samchain/econo-pairs-v1 huggingface dataset:
First, research undertaken in universities very frequently serves as a starting point for work undertaken in central banks. One of you may just have written a very good paper on the sensitivity of the New Zealand economy to international business cycles or the determination of capital flows between Thailand and the rest of the world. It may well be that this paper, unknown to the author, triggers research at the Hong Kong Monetary Authority on how sensitive our economy is to external factors or on the determination of capital flows in and out of Hong Kong. Secondly, academic research undertaken in a free and open manner, and presented at conferences such as this, serves to improve the quality of research in central banks. There is a strong presumption in my mind that competition, no matter whether it be in the market for airline tickets or in econometric models of exchange rates, are beneficial to consumers - and central banks are large consumers of economic research. More directly, I know that some of the HKMA’s research staff will present papers here, and I am sure that your comments on the papers will trigger ideas for how they could be improved. Next time, they will be better. Thirdly, universities are the source of staff for central banks. We do hire your students and sometimes we are even able to hire academic researchers.

Joseph Yam: A broad-brush economic picture of the Asia-Pacific region Opening remarks by Mr Joseph Yam, Chief Executive of the Hong Kong Monetary Authority, at the 2003 Australasian Macroeconomics Workshop, Hong Kong, 22 September 2003. *  *  *  Good Morning, It is a great pleasure for me to open the 2003 Australasian Macroeconomics Workshop and to welcome all of you to Hong Kong. I understand that this is the eighth time the workshop is being held, and that it is the first time you are meeting outside of Australia and New Zealand. I am delighted that you have chosen Hong Kong. We are now, I hope, entering a period of optimism for our city after a very tough few months, and there are continuing structural adjustments in Hong Kong arising from the economic integration with the Mainland, which is growing rapidly, bringing challenges as well as opportunities: it is a very interesting time to see Hong Kong. It may surprise you that the HKIMR decided to follow the splendid precedent set by the Reserve Bank of New Zealand in 2002 and host this year’s workshop. But it should not be too much of a surprise. Rather than giving a traditional lecture this morning, let me explain to you why, as Chairman of the Board of the HKIMR, I feel that conferences such as this are so important.
But the Bank is now actively working on these issues and I am hopeful that we will be able to release further details as early as the turn of the year. Second, the Bank has also started work to ensure there are no technical obstacles to our ability to accept equities as collateral should the need arise. At present, the Bank accepts a very broad range of collateral, including government bonds, asset backed securities and pools of “raw” loans. But the Bank can further bolster its flexibility by removing any technical obstacles to accepting equities as collateral, should the need arise. Given the complexities involved, the project will take some time to deliver, and we currently anticipate that work to remove technical obstacles will continue throughout 2015 and 2016. Finally, as noted in the Open Forum paper 1 published in June, the Bank stands ready in principle to support core markets directly through “Market Maker of Last Resort” (MMLR) actions. Such action would probably only be contemplated if the illiquidity in particular markets was judged to pose a threat to financial stability, or was judged to be important to the transmission mechanism of monetary policy. However, MMLR remains a relatively untested tool, and the Bank’s ability and willingness to act as a MMLR could be a fruitful topic to discuss at the forthcoming Open Forum. 1  2  Open Forum: Building Real Markets for the Good of the People.

The question of whether borrowers should choose an adjustable or fixed borrowing rate – in order to be able to safeguard their own interests to a greater extent – became more relevant with the advent of credit market liberalisation in the 1980s. However, in almost the entire period since then, the nominal interest rate level has exhibited a falling tendency, first as a result of a decline in inflation expectations, then after 2000 due to a decline in real interest rates. Borrowers who chose a fixed-rate loan have therefore not benefited from falling interest rates during the fixed rate period. There are few success stories to be heard from borrowers who chose fixedrate loans. This will probably change ahead. The share of mortgages with a high loan-to-value ratio has increased in recent years, particularly among young borrowers. In addition, more households are choosing interest-only mortgages. The opportunity to postpone paying the principal can act as a buffer when servicing the debt becomes more demanding. For many households, this buffer has already been used. The increase in household borrowing has not been matched by a similar increase in investments in financial assets. The household saving ratio has been on the decline since 2002 and was very low, probably negative, in 2006. Household saving also seems to be negative this year. This means that in addition to financing housing investments by raising loans, borrowers are also financing some of their consumption – often a new car or boat – by increasing their (net) debt.
Monetary policy decisions are taken, at the centre, by the Governing Council, but are implemented by the national central banks in a closely co-ordinated way. Strategy of the single monetary policy The Maastricht Treaty clearly defines the ultimate objective of the single monetary policy, that is to say maintaining price stability. However, for this it is essential to have a clear definition of price stability: we define it as a year-on-year increase in the overall Harmonised Index of Consumer Prices (HICP) of below 2% in the whole euro area. Bearing in mind this objective, our monetary policy strategy is based on two “pillars”. We have first assigned a key role to the monetary aggregate M3. This “pillar” is based on a reference value which we set at 4.5% for the annual growth rate of the broad monetary aggregate M3. The  1  concept of a reference value does not imply a commitment on the part of the Eurosystem to automatically correct deviations in monetary growth in the short term. Naturally, we also follow the counterparts of M3 closely, that is to say the sources of money creation, and especially lending to the economy, the evolution of government finance and capital flows with the rest of the world. However, it is common sense to say that monetary developments alone do not allow for a comprehensive assessment of the risks to price stability.

I applaud the significant progress being made by the International Accounting Standards Committee and look forward to the continued cooperation between the Basel Committee and the IASC toward achieving the goal of harmonization. Official supervision While effective bank level management and meaningful market discipline are crucial elements of an overall strategy for promoting and preserving financial stability, neither can substitute for the critical role played by official supervision. While banks perform functions that are indispensable to the success of any market economy, these same functions, by their very nature, introduce risks that are capable of undermining the prospects for such success. This reality was acknowledged by Adam Smith over two centuries ago in his seminal tract The Wealth of Nations. And it is with this fundamental reality in mind that governments have long recognized that banking and other financial institutions must be subject to at least some form of regulation and official oversight. The reasons for official supervisory intervention in the banking and financial system can be summed up as promoting financial stability and minimizing systemic risk. This is a broad mandate – to ensure that markets operate in a fair, transparent, and efficient manner, and that participants comply with the rules of the game. To successfully fulfill this critical responsibility, it is clear that the fundamental approach, scope and methodologies of official supervision must evolve in line with the way financial institutions manage their activities, which increasingly is along business lines rather than legal entities.
Figure 18: Overview of the corporate bond trading  Table 3: Fund characteristics  model  Source: Braun-Munzinger, Liu, and Turrell (2016). Source: Morningstar and Bank of America Merrill Lynch. Notes: The model is calibrated against empirical data including the flowperformance relationship and the distribution of sizes of openended corporate bond funds. The model is based on, and calibrated against, the corporate bond market using micro-level data on 1,000 mutual funds. These data can be used to calibrate the size distribution of funds, their trading behaviours and the links between their performance and in and outflows from the fund. Some of the fund characteristics are shown in Table 3. The interactions among these players give rise to interesting dynamics, some of which are shown schematically in Figure 19. For example, imagine a shock to the expected loss on a bond. This reduces demand for that bond by funds holding it and causes a re-pricing by the market-maker and momentum selling by funds, generating a further fall in the bond’s price and in the wealth of the funds holding it. 33  All speeches are available online at www.bankofengland.co.uk/publications/Pages/speeches/default.aspx  33  Figure 19: Transmission mechanism of expected loss rate shock  Source: Braun-Munzinger et al (2016). Notes: A schematic showing the feedback loops following a shock to the value of the expected loss rate. The colours in the feedback loop indicate the different market players; funds, the market maker, and the investor pool.

From those assumptions are derived equations of motion for the behaviour of  4  All speeches are available online at www.bankofengland.co.uk/publications/Pages/speeches/default.aspx  4  consumers and firms – which, rather revealingly, are often called the Euler conditions. Then, and only then, are these first-order conditions for behaviour taken to the data to be tested. These models, so derived, predictably exhibit the same damped harmonic motion as Newton’s pendulum. Let me give a couple of examples of this approach in mainstream practice in economics and finance. The most famous equation in finance is probably this one:  Figure 1: The Black-Scholes Formula  Source: Black and Scholes (1973). This is the Black-Scholes options pricing formula (Black and Scholes (1973)). Under a (relatively) small set of assumptions, it provides a (relatively) simple analytical description of how to price a financial option. It cannot rival Einstein for its simplicity and aesthetic beauty. But it nonetheless has many of the trademark characteristics of theoretical physics. That should come as no surprise because this equation was itself drawn from theoretical physics. In seeking a solution to their option-pricing problem, Fisher Black, Myron Scholes and Robert Merton drew an explicit link between their contingent-claims pricing problem and the heat transfer equation in physics (Churchill (1963)). If not quite a lift and shift from theoretical physics, the Black-Scholes formula was certainly a genetic mutation.
However, revised national account data —including the publication of the new Benchmark Compilation, with base year 2013— suggest the economy was somewhat stronger towards the beginning of 2016 and weaker towards the end of the year, leaving a low starting point for 2017 and a higher base of comparison for the beginning of the year. The new data also point to weakness in investment-related areas and in sectors that tend to be more persistent, such as business services (figure 4). Figure 4 GDP  Non-natural resources GDP  (annual change, percent)  (annual change, percent)  8  8  8  Construction  6  6  6  Wholesale and retail trade  4  4  4  2  2  2  0  0  0  4  Rest  2 Total  0  Manufacturing  -2 -2  -2 -4 14  15  Natural Resources 16  -4 -4  Personal services  Business services 14  15  8 6  -2 -4  16  Source: Central Bank of Chile. 6. On the expenditure side, domestic demand—excluding changes in inventories—also tended to decelerate throughout last year. Weakness was most evident in investment in construction and other works, which contracted by 4.9% in annual terms during the fourth quarter (average growth of 0.5% between the first and third quarters). 7. Private consumption, in line with its behavior in the previous years, supported the economy, growing by more than 2% annually throughout 2016.

In fact, despite being more precarious, self-employment has acted as a significant buffer to the loss of dynamism in wage employment (figure 6). Figure 6 9 6  Job creation by category  Wages (*)  (annual change, percent)  (annual change, percent)  Wage  15 8  Self-employment 7 10 6  Nominal 7  5  5  4  4  3  5  0  0  -3  -5  -6  -10 0 11  12  13  14  8  15  16  17  6  3  3  Real  2  2  1  1 0 11  12  13  14  15  16  17  (*) Both the nominal and the real correspond to the average of the annual variation of IREM and CMO. Source: National Statistics Institute (INE). 10. Domestic financial conditions remain favorable, particularly in terms of interest rates. Notwithstanding, credit volumes have decelerated with respect to previous years, as a result of overall subdued demand. Despite some increase in recent data, arrears ratios are still low, a clear sign that slower growth has not affected the financial health of companies and households. 11. The evolution of the local stock market has caught some attention lately, since the IPSA has increased about 17% this year and more than 30% since December 2015.
Growth in these high-paying jobs is picking up much of the slack created by the softness of the securities industry. In fact, strong growth in New York City has been helping many of its surrounding areas, including northern New Jersey, Long Island and Fairfield County. Many workers residing in these areas commute to New York City and have access to the City’s vast, diverse and expanding job market. For example, Long Island’s unemployment rate is now below 4 percent, its lowest level in nearly a decade. In Connecticut, Bridgeport has also benefited. When I visited a few months ago, I saw firsthand some of this resurgence. Bridgeport is both the largest and poorest city in Fairfield County, and for decades had seen its population and  BIS central bankers’ speeches  1  job base steadily decline. But, since 2000, its population has started to grow again for the first time since the 1940s. Even as other parts of Fairfield County struggle with a number of high-profile corporate relocations, jobs have begun growing and Bridgeport is showing signs of revival. In upstate New York, economic growth has generally been modest, with job growth running well below the national pace. This isn’t new, as upstate New York has historically tended to grow much more slowly than the nation. Though growth has been slow for the region as a whole, some places are doing relatively better than others.

This year, the government has been unable to make its debt payments on schedule and has lost access to the public debt markets. The pressures that culminated in these missed payments have been building for some time. This is an issue that we have been focused on for several years. We have published a number of reports in order to help highlight challenges and opportunities, to inform the discussion around solutions. I have visited Puerto Rico on several occasions, and had the opportunity to talk to residents and hear about the challenges they face. As an outgrowth of one of these trips – taken in 2011 – I commissioned my staff to produce a report on the competitiveness of the Island’s economy. We released this report in 2012, and it served, I believe, a useful purpose in providing technical analysis and identifying some important issues deserving of policy attention. Over the following two years, the Island’s fiscal problems worsened. Consequently, in 2014 we published an update to the initial report – this time focusing on the Island’s public finances – and again offering suggestions for consideration. In June, Congress and the Obama Administration took action providing a framework to help address the Commonwealth’s fiscal crisis. Part of that agreement re-emphasized that the Commonwealth’s fiscal sustainability depends crucially on an expanding economy.
Our CMU was linked up with Euroclear and Clearstream in 1994, with the Central Securities Depositories in Australia in 1997, New Zealand in 1998 and Korea in 1999. We also have a standing offer in the region to link up our Hong Kong dollar RTGS payment system with other currencies with RTGS capability so as to achieve payment versus payment in foreign exchange transactions, in other words, to eliminate Herstatt risk. But I must confess that, for the former, there  BIS Review 94/2001  3  has not been a lot of traffic, and for the latter, there have been no takers, so far. I hope this is merely a reflection of the fact that the financial infrastructures of others are not yet ready for these types of linkages. But I really cannot see a more robust arrangement than what we have proposed for promoting and facilitating the international financial intermediation that is found so lacking in the region. But we shall be patient. The other front that we have been working on is the replication of our Hong Kong dollar financial infrastructure for the US dollar, the popular currency for international financial intermediation. We have late last year completed this for the debt clearing system and the RTGS payment system. We have linked these to the corresponding systems in the Hong Kong dollar financial infrastructure. I won’t bore you with the technical details.

The public sector must be ready to steer and lead the nation onto a new, uncharted path with confidence, certainty and conviction. This is a heavy responsibility. What we do today will have ramifications on the future of our children and our children’s children. We must rethink the way we formulate policies, the way we deliver on our mandates and the way we think about public policy. 1/4  BIS central bankers' speeches  Today, I would like to speak about three possible characteristics that will be necessary for the public sector to navigate the challenges of the future. These are: Integrity, Agility and Validity of Measurement. Integrity: The courage to take the road less travelled As public servants, our duty is to serve and protect the public interest. Our legitimacy is strengthened by their confidence. Discharging this responsibility will become more challenging as we move forward: Priorities and needs will continue to expand faster than our resources. In these times, moral courage, integrity and transparency will be more important than ever. We must be brave enough to pursue the right course of action, doing the right thing, unpopular as they may be in the short-term. We must also be accountable for our decisions. This requires that we engage and communicate with the public as never before, explaining clearly the rationale of our policies. It is also important that we foster a culture and environment that prioritises these values at the level of the individual.
Today, more than 250 Swiss corporations are active in Brazil, which has become the top recipient of Swiss direct investment in Latin America and the fifth-largest worldwide. Despite differences in the structure of our economies - or maybe precisely because of them corporate Switzerland is very engaged in Brazil and has shared, for almost a century now, some of the fortunes and misfortunes affecting the Brazilian economy. After a long period of pegged exchange rates, Brazil recently decided to float its currency, to follow a monetary policy primarily focused on price stability and to reform its public finances. This new economic program seems to bear fruit, as growth has clearly resumed. However, the road to price stability is not an easy one. Inflation, although extremely low in comparison to the four-digit period of the late 80s, is not yet subdued, and the state of government finances is still subject to legitimate worries. The title of my speech is “Monetary independence and monetary stability: two sides of the same coin”. I will start by looking at some of the features which have given Switzerland the reputation of a financially strong country. Among other elements, I will show that price stability has played a central role in this respect. But there can be no monetary stability without an independent central bank and an independent monetary policy course. Drawing on my experience at the Swiss National Bank, I will spend some time discussing what, in my view, are the most crucial characteristics of a successful monetary policy.

On the contrary, most empirical studies, as you know, show that there is a negative relationship between inflation and output in the long run. Inflation is a tax on financial assets; it distorts investment decisions and increases overall uncertainty. In Switzerland, monetary stability has become part of the country’s culture and has been the guideline of monetary policy for more than 30 years now. After the collapse of the Bretton Woods system in 1973, the Swiss National Bank made it clear that the overriding objective of its policy was to preserve long-term price stability. Convinced that inflation was a monetary phenomenon, it opted for a strategy aiming at a steady growth of the money stock in line with the potential growth rate of the economy. At the time, the Swiss National bank was actually one of the first central banks to adopt a rule-based strategy. Between 1975 and 1999, we implemented a “pragmatic” policy, with monetary targets serving as benchmark and communication devices. Here I would like to emphasize the term “pragmatic”, because it was never the goal of our policy to fulfil monetary targets mechanically. As a small economy with an international currency, we had to face severe exchange rate shocks or money demand instability. In such circumstances, pre-announced monetary targets could not be met. In these particular and difficult periods, however, we never gave up our objective of preserving price stability in the long term. In the late 1990s, day-to-day implementation of monetary targeting turned increasingly difficult because of financial innovations.