samchain/econo-pairs-v1 huggingface dataset:
Distinguished Guests, As a result of the steps taken towards macroeconomic stability and the implementation of prudent policies, the level of dollarization in Turkey started to decrease after 2001, despite some pauses. As of November 2006, the share of foreign exchange deposits in the total deposits 12 and in the broad money supply were 38 percent and 35.5 percent respectively. Also the ratio of foreign currency loans to total loans in the banking sector decreased to the level of 16 percent in the same period. Moreover the share of the foreign currency denominated and the indexed debt of the government to total domestic debt decreased to 15.8 percent as of October 2006. By any measure, this, I believe, is a remarkable performance. But all these positive developments do not enable us to call it a persistent and permanent dedollarization process, for sure. It is apparent that the level of dollarization in Turkey is still high, which is an important challenge for monetary policy-making. Obviously, the dollarization is not declining fast naturally. This confirms the evidence that even if the inflation falls and the macroeconomic stability is maintained to great extent, the memories of the past inflationary and unstable economic environment can cause economic agents to carry on their past habit of holding foreign currency assets and create an inertia. Therefore, even a small threat to the macroeconomic stability or any kind of internal or external development that increase uncertainty perceptions can easily lead to a deterioration in expectations and give rise to an increase in dollarization.

As we all know, the choice of exchange rate regime is of critical importance for a central bank. The empirical findings show that in economies with serious balance sheet mismatches, the policy makers prefer fixed or controlled exchange rate regimes 5 ..  2  Eichengreen, B.; Hausmann, R. (1999); “Exchange rates and Financial Fragility”; NBER Working Paper No:7418. 3  De Nicolo, G.; Honohan, P.; Ize, A. (2003); “Dollarization of the Banking System: Good or Bad?”; IMF Working Paper; WP/03/146. 4  Galindo A.; Leiderman L. (2003); ”Living with Dollarization and the Route to Dedollarization”; Inter-American Development Bank; Working Paper; 526; p. 14. 5  Choi, W.; Cook, D. (2004); "Liability dollarization and the bank balance sheet channel"; Journal of International Economics; Vol. 64(2), p. 247-275. 2  BIS Review 124/2006  On the other hand, flexible exchange rate regimes provide more room for monetary policy that enables to respond to external shocks freely. It has also been found by using cross-country data for the banking sector that more volatile exchange rates reduce the share of the foreign currency denominated loans and deposits 6 , thus contributes to prevent dollarization. However, even if a flexible exchange rate regime is chosen de jure, dollarization and high pass through effect from exchange rates to inflation may cause “fear of floating”, thus monetary authorities are put under pressure to intervene in fluctuations in exchange rates at all costs.
In March 2000, the group issued a sobering reminder: institutions that provide leverage to HLIs must improve their counterparty risk management and hedge funds need to enhance their disclosures. Along with these developments, or some say in spite of them, the hedge fund industry has continued to grow from strength to strength. There are now about 6,000 hedge funds worldwide, managing more than $ billion. In 2001, some $ billion of new capital was invested into hedge funds. By 1 comparison, the entire industry was only $ billion in 1990 . While high net worth individuals remain the main source of capital, hedge funds are becoming more popular among institutional and retail investors. Funds of hedge funds and other hedge fund-linked 2 products are increasingly being marketed to the retail market . For example, ABN Amro launched the first retail fund of hedge funds in Singapore last month. There are a number of factors behind the meteoric rise in demand for hedge funds. The unprecedented bull run in the US equity markets during the 1990s swelled investment portfolios. This led both fund managers and investors to become more keenly aware of the need for diversification. Hedge funds are seen as a natural “hedge” for controlling downside risk because they employ exotic investment strategies believed to generate returns that are uncorrelated to traditional asset classes.

The elevated level of uncertainty reinforces the importance of a data-dependent approach to our policy rate decisions, which will be determined by our assessment of the inflation outlook in light of the incoming economic and financial data, the dynamics of underlying inflation, and the strength of monetary policy transmission. The key ECB interest rates remain our primary tool for setting the monetary policy stance. 2/3  BIS - Central bankers' speeches  The reduction of the asset purchase programme (APP) portfolio – the second topic for today's hearing – is part of our monetary policy normalisation. As of the beginning of this month, the APP portfolio has been declining at a measured and predictable pace of € billion per month on average and will continue to do so until the end of June 2023. The subsequent pace will be determined over time and the Governing Council will regularly reassess the pace to ensure it remains consistent with the overall monetary policy strategy and stance, to preserve market functioning and to maintain firm control over short-term money market conditions. Conclusion Let me now conclude. With war in Europe and high inflation requiring immediate action, policymakers may be inclined to divert their attention from long-term challenges – but we must all strive to keep up our efforts to address the existential crisis of climate change.
One of its key functions was to oversee inter-society mergers, which became a frequent occurrence as the number of building societies 30  reduced (largely through merger) from around 2,200 in 1900 to 480 in 1970 . By this point, Registry staff were examining societies’ annual returns and seeking to identify weaknesses in capital and liquidity; indeed, there was a keen focus on the latter when, in 1976, building societies started to submit a monthly liquidity return. I am told that at that time, the Registry had one electronic calculator to which the three building society teams each had access for half a day each week. History does not relate what the calculator did for the other three-and-a-half days – perhaps it was resting. I hope it will be as obvious to you as it is to me that many of these practices have shaped the PRA’s approach to supervision today, just as much as our heritage from the Bank on the banking side. This is partly because as the prudential supervisor of banks, building societies and insurers we must of course draw in full on our heritage across all three sectors. But it’s also because some of our wisest staff have been here all the way through – most obviously Eric Engstrom who was, I understand, born in Ketley’s pub in 1775. Indeed, the general approach that started to emerge for building societies in the early 80s was forward-looking and judgment-based, though nobody at the time would have described it in such terms.

The Governor was alerted given the “almost unthinkable consequences should Barings go down: not only would the failure of the City’s leading accepting house inevitably bring down a host of other firms… but the very status of London would be threatened and thus the pre-eminence of the City as an international financial 4  centre” . Amidst much to-ing and fro-ing between the Bank of England (hereafter “the Bank”), the Treasury and Downing Street, it was becoming apparent that the crisis at Barings was one not only of liquidity but also of solvency, and that there was now a palpable loss of confidence in the institution throughout the City. The Bank alone could not afford to act as lender of last resort so eventually the Governor of the day – Lidderdale – announced the establishment of a guarantee fund for Barings; within half an hour, the City’s top institutions rushed to contribute – the likes of Raphaels £ Antony Gibbs and Brown Shipley £ apiece) and Smith Payne & Smiths, Barclays, Morgan and Hambros (each contributed £ Indeed, the  2 3 4  Kynaston, David. City of London: the history, London, Vintage Books, 2012, pp130-131 Ibid, p.131 Ibid, pp.133-134 3  All speeches are available online at www.bankofengland.co.uk/speeches  3  leading joint-stock banks had put themselves down for £ and by mid-afternoon the fund was up to 5  £ and climbed further to £ by the following week . Barings was saved.
Moreover, developments in the financial markets are very rapid and there is every reason to believe that the relationship changes over time. If one looks back at global developments over the past year, the financial markets appear to have coped with more and greater shocks than many would have thought possible. The IT and telecom bubble burst, a simultaneous international slowdown in economic activity began, Turkey experienced a financial crisis, the USA suffered terrorist attacks on 11 September and began a war against Afghanistan and the American energy company, Enron, collapsed. Finally, Argentina suffered a severe crisis. The private market operators were not saved by further measures from the IMF, as many had expected. However, not even all of these events together appear to have had any serious long-term effects on the global financial markets. In addition, it now seems as though the repercussions for the real economy were relatively slight, despite the fact that households and companies, particularly in the USA, were heavily indebted when the economic upturn began. Does this mean that we can now write down the risk of financial imbalances and crises delaying the economic upturn most analysts predict to be on its way? Have economic policy, the financial infrastructure and the behaviour of market operators been adapted to the globalised, technologically well developed financial markets to the extent that the contagion effects on the real economy of financial disturbances has declined significantly during the past decade?

The lack of supervision also applied to Long Term Capital Management, LTCM, some years earlier. One might wonder whether function rather than company type might not be a better base for supervision. There is otherwise a risk that functions essential to society and thus needing protection will be transferred to companies not subject to supervision. At the same time, the public sector is in practice forced to intervene if the failure comprises a threat to the system, regardless of whether it has been able to exercise supervision. To what extent Enron was involved with functions that can be assessed as worth protecting is a question for discussion, but it is an important question of principle. We cannot and should not regulate all companies involved with financial operations, e.g. in managing their own funds. Secondly, it appears obvious that accounting regulations, at least those in the US, have not developed at the same rate as the instruments and forms for capital acquisition on the financial markets. Is it really reasonable in the long term for an increasing number of companies' risks to be reported off balance sheets? In the case of Enron, it also appears that there were risks that did not need to be reported at all, according to the regulations in force, such as liquidity risks that were triggered by a down-rating.
Michael C Bonello: Policy challenges beyond the euro Speech by Mr Michael C Bonello, Governor of the Central Bank of Malta, at the Annual Dinner of the Malta Institute of Financial Services, Saint Julian’s, 17 November 2006. *  *  *  I should first of all like to thank you, Mr President, and your Council for the opportunity to share my thoughts once again with such a distinguished audience. Before I do so, however, I would like to commend the Institute of Financial Services (IFS) for its admirable capacity to reinvent itself in response to the changing demands of the marketplace. This year, for example, the Institute has renamed itself as the IFS School of Finance. I have discovered that this apparently cosmetic change has a very significant meaning, in that the Institute in the UK is now empowered to award degrees. IFS Malta, on its part, has extended its reach beyond our shores and is cooperating with the Romanian Banking Institute in the delivery of one of its academic programmes in that soon-to-be EU member country. I am sure all your other guests will join me in wishing you and your Council every success in your continuing efforts to promote higher professional standards in the financial sector. Since Malta joined the EU in 2004, and particularly since the Maltese lira entered ERM II last year, the Central Bank of Malta has been making the case for an early adoption of the euro.

This has involved the recapitalisation and restructuring of bank balance sheets; downsizing, entailing reductions in staff and in bank offices; and an overhaul of the savings bank sector, improving the corporate governance structure and resolving the situation whereby it was impossible for these institutions to tap the capital market for funds. These favourable developments are apparent in the behaviour of certain variables, which I shall briefly review. i.  Non-performing loans  Non-performing loans (NPLs) as a proportion of lending to the resident private sector in Spain have been falling since early 2014. On the preliminary data for February, the latest figures available, the NPL ratio for Spanish banks as a whole declined to 12.6%, the lowest proportion for the past 18 months. This improved asset performance is the case both for households and for non-financial corporations. ii. Funding  Spanish banks have improved their access to both retail and wholesale funding, and have significantly reduced their recourse to the liquidity provided by the Eurosystem. Nonetheless, recourse to the Eurosystem remains high given the limited activity on interbank markets. The trajectory of deposits in 2014 and the still-declining trend of credit have allowed the narrowing of banks’ loan-deposit gap to continue. The gap has narrowed by almost 40% since 2007. 2  BIS central bankers’ speeches  iii. Profitability  The capacity of banks to generate profit reflects their resilience in the face of potential difficulties and, at the same time, their possibilities of developing banking business in a sustainable fashion.
Against this background, the authorities had two options: either to use the fact that Malta did not meet the fiscal criteria to maintain the status quo and delay the implementation of sensitive reforms, with the risk of undermining growth prospects; or to use the adverse impact of globalization on Malta’s current account and the vulnerability of the fixed exchange rate regime to highlight the urgent need for a faster pace of reform, while holding out the promise of the expected benefits of the euro. The authorities chose the latter approach, including a rather ambitious programme of fiscal consolidation and a unilateral commitment to maintain the Maltese lira/euro exchange rate at the central parity rate in ERM II. This appeared a natural way to buttress the economy’s long record of exchange rate stability, though it was also dictated by the need to counter harmful speculation at the time about the level of the exchange rate. Three years after EU accession, that bold decision appears to have paid off. Economic growth rose to 3.3% in 2005 and 2006, and is expected to stay around that level; the unemployment rate stabilised, then eased slightly; and FDI flows, which have always been important, strengthened further. The gap between productivity growth and wages narrowed to the point that unit labour costs are now increasing negligibly or falling, depending on the measure used.

These characteristics constitute a challenge for policymakers in that key economic variables are prone to volatility, being highly sensitive to external events and to shocks in specific sectors or individual enterprises which, though small in absolute terms, can have a disproportionately large impact in a small country context. Such an economy clearly stands to benefit from joining a monetary union, particularly in terms of greater stability and policy credibility. 1 From a central banker’s viewpoint, moreover, a key advantage is the elimination of the risks inherent in managing a small, vulnerable currency. Permanently fixing the Maltese lira / euro exchange rate, moreover, did not appear to be a radical change. The ECU, and since 1999, the euro, had in fact been the main reference currency in the exchange rate baskets since 1989. By 2002 the euro already carried a weight of 70%. Furthermore, Malta’s only devaluation, which took place in 1992, confirmed that exchange rate adjustments are not the most effective means for safeguarding an open economy’s competitiveness. The initial advantage derived from the devaluation was soon reversed, owing to the inflationary impact of compensatory wage increases resulting from a partial wage indexation mechanism and the high import content of inflation. If anything, the irrevocable fixing of the exchange rate and the economic policy co-ordination and monitoring procedures of EMU seemed to offer a congenial environment for implementing the structural changes necessary for a lasting improvement in the country’s international competitiveness.
If the increase in oil prices is sustained, the expected decline in annual HICP inflation rates to below 2% later in the spring could be less pronounced – and inflation rates during 2002 could turn out to be somewhat higher – than we expected in late 2001. Beyond the shorter term, in the light of current expectations of a gradual economic recovery in the euro area, upward pressure on prices from aggregate demand should remain contained. However, this outlook for inflation is fundamentally dependent on continued wage moderation. In this respect, there is some cause for concern with regard to ongoing wage negotiations. The economic downturn in the euro area in 2001 also presented challenges for fiscal policy. Since some countries came close to the 3% limit for the deficit to GDP ratio, the experience of 2001 clearly  2  BIS Review 26/2002  demonstrated the need for all countries to undertake consolidation efforts in good time to ensure a fiscal position close to balance or in surplus before the start of a downturn. In order to prevent problems like those experienced last year from recurring in the future, it is vital that the commitments made to achieving balanced budgets by 2003-04 be firmly followed up in the Member States concerned. Finally, I would like to highlight the need for structural reforms aimed at improving the functioning of product and financial markets. If implemented vigorously, these reforms can increase euro area growth potential and employment on a sustainable basis.

However, owing to the strong M3 growth in 2001, there is still a lot of liquidity in the economy. We therefore have to monitor monetary dynamics closely in the coming months. The persistence of excess liquidity in the economy could become a concern once the economic recovery in the euro area gathers pace. Turning to economic developments, the latest information has reinforced our expectation that real GDP growth in the euro area will recover in 2002 and that, later in the year, it should again be back in line with potential growth. The recovery should be supported by both domestic and external factors, in an environment in which financial conditions are favourable and where there are no major imbalances in the euro area. However, at the current juncture, some uncertainty still remains regarding the strength of the recovery. As regards price developments, there is no evidence thus far of a significant upward impact on the overall price level from the euro cash changeover. While some shorter-term effects cannot be ruled out, there is reason to believe that the introduction of the euro banknotes and coins will strengthen competition, thereby supporting the maintenance of price stability over the medium term. This notwithstanding, HICP inflation is currently somewhat higher than was expected a few months ago, owing partly to a significant rise in oil prices.
Productivity by factor, Sweden 1976-2002 50% Logaritmic scale  40% Productivity 30% TFP 20% Capital deepening 10% 0% -10% 76  78  80  82  84  86  88  90  92  94  96  98  00  02  Sources: SCB and Sveriges Riksbank. This picture is also supported by studies from the OECD (slide 6). A comparison of the different countries shows that Sweden, along with the USA, Finland and Australia, has had the highest technology content (TFP) in growth, while other countries have grown through using more labour or capital. What we still do not know is how large and how important the IT sector actually is in Sweden. One problem is that Statistics Sweden, which otherwise makes in-depth studies of many social phenomena, cannot discern investments in IT - much less adjust the price of these investments against the rapid qualitative development that constantly raises the performance of IT. It is necessary to obtain statistics in this field in order to calculate where productivity is coming from and how it is spread on, as Oliner and Sichel have calculated in the USA. The Riksbank therefore welcomes Statistics Sweden’s announcement of a report on IT-related statistics and hopes to see concrete results. BIS Review 89/2000  6  6.

During the last ten years, for example, U.S. nonfinancial corporations borrowed a net amount of $ billion in the form of bonds, three times the net amount they borrowed from banks. Over this same period, these companies as a group spent $ billion more to retire stock – through buybacks and mergers – than they raised in new offerings. Accompanying these increased levels of debt market activity has been a continuous process of financial innovation. This innovation has served to unbundle different kinds of risk and, thereby, to enlarge the menu of risks that investors may choose to bear. For example, interest-rate swaps, futures and options help reconfigure various interest-rate risks. Total return swaps and creditspread options are tools for reallocating the payment risks primarily of emerging market debt. Credit-default swaps and credit-linked notes are ways to redistribute default risks. In practice, this unbundling of risk means that a broad range of financial institutions today performs the credit intermediation process, eroding the historical comparative advantage of banks in bearing credit risk. At various times, some institutions will be underwriting issues, while others will be making bridge loans, providing credit enhancements, writing derivative contracts and taking up riskier components of securities. Within the United States, the fixed-income market is today a market of some $ trillion, roughly the same size as the total equity market. Trading activity in fixed-income instruments is concentrated in Treasury securities.