samchain/econo-pairs-v1 huggingface dataset:
Stock markets’ centre of gravity has undeniably shifted from Europe to the US. 1 In 1900, railway shares accounted for 63 percent of the US stock market and 50 percent of the UK stock market, while today, these shares account for less than 1 percent. New industries have emerged and industries already established in 1900, such as telecommunications, have changed radically.2 In the course of these past 100 years, global equity markets have experienced the Great Depression of the 1930s, the Second World War, the oil price shock followed by stagnation in the early 1970s, the dotcom crash in 2000and the financial crisis ten years ago. The management of the GPFG must have a long-term perspective that extends just as far into the future. We do not know which companies or countries the fund will be invested in 100 years from now, but we do know that investments will have to change over time. We must also expect that the return on the GPFG will fluctuate substantially in periods and that the fund will have to be managed through future dramatic events. What we do not know is when, how or why such events will occur. Maintaining stable management of the GPFG requires sound management of financial risk. An important feature of the fund’s strategy is diversification, where the fund’s capital is invested in many different assets worldwide, reducing the vulnerability of the fund’s return to developments in individual companies, sectors or countries. Nevertheless, diversification cannot shield the GPFG from crises that have a broader impact.

Ethical guidelines for the exclusion of companies from the GPFG were established by the Norwegian authorities as early as in 2004. Under the guidelines, the GPFG must not be invested in companies producing tobacco or certain types of weapons, or with significant coal-related operations. Companies may also be excluded if there is an unacceptable risk that the company contributes to or is responsible for certain types of behaviour. The GPFG’s guidelines for excluding companies show that there is some money Norway says no to. There are some products and some types of behaviour the GPFG’s owners do not want to be involved in, whether or not they contribute to financial return. In 2015, the Ministry of Finance decided that the responsibility for excluding companies, based on criteria laid down by the political authorities, should be transferred to Norges Bank. The Executive Board’s decisions are based on recommendations and assessments provided by the Council on Ethics, which is independent of both the Ministry and Norges Bank. Chart 10: Exclusions are not insignificant At the beginning of 2018, 133 companies, corresponding to a market value of around NOK 200 billion, had been excluded from the GPFG.8 This is a substantial amount, but only a small share of the fund. There is an inherent paradox in using exclusion as a responsible investment instrument as it transfers ownership shares to investors who do not regard the company as problematic in the same way.
Institutions and markets seem better positioned to handle a substantial degree of stress. Shocks may be less likely to result in the type of trend amplifying, self-reinforcing dynamic for sustained periods of time that can threaten the stability of the financial system. But it is important to recognize that that we do not know a lot about the underlying dynamics of financial crises in the context of the evolving financial system I have described. It is also worth reflecting on the fact that the favorable judgment of U.S. financial resilience at present is rooted in a  BIS Review 55/2004  3  period of lower overall volatility in macroeconomic outcomes, with lower inflation and less variability in inflation, and shorter and shallower recessions. Financial innovation has brought about a dramatic increase in the opportunities for diversification and risk transfer and in the sophistication of risk management, but it is unlikely to have brought an end to the periodic tendency of markets to experience waves of mania and panic. The systemically significant financial institutions are larger and stronger than in the past, but they are not invulnerable, and the impact of a failure would be greater. And it would be imprudent to expect that the lower overall magnitude of recent macroeconomic shocks that has contributed to lower volatility in growth and inflation outcomes will be with us indefinitely. What are the implications of these changes for how we think about managing systemic risk in the United States?

This translates into a more competitive and more innovative financial system, one that is more flexible and resilient, with weakness in one part of the system more likely to be offset by a capacity for expansion elsewhere. And, because their overall risk profiles are likely to differ from banks, the greater importance of non-bank financial intermediaries, and of the capital markets more generally, offsets some of the potential concern associated with consolidation in the banking system. Within the universe of non-bank financial intermediaries, there are other material changes worth noting. Let me highlight three. First, the role of the major investment banks in the United States as market makers and providers of liquidity in a broad range of foreign exchange, securities, and derivatives markets has continued to grow over the past decade, as has the international importance of these firms. These institutions are now key participants in the domestic and international clearance and settlement processes associated with these activities. Second, a sustained period of rapid growth in the major mortgage GSEs has left us with two very large financial institutions, whose balance sheets and associated off-balance sheet positions today account for a much larger share of the U.S. mortgage market than was the case a decade ago. This means that the credit and market risks associated with the home mortgage business in the U.S. are now in some respects more concentrated. It means that the actions taken by the GSEs to manage interest rate risk can have a substantial impact on interest rate volatility.
Subject to data availability, the sample is 1997–2007. The lead of monetary policy varies. Source: ECB Staff calculations. BIS central bankers’ speeches  11  Chart 11: Monetary policy accommodation and price of risk  Note: Monetary policy accommodation is proxied by the residual of an estimated monetary policy reaction function (with inverted sign). For the US it is based on G. Rudebusch (2009), “The Fed’s Monetary Policy Response to the Current Crisis”, San Francisco Fed Economic Letter. For the euro area it is based on an update of the reaction function estimated in L. Christiano, R. Motto and M. Rostagno (2010), “Financial Factors in Economic Fluctuations”, ECB WP No. 1192. The price of risk of equity is derived from the VIX-index following Bekaert et al. (2010), “Risk, uncertainty and monetary policy”, NBER Working Paper Series No. 16397. The charts are based on the historical decomposition derived from their multivariate model, extended also to the euro area. Subject to data availability, the sample is 1997–2007. Source: ECB staff calculations. 12  BIS central bankers’ speeches  Chart 12: Monetary policy accommodation and leverage  Note: Monetary policy accommodation is proxied by the residual of an estimated monetary policy reaction function (with inverted sign). For the US it is based on G. Rudebusch (2009), “The Fed’s Monetary Policy Response to the Current Crisis”, San Francisco Fed Economic Letter.

Peter Pang: Islamic capital and money markets Welcoming remarks by Mr Peter Pang, Deputy Chief Executive, Hong Kong Monetary Authority, at the workshop on “Islamic capital and money markets”, Hong Kong, 19 March 2013. *  *  *  Distinguished guests, ladies and gentlemen, 1. It is my great pleasure to welcome you to this Islamic finance workshop. We are particularly grateful to Mr. Mohd. Radzuan, Mr. Azidy and Mr. Azahari, the experts from Malaysia, who have flown all the way to Hong Kong to share with us their knowledge on Islamic capital and money markets and their valuable experience in developing these critical components of Islamic finance. I would also like to thank Mr. Najmuddin of Bank Negara Malaysia for bringing the Malaysian delegation here. Two fast developing asset classes in the global markets 2. This workshop comes at a very opportune time as Hong Kong is looking to develop Islamic finance as a way to diversify our financial platform and further enhance our capability as an international financial centre. In my view, to be a truly international financial centre, one needs to develop a conducive platform for the two fast developing asset classes in the global markets – Islamic financial products and RMB-denominated investment assets. 3. The development of Islamic financial markets has been phenomenal in the past two decades.
Conversely, inflation is a form of confiscation, which primarily affects the least privileged households. In a modern economy, the social contract is based on the confidence that citizens have in their currency. With the euro, French citizens now possess one of the world’s two foremost currencies, whose legitimacy is based on the stability that it bestows on their savings and purchasing power. The French economy In spring 2007, the picture of the French economy is mixed. At first glance, France’s performance is strong. Growth is above 2%, inflation is under control, investment is dynamic and 256,000 jobs have been created over the past year (of which 155,000 in the market economy). In 2006, the fiscal deficit decreased sharply and government debt was cut by 2 GDP percentage points. This assessment is, however, significantly tempered by the two following observations. First, and for the first time for a long time, growth in France is below the euro area average. France is following and benefiting from a European movement that it is not contributing to fuel. This is illustrated in particular by the (negative) growth differential with Germany, which is without precedent over the past 20 years. Second, France records a substantial current account deficit, which deserves particular attention. Thanks to the euro, the French economy is shielded from financial turbulence which would, in the past under such circumstances, have jeopardised the stability of its currency.

It is noteworthy that there has been a build-up of non-debt creating international reserves during 2017, with minimal impact on the exchange rate. Going forward, foreign exchange intervention policies will be adopted, which are consistent with a flexible exchange rate regime and supportive of improving foreign exchange market functionality. Maintaining a competitive exchange rate will be an important objective of the Central Bank. In line with this policy, we will continue to focus more on non-debt creating financial flows in building up reserves. Ongoing policy reforms of the government focus on boosting exports as well as attracting FDI. This gives greater salience to our agenda of maintaining flexibility in the exchange rate to boost competitiveness. The Board of Investment (BOI) has estimated FDI to have reached US dollars 1.5 billion in 2017, which will be a key milestone and could possibly be a turning point in FDI inflows. The commencement of the Hambantota Industrial Zone and the continuation of the Colombo Port City project are expected to bring significant FDI flows from 2018 onwards. Annual FDI flows of US dollars 2-3 billion are expected in the coming years. In addition to boosting growth and employment, it will also enhance external sector resilience by generating non-debt creating inflows and boosting exports. The Central Bank will continue to manage reserves in line with a model based Strategic Asset Allocation framework (SAA), to ensure foreign exchange reserves are managed with the objective of ensuring an adequate level of liquidity and a reasonable return in comparison to benchmarks.
The issue of asymmetric loss functions over outcomes is well understood by economists, and more recent research around robustness to ambiguity in probability assessments provides more formal methods of "extremizing" probabilities based on loss functions and the level of ambiguity.15 Another issue Tetlock raises is that prediction of binary outcomes of clearly stated problems, while useful for tracking forecast accuracy and learning good technique, leaves a lot of information to still be determined. For the question I posed on the probability of a recession, we would also want to have forecasts of how moderate or deep the recession would be if it occurred. This is particularly true in the current environment of low natural rates of interest, where recessions are more likely to be associated with trips to the zero lower bound (ZLB) and the ability to further reduce the policy rate is constrained.16 A topic beyond the scope of Superforecasting—but very relevant for the forecasting of recessions—is that policy decisions given the probability assessment can affect the actual outcome. This relationship suggests that extremizing results is much more useful for forecast tournaments than in every day practice for central bankers. Further, economic outcomes can be partly determined by multiple equilibria or animal spirits, which themselves can be influenced by current decisions and communications. For example, we have heard from market contacts that FOMC participants' recent discussions of the link between yield curve inversion and recessions could encourage some economic agents to believe a recession will occur if the yield curve does invert.

This brings me to my second proposition. Because of the existence of the zero lower bound, it is far easier for monetary policy to fight inflation by raising interest rates than to combat deflation by lowering them. Although central banks world-wide have used a range of non-standard measures to stimulate economic activity and push inflation up to the target, in practice, this has proven to be extremely difficult. Moreover, as I pointed out earlier, the institutional set-up of the euro area rules out the easiest policy option to raise inflation, namely the monetisation of budget deficits. Furthermore, in the euro area as a whole, monetary policy was, for a long time, “the only 6  game in town”. With many sovereigns weighed down by excessive debt burdens, there was no space for fiscal policy to play its part in supporting monetary policy in stimulating the economy. Rather, in many countries, the necessary focus on austerity measures meant that monetary policy and fiscal policy were operating at cross-purposes. Unfortunately, those euro area countries with space to manoeuvre chose not to do so. To sum up, monetary policy can influence nominal economic variables. In the long run, however, it cannot influence real economic variables, which depend on the economy’s endowments of factors of production and the efficiency with which they combine to produce output. This highlights the importance of structural reforms to ensure that the economy operates as efficiently as possible.
So yes, it is in our national interest that France remain committed to a full implementation of the December 2017 Basel III accord that is fair, definitive and reasonable: fair in the sense that there must be regulatory consistency with the United States, which appears to be fully guaranteed; definitive because there will be no Basel IV; and reasonable with regard to the application of the output floor. I support the application of the output floor at consolidated level for French banking groups, and solely for the calculation of the capital requirements defined in the Basel accord, as proposed by the Franco-German position. In insurance, Solvency II has enabled firms to confront the crisis on a very solid footing. But, as well as providing essential support for equity investment, the review of the regulation must allow us to strengthen the supervision and cooperation framework for cross-border activities. It is unacceptable that our national guarantee funds have to cover insurance payouts in the event of failures of cross-border insurers. Supervisors and guarantee funds in countries  of origin should be made to shoulder more responsibility. Our single market has its rules: freedom of movement does not imply free-riding! II. Five essential challenges still need to be addressed  In the short term, two challenges linked to the exit from the crisis Let us turn now to the challenges. The emergence from this crisis remains shrouded in uncertainty, and is very much conditional on the financial health of our firms.

The ACPR is paying close attention to the impact of the rising risk of bankruptcies on banks’ solidity, and has not so far noted any significant increase; I have already taken the opportunity to put some of the overly alarmist readings of the ESRB’s recent report into perspective. With the recovery, the lifting of the public health restrictions will need to be followed by a winding down of public aid mechanisms. Support for businesses has to switch from the widespread provision of liquidity to a more selective phase of quasi-equity based support, targeted at firms that are economically viable but that have been financially weakened by the crisis. As the health and economic situation gradually normalises, there will be no reason to maintain the exceptional crisis support measures beyond next year: this applies to the buffers and flexibilities decided on at the start of 2020. The restrictions on dividends could also be lifted from as early as September 2021. This is vital if we are to ensure that our financial institutions remain attractive in a context of heightened international competition, where the exceptional measures are often more flexible, as in the United Kingdom, or are in the process of being lifted, as of 30 June this year, for the majority of US banks. Three longer-term challenges I shall turn now to the three structural challenges that financial institutions will need to address in the next decade: profitability, innovation and climate action. For banks, profitability is no longer an issue linked to monetary policy.
Indeed, the financial crisis hit the European economies at a time when a number of Member States had unsustainably high public debt levels, leaving less room for demand management. Major structural reforms and internal devaluations, which included outright cuts in nominal wages, were inevitable, and these had to be effected without the possibility of complementing them with appropriate compensation on the demand side. The result is a prolonged and painful recovery with permanent effects on potential economic growth, in some countries driving a disinflationary process. A further challenge arises from the fact that in the Eurosystem the centralised monetary stance is accompanied by a fragmented fiscal effort on the part of the various national governments. This contrasts with, for example, the United States where both monetary and fiscal policies are more centralised and hence they can be harmonised towards a common goal. While these limits on national fiscal policies have influenced the slow momentum of recovery, there are still various options that can address this weakness. On the fiscal side, the recent proposal by the Commission to create a European Fund for Strategic Investments is one way of funding large scale investment projects that would promote competitiveness and boost activity in stressed areas. The Fund would be backed by guarantees from the EU budget and the European Investment Bank. A complementary policy is the switching of government  2  BIS central bankers’ speeches  expenditure to more investment and growth friendly areas, while reducing bureaucracy and other inefficient expenditure.

Given its size and lack of natural resources, it is not surprising that Malta has one of the most open economies in the world, with imports and exports each almost as large as the GDP. The EU is Malta’s main trading partner, accounting for over two-fifths of exports and two-thirds of imports in 2003. It is an even more important market for the tourism industry and is a major source of capital investment. For Malta, therefore, the prospect of being anchored in the relative safety of the world’s second largest economy and of using that economy’s currency represents a considerable advantage. Perhaps the foremost benefit of euro area membership is being able to share in the credibility of a Europe-wide monetary policy. This will not only mean reduced exchange risks and less uncertainty for economic operators, but also the elimination of the risk premium on the Maltese lira. The resulting reduction in interest rates, moreover, would be of direct benefit in terms of price competitiveness, as would also be the lower currency conversion costs and the increased price transparency. The euro should also act to spur the integration process with the EU since it is known that trade and investment flows tend to increase in the absence of exchange rate volatility, and also that the trade of countries sharing a common currency can be as much as three times higher than that of countries with different currencies. The Maltese economy is relatively well placed to secure these benefits of monetary union.