samchain/econo-pairs-v1 huggingface dataset:
On top of a series of macroeconomic imbalances in many Latin American countries, the sharp raise in interest rates generated a strong reversal in capital flows and pressure on FX markets on the region that induced a collapse in financial markets and activity across countries. Since the early 1990s, we can identify two main periods of interest rates rises in the United States, as seen in figure 1. The first one started in February 1994, and it comprised a hike of 300 bp in almost a year. The second one took place a decade later when, after a few quarters of the then historically‐low rates, the Fed started a process of rate normalization in June 2004, increasing almost 450 bp in about two years.2 For the sake of this presentation, I want to offer a simple comparison on these two episodes, which in some dimensions were very similar. In particular, the cyclical position of the US economy was arguably very similar in both occasions, and the process of monetary policy normalization is pretty comparable. However, the performance of emerging markets in these two episodes was very different. Indeed, overall, the process of Fed Funds increases in early 1994 was followed by large difficulties in developing economies the following years, with the Mexican crisis of December 1994 being the first example. Thereafter, a series of banking and balance of payments crisis followed in Latin America and elsewhere3.

From a European employment perspective, the good news is that Europe is catching up in line with the goals of the Lisbon agenda. From 1995 to 2003, the respective growth rates of overall labour input are still 0.9% for the U.S. against a now positive growth rate of 0.7% per annum for the EU-13. Thus, while the relative growth of labour input and measurement differences can explain the GDP growth difference up to 1995, this is no longer true since. The data indicates that instead, GDP growth divergence since 1995 has been influenced much more by changes in productivity growth. Productivity growth as change in GDP per work hour is crucial as it determines wages and – together with labour input growth - the potential growth rate. Productivity growth differential EU – U.S. As you can see from Graph 3, labour productivity growth rates since 1995 have been markedly less in the European Union than in the United States. Previously, the reverse was true for several decades. Graph 4 shows that between 1995 and 2000, Europe lagged behind the United States. Labour productivity grew on average 0.6 percentage points per annum less in the EU-11 than in the United States. After 2000, the situation worsened. Between 2001 and 2003, EU-11 lagged the United States by an average of 1.7 percentage points of labour productivity growth per year.
Three alternatives for supervision The first alternative is to give the home supervisor the role of lead supervisor with full responsibility for EU operations, branches as well as subsidiaries. This is the proposal from the European Financial Services Roundtable (EFR). The lead supervisor would be the single point of contact for reporting and would validate and authorise internal models, approve capital and liquidity allocations, decide about on-site inspections. In short, the lead supervisor would have full supervisory responsibility. The role of host supervisors would be as advisers in a college of supervisors. However, host supervisors would have no formal power. Also, when it comes to financial stability and crisis management, the lead supervisor would only have a national mandate. Thus, there would still be a need for cross-border regulatory cooperation. The second alternative, which is put forward by the two authors, is to give the home supervisor the role of lead supervisor with an EU mandate. The lead supervisor would work as in the EFR model, with the difference that the lead supervisor is given a “European mandate to ensure that the interests of all depositors/countries are taken into account”. In this model there is a decision-making agency of European Financial Supervisors at the centre, which is delegating the task of supervision to each respective home supervisor. Regarding financial stability issues, the home country central bank would also be involved, acting on behalf of the European System of Central Banks (ESCB).

There is hardly any good reason for different risk weightings on similar loans given by a domestic bank and a branch of a foreign bank. With these thoughts on central banks and macroprudential policies, I would remind you that we organize this conference hoping that we shall be able to take something useful away for our further work on financial stability. I would like to thank the program committee for putting together what looks like an engaging program. I wish all of you good luck and hope you shall have fruitful discussions in the next two days. 2  BIS Review 112/2010
The road will no doubt be long and arduous. Chart: Yields on 10-year government bonds But the situation across countries differs considerably and is reflected in wide yield spreads. Investors now demand substantial premiums for investing in less safe assets. Capital is seeking safe havens, even though real returns on presumably risk-free investments are low or negative. Wide yield spreads may persist for a period – it takes time for countries to restore competitiveness and build up stronger balances, particularly when growth is also weak in other regions. Substantial economic imbalances in Japan and the US also need to be redressed. Turbulence and bad times in Europe are now dampening activity in these countries and in emerging economies. This situation has led to the emergence of new forms of monetary policy in many parts of the world. Interest rates have been low – close to zero – for a long period. The Federal Reserve has indicated that the federal funds rate will most likely be exceptionally low at least until mid-2015. In the event, the US key rate will have been close to zero for almost seven years. As key rates cannot be lowered further, several central banks have decided to apply other methods. The methods fall into two main types: The first method relates to communication. Statements concerning the future central bank key rate are being employed as a new monetary policy tool.

Despite rising housing construction, the number of housing completions remains low in relation to population growth. The housing deficit has grown over several years and is pushing up house prices. The housing shortage requires measures in the real economy – in this case, an increase in housing construction. Monetary policy cannot aim to redress such real economic imbalances. Low interest rates over time can increase the risk of driving up debt levels and asset prices, bringing them to a level that is unsustainable over time. This is an important lesson from the financial crisis. We take account of this when setting the key policy rate, as has been made clear in the most recent formulation of the loss function. At the same time, there is – with one instrument available to us – the key policy rate – a limit to how many tasks can be assigned to monetary policy. In order to counter financial imbalances, instruments in addition to those available to monetary policy must come into play. Macroprudential regulation of the financial industry will play a greater role in the years ahead. The overall risk in the financial system is greater than the sum of the risk represented by each individual bank. Which macroprudential instruments would be the most suitable is currently being discussed in detail in various international fora and central banks. One instrument that will be introduced is the countercyclical capital buffer for banks. The purpose of this buffer is to reduce the procyclicality of bank lending.
In contrast, reserve expansion associated with LSAPs has a more enduring effect as long as the assets remain in the SOMA portfolio, subject to offsetting influences on reserves from changes in other balance sheet items. 5  The authority for the Federal Reserve to pay interest on reserve balances held by depository institutions was granted by Congress prior to the crisis, in the Financial Services Regulatory Relief Act of 2006, with a planned effective date of October 2011. However, implementation was accelerated as part of the response to the financial crisis. The statute authorizes Federal Reserve Banks to pay interest on balances maintained to satisfy reserve balance requirements (required reserves) and on excess balances (excess reserves). 6  As noted earlier, the Board of Governors is responsible for setting the rate of interest on reserves. Since December 16, 2008, the interest rates on required reserve balances and excess reserve balances have both been ¼ percent, but the rates need not be the same. Although the interest rate on reserves represents an overnight rate, it is calculated and paid out on a lagged basis according to two-week reserves management maintenance periods. The payment is based on daily account balances and a weighted average of applicable overnight rates over the maintenance period. More information can be found in Regulation D.  7  The MEP provided additional monetary policy accommodation by increasing the duration of the SOMA portfolio, but unlike LSAP programs, on net it had a neutral effect on the level of reserves.

These measures, which reflect the increasing intermediation role assumed by the Eurosystem during this period of turbulence, have contributed to the stabilisation of conditions in the euro money market, to containing the volatility in the very short-term rates,  2  BIS Review 123/2008  especially in the overnight rate as measured through the so-called EONIA, and to limiting somewhat the volatility in the three-month Euribor, even if the behaviour of the money market remained extremely tense, as was also the case in New York. Cooperation between central banks in the field of monetary policy It is important to recall that as the financial market turbulence developed , central banks strengthened the already remarkable levels of cooperation, first, through enhanced information exchange and collective monitoring of market developments and, later on, through coordinated steps to provide liquidity. Since December 2007, the ECB, in cooperation with the US Federal Reserve System and the Swiss National Bank, has been conducting term auction facilities – so-called TAF operations – in which it provides USD liquidity on behalf of the US Fed to euro area banks against ECB eligible collateral. These operations do not have a direct impact on euro liquidity conditions and are aimed at improving global funding conditions. In this respect I would like to stress that to my knowledge this was the first joint action of that kind ever taken by central banks to relieve pressures in the short term funding markets.
Pigovian taxes are common within the area of environmental regulation, where they can, for example, take the form of fuel taxes in order to put a price on the negative environmental effects of traffic. In the same manner as these taxes attempt to put a price on the environment, it is possible to imagine using a Pigovian tax, based, for example, on the banks’ lending, to price – or internalise – negative external effects associated with banking. As the banks would pass at least a portion of such a tax on to their customers, the effect of this tax on the borrowing rate would be equivalent to an increase of the interest rate margin. Sweden recently introduced a stability charge to be paid by the banks. This charge is intended to finance a stability fund to act as a central government financial buffer for the costs that may arise in a financial crisis. At present, the stability charge is not riskdifferentiated. A charge that is risk-differentiated in an appropriate manner to provide the banks with the incentive to redistribute their activities depending on risk could be seen as a type of Pigovian tax. It could also be imagined that Pigovian taxes could be used to attempt to correct the crossborder external effects that may arise in an increasingly integrated European banking market. One example is the Swedish banks’ lending activities in the Baltic which have probably entailed a liquidity risk in foreign currency in Sweden.

The Repo rate in practice and the rule of action 10,5  9,5  8,5  Percent  7,5  6,5  5,5  4,5  3,5  2,5 1992  1993  1993  1994  1994  1994  1995  1995  1996  1996  1996  1997  1997  1997  1997  1998  1998  1998  1998  Time  Source: Jansson and Vredin, The Riksbank (2000)  3  BIS Review 107/2000  While I accordingly consider that a rule of this kind is of considerable value, I must underscore that we never intended to implement it mechanically. What matters is that we secure our objective in the longer run, really for ever. We chose to focus on the period from twelve to twenty-four months ahead for a number of reasons. One reason for not having a shorter target horizon is the time lag that applies before an interest rate adjustment normally affects the economy and inflation. But effects do arise in the shorter run, for instance via the exchange rate. We pay less heed to developments more than two years ahead partly because forecasting the longer term is normally difficult. Still, although monetary policy is guided mainly by prospects one to two years ahead, there are normally grounds for paying some attention to forecasts both for the coming year and for the period beyond the two-year horizon. Neither is it reasonable in practice to focus solely on inflation.
Rising prices All in all, inflation has largely developed in line with the forecast in the February Monetary Policy Report. The consumer price index, CPI, increased by 3.4 per cent in March. This is an inflation rate well in excess of the target of 2 per cent. A large part of the upturn in the CPI – close to one percentage point – is linked to an increase in mortgage interest expenditure for home-owners and thus to the interest rate increases made by the Riksbank over the past two years. However, the upturn is also due to the rapidly rising commodity prices in the world market. This became clear in autumn 2007 in particular. CPI inflation then rose by just over 1.5 percentage points in just a few months. The primary reason was higher commodity prices. When such rapid price impulses from abroad have an effect on inflation, monetary policy is unable to counteract them immediately. Moreover, it may be very difficult, if at all possible, to predict this type of fluctuation. This is why one cannot expect to avoid effects on inflation like those we have seen recently. A balancing act Now, as I have said, both we and other central banks have to manage the balancing act I described. The Riksbank’s statutory target is price stability, and we must conduct monetary policy so that inflation attains the target of 2 per cent within a couple of years.

This could mean that demand for commodities will remain high in the future. One force that could hold back demand is if the price regulation applied by some of these countries begins to be perceived as too costly and is therefore abolished. If this happens, world market prices will have a greater impact on the domestic market. If this happens, it should dampen demand. The other explanatory factors – the weak dollar, the low interest rate, the increased interest in commodities as a form of investment and to some extent also the supply side restrictions – are reasonably of a more short-term, or cyclical, nature. In the shorter term, it is of course possible that commodity prices will slow down as a result of weaker international economic activity. But the emerging economies’ demand for commodities will probably remain as an underlying, long-term driving force that pushes up inflation. It is perhaps this international pressure on commodity prices and the risk of contagion effects on other prices and on wages that will be the first major test for the lowinflation policy. How should monetary policy react in general? What consequences will this have for monetary policy? One thing it is important to remember is that the rising commodity prices are examples of changes in relative prices. A relative price is the price of a particular product or group of products in relation to other prices.
The buffer requirement (size of the buffer) should be viewed in the light of other requirements applying to banks, particularly when new requirements are introduced. One of the most important purposes of the capital buffer is to alleviate stress in the financial system. History shows that the groundwork for banking crises is laid during upturns. When financial imbalances build up, this increases the likelihood of substantial losses in the entire banking system. In an environment characterised by large losses, insufficient equity capital may force banks to curtail lending to households and enterprises, amplifying a downturn. Banks should therefore hold larger capital buffers when financial imbalances are building up or have built up. Norges Bank’s advice regarding the buffer will primarily be based on four key indicators: Total credit as a percentage of mainland GDP, the wholesale funding ratio of Norwegian credit institutions, the ratio of house prices to disposable income and commercial property prices. Both economic theory and historical experience from a number of countries provide support for the view that these indicators capture systemic risk. The chart shows the indicators along with an estimated trend and a mean. 2 The greater the positive gap above trend, the stronger is the signal of vulnerability and imbalances. In line with the recommendations from the Basel Committee on Banking Supervision and from the European Commission, there should not be a mechanical relationship between developments in the indicators and Norges Bank’s advice on the buffer.

This development has been supported by the development of the derivatives market, in which Pension Funds have been key counterparts as well. Banking regulation, in turn, have result in limited currency mismatches at the bank level, which have made the introduction of new regulation to deal with FX risk unnecessary, as we have observed in many emerging market economies after the Global Financial Crisis (GFC). While may be true that other emerging economies have been increasingly active in the implementation of CBM in their banking systems, in Chile, we have followed a different approach to deal with FX risk at the banking level. This approach has been mainly characterized by limiting banks’ direct FX-currency exposure (limited currency mismatches) as part of our overall capital requirements for market risk purposes. Also, by acknowledging the potential indirect FX risk through the credit provisioning requirements. In fact, in Chile, the main regulatory changes introduced has been the recent modification of the General Banking Law (GBL), which constitutes a major step forward for the local banking industry, in that it will contribute to reducing the gap with international regulatory standards established under Basel III. The new regulatory  Page 2 of 12  Central Bank of Chile September 2019  framework raises important challenges for the industry in terms of compliance with the new, more demanding solvency requirements, especially for entities with a smaller capital cushion. High-level Policy Seminar on Integration or Fragmentation?
Zeti Akhtar Aziz: Into the next chapter – transformative changes to strengthen industry linkage with the real economy Keynote address by Dr Zeti Akhtar Aziz, Governor of the Central Bank of Malaysia (Bank Negara Malaysia), at the Global Islamic Finance Forum 2014 “Into the Next Chapter: Transformative Changes to Strengthen Industry Linkage with the Real Economy”, Kuala Lumpur, 2 September 2014. *  *  *  It gives me great pleasure to welcome you to this fourth Global Islamic Finance Forum. In this new era of great transformative change in the world, the growth and evolution of Islamic finance has continued to be very much part of the changing configuration of the global financial system. An important part of this ongoing change, is the growing internationalisation of Islamic finance, that has resulted in greater cross-border financial flows which has in turn facilitated greater and more diversified economic inter linkages between countries. With this increased pace of the internationalisation of Islamic finance, the total global financial assets of the Islamic financial industry is now estimated to be more than $ trillion. The growth has continued to gain scale with its geographical outreach now extending beyond Muslim countries to the more established international financial centres and to other emerging economies. Across continents, Islamic finance is therefore having an increasing role in intermediating funds across borders and creating greater financial and economic interlinkages. The increasing international dimension of the global sukuk market, in particular, affirms its offering as a distinct platform upon which international inter-linkages are fostered.

Following their pre-university programmes, Imran aspires to be a Mechanical Engineer, Hajar is keen to read Chemistry while both Ying Xin and Nur Shazlin aspire to be Doctors. I am confident that all of you will do your best and will contribute for the future of the nation. BIS central bankers’ speeches  1  In addition to the Kijang Emas Scholarship award, every year the Bank also awards scholarships to 50 high achieving SPM students for them to pursue their undergraduate studies abroad with the objective of them being part of the Bank’s future talent pool. The Bank has put in place a structured, holistic and collaborative Scholar’s Development Programme to support all of our scholars throughout their studies. The programme aims to develop high-quality and well-rounded scholars with leadership qualities as the next generation of young talent who will be the leaders of tomorrow for the Bank and our nation. 2  BIS central bankers’ speeches