samchain/econo-pairs-v1 huggingface dataset:
And not only their quality, of course. Yesterday morning I spoke in Croatia about the need to improve the efficiency of the judicial system. It is fair to say that many reforms have already been undertaken across Europe and that many countries are now seeing the benefits of such policies. For the last couple of quarters, every new GDP data release by Eurostat has been a positive surprise, while forecasters have been raising their GDP forecast for the EA and the EU. However, while growth has resumed in all countries, medium-term growth potential in the region is insufficient to ensure pre-crisis pace of real convergence. Namely, for convergence to be sustainable, long-term potential per capita growth must be consistent with an expansion of demand. In other words, GDP growth that results from strong capital inflow, foreign demand shock, or fall in interest rates due to perhaps euro area enlargement process, could prove to be unsustainable. So, the question is, did we take convergence for granted? Was one of the great features of the European integration process only a temporary and unsustainable phenomenon related to the 2  initial 'low-hanging fruit' reforms that corrected vast resource misallocation problems, followed by a huge inflow of foreign capital before the crisis? Will convergence return back to a faster speed, will it continue at a slower speed, or maybe even stop or reverse? Is convergence still here and, even more importantly, is it here to stay?

There is a term for it – mutualism, describing a mutually beneficial relationship between living things. And let me explain why I am talking about biology in a financial forum to begin with. 3. I have always longed to find an appropriate way to describe the financial relationship between Hong Kong and the Mainland. In my view, Hong Kong’s dynamic with the Mainland is truly unique in that it is a dynamic which no other pair in the world shares. In the financial world, our win is their win and their win is ours. As financial competition amongst the world’s hubs continues, Hong Kong and the Mainland have long enjoyed a mutually beneficial relationship. Sounds familiar? Yes, perhaps neither of us are exactly the same as a bee or a flower, but Hong Kong and the Mainland share a very similar dynamic as them in the financial world – one of mutual benefit. RMB internationalisation: Hong Kong stands out 4. And that brings me to the topic that I want to discuss in more detail today, which is the internationalisation of the RMB. With the continuing growth of the Mainland economy and its increasing financial integration with global markets, it is natural that RMB will be increasingly used in international transactions. The 14th Five-Year Plan has made clear that promoting RMB internationalisation should be conducted in a prudent manner, based on a marketdriven approach. 5.
These securities either have no fallbacks at all to handle a LIBOR cessation, or they effectively become fixed-rate instruments. And, in practice, it is very difficult, if not impossible, to add the kind of provisions that will be standard for new issuances going forward. A year after Andrew Bailey’s 2017 speech, he reiterated that firms should treat the discontinuation of LIBOR as an event that will happen and that they should be preparing for it.14 For my part, that’s also the message I would ask you to take away today. You can think of this as a call to arms or as a threat or as simply a warning. What’s important is that you act on it. To tackle the issues a LIBOR cessation presents for cash products, the Fed reconstituted the ARRC in 2018 to broaden its membership and its mandate. “ARRC 2.0” now has dedicated workgroups for floating-rate notes, syndicated and bilateral business loans, consumer products, and securitizations. Those workgroups include market participants that weren’t all members of “ARRC 1.0” but are active in their specific sectors. There are also working groups dealing with legal, regulatory, and accounting issues. Thanks to these working groups, for the first time market participants and their lawyers now have not just general concerns and warnings, but specific actionable language to react to and start to use in contracts across different products. Again, this is good news. The ARRC’s recommendations are voluntary, and the Federal Reserve is not mandating what fallbacks to use.

Another difference between SOFR and LIBOR is that SOFR is a “near risk-free rate” because 6/8  BIS central bankers' speeches  the underlying repo transactions are secured by Treasuries. LIBOR, on the other hand, was based on unsecured transactions and was intended to include the price of bank funding risk. Although most of the current uses of LIBOR have no actual need to reflect bank funding risk, that difference does still affect the level of the index, and so will need to be adjusted for in contracts that start out referencing LIBOR and then switch to SOFR. There are various technical ways to adjust for both the term difference and the credit difference between SOFR and LIBOR. The goal is to create a value-neutral adjustment mechanism that doesn’t create winners and losers as LIBOR contracts reset. Ideally, the adjustments would also be easily understood, transparent, and based on objective factors, not on discretion. That’s a very tall order. This is another area where the ongoing consultations are very important. Conclusion Change is hard. It’s hard to say goodbye to LIBOR when it’s been around for so long and is embedded in so many operations and processes that have been in place for decades. For the last several years, change has clearly been coming to the use of LIBOR, but there was a fog of uncertainty about what that change was going to look like, and so the reaction of many firms seemed to be to do nothing except wait and see what happens.
Regulation on the EU-level also faces another trade-off that is not present on the national level – that between the value of a level playing field and the cost of an overly detailed or inadequate regulation. A completely level playing field presupposes detailed rules that are applied in the same way in every market. But too detailed rules on the EU level risk being inadequate on the national level since national markets often differ widely. This could give rise to costly overregulation hampering financial development or driving financial institutions to settle elsewhere. Hence, it might be wise to leave some degree of freedom to the member countries. Historically, institutional competition has proved to be very positive for development in the long run. BIS Review 35/2005  3  At the same time, EU directives (as most international rules) tend to leave plenty of room for national discretions, effectively reducing the value of the convergence/harmonisation that probably was the motivation for the directive in the first place. We risk ending up with the worst of two worlds – very detailed rules on the EU level and loads of discretions on the national level. This makes the rules opaque and their implementation difficult to predict for the private sector. The starting point for EU rules should be the least common denominator. Today instead, it often seems like the starting point is the sum of all member states’ national rules.

Lars Heikensten: The Swedish krona and monetary policy Speech by Mr Lars Heikensten, First Deputy Governor of Sveriges Riksbank, at a seminar of Crédit Agricole Indosuez, held in Stockholm on 5 September 2001. *  *  *  Over the past year the Swedish krona has weakened markedly. Both we at the Riksbank and other players in the currency market have been surprised by this. In that the exchange rate is an important factor in our assessments of future inflation, it also plays a part in the direction of monetary policy. The fact that, for the first time in years, the Riksbank has intervened in the currency market has also contributed to the recent heightening of attention on the exchange rate. Today I shall first endeavour to clarify the krona’s role in the Riksbank’s intellectual framework for monetary policy. A policy that targets inflation requires us to forecast the exchange rate, which is my next theme and by no means an easy task. In that context I shall also say something about the Riksbank’s view of the krona’s long-term real equilibrium exchange rate and its course in the past year. Another question I shall be considering is how exchange rate movements affect inflation. Before concluding, I will also talk a bit about interventions and transparency - a topic that has featured in the debate since we took the decision in June.
This helps to explain why all banks found it more difficult to raise funding when the deterioration in the performance of sub prime assets became apparent, even though it would later be revealed that some banks were more exposed than others. 35 A further challenge is that the markets for innovative financial instruments can grow very rapidly, outstripping the capacity of back offices to keep up with trading. Towards the end of 2005, CDS trading had run ahead of the processing of trades to the extent that the major CDS dealers on average had unconfirmed trades outstanding that were equivalent to a couple of weeks of trading volume. If the reference entities underlying these CDS trades had defaulted, it would not have been clear – at least for some time – who was owed money by whom. The international authorities then set the major CDS dealers targets to reduce volumes of unconfirmed trades, which subsequently fell significantly. But a backlog of unconfirmed trades did start to cumulate again during the early months of the recent financial turmoil, although this has also diminished over the past six months. Furthermore, the proportion of new CDS trades that are confirmed electronically and hence immediately has increased sharply from around 50% when concerns were raised in 2005 to over 90% at present. 36 It is also important that innovative financial products are documented sufficiently carefully and that their risks are accurately communicated to potential investors. The more complex the instrument, the greater the scope for misunderstanding.

6  See for example, Borio, C., Furfine, C and Lowe, P “Procyclicality of the financial system and financial stability: issues and policy options” BIS paper 1, March 2001 and BIS Annual Report: The unsustainable has run its course and policymakers face the difficult task of damage control, 30 June 2008. 7  See Box 9 – Market dynamics and options selling, pp. 60-61, Bank of England Financial Stability Review, June 2005. 10  BIS Review 93/2008  Table 1 Growth of selected financial markets (per cent) OTC derivatives (notional principal outstanding) (a) 98H1 - 07H1 07H1 - 07H2 FX forwards and swaps 8.1 18.8 FX options 11.0 8.0 Interest rate swaps 28.1 13.7 Interest rate options 23.4 8.9 (a) 05H1 - 07H1 07H1 - 07H2 Credit default swaps 17.2 36.0 Asset-backed securities (issuance) (a) (b) 98H1 - 07H1 07H1 - 07H2 07H2 - 08Q1 Non-agency RMBS 15.7 -67.4 -67.5 CMBS 25.0 -40.9 -93.8 Auto loans 7.8 -32.5 -17.1 Credit cards 6.7 -9.8 19.0 Student loans 12.0 -56.9 -34.2 Collateralised debt obligations (issuance) (a) (b) 05H1 - 07H1 07H1 - 07H2 07H2 - 08Q1 Corporate CDOs 121.0 -46.0 -92.1 CLOs 42.5 -56.9 -74.4 ABS CDOs 38.7 -68.2 -85.2 Sources: BIS, Dealogic and SIFMA. (a) Annual growth rate. (b) Growth of annualised issuance. 43 It is vital that market forces should be decisive in determining which instruments live or die.
If this was a business-as-usual recovery, with equilibrium real rates close to historical levels, the Taylor-rule would suggest a considerably more aggressive monetary policy response, and a tighter stance, than has been the case in practice.7 Of course, there are good reasons for believing this may not be a business-as-usual recovery. For one thing, medium-term real rates of interest are materially lower than in the past (Chart 12). If these expectations were to be mirrored in persistently lower growth rates in the economy, then that would imply a lower equilibrium real rate of interest.8 Assume that equilibrium real interest rates are not fixed at 2%, but move in line with the real forward rate curve shown in Chart 13. That would give the Taylor rule path shown in Chart 23. This is now consistently below the actual and market-implied path. In other words, if secular stagnation is the name of the game, the Taylor rule suggests interest rates could remain lower for longer than markets currently expect. So how should a policy-maker choose between these twin peaks and their implied paths? The optimal response could be to probability-weight the two peaks, updating the probabilities as new data arrives. Financial markets may be doing just that. Implied interest rates lie between the upper peak recovery of Chart 22 and the lower peak of Chart 23. Markets rates have coursed a path in the valley between the twin peaks. But this path is also shifting towards the lower peak.

So far, the increase in income has not led to a pronounced rise in price and wage inflation. Businesses are using resources with steadily greater efficiency and the supply of labour has been ample. Nevertheless, in the face of such strong external influences, it is demanding to smooth developments in the Norwegian economy. Our stabilisation policy rests on four pillars, which were established in the 1990s and in 2001 against the backdrop of the wide fluctuations in economic developments during the first twenty years of the oil age in Norway. Under the oil fund mechanism, increased government petroleum revenues are invested abroad. This curbs the impact of price fluctuations on domestic demand and production - and on inflation and the krone exchange rate. A floating krone exchange rate also has a stabilising effect, as the exchange rate normally appreciates in favourable periods and depreciates during adverse periods. At the same time, the fiscal rule that provides for a steady phasing-in of petroleum revenues and the inflation target anchor expectations concerning developments in the krone exchange rate and inflation. As a result, the impact of a terms-of-trade change, stemming from variations in the oil price, on these variables becomes less pronounced. Moreover, the fiscal rule contributes to restraining the pace at which exposed industries are scaled back. In principle, these policy guidelines are just as conducive for coping with favourable periods as with adverse periods. We will face another test when the terms-of-trade change is reversed and the gains either fully or partly dissipate.
The data gaps would complicate the assessment on key issues such as the sustainability of household indebtedness, whether we are creating the right type of jobs or whether our policies are providing long term or temporary employment. Second, there are significant gaps in terms of balance sheet data, especially for households and corporates. This deficiency in data complicates detection of vulnerabilities, build up of risks and propagation of shocks from one sector to another. I hope the discussion today would provide insights into dealing with some of these issues I earlier mentioned. At this conference, we will have the opportunity to examine areas which we can improve so that our statistics are credible, relevant and timely, would facilitate informed policy formulation and decision making by the authorities, and enable informed decision makings by economic agents such as investors, financial institutions and the general public at large. In the first three sessions today, our distinguished speakers and discussants will share insights and experiences in many areas; the adoption of statistical best practices in data management, ways to promote data sharing and communication of statistics, identification of statistical gaps and limitations faced by analysts or authorities in the usage of data. The session would also explore and provide possible resolution to challenges confronted by compilers and users of statistics.

Indeed, it has been often noted that the surprise element at the onset of economic and financial crisis is often due to the lack of high quality, comprehensive and timely data. For example, the Asian Financial Crisis revealed major gaps in statistical coverage, especially on detailed cross border exposures and indicators for financial soundness, which had permitted serious vulnerabilities to go undetected and unresolved for a long time. Another key lesson learnt, was from the global financial crisis, where the lack of data and monitoring of financial innovation that had allowed the build up of financial risks to go undetected until it was too late. Another good example was the existent of a large shadow banking system that is unregulated and unsupervised. At the same time, insufficient coverage and depth of information can potentially place policymakers at the risk of deriving at the wrong conclusion and thus, prescribing the wrong policy measures or prescriptions. The decisions that we make are only as good as the data on which it is based. In this respect, I would highlight two areas in particular that requires further data compilation. First, in the area of labour market statistics, there are notable gaps in terms of data collection on the economy-wide wages, hours worked per labour, productivity index, unit labour cost and duration of employment. We also do not have data and enough information on the kind of jobs that the economy is producing, either by sector, wage level, type of jobs and for whom the jobs are created.
While risk-based divestments concern companies that we prefer not to invest in, there are other companies that we want more of. These are companies that, in our opinion, provide opportunities for solid returns in the longer term. In the mandate, the Ministry of Finance has also set a requirement for the Bank to establish separate environment-related investment mandates. At the end of 2019, these mandates amounted to NOK 79 billion invested in 77 companies and bonds. In 2019, the Ministry also decided to permit unlisted investments in renewable energy infrastructure. NBIM has a group in place that has begun to seek out opportunities in this sector. We set the same risk and return requirements for the investments under these mandates as for the rest of the fund’s investments. Everything we do in the area of ownership is, and must be, a result of an active approach. In our active management, we seek at all times to make the most of analyses we have performed and the knowledge we have acquired over the past 20 years. Our internal asset managers closely follow the largest European companies in particular. Knowing the companies well puts the fund in position where it is possible to earn excess returns. External management In emerging markets, we benefit greatly from our use of external asset managers. Knowledge of and proximity to markets are essential for being able to assess the risk of investments. In view of challenges associated with responsible investment, a passive investment strategy is not really appropriate in these markets.

The Bank’s investment management organisation analyses these companies thoroughly, in order to identify long-term investment opportunities, reduce the Bank’s exposure to undesirable risk and the like. We use such analyses in order to safeguard the portfolio. There are companies 3/5  BIS central bankers' speeches  where we prefer not to be an owner. If we see that a company has a business model that we do not regard as sustainable, it may lead to divestment. But unlike the ethically justified divestments, these risk-based divestments are justified by purely commercial considerations. All together, the fund has made risk-based divestments of 282 companies since 2012. The first divestments were of palm oil companies, whose activities entail destruction of rainforests. Since then, the fund has divested of a number of other companies, where the common denominator has been that we have observed inadequate management of risks such as those related to the environment and climate change, corruption and human rights. Chart: Return effects of risk-based divestments Our experience from this work has been favourable. We exploit the fund’s characteristics, primarily its long-term horizon, to reduce risk and – in any case as it appears today – also to improve the fund’s return. Since 2012, risk-based divestments have contributed to increasing the return by an amount equivalent to around 0.27 percentage point of the value of the fund’s equity portfolio, measured against the benchmark index. This is the equivalent of around NOK 7 billion.
Spencer Dale: Inflation targeting – learning the lessons from the financial crisis Speech by Mr Spencer Dale, Executive Director and Chief Economist of the Bank of England, at the Society of Business Economists’ Annual Conference, London, 23 June 2009. I would like to thank Rohan Churm, Jens Larsen and Rob Wood for their considerable help in preparing these remarks. The views expressed are my own and do not necessarily reflect those of other members of the Monetary Policy Committee. *  *  *  We are in the midst of a deep recession. Unlike recessions of the late twentieth century, this twenty-first century version is not the result of deliberate, but belated, attempts to slow the expansion of money spending in order to bring down inflation from very high levels. Inflation is close to the Government’s 2% target. This recession has at its heart a crisis in the banking system; a crisis that has strangled the supply of credit and undermined public confidence. For the first time in fifty years, the total amount of money spent in our economy during the first quarter of this year was lower than a year earlier. The era of “Great Stability” is over. The Great Stability followed hot on the heels of the introduction of the inflation targeting framework for monetary policy. Some attributed part of the improvement in economic performance to better policymaking. The abrupt end to that stability has, in turn, led the inflation targeting framework to be questioned.

Indeed, the very knowledge that the Bank stands ready to purchase assets may be as beneficial as the actual purchases. And over a period of time, as market functioning improves, the quantity of private sector assets held by the Asset Purchase Facility may well decline as assets mature and are rolled over into the private market. This should be seen as a sign of success not of dwindling support. The Bank continues to review actively the case for extending its operations into other corporate credit markets, and recently announced its intention to extend its purchases to include commercial paper secured on loans for working capital. But given the relatively modest size of corporate credit markets in the UK, to increase significantly the scale of our corporate debt purchases would involve changing the nature of our operations. Rather than improve their functioning, large scale asset purchases would risk crowding out private debt markets: substituting for markets rather than supporting them. That is not consistent with the aims of the Asset Purchase Facility and could detract from the long-term efficiency of the economy. A second criticism that is sometimes made against the asset purchase programme is that some of the gilts we have purchased have been from foreign investors and this may limit the effectiveness of the purchases. This argument is based on the supposition that overseas investors may be more likely to reallocate their portfolios into foreign currency assets, rather than into alternative sterling assets, such as corporate bonds or UK equities.