samchain/econo-pairs-v1 huggingface dataset:
Yet policy debates continue to be permeated by the “illusion of certainty”.1 The reluctance to give adequate prominence to risks may reflect the fact that many of us feel uncomfortable with formal statements of probabilities. Probability theory is relatively recent in our intellectual history, dating back to a flowering of ideas around 1660 from Pascal, Leibniz, Huygens and others.2 Despite advances since then, statistical thinking remains prone to confusion and is often avoided. Television weather forecasts in Britain rarely employ the language of probabilities used by the meteorologists themselves. Professor Gigerenzer of the Max Planck Institute in Berlin has demonstrated in a series of studies how poorly doctors, lawyers, and other professionals understand probabilities. And despite Seneca’s maxim that “luck never made a man wise”, airport bookshops stock titles on how to become rich by successful investors and entrepreneurs who are confident that their success is the result of outstanding business acumen rather than good fortune. Many of these misunderstandings stem from a failure to grasp basic statistical concepts. Juries are not informed that, in a country of our size, multiple cot deaths are likely to occur several times a year, that several people will have DNA that matches the incriminating sample, and that in themselves these  1  To use the phrase of Professor Gerd Gigerenzer who has done more than anyone to draw attention to the lack of public understanding of risk. 2  For an intellectual history of probability theory see Hacking (1975) and Bernstein (1996).

On the Bank of England’s Monetary Policy Committee the nine members debate among themselves our current state of knowledge of the  7  The data in Chart 5 are for occupational pension holders of Actuarial Profession member institutions. These individuals are typically wealthier than the rest of the population, and for that reason tend to live longer. 8  Peterman et. al. (1988) found that the probability of infecting a partner was unrelated to the number of sexual acts with that partner. 9  The large models made the further simplifying assumption that the rate took one of only two values. In fact, it varies widely among the population. Robert May, and his colleague Roy Anderson, showed that a key driver of the proportion of the population eventually infected was the “variance of the rate of acquisition of new sexual partners”. Simulations of the proportion of the population ultimately infected with AIDS are sensitive to that variance, and plausible differences in the number of their partners among different people changed the estimate of the proportion likely to be infected from 25% to 90%. 10  Many non-economists believe that economists use a single “model” to explain all economic phenomena. Hence the interest of many commentators in “the model” that is alleged to generate the forecasts of inflation and economic growth published by the Bank of England. But, as we never cease pointing out, the Bank uses not one but many models to help us understand particular aspects of economic behaviour.
Speculators may observe relevant information about the weaknesses of one particular financial institution or the system as a whole and exploit such information in speculative attacks that target certain assets when the central bank or another institution may have low reserves or liquidity problems. CBDC seems to lead inevitably to the replacement of the classical role of central banks at the top of a tiered liquidity system to that of a massive retailer, where deposit-taking may soon combine with loan-making. For this reason, the experiments with RSCoin at the Bank of England and CAD-Coin at the Bank of Canada take a very cautious approach, aiming at addressing technical issues before any definite step in such direction. This means that a real CBDC may still be many years away.

Slide 19  Chile’s financial market at a glance Chile’s financial market  Total debt of non-bank loans (*)  (percent of GPD; ratio; percent)  (percent of GPD) 140  2013  2014  2015  2016  120  Total Assets/GDP  112  119  123  122  100  NPL (%)  2.0  2.0  1.8  1.8  Loans/GDP  83  85  88  88  Loan/Total Deposits  1.3  1.3  1.3  1.3  ROE (%)  15.0  17.3  14.4  11.1  40  ROA (%)  1.2  1.4  1.1  1.0  20  CAR (%)  13.3  13.4  12.6  13.8  0  Local bonds Factoring, leasing and others External loans and trade credit  Local bank loans External bonds Debt related to FDI  80 60  09  10  11  12  13  14  15  16  (*) Based on firm-level data, expect for factoring, leasing, and other securitized bonds; and commercial paper. Source: Bank of International Settlements, Central Bank of Chile, and SBIF.
They are also well explained in the scientific literature.4 The basic problem is that banks have an inherent instability. As a depositor, I want to know that I can always withdraw the SEK 1,000 I deposited. This is because most of us use these deposits to make our payments and we need to know that the nominal amount cannot fall and that the money is immediately available. This distinguishes bank deposits from, for example, shares in mutual funds. The latter can also be immediately available, but mutual fund shares vary in value depending on how the value of the assets varies. However, bank deposits are both liquid and nominally fixed. For the bank, this means that funding is volatile. At the same time, much of the bank's assets are locked up for the long term, i.e. illiquid. Those of us who borrow from the bank want to know that we can repay the loan according to an instalment plan and cannot be called upon to repay it at any time. So we should be able to request our deposits at any time, but the bank cannot request the return of its money – your loan – other than as planned. The bank thus 3 See for example Rajan (2005) for an early reference. 4 Douglas Diamond and Philip Dybvig received the Nobel Prize in Economics in 2022 together with Ben Bernanke. Diamond and Dybvig's most important contribution was the model of bank runs that they published in 1983, see Diamond and Dybvig (1983).

Former Bank of England Governor Mervyn King recently launched a more drastic idea, that a bank must hold more assets that can be used as collateral in the central bank than it has liabilities (including deposits) that can suddenly flow outwards.10 In this way, central banks could always intervene and have sufficient access to liquid funds. Admati et al. note in a response that the consequence of this would be that the authorities also supported bad banks, which would reinforce moral hazard problems and lead to banks that should be wound up not being wound up.11 There is a risk that we would then have so-called Zombie banks, and this would have negative effects on growth and efficiency. In any case, I believe that the instability of deposits is an issue that legislators and regulators around the world need to analyse more closely. The resolution framework also needs to be reviewed The second question concerns the resolution framework. This was introduced after the global financial crisis and the explicit purpose is to make it possible to resolve a systemically important bank in an orderly manner. The idea is that losses should be borne primarily by shareholders and secondarily by bondholders. Public funds should not need to be used. Allowing bondholders to bear potential losses also reduces the problems of moral hazard. So if you can use an effective resolution framework as intended, you reduce the problems created by the deposit guarantee. 10  See King (2023). 11 See Admati, Hellwig and Portes (2023).
Reducing the European economy’s vulnerability to future shocks will also call for continuing progress towards a full Banking Union and a Capital Markets Union. The necessary support of the European Central Bank On this occasion, and unlike previous crises, the approval of the European recovery fund will prevent the European response to the crisis in the euro area from resting exclusively on the common monetary policy. The European Central Bank (ECB) has deployed a range of emergency measures during this crisis. These have involved, first, the extension of sovereign and corporate bond purchases in the euro area, with the aim of improving financing conditions. Specifically, the ECB has increased its pre-existing purchase programme and added a new emergency programme currently worth € trillion (11.3% of euro area GDP in 2019) and which will last, at least, until June 2021. One new feature is the fact that asset purchases under the new programme are being made with a high degree of flexibility regarding their distribution over time and across asset classes, and, in the specific case of public asset purchases, also as regards the issuing countries. As a result, the Eurosystem is focusing its purchases there where they are most needed at each point in time. The aim is to ensure the smooth transition of the single monetary policy to all countries in the area and to head off the risks of financial fragmentation.

That said, an improving path could be seen throughout Q2, in tandem with the ongoing gradual reopening of the economy. At present, then, we are witnessing an incipient recovery in the economy, which, however, is still incomplete, uncertain and uneven. The correlation of this economic activity during Q2 with the intensity of the restrictions on people’s movement in force at each point in time was very high. Thus, some indicators that measure people’s movements hit record lows in the first two weeks of April, with declines of around 80% in motorway traffic and fuel consumption, and of over 90% in the case of airport traffic. This was reflected in the high-frequency indicators of economic activity in the weeks in which the lockdown was stricter; then, for example, we saw reductions in electricity 1  consumption by firms and in consumer spending paid using cards of approximately 30% and 60%, respectively. For April as a whole, there was an unprecedented event in the time series when some variables fell practically to zero. This was the case of new car registrations and international tourist inflows, the latter variable obviously being closely related to the restrictions on personal movement. Since early May, and to a greater extent in June, the progressively staggered and regionbased easing of the lockdown measures prompted a gradual recovery in the mobility indicators and, in tandem, in economic activity indicators.
On balance, my outlook is that growth in the rest of the world will be roughly the same in 2014 as it is this year, so that the contribution of trade to growth will likely remain quite small. Putting all these factors together, I still conclude that there is a basis for a pickup in growth as fiscal restraint lessens, but the impulse is not likely to be a particularly powerful one without some unanticipated impetus to growth that solves the chicken-egg problems, especially in the near term. On the inflation side of the ledger, inflation remains below the Federal Reserve’s 2 percent longer-run objective for the personal consumption expenditure (PCE) deflator. The year-overyear change in the total PCE deflator was 1.4 percent in July. This has created some concern that inflation is “too low,” raising real interest rates and making monetary policy less accommodative. I acknowledge this concern, but I believe it will abate as inflation moves gradually back up towards a 2 percent annualized rate over the next few years. A number of considerations inform my view. First, a decomposition of core inflation reveals that the most recent slowing in inflation has been largely confined to core goods, whereas the rate of increase of core services has been relatively steady. Such was not the case in 2010 – the previous instance of a significant slowing of inflation. This suggests that the fall in inflation partly reflects idiosyncratic factors that are not likely to be sustained.

Tarisa Watanagase: Risk-focused supervision and risk assessment Opening address by Dr Tarisa Watanagase, Deputy Governor of the Bank of Thailand, at the APEC Financial Regulators Training Initiative Regional Seminar on Risk-Focused Supervision and Risk Assessment, Bangkok, 6 September 2004. *  *  *  Distinguished Guests, Ladies und Gentlemen, lt is a pleasure for me to be here at the opening of the APEC Financial Regulators Training Initiative on Risk-Focused Supervision und Risk Assessment. In making this opening address, I would like to personally extend a warm welcome to all the participants and to express my appreciation to the Federal Reserve experts who have kindly agreed to share with us their knowledge und experience on risk-based supervision. This regional seminar is held at an opportune time, about two months after the Basel Committee on Banking Supervision released the Basel II capital framework. As you all are undoubtedly aware of, Basel II aims to strengthen financial stability by encouraging sound risk management practices at banking organizations. The tools uscd are a more risk-sensitive capital regime (Pillar 1); the application of risk-based supervision (Pillar 2); und improved public disclosures to enhance market discipline (Pillar 3). Of the three pillars, one of the most formidable challenges for emerging market supervisors will be to properly implement the Pillar II risk-based supervisory framework. Since risk-based supervision is the main topic of this seminar, it may be useful to provide a few thoughts on some of the broader regulatory und supervisory implications associated with implementing this framework.
I would like to close by thanking Unnur Gunnarsdóttir, Deputy Governor for Financial Supervision, for her invaluable work for the Central Bank since its merger with the Financial Supervisory Authority in January 2020. In addition to thanking her for our time working together, I wish her all the best as she turns to the next phase of her career. I would also like to take this opportunity to thank Katrín Ólafsdóttir, who completed her tenure with the Monetary Policy Committee in March 2022, Andri Fannar Bergþórsson, who left the Financial Supervision Committee last autumn, and Gylfi Zoëga, who stepped down from the Monetary Policy Committee this month, for their work on behalf of the Central Bank. At the same time, I welcome new Monetary Policy Committee members Herdís Steingrímsdóttir and Ásgerdur Ósk Pétursdóttir and new Financial Supervision Committee member Gunnar Thór Pétursson. 8/8  BIS - Central bankers' speeches

The Asian financial crisis in 1997 taught us a number of painful lessons from volatile capital flows associated with such weak institutions. Since then, we have seen a large number of developing countries moving towards flexible exchange rate regime, adopting inflationtargeting framework, and improving the resilience of financial system. Yet, the challenges from volatile capital flows have become more intensified and we still see the implications of volatile capital flows on our economies. We are, therefore, very fortunate to have with us Mr. Rodrigo de Rato, Managing Director of the IMF, and Mr. Hervé Hannoun, Deputy General Manager of the BIS, to share their views and insight on this issue. I believe that we can greatly benefit from the IMF’s new surveillance framework, which put greater emphasis on the volatile financial market, as well as from the BIS expertise on analysis of capital flows during the morning session. I am certain that their perspectives will be useful in setting the tone for our further discussions on how to better prepare ourselves for the more intensified volatility of capital flows, which, I believe, have been rooted to our current economic environment. Ladies and Gentlemen, Following our discussions on the theme, we will have Dr. Perry Warjiyo and Mr. Richard Murray, our Executive Directors from the IMF to lead our discussions this afternoon on recent developments in global and regional economies with a view to identifying challenges ahead of us.
The world is changing quickly and it is only a couple of years since several of the big emerging markets, which now according to a GDP criterion should be given greater influence, were in need of support from the very countries that today by the same criterion would have to scale back their role. We do not know what the situation will be in five or ten years. Maybe, there are reasons to aim for more regional representation? A very difficult question – which I do not think can be ignored – is if the level of “democracy” or “governance” in individual countries’ should be a factor when determining countries influence in the IMF. Whatever the answer to this question is, it will have potential consequences for the legitimacy of the organisation. Finally, we should not be led to believe that a changed representation per se, resolves the problems of the IMF. There are a number of other things that could, and should, be done that may even play a more important role. Allow me to indicate a number of areas where more could be done, and where the prospect of progress is probably higher than in the QVR-field. I myself have positive experiences of a similar gradual process of reform within the framework of the Bank for International Settlements (BIS). 1. Much has been done to increase transparency in various ways at the IMF. Greater openness is probably the most important way to develop the organisation’s analysis and surveillance activities.

Many countries do not seriously consider the recommendations given to them by the IMF and/or blame the Fund for its own problems. Other countries want to avoid that the consequences of their own policy actions, for the rest of the world, are discussed within the IMF or prefer to discuss them elsewhere. •  To increase the legitimacy of the IMF, there are reasons to consider the formal governance issues, (i.e. the QVR-issues). A consensus has to be built, step by step, on how to deal with this. However, to increase the efficiency of the Fund, a number of other reforms could be implemented that are as important as the QVR-issue. In these areas it is possible start moving forward at once. Thank you. BIS Review 43/2005  5
The more flexible labour, product and financial markets are, the lower the employment and income losses in response to adverse domestic and global economic developments will be. Moreover, given that demographics in the euro area are less dynamic than in other economies, including the US, we need even more improvements in terms of higher productivity growth, rising labour force participation and declining structural unemployment. The case for decisive structural reforms is therefore pressing. Structural reforms are generally associated with changes in the long-term equilibrium demand and supply conditions of an economy and changes in the relative prices of goods and services. The transition from the pre-reform to the new post-reform equilibrium conditions normally takes time and within this period some resistance and uncertainty may occur. For this reason the implementation of structural reforms requires a strong leadership, a great deal of courage and a tireless explanation activity. It is very important to make it clear to the public that, if governments, Parliaments and social partners deliver those reforms, the benefits will be significant. In capital markets, structural reforms should aim at allowing a more effective allocation of savings toward the most rewarding investment opportunities. Since the introduction of the euro, the pace of capital market reform has been impressive. This includes policy-induced reform, such as the Financial Services Action Plan initiated by the European Commission in the spring of 1999 or the development of national legal frameworks governing the issuance of mortgage bonds.

I would also like to recall the unanimous recommendation we submitted on the voting modalities of an enlarged Governing Council, which has been accepted by the EU Council and is about to be ratified within these days by all Member States. This will allow the ECB to maintain efficiency and timeliness of decision-making in an enlarged euro area. Eventually, enlargement of the EU will lead to the extension of the euro area, as the new Member States are expected to adopt the single currency at some point in the future. In fact, upon EU accession, they will be committed to striving towards the eventual adoption of the euro. The main aim of the Eurosystem in the process towards euro adoption is to ensure that the monetary integration of each new Member States proceeds in a smooth manner and in line with Treaty provisions. In view of this challenge, at the end of last year the Governing Council of the ECB adopted a policy position paper on exchange rate issues relating to the acceding countries. The Treaty foresees that at some point following accession, new Member States will join the Exchange Rate Mechanism II (ERM II). To ensure a smooth participation in ERM II, however, it would be necessary that major policy adjustments - for example with regard to price liberalisation and fiscal policy - are undertaken prior to participation in the mechanism and that a credible fiscal consolidation path is being followed.
At the same time, we see some interesting social and economic indicators as well which disprove the Perception/claim that people do not feel the present economic growth. Let’s look at some of these facts too: •  Number of registration of motor vehicles and motor cycles continue to rise sharply. •  The usage of mobile phones is expanding rapidly. •  The number of new apartment buildings and individual housing units are increasing and selling fast – almost every road and by land now has some construction activity going on! •  Super market chains are expanding rapidly. In 2006, the per capita imported food intake was Rs.145/- per day. •  The number of banking outlets is increasing sharply. In the first 5 months of 2007 alone, 46 new units were added to our Banking system. •  The number of household appliances being sold, is increasing rapidly  •  The number of new EPF accounts is increasing. •  The number of people going abroad on holiday is increasing – Just look at the queues outside the Indian High Commission of people who are hoping to go on pilgrimage. •  The per capita incomes are rising. •  More people are sending their children abroad for studies. •  The number of “Wanted” advertisements is increasing rapidly in almost all newspapers. Nevertheless, the global picture of poverty and inequality is still quite gloomy.

At a time like the present, when governments around the world have been ready to adopt measures that were barely conceivable a few months ago, this is perhaps a lesson that has already been quickly learned. The region's recovery from the Asian financial crisis was nearly as rapid as the unfolding of the crisis itself, thanks to the vigorous measures taken by authorities in the region and the underlying momentum and vibrancy of the Asian economies. The experience of this shock generated a determination in the region to try to ensure that such a crisis did not happen again, and to strengthen financial systems against other forms of crisis. It would be complacent to suppose that we have been completely successful in these aims. We are, after all, in the midst of a serious financial crisis that no efforts by this region on its own could have prevented. The region’s financial systems may have been largely undamaged by the first wave of that crisis. But the second wave is now upon us, and this second wave may well carry greater risks to emerging markets. Even so, the determination among Asian economies in the aftermath of 1998 to build strength against future crises has placed this region in a much more resilient position. The raw resources for maintaining financial stability – foreign exchange reserves – have more than doubled in most of the economies in this region over the past decade.