samchain/econo-pairs-v1 huggingface dataset:
This calls for an iterative approach to stress-testing in which banks’ first-  11  Knight (1921). 12  For example, Epstein and Wang (1994). 13  FSA (2008). See also Counterparty Risk Management Group (2008) for other useful suggestions. 8  BIS Review 18/2009  round results and management actions influence second-round stresses facing firms – for example, the effects of asset sales and liquidity hoarding. In effect, what we would then have is a hybrid stress test-cum-war game. This will better enable firms to assess the spillover and contagion consequences of their own and others’ actions, so helping internalise to some degree the network externality problems which have been prevalent through this crisis. This dynamic, collective approach to stress-testing has already been attempted in one or two countries; it would be desirable if it became standard practice more widely. The recent Geneva report on financial regulation proposes greater use of such systemic stress testing. From the authorities’ side, the Bank is developing a framework which will enable us to capture such network effects – for example, the effects of liquidity contagion and asset price disposals – on other firms in the network. The results from that framework could be used alongside firm-specific results to gauge network risks. 14 •  Fourth, translation of results into firms’ liquidity and capital planning. The results from these exercises need to influence management outcomes if they are to be useful; the internal incentive problem needs to be overcome.

The house price inflation series begins in 1954. The FSTE-All Share Index series begins in Jan 1693. The 2.5% coupon consol yield series begins in July 1700. All data are for the UK. 14  BIS Review 18/2009
When Chairman Bernanke first talked about a possible timeline for tapering in May last year, there were strong market reactions globally and all EMEs experienced significant sell-off. The market then calmed down somewhat for several months before we saw another round of EME sell-off in January this year. The question that is most talked about now in the financial and central banking community is the pace of the Fed’s exit and its impact on EMEs going forward. Were these two rounds of EME sell-off merely isolated market over-actions or are they warning signals on the turbulence that awaits the EMEs when US interest rates normalise? 2. To assess what may lie ahead, it is useful to look back and try to understand what happened in the past five years during which the global monetary and financial environment was dominated by the UMP of the US and other advanced economies. In 2009, the market expectation was basically that QE would last for a year or so, i.e. “low for a short while”. The expectation then changed to “low for long”, and then “low for very long” and later to “low forever”. Of course “low forever” was never the intention or prediction of the Fed, but many market participants just positioned themselves as if QE would last for a long, long time. This sentiment encouraged the dollar carry trades or so-called one-way bets. So it was not surprising that Chairman Bernanke’s remarks on tapering in May/June last year had washed out a great deal of such one-way bets.

The weak domestic demand has created spare capacities in the economy, and has led to weak pressures for higher production costs and wages. Additionally, stable prices and exchange rates in global markets resulted in contained  BIS central bankers’ speeches  1  pressures from imported inflation. Developments in the real economy, especially the weak domestic demand and low monetary expansion, will condition low inflation rates to continue even in the period ahead. Inflation expectations remain anchored and in line with price stability. During the second quarter, economic growth was driven by public sector demand, whereas other components were weak. Though higher than in the first quarter, consumer spending did not manage to provide significant contribution to economic growth. The performance of this domestic demand component continues to be affected by high uncertainties and limited financing resources. Against the low consumer demand, presence of spare capacities, and relatively tight lending standards, private investments remained low. Developments in fiscal indicators during the first nine months of the year point to a stimulating fiscal policy, especially in the first half of the year. Stimulating features were present both in terms of expenditure and revenues. During this period, budget expenditure increased 8.3% from a year earlier, driven by both current and capital expenditure. At the same time, revenues marked a 4% annual decrease, reflecting the decline in most of its constituent items.
The tools provided by the Basel Committee for the supervision of liquidity risk, in particular those used for monitoring the concentration of financing or the maturity gaps between assets and liabilities, already enable supervisors to have a detailed view of the risks specific to each bank and to react appropriately. Could they be strengthened by introducing, for example, new alert thresholds? Could we also consider introducing such thresholds on the level of unrealised losses, which would trigger supervisory action? Will these adjustments to regulation and supervision be sufficient to prevent failures in this new age of one-click bank runs? While Basel Committee members undertook, when finalising the Basel III agreements in 2017, to only consider new changes to the rules once they  4  had been implemented at a global level (a commitment known as the “hard stop”), should the recent emergence of digital transformations in the financial sector and their rapid evolution not prompt us to be more vigilant and to anticipate the next move? I believe so. It is essential that the role played by new technologies and social networks in speeding up liquidity stresses be properly taken into account by regulations. At the same time, in the digital age, with easier access to information, and rumours, and the ability to conduct banking operations instantaneously, we will have to examine the regulatory assumptions, in particular with regard to the flight of some deposits. 2.

In the United States, these rules were not applicable to SVB, as certain exemptions, introduced in 2019 under the proportionality principle, apply to banks that are considered to be less important, this concept being understood in a broad sense since it includes banks with a balance sheet total of up to USD 250 billion. - The post mortem analyses carried out and published by the FED suggest that, had SVB been subject to these rules, it would not have complied with the short-term liquidity ratio as defined by the Basel Committee. Moreover, SVB's heavy reliance on tech companies' deposits should have alerted its supervisor if the additional monitoring tools required by international standards had been put in place. The same FED analyses estimate that SVB's interest rate risk sensitivity was around 35% before the crisis, well above the 15% alert threshold set out in the international rules and supposed to trigger supervisory action. - Monitoring compliance with regulations calls for strict, intrusive and reactive supervision, which, according to the FED, was not the case. Let me reassure you on one point: the European situation is radically different. The Basel Committee's rules are applied in Europe in their entirety and to all banks. By the way, I would like to add that Europe is in the process of finalising the transposition into European law of the latest reinforcements of the Basel III agreements, ahead of the other major jurisdictions.
With risk and rational expectations, the optimal response to complexity is typically a fully state-contingent rule (Morris and Shin (2008)). Under risk, policy should respond to every raindrop; it is fine-tuned. Under uncertainty, that logic is reversed. Complex environments often instead call for simple decision rules. That is because these rules are more robust to ignorance. Under uncertainty, policy may only respond to every thunderstorm; it is coarse-tuned. Herbert Simon, the father of decision-making under uncertainty, believed human behaviour followed simple rules. More than that, it was precisely because humans operated in a complex environment that they sought such simple behavioural rules. “Human beings, viewed as behaving systems, are quite simple. The apparent complexity of our behavior over time is largely a reflection of the complexity of the environment in which we find ourselves.” 1  1  2  Simon (1972). BIS central bankers’ speeches  Simon used the word “heuristics” to describe these simple rules. These heuristics were not plucked from the ether. Rather they were evolutionary responses, honed in the light of experience passed down generationally from the past (nature) or accumulated locally in the present (nurture). Neurological and experimental research has since lent support to Simon’s thinking (for example, Selten (2001)). In the 1970s and 1980s, Daniel Kahneman and Amos Tversky used heuristics as a means of explaining violations of the rational expectations axioms, often drawn from psychological experiments (Kahneman and Tversky (1974)). Like Simon, these simple rules of thumb had neurological roots.

The successful implementation of postpandemic measures, when the priority will be a return to economic and social normality as fast as possible, hinges on the extent to which macroeconomic stability is preserved. When I speak of independence I do not see the central bank secluded in an ivory tower, but working actively, and combatively, under the law, with the fiscal authority, with the government. Based on my experience, I do not think there is a better alternative to a balanced, coherent fiscal and monetary policy mix. And central bank independence implies accountability vis-à-vis the law, the mandate, the society. Or, in the words of 19th-century Romanian writer and politician Costache Negruzzi, the central bank needs to ‘stand accountant’ for what it does. By encroaching upon central bank independence, in favour of political decisions seeking shortterm electoral gains, the real costs will be borne from an economic and social perspective, in the long run, by the entire country. A recent study published by the European Central Bank, titled The Case for Central Bank Independence, shows that – while the de jure independence has largely remained intact – the de facto independence has deteriorated in almost half of the sample of central banks under review. This is a fact and, for me, it is a matter of concern. I shall not comment on it. Looking at central banking history that spans more than three centuries, I hope this is part of the long cycle of ups and downs in terms of central bank independence.
After 17 consecutive quarters of sequential expansion, the growth momentum has eased since the fourth quarter of 2007 as anticipated, to around the economy’s medium term potential. On average, GDP grew slightly over 4% in the first half of this year, registering 6.9% in the first quarter and 1.9% in the second quarter of 2008. The weaker performance in Q2 was due in part to a sharp decline in the output of the pharmaceutical sector, which can fluctuate significantly from quarter to quarter because of company-specific production cycles. 4. In the coming months, activities which rely directly on G3 demand, such as electronics manufacturing, or are sentiment-driven like stockbroking, will be more adversely affected by the global headwinds. However, other industries including construction, marine and offshore engineering as well as financial intermediation services are expected to continue to provide support to GDP growth over the rest of 2008. Our assessment for full-year GDP growth remains at 4-6%. Given the uncertainty in the external environment, we will be carefully monitoring the incoming data. 5. CPI inflation came in at 7.5% in June, bringing the average for the first six months of this year to 7.1%. Global oil prices had surged towards the end of May, reaching a high of $ per barrel (WTI) in mid-July. Though they have pulled back slightly, prices are currently around $ up from $ in Q1 this year. Our major trading partners are also facing a rise in inflationary pressures, as fuel subsidies were partially lifted in some of these countries.

Ravi Menon: Crypto tokens - the good, the bad, and the ugly Speech by Mr Ravi Menon, Managing Director of the Monetary Authority of Singapore, at Money20/20, Singapore, 15 March 2018. * * * Ladies and gentlemen, good afternoon. And to all our foreign guests, welcome to Singapore. This is a conference named after Money. Money has been with us for at least 5000 years. And over the last 300 years or so, we have come to accept Money as being issued by central banks whose mission in life is to safeguard its value. Now, along comes a new phenomenon – crypto money or currency or asset. The past year has seen explosive growth in the trading and use of these crypto assets. We have also seen a rollercoaster ride in their prices. Bitcoin – the most well-known of the crypto currencies or assets – hit a high of nearly $ 000 in December last year. And then lost two-thirds of its value in just over a month. MAS has been watching the crypto space with great interest. Our views are still evolving but let me share with you the current state of our thinking and our evolving regulatory approach. I will use the more generic term “crypto tokens” rather than “crypto currencies” or “crypto assets”. Crypto tokens began life as the medium of exchange within the blockchain ecosystem. But the token has now assumed a life of its own, outside the blockchain. Are crypto tokens money?
As data comes in, the Bank’s projections for unemployment are far more likely to change, in one direction or the other, than the Committee’s forward guidance. Probabilistically, that could explain part of the rise in the money market curve given the signs of recovery. All this underlines the need for the Committee to keep under review, month by month, a wide range of indictors of slack in the labour market and in firms. For example, if participation in the workforce develops in unexpected ways, the degree of slack implied by any rate of unemployment might change.7 That recovery is, I trust, finally underway should not be a complete surprise. The MPC has provided a massive amount of monetary stimulus over recent years. Its effects were arrested for an extended period by the threat of severe turmoil in the euro area, coming on top of an erosion of spending power from rising commodity prices. Monetary policy (and credit policy for that matter) works partly by incentivising households and firms to bring forward future spending. They were not likely to do so when the risks and uncertainties on our Continental doorstep were so great and so unusual. As those immediate risks and uncertainties receded,  5  See Volker (2013), “Central banking at a crossroad”.

3  This is consistent with Bean (2013), “Global aspects of unconventional monetary policy”, the Monetary Policy Committee’s Forward Guidance document (op cit); and with the Governor’s remarks during the August Inflation Report Press conference: “guidance is not a change in the reaction function, but it gives a better sense of the MPC’s reaction function to financial market participants”. 4  See remarks at the Treasury Select Committee hearing to discuss the Inflation Report on 28 June 2011, and 2012 and 2013 Annual Reports on Monetary Policy to the Treasury Select Committee. 2  BIS central bankers’ speeches  by-quarter. The threshold is not a target. Indeed, a monetary authority cannot have a target for unemployment; it can have a target only for price stability, as Paul Volcker recently stressed.5 That is why the Committee’s Forward Guidance incorporates, crucially, a “knockout” for inflation expectations, where individual members will have to judge whether they are “sufficiently well anchored”. Beyond that, I am glad that in its “financial stability knockout”, the Committee has in effect recognised that monetary policy influences risk-taking behaviour in the financial system.6 This does not mean that the MPC will suddenly lurch towards a supplementary goal of trying to control excesses in markets. The UK’s new architecture gives the Financial Policy Committee some tools to do that where there is a threat to the stability of the financial system.
Zeti Akhtar Aziz: Strengthening Malaysia’s financial system Speech by Dr Zeti Akhtar Aziz, Governor of the Central Bank of Malaysia, at the launch of the Finance Accreditation Agency, Kuala Lumpur, 6 September 2013. *  *  *  It is my great pleasure to join you this morning on the occasion of the launch of the Finance Accreditation Agency. The establishment of the Finance Accreditation Agency (FAA) is part of the efforts to strengthen the financial system as it continues to evolve in a rapidly changing environment. The change in our financial system in this recent decade since the Asian financial crisis has been transformational. It has encompassed major structural reforms in the banking sector, the development of a deep and vibrant securities market which has now assumed a key role in financial intermediation, the growth of Islamic finance and the modernisation of the insurance sector. The regulatory and supervisory structure and approach has also evolved to become more risk-focused, more aligned with efficient capital and financial markets, and less reliant on prescriptive and direct controls. This has fostered greater innovation and competition in our financial system, while preserving strong incentives for prudent risk-taking. This has been reinforced through the supervisory oversight and increased market transparency. The evolution of business and distribution models has followed, with significant gains achieved in efficiency, greater financial inclusion and a more dynamic and responsive financial industry to better serve the economy.

As you know, the globalisation of the world economy and the development of financial markets were driven by two key factors: ·  firstly, financial deregulation -reinforced in Europe by the setting up of the single market and subsequently of the Economic and Monetary Union- which liberalised capital flows and enhanced competition among financial sectors;  ·  and secondly, technical and financial innovation, which simultaneously paved the way for the creation of financial markets that are deep, liquid and interconnected. What is interesting to stress regarding financial globalisation is that the interaction of free capital movements within interconnected markets, increasing integration of market segments and hedging opportunities provided by new financial instruments have allowed a better fit between the financing capacities and borrowing requirements of governments, households and companies. The use of market interest rates, which represent the markets’ consensus on the risk incurred at a moment, as a driving force is fully beneficial to an efficient allocation of capital. Lowering the barriers to entering the financial sector, the free circulation of information and fiercer competition have also brought financial markets closer to a situation of pure and perfect competition, which is beneficial to all consumers. Last but not least, the growth of market financing has allowed savings to be channelled directly into investment. Reducing the share of bank financing, and consequently that of money creation, has enabled a less inflationary financing of the economy.
The collapse of Lehman Brothers is just one of many examples of how a bank with problems in one country can constitute a threat to banks all over the world. The crisis revealed the lack of effective regulations In an increasingly globalised world it is important to have well-designed global rules and regulations that contribute to stable financial sectors in all countries. It has been obvious for quite some time that this is not the case. But a crisis was required to eradicate any doubts that reforms are necessary. This is a good aspect of crises. They have the capacity to unite decision-makers and to provide an impulse to processes for change. BIS central bankers’ speeches  1  Consequently, over the last two years, considerable resources have been devoted to determining why the crisis arose and how we can reduce the likelihood of a similar crisis occurring in the future. Politicians and decisions-makers have left almost no stone unturned. They have discussed everything from bonus systems and the role of accounting in the financial crisis to shortcomings in financial supervision and weaknesses in derivatives trading. Above all, however, they have discussed bank regulation. As a result they have realised that the current regulatory framework has a number of fundamental weaknesses that must be dealt with. The Basel Committee 1 has therefore drawn up new, revised regulations for capital and liquidity, the so-called Basel III regulations.

Such a situation would no doubt lead in time to the public authorities also encountering a demand for euro services, perhaps ultimately leading to the euro being accepted to a greater extent than desired at present. If so, the "wait-and-see" alternative would finally amount in practice to the adoption of the euro. We can only speculate about the practical consequences of a gradual transition but it would probably entail increased costs as well as greater uncertainty for firms as well as society. If we intend to join the euro area in a not too distant future after 1999, the recommendation therefore seems to be: participate from the start and avoid unnecessary and costly solutions for firms as well society. Still a large need of information When talking about the monetary union we should be clear that in Sweden the debate about Europe and EMU is relatively new. Elsewhere in Europe the issue of integration has been discussed much more and for far longer. The debate in Sweden has been rather low key and not particularly widespread. So it is hardly surprising that people here are hesitant and want more information. That the discussion has now got going is all to the good. I was therefore pleasantly surprised by the submissions to the Ministry of Finance on the EMU report. Of 56 submissions, only 4 were negative about EMU.