samchain/econo-pairs-v1 huggingface dataset:
As a consequence, global trade contracted, financial flows dried up, and unemployment rates soared. The global financial system is still under stress; but one can see some signs of recovery in the global financial markets and economic indicators around the world. Unprecedented policy reactions to the crisis taken by governments and central banks worldwide have managed to stabilize the financial markets and reduced liquidity concerns. Especially, thanks to ease of tension in the global financial markets, emerging market equities have boosted and spreads have narrowed. Commodity prices have rebounded from their recent low levels while capacity utilization and industrial production have globally recovered modestly. As a consequence, international institutions like the IMF and OECD announced that the global economy will recover sooner than expected and they are getting more and more optimistic regarding their projections. In the words of Winston Churchill who had seen the sunlight after the darkest days of the Second World War: “This may not be the end. It is not even the beginning of the end. But it is, perhaps, the end of the beginning.” Dear Guests, A key characteristic of the recent crisis was that it combined an acute international financial crisis with an outright global recession. At the same time, synchronized countercyclical policies were implemented by both advanced and emerging economies in response to global turmoil. In my opinion, it would be better to briefly elaborate on these distinctive features of the recent crisis to have a better understanding of the nature of the recovery going forward.

Durmuş Yılmaz: Green shoots – how vigorous and how sustainable? Speech by Mr Durmuş Yilmaz, Governor of the Central Bank of the Republic of Turkey, at the Conference on “Green shoots – how vigorous and how sustainable”, IMF-World Bank Annual Meetings 2009, Istanbul, 5 October 2009. *  *  *  Ladies and gentlemen, First of all, I would like to welcome everyone to Istanbul. It is a great pleasure for me to be here addressing such a distinguished audience as we convene for the 2009 Annual Meetings. “Green shoots” has been a popular metaphor to describe the recovery process. And today, I will try to elaborate on our path to build a career as a prudent gardener. I want to begin with discussing the path that brought us to this crisis. Then, I will talk about the recovery signals in both global and Turkish economy. I will conclude my speech with my thoughts on the solidity and sustainability of these signals. As is well known, financial strains originated in advanced economies abruptly mutated into a full-blown crisis and had a devastating effect on international capital markets. As the crisis intensified, measures of perceived risk escalated to record levels and major financial institutions suffered massive losses. At the same time, liquidity shortages, tighter credit conditions, and heightened uncertainty were associated with a sharp decline in both private consumption and investment spending. In fact, many economies fell into recession or have seen their growth rates decline sharply.
The terms of trade measure the price of imported goods in relation to exported goods. When oil prices decline and import prices remain steady, we must export more in order to buy the same quantity of imports. This is not the first time that we have experienced substantial changes in our terms of trade. The most pronounced variations – in 1986 and 1998 – were due to the sharp drop in oil prices. Variations in Denmark’s terms of trade are negligible compared with Norway. In this sense, the Norwegian economy has more in common with countries like New Zealand and Australia, which are also large exporters of commodities. A substantial change in the terms of trade  7  BIS Review 20/1999  translates into considerable changes in these countries’ earnings and balance of payments. Over the years this has resulted in sizeable exchange rate fluctuations. The exchange rate is a buffer against changes in the terms of trade. While a country like Denmark has also managed to maintain a stable exchange rate, commodity-producing countries typically experience fluctuations in the exchange rate in tandem with changes in the terms of trade. In New Zealand, Australia and many other countries, monetary policy is oriented directly towards price stability, and these countries permit short-term fluctuations in the exchange rate. This means that monetary policy bears the primary responsibility for price stability, whereas fiscal policy is to a greater extent oriented towards long-term stability in government finances.

1  BIS Review 45/1999  It is important to note that workouts should not be seen as a soft option for the debtor or an act of charity on the part of the creditors. Banks will generally only be prepared to embark on a workout if the prospect of eventual recovery is greater than it would be in a liquidation. Bearing in mind the generally low recovery rate that unsecured creditors obtain from liquidations, workouts will usually be the better option. But the threat of liquidation must always be there as a last resort to provide an incentive for the debtor to face up to its problems and to agree to cooperate with the banks. Workouts have a long history in Hong Kong but the principles that govern them were only recently codified in the form of the Guidelines on Corporate Difficulties issued by the Hong Kong Association of Banks in April 1998. These are generally known as the “HKAB Guidelines”. The Guidelines are non-statutory, but they are supported by both HKAB and the HKMA and all banks are expected to use their best endeavours to comply. In my view, this represents one of the most important initiatives of HKAB in recent years, taken as it was at a time when the economy was in the early stages of recession and when the need for workouts would inevitably rise.
This turnaround in the economy has prompted an active debate about when the Bank’s monetary policy stance should be shifted from back foot to front – in other words, whether and when UK interest rates might rise. Market expectations of future interest rates have already adjusted since the economy began growing. In January 2013, the first rise in UK interest rates was expected in the third quarter of 2015. Now, it is expected by the end of this year. This prospect has sent shivers down some spines. But some context is important here. When the first rate rise does come, it will be because the economy has recovered sufficiently to thrive on smaller doses of monetary medicine. A normalisation of interest rates would signal the economy having returned to the hospital ward, after six years in intensive care. The economy would be switching channels, from ER to Casualty. That is something to welcome, not fear. At the same time, the Bank’s policy guidance was introduced in August last year in part to prevent interest rate expectations getting ahead of themselves and derailing recovery. From our survey evidence, it appears that businesses listened and took heed. Investment rose 8.5% during 2013. This has meant the UK’s recovery has not just been healthy but reasonably balanced, with both households and companies contributing. Today’s uncertainties None of this leaves the job of judging the future path of monetary policy an easy one.

“A desirable monetary policy is characterised by inflation under normal circumstances being close to the inflation target in a two-year time perspective while at the same time the paths for inflation and the real economy do not exhibit excessively large fluctuations.” Given this reasoning, I think it is possible to identify some important characteristics of a good interest rate path. Firstly, the interest rate should be set so that inflation remains close to the 2 per cent target. If inflation were to deviate from target from the start, we should normally choose a path for the repo rate that brings inflation back on target within two years. Moreover, this path should be chosen so that inflation is close to target even beyond the two-year horizon. This way of conducting monetary policy helps reduce uncertainty and anchor inflation expectations around the target. The interest rate should also be set to achieve as far as possible a stable, sustainable development in the real economy, as long as this is compatible with the price stability target. Let us say that the  11  See, for instance, Giavazzi, F., and F. S. Mishkin (2006). 12  See also Rudebusch, G.D. and J.C. Williams (2006). 13  See the box ”Uncertainty regarding future interest rate movements” in Inflation Report 2006:1 for some examples of how to produce such uncertainty intervals. 14  See the memorandum "Monetary policy in Sweden” which can be downloaded from the Riksbank’s website, www.riksbank.se or ordered as a printed document.
Basel I was flawed in that it failed adequately to cover investment banking activities that grew after the late 1980s, arguably because of the regulatory arbitrage. Basel II failed to fill these gaps adequately. But Basel I, through its simple risk weights, also encouraged the property-lending boom. One part of the story goes something like this: demutalised building societies came under pressure to generate higher returns for shareholders and thus devised business models that pushed them towards greater leverage and larger risks for a given amount of lending – in other words, higher LTV lending. And they also exploited another flaw in Basel I, the ability to securitise loans without properly assessing the impact on the viability of the business models. Thus, Northern Rock grew its high LTV, low-margin lending and developed a securitisation operation that was ultimately too big for the bank to sustain. Now to be clear, this is not a defence of Basel II. Far from it. Basel II introduced a modelbased approach alongside the so-called standardised approach. It created complexity, and it encouraged the use of models generally, including for assets that are not, in my view, susceptible to robust modelling. Basel II was also implemented in what looks like too much haste – it may not have seemed that way at the time I accept. But bad models were allowed through the gate. Commercial property was a bad case in point. One has to ask whether commercial property loans are too lumpy to be modelled. But, modelled they were.

But, it is a very useful tool, because on their own, risk-based measures can be arbitraged too by claiming that the measured risk has fallen when the real risk has not. The leverage ratio helps to put a floor into the system which stops that type of activity beyond a certain point. Does this approach of using several tools leave the whole system of regulation too complicated? It certainly puts an emphasis on having good people in regulation, but I come back to the quote of the late 1980s, namely that good regulation has to understand how firms take risks. That does not, however, mean that a supervisor should allow a free-for-all and then (usually vainly) hope to understand it. We are doing a number of important things to counter complexity. First, the proposal on ringfencing from the Independent Commission has a strong element of separating more straightforward activities from the more complex. It should not be a matter of rules and good behaviour inside the ringfence and the Wild West outside, because the outside could damage the financial system, but we will be able to use different approaches on each. Second, the Prudential Regulation Authority will be very focused in its judgements on the things that matter for our objectives. For me, this is where simplicity is key – keep it very focused, but to do that we must have good people who can see the wood for the trees. That is what we are developing for the PRA.
The losses of CHF 3 billion announced by the bank for the fourth quarter show how important it was to reinforce the capital base. At UBS, the government package provided significant relief to the balance sheet from the burden of illiquid positions particularly affected by the crisis. With this package, the SNB made it possible for UBS to transfer illiquid positions to a special purpose vehicle. The UBS provided this special purpose vehicle with equity amounting to USD 6 billion. The Confederation compensated UBS for the capital requirement arising for this purpose by  BIS Review 157/2008  1  subscribing to mandatory convertible notes (MCN). Since the announcement of the package, the UBS liquidity situation has stabilised. The numerous international measures aimed at stabilising the financial system have also had a positive effect on the position of the Swiss big banks. Nevertheless, further losses cannot be ruled out in view of the difficult market conditions. The situation remains serious, and the SNB will continue monitoring it closely together with the Swiss Federal Banking Commission (SFBC) and the Federal Department of Finance. Lessons from the crisis and reforms in Switzerland I would now like to speak about the lessons learned from the crisis. The continuing financial crisis is almost unprecedented, in terms of both extent and duration. It is also unprecedented in terms of the measures taken by the authorities and the central banks with the aim of stabilising the situation and minimising the impact on the real economy. This also applies to Switzerland.

While regional capital markets have generally experienced strong growth since the financial crisis, our potential is limited because by international standards the regional equity and bond markets are small and fragmented. We made some headway four years ago with the Chiang Mai Initiative (CMI), which saw the expansion of existing multilateral currency swap arrangements to include all 10 ASEAN members, as well as the conclusion of 16 bilateral swap arrangements, totalling $ in combined facility. When the CMI was launched in May 2001, it was agreed that Finance Ministers should review the Initiative 3 years  2  BIS Review 20/2004  after implementation. So it would be timely this year, for ASEAN Finance Ministers together with our “Plus-3” counterparts to consider what and how the review of the CMI could be done. We should also explore further avenues of cooperation. For example, we may develop greater linkages between stock exchanges in the region, or harmonise standards and conventions so as to make it easier for investors to operate across the capital markets in the region. In such initiatives, we do not have to wait for all ASEAN members to be ready. Once two or more ASEAN members are ready to make the move, they can work together as pathfinders for the whole region. Conclusion Globalisation has presented many challenges to ASEAN, but it has also created many opportunities. Integrating our economies requires hard work, political will and often, tough decisions.
If history serves as a guide to the evolution of EME balance sheets, EMEs’ external liabilities could double as a share of GDP by 2030: market-based finance could then account for half of external liabilities, up from onethird today. And if investment funds keep growing as they have over the past few years they could represent 40% of market-based finance flows to EMEs in a decade’s time. 22  22  There is a systematic cross-country relationship between the size and composition of external balance sheets with levels of incomes per capita. This has been combined with current forecasts (and for investment funds recent trends) to generate scenarios for the size and composition of EM balance sheets in 2030. In early stages of development a country’s cross-border finance tends to reflect trade finance provided by banks. As global value chains develop FDI becomes more important. Finally, market-based finance increases as financial 16  All speeches are available online at www.bankofengland.co.uk/speeches  16  These flows will benefit EMEs in good times, but if domestic institutional frameworks do not evolve in parallel, they could also be major sources of instability. By 2030, the sensitivity of Capital Flows-at-Risk to push factors could triple (fourth bar, Chart 15).

Chart 15: Major structural changes are increasing the sensitivity of Capital Flows-at-Risk to push shocks  2006  2018  2030 excluding growth in 2030 including growth in EME external balance EME external balance sheets sheets  -1  -2  Impact of the increasing role of investment funds  -3  Impact of the shift to market-based finance Impact of higher share of FX-denominated debt in EMs Pre-crisis Total  -4 Capital Flows-at-Risk as a % of GDP  Sources: IMF, EPFR, IIF, Bank calculations. Notes: This chart shows estimates and projections for the sensitivity of Capital Flows-at-Risk to negative push shocks at different points in time. The chart is based on separate panel quantile regressions for FDI, banking, market-based finance and investment fund flows. We use the global FCI (push), country-specific FCIs (pull), and the share of NFC debt denominated in foreign currency as regressors. The third bar combines regression results with projections for the composition of flows and the role of FX-denominated debt in 2030, as described below and in footnote 21. The fourth bar also takes into account projected growth in EM’s external balance sheets as described below and in footnote 21. In particular, we estimate that the growing shares of FX-denominated debt, market-based intermediation and, within that, the increasing role of investment funds, have increased the sensitivity of Capital Flows-at-Risk to push factors by 50% since the crisis (second bar, Chart 15) – largely using up the self-insurance purchased by EMEs. Left unattended, these vulnerabilities are likely to grow.
Ardian Fullani: Overview of Albania’s latest economic and financial developments Speech by Mr Ardian Fullani, Governor of the Bank of Albania, on the Monetary Policy Decision-Making of the Bank of Albania’s Supervisory Council, Tirana, 27 November 2012. *  *  *  Today, on 27 November 2012, the Bank of Albania’s Supervisory Council reviewed and approved the monthly Monetary Policy Report. Based on the latest monetary and economic developments in Albania, and following the discussions on their future outlook, the Bank of Albania’s Supervisory Council decided to keep the key interest rate unchanged, at 4.00%. The Supervisory Council deems that the current monetary conditions are adequate to meet Bank of Albania’s inflation target in the medium term. These conditions ensure the necessary monetary stimulus to support the domestic demand. Let me now proceed with an overview of the economic developments and key issues discussed at today’s meeting. *** Annual inflation fell for the second consecutive month, down to 2.4% in October. Its performance was driven by food price developments, which account for almost 70% of the inflation rate. Prices of other consumer basket items moved in different directions, retaining their contribution at the same levels as in the previous months. From the macroeconomic viewpoint, inflation rate continued to be determined by temporary externally-generated supply factors and structural changes in the domestic market. The slow performance of economic activity is associated with low increase in producer costs and low pressures on inflation.

The strained financial situation in the public sector would seem to indicate weak employment growth for at least the coming year, while the economic upturn will probably only lead to a relatively small increase in employment in the private sector. There is, of course, a risk that the weak labour market will affect households' expectations and consumption propensity; a risk that we pointed out already in December and which may have been reinforced. The higher the rate of unemployment, the more caution households will probably show when purchasing and consuming. This could in turn lead to a risk of lower growth during 2004. All in all, the view of the demand situation in Sweden remains essentially the same as in December; demand will increase and approach the economy's long-term sustainable level. Lower domestic cost pressure The relationship between unit labour costs and inflation is usually fairly clear. Thus, when we made a downward revision to the figures for unit labour costs in December, it was not entirely insignificant for the inflation forecast. The background was primarily the signs we saw of an improvement in productivity growth, combined with a weaker labour market. I shall return to the subject of productivity in more detail in a moment. With regard to wage developments, the wage bargaining rounds are currently a central issue. Their outcome will have great significance for the rate of wage increase and thereby also to a large extent for inflation in coming years.
When one compares it with other public enemies like drug abuse or terrorism, one would still find that those issues would also affect only a segment of the society at any given time. Since inflation affects everyone and people have limited prospects of escaping it, it is considered as the public enemy number one. Some amusing stories about inflation In the recent history, there have been many countries which have been hit by hyper inflation. Of them, the most prominent case has been the hyper-inflation in Germany after the First World War, where inflation accelerated to 1,000,000 % per annum. Other noteworthy examples are Bolivia (25000 % p.a. ); Russia (2000 %); Israel (1500 %); Turkey (again 1500 %) and currently Zimbabwe (3700 % and still rising). When prices rise at these high rates, the first casualty would be the currency of the country. No one would like to accept the domestic currency, because its value would fall by the minute. Instead, people would start to accept other types of hard currencies like the US Dollar. If there is a shortage of those hard currencies, people would invent their own currencies. In Germany, with that hyper-inflation in which prices rose by 2 % every minute, German Mark ceased to function as money. Instead, people started to use cigarettes, chocolate bars or empty bottles as the medium of exchange. Then, there is the story of those two brothers who inherited a sizeable wealth from their father.

Those who are subject to this pain should have a good understanding of the virtues of this painful adjustment and be prepared to take the bitter medicine for a permanent cure of the ailment. This casts a new responsibility on the banks, because monetary policy is implemented by the central bank through banks. In terms of this new responsibility, the banks should appreciate the intention of the central bank with a positive note. If the central bank raises interest rates and curtails credit levels, the banks should do much more than what the central bank has directed. It has to extend, both by deed and word, its full cooperation and commitment to attaining the monetary policy targets, because at the end, they are the main beneficiaries of having an inflation free world. A similar responsibility is cast on the private sector as well. The Central Bank, like a good physician, has to flush out all the causes of inflation from the system. When doing so, it has to adopt painful and unpopular measures. But such measures are taken for the interest and the long term well-being of the economy. If the economy is allowed to be hit by inflation continuously, it is the private sector which would suffer most. It would be reduced from a long term planner to an at the moment event manager. It would be pestered with numerous requests for wage increases by the employees. Its profits would fall in real terms.