samchain/econo-pairs-v1 huggingface dataset:
The economic impact of globalisation and the role of EMU I would now like to turn to the main area of my paper and discuss, first, the economic impact of globalisation on economic linkages – most notably trade and capital flows – and second, the impact of EMU on regional financial integration and global portfolio reallocation. Impact on trade, foreign direct investment and cross-border portfolio flows The effects of globalisation are channelled via trade in goods and services, all of which has a tangible impact on businesses and households. Globalisation means that transport costs have decreased, technological innovations are more easily diffused, information is readily available at a low cost, and consumer tastes have been converging with an increasing number of global brands. Over the last three decades, tariffs have halved and a large number of trade agreements have entered into force between various countries. These developments have resulted in a steady opening of markets in Europe and around the world. In the early 1970s, for example, global exports accounted for only onetenth of world GDP, compared with one-quarter today. The share of intermediate inputs in total trade flows is also at a historically high level, reflecting the dramatic deepening of global economic interlinkages in recent years. Higher global demand and increase in the use of the euro in international trade have contributed to this new phenomenon. While intra-euro area trade has grown robustly since the introduction of the euro, extra-euro area trade has recorded even more rapid growth.

13 To sum up, from a global perspective, the establishment of EMU in January 1999 represents a fundamental institutional change in the world economy, and could in part help explain the large reallocation of capital that has taken place worldwide. 11  A more sophisticated analysis based on an international portfolio choice model reaches the same conclusion (see De Santis and Gérard, 2006). EMU has enhanced regional financial integration in the euro area in both the equity and bond markets. There is evidence of active trading among euro area Member States, with euro area investors assigning a higher weight to portfolio investment in euro area countries. Over the period 1997-2001, the average increase in weights - on top of the world average portfolio weight increase in euro area assets - amounts to 12.7 percentage points for equity holdings and 22.4 percentage points for bond and note holdings. 12  See ECB (2005). 13  On international risk sharing and EMU see for example Sorensen and Yosha (1998). 6  BIS Review 43/2006  The euro area – a zone of stability Before concluding, let me emphasise that since 1999 we have experienced a number of important shocks to the global economy, such as the Y2K problem at the turn of the millennium, substantial oil price increases, the fall and the rise of the euro exchange rate, the boom and burst of the equity market bubble, global imbalances and the clouds of war and terrorism.
The earlier domination of investment and borrowing is giving way to increasing flows from transactions in securities. New players have become more and more important. The quest for the best possible return on private savings is giving insurance companies, pension funds and highly leveraged funds a dominant position. Whereas the players used to be a more homogeneous group, consisting mainly of banks, households are increasingly opting to have their savings managed more actively than simple deposit accounts. While these changes have occurred in the various national financial markets, they have obviously also had consequences for the international capital flows. Advantages of free capital flows International financial markets that are free and integrated can enhance global growth through more efficient resource utilisation. Savings can be channelled to the best investment opportunities, unrestricted by national borders. Capital-importing countries can build up productive facilities, obtain access to modern technology and expand in sectors with relatively high productivity, while capitalexporting countries can earn a higher return. The industrialisation of Sweden in the latter part of the nineteenth century is a good example of what access to foreign capital can do; the construction of the railway network, for example, was financed with foreign loans. Financial markets also make it easier for economic agents to manage risks so that the economy functions more efficiently. The wide variety of financial instruments enables investors and borrowers to choose their preferred level of risk.

When we adjust the forecast of the real exchange rate for the expected difference in inflation between Sweden and the euro area, we get similar development paths for the nominal krona/euro rate. As differences in inflation are expected to be small, the forecast strengthening of the real rate is also reflected in the nominal rate. Towards the end of the forecast period, the rate should lie, according to the assessments of the Riksbank, within an interval of approximately 8.20 to 9 kronor per euro. The forecast for the rate at the end of 2003, however, consists of a narrower interval, around 8.50 to around 9 kronor per euro. Consequently, should Sweden join ERM2 around the end of the year, this kind of estimate would advocate a suitable central rate between the interval 8.50 to around 9 kronor per euro. It should be noted that the models imply an expected strengthening in both real and nominal terms but that this strengthening from next year onward will be rather limited. When choosing a central rate, it is vital to find a rate vis-à-vis the euro that is consistent with a balanced development in the Swedish economy in both the short and long term. It is important to remember that the real exchange rate, i.e. the relative price between baskets of goods in Sweden and the euro area Member States would be variable even if were to introduce the euro as our currency. But the adjustment would then occur through the relative rate of price increases.
Let’s be honest, at that time none of us knew exactly what a national budget really means and how the amount of state-collected taxes and public expenditure in practice affect the economy. One thing was clear - public expenditure should not exceed public income or the value of the Estonian kroon would immediately be put at stake. The 1992-1993 strictly balance-oriented strategy helped to create the social foundation that would even to date be suitable for developing a fiscal policy capable of even better supporting the balanced economy. I touched upon the economic policy key issues of the past decade because the same issues that were topical then are on today’s and tomorrow’s agendas. How to achieve better economic efficiency and improve competitiveness? How to avoid the deterrent impact of local lobby-groups on the economic policy and ensure a truly effective and free market? How to develop a truly balanced and forwardlooking fiscal policy? These issues are in the focus not only in Estonia but also in the European Union. Naturally, today’s problems - like the society itself - have a completely different look than 10 years ago. It is not only Estonia that has changed, it is the entire world. However, the key questions - likewise the optimum solutions to them - are, in essence, the same. I would like to offer just a few examples for the illustration of the above-said. In the beginning of 1990s we created in Estonia conditions for truly free competition in the financial sector and the entire economy.

It is obvious that no country, not even Estonia, when planning its economic policies should assume, for example, a 8-8% current account deficit spanning several years. Even if the latter is in the initial years financed through foreign direct investments, the adaptation of the economy is inevitable. The slower the economic growth is during the adaptation period, the more painful it is for the society. The goal of the economic policy should be the prevention of the internal demand-driven boom immediately prior and after the EU accession which will be followed by a significantly slower growth phase. Pre-accession economic programme and macroeconomic risks All these important issues are, to a certain extent, reflected in Estonia’s pre-accession economic programme which was recently approved by the government of the republic. I stress that the projections which form the basis of the national pre-accession programme and the premise that in Estonian economy the real total output is going to increase at the rate of about 6% per year are attainable only if the current economic policy continues. Keeping of the macrobalance is of critical importance for sustaining the economic growth and credibility of the monetary policy. The kroon’s fixed exchange rate and the forthcoming entry into the euro zone are by no means “free lunches”.
•  Furthermore, the idea was never to place a ban on financial innovation. You are probably familiar with the words of former Fed Chairman Paul Volcker: that the only useful thing banks have invented is the ATM. I don’t completely agree with this statement (and, in all likelihood, neither does the man behind it, it was a joke). As with other industries, I believe that innovation and competitiveness should be encouraged in finance. Since the first commodity derivatives markets were created in Chicago, market innovation has more often than not proved useful to the real economy, notably enabling companies in the real sector to better manage their risks. However, given that excesses in finance have more potential than in any other sector to damage the broader economy, financial innovation needs to be closely controlled. •  To conclude, a great deal has already been achieved since 2009 to tighten control of the financial industry, and ensure that it fulfils its vital role in serving the economy without destabilising it. But there is still a lot of work underway that needs to be completed. I’m thinking in particular of work in those sectors where regulators have less influence than over banks: shadow banking, hedge funds, tax havens or rather regulatory havens. I am sure that the discussions in this session will help to give us some ideas. BIS central bankers’ speeches  3

Ladies and Gentlemen, it is in this regard that the Bank of Zambia and Professor Collier with the support of the UK Department for International Development partnered to hold this international symposium whose objectives include: (i)  enhancing understanding of advantages of central bank independence among central bankers, Government, banks, non-bank financial institutions, the business community, academics and other stakeholders;  (ii)  drawing lessons and sharing experiences of central bank independence in developed, emerging and developing countries;  (iii)  appreciating the political, economic and legal aspects of operationalising greater independence for central banks; and  (iv)  exploring ways of enhancing fiscal and monetary coordination. Ladies and Gentlemen, the selection of papers to be presented and discussed at this Symposium will provide a platform for sharing ideas required for practical solutions aimed at improving the Bank’s service delivery. As we tackle issues of inflation, exchange rates, and other key macroeconomic indicators, let us use this forum to outline some of the past developments and challenges that lie ahead of us as we aim to taking Zambia’s financial sector to higher heights. Lastly, let me say that while we can all learn from what other central banks have done, each country should establish the legal framework for its central bank, and allow for its evolution, in ways which best fit that country’s own history and institutions. I have no doubt that the symposium will be thought-provoking and highly participatory.
The ACPR took a decisive step forward with the very first climate related stress tests, whose results were published in May 20211. A large number of major banks and insurance companies took part on a voluntary basis. The two key takeaways from this pilot exercise are that (i) financial risks are better contained in the context of an early and orderly transition to a greener economy, (ii) all main supervisors should now follow suit, as for instance the ECB and the Bank of England will in spring 2022. When it comes to climate stress tests, learning by doing is much better than waiting for the perfect solution before taking any action. On voluntary disclosure of risks, the TCFD increased its footprint; it now has more than 2,600 supporters (a number that has more than doubled since last year), including more than 50 central banks. The European Union is about to make a significant step forward, as it will implement mandatory disclosure for corporates through a new standard developed by the EFRAG with the Corporate Sustainability Reporting Directive (CSRD), which should hopefully be adopted by mid-2022. Some might always argue – passionately – that Europe and France never do enough. Yes we must do more but we should value the reality of action to rhetorical overbidding. We must avoid discouraging those who are doing the most while excusing those who do the least. I very much hope we will soon have this mandatory disclosure everywhere. I welcome the US endeavour here under the sponsorship of the SEC.

Page 1  Looking through a glass onion: lessons from the 2022 LDI intervention − speech by Andrew Hauser Given at the Initiative on Global Markets’ Workshop on Market Dysfunction, the University of Chicago Booth School of Business  Page 2  Published on 03 March 2023  Andrew Hauser reflects on our gilt market intervention last year and the key lessons for Central Banks when tackling liquidity crises. The lessons are informed by wellestablished principles but we need new tools for a new era given the growing role of non-banks. Speech Introduction It was just over two years ago when Lorie Logan and I first sat down to map out a plan for a working group of the Bank for International Settlements (BIS) Markets Committee on tools for market dysfunction. A year earlier, central banks around the globe had been required to intervene, at pace and scale, to prevent the sudden ‘dash for cash’ that followed the announcement of Covid lockdowns from undermining monetary and financial stability. Those interventions worked, aided by the fact that the stance required to tackle market dysfunction was directionally aligned with that required to achieve monetary policy goals more broadly. Nevertheless, given the speed with which dysfunction appeared, many central banks had to innovate, using tools they had to hand, rather than those designed specifically for the purpose. [1] If the mayhem in financial markets in Spring 2020 had been a genuine one-off, that might have been the end of things.
22  All speeches are available online at www.bankofengland.co.uk/news/speeches  22  Chart 12a: UK monetary policy trade-offs in successive 2-year ahead Inflation Report projections 3.0  Inflation (%)  2.5  August 2016  August 2019  2.0 -1.0 Excess supply (%)  -0.5  0.0  0.5  1.0  1.5  2.0 Excess  Preferred trade-off if λ=0.1  1.5  Preferred trade-off if λ=1 1.0  Chart 12b: UK monetary policy trade-offs in successive 3-year ahead Inflation Report projections 3.0  August 2016  Inflation (%)  2.5  August 2019  2.0 -1.0 Excess supply (%)  -0.5  0.0  0.5  1.0  1.5  2.0 Excess  Preferred trade-off if λ=0.1  1.5  Preferred trade-off if λ=1 1.0  Notes to Chart 12: Each observation shows the central projection for spare capacity or excess demand at the end of the second / third year of the forecast period (the 'Year 2' or ‘Year 3’ point) on the horizontal axis against the central projection for four-quarter CPI inflation at Year 2 / Year 3 on the vertical axis from successive Inflation Reports. See ’Lambda’, speech by Mark Carney, 16 January 2017, for further details and discussion. 23  All speeches are available online at www.bankofengland.co.uk/news/speeches  23

By occupation, consistent with qualifications, the gender pay gap is smaller for professional and administrative occupations than for skilled trades, customer service and plant operatives (Chart 9). For almost all occupations, the gender pay gap is higher outside London. In 2018, the gender pay gap outside London remained higher for managers, skilled trades and elementary occupations. For the rest of the occupations, the pay gap in London overtook the respective gap outside London. Broadly speaking, occupations with median hourly pay of more than £ (managers, professional, and associate occupations) have lower gender pay gaps than occupations where the median hourly pay is less than £ (sales and customer services, and elementary occupations). Relatedly, there is a clear inverse relationship between the gender pay gap and female-dominated professions. Occupations with a lower share of females tend to be characterised by higher gender pay gaps and vice versa, consistent with increased female representation shrinking gender pay gaps cross-sectionally, if not always over time. 12  All speeches are available online at www.bankofengland.co.uk/speeches  12  Chart 9: Median gender pay gap by occupation, sample average Gender pay gap, per cent 35  London  Other  30  25  20  15  10  5  0 Managers  Professional  Associate Administrative Skilled trades professionals  Male male  Personal service  Sales and customer  Process and plants  Elementary  Female female  Source: ONS Labour Force Survey and Bank of England calculations.
It therefore comes as no surprise to hear the view expressed that the capital controls should be maintained on a more permanent basis. This is not as attractive an option as might appear at first glance, however. In the first place, liquid capital cannot be kept here forcibly for an indefinite period of time. The controls are a violation of various international agreements signed by Iceland. They are tolerated as long as Iceland follows the economic Recovery programme supported by the IMF, and thus indirectly by the member states of the EEA, OECD, and the Fund itself. Soon after this programme concludes, the controls will likely have to disappear; i.e., if the Icelandic government does not wish to renege on international treaties it has ratified. Eventually, frozen capital will have to be allowed to go wherever it wishes. Second, long-term confidence cannot be established as long as uncertainty exists as to how much capital is tied up in ISK assets simply because of the capital controls. This uncertainty will not dissipate fully until they are removed. Until that time, there is a risk that it will restrain foreign investment, which is a premise for export-driven economic recovery. Third, the hefty profits that can accrue to parties that circumvent the capital controls undermine business ethics and create a competitive advantage vis-à-vis those who abide by the law. The controls prompt individuals and firms to devote efforts to seeking ways to circumvent them, resulting in waste of resources and excess cost in the economy in the longer term.

Anyone needing an umbrella when it’s raining has to show that he can get alternative one on demand. Loans from the IMF and others are our umbrella. In the third place, co-operation with the IMF is important not only because of the access to credit contingent on the progress of the programme. The Fund serves as a sort of validation agency for the economic policies of countries that find themselves in economic difficulties. Its stamp of approval is a precondition for obtaining credit not only from other countries, but also from foreign banks and investors. In many instances it is a premise for foreign investment in domestic industry. This view has been clearly expressed in interviews with numerous foreign bankers, who are prepared to take Iceland to the global credit market as soon as the uncertainty delaying the progress of the programme is eliminated. Many find the medicine prescribed by IMF bitter, and have requested a more palatable economic strategy without the Fund’s involvement. Of course, it would be desirable to use automatic fiscal stabilisers or discretionary fiscal policy to mitigate the economic cycle. Countercyclical fiscal policy, however, is a privilege reserved for countries whose credit rating has not been tarnished. Iceland does not enjoy this privilege any more than Greece, Latvia, and various other states. To toss away the IMF’s umbrella and set off empty-handed to meet with foreign creditors in an attempt to refinance the loans maturing in the next two years would be a fatal error.
These dynamics are captured in the simple specification  where  indexes time,  are iid normal shocks and  is the indicator  function taking value 1 when and value otherwise. As reputational concerns disappear, the term goes to zero, leaving simple autoregressive dynamics. But with reputational externalities, productivity shocks become amplified by the credit cycle: a high realisation of in period could push the macro state above the risky policy threshold, at which point the dynamics of begin also to shape the real economy. The distribution of is assumed to have a higher mean and variance than to simulate the effects of the credit boom. In particular, we constrain the distribution of relative to such that expected risk-adjusted fundamentals are constant over time. 10 So we have, in effect, a regime-switching model. When banks play safe strategies, fundamentals are relatively stable. When banks risk up, they create a temporary improvement in expected fundamentals at the cost of greater volatility. This dynamic specification has some interesting properties. First, even small shocks can have disproportionately large effects on fundamentals depending on the initial conditions. In particular, if fundamentals happen to be close to the switching threshold, a further positive shock will lead all firms to coordinate on the high risk-taking strategy. That drives up both the expected value of fundamentals and its volatility. This generates a form of path dependence. Second, credit cycles are endogenous in this framework. As firms coordinate on high risk strategies, this drives up the expected value of fundamentals.

That will have consequences for trade balances and activity in both emerging markets and industrialised countries. Second, falls in equity prices around the world have reduced household wealth. And third, the sudden increase in risk aversion in financial markets is changing the balance sheets of financial institutions and some fear that this may lead to a credit crunch. The reduction in capital flows to emerging markets started over a year ago when concerns about the foreign currency exposures of a number of countries led to withdrawals of funds and a liquidity crisis in Asia. That liquidity problem was compounded by macroeconomic and structural problems which varied from country to country. But the net effect was that capital flows to emerging markets in Asia fell from over $ bn in 1996 to only about $ bn in 1997. That retrenchment has continued during 1998. Why does this matter? In the absence of other sources of finance, a reduction in net capital inflows has to be matched by a corresponding improvement in the current accounts of the emerging market economies. To achieve such a rapid turn-round in the current account required significant depreciations of their currencies and deep recessions. The counterpart to the improvement in the current account of the countries affected is a larger trade deficit, or smaller trade surplus, in the rest of the world.