samchain/econo-pairs-v1 huggingface dataset:
According to this theory, political time – dictated by electoral terms – is too short to tackle far-reaching issues effectively. There is a considerable body of literature on this theory, according to which some areas of economic policy, in particular monetary  9  4  A. Greenspan (2009), “The Fed Didn't Cause the Housing Bubble”, Wall Street Journal, 11 March 2009. BIS Review 66/2009  policy, should not be determined by discretion but should instead be subject to rules. 10 This stream of analysis, while certainly relevant, does not seem sufficient to explain behaviour which is repeated over time, particularly in democratic systems where such behaviour should ultimately be penalised. An alternative theory is that the presumed short-sightedness of economic policy only reflects a more general short-sightedness in advanced societies, in particular with regard to the potential for economic development. A certain level of indebtedness may be appropriate if income is expected to grow at a sustained pace, but excessive if such expectations turn out to be too optimistic. It would not be surprising if, in a society in which citizens have excessively optimistic expectations with regard to increases in their income, economic policymakers were to implement policies aimed at systematically stimulating aggregate demand. This has happened on various occasions in the past. In the mid-1970s, after the first oil shock, most industrial economies did not realise that the increase in energy prices had substantially reduced the growth potential of their economies.

For example, in countries where the private sector was already highly indebted, economic policies sometimes promoted further borrowing, in particular through low interest rates and fiscal incentives. If we wish to avoid recreating the conditions which led to this crisis, we must carefully examine the motives behind the economic policies that were implemented during this period. This exercise can be conducted at two levels. The first implies analysing the economic policies on the basis of the specific reference criteria of those policies. A policy may turn out to be inappropriate, for example, because it is based on incorrect economic forecasts or because it is implemented through ineffective instruments. Thus far, the discussion has mainly taken place at this level, and the remedies suggested have mainly been aimed at correcting these aspects. It is an important discussion, without a doubt, but there is a risk that such discussion is insufficient because it does not tackle the fundamental causes that led economic policy-makers to take certain measures. For this reason, a second, more profound level of analysis is necessary. Let us proceed in order. Let us begin with the first level of analysis. This involves examining the way in which the conduct of economic policies contributed to the emergence of the imbalances which caused the crisis. Various policies can be considered: structural, regulatory, fiscal and monetary policies.
“Japan’s Lost Decade and its Financial System”, The World Economy, 26, pp. 365–384, and Caballero, R., T. Hoshi and A. Kashyap (2008). “Zombie Lending and Depressed Restructuring in Japan”, American Economic Review, 98:5, pp. 1943–1977. 5  See footnote 4. 6  See Krugman, P. (1999). “What happened to Asia?”, in Sato R. et al., Global Competition and Integration, Kluwer Academic Publishers, pp. 315–327. Already in 1590 Hong Zicheng’s Càigēntán claimed that “water that is clear has no fish.”  7  See Krugman, P. (1994). “The Myth of Asia’s Miracle”, Foreign Affairs, 73:6 (1994: November/December). 2  BIS central bankers’ speeches  were essential.8 The lesson to be learnt was that sustainable growth can only be achieved by fostering an environment that encourages open markets, innovation and entrepreneurship. A third lesson is that re-nationalisation and protectionism are not the solution to a crisis Indeed, there is empirical evidence that more open economies recover faster from the output contraction that usually accompanies a sudden stop of capital.9 As such, the most open Asian economies, such as Hong Kong and Singapore, were among the least severely affected and fastest to recover from the Asian crisis.10 In other words, despite the attendant risks, globalisation in trade is still the best way to achieve progress and economic development, and open financial markets can support it provided they are backed by strong prudential supervision.

In practice, however, determining the neutral stance of monetary policy is not an exact science. The potential output alone is never observed with precision, as it depends on our labor force productivity, our competitiveness in the global market, our demographic structure, and the degree of distortions caused by public policies and other market failures, to name a few. Uncertainties about these structural determinants make it difficult to ascertain precisely the output potential, and by implications, the neutral interest rate. Finding the neutral rate would depend on incoming information about both the demand outlook and supply-side factors. That said, I would also add that real neutral rate should be in or close to positive territory. Currently the real interest rate is negative. I have said that this year is the year of regaining poise, but regaining poise in an unbalanced world of fluid global liquidity is not easy. There may be more exchange rate volatility on the back of fluid flows. Hence, the Bank of Thailand has pursued a managed floating exchange rate policy to lessen volatility. Emerging markets in Asia have pursued varying degrees of capital controls. On this point, let me say that my view is that capital control measures are options in our toolkit but they have to be appropriately designed. The trend has shifted from controlling capital towards more friendly pre-emptive prudential regulation to manage flow types rather than barring overall flows.
As usual, the baseline scenario reflects the events that are estimated to be the most likely to occur with the information at hand at the close of the Monetary Policy Report. However, there are many risks that might significantly divert the performance of the world economy from the baseline scenario. In fact, today these risks are greater than on other occasions. The repercussions on the Chilean macroeconomic outlook of scenarios other than the one described are varied and, in some cases, difficult to calculate. This time, after assessing the likelihood of alternative scenarios, we estimate that the risk balance is biased downward for output, and unbiased for inflation. The main risks have to do with the way the Eurozone situation will unfold. The possibilities range from a deeper recession than foreseen in the baseline scenario due to a sharper contraction of fiscal expenditure and credit, to a financial or currency crisis with a severe impact on the world economy and financial markets. It is also possible that emerging economies are hurt more than foreseen, causing deeper or more lasting effects on world growth and commodity prices. And we cannot rule out a further weakening of the U.S. economy, depending on the fiscal policy trajectory. Such a scenario abroad would affect the Chilean economy. The combination of tighter external financial conditions, a drop in the terms of trade and slower growth of our trading partners could have a more negative incidence in the evolution of Chile’s GDP growth in the projection horizon.

While less flexible labor markets and the absence of a federal fiscal system will certainly pose constant challenges for the management of a common European currency, a fluctuating exchange rate need not be the optimal way to respond to these shortcomings. The argument that Europe -- even a core component of Europe -- can ill afford to renounce exchange rate flexibility rests crucially on the view that Europe is significantly more BIS Review 109/1997  -6-  heterogeneous than the United States and, therefore, more vulnerable to country-specific shocks that can best be corrected by exchange rate changes. I do not support this view. Rather, I believe that in many respects differences among the European economies have been over-emphasized in the public debate. It is possible to suggest, for example, that the economies of some European countries have more in common today than do those of some individual states in the United States, such as New York and Michigan or California and Idaho. Moreover, as a result of the convergence of economic policy objectives, the economic cycles among many European countries have become more synchronized over the last ten years, a trend that is likely to be reinforced by monetary unification. Furthermore, when shocks are mainly at the industry level -- for instance, when a recession hits the automobile or steel industry in Germany and France -- the German and French economies would hardly benefit from an exchange rate change. Such a change, in this case, simply would not affect the appropriate relative prices.
But this does not mean that there are no important tasks for the Banco de España – or other participating countries’ national supervisors – to perform in the SSM, in addition to the functions that remain intact as they are not assumed – or are assumed only partially or in exceptional circumstances – by the SSM. In recent months there has been talk of the Banco de España becoming devoid of its powers. This reflects a lack of knowledge or misunderstanding of how the SSM is organised and how it will operate and is reminiscent, in a sense, of the talk afoot when Monetary Union came into being and the ECB assumed responsibility for the main monetary policy decisions. The model then adopted entailed full decentralisation of monetary policy implementation. This meant that it relied on the national central banks for its implementation (in fact, credit and deposit institutions have no direct operational relationship with the ECB) and that in practice, although the ECB assumed decision-making powers, there was no decrease in either the workload or the staffing needs of the national central banks. BIS central bankers’ speeches  3  Albeit for different reasons, the start-up of the SSM is expected to have a similar impact on workload and staffing needs at the Banco de España and at the other national supervisory authorities. *** In any event, the creation of the SSM poses an organisational challenge for the national authorities.

This fear of counterparty default dented global trading and interbank lending activities. To allow market participants to better manage their counterparty risks, the Singapore Exchange launched a new clearing service for OTC financial derivatives in 2010. This is the first such service in Asia. 10 international and local banks have since signed up with SGX to clear their OTC financial derivatives, and there are intentions to expand the product suite going forward. This initiative also enhances our role as a regional risk management centre. 9. In May last year, MAS published a consultation paper on amendments to the Code on Collective Investment Scheme. Among other things, there are proposals to introduce a number of measures to address counterparty risks. For instance, MAS has proposed that managers may only enter into OTC financial derivative transactions with counterparties subject to prudential supervision. If the financial derivative transaction is performed on an exchange where the clearing house performs a central counterparty role, the counterparty risk can be taken as zero. MAS will be publishing its response to the consultation paper in due course. 10. Singapore is also a key risk management hub for the commodities business. We are Asia’s leading OTC commodity derivatives trading hub, accounting for more than 50% of Asia’s volume. There is also a confluence of users and suppliers of commodities risk management solutions in Singapore. Apart from the critical mass of global commodities traders, many global banks have also based their Asian commodities business in Singapore.
At the same time as the steady ascent in the numbers of countries adopting the executive democratic model, there has been a steady descent in public trust in the representatives of executive democratic institutions. At the heart of those trust problems are concerns about whether decision-making is sufficiently reflective of wider society. By and large, the public accept that the executive democratic model is a reasonable vehicle for discussion and deliberation in decision-making. Indeed, the public can watch those deliberations on TV. But there is a concern among the public about whether decision-making and decision-makers are sufficiently diverse, whether they properly reflect and represent societies’ views and needs. This is not an accusation that could be levelled at the alternative model of representative decision-making – so-called direct democracy. This puts voice and vote firmly in the hands of public on decisions with an important bearing on wider society. This model has been used to varying degrees across various countries at various times. In some countries, public referenda are reserved for decisions whose societal impact is especially large and long-lasting. I am sure we can all think of examples. This model is recognised as having both pros and cons. It draws in a much wider range of expert and non-expert opinion, so achieves a potentially greater degree of representativeness and diversity than alternatives. This very breadth, however, makes it difficult to have a deliberative dialogue in which participants have the time to consider carefully the facts, competing hypotheses and possible solutions.

In Norway, the lead-up was similar with rising house prices, accelerating credit and consumption growth and lower saving. Interest rate setting managed to stabilise developments somewhat. Economic policy was perhaps more successful in Norway and the government had larger buffers. But the soft landing in the Norwegian economy so far is also attributable to a good measure of luck, not least as oil prices rapidly rebounded after falling from USD150 per barrel to 35. Stricter requirements for systemically important banks The bankruptcy of the US investment bank Lehman Brothers rapidly led to a general crisis of confidence in the financial system. Central banks and government authorities implemented extensive measures to mitigate the impact of the crisis. At a meeting in Washington on 10 October 2008, the G7 countries stated that they would protect their systemically important institutions. 9 This was a decisive measure. 8  See Van den Noord, Paul (2005): “Tax Incentives and House Price Volatility in the Euro Area: Theory and Evidence”, Économie Internationale 101, pp.29-45. This study shows that house price volatility is higher in countries where tax regimes favour owner-occupied housing. See also IMF (2004): World Economic Outlook, September, p.81. The article shows that house price volatility is higher in countries with predominantly adjustable-rate mortgages. 9  IMF (2008): “Communiqué of the International Monetary and Financial Committee of the Board of Governors of the International Monetary Fund”, 11 October.
14  This follows from the fact that transnational corporations often react to the prospect of a larger market arising from regional arrangements by establishing integrated production and distribution networks within the region in question. 15  Eurostat, European Union Foreign Direct Investment Yearbook 2000. Moreover, according to UNCTAD’s latest World Investment Report, Poland, the Czech Republic, the Russian Federation, Hungary and Slovakia absorbed around seventyfive per cent of world FDI flows to Eastern Europe in 2001. 16  Staying out of the EU is also likely to have negative implications for Malta’s credit rating. In a recent report, for example, FITCH credit rating agency notes that: “staying out would damage Malta’s creditworthiness unless a new government were clearly determined to retain and develop the parts of the EU Acquis that are starting to enhance the efficiency and competitiveness of the Maltese economy.”  17  Argentina, Brazil, Paraguay and Uruguay. 18  Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and United Arab Emirates  4  BIS Review 69/2002  EU membership would also pose some challenges. For example, because membership implies more than a free trade agreement, Malta would have to apply the EU’s common external tariff (CET) to imports from third countries. Upon closer examination, however, it seems that this is unlikely to be a major problem. For a start, Malta’s customs duties on non-EU imports are already roughly in line with the CET, so that not much change would be necessary.

François Villeroy de Galhau: Presentation of the 2019 Annual Report of the ACPR Speech by Mr François Villeroy de Galhau, Governor of the Bank of France and Chairman of the Autorité de contrôle prudentiel et de resolution (ACPR), at the press conference, Paris, 28 May 2020. * * * Ladies and Gentlemen, I am pleased to welcome you to this presentation of the 2019 Annual Report of the Autorité de contrôle prudentiel et de résolution (ACPR – Prudential Supervision and Resolution Authority), in the company of Bernard Delas, Vice-Chairman of the ACPR, Dominique Laboureix, the new Secretary General of the ACPR, and Alain Ménéménis, the new President of the Sanctions Committee. The circumstances are unusual and unprecedented. Indeed, we shall be talking about a year that has ended, at a time when, since then, we have found ourselves engulfed in an unprecedented health and economic crisis. We shall come back to this. In 2019 and since the start of 2020, the women and men of the ACPR have continued to work tirelessly to safeguard financial stability. I would like to take this opportunity to thank them. This morning, I shall focus my comments on an issue that cannot be ignored and that is at the heart of our concerns, without forgetting the other challenges we face – the profitability and solvency of French and European banks and insurers. I.
There needs to be extremely high levels of resilience at CCPs and effective recovery and, in extremis, resolution options were a CCP to fail. So we need to have confidence in the sequential lines of defence that are in place to manage risks and absorb shocks within CCPs and in how resolution might provide a backstop. Clearing members themselves are the first line of defence  CCPs are not risk-taking entities. Rather, they are mechanisms for the management and for the mutualisation of their members’ credit counterparty risk. Their greatest, though not only, vector of risk is the default of one or more of their members. Ensuring that those members are able to continue to meet their obligations to CCPs is clearly the first line of defence. There has been a very substantial increase, since the crisis, in the resilience of the systemically important banks that are the main members of the largest CCPs. 55  A recent FSB survey found that exposures to CCPs are concentrated among a small number of institutions. And clearing member affiliates are also important providers of other critical services required by CCPs such as liquidity and credit providers or custodian and settlement banks. A small number of entities tend to dominate each resulting network. These concentrations suggest that shocks to one central element of each CCP network would likely have significant consequences for the rest of the network. FSB report ‘Analysis of central clearing independencies’, July 2017.

  Finally, the sovereign debt crisis in Europe has weakened the outlook for global growth and with it, U.S. exports. To date, these effects have been much more acute in Europe than here, but spillovers to the United States may occur, so we need to monitor them carefully. Thus, our economy continues to face some serious headwinds. Without robust growth, the economy is more vulnerable to negative shocks, which unfortunately seem to keep coming. It is like riding a bicycle – at a slow speed, the bicycle wobbles and the risk of falling rises. Politics have not helped. The intense debate around raising the debt ceiling took a toll on confidence. More recently, the difficulties in Europe and lower U.S. growth prospects made investors less inclined to take risks, spurring a major stock market sell-off and widening credit spreads. All these events increase the downside risks to growth. Let me turn now to the inflation outlook. As you may know, the FOMC has two charges: promoting stable prices and sustainable growth. This has been a tough year on both counts. Unemployment remains too high. At the same time, inflation has risen more than expected. Nevertheless, because monetary policy works with a lag, we have to make policy based not on where inflation is today, but where it is headed in the future. I believe that underlying fundamentals will help to subdue inflation over the next few quarters.
NBRM cannot require those banks to increase lending, but we undertake everything we can to prevent a reduction in their loan  2  BIS central bankers’ speeches  portfolios. Obviously, this is another area where we have a spillover of the negative developments in the Euro area into our economy. What will be the credit growth this year, and what do you expect it to be next year? The estimate for this year is about 7 percent, and for the next year it is somewhat higher. In which direction will the interest rates on loans and deposits move next year? The downward trend is likely to continue, although at a slower pace. The European Central Bank reduced the basic interest rate to 0.75 percent in order to stimulate the economic growth. The National Bank of the Republic of Macedonia maintains it at 3.75 percent. Why not reducing it down to 1 percent in our country, too, which will reduce the interest rates on loans as well? In a highly euroized economy as the Macedonian, it is necessary to motivate economic agents to demand Denars, not Euros. Therefore, interest rate parity on Denars and Euros must be kept at an appropriate level that stimulates the demand for Denars. In the last three years we have reduced that parity from 8 percent to only 3 percent. Further reduction is a process that depends on the resilience of the economy.

Macedonia will have to save more What are your expectations for the Macedonian economy in 2013, which is expected to be perhaps more difficult and more turbulent than this year? What, according to you, will be the biggest economic challenges and problems next year? It will be another year full of uncertainty for the world and especially for the European economy. Thus, the export demand for Macedonian products is unlikely to improve. So, we cannot expect that to boost economic growth. However, our expectation for the economic growth in Macedonia is to be much better than this year, driven by diversification of the production into new export-oriented facilities that started to work this year, or will start to work in the next year, as well as infrastructural facilities for which funding has already been secured from foreign sources. Both politicians and economists globally are of a divided opinion in terms of the economic policy that should be conducted in order to emerge from the crisis. Some advocate austerity, others encourage spending to stimulate growth. Which policy you prefer and think is right for Macedonia? According to me, those are “false” discussions. If a country has a room for increased spending, certainly now is the time to stimulate the economy. But unfortunately, there are not many such countries worldwide. Developed economies were spending more than they could afford for years, and now they do not have any room for fiscal stimulus left.