samchain/econo-pairs-v1 huggingface dataset:
Focusing on the latter issue, I would like to remind you that safeguarding and strengthening financial stability has been and remains a major objective of BoA’s work. As we have stated in our previous communications, the deterioration of the loan portfolios’ quality has been one of the biggest challenges we have been facing in recent years. This deterioration reflected the effect of many factors, but the high level of informality in the economy, undoubtedly, provided its contribution to this performance. More concretely, the lack of financial transparency, lack or problems with property titles and those encountered during the execution of collateral contributed to the increase of non-performing loans and were a barrier to our legal and regulatory measures, for their reduction. In addition to the negative impact of informality on the loan performance and quality, it has also negatively affected the borrowers. Taking risks beyond the repayment capacities, not identified as a result of the lack of clarity regarding the financial statements, has also caused credit default, thus making/driving borrowers face with unpredictable situations. For these reasons, the Bank of Albania has commended and has continuously supported the initiatives for increasing the formalization of the economy. We have taken several measures to address informality, which have given their effects over the years. Enhancing transparency and lowering the costs of bank transactions, without affecting the operational independence of banks and their decision-making, has brought households and enterprises closer to the financial institutions.

Lower demand in turn curbs the rise in prices and wages. Higher interest rates make it more attractive to invest in NOK and borrow in foreign currency. Therefore, higher interest rates normally lead to an appreciation of the krone. This makes imported goods cheaper. In addition, a strong krone reduces activity, profitability and the ability to pay in the internationally exposed sector. Expectations in the US as to how far the interest rate will fall have been adjusted downwards considerably since summer 2002. Last summer, market participants expected the key rate in the US to be increased to about 5 per cent towards the end of 2004. Now interest rates are believed to have reached their lowest level and are expected to remain at 1 per cent until the end of 2003, with a gradual rise to about 2.5 per cent in 2005. Clearer signs of the expected upswing have emerged recently, however. GDP grew by 3.1 per cent (seasonally adjusted, annual rate) in the second quarter. Optimism among participants in the financial markets is increasing; both equity prices and long-term interest rates have risen. Despite improvement in the US economy, some aspects still give rise to uncertainty as to whether the expected upswing will be sustained. Capacity utilisation in manufacturing is still low. The household saving ratio is low and household debt is high. The current account is showing a large deficit.
We need to take a more sophisticated, integrated, and purposeful approach to prepare our workforce for the future of jobs. This is why MAS and IBF commissioned Ernst & Young to study the impact of data analytics and automation – the two most immediate technologies – on jobs in the financial sector. The study takes a three to five year time horizon. It reviewed 121 distinct job roles in the financial industry, examining how data analytics and automation are likely to change the individual tasks in these 121 job roles. It identified the additional skills that would be necessary to perform these new tasks. The study took nine months to complete and the findings have been validated extensively with more than 80 industry participants. Many of you here contributed to this study. You will be hearing from Ernst & Young later on the study findings, and Minister Teo will speak more on this, including how the industry, the labour movement, and government are coming together to put into action the key strategies emerging from the study. I want to make three key points that I think are worth keeping in mind:  1/3  BIS central bankers' speeches  First, the biggest impact of technology is to transform jobs rather than to destroy existing ones or create new ones. Second, our strategy to help finance professionals must address skills, jobs, and careers in an integrated manner. Third, workforce transformation must become a core business capability for all financial institutions. Let me elaborate.

This is because of the start of the development of the market economy goes back to 1950, relationship with the EU back to 1963 and the completion of the Customs Union back to 1995. Indeed, Turkey is the only country that completed customs union without being a member. In a sense, Turkey is more integrated to the European markets than many new members and other candidates. When you look at the current account, Turkey has the second largest share after Poland in total trade volume towards the EU-15. And as of August 2005, the share of the EU-25 in Turkey’s total exports and imports are 52.5 percent and 42.4 percent respectively. Furthermore, 52 percent of the total number of tourists visiting Turkey so far in 2005 are EU citizens. Viewing Turkey’s capital account, it is noticeable that in the last two years, 85 percent of total foreign direct investment inflows to Turkey came from the EU. That figure was 71 percent on average in the last fifteen years. In consequence, the Turkish membership to the EU will nourish this close economic relationship further. Turkey’s membership will not only create a market for the EU in favour of both consumers and firms, but also help the EU to become closer geographically to the Middle East, Russia, Black Sea and Central Asia markets and so increase its competitiveness. As you all know, Turkey is an important regional power at the crossroads of important energy, transportation and communication networks.
Some say this means our projections are worthless, or, even worse, will cause people to underweight interest rate risk in making economic decisions. I disagree. The accuracy of the early forecasts we write down is not so important as how the public can observe the forecasts change over time. As the economy is hit by shocks or the data come in contrary to expectations, we will change our forecasts for both the economic variables and the policy rate. As we do, households and businesses will be able to learn more about the monetary policy reaction function. And it is this knowledge that will help them make better informed decisions. Another criticism we heard on the day the projections were published was that they seemed to be inconsistent with the FOMC policy statement released a couple of hours earlier. The  4  Taylor (1979), Svensson (1997) and Woodford (2003). 5  Note a weight of 1 on the unemployment rate is equivalent to a weight of about ¼ on the output gap. Of course, policymakers could debate the relative weights to put on inflation and the real-side goal variable in their loss function. BIS central bankers’ speeches  3  statement indicated that the Committee thought economic conditions are likely to warrant exceptionally low levels for the federal funds rate at least through late 2014, but six of the 17 policy projections showed that the funds rate would be 1-1/2 percent or higher at the end of that year.

(Indeed, the mere chance that this may occur may be diminishing the degree of accommodation in place today.) The economic thresholds I am proposing put a higher and more predictable standard on the removal of accommodation. Conclusion I would like to conclude by noting that I have undoubtedly generated some discomfort in the room tonight by saying that even with the large degree of accommodation already in place, monetary policy can and should take additional steps to facilitate a more robust economic expansion. Central bankers naturally worry about such statements. We think back to the 1970s, when our failure to appreciate the changing structure of the economy led to over-stimulative policy and eventually to stagflation. It’s in our DNA to have these concerns; and they remind us of the need to continually do our best to calibrate important markers such as the natural rate of unemployment, keep close tabs on inflation expectations and have our eyes open for early warning signs of financial instability. But I believe a greater risk today is that we buy too quickly into thinking that the equilibrium rate of unemployment has jumped 2 or 3 percentage points or that long-run inflation expectations have become so fragile that they are on the verge of spiking well above 2 percent. I just don’t see the evidence out there supporting this view. But if we do buy into it, then we’ll end up following overly restrictive policies that could unnecessarily risk condemning the U.S. economy to a lost decade – or even more.
A respected, self-confident but restrained line supervisor, with the forensic skills to get to the heart of things, can do a very great deal for stability. It is terrific that Adair and Hector are renewing the emphasis on line supervision. (But, by the way, when supervisors do their job, their achievements are invisible and they get no thanks.) Second, it is important to remember that most bank failures have their roots in large or concentrated exposures. This crisis is in some respects no exception. It is, therefore, good news for the future that, ahead of this crisis, the EU was already planning to extend the bar on large credit exposures to interbank deposits. Line supervisors must additionally look for concentrated exposures to sectors or instruments; to give just one of many possible examples, large holdings of super-senior CDO tranches just might have been a pointer to the vulnerabilities at some large internationally active banks. And the possibility of fateful concentrations in bank funding structures should be given similar weight. If all that requires more reporting by banks, it would be worth it. Third, effective prudential supervision is seriously impeded by complex group structures. That was a headline lesson from the failure of BCCI nearly two decades ago; and EU Directives were amended to make unsupervisable structures a ground for withholding or withdrawing authorisation, and so for exercising regulatory powers. But complexity is not just a convenient shield for wickedness.

It can also make it hard for management and supervisors to figure out what is going on in a perfectly honest business. The explosion of what I referred to a couple of years ago as Vehicular Finance, with committed credit lines and reputational risk constituting umbilical cords back to parent or sponsoring banks, was precisely a manifestation of that variety of obfuscatory complexity. Supervisors around the world should not allow it. And, related to that, as the Turner Report rightly says, supervisors should get serious about working together on the oversight and regulation of international groups. The long-standing challenges of consolidated supervision are unfinished business, more than thirty years after the first Basel Concordat. 2  BIS Review 39/2009  Micro-to-macroprudential Those issues, and even more those of capital and liquidity, shade into the debate about macroprudential oversight and regulation. One explanation of the parlous state of the industrialised world banking system is that too many banks had made too many rotten individual-loan underwriting decisions. Quite plainly there was some of that: for example, manifestly in the US subprime market, in commercial property, and probably in some Leveraged Buy Outs. It would be the job of the authorities’ bank examiners, as they are termed elsewhere, to detect significant erosion in the quality of individual portfolios or underwriting standards, and get it fixed before it overwhelmed the system.
The interest rate level which has now been established should, in addition to directly contributing to stabilising the krone exchange rate, dampen price expectations.”  32  Svein Gedrem (1999) “Utfordringer i pengepolitikken” [Monetary policy challenges], Aftenposten, 4 May. 33  Kydland, Finn E. and Prescott, Edward C. (1977): “Rules Rather than Discretion: The Inconsistency of Optimal Plans.” Journal of Political Economy No. 87, pp 473–492. 34  Barro, Robert J. and David B. Gordon (1983): “A Positive Theory of Monetary Policy in a Natural Rate Model”, Journal of Political Economy No. 12 pp. 101–121. BIS Review 154/2010  9  long-term cost can be considerable and the short-term gains limited. Norway and other countries learned this in the 1970s and 1980s. The British prime minister Harold Wilson once remarked, “A week is a long time in politics”. This attitude also influenced economic policy in our country. The result was economic instability, with both high inflation and high unemployment. Just as Ulysses had himself tied to the mast to resist the Sirens’ 35 temptations, the government authorities can prevent themselves from pursuing a policy that is harmful in the long run by setting objectives and delegating tasks. A central bank should be independent in its use of policy instruments, though the objective of monetary policy should naturally be set out by the government and the Storting. 36 The division of responsibility was clearly defined when the government presented its guidelines in 2001.

Hence, the first choice which Exter had to make was whether to retain the currency board system or go for a central banking system. In a way, he did not have much choice in this regard, because his mandate was “to report on the organization and the functions of a Reserve Bank for Ceylon….” If he preferred a currency board, he should not have accepted the assignment. However, like a true professional, he compared and contrasted the two systems before he made his recommendation in favor of a central bank. The report demonstrates that his recommendation was out of conviction rather than the performance of a mere duty. His choice of a central bank for Ceylon in preference to the continuation of even a reformed currency board system was made on the basis of strong economic arguments. BIS Review 92/2007  1  1. The higher credit needs of a growing economy: Currency boards which are restrained by the need for maintaining a 100 % foreign reserve backing for the currency cannot supply enough liquidity to meet trade and other requirements unless the country continues to experience a huge balance of payments surplus year after year. Exter argued that it was not only impossible, but also undesirable to have such a surplus. Impossible because a country cannot continue to maintain a competitive edge over its competitors. Undesirable because freezing foreign reserves does not help the country to attain higher growth or welfare. 2.
The target range and the length of the policy horizon reflects that the Bank will tolerate deviations away from the target range, particularly if caused by temporary supply shocks that raise headline inflation and recognizes that a tradeoff exists between the length of the policy horizon and the volatility of output and employment. This raises several questions, such as: Is the present combination of a 2-4 target range for annual inflation and a 12-24 month policy horizon optimal? How flexible should the extent of the policy horizon to the type of shocks—temporary vs persistent—of supply vs demand? Is it advisable to review the length of the policy horizon as a way to consider asset prices or, in general, financial stability concerns in the conduct of monetary policy? (4)  Measurement and implications of inflation expectations  Of all monetary schemes, the one based on inflation targeting is the most sensitive to private expectations regarding future inflation, because this is the main anchor of inflation and, together with output gaps, is also the main determinant of medium-term inflation. In addition, central banks have no direct control on such expectations. Inflation is the result of pricing decisions of a large number of decentralized agents, whose actions are significantly influenced by their views of what the future aggregate inflation rate will be. Recognizing this, in our Central Bank we assign great weight to direct measures of expected inflation and to inflation compensation derived from the differentials between nominal and inflation-indexed interest rates.

To finish, Stephanie Schmitt-Grohé and Martín Uribe derive optimal but operational rules for monetary policy in a general equilibrium  4/5  model calibrated for the US, under different initial conditions and different degrees of indexation to past inflation. I would like to end these words by thanking Frederic Mishkin and Klaus Schmidt-Hebbel for their hard work in putting together this magnificent conference, and Mauricio Larraín and Mónica Correa for valuable assistance in organizing it. I also thank the large number of discussants of the papers for their dedication in preparing their remarkable interventions, which will undoubtedly contribute even more to our understanding of these important issues. To you all, dear participants, I wish two days of fruitful discussions and much learning. 5/5
This smooth transmission of the impulses from monetary policy to the real economy depends critically on the health of the financial system. In Europe, this primarily means the banks. Since the banks themselves were in trouble, however, the impact of these monetary policy measures was much weaker than it should have otherwise been. The next wave of the financial crisis in Europe hit in 2010. Financial market tensions rose, resulting from growing market concerns about the sustainability of public finances, especially in Greece. The strong links between banks and their sovereigns led to contagion that  eventually also engulfed Ireland, Portugal and Cyprus – all of which needed international rescue programmes. Banking systems in vulnerable countries lost access to funding,  4  financial intermediaries retreated behind national boundaries and markets began to bet on a breakup of the euro area. In July 2012, President Draghi announced that the ECB would do “whatever it takes” to preserve the integrity of the euro area. This announcement was followed up in September with the launch of the Outright Monetary Transactions programme, aimed at stabilising jittery sovereign bond markets. One could argue that, in the absence of a robust political  response, the ECB stepped beyond the normal remit of monetary policy to counter a threat to the very existence of the euro area itself. Although the programme itself was never activated, the fact that it was in place reduced tensions in financial markets and the risk of a breakup of the single currency area receded.

In the long run, the level of output that an economy can generate depends on the capital stock, the labour supply and the productivity of factors of production. In the steady state, all these factors are outside the scope of monetary policy. Given that monetary policy cannot determine the long-run values of real economic variables then, the argument goes, it is best to let monetary policy focus on what it can really control, namely nominal variables or, in other words, prices. This brings me to my first proposition: by and large monetary policy cannot affect real economic developments in the long run. The long-run potential output of an economy depends on structural features of the economy, including demographic developments, labour force participation rates, levels of educational attainment and efficiency in product and labour markets. It also depends on the transformation of savings into investment, that is, the proper functioning of banks and financial markets. Success in these domains depends on other  2  policy makers, notably governments, which can undertake structural reforms and often play a major role in the provision of education. So what can monetary policy actually do? In the near term, monetary policy nevertheless has a role to play. By influencing aggregate demand, it can cushion the economy from the impact of adverse shocks. In this way, it can limit the volatility of output from its long-run, or potential, level. Moreover, by sustaining demand in the short run, it can prevent a cyclical downswing in the economy from becoming entrenched.
More specifically, the main scenario assumes a forecast for TCW-weighted interest rates abroad that are much higher than the current market expectations a couple of years from now. In Figure 7 the yellow curve shows the main scenario’s forecast for TCW-weighted interest rates abroad. The main scenario moreover assumes that all market agents in Sweden and abroad will not only believe in the repo rate path, but will also believe in the Riksbank’s forecast for interest rates abroad. The main scenario in the Riksbank’s report assumes that this belief is incorporated in market expectations of foreign interest rates and included in the pricing of foreign market rates. The yellow curve in Figure 8 shows the foreign yield curve that would then arise. The main scenario thus assumes that long-term interest rates abroad are much higher than prevailing market rates (which are represented by the grey curve in Figure 8). The difference between a Swedish and a foreign five-year interest rate is approximately 60 basis points, much less than the difference of around 160 basis points described above. According to the latter, greater difference, the main scenario will lead to a much stronger krona appreciation. It is important to understand that it is the actual difference between long-term Swedish and long-term foreign market rates that affects the prevailing exchange rate. This is the case regardless of whether or not these long-term interest rates correspond to market expectations of short-term rates.

Davíð Oddsson: Recent economic and financial developments in Iceland Speech by Mr Davíð Oddsson, Chairman of the Board of Governors of the Central Bank of Iceland, at a seminar organised by the Iceland Chamber of Commerce, Reykjavik, 7 November 2006. *  *  *  I would like to thank the Iceland Chamber of Commerce for giving me the opportunity to say a few words here as has become customary at this time of year, following the Central Bank of Iceland’s interest rate decision and the publication of Monetary Bulletin. That publication provides indications of the position and outlook at the end of this year and what is to be expected over the forecast horizon of the next two years. Of course the Bank’s long-term forecasts are presented with due humility and respect towards the uncertainties that time may bring. Something of a milestone was reached on November 2 when the Board of Governors of the Central Bank decided to leave the policy interest rate unchanged at least until the next interest rate decision day, which was in fact brought forward to December 21. The last decision marked an end to 17 successive hikes on interest rate decision days. At this juncture it is uncertain whether a real turning point has been reached, because the decision was presented more as a deferral of a rise in the policy rate than as an end to the hike process. In other words, the data available to the Central Bank supported raising the policy rate still further.