samchain/econo-pairs-v1 huggingface dataset:
Products such as CDOs, CDOs of ABS and CDO squared have been prominent in recent months in the business news, especially because of their adverse impact on the results of the biggest international financial institutions. Some of these products used the bonds resulting from a specific securitisation, packaging them and combining them with other financial instruments in order to re-securitise them. Other products, to offer another example, were made up of securitisations of relatively heterogeneous asset portfolios, in which the degree of concentration was high. Evaluating these products required the use of sophisticated models based on numerous assumptions and on information not directly observable in the markets. Also, owing to their recent development, the models had not been tested in a highly adverse scenario. In addition, the sophistication of these products meant that the calculation of the parameters needed for the valuation models was more complex, making it increasingly difficult to value the level of risk incurred. Events have highlighted the fact that the valuation models have not worked well, meaning that many banks have miscalculated the level of risk assumed and that stress tests have not worked properly. Beyond these quantitative considerations, the use of these complex products also indicates significant shortcomings in the more qualitative facet of risk management. Quite simply, numerous banks and investors took positions in products that they did not properly understand. And today it is quite clear to see that they have perhaps committed the most basic error contrary to sound risk management, i.e.

Indeed, the events of recent weeks offer grounds for some optimism: after a virtual drought for seven months, in only three weeks a notable group of banks have obtained over 13,550 million euro on the international market. "Homework" The starting position of Spanish banks at the outset of the turbulence was, as I have already said, very sound, and this has allowed them to avoid its more immediate and direct effects. The reporting of results both for the fourth quarter of 2007, and those being released for the first quarter of 2008, show the notable differences in comparison with other international banks. However, the dysfunctions continue affecting international financial markets, and that does not leave the Spanish financial system immune to what we might call second-round effects. Accordingly, financial market participants - each in their own area of responsibility – must act in such a way as to ensure these effects are minimised. 6  BIS Review 62/2008  Indeed, the tasks to be performed pose an even more demanding challenge, considering that the turbulence is coinciding with a period of internal adjustment and deceleration in the world economy. The deterioration in macroeconomic conditions is most patent in the United States, with most analysts forecasting a sharp slowdown in the opening quarters of 2008. But slacker growth is also expected in Europe in the coming months. The Spanish economy, after an upturn lasting more than ten years, has also begun its adjustment.
Figure 7 shows developments in Sweden’s current account and in the real exchange rate in Sweden. As we can see, there is a clear correlation. The devaluation at the end of the 1970s and the beginning of the 1980s only led to short-term surpluses in trade. The devaluation was instead followed by higher inflation in Sweden than abroad, which led to an appreciation in the real exchange rate. The deficit in international trade returned. However, when the krona was allowed to float in November 1992, the real exchange rate immediately weakened by almost 25 per cent and has since then remained weak. Sweden has for the most part had large surpluses in foreign trade since then. How should we then view future developments? Our assessment is that the surplus on the current account will decline from almost 10 per cent in 2008 to around 7 per cent at the end of the forecast period (see Figure 7). An important factor in this assessment is that households are expected to reduce their saving in the future. During the financial crisis, confidence indicators showed that households had a very pessimistic view, which probably led to an increase in precautionary saving. As the economy recovers and households’ confidence is restored, which economic survey data now indicates, it is reasonable to expect that saving will fall. As we saw in Figure 7, a reduction in the surplus on the current account is usually connected to a real strengthening of the exchange rate.

It is this tradeweighted krona rate that the Riksbank tries to analyse and forecast. If one looks at the period with a floating exchange rate (since November 1992), one can draw the conclusion that the nominal and real exchange rates are strongly correlated. This is because exchange rates, which translate prices into a common currency, change quickly, while price levels change slowly. Nominal exchange rates are determined at the trading counters daily, while it takes time to change prices. Figure 4 Nominal and real TCW-weighted exchange rates Index, 18 November 1992=100  Note. Broken lines represent the Riksbank’s forecasts. The real exchange rate has been calculated using Swedish and TCW-weighted CPI. Sources: Statistics Sweden and the Riksbank. How do we compare the impact from the nominal exchange rate on inflation, which I took up earlier, with Figure 4, which shows a strong correlation between the nominal and real exchange rates? According to the earlier example, only around 15 per cent of a nominal exchange rate change “spills over” into domestic inflation. This means that 85 per cent of the nominal exchange rate change does not have any effect on inflation and that the real exchange rate is thus affected by 85 per cent of the change in the nominal exchange rate. There is thus a strong, but not complete, correlation in the short term between the nominal and real exchange rates.
For instance, a central bank cannot prevent oil prices rising in the wake of the concern over a possible war in the Middle East. On the other hand, a central bank could of course try to quickly tighten demand in the country to push down prices in other areas and thus ensure the average rate of price increase remains in line with the target level. The focus on inflation 1-2 years ahead, entails monetary policy being conducted gradually, little by little, rather than a constant acceleration and braking, which would risk creating unnecessary variations in demand and which could in turn have a negative effect on production and employment. The focus on the coming 1-2 year period thus means that temporary rises or falls in the inflation rate can be tolerated. However, it is important that the Riksbank is clear in its communication of whether it considers the rise to be temporary and when it expects it to subside. One-off shifts in price levels can have a more lasting effect on future inflation if, for instance, those involved do not believe that the rise is temporary, assessing that it will be lasting and thus wishing to compensate for the upturn. If this occurs, monetary policy must be used to intervene, even if the economic situation in itself does not provide cause for concern with regard to inflation, to prevent inflation taking a hold through expectations.

When new information changes the economic outlook, we must of course reconsider our view of how the repo rate should be set in the future. But this is hardly a reason to refrain from being as open and clear as possible about what we currently believe will happen. As I have said on previous occasions – it would be roughly like the Swedish Meteorological Institute refraining from publishing five-day forecasts because conditions might change in the meantime. Another argument against publishing interest rate paths is linked to the way the market functions. This means that in principle the financial market agents could stop looking for other information if they have access to the central bank’s forecasts for interest rates in the slightly longer term. How the market views economic prospects is normally reflected in the long-term market rates. This source of information could thus be lost and this would impair the functioning of the market. But I find it very difficult to imagine that the market agents would stop making independent assessments because we are now publishing our own view of interest rate developments. They know as well as we do that we are living in an uncertain world and that the forecasts we make are constantly being revised. They have strong reasons for continuing to look for information via other channels than the Riksbank and for assessing this information, even when we publish our forecast of the future interest rate path.
In addition, some large domestic clearing systems like Euro Access Frankfurt (EAF) allow banks from all EU countries to participate. The participants naturally take such factors as price, risk and time into account when considering whether to make use of TARGET or any of the other options. The Norwegian banking industry has expressed an interest in having Norges Bank provide settlement services for a multilateral netting system for domestic transactions in euros. As an EEA member, Norway participates fully in the single market (with the exception of agricultural products) and Norwegian banks are subject to the same requirements and obligations as those applying in the EU. Access to the common payment system on virtually equal terms is therefore regarded as desirable and natural. Norwegian banks attach importance to being able to offer competitive euro services, and a Norwegian euro settlement system could make a contribution in this respect. Norges Bank is pursuing this matter with the ECB. We have taken note of the solutions found with respect to the non-euro EU members, including the UK. Developments in the Norwegian banking industry The industry that will probably be most affected by the euro is the banking industry. The banking industry in Norway and other countries has undergone, and will continue to experience, substantial changes as a result of technological advances, internationalisation, deregulation and changes in customer behaviour. This has intensified competition and reduced margins, thereby prompting a need for restructuring and reducing overcapacity.

A significant development relating to the Zambian financial sector was the decision to relocate the function of the Registrar of Banks and Financial Institutions to the Bank of Zambia from the Ministry of Finance and National Planning where it was previously located. This decision was taken in an effort to enhance regulatory oversight of banks and financial institutions starting from the licensing stage. Currently, all applicants have to be evaluated in line with relevant provisions of the Banking and Financial Services Act (BFSA) and international best practice such as the Basel Core Principles on Effective Banking Supervision. The intention is to ensure that only applicants who meet these stringent criteria enter the financial system in Zambia. This is crucial for fostering confidence and stability in the financial system. Mr Chairman, you may be aware that in the early stages of the reforms, a number of commercial banks faced serious problems and were subsequently liquidated. The closures were in part a consequence of the reforms. The reforms also highlighted some weaknesses in corporate governance arrangements at most failed banks. However, following improvements in the regulatory and supervisory frameworks, no bank closure has been recorded since 2002 and the banking sector has recorded significant growth. The growth in the sector can also be attributed to prudent fiscal and monetary policies aimed at achieving sustainable macroeconomic stability. This has been accomplished under a stable political environment and liberalised market conditions.
We are about a month and a half behind schedule only on this issue. The consultations that the Minister of Finance and I had last week show that the signing of such a Memorandum is still possible but this will urgently require at least two things: firm political support and a clear mandate of the central bank governor. The political decision on this issue comes with a price. Over the last months, and especially the last weeks, markets have been giving us very clear and warning signals. The price of Bulgaria's newly issued debt has been rising at an unprecedentedly high rate. This implies an enormous additional financial weight in the medium term, which  3/5  BIS - Central bankers' speeches  more acutely than before poses the question about the terms of funding Bulgaria's budget and economy. What is the connection with the topic under discussion? The connection is direct. If you read credit rating agencies' announcements, you will see that the key factor for Bulgaria to get a rating upgrade, i.e. for improved terms of its funding, is the successful implementation of the euro area accession process. As a reference point, after the decision on Croatia's accession was made, two credit rating agencies upgraded its credit rating by two notches even before Croatia actually joined the euro area. Thus Croatia's credit rating, which before the decision was one notch lower than Bulgaria's, now is one notch higher than Bulgaria.

Having a work force that feels they are contributing to the greater good should benefit the organization in its effort to recruit the best minds, but also in the effort to recruit those with the best hearts (who presumably will be less likely to become malefactors). The last item that I will leave out is “short termism.” Permit me to describe the concept. With increasing frequency, people working in a financial services firm have no loyalty to their employer because they do not intend to work there long. Instead, the idea is to get some experience and a decent bonus and then move to the next employer – or, if the bonus is large enough, to work for oneself. 9 10 Given the specialization that tends to accompany various financial services, people with near‐term career horizons tend to develop loyalty to the special group of individuals with whom they transact business and who might provide the next job opportunity. These specialized bankers or traders increasingly resemble independent contractors or freelancers – careerists with no institutional loyalty. In foreign exchange, for example, we saw people orchestrating a manipulative scheme across a network of individuals at many institutions. This is all rational and understandable – specialists need the long-term allegiance of their network to continue to ply their trade, and this allegiance is far more consequential than loyalty to the organization currently employing them. So, when in conflict, career trumps institution. Some of this is simply generational; there is more employment mobility now than thirty years ago.
That could be due to the fact that the degree of rigidity of the economy would augment in practice under the economic “stress” of the much more rapid changes of their environment. The fact that total factor productivity, which is one of the proxies for the pace of structural transformation over years has dropped from 0.7% before 1995 down to 0.3% 4 after 1995 seems to give some credit to this conjecture. - Finally, let us not forget the demographic change occurring on both sides of the Atlantic. Indeed, Europe’s long term growth performance has also been constrained by the low rate of population growth and the ageing of its society. Since the mid 1990’s, population in the euro area has been growing at a yearly rate of just 0.4% compared to 1.1% in the US. However, what is worrisome is that at the same time, the gap in population growth has been even larger with regard to growth in the working age population the working age population grew on average by 0.3% per year in the euro area over the period 1996-2006 compared to 1.4% in the US , which manifests that Europe has a more acute problem of population ageing. The need for further structural reforms in Europe This brief assessment of the underlying causes of Europe’s relatively disappointing longerterm growth performance provides a mixed picture of the European economy.

Adjustments should be made to employment legislation where it impedes the hiring of younger and older workers in particular. For instance, Denmark, Ireland and the Netherlands – which, by the way, are all three, de jure or de facto for Denmark, in the euro area – have achieved success in reducing unemployment and stimulating job creation, despite significantly different economic conditions 8 . In 2006 the unemployment rate in these countries stood below 4.5%, while their overall employment rate was above or close to the US level, namely 72 %. To achieve such remarkable success, these countries reformed their tax and benefit systems by reducing for example tax wedges on labour income and by carrying out a stricter enforcement of job search rules and a better surveillance of eligibility. They also increased, when and where needed, the flexibility of their labour market. 5  See “The economic costs of non-Lisbon: A survey of the literature on the economic impact of Lisbon-type reforms” by Directorate-General for Economic and Financial Affairs, European Commission Occasional papers No 16, March 2005 EC. See “Demographic change in the euro area: projections and consequences” ECB Monthly Bulletin October 2006. 6  See Blanchard, O. (2004): “The economic future of Europe”, The Journal of Economic Perspectives, vol. 18, pp. 3-26; and also Gordon, R. J. (2004): “Two centuries of economic growth: Europe chasing the American frontier”, CEPR Discussion Paper, No. 4415.
President Dudley: Let’s put it this way, if it did reach 30,000, I would be concerned about the stock market valuation. I think one of the things that’s interesting post the election is, I think the uncertainty level about policy has gone up enormously, yet markets have actually performed very well, especially the equity market. And that’s actually pretty unusual. Usually markets don’t like uncertainty. And so, one thing to ask yourself the question is, why are markets going up even though the uncertainty level has climbed so much? I think one of the reasons, perhaps, is the notion that political deadlock in Washington is going to ease. Another thing is maybe fiscal policy is going to ride in and provide some support for the economy. But it’s an unusual environment, where uncertainty level goes up and the stock market goes up. There’s a little tension there between those two things. Maureen O’Hara: The VIX which is – President Dudley: Well, that’s the other thing. Volatility in the market is extraordinarily low. So, that’s another thing that doesn’t quite fit. You would think if uncertainty was high, you’d have a little bit more volatility. If I was going to write something down as a prediction, I guess I would think volatility will go up. At some point. 3 / 13  BIS central bankers' speeches  Maureen O’Hara: Well, it is a confusing structure right now. I think it’s hard for anyone to kind of predict this economy. But that kind of makes it fun.

Constantinos Herodotou: Current economic developments in euro area and Cyprus - the balancing act of monetary policy Speech by Mr Constantinos Herodotou, Governor of the Central Bank of Cyprus, at the Distinguished Speakers Seminar of the European Economics & Financial Centre (EEFC), London, 19 October 2022. ***  Introduction Dear guests, ladies and gentlemen. Thank you for inviting me to this seminar. It is a pleasure to have this opportunity to speak to you today. I will begin by providing an overall assessment of recent economic developments in the euro area, as well as the monetary policy decisions taken by the Governing Council of the European Central Bank in response to the new challenges of persistently high inflation and rising economic uncertainty. I will continue with the developments in the Cyprus economy and its banking sector, and how it responds to the challenges in this rapidly changing economic environment. Euro area economic developments In the euro area, GDP is growing at a slower pace this year than previously expected due to the negative geopolitical developments, caused by the war in Ukraine. Growth is hampered by soaring energy and commodity costs, low confidence and supply chain disruptions. At the same time, inflation has approached double digits, and a winter with possible energy shortages and high energy prices is on the horizon. Nevertheless, a recovering tourism industry, decreasing unemployment, and EU funding payments helped to boost activity and limit, to some extent, output loss.
Chart 8: UK market interest rates still responsive to economic data news UK US Euro area  Rolling 1-year sensitivity  Lehman collapse  US presidential election  Draghi "whatever it takes" speech  0.7 0.6 0.5  EU referendum  Eurozone debt crisis  0.4 0.3 0.2 0.1 0.0 -0.1  2004  2006  2008  2010  2012  2014  2016  2018  Sources: Bloomberg Finance L.P. and Bank calculations. Notes: Dotted lines show 2004 – 2017 averages. For details of the methodology, see 'Stirred not shaken: how market interest rates have been reacting to economic data surprises' , Bank Underground blog. Chart 9: Interest rate volatility as percentile of historic distribution since 1997 Percentile 0.35 0.30 0.25 0.20 0.15 0.10 0.05 0.00 Jun. 16  Sep. 16  Dec. 16  Mar. 17  Jun. 17  Sep. 17  Dec. 17  Mar. 18  Sources: Bloomberg Finance L.P., ICE and Bank calculations. 14  All speeches are available online at www.bankofengland.co.uk/speeches  14  Guidance into Brexit Now, with the excess supply in the economy virtually used up and the Brexit date looming, monetary policy could travel along two broad paths. The first path is consistent with the MPC’s current central projection which assumes a smooth transition to a Brexit that is the average of a range of outcomes. In this case, the Committee’s reaction function will become conventional again, with the path of policy driven primarily by demand.

The rationale of our regime, i.e., providing support to the currency, does indeed require us to mirror interest rates offered by other currencies – primarily the euro since we moved to a full peg last May – , but in addition we also need to offer a premium to holders of Maltese lira assets to compensate for the small size and vulnerability of our economy. Our judgement on the appropriate size of that premium at any point in time, complemented by considerations relating to financial market sentiment and economic conditions generally, determines our decisions on the Bank’s central intervention rate. The markets have so far judged the interest rate premium on the lira as being appropriate. 4  BIS Review 16/2006  7. It would be ironic if the government were to meet the fiscal criterion for euro adoption, but fail because of the inflation rate. What interest rate policy will the Bank adopt in this regard? I have already explained that the focus of monetary policy in a fixed peg regime is the exchange rate. Unlike most countries with a floating regime, we are not inflation targeters. The Bank’s ability to influence price levels directly through its power to change short-term interest rates in the money market is, therefore, rather limited.