samchain/econo-pairs-v1 huggingface dataset:
Second, as I’ve noted many times in the past, a symmetric inflation target means we should be averaging 2 percent inflation over time. We’ve averaged well under that 2 percent mark for the past six and a half years. With a symmetric inflation target, one could imagine moderately-above-target inflation for a limited period of time as simply the flip side of our recent inflation experience – and hardly an event that would impose great costs on the economy. The murky state of inflation expectations is another factor that enters my risk-management considerations. For inflation to take off rapidly, we would have to see a jump in inflationary expectations. But inflationary expectations have been quite stable. Indeed, we may be facing a quite different problem. Many forecasters – myself included – assume that stable 2 percent inflation expectations will be an important factor helping to pull actual inflation up. Over the past five years, professional forecasters’ projections for long-run inflation have been at the 2 percent target and Treasury Inflation-Protected Securities (TIPS) break-evens have been flat. Yet actual inflation has only just recently made it back up to 1-1/2 percent. Moreover, we still have not seen much at all in the way of higher inflation compensation being built into interest rates or wages. So there is cause for concern that expectations might not produce as strong a pull on inflation as we hope. We can turn to the Japanese experience again to highlight this risk.

The U.S. experience during the Great Depression – in particular, in 1937 – is a classic example for monetary historians: In response to the positive growth and reinflation that occurred after the devaluation and suspension of gold convertibility, the Fed raised reserve requirements, the Treasury sterilized gold inflows and there was a fiscal contraction. Subsequently, the economy dropped back into recession and deflation. During this time, interest rates remained very low. The discount rate was lower after 1937 than before, and Treasury bill rates were less than 1 percent. By many economic accounts, it took the big fiscal expansion associated with World War II to exit the Great Depression. Japan over the past 20 years We can also learn from the Japanese experience over the past 20 years. After attempting to expand production and avoid deflationary prospects in the late 1990s, monetary policy reversed course prematurely in the early 2000s as the inflation rate inched above zero; deflationary pressures soon reemerged and policy rates returned to zero by 2001.This experience was repeated again later in the decade. Indeed, it has only been over the past year – following nearly 20 years of stagnation – that we see the recent goal-oriented monetary expansion making significant headway in extracting Japan from below-target inflation. Recent European experience The recent European experience in 2011 is yet another example of premature tightening.
But that’s generally the sort of thing that has to happen: almost always, these currency substitutions occur only once the existing currency has become deeply compromised3. Even then, the thing people naturally reach for is an existing, trusted currency – often the US dollar – rather than some entirely new unit of account. So if it’s neither the “digital” nor the “currency” aspect of bitcoin that matters, what is it that has sparked so much interest? Well perhaps a better name for what we’re talking about, albeit more of a mouthful, is a “decentralised virtual clearinghouse and asset register”. As the Quarterly Bulletin articles explain, the key innovation in bitcoin is its settlement mechanism. Instead of relying on an independent third party to process and record transactions, holders of bitcoin use a decentralised computer system called the “distributed ledger”. The distributed ledger works by encouraging users to verify for themselves, and others, blocks of transactions made over time. As everyone in the system has the right to do this, and everyone can see the results, there is no need for a trusted, centralised clearer. In principle, this technology could be applied to many things, not just the exchange and registering of financial assets. A recent official report in the UK suggested that distributed ledgers might eventually be used for a wide variety of government services, including the collection of taxes, the delivery of benefits – potentially including new “smart” transfers that could target particular groups – the keeping of business registers and other things besides4.

And, at least to a degree, competing away their deposits would compromise banks’ ability to supply credit, or at least make it more expensive.15 It might also make that supply more variable. With an easily available alternative, banks’ remaining deposits would more readily migrate to the CBDC during times of stress. (It would certainly be more straightforward than stuffing cash under the proverbial mattress16.) Nor has the alternative source of funding the banks – raising debt in wholesale markets – proved that stable in the past. In fact, one striking feature of the financial crisis was that banks’ wholesale debt proved much less stable than deposits. That’s why regulators have since recommended that banks actually raise the share of (non-equity) funding that comes from deposits17. It’s hard to know how significant these effects would be. And, as I tried to explain earlier, a CBDC that sought simply to replicate cash would probably have a greater impact on the demand for banknotes than on commercial bank deposits, with more limited macroeconomic effects. If the central bank’s balance sheet were opened up only to non-bank financial companies, and no wider, the issue probably wouldn’t arise to begin with. But as you widen that access, and the more closely a CBDC substitutes for existing deposits – i.e. the further towards the south-east you move across (the extremely stylised) Chart 5 – the more prominent the issue becomes. No longer would a CBDC be a purely technical decision, about the costs and security of exchanging money.
Greater focus on credit risks Now that liquidity risks are less prominent, there is instead a greater focus on credit risks, as economic activity has weakened and growth prospects have deteriorated. The very large policy rate cuts made by central banks around the world and the fiscal policy stimulation from governments have not been able to prevent a severe weakening in economic activity. Our most recent forecast published in April points to GDP in the world falling by a good 1 per cent in 2009. This is a something quite unique: since 1970 GDP in the world has increased by on average 3.6 per cent a year and growth has not been negative even for a single year. The export-dependent Swedish economy is hard hit by the international downturn. In our April Monetary Policy Update we forecast a fall in GDP of more than 4 per cent in 2009. When economic activity weakens and the demand for goods and services declines it becomes more difficult for the banks’ borrowers to meet their payments. Bankruptcies  2  BIS Review 73/2009  increase and the banks suffer loan losses. The loan losses in their turn make the banks even less willing to lend money and the economy risks ending up in a spiral where falling activity and stricter credit terms reinforce one another. The banks can cope with loan losses The main scenario in the Riksbank’s forecasts does not involve Sweden ending up in a serious downward spiral.

First, we aimed to make these financial institutions healthy and profitable so as they could resume their normal function of financial intermediaries. In 2001, the Bank of Thailand issued a few measures and guidelines to enhance banks’ profitability; for example, the reduction of provision requirement for a normal loan which is not NPL to a more reasonable level and the classification of NPLs by account was introduced to replace NPLs by name. More important, banks were persuaded to change from the old practice of competing for deposits with higher interests which resulted in lowering the cost to support banks’ profits. Moreover, banks also have made substantial progress on productivity and risk management, with restructured work process that has significantly brought down operating costs. As a result, return on assets has improved from negative in 2001 to 0.7 percent in 2003 and the annualized rate of 1.5 percent for the first half of this year. At the same time, good progress has been made in NPL reduction. The proportion of outstanding NPLs to total loans has reduced from 24.5 percent in 2000 to 12.4 percent at the end of 2003 due to various efforts put to restructure NPLs. Now, with improved balance sheets and more stable financial standing of all banks, the Bank of Thailand has moved into the second step; and that is to improve the quality of banks’ businesses and management. The Bank of Thailand has recently tightened provisioning rules for NPLs.
Most countries would no longer benefit from local currency invoicing, which would exacerbate the effects on inflation if they undertook large exchange rate devaluations. And they would be more exposed to monetary policy spillovers from abroad – not least from the ECB itself – which could constrain their domestic policy autonomy. In recent years, Denmark, Sweden, Switzerland and central and eastern European economies have been affected by spillovers from our policy measures. [13] In fact, spillovers from larger economies were one reason why the euro was created in the first place. Under the European Monetary System that preceded the euro, most central banks had to follow the policy of the Bundesbank. After more than a decade of disappointing, if not devastating, experiences, it was deemed preferable to regain monetary policy sovereignty by launching the single currency together. [14]  Cooperation and economic policy The second way in which globalisation constrains sovereignty is by limiting countries’ capacity to set laws and standards that reflect their social goals. Global trade integration tends to reduce that capacity, because as production fragments through value chains, there is a greater need for countries to agree on common standards. Those standards are mostly set not within the World Trade Organization, but by large economies with dominant positions in the value chain. Smaller economies tend to end up as rule-takers in the international system. [15] Global financial integration can likewise reduce individual countries’ power to regulate, tax and uphold labour standards.

[24] The same protections do not exist at the global level or are much weaker in other regional trading blocs such as NAFTA. The history of the United States itself illustrates the difficulty of aligning the approaches of individual states to improve working conditions. In the early 20th century, there was a growing concern in several US states about the lack of a social safety net, especially for the elderly. But individual states feared that providing social security would impose, in the words of the time, “a heavy tax burden on the industries of the state that would put them at a disadvantage in competition with neighboring states unburdened by a pension system.”[25] The lack of coordination created a severe underprovision of social security, which was exacerbated by the Great Depression. In 1934, half of the population over 65 were in poverty. [26] This was only resolved through the passing of the federal Social Security Act in 1935, which enabled states to coordinate in providing social security. In a similar way, the EU provides a powerful coordination function that allows countries to achieve goals that they could not realise alone. And the EU is able in turn to export some of its 4 / 10  BIS central bankers' speeches  standards globally. The EU is the top trading partner of 80 countries, compared with just over 20 for the United States. [27] That allows the EU to insist on higher labour and product standards abroad via trade agreements,[28]as well as protecting local producers at home.
In Malaysia , such markets exist and have been key to facilitating liquidity management. Coordinated initiatives across jurisdictions can be taken to foster the development of an efficient and vibrant international Islamic financial market. The IFSB Task Force on Liquidity Management reflects a concerted effort to explore measures needed to develop the liquidity management infrastructure and framework for the Islamic financial institutions. Notwithstanding the effort by the Task Force to look into the pertinent issues, Islamic financial institutions are encouraged to promote innovation in the development of a broader range of Islamic financial market instruments. These include instruments with equity ownership features, Islamic asset-backed securities, the inclusion of permissible forms of credit enhancements as well as Shariah-compliant risk mitigating instruments. It is also essential that there should be sufficient availability of liquidity to support the intermediation of funds in the Islamic financial system. Central banks must therefore have sufficient Islamic financial instruments at their disposal to manage the liquidity conditions in the Islamic financial system. Secondly, is the international cooperation to ensure financial stability of the international Islamic financial system. This will also involve partnerships between international financial centres in promoting financial stability. A robust and effective regulation and supervision of Islamic financial institutions is key to preserving financial stability. The current ongoing  2  BIS Review 86/2009  global financial and economic crisis has highlighted the structural weaknesses in the global financial regulatory and supervisory framework.

Inflation forecast I shall now turn to the course of inflation and our new inflation forecast. Our inflation forecast of June 2002 (the green dash-dotted curve in the graph) shows that at that time we assumed, based on a stable three-month Libor rate of 1.25%, that inflation would gradually rise to 1.9% in the first quarter 2005. Year-on-year inflation, as measured by the national consumer price index, dropped to 0.3% in the third quarter 2002 from 0.7% in the second quarter. In October and November it rose to approximately 1%. These fluctuations are due mainly to changes in the exact points in time when data on clearance sales prices are collected. This is also the main reason why our forecast of June 2002 over-estimated the development of inflation in the third quarter 2002. Our new inflation forecast (red dashed curve) is based on the assumption that growth in the US will pick up again from the second quarter 2003 onward. The US economy is likely to achieve its growth potential stepwise until the beginning of 2004. In the EU, the upswing will take a little longer. We are not expecting a significant acceleration of growth before the end of 2003. We assume that the  BIS Review 73/2002  1  dollar/euro rate will remain at about the current level and that the oil price will be around $ per barrel.
3 M LI BOR and Targe t Ban d  %  4 .5 4 .0 3 .5 3 .0 2 .5 2 .0 1 .5 1 .0  .0 1 .0 1 04  04  .1 0  .0 0  .0 0 .0 7  00 04  .0 4. 04  .0 0 .0 1 04  .1 0  .9 9  .9 9 04  .0 7 04  .9 9 .0 4 04  04  .0 1  .9 9  0 .5  Until the latter part of 1999, the interest rate path was shaped by our concern about the economic downside risk. We aimed at a generous setting of the monetary conditions by means of very low money market rates. We were therefore not unhappy that during this time the Swiss franc remained consistently stable vis-à-vis the euro, while weakening against the USD. During the - surprisingly vigorous - recovery that set in in winter, we increased the 3-month Libor rate in several steps from around 1% to 3.5% in June 2000. In this phase, we pursued a more restrictive course than our colleagues at the European Central Bank. We considered this course to be adequate because our economy was practically back at full employment. Since June 2000, we have not adjusted interest rates. In retrospect, that was an adequate policy.

The Swiss franc is trading currency number 5, ranging behind the Big Three and Sterling, but well ahead of the currencies of much larger countries like Australia and Canada. Economically more important than the trading volume is - second - the position of a currency held in international portfolios. Relative to the size of our country, the SFR occupies an unusually prominent position in international institutional and private portfolios. This position is the combined result of an above-average stability record, an efficient financial centre and the commitment to an independent monetary policy which lends the SFR special diversification characteristics in global portfolios. This certainly is a sign of strength, a sound basis for value creation, especially in our financial industry. At the same time, its strong position makes the SFR particularly sensitive to global capital movements. Thirdly, due to relatively low interest rates, the Swiss franc - like the yen - periodically plays an important role in the short-term financing of trading positions. Currency and securities traders take short positions in our money market to finance long positions elsewhere. This is a rather volatile game, often reinforced by herd effects, which comes and goes with short-term exchange rate expectations. These so-called carry trades from time to time generate a significant amount of short-term exchange rate volatility. In the recent past, however, such strategies have lost their appeal, probably as a combined consequence of last year's increase in money market rates and the appreciation of the Swiss franc.
Ex post assessments of policies are admittedly much further along in their development at the practical level, and their benefits as a part of the overall public policy process are wellestablished in the most advanced democratic societies. Yet they also come up against theoretical and empirical limitations that we cannot conceal. On this front, Spain is lagging behind our peers. And this is not because of a lack of know-how but rather, in my opinion, on account of the existing limitations in the current administrative, political and social ecosystem which do not sufficiently encourage the insertion of the assessment process into the public-policy-programme design and review cycle. True, there have been some promising developments of late, such as the mandatory periodic evaluations to assess the functioning of the minimum income scheme. Yet in much of the Spanish administrative apparatus there are still significant technical hurdles to building potential ex ante or, at least, ex post assessments into the design of public programmes. These impediments not only limit the general government’s own ability to conduct thorough assessments, but also prevent the findings of external assessments from being fully harnessed. Political action to address them is also an important long-term policy; for example, the creation of technical posts and hiring mechanisms that attract people with adequate training. Setting up agencies without long-term hiring plans does not work. Nor is it just a question of public-sector shortcomings.

What is impracticable – akin to Canute holding back the tide – is to confront reality standing behind ridiculous theoretical instruments. That way lies only bitter impotence.”5 A second role of ideology is to provide initial starting points as to how, a priori, these ends might be addressed when we lack sound evidence of the best course of action to attain them. To some extent, ideology occasionally fills the gaps that rigorous evaluation based on reliable data can leave, which I highlighted earlier. In this second area, there is ample room for fruitful dialogue between ideology and evaluation, with only one pre-requisite: that, no matter how firm ideological postulates are about the means that should be used, economic policymakers should be willing to be swayed by the findings of rigorous and independent evaluations. The outcome of this dialogue may be very enriching for society: the emergence of a minimum consensus on how to tackle, using public policies, specific challenges that are identified as such by a very wide political spectrum. As discussed on previous occasions, ever since our society and economy were impacted by the pandemic, such basic social and political consensus has become key to contending with situations of enormous uncertainty like the present, where farreaching reforms are needed to improve citizens’ well-being.
On the eve of the crises, net capital inflows to the Asian crisis countries were equal to almost 6 percent of their GDP. Over the next two years, the flow of capital more than fully reversed. Income and output contracted abruptly: in the worst affected countries, GDP shrank by more than 10 percentage points from peak to trough and in one case, the contraction was closer to 15 percent. By any standards, these financial crises were unusually severe. The crises marked a sudden and dramatic break with the past, and brought a new sense of vulnerability to economies perceived as strong and successful. Yet though some of the characteristics of the Asian crises distinguished them from other episodes of financial turmoil, they shared several important features in common with crises in countries with modern, market-oriented financial systems. They were largely unanticipated. A rise in borrowing created vulnerability to a shift in asset prices. Uncertainty about the scale and nature of the underlying vulnerability magnified the problem. Contagion spread rapidly. Markets overshot. The fundamental economic and financial weaknesses that were the source of vulnerability were the consequence of the interaction between weak domestic financial systems, selective liberalization of controls on capital flows and fixed exchange rate regimes. Banking systems combined relatively weak supervision with broad government guarantees, some explicit, but more commonly implicit, reflecting a tradition of public sector intervention to protect troubled companies and banks from failure. Tax and regulatory incentives promoted short-term borrowing in foreign currency through the banking system.

There is of course a downside to this strong work ethic. Many people appear not to have much time for fun. It worries me if people say they cannot afford the time for their favourite recreations or pastimes. It worries me when, late in the evening, someone jumps up from the dinner table immediately after the last mouthful, saying that he must get back to the office. But perhaps such people regard work itself as sufficient fun. So, when people ask what is it that has made Hong Kong a leading business and financial centre, I would reply that it's not just the position in the Asian time-zone, or low taxes, or the legal framework, or the English language, or the entrepot trade with the Mainland, or the Convention Centre, or the airport with its excellent international connections, or the MTR, or the rugby sevens, or the hotels and restaurants, or the shops. It is of course all of those, but additionally, and arguably foremost, I would emphasise the people and the work ethic, and the fact that in Hong Kong you can get the job done. It is in this respect – and relating back to the title of my talk - that there is perhaps something really special about Hong Kong. We may take it too much for granted, but our "can do" mentality is acknowledged by outsiders as something special and is a crucial component of Hong Kong's reputation as a business and financial centre.