samchain/econo-pairs-v1 huggingface dataset:
Effects on the real economy So what do we believe about the effects on the real economy? Increased interest rate margins and reduced lending volumes will probably result in certain macroeconomic effects in the form of reduced GDP. How great these effects will be is hard to say. The Basel Committee has appointed two groups with the task of more closely examining both the direct and the long-term macro effects of the new Basel regulations. 9 The results of their work do not indicate any drastic costs. They estimate that, during the actual implementation phase, Sweden’s GDP level will be slightly lower (approximately 0.3 per cent) that what it would be without Basel III. But, over the longer term, the new banking regulations will instead lead to higher GDP and prosperity – because we will reduce the likelihood of new crises. Making exact forecasts is always difficult. However, it is helpful to have an estimate of the levels we are talking about. And, in Sweden’s case, we can note that the costs for Basel III will not even come close to the costs of a crisis. For society as a whole, this will be a highly profitable investment in increased security. Basel III is a step forward, but more may be needed Consequently, the Riksbank welcomes the Basel III regulations. Considering the severe financial crisis we have been through in recent years and the shortcomings we have identified in the current regulations, it is perhaps not so difficult to understand why.

Given this it may seem paradoxical for the Basel Committee to recommend a leverage ratio that does not vary with risk. However, we should remember – and this is important – that the traditional capital requirement has not prevented banks from borrowing too heavily, and this was one of the central problems during the financial crisis. As long as the economy ran smoothly the banks could use their debt-burdened balance sheets as levers and make large profits. However, as soon as the downturn began and the banks began to make loan losses they had hardly any capital that could be used to bear the losses. Instead, governments and taxpayers had to provide funds to rescue the indebted banks. Of course we do not want to experience such a sequence of events again. It is therefore positive that we are introducing a complementary capital requirement that ensures that the banks do not overburden themselves with debt. The idea behind the leverage ratio is to limit the growth of credit when the economy is going well. It therefore acts as a complement to the counter-cyclical capital buffer and helps to prevent an extreme expansion of the balance sheets. Another reason for introducing a leverage ratio is that most large banks use internal models to estimate the risks associated with their lending. If banks estimate these risks incorrectly, for example by underestimating them, they may not hold enough capital.
Overall conditions in the markets for capital have improved greatly from the autumn 2008 paralysis. The functioning of money markets is now comparable with the conditions that prevailed in the third quarter of 2007. Money market spreads are close to levels that are reasonable to view as normal after the equilibrium re-pricing of risk that was needed and is likely to have taken place since then. Term lending has resumed on a satisfactory scale. The funding ability of banks is not a restraining factor for lending, as it was the case for some time after October 2008. Since the second half of last year, it appears to support bank profitability. Corporate and bond spreads have also declined steadily across the quality spectrum. Currently, these considerations are what motivate and guide a gradual phasing-out process. We started to phase out our enhanced credit-support measures in December 2009, in an environment of improving financial market conditions and emerging signs of recovery. On 4 March we came to the conclusion that the current pace of phasing-out is appropriate. With the resumption of longer-term loans in the private market, we have started to adapt the conditions of our longer-term credit to banks. The first step was to announce a discontinuation of one-year and six-month longer-term refinancing operations. One-year refinancing now pays an interest rate indexed to the average rate that will be applied in our weekly main refinancing operations over its 12-month life. The pricing will be the same in our upcoming and last 6-month refinancing operation.

Even in a crisis situation – in conditions of collapsing confidence and very low interest rates – monetary theory assumes that a central bank will always be in a position to influence inflation and demand by steering expectations of the future path of its interest-rate instrument in the future. These theoretical prescriptions are based on the assumption of perfect market arbitrage. Intertemporal arbitrage is indeed what makes monetary policy effective in normal times. It ensures that the return on a long-term security is equalised with the return on a strategy of holding a very short-term security – paying the policy rate – and rolling it over until the end of the policy commitment. In this crisis, however, market arbitrage was simply unavailable. The disappearance of market arbitrage was a challenge for monetary policy. But by no means did it imply policy ineffectiveness. It called for central banks to engage in non-standard measures and play an intermediation role that the market was unwilling or unable to perform. The ECB fulfilled its role of market-maker in particular by providing liquidity to banks without limit, for “as long as was needed”, to restore normal market functioning. Note here a difference between the ECB and the Federal Reserve. Even in normal times the ECB conducts monetary policy through loans, rather than via direct purchases and sales of securities. Unlike Fed discount-window lending, however, our loans are untargeted. They are an instrument for the routine provision of monetary policy liquidity, rather than part of selective assistance to distressed banks.
With virt-x, here in London, it has now gone one ambitious step further, creating the first international fully integrated electronic exchange. d)  Stable domestic environment  Fourthly, Switzerland, with a stable political environment, also offers the legal protection that, together with trust, is so crucial in the banking business. Furthermore, the healthy social climate and peaceful labour relations also contribute to a successful banking system. Among the elements which contribute to a favourable environment - and indeed very high on the list - I obviously also include financial stability and the strength of our currency. Switzerland enjoys traditionally a very strong current account position. Contrary to a popular belief, it is not a net capital  2  BIS Review 13/2002  importer, but a massive exporter of funds. With an excess of savings over investment, we transfer capital to the rest of the world. Our external surplus gives to our banks an important role in channelling funds and it strengthens their international position. For the long-term oriented investor, moreover, knowing that the Swiss franc will keep its purchasing power and maintain its external value is, of course, of great importance, and it reflects positively onto the entire Swiss financial industry. In situations of crises, security-conscious investors too, even those with shorter time horizons, demonstrate through their actions that the Swiss franc has special merits. The fact that the Swiss franc is a safe haven currency certainly does not make the work of the Swiss National Bank any easier.

Philipp M Hildebrand: The international monetary system Opening remarks by Mr Philipp M Hildebrand, Chairman of the Governing Board of the Swiss National Bank, at the High-Level Conference on the International Monetary System, Zurich, 11 May 2010. * I. *  *  Introduction  Good morning, Ladies and Gentlemen. It is a pleasure and special privilege to welcome you to this conference on the international monetary system. I am delighted that, together with the IMF, we have succeeded in bringing together such an outstanding group of policy makers and academics. I want to thank you for taking the time to join today’s discussion at this critical juncture for the international monetary system. I am especially grateful that the Managing Director of the IMF is with us today. Dominique, a very warm welcome to you. I know I speak on behalf of everyone here today when I say that we really appreciate your presence. Conferences on the international monetary system are held with great regularity, particularly in the wake of financial crises. It is therefore not surprising that the recent crisis has brought renewed attention to the functioning of the international monetary system. But as Herb Stein noted more than 40 years ago, it is not easy to define the international monetary system. Where does the international monetary system end and domestic economic policy begin? Did the recent crisis have its roots in shortcomings of domestic policies or in shortcomings of the international monetary system?
Bank analysis suggests that Brexit remains the most important driver of short term market interest rates since then (Chart 12). 20  See the written statement to Parliament made by the Chancellor on 20 December 2017, available at www.parliament.uk/ business/publications/written-questions-answers-statements/written-statement/Commons/2017-12-20/HCWS382/. 19  All speeches are available online at www.bankofengland.co.uk/speeches  19  Chart 12: Brexit news has been the main driver of UK interest rates Decomposition of the variance of UK 3-year interest rates since November 2015 Per cent 100  Other  90  Brexit  80  Euo-area data  70  US data  60  UK data  50  Euro-area monetary policy  40  US monetary policy  30  UK monetary policy  20 10 0  Sources: Bloomberg Finance L.P. and Bank calculations. Notes: This decomposition is based on changes in UK 3-year interest rates in 30 minute windows around data releases and monetary policy announcements in the UK, US and euro area, and news about Brexit. Households looked through Brexit-related uncertainties initially. But as the consequences of sterling’s fall showed up in the shops and squeezed their real incomes, they have cut back spending growth to rates about one half of those pre-referendum. Businesses have been somewhere in between. Since the referendum, they have invested much less aggressively than usual in response to an otherwise very favourable environment – with global demand growing strongly, limited spare capacity, relatively high rates of return on capital and the low cost of finance – reflecting the drag from Brexit-related uncertainties.

4  All speeches are available online at www.bankofengland.co.uk/speeches  4  Chart 1: Close correlation pre-crisis between output growth and policy  60  3 month moving average, bps 50 Combined CIPS output survey (LHS) 25  55  0  50  -25  45  -50  40  -75  3 month moving average, balance 65  Average MPC vote, including QE (RHS)  35 30 1998  -100 -125  2000  2002  2004  2006  2008  2010  2012  2014  2016  2018  Sources: IHS Markit, ONS and Bank calculations. Notes: Combined CIPS output survey is a weighted average of the Markit/CIPS PMIs for services, manufacturing and construction. Average MPC vote includes both decisions on Bank Rate and QE, with every extra £ of asset purchases (gilts and corporate bonds) treated as equivalent to a 25bp cut in Bank Rate (see Joyce, Tong and Woods, 2011). Five years ago, the MPC recognised that past should not be prologue. The MPC was pretty certain there was a large amount of slack, although it had questions over how much productive capacity had been destroyed following the crisis; how quickly productivity growth would recover; and whether labour supply would change in the wake of reforms and a heavy burden of household debt. Such uncertainties about supply meant that knowing what was happening to demand was no longer sufficient for gauging the appropriate policy response.
Prasarn Trairatvorakul: “The Role of the Central Bank in Driving Thailand’s Sustainable Growth” Speech by Dr Prasarn Trairatvorakul, Governor of the Bank of Thailand, before the Thai Forum, New York, 8 October 2014. *  *  *  Ladies and gentlemen, Thailand has undergone much change this year, and the usual visitors from abroad may have chosen, understandably, to watch developments from afar. It is thus my sincere pleasure to bring some of Thailand to your very doorstep. The country is now at an important junture. Political uncertainty has subsided and some promising government plans have taken place. Therefore there is no better time for domestic and international investors alike to capitalize on the new wave of growth. Thailand’s immediate challenge is to restore growth to its potential. For much of the past seven years, we have been experiencing sub-par growth rates. As the economy now wakes up from its third contraction since 2008, it is time to focus on Thailand’s avenues for restoring normal growth again. How can an economy rebound from a contraction back to growth? Part of the answer lies in the economy’s strong fundamentals, and the Bank of Thailand, as the central bank, plays a part in safeguarding them as attested by quick rebounds of the Thai economy after the Great Recession in 2008 and the Thai floods in 2011. In addition, as caretaker of the country’s banking system, the Bank of Thailand also fosters development of the financial system to bring about growth.

Going forward, the strategic location of Thailand and regional trend towards more economic integration provides an opportunity for Thailand in terms of market reach. We are located in the centre of ASEAN, with a combined population of more than 600 million, a large proportion who are of middle income and have potential to spend on goods and services. We are also to enter the ASEAN economic community, a regional agreement to liberalize and integrate trade in 2015 which would further develop trade prospects. Economic integration with CLMV countries will open up the opportunity to tap into a rapidly-growing consumer market as well as the regional workforce. Thailand is well known as a high performance production base in the region, especially for automobiles, food and petrochemicals. Meanwhile, the CLMV countries have a young and abundant labor force. Thus Thailand can benefit from a production supply chain that makes use of the CLMV resources for more efficient production to support businesses at home. Seeing these chances, the government has given priority to infrastructure by endorsing investment plans, especially in railways and roads, to reduce transportation costs, and setting up Special Economic Zones at five locations along our border to reap the benefit from our strategic location as a gateway to other ASEAN countries. On the side of the Bank of Thailand, we facilitate the ease of doing business through the Capital Account Liberalization Master Plan so that businesses can benefit from this opportunity.
The first report, issued in 2012, set out fresh ways to describe and develop more effective governance at financial institutions. The second report, issued late in 2013, deals specifically with the interactions of boards of directors and supervisors. Both reports place less emphasis on the form of corporate governance – the traditional structures of boards and the like – and focus more on the actual behaviors of the various players involved, be it the chairman, the lead director, the chief risk officer, auditors or senior management. The 2013 report proposes a new kind of relationship, one that involves far more direct contact and ongoing dialogue between directors and supervisors about the key issues confronting firms and the financial system, such as assessing financial institution strategies, business models, risk vulnerabilities, governance effectiveness and corporate culture. The Federal Reserve has growing experience in this area. Nearly three years ago, the New York Fed initiated a program of “enhanced engagement” with directors and senior management at the major firms we supervise, very much along the lines now described in the G30 report. We provided additional training for our senior supervisory officers concerning corporate governance and relationship-building with boards, key directors and senior managers. We also gave direction on how to focus their interactions on the most important supervisory matters, particularly with respect to the firm’s risk profile and risk management  4  BIS central bankers’ speeches  practices. We also reached out to board chairmen and chief executive officers to enlist their cooperation and support.

As a result, the level and sophistication of the defence against cyber attacks need not be the same for all the banks in Hong Kong. So what the Cyber Resilience Assessment Framework seeks to establish is a common risk-based framework for banks to assess their own risk profiles and then use these profiles to determine the level of defence and resilience that would be required to accord appropriate protection against cyber attacks, drawing references to the relevant international experiences and good practices. 6. Once the risk profile of a bank and the level of resilience needed are established, the HKMA will require the bank, under the guidance of the senior management and, where appropriate, the board of directors to put in place proper governance arrangements and processes to achieve the level of resilience in cybersecurity commensurate with the risk profile of the bank. Specifically, the HKMA will examine how effectively a bank can detect and protect itself from attacks and, when the bank gets hit, how it will respond and how quickly it can recover. Clearly if there is a shortfall between what is needed and the actual preparedness, the HKMA will follow up with the bank to bring up the level of resilience as soon as practicable. 2  BIS central bankers’ speeches  Professional development programme 7.
Second, the timing of this sequence will depend on the inflation outlook and its progress towards our target of close to but below 2%. We will accordingly monitor the impact of the exchange rate evolution – which is a source of uncertainty –, and be ready to reassess if necessary. Fiscal devaluations have also been considered by countries aiming at boosting competitiveness through changes in their tax system, typically by cutting labour and/or capital taxes, while rising consumption taxes.9 This shift in the tax system increases the competitiveness of domestic firms with respect to foreign ones, both in domestic and export markets. In practice, however, 3/5  BIS central bankers' speeches  there are empirical limits to this strategy. A race to the bottom on corporate tax rates also raises increasing challenges about the social fairness of globalisation – and hence its sustainability – as President Macron stressed in Davos… and as is even pointed out sometimes in debates about Ireland. Recent research has put emphasis on the noticeable influence that fiscal policy can have on variations in imbalances, including in the US and Germany. In this respect, the recent US tax reform adopted by Congress is expected to significantly boost the US economy, which is already at full employment, leading in turn to increasing imports and a widening external deficit. So, it clearly risks increasing global imbalances.10 Symmetrically, within the euro area, some countries with large positive current accounts recently experienced budget surpluses (e.g.

The macroeconomic effects of a transfer of resources from debtor to creditor 1/5  BIS central bankers' speeches  countries is an old issue, going back to the debate between Keynes and Ohlin about Germany’s international obligations after World War I. In recent decades, Maury Obstfeld and Ken Rogoff 4 have pointed out in a series of papers that the basic mechanism of the adjustment results in a transfer of real resources from debtor countries to surplus countries, regardless of the drivers of global rebalancing. In the debtor country, there is a clear macroeconomic cost related to a drop in domestic spending and welfare, leading to large negative output gaps and high unemployment rates, and in turn putting strong downward pressures on wages. This is typically what we saw in the euro area, where the adjustment contributed to the very different dynamics of unit labour costs across countries [Slide 5], and therefore led to relative price adjustments. In cumulative terms since 2007, Germany has seen real exchange rate appreciation of about 8% relative to France, and 20% relative to Spain, although we should take into account in these dynamics the large gains in German competitiveness before the crisis. The adjustment relied mainly on nominal adjustment in deficit countries. The link between the current account and the real exchange rate is still subject to considerable debate among academics.
To be effective in curbing recession risk, that response should have as its objectives, first, speeding-up the process of reskilling by workers (“enabling”) and, second, cushioning the impact of new technologies on displaced companies and their workers (“insuring”). In the face of mounting concern about the societal impact of the rise of the robots, quite a lot has been written recently on the sorts of new insurance mechanism that might be required to smooth this transition. 56  Here, I will focus on two areas where new “enabling institutions” could ease the transition for workers and companies. Both draw on one of the greatest institutional inventions of the past millennium – universities. In 1852, John (later Cardinal) Newman published The Idea of a University, a book that has since assumed classic status as a statement of the principles by which universities should be run and organised. There are many themes to that text. From these, I would highlight two which have particular relevance to the debate about the future role of universities within our societies. First, Newman emphasised universities’ role in providing a liberal education for students, by which he meant access to a range of disciplines. Rigid specialism was to be avoided. The capacity to think was what mattered. Second, the role of the university was to propagate ideas, rather than necessarily generate them. The capacity to diffuse knowledge, rather than generate it, was what mattered. With a twist, both are st  relevant to the Idea of a University in the 21 century.

When all three - effective leaders, sound institutions and social consensus - are put together, we have the clues to the treasure trove of economic growth. When countries lack any of these three components, they cannot discover the treasure. In countries where politics are divisive and politicians play one group against another, investors will not commit to large scale and long-term investments. Without investor confidence, a country's capacity to grow will be severely limited. For successful policy implementation, it often pays to start cautiously on reforms and leverage on "demonstration effects". Taking many small and gradual steps in the right direction often works better than "big bang" reforms. It allows us to review whether an idea works and make adjustments to ensure that implementation succeeds. When Deng Xiaoping opened China's doors to the outside world in 1978, he took the approach of "crossing the river by feeling the stones underfoot". He experimented with four Special Economic Zones (SEZs) (Shenzhen, Zhuhai and Shantou in Guangdong, and Xiamen in Fujian) to spearhead reforms. Only when he saw success and understood clearly the challenges and impact of his liberalisation policy did he open up China further. Deng's pragmatic step-by-step approach has enabled China to grow steadily without political and social upheaval. In contrast, Gorbachev chose to reform the Soviet Union with a big bang through glasnost and perestroika at the same time. The Soviet empire collapsed with a loud bang.