samchain/econo-pairs-v1 huggingface dataset:
Table 2 suggests, furthermore, that these flows have become increasingly correlated over the past decade. But it is not just cross-border claims which are cyclical and correlated across countries. Chart 20 plots the cycle in total credit across countries, while Table 3 looks at the degree of crosscountry correlation in total credit provision. They suggest total credit also follows a global cycle which has strengthened over time. On this evidence, the credit cycle is as much international as domestic. If credit cycles are global in nature, there may in future be a case for national macroprudential policies leaning explicitly against these global factors. This would help curb the global credit cycle at source. It would take international macro-prudential policy co-ordination to the next level. While not without operational problems, this is much more likely to be a practical policy option than co-ordinating national monetary policies. A second macro-prudential policy avenue for the future concerns the non-bank sector. For example, the pattern of correlations in Chart 18 is consistent with asset managers playing an increasingly important role in driving financial markets. Yet macro-prudential policies have, to date, focussed on banking sector-specific measures operating at a national level. The next phase of macro-prudential policy may see its focus shift in two important ways: towards measures targeted at the non-bank, as well as banking, sector and towards measures targeted at particular markets, as well as particular countries.

Calvo, G. (1998), “Capital flows and capital-market crises: The simple economics of sudden stops”, Journal of Applied Economics, 1, pp.35–54. De Larosiere, J. (2014), “The international monetary ‘anti-system”, Central Banking Journal, May. Dell’Erba, S. and Reinhardt, D. (2013), “Not all capital waves are alike: A sector-level examination of surges in FDI inflows ”, Bank of England Working Paper No. 474. Farhi, E., Gourinchas, P.-O., and Rey, H. (2011), ‘Reforming the international monetary system’, CEPR Report. Feldstein, M. and Hoioka, F. (1980), “Domestic Savings and International Capital Flows”, The Economic Journal, Vol. 90, No. 358, pp. 314–329. Forbes, K., Fratzscher, M. and Straub, R. (2013), “Capital controls and macroprudential measures: what are they good for?”, MIT Sloan Research Paper No. 5061-13, December. Forbes, K. and Warnock, F. E. (2012), “Capital flow waves: Surges, stops, flight, and retrenchment”, Journal of International Economics 88, pp. 235–251. Fratzscher, M. (2012), “Capital flows, push versus pull factors and the global financial crisis”, Journal of International Economics 88, pp. 341–356. Fratzscher, M., Lo Duca, M. and Straub, R. (2013), “On the international spillovers of US quantitative easing”, Deutsches Institut für Wirtschaftsforschung Discussion Paper 1304. Gai, P. and Kapadia, S. (2010), “Contagion in financial networks”, Proceedings of the Royal Society A, Vol. 466, No. 2120, pp. 2401–2423. Goldin, I. and Mariathasan, M. (2014), “The Butterfly Defect: How Globalization Creates Systemic Risks, and What to Do about It”, Princeton University Press, July.
They are as much an article of faith as fact, as much art as science. This weakens both Pillars II and III. For what the market cannot observe, it is unlikely to be able to exercise discipline over. And what the regulator cannot verify, it is unlikely to be able to exercise supervision over. Banks themselves have recently begun to voice just such concerns. (b)  Robustness  A further cost to complexity arises from model error. Model uncertainty, as distinct from risk, is rarely taken into account when interpreting reported capital ratios. But without some idea of uncertainty, it is difficult to know how much confidence to place in reported solvency measures. How large are the confidence intervals investors and regulators ought to place around them? Calibrating confidence intervals around capital would involve aggregating across myriad assets and multiple models. Rather tellingly, that is too complex a calculation for anyone to have carried out. But by drawing on banks’ own published model output, it is possible to gauge uncertainty around some of the key balance sheet components – for example, the retail credit portfolio, the wholesale credit portfolio and the trading book. For the retail credit portfolio, consider a simple, single source of model error – calculating the probability of default (PD) for different classes or borrower. Under the advanced modelbased approach to calculating retail PDs, each loan is placed in a risk bucket.

Ivan Iskrov: Bulgarian National Bank – independence, predictability and transparency Speech by Mr Ivan Iskrov, Governor of the Bulgarian National Bank, before the 41st National Assembly of the Republic of Bulgaria on the occasion of his election for a second term of office, Sofia, 26 August 2009. *  *  *  Ms. Speaker, Ladies and Gentlemen MPs, Allow me first and foremost to thank you for the enormous trust and the strong support you just now gave to the Central Bank and its Governor, Ivan Iskrov. I don’t know of any head of any public institution that has so far enjoyed such a vast parliamentary vote of confidence with the support of 195 MPs. This result exceeds the 165 votes in support of my nomination in the previous 40th National Assembly. When a week ago I shared with the person closest to me that I had decided to use the parliamentary case of Mr. Nenovsky to submit myself to a confidence vote by the 41st National Assembly, I heard the following: “Isn't this step rather too risky, besides the Prime Minister publicly announced that he did not approve of the procedure but he respects the BNB as an institution, and highly values you as a governor and wishes you to continue on the post?" I replied that no one could predict the possible deliberations and how the 240 MPs would vote, but that I was nonetheless obliged to ask for their confidence. Or else on 9th October this year I leave!
2  BIS central bankers’ speeches  It has been estimated that a comprehensive and ambitious TTIP would create 400,000 new jobs in the EU and raise EU GDP by € billion a year. The economic gains for the US economy would be around € billion a year. And these benefits would also accrue to the rest of the world by increasing its income by almost € billion a year. Such efforts on a regional level would in turn create momentum to revive the stalled multilateral agreements. Looking within the euro area, the main focus has recently been on the German current account surplus. There are various negative claims made about this, for instance that German competitiveness hinders intra-euro area adjustment and the return of stressed countries to growth. I think we need a more nuanced view. First, at a macroeconomic level Germany is already contributing to euro area rebalancing. Its surplus with the euro area has more than halved since 2007 – falling from 4% of GDP to 2% of GDP – and with stressed countries it has virtually disappeared – falling from 2% of GDP in 2007 to 0.5% of GDP. This is being driven in a large part by higher domestic demand which is structural, not cyclical in nature. Second, at a microeconomic level Germany’s export performance supports both upstream producers and downstream producers in the rest of Europe. Germany is at the centre of the European value chain and is a gateway to global value chains.

Examples include using the Kuala 2  BIS central bankers’ speeches  Lumpur Regional Centre for Arbitration that offers services as dispute resolution for Islamic financial contracts; Hong Kong issuers tapping the Ringgit sukuk liquidity for cost-effective pricing given the depth of the sukuk market in Malaysia; as well as enhancing knowledge and expertise in Islamic finance through our higher learning education centres such as the International Centre for Education in Islamic Finance (or INCEIF). Forward-looking scenario – A common trading platform for sukuk Future growth prospect for the sukuk market is tremendous. Growth is expected to come from the GCC and Asian regions as infrastructure projects are estimated to be USD2 trillion and USD8.3 trillion respectively till 2020. Hong Kong, with its sizeable bond market to GDP of 72% can play a role in funding these projects. Moving forward, more efforts are needed towards developing financial inter-linkages between our two markets. One area is for our financial communities to explore a common sukuk trading platform for cross-border transactions. A common platform that incorporates international standards and best practices in all aspects of the sukuk trading is key to instil confidence in secondary markets. It can also increase cross-border activities. It has the potential to spur further diversification of product offerings, reduces cost of intermediation and boosts trading activities.
As recently pointed out by the G20 Finance Ministers and central bank governors, recent events have highlighted the importance of sustainable public finances : those countries with serious fiscal challenges need to accelerate the pace of fiscal consolidation;  2)  Secondly, the announcement of a EUR 110 billion financial aid package for Greece, agreed between the European Commission and the IMF conditioned to a package of substantial fiscal consolidation measures by Greece contributed to alleviate concerns in the markets. 3)  Thirdly, to restore confidence in the whole euro area and to contain contagion, a plan with a broader scope has been adopted at the euro area level, the European Financial Stabilization Facility, for a global amount of 750 billion euro with the financial participation of the IMF. One of the key features of this Facility will be the possibility to be used on short notice without involving further national Parliaments. Finally, let me focus on the other recent actions of the European central bank which have been essential in response to these challenging circumstances. Central banks complemented these actions by specific and innovated measures 1)  After careful consideration of all implications of this option and based on its positive assessment of the Greek consolidation package , the Eurosystem decided to suspend the reference to credit rating and current market prices in the collateral requirements for marketable debt instruments issued or guaranteed by the Greek government.

Within the Islamic finance realm, prospective cases studies can include amongst others the application of Shariah Standards by Islamic banks and its effects on product structuring and pricing strategy, legal aspects, risk management, oversight function and governance process of the banks. For the takaful sector, case studies on microtakaful for example can lead to the development of protection schemes that can be offered at affordable prices. I trust the academia has enough resources to produce such case studies and generate new research findings and breakthroughs, given the knowledge and expertise of their academic faculties. In essence, we need to be more exploratory and brave to rigorously investigate or examine real life situations and complex scenarios and benefit from hindsight and learnt lessons that can give new solutions for future growth. The initiative to develop the Educator's Manual is in itself a good starting point to encourage universities to move towards experiential learning. Students will be exposed to Shariah and operational requirements covering areas such as product structuring, legal, accounting as well  BIS central bankers’ speeches  3  as risk management. The transparent nature of the standards would enable students to critique and form their own views and conclusions. It is a leap forward to change the paradigm on the theoretical and operational aspects of Shariah applications. This initiative is certainly a gamechanger for our Islamic finance education programme.
Early studies, using data from the 1980s, failed to find scale economies much beyond bank asset sizes of around $ million (Pulley and Braunstein (1992)). Empirical studies in the 1990s nudged up the optimal bank scale to around $ billion (Amel et al (2004), Mester (2005)). 8  BIS central bankers’ speeches  Most recently, a small number of studies using data from the 2000s have pointed to scaleeconomies at much higher asset thresholds. For example, Wheelock and Wilson (2012) find scale economies for banks with assets up to $ trillion and Feng and Serilitis (2009) for bank with assets up to around $ trillion. Using data on banks with assets in excess of $ billion, Mester and Hughes (2011) not only find scale-economies, but argue that these may increase with bank size. At face value, these findings pose a real challenge to policy options which re-size banks. Or do they? Bank of England research has re-looked at the evidence on economies at different banking scales (Davies and Tracey (2012)). As Chart 8 shows, in standard models there is evidence of scale economies for banks with assets above $ billion. Indeed, these economies tend to rise with banking scale. But this finding is based on estimates of banks’ funding costs which take no account of the implicit subsidy associated with too-big-to-fail. Removing this subsidy raises banks’ funding costs, lowers estimates of bank value-added and thereby reduces measured economies of scale.

Brunnermeier et al (2009) use this framework to motivate levying a tax – a “Pigouvian tax” – on institutions posing systemic risk externalities. This tax would be set at levels which offset the effects of the bank’s actions on wider society. A number of academics have since proposed measures along broadly Pigouvian lines (Archarya et al (2010)). Rather remarkably, policy reforms in practice have followed closely in the spirit of these proposals. In 2010, the FSB announced its intention to introduce a “systemic surcharge” of additional capital on the world’s largest banks. In July 2011, the Basel Committee published a methodology for measuring systemic importance based on indicators of bank size, connectivity and complexity, with additional capital of up to 2.5% depending on this score. In November 2011, the FSB endorsed this methodology and announced the 29 systemicallyimportant entities to which it would apply. This framework will be finalised this year, before being phased-in from 2016. Legislation is already in place, or is being drawn up, to implement the systemic surcharge in the United States and Europe. These proposals are clearly a practical step in the right direction. By boosting levels of capital in the system, the probability of big bank failure will be reduced. You would have got good odds back in 2007 that something as seemingly elliptical as a Pigouvian tax on systemic risk would have found its way onto the regulatory statute books. Now we have it. “We are all Pigouvians now”, even if most of us cannot spell it.
While we might have been somewhat surprised by the number of responses that we received, we were not surprised by the hard work that was evident in the letters. On this note, I would like to offer the Committee’s appreciation to the banks, banking associations, including the members of the IIF, and public agencies in Asia and elsewhere that devoted considerable time and resources to the consultations. If you’ve been following our work since the first consultative paper was released in 1999, you know that the proposals have evolved and improved considerably thanks to the honest responses and letters that you and others shared with us. At the Committee’s meeting last month, all members acknowledged our responsibility to consider carefully all comments. At the same time, we recognised the need to resolve the open issues and release the New Accord as soon as possible so that banks can continue to prepare for the new rules. In a statement to the press after our meeting, the members of the Committee noted that we expect to take account of the remaining issues and complete the text of the New Accord in the coming months and not later than mid-year 2004. Let me briefly mention some of the issues present in the comment letters. Complexity and the balance with risk sensitivity and comparability Certainly a key issue that we are addressing is balancing the complexity of the agreement with the need to be sensitive to risk and to offer different kinds of banks comparable approaches.

This puts the responsibility for assessing and responding to risk in the most appropriate place, namely in a bank’s own management and directors. They are in the best position to know their customers and their risks, and it is therefore most appropriate - and critically important - that they understand their responsibility for administering the bank’s assets and its activities in a responsible manner The second pillar highlights the important role that supervisors play in ensuring that each individual bank is holding adequate capital. Under the New Accord, supervisors will be responsible for evaluating  2  BIS Review 52/2003  the internal processes banks use to determine their need for capital to ensure that managers are exercising an appropriate degree of judgement. The responsibility of a supervisor is to ensure that the banking system operates in a safe and sound manner and that individual banks are run by capable and competent leaders. But supervisors are not the managers of the banks. The decision on how each bank should best respond to different risks: that job should always rest with senior managers and a bank’s board of directors. Instead, by engaging managers in a dialogue about the risks they face and the controls they have adopted to address them under the second pillar, supervisors create incentives for managers to behave prudently and find ways to improve their performance. The third pillar seeks to leverage the ability of markets to provide discipline to banks to ensure that they are not holding unrealistically low levels of capital.
There is little, if any, policy co-ordination amongst Asian economies, not to mention any interest in monetary integration. It is not clear whether this is a reflection of reluctance to subject domestic policy decisions to external influence. Indeed, until recently the majority of the economies in the region seemed happy to concede their sovereign right over monetary policy to the central banks of their major trading partners, notably the United States, through maintaining a stable exchange rate against the US dollar by varying degrees. But whatever the reason for the relative lack of monetary co-operation in the past, there have been significant changes recently, spurred by the events surrounding Mexico which affected the region and those of Thailand which is right in the middle of our region. There is serious and continuing discussion on the subject of Asian monetary co-operation. Hong Kong stands ready to contribute to this discussion and I very much hope that a long term strategy could come out of this. History of Asian Monetary Co-operation 15. Let me now describe briefly to you the history of Asian monetary co-operation. In the post-war period, many Asian central banks evolved from colonial currency boards, which practised the virtue of stable money fixed to an international reserve currency. As a result of this monetary discipline, supported by sound fiscal discipline, Asia has enjoyed stable growth with low inflation.

This may or may not be a prelude to policy co-ordination, as the case has not yet been established. But a regular channel of communication on policy issues is still needed. The EMEAP forum is a good start, but needs to be strengthened. The IMF and the BIS have demonstrated how closer relations and deeper appreciation of the issues can only be fostered through a system of formal and informal channels of communications and regular discussions. Such discussions not only promote appreciation of the issues facing individual economies, but also regional and international matters. We look forward to their playing a more significant role in this region. Conclusion 60. Ladies and gentlemen, the road to international monetary co-operation has never been straight and smooth. The European experience suggests that there are many bumps along the way. With much more diverse needs and perspectives in Asia, we must allow Asian monetary co-operation to take shape gradually and in a flexible way, starting with less ambitious goals and proceed at a pace and with arrangements comfortable to all. I believe the approach of building an Asian monetary network capable of further linkages to form a global monetary network is the correct one. It is based on voluntary participation and accommodates each participant’s unique circumstances. We do not have the visionaries of Europe that saw the need for a single currency, nor do we believe that a single global institution would be adequate in providing solutions to all Asian monetary problems.
For this reason, when making an assessment of the likely impact of asset purchases, the Committee did not factor in a material expansion of bank lending. Indeed, our asset purchases were designed to facilitate a disintermediation of corporate financing away from banks and toward capital markets. This disintermediation was supported in part by the portfolio rebalancing triggered by our gilt purchases. As investors’ demand for alternative assets such as corporate bonds and equities increased, the ability of businesses to raise finance in capital markets improved and the cost fell. This disintermediation was reinforced by the Bank’s operations to improve the functioning of corporate credit markets. The financial market dislocation in the immediate aftermath of the crisis hindered the functioning of the commercial paper and corporate bond markets and led to substantial increases in liquidity premia. In response, the Bank established facilities to make small regular purchases of corporate bonds and commercial paper, with the aim of aiding secondary market liquidity. The significance of these purchases of private sector debt should not be judged by their scale, which was tiny in comparison to gilt purchases. The purpose of these operations was not to purchase a specific quantity of assets, but rather to improve the functioning of those markets. In that respect, the knowledge that the Bank stands ready to purchase assets may be as beneficial as actual purchases. 5 The importance of expectations also played a central role in the design of our asset purchase programme.

Andrés, López-Salido and Nelson (2004) incorporate imperfect substitutability between short- and long-term bonds. Here the lack of a secondary market for long bonds is the source of the friction. In this model, base money expansion by a central bank can relieve portfolio constraints and lead to an increase in demand for long bonds, thereby raising their prices. Much of this literature is still in its infancy and there is some way to go before it can be combined within an applied, quantitative model that policy makers can use. But the central message I take from this work is that there are a number of channels through which monetary policy is likely to be able to influence the economy at the zero bound. Unfortunately, the financial crisis meant that we had to put these insights into practice. When doing so at the Bank, we placed weight on three key channels of monetary transmission: the impact of imperfect substitutability and the portfolio rebalancing channel on relative prices, the role of financial market liquidity, and the importance of expectations. All three channels were important in the design of the Committee’s asset purchase programme. Let me take them in turn. Channels of transmission To date, the Bank has purchased £ billion of assets financed by the issuance of central bank reserves, the vast majority of which have been relatively long maturity gilts. The central objective underlying those gilts purchases was to inject a substantial amount of additional money into the economy.