samchain/econo-pairs-v1 huggingface dataset:
2.4 Given these challenges in Risk Management, financial institutions are expected to move towards Integrated Risk Management (IRM) which, in simple terms, is a continuous proactive and systematic process aimed at understanding, managing and communicating risks from an organization-wide perspective. It is about making strategic decisions that contribute to the achievement of an organization’s overall corporate objectives. In other words, IRM requires an on-going assessment of potential risks at every level and every segment and then aggregating the results at the corporate level to facilitate priority setting and improved decision-making. IRM should be embedded in the organization’s corporate strategy and it should shape the organization’s risk mitigation culture and highlight the importance of effective coordination among interdependent risks. 2.5 Many of you may have been following the rogue trading scandal that cost 4.9 billion Euros for Societe Generale – SocGen, the French Bank in recent months. The credibility of the bank suffered a fresh blow this week following the interim report handed over by the Finance Minister, Christine Lagarde to the Prime Minister. In summary, the findings of this report said “Very clearly, certain mechanisms of internal controls of SocGen did not function and those that functioned were not always followed by appropriate modifications”. Further, the report highlighted 8 elements of internal controls that were clearly inadequate and they may have been the decisive factors behind the crisis.

In Sweden and Denmark, they are the underlying solution for most mobile payments. The result is faster and cheaper payments. A common solution for instant payments is a step forward for both users and banks. At the same time, banks should think in terms of further development. One ambition should be to  BIS central bankers’ speeches  1  eliminate the risk that arises between banks when the payee receives the funds before bank settlement occurs. International experience shows that this can be done in several ways. A long-term goal should be that payments occur in real time both between users and between banks. This will require adjustments to settlement systems. In the near term, it is also possible to use today’s infrastructure to make payments faster. I have noted that the banking industry is working towards increasing the number of daily net settlements from four to five, and more payments will be settled individually and immediately. Considerable work is underway under the aegis of Finance Norway and the new joint venture company Bits, which may lead to faster payments. Norges Bank, for its part, will explore whether possible adjustments to the bank settlement system could enhance payment efficiency. Norges Bank will do its utmost. We will seek a dialogue with the financial industry in order to find good solutions. Several aspects of mobile payments should be improved Mobile payments are becoming increasingly common. New features are the customer interface and additional services tailored to customers’ individual needs.
Also worth mentioning is Caruana, who pointed out in 2005 that, while a highly-developed decision-making framework was in place for pursuing monetary policy, financial stability was less deeply looked into. Let me add that, back in 2006, the key message of my dissertation at the University of Piteşti was that financial stability is, in turn, instrumental to monetary policy effectiveness and hence to safeguarding price stability. At the end of the day, it was the global crisis that invalidated once and for all certain elements of mainstream economics. Nothing new, as a matter of fact: economic thought has always been influenced and spurred by major crises. 8  BIS central bankers’ speeches  It became readily visible that threats to financial stability do not necessarily go away once inflation is brought down to a low level – they merely change their nature. And this has been shown at a global level by the “detail” (after all, “the devil is in the details”, as Professor John Bonin kindly reminded us from the very title of the presentation he delivered earlier) that the financial crisis broke out in an economic environment with relatively low inflation rates. In other words, the price stability that set in during the Great Moderation could not prevent the start of the Great Recession. Furthermore, the “mop up after” strategy in the aftermath of the financial crisis proved much costlier than “leaning against the wind” would have been.

As recent as in January 2012, Paul Krugman said in an interview for Le Monde that “inflation is not the problem, but the solution”. Likewise, my advisor on monetary policy issues is of the opinion that Minsky’s Financial Instability Hypothesis teaches the lesson that when a credit-fuelled bubble bursts, it is better  BIS central bankers’ speeches  11  if inflation is high in order to support balance sheets. He proposes to enhance the monetary policy objective from “low and stable inflation” to “moderate and stable inflation” (Croitoru, 2012). Although I am not opposed to the aforementioned judgments and to the idea of moderate and stable inflation, I believe that “moderate inflation” should be clearly defined. However, I am afraid that, from this point on, my views depart from the theories of moderate inflation, because, in my opinion, “moderate” as it might be, inflation needs to be low enough in order not to trigger adverse consequences such as disanchoring inflation expectations and the emergence of a wage-inflation spiral, in which widespread wage indexation magnifies the impact of inflationary shocks and hampers monetary policy effectiveness. Experience has taught me that inflation is an insidious disease and should not be toyed with. As a matter of fact, one of the first pieces of advice I received as Governor from experienced central bankers was that for a Governor there is no such thing as too low inflation and too high foreign exchange reserves. 7.
The adverse impact on profitability, and therefore capital, would likely limit the pass-through of rate cuts into loan rates, reducing the effectiveness of negative interest rates. That is why the MPC has concluded that the lower bound on Bank Rate is “close to, but a little above, zero.” This judgement is informed by close consultation with PRA supervisors. Of course, the effectiveness of unconventional policies means that there is considerable total policy space. In the UK, the MPC can increase its purchases of both gilts and corporate bonds, providing stimulus through a number of channels including portfolio rebalancing. At present, there is sufficient headroom to at least double the August 2016 package of £ billion asset purchases, a number that will increase with further gilt issuance. That would deliver the equivalent of around a 100 basis point cut to Bank Rate on top of the near 75 basis points of conventional policy space. Forward guidance at the ELB adds to this armoury. All told, a reasonable judgement is that the combined conventional and unconventional policy space is in the neighbourhood of the 250 basis points cut to Bank Rate seen in pre-crisis easing cycles. For example, as banks’ profitability is gradually eroded, they may widen net interest margins by cutting deposit rates further or raising loan rates. For more detail on the potential for time dependency, see Brunnermeir, MK and Koby, Y (2018) ‘The Reversal Interest Rate’, NBER Working Paper No. 25406.

These overall statistics mask the severity of the health and economic hardships felt by lowerincome families and communities of color as a result of the pandemic. To cite just a few statistics, the Black unemployment rate is above 12 percent and the Hispanic unemployment rate is over 10 percent, and Black-owned businesses were shuttered at more than twice the rate of white-owned businesses during the early stages of the pandemic.7 In terms of monetary policy, the appropriate focus right now is on getting the country back to work. For that reason, policy is supporting very low interest rates to provide stimulus to the economic recovery and keeping inflation expectations anchored at 2 percent. In thinking about the future path of policy, it is important to recognize that the pandemic engenders a unique and highly uncertain economic outlook. This is not a standard recession and the economic future is inextricably tied to the spread of the virus, people’s behavior in containing that spread, and the development of vaccines and therapeutics. Given this uncertainty, transparency and flexibility in our policy approach will enable us to respond to changes in the outlook as they happen. Indeed, these are key features of the forward 8 2/3  BIS central bankers' speeches  guidance we issued after the FOMC meeting in September.8 September’s FOMC statement clearly linked our policy to the key elements of the new policy framework.
Much of this stronger spending was for durable goods, particularly motor vehicles. In the fourth quarter of 2011, sales of light-weight motor vehicles reached the highest quarterly rate since the first half of 2008. This increase is encouraging because it suggests that consumers are now more able to borrow money to finance their purchases of cars and trucks. However, I must note that this boost is likely due in part to temporary factors. First, vehicle sales in the middle of 2011 were depressed due to supply chain disruptions stemming from the tragic earthquake and tsunami in Japan. In addition, a stimulus-related tax provision that allowed businesses to immediately expense some investments expired at the end of 2011. So, some purchases were no doubt timed to occur before that expiration. Moreover, for goods and services other than durable goods, the rate of growth of consumer spending has been rather tepid. The picture that emerges – up to now – is of a consumer who continues to be cautious. In addition to stronger growth of consumer spending, manufacturing output has firmed over the past several months. For example, the widely followed Institute of Supply Management manufacturing composite index rose from October to December 2011. Improvements were particularly notable in new orders and production activity. Stronger growth of consumer spending on durable goods is likely boosting the manufacturing sector. In addition, growth of U.S. exports has been well maintained, while import growth has been subdued.

As a result, by the first quarter of 2022, inflation in the EU was already at its highest level since the creation of the monetary union. Lastly, in this unstable scenario in which supply and demand had yet to adjust, the outbreak of war in Ukraine fuelled further instability in the inflation outlook and hindered the economic recovery that was starting to take hold in early 2022. Europe is particularly exposed to the economic repercussions of the Russian invasion of Ukraine. First, the continent has close commercial ties with Ukraine, a supplier of primary goods such as grain, sunflower oil or corn. These products are widely used in the European agriculture, farming and food industries. Second, and most importantly, Russia continues to play a major role as an exporter of energy products to Europe (mainly oil and gas), and remains of key importance for some European countries. Russia is the euro area’s main supplier of natural gas and oil: in 2019, 36% of all of the natural gas consumed in the euro area came from Russia, as did 22% of all of the oil consumed. As a result of the war, the European Union has taken measures to sanction certain activities that could be used to finance Russia and, by extension, the invasion. In turn, Russia has restricted supplies of gas to Europe, and these are hard to replace in the short term. All these elements make up a cocktail that is hard to digest.
Michael C Bonello: The Maltese lira Interview with Mr Michael C Bonello, Governor of the Central Bank of Malta, by The Malta Business Weekly, 9 December 2004. *  *  *  I must first of all point out that decisions regarding the external value of the Maltese lira can only be taken by the Minister of Finance on the recommendation of the Central Bank of Malta and with the consent of the Prime Minister. Decisions on such a complex, technical issue can have far-reaching economic and social implications and are understandably not taken lightly. They must, for that same reason, be made on the basis of facts not supposition. Having said that, I must make it equally clear that at this point in time the Bank cannot responsibly make a recommendation in this sense for the simple reason that it has no conclusive evidence that such a change is warranted, still less that it would deliver the expected benefits. Nor is the Bank aware that anybody else has made a credible case for changing the value of the currency. The conclusions of the Bank’s study on the equilibrium exchange rate have been shared with several local and foreign experts, including the IMF mission that was in Malta last May.

With excessive euphoria, the expansion of the capital stock may go too far. Sizeable investments are made in sectors that will never yield the expected return. The subsequent adjustment accordingly involves a marked fall-off in investment activity and thus a weak development of demand. Both the excessive investment earlier and the inevitable correction of asset prices contribute to this. The setback can also lead to problems in the financial system in general. Much of what the Austrian School had done was forgotten during the half-century of regulation from the crisis in the 1930s to the 1970s. Political economy was dominated instead by Keynesianism. It may also be the case that the efficient market hypothesis has been interpreted too freely. This theory largely amounts to a warning that the market is basically the best judge of a share’s real value. Under normal conditions that is probably true. When a bubble has got under way, however, the market’s normal information processing tends to be disrupted and prices are driven instead by impenetrable forces of a psychological nature. In many respects the financial turbulence in the 1980s and ‘90s was a rude awakening for many economists, decision makers in economic policy, authorities, representatives of the business and banking communities and people in general. I find it important to underscore how broad was this lack of insight into how financial problems arise. One cannot single out a person or group as being solely responsible for how things took a turn for the worse.
So there are numerous factors to consider. It is also important to realise that adjustments to the new technology do not occur automatically. The new facilities will not necessarily be utilised in such a way that the effects suddenly show up in general economic development. A proper transformation presupposes that the right driving forces are in place and that other important requirements have already been met. Otherwise the so-called new economy may mean difficulties rather than opportunities. A lack of adaptability can result instead in the economy being weaker and more susceptible to inflation. In other words, if the global economy faces Sweden with stronger international competition and demands for change and the necessary renewal of the capital stock and production facilities does not happen, our economy will be liable to lag behind. I should like to consider two factors that I believe will be significant for Sweden’s growth path after the turn of the millennium, namely wage formation and a functional financial system. Of course there are other factors of importance for the future growth path, such as the construction of taxes and how the education system performs. They obviously have to be discussed as well. I have chosen to consider wage formation because wages make up approximately 70% of total costs in the economy, which makes them a major determinant of the profit level; profits in turn are important for the development of investment. The functioning of the financial system has a bearing on the possibility of financing new investment at a reasonable cost.

In an attempt to maintain growth in the traditional industries, economic policy responded with a series of devaluations. Each devaluation was invariably said to be the final one but the cycle of rising wage  BIS Review 129/1999  2  costs and a devaluation was still repeated again and again. The aim of compensating for the lack of change in Sweden’s corporate sector, which stemmed from the 1960s, simply did not work. If anything, the devaluations meant that the problems persisted and were accentuated. With the lack of investment in new products and the dependence on an increasingly outmoded structure of production, the entire nation’s material standard had to be adjusted. For many years, growth in Sweden was weaker than in the world around us. This example shows how a “new economy” at that time posed problems for the Swedish economy rather than opportunities. The lack of change, because wage formation did not function properly, resulted in an economy that was weaker and more susceptible to inflation. The period clearly illustrates how globalisation, increased competition and new technology can lead to lower growth and higher inflation if changes are not made sufficiently quickly. If the economy is under pressure from strong competition as well as poorly functioning wage formation, economic renewal may lag behind. It is therefore gratifying that the labour market organisations seem to be increasingly in favour of the inflation target policy.
And even those countries with more flexible exchange rates can see competitiveness eroded if their major trading partners resist exchange rate appreciation. For most countries, though, these challenges would be exacerbated rather than eased by a policy designed to try to sustain a fixed rate or to narrowly constrain variability in the exchange rate. Although it may seem counterintuitive, small open economies, even more than larger less open economies, need the flexibility that floating exchange rates bring. Changes in exchange rate regimes were present at the scene of most of the major emerging market financial crises of the last decade, and many have argued that the decisions to let the exchange rate adjust was a major source of the trauma that followed. But that's not a fair reading of the evidence. In general, the crises were the consequence of fundamental economic problems, often manifested in the buildup of substantial balance sheet problems, with excessive borrowing in foreign currency by the sovereign, the banking system, or both. These balance sheet problems were one reason many governments chose to postpone currency adjustment for as long as possible, and these delays ensured that the cost of adjustment, when it was forced on these governments, was far higher than if action had been taken earlier. But this is not the whole story since the fixed exchange rate regime itself had contributed to the initial currency mismatch and associated balance sheet problems.

Quarterly GDP volatility in the United States, for example, has fallen by more than half since the mid 1980s. And average rates of inflation and the variability of inflation outcomes have of course  BIS Review 44/2007  1  declined substantially as well. This is not to say that these swings in exchange rates have not come with pain and trauma, only that overall economic performance has fared better than many would have expected three decades ago when contemplating life under flexible exchange rates. Among emerging markets, experience with exchange rate flexibility has been more limited, and the record has been more mixed. Chile probably has one of the longest record of successful performance under a flexible regime, success due in large part of course to a strong record of prudent macroeconomic policy management and strong institutions. But there are many more examples today – Brazil and Mexico are two – of emerging economies with sustained periods of improved growth and inflation outcomes under more flexible exchange rate regimes. Emerging market economies face substantially greater challenges than the less open major economies in adjusting to a more integrated world and to the greater exposure to real and financial volatility that comes with integration. Large movements in capital flows can complicate the task of achieving sustainable growth, low inflation and financial stability. This is obvious for those countries experiencing sharp net outflows of capital, but the challenges are formidable even for those countries experiencing sustained periods of large inflows.
Barrdear, J and Kumhof, M (2016), “The macroeconomics of central bank-issued digital currency”, Bank of England Working Paper, forthcoming. Bossone, B (2001), “Should banks be narrowed?”, IMF working paper no. 159. Buiter, W (2009), “Negative interest rates: when are they coming to a central bank near you?”, Financial Times article available at http://blogs.ft.com/maverecon/2009/05/negative-interestrates-when-are-they-coming-to-a-central-bank-near-you/#_ftn1 Carney, M (2013), “The UK at the heart of a renewed globalisation”, speech given at an event to celebrate the 125th anniversary of the Financial Times, London. Diamond, W (1984), “Financial Intermediation and Delegated Monitoring”, The Review of Economic Studies, Vol. 51, No. 3, pp. 393–414. Diamond, W and Rajan, R (2001), “Liquidity Risk, Liquidity Creation, and Financial fragility: A Theory of Banking”, Journal of Political Economy, Vol. 109, No. 2, pp. 287–327. Goodhart, C (1988), “The evolution of central banks”, MIT Press, Cambridge (Mass). Goodhart, C and Jensen, M (2015), “A Commentary on Patrizio Lainà’s “Proposals for Full-Reserve Banking: A Historical Survey from David Ricardo to Martin Wolf”, Economic Thought, Vol. 4.2, pg 20-31. Haldane, A (2015), “How low can you go?” speech given at the Portadown Chamber of Commerce, Northern Ireland. 18  8  Bank of England (2015); see, in particular, section 5 “Response to fundamental change”. BIS central bankers’ speeches  Hills, S, Thomas, R and Dimsdale, N (2015), “Three Centuries of Data – Version 2.1”, Bank of England. Harris, M and Raviv, A (1990), “Capital Structure and the Informational Role of Debt”, The Journal of Finance, Vol. 45, No. 2 (Jun., 1990), pp.

Bossoni (2001) provides a useful overview of the literature on narrow banking and comes to a more sceptical conclusion. A longer-term perspective on the debate is provided by Goodhart and Jensen (2015). 11  Tobin (1987); there are echoes of this proposal in the more recent work of Barrdear and Kulmhof (2015). 12  Under his proposal, however, deposit-taking banks would be “ring-fenced” from providing investment-banking services. Even so, commercial bank deposits would have to offer more attractive terms – in particular a higher rate of interest – than the DCAs. One implication is that, if the appropriate spread between the interest rate paid on commercial and central bank deposits were to widen during times of banking stress – and one imagines it would – the central bank would more often run up against the zero lower bound. 13  See, for example, Diamond (1984); a useful summary can also be found in Freixas (2008). 14  Kashyap et al. (2002) point out that there are technological similarities between holding deposits and making advances: both involve expertise in liquidity management. Diamond and Rajan (2001) go further, arguing that, given imperfect information on the part of depositors about the riskiness of individual loans on a bank’s balance sheet, the risk of a run is a necessary discipline on the bank. 6  BIS central bankers’ speeches  because we’ve partially insured their liabilities.