samchain/econo-pairs-v1 huggingface dataset:
As a result of the limited improvement in risk perceptions and the Central Bank’s projections supported by actual inflation data, market interest rates decreased significantly. In this period marked by the crisis, policy rates continued to be one of the factors determining market rates. In an era where ballooning government deficits are likely to put upward pressure on medium to long-term interest rates across the globe and markets are still sensitive to risk appetite, the fact that market rates continue to be primarily determined by the CBT’s policy rates is evidence of the increased effectiveness of monetary policy. The course of real rates and financial tightening measures during the crisis are also indicators of the improved effectiveness of monetary policy in Turkey. Real market rates declined continuously amid CBT’s policy rate cuts and reached historic lows. The tendency of real rates to fall is quite common in well-functioning economies during times of recession; yet, it is quite unprecedented for Turkey. In this regard, the current level of real rates is an indicator of the improved effectiveness of monetary policy. During the crisis, the monetary policy decisions of central banks in emerging economies had very limited short-term effect on their currencies. The values of these currencies were mainly determined by global risk perceptions.

The takaful industry continues to exhibit good financial results each year, as reflected in the three-fold increase in total assets to RM6.5 billion in June 2006, as compared to RM1.9 billion five years ago. More significantly, average doubledigit growth rate of 18.9% for net contributions of combined family and general takaful in the past three years, demonstrated the high potential of the industry. Whilst sustaining the current pace of development, there still exists high growth prospect for the takaful sector, in view of the large untapped potential, with the market penetration rate recorded at merely 6.1% in June 2006. Ladies and gentlemen, Bank Negara Malaysia has laid down a number of initiatives to further enhance the competitiveness and growth momentum in the development of the takaful industry. These initiatives emphasised on enhancing operational efficiency, strengthening corporate governance and risk management as well as improving the market practices and consumer awareness. All players need to capitalize on these initiatives for the takaful industry to achieve sustainable success and unleash the potential gains of the Islamic finance in Malaysia and abroad. Allow me to share some significant developments that may shape the future direction of the takaful industry moving forward. Firstly, as the prudential framework evolves towards a predominantly principle-based and riskbased regulatory approach, there will be a greater emphasis on risk management, corporate governance and transparency so as to maintain investor confidence and public trust.
To achieve this, the priority is to boost business investment – in France it is currently forecast at +3.4% for 2016. This depends on economic levers, to be strengthened through structural reforms. But it also depends on financial levers – the core challenge being equity financing, which is key for innovation. In this respect, Europe is lagging far behind the US: the equity share of corporate financing in the euro area is 52% of GDP compared with 121% in the US. BIS central bankers’ speeches  1  France and Europe do have substantial strengths to meet this investment challenge. Let me focus on two of them today: –  First, savings are abundant. In France, the household saving rate is high: 14.1% of gross disposable income in 2015, second only to Germany (17.4%) among the main European economies. In the euro area, the current account surplus is substantial: more than 3% of GDP in April 2016 – meaning that savings exceed investment by nearly EUR 330 billion. This gap needs to be closed by fostering investment rather than by reducing savings. –  Second, our financial system is solid. The regulatory and supervisory frameworks have been considerably strengthened since the crisis, both at the international and European levels. Today, the French banking system is one of the soundest in Europe and in advanced economies: between 2008 and 2015, the CET1 solvency ratio of France’s major banking groups more than doubled, from 5.8% to 12.6%, which is EUR +143 billion of core capital.

François Villeroy de Galhau: Addressing Brexit, and unlocking Europe’s investment potential Welcome address by Mr François Villeroy de Galhau, Governor of the Bank of France, at the Paris Europlace International Financial Forum, Paris, 6 July 2016. *  *  *  Welcome to Paris! It is a pleasure for me to be here today, and to share with you our responses to the new disruptive challenges facing Europe. Brexit is certainly a new one: the decision has serious consequences, especially for the United Kingdom. And obviously, Europe is at a crossroads. But let me just stress that this is nothing new. I’ve said it before, notably in a joint article with Jens Weidmann last February. Brexit is not a game-changer, but it does highlight the need to give renewed impetus to the European project. It also reminds us what finance is for: achieving the best balance between savings and investment. How this is done is still more important than where it is done; but there is clearly a link between the two. Before I share my views on the way forward for unlocking Europe’s investment potential, let me add a few more words on Brexit. 1)  Addressing the consequences of Brexit  Obviously, Brexit is bad news, first and foremost for the United Kingdom. The priority right now is to deal with the fallout as smoothly as possible. For economic and monetary authorities, this means reducing uncertainty and fostering confidence, in at least three ways: –  First, by managing the financial shock.
But even on foreign currency borrowing, a country may find that the spread of the interest rate at which it can borrow over the interest rate charged to "safe" countries, such as the United States, can reach extremely high levels. And where that interest rate is markedly higher than the growth rate of the economy, the debt burden rapidly becomes unsustainable unless the interest rate can be brought down quickly. Before the Russian default and devaluation of 1998, the average spread on emerging market sovereign debt was around 500 basis points, in itself a sizeable addition to the burden of borrowing in international capital markets. That spread then rose sharply to levels of between 1000 and 1500 basis points. At these levels debt burdens were clearly unsustainable. Since then, macroeconomic reform in many of the affected countries, with the help and support of the IMF, has reduced average spreads to a range of between 600 and 800 basis points, although there has been a further rise recently following the difficulties in Turkey and Argentina. Emerging market spreads are currently around 900 basis points over interest rates on US Treasury bonds. It is not easy to reconcile spreads at this level with the fact that sovereign debt defaults on bonds are running at historically low levels. In part, the low level of defaults may reflect the increase in the number of exceptionally large loans made by the IMF in recent years. So what does account for the high level of emerging market spreads?

Personally, I do not much like the notion of a list of “systemically important firms” because, as a previous generation of policymakers taught us, what proves to be systemic  4  Blunden G, “Supervision and Central Banking”, Bank of England Quarterly Bulletin, August 1987. BIS Review 134/2009  3  depends so very heavily on the circumstances. For example, it judged it safe to let Barings fail because the causes were clearly idiosyncratic and, just as important, the financial waters were calm. But essentially the same group of senior officials judged that it would not have been safe, in the circumstances of the time, to leave unaddressed the distress amongst fringe banks in the Secondary Banking Crisis of the mid-1970s, or amongst small banks in the crisis of the early 1990s. In both cases, actions were taken to stop the problems spreading to larger banks. But I do agree, of course, that banks are woven into the fabric of the financial system in potentially dangerous ways should carry more capital and liquidity than otherwise. That amounts to overturning a consensus that, assessed on an atomistic basis, greater diversification in a bank’s risks is a sufficient reason for lower regulatory requirements. The FSA published some thoughts on this area earlier today. Third – and this is a major departure from the past – we need a regime that recognises that inevitably regulation and supervision is flawed and, occasionally, will prove seriously wanting. However good a country’s supervision, banks and other firms will fail.
Had we done that, inflation would have been closer to the target last year and we’d have had a little more room to ease the interest rate component of the monetary conditions. The second reason is rather more complex and technical and relates to our gradually evolving perception of the relationship between the supply and demand-side factors of inflation. At the start of the coronavirus crisis we felt that the potential output level would not fall significantly and that the sharp drop in demand would cause the output gap to widen and have a disinflationary effect. However, core inflation did not fall very far in the months that followed. So, we gradually reappraised this picture, lowering the potential output level and proportionately reducing the size of the output gap. Not only was the persistently high inflation consistent with a relatively small output gap, but the decline in potential output matched our growing conviction that the coronavirus crisis was primarily a supply shock. This is apparent from a closer inspection of the supply side, where remarkable changes were and still are going on. The coronavirus crisis saw unprecedented interactions between the supply and demand side.

See ‘Lambda’, speech by Mark Carney at the London School of Economics, 16 January 2017. 16 Each observation shows the central projection for spare capacity or excess demand at the end of the second year of the forecast period (the 'Year 2' point) on the horizontal axis against the central projection for four-quarter CPI inflation at Year 2 on the vertical axis from successive Inflation Reports. The left-most observation (labelled "Aug. 2016 no stimulus") is a counterfactual version of the August 2016 Inflation Report forecasts with the effect of the MPC's Bank Rate cut, Term Funding Scheme and Asset Purchases removed. See ’Lambda’, speech by Mark Carney at the London School of Economics, 16h January 2017, for further details and discussion. 17 See Table 4.C in the May 2018 Inflation Report, available at www.bankofengland.co.uk/inflation-report/2018/may-2018. 12  All speeches are available online at www.bankofengland.co.uk/speeches  12  Chart 7: Trade-off in successive Inflation Report projections at Year 3 3.0  Inflation (%)  August 2016 2.5  November 2016  February 2017 August 2017  May 2017 November 2017 February 2018  2.0 -1.0  August 2016, no stimulus  -0.5  May 2018  Excess demand (%)  0.5  1.0  0.0  Preferred trade-off if λ=0.1  1.5  Preferred trade-off if λ=1 1.0 A Guidance Stocktake As the UK enters the most critical phase of the Brexit negotiations, it is useful to take stock of forward guidance and its potential role during the upcoming period.
The firm, concerted response by the monetary authorities in the main economic areas softened the initial impact on financial markets and meant that the effects on the world economy were relatively short-lived, though sharp, and confined to specific sectors. Broadly, the design of the euro area members' fiscal policies in 2001 prevented expansionary discretionary measures being adopted. Such measures would have jeopardised the sustainability of recent fiscal consolidation achievements and, given the lag with which such measures operate, they could have had a counter-productive effect on the cyclical stability of the economies in the area. However, the available estimates of the structural budget balance show that, at the aggregate level, there was a slight deterioration last year as a result of the tax cuts applied in certain countries before the cyclical weakening had become apparent. Further, fiscal results have shown that, in certain countries, not enough room for manoeuvre was available to absorb the budgetary effects of the slowdown without drawing too close to the limits set in the Stability and Growth Pact. Clearly, in such cases the consolidation drive made has not been sufficient to attain a balanced budgetary position. In this respect, it is of paramount importance that EMU members maintain the commitments entered into under the Pact and do so symmetrically, as reflected in the conclusions of the Barcelona Summit. The appropriate response by economic policies to the slowdown in 2001 has therefore contributed to the recovery of the European economy apparently under way since the beginning of the current year.

These considerations largely explain the easing of monetary policy in the US and in Europe since last autumn. The fact that we reduced interest rates by different amounts, and that they remain at different levels, is explained by differing assessments of the prospective impact on the pressure of overall demand, taking account of our own particular starting points. But the general nature of the response was driven by essentially similar considerations. Managing this global imbalance will be a considerable challenge for policymakers over the next few years; and helping to finance it – including helping to finance re-emerging markets – will be a considerable challenge for international bond markets. The fact that you are all here – and in evidently good form – after the past remarkable year suggests that you have strong nerves. You may well need them again in the period ahead. But think of it this way. By the time we meet again for this great Congress next year, Y2K will be behind you – and if you have survived that, you can survive anything! I wish you all possible success. *  *  *  BIS Review 17/1999
The European Commission is currently reviewing the European fiscal rule framework. In my view, this review should include simplifying the framework, by establishing a public expenditure growth rule and a debt-to-GDP ratio anchor, and reinforcing the capacity to build up fiscal buffers in good times for use in crises. In the case of Spain, shoring up the sustainability of public finances calls for a medium-term strategy. This should be based on immediately setting out a multi-year fiscal consolidation plan for implementation once the economic impact of the pandemic and of the war in Ukraine has been overcome. The plan should have broad political consensus and be accompanied by an efficiency review of public spending and the tax system, including all tiers of general government. Defining the plan early on would generate greater certainty and trust, which is particularly important against the backdrop of the monetary policy normalisation I have described. The course of the war in Ukraine has laid bare the EU’s vulnerabilities and dependencies in key sectors, such as energy, as well as the disparities between Member States in their exposure to such tensions. A challenge of this magnitude underlines the importance of a joint response to common risks. The response to the war in Ukraine must, once again, be more Europe. These common decisions must apply both to short-term measures, to address potential energy supply problems in the years ahead (in line with the recent European Commission proposals), and to medium and long-term reforms.

Growth was also improving abroad, which increased the demand for our exports (Chart 16). In this chart, each business cycle is contrasted with real exports normalized to a value of one at the business cycle peak, which is dated as time zero on the chart. The chart shows the relative path of real exports during the contraction and recovery for each cycle. The recovery in exports for this cycle was quicker than for the prior recession in 2001. Firms reacted to the significant challenges presented by the recession by focusing on cost cutting and improved efficiencies. These efforts led to a rise in measured labor productivity (Chart 17). With labor compensation growth declining due to the weakness in the labor market, the higher labor productivity resulted in sharp declines in the costs of producing goods – unit labor costs. The decline in unit labor costs helped firms to restore their profitability. As demand conditions improved, firms on net began to increase their employment and hours worked by their staff (Chart 18). It is important to note that improvement in the demand for workers will not necessarily lead to a steady decline in the aggregate unemployment rate. During the recession, many unemployed workers withdrew from the labor force and stopped  2  BIS central bankers’ speeches  actively looking for employment. This can be seen by the decline in the labor force participation rate (Chart 19).
We are still faced with five challenges and if I may, I would like to consider each of them in turn. 1) The first challenge is to complete the rules for banks’ minimum capital requirements by finalising the Basel III reform. The majority of the work – let’s say 80% – has already been done: its main aspects were approved in 2010–2011 and are now widely implemented. However, discussions remain ongoing on the question of risk weighting in bank balance sheets. The goal is to limit any unjustified variability in the weighting between banks or countries. However, this must not result in a standardisation, as the variability of results is also a reflection of different risk profiles. The risk sensitivity allowed for in banks’ internal models represents a huge step forward, as it ensures that requirements are proportionate to risk-taking. Naturally, we must reinforce confidence in internal models by supervising them closely, as the ACPR has long done and as the Single Supervisory Mechanism in Frankfurt does today. But the task at hand is to finalise Basel III, not to build a new Basel IV based mainly on the standard approach that by definition would not take account of differences between countries and banks. It is in the strategic interests of France, which has always promoted international rules, to conclude a final agreement on Basel III.

We have made significant progress, particularly during the latest Basel Committee meeting last month on 4 and 5 October, but we are not there yet, even though I hope that an agreement will be reached as quickly as possible. If we are to reach an agreement, two conditions must be met. First, the agreement must be fair – it must be applied by all jurisdictions, in all its components, including by the Americans in the measurement of market risks, i.e. the “fundamental review of the trading book” (FRTB). Second, the agreement must be reasonable, in terms of the increased capital requirements that will apply to French and European banks – including through the introduction of the so-called “output floor” on capital requirements for banks that use internal models. On the one hand, these capital requirements would have to be met over time through “normal” allocations of profits to reserves, without any bank having to resort to a dedicated capital increase. On the other hand, these new rules must be fully compatible with the smooth financing of the French and European economy and sound credit growth. In particular, our mortgage lending model, based on guaranteed loans, and our 4/7  BIS central bankers' speeches  financing of SMEs cannot be called into question. In my view, these are the principles that will determine whether any future agreement can be accepted. 2) The second challenge is to finalise measures that target non-banks.
Others have vulnerabilities in some of these areas, which may have been magnified by access to inexpensive, abundant credit in international markets. Chile’s macroeconomic framework Chile has gradually developed a scheme of macroeconomic policies that permits us to deal with the natural volatilities of the business cycle of any open, commodity-exporting economy. This scheme has evolved over time to address the new challenges, such as a growing degree of financial integration to the global economy. This scheme leans on several pillars. One such pillar is our fiscal policy based on a structural balance rule. This rule dictates clear fiscal commitments that ensure that public finances are both sustainable and predictable. Our fiscal policy is no longer a factor amplifying the business cycle as it was in the past, but on the contrary, it is a buffer. More precisely, under our regime fiscal spending is neutral to the cycle. In turn, the resources accumulated in the sovereign wealth funds are an important source of external liquidity and financing to withstand periods of low fiscal income. Plus our public sector is a net creditor. Indeed, net public debt of the central government is negative, at around minus 6% of GDP. Another pillar is the autonomy of our Central Bank and its commitment with its constitutional mandate to pursue price stability and its inflation targeting regime. Since the year 2001, Chile relies on an inflation target of 3% annually, with a tolerance range between 2 and 4%, which has been met over the years.

The change in name is due to the fact that we have incorporated an additional perspective: the macroprudential supervision, whose ambitious aim is to prevent the formation of a crisis or, at least, to contribute to alleviating its effect, should it be unleashed. Clearly, the application of any pre-emptive policy calls for the identification and correction of potential macrofinancial imbalances before they reach worrying levels. The logic underlying this approach is conceptually straightforward: future crises are the consequence of our current actions. In other words, crises are endogenous and, therefore, avoidable phenomena. It is then rather ironic that, now that we have a framework aimed at correcting imbalances before they cause future crises, we have been caught unaware by an eminently exogenous crisis. In any event, we should be aware that macroprudential policy is a recent development. Its theoretical framework was approved in Basel in late 2010, just a decade ago. It has arisen as a complement to microprudential supervision, and its aim is to boost financial stability through the prevention and mitigation of so-called systemic risks and vulnerabilities, thereby fostering the sustainable contribution by the financial system to economic growth. To achieve this, risks are evaluated in an aggregate fashion system-wide, but considering also the potential interactions between individual institutions and financial sub-sectors. Since 2014, the Banco de España has had the possibility of introducing countercyclical capital buffers (CCyB).