingly, the CBRT’s average funding rate and the BIST interbank overnight repo rate increased (Chart 4). Moreover, in line with its strategy of enhancing the predictability of liquidity management, we have been sharing more information about the frequency and timing of the additional tightening since August. Recently, due to our cautious monetary stance, the Interbank Repo Market rates have been mostly hovering between 6.75 and 7.75 percent.
7 Furthermore, Governing Board members have appeared on numerous occasions before parliament committees, on public panels, as well as in print and electronic media, to explain significant monetary policy measures, such as the UBS bail-out, as well as the introduction and discontinuation of the minimum exchange rate. However, transparency is not a goal in itself, but rather a means to achieve accountability, and it has its limits. It cannot be allowed to hamper the implementation or the effectiveness of monetary policy. An obvious example here is the discontinuation of the minimum exchange rate, when it was impossible for the SNB to give any kind of advanced warning of this decision without triggering speculative attacks on the EUR/CHF exchange rate. In short, it is a fiction that the SNB has unlimited power. It is a fact that Switzerland has a well-developed system of checks and balances obliging the SNB to transparently account for its decisions. Fiction IV: Financial stability is an impossible dream With this, let me turn to another field in which the SNB has taken on a more prominent role recently, namely, financial stability. Substantial efforts are underway to improve the regulation of the financial system, both globally and nationally. Sometimes, these efforts are greeted with scepticism, based on the view – or the fiction – that financial stability is an “impossible dream”. While I accept that there are conceptual and practical difficulties in fostering the stability of the financial system, I do not share this pessimism.

•  Competition between all issuers, corporate or sovereign, has intensified. For sovereign issuers, the disappearance of currency risk and the convergence process driven by the Maastricht Treaty have transformed government bonds into directly competing risk free assets. As a consequence, sovereign issuers have implemented strategies aimed both at differentiating their issuance profiles –in order to diversify the opportunities offered to investors– and at establishing benchmarks on a selection of maturities. This is reflected by the building up of an outstanding amount of at least 5 bios euros on the internationally important 10 years segment, in each euro area country, while issuance strategies on other segments –2, 5, 30 years– differ, some countries building up relatively larger outstanding 3 amounts on 30 years maturities (Italy), some on 5 years maturities (Netherlands) . Only a few large countries (Germany, France for instance) are able to provide a high level of liquidity on all the spectrum of maturities. This competition has provided market participants with a wider range of products that are also more standardised, which allowed for the development of electronic trading and enhanced the liquidity of the euro bond market. •  Internationalisation and competition between private issuers have been accompanied by an impressive surge in the amounts issued. Issuance of Euro denominated non-government 4 bonds has more than tripled between 1998 and 2002 .
Others blame the lack of instruments allowing us to tackle asymmetric shocks that may arise, and underline the lack of flexibility or the absence of mobility of the European labour force. Others claim that the  BIS Review 11/2003  3  presumed economic divergences and structural gaps among euro area countries are too large to ensure a viable monetary union. How do we respond to these important objections? (1) It is not disputable that for EMU to function well, Member States, especially the major ones in terms of GDP, must be aware of the spill-over effects that national economic policies may trigger. The existence of spill-over justifies the implementation of a close co-ordination between national economic policies. This is embodied in the Treaty itself, which obliges Member States to consider national economic policies “as a matter of common concern” and subject them to a multilateral procedure. Practically, member States have designed institutions and mechanisms to promote appropriate co-ordination. We can now say that EMU has in turn been beneficial to the European economic and financial integration as a whole. Indeed, a coherent operational framework has been provided for the co-ordination of economic policies through close mutual surveillance (under the responsibility of the “Euro Group” and the Ecofin Council) and through the implementation of the Stability and Growth Pact. Moreover, the Broad Economic Policy Guidelines, discussed each year by the Heads of States and Governments, help monitor macroeconomic and structural developments in the Member States.

The healthy growth has continued into the first quarter of this year, buoyed by regional demand. MAS will continue to foster sustained growth in our financial sector, underpinned by a conducive ecosystem and a sound regulatory framework. Conclusion Before I conclude, a word on MAS’ accounts. MAS made foreign investment gains of $ billion but recorded an overall profit of $ billion in Singapore dollar terms due to a strong exchange rate Excluding exchange rate effects, MAS achieved net foreign investment gains totalling $ billion during the financial year (FY) ended March 2012, roughly similar to the previous FY. However, in Singapore Dollar terms, this translated to a net profit of $ billion. Let me sum up. The global economy is slowing, and financial markets remain vulnerable to renewed stresses. MAS is keeping a close watch. The situation in the Eurozone remains the most significant risk to global financial stability. MAS is monitoring the various channels of spillover to Singapore. Bringing down inflation remains one of MAS’ top priorities. Core inflation is likely to moderate to close to our historical average by the end of year. Headline inflation will also moderate but remain elevated due to high imputed rentals on owner-occupied homes and COE prices. MAS will continue to ensure that our financial markets function smoothly and that investors maintain a high level of confidence in our financial system. I will now be happy to take questions, together with my two deputy managing directors, Chong Tee and Swee Lian. 6  BIS central bankers’ speeches
Such measures can stimulate the economy in the short term at the same time as they are structurally justified. 5  See Riksbank (2014c). This calculation then builds on household disposable income being approximately 50 per cent of GDP. The additional amortisation payments as a percentage of GDP will then be (50% × 0.6%)/5 = 0.06%. The effects on household consumption may be smaller or greater, depending in part on how the households adjust their behaviour and on how this affects housing prices. BIS central bankers’ speeches  3  References Andersen, Asger Lau, Charlotte Duus and Thais Laerkholm Jensen (2014), Household Debt and Consumption during the Financial Crisis: Evidence from Danish Micro Data, Working Paper No. 89, Danmarks Nationalbank. Dynan, Karen (2012), Is Household Debt Overhang Holding Back Consumption?, Brookings Papers on Economic Activity. European Commission (2014a), Macroeconomic Imbalances: Sweden 2014, Occasional Papers 186. European Commission (2014b), Institutional Features and Regulation of Housing and Mortgage Markets, chapter 2 in Quarterly Report on the Euro Area, 13(2). IMF (2012), “Dealing with Household Debt”, Chapter 3 in World Economic Outlook. Jorda, Oscar, Moritz Schularick and Alan Taylor (2013), When Credit Bites Back, Journal of Money, Credit and Banking 45(2). Mian, Atif, Kamelesh Rao and Amir Sufi (2013), Household Balance Sheets, Consumption, and the Economic Slump, Quarterly Journal of Economics 128(4). Nilsson, Christian, Jonas Söderberg and Anders Vredin (2014), The significance of collective pension saving for the Swedish financial system, Economic Commentary no. 3, the Riksbank.

In the future, we may well end up in the opposite situation with the repo rate being set higher than justified by this particular part of the economy. Longer fixed-rate periods desirable It is difficult to determine how large a proportion of variable interest rates is desirable in an economy, but I suspect that we have gone too far in that direction in Sweden. And by this I mean from the point of view of systemic risk. For an individual household there may be good reasons for choosing a variable interest rate, but for the economy as a whole it would probably be good if we could limit the proportion of variable rates. This can be achieved in different ways. In some countries, regulations have been used to either limit how large a proportion of the mortgage may have a variable interest rate or how much a variable interest rate may increase during the maturity of a mortgage. In other countries, long fixed-rate periods have become the norm without the need for regulations. The fact that this has not happened in Sweden indicates that the financial markets are not working well enough for some reason. This may, for example, be due to the lack of a market for mortgage bonds at really long maturities, or of regulations concerning how mortgages with long fixed-rate periods can be paid off prematurely.
As inflationary pressure varies with the state of demand and resource utilisation, the events influenced the formulation of monetary policy in many countries, including Sweden. Six months later, however, we are now seeing more and more signs of an imminent improvement in activity abroad. The attacks’ impact on the global economy were fortunately limited, though certain sectors, such as air transport and insurance, have been heavily hit by the attacks and their repercussions. Production last year was constrained by excessively large stocks but it now looks as though stock adjustments have come a long way, which is a good sign for output. A certain amount of optimism is beginning to spread. Order books are becoming more stable and in some cases even improving. Then there is the additional impetus that comes from the expansionary economic policy in many countries. A proper global recovery that becomes increasingly strong does, however, presuppose a broad and sustained increase in demand. An increase in production that is generated solely by an end to stock reductions is liable to be relatively brief. In this respect there may be some uncertainty. There are still large imbalances in the American economy and stock market values are high, both in a historical comparison and in relation to the current cyclical phase. Opinions differ somewhat about the imbalances in the United States. Many observers focus on and are worried about structural imbalances in the U.S. economy.

Another longer-term challenge—and one that’s perhaps most important—is the chance that some economies in our region might fall into the so-called “middle income trap”. The middle income trap is the phenomenon that many emerging economies slow markedly as per capita income approaches a certain level, typically estimated to be around $ Many important economies in Asia are already approaching that level, so we should all be thinking about this challenge before it’s too late. Trends such as population ageing, a slowdown of urbanisation, low productivity as a result of overinvestment, and the lack of financial market development are generally cited as the causes of the middle income trap. One would think that the reversal of these trends could help economies evade the trap, but this of course is easier said than done. Crucial Role of Financial Market Development While issues such as population ageing are probably best left to other forums, those of us here today are well-suited to think about how financial market developments can help Asian economies overcome the two longer-term challenges. Informed by Hong Kong’s blueprint as an International Financial Centre, let me share a few thoughts on this issue. First, both longer term challenges – navigating China’s economic transition, and evading the middle income trap – require Asia’s financial institutions to be tech-forward. Around the world, we have seen fintech play a key role, with innovations ranging from the digitalisation of traditional banking activities, to ones aimed at promoting financial inclusion.
A number of idiosyncratic factors could influence the terms of that trade, such as how desperate the borrower is at the end of the day, which could add unnecessary noise to market rates. Figure 3 illustrates this change. 6 Turning to market discipline, Ulrich notes that the interbank market may perform this function particularly well because it is a peer-to-peer market. I would like to see more empirical research before I can feel comfortable that money markets provide much market discipline, especially in overnight markets. If the monitoring was so good pre-crisis, why did we have a crisis? One reason to question how much money market participants monitor the counterparties to which they lend is that it is hard to appropriate the value from such monitoring. Money market “freezes” may affect financial institutions somewhat indiscriminately, and, for that reason, lenders may prefer to withdraw short-term funding indiscriminately when they fear other lenders might do so. If money market participants provide some market discipline, we could expect nonbank lenders in U.S. money markets to do this effectively. They are sophisticated financial institutions that have established relationships with the banks to which they lend. And, because they lend to these banks on a consistent basis, they have strong incentives to monitor their counterparties. 7 While my assessment is necessarily preliminary, I don’t see a reason why one type of money market activity should be preferred over another.

Even so, nonbank lenders may be captive to perceptions of their investors (who may be less informed and more skittish), resulting in preemptive reductions in exposures to some bank counterparties and contributing to market freezes in spite of lenders’ own analysis. 8  The leverage ratio creates a direct cost only if it is binding but banks also appear to take into account the possibility of it binding in the future and how it might be treated in stress tests. BIS central bankers’ speeches  3  illustrates is that interbank trade increases the aggregate size of the balance sheet of the banking sector. Suppose, instead, that a nonbank that is currently lending to Bank A would lend to Bank B. As a result Bank A would have fewer reserves and deposits, so its balance sheet would decrease in size. Bank B would have additional reserves and its balance sheet would increase in size, just as in the above example. However the size of the aggregate balance sheet of the banking sector would not change, as shown in the lower part of Figure 4. The two sets of transactions achieve the same movement of reserves from Bank A to Bank B, but if there is a cost associated with the size of banks’ balance sheets, then the second option would likely be preferred. The three parties would be expected to find a way to share the surplus generated by the lower balance sheet cost.