samchain/econo-pairs-v1 huggingface dataset:
The MPC is assessing the economic impacts and considering the policy implications of various possible scenarios, including the extent to which supply disruptions have aggregate demand consequences via cash flow, cost and availability of finance, as well as confidence effects. Our PRA and FMI supervisors are also working with banks, insurers, and payment operators and clearing houses to ensure they have plans in place to maintain their operational resilience. And finally, the FPC is examining macro-financial impacts including spillovers to market functioning and how to address any possible constraints on financing to UK businesses and households that might emerge. The Bank’s annual stress test included a severe global shock originating in Chinese where growth falls to 1.2% (Chart 23), and residential property prices fall -45%. Hong Kong’s GDP drops -7.9% and residential property prices fall -55%. As the shock broadens to global financial markets and the rest of the world, world GDP falls -2.6%. Globally this is a very severe test, with a roughly 1 in 100 likelihood of these stresses occurring together based on history.

The key difference is that the inflation target is symmetric – the monetary policymaker’s loss grows equally when inflation is either under or over the target, whereas the macroprudential policymaker’s loss function is asymmetric – increases (ie deteriorations) in GDP-at-risk are far more costly than the benefits of the reductions in GDP-at-risk. The relationship between the primary objective of financial stability and the macroprudential policymaker’s loss function can be represented by a decreasing and convex function, 𝑓(·). This means the marginal gains from taking action to protect financial stability grow as GDP-at-risk increases. Conversely, the marginal benefit from reducing GDP-at-risk falls as tail risks decline. This is illustrated in Chart 7. Financial risks increase moving along the curve to the right. A policy to reduce GDP-at-risk (lines A) is more valuable to the policymaker at higher levels of GDP-at-risk (line B) than lower levels (line C). The weight the macroprudential policymaker places on the central GDP forecast relative to GDP-at-risk is also determined by 𝜙 (“phi”). 𝜙 is analogous to the monetary policy’s 𝜆, the weight monetary policymakers place on output stabilisation relative to inflation stabilisation. 𝜙 is strictly greater than 0, as dictated by the “stability of the graveyard” clause in the Act that the FPC should not take action detrimental to medium-to-long term growth.13 In its annual remit letter, the emphasis the government places on this clause, and therefore the FPC’s secondary objective, can be thought of as changing 𝜙.
Over the past few years the HKMA has been encouraging banks to consider consolidation as a way of improving competitiveness - technology, among other factors, has obviously moved the optimum size of a retail bank towards the larger end. The banking industry has responded positively: the number of locally incorporated banks has fallen from 31 three years ago to 24 at present, the result, I am happy to say, of consolidation and not of abandonment of Hong Kong. As expected, the various consolidation exercises have produced the economies of scale intended and, in some cases, immediate financial benefits for the institutions concerned. As consolidation continues, and with the subsidiarisation of the local operations of a few major foreign retail banks, the structure of the banking sector will become increasingly polarised. At one end will be several large banks; at the other end will be a number of much smaller players. The smaller players will increasingly face two disadvantages: on the one hand they will find it difficult to compete; on the other hand, they will find that the opportunities for consolidation will dwindle over time, as the number of possible targets for consolidation declines. It may not be quite right to classify this structural shift as purely a long-term risk. In fact, the trend is already there and the effects of consolidation on the industry as a whole will begin to be seen very soon. Smaller banks, if they wish to continue to thrive, should, as a matter of priority, carefully review their strategic direction.

The U.S. Treasury and the Federal Deposit Insurance Corporation extended guarantees for money market mutual fund shares, issuance of certain types of debt by bank holding companies and unlimited amounts of deposits in transactions accounts of commercial banks. Later, with the passage of the TARP legislation, the federal government addressed the excessive leverage and shortages of lossbearing capacity through the injections of capital in October 2008 and in April 2009 in conjunction with the Supervisory Capital Assessment Program, or stress test of the major U.S. bank holding companies. Ultimately, the 2007–09 crisis was about both leverage and liquidity in the financial system as a whole, and not only in the tightly supervised sector of banking firms. This suggests that official sector efforts should aim at forward-looking monitoring of financial vulnerability that take both leverage and maturity transformation into account, and to broaden supervision to include broader coverage of the financial sector. In addition to many other efforts, the Federal Reserve is conducting tests of exactly that sort through its capital and liquidity assessments, the Comprehensive Capital Analysis and Review, or CCAR, and the Comprehensive Liquidity Analysis and Review, or CLAR. CCAR is the Federal Reserve’s annual process for evaluating capital adequacy of large and complex financial firms under normal and stressed conditions. CLAR is the Federal Reserve’s annual, horizontal exam to evaluate the liquidity position and liquidity risk management practices of those firms.
With lessons learned from previous episodes and improvements over the years, emerging market economies on average are better positioned to withstand financial turbulences, both now and in the future, than in the past. They embarked on extensive structural reforms aimed at overhauling financial regulatory and supervisory systems, strengthening public finances and fiscal discipline, granting central banks independence and adopting flexible exchange rate systems. These reforms enabled them to implement more prudent and countercyclical policies. EM economies supported their post crisis reforms by accumulating adequate foreign exchange reserves as an alternative to the IMF provided financing, which carries strong conditionality, as well as by further deepening and broadening their domestic financial markets. As a result, stock and flow balances, policy frameworks, and levels of economic confidence and market development in EM economies have strengthened substantially and radically. Deepened and  BIS central bankers’ speeches  1  broadened domestic financial markets have alleviated the so called original sin problem. It is fair to say that they now look strong enough to render the adverse effects of external financial shocks manageable. Given the current IMS what EM economies can most rely on are their prudent policies, better policy frameworks, foreign exchange reserves and flexible exchange rates. As for the IMS related questions of the session namely • “Do floating exchange rates along with largely unrestricted capital flows play their role of shock absorber? Are we going to witness a return of currency crises of the 1990’s?

19 20 21  For example, Nagel, S and Malmendier, U (2011) Stiglitz (1997) has described a similar process for the price Phillips curve based on asymmetric price adjustment. See Borio and Filardo (2007). 9  All speeches are available online at www.bankofengland.co.uk/speeches  9  Mark Carney has pointed out how global influences will shift the Phillips curve both lower (due to the positive supply shock from increased product and labour market integration) and flatter (due to integration of global value chains, increased competition and contestability of product and labour markets). The downward shifts, which will persist as long as integration continues, are disinflationary, pointing to running the domestic economy at tighter spare capacity to meet the inflation target. 22  For the policymaker a flattening of the Phillips curve poses a more difficult challenge than under-measurement of labour utilisation or a lowering of the natural rate or of inflation or real pay expectations (Chart 9). The latter pose the challenge of judging the timing of policy action right; excess (deficient) demand for labour will drive pay up (down) as before as unemployment falls (rises). But the point – i.e. the level of unemployment and the rate of growth of pay – at which that will happen is lower. Getting the timing of monetary policy right is a formidable challenge for the monetary policy maker. But it is a familiar one.
The background material for the Act relating to the Petroleum Fund clearly indicates that the Fund shall not be a second central government budget and, by implication, shall not be used for investment or spending that have not received priority in the budget. The chart shows the share of the central government’s annual net cash flow from petroleum activities that has been transferred from the Fund to the fiscal budget. Since 1996, a considerable portion of the petroleum revenues has been retained in the Fund. In 2000 and 2001, there were almost no transfers from the Fund to the fiscal budget while in the past two years the share transferred to the fiscal budget represented about one-third of the cash flow. 1  See Act relating to the Government Petroleum Fund, adopted on 22 June 1990 and amended by Act no. 2 of 16 January 2004. The Petroleum Fund has become large. At the end of the second quarter of 2005, the market value of the Petroleum Fund’s portfolio was nearly NOK 1 200 billion or approximately EUR 150 billion, or roughly 65 per cent of GDP. The Ministry of Finance has defined a clear mandate for Norges Bank’s management of the Petroleum Fund. Norges Bank shall seek to achieve an excess return in relation to a benchmark portfolio by means of active management within a certain risk limit. The chart shows developments in both the average annual net real return and the real return without the contribution from active management.

Returns have fluctuated considerably since the Petroleum Fund made its first investments in equity markets in 1998. Since 1998, the first whole year the Petroleum Fund invested in equities, the annual excess return from active management has been close to half a percentage point. The corresponding krone amount is about NOK 18 billion. Petroleum revenues generally involve substantial, but uneven currency inflows into Norway. The currency flows might have resulted in a strong krone and large variations in the exchange rate. The Petroleum Fund acts as a buffer and dampens the wide fluctuations in the krone exchange rate that petroleum revenues might otherwise have generated. An increase in petroleum revenues will result in higher capital outflows from the Petroleum Fund. Operators in the foreign exchange market may at times have a tendency to underestimate the Fund’s function as a stabilisation mechanism. The capital outflows through the Fund contribute to both curbing the appreciation of the krone and maintaining its stability. Since the summer of 2004, the krone exchange rate has appreciated by about 5 per cent, as measured by the trade-weighted exchange rate index (TWI). The chart shows the krone exchange rate and oil spot prices from 1999. The chart indicates that there is no clear relationship between the nominal exchange rate and oil spot prices over time. An appreciation of the krone has accompanied higher oil prices in some periods and lower oil prices in others. The correlation between oil prices and the nominal exchange rate has therefore varied over time.
So what’s on the docket for monetary policy in 2016? The answer is that it depends on how the incoming data weighs on the outlook, and how changes in the outlook influence our views on the appropriate setting for monetary policy. What I can say is that our expectation at the December FOMC meeting was for further interest rate hikes in 2016 and beyond. Participants anticipated that the federal funds rate would likely continue on a gradual upward path. Over the longer term, FOMC participants expected that the federal funds rate would eventually reach 3 to 4 percent as inflation rose back to our 2 percent objective and the headwinds from the financial crisis that had been restraining economic activity fully dissipated. Even though this path is shallow relative to previous tightening cycles, the median federal funds rate path of FOMC participants in the December Summary of Economic Projections (SEP) is well above the path implied by the federal funds futures market. Should this be a concern? Does this imply that there is a significant risk of an abrupt future spike in short- and long-term interest rates as market rates realign to levels more consistent with the median FOMC participants’ projections? I don’t think so for several reasons. First, the SEP projections are modal forecasts – that is, what the participants believe is most likely to happen – whereas those embodied in market prices are a mean – that is, an average across all possible outcomes.

William C Dudley: The US economic outlook and implications for monetary policy Remarks by Mr William C Dudley, President and Chief Executive Officer of the Federal Reserve Bank of New York, at the Economic Leadership Forum, Somerset, New Jersey, 15 January 2016. *  *  *  It is a pleasure to have the opportunity to join you again at the Economic Leadership Forum. I would like to thank John McWeeney of the New Jersey Bankers Association and Rutgers University for the invitation to be here today. Northern New Jersey is a vital part of the New York Fed’s district, and I don’t just say that because I live here. My staff and I actively maintain ties with local community, business and banking leaders, and we always benefit from opportunities to hear about what is on your mind. I am particularly delighted to see that community banks are well represented here today. The Federal Reserve understands the importance of a vibrant community banking sector and the crucial role community banks play in supporting the activities of local businesses and households. While protecting the safety and soundness of the financial system is an important part of the Federal Reserve’s mandate, I believe that the regulation of community banks should be appropriately calibrated to reflect the lower degree of risk they pose to the financial system relative to larger banks. In other words, community banks should not be subject to the same set of regulations that are applied to the most systemically important banking organizations.
1  See for example IMF, World Economic Outlook September 2006, Feldstein, 2007, Krugman, 2007. Obsfedt and Rogoff also warned about a substantial depreciation of the dollar as a result of global imbalances as early as 2005. 2  Some observers claimed, however, that the deficit could be sustainable as to a certain extent it could consist of “dark matter” in the form of the value of the knowledge transferred from direct US investments abroad and the implicit insurance services provided to the rest of the world by US financial institutions, see Hausmann and Sturzenegger, 2005. 3  IMF, WEO April 2011. BIS central bankers’ speeches  1  Today I intend to present my view of the global imbalances and their significance to the Swedish economy. 4 There is currently a widely-held view that the large current account surpluses and deficits make the global economy vulnerable, and that they should therefore be reduced. A move towards reduced surpluses and deficits could affect the Swedish economy in a way that has significance for monetary policy. Although it may be underlying imbalances that give rise to deficits and surpluses, we should not, in my view, set targets for how large these deficits and surpluses should be. Surpluses and deficits are to a certain extent a natural result of the different conditions in different countries and important mechanisms for redistributing capital in a way that makes the global economy more effective. Sweden, for example, has had a relatively large current account surplus for 15 years.

Market financing costs have fallen, while bank lending rates for both firms and households have dropped by more than 110 basis points and are now at historical lows. This has been accompanied by rising lending volumes and improved access to finance, especially for small- and medium-sized enterprises. And crucially, our policy has not only eased financing conditions on average, but triggered a remarkable convergence in borrowing costs across different euro area countries. Granular data show that in June 2014 the median lending rate for firms in vulnerable economies was 120 basis points higher than for those in stronger ones – despite overnight rates being close to zero. Today the difference is only 20 basis points. Without this, it is likely that large parts of the euro area would have been remained stuck in a self-sustained credit crunch. The recovery is progressing and gaining momentum As this policy stimulus has worked its way through the economy, the atypical makeup of the recovery – relying mostly on monetary policy and oil prices – has been gradually shifting towards a stronger contribution from underlying growth forces. This is evident from the fact that, as the impetus coming from oil prices wanes, the economy is accelerating rather than slowing. There are indeed three features of the recovery which give us confidence that it may be gaining its own momentum, although – given the severity of the slump we are emerging from – monetary policy still remains critical to facilitate the transition.
•  They continuously adapt to new data as well as feedback and inputs gathered from their experiences, including interactions with humans. We are already beginning to see examples in the financial industry: •  In equity, commodity, and FX markets, some traders are using self-learning algorithms –  •  they not only analyse historical data, predict price movements and make trading decisions, but continually upgrade and adjust their trading strategies in the light of new evidence and market reactions. In lending, learning machines have been used to construct models for consumer credit risk and improve the prediction of loan defaults. The legal minds assembled here might want to reflect on where the legal liabilities arising from the actions – or inactions - of such learning machines lie. The six technologies that I have outlined have the potential to transform the financial industry globally. There could well be others that I have not mentioned. The important thing for our FIs is to be alert to these and other technology trends, understand their possible implications, and seize the opportunity to apply relevant technologies safely and efficiently - to boost productivity, gain competitive advantage, and serve consumers better. Smart nation needs a smart financial centre At the national level, Singapore has set its sights on becoming a Smart Nation – one that embraces innovation and harnesses info-comm technology to increase productivity and improve the welfare of Singaporeans.

•  A recent case that went on this approach was a mobile banking application that utilised fingerprint authentication for balance enquiries. •  The bank went ahead, did not need MAS approval. What does this approach entail? •  FIs’ board and management should take the responsibility to ensure that the risks of new innovative offerings are well identified and managed. •  The compliance people should ideally be involved early in the innovation process. However, they should avoid second-guessing MAS by taking an overly conservative stance that might nip innovation in the bud. •  If the FI encounters a specific issue on which it needs MAS’ guidance, we will be happy to help. •  But the FI must offer its own assessment of the risks in what it proposes to do and take ownership for its decisions. •  It cannot rely on MAS to do its due diligence. Second, innovation in a “sandbox”. Sometimes, it is less clear whether a particular innovation complies with regulatory requirements. In such cases, FIs could adopt a “sandbox” approach to launch their innovative products or services within controlled boundaries. •  The intention is to create a safe space for innovation, within which the consequences of failure can be contained. •  FIs can seek MAS’ guidance and concurrence on the boundary conditions – for example, the time period, customer protection requirements, etc. Third, innovation through co-creation. MAS has a long tradition of active consultation with industry on proposed new rules or initiatives.
And on the subject of history, I would like to make some observations. Europe's single currency has ancient roots: apart from the single currency of the Roman Empire, two thousand years ago, I could mention George of Podebrady, a king of Bohemia in the 15th century, who called for a common currency for Europe, or Victor Hugo's call for a single market with a single currency in Europe in the 19th century. By implementing the Economic and Monetary Union enshrined in the Werner report 38 years ago, we have also achieved a much older plan, an ancient vision of a unified continent, including monetary union. This historic vision has always been closely associated with the search for prosperity and the preservation of peace. Voltaire's remark: “En effet l’histoire n’est que le tableau des crimes et des malheurs” – “Indeed, history is nothing more than a tableau of crimes and misfortunes” – from the perspective of the mid-twentieth century could not have been more apt . It is no surprise that it was at that point in time that Europeans decided to accelerate the march towards European unity. The single currency is the most advanced feature of European unity and in many respects its emblem. We owe it to the lucidity of the founding fathers and to the determination of a series of visionary leaders. We saw these founding fathers a moment ago on the screen. To them we owe an immense debt of gratitude.

The ECB pursues this objective in a consistent and forward-looking manner, ensuring the confidence of all policy-makers, both within and outside the euro area. Experience so far suggests that the ECB has been able to keep inflationary expectations at a low level. Although current HICP figures in the euro area are adversely affected by energy and food prices, the current outlook is compatible with the maintenance of price stability in the medium term. This view is supported by the analysis of bond yields. It is comforting to see that market participants expect medium-term price developments to remain in line with the ECB's definition of price stability. Currently available forecasts give rise to the expectation that inflation will again fall below 2% in 2002. Hence, we appear to be on the right track. However, we must not ignore existing risks to price stability. The Governing Council of the ECB therefore always stresses that it is vigilant and will take into account all new information that might affect the outlook for price stability in the medium term. Let me now conclude by recalling that, while the ECB cannot be held accountable for growth in the euro area, interest rates in the euro area have been relatively low, and cannot, by any means, be considered to be an obstacle to growth. Currently, although uncertainty remains high, the general expectation is that growth in the euro area will remain at, or slightly above, trend potential growth in the period ahead.