samchain/econo-pairs-v1 huggingface dataset:
Essentially, it all comes down to a choice between two alternatives. On the one hand, central banks can try to slow down a worryingly rapid price rise in the housing market by keeping interest rates higher than they otherwise would have been. The obvious risk is that if increasing prices actually are driven by fundamentals, then an incorrect assessment has  2  BIS Review 134/2008  been made and demand in the economy will be subdued unnecessarily. But if the assessment was correct, a rapid downward correction in house prices may be avoided, or at least mitigated, as well as a subsequent fall in demand. On the other hand, central banks can disregard the fears and refrain from raising the interest rate. If price increases in this case are due to fundamentals a needless slow down in demand will be avoided. But if prices are due, for instance, to over-optimism among households and lenders, then severe problems may occur in the future when there is a rapid downward adjustment of house prices and a subsequent fall in demand and inflation. Which of the two alternatives is preferable can always be discussed, and may quite likely vary from case to case. However, it is far from obvious that the best choice is always to wait and see when facing a rapid increase in the price of houses or some other asset.

Erdem Başçi: Commodity price volatility Speech by Mr Erdem Başçi, Governor of the Central Bank of the Republic of Turkey, at the “G-20 Commodity Price Volatility Conference”, Istanbul, 13 September 2011. *  *  *  Dear Colleagues and Distinguished Guests, Today I will discuss commodity price volatility, a topic which has vital importance for the global economy and thus for policy makers. In my speech, I would first like to discuss the possible sources of commodity price movements and then elaborate on the approach of the Central Bank of Turkey in dealing with commodity price changes in the past few years. Commodity markets cover a wide range of raw materials such as oil, metal and agricultural products. These commodities have different characteristics not only in terms of trade volume, supply and demand structure but also in terms of their exposure to financial market transactions. Understanding the sources of the volatility in prices is essential in order to give appropriate policy response. The challenges posed by high and volatile commodity prices are important worldwide, yet they are more immediate for emerging markets. For instance, the share of food in the typical consumption basket is higher in these economies than in advanced economies. The average weights of food in the consumer price index in emerging market countries and in developed countries are around 30% and 13% respectively. Besides, especially for the net importers of commodities, high and volatile prices pose significant risks on balance of payments and sustainability of growth in developing countries.
Per cent 10  10  8  8  6  6  4  Actual interest rate  4 Market expectations  2  2  0 1998  0 2002  2006  2010  2014  Source: Norges Bank  Norwegian households generally finance their mortgages at an interest rate that follows the short-term money market rate. Floating interest rates tend to vary widely over time. The interest rate level is very low at present, and long-term investments cannot rely on this interest rate spanning the life of a housing loan. According to money market expectations, the interest rate will eventually stabilise around 5½ per cent. This is consistent with an inflation target of 2½ per cent and a long-term real interest rate in line with the level abroad. This interest rate, with a mark-up for banks’ margins, provides a more realistic expression of the interest rate level that will apply over the loan’s life than the floating interest rate prevailing today. It may prove to be particularly challenging for borrowers to assess their debt-servicing capacity over time at a time when the interest rate is abnormally low. Such a low interest rate also places particular demands on banks in assessing the creditworthiness of borrowers. But experience has shown that the underlying cause of loans defaults can be overly optimistic assessments on the part of both the lender and borrower. House prices and developments in household credit influence consumption and housing investment.

Growth in Continental Europe, which is highly reliant on impetus from exports, may weaken markedly if the dollar continues to fall. Chart 15. Mainland GDP and employment Annual growth. Per cent 6  6 GDP  4  4  2  2  0  0 Employment  -2  -2 1990  1992  1994  1996  1998  2000  2002  2004  Sources: Statistics Norway and Norges Bank  BIS Review 11/2004  11  Norway, like other countries, experienced a period of strong expansion in the 1990s. The expansion in Norway lasted considerably longer than in other countries. In 1998, the economy shifted from an upturn with high growth rates to an expansion with lower growth but low unemployment, labour shortages in many sectors and strong growth in labour costs. Wage developments culminated in the spring of 2002 and the expansion was reversed in the second half of the year. Growth came to a halt and employment fell. A number of factors triggered this development. Higher wage costs weakened the purchasing power of public entities. Global stagnation had a dampening impact on Norwegian exports. In Norway, the interest rate was kept high after the wage settlement and a persistent, unexpected low level of interest rates abroad resulted in a strong krone. The sharp rise in electricity prices last winter also affected the domestic economy. Chart 16.
Key lessons may be drawn from the recent crises that have affected emerging economies - though not only them - which should be borne in mind when designing mechanisms to reduce their frequency and cost. They include most notably: the need for a sound and well-designed institutional framework that protects property rights, prevents excessive public - or private-sector debt from accumulating and ensures economic stability; the importance of ensuring consistency between the exchange rate regime and the domestic economic policies and institutional framework; the risks entailed by the vulnerability associated with exchange rate instability processes for the balance sheets of different sectors in the economy, especially when there is a high degree of dollarisation; the marked sensitivity of emerging market economies to potentially very volatile capital flows, the direction of which can change suddenly due, at times, to factors that may even be exogenous to the country experiencing them; the importance of an appropriate regulatory and macro-prudential supervisory system to prevent crises  2  BIS Review 37/2004  generated in the financial system and to alleviate the ensuing costs if such crises finally occur, and to cushion the effects of shocks stemming from the real sector of the economy; and, finally, the importance of distinguishing, as far as possible, between liquidity and solvency crises in countries’ external debt and in governments’ public debt, as a first step towards applying suitable remedies for resolving each type of crisis.

Update on the microfinance regulations •  The draft microfinance regulations, which are aimed at providing a legal framework for regulation and supervision of microfinance institutions, are currently being reviewed by the BoZ and are scheduled to be submitted to the Minister of Finance and National Planning during the second quarter of 2004. Polymer notes •  As most of you must have heard, through the media, there are public concerns about some features fading on the polymer banknotes of K500 and K1,000. While we have also noticed a number of them, we wish to inform you that fading is a definite and expected feature of these notes as they approach the end of their useful life. However, we also feel that being a new concept, the notes could still be subjected to undue stress testing due to public curiosity. However, we are also not ruling out premature wearing of the notes. We are therefore doing everything possible to ensure that subsequent consignments do not suffer similar setbacks. In the meantime, we wish to make an earnest appeal to all the banks to assist the Bank of Zambia in ensuring that faded notes are quickly taken out of circulation, in the same way as soiled banknotes have been handled in the past. The Bank of Zambia is also going to set up mechanisms for enhancing the process and pace of siphoning faded notes from circulation.
As in many countries in the region, some banks in Hong Kong have placed too much emphasis on collateral in making their lending decisions. Collateral does of course have an important part to play in providing secondary protection to the lender if the borrower defaults. But the primary consideration should be debt servicing capacity of the borrower. The drawbacks of over-reliance on collateral become all too clear when asset values collapse as they have done during the Asian crisis. The act of realizing collateral can in itself be destabilizing as we have seen when banks have sold shares in listed companies pledged by their owners to secure their private borrowing. In such cases, confidence in the company concerned can be seriously undermined. I should point out however that some of the worst fears that had been expressed about the property exposure of banks in Hong Kong have so far proved to be unfounded. The major property developers have come through the recession relatively unscathed and the performance of the all-important residential mortgage portfolio has been much better than other types of lending. At end-March of this year, the delinquency ratio for mortgages was only 1.13%. This seems to confirm that homeowners will do all they can to avoid default, though this may be at the expense of cutting back on other forms of discretionary spending.

It may be of interest to this audience to know that trade finance has been a particular problem area and has attracted higher than average bad debt provisions. On the face of it, this seems strange since trade finance is normally seen as being short-term, self-liquidating and secured on the underlying goods. In practice, companies found it possible to obtain trade lines from a multiplicity of banks in excess of their underlying needs. In this situation, trade finance becomes in effect part of the general working capital of the company and can be siphoned off into the kind of speculative activities I have already described. In many cases, short-term trade finance financed long-term property developments in China. What lessons can be drawn from this? Banks should obviously have a thorough knowledge of their customers’ business and of their real funding needs. Banks should know what their lending is being used for and try to ascertain the borrowers’ facilities from other banks. 3  BIS Review 53/1999  However, in situations where banks are too anxious to lend, it is all too easy for the borrower to deny information to the banks and to play the banks off against one another. In granting credit, banks thus need to undertake proper financial review of their customers based on reliable information. Particular attention needs to be paid to cash flow and the ability to service debt in stress situations as well as normal conditions.
The second is that expectations that monetary policy will remain expansionary in large economies like the Unites States and the euro area, for a longer period than was previously assumed, also have an effect on Swedish monetary policy. Swedish interest rates cannot deviate too much from foreign interest rates without this having an effect on the exchange rate. The exchange rate is of great importance to both inflation and resource utilisation and thus influences what constitutes a well-balanced monetary policy. What then will be the overall effect for Sweden? We were able to note in September that the demand for Swedish exports was growing more slowly than previously expected due to the weaker development of the export markets of importance to Sweden. This weaker development is partly due to the fact that market turbulence resulting from the uncertainty about weak public finances in Europe and the United States is forcing some countries to launch extensive austerity programmes. 8  Bergman, 2010. 9  Central banks can conduct quantitative easing, which entails buying assets with the aim of reducing long interest rates. They can also carry out a twist, as recently announced by the Federal Reserve, which entails selling securities with short maturities and buying securities with long securities in order to push down longer interest rates. BIS central bankers’ speeches  9  Falls on stock markets in Sweden and around the world have also reduced the financial wealth of the households.

We have also published a working paper entitled: “Studies on the Validation of Internal Rating Systems” Although validation is foremost the responsibility of banks, supervisors must have a thorough understanding of validation in order to ensure the overall integrity of banks’ activities in this area. I think these principles set out clearly what supervisory expectations are, and should provide a useful guide to the industry. Our work on validation will accelerate over the coming months, although our focus will be more on sharing and cataloguing information and approaches, and not on trying to develop a prescriptive method. Close dialogue with the industry in our work will be of great importance. Let me finish by saying that we, the supervisory community, continue to devote significant resources and efforts to improving the consistency of cross-border implementation. Consequently, the excellent dialogue between supervisors, organisations such as the IIF, and the industry more broadly, must continue in the coming months and years ahead. I welcome the discussions that we have been having, both inside and outside this conference, and look forward to hearing more of your thoughts and perspectives. BIS Review 23/2005  3
Whether for market counterparties, central banks or backstop providers, lending decisions are much easier to contemplate where solvency is assured in the operating entities that need funding. Work in FSB to date has concentrated on what is necessary to stabilise G-SIBs at the point of entry to resolution, whether changes to firms to make them resolvable - like TLAC and operational continuity requirements - or to market contracts and conventions - like the ISDA Protocol or access to FMIs. But bail-in is not the end of the task. It is a prelude to whatever reorganisation is necessary to restore a firm to viability or to wind it down. Importantly though bail-in buys the time for that process to be orderly. Post bail-in restructuring runs as a thread through some of the other initiatives I have mentioned. It is part of the operational continuity principles. And, as part of the access to FMI work we are keen to investigate how easy it would be in resolution to dismantle the quasiFMI functions – payment services, clearing and custody – provided by G-SIBs to clients, financial and non-financial. However easy or difficult it is to transfer or wind-down services provided by a G-SIB, clients may have contingency providers themselves or may want to rely on the portability of their positions to move. If they are to move we need to find a way for that to happen in an orderly way. Post bail-in restructuring is also where ring-fencing of UK banks fits in.

The flip side of digital assets are, however, their inherent risks which, as just demonstrated by the collapse of FTX, can have far-reaching implications for their very markets and, eventually, spill over to the regulated financial system through various types of exposures for conventional players. Hence, authorities need to develop and deploy swift and appropriate regulatory responses, of which, I think, MiCA is a telling example. The European Union's Regulation on Markets in Crypto-assets, on which we have acted as one of the advisors to the Spanish Treasury, lays down a set of common rules applicable to both crypto-asset issuers and service providers with a view to providing crypto-asset users with legal certainty and adequate legal protection. In the same way as we deal with banks, MiCA foresees an ex-ante authorisation of the new types of crypto-asset service providers. Moreover, it sets out a number of prudential, organisational and transparency requirements, as well as others relating to the safekeeping of client funds, conflicts of interest and outsourcing. With regard to their issuance and offering, MiCA introduces rules on both the authorisation of the respective players and on how to draft the "white paper" that should reflect all the necessary and accurate information future investors may require. MiCA leaves outside its scope non-fungible crypto-assets. Furthermore, it does not apply to crypto-assets that may be classed as financial instruments. The latter will still be governed by the existing legislation on financial services.
Given the magnitude of the challenge, in the specific area of public finances action will be needed in relation to both public revenues and spending. In the case of spending, the various expenditure items will need to be thoroughly reviewed in order to identify those areas with room for efficiency improvements. In this respect, the review performed by the AIReF (the independent authority for fiscal responsibility) has revealed the existence of scope for efficiency gains in various areas, including, for example, active employment policies, various subsidies and, in the context of the latest review concluded just a few weeks ago, tax benefits, hospital spending and hiring incentives. Some of the recommendations arising from the two phases of the spending review carried out to date have already had an impact on the content of the Draft Budget for 2021. However, in future, it would be desirable for these AIReF spending efficiency analyses to be taken into consideration more systematically when budgets are prepared. One aspect that should play a very important role in improving the efficiency of government is its modernisation and digitalisation. On the revenue side, the tax system needs to be reviewed to ensure that the receipts obtained are sufficient to finance spending. One characteristic of the Spanish tax system is that, relative to other European countries, the revenue-to-GDP ratio is low. Obviously, this on its own should not be judged either negatively or positively, insofar as it is simply the result of collective decisions reflecting social preferences.

After the crisis, there was some excitement about domestic demand being the driver of growth, and there was some justification for such enthusiasm. There was certainly a component related to the growth in incomes and private demand. But there was also a significant component related to public spending and the rapid growth of domestic credit. The outcome is higher debt levels for both households and the Government. This is clearly not a sustainable strategy for growth. Indeed, the experience has shown that there are limits to how fast and how sustainably we can grow by relying on domestic demand alone. Therefore, going forward, while domestic demand will continue to support growth, we really need to strengthen our integration with both the regional and global economy, and by implication, strengthen our overall level of economic competitiveness, if we are to achieve sustainable growth over the long term. Returning to the economic outlook, the good news is that we are seeing more sustained growth around the world and that is already beginning to benefit Malaysia and creating more balanced growth of the Malaysian economy. Now what are the potential clouds over this rather sunny outlook? There are several, but in the interest of time, I will just mention five. The first of this is the slow recovery of investment in the AEs after the crisis. It has been noted that this recovery, unlike recoveries from past recessions, has been accompanied by rather lackluster investment. This is despite the fact that companies are sitting on large piles of cash.
Svein Gjedrem: Monetary policy and the labour market Speech by Mr Svein Gjedrem, Governor of Norges Bank (Central Bank of Norway), at the conference to mark the 10th anniversary of the Federation of Norwegian Professional Associations, Oslo, 24 October 2007. The text below may differ slightly from the actual presentation. The speech does not contain assessments of the economic situation or the monetary stance. *  *  *  The Norwegian economy is expanding sharply after the strong upturn began in summer 2003. The upturn followed a period of slow growth from 1998 and a mild slowdown in 2002 and into 2003. Growth has been stronger than in the cyclical upturn in the mid-1990s. The high rate of growth has only to a limited extent fed through to a higher rise in prices for consumer goods and services. Electricity prices have fallen sharply this year, contributing to low inflation and high real wage growth. But even excluding energy, inflation is still low, even though it has gradually picked up since late summer 2006. In recent years, the Norwegian economy has been influenced by a number of positive supply-side factors. First, high export prices and low import prices have resulted in a substantial improvement in Norway’s terms of trade. We can now import considerably more for a given quantity of export goods. Second, productivity growth has been unusually strong, both for companies competing on international markets and those supplying goods and services to the domestic market.

•  Several Asian regulators, such as China, India, Philippines and Singapore, have set capital requirements that exceed the Basel III standards. •  And banks in China, India, Thailand, Hong Kong and Singapore were already subject to liquidity requirements prior to Basel III. Second, Asia’s financial systems emerged from the last crisis less affected than their global peers, with much of their financial resources and businesses intact. BIS central bankers’ speeches  3  •  A focus on traditional banking helped Asian banks avoid the fall-outs from the collapse of complex, structured products and risks from outsized trading desks. •  This, together with their strong deposit funding, means that Asian banks do not need to deleverage or withdraw from markets in order to meet the more stringent capital ratios or new liquidity requirements. Asian banks have been able to fill the financing gaps that opened up as global banks concentrated on repairing their balance sheets back home. •  According to BIS data, between 2008 and 2014, the share of Eurozone banks in international claims on Emerging Asia more than halved to just 15% whereas the share of Asian banks almost doubled to 60%. If Asian banks continue to maintain strong buffers and manage their risks well, they are wellplaced to thrive and grow in the new regulatory environment. Technological innovation A third major force shaping Asia’s banking landscape is technology, specifically digital technology. This could prove both transformative and disruptive in a region where banking penetration remains low.