samchain/econo-pairs-v1 huggingface dataset:
The global picture is even more unsettling – the roughly 3  4  $ billion in legal costs for global banks since 2008 translates into more than $ trillion of reduced lending capacity to the real economy. Never before has misconduct occurred so systematically, in such a scale and across multiple jurisdictions. Clearly it was not the case of a few bad apples, but something was rotten in the entire barrel. A combination of factors caused “ethical drift” across the industry where bad behaviour went unchecked, and became progressively more widespread and accepted as the norm. Market structures (such as poorly designed benchmarks, unmanaged conflicts of interest, and possibilities for collusion) presented opportunities for abuse. Systems of governance and control focused on second and third lines of defence that were weaker than highly profitable and powerful trading desks. Weak market discipline, particularly from the buy side, meant that poor market practices were allowed to continue. Remuneration and incentive schemes stressed short term returns over longer term value enhancement. And finally; a culture of impunity was prevalent because of a perception that the likelihood of being caught was low. Just as multiple forces caused the deterioration of conduct, multiple actions will be required to achieve the kind of “ethical lift” we want to see in the financial markets of the future.

(1997), “Inflation Forecast Targeting: Implementing and Monitoring Inflation Targets”, European Economic Review 41, pp. 1111–1146 introduced this type of loss function to analyse so-called flexible inflation targeting. However, the behavioural assumption that the loss function (or very similar variations of it) implies, has a long tradition in analyses of monetary policy (for example, Kydland, Finn E. and Edward C. Prescott (1977), “Rules Rather than Discretion: The Inconsistency of Optimal Plans”, Journal of Political Economy 85, 473–491.) 15  One can also calculate the mean value of these deviations, what is known as the mean squared gap. The mean squared gap for inflation and resource utilisation can then be drawn in as points in a figure; see, for instance, the article “A method for assessing different monetary policy alternatives” in the Material for assessing monetary policy 2011, Sveriges Riksbank. 16  See, for example, Apel, Mikael, Per Jansson and Lars Heikensten (2007), “The role of academics in monetary policy: a study of Swedish inflation targeting”, Sveriges Riksbank Economic Review 2007:1, pp. 21–58. 17  The document “Monetary policy in Sweden 2010”, Sveriges Riksbank, summarises the Riksbank’s monetary policy strategy. It is stated there (p. 5) that monetary policy “in addition to stabilising inflation around the inflation target, also strives to stabilise output and employment around long-term sustainable paths”. However, this does not mean that policy needs to be pegged to specific numerical estimates of these paths; see the continued discussion in this speech.
Ravi Menon: China at an inflection point – what does it mean for Asia? Speech by Mr Ravi Menon, Managing Director of the Monetary Authority of Singapore, at the Official Monetary and Financial Institutions Forum (OMFIF) City Lecture, London, 5 May 2016. *  *  *  Mr David Marsh, Managing Director and Co-founder of OMFIF Ms Foo Chi Hsia, Singapore’s High Commissioner to the UK Distinguished guests, ladies and gentlemen The China syndrome China’s size and promise have long enthralled the world. •  The dream of penetrating China’s market was colourfully captured in the words of a British commentator in the 1840s: “If we could only persuade every person in China to lengthen his shirt-tail by a foot, we could keep the mills of Lancashire working around the clock”  •  Well, war, revolution, and central planning quickly laid to rest that fantasy. Since the closing decades of the last century, the gravity-defying growth and transformation of the Chinese economy have once again stirred global imagination. •  GDP growth averaged 10% per annum during 1980–2010, ahead of virtually all other economies. China’s size, growth, and rapid integration with the rest of the world mean that no evaluation of the global economy can be complete without looking at China. •  In 2000, just 5 countries ranked China as their top export market, compared to 53 countries that ranked the US similarly.

•  Demand for final consumption goods will increase as China’s middle-class grows, stimulating imports of consumption goods even as trade in intermediate goods slows. •  Indeed, at a rate of nearly 10% per annum, China’s import of consumption goods has grown by more than twice that of intermediate goods over the past ten years. Second, direct investment will increasingly be an area where China’s impact on the region is felt. Since late last year, China has emerged as a net exporter of direct investment. •  Outward direct investment from China has grown by 28% per annum over the nine years to 2014. Third, a new regional production network could emerge in Asia. •  Indonesia and the economies in Indo-China, with favourable population dynamics, are well-placed to absorb the labour-intensive and lower value-added jobs that China is shedding as wage costs rise. •  The Chinese push to finance infrastructure construction in less developed Asian countries, as part of its One Belt One Road plan, will greatly enhance these countries’ attractiveness as nodes in the Chinese manufacturing network. Conclusion Let me conclude. China is in the midst of an unparalleled economic transition. It is grappling with the challenge of managing a growth slowdown, addressing vulnerabilities in its financial system, and implementing structural reforms – all at the same time. It is not an easy task, juggling these three balls at the same time.
Under these assumptions, and using the same discount rate of 2.5%, the present value of reducing  BIS Review 100/2010  9  the likelihood of a systematic crisis in any one year by one percentage point is around 55% of current annual GDP. If we instead assumed that there are no permanent effects on GDP from financial crises the benefits of reducing the chance of a crisis happening in a year are lower at around 20% of GDP (Table 1, column 2). The third column in the table shows by how much the chances of a banking crisis would need to fall given a rise in capital of 1% of bank assets so that the benefits of that would match the estimated cost. (Whereas before both benefit and cost are expressed as the present value of lost or gained GDP.) This is the reduction in the probability of a banking crisis required to justify a 1% increase in banks’ risk-weighted capital – given the assumptions made on tax, Modigliani Miller offsets and so on corresponding to that row in the Table. Chart 7 illustrates this calculation for multiples of a 1% increase in banks’ capital. For example, on the least favourable assumptions about the cost of extra bank capital (corresponding to row 1 in the table) the Chart shows that a 10% increase in banks’ capital ratios would require a minimum reduction in the probability of financial crises of 0.8 (the red line) for it to pass a cost-benefit test.

Clearly more stringent capital requirements on banks will be part of any new regulatory framework. I believe that moving capital requirements on banks is a very useful tool to work alongside monetary policy in achieving a stable economic environment. But there are other tools such as time-varying liquidity standards or limits on loan-to-value ratios on secured lending that could be used to limit the growth of credit over the cycle. However, it is not my role as a member of the MPC to comment on the exact design of macro-prudential instruments. But I do believe there is a strong case for having monetary policy tools – which for most of the time means the level of interest rates – set to achieve stability in nominal conditions; which means that they are focused on inflation. Using the interest rate as a tool to maintain the stability of the banking system strikes me as a strange assignment of policy tools to targets. Changes in interest rates have an uncertain impact on financial stability; often it would be unclear in which direction to move interest rates to help make the banking sector more robust. But in the UK changes in interest rates have a powerful – and relatively predictable – impact on the wider economy. In contrast capital requirements may have a powerful and relatively clear impact on bank robustness and an uncertain – but quite likely relatively small – impact on the wider  12  BIS Review 100/2010  economy.
Lowering the policy rate into negative territory can also be useful in reducing the pressure on an appreciating currency. If a country’s currency is facing such appreciation pressures at a time when “substitute” currencies have policy rates at or near zero, then the country’s central bank may choose to move its policy rates into negative territory to reduce the yields available to market participants who are holding the currency in anticipation of a gain on sale. Complications I’ll now outline seven categories of complications associated with negative nominal policy rates. While some of these complications are already relevant in an environment of low real rates of interest, most arise only when nominal rates turn negative. 1. Avoidance  Why do people say there is a lower bound on interest rates at zero? Our simple proposition is that people would not invest a dollar in an account or bond from which they could expect to recoup only an amount less than a dollar so long as they could alternatively and costlessly put their money in currency – an investment in which a dollar remains a dollar. If everyone could costlessly invest in currency rather than in activities bearing negative rates, then there wouldn’t be any negative rate activity in which people would invest. Consequently, the negative interest rates in many European countries indicate that it is costly to invest in currency to earn a zero nominal rate of interest. Why is this the case? First, currency is bulky and weighty.

As I pointed out earlier, the costs of avoiding negative interest rates by substituting currency for deposits is probably lower for retail depositors than for larger, business and institutional, depositors. Because retail depositors can avoid negative rates on deposits relatively easily, it makes sense not to impose negative rates on their deposits. In addition, many retail depositors may have a visceral negative reaction to being charged negative rates, and may lack a clear understanding of whether their bank is minimizing the costs of storing their deposits. Recognizing these difficulties, the central banks that have negative policy rates offer zero rates on many of their deposits from banks, imposing negative rates on the “marginal” deposits. In this way, commercial banks can, in general, charge their retail depositors deposit rates of zero and earn zero at the central bank on at least a large portion of their reserve holdings. Observers report that retail depositors in Switzerland, Denmark, and Sweden do not face negative deposit rates. At the same time, many large business and institutional depositors do earn negative rates on their bank deposits. This state of affairs opens up new avenues, at least in theory, by which some can avoid negative rates: large business depositors could attempt to impersonate a host of retail depositors. While generally unrealistic, the possibility of such a ploy requires that some effort be expended to prevent that avoidance activity.
Downside risks also relate to further increases in commodity prices. Euro area annual HICP inflation was 2.6% in March 2012, according to Eurostat’s flash estimate, after 2.7% in the previous three months. Inflation is likely to stay above 2% in 2012, mainly owing to recent increases in energy prices, as well as recently announced rises in indirect taxes. On the basis of current futures prices for commodities, annual inflation rates should fall below 2% again in early 2013. In this context, we will pay particular attention to any signs of pass-through from higher energy prices to wages, profits and general pricesetting. However, looking ahead, in an environment of modest growth in the euro area and well-anchored long-term inflation expectations, underlying price pressures should remain limited. BIS central bankers’ speeches  1  Risks to the outlook for HICP inflation rates in the coming years are still seen to be broadly balanced, with upside risks in the near term mainly stemming from higher than expected oil prices and indirect tax increases. Downside risks continue to exist owing to weaker than expected developments in economic activity. The monetary analysis indicates that the underlying pace of monetary expansion has remained subdued. The annual growth rate of M3 was 2.8% in February 2012, compared with 2.5% in January. In both January and February we observed a strengthening in the deposit base of banks.

From the perspective of the National Bank, this means that the Government is trying to anticipate the policies that we implement to maintain the level of the exchange rate and it takes them into consideration when adopting the budget. It is clear that the National Bank and the Government may adopt essentially good decisions in their respective spheres of action if they cooperate even during the discussions which precede the decisions. The cooperation with the Government would also be in terms of creating conditions for the social dialogue to take into account the challenge we face in conducting the monetary policy. This actually means that the inflationary pressures which in themselves would result in faster development of the domestic economy, as well as more positive output gap compared with the countries of the Eurozone, would also lead to more pronounced interaction with the increase in unit labor costs. The perception of close coordination between the Central Bank and the Government in dealing with this challenge would mean that both public institutions are aware of the need to adjust to the conditions that the maintenance of price stability through the exchange rate brings. This adjustment would prompt the Government, through dialogue with social partners, to advocate a moderate growth of wages, i.e. wage growth which will take into account productivity in both the tradable and non-tradable sectors. This would lead to increased employment, while simultaneously improving the competitive position of enterprises, which would alleviate the emergence of imbalances in the economy as a whole.
Economic policy reaction came promptly. In Chile, and other Latin American countries, we implemented a combination of fiscal and monetary policies to stimulate the economy. More important was the fact that probably for the first time, a crisis of the magnitude that affected – and still affects – developed countries, did not cause Latin American economies to enter into a balance of payments crisis or a profound recession. Suffice it to remember what happened in the early 1980s, when our own weaknesses and the shortcomings of economic policies, coupled with a significant rise in interest rates worldwide, dragged us into a deep recession. This is of utmost importance as it shows that we have matured in economic policy framework and that we face the challenge not only of maintaining but also of improving it. After some quarters, the world economy began to recover gradually. This process took place at two speeds. Emerging economies recovered at a fast pace, while developed countries experienced a slower rebound. The causes and consequences of the Great Recession continue to affect economic performance of the developed world. This is so because the fundamental problem, high indebtedness of households, companies and governments, is still present. The fact that the higher the level of debt the more costly the solutions and greater the side-effects, poses a problem. We have been seeing this clearly during recent quarters.

The European Central Bank (ECB) has provided long-term liquidity to the financial sector, European leaders have placed conditions on this financing, governments have agreed on adjustment plans that seem to go in the right direction, and it seems as time has been bought to address the more structural problems that are still present in the Eurozone. Financial markets have understood this, and risk indicators and monetary conditions have improved. Consensus forecasts on world growth point to a performance of the global economy below that of 2011. Nonetheless, the degree of downward correction has diminished noticeably in the latest data. Does this mean that circumstances in developed countries have reached a point beyond which we must not expect other significant setbacks? This is not so in my opinion. Allow me to give you some background. As mentioned, the solution to the Eurozone’s problems is still far ahead. Its economy is in recession and the necessary adjustments are expensive and highly unpopular among the population. Some economies have very high unemployment and a very fragile fiscal situation. If anything, measures adopted up to now have put a firewall to isolate systemically relevant economies from greater disaster. Also, financial conditions have improved these last weeks, mainly due to the ECB’s LTRO initiative. With it, the concern over the region’s banking sector financing needs has been dealt with. However, serious fiscal and financial problems and macroeconomic imbalances continue to exist in the Eurozone. In response to high unemployment and low growth, banks’ portfolios deteriorated.
Benoît Cœuré: A budgetary capacity for the euro area Introductory remarks by Mr Benoît Cœuré, Member of the Executive Board of the European Central Bank, at a public hearing at the European Parliament, Brussels, 2 March 2016. *  *  *  Madam Chair, Mr Chair, Honourable Members of the European Parliament, Ladies and gentlemen, I am grateful to the two rapporteurs and to the two committee chairs for holding this hearing today to advance the public debate on a fiscal capacity for the euro area. We are all well aware that political attention is largely focused elsewhere, but we should not lose sight of the objective of completing Economic and Monetary Union (EMU), securing its capacity to absorb economic shocks and creating confidence today in its future economic performance. As I have said elsewhere, if downside risks to the recovery were to materialise, this would not make it easier to respond to the refugee crisis or to counter terrorism. 1 A quick glance at fiscal policies today should further convince us of the importance of this discussion: •  The recovery in the euro area is proceeding at a sedate pace; it is mainly supported by our monetary policy measures and by the low price of energy. At the same time, the global economy is overshadowed by renewed uncertainty and broader geopolitical risks. •  Public finances in many euro area countries are still in a fragile condition.

The large majority of citizens, who had nothing to do with the errors leading up to the crisis, were made destitute because their small incomes and savings declined in value. Large parts of the growing middle class in the worst hit countries in South East Asia were wiped out. Conditional support was often provided with tough requirements of economic policy restraint. A tight fiscal policy would create scope for financing restructuring in the banking sector. Stringent monetary policy would counteract an overly severe depreciation of the currency. This can be criticised with hindsight, as in South East Asia the countries often did not have problematic deficits in public finances or high inflation rates. The IMF has admitted since that the restraint was too great, as they did not realise the extent of the financial crisis. The task for the BIS, the IMF, the World Bank and other international organisations should be to continue the work on finding rules and methods, both to protect innocent people from ruination and to put the risk for bad investments on those making the investments. Work on this is underway in the organisations I mentioned earlier. It involves capital adequacy rules for banks, but also reporting,  4  BIS Review 9/2002  auditing, financial supervision, bankruptcy legislation and transparency in conducting monetary and fiscal policy.
Innovations indeed move the world with financial technology, transforming the financial services industry as we know it – moving it towards the digital arena. In such an environment, building and maintaining close cooperation becomes essential for sustaining financial stability and protecting consumers from security threats. The Conference will cover various topics related to the latest developments at global, European and national level. The emergence of FinTech – financial technology marked the global developments in recent years by attracting financial institutions attention to its implementation for improving the present financial products and new products development. On the other hand, FinTech companies started offering their own financial services, thus entering into competition against banks. Moreover, digital technologies pose challenges to financial institutions, including the central banks, in the context of digital banking and digital transformations. Implementation of Distributed Ledger Technology, particularly Blockchain, could cause disruption to financial market infrastructures and furthermore, to worldwide financial system. Theoretically, it could facilitate cross-border payments, improve the efficiency of back-office operations, eliminate the need of data reconciliation, facilitate financial inclusion and information sharing, but also, it could reduce the need or completely replace some financial market intermediaries. DLT strongly emphasizes the questions about effective regulation, prudential supervision, oversight and cyber security issues, but it could also catalyze the issuance of digital currencies backed by the central banks and facilitate the implementation of monetary policy. In the European context, the Second Payment Services Directive (PSD2) is fundamental part of the European payments regulation and significant step towards single digital market in Europe.

I am particularly pleased that on the last day of the Conference the honored governors, board members and experts from the European Central Bank, De Nederlandsche Bank, Banco de Portugal, Croatian National Bank, Bulgarian National Bank, National Bank of Belgium, Global Sovereign Advisors and the National Bank of the Republic of Macedonia will reflect on innovations and cooperation as the main drivers of the European payment integration as well as on how consumers, firms and government users will pay in the future. Without further ado, I now declare the 10th jubilee Conference on Payments and Market Infrastructures open. I wish you pleasant days here in Ohrid and many fruitful discussions. Thank you! 2/2  BIS central bankers' speeches