samchain/econo-pairs-v1 huggingface dataset:
There is clearly very significant long-term potential across most of the region. The second issue is our continuous commitment to developing Islamic finance in Hong Kong. The Chief Executive of the Hong Kong Special Administrative Region acknowledged in his Policy Address in 2007 that Islamic finance offers huge potential for development. To further consolidate Hong Kong’s position as a global financial centre, Hong Kong should actively leverage on this new trend by developing an Islamic financial platform. Our priority is to push ahead with the development of an Islamic bond market. There should be no doubt about our determination to establish a platform for Islamic finance in Hong Kong. In a recent speech, the Secretary for Financial Services and the Treasury also mentioned that having reviewed Hong Kong’s legal, taxation and regulatory regimes, there is no fundamental obstacle to accommodating a sukuk market in our existing system. Technical modifications to the taxation regime to provide a level playing field for Islamic finance transactions are being pursued as a priority. With our commitment and status as an international financial centre, we believe that Hong Kong is well positioned to develop Islamic finance. We should play to our key strengths and capabilities and I would like to highlight two very important aspects on which Hong Kong intends to capitalise. The first aspect relates to the core strengths of Hong Kong in providing a stable and free economy. Hong Kong has been ranked the freest economy in the world for 14 consecutive years by the Heritage Foundation.

Your presence here is ample evidence that there remains plenty of opportunities even in circumstances like these and that a forward-looking view is more important than ever. Today, I’m particularly honoured to join you in the discussion of a topic that has been recognised as a source of sustainability and growth – Islamic finance. There are two main issues that I would like to talk about today. First, despite the current financial turmoil, we continue to see the long term potential in Islamic finance. There are two good reasons for this. One is that the Islamic finance industry is in many ways fortunate to be at an early stage of development during this turmoil. Despite the effects of a temporary shortage of liquidity, which has been a worldwide phenomenon,  1  Source: Bloomberg. BIS Review 146/2008  1  the degree of damage has been far lower than that to the much wider network of international finance, primarily because of the more restricted spread of Islamic financial instruments across regions and the generally lower level of leverage allowed in Islamic financial transactions. Although Islamic finance has grown by leaps and bounds in recent years, assets held by Islamic financial institutions and insurance operators known as takaful providers are estimated to be $ trillion, accounting for only about 1% of the financial assets in the overall banking and insurance sectors. 2 The industry’s remarkable annual growth rate of 15% to 20% has to be viewed in perspective: after all it began from a small base.
If this analysis suggests that monetary developments are a threat to future price stability, monetary policy will respond in a manner appropriate to counter this risk. In parallel with the monitoring of monetary aggregates, the ECB also pays close attention to various other indicators which may signal inflationary risks or tensions: this is the second pillar of the monetary strategy. Indeed, while inflation is a monetary phenomenon over the long term, it is useful in the short to medium-term to detect those inflationary tensions in the economy - reflected in various real and financial indices - which are not captured by monetary aggregates. With these two pillars and the various indicators, monetary policymaking in the euro area may appear complex, but this reflects the complexities and uncertainties which surround the transmission mechanism of monetary policy in modern economies, and, even more so, in the new economic environment created by the changeover to the euro. Against this background, the Eurosystem must rely on a whole range of indicators and on a variety of models which help to sharpen and crosscheck the analysis. The efficiency of monetary policy does not rely only on a careful analysis of the monetary, financial and economic situation, but also on the ability to explain monetary policy decisions to the public in a convincing manner.

It must also be noted that real lending rates, although they have been rising since the spring of last year, are still lower in real terms than those observed at the beginning of 1999. Overall, money and credit developments signalled an upward risk to price stability which had to be counteracted. The new monetary data for May which was released this morning broadly confirmed this assessment. The three-month average of the annual growth rates of M3, covering the period from March to May 2000 remained unchanged at 6.3% and loans to the private sector continued to grow rapidly. Let me now discuss the outlook for growth and inflation. This is a rather pleasant task, as the prospects for strong growth are very favourable. Indeed, let me reiterate our conviction that they have not been this favourable in many years. If central bankers are famous for anything, it would normally be for guarded rather than for exuberant views. So, for a central banker, this assessment is quite something. I therefore hasten to fill you in on some of the underlying details. The consensus view emerging from the forecasts currently available is that of strong economic growth of over 3% in the euro area both this year and next. This is clearly more than most forecasters expected at the end of last year, when projections were still very much made in the light of the previous crises witnessed in emerging market economies.
that monetary policy is credible, an estimate of the expected equilibrium real interest rate can be derived from the long-term forward rate. About ten years ahead, market participants expect a short-term nominal interest rate in Norway of about 5¾ per cent. With expected inflation corresponding to the inflation target of 2½ per cent, we can estimate the market’s expected real interest rate in the long term at about 3¼ per cent. This is approximately the same level for long-term real interest rates as in the period 1997-2002, but higher than the long historical average from 1870 to 2003. Deflation tendencies in a number of countries Inflation has declined in a number of countries. This indicates that the global shift in monetary policy, with a greater focus on inflation, has been effective. However, other factors have also played a role. Fiscal policy is being used to a lesser extent in demand management. Structural reforms have been adopted in order to improve the growth potential of the economy. Financial markets have been liberalised and the markets for both financial services and products have been globalised. Deflation, i.e. a sustained fall in prices, has again become a subject of economic debate in the last few years. This is naturally due to the fall in consumer prices in a number of countries in Asia and the very low rate of inflation in many countries. Deflation can have a destabilising effect.

In other cases, the laws in the United States will treat a bank as the perpetrator. That is because, as an employer, the bank may be legally responsible for the actions of its employees. So a bank could risk losing money in two ways: theft or fines. And, more important, a bank may risk losing its good name or reputation for trustworthiness. Now consider, hypothetically, a bank that employs 100,000 people. That bank may have a 99.9 percent record of good conduct—almost perfect. Even then, there will still be 100 employees whose misconduct could, under the right circumstances, damage the bank’s reputation or balance sheet or harm its customers. Banks face risks from third parties too. Vendors or other service providers may expose a bank to additional risk. For example, if a bank gives a software vendor access to its network, the bank may take on risks in the vendor’s cyber security. Cyber risk is not limited to software vendors. It actually could be any vendor. The vendor that opened the gate for a cyber attack on a chain of retail stores in the United States was an air conditioning contractor using an electronic vendor invoicing system. Here is another example of risk from third parties. A newer, faster means of executing or settling transactions may draw such a significant share of a market that it creates a concentration risk that previously did not exist. If that connection fails, an entire market could shut down. Banks can also face risks from their customers.
In the United States, the strategy of turning a blind eye to the period of soaring asset prices and then cleaning the mess when it was already there used to be long  2  BIS Review 68/2009  considered appropriate (Blinder and Reis, 2005). The cleansing consisted in cutting the interest rates and granting all the necessary liquidity for the market to continue operating. This approach was first used on the “Black Monday” of October 1987, then with the breakdown of Long-Term Capital Management (LTCM) and later with the bursting of the high-tech bubble. In all these occasions, once the asset prices reversed down, there was an abrupt relaxation of the monetary policy. 1 This implicit insurance, popularly known as the Greenspan put, certainly makes the creation of bubbles more likely. Sadly, having worked for some earlier episodes, it lost its power with the biggest collapse in decades. A monetary policy strategy that used to provide insurance to speculation in episodes of limited financial turbulence proved incapable of confronting a systemic financial crisis. And it is possible that the very “risk management” strategy had as a consequence that a great collapse was bound to happen sooner or later. The final verdict is yet to be seen. This strategy certainly contributed to increase liquidity, but low interest rates need not result in a financial crisis as I have illustrated with these few examples. An inflation-targeting policy that in some circumstances determines an extraordinary monetary impulse is perfectly compatible with preserving financial stability.

Most famously, in August 2012, Knight Capital – a firm engaged in market making and at the time the largest trader in US equities – lost $ million as a result of an undetected manual error in its algorithmic trading software. And in 2013, an error in a trading algorithm at HanMag Securities – a Korean brokerage firm – led it to place erroneous equity option trades, generating losses in excess of its capital. 17  As I noted above, end-users – corporates and asset managers – are increasingly splitting up larger trades into smaller pieces and trading them over a longer period. Doing so exposes them to more execution risk; that is, the risk that prices move against them before they have finished transacting – which traditionally was more the preserve of intermediaries. Some end-users are also now automating this trading process through the use of algorithms. Indeed, a recent Greenwich Associates survey found 21% of institutional asset managers and 10% of corporates do so in foreign exchange markets. 18  In so doing they swap one set of  risks for another, and the examples of losses by specialist firms in periods of fast market turbulence cautions against assuming that all end-users will effectively manage the new risks associated with the use of algorithms. These risks can exist through indirect as well as direct exposure to developments in fast markets. Many exchange-traded instruments (such as government bond futures and Exchange Traded Funds (ETFs)) are intrinsically linked with less liquid underlying (slower market) instruments.
Már Guðmundsson: Financial integration and central bank policies in small, open economies – what are the key lessons from the crisis? Remarks by Mr Már Guðmundsson, Governor of the Central Bank of Iceland, in a plenary session on monetary policy and policies of central banks at the Singapore Economic Review Conference, Singapore, 5 August 2015. *  *  *  A revised and extended version of this talk will be published in a forthcoming Singapore Economic Review. Chairman and participants, I would like to thank the organisers for inviting me to speak at your conference here in Singapore, a country that I have long respected for its economic management. My remarks today bear the title Financial integration and central bank policies in small, open economies: what are the key lessons from the crisis? They are motivated by my experience as a policy-maker from a very small, open, and what used to be financially integrated economy, and my tenure at the Bank for International Settlements. 1 There is a widespread sense that global financial integration can be problematic for the conduct of monetary policy in small, open economies. Why is that? It is well known that the transmission mechanism of domestic monetary policy evolves as domestic financial markets develop, and that this in turn affects the relative effectiveness of different monetary instruments. The same applies to external liberalisation of domestic financial systems and the cross-border financial integration it gives rise to. Initially, it can give a boost to domestic financial market development.

In what I have said so far, there is no presumption that small, open, and financially integrated inflation-targeting countries with floating exchange rates cannot reach whatever inflation target they choose and determine short-term domestic interest rates. You might then ask: how is it that their capacity to affect long-term domestic rates is undermined, and how is this consistent with the theory that long-term rates are determined by expected short-term interest rates (with the addition of risk premia)? The answer is that, insofar as the theory  1  This talk is thus based partly on my paper entitled “Financial globalisation: key trends and implications for the transmission mechanism of monetary policy”. BIS Papers No. 39. April 2008. http://www.bis.org/publ/bppdf/ bispap39c.pdf. BIS central bankers’ speeches  1  holds, it is global short-term rates that increasingly drive domestic long-term rates in small, open economies as global financial integration comes closer to the limiting case. Enough of theory. To what degree does the evidence support that this was indeed relevant for monetary policy in small, open, and financially integrated economies during the build-up to the GFC? There is significant literature on this, including one or two pieces of my own. Overall, the data are consistent with the suggestion that a significant progress of financial globalisation took place during the decade and a half before the GFC. This could be seen by quantity measures such as gross external positions and saving-investment correlations. The correlation of asset returns also reached high levels.
It helps the Banque de France make sure that the economy is supplied with enough financing to grow, and it enables us to track developments in financing for businesses, households and general government simultaneously. The Monetary Policy Council will keep a close eye on other indicators, including all leading indicators of changes in prices, such as capacity utilization rates, production costs, developments in incomes and commodity prices. The Monetary Policy Council will also monitor long-term interest rates and the current account balance. *  *  *  Before announcing the Council's monetary policy decisions for 1997, I would like to discuss the results achieved in 1996. 1. The 1996 results are in line with the targets we set. The ultimate monetary policy goal, which is price stability, was met. Businesses delayed passing on part of the August 1995 two-point increase in the standard rate of VAT until the beginning of 1996. The twelve-month rise in consumer prices was equal to and then above 2% during the first seven months of 1996, but subsequently fell back to 1.ó% in August and September, once the VAT effect had disappeared. The twelve-month increase stood at 1.5% to 1.ó% in November and the latest forecasts predict a price rise of close to 1.5% for the end of 1996. The twelve-month price increase thus resumed its pre-August 1995 trend and will be less than 2% at the end of 1996, in line with the objective set by the Monetary Policy Council.

The objective of the Monetary Policy Council is that the increase in prices, as measured by the consumer price index, should not exceed 2% in 1997. as in the medium term. 2. To meet this ultimate goal, the Banque de France uses two intermediate objectives, one of which is external and the other internal: -  The objective of a stable external value of the currency: as it has been for ten years, the stability of the franc will be maintained against the group of the most credible currencies in the European Exchange Rate Mechanism. -  An intermediate internal growth target for the money supply assessed by the development of the narrow and broad monetary aggregates: in 1997, the money supply should be able to show a medium-term growth trend of 5%. This figure is consistent with price inflation of no more than 2% and non-inflationary real GDP growth of about 2.5%, which could be exceeded, in view of the potential for growth to catch up in the medium term. The Monetary Policy Council has decided to simultaneously BIS Review 2/1997  -4-  monitor the main narrow and broad money aggregates in order to obtain a concise estimate of all monetary developments. 3. Total domestic debt is an important indicator. It helps the Banque de France make sure that the economy is supplied with enough financing to grow, and it enables us to track developments in financing for businesses, households and general government simultaneously.
I will then turn to financial stability, which is essential for the effectiveness of monetary policy (by preserving its transmission channels). Finally, I will talk about economic stability and the way monetary policy, in combination with fiscal policy, can smooth the business cycle and foster a robust and sustainable recovery from the covid crisis. Clearly, these different aspects are closely intertwined: monetary policy, while pursuing its primary objective of price stability, can affect financial stability; fiscal and monetary policy closely interact with each other, as do monetary and macroprudential policy. But for the sake of clarity I will tackle each concept in turn. I. Price stability To achieve the ECB inflation objective, we are determined to maintain, as long as necessary, a very accommodative monetary stance. We continue to stand ready to adjust all of our instruments, as appropriate, including possibly a lowering of the DFR if needed. And to guarantee the full transmission of this accomodative stance, we pay particular attention to ensuring that both bank and market financing conditions remain favourable for all agents (governments, firms and households). This leads us to monitor a large set of indicators, with a multifaceted and holistic approach. Let me add some comments about the recent increase we have seen in long-term rates, following although to a lesser extent the move in the US. This increase has different causes, and hence calls for different reactions and instruments.

The Governing Council of the ECB has decided to support, in principle, the activities pertaining to the introduction of a STEP label, which would acknowledge adoption of the standards, for the first two years after its launch. It has also decided to produce and publish STEP yield indices as well as statistics on volumes on an ongoing basis. The ECB would like to strongly encourage similar initiatives to promote financial integration in Europe. Continuing my assessment of the wholesale markets, I will briefly discuss the equity market. Recent empirical evidence shows that the degree of integration has increased here. For example, the so-called “home bias” in the equity holdings of investment and pension funds has decreased substantially over the time. Overall, however, this market segment is still one of the least integrated. As a final comment on the wholesale markets, I would like to say a few words on the development of new credit markets. Sometimes, these markets are set up in a pan-European context right from the start – we might say they are “born integrated”. One example of this is the European market for synthetic collateralised debt obligations. This development is encouraging. However, the existence of cross-border activity, with its impact on prices and volumes, does not always signal the absence of hurdles and the achievement of full integration. Factors of segmentation may still exist, but can be overcome by innovative instruments.
The second challenge I would like to comment briefly is: what role for public authorities, and especially for central banks? The trends I just mentioned require public authorities, especially central banks, to reflect on their role to ensure that retail payments changes underway support economic growth and consumer confidence. 1) The first way central banks can help bring about such an outcome is through their catalyst role, by fostering due cooperation and coordination between stakeholders in areas where it is needed. This role needs to be played both at national and European levels. In that perspective, the new Euro Retail Payments Board (ERPB) should play a pivotal role in Europe, by gathering -under the aegis of the ECB and the NCBs of the Eurosystem- actors from the supply side and the demand side to facilitate the development of an integrated, innovative and competitive market for retail payments in euro. Works on card payments have already been carried out by the ERPB, especially focusing on the next phases of standardization, to pave the way for further action by market stakeholders at European level. Nonetheless, these initiatives have to be complemented at the national level to be effective. This is one reason why a national strategy for retail payment systems has been elaborated by the stakeholders in France last October and endorsed by the Minister of Finance.

One of the main axis of the strategy aims at facilitating the use of cards for proximity payments through the modernization of card terminals and infrastructures which will boost the development of contactless payments, as a secure and efficient alternative to cash for everyday transactions. The National Payments Committee, which will take over from the National SEPA Committee shortly, will, similarly to the ERPB at the European level, involve all stakeholders under the aegis of Banque de France to foster the necessary dialogue for an effective implementation of the national strategy and feed the ERPB with input from the French community. 2) In addition to their catalyst role, central banks through their oversight function should aim at ensuring that competition between market participants does not translate into a race to the bottom, but rather translate into a race to the top in terms of security, by setting high level objectives and by overseeing that they are complied with. Indeed, while innovation is a promise  2  BIS central bankers’ speeches  and a vector for economic growth, it is also a door open to new threats for the very security of payments and public confidence in those. Changes in the customers’ usages generate new risks that may not be fully and comprehensively mitigated at the present time. I will only recall that Card-not-present payments, though accounting for “only” a little less than 12% of the overall value of card-based transactions in France, represent more than two-third of the overall value of fraudulent card-based transactions.