samchain/econo-pairs-v1 huggingface dataset:
As is usual, in our diagnosis and assessment of developments of the world and local economy, we identify the risks whose potential consequences on inflation and output warrant special attention. These are also the risk scenarios that we consider when evaluating the resilience of the domestic financial system. On this occasion, the main concern in the international outlook is global recovery being slower than foreseen in the baseline scenario, thus producing a milder external impulse for the national economy. One of the reasons tilting the risk balance toward the negative side are constraints facing macroeconomic, fiscal and monetary policies in the main advanced economies to mitigate potentially negative trends in private confidence. These facts could originate in the persistence or intensification of financial turbulences associated to European countries, or in the application of tighter policies in some emerging economies to avoid a resurgence of inflation and/or an overheating of the economy. This entails the risk of the emerging world being unable to sustain world growth. In addition, this would have a negative impact on the prices of commodities, including copper. Barriers to exchange rate adjustments help amplify those effects on world economic activity. Regarding inflation, the main risks are associated to pressures coming from higher prices of foodstuffs and/or other commodities, which could continue rising globally and be more intensely transmitted to local prices. Also, it may so happen that local demand and output is stronger than projected in 2011, thus creating higher than foreseen inflationary pressures.

After peaking at 2.2% in October 2018, euro area inflation could fall to around 1% in some months of this year, before rising again gradually to 1.8% in 2021 according to the latest Eurosystem projections. Beyond these temporary fluctuations, the key trend to watch is core inflation. The improvement in the labour market has already led to a substantial acceleration in wage inflation. Growth in average compensation in the euro area has thus risen from 1.2% in 2016 to 1.6% in 2017 and will probably reach 2.2% in 2018. However, this wage inflation has not yet been passed through to core inflation [slide 5]. Until now, the acceleration in the inflationary pressures linked to unit labour costs since the fourth quarter of 2017 has been offset by the improvement in terms of trade and the decline in corporate profit margins. In our forecasts, these downward factors have a temporary lagging effect: core inflation should gradually increase towards a rate of 1.8% in 2021 (after 1.0% in 2018, 1.4% in 2019 and 1.6% in 2020). However, certain observers have stressed that this lagging effect appears to be durable, and has caused inflation to fall repeatedly short of Eurosystem projections. Inflation excluding energy and 4/6  BIS central bankers' speeches  food remained subdued at 0.9% in November, as well as in December according to the Eurostat flash estimate.
A lack of reliable information resulted in excess risk-taking by many, perhaps unknowingly. Investors and banks believed they could pass on losses to others or expected the authorities to intervene in the event of failure. It is now widely recognised that the regulatory framework for financial markets was too weak. Increased ambitions with regard to regulating financial markets and new and better instruments are on the agenda. I will revert to this later. But let me start with the external environment. The world economy: Keeping one’s house in order provides robustness The global economic crisis in autumn 2008 was the biggest economic earthquake in our time. The following year, world GDP fell for the first time in generations. The crisis was triggered by an abrupt decline in the US housing market, but a tightly interwoven financial sector caused the problems to spread rapidly across countries and sectors. When the bubble burst, excessive optimism in the financial sector turned to deep pessimism. The flow of credit dried up. It became expensive and difficult for financial institutions to procure funding even though the problems had originated in asset value losses in a faraway region. Cross-border trade, which is dependent on well functioning credit channels, was adversely affected. Even an expansionary economic policy, with record-low interest rates, low tax receipts and strong growth in public demand for goods and services, could not prevent the downturn from deepening in many countries. However, it did help reduce its duration compared with the depression in the 1930s. Chart 1: Current account.

Namely, if the policy prescriptions for achieving the inflation and unemployment goals are in conflict, we will take a balanced approach promoting the return to each, taking into account the size of the deviations and the relative  3  2  See FOMC (2005). BIS central bankers’ speeches  speeds at which convergence can be expected. As we all know in this audience, there is an enormous literature related to characterizing the monetary policy loss function for a central bank with a dual mandate – such as work by John Taylor, Lars Svensson and Michael Woodford.4 For me, our Federal Reserve dual mandate responsibilities are well captured by a quadratic loss function that equally weights squared deviations of inflation and unemployment from their period goal values. In the U.S. today, that would be 2 percent for inflation and 5-1/4 to 6 percent for unemployment given today’s structural challenges in the labor market.5 Just about every major central bank around the world publishes something akin to such a framework statement. In one way, the Federal Reserve is different because, unlike other countries, we have a dual mandate, and so our framework explicitly addresses goals for both inflation and the real side of the economy. But just about every bank with a single price stability mandate also says that it will avoid undue disruptions to the real side of the economy when pursing its inflation goal. Indeed, some are quite clear about following a flexible inflation targeting strategy. Policy projections What about the policy projections?
Adnan Zaylani Mohamad Zahid: Leaders setting the direction for change Opening remarks by Mr Adnan Zaylani Mohamad Zahid, Assistant Governor of the Central Bank of Malaysia (Bank Negara Malaysia), at the Sustainability Leadership Programme for Financial Institutions, 14 July 2021. * * *  Introduction Good afternoon and a very warm welcome to all. Thank you to IBFIM and the University of Cambridge Institute for Sustainability Leadership (CISL) for this invitation to deliver the opening remarks. At the recent Joint Committee on Climate Change (JC3) Conference held last month, in his address, Sir David Attenborough somewhat laid down the gauntlet, in particular for us in the financial industry. “All of us, no matter who we are, have the responsibility to care for the planet. The future of all humanity now depends on us and on none more than you in the world of finance. You have the fate of the whole world in your hands.” With this in mind, it is quite apt that we are here, senior leaders in the industry, participating in this Sustainability Leadership Programme over the next two days. Over the past 18 months, many have felt the economic and social impact caused by the global health crisis. At the same time, the world has not been spared from natural catastrophes due to climate change. The latest being the mudslide in Atami, Japan. In Malaysia, more than 25,000 people were displaced from their homes due to severe flooding in several states between November 2020 and January 2021.

The depreciated global demand, reflected through several channels, with a decrease in the national economy and real decrease in the GDP in the first half of the year of 1.2%. BIS Review 127/2009  3  Also the pressures on the inflation caused by the import prices decreased, which together with the entering into the zone of a negative production gap, resulted in price stabilization. The average annual inflation rate in the first eight months of 2009 is negative and it equals – 0.3%, which is a significant downward movement, compared to the preceding year. Alike the pressures on the foreign exchange market caused by the indirect effect of the global crisis, transmitted through the movements in the balance of payments, no movements typical for the global money markets characteristic for the past two years on the Money Market in the Republic of Macedonia were registered. Namely, on the Money Market, in the segment of the non-collateralized borrowing, increase in the turnover and stable movements of the interest rate in the last two years were registered, proving that the mutual confidence in the banking system of the Republic of Macedonia was not impaired. Thus in 2007 exactly, when the global financial crisis began in August, the turnover registered on the Money Market in the Republic of Macedonia started to increase, with the average monthly turnover reaching the level of Denar 1,712 million and it was higher by twice relative to the average monthly turnover registered in the preceding year.
The debate preceding the passage of the Federal Reserve Act in 1913 was protracted and intense. Early drafts of reform proposals were careful not to even mention a “central bank” – the 75-year-old scars from the Second Bank’s failed reauthorization battle had still not fully healed. Although there was a strong recognition that the country needed a central bank to forestall and mitigate financial panics, there was considerable disagreement about how it should be structured. Important considerations included what role should be played by  BIS central bankers’ speeches  1  private bankers versus government officials, how centralized the new bank should be and the extent of its powers. 1 During this period, the U.S. economy was susceptible to financial panics. Lacking a central bank, the country had no reliable lender of last resort that could provide currency and credit on demand against high-quality assets. Banks had to self-insure against bank runs by holding a high fraction of deposits as cash, and by entering into private liquidity agreements with other banks. Self-insurance was not only expensive relative to the cost of a public backstop provided by a central bank, but it was also limited in its effectiveness. When the business cycle turned down and financial stress intensified, bank runs often ensued as bank customers rushed to convert their deposits into cash. Without a true lender of last resort, cash that banks individually and collectively kept in reserve often proved inadequate to meet demand.

However, in addition to imperfect rules and policy actions, the crisis has revealed a series of institutional deficiencies which need to be eliminated in order to restore economic and financial stability. The clearest example in this regard is probably the European institutional framework. Over the last three years we have witnessed how the perception of country risks has climbed to very high levels as a consequence of both sovereign credit risk as well as the so-called redenomination risk. This development has impeded the adequate functioning of monetary union by leading to sizeable differences in the financing conditions for agents located in different States within the monetary union and by instigating the renationalisation of financial markets. There can be no doubt that much of what has happened is directly linked to the significant macroeconomic and financial imbalances accumulated by several euro area countries, as well as to the emergence of vulnerabilities within the financial sector. It is also clear that the main remedy for those destabilising developments lies in effective adjustment of domestic policies, which is currently being implemented in those countries suffering the most significant stress. But, at the same time, the elimination of any perception of redenomination risks can only be fully accomplished if – in addition to the required domestic policy action – the central bank is fully and credibly committed to intervening in sovereign markets as far as is necessary to avoid the pricing of sovereign risk becoming self-fulfilling.
As to removing the weakest institutions from the system, 2 banks and 28 savings banks had disappeared up to December through integration processes, and there should be further processes in the coming months. Finally, as concerns having institutions on a more efficient scale, average size measured by managed assets has doubled over these years. 1  RDL 9/2009; Third Additional provision of Law 3/2009; RDL 6/2010; RDL 11/2010; RDL 2/2011; RDL 16/2011 y RDL 19/201; and RDL 2/2012  BIS central bankers’ speeches  3  But perhaps the results best testifying to the transformation of Spain’s banking system during the crisis are not quantitative but qualitative, for example, the metamorphosis of savings banks into banks. If before the crisis someone had said that, except for two small institutions, all Spanish savings banks would be converted into banks, nobody would have taken them seriously and they would have been accused of seeking to do away with one of Spain’s oldest and best-loved institutions. Yet today what this conversion brings in terms of improved management, market discipline, etc. has been accepted, and should in the future spare Spaniards from again suffering the consequences of the excesses detected at certain savings banks. Another most important qualitative advance with a view to the medium term has been the enhanced transparency of our banks, not only thanks to the stress tests which, as you know, were first proposed by Spain, but above all to the greater disclosure requirements progressively imposed over recent years.

These figures demonstrate that we should be able to seize the abundant business opportunities arising from the Mainland’s expansion in external trade if we continue to fortify our trade relations with the Mainland and the rest of the world, just like our trade intermediation activities growing from 15% of GDP in 1979 to 20% in the early 1990s, and then to 25% now. 6. Let me illustrate with another example why Hong Kong will not be marginalised as the Mainland continues to open up to the world. Let’s look at the opening of the cross-strait “Three Direct Links”. Prior to 2008, there were no direct flights between the Mainland and Taiwan. Passengers had to make a mid-way stopover at a third place. As a result, Hong Kong became the busiest transit point between the Mainland and Taiwan by virtue of its favourable location. Some pundits predicted that the opening of the “Three Direct Links” would deal a devastating blow to the aviation industry between Hong Kong and Taiwan. On the contrary, air traffic between Hong Kong and Taiwan increased by 15% from an average of 118 flights per day in 2007, before the implementation of the “Three Direct Links” in 2008, to 136 daily flights in 2013. This clearly illustrates that as long as Hong Kong is able to maintain its attractiveness and competitiveness, we can continue to effectively perform our role as an intermediary between the Mainland and Taiwan. Are Hong Kong and Shanghai deadly rivals? 7.
The point here is not that there is some irreconcilable conflict between the rules of the single market and financial stability. They can and generally do reinforce each other. As I have said, it is important to financial stability in general – and the UK’s financial stability in particular – that the single market is supported by strong prudential rules that have force of law. The point is rather that the ultimate responsibility for financial stability – with one major exception to which I will return – lies with the governments, supervisors, central banks – who are accountable to national legislatures. To a large extent this necessary balance between the rules for the single market and financial stability is automatically achieved by the fact that the rules themselves have to be negotiated and agreed between the authorities of member states. But given the very different circumstances and risks faced by different member states, it is also important that the rules allow sufficient flexibility to recognise national financial stability responsibilities. And that they are applied by national authorities that have responsibility for financial stability. For the UK, stability depends on the working together of EU rules and well-aligned national authorities. 2  BIS central bankers’ speeches  The important and recent exception, of course, is the euro area that through the creation of the Banking Union – the single supervisor and the single resolution authority – has brought financial stability responsibility to the euro level to sit alongside the monetary stability responsibilities of the ECB.

It was not fully completed until the Maastricht Treaty of 1992 when free movement of capital became a directly applicable Treaty right. And throughout this process, in recognition of the potentially destablising effect, safeguards were included to allow member states to defend their stability, including in relation to prudential supervision. The real push for free movement of capital came in the mid 80’s when European growth was sluggish, especially compared to the US and Japan. There was a search for policies to generate economic dynamism, which led to the birth of the single market. But, of course, until capital could flow freely between member states it was not really possible to have a single market in financial services or, in the financial sector, to give effect to that other founding freedom – the freedom to provide services across the EU. The liberalisation of capital markets in the EU was rooted in two beliefs. First and foremost that open capital markets, cross border investment and cross border financial services would create a more efficient allocation of capital through better intermediation between savers and borrowers across the EU as a whole. And, second, that the risks to economic and financial stability of an open capital account and cross border financial services could be managed by sound economic and financial policies to prevent destabilising volatility of capital flows and by good financial services regulation at the EU level.
The financial system in the aftermath of the crisis  The financial industry is supposed to be the lubricant of the economic engine and ensure its smooth and efficient functioning. To grasp the sheer scale of its task, just imagine the billions of savers and investors whose interests have to be matched by the financial system, each of them having a particular behaviour, often driven by emotions. In doing so, financial institutions use specialized resources to assess and manage risks, including complicated mathematical models. Just think of the many Nobel prizes that were awarded for achievements in this field. The complexity of financial intermediation explains some of the seemingly peculiar features of the financial system as, for instance, the fact that the volume of transactions on the forex market is many times larger than what would be required by the actual exchange of merchandise. BIS central bankers’ speeches  3  The major positive contribution of the financial system is its ability to deal with asymmetric information problems. Adverse selection and moral hazard are issues emerging from asymmetric information. They are a cost to society, as they hamper lending. Financial system expansion has been the natural solution of the society in order to overcome asymmetric information problems. Financial institutions put their capital at risk and derive income from the spread between lending and deposit rates. In doing so, they use specialized resources to assess credit risk and discipline the borrower.

This means that the members of the banking union should establish and implement a harmonized framework for banking regulation and supervision. Second, there should be a single supra-national supervisory authority in charge across the union (the main supervisory tasks will be transferred from the national to the European level). Third, there should be a single bank resolution mechanism to address potential banking crises. Fourth and finally, there should be a single deposit guarantee scheme in order to harmonise and centralise deposit insurance. IV.3. Assessing the project  Obviously, each pillar has its own pros and cons. Let me mention the most important ones. As concerns the single rulebook, the financial crisis highlighted the danger of divergent national rules. The current context justifies the adoption of a common legal framework for banking regulation. The European Banking Authority would play the central role in elaborating the rulebook. The result will be (i) less regulatory arbitrage; (ii) a reinforcement of the competitive neutrality principle: same business, same risk, same rules; and (iii) a higher level of transparency, contributing to a robust and uniform regulatory framework in the Single Market. On the other hand, there are some risks: (i) implementing the same rulebook across over 8,000 banks in 17 or more countries may not prove flexible enough; (ii) the tougher regulations currently in place at national level might be undermined in those non-euro area Member States which decide not to join the banking union. Local subsidiaries may choose to bypass the more prohibitive banking legislation by turning into branches.