samchain/econo-pairs-v1 huggingface dataset:
Figure 10 MPR and expectations (percent) 6  6  5  5  4  4  3  3  2  2 12  13  14  15  16  MPR  FBS, 2nd half August 2014  EES, August 2014  Forward IPoM septiembre 2014 Forward, September 2014 Report  Source: Central Bank of Chile. BIS central bankers’ speeches  13  Table 1 International baseline scenario assumptions 2013  GDP growth  2014 (f) Report, Mar. 14  Report, Jun. 14  Trading partners' GDP  3.5  3.7  3.6  United States Eurozone Japan China India Rest of Asia (excl. Japan, China and India) Latin America (excl. Chile)  2.2 -0.4 1.5 7.7 4.4 3.9 2.6  2.7 1.2 1.5 7.3 5.4 4.1 2.3  LME copper price $ Brent oil price $  332 109  Terms of trade  -3.2  World GDP at PPP  3.1  2015 (f) Report, Mar. 14  Report, Sept. 14  Report, Jun.

This assumption is important from the point of view of monetary policy because, combined with other elements, it allows to estimate the size of capacity gaps and the resulting inflationary pressures. After assessing all the data at hand, we estimate that Chile’s medium-term growth is in the 4 to 4.5 percent range, less than we previously thought. The slower growth foreseen in investment and total factor productivity explain a large part of this revision. Medium-term growth declines are a natural process as the economy attains higher per capita income levels. Still, we believe that Chile has available some measures that could moderate this phenomenon. As I said, part of the revision has to do with the expected slowdown in investment. One argument that is usually put forward to explain the lower investment is rising energy costs and difficulties to materialize investments, despite having all permits required by the relevant institutions. From the Central Bank we have stressed time and again how important it is for the country’s development to have well-defined policies that will allow over time to cut down the cost of such an important input. The Government recently launched an energy agenda with certainly ambitious goals, and hopefully we will see advances in that direction, which should translate into further development of our country. Another way to raise our potential output is by investing in infrastructure works. BIS central bankers’ speeches  3  In the past few years, our economy has shown a decline in total factor productivity.
Lower real interest rate trend since the 1980s As the process of financial and economic integration in the global economy has increased, common factors such as global growth and global saving have played an increasingly large role with regard to interest rates.1 Real interest rates have fallen around the world which justifies calling this a global real interest rate. The fall is in the order of 4–5 percentage points since the 1980s.2 As Sweden is a small, open economy, the long-term global real interest rate can be regarded as an anchor for the Swedish real interest rate. During brief periods, the real interest rate in Sweden may deviate from the global real interest rate, but over longer periods of time the Swedish real interest rate will be determined by global factors. Figure 1 shows how the long-term real interest rate has developed in Sweden and the United Kingdom since the mid-1980s. More specifically, the figure shows the 10-year yield on Swedish and British real government bonds. From the mid-1980s and ten years onwards, the real interest rate varied around almost 4 per cent in the United Kingdom, while in Sweden it was much more volatile and at a higher level. This was followed by a trend decline that has continued until today. At present, the Swedish real interest rate is around –0–5 per cent, while the British one is around –1 per cent.

Public authorities have a clear role in this respect, and the Basel Committee on Banking Supervision is a major player in this field at the global level. I fully endorse the work done by the Basel Committee to review banks’ risk management practices, as well as the Guidance on Sound Liquidity Risk Management and Supervision, which was recently published and constitutes a benchmark for the practices of financial institutions. The European Central Bank, as the ultimate provider of liquidity in the euro area, has a particular interest in issues relating to liquidity risk management. Against this background, our work on liquidity stress testing and contingency funding plans has highlighted the importance of both banking supervisors and central banks having access to the results of liquidity stress tests carried out by banks so that they can better assess the potential  4  BIS Review 123/2008  systemic impact of a liquidity shock. The ECB supports the idea of organising common liquidity stress tests, for which participating banks would use their own stress tests based on a joint scenario. Furthermore, the contingency funding plans of large banks should be shared not only with banking supervisors but also with central banks, as also recommended by the FSF. Having said that, I would like to stress that financial institutions are ultimately responsible for ensuring that all relevant risks, including liquidity risk, are properly integrated into their overall risk management.
Svein Gjedrem: Investing for the long run Dinner speech by Mr Svein Gjedrem, Governor of Norges Bank (Central Bank of Norway), at The Norwegian Government Pension Fund’s Investment Strategy Summit, Oslo, 3 June 2009. *  *  *  Minister, Ladies and gentlemen, We are gathered here for a conference – and a dinner – centred on investing for the long run. And indeed, it is my expectation that the Government Pension Fund – Global will endure through good times and bad times in the markets to provide a permanent revenue stream for our children and grandchildren. I would like to thank all the participants for the good advice and interesting analyses you have presented here today. It has really been inspiring to attend, and to listen to your presentations and discussions. The oil age in Norway has spanned some 40 years, and it appears that it will continue for years ahead. The idea of a fund arose in the early 1980s. Up to 1995, all government revenues were used for investment in the petroleum sector and to cover budget deficits during the recession around 1990. The formal structure of the Fund was actually decided on in 1990 in the midst of a banking and currency crisis, with meagre growth and high unemployment. I have every reason to believe that the people that prepared the proposal did not think at the time that the savings in the Fund would prove to be of any significance.

One lesson that authorities in this part of the world drew from the financial crisis in the late 1990s was that strong policy fundamentals are not always enough to guard against the vagaries of international capital flows. A sizable cushion of international reserves is important as a buffer to guard against sudden changes in market sentiments that can lead to capital outflows and pressures on the currency. Starting shortly after the Asian financial crisis reserves were thus accumulated in the region to build up such buffers. But holding large amounts of reserves is of course costly as they are typically invested in highly liquid assets with relatively low yields compared with some alternative uses of the funds. It is partly for this reason that authorities in the region have taken steps to create a mechanism for pooling some of their reserves in the form of the Chiang Mai initiative which started in year 2000 and its multilateral extension which was agreed on in 2010. While the size of the pool of reserves under the Chiang Mai agreement is relatively modest compared to the potential needs for some of the larger economies in the region, the importance of the agreement goes far beyond the aggregate amount of reserves involves. It reflects a desire by authorities in the region to foster financial cooperation in the region while at the same time creating arrangements which will help safe-guard financial stability.
And in 2006 both the number of hours worked and the number of persons employed rose quite substantially. This was partly because the number of people in employment measures increased considerably during the fourth quarter of last year. But despite the fact that fewer people are in labour market programmes this year, the number of employed has continued to increase. This indicates considerable strength in the labour market. We also assess that employment will continue to increase during the forecast period, but at a slower rate. The fact that the pace slows down is due to the economic upturn slackening. It is also due to higher wage increases contributing to a lower demand for labour. The supply of labour has also increased, but not as much as employment. Open unemployment has thus fallen (slide 7). According to our forecast, the labour supply will continue to increase, albeit at a slower rate, during the forecast period. This development is mainly due to the economic cycle, but also to some of the Government’s measures. The fact that the rate of increase is slowing down is due to the economic upturn slackening, and also to factors such as the number of persons in the age groups with high participation in the labour force declining. All in all, this will lead to the number of open unemployed persons continuing to fall, but at an ever slower rate. Compared with what we were expecting in June, the conditions in the labour market have become tighter.

We must also remember that our external environment may not always and necessarily be ideal. But we would do well to remember that ours has been and is a resilient economy. We have shown that we can grow even in the face of highly adverse circumstances and scenarios. In that context, we would be wise, if we do not develop our economic plans on the overriding assumption of a totally terrorism free environment. Of course, if the peace process is successful and a early political solution is found to the on-going conflict, it would be highly desirable. But at the same time, if we consciously develop our plans and frameworks on less than perfect conditions, we could still find ways and means to succeed and deliver the planned results. We owe that to our people, who cannot and should not have to wait until everything falls in to place. Therefore, our future strategies should be aimed at moving ahead even in the face of threats of terrorism and other adversities without setting out as a pre-condition, the achievement of a permanent peace or ideal conditions to embark on our development projects and programmes. We are also working today on the basis that all our strategies would be of no avail, if we are not sufficiently committed to achieving those plans. We know we are serious in our efforts. We also have to show we are serious.
Expressed in terms of a path for the price level, it is thus sufficient if it has the same slope as before (upper right figure). It does not matter that the new path is below the original one. But if one instead has a price level target, one must return to the earlier path (upper left figure). This means that inflation must be above 2 per cent for a period of time to compensate for the earlier period when it was below that (lower left figure). One advantage with a price level target may thus be that economic agents will adjust their expectations in such a way that they anticipate that a low inflation rate today will be compensated by more expansionary policy, faster growth and higher inflation in the future. The downward pressure on real interest rates caused by this alleviates the original downturn in production and inflation and speeds up the future recovery. This may of course be particularly beneficial during the periods when the lower bound sets a restraint. One disadvantage of a price level target is that the central bank cannot disregard, or “see through”, supply shocks that temporary push up inflation. As one needs to return to the same path for the price level, a period of unusually high inflation – regardless of the cause – must be followed by a contractionary policy that holds back price developments and contributes a period of unusually low inflation. The 24 See Bernanke (2017a).

We can thus expect a decrease in ROE, but this only reflects the decreased risk premium associated with the decreased risk-taking. Similarly, the cost of debt decreases and this drop in the cost of funds perfectly offsets the effect of the greater use of the more expensive source of capital in the firm’s financing structure. The essence of the Modigliani-Miller theorem is that the cost of capital and thus the firm’s value are unaffected. Of course we do not live in a perfect world, and the Modigliani-Miller equivalence does not hold. Financing matters. The relevant literature typically puts forward a number of factors to justify the higher cost of equity financing: the fiscal advantage of debt, the cost associated with bankruptcy and the differential liquidity and issuing cost between debt and equity. These arguments apply to pure equity financing, not in the case of Cocos. As debt instruments, Cocos offer the fiscal advantage of other debt instruments. As hybrid instruments, they substitute for other hybrids that are already part of the financing structure of banks and that have proved relatively inexpensive for banks to issue. Finally, it is not clear that bankruptcy costs are relevant in the context of the TBTF problem where precisely those costs are never really incurred. For all these reasons, we may hypothesise that the total cost of bank financing will not materially increase as a result of higher capital requirements, in particular if the latter can take the form of Cocos.
2  Again, due to their risky nature, EMEs are often perceived as a risky-asset class. As such, capital flows into/out of these economies tend to follow risk-on/risk-off patterns of the Global Financial Cycle, in turn strongly linked to the Global Business Cycle. The ER regime plays an important role in the transmission of financial spillovers. When capital flows into EMEs—for instance, as a result of a perceived softening of international monetary policy (MP) conditions—, the resulting appreciation of domestic currencies is the first line of response that discourages further flows (as a contemporaneous appreciation increases the expected depreciation in the medium term). But, if the FX adjustment is neutralized by FX interventions by the domestic monetary authority, it will further encourage inflows by reducing ER risk for foreign investors. As a result, FX stabilization enhances the spillovers from foreign conditions on broader metrics of domestic financing conditions, including credit expansion and stock market prices, as well as local bond markets.

In particular, a classical Latin American and Caribbean countries (LAC) crisis would show up as an unsustainable disequilibrium between public, private, or foreign savings and investment partially contained by some form of FX control, which turns into a major economic and financial crisis once the currency devaluates. Abundant foreign capital may help prolong the situation for a while, but only to make the inevitable turnaround more damaging. It is important to underscore the role of domestic ER policies. During the upswing, central banks in EMEs often try to curb the resulting appreciation, either through outright currency fixation of heavy FX market intervention. As a number of recent papers have found, these policies tend to reinforce capital flows. 1 When the tide turns, however, these rigid ER regimes are often accompanied by large devaluations, which contribute substantially to insolvency problems in both real and financial domestic sectors. Global financial conditions may thus influence the timing or even the intensity of a domesticallyinduced crisis, but they cannot suppress it altogether. Moreover, such favorable financial conditions usually hit back with a vengeance once local weaknesses reveal themselves. From here we can conclude that appropriate macro policies are necessary to prevent locally-induced cycles, even when powerful global financial forces are at play. The transmission of Global Financial Cycles to EMEs and the role of ER regimes 1  See Maurice Obstfeld, Jonathan D. Ostry, and Mahvash S. Qureshi (2018), “Global Financial Cycles and the Exchange Rate Regime: A Perspective from Emerging Markets,” Discussion Paper #12696, Centre for Economic Policy Research.
Overall, both of the big banks must thus have total loss-absorbing capacity (TLAC) of 28.6% of their RWA and 10.0% of their total assets. Page 7/8  uncertainty. The SNB therefore considers that the most effective approach is to make our banking centre more crisis resilient using the measures I set out before. It is now incumbent on us to complete the implementation of the new regulations rigorously. A large part of this has already been done. The authorities will of course have to review the effectiveness of the regulations going forward, and in so doing must also consider the costs of such regulation for the banks and the economy. The goal here has to be to keep costs as low as possible without diluting the fundamental elements of financial stability. Concluding remarks Ladies and Gentlemen, in my speech I have painted a positive picture of regulatory efforts and of our banks’ ability to withstand a crisis. The resilience of our banking system has increased significantly, and will be improved yet further once all of the regulations have been implemented in full. Nonetheless, we would be wise to keep our feet on the ground. The new banking regulations will not be able to prevent all crises – indeed, it is not claimed that they can. Their purpose is to substantially reduce the likelihood and severity of any future financial crisis. At the same time, the Swiss regulations will resolve the ‘too big to fail’ issue.

More recently, there has also been continuous innovation and an increasing number of issuances in foreign currency. As Malaysia offers international participation in our Islamic financial system, we offer to be an international gateway, particularly in strengthening the link between the two important dynamic growth regions of Asia and the Middle East. Malaysia will also continue to collaborate with other regulatory authorities to ensure financial stability in the Islamic financial system. This will be through our active involvement in the Islamic Financial Services Board (IFSB), the Islamic Financial Stability Forum (IFSF), the initiatives by the Islamic Development Bank (IDB), and finally in the newly formed International Islamic Liquidity Management Corporation (IILM). In the area of capacity building, Malaysia has also given priority to two areas: one is in human capital development and the second, in catalysing mutual recognition of Shariah  BIS Review 141/2010  1  interpretations. The International Centre of Education in Islamic finance (INCEIF) was established in 2006 for advanced education for practitioners in Islamic finance, and in 2008, the International Shariah Research Academy (ISRA) was established to conduct applied Shariah research on the contemporary Islamic finance issues and to provide a platform for active international engagement among Shariah scholars. Moving forward, Malaysia will continue its efforts in strengthening our international linkages in the global Islamic financial system through collaborative partnerships and cooperation with the objective of contributing towards greater international financial and economic integration. Let me conclude.
On the financial markets, the trust to the others plummeted to a point below which the investors sought their way out mainly in the government instruments, for example US Treasury Bills, which at a certain point had a negative yield. Distrust went much further than the sub-group of vulnerable banks. The reports reveal that USA and Europe have registered market losses from the asset loans of nearly 3 trillion US Dollars. Regardless of the fact that all these losses will not encumber the banks and can overemphasize the losses of those able to keep the debt until the maturity, the investors and their partners became very concerned about the amount of the actual losses in the banking and trade portfolio in broader scope of the institutions and their capability to continue financing their business. The focus of the concern moved from prospective profitability to prospective survival. That is why the CDS premium increased to unprecedented ranges, the prices of the banks' shares plunged, while the money market overdried. The interbank lending margin deepened dramatically, the lending, as I mentioned previously, reduced to only overnight loans. Around October 6 and7 even the overnight loans stopped. How did the central banks of the countries in the crisis' epicenter respond? In the beginning, the central banks were committed to provide liquidity as much as necessary. The volume of the liquidity support from the central banks of USA, England, Europe was without precedent in the history so far.

As a consequence, the return on capital is relatively low and wages are comparatively high, particularly so for unskilled labour. We thus tend to specialize in capital intensive and high-value added activities. External shocks tend to impact on us in a way that is not quite the  BIS Review 72/2004  1  same as on the rest of Europe. Moreover, we also have to cope with home-brewed shocks. It is for these reasons that we are eager to keep an autonomous monetary policy. Furthermore, if markets became convinced that in the future the SNB’s actions would simply mimic those of the ECB, they would rapidly force a convergence between Swiss nominal interest rates and those of the eurozone. Our real interest rates might remain lower for a while, given our relatively large supply of physical capital, but a tendency towards equalization would nonetheless set in. What this might mean for us is a higher rate of inflation for some time, together with a collapse in asset prices and in domestic gross capital formation. A mixture of higher interest rates and high, sticky wages would be very harmful to our economy. The third fear that was sometimes expressed, although here I must say I was rather sceptical myself, was that the euro would gradually render the Swiss franc obsolete. With many of our trading firms billing and paying their suppliers in euros, there might be a tendency for them to adopt the euro more generally for their accounting as well as for their domestic transactions.