samchain/econo-pairs-v1 huggingface dataset:
For example, the need for a lender of last resort following panics and crashes during the early 20th century led to creation of the Federal Reserve system in the US. The Central Bank of Turkey, on the other hand, was founded both as a symbol of national independence and to stabilize seasonal fluctuations in financial markets due to nature of agriculture-based economy. The concept of price stability was not brought to the foreground during the initial stages of central banking, because there was not much concern for inflation in many advanced economies. The value of money was well-protected thanks to the use of gold standard. As Friedman once said, “Inflation is always and everywhere a monetary phenomenon.” Therefore, there would be no permanent inflation as long as long term money supply expands in parallel to long term money demand. In this context, inflation concerns were kept in the background in many countries under the gold standard during the 19th and most of the 20th century. With the collapse of gold standard after the Great Depression and its successor (the Bretton Woods System) in 1973, we have entered the era of fiat money. In the absence of a solid anchor like gold, the only mechanism left behind to support the value of the fiat money was the credibility of central banks. This brought out the issue of price stability in the foreground of central banking. Our initial experience with fiat money was not promising.

In the current crisis, the securitization boom and the easing of monetary policy in the US helped fund the loan growth, while in the case of the Asian financial crisis, it was the large capital inflows in the form of direct borrowing that funded the credit boom. In both cases, however, poor underwriting standard by banks was an important common contributing factor. Looking back, the Asian financial crisis has been an important turning point for policymakers in the region, as the lessons learned from the crisis had led to many important policy reform initiatives, all of which aimed at strengthening the robustness and the risk management discipline of the domestic financial systems, and this brings me to my second point. BIS Review 96/2009  1  In the case of Thailand, after having restored financial stability in the early 2000s, financial reform became a top priority, with emphasis on instilling prudent regulations and strong risk management. We adopted a macro-prudential approach in the early 2000s, in recognition of the systemic linkages between the financial system and the increasingly opened macroeconomic conditions; utilizing our natural institutional advantage as we continue to oversee both monetary policy and financial institutions supervision. Hence, from 2003 to 2006, a series of macro-prudential measures were introduced, aiming at restraining then the rapid growth of credit, especially credit card loans and mortgage loans.
To achieve this greater awareness will require both openness on the grounds for the rulings  BIS central bankers’ speeches  3  and in-depth research on the basis of such grounds. A recent study conducted by the International Shariah Research Academy for Islamic Finance (ISRA) on fatwas of Shariah boards in the Asian region and the GCC countries reveals that, contrary to the popular perception, there are more similarities than differences in Shariah resolutions between the two regions. The study by ISRA however further indicates that there is a lack of awareness on the Shariah justifications to most of the resolutions being reviewed. This awareness is essential to pave the way towards greater understanding and nurturing of mutual respect. Whilst there are some initiatives to enhance the greater awareness on the juristic reasoning in Islamic finance, to facilitate greater mutual recognition, it will require greater transparency in the Shariah rulings in addition to constructive dialogue on the grounds of such rulings. With the efforts of the Islamic Development Bank (IDB), the Islamic Financial Services Board (IFSB) and the Accounting and Auditing Organization for Islamic Financial Institutions (AAIOFI), it has facilitated greater cross-border engagement among practitioners and Shariah scholars. In turn this has contributed to a greater understanding on issues and challenges faced by the industry and the progressive convergence of Shariah views and rulings. More such international collaborative work and engagement would further facilitate this harmonization process.

Chart 8: Accounting for intangibles reduces the missing-investment puzzle  Note: The orange line shows the investment puzzle using industry-level data, and the shaded area around it is the 95% confidence intervals. The line shows the estimated year fixed effects from an industry-level regression of investment rates on the wedge, including industry fixed effects, and standard errors clustered at the industry level. See Appendix B to Bailey et al. (2022) for full details. The blue line shows the same statistic from the regressions in which both investment rates and the wedge are adjusted to include intangibles. See Appendix A.2 to Bailey et al. (2022) for a discussion of the adjustment. Source: ONS, KLEMS, Jordà et al. (2017) Macrohistory Database and authors' calculations. The remaining puzzle is mostly concentrated immediately after the global financial crisis, and so it is possible this is not driven by structural factors, but rather the lingering impact of the global financial crisis, for example related to the sluggish demand recovery or financial frictions. [22] While the results suggest an important role for intangibles in explaining the missing-investment puzzle, a few notes of caution are in order. It could be that certain drivers of investment, such as financial frictions, are captured more accurately only at more granular level, such as in firm-level data. Moreover, there could be large non-linearities related to the nature of the global financial crisis that cannot be captured by the simple regression framework used above.
On the contrary, Basel III has many important components, including completely new requirements concerning the banks’ liquidity management and limits for debt levels. The new regulations will be implemented over a period of six years, starting in 2013. 5 In some cases, however, the banks may be forced to meet the requirements earlier due to the demands of the market and individual countries. I  4  Basel II states the liquidity risk is a central factor in the banks’ risk management and that risk management should comprise adequate systems and calculation methods for the correct assessment of the extent of the risk. 5  For a detailed schedule for the implementation of Basel III see Financial Stability Report 2010:2. 4  BIS central bankers’ speeches  will discuss all of the components of Basel II in more detail, but let me begin with perhaps the most fundamental change, the revised capital regulations. Higher capital levels and a new definition of capital The changes in the new regulations mainly affect Tier 1 capital and Core Tier 1 capital. I will therefore focus on these two components. An important new feature is the stipulation of a minimum level for Core Tier 1 capital. In contrast to the present vague wording about the role of equity in the capital base, Basel III makes it clear that all banks must have at least 4.5 per cent of their risk-weighted assets in share capital and retained earnings.

Decisions are made by the governing body “The Group of Central Bank Governors and Heads of Supervision” (GHOS) which is made up of the central bank governors and the heads of the supervisory authorities from the 27 member states. 2  A more general description of the Basel III regulations and the Riksbank’s view of them can be found in the speech that Barbro Wickman-Parak made on 26 November 2010 – “New international regulations for banks – a welcome reform”. 2  BIS central bankers’ speeches  balance sheets by borrowing. Before the crisis began, no one raised their eyebrows at banks with debt levels of more than 30 times their equity. However, as you well know, low levels of capital and high levels of debt turned out to be a catastrophic combination. When the crisis broke out and it was realised that the ability of hybrid capital to cover losses was extremely limited, the highly leveraged banks were left more or less defenceless. It was not long before many of them were forced to turn to the governments and the taxpayers who had to inject capital and become part-owners. The rest is history. Basel II underestimates the risks in banking operations Another weakness of the current Basel II regulations is that they do not sufficiently capture the banks’ risks. There are many examples of this. One is that the regulations and supervision have focused too much on risks in individual banks and too little on risks in the system as a whole.
I take this opportunity to extend my special thanks to the media and congratulate this community for its work. The media has transmitted the decision-making and activity of the Bank of Albania in a timely and reliable fashion to the public. Year 2011 was a complex year for the entire global economy, especially the European one, to which the Albanian economy is more sensitive. From this perspective, the role of the media takes special significance. I am happy to affirm that in Albania, the media has expanded its broadcast time dedicated to economy and finance-related issues and especially to transmission of information from the Bank of Albania, whose decisions were covered professionally. The media has been active also in promoting reflection by stakeholders. Media has supported Bank of Albania policies, forestalling dissemination of uncertainties amongst the public. The self-adjusting attitude has been another important element in media’s activity. The alarming effect has been cancelled successfully by thorough analysis of news items, providing nuances of the truth beyond excesses and speculations. A fresh example of this responsible behaviour is the EUR/ALL exchange rate fluctuation at the beginning of December this year. Some “panic” was caused amongst the public by earlier media reports and analysis, which were later considered by the media itself as an unreal exchange rate volatility.

Ardian Fullani: Educating and inspiring Albania’s young generation Speech by Mr Ardian Fullani, Governor of the Bank of Albania, at the 2011 end-year reception, Tirana, 21 December 2011. *  *  *  Honourable Minister, Your Excellencies Ambassadors, Honourable Members of Parliament, Dear representatives of the banking system and the media, Dear participants, I would like to welcome and thank you for your participation. Your presence today is a special pleasure for me personally and the Bank of Albania. My special thanks go to the former members of the Supervisory Council of the Bank of Albania, whose term in office has ended. I personally appreciate the seriousness and commitment they have dedicated to their work, a precious contribution to Bank of Albania’s institutional furtherance. Thanking them once again for their professional work, allow me to welcome the newly appointed members of the Supervisory Council of the Bank of Albania, renowned public figures with an unquestionable professional career. They come from diverse fields of professional careers and will bring in added value to the Bank of Albania, contributing to a wider coverage of the institution’s functions. I am confident that the Bank of Albania, in its activity, will continue to incorporate best international standards as regards decision-making, independence, accountability, transparency and governance. I believe that a healthy economy that generates stable growth needs a developed financial sector in terms of its depth and width; a flexible banking system, which manages public’s deposits cautiously and channels them efficiently to fund the economy.
The challenge is for policy makers to find ways of operating more effectively within the current system, to maximise the opportunities it affords and to manage the risks associated with open capital markets. As a monetary policy maker, I am acutely conscious that a world of large imbalances carries some risk of disruptive market adjustments, even if the probability of them occurring is low. These could have a significant impact on economic activity, especially if they included a sharp reversion of long-term interest rates to something closer to their long-run average. We have been trying to factor this risk in to our thinking about interest rates as long as I have been on the MPC. But it is not a risk that maps easily on to any particular interest rate decision. While the risk of a disruptive adjustment may still be low, the sheer scale of current imbalances increases the potential costs of policy mistakes and misperceptions. Any disconnect between what the markets expect and what policy makers intend to do becomes increasingly hazardous. That puts a premium on excellent policy communication, to reduce uncertainty and minimise the risk of sharp market corrections. And policy makers need to ensure that their policies are robust to the possibility that market expectations may not be consistent with economic fundamentals. Policy makers in systemically important countries also need to be better at factoring wider political risks into their decision taking.

At present the US still earns positive net income from abroad despite a steady deterioration in the current account since 1991, and a slower rise in its net external indebtedness. This is not to imply that the US is immune to the basic arithmetic of debt sustainability – sooner or later persistent deficits will lead to levels of external indebtedness that represent a significant economic burden even on the US; but it is more than usually hard to predict how long this might take. The dollar’s central role in the foreign exchange policies of Asian emerging markets adds to the uncertainty about the deficit levels at which the US will face tighter credit constraints. Since the foreign official sector – mostly Asian central banks – have been financing a substantial part of the US current account deficit (in net terms) and now hold a substantial amount of the outstanding stock of US Treasuries, private investors’ willingness to hold dollar assets depends to some extent on their expectations of what these Asian central banks will be doing. Since many Asian EMEs already have far more reserves than they need for self-insurance against financial crisis, their appetite for continued accumulation of US dollar assets will at some stage abate: indeed there has been some anecdotal evidence of this over the past year. They can already choose to diversify their reserve holdings, and the options available may become more attractive to them with the development of Asian bond markets. Their development strategies will also evolve.
The key principle behind our targeted loan policy is to provide funding in a way that will boost investment, employment, production and exports, and on reasonable terms. Therefore, we attach great importance to making credits available to a broader population and the easy access to loans by our industrialists. Thanks to our efforts to expand the use of rediscount credits, the share of SMEs in total credit utilization has steadily increased since early 2022. The share of SMEs was 6% of rediscount credit utilization at the end of January 2022; this exceeded 20% in July 2022. 4/5  BIS - Central bankers' speeches  In this context, the regulations we have made regarding access to export credits have affected SMEs positively. The share of SMEs saw an increase to 50% of TRY rediscount credit utilization, which reached 90% on the back of our liraization strategy. The net export status and rediscount credit shares of firms with a rediscount credit balance since the beginning of the year indicate that the share of net-exporting firms in rediscount credits has increased to 55% from 40%, and the ratio of net-exporting firms that used credit has gone up to 68% from 59%. Accordingly, the net foreign trade contribution of firms with a rediscount balance, and their net FX contribution in the spot market improved significantly in the same period. In our new economy model, we are focused on achieving the most efficient results for the Turkish economy with our targeted loan policies that will support the current account surplus.

Having grown steadily before the pandemic, our exports accelerated and increased sharply after the pandemic, reaching USD 126 billion in the first half of 2022, up nearly 20% year-on-year. This marks a historical high for our exports in the first six months of any year. 3/5  BIS - Central bankers' speeches  We identify three main reasons for our record-breaking export performance despite the armed conflict between our major trading partners. First, we see that Türkiye has become a key trade hub thanks to its increased relative advantages in the reshaped global market after the pandemic. Second, we observe that our exporters have the capacity to adapt rapidly to changing conditions by covering diverse products and destinations thanks to their resilient and flexible structure. I would like to discuss this point with you in more detail. As you know, Turkey has a much stronger export structure compared to many similar, neighboring or regional economies. This is supported by the high share of manufacturing in exports and the diversity of the number of destinations and exported products. The destination and product diversity of our exports doubled in 2022 compared to 2006. Around 29% of the increase in our exports between 2015 and 2022 was generated by new markets. The flexible and dynamic structure of our exporters protects our economy against external shocks. Our companies' flexibility in introducing new products and finding new markets allows them to compensate for possible losses in adverse conditions, including the current armed conflict.
All the usual suspects were present during the build-up to the Icelandic crisis: very strong capital inflows fuelling a credit and asset price boom that subsequently turned into a bubble at the same time as the economy overheated and an unsustainable external position developed, as could be seen in a double-digit current account deficit. And macroeconomic and prudential policies were not up to the task. Quite the contrary: there was a policy conflict between monetary policy and the demand levers pulled by the Government, and the risks inherent in capital flows, FX balance sheets, and credit and asset price booms were left under-regulated and insufficiently supervised. At a deeper level, the macroeconomic part of the story was related to three factors. The first factor centres on the complications that tend to arise with macroeconomic management as very small, open economies become more and more financially integrated. The second relates to the specific conditions of abundant, cheap credit at the global level. Third, major policy mistakes were made in Iceland, both of the type that would be deemed to be such in any book (such as giving an already overheated economy a demand stimulus), and those more closely related to the orthodoxy prevailing at the time: freely floating exchange rates, interest rate policy focusing mainly on low inflation in terms of goods and services, and good micro-supervision; and let the markets do the rest. In the wake of the crisis, it is better appreciated that this view is deeply flawed.

That autumn, two separate but interrelated sub-stories of the recent Icelandic saga converged in a tragic grand finale. The first story was related to Iceland’s boom-bust cycle and problems with macroeconomic management in small, open, and financially integrated economies. This is a story that has played out many times around the globe, and many of its elements have been seen before in Iceland. It might have been somewhat more extreme this time around, but it wasn’t fundamentally different. The second story was the rise and fall of three cross-border banks operating on the basis of EU legislation (the European “passport”). This story was much more unique, as it involved the first banking crisis in Europe since the EU single market was formed in the early 1990s. Let me turn first to the banking story. In a few years prior to the crisis, the banking system had expanded very rapidly, as you can see from Figure 1, making it one of the biggest in Europe relative to GDP. Most of this expansion was cross-border, and a significant part of it was really off-border, having little to do with Iceland, as both financing and investment took place abroad. Towards the end, around two-thirds of the combined balance sheet of the three cross-border banks was denominated in foreign currency. On the liabilities side, the share of FXdenominated debt was actually higher, as can be seen from Figure 2, with almost half of the financing in the form of FX deposits and other short-term FX financing.
We are therefore faced with a situation where the traditional triangle of the trilemma is shrinking and sometimes seems to collapsing into the straight line of a dilemma. I still think it is a trilemma, but the trade-offs facing SOFIEs can be severe. In principle, there are three ways to mitigate the problem. The first is to adjust macroeconomic policy frameworks and improve execution and policy co-ordination. The second is to use prudential regulation and supervision aimed at reducing potential vulnerabilities and increasing resilience in the face of volatile capital flows. The third is to introduce targeted tools aimed directly at the financial integration part in order to regain greater monetary independence and shift the effects of monetary policy more to the interest rate channel and towards the non-traded goods sector. In Iceland, this issue is very much on the agenda as the country prepares to lift the comprehensive controls on capital outflows that were introduced at the peak of its financial crisis. We have been working through all of the avenues that I have just mentioned. Very recently, we introduced a CFM tool in the form of a special reserve requirement on portfolio inflows excluding equity. It is constructed in such a way that the bite is biggest for short-term flows.

It is against that gloomy – some would say dismal – background that I want to discuss today how I view the growth and development of market-based finance in recent years. 1  Carlyle is thought to have coined the phrase having read the works of Thomas Malthus, who argued that economic stagnation and starvation would be an inevitable result of population growth, although the exact phrase first appears in Carlyle’s tract on his opposition to the emancipation of West Indian slaves. 2  All speeches are available online at www.bankofengland.co.uk/speeches  2  And, to reassure you that we do not invariably see the glass as half empty, I want to start not with the risks, but with the benefits of the development of market-based finance from a financial stability perspective. And finally, I want to look at some of the issues and the risks to market-based finance arising from Brexit. Growth and development of market-based finance. Market-based finance, measured by the assets of non-bank financial institutions, grew to $ trillion in 2015 – an increase of about 50% since 2008. It now represents nearly half of the assets of the global financial system. The asset management industry – firms like those here today – manages around $ half of which is in investment funds. The growth of market-based finance since the crisis has not been evenly distributed – either geographically or between types of activity. Geographically, the US still dominates with 35% of global non-bank financial assets.