samchain/econo-pairs-v1 huggingface dataset:
The most important features of a macro-prudential approach is that it treats aggregate risks as endogenous and considers possible feedback effects between the real economy and the soundness of financial institutions. Its ultimate objective is to prevent costly recessions such as the one we are currently experiencing. Consequently, its implementation must be grounded on some welfare analysis. This is an area in which further research is required. It is very important that the implementation of this macro-prudential approach finds the right balance between efficiency and stability in the financial sector, It should therefore be constructed so as to act directly on the incentive to take risk and the rewards provided by risk taking. Should central banks be involved in? Clearly, they should play a pivotal role: they are a major player during financial and liquidity crises. They are well equipped to assess cyclical positions and they have a strong incentive since the efficacy of their monetary policy relies on the smooth functioning of the transmission mechanism. On the other hand, they are not alone in caring about financial stability and their primary mandate, which is price stability, does not always necessarily coincide with financial stability. As a conclusion, I would like to thank your very much for you attention and for your kind participation and thank once again the organisers and the teams involved in the preparation of this conference. BIS Review 74/2009  3

This is no easy task, because the future cost is unknown and far away, while an ongoing financial market crisis is a clear and present danger. Recent events have clearly shown that moral hazard is not just a textbook phenomenon, but is in fact a serious problem. Market players do indeed rely on the implicit insurance granted by central banks and other authorities, and central banks and authorities, having no choice, do indeed step in to support markets in a crisis. There is no easy way to address the moral hazard problem. However, the right time to tackle it is probably not primarily during a financial crisis, but during the preceding calm. Since a strict declaration of no intervention by a central bank may not be fully credible, regulation must aim to neutralise the distortion of incentives which financial market participants face because of moral hazard. Larger capital and liquidity requirements are probably a robust means of countering that distortion. Larger capital and liquidity requirements do not eliminate moral hazard, but they limit the risk of an accident and thus the cost to the public in the event of a rescue. Related to the moral hazard issue is also the issue of the risk-bearing capacity of a central bank. A central bank can only act as a lender of last resort if it has the means to act as one. This is especially important if the banking system has relatively large liabilities in foreign currency.
1/3  BIS central bankers' speeches  AT THE CROSSROADS 6. Allow me to offer some perspectives to this set of questions. Liveability: Balancing between resilience and growth 7. Just as houses must not only be safe but also functional, so too must the financial system be able to support the activities of its participants. The reforms are set out to strengthen the safety of the system but not regardless of economic cost, or to impede the ability of market participants to function properly. We can always build a house with many more pillars, fences, gates and other defences that would assure that it can never be at risk of collapse, but we also need to consider its liveability. 8. I can assure you that it is not lost on global regulators that the reforms that we have embarked on in the past decade are not ends in themselves. The key is to strengthen the foundations of the global financial system to better assure ongoing resilience and steady development of the sector. Therefore, the new regulatory requirements should take into account the financial sector’s linkages to and support of the broader economy. 9. While most policy-related reviews of the reforms have been done, there are ongoing impact studies to assess how different parts of the world as well as different stakeholders are affected; and whether there are unintended effects. 10. Take central clearing requirements for example.

Thomas Jordan: Financial crisis dispersing? Economy changing direction? Speech by Mr Thomas Jordan, Member of the Governing Board of the Swiss National Bank, at the general assembly of the Handels- und Industrieverein des Kantons Schwyz, Schwyz, 25 August 2009. The complete speech can be found in German on the Swiss National Bank’s website (www.snb.ch). *  *  *  The situation on the international financial markets has recently brightened again. This is mainly due to the positive keynote in company earnings reports and a series of unexpectedly favourable economic data. The relaxation of monetary policy was pursued further through the implementation of unconventional measures in March 2009, and this is also likely to have had a calming effect. Price advances since March should, however, be partly seen as corrections to excessive downward movements in the previous period. Considerable uncertainties still prevail and the danger of setbacks should not be carelessly underestimated. The recessionary developments in the world economy weakened significantly in the second quarter of 2009. Expansionary monetary policy around the world, together with fiscal support programmes, have probably played an important role in this respect. Economic indicators are also showing a turn for the better in the Swiss economy. Nevertheless, in view of the exceedingly low level of utilisation of production capacity, industrial investment will probably continue falling. Given the increasingly gloomy outlook for employment, private consumption is also likely to put a damper on the resumption of cyclical activity.
This point becomes clear if we consider for a moment their basic purposes: •  To provide reasonable assurance that the bank’s and its customers’ assets are safeguarded, that its information is timely and reliable, and that errors and irregularities are discovered and corrected promptly;  •  To promote the bank’s operational efficiency; and,  •  To ensure compliance with managerial policies, laws, regulations and sound fiduciary principles. With these purposes in mind, it is clear that the long-term success of any banking organization depends on the effectiveness of its internal control apparatus. And never has this been more true than today. As the activities of commercial banks have become increasingly diverse and complex, internal controls have become critically important to the sound and successful execution of banks’ strategic objectives. I want to stress this point as strongly as I can. As a former commercial banker myself, I know there is a powerful temptation for management to focus its attention and resources on the front office – those areas and individuals that generate profits for the institution. But if something goes wrong in the back office, it can quickly become the most important aspect of a bank’s operations. We’ve seen this time  BIS Review 75/2000  4  and time again. It is essential that sufficient resources, staff and managerial attention are devoted to the back office and internal audit functions. Firmly rooted on the foundation of good corporate governance and rigorous internal controls is the central importance of effective risk management.

Here again, there is a nexus in the appropriate rhythm and interaction between the liberalisation of financial versus real markets. Once financial liberalisation has started, the process benefits from continuous innovation and from its own impetus. The same does not apply to reforms in the labour and good markets where rigidities and obstacles are often deeply rooted. BIS Review 64/2007  3  Lastly, better integration into the global economy requires an appropriate exchange rate strategy. An emerging economy with high productivity gains and potential growth in the tradable sector is prone to receive large capital inflows and have a real appreciation of its currency in the long term. The latter may come either or both from nominal appreciation or higher relative inflation. Arguably, exchange rate appreciation, which may result in an overvalued currency, is a risk for emerging economies that conduct export-led growth strategies. In order to stem appreciation and maintain their competitiveness, some emerging economies – like China – have accumulated ever larger amounts of foreign reserves. However, undervalued currencies also represent a significant risk, not only for inflation but also because it allows foreigners to buy cheaply national assets. In addition, undervalued currencies contribute to ballooning global imbalances. "En passant", I am pleased to note that both India and the Euro area post significant but not extravagant levels of reserves and that neither is responsible for the persistence of global imbalances.
Generally, it is appropriate to increase the contributivity of the system and its transparency, ensuring a level of sufficiency for those households with more limited resources. Also, establishing automatic adjustment mechanisms would help stabilise the system, adapting it to demographic and economic changes. Indeed, several EU countries (such as Germany, Sweden and Italy) have already established a link between the level of benefits or retirement age and life expectancy. Combating climate change and smoothing the transition to a more sustainable economy are another of the fundamental challenges we face. Fiscal policy should take the lead in attaining objectives in this field, both to deter the most environmentally harmful activities, through an internationally harmonised tax system, and to foment the public and private investment needed to develop cleaner technologies and alleviate the social costs of the transition. As to inequality, we began the current crisis with a higher level than was the case at the end of the previous upturn, and everything suggests that this crisis will entail a further increase. The employment protection and income support measures approved should contribute to lessening the vulnerability of the households most affected. Also, many of the reforms intended to improve productivity or lower unemployment and job insecurity are vital for  7  reducing inequalities. The minimum life income scheme could, in coordination with regional government arrangements, contribute to alleviating extreme poverty. In this connection it will be important, as provided for in the scheme’s founding legislation, to assess its application on an ongoing basis.

1  A concept constructed by subtracting those workers in a temporary employment adjustment situation from those paying social security contributions. 1  And the economic vulnerability of those working in these sectors is greater. Their income is not only on average lower, but also they have a less sound financial position: they form part of households with less accumulated saving2 and their median net wealth is 17% lower. This heterogeneity is also patent in the business sector, in particular regarding financial vulnerability. Thus, somewhat less than 15% of firms were in a vulnerable position before this crisis.3 This proportion did not vary significantly on the basis of firm size and sector of activity. Conversely, the proportion of vulnerable firms increased by an estimated 20% in 2020, with the rise more pronounced at small firms; and by sector, in hospitality, the figure would have stood at 40%. The banking sector, for its part, has shown notable resilience. Underpinning this have been the improvements both in its balance sheet quality and solvency in the past decade, and the forcefulness of the economic policies applied since the onset of the crisis.4 The CET1 capital ratio increased by 71 bp and the NPL ratio fell by 0.4 pp in 2020. But the sector’s profitability declined significantly as a result, above all, of the increase in provisions for impairment losses, more than 50% up on those in 2019.
The Federal Reserve has undertaken to keep an ultraexpansionary monetary policy in place for as long as this situation persists and does not jeopardize inflation, which has important implications for the global financial scenario that the Chilean economy will continue to face in the coming years. Plus, the U.S. has a high fiscal deficit that reflects in an excessive increase of its public debt. If a political agreement is not achieved, early next year a number of automatic adjustments of taxes and expenses (the socalled fiscal cliff) will be forced into the economy. Given the sluggish growth in this country, if they have to apply such major adjustments, the economy will relapse into a new recession. Unfortunately, when the deadline is only days away, there are no signs of agreement in sight. BIS central bankers’ speeches  1  The emerging world continues to outperform the developed economies, although with greater diversity within the group. In China, indicators suggest that growth is picking up after the deceleration of most of 2012. Latin America, meanwhile, has shown reduced growth during the year and the outlook for the next two years has also been revised downward. The slowdown has been sharper in Brazil and it is not clear what the velocity of its recovery will be. Mexico and Colombia have also begun giving signs of a slowdown. Peru continues to grow strongly, while Argentina is dealing with major adjustments. The Chilean economy has remained on an upward slope, driven by strong domestic demand and, particularly, fixed investment.

Household credit has continued to grow  2  BIS central bankers’ speeches  in tandem with disposable income, although the increase in loans by non-bank suppliers – with a higher penetration in lower-income households – has been smaller than in previous periods. Corporate debt has grown somewhat above GDP, driven by strong local banking credit and external financing via bonds, in a context of favorable financing conditions in international markets. In turn, the banking system keeps robust indicators, with capital significantly above regulatory levels, a more diversified external funding base, and a stable liquidity position. Toward 2013, the Board estimates that GDP growth will be within the range of 4.25 to 5.25 percent. This range is above the one foreseen in September. In this scenario, domestic demand will increase 5.7 percent y-o-y, further amplifying the current account deficit to 4.6 percent of GDP. This projection supposes that macroeconomic conditions facing the Chilean economy will remain fairly unchanged in the near future, and that the economy will grow in line with trend rates, which the Board continues to estimate around 5 percent (table 1). Internationally, the baseline scenario foresees that in 2013 and 2014 the world economy and Chile’s trading partners will grow by averages of 3.6% and 3.8%, respectively, not far from those of 2011–2012. Important differences remain between the performances of the developed world and the emerging world. The recession in the Eurozone has settled and is expected to last some more time.
Given our highly open economy, we may have to accept somewhat wider variations in inflation than some other countries. The last time I was here, almost exactly a year ago, Norges Bank’s Executive Board had just decided to reduce the key rate by 0.25 percentage point to 1.75 per cent. Since then, the key rate has remained at this historically low level. Real interest rates are also low. From December 2002 to March 2004, the key rate was reduced by a total of 5.25 percentage points. The interest rate decline can be ascribed to a number of factors. In late autumn 2002, inflation started to fall. The inflation projections were also revised down. Gradually new information about the outlook for other countries and the Norwegian economy indicated that inflation might be very low. Short-term interest rates fell by close to 4 percentage points. It would seem that it is not only changes in the real interest rate that have an influence, but also the level of real interest rates. Between December 2002 and March 2004, the interest rate has moved from a high to a low level. The real interest rate is now lower than a neutral interest rate. A real interest rate that is lower than the neutral rate will stimulate activity even after the effects of the interest rate fall itself have been exhausted. Calculations seem to indicate that the neutral real interest rate for Norway is between 2½ and 3½ per cent, and it has probably fallen somewhat in recent years.

High demand for commodities produced by Norway is boosting activity and is strengthening profitability for Norwegian enterprises. Partly due to very high growth in demand for oil, the average price of Brent Blend rose to almost USD 40 per barrel in 2004. Strong economic growth, particularly in the US and China, has resulted in high energy consumption. So far this year, the price of Brent Blend oil has largely hovered around USD 45 per barrel, although the price rose to more than USD 50 per barrel at the beginning of March. 4  BIS Review 18/2005  Oil futures prices have also increased. Little idle production capacity in OPEC countries, combined with the prospect of lower production in non-OPEC countries, has probably influenced oil prices. At the same time, there are prospects of continued strong demand growth in important oil-importing countries, such as China and some other emerging economies. On the other hand, US crude oil stocks are now far larger than they were at the same time last year and the previous year. Petrol stocks are also relatively high. This reduces the risk that low stocks and high petrol demand will push up the price of crude oil, as was the case last summer. Planned, large-scale projects resulted in strong growth in petroleum investment in 2004. Due to persistently high oil prices and expectations that oil prices will remain high, investment in the petroleum sector may reach record levels this year. The investment intentions survey for the petroleum sector points to very high growth.
First, the efficiency of a credit institution introduces an additional condition; the issue is not only to maximise output by minimising costs, but also not to alter the institution’s risk profile. Here, then we have three elements output, costs and risk. This idea factors in significant constraints and makes it necessary to focus on improved efficiency as a balanced process in which attention must be paid to a series of management elements that cannot be run down in cost-cutting drives. For example, no clear efficiency gain is achieved if it is done at the expense of increasing operational risk. Second, in the financial sector efficiency can be analysed from a dual perspective: from that of the system as a whole, a macro perspective, and from that of the individual institutions, a micro perspective. The financial system and intermediation I shall refer firstly to the financial system as a whole, which enables saving to be channelled from agents wishing to lend funds, because they have a surplus of them, to others who wish to borrow funds, since they are lacking financing. Adding to this important function performed by the financial system is that of allowing the transmission of risks to those who have a greater wish or capacity to assume it. This is especially important in an environment of uncertainty. An efficient financial system will enable a greater volume of funds to be channeled towards productive investment and therefore will help to boost economic growth and to achieve greater levels of well-being.

The exchange rate is generally a more potent transmission channel of monetary policy decisions than domestic interest rates, and it also plays a crucial role in explaining the pass-through to price developments in most accession countries. Thus, in order to achieve further disinflation and sustainable growth, excessive exchange rate fluctuations need to be avoided. In our view, and this view is supported by our previous experiences with the EMS/ERM framework, ERM II provides a useful mechanism to anchor exchange rate expectations. At the same time, ERM II, with its adjustable central rate and its current fluctuation band of ±15%, provides accession countries with the same degree of flexibility as the EMS/ERM following the decision to widen the fluctuation band in 1993. This may be suitable for accession countries. Given that accession countries still need to complete the process of restructuring their economies and catching up in terms of real income, the flexibility inherent in ERM II and its wider fluctuation bands provides accession countries with sufficient scope to accommodate these reforms. Bearing in mind that ERM II constitutes a multilateral arrangement, and that it is consistent with the regional integration process in which all accession countries are deeply involved, ERM II is likely to have fewer potential weaknesses than other alternative exchange rate arrangements have shown over recent years. Of course, as for any exchange rate arrangement, coherence between macroeconomic policies must be ensured for successful participation in ERM II.
However, my remarks today will focus on monetary policy. 2  BIS central bankers’ speeches  from markets in which they are no longer competitive, or relocate part of their production – and thus some jobs – to lower-cost countries, in order to keep pace with their foreign competitors. Individual companies may even have to cease their activities in Switzerland altogether. A study by the KOF research institute shows that, following a Swiss franc appreciation, the segment of lower-skilled workers in particular sees employment numbers fall. 3 However, the same study also points out that, despite pressure on margins, the remaining companies will respond to the franc’s appreciation by stepping up research and development, improving product quality and increasing the number of highly skilled workers they employ. Over time, these measures should lead the industries concerned to become more productive overall. The majority of empirical studies for other countries confirm that, as a general rule, strong competitive pressure increases an industry’s productivity. 4 Moreover, a number of country studies indicate that an appreciation can have a positive impact on productivity. 5 Often, the relationship is reciprocal, with productivity gains themselves leading to a stronger currency. Thus, in contrast to the short term, in the long term one cannot claim a contradiction between an economy’s competitiveness and a strong currency (cf. chart 9). The fact that Switzerland is among the world leaders in competitiveness, despite the strong Swiss franc, confirms this finding.

What are the major causes of the current world imbalances? c.  Do imbalances impede world growth? d.  What are the best (domestic/global) policies to mitigate the imbalances? Are there any chances for (efficient) international cooperation? Who should do what? e.  How are the current changes in regulatory and supervisory frameworks influencing EU-wide imbalances? Are they mitigating them or deepening them? f.  Can creditor countries (such as China or Germany) act as “locomotives of growth” given that the juan is quasi-fixed against the US dollar and the “German currency” is fixed against the “currencies” of many trading partners in the eurozone? And what proportion of the potential fiscal impulse will merely benefit those mainly Asian countries whose products are becoming more and more competitive on EU markets. BIS central bankers’ speeches  3