samchain/econo-pairs-v1 huggingface dataset:
Earned principal reduction Investment firms that purchase delinquent mortgages routinely reduce principal in order to maximize value on these loans. It would make sense for Fannie and Freddie to do this as well in order to minimize loss of value on the delinquent loans they guarantee. However, I am uncomfortable with the notion that “underwater” borrowers who owe more on their mortgages than their homes are worth should have to go delinquent before they have a chance of securing a reduction in their mortgage debt. I believe we should also develop a program for earned principal reduction for borrowers who are underwater but keep on making their mortgage payments. Such a program would strengthen the incentives for mortgage holders who are underwater to continue to stay current on their loans, and reduce the likely number of defaults and REO sales. Negative equity is one of the most significant predictors of mortgage default across all types of mortgage products, including when you control for credit scores and level of income documentation. While recent underwater borrowers have not been defaulting at a rapid pace, they are also not prepaying, implying that underwater mortgages remain “at risk” for a prolonged period of time to any adverse shock to the borrower. It is admittedly challenging to predict how underwater borrowers will ultimately perform and this performance will be sensitive to the path of home prices.

in the product, services and labour markets, healthcare and social insurance systems etc. For Estonia the adoption of the euro is the only logical step and the overarching policy priority. In this context, we would like to emphasize that it is in the interest of the whole European Union that the Euro Area enlargement takes place in accordance with the clear set of well known rules while the criteria are applied, in line with the Treaty provisions, on an equal and economically meaningful manner. The countries joining should have a proven track record to fare well under the common monetary policy. This being the case, the Euro Area membership would fasten the catch-up process in these countries and strengthen the countries' ownership in the EU-wide macroeconomic co-operation at large. Macroeconomic stability and economic flexibility are prerequisites for the new Member States to ensure that investment in physical and human capital is sustained and outlays for research and development further increased. Higher growth and stronger policy coordination on the EU level will also strengthen the social dimension of enlargement. BIS Review 60/2006  1
Limitations on loan-to-value and loan-to-income ratios, which are applied in Norway, are examples of rules that can have a stabilising effect. Minimum capital requirements for financial institutions and liquidity and funding structure requirements are other examples of rules that will make high credit growth more expensive for financial institutions, and thereby for customers. Rules to ensure that shareholders and creditors bear the cost if banks suffer substantial losses or have to be wound up will have a similar effect. Financial vulnerability can build up more quickly in periods of expansion, partly because financial institutions then have a stronger inclination to take risk. This implies that regulations should be countercyclical, having the strongest effect when the risk of a buildup of imbalances is greatest. It is important that the rules function as automatic stabilisers in the economy. Discretionary use of instruments is considerably more demanding. But it may nevertheless be advisable to introduce such instruments, such as capital requirements that vary over time with the rise in debt and asset prices. The Basel Committee, which assesses new rules for financial institutions and which includes members from major countries, has proposed the introduction of a time-varying capital buffer requirement over and above the minimum capital requirement. Financial corporations with a capital buffer judged to be insufficient would be subject to restrictions on dividends and other payments to shareholders and employees.

The floor system makes it easy to ensure that money market rates track key rate decisions. However, the system has proved to have undesirable side-effects. It makes banks passive. The market for short-term unsecured liquidity becomes very limited or disappears. The pricing mechanism – or the rates set in the money market – contains information that will not emerge if a public actor such as the central bank takes the market’s place. Consequently, we now need to set clearer boundaries between the central bank’s role as lender of last resort and settlement bank and the role of the market. In order to stimulate money market activity and reduce demand for central bank reserves, it should be more expensive for banks to hold substantial deposits in the central bank. We are therefore working on changes in our lending and deposit facilities. There are also other weaknesses in Norway’s money market. When setting household and corporate interest rates, banks not only take into account movements in the key rate, but also give weight to the money market rate, i.e. the Norwegian InterBank Offered Rate (NIBOR). In our opinion, there are shortcomings in the way this rate is set. The basis for setting the rate can be made more transparent for the benefit of other participants and it is calculated using information from only six large participants. This group does not include Norway’s largest saving banks or any international banks. We will take the initiative for improving the structure for setting NIBOR.
The Riksbank has little opportunity to influence Sweden’s long-term growth capacity As everyone knows, one of the Riksbank’s statutory remits is to promote price stability. A large part of the Riksbank’s operations revolve around this remit. In order to be successful in this regard, it is important that the process of wage formation works well and that both the central and local governments manage their finances in a responsible manner. Relatively stable inflation in recent years and expectations of future inflation around the Riksbank’s target of 2 per cent indicate that the Bank has been successful in its conduct of monetary policy in recent years. This success has been largely attributable to increased stability in economic policy in general; in particular, fiscal policy has been governed by a ceiling for central government expenditure and a surplus target for the public finances. Furthermore, partly as a result of greater credibility for the Riksbank’s inflation target, the social partners have managed to halve the rate of wage increases from the levels that were common in the 1970s and 1980s. These circumstances have formed the environment in which the Riksbank has acted in recent years. The very point of giving the Riksbank’s objective of price stability high priority in economic policy is that a stable economic environment fosters economic growth and high employment.

On the other hand, the banking system continues to apply additional prudence with regard to lending, albeit it is under good liquidity and capital conditions. Financial markets are characterised by downward liquidity risk premiums. Interest rates in the inter-bank market fell even further in November, reflecting the ample liquidity and eased monetary conditions. In the primary market, government security yields continued to fall. Moreover, the interest rate on deposits and loans denominated in the Albanian lek were downward, in response to monetary policy signals. In the period ahead, a more comprehensive response of the real economy to the eased monetary conditions is expected. *** The Supervisory Council of the Bank of Albania deems that inflation will remain at low levels and close to the medium-term inflation target of the Bank of Albania. The performance of the domestic economy, global economy, and financial markets is not expected to generate any deviation from the 3.0% inflation target. Under these conditions and in the absence of unexpected shocks from the supply side, consumer prices will increase at low rates and will range within the target of the Bank of Albania. *** At the conclusion of discussions, the Supervisory Council decided to keep the key interest rate unchanged, at 4.00%. Keeping the key interest rate at minimum rates helps maintain the stimulating character of the monetary policy, thus enabling the real economy to take advantage of better lending terms in 2013. Furthermore, this policy contributes to keeping inflation expectations in control, by helping lower long-term interest rates.
But secular stagnation may imply a level much lower than in the past, possibly even negative. In monetary policy, this is the difference between chalk and cheese, success and failure. In this respect, the behaviour of global real interest rates over the past 30 years is remarkable. Chart 13 plots a measure of real interest rates since 1990, in advanced and emerging economies. Both have exhibited the same secular downward trend, falling by around two percentage points per decade. Today, they are around zero. For some advanced countries, the pattern is even more striking. Chart 14 plots the real interest rates expected over the next 30 years in the UK and euro-area. For both, real rates are expected to remain negative for the next three decades. Investors are willing to pay governments for the privilege of lending to them for the next 30 years – a negative rate of time preference. This pattern has no historical precedent. One interpretation is society having become significantly more patient, as in the lead up to the Industrial Revolution: higher global saving relative to investment would lower global real interest rates. If that is the cause, bring out the bunting. By lowering the cost, and raising the return to innovation, investment and growth would be stimulated. 43 Falls in real rates would signal secular innovation. The optimists would have it. But an alternative reading is possible. Low real rates may instead reflect a dearth of profitable investment opportunities relative to desired savings.

It will also be necessary to impose tight restrictions on foreign-denominated lending to households and businesses without corresponding foreign currency-linked income. But these restrictions are prudential rules rather than capital controls. The Central Bank sent the Minister of Economic  BIS central bankers’ speeches  5  Affairs a report on this topic at the end of 2010 and intends to send him a more in-depth report on the same subject shortly after Easter. Looking ahead to the next several years, the question is not whether we lift the controls, but how. This is not the time or place to go into that topic in detail, as it has been discussed recently in some depth by the Bank and its representatives, and that discussion will presumably continue. The main point is that carefully preparing the liberalisation process, as is currently being done, significantly reduces the risk to financial and economic stability. Progress has been made in this area, and a great deal more can be done in the near future. There is quite a bit at stake: the short-term benefits conferred by the capital controls could be lost at the eleventh hour and several years of long-term benefits of free capital movements could be burned up if liberalisation is carried out recklessly.
It has been the endeavour of this report to propose a type of central bank which, with proper skill and understanding in its management, will establish monetary conditions in Ceylon that may make possible, as never before, the fuller use of the nation’s human and material resources and a rising standard of comfort for all.” History has judged us before! I will leave it up to you to judge us in future as well! Bibliography Bernanke Ben S. and Michael Woodford (eds), The Inflation Targeting Debate. Cambridge Massachusetts: National Bureau of Economic Research Studies in Business Cycles, 2005. Bernanke, Ben S., Thomas Laubach, Frederic S. Mishkin, and Adam S. Posen (eds), Inflation Targeting. Princeton: Princeton University Press, 2001. Blinder, Alan, Central Banking in Theory and Practice, Cambridge Massachusetts: The MIT Press, 1996. Central Bank of Sri Lanka, 40th Anniversary Commemorative Volume of the Central Bank of Sri Lanka, 1950-1990. Colombo: Central Bank of Sri Lanka, 1990. Central Bank of Sri Lanka, 60th Anniversary Commemorative Volume of the Central Bank of Sri Lanka, 1950-2010. Colombo: Central Bank of Sri Lanka, 2011. Central Bank of Sri Lanka, Annual Report. Various Years. Central Bank of Sri Lanka, Road Map: Monetary and Financial Sector Policies, Various years. Colombage, Sirimevan, The Political Economy of Central Banking in Sri Lanka. Prof. H. A. de S. Gunasekera Memorial Oration, University of Peradeniya, October 2017. 23  Government of Ceylon, Sessional Paper XIV: Report on the Establishment of a Central Bank for Ceylon (Exter Report). 1949.

This was an overnight 7  devaluation of the basic exchange rate by 120 per cent! The rupee was then allowed to float under a managed exchange rate regime. Accordingly, compared to the end 1976 exchange rate of Rs. 8.83 per US dollar, the exchange rate was recorded at Rs. 15.56 at end 1977. This sharp devaluation addressed the overvaluation of the rupee observed under the fixed regime. The subsequent managed exchange rate regime allowed some flexibility to determine the value of currency largely on the basis of market demand and supply, while attempting to prevent the overvaluation of the rupee by maintaining the real value of the rupee against movements of a basket of major currencies. The Aftermath of the Managed Float The introduction of the managed floating exchange rate was a welcome move from the perspective of a liberal macroeconomist. However, this resulted in new challenges to the conduct of monetary policy, particularly as the exchange rate was no longer available to anchor inflation expectations like in the past. The Central Bank also had to face a new challenge, as the government started to run extremely large fiscal deficits funded mainly by concessional external funding to develop public infrastructure such as the accelerated Mahaweli scheme. Annual fiscal deficits averaged 13.3 per cent of GDP between 1978 and 1983, External current account deficits averaged 10.8 per cent of GDP between 1979 and 1983. Year-on-year inflation averaged 15.6 per cent during February 1978 and January 1985, with a peak of 32.5 per cent in August 1980.
This meeting of great minds will be the path towards building future leaders and respected finance professionals. It will be a hub where the best minds in finance will come together to contemplate, reflect and discuss on the frontiers of finance. In the pipeline are also plans to develop a mentorship programme supported by financial industry leaders, including bankers for fintech startups. This will expand horizons for ideation, enable cross-fertilisation of knowledge and boost startups in their journey to be successful ventures. This will be launched by the end of the year. Guardians of the future With the acceleration of technology, the financial sector of the future will be vastly different from what it is today. Fintech innovation, regulatory reforms, deepening integration and shifts in consumer demographics and preferences are some of the forces that will drive this change. Future bankers of the Malaysian financial sector will encounter opportunities and challenges not seen before. New jobs will be created and existing jobs will change or become extinct. Automation will change the back and middle office functions. Artificial intelligence will change how banking services are delivered to the consumer. Data science and big data will change the way financial and data analytics are conducted. Yet, the fact remains that we cannot predict the future with great certainty. In one of my speeches last year, I mentioned four possible scenarios on how the future of finance may unfold. The possibilities are exciting and almost limitless.

With the loss of its monetary identity, Switzerland would have seen its interest rates, traditionally below German rates, converge to higher European interest rates causing severe pains to the Swiss economy. Fortunately, we did not experience this outcome. First, in the months following the introduction of the euro, it became apparent that markets were not anticipating a pegging of the franc to the euro. An expected peg would have generated a convergence in interest rates, which simply did not happen. Second, and as could have been expected, the monetary needs of the Swiss economy differed from those of the euro zone: •  As an open economy strongly oriented towards global markets, the Swiss economy felt more deeply the slowdown in global trade than the euro zone. •  Furthermore, the Swiss franc kept playing its role - although to a smaller extent - of safe haven in tense international situations. •  Finally, Swiss inflation was considerably lower than inflation in the euro zone, where adjustments and catch-up phenomena took place. Facing this reality, we decided to act independently and lowered interest rates initially in March 2001, a few months before the European Central Bank. Then, seeing a clear economic slowdown and a strengthening of the Swiss franc, we lowered interest rates repeatedly and aggressively. The magnitude of our policy loosening has exceeded that of the ECB. This year, with growth accelerating again an adjustment of monetary policy became necessary. We raised interest rates by 25 bp in June and September.
Features of the design and operation of an infrastructure can help to lower risks of this type – for example, by introducing collateralisation and loss-sharing rules, net sender limits and throughput guidelines to promote efficient liquidity recycling – so that failures do not give rise to financial contagion. Again, left to their own devices, users will lack an incentive to take into account fully the costs imposed outside of the system and they again face acoordination challenge in effectively implementing system design or rule changes to reduce such effects. Infrastructure robustness and the changing nature of risks Some of the financial market trends identified earlier have placed additional pressure on potential shortcomings in the financial infrastructure, attracting the interest of the public authorities and, in some cases, prompting targeted intervention. I would like to discuss two of these: financial market innovation; and the global linkages and system interdependencies that arise from the emergence of large cross-border banking groups. Financial market innovation Taking the first of these, over-the-counter (OTC) derivatives markets have grown rapidly in recent years, particularly in the credit sector, driven in part by the shift towards an “originate and distribute” model of banking finance and by greater recourse to credit risk transfer to manage and hedge risks, as well as increasing activity by insurance companies, hedge funds and institutional investors in this sector. The infrastructure for OTC derivatives has, however, lagged behind.

Nigel Jenkinson: Promoting financial system resilience in modern global capital markets – some issues Speech by Mr Nigel Jenkinson, Executive Director, Financial Stability, Bank of England, at the conference, Law and Economics of Systemic Risk in Finance, University of St. Gallen, St. Gallen, 29 June 2007. This speech has been prepared with my colleague Mark Manning. I am very grateful to Mark and to Joanna Perkins for her input on legal risks, and to Ben Norman, Victoria Cleland and Andrew Bailey for their comments. *  *  *  The changing nature of risks Spurred by rapid innovation, we are currently witnessing a period of major structural change in financial intermediation and the global financial system. Financial market activity is growing at a tremendous pace. For example, over the past five years, the credit derivatives market has grown spectacularly from around $ trillion notional amount outstanding in 2001 to around $ trillion in 2006 (Chart 1) and the issuance of leveraged loans has increased almost three-fold (Chart 2). The balance sheets of the major global financial institutions (the so-called large complex financial institutions or LCFIs) have more than doubled since 2000, fuelled by an increase in trading assets (Chart 3). Turnover in the UK and US foreign-exchange markets has risen by around 50% in only the last couple of years. And capital market integration is rising rapidly as barriers to cross border flows have come down.
This emphasis on macro-economic stability - and sustainability - has served to focus attention increasingly on the supply-side of our economies - on structural reform and supply-side flexibility - as the key to raising the underlying rate of growth which our economies can maintain. And that is the second general trend I'd like to touch upon. It has meant increasing reliance upon free markets - again both nationally and internationally - to allocate productive resources to where they can most effectively contribute to meeting demand. The collapse of communism is a dramatic example, but the promotion of free trade through the WTO and of the free movement of capital through the IMF, or the spread of privatisation and deregulation all around the world, not least in financial markets, can all be seen as aspects of essentially the same thing. This emphasis on free markets cannot mean "anything goes". Public policy concerns, of course, remain; and we need to have rules to ensure that competition is fair as well as free. But it does mean less centralised, bureaucratic, intervention telling people what they may or may not do, leaving them much greater freedom to do what they choose provided they meet the necessary nationally or internationally agreed standards. The resulting intensification of competition can, of course, be uncomfortable for existing producers - and can lead to protectionist pressures at the micro-economic or even the national level - so we still have a long way to go.

And fiscal prudence has brought not just a proportional, but in some countries an absolute, decline in the amount of private savings absorbed by government debt. That has left room for a rapid expansion and diversification of the corporate debt market to accommodate increasing demand, as the role of the private sector has increased. And the sovereign debt market, too, has diversified to include those emerging markets and transition countries that have succeeded in accessing the increasingly free international flow of capital. These are big, long-run, changes which, are for the most part likely to continue. So your job - as investors and investment managers, won't get any easier! I have the impression that the investing public is still coming to terms with the lower nominal returns that they can expect if we really are in a world of sustained low inflation. So they may be demanding quite a lot from you. It's true that in an environment of sustained monetary stability you might not see the very large and unpredictable swings in interest rates that I grew up with.