samchain/econo-pairs-v1 huggingface dataset:
In normal times, if a country’s currency appreciates to the point where it begins to jeopardise price stability, that country’s central bank will react by lowering the reference interest rate. Lowering rates makes portfolio investments denominated in the relevant currency less attractive, thereby weakening it on the foreign exchange markets. However, when nominal interest rates reach their lower bound at or close to zero, central banks must take unconventional measures to prevent an undesired tightening of monetary conditions. A minimum exchange rate is one such measure. In summary, a minimum exchange rate is first and foremost a temporary instrument for use in situations where foreign exchange markets are extremely unsettled, a country’s currency is substantially overvalued against most other currencies, and nominal interest rates are at their lower bound, meaning that the exchange rate can no longer be influenced by cutting interest rates. The introduction of the minimum exchange rate against the euro in September 2011 In summer 2011, the decision to introduce the minimum exchange rate undoubtedly made sense. We had already lowered the target range for the reference interest rate to between 0.0% and 0.25%, with the aim of reducing the three-month Libor to zero. Moreover, uncertainty on the financial markets was exceptionally high and the debt crisis had raised questions about the future of the euro. The acrimonious budget dispute in Congress was taking its toll and the US dollar was showing signs of weakening.

This situation was compounded by weak economic data in the first half of 2011, which pointed to the risk of another global recession. Swiss franc appreciation accelerated in response to these developments, with the currency reaching historic highs against the euro and the US dollar and threatening to plunge Switzerland into a deep recession (cf. chart 3). The discontinuation of the minimum exchange rate in January 2015 The minimum exchange rate – which was to remain in place for almost three and a half years – halted the appreciation of the Swiss franc and helped to ease tensions. When we discontinued the measure in January 2015, the decision was criticised in some quarters. This is understandable, as the scale of the minimum exchange rate’s negative side effects was not yet fully apparent. However, the discontinuation of the minimum exchange rate was  BIS central bankers’ speeches  3  unavoidable; conditions had changed and an analysis of the risks clearly favoured the decision to remove the floor. The overall situation had improved significantly since the introduction of the minimum exchange rate. The economy had regained momentum, confidence in the US dollar had been restored and uncertainty had decreased considerably. Then there was the issue of divergence: the monetary policies of the US Federal Reserve and the ECB were moving in opposite directions. As the markets were expecting the Americans to tighten and the Europeans to substantially loosen monetary policy, the euro had been weakening against the US dollar since mid-2014.
Zeti Akhtar Aziz: Raising the bar for the next phase of growth and development – sustaining transformative momentum Welcoming address by Dr Zeti Akhtar Aziz, Governor of the Central Bank of Malaysia, at the 10th IFSB (Islamic Financial Services Board) Summit 2013 “The future of the Islamic financial services industry – resilience, stability and inclusive growth”, Sasana Kijang, Kuala Lumpur, 16 May 2013. *  *  *  It is a great pleasure to welcome you to this 10th IFSB Summit, on the “The Future of the Islamic Financial Services Industry: Resilience, Stability and Inclusive Growth”. Bank Negara Malaysia is most honored to host this year’s summit, which is held in conjunction with the 10th anniversary of the Islamic Financial Services Board (IFSB). It was here in Kuala Lumpur 10 years ago that we witnessed the momentous occasion of the IFSB inauguration, that was the culmination of international collaboration among the founding member countries with the support of several key international and multilateral institutions. Its landmark establishment in 2002 as the international prudential standard setting body for the Islamic finance marked a major milestone in the effort to strengthen the international infrastructure for the Islamic financial system, steering the path for its successful integration as a viable component of the global financial system.

Although, Islamic finance institutions are mainly founded in the Middle East and South-east Asia, the interest has extended to Europe and the United States. Today, the size of Islamic banks around the world is estimated to be more than USD 250 billion and expected to grow by about 15 percent annually. Due to the growing importance of the Islamic finance, the Islamic Development Bank (IDB) was established in December 1973. The purpose of the Bank is to foster economic development and social progress of Muslim communities individually as well as jointly in accordance with the principles of Islamic Law. The number of members to the Bank is steadily enlarging and currently consists of 56 countries. The primary functions of the IDB are to participate in equity capital and grant loans for productive projects and enterprises besides providing financial assistance to member countries in other form for economic and social development. The Bank is also required to establish and operate special funds for specific purposes including a fund for assistance to Muslim communities in non-member countries, in addition to setting up trust funds. The Bank is authorized to accept deposits and to mobilize financial resources through Shari'ah compatible modes. It is also charged with the responsibility of assisting in the promotion of foreign trade especially in capital goods, among member countries; providing technical assistance to member countries; and extending training facilities for personnel engaged in development activities in Muslim countries to conform to the Islamic Law.
It is of course difficult to identify the exact impact of individual factors on inflation, but it is nevertheless possible to highlight some things that have played a part. One factor that affects the CPIF in rather a direct and straightforward way is changes in the international market prices for energy. Particularly in 2017, higher energy prices helped fuel CPIF inflation. Earlier in the period, the contribution from energy prices was instead negative. Another factor, which is more difficult to capture and had an inhibitory effect for a long time, is international economic activity. In Sweden, resource utilisation has been rising for quite a long time, which should have made it easier for companies to raise their prices. At the same time, however, a weak and uncertain economic situation abroad has contributed to lower external price pressures. Recently, however, increasingly strong international economic activity has pushed inflation upwards in many countries. More inflation impulses from abroad should also have further improved the conditions for an inflation rate in line with the target. A factor that has probably also contributed to higher inflation is the rise in both short- and long-term inflation expectations, as they are measured in surveys, since 2015. Since the end of 2016, more long-term inflation expectations have been close to the inflation target of 2 per cent. Actual inflation obviously affects expectations, but the converse is also true. When confidence in the inflation target is strong, it becomes easier to reach the target, as price and wage formation are adapted to these expectations.

Sources: Swedish National Mediation Office, Swedish Public Employment Service and the Riksbank  Figure 5 indicates that this is not really the case during this period. Seen over the entire period, the correlation, if anything, is negative. If we look again at developments since 2011, the curve is almost horizontal, once again reflecting that wage increases have been low and stable. We have now looked at the correlations between wage increases and unemployment and between wage increases and the number of job openings. Let us complete the cycle and also study the third possible combination, that is, the correlation between the number of job openings and unemployment. The Beveridge curve shows how well the labour market is functioning The correlation between job openings, or job vacancies to be exact, and unemployment is another well-known curve within economics. It is called the Beveridge curve and like the Phillips curve was developed in 1958. In contrast to the Phillips curve, however, William Beveridge was not the originator of the curve, but a British economist who gave his name to the curve as a result of his commitment to labour issues such as unemployment and skills matching. The Beveridge curve is a way of measuring how well the labour market is functioning. It is reasonable to assume that when demand in the economy is high, the number of job openings rises while unemployment falls, and vice versa. The correlation should therefore be negative. But it is above all the position on the Beveridge curve that is interesting.
Prices have also risen considerably over the past year as a result of poor crop yields in many parts of the world following storms and drought. Our analyses of the outlook for the world economy and the Norwegian economy are based on the assumption that oil prices will remain at the current level. It is difficult to predict future prices with any assertion. Should oil prices show a marked decline, the oil fund mechanism will to a considerable extent shield the Norwegian economy from the short-term negative consequences of a fall in oil revenues. However, our petroleum wealth will be reduced. On the other hand, should oil prices continue to rise, the Government Pension Fund Global and the fiscal rule provide a sound and robust system for coping with higher revenues. The investment strategy for the Government Pension Fund Global Let me now turn to how the changes in the world’s economic geography influence the investment strategy of the Government Pension Fund Global. Chart: Norway’s terms of trade Norway has profited from globalisation, through both trade and capital markets. As a major commodity exporter we have benefitted from high commodity prices. At the same time, we have had access to cheap imports from emerging economies. Norway’s terms of trade have improved throughout the past decade. Norway’s national income has risen substantially throughout the oil age. Substantial current account surpluses and the buildup of the Government Pension Fund Global have also made Norway a significant exporter of capital.

The global imbalances that were behind the financial crisis are still present. Some countries will be struggling with large fiscal deficits for some considerable time. However, it is conceivable that the imbalances will gradually diminish. Emerging economies are facing a period of considerable investment in welfare and infrastructure development. Households and firms will be able to reduce saving as welfare schemes and national capital markets are developed. In addition, many countries with an ageing population may find that an increasing number will have to draw down their wealth, resulting in a decrease in total saving. For European countries and the US, there is no doubt: deficits must be reduced and savings increased. Energy and commodity prices Let me move on to how the changes in the world economy have influenced commodity demand and commodity prices. Chart: Real prices for metals, food and oil The price of oil is now around USD 115 per barrel. Prices for other commodities such as metals and food are also high. A weak dollar, low interest rates and an ample supply of liquidity may have contributed to the rise in prices. We have also recently seen that prices are being pushed up by political unrest in North Africa and the Middle East. Nonetheless, strong growth in emerging economies and supply-side conditions have been the dominant factors in developments since the early 2000s. From 2000 to 2009 emerging economies accounted for 100 per cent of the growth in global consumption of primary energy sources.
Banks can in a variety of ways assume tail risk on particular instruments – for example, by investing in high-default loan portfolios, the senior tranches of structured products or writing insurance through credit default swap (CDS) contracts. In each of these cases, the investor earns an above-normal yield or premium from assuming the risk. For as long as the risk does not materialise, returns can look riskless – a case of apparent “alpha”. Until, that is, tail risk manifests itself, at which point losses can be very large. There are many examples of banks pursuing essentially these strategies in the run-up to crisis. For example, investing in senior tranches of sub-prime loan securitisations is, in effect, equivalent to writing deep-out-of-the-money options, with high returns except in those tail states of the world when borrowers default en masse. It is unsurprising that issuance of asset-backed securities, including sub-prime RMBS (residential mortgage-backed securities), grew dramatically during the course of this century, easily outpacing Moore’s Law (the benchmark for the growth in computing power since the invention of the transistor) (Chart 32). 5 Tranched structured products, such as CDOs (collateralised debt obligations) and CLOs (collateralised loan obligations), generate a similar payoff profile for investors to sub-prime loans, yielding a positive return in stable states of the world – apparent alpha – and a large negative return in adverse states. Volumes outstanding of CDOs and CLOs also grew at a rate in excess of Moore’s Law for much of this century.

Issues related to credit growth were addressed at length in the Albania Financial Forum IV. The Forum's conclusions will serve as a road map in our joint efforts for lending to return to the desired levels. Concluding, I would like to underline that the Bank of Albania will remain committed to maintaining price stability and strengthening financial stability in Albania. In parallel, and in accordance with the engagements in the framework of this arrangement, the Bank of Albania will continue to work to further improve the regulatory framework and to further develop the financial infrastructure in Albania. Thank you for your attention! 2  BIS central bankers’ speeches
The external financing needs, within the current scenario, are expected to be covered by further inflows of foreign direct investments and by the public borrowing for infrastructure purposes. The current forecast points to a rather stable external debt to GDP ratio. No major pressures are foreseen in the following two years on foreign reserves, and they are to be maintained at the adequate level. Risks surrounding this baseline macroeconomic scenario should not be neglected. For us, as a small an open economy, they mostly come from the external environment and our main trading and financial partners. Although with the latest monetary easing of the ECB the downside risks to the euro zone growth are less pronounced, and in general the global growth risks are more balanced, they are still present and if being materialized, could impact the economy. Additional source of risks are the sharp and sudden swings in the primary commodities prices, which for country like ours, can change the envisaged economic profile to a large extent. A new, additional source of risks is the current domestic political context, which can harm the economy, if not being tackled swiftly. Of course, the risks are challenging and are to be closely monitored. This is even more pronounced, given that the policies’ space at the current juncture is to a great extent exhausted. Hence, the continuation of the structural reforms remains paramount and a challenge, as it can further increase the resilience of the economy, mitigate the risks and reduce the policy burden.

The most immediate one is the uncertainty over the outcome of the Brexit vote. Even if we don’t want it, prudence requires that we prepare ourselves for the possibility of a no-deal Brexit, the impact of which would be more significant for the United Kingdom than for the euro area. However, any consequences for financial stability must and can be managed. But there are also considerable uncertainties outside Europe. The US cycle appears to be reaching maturity after an expansionary phase that began in mid-2009, but it is still far too early to worry about a recession. Growth should remain robust at around 2.3% compared with 3% in 2018, although at the expense of an ill-timed fiscal stimulus. There are greater uncertainties overshadowing the Chinese economy. The latest activity indicators have been weak. An escalation in trade tensions could lower Chinese GDP growth by up to 1.5 percentage points6 over a two year horizon. The slowdown could also encourage authorities to stimulate the economy, leading to increases in already high levels of corporate debt (155% of GDP compared with 106% in the euro area)7 and in the risks to financial stability. Our second challenge is impatience. Thirty years ago, independence was conceived as a response to the temptation to make trade-offs between growth and price stability. But the real temptation, which is even stronger today, is to trade off long-term interests in favour of the short term. Financial markets are frequently characterised by short-termism and bouts of extreme volatility.
Every time inflation “surprises” on the downside, it creates an unexpected increase in real wages and purchasing power. I believe this mechanism is playing some role by improving economic sentiment and supporting consumption as we have seen in the euro area over the past months. That said, when inflation is too low, it carries very significant dangers and risks: •  First, it makes real adjustment more complicated. •  Second, low inflation makes it difficult to attain low, or negative, real interest rates, which are necessary in all advanced economies at the current juncture. •  Finally, low inflation increases the risk that the economy could fall into outright deflation if and when it is hit by a negative shock. The 2% target is meant to act as a cushion against that risk. To sum up, the situation today calls for a very careful assessment of the balance of risks. Precisely because deflation is hard to reverse, even small probabilities cannot be neglected and must be fully factored into policy-making. I think the ECB Governing Council has made this point very clear over its last meetings. We currently anticipate a progressive return of inflation to our objective of below but close to 2%. Our monetary policy remains very accommodative and we continue to expect the key ECB interest rates to remain at present or lower levels for an extended period of time.

The government has made it clear that it shares this view of the causes behind our current problems and of the solutions that we need to implement as soon as possible. It has indeed begun implementing major structural reforms, and is committed to going further, notably on firms’ cost competitiveness and on the reduction of the public deficit through greater cost efficiency in public administration. Thank you for your attention and I am looking forward to your questions. BIS central bankers’ speeches  3
At the same time, new guidelines for fiscal policy were drawn up, providing for the use of petroleum revenues over the central government budget equivalent to the expected real return on the Government Petroleum Fund. 2  BIS Review 90/2001  The new guidelines for monetary policy did not entail any significant change in the conduct of monetary policy. Quantifying an inflation target, in line with international practice, has made it easier to explain and understand Norwegian monetary policy. The implementation of monetary policy Monetary policy influences the economy with considerable and variable lags. Our analyses indicate that a substantial share of the effects of an interest rate change occurs within two years. Two years is thus a reasonable time horizon for achieving the inflation target of 2½ per cent. The effects of interest rate changes are uncertain. In addition, it may be difficult to assess the current situation. Different indicators may point in various directions and economic statistics are normally published with a lag. This suggests that a gradualist approach to setting interest rates is appropriate. We will then acquire new knowledge and can adjust interest rates underway. If evidence suggests that inflation will be higher than 2½ per cent with unchanged interest rates, the interest rate will be increased. If it appears that inflation will be lower than 2½ per cent with unchanged interest rates, the interest rate will be reduced. There is symmetry here.

There are some promising global developments that may help to address some of these challenges. The United Nations has convened a high-level advisory board on effective multilateralism which will explore reforms to the global financial architecture to help channel more public and private capital to developing countries. This is timely work. If we are to finance the sustainable infrastructure that the world needs, especially through blended finance, we will need to reform how development finance is implemented and consider adjustments to the mandates and incentive structures of multilateral development banks. The Network of Central Banks and Supervisors for Greening the Financial System is launching an initiative to raise awareness on blended finance including potential regulatory and practical barriers. We can look forward to more details at COP 27 but suffice to say the NGFS will focus on practical guidance from past case studies and demonstrative projects to explore what is possible. The GFANZ Asia-Pacific Network will launch an initiative to develop guidance for financial institutions on how they can facilitate the managed phase-out of coal power generation in the Asia Pacific. MAS and the Asian Development Bank will participate in this initiative. There are about 5,500 operational coal plants in Asia, responsible for over 4.5 gigatonnes of carbon emissions per year. Asia's coal plants are far younger than the coal fleets in the US and Europe, with the majority having decades left to operate.