samchain/econo-pairs-v1 huggingface dataset:
In the course of the last 20 years, a revolution has taken place in global financial markets. Capital restrictions have been removed. Companies around the world are experiencing a wave of mergers, acquisitions and demergers. These transactions reflect a higher required rate of return among all companies and all areas of a business. At the same time, there is an increased willingness to take risk, with a soaring number of start-up companies. This trend has been particularly evident in the US, but European countries are also part of this process. Increased possibilities for using information improves financial markets’ ability to act as a catalyst for profitable restructuring and growth. Companies financed through equities, bonds and commercial paper are continuously monitored through a transparent process. Owners and potential investors follow company performance closely. There are ever-stricter requirements concerning information. A poorly performing enterprise can be acquired by others who feel they can either run it more profitably or use its resources more effectively elsewhere. One may be sceptical with regard to these developments, which seem to have created a situation where a few keyboard operations can lead to wealth and losses. Financial markets are driven by forces and psychological mechanisms that may result in extreme volatility. Financial bubbles fuelled by unrealistic optimism may lead to the darkest pessimism and fears. The so-called new economy may be a bubble. The concept “new economy” was first introduced prior to the stock market crash in 1929.

Our economy may also be exposed to disturbances that both increase domestic activity and strengthen the krone. Interest rates should then not be lowered. In response to the prospect of a downturn in the Norwegian economy, Norges Bank reduced interest rates in the winter of 1999 when the krone was weak against the euro. This contributed to stabilising the Norwegian economy and hence also the krone exchange rate. Along the same lines, a situation may arise with growing pressures in the economy and signs of higher inflation where interest rates will be increased when the krone is strong in relation to the euro. Chart 10  Over the last 15 years, the business cycle in Norway has been desynchronised in relation to cyclical developments in most European countries. The output gap provides a rough indication of capacity utilisation in the economy. The chart shows a specifically Norwegian upturn in the mid-1980s and a subsequent downturn. While the downturn bottomed out in Norway in 1990, other European economies were booming. Subsequently, cyclical developments have remained desynchronised. The cyclical fluctuations in Norway can to some extent be traced back to the disturbances in the Norwegian economy in the 1980s and the economic shock in Europe in the wake of the fall of the Berlin Wall. The cyclical desynchronisation is the main reason behind the inflation differential between Norway and euro area countries. The very low rate of inflation in Europe primarily reflects the downturn in the 9  BIS Review 14/2000  1990s.
The matters of economic policy that are up for EU discussions are also more specific than before. How is economic policy to be formulated? How can the labour market be made to function better? At the European Central Bank we have missed the train on which the participating central banks designed their monetary policy strategy and decided how the functions of the system of central banks are to be performed. If we join the monetary union in the future, influencing the procedures of the ECB and the formation of monetary policy will be more difficult. In the economic domain the European Union is also increasingly tending to establish joint European positions, for example on such matters as the crises in Russia and Brazil, the role of the IMF, etc. Here, too, I consider we are in a formative phase. Guidelines are now being drawn up for how Europe is to be represented on international bodies and in the work of developing a new international financial structure. The questions include the future status of the G7, G10, G33 and other informal groups. In these contexts we are now becoming rather isolated. Conclusion Now for a brief summary and some conclusions. EMU is a part of the effort that has been in progress for more than five decades to bring the countries of Europe closer together. Today the monetary union is perhaps the most important EU project and as a member of the Community we cannot disregard it.

The report considered that the arguments in this respect were not clear-cut either way but that the advantages of staying outside for the time being predominated. With a national monetary policy at a time when the economy still had major imbalances and was highly vulnerable to shocks, Sweden would then be in a position to parry any negative repercussions that might hit the economy while leaving the euro area relatively unaffected. 1  BIS Review 92/1999  A radical change in conditions for the forest industries is the standard example of such a shock. But even a more general worsening of conditions for growth in the rest of the world might have particularly adverse effects for a small economy with a high level of foreign trade. Moreover, with an independent monetary policy, interest rates can be increased to counter effects of a specific domestic policy failure, for instance an excessively weak budget policy or inflationary wage settlements. At present some observers might perhaps regard this as the greatest risk. According to the report, the high unemployment that had occurred in Sweden since the early 1990s made constraints on Swedish monetary policy particularly risky. In the situation at that time, a shock could have serious consequences for unemployment, with a further increase from a level that was already high. Experience in other countries, moreover, pointed to a major risk of an increase in unemployment becoming permanent. Swedish monetary policy could then provide support for the necessary labour market reforms that were advocated in the report.
Certain kinds of unconventional monetary policy actions in specific environments could be ruled out of order because of the large adverse spillovers they create—much as sustained one-directional intervention in the exchange rate was frowned on until recently. In this view, adhering to such rules would not be a matter of altruism. Countries that have signed the IMF Articles of Agreement already accept responsibility for the international consequences of their actions. 27 The impact on EME growth combines estimated higher volatility, derived from the Capital Flows-at-Risk model in the face of increasing sensitivity of capital flows to global factors, with the historical relationship between growth and volatility shown in Chart 2. The spillback to advanced economies is consistent with estimates in the following paragraph for the US. 19  All speeches are available online at www.bankofengland.co.uk/speeches  19  Taking the two together, spillbacks from a tightening in US financial conditions have tripled - accounting for around 6% of the impact of changes in US financial conditions on US GDP. These effects will grow as financial integration continues. Continued transparency around monetary policy will also help EMEs to anticipate Capital Flows-at-Risk, and take pre-emptive actions where warranted. As long as there remains a fundamental asymmetry between the multi-polar global economy and dollardominated international monetary financial system, absent other reforms EMEs may turn to Capital Flow Management (CFM) measures to safeguard financial stability in the face of push shocks.

In keeping with new global liquidity standards, banks have changed their funding models and their liquid assets – relative to their liabilities that can readily run – are tenfold higher now than before the crisis. Regulation has also made banks less complex and more focused. Trading assets have been cut in half, and interbank lending is down by one-third. Second, the growth in assets under management, from around $ trillion a decade ago to over $ trillion today, is bringing welcome diversity to the financial system, but is also increasing the risks of sudden stops and sharp capital reversals. Chart 12: Structure of external liabilities for emerging market economies  Sources: IMF, EPFR and Bank of England calculations  For EMEs, market-based finance has accounted for all the increase in foreign lending since the crisis, as bank lending has declined and FDI has stayed fairly constant (Chart 12). 13  All speeches are available online at www.bankofengland.co.uk/speeches  13  Within market-based finance, investment funds are growing, accounting for the bulk of the growth in asset management over the last decade. In parallel, investment fund flows to EMEs now account for around one third of total portfolio flows, compared to around one tenth pre-crisis.
Ravi Menon: Getting in all the cracks or targeting the cracks? Securing financial stability in the post-crisis era Opening remarks by Mr Ravi Menon, Managing Director of the Monetary Authority of Singapore, at the Asian Monetary Policy Forum (AMPF), Singapore, 24 May 2014. *  *  *  Monetary policy at the crossroads 1 Professor Tan Chorh Chuan, President of the National University of Singapore, distinguished guests, ladies and gentlemen, good morning, and welcome to the inaugural Asian Monetary Policy Forum. Thank you all for coming. 2 I would like to particularly thank Steve Davis of Chicago Booth and Bernie Yeung of NUS Business School. It was your vision and tireless effort that made this Forum possible. You have assembled here a dazzling array of eminent economists and respected practitioners to discuss and debate the most pressing questions in monetary policy today. 3 One of these questions must be: what role should monetary policy play to help secure financial stability? For two decades before the Global Financial Crisis, central bankers thought they had found the secret sauce of monetary policy. The recipe was simple – an independent central bank, a single target (price stability) and a single instrument (the interest rate). Monetary policy was directed at achieving price and output stability, with the central bank’s reaction function well-characterised by the Taylor rule on an ex-post basis. 4 The recipe worked brilliantly. Sustained price stability and steady economic growth were the order of the day. The result was the Great Moderation.

He argues that monetary independence is still possible, but because of the impact of financial globalisation, monetary policy carries a much bigger burden in trying to achieve both financial stability and purely macro objectives. 26 Recent Asian experience is illustrative. The exuberance in Asian asset markets and consequent build-up of financial risk in recent years has been exacerbated by the global search for yield in a zero interest rate environment. Raising policy rates may not sufficiently alter the level of risk-taking in these economies. •  In fact, paradoxically, a central bank that tightens monetary policy to stem financial vulnerabilities could perversely attract more capital flows into the economy, resulting in stronger credit growth and rising asset prices. 27 Third, it is not clear that monetary policy can fill all the cracks. Monetary policy flows into all the cracks no doubt, but some cracks are just too big to fill. 28 Financial vulnerabilities are not evenly spread across the economy. They tend to be concentrated in specific sectors and segments, such as in real estate. So, even when monetary policy has configured overall liquidity and risk-taking settings appropriately, specific pockets of financial market vulnerabilities, e.g. a property bubble, could remain. 29 Monetary policy is too blunt an instrument for addressing such specific risks to financial stability, and it can cause significant collateral damage on the rest of the economy if it tries to do so.
Once confidence had been shattered, the markets responded with brutal speed and force. Monetary authorities without a record of institutional independence and without a sufficiently clear mandate for price stability did not have the experience or credibility needed to restore confidence quickly. The crises helped bring about a fundamental reassessment of the merits of fixed but adjustable exchange rate regimes, regimes that try to exist somewhere in the middle between the opposite extremes of irrevocably fixed and purely floating. The new consensus, which you can now see in policy choices across emerging markets, is that the soft middle is fundamentally untenable for an economy that is open to cross-border capital flows. With the limited exceptions of those cases where full monetary union or a currency board is optimal, or where a fixed exchange rate can provide a nominal anchor for a disinflation strategy, the general view now is that flexible exchange rate regimes make more sense for emerging market economies. Exchange rate flexibility offers the advantage of allowing monetary policy to be directed at sustaining price stability, which in turn offers a better prospect of sustained growth. Changes in fundamental factors such as productivity growth and inevitable shocks to demand and supply require changes in relative prices, both domestically and internationally. A flexible exchange rate makes it easier for relative prices to move rapidly and effectively in the appropriate direction and so generally eases the cost of adjustment.

The policy consensus that has emerged from this experience has a more cautious view of the benefits of financial integration, a greater awareness of the damage caused by creating incentives that distort the composition of flows and a greater appreciation of the importance of having in place a strong set of institutions, in the financial system in particular. It has also fostered a greater skepticism within governments of their ability to sustain and adjust a set of limited controls on capital flows, once an economy has passed a certain point of relative openness. Money tends to move around these controls with progressive ease, and it becomes more difficult over time to counteract this force with acceptable costs to other objectives. For this basic reason, many emerging market governments that were early proponents of selective controls have moved to eliminate them. Faced with the challenges of managing policy in an increasingly integrated world economy, the dominant instinct of officials is often to try to shield the economy from volatility. But the crises of the 1990s helped demonstrate why this approach can be both futile and counterproductive. As economies become more open to capital flows, policies designed to insulate an economy from external shocks, whether they be fixed exchange rate regimes or selective capital controls and restrictions on international transactions, rarely offer durable stability, and they bring additional risks. These risks come in the form of additional distortions that might undermine future growth or magnify vulnerability to future financial volatility.
In this context, we should bear in mind that while Iceland’s performance in 2011 was good in spite of heavy weather globally in the latter half of the year, it is a small country and cannot remain insulated from international economic developments for long. Monetary policy has been under discussion recently, as it has often been before, and opinion is divided on its optimum stance. There was a turning point in August, when the Central Bank published its forecast that inflation would rise strongly in ensuing months and peak in Q1/2012. It was also projected that Iceland’s economic recovery would continue and that the difficult situation globally would not necessarily intensify enough to derail it. This outlook lay behind the Monetary Policy Committee’s decision to raise Central Bank interest rates by 0.25 percentage points and indicate further increases ahead, which materialised in November and again this March. Another underlying factor was that the real policy rate had fallen considerably in the weeks beforehand. These decisions and the analysis on which they were based have proven correct. The economic recovery gained momentum, and it tolerated turbulence from abroad and modest rate hikes at home, which did little more than prevent the real policy rate from becoming even more negative. The Bank’s rate increases were very controversial at first, but the discussion has become less heated as the underlying analysis has been shown to be correct.

But the controls affect the exchange rate of the króna and should do so. By all available measures and in international comparison, the króna has fluctuated less since the controls were imposed than it did over a long period prior to the banking and currency crisis. I have discussed recent economic developments and conditions, but what about the outlook? According to the Bank’s February forecast, output growth is expected to measure 2½% in 2012 and roughly the same in the following two years. If this forecast materialises, unemployment will decline gradually over the period, to about 5% in 2014, by which time the slack in the economy is expected to have disappeared. An underlying current account surplus is expected throughout the forecast horizon. According to the forecast, inflation will subside over the course of 2012, approaching the target in 2013 and aligning with it in 2014. These projections are dependent on a number of factors, however, specifically the exchange rate, which is currently below the levels assumed in the forecast. 2  BIS central bankers’ speeches  As so often before, the economic outlook is uncertain, not least because of the global situation. The most recent indicators of private consumption and economic activity in the first quarter are broadly in line with the forecast, and perhaps a bit better. On the other hand, the short-term inflation outlook has deteriorated, and it could take a longer time than previously expected to bring inflation back to target unless the króna appreciates in coming months.
The household sector, already an important segment being served by the industry, will see further transformation with the continuing evolution of multi-channel distributions with online channels becoming more popular and increased customer demands for product transparency and overall service levels. We expect to see a re-orientation of processes and incentives towards value over volume, further differentiation in the management of customer-relationships and an increasing focus on technology-driven transformations that are more aligned with business strategies. The outgrowth of these strategies will include an accelerated shift in product offerings towards more comprehensive end-to-end financial solutions and further changes in the traditional roles of physical branches and intermediaries, with greater use of more efficient direct channels and strategic alliances to widen the outreach of financial products and services. In the area of e-payments, the creation of a mobile ecosystem is envisaged, to provide an open and inter-operable platform for all financial institutions, mobile network operators and services providers to offer highly automated and cost-effective mobile payment services. Going forward in this new financial system, the role of boards of financial institutions in determining the risk appetite of their institution, in ensuring that strategies are consistent with that appetite and in overseeing risk management systems will become increasingly critical. Shortcomings in how boards discharged their roles in a number of major international financial institutions were a material contributor to the global financial crisis.

As a central bank, we have to be prepared for all contingencies. And likewise, the financial sector should prepare for the worst: a no-deal Brexit. At the same time, I hope, of course, that Europe and the United Kingdom will find an agreement allowing for a transition period that gives everyone time to prepare for an orderly Brexit. I would like to end with a personal question. The ECB needs a new President next year. Would that be a job for you? No one can “apply” to become the ECB President. It’s in the hands of Heads of States and governments, and that discussion has not started. 3/3  BIS central bankers' speeches
Second, legal changes need to be implemented abroad so that the one-day stay that applies to qualified financial contracts governed by U.S. law is enforceable against those contracts governed by foreign law. Only by making these changes can we avoid the potential for disruptive close outs. I strongly encourage the ongoing efforts to address this critical issue. A second issue with respect to Title II resolution on a cross-border basis is that we cannot be certain how foreign authorities will react when the parent holding company is put into the Title II proceeding. While the U.S. authorities have been in discussion with our colleagues abroad to enable the coordination needed for a smooth cross-border resolution process, uncertainties remain regarding the circumstances under which host authorities may either choose to take or be required to take actions such as unilateral “ring-fencing” that might disrupt the implementation of the single point of entry approach. Thus, we need to continue to work with foreign regulators to iron out any issues ahead of time to remove these uncertainties so that the resolution regime will work well for global, systemically important firms. Another issue with respect to the Title II resolution regime is the residual uncertainty about whether a particular firm in fact would go through a Title II resolution. Recall that under the Dodd-Frank Act, Title II is not the default approach for dealing with the failure of a large complex firm.

These findings are based on evidence drawn from banking systems with a substantial presence of Islamic banking. Therefore, they are not strictly transposable to France. Nevertheless, precisely because France is a conventional environment, I would like now to conclude my speech with some remarks on conditions Islamic banks need to meet to ensure that their establishment in France offers sufficient safety for their customers and is compatible with the smooth functioning of the French banking system. This is primarily in Islamic banks’ own interest and is also in the interest of the banking system! Regarding licensing, the Credit Institutions and Investment Firms Committee (Comité des Etablissements de Crédit et des Entreprises d’Investissement – CECEI) will assess the same criteria as for any conventional bank: financial resources and suitability of the shareholders; integrity, qualifications and suitable experience of managers; level of own funds; business plan; capacity of the bank to achieve its development objectives and so on. Indeed, there is no specific criteria or requirement for Islamic banks in the French licensing framework. But beyond these standard licensing criteria, banking authorities need to ensure that Islamic banks will interact with their conventional environment in France as soundly as possible.