samchain/econo-pairs-v1 huggingface dataset:
Turkish inflationary expectations have been following the behavior of the US dollar. Under these circumstances, inflation outcomes have lagged above the targeted level. In addition, due to the preannounced depreciation path of the Turkish lira against the currency basket, the continuous depreciation of the euro against the dollar has resulted in a loss of competitiveness of Turkey vis-à-vis Europe. Due to this chain of events, the total value of Turkey’s imports from the EU countries has risen 29.6% in the first half of the year, while the value of Turkey’s exports to EU countries has grown by only 3.4%. In other words, the depreciation of the euro has contributed to Turkey’s growing trade deficit, which was initially mistaken for a side effect of the disinflation program. In this situation, the correction of the euro’s value against other major currencies will have a beneficial effect on Turkey’s current account balance, in addition to the offsetting of the negative effects of the weak euro provided by the high productivity of our manufacturing sector and the diversified nature of our exports. The weak euro has also led to a portfolio shift in the Turkish economy. At the end of September, total foreign exchange deposits in Turkish commercial banks amounted to $ billion. Of this 27% consisted of euros, which have decreased in value by 38.5% since the end of 1998. The share of US dollars gradually increased during the same period from 58% to 71%.

This is why we have launched a comprehensive disinflation program aimed at reaching single-digit inflation and eliminating macroeconomic imbalances by the end of 2002. Winning for Turkey the possibility of membership in the EU and EMU is one of the main goals of our program. The ideal of independent central banks is a core issue for the countries of the European Union. We are currently in the process of examining our Banking Law to determine what must be done to bring it up to the standards promulgated by the European System of Central Banks. New modifications are planned to make price stability the principal goal of monetary policy. Debt monetization will no longer be allowed. The new Law will also grant more independence to the Central Bank. Before ending these remarks, I want to point out that introducing a single currency and reaping the full benefits of doing so is a long-term endeavor. For the time being, Turkish monetary policy is directed towards a single transparent objective, that of price stability. Price stability will serve as a link between the initial expectations about the euro area and the potential economic benefits of a single currency system. The reforms and changes executed up to now will provide a base for ambitious future policies that will broaden the area of integration and encourage the faith of economic agents that the area offers additional benefits such as greater price transparency, improved efficiency, growing investments and economic activity, and a more competitive environment.
That is a key reason why we committed to raise interest rates significantly and at a steady pace over recent meetings – and why we decided last week that a further 50 basis point hike was necessary. The policy path ahead Now a sizeable policy adjustment is already behind us: since July last year we have raised interest rates by 350 basis points. However, inflation is still high, and uncertainty around its path ahead has increased. This makes a robust strategy going forward essential. Such a strategy has three elements. First, with high uncertainty, it is even more important that the rate path is data-dependent. This means, ex ante, that we are neither committed to raise further nor are we finished with hiking rates. Indeed, as I explained last week, if the baseline scenario in our most recent projections is confirmed, we will still have ground to cover to make sure that inflation pressures are stamped out. Second, while the European banking sector is resilient, with strong capital and liquidity positions, in view of recent financial market volatility, we are ready to act and provide liquidity support to the financial system if needed and to preserve the smooth transmission of monetary policy. But it should be clear that there is no trade-off between price stability and financial stability. As we have proven many times, we are able to set the appropriate policy stance to control inflation and at the same time use other instruments to address risks to monetary policy transmission.

I would also like to emphasise today that regulation needs to adapt to the evolving financial system. In that vein, I will discuss what remains to be done in developing macroprudential and other policy tools in response to evolving risks in the investment fund sector. Financial stability risks in the euro area In the euro area, we have now seen 22 consecutive quarters of economic growth and declining unemployment – a development which has also been bolstered by our accommodative monetary policy and which has supported financial stability overall. Notably, banks’ profitability has improved somewhat, though it is still at low levels, and they now have higher capital and liquidity ratios, making them more resilient than they were before the global financial crisis. Indeed, the results of the recent EU-wide stress test show that the banking sector has a good level of resilience overall, albeit with some pockets of vulnerability. However, while the fundamentals for solid growth rates over the next two years are still in place, some risks are building up in the financial system. We are currently paying particular attention to three major developments that could trigger financial stability concerns globally and in the euro area. First, the current expansion of the US is now significantly longer than historical norms and the second longest in US modern history. Looking ahead, a down-turn in the US macro-financial cycle could trigger a reassessment of riskier asset classes.
This report was published for the first time last year and it displays, among other things, our most important indicators to assess the degree of financial integration in different parts of the financial system. The second report will come out next month, and will again feature a number of interesting analyses and conclusions. I would like to mention yet another example in this group of activities, namely our contribution to the possible extension of the market transparency provisions in the Market in Financial Instruments Directive, in short MiFID, to financial instruments other than equities. The interest of the ECB in this issue follows in particular from the great importance of wellfunctioning markets for the transmission of monetary policy impulses. We explained our view at a public hearing held by the European Commission in September 2007. Focusing on post-  6  Schmiedel (2007), The economic impact of the Single Euro Payments Area, ECB occasional paper, no. 71, August. BIS Review 17/2008  3  trade transparency in retail and wholesale bond markets, we proposed a market-led controlled experiment about the trade-off between transparency and liquidity. In such an experiment, post-trade transparency could be gradually introduced, starting for example with the most liquid bond market segment, in order to assess its effects on market liquidity. The ECB stands ready to support such an experiment. In the present time, the importance of transparency in financial markets to allow for an efficient processing of information has of course become particularly evident.

We can likely achieve the same risk distribution with substantially fewer securities. This will also reduce operational risk and bring down management costs in the long run. Petroleum revenue spending In the book “Over Evne”1 [Beyond our power] about the history of the Ministry of Finance, the historians Einar Lie and Christian Venneslan describe how the discovery of oil at the end of the 1960s brought bright prospects for the future and considerable eagerness to spend the revenues. Oil would give us a “qualitatively better society”2. But the oil nation stumbled at the start. The current account surplus at the end of the 1960s had been reversed to a deficit of 12 percent of GDP by 1977. The deficit was three times as large as that recorded by Italy and Spain last year. The International Monetary Fund came knocking at Norway’s door. Fiscal policy had to be tightened and many Norwegians experienced a decline in income. Norway was hit by oil price shocks in the following years and economic reforms were implemented in several areas. After a period it became clear that the central government budget would be in surplus and that transfers would be made to the Fund. Norway’s experience from its first 30 years as an oil-producing nation led to the introduction of the fiscal rule, which has been a key element of Norwegian economic policy for the past decade. Report no.
The economy is operating far below its productive potential – leaving the level of output, income and employment much lower than they would be if the economy’s unused  BIS central bankers’ speeches  3  resources were put to work. One summary statistic says it all – the unemployment rate is unacceptably high at 9 percent. Given my outlook, the decline of unemployment over the next year is likely to be modest. Furthermore, we also continue to face significant downside risks, mostly related to the stress in the eurozone. In a speech yesterday at West Point, I highlighted the need for our nation to deploy a full set of economic policy tools to secure the recovery and build for the long term. This includes monetary policy, but also requires policies to help repair housing markets, fiscal policy that supports growth in the short and long run, and structural reforms that increase competitiveness and support a shift in the pattern of economic activity toward a more sustainable growth path than that which prevailed during the last business cycle upswing. Regional economic conditions How is the recovery proceeding in the state and the region? As I mentioned, the New York Fed produces economic activity indexes to help monitor conditions in New York State.1 Based on our index, the downturn in the state’s economy ended in November of 2009. Since then, I would describe the state’s economy as recovering at a moderate pace, although there appears to have been a pause in September.

The work will stocktake current and emerging post-trade technology solutions, identify key pinch points and barriers to adoption across markets and products, and look at the cost and benefits of different solutions to address these barriers. Conclusion  The post-trade system is a key component of a bigger effective, efficient, and resilient financial system; one much reformed since the financial crisis of eleven years ago. A key feature of the financial system is it is one of multiple interdependencies, and it is this interdependent nature which is why I chose to focus on resilience and innovation today On the face of it, these two concepts are quite different – one referring to the ability to return to a previous state, the other referring to making change. But in practise they are irrevocably linked. An environment that prioritises resilience and innovation is one that ensures post-trade continues to thrive and adapt to technology, finance, and wider changes in the economy, whilst avoiding costly fragmentation. The Bank is playing its part here, with strategic goals on the one hand focussing on the need to innovate and drive change (Fintech; RTGS), but on the other on maintaining resilience (operational resilience; RTGS) – demonstrates that well. That’s why we’re focussing on providing a platform, via the right hard and soft infrastructure, for innovation to flourish. And why we will never slacken our focus on the criticality of resilience. 7  All speeches are available online at www.bankofengland.co.uk/publications/Pages/speeches/default.aspx  7
For example, we successfully dealt with three major attacks on the Denar exchange rate, in the spring of 2001, in the autumn of 2004 and in the spring of 2009, although these attacks were caused by quite different reasons. With this action we justified the confidence of citizens, the confidence that is the greatest treasure, the greatest reserve of the National Bank. Also, the careful study of economic theory leads to the perception that the conditions under which the weakening of the domestic currency would lead to improved net exports are not at all present in the Republic of Macedonia. The increased sales of Macedonian goods and services abroad, but at lower prices expressed in Euros, would not lead to foreign exchange inflows, which could offset the more expensive imports of energy and machinery. In the imports of the latter, we depend almost exclusively on the world rather than on the domestic prices of production, so the result could be even worsening, instead of improving the balance of goods and services. To the same end are the different, but more emphasized arguments based on empirical studies: the competitiveness of the Macedonian economy is not reduced and the research of the effective exchange rates continuously shows their adequacy. This policy of stable exchange rate has caused the inflation in the Republic of Macedonia in the last fifteen years to average 2.1 percent, versus 1.9 percent in the countries of the Eurozone.

From the perspective of the National Bank, this means that the Government is trying to anticipate the policies that we implement to maintain the level of the exchange rate and it takes them into consideration when adopting the budget. It is clear that the National Bank and the Government may adopt essentially good decisions in their respective spheres of action if they cooperate even during the discussions which precede the decisions. The cooperation with the Government would also be in terms of creating conditions for the social dialogue to take into account the challenge we face in conducting the monetary policy. This actually means that the inflationary pressures which in themselves would result in faster development of the domestic economy, as well as more positive output gap compared with the countries of the Eurozone, would also lead to more pronounced interaction with the increase in unit labor costs. The perception of close coordination between the Central Bank and the Government in dealing with this challenge would mean that both public institutions are aware of the need to adjust to the conditions that the maintenance of price stability through the exchange rate brings. This adjustment would prompt the Government, through dialogue with social partners, to advocate a moderate growth of wages, i.e. wage growth which will take into account productivity in both the tradable and non-tradable sectors. This would lead to increased employment, while simultaneously improving the competitive position of enterprises, which would alleviate the emergence of imbalances in the economy as a whole.
If the governments of the Member States of the euro define jointly and irrevocably their vision of what the political and economic construct that supports the single currency will be and what the conditions to reach that goal together should be. This is the most effective answer to the question everyone is asking: “Where will the euro be in ten years’ time?”. The second pillar is that of structural reforms, especially, but not only, in the product and labour markets. The completion of the single market and the strengthening of competition are crucial for growth and employment. Labour market reforms that combine flexibility and mobility with a sense of fairness and social inclusion are essential. Growth and fairness are closely connected: without growth, and the events of recent months also reflect this, the temptation to “circle our wagons ”gains strength, and solidarity weakens. Without fairness, the economy breaks up into multiple interest groups, no common good emerges as a result of social and economic interaction, and there are negative effects on the capacity to grow. Recent Italian history has no shortage of examples. These reforms have long been indispensable in a global economy very different to the one which witnessed the creation of the institutions still operating today. In the political structure that will emerge from the crisis it is likely and desirable that for these reforms a system of European rules will be introduced similar to that for the fiscal compact, a discipline leading over time to the European harmonisation of objectives and tools.

Monetary policy, by contrast, is strengthened by this. Acting through the expectations channel, it can have a lasting effect on the expected flows of financial revenue. Affecting the real rate of intertemporal discount, it can deeply affect decisions on savings and consumption. The definition of the objective is now wider. Price stability has become an essential parameter in defining and measuring prosperity. From taking a relaxed approach to inflation and considering it secondary, nowadays low and predictable inflation is a pre-eminent criterion of economic performance. Why? High inflation hits savings – and therefore investment and future consumption – with a tax on real returns that rewards the risk of uncertain inflation. Low inflation, however, frees up resources that individual choices can allocate to increasing the fixed capital. A policy that neglects inflation gradually destabilises the economy. The costs of uncertainty about the value of the money, initially unimportant, then overlooked, subsequently become evident, and then are judged intolerable. At that point, voters express a strong preference for policies that promise rapid disinflation. But such policies impose high costs in terms of job losses, which have to be included in the dynamic calculation of the costs of inflation. Also, it should not be forgotten that inflation affects the poor more than the rich, and is therefore a tax on the weaker members of society.
They have significantly higher gross job creation (and destruction) rates than large enterprises. At the same time, SMEs tend to face more stringent financial constraints, have a higher cost of external finance and exhibit higher debt levels than large firms. According to the most recent survey on SMEs conducted by the Eurosystem, in the second 2  BIS central bankers’ speeches  and third quarter of 2011 access to finance remained one of their most pressing problems. To put things into perspective, bear in mind that the number of firms concerned about financing was actually lower in 2009, a period when economic activity in the euro area was very weak. According to the survey, bank financing (via overdrafts, credit lines and bank loans) remained the most important source of external financing for SMEs. In addition, 20% of the respondents perceived a further decline in banks’ willingness to provide loans. Therefore, after the improvement registered in 2010, SMEs were experiencing once again significant constraints in obtaining financing. In the light of this evidence, the concrete risk that the increasing pressures on banks’ funding and capital positions could lead to a significant curtailment of banks’ lending activity in some countries was judged to be extremely high in December 2011. In particular, a dangerous loop involving low economic activity, funding stress for banks and a reduction in lending had increased the downside risks to price stability. It was therefore a top priority to break this loop before it spiralled out of control.

The decline in credit to the private sector was accompanied by an increasing reluctance on the part of the euro area private sector to invest in financial assets; it severely hampered banks’ access to financing via the secured money market, due to an increase in haircuts and a deterioration of the available collateral. While market-based funding was becoming ever scarcer for banks in the euro area (as investors were growing increasingly nervous about the escalation of the sovereign crisis), banks were also facing regulatory and market pressures to strengthen their capital position. In short, back in December 2011, even though there was significant cross-country heterogeneity, the overall picture was rather gloomy. There were clear signs that supply-side factors were making banks less willing to lend to the non-financial private sector, and that banks may have entered a vicious circle which could compromise their ability to supply credit to the economy, both in the short and the long run. The additional negative impact on banks’ balance sheets of rapidly declining sovereign bond prices made the situation even worse. Banks typically have three ways to adjust to pressures on their funding and capital positions: they can sell assets, raise capital or reduce lending. Let’s look at each of these options in turn. In an environment of extreme uncertainty and high risk aversion, risky assets can only be disposed of at very low prices, possibly considerably below their book value.
For example, in July 2016, the Desk purchased approximately $ billion in agency MBS across only 10 different TBA contracts; upon settlement of those transactions the following month, SOMA received almost 2,000 different individual MBS securities. In addition, the TBA market trading convention allows for the use of dollar rolls (which extend the settlement date by one month) and coupon swaps (which allow the specific TBA contract being purchased to be switched). These trading tools have been used to facilitate efficient settlement and can alleviate market stress.17 The liquidity and market depth provided by the TBA trading convention facilitate the Desk’s ability 3 / 10  BIS central bankers' speeches  to conduct large-scale asset purchases in a non-sovereign market and to do so at a relatively fast pace without hindering market functioning. For example, the Desk purchased more than $ trillion agency MBS in 2009 and almost $ billion of agency MBS in 2013. These purchases allowed the SOMA portfolio, which owned no agency MBS at the end of 2008, to expand its agency MBS holdings to approximately $ trillion by October 2014.18  SOMA agency MBS holdings have been maintained near this level since the end of the latest purchase program on October 29, 2014. These holdings constitute approximately 10 percent of GDP and account for almost one-third of the universe of fixed-rate agency MBS.

The payments system we live with today is a complex mix of national and cross border systems originally designed for a safer, slower, less complex, more segmented financial world. While many improvements have been made to this system over time, it is important that we work to strengthen further the core infrastructure of the payments system. We also need to promote further evolution in the framework of supervision and regulation of our more complex and integrated global financial system. To paraphrase Bob Rubin in a different context, we need a framework for supervision and regulation that is “as modern as the markets” and that stays abreast of the pace of change and innovation. Perhaps the greatest challenge we face – in macroeconomic policy and in financial supervision - is a challenge of imagination: How do we best prepare for the low probability of an extreme event; a crisis not captured by past experience? How do we generate the will today to build a greater degree of insurance against a more uncertain future, particularly if the risk of adversity seems remote and the immediate future looks strong? We can take considerable reassurance from apparent moderation in overall macroeconomic volatility recently, and from the ease with which our system has handled recent stress. Prudent macroeconomic policy actions will increase the likelihood that these beneficial circumstances will continue. But we cannot know with confidence that the future will bring an enduring reduction in volatility and risk, and it would be imprudent to plan for such a world.