samchain/econo-pairs-v1 huggingface dataset:
I will start to discuss monetary policy and then move on to macroprudential policy. The monetary policy framework is in need of review As I have mentioned, monetary policy of the 1990s and up to the financial crisis was viewed as successful by many. It was considered that this played an important role in both the relatively low and stable inflation, and the relatively stable GDP growth during those years. During the global financial crisis, it came to light, however, that major financial imbalances had been built up despite the seeming stability of many macroeconomic indicators. An important lesson from the financial crisis is therefore that low and stable inflation does not always guarantee financial stability or sustainable economic growth. The huge costs of the financial crisis to the real economy have led central banks around the world to start thinking about the current monetary policy framework. The challenge ahead is to create a framework which continues to safeguard stable prices, but which at the same time is consistent with a sustainable development in the financial system. Financial circumstances therefore need to be accounted for in the monetary policy decision-making. Taking account of financial factors in monetary policy decisions Different approaches can be used to formally take greater account of financial stability in monetary policy decisions. For instance, how much a change in the policy rate affects the probability of a financial crisis can be calculated.

Placing responsibility on one body is well in line with international recommendations and proposals starting to take shape in other EU countries.10 The Riksbank should have an influential role in macroprudential policy In my view, the Riksbank has solid fundamentals to shoulder responsibility for macroprudential policy in Sweden. Over the last 15 years, we have built up extensive systemic risks analysis capabilities. As I briefly mentioned before, we also have in-depth knowledge in terms of studying the relationships between the financial and real sector, for instance, as a result of the monetary policy analysis apparatus. Placing responsibility for macroprudential policy on the Riksbank would also involve synergies with monetary policy. Because coordination with microprudential policy is also important, in our consultation response we propose the establishment of well-defined ways of cooperation between the Riksbank and Finansinspektionen. The central bank having a key role in macroprudential policy is also recommended by the European Systemic Risk Board (ESRB). The Riksbank is an authority with a high degree of autonomy, which raises the question about how autonomous macroprudential policy should be. A high degree of autonomy can be beneficial when it comes to preventing financial instability, more or less for the same reasons as in monetary policy. On the one hand, the decisions can be unpopular politically, and on the other hand expert knowledge is important. However, there is a crucial difference between monetary policy and macroprudential policy in one respect.
At a time when our monetary policy was working hard to prevent the propagation of the inflationary shock to other prices, we suffered the onset of an international financial crash of a magnitude not seen since the Great Depression of the 1930s. The sharp fall in demand, caused largely by a crisis of confidence and an unprecedented rise in volatility and uncertainty, caused a severe downturn in the world economy and in Chile. The downturn was especially strong in the last quarter of 2008 and the first four months of 2009. The drop in output during that period was determinant in the recession we saw last year. Macroeconomic policies reacted strongly. However, they could do little to counteract the immediate effects of this phenomenon, not only because of the lags with which they operate, but especially because of the sudden nature of the collapse in demand. Still, and as we have previously claimed, a monetary policy based on a flexible inflation targeting regime – that allows for the accommodation of shocks over a reasonable period of time –, a floating exchange rate, a solid financial system and a fiscal policy that saved during the good times, were key to ensuring a rapid and sustainable economic recovery. Our macroeconomic policy scheme allowed us implementing an unprecedented stimulus, which has had important positive effects on output, within a context of well contained inflationary pressures. The national economy began recovering by the middle of the second quarter of 2009.

It is also encouraging to note that rating agencies have come forward to formulate rating methodology and review for takaful operators. Third area relates to the need for joint effort to shape prudential rules for takaful. For the formulation of prudential standards, the setting up of the IFSB remained one of the landmark developments in this decade. Established in 2002, the IFSB's core role is to promote prudent, transparent and robust development of the Islamic financial services industry through the promulgation of international prudential standards that are consistent with the principles of Shariah. The IFSB provides the platform for cooperation among the regulators through meetings, conference and the setting-up of working groups that give  BIS Review 95/2007  3  opportunity for the regulators to discuss and exchange information on issues confronting Islamic finance. For takaful industry, two developments are relevant that are: i.  the issuance of Issues Paper jointly by IFSB and IAIS on the applicability of IAIS core principles to takaful, and  ii. the formation of a working group to formulate corporate governance standard for takaful industry. In view that the formulation of the IFSB standards involves consultation with IFSB members, I would like to call more takaful operators to be members of the IFSB so as to provide the opportunity for the players to be part of the official consultation procedure for IFSB and to make comments on draft IFSB standards.
(3) Knowing that our own individual judgement is worthless, we endeavour to fall back on the judgement of the rest of the world which is perhaps better informed. That is, we endeavour to conform to the behaviour of the majority or the average. The psychology of a society of individuals each of whom is endeavouring to copy the others leads to what we may strictly term a conventional judgement”. This suggests that it is very hard to take a truly independent view – especially a contrarian one that recognises the possibility that improbable but conceivable events could result in  2  BIS Review 32/2009  large losses. In other words, the sheer difficulty of forecasting the future makes it hard for contrarian investors without substantial net worth to survive in the market. As a result the market is vulnerable to “sudden and violent changes”. As Keynes put it, “the forces of disillusion may suddenly impose a new conventional basis of valuation. … At all times the vague panic fears and equally vague and unreasoned hopes are not really lulled, and lie but a little way below the surface”. So a conventional wisdom that leads to a speculative mania, can quickly collapse as sentiment turns on its head. But a speculative mania is not the product solely of the creative imagination of financial engineers. It requires the willing collaboration of gullible investors, who may not fully appreciate the risks that they are taking.

Another culprit is high subsidies provided by many governments in the developing world to at least partially protect consumers from the cost of high food and energy prices. Fast-forwarding to the recent period, the observation that the central banks of developed countries still keep real interest rates negative in the face of financial risks may hamper a correction in commodity prices. On the other hand, many developing countries, mainly China, India, Malaysia, Indonesia, and Egypt have decided to gradually reduce subsidizing energy prices and pass the true cost to consumers. This is a favorable development that will eventually help to control demand pressures on commodities. Dear Guests, As you may all know, the commonly accepted practice in inflation targeting regime is that monetary policy should not react to supply-driven shocks that are temporary in nature and should allow temporary increases in inflation in the short-term, unless they create deterioration in inflation expectations. Otherwise, undesired fluctuations might arise in economic activity and relative prices. The increase in commodity prices would trigger a selfcorrecting mechanism. By changing the relative prices, it would provide valuable information on how the resources of the economy should be distributed. While high food and energy prices curb consumption on these products, they would also encourage investment and increase supply in the long-term. In short, the common view is that central banks have nothing to do but wait for the supply-driven shocks to work out their natural course.
In the context of a greater expansion of credits to the economy during the past two years, particularly in real terms, the net flow of credits to private enterprises has mainly consisted of medium and long term credits extended to finance investment. Overall, excluding credits repurchased by the Treasury, bank credits to the private sector (enterprises and households) stood at dinar billion 3120 by end 2014, with the share of medium and long term credits increasing from 62.3 percent by end 2013 (61.3 percent by end 2012) to 64.3 percent. The dynamism of bank credit to the economy, mainly for the benefit of private enterprises, clearly reflects the improvement in the financing structure and conditions as a result of the measures taken by the Government to boost medium and long term credits to the private sector, notably measures implemented in 2013 to facilitate SMEs’ access to bank credit. In parallel, banks improved information provided to SMEs on required investment credit documentation and made notable progress in reducing processing times. After fourteen years of savings surplus, 2014 and 2015 recorded a cycle reversal. The drastic oil price fall as of mid-2014 resulted in a widening savings-investment gap. Six years after the international economic and financial crisis, the Algerian economy, like other oil exporting countries, has been affected by the resource contraction as of 2015. However, credits to the economy continued to expand (15.9 percent in 2015), mainly for the benefit of private enterprises.

Transition to a new investment financing pattern  In the context of structural excess savings over investment, which characterised the period 2000-2013, the structure of investment financing in Algeria during 2008-2014 showed a very high level of self-financing (84 percent), particularly with regard to the Government’s and the national oil company’s investments. Investment in the economy (excluding the hydrocarbon sector) has also been, to a large extent, self-financed (59.7 percent over 2008-2014), while the financial savings of private firms and households have significantly increased. In particular, the years 2010 and 2011 recorded a  BIS central bankers’ speeches  3  substantial increase in self-financing (71.4 percent and 24.1 percent respectively), which contributed to the significant recovery of investments in the non-hydrocarbon sectors. In the meantime, the relative share of medium and long term domestic bank credit in the financing of investments in the productive non-hydrocarbon sectors increased substantially between 2012 and 2014, up from 38.4 percent to 45.2 percent. Reflecting dynamic medium and long term bank financing, credit to the economy recorded strong growth in 2013 (20.3 percent) and 2014 (26.1 percent), following already high growth in 2012 (15.1 percent). Improved credit conditions, together with Government support measures with regard to credit to SMEs, which improved their access to bank credit as of 2010, have contributed to the sustained expansion of overall credits to the private sector, which recorded an average annual growth rate of 19.4 percent over the period 2001–2014.
Responsible openness: The PRA’s approach to supervising banks Speech given by David Bailey, Executive Director for International Banks Supervision, Prudential Regulation Authority  Bank of England Hosted Webinar 11 January 2021  I am grateful to Andy Murfin, Tom Crossland, Orfhlaith Sheehy, Caleb Barnes, Shakir Anverally, Marina Barnard, Ross Howie and Tanveer Hussain for their assistance in writing this speech. 1  All speeches are available online at www.bankofengland.co.uk/news/speeches and @BoE_PressOffice  Introduction  Welcome. I am delighted that so many of you could join us today. I started my role as Executive Director for International Banks Supervision in late 2019. I took on the role, in part, because of the wide variety of firms I would be supervising, the diversity of cultures I would be interacting with, and the promise of travel to exotic locations. The role has delivered in many respects – although given the events of the last year, the travel has been somewhat disappointing. While my travel guides are left unread, my videoconferencing systems guide has many worn pages. One clear lesson I have taken away from talking to such a variety of institutions remotely, is the value of simple and clear communications. So today I will be giving you the headlines from our Supervisory Statement published today that sets out the PRA’s approach to supervising international banks. It sets out publicly, for the first time, our approach to subsidiaries and combines that with the approach set out in our existing Supervisory Statement on branches (SS1/18)1.

Figures from the Institute of International Finance suggest that the same picture is true for a larger group of emerging markets, with 81% of the decline in private net capital flows to the 29 most important emerging market economies accounted for by bank lending. Liquidity runs, although not the sole cause of problems, did play a major part in recent financial crises. Such runs reflect mismatches in the national balance sheet. Such mismatches can occur in either the public or private sectors. Examples of the former are Mexico and Argentina in 1994, where short-term official dollar denominated debt exceeded foreign exchange reserves. Examples of the latter are Thailand, Korea and Indonesia in 1997, where the private sector had borrowed short in order to lend long. Either maturity or currency mismatches create the potential for sudden reversals of capital flows on a huge scale. In the technical jargon, such markets are subject to multiple equilibria where a small event can cause a shift from one benign equilibrium state to another which is accompanied by rapid capital outflows. The possibility of a rapid shift from one equilibrium to another explains, in the words of Maurice Obstfeld, “why capital markets can appear to impose too little discipline before the crises arise, and too harsh a discipline afterwards”.3 If this diagnosis is correct, two observations follow. First, capital flows in the form of foreign direct investment and portfolio equity investment should be encouraged.
Instead, outcomes are drawn from a Power Law  distribution, which has fatter tails and a much greater probability of extreme outcomes.18  Chart 14 plots the distribution of health, wealth and happiness across the UK. The straight line shows where outcomes would lie if they were Normally-distributed. Deviations from that line, at its extremities, signify fat-tails. For health and income there is strong evidence of fat tails and Power law distributions.19  Chart 14: Power Law tests  GVA per head  18 19  Well-being  Haldane (2012) discusses Power Law distributions as they apply to economic and financial variables. Haldane (2012). 19  All speeches are available online at www.bankofengland.co.uk/speeches  19  Wages  Health (life expectancy)  Sources and notes: as per violin plots in Charts 9-12. Fat-tails and Power Law distributions are associated with systems that are complex and adaptive. The best definition of complexity is, for me, the one provided by Herbert Simon back in 1962: “one made up of a large number of parts that interact in a non-simple way”.20 That description fits our maps rather well. They are certainly made up of a large number of distinct parts, even within geographically-concentrated areas. If the economic system is complex, in the sense of Simon, this carries important implications for understanding and modelling these systems. As with the body, to understand the dynamics of a complex system it is crucial you study the micro-level moving parts. It is equally important to understand interactions among these parts.

17  All speeches are available online at www.bankofengland.co.uk/speeches  17  Chart 13: Heat maps of health in Belfast, Cardiff, Edinburgh and Inner London  Sources: 2011 Census. Notes: Data show percentage of respondents declaring themselves to be in bad or very bad health at electoral ward level. I draw two conclusions from these micro-level visualisations. First, however striking the regional differences in economic and societal health across the UK relative to historical and international standards, these conceal even more striking differences in levels of health, wealth and happiness within regions. To the extent there is an inequality issue in the UK, it is as much or more a local rather than regional one. 18  All speeches are available online at www.bankofengland.co.uk/speeches  18  A second, nerdier, point is what this means for our understanding the economy. Many systems – social, natural and physical – exhibit a pattern in which the distribution of outcomes does not converge at higher resolutions; it remains constant or even expands. These systems have a fractal property with patterns that are self-similar at different levels of resolution. Snowflakes and shorelines are the best-known examples. The violins charts suggest economic systems may also exhibit some of these properties, with distributions which do not converge at higher resolutions and may even expand. Outcomes in these systems are not distributed like a bell-shaped, Normal distribution.
Let me explain why in more detail, and then conclude with where that leaves my policy thinking. The Brexit vote  Turning first to Brexit. The vote to leave the EU leaves the UK in a position which is not just unusual but unique. As my colleague the Governor said recently, the Brexit negotiations are the biggest challenge as well as the biggest opportunity facing the country at this moment. And the outcome of those negotiations remains the most significant influence on the economic outlook, as well as the greatest source of uncertainty about the future. As a member of the MPC, my task in the face of this uncertainty is to balance any trade-off between the speed at which inflation returns sustainably to target and supporting employment and activity, in line with our 5  All speeches are available online at www.bankofengland.co.uk/speeches  5  remit from the Government, as the UK economy transitions to whatever end state results from those negotiations. What does that mean in practice? In the MPC’s assessment, consistently held since before the referendum, Brexit is affecting the UK economy via three main channels – that is, through its effects on supply, demand and the exchange rate. On the supply side we expect Brexit to have both a long and a short run effect on productivity. 5  The long run effect comes about through the effects on the UK’s openness. We know that on average being more open to trade makes an economy more productive.

Cheque usage declined by 35% from over 200 million cheques in 2011 to 133 million in 2016. Over the same period, Interbank GIRO (IBG) and Instant Transfers (IBFT) grew almost four fold from 66 million transactions in 2011 to 257 million transactions in 2016. Encouraging progress has also been achieved in efforts to displace cash. Reform measures implemented since 2015 have made the acceptance of payment cards more affordable to merchants. We estimate the annual cost savings to merchants to be about RM168 million in 2016. This in turn has encouraged an increase in the number of payment card acceptance devices (or POS terminals) which expanded by 40% to 323k terminals in 2016. We expect these developments to further expand the usage of debit cards to displace cash together with the enhancements to the payment card infrastructure to support PIN and contactless technology. A new era in payments For many years, Bank Negara Malaysia has taken the leading role in shaping the development of the country’s payment systems, in line with its statutory mandate to promote safe, efficient and reliable payment systems. We have taken important steps to correct price signals associated with the use of different payment instruments, and created market mechanisms to better align incentives at the institution level. Along the way there was resistance, but we had experienced that left to its own devices, the market is not capable of making strategic changes necessary to drive payment efficiency, financial inclusion and competitiveness. But, cooperation is key.