samchain/econo-pairs-v1 huggingface dataset:
Today, it amounts to 13%. It was also said at the time that one franc out of three was made abroad. Today, it is one franc in two! The 1990s marked the real turning point in our economy’s trend toward globalisation. Our commercial relations with China are exemplary in this regard. After having levelled off at approximately 900 million francs a year in the late 1990s, our exports to China grew at a rapid pace in more recent years, reaching 2.9 billion francs in 2004. With regard to Chinese exports to Switzerland, the trend is just as spectacular, but much more steady. Sales of products manufactured in China in the Swiss market have risen continuously for 20 years now, be it textiles, electronic equipment or - naturally - product components that are reintegrated into our domestic production. Owing to soaring exports to China, our trade balance with this country has thus flattened out steadily; toward the end of the 1990s, it was clearly negative, in 2004 we even had a slight surplus. Despite the rapid expansion of our trade with China, its overall significance remains modest, amounting to just 2% of total Swiss trade. From a Chinese perspective, the relative importance of trade relations with Switzerland is even smaller. Switzerland accounts for less than 1% of Chinese imports and exports. A similar picture can be observed with respect to Swiss foreign direct investment here. Despite a thirty-fold increase between 1993 and 2003, it still amounts to less than 0.6% of total Swiss investment abroad.

Jean-Pierre Roth: Switzerland - small, but global Speech by Mr Jean-Pierre Roth, Chairman of the Governing Board of the Swiss National Bank, at the Swiss Chinese Chamber of Commerce (SwissCham), Beijing, 10 June 2005. *  *  *  I am pleased to be a guest here today at the Swiss-Chinese Chamber of Commerce and speak a few words to you. I am sure it is not necessary to convince any of you of the importance of globalisation and trade. You are living proof of our export sector’s dynamism and willingness to adapt to changing circumstances. By your presence in China, you contribute not only to our country’s influence abroad, but also to the expansion of its economy. As you know, economic globalisation often gets bad press in Switzerland. Some of our fellow citizens condemn it, hoping that barriers to delocalisation might strengthen the situation on our labour market. But let’s not be led astray by these scaremongers! Those who succumb to those fears fall victim to an illusion. A policy of inactivity is not synonymous with consolidation, but with decline. It is important to realise that Swiss investment abroad, particularly in low-wage countries, secures the high added value jobs we have at home. As a small country, we therefore have no other choice but to trade with the rest of the world if we want to prosper. This means that we will be continuously faced with the challenge of international competition.
This approach, known in the literature as risk-based supervision, is the one that has been recommended in the light of the recent crisis. On several occasions, supervision has ventured into what is today termed macroprudence. At the end of the 1990s, the SBIF issued recommendations urging that due attention be paid to the concentration of risks in the real estate sector, beyond what each institution might have on its books. Applying this same logic, it also issued instructions for the treatment of lending to individuals, particularly consumer loans, in the context of the rapid growth of these operations. Then, in the early 2000s, it instructed supervised institutions to carefully assess their clients’ exchange-rate risk, regardless of whether their own positions were well hedged. When mergers and acquisitions intensified a few years ago, it also took the initiative of introducing stricter regulation for banks of a larger relative size so as to guard against systemic risks. Although a factor of a different nature, the development of Chile’s capital market has also contributed to financial stability. The creation of a private pension system brought with it the appearance of institutional investors as well as new sources of medium and long-term financing. At the end of 2008, when international markets became tense, Chilean companies were able to replace external financing with placements on the domestic market on convenient terms and conditions. 3. Remarks in the light of recent experience  The paramount objective of central banks has been and will continue to be price stability.

Recent decades have brought notable achievements in this area. They were possible thanks to the institutional strengthening of central banks, including statutes of autonomy and advances in the design, implementation and communication of monetary policy. It is important to persevere on these lines whilst also bearing in mind possible adjustments or improvements. Central banks, however, also have an important responsibility for financial stability. Although this responsibility had lost prominence over time, the experience of recent years has clearly underlined its importance. Moreover, because of their monetary policy tasks, they are in direct contact with the markets and, therefore, have access to first-hand information about  4  BIS Review 142/2010  the functioning of the financial system. This puts them in a privileged position to undertake tasks related to financial stability. Central banks must, however, be realistic in setting their objectives. It is critical to ensure that they do not result in a more than reasonable level of protection for the financial system since this would encourage banks and other financial institutions to take excessive risks. The responsibility of central banks as regards financial stability must be geared principally to strengthening the reaction capacity of the system as a whole. If problems occur in specific institutions – which cannot be ruled out – the aim must be to minimize their systemic impact. Central banks must have a set of instruments that allow them to contribute effectively to financial stability.
The Bank of England has been working intensively with the City for the past few years to ensure that it is as thoroughly prepared for the start of the euro next year as the financial centres in any of the participating countries. We will be ready to provide financial services denominated in euro to all those that want them from day one. And we are already taking the initiative with our European partners in creating regional market structures, as you see, for example, in the talks between the London Stock Exchange and the Deutsche Börse, which are designed to lay the foundations for an inclusive, pan-European, equity market. You will be able to account, trade and settle in euro-denominated assets in London just as you can now in Deutsche Mark or French francs or dollars or yen. The financial markets of the City are our wedding present to the euro marriage partners. They are not just a national - but a European - asset. There are, of course, some here on the Continent who regard this role of the City as something of a mixed blessing - perhaps even a threat rather than a promise. There is a view that the euro should somehow ‘belong’ exclusively to the participating countries and that its introduction should be used as an opportunity to confer competitive advantage on national financial centres within the euro area.

I am simply describing the sort of economic risks which might occur, and which have been identified in the debate about monetary union in the United Kingdom as the potential downside to be set against the potential benefits of nominal exchange rate certainty which I touched upon earlier. You here in Belgium may think that these risks are sometimes exaggerated - you have after all been effectively in de facto monetary union with Germany for some considerable time. But I don’t think one can reasonably argue, certainly in the case of a larger country, that the risks can be ignored. It was against the background of this kind of economic debate that the Chancellor of the Exchequer announced a year ago that the United Kingdom would exercise its opt-out and not participate in the first wave of euro membership. That was a disappointment to some of our European partners. But it was a considerable relief to others, because UK participation from the outset would undoubtedly have complicated the project - not least because of the substantial cyclical divergence between ourselves and the major countries on the Continent. But the Chancellor also made it clear that the present British Government is not opposed to euro membership as a matter of principle; it will make its decision on pragmatic grounds - the test being whether membership would be in our economic interests; and it would BIS Review 88/1998  -4-  submit that decision to Parliament and to the British people in a referendum.
So, there is a risk that central bank may cut interest rate by too much, hence, sowing the seeds for inflation and an asset price boom down the road as well. On the other hand, sterilized intervention also entails quasi-fiscal costs, as well as adding to inflation risk from the build-up of local currency debt should there be future fiscal stresses. Moreover, international reserves accumulation can also risk damaging central bank credibility as they can incur balance sheet loss when reserves are marked to market in local currency. These are all important and delicate points for policy consideration. The second challenge is the ability of emerging market central banks or financial supervision authorities to identify and quantify risks of potential financial instability in advance. On this, we find stress testing to be a powerful tool to assess financial stability ex-ante. Unfortunately, financial institutions and regulators in emerging markets have significantly lagged behind their counterparts in advanced economies, especially on credit and liquidity risk stress testing. Therefore, regulators in emerging markets should move faster to increase the use of macro stress testing. They should also push financial institutions to invest in human resource and technology to conduct macro stress testing at least on an annual basis. And regulators and monetary policymakers must increase coordination in order to arrive at more relevant and convincing macro stress testing scenarios. The third challenge is the role of prudential measures.

This has a direct bearing on ensuring financial stability. But because Basel II is developed from the current practice among banks in developed countries, some banks in emerging markets may have a large gap to fill. For example, in moving away from collateralbased to credit-based loan approval, banks must focus more on the ability to pay of customers and to make loan decisions in a forward looking manner. This requires a different set of expertise that focuses on risk assessment in the environment changing economic cycle and asset quality. (ii)  Information system and resource and capacity building  Next is the information system which is the most important foundation for achieving financial stability through capital adequacy. Whereas developed countries generally already have in place the necessary infrastructure in this regard, financial institutions in emerging countries have to build the system from the ground up, involving areas such as data collection, storage, analysis, and ways to effectively embed the information in the decision making process. This step may take more time and effort because it involves building a knowledge base for quantitative analytical skills and ability to apply international best practices to the unique local settings of emerging market. (iii)  Involvement of stakeholders  Another difficulty in Basel II implementation is that other players in the wider financial industry will be playing more active role in the banking sector’s risk assessment.
Maintaining financial stability, including a well-functioning payment system, is, explicitly or implicitly, an important objective for central banks. In my overview of best-practice monetary policy in Svensson (2002), long before the crisis but during an ongoing debate about monetary policy and asset prices, I briefly discussed how this objective can be reconciled with flexible inflation targeting, how conflicts can arise and how they could be handled. 4 One question is whether financial stability belongs in the loss function for the central bank, together with inflation and resource utilization. I argued that a good way of handling this additional objective is as a constraint on monetary policy rather than as a separate target variable that appears in the loss function. The idea is that financial stability is normally pursued with different instruments, such as supervision and regulation, and is normally not a concern for monetary policy. Under normal circumstances, at least in industrialized countries, financial stability is good and does not impose any constraints on monetary policy. Only rarely, when financial crises occur, does financial stability impose constraints on monetary policy and force the central bank to modify its decisions.

The role of monetary policy in the financial crisis  As I see it, the crisis was mainly caused by conditions that had very little to do with monetary policy and were mostly due to regulatory failures and, to some extent, to specific circumstances, including the U.S. housing policy to support home ownership for low-income households. 7 The macro conditions preceding the crisis included low world real interest rates due to global imbalances, as well as the Great Moderation with a long period of very stable growth and stable low inflation, which led to a systematic underestimation of risk and very low risk premia in financial markets. There were distorted incentives for commercial and investment banks to increase leverage that were made possible by lax regulation and supervision and the lack of an appropriate bank resolution regime, as well as distorted incentives to exercise less due diligence in loan origination because of securitisation and to conduct regulatory arbitrage by setting up off-balance-sheet entities which for various specific reasons ended up still effectively remaining on the balance sheet. There were also distorted incentives for traders and fund managers to take excessive risks because of myopic and asymmetric remuneration contracts. There were eventually enormous information problems in assessing the risks of extremely complex asset-backed securities, and there was a huge underestimation of the potential for correlated systemic risks. None of these causes had anything to do with monetary policy, except that monetary policy may have contributed to the Great Moderation.
[6] The entire monetary and financial sector would be deprived of its anchor – central bank money – and would be exposed to potential instability. [7]  It is also conceivable that non-European digital payment solutions and technologies operated abroad might dominate our payments market, as we are already seeing in some segments like cards and online payments. This risk would be exacerbated by the expansion of means of payment offered by big techs, which could use their very large customer base to their advantage. This would raise questions about our autonomy and privacy in payments. It could even endanger European sovereignty. [8] Moreover, the international monetary system may see the emergence of central bank digital currencies (CBDCs) in large economies. Such CBDCs would offer benefits in terms of efficiency, scalability, liquidity and safety that would support their attractiveness internationally. And they would have the potential to facilitate cross-border payments, which may enhance their role as a global payment unit. [9] In such a context, not issuing a digital euro could undermine the international role of the euro and create additional risks to sovereignty. This scenario is not imminent, but it could potentially materialise in the future if we do not start acting today. And if we don’t act, we will also see increasing confusion about digital money. Crypto-assets are a case in point. [10] Unbacked crypto-assets, for example, cannot perform the functions of money. They are neither stable nor scalable. Transactions are slow and costly.

Of course, this policy is not free of cost, since holding reserves is costly, and therefore its use is limited.4 It is difficult to recommend a particular strategy, since realities are different across countries, not only on the nature and impact of capital flows, but also on the overall macroeconomic policy framework and deepness and strengths of financial systems. However, the general principles discussed above should be taken into consideration. Final remarks The connections between price and financial stability suggest that the central banks should consider the cross effects of financial policies and monetary policy. In countries like Chile, the central bank has an explicit mandate on financial stability, and many other countries are moving in this direction as the interactions among policies have been recognized. But also, it is important to have a close and continuous coordination among all authorities with responsibilities on the financial system. This coordination becomes also more needed in times of crisis or extreme distress, since the central bank has to implement its LLR functions. In normal times, the pursuit of price stability in a small open economy is not in contradiction with financial stability in the presence of capital flows. In this context, the potential vulnerabilities to high exchange rate volatility can be handled with prudential regulation. However, in episodes of capital surges that may affect macroeconomic and financial stability a close coordination of monetary policy and prudential policies is required. References Bernanke, B.S.
It is also much easier now to see the implications of the crisis for Sweden than it was  1  I refer to my speech of 1 March, “The housing market, the banks and household debts” as regards details of the housing market and indebtedness among households. The speech is available at the Riksbank’s website, www.riksbank.se. However, at the end of today’s speech, I will touch on household debts and housing prices when I discuss our forecast for the repo rate. BIS central bankers’ speeches  1  while the crisis was in progress. One way of emphasising the drama of the financial crisis is to look at GDP in the world as a whole, which decreased for the first time since the 1940s (see Slide 2). With an economy in free fall in many parts of the world, policy rates dropped with full force (see Slide 3). At the same time, very extensive fiscal easing was implemented in many countries. Furthermore, both governments and central banks launched various support measures to avoid a collapse of the financial system. Today, we know that, in the end, the financial crisis mainly manifested itself in Sweden in the form of decreased demand from abroad. World trade declined sharply, as did Sweden’s exports (see Slide 4). The uncertain situation meant that the currencies of many smaller economies were weakened in relation to the US dollar and euro. To a great extent, this also applied to the Swedish krona, which reached its lowest point ever (see Slide 5).

Caleb M Fundanga: Bank of Zambia retirees Talking notes by Dr Caleb M Fundanga, Governor of the Bank of Zambia, at the luncheon in honour of Bank of Zambia retirees, Bank of Zambia, Lusaka, 12 December 2006. *  *  *  • Deputy Governor – Administration • Directors • Ladies and Gentlemen • Retirees and Potential Retirees in our midst Some people say “retirement is wonderful; it is described by many as doing nothing without worrying about getting caught at it”. That is to say, you now become accountable to yourself for your actions! Retirement marks an important milestone in one’s life, it is so important that in many cases you have to consult, and reflect extensively before you take that very important decision. It is a day one should not only anticipate during ones working life, but also plan for. Retirement can occur voluntarily as the case is with VESS, by attaining the age of 55 as provided by statute or prematurely due to a misfortune such as failing health. In all circumstances one must plan for the event. Ladies and Gentlemen, it is for this reason that the Bank has found it befitting to host a luncheon in your honor, by recognizing all the hard work that you have put in the Bank in the many years of service. Admittedly, relationships between the Bank and ex-members of staff have in certain cases not been so good.
This was one of the reasons why we changed over  1  At present the central banks in Iceland, Norway, New Zealand and Sweden publish their own paths for the policy rate. BIS Review 112/2007  1  in autumn 2005 to basing our assessments on the assumption that the repo rate would develop in line with market expectations. But although this was a more realistic assumption, it was still the case that the forecasts did not necessarily reflect the Riksbank’s assessment of the most probable economic development. This is because market expectations do not necessarily agree with the interest rate path the Riksbank considers to be most appropriate. Now that our analyses are based on our own path for the repo rate, they describe the course of events we are actually expecting to see. This has several advantages. For one thing, it is possible to say something about how accurate our forecasts have been and how well the Riksbank has done its job. And for another thing it will also be easier to internally evaluate and improve the models and methods of working used as a basis for our forecasts. Finally, it makes it more worthwhile to compare our picture of the economy with the picture painted by other forecasters. Reasoning and considerations made clearer The second advantage of an own interest rate forecast is that it becomes easier to show why we believe in a particular policy and how we reason when we make our decisions.

But our view of inflation prospects and what they entail for the repo rate had not changed to any great extent in February compared with the previous monetary policy meeting in December 2006. We also expressed this attitude in speeches given in the weeks prior to the February meeting. When we presented our own interest rate forecast for the first time in February some analysts showed considerable surprise. Using our own interest rate forecast enables us to explain more fully how we viewed developments in the Swedish economy during the forecast period, and what demands this made of monetary policy. Our assessment was that cost pressures in the Swedish economy would not be overly high. Productivity has been high in recent years and is one important reason why inflationary pressures have been low. We were assuming that productivity would increase slightly more slowly when employment began to pick up and that wage increases would be slightly higher as it became more difficult for firms to recruit employees with the right competence. But inflation was still low and although the forecast was based on cost and inflationary pressures rising during the forecast period, our assessment was that this would occur at a moderate pace. We therefore concluded that it would be sufficient to have a fairly limited raise in the repo rate in the future. But to emphasise that forecasts are uncertain, we also published uncertainty bands for the repo rate and for GDP growth and inflation.