samchain/econo-pairs-v1 huggingface dataset:
Even if you are right, consistently betting on that mispricing can drive you out of business if the majority of the other agents keep acting in such a way as to validate such mispricing. As in Keynes’ beauty-contest illustration, what matters for you is not so much to be right about fundamentals as to be right on what others will do. This position was best expressed just one month before the beginning of the crisis by Chuck Prince, then CEO of Citigroup, when, in an interview with the Financial Times, he stated that5 “[w]hen the music stops, in terms of liquidity, things will be complicated. But as long as the music is playing, you’ve got to get up and dance. […] At some point, the disruptive event will be so significant that instead of liquidity filling in, the liquidity will go the other way.”  4  See Shleifer and Vishny (1997). 5  See “Citigroup chief stays bullish on buy-outs”, by Michiyo Nakamoto and David Wighton, published in the Financial Times of July 9, 2007. 4  BIS central bankers’ speeches  Those words provide the strongest possible refutation of the notion that an asset price being out of line with fundamentals will by itself guarantee that such a misalignment automatically disappears.

In essence, this is what the ECB has been doing through its “monetary analysis”, as a key rationale for its close monitoring of money and credit aggregates has precisely been to keep track of the evolution of medium-to-long-term tail risks which simply do not map onto the central projection for inflation. Let me now turn to another lesson of the crisis, namely the practical relevance of the zero lower bound for monetary policy purposes. II.4. The zero lower bound is a relevant issue for contemporary monetary policy  For many years before the crisis, the general consensus within both academia and the central banking community had been that the zero lower bound (henceforth, ZLB) and the associated problem of the liquidity trap, in which conventional monetary policy – that is, the one associated with setting short-term interest rates – all but loses its ability to impact upon the economy, were issues of mainly historical interest. Japan’s recent experience with the ZLB, and its difficulty in extricating itself from a liquidity trap situation, presented a troubling counter-argument to this position, but that could be “explained away” as the result of a series of policy mistakes on the part of Japanese policymakers. As a consequence of the financial crisis, there is, today, a generalized recognition that the ZLB may be a much more significant problem for monetary policy than previously thought.
This does not bode well for productivity. Thailand’s infrastructure continuously needs improvement in several areas, particularly logistics, irrigation and quality of education. These public investments will also influence private investment through the “crowding in effect” as public and private investment complement each other. Therefore, the government policies should be prioritized, be gradual and have specific target in their spending. Priority should be given to productivity enhancement project and spending should be selective and targeted to certain areas to ensure policy’s effectiveness. At the same time, graduality of policies is necessary to minimize inflationary pressure and allow time for private sector to adjust. Second, fiscal stance, like monetary policy, is also required to normalize in order to ensure fiscal discipline and sustainability. In a time of normal trend growth, there is a lesser need for a fiscal stimulus. Rising public debt, together with increasing contingent liabilities, may endanger fiscal sustainability in the long run. Reforms of the tax revenue collection and tax structure should be implemented along with rising expenditure to ensure a healthy balance sheet of the fiscal sector. Third, political stability is a vital condition to the private sector for maintaining an investment-friendly environment. These three challenges, if prevail, will put Thailand forth into a competitive frontier. Likewise, the private sector contribution is as equally important. One immediate challenge which businesses face today is the problem of labor shortages.

This progress has been driven by a combination of factors, but the most important has been the Asian financial crisis itself, which prompted policy makers in the region to recognize the potential benefits of financial cooperation as a mechanism that can allow the region to prevent or to better manage the risks of financial crisis. Since the 1997-98 crisis, regional financial cooperation has been strengthened in three main ways: The first is the strengthening of liquidity arrangements, the second is the introduction of regular policy dialogue and surveillance, and the third is the coordination of efforts to develop the region’s bond market. So far, progress which has been made includes an expanding network of Bilateral Swap Agreements between ASEAN and Plus Three countries under the Chiang Mai Initiatives to provide short-term liquidity. There is also the Formal and Informal ASEAN+3 Finance and Central Banks Meetings to exchange information and discuss policy issues, as well as the discussion under the APEC platform. Also, new developments from the Asian Bond Market Initiative and the APEC Forum have also been launched to develop the region’s bond market. My point is that these achievements are important and their realization would not have been possible without the awareness and the determination of the authorities concerned to make them happen. But notwithstanding the progress made, more can definitely be done to bring regional financial cooperation to a level that is on par with the region’s economic and financial potentials.
6  See Tucker (2010), Remarks at an FSB conference entitled “Financial Crisis and G20 Financial Regulatory Reform: An Overview”: “part of deferred compensation should be in the form of a debt contract, so that the managers and workers in large firms eventually become creditors of the firm and so they themselves have the same risks as other debt holders”. See also Liikanen (2012), “High-level Expert Group on reforming the structure of the EU banking sector”. 4  BIS central bankers’ speeches  Competition policy may matter too. Some countries – notably Australia and Canada – are sometimes characterised as shielding their main domestic commercial banks from competition, 7 in order to dilute the temptations of international wholesale banking. The UK should try, instead, to combine openness with stability. That requires a profitable banking sector: we should not forget that, as the Bank used to say, the first buffer against losses is profits. Other countries – perhaps most obviously the US – ban acquisitions of banks that would result in control of more than 10% of the country’s insured deposits. The approach there is to limit the accumulation of market power. Questions of industry structure, as well as firm structure, might be relevant to the UK. The operations making up Lloyds Banking Group and the Royal Bank of Scotland accounted for about 40% of the stock of lending to UK businesses in 2007. It was a disaster for domestic credit conditions when they failed.

The new Basel package is an attempt to use simple measures to put bounds on the consequences of flaws in more complex measures, which were themselves designed to avoid the perverse incentives to hold only very risky assets created by the previous generation of simple measures. More will need to be done in the years ahead to simplify and underpin the Basel regime. Market discipline can help, but only if there is much more transparency around the drivers of risk weights – both why they change over time and why they differ, for similar exposures, across institutions. The market needs to be able to understand what is published. Microprudential supervision under the new UK Twin Peaks system But the new UK regime will not rely on getting the regulations exactly right. That would be a fool’s paradise. Effective supervision is absolutely vital. Whether we like it or not, firms will be able to find their way around any set of rules – complex or simple – if they are determined to do so. This is not good. But the UK’s new Twin Peaks structure will help. In the first place, the reforms will finally give London a dedicated securities regulator a quarter century after the Big Bang that made it so necessary. The Financial Conduct Authority’s approach to enforcement will need to preserve – and, where necessary, restore – honesty in a market community for which side-stepping rules and principles has become too close to being part and parcel of commercial life.
In this regard, greater clarity about the large public investment projects will be crucial in putting both public and private investment back on track. The continued high capacity utilization and investment promotion applications to the Board of Investment have pointed to stronger appetite for investment once the investment climate becomes more favourable. During this period of uncertainties, monetary policy has become more accommodative in line with declining inflation and low risks of picking up going forward. Latest data for August showed headline inflation at 1.1 percent and core inflation at 0.7 percent. Set in this light, the Monetary Policy Committee cut its policy interest rate in total by 175 basis points since the beginning of this year. The aim is to stimulate the domestic demand to offset the expected slower export growth in light of the slower US economy and baht appreciation, though exports still remains an important driver of growth for next year. Latest economic forecast projects the economic growth to lie between 4.5-6.0 per cent in 2008, while core inflation is expected to stay comfortably around 1.0-2.0 percent. Given the appreciation trend of the Thai baht thus far, we cannot deny that certain industries, especially those who rely more on the high local content materials, have been affected far more than those who rely more on the import-content materials.

Marzunisham Omar: Launch of Association of Islamic Banking and Financial Institutions Malaysia's Integrity Year 2023 Speech by Mr Marzunisham Omar, Deputy Governor of the Central Bank of Malaysia (Bank Negara Malaysia), at the Launch of Association of Islamic Banking and Financial Institutions Malaysia's (AIBIM) Integrity Year 2023, Kuala Lumpur, 14 February 2023. *** Assalamu'alaikum and a very good morning to distinguished guests. It is with great pleasure and gratitude to AIBIM that I am able to be with you today to speak on a topic that is close to my heart. Integrity, as this audience is aware, is the cornerstone of any well-functioning financial system. Throughout history, we have seen the damaging consequences from bank runs, financial market meltdowns and other financial shocks that occur when the public can no longer count on financial institutions to do the right thing in private. And yet, cases of corruption and financial mismanagement continue to abound. Trust is central to banking. If we already know how badly things can go when trust breaks down, why is integrity – or rather, the lack thereof – still an issue in 2023? Anybody here who has ever had to make a difficult life decision may understand why. Integrity is not a given. It cannot be written or codified into existence. Integrity requires continuous personal and institutional reflection of what our values are. Above all, it demands of us the strongest form of ethical courage to stay true and consistent to these values, especially when it is much easier to do otherwise.
Elvira Nabiullina: The Russian economic situation and Bank of Russia’s forecast Statement by Ms Elvira Nabiullina, Governor of the Bank of Russia, in follow-up of Board of Directors meeting, Moscow, 11 December 2014. *  *  *  Good afternoon! Today the Bank of Russia Board of Directors has decided to raise the key rate to 10.5% per annum. In the recent months, domestic inflation accelerated significantly and inflation expectations increased. According to our estimates, annual inflation will approximate 10% in 2014. The acceleration of inflation results from both the impact of the external trade restrictions and specific factors in the food market (which will add about 2.3 pp to the total inflation at yearend), and considerable ruble depreciation (that will contribute 2.6 pp). According to the Bank of Russia estimates, the impact of these factors will persist in 2015 Q1 resulting in stable increased inflation expectations and spreading inflationary pressure to the markets of goods and services not directly related to imports and sanctions. Meanwhile, the direct impact of ruble depreciation is time-limited and, according to our estimates, may be largely exhausted during the next six-month period. Tighter monetary policy of the Bank of Russia will contribute to limiting secondary effects, cooling inflation expectations and slowing price growth. Should inflation risks aggravate, the Bank of Russia is ready to further raise the key rate in order to prevent acceleration of inflation and loss of control over it. Monetary policy easing can be considered when inflation and inflation expectations show a stable downward trend.

The inflation level is currently affected by the actual ruble depreciation and the imposed import restrictions but, according to our estimates, these factors will contribute to inflation increase only till late 2015 Q1, afterwards, the inflation will start declining. By late 2015, inflation will fall to 8%. Inflation is forecast to slow down to the target of 4% by late 2017. These dynamics are largely connected with the increased inflation expectations. In this regard, the Bank of Russia intends to conduct its monetary policy to prevent further aggravation of inflation and inflation expectations. As I have mentioned, under the baseline forecast the current account surplus will amount to $ billion in 2015 which is below the possible capital outflow we estimate to reach up to $ billion next year. Next year the volume of external debt payments will also approximate to $ billion, of which banking sector debt payments will amount to $ billion, including interest payments. Non-financial sector debt payments are estimated to be $ billion, including interest payments. We have made special calculations based on the reporting data received from banks and the survey of 40 largest companies. According to our estimates based on these data, more than 10% of these payments refer to intergroup transactions. Another 20% can be refunded in the international markets. At least 15% can be redeemed through the partial use of cushion of liquid foreign exchange assets accumulated by banks and state-owned companies.
10  If only the G20 would  11  But such cures are prescribed in the abstract where policy space is unconstrained – a situation far removed from current realities. 8  Caballero, J. (2014) ‘Do surges in international capital inflows influence the likelihood of banking crises?’ Economic Journal. For example, the IMF estimate that the output cost in Mexico following the Tequila Crisis of 1994-96 was around 14% (Laeven, L. and Valencia, F. (2012), ‘Systemic banking crises database: an update’, IMF working paper). For the global financial crisis, the cumulative loss of global output, when compared to its pre-crisis trend, is of the order of 25% of global output, while for the Lawson boom it is close to 10% of UK output. 10 More recently, attention has been paid to the need to maintain appropriate macroprudential policies as well as monetary and fiscal. See, for example, the IMF policy paper (2011) ‘Macroprudential Policy: An Organizing Framework’. 11 See speech by Mervyn King at the University of Exeter, 19 January 2010, available at http://www.bankofengland.co.uk/archive/Documents/historicpubs/speeches/2010/speech419.pdf. 9  6  All speeches are available online at www.bankofengland.co.uk/speeches  6  Monetary policy is still challenged by the lingering risks of a global liquidity trap, with a very low global equilibrium interest rate, r* – the interest rate central banks must deliver in order to balance demand with supply and so achieve stable inflation.

According to this hypothesis emerging and developing countries are unable to borrow abroad in their own currencies reflecting lower degrees of portfolio diversification at the global level to emerging currency denominated investments. Needless to say, borrowing in foreign currencies creates currency mismatch problem – increases in the cost of debt-servicing of foreign currency – denominated external obligations in cases of real exchange rate depreciation. The cost is measured in terms of the reduced purchasing power of domestic output over foreign claims following the depreciation. The original sin indicator depicted in Figure 5 shows that original sin level is much below that of the 1990s despite its rise since the beginning of 2012. BIS central bankers’ speeches  3  In other words, EMEs’ share of obligations in foreign currencies is well below those observed in the 1990s.7 Bailing out banks during the above mentioned EME financial crises put heavy burden on government budgets of EMEs. It was well-understood that banking sector plays a systemic role. In order to avoid bailout costs and disturbances to the intermediation of loans to real economy EMEs overhauled their banking sector regulatory and supervisory systems. These reforms tried to ensure that banks hold adequate capitals to be resilient to shocks and, in general, run their businesses in a prudent way. Figure 6 shows that leverage ratios measured as (risk unweighted) capital divided by total assets, on average, stayed above the average levels of the 1980’s and 1990’s and also the average ratio of advanced economy banks.
On four of these occasions the Board also adopts an Inflation Report. The meetings are scheduled about six months in advance both for the sake of our internal work and to inform those who follow this, for instance in the financial markets. Additional meetings can, of course, be arranged if necessary and we have said that they will be announced as soon as we have fixed a date. But we have now used this procedure for more than two years and that has not yet happened. The publication of the Riksbank’s quarterly Inflation Report is preceded by at least three discussions in the Executive Board: one or two to consider which general questions to include in the Report and our picture of future inflation, a meeting to finalise the text and a final meeting about a week later to set the  4  BIS Review 24/2001  repo rate. At the intervening Board meetings we simply compare new information with the picture in the most recent Inflation Report and decide the repo rate. Processes in compiling the Inflation Report Executive Board Discussion of synopsis. Assessment of inflation from staff. Discussion of the inflation situation.r  Decision made on inflation situation and text. Decision made on interest rate. Drafting committee Discussion of inflation situation. Discussion of interest rate decision. Material for each Board meeting is prepared by the Monetary Policy Department, where some forty economists are involved in various ways.

We opted for this in order to make discussions as fruitful and lively as possible, as well as to motivate and engage our staff. That does not alter the fact that the final decision is up to the Executive Board. In the past two years or so we have not refrained for altering either the main scenarios or the risk spectrums that the staff has  BIS Review 24/2001  5  produced. Neither have we always shared the policy group’s majority view of the appropriate interest rate. But the Board has had well thought-out and consistent assessments on which to base its decisions. Communication and transparency The issue of central banks’ communication and transparency is sometimes discussed as though it were unconnected with the actual formation of policy — as though it were just a matter of selling a given message. I see this differently. The extent to which a central bank is understood and the credibility of its policy do, of course, depend on its track record in goal fulfilment and how long it has been operating. But the clarity of its policy framework also plays a part, as do the procedures for arriving at decisions. That the Riksbank managed to establish reasonable respect for its task and confidence in its policy so quickly was no doubt largely a consequence of the Swedish economy’s good performance in recent years.
Moreover, it was difficult to communicate how “appropriate” the forward rate path was as an interest rate forecast, and the logical consequence of this was to quite simply go on to publish our own interest rate forecast. The period with implied forward rates as a forecast assumption can therefore be  1  See Irma Rosenberg’s speech “The Riksbank and monetary policy” in September 2005, on the reasons for changing over to implied forward rates in the forecasts. BIS Review 85/2010  1  regarded as a learning process on the road towards publishing our own interest rate forecasts, which has several advantages compared with using forward rates. 2 When we began publishing our own repo rate path, this was the start of a learning process for us at the Riksbank, but also for market participants. I believe that we have made a lot of progress in this direction. Monetary policy through “management of expectations” The established view today is that a large part of the monetary policy effect is through influencing expectations among participants in the economy. By publishing our own repo rate forecasts we improve the opportunities to influence rates with longer maturities by influencing the general public’s expectations of future repo rates (“management of expectations”), something that proved very useful during the financial crisis. Figure 1 shows the development of the repo rate and market rates with different maturities. We see that the Riksbank has considerable influence over developments in market rates with maturities of up to six months.

As a rule, foreign funding, excluding equity and reserves, did not exceed 10% of all sources of financing of the banking sector. There has always been a difference amongst individual banks, a reflection of the different strategies for funding and acquiring sources, yet the overall importance of foreign funding is not in its percentage, but in its long-term nature. This is the premise on which the good business relations between parent banks and subsidiaries is based. When the crises stroke the relative importance of domestic deposits in financing the claims on Macedonian borrowers actually increased. In the Republic of Macedonia the ratio of loans to domestic GDP is still 47–50%, while the ratio of deposits to domestic GDP is around 55%. These ratios in the developed world tend to be above 100%, which shows the potential for growth. Similarly, the ratio of household debt, including mortgages, to household disposable income, is around 25%, substantially lower than most countries at a similar level of development, also offering opportunities for the banking sector. Regulatory capital allocation, on average, is 17%, more than two times the legal minimum of 8%. The high capitalisation of banks means they have the capacity to take losses and do not need to evergreen existing loans, but lend to new customers that are more likely to borrow. Strong capital ratios are one of the bright spots of the Macedonian economy. The Macedonian banking sector comprises 16 banks.