samchain/econo-pairs-v1 huggingface dataset:
Let me follow up this brief summary by focusing my remarks this morning on four main areas where lessons from the recent East Asian crisis may be found. First, it was the countries’ ongoing exchange rate policies that contributed to the build up of crisis conditions. The countries of the East Asian region chose to pursue a fixed exchange rate policy, or one pegged to the US dollar, for about a decade after the Plaza Accord. In the beginning these policies contributed to stronger growth and low inflation in these BIS Review 50/1998  -2-  countries. But starting in 1995, the appreciation of their currencies had begun to threaten their balance-of-payments positions. Second, to offset the weakness of their economies, the authorities relied heavily on much short-term financing, which concealed the weaknesses of their macroeconomic policies. The nature and direction of the flow of short-term international capital had not been properly analyzed. The ratios of short-term debt to usable foreign exchange reserves were in the range of 170-200 percent for Indonesia, Korea and the Philippines, much higher than the average ratio of 70 percent for the other major emerging market economies. Third, transparency of banking systems, including central banks, is essential for analyzing ongoing developments in countries’ financial sectors. In particular, trends in their off-balance-sheet items, cross-border interbank funding and their transactions with offshore centers should first of all be transparent and second should be available for making judgements about the system.

Anita Angelovska Bezhoska: The importance of savings for investment growth Speech by Ms Anita Angelovska Bezhoska, Governor of the National Bank of the Republic of Macedonia, on the occasion of the World Savings Day - celebration of the Macedonian Banking Association, Skopje, 30 October 2018. * * * Dear Guests, Ladies and Gentlemen, It is a great honor and pleasure for me to address you at today's event marking the World Savings Day - a day that banks and financial institutions around the world dedicate to promoting saving and raising awareness of the public about the benefits it brings. The saving is undoubtedly important from the aspect of both, individual and overall economic progress and maintenance of the macro financial stability. For each individual, or family, it is the principal and the most important step towards providing financial stability in a long run. By saving, we protect ourselves from unpredictable changes in the personal income dynamics, we more efficiently plan the longterm investments and we build sound foundations for maintaining stable finances throughout the lifetime. Saving is also beneficial for the entire society, as it is one of the key factors which the economy’s investment level depends on, which is a prerequisite for boosting the long-term economic potential. Usually, a significant portion of the savings is channeled into the banking system thus providing stable sources of financing to domestic banks, which is particularly important for the bank-centric financial systems, such as the Macedonian one, where the banks act as major financial intermediaries.
This should help to deter future speculative attacks on the Hong Kong dollar. However, we have to acknowledge that the possibility of short term interest rates shocks does exist under the currency board mechanism and the banks therefore need to take this into account in the way in which they run their business and manage their balance sheets. 21. Bearing this in mind, I draw three main supervisory lessons from the regional crisis and its impact on Hong Kong: • First, it is important for banks to maintain a strong balance sheet that can withstand the interest rate fluctuations to which I have referred and maintain the confidence of the public. Banks in Hong Kong score well in this respect but it is not something that can be taken for granted. I think that it is true to say that some banks did expand their loan books too rapidly during the mortgage boom in 1997. As a result, loan to deposit ratios came under some strain. The banks were also exposed to growing interest rate risk because a substantial proportion of their assets are linked to best lending rate while their liabilities are linked to HIBOR. This has been a reminder of the need to maintain sound fundamentals: high capital adequacy and liquidity ratios; prudent loan classification and provisioning; and sound risk management. • A second and related lesson from the region is that banks need to beware of excessive lending to finance overheated asset markets.

Looking forward, we continue to expect inflation rates in the euro area to be in line with price stability over the policy-relevant medium-term horizon, thereby supporting the purchasing power of incomes and savings. After today’s decision we consider risks to price stability over the medium-term to be broadly balanced. This takes into account the latest economic data releases and survey information, which add clear further evidence to the assessment that the euro area is experiencing a significant slowdown, largely related to the effects of the intensification and broadening of the financial turmoil. Both global demand and euro area demand are likely to be dampened for a protracted period. A cross-check of the outcome of the economic analysis with that of the monetary analysis confirms this view. Monetary expansion is moderating further, supporting the assessment that inflationary pressures and risks are diminishing. All in all, the level of uncertainty remains exceptionally high. The Governing Council will continue to keep inflation expectations firmly anchored in line with its medium-term objective of inflation rates below, but close to, 2%. This supports sustainable growth and employment and contributes to financial stability. Accordingly, we will continue to monitor very closely all developments over the period ahead. Regarding fiscal policies, the Governing Council welcomes the European Council’s reconfirmation of its full commitment to sustainable public finances. In this respect, the current economic situation calls for particular prudence with regard to the adoption of extensive fiscal stimulus measures, taking into account the particular fiscal situation in each country.
BIS Review 99/2010  9  Table 2 Economic growth and inflation  (annual change, percent)  2008  2009  2010 (f)  2011 (f)  GDP Domestic demand Domestic demand (w/o inventory change) Gross fixed capital formation Total consumption Goods and services exports Goods and services imports Current account (% GDP)  3.7 7.6 7.5 18.6 4.0 3.1 12.2 -1.5  -1.5 -5.9 -2.8 -15.3 1.8 -5.6 -14.3 2.6  4,0-5,0 14.5 11.3 23.0 7.8 1.0 25.8 -1.2  Average CPI inflation December CPI inflation CPI inflation in around 2 years (*)  8.7 7.1  1.6 -1.4  1.8 3.8  3.2 3.1  Average CPIX inflation December CPIX inflation CPIX inflation in around 2 years (*)  8.4 8.6  2.8 -1.8  0.7 3.3  3.5 3.5  Average CPIX1 inflation December CPIX1 inflation CPIX1 inflation in around 2 years (*)  7.8 7.7  2.8 -1.1  -0.1 1.8  3.2 3.2  2012 (f)  3.0  3.2  3.1  (f) Forecast. (*) Inflation forecast for second quarter 2012. Source: Central Bank of Chile.

Today, however, the economy is still operating below full capacity, which limits inflationary pressures and is consistent with monetary policy remaining significantly expansionary. Nonetheless, as output gaps close, inflationary pressures will be incubated which must be contained in time in order to ensure that annual inflation will stand at 3% over the two-year policy horizon. Hence, the Board estimates that achieving the inflation target in the projection horizon requires, as has been said in recent months, a progressive normalization of the current significant monetary stimulus. As a working assumption, the baseline scenario estimates that the level of the MPR one year ahead will be similar to the one inferred from private expectations. In the long term, it will converge to its neutral level (figure 8). As usual, the outlined scenario is subject to several risks. Internally, the greatest risks come from domestic expenditure. The baseline scenario considers that a significant part of its current strong expansion is temporary. However, there is a risk that said strength is largely the response to stimulative macroeconomic conditions, which would mean that the downturn foreseen in the second half of this year may not occur, speeding the closing of output gaps. The medium-term impact on aggregate demand of reconstruction works and the funding thereof will have to be assessed continually. In the immediate term, April data and the reaction of economic sectors to the earthquake and tsunami reduces the possibility of a generalized delay in the economic recovery.
See, for example, Gordon (2012) and, for a recent survey, Fernald and Inklaar (2022). 12. The model makes the simplifying assumption that households store their wealth by holding bonds and capital via a financial intermediary, but the same mechanism would operate if households held claims on firms directly (for example, equity). The same mechanism also operates in richer models that include additional stores of wealth such as housing (Lisack et al., 2021). 13. Similar points have been made by Lisack et al. (2021), Vlieghe (2021) and Blanchard (2022). On the other hand, Goodhart and Pradhan (2020) argue that the effects of baby boomers retiring could be powerful enough to raise the equilibrium real interest rate. 14. See Bailey et al. (2022) for details. As for the baseline estimate over the 1985-2015 period, the total l ong-run effect is also subject to substantial uncertainty, and ranges between -4.3 and -1.8 percentage points depending on the simulation assumptions. 15. For example Rachel and Smith (2017) estimate a 0.45 percentage point contribution from inequality on the past decline in Global R*, although their analysis suggest that this factor will not push down any further in the future. For the United States, Auclert and Rognlie (2017) find that increased inequality can account for between 0.45 and 0.85 percentage points decline in the real interest rate. See Auclert and Rognlie (2018), Eggertsson et al. (2019), Mian et al. (2021) and Moll et al. (2021) for further discussion of the various mechanisms through which inequality impacts R*. 16.

The decline of labour market institutions includes lower trade union membership, which reduces the relative bargaining power of labour, and more flexible labour market institutions that can pose challenges See, for example, the effects of the monetary policy pursued by the Federal Reserve in connection with the financial crises in Bivens (2015), the effects of monetary policy in the USA since 1980 in Coiboin (2016), the effects in advanced economies since 1990 in panel data-analyses in Furceri et al. (2016) and effects of the monetary policy conducted by the ECB in connection with and after the financial crises, with a focus on Germany in Bundesbank (2016). 4 One example is that a decline in trade union membership (union rate) reduces the relative bargaining power of labour, exacerbating wage inequality (Frederiksen and Poulsen 2010). Another is that more flexible labour market institutions (although positive for reallocating resources to more productive firms and enabling firm restructuring) can pose challenges for workers, especially those with low skills, and hence play an important role in explaining inequality developments (Alvadero et al 2013). 3  3 [5]  for workers with low skills. Technological progress combined with globalization seems to have played at least some role in increasing inequality within countries. • The discussion of the effects of globalization is interesting. Globalization has for long been a natural part of the Nordic economies. Our dependency on foreign trade is much higher than the global average.
BIS central bankers’ speeches  3  which emerged before VAT was raised to 20% in the UK. Indeed, the UK is not alone in raising indirect taxes to reduce its public sector deficit and VAT rates have been rising in other European countries as well.3 In addition to this contrast with other European countries, our experience of rising UK inflation has been at odds with the standard “output gap” model used by many central banks and economic forecasters to project inflation. The impact of depressed demand and spare capacity created by the recession should mean that inflation falls in a recession and the early phase of an economic recovery – and this was indeed the expectation of the MPC and other forecasters in 2009 and early 2010. As Chart 3 shows, the forecasts published in the Bank of England Inflation Report at that time were for CPI inflation to be around 1% or below in the first quarter of this year, whereas in fact the out-turn is above 4%. Short-term inflation forecasts have had to be radically altered as evidence of higher inflation has accumulated. And yet the settings of UK monetary policy have not changed at all in the light of this experience of much stronger inflation. The view that spare capacity and weak demand will bear down on inflation in the future still underpins the majority view on the MPC, despite the evidence that this is not what has happened over the recession and the early phases of the recovery.

The benchmark prices of traded goods in the European market will be set in terms of euros, reflecting the fact that this is the currency in which most European producers will have their costs and revenues denominated. So when the pound falls against the euro, producers will tend to raise their prices in sterling terms to maintain euro revenues, creating a positive UK-euro area inflation differential, as we have seen recently. By the same token, the weakness of the euro against the pound in the first half of the last decade created a negative UK-euro area differential with UK inflation running below continental European countries. Chart 6 Euro-Area/UK inflation differential and exchange rate Euro/ sterling  %  0.3  2.0 1.5  0.2  1.0 0.1  0.5 0.0  0  -0.5 -0.1 -0.2  -1.0 Euro-area/UK CPI differential (RHS) *  -1.5  Euro-Sterling exchange rate (LHS) **  -2.0  -0.3  -2.5  -0.4 -3.0 1997 1998 1999 2000 2001 2002 2004 2005 2006 2007 2008 2009 2011  *: Euro-area CPI minus UK CPI. A negative differential implies higher UK inflation. **: Expressed as the deviation from its average over the same period. Source: Thompson Datastream  Chart 6 suggests that this inflation differential can be quite persistent as it takes time for prices to adjust. That is not surprising, as companies know that foreign exchange markets are volatile and so the initial response of prices to an exchange rate change is likely to be relatively small.
Many of  3  2  For a more detailed description see the Riksbank’s Financial Stability Report 2007:2. BIS Review 11/2008  these funds belonged to the group of hedge funds with a strategy that is normally called a long/short equity strategy. In principle, with the help of quantitative methods as a basis for investment, their strategy entails both long and short positions in equity. At the same time they are neutral to the stock market as a whole. If we disregard quant methods, this strategy was one of the first to be used by hedge funds, and which, more than 60 years ago, gave them their name. Over a number of days in August several quant funds were however forced to close positions and to realise significant losses. They were forced to do so because of the sudden emergence of large price fluctuations in parts of the stock market. The large fluctuations entailed that the quantitative links, which were based on historical data and statistical probability analyses, no longer worked. But what was it that triggered the initial fluctuations in prices? It was probably the case that other types of hedge funds or investors, in order to meet the banks increasing collateral requirements, were forced to reduce their risk exposure. 4 If trading is thin in the shares concerned, that is, if liquidity is weak, the price fluctuations can be significant. That is the normal pattern.

My main message is that recent events support rather than oppose my opinion – namely that further regulation is not necessary as long as the major banks manage their exposures to the hedge funds correctly. I shall shortly discuss the role the hedge funds have played – and not played, during last autumn’s unrest in the financial markets. However, let me first say a few words as to why hedge funds as a group are important to financial stability. Hedge funds spread risk and improve pricing Hedge funds are, as we know, a broad concept and one that covers managers with a number of different working methods and strategies. However, a common denominator for most hedge funds is that they have as a goal an absolute return rather than a relative return and have far more liberal investment rules than other funds. Also they often have highly leveraged portfolios with the aim of increasing the return. For those who reflect on the way in which financial stability develops, and all central banks do so, it is, of course, of particular interest to see what advantages and risks hedge funds as a group can convey – once again being aware that this is an extremely heterogeneous group. In my opinion, hedge funds fulfil several useful functions in the financial markets. They contribute to spreading market risk and credit risk to more agents. Further, since they can act swiftly and in a flexible manner, they can often help improve the pricing for different products.
This is a rapidly-developing area even by fintech standards and an important area of work for us, and one worthy of a speech in its own right. I don’t have time to do it full justice today, so I’ll just note three key recent developments. 1. First, we are continuing with our work to renew our RTGS service, which is twenty five years old this week. Building on the functionality provided today, the new RTGS service will deliver a range of new features and capabilities for payments and settlements between financial institutions, ensuring our payments architecture is fit for the future.5  2. Second, as the Chancellor of the Exchequer highlighted in his speech at the start of Fintech Week on Monday, we have also enabled ‘omnibus accounts’ to be opened in RTGS: these allow us to offer the benefits of settling in the ultimate risk-free asset, central bank money, to a wider range of payment systems, and by so doing can help the industry to develop faster and cheaper high-value payment services.6  3. And third, as the Chancellor also highlighted, we are, together with HM Treasury, establishing a new joint Taskforce, along with two stakeholder engagement forums, to explore a possible central bank digital currency or CBDC. A CBDC would, if introduced – and that is an important if – be a new form of digital money issued by the Bank of England and for use by households and businesses, existing alongside cash and bank deposits rather than replacing them.

To some extent, this is inevitable, and it is normal that items like intangible assets should be prominent in good times; but when the sky darkens and the clouds become heavy, the rain can start at a moment’s notice, and little may be left of those assets when the air clears. So we must take care in this as well as in other things. By law, the Central Bank of Iceland is assigned a clearly defined role. The Bank takes that role very seriously. It does not ask to be spared criticism of its work and its decisions, but it would appreciate some support in its attempt to keep inflation within tolerable limits. If we are successful in that endeavour, all Icelanders will benefit. If we all work together, we can reduce interest rates sooner and more quickly. BIS Review 131/2007  5
The financial education course was not detected, however, to have any significant impact on pupils’ decision to have a bank account or card, or on the amount of money they report they save weekly. The financial education course did significantly raise the proportion of pupils who talk to their parents about economic matters. After having followed the course, the percentage of pupils doing a job at home to obtain income also increased, which suggests that financial education may lead to greater pupil involvement in their household’s financial matters. A change in pupils’ attitudes was detected regarding their temporary consumption preferences six months after the financial education course, with their “patience” increasing when it came to hypothetical money choices. This observed result did not disappear in an exercise performed three months afterwards, in which it was  8  An initial pilot programme was carried out in 2010-2011. Bover, O., L. Hospido and E. Villanueva (2018): "The Impact of High School Financial Education on Financial Knowledge and Choices: Evidence from a Randomized Trial in Spain", Banco de España WP 1801. 9  7/8  proposed to students that they distribute their present and future consumption with real payments.10 These results point to the pertinence of monitoring over time the pupils evaluated, with the aim of analysing the effects of financial education in the long term. This is in light of the potential significance of consumer attitudes in financial decision-making throughout the life-cycle of individuals.

Matters to do with world economic development and what should be done - not just to mitigate the short-run effects but also to construct systems and institutions so that similar events can be avoided in the future - have been high on the agenda for economic policy discussions in various fora this autumn. The latest instance is the 1998 Annual Meeting of the International Monetary Fund in Washington D.C. earlier this week. In connection with that meeting, finance ministers and central bank governors from all over the world assembled in various groups to discuss the situation. Background to the global economic problems Just a year or so ago, many observers foresaw a golden future for the world economy. There was talk in some places of a new economic era, with strong growth and permanently low inflation, at least in the United States. Today, the discussion has shifted in general to deliberations about the risks of a world economic slowdown. The challenges the global economy is facing at present are a combined result of several factors. One of these factors is, of course, the situation in Japan, where the economic problems, as I just said, have been at work throughout this decade. The inability to take sufficiently resolute action has led the Japanese economy into a serious decline. Japan has the world’s second largest economy and is of primary importance for the outlook in Asia as a whole. A crisis in other Asian countries then materialised almost a year ago.