samchain/econo-pairs-v1 huggingface dataset:
Many approaches to measuring liquidity seek to quantify the cost of transacting in a given size, and this is certainly one reasonable definition. Others, however, might argue that it is the ability to transact that matters most for liquidity, even if the “cost” goes up during periods of heightened volatility. Perhaps even more difficult than defining liquidity is answering the question of how an increasingly electronic, and often automated, market affects liquidity. As we will see, this is a particularly pertinent question when examining the events that took place in the Treasury market on October 15 of last year. Electronic and automated trading in the treasury market As I noted earlier, electronic trading – or the practice of executing transactions through computer systems – has become an important feature of the modern Treasury market. While comprehensive data on the universe of secondary trading in the Treasury market is somewhat lacking, estimates suggest that electronic trading represents a greater share of activity than transactions conducted by voice, perhaps by a substantial margin. As noted above, the vast majority of interdealer market trading is conducted electronically, but a sizable proportion of trading in the dealer-to-customer market is now executed electronically as well. Automated trading is a subset of electronic trading that relies on computer algorithms for trading decisions, execution, and booking.

First, because financial markets are so highly integrated, central banks need to cooperate closely in order to master the problems. Second, incentive schemes in banks that have given particular priority to rewards for risky behaviour should be changed, and the instruments for measuring risks need to be reassessed. The way in which the Swiss National Bank steers the Swiss franc money market, however, has proved its worth, with the three-month Libor being successfully held inside the target range. In this way, the real economy has been protected from the upheaval on the interbank market. BIS Review 31/2008  1
Financial conditions include the level of the stock prices, the level of short- and long-term interest rates, the size of credit spreads, the foreign exchange value of the dollar and factors that weigh on the availability of credit. If the linkage between financial conditions and the short-term interest rate controlled by the Federal Reserve were stable and predictable, then there would be no need to also monitor financial conditions. But the linkage is not stable and predictable. Sometimes financial conditions loosen or tighten in response to economic developments independent of our monetary policy decisions. At other times, the response of financial conditions can be much larger or smaller than anticipated for a given change in interest rates. Several examples will help me make these points. During 2004 to 2007, the FOMC raised the federal funds rate target 17 meetings in a row, lifting the federal funds to 5.25 percent from 1.0 percent. Yet, during this period, financial conditions eased, as evidenced by the fact that the stock market rose, bond yields fell and credit availability – especially to housing – eased substantially. In hindsight, perhaps monetary policy should have been tightened more aggressively. In contrast, during the Fall of 2008, financial conditions tightened substantially even as the FOMC was cutting short-term rates. Again, in hindsight, perhaps monetary policy should have been eased more aggressively. How financial conditions evolve and how markets respond to our actions are important in influencing the economic outlook, and we need to take that into consideration in our monetary policy decision-making.

In any case, this investment slowdown is expected to continue, but not as intensely as in the first quarter (figure 1). As I was saying, there has also been important news on the external front, notably a major increase in the volatility of the world financial markets in the last month. These tensions originate in two forces. First, the consolidation of the recovery of output and employment in the United States and the Federal Reserve has indicated that, if the recovery continues,  BIS central bankers’ speeches  1  during the second half of the year it will begin to gradually withdraw the extraordinary monetary stimuli now in effect. As there is no comparable precedent regarding these policies, these signals have shaken international financial markets in recent weeks, because of the implications that such withdrawal could have. Second, the Chinese economy has slowed down beyond expectations and apparently the Chinese authorities would be more than willing to accept lower growth rates in an effort to safeguard the stability of its financial system and achieve a better balanced growth structure. This situation creates volatility because of China’s major contribution to world growth and its enormous weight in the commodity markets. The deceleration of emerging economies has been widespread, some of them affected by slower growth in China and others by the maturation of its expansion cycle, after several years of rapid economic growth.
We will become less dependent on Sweden as a nation being economically successful as some of our pension money is invested in other countries' shares and bonds. However, it also makes us owners of very mobile capital, which immediately flees a country facing economic difficulty. None of us would want the AP funds or PPM to invest their capital in Argentina, would we? Are poor countries negatively affected by globalisation? Globalisation with regard to movement of free capital must be regarded as different when it comes to less developed economies. The population in these countries, e.g. in South East Asia, is more vulnerable than others in well-developed welfare societies. Let us finally look at the events in South East Asia around 1997. Domestic banks lent money to longterm projects, often with government guarantees, such as shopping centres, hotel complexes, airports, motorways, etc. Banks and companies financed themselves by taking up short-term loans in the international capital markets, which had lower interest rates than the domestic markets. When the foreign investors became nervous at the possibility that those making the investments might not manage to pay the interest rates, they cancelled the short-term loans, the capital flowed out of the country and the banks suffered a crisis. No interest rate was high enough to attract the foreign investors to provide new loans. The foreign currency reserves dried up and exchange rates came under pressure. Devaluation was the only way out. Bankruptcies, bank crises and mass unemployment were the result.

If the financial sector ceases to mediate payments efficiently, it could have very serious consequences for economic development. One of the Riksbank's tasks as established by law is to promote a safe and efficient payments system. It is not as easy to see the direct usefulness of the modern financial system as it is to realise the importance of energy and transport. However, the functions of the financial markets - financing, risk management and mediation of payments - are as necessary in an advanced industrial and services society as the supply of energy and a functioning transport system. In advanced societies, savings are at least partly separate from investment activities. The financial sector has the important task of balancing savers' need of security and liquidity against investors' need of long-term financing. It often takes a long time from investment until production results come onto the market. Households that save money could suddenly find themselves in need of access to their money, which is made possible by selling their savings in the form of, e.g. shares and bonds on secondary markets for these securities. A company like Stora Enso wants long-term financing for a new paper machine, which it might not be possible to sell in a couple of years' time should the company be forced out of the investment. The company's issues of shares and/or bonds provide this long-term investment, partly because the securities can be sold on a market without having to be redeemed by the company issuing them.
Conversely, the owner should require a higher return on investments with higher risk. The absence of this excess return will reflect social losses. It is important to bear in mind that the government can choose the composition, the required return and the risk profile with regard to its financial investments without taking into account the funding requirements of Norwegian companies. By the same token, Norwegian companies can choose their debt and equity structure independent of the government’s financial investments. The capital market serves as an intermediary between the government as investor and enterprises seeking capital. This market makes it possible to separate the government’s choices from companies’ choices. The distribution of the government’s financial investments and the choice of corporate funding structure should not be based on the notion that we are living in a barter economy. The Norwegian capital market is part of a Nordic market, which is being increasingly integrated into an international capital market. Capital markets are a very efficient tool for channelling funds from savers to investors. Direct strategic ownership could nevertheless be the best solution if it generates a high return and the government has a solid basis for exercising its role as owner. There is some room for doubt concerning both points. The government has often neglected its demanding role as owner. A number of shortcomings stand out with regard to the way government ownership is managed.

Svein Gjedrem: Economic perspectives Annual address by Mr Svein Gjedrem, Governor of the Norges Bank, at the meeting of the Supervisory Council of Norges Bank, Gausdal, 15 February 2001. *  *  *  Introduction Norway’s economy is today characterised by substantial petroleum revenues, sharp growth in government expenditure, a tight labour market and high cost inflation. High oil prices and sizeable petroleum production are contributing to surpluses on the current account and the central government budget. This has also resulted in a vigorous rise in Norway’s disposable income. The current account surplus in 2000, which was equivalent to about 14 per cent of GDP, is among the highest surpluses recorded by an OECD country in the post-war period. The total general government budget surplus also rose sharply, reaching 14½ per cent of GDP. Surplus as a percentage of GDP and income growth for Norway 16  16  Current account balance Public sector Disposable income (growth rates)  12 8  12 8  4  4  0  0  -4  -4 1998  1999  2000  With the exception of a brief pause in growth from the summer of 1998, the Norwegian economy has been expanding since 1993. Employment has risen and unemployment has fallen to just over 3 per cent. A shortage of labour in many sectors has resulted in a relatively sharp growth in labour costs in Norway.
And, if it is true that the central bank should not be confined to an ivory tower, it holds equally true that economic media should avoid slipping into cheap sensationalism, which only yields short-term gains. Eventually, the media should help its public take informed decisions, to the benefit of overall economic developments. I am well aware that shaping the public opinion is neither simple, nor linear. It is hard for a generation that has learnt that prices are formed by adding the planned benefit to the planned cost to grow accustomed to today’s reality, when price formation depends on demand and supply. Hence the greater difficulties faced by economic policymakers, analysts and the media alike. Disseminating – sometimes in good faith – the statements of certain market participants may equally generate confusion. For instance, let us recall that representatives of some edible oil producers claimed a few months ago that the price of their products would be on the rise, although this year’s market supply is several times higher than a year earlier. As it was normal, edible oil prices entered a downtrend which is likely to persist given the change in the supply-demand ratio. Another example is that of a businessman who said that weaker demand in a particular industry would entail higher prices in the producers’ attempt to safeguard their profits. This was another statement that did not receive an adequate response, so that the message conveyed to the market is that prices will rise no matter what.

Second, actions need to be taken to get academia more involved in policymaking, to bring the discipline of theory-based analyses to the policy debates. That implies a better access to governmental data for academic researchers, to enable them to conduct independent and  BIS central bankers’ speeches  1  rigorous research and expose their results to policymakers and the general public, who should listen to them in return. Well, I hope this is no wishful thinking and I will now leave the floor to our distinguished speakers. Thank you. ***** Closing speech To close today’s conference, I would like to come back to the Foundation and its role. I will focus on a brief historical overview of the Foundation for Monetary, banking and financial economic research. A lot has been achieved since 1995, as you know. What was our goal? To promote excellence in academic research in the field of monetary policy and finance. And did we achieve it so far? Well, over three hundred conferences and seminars have been sponsored. The research grant program has also awarded 81 grants for about 2.4 million euros in total. While it is difficult to identify the potential outcome of projects at an early stage, the program has been rewarded by excellent outcomes. Most papers were published in the best international research journals. Yet not just academic successes were achieved. Some papers were also financed by the Foundation and later became hot policy topics, sometimes with very good insight.
François Villeroy de Galhau: New ideas for Europe Speech by Mr François Villeroy de Galhau, Governor of the Bank of France, Munich, 15 February 2018. * * * Mr. Prime Minister, Ministers, Dr. Theo Waigel, Ladies and Gentlemen, It is an honour for me to speak here this evening, following on from my compatriot from the Saarland, the Finance Minister, Peter Altmaier. I am 100% French, but with family roots in Germany that go back two centuries... and Dr. Altmaier even represents my town of Saarlouis in the Bundestag. However, all honour today goes to Munich and to Bavaria, and I would like to thank Dr. Theo Waigel for so kindly inviting me. Dr. Waigel, you played a key role in the construction of our European currency. I would like to repeat the words that you used before the Bundestag in April 1998 in anticipation of the transition to the third phase of our Economic and Monetary Union: “After two devastating and painful world wars, the European project is opening up opportunities to our children and grandchildren that our mothers and fathers, our ancestors, would never have dared dream of".1 Twenty years later, we can state that monetary union is a success: 74% of euro area citizens support the euro, and this figure is as high as 81% in Germany. The Economic Union on the other hand, has not yet fulfilled its potential. And that is a concern for two reasons.

But to innovate, in digital technology, or in energy transition for example, companies need to be able to take more risks, which requires more equity financing, over the long term, rather than debt financing. The euro area is seriously lagging behind in this respect: equity capital amounted to only 73% of GDP in 2017, compared with 123% in the United States. As for resources, let’s take what is often a difficult debate – on Germany’s substantial surpluses – and transform it into a positive: we have abundant savings in the euro area. In order to match resources to needs, I propose a European-level “Financing Union for Investment and Innovation", which would better channel the EUR 350 billion savings surplus into equity financing and innovation, in digital or energy technologies. This Union should bring together existing initiatives, and as a priority, the Capital Markets Union, but also the Banking Union and the Juncker Investment Plan. The Capital Markets Union requires concrete progress on several fronts: amending accounting rules, taxes and insolvency laws to facilitate cross-border investment, notably in equity capital; and developing pan-European long-term savings products. Within the Governing Council, and together with my colleague Jens Weidmann, President of the Bundesbank, we find it most regrettable that the Capital Markets Union is currently being overlooked in political discussions on enhancing the euro area. My second idea to make progress in Europe is to start with the quality of public spending and give priority to investment and expenditure for the future.
This means that, given that we have already reinforced the level and quality of capital for the overall banking industry, the impact on requirements of the current revision should be borne by those parts of the banking system where the major unwarranted low asset densities are located. This objective of reducing the unwarranted variability in risk-weighted assets could be achieved through the implementation of a combined set of measures that ensure risksensitivity and comparability. Internal models are being revised with that objective in mind. First, there are some portfolios which should be defined as non-modelable, due to the scarcity of reliable data (i.e. low default portfolios). Second, among those exposures or risks that are considered as modelable, there are reasons that justify the revision being undertaken on definitions and methodologies. And, third, consideration should be given to the inclusion of restrictions to model parameters as a means to facilitate the supervisory task, so avoiding abnormally low values for individual parameters. In order to limit unwarranted variability in risk-weighted assets, a common backstop that has enough granularity to ensure risk-sensitivity is also needed. In this regard, capital floors based on the standardized approaches and designed as a limit to the output of internal models may be considered. In this regard, the revision of standardized approaches is also relevant. This revision seeks to incorporate the lessons learned in order to increase their risk sensitivity avoiding undue complexity.

Also on the derivatives front, clearinghouses LCH and CME will change over discounting and price alignment interest on listed derivatives to SOFR in two weeks’ time, and will incorporate the ISDA transition terms into their standard contracts. That should help increase activity in SOFR derivatives, which, as we’ll see next, should help lay further groundwork for new SOFR-based alternatives. Coming to Terms with SOFR Apart from the overnight and average SOFR rates that are being used right now, there are two other types of rates that some market participants seem to be awaiting. One is the forward-looking term SOFR rate that the ARRC is working on. Earlier this month the ARRC released a request for https://www.newyorkfed.org/newsevents/speeches/2020/hel200929  3/6  30/09/2020  The LIBOR Countdown Has Not Stopped - FEDERAL RESERVE BANK of NEW YORK  proposals for the design and production of term SOFR.14 But that doesn’t mean you should wait for it. No one can guarantee that the ARRC will end up recommending a term rate, or when that will happen if it does. Designing a robust new rate is not a quick process, and the ARRC’s first priority will be ensuring that whatever term rate it recommends is robust and durable. The likeliest basis for such a rate is forward derivative contracts on SOFR, which have not yet reached the volume and liquidity that are sufficient to support a widely used term rate.
Muhammad bin Ibrahim: Audit as a partner of change Remarks by Mr Muhammad bin Ibrahim, Governor of the Central Bank of Malaysia (Bank Negara Malaysia), at the 5th PETRONAS Board Audit Committee (BAC) Forum “Audit as a partner of change”, Kuala Lumpur, 16 August 2016. *  *  *  The theme of today’s forum “Audit as a Partner of Change” is highly relevant and timely, as the events in the global market today, involving failures of large firms, frauds and market manipulation activities, underscores the criticality of the three lines of defenses in organizations. For confidence and trust to be restored in the marketplace, the role of the BAC and internal auditors as the third line of defense will be even more critical than ever. Our role as members of audit committees is much broader than what we may perceive it to be. Organisations such as PETRONAS are widely regarded as amongst the few key flag bearers for the country. Hence, it is incumbent upon the Board and the BAC members to be strong and energetic in upholding the highest standards of professionalism, ethics and integrity in discharging their roles and responsibilities. The people of Malaysia must have confidence and pride that an institution entrusted with much strategic natural resources are run with utmost integrity and professionalism. Before I proceed further on the topic for today, allow me to touch briefly on the current outlook on the global and domestic economy.

Over the recent years, the Bank of Thailand has built awareness of this risk in the public which has contributed to the natural adjustment of the market and therefore the slowdown of household debt 2  BIS central bankers’ speeches  accumulation. Going forward, the Bank is proposing a national agenda to the government to promote financial literacy and discipline to ensure long-term stability in line with our own ongoing financial awareness projects. I have now talked about the central bank’s commitment to growth, price, and financial stability in order to support sustainable growth. Now that we are in recovery, minding the future risks to financial and price stability, and being in possession of stabilization tools tested and refined over time, the Monetary Policy Committee will carefully weigh the tradeoff between short-term growth and long-term risks and ensure that the economy will have enough financial ease to recover to sustainable growth. Ladies and Gentlemen, I would now like to move on to the second role of the Bank of Thailand: facilitating an expansion of the growth frontier. Keeping balance as described in the first part is achieved through the use of the Bank of Thailand’s tools in guarding economic stability. To allow stakeholders to move forward and capture new opportunities, the Bank of Thailand employs its other instruments to enhance financial sector efficiency and create a favorable financial environment for investment that would lead to higher productivity growth.