samchain/econo-pairs-v1 huggingface dataset:
However, there have also been episodes where bubbles have accumulated in these markets, in the form of sharp increases in asset prices, while inflation has been low. The situation in Japan in the 1980s is an example. Price increases in property and financial markets may have a considerable impact on wage growth and consumer price inflation after a period. When the bubbles burst, the result may be an economic downturn. In this way, developments in financial and property markets may be a source of a more unstable inflation environment. In principle, it would be appropriate to use the interest rate to counter this. In practice, however, it is difficult to assess whether price trends in property and financial markets are sustainable. When Norges Bank concludes that the key rate should be changed, the change will in most cases be made gradually. This is because there is normally uncertainty about the situation in the economy, 2 potential disturbances to the economy and how fast an interest rate change will affect price inflation. But we will not always take a gradualist approach. A rapid and pronounced change in the interest rate is appropriate if monetary policy credibility is threatened. If special circumstances prompt Norges Bank to apply a different time horizon than two years, the Bank will provide an assessment of this. We will also do so if developments in financial markets or the property market warrant particular attention.

The Swedish banks have had comparatively minor loan losses and provisions since 2008. But there is nothing to say that the banking sector will not be affected more severely next time. Allow me to use a rough estimate to give you an idea of how a crisis can impact the banks’ equity. In 2007–2010, 35 of the largest banks in the EU had loan losses and provisions of about SEK 350 billion. Today, these same banks have Common Equity Tier 1 of about SEK 780 billion. So if we incur similarly large loan losses in the next few years, about 45 per cent of the banks’ Common Equity Tier 1 would disappear. 4  BIS central bankers’ speeches  The important point here may not be the exact amount of the total loan losses – the estimate has been, and still is, uncertain. The important point is that, in such a situation, confidence will be a hard currency. Uncertainty over the banks’ resilience affects confidence. When confidence is undermined, the banks’ funding disappears. For the Swedish banks, this could be particularly devastating. Other countries with large banks have more stringent regulations than Basel III Earlier experiences, not least from the latest financial crisis, have also been studied by other major banking countries. Authorities in these countries wish to proceed faster and set higher requirements than the minimum standards of Basel III.
Furthermore, recovery varies from one industry to another. Overall, the situation today is much better than many observers had expected at the beginning of 2015. The Swiss economy has once again demonstrated its flexibility by, for example, making swift adjustments to working hours and taking measures to improve production processes. In view of the structural changes taking place, this adaptability will remain key, regardless of developments in the international economy and exchange rates. I’m thinking here of traditional retailing, which increasingly has to compete with internet trading. Digitalisation, too, presents new challenges for manufacturing and finance that will continue to call for major efforts on the part of companies and staff in all the industries concerned. Current monetary policy  What challenges does this situation pose for our monetary policy? We have the statutory mandate to ensure price stability. In so doing, we must take due account of economic developments. Since the beginning of the year, the inflation rate in Switzerland has climbed above zero again (cf. chart 4). As is the case with our trading partners, this is largely driven by oil and food prices. Core inflation is somewhat lower, primarily because of underutilised production capacity. Our current forecast puts inflation in mid-2019 at around 1%. Given low inflation and underutilisation of production capacity, maintaining an expansionary monetary policy in Switzerland is the right course of action to take. The Swiss franc is still significantly overvalued.

The exchange rate remained stable up to autumn 1996, partly because wage growth was low and overall demand did not generate pressures in the economy. Gradually, the krone began to show wider fluctuations. The experience of the latter half of the 1990s demonstrated that monetary policy cannot fine-tune the exchange rate. Developments in international financial markets led to more pronounced fluctuations. And more fundamentally, when labour market pressures rose and incomes policy failed, exchange rate developments no longer provided signals to wage formation and fiscal policy. High petroleum revenues, fiscal slippage and expectations of increased government petroleum revenue spending contributed to this. The exchange rate was therefore no longer suitable as a nominal anchor. Towards the end of the 1990s, monetary policy placed emphasis on the fundamental preconditions for exchange rate stability. Monetary policy instruments were oriented in such a way that price and cost inflation was brought down to the price stability objective of the European Central Bank (ECB). Pursuant to the Regulation of March 2001, the mandate for monetary policy stipulates that monetary policy shall be aimed at stability in the Norwegian krone’s internal and external value, thereby contributing to stable exchange rate expectations. At the same time, monetary policy shall underpin  2  BIS Review 90/2006  fiscal policy by contributing to stable developments in output and employment. The operational objective of monetary policy is low and stable inflation, with annual consumer price inflation of approximately 2.5 per cent over time.
1 Based on those he expressed a view, which I share, that while the recent experience may have made us a bit more confident about detecting bubbles, it has not resolved the problem of doing so in a timely manner, nor has it shown that small-to-modest policy actions will reliably and materially dampen speculation. An extra policy reaction to changes in asset prices thus still remains questionable. The second frontier to be mentioned tonight is related to the monetary policy implementation, current situation on the money market and financial stability of the banking sector. For years the monetary policy implementation was not an issue and central banks were able to tighten the short-term money market interest rates such as for instance 3M PRIBOR closely to the key policy rate. Unfortunately, this changed in August 2007 for the US interest rates when the 3M LIBOR for the US dollar denominated funds started to deviate significantly from the Federal Reserve target for funds. A year later following the second round of the financial crises that peaked during the bankruptcy of Lehman Brothers also the Czech short-term money market rates started to elevate well above our policy rate, the two week repo rate. 1  Quoted from speech of Vice Chairman Donald L. Kohn: “Monetary Policy and Asset Prices Revisited” at the Cato’s Institute 26th Annual Monetary Policy Conference, Washington, D.C., on November 19, 2008.

Zdeněk Tůma: Frontiers of monetary policy Speech by Mr Zdeněk Tůma, Governor of the Czech National Bank, at the Forecasting Dinner 2009, Czech National Bank, Prague, 12 February 2009. *  *  *  Ladies and gentlemen, dear colleagues, I had the opportunity to speak on the occasion of the Forecasting Dinner several times, but this year is rather special in one respect and that is the global economic crisis, in the midst of which we are right now. Severity of the crisis brings new challenges to central bankers which result in unconventional methods of the monetary policy conduct. Indeed, the policy interest rates in the United States reached effectively zero and the European Central Bank is expected to lower its policy interest rate to historically low level soon. Global economic outlook is worsening and the latest macroeconomic forecast of the Czech National Bank expects the economic growth to be around zero this year and only roughly one percent growth in the year 2010. Accordingly, we expect inflation to hit almost zero in summer this year but return close to the Czech National Bank inflation target of 2% in the first half of the year 2010. Challenges we face as central bankers lead me tonight to talk about frontiers of monetary policy, issues that have been heavily discussed among central bankers recently but are not completely resolved yet.
During the 20 century there was a development towards a greater element of competition and use of alternative operating forms within the public services sector. In the central government sector, state-owned monopolies such as the post office, the telecommunications administration and the state-owned energy company have been opened up to competition. Examples of remaining state-owned monopolies are Apoteksbolaget, Systembolaget, Swedish Railways, Svensk Bilprovning, Svenska Spel and Statens Pensionsverk. The county council/local authority sector has now chosen to expose to competition many of the businesses it runs. This includes waste transport, property maintenance, local bus routes, care of the elderly, cleaning, 6  SNS Economic council (2002), Unlimited competition, SNS-förlag. Exposure to competition is here defined on the basis of concentration and other barriers to competition such as companies' actions, regulations limiting competition, entry and exit barriers. 7  Price comparisons for housing are difficult. Differences in quality and structure between the Swedish and European housing markets makes accurate price comparisons difficult. For instance, there is a large supply of rental apartments in Sweden, while in other countries there are few of these and they are often greatly subsidised. Statistics Sweden estimates that the relative price for housing in Sweden is probably rather exaggerated. 4  BIS Review 25/2002  primary healthcare and dental treatment. Studies by the Swedish Association of Local Authorities show that increased competition in the county council/local authority sector operations have increased efficiency and led to lower costs.

10  Government Bill 01/02:167, "Changes in the Competition Act for more efficient combating of cartels, etc.". BIS Review 25/2002  5  registered in a special product register containing information on the exact contents also hampers import competition as most other countries do not have such registers. The fact that the Swedish market is small means that it is not economically viable for foreign manufacturers to make the adaptation required by Swedish rules or legislation. The existence of recycling systems for cans and bottles also makes import competition more difficult in the soft drinks market (soft drinks are approximately 40 per cent more expensive in Sweden than the rest of the EU). The fact that requirements motivated by concern for the environment could impede competition does not, of course, mean that they should be abolished. On the other hand, this is a good argument for coordinating the various regulatory systems in Europe. The bank sector  As I am today speaking to people who work in the bank sector, I thought I would take the opportunity to say a few words on competitive conditions in this sector. The bank sector was characterised by extensive regulations right up until the mid-1980s, which acted as an impediment to dynamic development in this sector. Few new operators could enter and competitive pressure was fairly low. However, the deregulation that has occurred since then has radically changed this picture.
Let me be elaborate on these key risks and vulnerabilities: The main risks identified outside the euro area financial system include the possibility of: •  vulnerabilities being revealed in non-financial corporations’ balance sheets, because of high leverage, low profitability and tight financing conditions;  •  greater-than-expected household sector credit losses if unemployment rises by more than expected;  •  the surge of government indebtedness raising concerns about the sustainability of the public finances, as well as the crowding out of private investment; and  •  an adverse feed-back between the financial sector and public finances as a result of government financial system support measures, fiscal stimuli and weak economic activity. Within the euro area financial system, important risks include the possibility of: •  renewed financial strains and that the recent recovery of bank profitability will not prove durable;  •  vulnerabilities of financial institutions associated with concentrations of lending exposures to commercial property markets and to central and eastern European countries being unearthed; and  •  a setback for the recent recovery of financial markets, if macroeconomic outcomes fail to live up to optimistic expectations. All in all, the challenges facing the euro area banking sector in the period ahead call for caution in avoiding timing errors in disengaging from public support. In particular, exit decisions by governments will need to carefully balance the risks of exiting too early against those of exiting too late.

Exiting before the underlying strength of key financial institutions is sufficiently well established runs the risk of leaving some of them vulnerable to adverse disturbances, possibly even triggering renewed financial system stresses. Late exits, on the other hand, can entail the risk of distorting competition, creating moral hazard risks that come with downside protection – including the possibility of excessive risk-taking – as well as exacerbating risks for public finances. To cushion the risks that lie ahead, banks will need to be especially mindful in ensuring that they have adequate capital and liquidity buffers in place. If the circumstances require it, some banks may need to raise new and high-quality capital. In addition, some banks, especially those which have received state support, may need fundamental restructuring in order to  BIS Review 168/2009  7  confirm their long-term viability when such support is no longer available. This could involve the shrinking of balance sheets through the shedding of unviable businesses with a view to enhancing their profit-generating capacities. At the same time, banks should take full advantage of the recent recovery in their profitability to strengthen their capital positions, so that the necessary restructuring of businesses and the enhancement of shock-absorbing capacities do not impinge materially on the provision of credit to the economy. Thank you very much for your attention. I am now at your disposal for questions.
Such assessments are usually allocated according to each member’s contribution to the CCP’s default fund. This way of allocating assessments, provided it is transparent, gives members a degree of predictability about what will happen. Nevertheless, they could expose surviving clearing members to sudden and very large liquidity demands which they would have to source in the market, and could thus have strong contagion effects14 – even pushing members to close out their contracts and leave the CCP, rather than face the spiralling costs of remaining a member. For these reasons, such tools may prove problematic for bank supervisors. Another tool which is frequently mentioned in discussions on CCP recovery is variation margin gains haircutting (VMGH). In my view, this tool may have a certain advantage over ex post cash calls, in the sense that it would alleviate the need for members to raise extra  12  While central clearing protects banks against idiosyncratic risk, it can reduce their incentives to protect themselves from non-diversifiable shocks, hence the need for regulation to provide a strong incentive framework. For a theoretical discussion, see Biais, B., Heider, F., and Hoerova, M., “Clearing, counterparty risk and aggregate risk”, European Central Bank, October 2011. 13  For a discussion of loss-allocation rules, see also Elliott, D., “Central counterparty loss-allocation rules”, Bank of England, Financial Stability Paper, No. 20, April 2013. 14  See Heath, A., et al. (2015, op. cit.) for a simulation of the impact of different loss allocation mechanisms.

Should authorities be doing more to address potential weaknesses in CCP risk management? As I just mentioned, the regulatory standards have been significantly strengthened since the financial crisis. However, catastrophic losses beyond those already covered by the regulatory requirements could still occur. Given the critical role of CCPs in financial markets, regulators need to think the unthinkable. Indeed, stress events concerning CCPs are – thankfully – rare: the most recent example of a CCP failure was the collapse of the Hong Kong Futures Exchange clearing house in 1987. A more recent – albeit less dramatic – stress event was the uncertainty caused by the default of a clearing member at KRX, the South Korean CCP, which caused it to tap its mutualised default fund, and revealed that clearing members were not always aware of their potential liabilities towards the CCP. When such events occur, they have the potential to shut down the markets they serve. With the emergence of supersystemic CCPs serving global derivatives markets, a CCP failure could be a catastrophic event of global proportions. In September 2014, the gross notional outstanding amount of centrally cleared positions was estimated at USD 169 trillion for OTC interest rate derivatives, and at USD 14 trillion for credit derivatives.7 The sheer magnitude of these figures (around ten times the GDP of the United States or European Union) gives us an idea of the severity of the potential consequences from a stress event at a major global CCP.
But, for the region as a whole, this kind of integration is less striking than the presence of banks from the developed markets. For example, the number of US and European banks in Hong Kong roughly equals that of banks from the region. Similar observations may be made about the equity markets. In declining order, we now come to monetary integration. There have, in fact, been some recent efforts at monetary co-operation. These began in 1995 with the collection of EMEAP bilateral swap facilities that provide US dollar liquidity secured against US Treasury securities. In 1997 the idea of an Asian Monetary Fund was aired, but it came to nothing. Then, in 1999, came the collection of ASEAN+3 bilateral swap arrangements under the Chiang Mai Initiative. These cannot be said to amount to efforts towards monetary integration. And, in fact, while ideas may have been thrown around from time to time, there has not really been any formal discussion among Asian authorities that I am aware of towards monetary union. Why is this the case? I think it is mainly because the obstacles to union appear to be so daunting, and that the special considerations that apply to the Asian case throw up so many difficult questions. These "special considerations" are big matters, and they can be conveniently divided into three broad categories: economic, technical and political. Let me give a brief outline. The economic issues concern the viability of an Asian monetary union.

Thirdly, the importance of the ECB’s flexibility as regards the recalibration and use of instruments should be highlighted. By way of illustration, the evolution of the economic crisis caused by the pandemic required an increase in the PEPP in June of € billion, and of € billion in December, up to a total of € trillion. The net purchase horizon was also extended until at least end-March 2022 and the maturing securities reinvestment horizon until at least end-2023. 4  In December we also decided to recalibrate the conditions of the TLTROs. We extended by 12 months, until June 2022, the period during which the reduced interest rate for banks meeting the lending target will be applicable, scheduling three additional quarterly operations between June and December 2021, and increasing the borrowing allowance of TLTRO funds each bank can obtain from 50% to 55% of its eligible loans. Another of our decisions was to extend until June 2022 the aforementioned collateral framework flexibility measures. But apart from this flexibility in the response over time, there is a key difference in the PEPP compared with the previous asset purchase programme (APP). Whereas the APP retains a relatively rigid structure regarding the distribution of asset purchases both over time and across jurisdictions, the PEPP afforded itself from the outset the possibility of concentrating these purchases in the most critical months of the crisis and in the countries which, at each point in time, have been subject to tighter financing conditions.
This will mean that in the two-year period 2012–2013 world growth will be slower than foreseen in September. We now anticipate a recession in the Eurozone in 2012, based on the recent indicators of manufacturing output and expectations in the region. In the U.S., recent output indicators have been somewhat better than expected, but not so much as to modify the view that this economy will experience a long period of slow growth, but not a recession. Political difficulties to agree on a gradual fiscal adjustment plan have increased the uncertainty about the performance of the U.S. economy. Emerging economies will grow less than we thought in September, but still outperforming their developed counterparts. China’s GDP growth will slow down in 2012–2013, to 8.2% in 2012 and 8.5% in 2013. These figures, although high, are the lowest since 2001. All these data combined result in a forecast for world growth in 2012 and 2013, 0.5 and 0.4 percentage points less than assumed in September. The terms of trade will also drop from 2011. The scenario assumes a copper price averaging $ and $ in 2012 and 2013, respectively. The prices of oil and fuels will follow a downward trend (table 1). The reduced external impulse assumed in the baseline scenario will translate into slower growth in Chile than forecast in September. The main sources of this revision are the weak external demand affecting domestic activity, stringent international financial conditions and reduced terms of trade.

More recently, there has also been continuous innovation and an increasing number of issuances in foreign currency. As Malaysia offers international participation in our Islamic financial system, we offer to be an international gateway, particularly in strengthening the link between the two important dynamic growth regions of Asia and the Middle East. Malaysia will also continue to collaborate with other regulatory authorities to ensure financial stability in the Islamic financial system. This will be through our active involvement in the Islamic Financial Services Board (IFSB), the Islamic Financial Stability Forum (IFSF), the initiatives by the Islamic Development Bank (IDB), and finally in the newly formed International Islamic Liquidity Management Corporation (IILM). In the area of capacity building, Malaysia has also given priority to two areas: one is in human capital development and the second, in catalysing mutual recognition of Shariah  BIS Review 141/2010  1  interpretations. The International Centre of Education in Islamic finance (INCEIF) was established in 2006 for advanced education for practitioners in Islamic finance, and in 2008, the International Shariah Research Academy (ISRA) was established to conduct applied Shariah research on the contemporary Islamic finance issues and to provide a platform for active international engagement among Shariah scholars. Moving forward, Malaysia will continue its efforts in strengthening our international linkages in the global Islamic financial system through collaborative partnerships and cooperation with the objective of contributing towards greater international financial and economic integration. Let me conclude.