samchain/econo-pairs-v1 huggingface dataset:
It is a process we are particularly conscious of in London where major financial institutions from all over the world, including, of course, from elsewhere in Europe, have long been predominant players, especially in international wholesale market activity. But international ownership of banks (including newly privatised banks) and other financial institutions has increasingly become a common characteristic of financial systems in a wide range of other countries. I will not comment further on globalisation, which is certainly very familiar to you, except perhaps to say that I have often been teased by people who talk about the Wimbledonisation of the City of London – meaning that we provide the tournament venue but the prizes are mostly carried off by competitors from overseas. I think that many of those people now increasingly understand that it is activity rather than nationality of ownership which creates a competitive market place, and in turn provides employment and income and tax revenue, which are the things that really contribute to the macro-economy. As a broad generalisation the wider the range of participants the more efficient the market place. A third major driver of change in our financial systems – as elsewhere in our economies – is, of course, information technology. This has clearly transformed transactions processing, putting a premium on throughput, and encouraging some forms of specialisation and consolidation. It has made possible entirely new – and typically much cheaper – means of delivering financial services making it easier for new entrants to contest existing franchises.

But the point I have tried to emphasise this morning is that it is just one important factor among a number of others affecting our financial systems, so that one should not perhaps expect that it would have had a dramatic overall impact – certainly not in so short a period of time. And my message is that there are many other things beyond the introduction of the single currency that we can and should do, whether from inside or outside the Eurozone to improve the functioning of our financial systems. Nationally, certainly within the UK, apart from continuing to try to find the right balance generally between competition and necessary regulation, we need also – through the authorities and the financial markets working together – to continue working to ensure that the financial system reaches those parts of the economy that are traditionally most difficult to get at, including particularly the encouragement of smaller and medium-sized businesses and new enterprises as well as community development and regeneration. Regionally, within Europe, as I said earlier, we need to work away at developing the single financial market, pressing on with the Financial Services Action Plan. Most immediately, in line with the Lamfalussy recommendations, we need to address some of the regulatory obstacles to greater integration of securities markets. And we need to encourage the markets to find more efficient solutions to trading, clearing and settlement systems, particularly in securities markets, but also more generally.
There was a marked expansion in the issuance of asset-backed securities: bundles of residential and commercial  1  2  Most notably Nouriel Roubini, Bob Shiller and Bill White and others at the BIS. BIS Review 101/2009  mortgages, other consumer credit, and of loans to businesses that were sold on by the loan originator, thus shifting the associated risks. And a new class of asset in the shape of Collateralised Debt Obligations (CDOs) was created, which facilitated a further layer of restructuring and redistribution of the risks in an asset-backed security. The extent to which loans were moved off balance sheet through these means is shown in Fig. 2 (left-hand panel). Finally, we saw a veritable explosion in the issuance of Credit Default Swaps (CDSs), which allowed investors to hedge themselves against a wider range of default risks (righthand panel). The picture that emerges from this is one of a more complex process of financial intermediation, but one in which the innovation in contracts apparently allowed specific types of risks to be split out, traded and redistributed towards those in a better position to bear them. We thus seemed to be moving ever closer to an idealised Arrow-Debreu world of a full set of state-contingent securities.

I have already mentioned the measures taken to support the banking system directly. Lack of time prevents me expanding further on that topic. But it would be remiss if I did not say a few words about the response of central banks. The first action has been to offer extensive liquidity support, particularly after the intensification of the crisis in the wake of the collapse of Lehman’s. Following Bagehot, the classic guide for central banks in the face of a financial crisis is to lend freely against good collateral at a penalty rate. Although the details of the operations differ, the central banks in each of the main jurisdictions have followed that guide, widening both the range of the collateral that are prepared to lend against and extending the tenor of the loans. In the United States, because of the critical importance of non-bank financial intermediaries to the US economy, the Federal Reserve has also extended the range of counterparties that it is prepared to deal with. As a result, the balance sheets of central banks have mushroomed (see Fig. 19). All of the key central banks have also cut their policy rates aggressively, so that both policy rates and short-term market rates are close to their effective floor of zero. Before the crisis erupted, and with policy rates averaging somewhere in the 4-5% range, most central bankers would have thought they had plenty of room for manoeuvre to offset adverse demand shocks by cutting policy rates.
Annual inflation figures are somewhat below levels foreseen in March. This is because the immediate effects of the earthquake and tsunami, if any, were bounded and certainly smaller than projected in the last IPoM or by overall market expectations. Despite this difference, the assumptions about changes in some specific prices such as public transport fares, the tobacco excise tax or the unchanged stamp tax will result – in the baseline scenario – in inflation being at the end of 2010 in the upper area of the tolerance range of the inflation target. Towards 2011 and 2012, annual CPI inflation will oscillate around 3% and will stay there through the end of the relevant projection horizon, this time the second quarter of 2012. Core inflation will show a slower convergence to 3%, to hit that figure over the course of 2011. These projections are consistent with June’s Economic Expectations Survey, which foresees y-o-y inflation for December of this and next year at 3.5% and 3.2%, respectively, and at 3% two years ahead (figure 7). Aside from the assumptions just described for domestic and external growth, the baseline scenario considers that in the long run the real exchange rate (RER) will be similar to its current level. This, considering that, with the current level of the nominal exchange rate and the parities prevailing at the statistical closure of this IPoM, the RER is aligned with its longterm fundamentals. The domestic growth scenario foreseen for the coming quarters assumes output gaps closing fully during 2011.

Nevertheless, the issue of diversification continues to strike a chord among regional central banks and major institutional investors, driven by the accelerated pace of reserves accumulation in the past decade, low-yield environment in the G7 economies and changing trends in trade pattern and currency regimes. This necessitates a rethinking on how reserves should be invested. The fast pace of reserves accumulation and low yields on G7 assets remained the most compelling reasons for diversification in the quest to seek better risk-adjusted returns in alternative asset classes, such as emerging market debt, commodities and equities. BIS Review 162/2010  3  Intra-regional trade in Asia has surged from 32% of total exports in 1995 to an average of 50% in 2008, while the use of regional currencies for trade settlement has started. Furthermore, most Asian economies have gradually shifted from a US dollar focus to a more flexible exchange regime against broad basket of currencies, a trend which underlies the rationale of diversifying away from US dollar. In tandem with the rising savings and reserves accumulation by regional central banks, these reinforce the argument for more intra-regional investments which will contribute to the goals envisioned by the Asian Bond Fund (ABF) initiatives. The ABF was a fund launched by EMEAP, comprising foreign reserves held by regional central banks for investments in regional bonds with the aim of contributing to the development of regional bond markets.
Socialism (as defined in Kornai, 2000), the predominant system in countries where EBRD operates today, has imploded, has collapsed. This system was not able to meet the growing demands of the population for a better life, that is to say: raising living standards, and the development of a civil society and political freedoms. In a globalized world, information on living standards and developments of civil society and political freedoms from the neighbouring West could not be hidden any more from most transition economies, and discontent grew. The political conditions for change are symbolized in the fall of the Berlin Wall. This created huge expectations among people in the countries of formerly socialist economies. The expectations of the population at that time were that there would be a rapid catch-up with the western standard of living (including political freedoms as well). With regard to the speed of catching up in terms of economic wellbeing, this turned out to be a naïve view. The main goal of any economic policy should be to increase the welfare of the population, which includes a sustained and high growth of GDP and a desirable distribution of income. In other words, we want welfare to increase; we want people to be better off. Not many people should have trouble agreeing with that statement. Today, indeed, there is evidence that the dual goals of growth and equality of income distribution are mutually compatible (Wolf, 2000).

What is the purpose of getting a monthly 2% efficiency gain in some production process if monthly prices change more than 20%? The same principle applies if monthly inflation is more than 4% as it was in Croatia (on average) in the two decades preceding independence. Throughout that period GDP was either stagnant or falling.3 GDP started to increase only in 1994, after prices were successfully stabilized. The costs of inflation are relatively well analysed in the literature, so there is no need to analyse them any further, but let me reiterate that it is important that the incentives in a country help people produce new wealth and not put their efforts into redistributing it. Inflation favors predation over production. The second important function of the central bank is a stable financial or, more narrowly, banking system. But, banking crises have affected a large number of countries and almost none of the transition economies escaped them (Frydl, 1999). A lot of transition economies passed through two banking 3  The dramatic fall in GDP in Croatia in the early nineties cannot be attributed to inflation alone. It was not even the main contributor. The disintegration of former Yugoslavia, war and transition were taking place at the same time. 5  BIS Review 43/2000  crises: the first was the crisis of the old banks with their legacy (dubious assets) from the previous economic system.
At 8 per cent, the vacancy rate is still relatively high, although in some central areas, it has fallen to below 4 per cent. The share of vacant office premises in Bergen has been lower than in Oslo for the past three years. The value of property has increased, both in Norway and in other countries, even though the rise in rental rates has been moderate and the vacancy rate has been high. Investors have been willing to pay more than previously for a krone, a dollar or a euro in future net rental income. The direct return, i.e. annual rental income minus operating costs as a share of the price paid for the property, for office premises in Oslo has fallen to a historically low level. This is probably related to developments in longterm interest rates. An investor will expect a higher return on property, and property as an asset class is probably midway between equities and bonds in terms of both risk and return. Since nominal interest rates are low, many investors prefer to move their low-risk investments from the bond market to alternative vehicles such as property. Developments in the real value of office premises and our estimates of capacity utilisation in the Norwegian economy seem to co-vary in the period 1980-2005. The effect on the value of office premises prior to the banking crisis was much greater than the effect of a similar level of capacity utilisation in the years 1998-2000.

We cannot write a rule to take care of every situation that may occur, and as a forward looking supervisor we are applying judgement in conditions of uncertainty about the future. How firms deal with the uncertainty of the future will also shape their culture. I firmly believe that what we can best do in this area is to provide a clear sense of direction and guidance through open communication starting with those of us at the top, in which we are clear on what we expect of firms. Open and transparent communication of this sort should then be supplemented by the clear understanding that we will all stick to the script. Trust is important. Consumers need to be confident in the firms that they choose to use, and inevitably trust is an important part of that confidence. Likewise, as supervisors, our judgements are inevitably conditioned on whether we can trust the people with whom we deal. Good culture is a product of trust and it matters a lot for both prudential and conduct regulators. Culture is everywhere and nowhere in firms; everywhere in the sense that it is shaped and determined by all the features of the firm – its people, organisation, reward structures etc; and nowhere because culture is not a tangible thing sitting on a shelf that can be prodded and changed of itself.
From August to the end of February the DMBs had disbursed 14,500 mortgage loans, for a total of 158 b.kr. In the opposite direction, pension funds’ loans to members contracted over the same period by 6 b.kr. and lending by the HFF by 59 b.kr. The transfer of mortgage lending to the banking system is beneficial and will strengthen it in the long run. However, the timing of this development during a strong expansionary phase is inappropriate. Given the way that events have unfolded, a review of the role of the Housing Financing Fund and the legislation governing it has become very necessary. Excluding their direct foreign operations, the DMBs’ foreign debt amounted to 1,200 b.kr. at the end of January, and had grown by 561 b.kr. over the previous twelve months. The lion’s share of this debt is long-term, which is a great improvement from the times when the banks were overdependent on short-term borrowing for their funding. Their foreign assets have grown as well, but not in pace with their debts. Foreign assets of DMBs amounted to 590 b.kr. at the end of January, having grown by 312 b.kr. over the previous twelve months. Iceland’s external debt, which is largely comprised of the banks’ foreign debts, is one of the weakest links in its economy. All the agencies that issue sovereign ratings for Iceland identify this as a risk and warn that increased indebtedness could lead to a downgrading of its credit ratings. The banks therefore bear a great responsibility in this respect.

In light of this forecast, at the same time as Monetary Bulletin was published the Central Bank decided to raise its policy interest rate by 0.25 percentage points, which is a somewhat lower hike than market agents had predicted and also less than the Bank’s other recent policy rate rises. The policy rate is therefore currently 9%. Among other things, the decision to take a relatively modest step now is based on the fact that the tightening implied by the recent policy rate hikes and the significant appreciation of the króna have yet to be transmitted in full. Nonetheless, further tightening may be necessary over the next few months. Comparisons with previous forecasts and various indicators suggest that since December the Central Bank’s policy rate hikes have by and large delivered a tighter stance. The Central Bank’s monetary policy is very much debated in society at large at the moment, which is natural given the great interests at stake. Obviously I have closely followed discussions of monetary policy for a fairly long time and must admit that the debate in recent times has been more mature and bears witness to a deeper understanding of economic principles than before. It is normal for opinions to be divided over the Central Bank’s measures during tight stances such as the present. The Central Bank welcomes public debate and is ready to take part in it. I would like to use this opportunity to address a few points that have been raised in this debate recently.
BIS Review 45/2007  3  An important key to the success of the Fund so far has been the clear separation between investment decisions by professionals in a performance-oriented environment, and the economic policy role of the Fund. We have been able to establish a setting where investments are made in a business-like manner. Another essential insight is the importance of political support for strategic allocation. There was a broad consensus in parliament behind the choice of investing in equities in 1997. This was important in order to navigate through the turbulent waters of equity markets in the beginning of this century – and such turbulence will certainly return. Perhaps most importantly, the Government Pension Fund and our fiscal guideline have helped us to avoid the common pitfalls in resource rich economies, e.g. lack of fiscal discipline and loss of focus in structural policy. We have managed to avoid creating a subversive second fiscal budget. The Fund has shielded the mainland economy from excessive variability and has to a large extent reduced the oil-price dependency of the exchange rate. Yet, I would like to end with a word of caution: The model we have chosen in Norway has evolved in a Norwegian setting and is not necessarily suited as a blueprint for other countries. But it is important to understand the basic, and maybe universal, principles underlying the model and adapt them to the particular fiscal situation and the particular political tradition of the country in question.

These could weigh on the pace of the already fragile global recovery and create more bumps in the road for the Thai economy than we have anticipated. Moreover, the impact could be more pronounced in the rural areas, where drought and low commodity prices worsened the already weak farm income. Nevertheless, I believe there are grounds for optimism for the Thai economic growth. The Thai economy this year will continue to be driven largely by domestic demand and tourism. Exports will likely remain flat or decline further, not only due to subdued global demand but also price effects as export prices have tumbled following the low commodity prices. But, so far the impact on the labor market, even those in export-oriented sectors, has appeared well-contained. Notwithstanding the threatening uncertainty around us, tourism continued to be a main growth driver for the Thai economy, with expected tourist arrivals of around 31 millions in 2016. The CLMV market is another bright spot. The Thai exports to CLMV market are expanding in accordance with their growing middle class and vibrant economic activities. The CLMV market is now accounting for 10.4 percent of Thai total exports, which is already larger than our exports to Japan, the third largest export destination. In terms of the domestic economy, we have learned from the latest GDP release that the construction sector has picked up with a strong growth of more than 20 percent in the fourth quarter of last year, thanks to government infrastructure projects.
Although an understandable response to the events of the past few years, an increased prevalence of self-insurance is not good for the efficient functioning of our economy. The scarring effects of the financial crisis and the uncertainty it brought with it, together with the fiscal consolidation and the weakness of the euro area, are likely to continue to weigh on the recovery over the next few years. Yes: our economy appears to have turned a corner. And yes: there are good reasons for optimism that the recovery will persist. But we can’t take it for granted: there’s still a long way to go. And that sense of how far there is to go underpins the policy guidance provided by the Committee earlier this year and takes us to our third and final question: what next for monetary policy? What next for monetary policy? The primary objective of monetary policy remains to hit the Government’s 2% target for CPI inflation. Despite missing the target for much of the past five years, I’ve no doubt that the credible nominal anchor it provided served our economy well during the crisis. Indeed, without that credibility it wouldn’t have been possible to loosen monetary policy as aggressively as we did in order to support output and jobs. As we have seen, the good news is that inflation has fallen sharply over the past few months and the 2% target is now in sight for the first time in over 4 years. But this isn’t a time for complacency.

Meanwhile, it is of key importance, not just for the financial centre but for Switzerland as a whole, that an acceptable solution be found for the taxation of foreign bank deposits. BIS Review 68/2010  1