samchain/econo-pairs-v1 huggingface dataset:
To return to the ice skating metaphor, you may fall through the ice despite being careful. But then you will hopefully have both the equipment and the training to manage to get out of the water and get home in dry extra clothing. Everything may not happen exactly as you have trained for, but you know what to do – you have both the tools and the techniques required. And we do. We are well-prepared to manage our task, even when there is turmoil in the world around us and when unforeseen events occur. We are aware that extraordinary events may require extraordinary measures. If necessary, we can act both quickly and forcefully. If necessary, we can implement more unconventional measures as a complement to our interest rate policy. This is the way we have worked so far, and this is what we will continue to do. If necessary! Concluding reflections – why are things better this time? There have been many gloomy headlines regarding economic developments recently. We are certainly in an economic downturn. And the global financial crisis will probably affect us all for some time to come. But, particularly in the light of all of the measures taken and those that will be taken around the world, we are expecting economic activity in Sweden to pick up again next year. After our most recent interest rate decision some analysts wondered why we believe that the Swedish economy will recover more quickly now than after the crisis at the beginning of the 1990s.

The growth rate we attained with the high inflation in the 1980’s did not last long and had been replaced by higher inflation rates and economic recession. Meanwhile, between 2002 and 2007, high growth rates were attained while a remarkable decline was recorded in inflation. In this scope, we are of the opinion that the monetary policy implemented by the Central Bank of Turkey, which is consistent with the main objective of price stability, has supported the establishment of price stability in Turkey and contributed to the permanent increase of the competitive power of the whole economy and the exports sector. I would like to emphasize that the quality of fiscal adjustment is crucial for both the struggle with inflation and the permanence of the high growth rates. The fiscal rule, which is to be enforced in the near future will enhance predictability and create confidence for the future. Fiscal rules play a critical role in the establishment of fiscal policies consistent with sustainable debt dynamics and foster a more prudent and permanent implementation of fiscal discipline. However, in the light of country experiences, in order that fiscal rules can function as expected, these rules should be implemented in a transparent way as per the required institutional and legal framework to be established. 5. Exchange rate  As you may have noticed, in my speech regarding how to increase the potential growth rate of Turkey, I have not mentioned the issue of foreign exchange rates.
These trends have been particularly visible in Latin America. During 2012, annual gross capital inflows to the seven largest Latin American countries – as classified by the IMF – amounted to more than 250 billion dollars. Sovereign EMBI spreads shrank to around 150 basis points, and, with a few exceptions, stock market prices recovered or surpassed their pre‐crisis levels.1 After the large depreciation suffered at the peak of the crisis, the real exchange rates of these countries persistently appreciated, continuing with a trend coming from the mid‐2000s. House prices in the region also experienced high annual growth rates, in many cases reaching two‐ digit figures. Chile was no exception to these patterns, although they were a bit less pronounced than in the average emerging or Latin American country. Our real exchange rate appreciated by about 15 percent between the peak of the crisis and the end of 2012, real house prices grew about 20 percent between 2009 and 2012, and our current account moved from a surplus of 2 percent of GDP in the last quarter of 2009, to a deficit of 3.5 percent of GDP by the end of 2012. Sure enough, these patterns could be explained by pull factors. The faster recovery of growth rates in emerging markets, the quick rebound of their commodity prices after the crisis, and the sounder policies being implemented by several of them during the last decade could give reason to allocate more capital to this group of countries.

Rodrigo Vergara: Global liquidity, spillovers to emerging markets and policy responses Opening remarks by Mr Rodrigo Vergara, Governor of the Central Bank of Chile, at the XVII Annual Conference on “Central banking, analysis and economic policies” of the Central Bank of Chile, Santiago de Chile, 14 November 2013. *  *  *  I thank Claudio Raddatz, Luis Oscar Herrera, and Consuelo Edwards for helpful comments. Good morning. Welcome to the Central Bank of Chile’s Seventeenth Annual Conference on Central Banking, Analysis and Economic Policies. This year, our conference focuses on “Global Liquidity, Spillovers to Emerging Markets and Policy Responses”. You will probably agree with me that this is a very timely topic. The global financial crisis that started in 2008 prompted a quick and decisive reaction of monetary authorities around the world. The central banks of most countries soon slashed interest rates to boost their economies, and implemented various types of facilities to inject liquidity into troubled financial markets. However, while most emerging markets reversed some of these policies as their economies recovered, advanced economies have maintained historically low interest rates and engaged in unconventional policies that last to these days. I will discuss today some of the policy issues around these developments and share some thoughts about the pending research questions along the way. These years of global liquidity expansion have coincided with a surge in gross capital inflows into emerging markets, a real appreciation of their currencies, and an increase in the prices of their main commodities, stocks, and houses.
Capital adequacy ratios were raised and a more risk-differentiated view was taken of bank assets. Risk management systems were made more robust. It was in large part because of these changes, that Asia was better able to withstand the global financial crisis in 2008 and 2009. 18. But much work remains to be done in one important area. Developing Asia needs to continue to develop its capital markets. The Asian financial crisis was essentially due to a double-mismatch in bank financing – currency mismatches and maturity mismatches. This is where strong capital markets can play a useful role in allocating capital in a more balanced and efficient manner. They also help to deepen financial intermediation, so as to facilitate the deployment of the region’s high savings for investment within the region. 19. This was why, nearly ten years ago, the ASEAN+3 countries (namely the ten nations of ASEAN together with China, Japan and South Korea) introduced the “Asian Bond Markets Initiative (ABMI)”. The ABMI has had a good start – the Asian corporate bond market has grown by more than 2.5 times during 2002 to 2010. But it is still too small relative to the size of Asia’s investment needs. It needs to be more liquid and diverse. Access to capital market funding is still mostly restricted to large conglomerates and government-linked companies. 20. Emerging Asia is also under-represented in the equity universe.

These numbers, in themselves, are not cause for concern. Indeed, some would argue that emerging Asia’s investment on a per capita basis is not very high. The real question is whether these investments are going into the right places. Asia’s periodic bouts of asset market bubbles – especially in real estate – are a case in point. Michael Pettis of Beijing University, for instance, warns that Asia’s extraordinarily successful development model will eventually run into the constraints of “massive over-investment and misallocated capital”. BIS central bankers’ speeches  1  8. The key challenge that faces Asia therefore boils down to this: “how can Asia harness its sizeable domestic savings and large inflows of foreign capital to realise its economic potential?’ There are three things emerging Asia needs to do right. First, Asia needs to price capital correctly. Second, Asia needs to strengthen its infrastructure for allocating capital. Third, Asia needs to build up expertise in investing capital. Price capital correctly 9. Let me begin with the pricing of capital. History is replete with examples of how mispricing capital leads to serious misallocation of resources, which in turn leads to excessive risk-taking and a build-up of debt that eventually ends in a financial crisis. 10. Take Latin America in the 1970s. Global interest rates were low and capital sought higher returns in a booming region. International creditors lent huge sums for industrial development. External debt quadrupuled between 1975 and 1983, rising to 50% of the region’s GDP.
The main principles of foreign exchange reserve management at the SNB Currently, the management of foreign exchange reserves is enshrined in the National Bank Act (arts. 5, 30, 42 and 46), and defined in detail in the internal instructions drawn up in 2004 and revised in 2008. These instructions are available on our website. Contrary to received wisdom, the SNB is as transparent as possible about the principles surrounding the management of its foreign exchange reserves. Thus, in contrast to other central banks, it publishes quarterly data on its foreign exchange reserves, broken down according to currency and asset class. The basic principles of foreign exchange reserve management are very clear; let me just quickly run through them. First principle: Primacy of monetary policy over foreign exchange reserve management. Concretely, changes in foreign exchange reserves result from monetary policy decisions. The level of these reserves is a variable upon which reserve management policy has no influence. Once this framework has been established, the management of foreign exchange reserves takes place independently from monetary policy. However, the SNB does need to make sure that its investments do not give rise to any conflict of interest with the objectives of monetary policy, or indeed of the SNB as regards financial stability. So, for example, we do not invest in Swiss financials, so as to avoid a conflict between the management of foreign exchange reserves and the SNB’s mandate to contribute to financial stability in Switzerland. As a general rule, the SNB does not invest in Swiss corporate equities.

Many observers of the SNB’s activities have expressed a desire that this proportion be larger. Yet such an increase is not without risk. While the inclusion of equities in a portfolio can reduce the risk profile as a result of the diversification effect, this is only true up to a certain level. We estimate this level of equities to be between zero and 5% of the portfolio. While a higher share would naturally translate into a higher return on the portfolio, it would also mean incurring greater risk. Any increase in the proportion of equities must therefore be analysed from two vantage points: return and risk. Additional risk can run contrary to the criterion of security that the SNB applies to its investments. Let me now turn to the fifth and last challenge: Managing exchange rate risk. The return on foreign exchange reserves essentially fluctuates in line with changes in local currency returns versus Swiss franc returns. This exposure to exchange rate risk is the result of the SNB’s monetary policy. It thus forms, so to speak, part the DNA of a central bank’s activities in a small open economy such as ours. Eliminating this risk would go against monetary policy, which remains the SNB’s priority. We therefore have to live with this risk and try to reduce it without getting rid of it completely. To this end, the Governing Board pursues a strategy of maximum diversification across the currencies at its disposal.
The New Keynesian model features no realistic frictions in financial markets either, at least to generate problems as severe as the current ones, so it has nothing to say about the origins of the crisis. 4 These models are widely used in central banks to calibrate the monetary policy that is consistent with an inflation target. 5 In that sense, they are a very useful tool for establishing well-specified, well-estimated transmission mechanisms, but they are certainly limited, and it is unrealistic to believe that they can provide a full description of the economy. Economies are exposed to many shocks that cause deviations – sometimes significant deviations – from projection scenarios. However, they help to understand alternative courses of action of monetary policy after the shocks have hit. Actually, the much praised aggressiveness in interest rate cuts around the world, to unprecedented levels in many cases, is largely justified by the sharp drop in inflationary pressures. It is likely that, without the commitment to bringing inflation back up to normal rates, monetary policy actions could have attained only part of the expansion. This is a practical demonstration of a wrong criticism on inflation-targeting central banks, which is that they are not concerned with the level of activity. Drops in activity and downward pressures on costs are the factors that opened room for monetary policy, avoiding to repeat the mistakes made in the 1930s.

Another aspect making a big difference is the performance of emerging economies. Latin America, excluding Chile, posted an average annual fall of 4.2% between 1930 and 1932, while Chile, where the crisis compounded with the downfall of the nitrate industry, fell an average of 17.6%. For the three-year period 2009-2011, private forecasts indicate that Latin America will grow by an average of 1.2%, while Chile will grow by 2.1%. These are just projections, not definitive figures, but data released so far this year indicates that the effects of the crisis, although far from negligible, are much milder than they were in the 1930s. This is an encouraging fact. Usually, whenever developed countries go into a recession, its effects are amplified into our region. That has not been the case this time; on the contrary, our region today is outperforming the developed economies. That the current crisis did not turn into a Great Depression proves that lessons have been learned. Economies are much stronger, and also the policies applied have gone in the proper direction of mitigating the tremendous financial shock of last year. For one thing, the task of stabilizing the financial system was assumed decisively, which prevented its collapse. Uncertainties remain, but are more focused and less dramatic than at the end of last year.
Of course the last ten years have, thankfully, not seen any further liquidity crises, but this progress was tested with the preparatory and contingency work conducted around the EU Referendum in June 2016 – where our approach helped firms plan with confidence. 21  17  As well as opening up the SMF, the Bank has expanded access to Settlement Accounts for its Real Time Gross Settlement system (which allows account holders to settle payments real time in sterling central bank money) from 21 in 2006 to 201 today. These now include to new entrants in payments – non-bank payment services providers. We are currently renewing our RTGS system, and a core feature of the new system will be the ability to interface with new and innovative payment systems, designed to encourage a more diverse and resilient financial system. 18 Before widening access to new classes of institution, the Bank considered three key criteria to ensure usage of the facilities remained appropriate; whether they were systemically important, whether they were exposed to sterling liquidity risk, and whether they were appropriately prudentially regulated. 19 The 2017/18 SMF Annual Report can be found at https://www.bankofengland.co.uk/-/media/boe/files/sterling-monetaryframework/annual-report-2017-18.pdf. 20 The IEO report on the Bank’s approach to providing sterling liquidity, together with the Bank’s response, can be found at https://www.bankofengland.co.uk/news/2018/january/ieo-evaluation-of-the-boe-approach-to-providing-sterling-liquidity. 21 See Shafik, M. (2016), “Small is Beautiful but Big is Necessary”, speech at the Bloomberg Markets “Most Influential” Summit, available at https://www.bankofengland.co.uk/-/media/boe/files/speech/2016/small-is-beautiful-but-big-is-necessary.pdf.

By requiring prime MMFs to adopt a system of gates and fees, the reform made them less money-like; floating NAVs reduced the money-likeness of the institutional subsegment even further.16,17 The differential impact of the SEC’s MMF reforms—which made prime MMFs less money-like yet not riskier—can be used to distinguish between investors’ preferences for money-likeness and safety in normal states of the world. Figure 2 shows the industry’s aggregate assets around the implementation of the new rules. In anticipation of implementation, more than $ trillion flowed from the prime MMF sector into the government MMF sector.18  3 / 10  BIS central bankers' speeches  Moreover, the absence of other changes in investors’ behavior suggests that MMF investors were driven by a narrow desire to preserve the money-likeness of their investments. When moving from prime to government MMFs, investors largely remained in the same fund family. Figure 3 illustrates this observation using a scatter plot of outflows from prime funds versus inflows into government funds at the family level. Additionally, investors shifted into funds that invest primarily in agency debt, the sub-segment of the government MMF industry with a riskreturn profile most similar to that of prime MMFs. 4 / 10  BIS central bankers' speeches  This response to MMF reform differs significantly from what happened in 2008.
It is a process we are particularly conscious of in London where major financial institutions from all over the world, including, of course, from elsewhere in Europe, have long been predominant players, especially in international wholesale market activity. But international ownership of banks (including newly privatised banks) and other financial institutions has increasingly become a common characteristic of financial systems in a wide range of other countries. I will not comment further on globalisation, which is certainly very familiar to you, except perhaps to say that I have often been teased by people who talk about the Wimbledonisation of the City of London – meaning that we provide the tournament venue but the prizes are mostly carried off by competitors from overseas. I think that many of those people now increasingly understand that it is activity rather than nationality of ownership which creates a competitive market place, and in turn provides employment and income and tax revenue, which are the things that really contribute to the macro-economy. As a broad generalisation the wider the range of participants the more efficient the market place. A third major driver of change in our financial systems – as elsewhere in our economies – is, of course, information technology. This has clearly transformed transactions processing, putting a premium on throughput, and encouraging some forms of specialisation and consolidation. It has made possible entirely new – and typically much cheaper – means of delivering financial services making it easier for new entrants to contest existing franchises.

This cluster comprises the manufacturing, transport & storage, and wholesale services sectors. These activities comprise some 43% of the economy and, on average, contributed slightly over two-thirds of sequential GDP growth in Q4 2016 and Q1 2017. Electronics manufacturing firms expect business conditions to remain favourable in the next six months, albeit slightly slower than in H1 2017. MAS expects higher growth in this cluster to flow-through more broadly to the rest of the 2 / 10  BIS central bankers' speeches  economy and gain momentum over time. The modern services cluster recorded mixed outcomes over the last two quarters but is poised for higher growth in the second half of this year. This cluster, comprising financial, business, and ICT services, accounts for about 30% of GDP. Financial services saw a strong outturn in Q4 last year but a sequential pullback in Q1 this year, reflecting heightened political and geopolitical uncertainties globally which dampened investor sentiments. The performance of modern services is likely to improve as the global economy recovers and the upturn in the trade-related cluster raises business confidence and investments. The pickup in regional growth and trade should help anchor growth in lending and trade financing activities. Demand for ICT services will be boosted by government initiatives, as well as general IT deepening that is occurring in Singapore and the regional economies. The domestic-oriented cluster has had lacklustre growth and some segments are expected to remain weak.
As explained in detail in the Annual Report, set against the significant slowdown in exports and the fall-off in capital investment, household consumption grew at a rate of close to 2% in 2002. This growth was underpinned by the increase in disposable income, contributing to which, in turn, were the interplay of net general government transfers to households and higher employment. Moreover, the rise in households’ property assets, to which I shall refer later, also helped sustain consumption, offsetting the losses in financial wealth brought about by the heavy stock market declines. House purchases, the other component of household spending, have grown over the past two years at a lower rate than that observed in the period to 2000. More recently, this spending component has been subject to opposite-moving influences: on one hand, house-price rises may have dampened the demand for habitual dwellings; but on the other, the fact that the return on residential investment has held far above that provided by other forms of investment (financial assets in particular) has encouraged house purchases. In any event, investment in housing has continued to sustain the increase in construction. And further contributing factors here have been the forceful investment in  4  BIS Review 31/2003  infrastructure, carried out both by general government and by non-financial corporations related to this sector. Although this consumption- and construction-led growth pattern has provided suitable support for progress in real convergence, some of the elements on which it is based are likely not to continue in the future.

It is duly assigning additional resources and focusing on the matter more closely. Far from being a passing fad, improving corporate governance should receive priority attention from banks. Not only because of the factors habitually cited, but also because the new environment of transparency associated with IAS and Basel II will simultaneously involve greater market scrutiny, a greater capacity for action by bank managers and, in sum, heightened responsibility for them. My final comments relate to the internal changes at the Banco de España. The year 2002 has also been important in this respect in view of the reforms initiated, which will continue in the coming years. Last year the Banco de España successfully met the logistical challenge of substituting euro for pesetas. While the intensity of this process has diminished, it has nevertheless continued this year. I should like to reiterate my gratitude to the staff at the Banco de España for their efforts and dedication, which have been on a par with the historic significance of this event. 8  BIS Review 31/2003  Likewise, last year saw the start of an ambitious plan to rationalise our network of branches, located in each and every Spanish provincial capital. The restructuring involves acknowledging what is a fact: namely, that many of the services provided by the branches do not -owing mainly to new technologiesrequire a physical presence. And those requiring physical presence can be more efficiently organised through a smaller group of better-equipped logistical centres.