samchain/econo-pairs-v1 huggingface dataset:
After a spectacular period of sustained growth during the 1980s, the Japanese economy has stagnated over the past six years, as Japan has struggled to overcome the fragility of its financial system in the aftermath of the infamous Japanese financial bubble. A constraining factor for much of this time has been a widespread resistance to the use of public funds to strengthen the financial system which has, in turn, constrained the financial system in its extension of domestic credit. Japan has been reluctant, too, given the size of its public debt, to use fiscal policy to stimulate the domestic economy. There is now evidence of a change of heart on both these fronts. Japan - which has an extraordinarily strong external position - was never at the eye of the storm which struck Asia around the middle of last year. But if, as I expect, these policy changes now lead to somewhat stronger domestic demand growth, and greater confidence BIS Review 5/1998  -2-  in Japanese financial institutions, that will make a crucial contribution to the stabilisation of the region as a whole. The storm struck essentially the ASEAN Four - Thailand, the Philippines, Malaysia and Indonesia - spreading subsequently to South Korea and intermittently battering Hong Kong and elsewhere. It is still not wholly clear - to me at least - quite why the storm suddenly struck. Most crises of this sort have their origins in some evident macro-economic policy failure.

Complex and opaque links between government, financial institutions and non-financial companies made it difficult for outsiders to understand the real nature of their exposures. Financial markets were not well developed, leaving the system heavily dependent upon the banks. There was inadequate regulatory or supervisory oversight. There was widespread government influence over financial flows, which importantly also contributed to a perception that much of the borrowing was effectively under-written by the government. The list could go on. The problem was compounded by the absence of any real perception of exchange rate risk. Borrowers were evidently confident that governments would maintain their exchange rate pegs against the dollar so that unhedged foreign currency debt, much of it at short term, appeared a cheap alternative to domestic currency borrowing. The result was a build-up of short-term private sector foreign currency liabilities, by banks and non-banks, which was not fully appreciated, and which left the Asian economies especially vulnerable to a flight of capital in the event of a change in sentiment. The problem is that national authorities can create their domestic currency, if they choose to do so, even if it leads to inflation, but they cannot simply create foreign currencies in the same way. So, once the run started, it was violent and contagious. There are certainly all sorts of lessons to be drawn from Asia’s experience for the future relating to the structural weaknesses in the financial system that allowed the problem to emerge.
But it is something that needs to be done now if we are to prepare the ground for our future generations. It is from the legendary Dr. Puey whom we can draw significant inspiration. Dr. Puey had long recognised the importance of institutions to economic development and dedicated a major part of his life to this endeavour. He was a true leader, whose contribution to his country’s economic progress extended beyond the Central Banking sphere to several other areas of public service, to education, and to beyond the national borders of Thailand. We are now the beneficiaries of Dr. Puey’s efforts which laid the foundation for the greater Central Bank cooperation that we see in the region today. Dr. Puey was a true visionary. He had consistently demonstrated his vision, dedication and foresight and in the process, created highly regarded institutions not only in Thailand but also for the region. The subject of institutional building has generally referred to institutions that support the functioning of markets. It is maintained that markets allow for the more efficient use of skills and resources to engage in activities with higher productivity. As stated by Douglass North, known for his work on institutional economics, institutions comprise a set of formal rules that provides the framework for interaction and which shapes the incentives for the functioning of the economy. These include the incentives for people to invest in more efficient technology, to increase their skills and to organise efficient markets.

It has been a great privilege for me to be part of this Central Bank community. 4  BIS central bankers’ speeches
Speeches  Published Date: 19 July 2022  Remarks by Mr Ravi Menon, Managing Director, MAS at the MAS Annual Report 2021/2022 Media Conference on 19 July 2022 Good morning and thank you for joining us in person for the release of the MAS Annual Report. This year, I will focus my remarks on inflation. It is the key macroeconomic challenge facing the global economy, affecting countries ranging from the United States to Sri Lanka, as well as Singapore. The IMF’s latest projection for global inflation in 2022 is 7.4%. This would be the fastest rate of inflation in the last 25 years. Inflation is a pervasive economic ill – it affects everyone. The lower-income groups are particularly vulnerable. Inflation is uppermost in the minds of many Singaporeans. I will cover four themes on inflation, both globally and in Singapore. Inflation is being driven by both supply and demand factors Taming inflation will mean a slowdown in economic growth A multi-pronged approach to deal with inflation Managing debt amid inflation and rising interest rates I will then briefly touch on three issues which MAS will cover in depth in the coming weeks and months: Developments in the crypto ecosystem Singapore’s financial sector performance and strategies Positioning the financial sector for sustainability  Before I close, I will briefly report MAS’ financial performance. Let me begin with inflation. It is important to understand the nature of the inflation problem the world is dealing with.

A good scenario would be what policymakers and analysts call a “soft landing”, where growth slows down sufficiently to reduce inflation but the economy avoids recession. Given how high inflation has climbed and the degree of monetary policy tightening that may be necessary to bring inflation down, the pathway to achieve such a scenario is quite narrow. A more likely variant of a good scenario is a mild, short-lived technical recession that tames inflation and sets the stage for a sustained recovery in growth. A bad scenario is a deeper recession in some of the major economies even as inflation is brought down: a so-called “hard landing”. Such a scenario could occur if monetary policy tightening precipitates sharp dislocations in financial markets. In many countries, financial vulnerabilities have increased due to a run-up in private sector debt during the last ten years of highly accommodative monetary policies. Overvalued assets and high debt could magnify any growth slowdown. An ugly scenario would be one where growth stagnates while inflation remains high – stagflation. This could happen if fresh supply shocks or disruptions further boost inflation while monetary policy tightening sharply reduces economic activity. Stagflations are rare but when they occur, they present difficult policy dilemmas for governments and central banks. Economic growth in Singapore is expected to moderate further in 2023 in tandem with the slowdown in our major trading partners. The extent of the growth moderation will depend in part on how the scenarios for the global economy will pan out.
It might be the case that, given the depth and severity of the crisis, some workers have remained in the labour force but have been without a job for so long that they have become virtually unemployable – that is, that they have become structurally unemployed. This would also have a negative effect on growth potential. The natural starting point to assess the magnitude of such effects is to consider estimates of the NAIRU. What we see here is that, in certain countries where unemployment rose sharply and where there was a strong sectoral dimension to the crisis, estimates of structural unemployment have indeed risen significantly. Current real-time estimates from a variety of international institutions, for example, suggest that Spanish structural unemployment increased by over three percentage points in the aftermath of the crisis, to around 17%. At face value, this would suggest that virtually all of the unemployment that we currently observe in Spain is of a structural nature – and that the crisis has left permanent and irreversible scars. And although current estimates do not suggest a notable increase in structural unemployment for the euro area as a whole, this was not true just a few years ago.

Currently there are more than seven million underemployed part-time workers across the euro area – those who would like to work more hours but cannot – an increase of around one million since the crisis. This may have important implications for inflation dynamics. While the main objective for workers in permanent work is typically higher wages, those in temporary or part-time positions may pursue objectives other than wage increases, such as fulltime employment or an increase in hours worked. Or if they do seek higher wages, they may be less likely to benefit from union representation and thus have less bargaining power. An increase in temporary or part-time employment as a share of total employment may therefore lead to less pressure on wage inflation. Recent estimates by ECB staff – which you can see on the right-hand side of slide 4 – suggest that broader measures of labour market slack, including the unemployed, underemployed and those marginally attached to the labour force currently affect around 18% of the extended euro area labour force.10 This broader measure of slack also appears to be less sensitive to GDP growth than traditional measures: it has declined rather less than the reductions in the unemployment rate over the course of the recovery – a broader version of Okun’s, law if you will. And our analysis suggests that this might help explain why underlying inflation has been so sluggish recently.
At that time, the concept was inspired by the work of Knut Wicksell 30 years earlier. As early as in 1898, Wicksell argued that price stability should be the central bank’s objective.1  The conduct of monetary policy In Norway, the inflation target is set at 2½ per cent. Norges Bank operates a flexible inflation targeting regime, so that weight is given to both variability in inflation and variability in output and employment. In the long term, there is no conflict between low and stable inflation and stability in the real economy. On the contrary, price stability will be a precondition for high and stable output and employment over time. However, in some periods, there may be disturbances that create conflicts in the short term. The point of departure for the monetary policy strategy ahead is the very low level of inflation at present. It has been lower than the inflation target since the autumn of 2002. The aim of monetary policy is higher inflation. Therefore, the interest rate is low. Monetary policy influences the economy with long and variable lags. Norges Bank sets the interest rate with a view to stabilising inflation at the target within a reasonable time horizon, normally 1-3 years. The more precise horizon will depend on disturbances to which the economy is exposed and how they will affect the path for inflation and the real economy ahead. The economy grows over time.

In the bank’s drive for excellence and customer satisfaction, the Bank of Sierra Leone has continued and will continue to create the enabling environment for safe and sound banking. For instance, in collaboration with other stakeholders, the Bank of Sierra Leone is putting in place measures to implement all provisions of the Anti-Money Laundering Act so as to prevent money launderers using our financial system for their criminal activities. A recently concluded workshop organised by UNODC/GIABA//Bank of Sierra Leone succeeded in drafting a National Anti-Money Laundering Strategy with the aim of providing a framework for an Anti-Money Laundering regime that will ensure effective crime prevention and detection, and at the same time avoid creating excessive burden on the financial system and its users. The workshop attracted various stakeholders, including the Association of Commercial Bankers in Sierra Leone to which GTB is an active member. The Bank of Sierra Leone shall continue to maintain the open door policy and encourage dialogue in the process of ensuring a sound and stable financial system. BIS Review 79/2006  1  Mr Chairman, Distinguished Ladies and Gentlemen, allow me to close this brief remarks by once again congratulating the Board, Management and staff of the Guaranty Trust Bank (SL) Limited for another step taken to enhance the public image of the bank. I thank you for your attention. 2  BIS Review 79/2006
It would run the big risk of encouraging banks to reduce their loan books – in other words, it would affect the interaction of our two objectives, or incentivise the banks to reduce/”optimise” their risk weights. We are, instead, defining the growth of capital in terms of the increase in the nominal stock of Core Tier One, or equity, capital. This makes it easier to find a transition path that allows more capital and more new lending to co-exist. But, this begs three big questions: by how much do we want to see the nominal capital bases of banks grow in short order; why do we want this to happen; and what form do we want the capital to take? The first two of these questions, how much and why, are best taken together. Here, in my view, we face uncertainty that we have to find a way to resolve adequately. What we have done so far is to ask the major banks to try to maintain the projected growth of nominal Core Tier One capital over the next 18 months, according to the projections for this growth that they provided to us earlier this year. This is, their Basel III transition path. In order to go beyond that path, we have to ask why we want to do so? In my view, there could be at least four reasons why new lending by banks might be restrained by lack of capital as represented by low price to book ratios.

First, there is a possible shortfall in asset values relative to their book values, which is exacerbated by the accounting standards preventing provisions being taken against expected future losses. Second, there could be inadequate capital to protect against tail risks, most obviously a disorderly break-up of the euro area, which has negative consequences for banks and their valuation. Third, the impact of higher funding costs and the constraints on the ability of banks to re-set rates on longer maturity assets could mean that banks cannot earn the previously expected rate of return on them, which, like the first reason, is amplified by widespread loan forbearance, in both the household and corporate books. And, fourth, there could be a market value adjustment to reflect more structural uncertainty about the future business model of banks, for instance due to uncertainty about the final shape and impact of regulations, for instance the likely cost of implementing the ring-fence. Any of these four could contribute to the market value of banks’ capital being less than the book value of tangible equity capital. This is not currently true for all banks, but among the UK banks, more often than not, they are valued by the market at quite a sizeable discount to book value. If the market value diverges from the tangible book value, we know that investors are likely to be at least unsure that a firm’s net assets are valued correctly in the published accounts.
The increase from 2011 to 2012 will amount to 16 pp of GDP, of which: 7 pp are explained by the deficit (4 pp by the primary balance and 3 pp by interest); nearly 1 pp is due to the fall in nominal GDP nominal, and 8 pp are attributable, essentially, to the financing of the Plan to Pay Suppliers and € billion of the amount estimated by the FROB to be drawn down from the European Financial Facility before year-end. This ratio is projected to grow more moderately in 2013, from 85% to 91% of GDP, i.e. an increase of 6 pp compared with the 16 pp we will record in 2012, and will be almost exclusively due to the increase in the interest burden on public debt because, if the projections are fulfilled, the primary deficit will be 0.7% of GDP in 2013. Clean-up and restructuring of the banking system I would not like to conclude without commenting, albeit very briefly, on the programme for the clean-up and restructuring of our banking system. As you know, a further step has been taken with the publication of the estimates of capital needs, based on the stress tests performed by an independent appraiser, supported by audit firms and real estate appraisal companies under the supervision of the European Commission, the European Central Bank, the International Monetary Fund and with the participation of the Ministry for Economic Affairs and the Banco de España.

In terms of the different agents, a deficit target, in National Accounts terms, of 3.8% of GDP is proposed for central government and the Social Security system, compared with a deficit of 4.5% of GDP projected in 2012, which would represent an improvement of 0.7 pp of GDP, similar to that projected for the regional governments, which should reduce their deficit from 1.5% in 2012 to 0.7% in 2013. The adjustment would be completed with the projected reduction of 0.3 pp in local government to reach a balanced budget in 2013. Revenue On the revenue side, this budget tightens the fiscal pressure both in terms of direct and indirect taxation, with a range of new measures. Furthermore, it should be recalled that, in 2013, the measures approved in 2012 in relation to higher personal income tax rates, the increase in the rate on income from fee-earning activities, changes to corporate income tax and the rise in VAT rates will still have a significant impact. Despite the background of recession, the tax take is projected to increase overall by 3.7%. The net effect of all the tax regulation measures with an impact in 2013 is estimated to be approximately € billion. Net of this impact, revenue would fall by 0.5%. As for the Social Security Budget, the 1 pp reduction planned last July is postponed or ruled out, and a 1.1% fall is projected in 2013 in total social security contributions compared with the initial budget for 2012.
First, there are limitations to what one can learn from market intelligence, whether it is done with a survey, through analytical modeling, or market monitoring. The Federal Reserve’s market intelligence-gathering is among the best there is when it comes to breadth, detail, and rigor. For example, we are the only central bank that conducts market surveys directly on balance sheet policy. That said, the 2013 taper tantrum would not have been anticipated based on market surveys conducted at the time, as the median surveyed market participants’ projection for the end of asset purchases was similar to the plan Chairman Bernanke outlined in his announcement.20 In his book “The Courage to Act: A Memoir of the Crisis and Its Aftermath,” Bernanke attributed the failure of surveys to anticipate the taper tantrum to the fact that, at the time, they reached only primary dealer economists, a homogenous and insular group that he felt was unrepresentative of investors generally.21 I think there is truth to this, but I wonder if there is more to the story. We now survey a broad community of investors in addition to the primary dealers in a bid to gather a more diverse and inclusive perspective, partly in response to this concern. While this makes our surveys more robust, since we started doing this we haven’t observed large differences in median responses between the dealers and the buy-side community.

The importance of predictability is underscored when one considers that in recent years, adverse economic shocks have generally been associated with sharp falls in longer-term interest rates. Such declines would tend to bring about faster MBS repayments and, if the outflow from the Federal Reserve’s portfolio were not constrained by a cap, an unforeseen tightening effect on financial conditions, amplifying the adverse shock. Prepared for the unexpected While I am confident that the FOMC’s plan will work well, there’s always the risk that events unfold differently than expected. In my view, we best prepare for the unexpected in two ways: we need to be operationally ready to change course when needed, and we need to remain analytically focused so we know when to recommend to policymakers that they do so. So long as the plan I’ve described to you proceeds uninterrupted and as expected toward normalization, it is likely that policymakers’ operational demands on the Desk will be considerably lighter than they have been over the last decade. However, it is possible that unexpected developments in the economy may require a change of plans. For example, the FOMC has made it clear in its addendum to the Policy Normalization Principles and Plans that it stands ready to resume reinvestment if a material deterioration in the economic outlook were to warrant a sizable reduction in the federal funds rate.