samchain/econo-pairs-v1 huggingface dataset:
This implies that we will continue to exert downward pressure on the yield curve by keeping our stock of asset holdings at a high level for a prolonged period of time, and we could specify it in our communication. 2/ Perhaps the most unconventional policy tool is the use of negative interest rates. Negative interest rates have their limitations; I have already stressed them in the past.vii And at our Governing Council’s meeting in Tallinn last June, we clarified these limitations in our forward guidance stating that we do not intend to lower our deposit facility rate below its current level of -0.40%. But slightly negative interest rates have their virtues. First, by removing the zero lower bound constraint on expectations of future short-term interest rates, they contribute to easing financial conditions by lowering rates along the curve, with a positive impact on the demand for credit by firms. Second, the negative deposit facility rate (DFR) positively interacts with asset purchases. Indeed, the portfolio rebalancing effect of QE is reinforced by the negative DFR, as banks with excess liquidity holdings have a stronger incentive to put their reserves to work. And, so far, we have not seen significantly detrimental effects of negative rates on the profitability of banks, notably thanks to the favourable fact that the slope of the yield curve has remained positive. 3/ Our forward guidance provides further indications as to the future path of our monetary policy; and by steering expectations, it has an impact on the yield curve.

To be frank, this very gradual normalisation has already started. I will begin by focusing on the progress that our accommodative monetary policy has already achieved, before talking about prospects for the future, and then come to the necessary completion of non-monetary tools in Europe. **  I. The progress that we have already achieved Economic recovery in the euro area is here [slide]. It is robust and broadly based across countries and sectors. Our latest ECB forecasts ii confirm this: growth should stand at 2.2% in the euro area in 2017, that is, a significant upward revision of 0.3 point compared with June’s forecast of 1.9%. This means that for the second consecutive year, euro area growth will be  Page 2 sur 8 comparable to that of the United States. And, according to Eurosystem calculations, the output gap will return to close to zero by the end of the year (-0.6%). The non-standard monetary policy that we have been conducting since 2014 is contributing to this acceleration of growth in the euro area, by fostering very favourable financing conditions and by supporting domestic demand. In concrete terms, this acceleration results in more jobs – over 6 million jobs created in the euro area since the start of 2013 – and in a pick-up in investment. Corporate investment in particular, decisive for supply capacity, is clearly recovering: up 4.7% in 2015, 6% in 2016, and is expected to be up 4% in 2017 and 2018.
The process of globalisation is not, as we are frequently reminded, a universally benevolent force. But the process has largely ensured that international capital is allocated to where it can be most efficiently used, and that nations produce goods and services for which they have a competitive advantage. And, whatever the risks and shortcomings, the more efficient the global financial system, the more effective the process of globalisation is. As a result, global growth and development benefit. 11. It is possible to discuss this subject from a number of angles and for a very long time. But I should like to focus on two aspects today. One is how globalisation, as we are experiencing it today, is changing the role of governments. The other is the implication of globalisation for the choice of exchange rate regimes by individual jurisdictions. 12. To benefit from globalisation, national economic systems have made a distinct movement towards what Alan Greenspan has called ‘market-oriented capitalist structures’. Fifty years or more ago, the clear trend was towards state regulation, centralisation, and – at the extreme – nationalisation. Today, it is in the opposite direction: the themes are liberalisation, privatisation and deregulation. Indeed, economies are now graded on the extent of their market orientation. Governments have become smaller relative to the economies they serve. Market competition, freed from distorting regulation or dirigiste policies, has come more fully into play, with lower transaction and information costs and increased market efficiency.

In other words, the business ‘creation effect’ stimulated by WTO accession will far outweigh the ‘diversion effect’, under which the pessimists had been predicting that Hong Kong’s trade would gradually dry out and shrivel up. To put a figure on it, our estimates within the HKMA suggest that Hong Kong’s annual GDP growth rate will be boosted by somewhere between half to one per cent through the increase in re-export trade resulting from China’s membership of the WTO. 6. But that is not the end of it. For our less visible trade, in financial, technical and professional services, the outlook is even more promising. These lucrative service industries, which are increasingly taking pride of place in Hong Kong’s economy, will be greatly boosted by business from Chinese enterprises seeking to expand their capabilities and improve their governance to handle increased trade and meet foreign competition. They will also be stimulated by overseas investors who need advice on how to make the best of the opportunities on the Mainland and who find Hong Kong the best place at which to obtain that advice. These trends have been in play for a long time – indeed they reflect Hong Kong’s historic role as a hub of commercial, technological and cultural exchange between China and the rest of the world. But there are clear signs that these mediatory and advisory services are now receiving a boost in anticipation of WTO entry, as companies in the Mainland, in Hong Kong and overseas position themselves for new kinds of commercial relationships.
As a result, import prices do not adjust efficiently to reflect changes in relative demand between trading partners, in part because expenditure switching effects are curtailed,10 and global trade volumes are heavily influenced by the strength of the US dollar.11 This is less of a problem when all boats are rising with the global tide of synchronised growth. But when the tide is rising in America while receding elsewhere, those authorities face more difficult trade-offs between price stability and output volatility – a situation that could create large potential gains from policy coordination that independent policymakers would not address. 6  World trade as a share of global GDP has doubled since 1970. Over the past two decades, 80% of the increase in total trade has come from intermediates goods trade, driving up the value added of imports as a share from 10% of exports in 1990 to around 20% in 2015. Cross-holding of countries’ assets and liabilities increased almost fourfold since 1990, and measures of stock market integration are at their highest ever (see Bastidon, C, Bordo, M, Parent, A, and Weidenmier, M (2019), ‘Towards an Unstable Hook: The Evolution of Stock Market Integration Since 1913’, NBER Working Paper No. 26166. 7 For more detail on these changes, see ‘[De]Globalisation and Inflation’, ibid. 8 Dominant currency pricing refers to the widespread use of a single currency – the US dollar – in trade invoicing, in place of the currency of either the producer or the importer.

Fluctuations in the exchange rate can be an important source of such trade-offs, as they can exert pressures on consumer price inflation without proportional effects on activity.27 A simple way to represent formally how the policymaker optimises the trade-off is in “linear-quadratic” form – a set of linear constraints describing the behaviour of the economy, and quadratic preferences that penalise deviations of inflation from its target and output from its potential. The relative weight the policymaker places on output stabilisation, relative to inflation stabilisation, is often denoted 𝜆 – or ‘lambda’. A lambda of zero would imply no weight on the stabilisation of real activity – so-called “inflation nutter” preferences. A positive lambda implies a willingness to strike at least some trade-off between output and inflation stabilisation; a higher value indicates that relatively more weight is given to output stabilisation, so that more of the effects of any shock flows through to inflation. In this framework, the value of lambda should vary over time in light of the nature and persistence of the shocks hitting the economy and features of the economy. The MPC’s remit explicitly builds in such flexibility. It recognises that in exceptional circumstances, when shocks to the economy may be particularly large, persistent or both, the MPC is likely to be faced with more significant trade-offs.
Relative to money spending, central bank money supply is at its highest levels in the 15-year history of the European Central Bank, the 100-year history of the US Federal Reserve, the 131-year history of the Bank of Japan and the 319-year history of the Bank of England. Accompanying these monetary policy changes has been a marked shift in regulatory philosophy. Since the crisis, financial regulation has become explicitly macro-prudential [Morris and Shin, 2008; Bank of England, 2011; Hanson et al, 2011]. This is an expression much-used, but generally little-understood. In a nutshell, it means that policymakers have begun using prudential means to meet macro-economic ends. Those macro-economic ends include tempering swings in credit and leverage – the classic credit cycle. The credit cycle is a long-established feature of the financial landscape [Aikman et al, 2014]. Chart 1 shows its pattern in the UK over the past 130 years or so. The credit cycle is every bit as regular as the business cycle. But it differs from the business cycle in two critical respects: its amplitude is at least twice as large and its duration at least twice as long. Both are important for the design of macro-prudential policy regimes. The larger amplitude of the credit cycle is one reason why credit booms have, more often than not historically, resulted in banking crises (Table 1). Because financial crises cause large and long-lived disruption to the economy, this suggests a strong empirical link between credit cycles and macroeconomic destabilisation.

At the same time, there has been a need to fundamentally rethink conceptual frameworks and approaches to financial regulation. The rapid digitalization of trade and finance has transformed the nature of financial services, the types entities offering them, and the location from which they are being offered. Borders and dividing lines are being eroded, creating potentially large gaps in regulatory perimeters. Meanwhile the  2/4  BIS - Central bankers' speeches  rise of data-intensive platforms with strong network effects have raised issues concerning privacy and competition. How best to foster innovative solutions while safeguarding stability, ensuring fair competition and market contestability, and providing adequate consumer protection? What is the appropriate balance and combination between entity-based and activity-based regulation? How does this relate to the application of micro-versus macro-prudential regulation? Moreover, we also need to consider how best to gear regulation to facilitate the green transition that is so critical. Our conceptual framework for financial oversight has to shift as we grapple with these complex regulatory challenges. The climate challenge The third and final fault line is climate change and central banks' role in combating it. Of all the three challenges, this is arguably the most daunting one. It is new to us. There is no precedence to follow. And the outcome is not under our direct influence, testing the limits of our tools. Yet we cannot ignore it. Given the potential consequences, combatting climate change is simply too urgent and too important.
Perhaps it would go away eventually, maybe dying of loneliness, or perhaps it would stagger on for a small range of transactions—but in any event it would cease to be a problem. While this work was underway, new regulations brought the production of LIBOR under the supervision of the UK Financial Conduct Authority (FCA) and introduced minimum requirements for benchmarks used in the EU. In 2017, Andrew Bailey, the head of the FCA, spotlighted the possibility that LIBOR itself might cease to exist altogether. 13 Bailey announced that the FCA had been exerting an increasing amount of persuasion to get panel banks to keep submitting quotes, and had gotten their commitment to continue until the end of 2021. But he warned that the FCA could not ensure that LIBOR would be published at all after that. Suddenly, instead of just the general threat that LIBOR could cease to be produced someday, there was a specific expiration date on the horizon. The challenge to the market was no longer to gradually start writing new contracts on alternative rates like SOFR instead of LIBOR, but to prepare for the risk that LIBOR could entirely cease to exist within a fairly short time frame. That was a much bigger job, because when you looked at the underlying contracts that used LIBOR, they didn’t provide very well for LIBOR simply disappearing. I blame the lawyers, and our congenital lack of imagination.

For example, the lack of underwriting expertise is a major reason why we have yet to stem the outflow of insurance for large and specialised risks. Over the last five years, the amount of direct and reinsurance premiums ceded overseas for the Marine, Aviation & Transit (MAT) and Energy risks amounted to over RM5 billion, with the retention ratio for these classes  BIS central bankers’ speeches  1  remaining below 30% for the last 10 years. With our world-class oil and gas industry and one of the largest airline fleets in the region, having the requisite insurance underwriting expertise in these sectors is not only a logical business extension for the industry; it is also an important economic imperative for the country. With more than 200 actuarial science graduates coming into the market annually, a healthy talent pipeline exists to support a whole range of functions from pricing to risk management and financial reporting. To leverage this resource, more needs to be done by the industry. In a recent survey of 20,000 graduates in Malaysia, the insurance and takaful sector lags other financial institutions in attractiveness, with only three positions among the top 100 employers in Malaysia, compared with the banking sector which has 16 names. The industry, collectively, ought to do better than this. We cannot be complacent when it comes to talent development. The hunt for talent is a continuous affair. Therefore, a strategic focus and investments to attract, retain and develop this talent must be prioritised.
Let’s talk about something else that is somewhat hard to fathom. What are your thoughts on the election? Let me make it a little more – are there lessons from the election that you think are particularly important for the economy going forward? President Dudley: Well, obviously, the Federal Reserve is completely apolitical, so we don’t take sides in terms of elections, and whether the Democrats or Republicans win. But I do think there is an interesting lesson in the election in the sense of support around the country and around the world for globalization, and why that support did not seem to manifest itself in terms of our election outcome. You know, I think that globalization has lifted literally hundreds of millions of people out of poverty over the last decade or two. And so I think net-net from my perspective it’s been a good thing. But people have been left behind from globalization. I think a lot of people in the United States didn’t put enough weight on those people. You look at income distribution in the United States it’s become a lot more skewed. You look at income mobility in the U.S., it’s not very good. I think those are things that we really need to work on is the country. I think we really want to make it so that globalization lifts all boats rather than just some boats because if you don’t have that, you’re not going to have support for globalization. You’re not going to have support for free trade.

I expect not because I think there’s always people that test the limits of the law and regulation and are always trying to see where they can go. And there are obviously going to be bad apples in any really large organization. What I hope is that, one, the banks will sustain their effort to improve their cultures. Banks really are working on this. I spoke at a bank industry conference about a month ago, where they brought in all their very high potential mid-level people to talk about culture, and it was really them talking about bank culture and I came in for a very short period. I think I was the only person from the official sector that spoke there. And I thought the fact that they were taking all these people that are high-performers and spending a day trying to inculcate them with the importance of culture maybe suggests that we’ve passed a tipping point. So, that’s important. I think the other thing that I’m hoping to see is the banks start to cooperate a little bit more with each other and share best practices on bank culture. Up to now it’s been most banks working sort of on their own thing alone. I think if they actually shared best practices, shared survey results, to see how they were doing relative to their peers, that would also help them perform. And the last thing I would say on culture, I think we’ve got to continue to work on incentives.
It is also important to increase the banks’ transparency with regard to information on fair value valuation methods and how they are used to produce income statements. * ** As you can see, the challenges related to the implementation of Basel II are numerous. Whether these are long-recognised or recent, such as those that have appeared since the financial turmoil this summer, they must be addressed. To use what is I believe Governor Laksaci’s expression, the “challenge is a feasible one” and over the coming period, banking supervisors will have to continue to work towards the robust and sound implementation of the new framework. This implementation will bring about significant improvements with regard to risk assessment and management, as has been confirmed by the initial feedback by authorities that have already switched to Basel II. I will conclude my contribution by citing a formulation used by the General Secretariat of the Basel Committee, which, it seems to me, sums up perfectly the spirit in which the reform should be introduced in each country: “Basel II is not a destination but a journey”. Thank you for your attention. 6  BIS Review 11/2008

This persistence has partly reflected a series of transitory developments, such as the indirect effect of previous oil and food price increases and a limited changeover effect. However, structural factors in the labour and product markets have also played a role, as mirrored, in particular, in the upward trend in wage developments observed until recently. This trend has only just shown signs of stabilisation. Services price inflation has also remained stubbornly high. Indeed, structural rigidities have impeded an appropriate adjustment of wages and prices. As a result, annual inflation rates have remained above 2% during most of 2002, including November, as has been confirmed by Eurostat's flash estimate, which indicates an annual HICP inflation rate of 2.2%. Second, when looking forward from now until the early part of 2003, although recent developments in oil prices have lowered short-term price pressures, there are still some factors that could keep annual inflation rates above 2% for several months to come. Yet this short-term outlook is related both to base effects and to indirect taxes and administered prices, i.e. to temporary developments. Third, when looking beyond the short term, we consider that both the overall economic environment and the euro exchange rate, which has strengthened since early this year, will contribute further towards reducing inflationary pressure. Moreover, we expect the indirect effects of previous increases in oil prices and other factors to further unwind. Although wage-related risks remain in place, they are judged less likely to materialise as long as the economic environment does not change substantially.
Ravi Menon: The future of capital is green Keynote address by Mr Ravi Menon, Managing Director of the Monetary Authority of Singapore, at IMAS-Bloomberg Investment Conference, 9 March 2021. * * * Ms Susan Soh, Chairman of IMAS Mr Steven Yankelson, Head of ASEAN, Bloomberg Distinguished guests, ladies and gentlemen, good afternoon. The future of capital is green. There are three powerful forces driving this: growing recognition of climate change as a global priority; advances in approaches to sustainable investing; and changing investor preferences. First, climate change has become a risk that is too important for investors to ignore. The world needs to sharply reduce greenhouse gas emissions if we are to limit global warming to well below 2, and preferably 1.5 degree Celsius above pre-industrial levels as committed under the Paris Agreement … … specifically, reducing carbon emissions by half from 2010 levels by 2030, and reaching net zero around 2050. This implies a major transformation of economies and societies – affecting how we work and how we live. The transition to a low-carbon economy will impact every sector. It is not just about renewables and electric vehicles. Greening will have to take place across all industries – steel, cement, mining, buildings, construction, maritime, agriculture, the list goes on. Given the scale of the transformation, asset values will change quite fundamentally. Technological changes leading to a sharp decline in the cost of renewables or policy interventions such as a sharp hike in carbon taxes, will have diverse effects on asset values.

12 Morningstar, 2021, Global Sustainable Fund Flows: Q4 2020 in Review. 13 The Business Times, 2021, ESG magnates pour money into China and its Asian peers. 7/7  BIS central bankers' speeches