samchain/econo-pairs-v1 huggingface dataset:
However, the models developed and long-term analysis made after 1980s revealed that the loose monetary policy under high inflation conditions could only end up raising the inflation rate and growth would slow down due to uncertainties arising from inflation. We very well know from our own high inflation experiences in the past three decades and other countries’ experiences that average growth slows down when inflation climbs and average growth accelerates when inflation falls. The high growth rates we achieved in the past three years, which were marked by the stability program, is a good evidence of this generalization. Attaining price stability is a prerequisite for achieving sustainable growth. For this very reason, today, the primary objective of the Central Bank is to achieve and maintain price stability, which makes the biggest contribution to sustainable growth and increase in employment. Distinguished participants, In this part of my speech, I would like to dwell on the three pillars of the change observed in inflation dynamics under falling inflation process. The first significant change observed in economies under falling inflation conditions is the decline in interest rates. If enough credibility has been established in the falling inflation process, significant decline is observed both in nominal and real interest rates and this process does not only lead to rise in expenditures but also in investments.

Zeti Akhtar Aziz: Renminbi and China’s global future Keynote address by Dr Zeti Akhtar Aziz, Governor of the Central Bank of Malaysia (Bank Negara Malaysia), at the HSBC Reminbi Forum “Renminbi and China’s Global Future”, Kuala Lumpur, 17 August 2015. *  *  *  The increasing role of the renminbi in the global financial system from a trade currency to an investment currency and now its potential role as a global reserve currency will have significant global implications. I am delighted to be here this morning to speak at this Renminbi Forum. The renminbi sphere has indeed extended beyond the Asian region, extending to other continents, to Europe, Latin America and the Middle East. The renminbi is no longer an Asian story, but it has now become a global story. It reflects China’s importance and influence in the changing contour of the global economic and financial landscape, and the steps that have been taken to enhance its international role. My remarks today will focus on the increasing trend of the internationalisation of the renminbi despite the recent challenges faced in the Chinese economy; the implications of this trend to the region and finally on the steps that Malaysia has taken as the region transitions into this environment. Long-term prospects for the Chinese economy and the renminbi After decades of rapid growth, the Chinese economy is now transitioning to a growth path that is more sustainable.
These developments and the banking crisis contributed to the currency crisis that struck in the first half of 2008. The Bank’s two publications on post-capital controls monetary policy and prudential rules have stood the test of time, as many of the proposals in them have already been implemented. We now intervene in the foreign exchange market with the aim of smoothing out fluctuations due to temporary capital flows and mitigating short-term exchange rate volatility. We no longer have a free-floating currency, but a managed float. We have adopted prudential rules that severely limit the banking system’s ability to take risk in foreign currencies. We have established a Financial Stability Council and a Systemic Risk Committee in order to monitor financial system risk more effectively than we did previously, and we are developing prudential rules and macroprudential tools to respond to systemic risk. This will also support monetary policy. One important step remains, however: to develop policy instruments that can be applied so as to curtail carry trade-related capital inflows when such inflows interfere significantly with the transmission of monetary policy along the interest rate channel, as was the case last summer and autumn. Analysis of the options available has been underway in the recent term, but these mainly involve a tax or a special reserve requirement. In both instances, statutory amendments would be necessary.

It can be argued that such policy instruments should be on the law books by the time the auction of offshore krónur takes place because, if the auction is as successful as we intend, it is possible that confidence in Iceland will grow still further and capital inflows will increase. BIS central bankers’ speeches  3  Why do we need all of these additional tools and contingency measures? An important reason is the risk to financial stability that accompanies excessive and volatile capital movements that are unconnected to economic fundamentals. Another important reason is that in an increasingly financially integrated world, it is more difficult for small countries to deviate too far from the monetary policy pursued in the larger countries that determine global financial conditions. We saw this before the financial crisis, in New Zealand and here in Iceland. And we have seen it more recently, in countries like Switzerland and Sweden. We can better understand why this is so if we consider a situation where cross-border financial integration is nearly perfect, so that capital movements very quickly even out the difference in risk-adjusted real returns on assets in different countries. The interest rate channel of monetary policy transmission then becomes clogged up in small, open, and financially integrated economies, where long-term interest rates are determined by rates in large countries and transmission takes place largely through the exchange rate channel.
The strongest pension funds reduced significantly their allocation, effectively cutting it in half, while weak funds maintained or increased their allocation. By the end of the period, the strongest funds had half the equity allocation of the weakest. At one level, these portfolio reallocations made sense – the strongest protecting their surpluses by de-risking, the weakest trying to close their deficits by re-risking. Yet, from a longer-term or societal perspective, these reallocations are troubling. To cushion the risk cycle, we would wish to see stronger long-term investors purchasing risk when it was cheap. That would benefit both investors and the economy. Capital that can afford to be patient should be patient. But those funds with the strongest shoulders appear instead to have ducked for cover, while the weakest appear to have engaged in a gamble for resurrection. In the longer-term, this type of behaviour is likely to worsen returns to investors. It will also amplify cycles in the financial system and economy by draining risk-taking when it is already weak. Patient capital ought to part of the solution to the long-term financing puzzle. In practice, it may have been part of the problem. Regulatory policy That naturally begs the question of what, if any, policy response might best deal with the risks and opportunities asset management poses. From a potentially long list, I will focus on three areas. First, Too-Big-to-Fail. Here, the jury is still sitting.

3 At the same time, the problems of falling inflation and inflation expectations also became increasingly apparent in the euro area. This led to the European Central Bank signalling the need for even more expansionary monetary policy in the period ahead, with low interest rates for even longer, supplemented by extensive asset purchases. The increasingly expansionary monetary policy in the euro area also led to monetary policy reactions from several smaller countries on the outside. 3 The significance of the inflation target for the economy is explained in detail in Sveriges Riksbank (2015a) and  Flodén (2015). 2 [12]  Chart 2. Inflation and inflation expectations have picked up 3  3  2  2  1  1  2.3  2.3  2.2  2.2  2.1  2.1  2.0  2.0  1.9  1.9 Inflation expectations  0  0  CPIF excluding energy  1.8  1.8  1.7  1.7  CPIF  -1  -1 10  11  12  13  14  15  16  1.6  1.6 10  11  12  13  14  15  16  Note. Annual percentage change and per cent. The CPIF is the CPI with a fixed mortgage rate. Inflation expectations 5 years ahead according to money market participants. The broken line indicates the time of the monetary policy decision in February 2015.
We are in the midst of an unusual dynamic in financial markets, in which low realized volatility in macroeconomic outcomes, low realized credit losses, greater confidence in the near term path of monetary policy, low uncertainty about future inflation and interest rates, rapid changes in the nature of financial intermediation (role of hedge funds and the change in how credit risk is bought and managed), and a large increase in the share of global savings that is willing to move across borders, have worked together to bring risk premia down across many asset prices. There is no reliable analytical framework one can use to determine whether we are experiencing an unwelcome or unjustified decline in expected volatility, or whether investors are giving too much weight to the relative stability of the recent past and too little to the uncertainty posed by the challenges ahead. And analysts can point to good fundamental reasons and some plausible theories to support this collective judgment of market participants about low future risk and volatility. But there is much we do not understand about how these transitions ahead will unfold - in fiscal positions, the U.S. external imbalance, and in the exchange rate system and portfolio preferences. The recognition that things that are not sustainable will eventually come to an end does not give us much of a guide to whether the transition will be calm or exciting.

The more this can be realised the more the new financial system will support the new creative jobs people will need – and enjoy – in the coming Machine Age. 20  While only private sector ingenuity will make these gains possible, authorities have essential, supporting roles in reinforcing them and managing the associated risks to financial stability. To help realise FinTech’s promise, we should refresh our supervisory approaches in a few ways. First, regulatory sandboxes can allow businesses to test innovative products, services, business models and delivery mechanisms in a live environment and with proportionate regulatory requirements. This supports innovation and learning by developers and regulators. The FCA was an early mover launching Project Innovate in 2014. 21  The G20 might consider the extent to which such approaches should be adopted  more widely. Second, existing authorisation processes can also be adapted to ensure they do not unnecessarily block new business models and approaches. This is why in the UK, the PRA and FCA now work closely with all 22  firms seeking new authorisation as banks. Third, the Bank of England is expanding access to central bank money to non-bank payments service providers (“PSPs”). Allowing access to the Bank’s Real Time Gross Settlement System allows PSPs to compete directly with banks, and so supports innovation, competition and financial stability. 23  Fourth, a number of authorities, including the Bank of England with its FinTech accelerator, are developing Proofs of Concepts with new enabling technologies from machine learning to distributed ledgers.
Excessive debt is namely a common denominator in most financial crises. Even before the crisis, a number of banks expanded their operations substantially with the aid of debt financing. When the markets became shaky it turned out that many banks lacked sufficient capital to cover their losses. The idea of the leverage ratio requirement is that it should be a relatively simple and transparent supplementary capital requirement that sets an upper limit as to how much leverage the banks can take on. Basel II created too much freedom for the banks, with well-known results. We need to put this right. We will therefore now have a system with many different types of constraints. Government exposures are also risky Another question discussed by the Basel Committee is if and how the banks should maintain capital to cover their exposures to governments and other public bodies. Today it is in practice possible for the financial supervisory authorities to completely exempt such exposures from the capital adequacy requirement. We know from experience, however, that the banks’ exposure to governments is not risk free. The Basel Committee has therefore decided to review whether and how the regulations need to be changed. Almost 10 years on from the crisis – time to complete reforms The international regulatory work has been in progress since the global financial crisis broke out in 2007. It is important to many parties, not least banks, investors and policy-makers, to clarify how the global regulatory framework for banks will function.

There are two clear dents in Swedish GDP post-war development: during the financial crisis in the 1990s and during the global financial crisis 2008-2013. The most acute problems are remedied but some work remains A crucial cause of the most recent financial crisis was that banks around the world had taken on too much risk. This was possible for two reasons. Firstly, the regulatory framework applying at the time did not sufficiently influence the banks’ risk taking. Secondly, the banks themselves evidently did not have the will or ability to manage their risks on their own. The answer was the Basel III Agreement - a comprehensive package of reforms with the main purpose of strengthening the banks’ capital base to ensure that they can manage losses in a better way and improve the banks’ liquidity management. But even if Basel III dealt with the most acute shortcomings, work remains to be done to ensure that banks around the world are well capitalised. I intend to spend a little  1 [5]  time here talking about the reform work the Basel Committee is currently involved in and why it is important that the new reforms are put into place. The global capital regulations will become more reliable and easier to compare between banks A basic idea behind the design of Basel II -the global capital regulations that were completed a few years before the financial crisis - was to create a stronger link between capital requirements and the banks’ risks.
4  BIS Review 8/2007  This rule was easy to understand and in that respect it was a good educational tool. However, there were also disadvantages. In normal cases it is not, for instance, particularly realistic that the policy rate would remain unchanged a couple of years ahead. The assumption made it difficult to assess our forecasts and to compare them with those of other forecasters. The latter usually base their assessments on the policy rate being changed. It was also difficult to apply the assumption in a consistent manner in the forecasting process. These problems would have become worse when we extended our forecast horizon. Moreover, it gradually became clear that this rule could sometimes be an obstacle in our communication. It created an exaggerated focus on the current interest rate decision and on the inflation forecast exactly two years ahead. The gradual shift towards more flexible monetary policy led to a greater need to illustrate the fact that it is the entire expected sequence of events for inflation and the real economy a few years ahead that is important in monetary policy decisions, and not only the levels we foresee two years ahead. And the focus should not only be on current interest rates, but also on expectations of future interest rate changes. 5 We left most of these problems behind us when we changed over in October 2005 to making forecasts based on market expectations of the future development of the policy rate.

Compared with other countries that have implemented similar reforms, it is perhaps primarily the changes in fiscal policy that distinguish Sweden. During the mid-1990s a radical consolidation program was implemented, with broad parliamentary support, and a framework with an expenditure ceiling and target balance was introduced. The relatively good central government finances over the past ten years have undoubtedly been a source of strength for the Swedish economy. 2  BIS Review 8/2007  The Riksbank’s monetary policy framework and strategy Let me now, with this as background, move on to describe our monetary policy strategy in slightly more detail. 1 The inflation target The Riksbank has chosen to specify an explicit target for inflation. The target is for the annual rate of change in the consumer price index, CPI, to be 2 per cent, with a tolerance for deviations of ± 1 percentage point. The decision to define the target for monetary policy clearly in terms of a specific figure was of course partly due to the desire to create a nominal anchor that everyone could recognise and base their expectations on. However, another important reason was that it would facilitate assessments of the Riksbank’s activities and make the Bank more easily accountable. This is particularly important now that the Bank is so independent. Inflation can be measured in many different ways. The Riksbank chose the CPI as target variable partly because it is a broad price index that represents typical purchases made by consumers, and the index is familiar to the general public.
The report highlights three possible end-states for an expansion of operating hours: (i) an incremental increase in operating hours on working days, (ii) an increase to include current non-operating days like weekends or holidays and (iii) extension to full 24/7 operations. [17] Expanding operating hours would have some significant benefits for cross-border payments: 1. Faster cross-border payments: Longer operating hours would extend the window of overlap between systems and lower an operational barrier to completing cross-border payments within the 1hr timeframe specified in the FSB targets. 2. Improved liquidity management: To enable cross-border payments banks need to hold liquidity positions to fund the payment. The longer cross-border payments take the longer these positions need to remain open, trapping liquidity. Greater overlap in operating hours could speed up the transaction. 3. Reduced settlement risk: When the operating hours of payment systems do not overlap final settlement in central bank money cannot happen which leads to the build-up on settlement risk. The longer settlement is delayed due to operating hours the greater the settlement risk becomes. Expanding operating hours will make cross-border payments faster and reduce settlement risk But, as the report points out, there are also risks and operational and policy implications to assess when reviewing expansion of operating hours. Parties involved in RTGS systems may need to review and enhance existing operational procedures, risk monitoring tools and mitigation measures, and central banks and other authorities, will need to consider issues related to monetary policy, financial stability, and resolution policy for troubled institutions.

BIS central bankers’ speeches  7  8  BIS central bankers’ speeches  BIS central bankers’ speeches  9  10  BIS central bankers’ speeches  BIS central bankers’ speeches  11  12  BIS central bankers’ speeches  BIS central bankers’ speeches  13
At the time, pension payments from the public system were still somewhat larger than those from the occupational pension funds, but the difference was slight and, as the total pensions paid out by the occupational pension funds were growing much faster, they did overtake the public system in subsequent years. It is instructive in this regard that, according to OECD, the balance between public and private provision of mandatory pensions is heavily in favour of the private provision in Iceland, or 84%, which is the highest rate amongst OECD countries. As a result, public pension spending in Iceland is 2% of GDP, compared to the OECD average of 7.2%. The occupational pension funds have grown very fast in the last few decades, through mandatory contributions from all wages and salaries, low operational costs, and long spells of good returns. Around the turn of the century, they were the third-largest in EU and EFTA countries in terms of assets as a share of GDP, at around 80%, after Switzerland and the Netherlands. Shortly before the international financial crisis struck, Iceland had overtaken even these countries. The funds were bound to grow much more, as they were far from reaching maturity in the sense that most of those receiving pensions had not accumulated rights based on their lifetime earnings. The clearest measure of this was the fact that the pension burden, or pensions as a share of contributions, was still below 50%.

But if such a rule were followed, the results would depend on the inflation target and the GDP growth target. If the inflation target is perhaps 2½% and potential output growth in the 2½–3% range, it would be around 5–6%. In Chart 7, we can see that the countries fall into three categories. First are the countries significantly below this level. All of them have relatively low policy rates in accordance with the rule. Then we have the countries that are more or less on the right track and, finally, three countries above that. Iceland is in this last group, and the other two are emerging countries with much more GDP growth potential than developed industrialised economies have. It is interesting to note that Iceland is in third place as regards nominal GDP growth and in fifth place as regards the policy rate. All of this comparison points in the same direction. It simply cannot be argued that Iceland is out of sync with other countries because of excessive monetary restraint. Quite the contrary: some indicators suggest the reverse. I know that I am not addressing all possible criticism with these points, but I hope that those listening to me will begin to ponder whether some of that criticism has perhaps been somewhat unbalanced. Some criticism of monetary policy is more pertinent, however, and I would like to address three points. It has been asked why the Monetary Policy Committee raised interest rates when the Bank has forecast that inflation will subside markedly next year.