samchain/econo-pairs-v1 huggingface dataset:
These challenges have been compounded by deeper forces that have radically altered the balance of saving and investment in the global economy.4 In the process, these have moved equilibrium interest rates into regions that monetary policy finds difficult to reach. Whether called “secular stagnation” or a “global liquidity trap”, the drag on jobs, wages and growth is real. Chart 1 Geopolitical risk doubled, on average, after 9/11  Source: Bank calculations and Caldara and Iacoviello (2016), ibid. Less visible, but more fundamental drivers of economic uncertainty are the powerful forces arising from technology and globalisation. The integration of 40% of humanity into the global economy has re-orientated production, eliminated jobs and may have depressed wages. These dynamics have been accompanied by the implications of technology for the  2  These are distinct from other types of uncertainty familiar to economists, including model uncertainty (uncertainty about the empirical properties of models as descriptions of the world), or to policymakers, such as the long and variable lags involved in the effects of monetary policy. 3  Economists have recently attempted its measurement by examining the frequency of newspaper articles containing terms like “geopolitical tensions”, “terrorist threats”, and “war risks” in a sample of global newspapers. See Caldara, D and Iacoviello, M (2016), “Measuring geopolitical risk”, Federal Reserve Board, mimeo. Political scientists have also constructed similar measures though, it seems, at lower frequency. For an application see for example Berkman, H., B. Jacobsen, and J.

Chart 10  Chart 11  Whole economy real investment substantially weaker than pre-crisis forecasts  Advanced economy investment has fallen relative to GDP, remains lower than past episodes  Residual Non-residential Total  Equipment Residential  Per cent 10  1980  1989  0  2001  2007  pp fall in investment share of GDP 1.0  -10  0.5  -20  0.0 -0.5  -30  -1.0  -40  -1.5  -50  -2.0 -2.5 -3.0  Sweden  Switzerland  Germany  UK  Canada  US  France  Denmark  Italy  Spain  -60  -3.5 -4.0 -4.5 T  T+1 T+2 T+3 T+4 T+5 T+6 T+7 T+8  Years  Source: IMF World Economic Outlook and Bank calculations. 8  Source: IMF World Economic Outlook and Bank calculations. BIS central bankers’ speeches  Chart 12  Chart 13  UK business investment still short of pre-crisis share of GDP…  … and tracking below past cycle average Business investment, peak GDP = 100  12  Average of past cycles  11  2008  Nominal 10.5 10 9.5  Per cent of GDP  Real  130  11.5  90 80 70  8.5 2016Q1  2014Q4  2013Q3  2012Q2  2011Q1  2009Q4  2008Q3  2007Q2  2006Q1  2004Q4  2003Q3  2002Q2  2001Q1  Source: ONS and Bank calculations.
But it brings very material benefits through increased competition as a result of greater transparency of prices and lower transactions costs, through broader and more liquid financial markets, and through the associated improvement in economic resource allocation. And there is no doubt that intra-European exchange rate certainty in particular will enhance the benefits to be derived from the European single market. Whether or not it is essential, therefore, most people would, I think, agree that, other things equal, the nominal exchange rate certainty that comes with the move to the single European currency is very desirable in this context. What then are the economic arguments against it? Essentially they can be summarised as the risk that the single monetary policy - the single, one-size-fits-all, short-term BIS Review 88/1998  -2-  interest rate within the euro area, which is a necessary corollary of the single currency - will not in the event prove to be appropriate to the domestic needs of each of the euro-member countries. There is no doubt that such risk exists. It may result from cyclical divergence within the euro area, with some participating countries needing to stimulate domestic demand while others are already operating close to capacity. It may arise from differences in fiscal positions even though these are to be constrained through the Stability and Growth Pact. Or it may result from economic shocks of some sort that have a bigger impact on some countries than on others.

I am pleased to observe that some countries in the euro area have already realised that the only solution to addressing the current economic slowdown lies in structural reforms to strengthen the functioning of the economy. I warmly welcome the efforts of the governments of these countries and sincerely hope that others will follow their example. Second, as I have sketched out in my remarks to you today, while the need for structural reforms is pressing in the euro area, in all other regions of the world - albeit to different extents and to address somewhat different problems - there are benefits of structural reform to be won. Thank you very much for your attention. 4  BIS Review 39/2003
Something which in my opinion is quite natural, given the current economic situation, to ensure continued good growth. Developments in household indebtedness and house prices are also factors that are important; however they are not in any way decisive for this interest rate decision. From a monetary policy perspective, one can say that we are on somewhat unfamiliar ground with regard to this type of aspect. We cannot say with certainty what will happen to house prices when the interest rate is increased. We probably have a gentle adjustment ahead of us, with a rate of price increase that cautiously slows down. If house prices and indebtedness were to continue to rise very rapidly, there could be a risk of a more dramatic adjustment further ahead, with effects on the real economy and effects on inflation. With this background, too, the timing of the interest rate rise appears reasonable. The bank raised the repo rate in January. Given the good economic developments, the Executive Board’s assessment was then that a continued gradual increase in the repo rate would be reasonable. The information received since then does not alter this picture, in my opinion. Now the work on producing and discussing a new forecast of inflation begins, so that we can make a decision on 22 February regarding the monetary policy stance. I look forward to seeing the forecasts and participating in the ensuing discussions.

It is surprising that this issue is still outstanding, despite the fact that it is more than ten years since the bank crisis occurred and despite a draft bill being taken up for consultation five years ago. We play a central role in the monitoring work and concentrate our task to assessing how the financial system functions and what risks might arise. Our Financial Stability Report is very important here. The aim of this report is to identify potential risks and to influence market operators with good analyses. The third part of the stability work – crisis management – arises because the central government might need to take action to avoid a crisis that threatened the stability of the system. In order to manage a crisis, the central government must be able to assess what consequences will arise if an institution suffering problems should become bankrupt. If these consequences are judged to be serious, the central government must also be able to take measures to alleviate the effects. In extreme cases the central bank can act as “lender of last resort” (provide emergency liquidity assistance, ELA) if this is necessary to prevent the bank system from collapsing. A lot has happened with regard to stability work since 1997 and the work changes continuously as the world around us changes. For instance, the increase in the banks’ operations abroad means that foreign borrowers also need to be analysed to a greater extent. In addition, the stability work must follow the increasing integration of the financial markets.
Such developments can create difficulties for emerging markets through spillover effects, large and persistent capital inflows, and the risk of sudden stop and capital reversals. So, it is in this context that IMF surveillance on emerging markets, in addition to the new directions that we have discussed, should pay attention to the sources of the externally-induced risk and vulnerabilities, and to assist members, through Fund policy advice, on how best to prepare. To help emerging market members become better prepared for these risks, I have a few suggestions to make on the Fund’s current efforts. First, for the new direction on financial sector surveillance to be relevant for crisis prevention, it is important that the key systemically important economies participate. As with FSAP, this is an area that is likely to be a challenge. Ideally, most systemically important economies and those with potential financial vulnerabilities should participate if the new direction were to have a strong relevance to the global surveillance objectives. The second suggestion is in financial markets surveillance. Again, if surveillance is to have a strong relevance for emerging markets, we will need to have a more policy-oriented surveillance of the global financial markets, focusing on the key financial flows, and on keeping members informed of what the Fund sees as the current trends and risks in the global financial markets.

And Singapore’s CapitaLand and the Middle Eastern-owned Arcapital Bank have recently set up a property fund aimed at investing in Japanese real estate, with a target asset size of $ 300 million. 2  BIS Review 47/2005  Second, similarly for the banking sector. I expect to see more Middle East banks and financial institutions set up in Singapore and Asia going forward, and a counter-flow into the Middle East over time. Some Middle East banks are already planning to scale up their presence in Singapore to service Middle Eastern entities interested to operate in Asia, as well as to help Asian corporates to operate in the Middle East. There are similar plans by Singapore-based financial institutions to step up their profile in the Middle East as they seek to tap into Middle Eastern financial flows. Such plans may give added impetus as Singapore concludes FTAs with more Middle Eastern countries, including those which are currently ongoing with Qatar and Kuwait. Third, Islamic finance is an area that shows considerable promise globally. We know the size of the market - around $ 200 to $ 300 billion globally, and growing at about 15% per annum. Efforts are being made in Asian markets, to grow Islamic financial services. For example, Malaysia has been awarding Islamic banking licences to foreign players and encouraging the subsidiarisation of Islamic banking windows. It aims to have 20% of total banking assets to be Islamic by 2010. Singapore, as an international financial centre, is also keen to offer Islamic financial services.
Global financial conditions are still on the favorable side from a historical perspective, which in no case means that a sudden turnaround cannot happen. As a matter of fact, the consequences on global financial markets of a negative outcome in Greece or the ever closer rise in US interest rates are still significant risk situations which, despite having been on the horizon for so long, must not be overlooked or forgotten. Chile, as we have said time and again, has been able to confront the changes in external and internal conditions via a significant and quick adjustment. The absence of large imbalances, combined with the proper macroeconomic policy framework, are, in our view, key elements, although not sufficient, to generate the conditions required to resume growth levels that allow us to reach the desired development of our country. In this context, I would like to note that I fully endorse what the Finance Minister said recently, that fiscal stimulus-and I would add monetary stimulus as well-cannot by itself persistently maintain the growth of the economy. On the fiscal front, it is clear that, as stated by the appropriate authority, to honor the commitments on the matter, spending cannot grow eternally at the rates projected for this year. On the monetary front, given the baseline scenario, the convergence of inflation is inconsistent with a bigger impulse than the present one.

These spillovers have had tremendous implications on emerging market central banks through macroeconomic and financial instability, financial and foreign exchange market volatility, and more importantly, the ability and autonomy of central banks in the region to conduct monetary policy. So much attention has been focused on the advanced economies – the growth recovery, policy trajectory and political uncertainty. Not enough has been discussed on the countries at the receiving end of these uncertainties, and the difficult circumstances under which emerging market central banks have had to operate in recent years. This will be the focus of my remarks today. I intend to describe a few reasons on why it has been a real challenge for emerging market central banks to conduct monetary policy in recent years than in the period prior to the global financial crisis. I will then discuss the policy thinking and tools from the perspective of an open economy when facing the challenges that emanate from global policy-spillovers. Lastly, I will share my view on the importance of having utmost autonomy in policy-making and suggest what we and the global community can possibly do to improve independence in policy decisions. Global developments since the crisis have added extra layers of complexity in policymaking For most emerging economies, structural changes in the economy over the past two decades such as diversification of sources of growth, wider set of policy tools and deeper domestic financial markets have all contributed to greater independence in the formulation of monetary policy.
The innovations that the Central Bank of Chile has incorporated into all its areas of action, from monetary policy to its own corporate management, from generating statistics to the management of circulating money, are proof that a sound institution is not necessarily immutable. Also, that an autonomous organization can develop beyond its legal mandates. The challenges facing the Bank in the future, in both the macroeconomic and the institutional fields must not be underestimated. The confidence that our citizens put in this institution is not an insured capital but something that, again, needs to be earned day by day in each one of its areas of responsibility. 8 / 19  BIS central bankers' speeches  These challenges involve, first and foremost, applying the inflation targeting framework in a changing macroeconomic context, both externally and internally. The business cycle has stopped behaving as it was traditionally understood—with a certain regularity between economic activity in the United States and the emerging economies; between the value of the dollar and commodity prices; between the money supply and market interest rates. International trade and investment have been slow to recover, which has been especially damaging for exporters of natural resources, such as Chile. China’s economic prominence, the integration of financial markets and the accumulation of liquidity globally have amplified the contagion mechanisms across countries and sectors.

Even though this figure is not a trend setter, it is sufficient to reduce fourth-quarter growth, which in turn weighs in the revision of estimated 2016 growth, which now stands at 1.5%, i.e., the floor of the forecast range we estimated in September. Despite the performance of activity in October, partial fourth-quarter data suggest that the behavior of domestic spending has not changed significantly. This, in an environment where the labor market is adjusting gradually, with an unemployment rate that remains low (although strongly influenced by increased selfemployment) (figure 4). In turn, although with monthly fluctuations, wages show annual expansions around their historical averages. Bear in mind that the decline in inflation has accelerated growth in the wage bill in real terms (figure 5). As I said, the main event abroad was the American election. It opened a number of questions about the external economic outlook, characterized by highly expansionary monetary policies in the developed world. One such question is about the potential effects of a fiscal package in the US, which the financial markets estimate to be very likely. This yielded the way to increased inflation expectations, prospects of a not-so-expansionary monetary policy, a strengthening of the dollar and reduced appetite for longer-term securities. Thus, long-term interest rates have increased substantially in the US, and have been replicated in the rest of the world with varying intensities. In this context, financial conditions facing emerging economies have tightened, although they remain positive from a historic standpoint (figure 6).
And it is also crucial to harness the upswing to bolster the financial sector, the soundness of which has enabled the world economy to better withstand the severe shocks it has undergone in recent years. The euro area Last year the euro area remained in a period of low growth that began in 2001. In the second half of the year the first signs of recovery were detected, which appear to have strengthened in early 2004. That said, the area remains far less buoyant than the rest of the main regions and its prospects are still considerably uncertain. This prolonged phase of relatively sluggish economic activity has been the outcome, among other things, of a series of global shocks and, more recently, of the pronounced appreciation of the euro amid heightening international financial imbalances. But the unsatisfactory results of recent years also appear to be indicative of the excessive vulnerability of the European economy to developments in its external environment and of the chronic weakness of its internal demand, which favourable monetary and financial conditions have been unable to counter. The performance of the euro area has proven somewhat disappointing when set against the expectations generated at the outset of Monetary Union over five years ago. Among other objectives, the Union was intended to increase the economic prosperity of European citizens. However, we should not ignore the progress made in overcoming some of the structural shortcomings during the process of monetary integration.

This would be in line with the greater concern at all levels to avoid the funds extended through the banking system being used, among other activities, for terrorist financing or money laundering. 8  BIS Review 39/2004  Customer knowledge on the part of financial institutions has a second but no less important dimension. The products offered to financial-services consumers must be tailored to their needs, with the institutions helping them to assess the risks that they wish to and are able to assume. In a context of rapid credit growth like that in Spain, it would seem to be enormously important to help customers assess the commitments they are capable of assuming on the basis of both their present and future circumstances. The challenges I have referred to justify the need for a response by supervisors and regulators. The focus of our concern is currently the promotion of the stable functioning of the financial system, and the need to boost the incentives offered to ensure that it continues to enhance the scope and quality of the services that it has traditionally offered to society. The New Capital Accord is undoubtedly a significant step in this direction and represents a great opportunity for the banks to review, update and improve their capital strategies and risk management systems. It is, therefore, a suitable framework for boosting financial stability. The New Capital Accord proposes a comprehensive approach based on the combined operation of a number of complementary elements and considering a broader set of risks than its predecessor.
It confirms that the expansionary monetary policy cannot be maintained for the next three years because price stability will be compromised in the long term. However, a swift correction in monetary policy would be precipitate since the inflation outlook is still associated with downside risks. If these risks materialised, we could again be faced with the threat of deflation. The uncertainties relate to the global economy and to the level of recovery within the financial industry. These factors have persuaded the SNB to opt for a cautious stance, and it is leaving its monetary policy course unchanged for the time being. Strengthening the SNB’s equity capital On 4 December, the SNB Bank Council decided to strengthen the SNB’s equity capital by doubling the allocation to provisions over the next five years. This decision was prompted by the growth in market and credit risks in the SNB’s balance sheet (creation of the SNB StabFund and the increase in currency reserves). Given the high level of the distribution  BIS Review 167/2009  3  reserve and results expected for 2009, this decision should not pose problems in terms of the distribution of profits, in the amount of CHF 2.5 billion annually, up to the end of the period agreed with the Confederation and the cantons (2017). My colleague Thomas Jordan will address these aspects in more detail in his own introductory remarks. 4  BIS Review 167/2009

When we say that we are “withdrawing our money” from an ATM – what we are actually doing is converting our IOUs from our bank, ie commercial bank money, into banknotes issued by the Bank of England. So even though we don’t think about it, we’re already using private money all the time. Ninety-five percent of the funds households and businesses hold that are typically used to make payments are now held as commercial bank deposits rather than cash2. The pandemic has prompted a further decrease in cash usage, accelerating a longer-term decline that is likely to continue3. 1/5  BIS central bankers' speeches  Private Money: Why do we care? Today in the United Kingdom we don’t generally pay attention to whether we are using private or public money. We can assume that the value of the money we use will be more or less stable. Shops don’t need to scrutinize which bank holds your deposit before you pay – and they are generally as willing to receive private money in the form of card or smartphone wallet payments as they are cash. The fact that commonly used private money is interchangeable with cash anchors it to national currencies and, as a result, promotes financial stability. The fact that bank deposits can be exchanged for cash on demand guarantees uniformity – ensuring that bank deposits from one bank can be used interchangeably with cash and with bank deposits from another bank. While banks do fail, regulation and liquidity backstops makes that relatively rare.