samchain/econo-pairs-v1 huggingface dataset:
If, overall, the result were a greater dispersion of risk around the banking system and fewer large exposures relative to capital, the system as a whole would probably be safer even if, net, no credit risk had left the banking industry in aggregate. According to various surveys, some credit risk has been shed to non-banks, including insurance companies, pension funds and hedge funds. That too should, on balance, promote the resilience of the system, not least because non-banks are not part of the core payment systems that underpin our financial markets – provided, of course, that banks prudently manage their counterparty exposures to non-bank sellers of credit protection. As others have argued, this is a change of degree rather than kind: with the growth of corporate bond markets, and especially securitisation, non-banks have been  1  My thanks to Mike Cross, Colin Miles and David Rule for long-running debates on the issues discussed here. For comments, to Peter Andrews, Andrew Bailey, Alex Bowen, Alastair Clark, Paul Fisher, Damien Lynch, Peter Westaway and Simon Wells. And to Sandra Bannister for secretarial support. 2  For an early review, see Rule, D, (2001) ‘The Credit Derivatives Market: its Development and Possible Implications for Financial Stability’, Financial Stability Review, Issue 10, June 2001, pages 117-140 and Rule, D, (2001), ‘Risk transfer between banks, insurance companies and capital markets: an overview’, Financial Stability Review, Issue 11, December 2001, pages 137-159. BIS Review 50/2005  1  running credit portfolios for years.

At the Bank of England, one of the questions we now more or less routinely ask in our MI work goes along the lines of “is the Street and/or is the fund community short volatility /gamma/vega in a big way  3  ‘The dynamics of US dollar interest rate adjustment’, Financial Stability Review, Issue 15, December 2003, page 22. 4  ‘Structured notes and the US dollar/yen exchange rate’, Financial Stability Review, Issue 14, June 2003, page 43. BIS Review 50/2005  3  in any particular market?” This is discussed further in the latest edition of the Bank of England’s Financial Stability Review, which is published next Monday. Regulators can put any general information gleaned from MI alongside their more granular sources on the positions of firms. A risk properly understood is, I hope, a risk that can be managed effectively. And so my analysis of the impact of options hedging on market dynamics does not cancel out the benefits that derivatives can potentially bring. For the reasons described earlier, the plugging of ‘missing markets’ is something to welcome. Innovation, competition, and risk management That so many markets are no longer ‘missing’ owes something to innovation in the wholesale financial services industry. The underlying forces driving innovation seem to be powerful, and indeed perhaps self-feeding. They may also give rise to some risk management challenges. One possible story – there are others – would go along the following lines. Core wholesale markets have become more efficient.
Øystein Olsen: The purpose and scope of monetary policy Speech by Mr Øystein Olsen, Governor of Norges Bank (Central Bank of Norway), at the Centre for Monetary Economics (CME) / BI Norwegian Business School, Oslo, 26 October 2017. * * * Accompanying slides On 23 June this year, the Central Bank Law Commission submitted its proposal for a new central bank act and for the future organisation of Norges Bank and the Government Pension Fund Global.1 I want to commend the Commission, headed by my predecessor Svein Gjedrem, on its thorough work. Important issues have been thoroughly examined and deliberated. Norges Bank has carefully scrutinised the Commission’s proposals before submitting its response to the consultation document. As our response was published today, this speech provides a good opportunity to elaborate on Norges Bank’s views on some of the key aspects of the Commission’s recommendation. I will primarily focus on the Commission’s proposal for an objects clause in the new central bank act and in particular on one of the core functions of the central bank – monetary policy. What is the main objective of monetary policy, and what scope is available to monetary policy for pursuing other goals? Towards the end of my speech, I will also discuss the future organisation of the central bank and the Government Pension Fund Global (GPFG).

In the literature, this is referred to as hysteresis. Research indicates that the costs of a downturn may be far higher than the immediate output loss. 4/8  BIS central bankers' speeches  With a sufficiently flexible inflation targeting regime, it is possible to prevent a long-term reduction in employment following a sharp fall in the level of activity. At the same time, this means accepting that inflation will temporarily overshoot the target while labour market conditions normalise. The benefit is somewhat higher average employment than under less flexible inflation targeting. But if the policy rate is kept lower than the level necessary to stabilise inflation for a considerable period of time, there is a risk that inflation will accelerate. A monetary policy objective of achieving the highest possible level of employment can therefore come into conflict with the primary objective of “monetary stability”. If that were to happen, the Bank will give precedence to its primary objective – low and stable inflation. Delivering low and stable inflation is the best contribution monetary policy can make to favourable and stable developments in the economy over time. Financial stability considerations Monetary policy can also contribute to high and stable output and employment by giving weight to preventing a build-up of financial imbalances. Experience shows that the likelihood of a severe economic downturn increases when financial imbalances have built up. Economic downturns caused by financial crises tend to be both deeper and longer than other downturns.
We set the main scenario that the banks must use, and the banks were required to apply the stress test in the manner they deemed appropriate in assessing their capital adequacy. Supervisors used independent quantitative techniques both as a check on firm estimates and to assist in their evaluation of the firms’ tools and processes. We evaluated their efforts in terms of: 1) how the stress test is applied, 2) what this implies in terms of capital adequacy, and 3) their capital plans and requests to pay dividends and/or conduct share repurchase programs. Our evaluation of their capital planning processes and their requests to make capital disbursements was based mainly on three factors: 1) capital adequacy, 2) the quality of the capital planning process, and 3) the credibility of their plans to meet the Basel III capital requirements. Elements of a good planning process include: 1) description of risk appetite and capital targets, 2) robust internal controls, 3) incorporation of stress testing and stress-test results into the decision making process, 4) good governance with respect to the role of senior management and the board of directors, and 5) well-articulated capital distribution policies that describe how decisions are made relative to the expectations of future outcomes. Some outside observers ask why supervisors would ever want to use bank-run stress tests rather than supervisory stress tests. The answer is that they serve different purposes.

So what are the implications of the U.S. experience? The context and purpose of any stress test should dictate the form it takes. Both the SCAP and CCAR models likely have some lessons for other such exercises, but in circumstances of market stress, the SCAP model is more relevant than the CCAR model. In such episodes, our experience suggests:   First, the stress scenario needs to be severe to be credible.   Second, disclosure of the results is needed at a sufficiently granular level so that private analysts can make their own independent assessment.   Third, the results need to be credible in terms of expected losses.   Fourth, there needs to be a credible capital backstop so that market participants can be sure banks will be able to raise the capital that they need under a stress environment, one way or another. One tricky issue is how to treat sovereign debt exposures. This was not an issue in the U.S. SCAP exercise. This is difficult because there is a complex interaction between fiscal soundness and bank soundness, which is very hard to model. This illustrates a wider point – that all situations are importantly distinct and that while we can all learn from each others’ experiences in this field, there is no one-size-fits-all approach. BIS central bankers’ speeches  5  6  BIS central bankers’ speeches
8 The decision to restrict the issue of money in this way, despite the disadvantages, had, of course, to do with the strong temptation to issue too much money. 9 And, as we all know, this results in their value being undermined due to high inflation. There are many historical examples showing what happens when central government mismanages its assignment in this area. For example, we have the hyperinflation in Germany in the 1920s, which led to an economic collapse and political  See, for example, “Sveriges Riksbank and the history of central banking”. Edvinsson, Jacobson and Waldenström. 2018. Cambridge University Press. 7 It was also common for the metal content in the coins to be debased. See, for example, Schnabel, I. and Shin H. S. (2018) “Money and trust: lessons from the 1620s for money in the digital age”. BIS WP No 698. 8 See, for example, Eichengreen, B and Temin, P. (1997) ”The gold standard and the great depression”. NBER Working Paper 6060. 9 The fixed exchange rates maintained between 1944 and 1971 under the Bretton Woods system were also tied to the value of gold. It was not until after this that the convertibility to gold was abandoned and the US dollar became a fiat currency, which is to say a currency whose value is not linked to any external store of value. However, even after this, many currencies, including Sweden's, were tied to other currencies in fixed exchange rate arrangements. 6  3 [15]  instability.

I have given my views on the current monetary policy situation and described the principles that guide monetary policy. I have also mentioned some of the practical problems we face. When it comes to the current monetary policy situation, my assessment is that the picture we painted of inflation prospects in the February Inflation Report still holds true to a great extent, although it now looks as though energy prices may contribute to higher inflation in the short term. Monetary policy needs to become less expansionary. With regard to the monetary policy strategy, one important message has been that we do not always aim to bring inflation back on target as quickly as possible; we also give consideration to the real economy. We cannot rule out the possibility of situations arising where it may be necessary to set our sights further ahead than the time period normally used to guide monetary policy decisions. However, in this case we will make it clear in advance that we envisage such a development. Thank you! BIS Review 44/2006  5
This has to do with the fact that the development of the Swedish economy further ahead would be even worse if high inflation were allowed to become entrenched – we know this from experiences both in Sweden and in other countries. The question is not, therefore, whether inflation will return to the target, but how it will happen, and how the Swedish economy will develop during this process. It can be painful, but it can also be relatively smooth. 9 For a more detailed discussion, see Jansson (2020). 8 [15]  How well the Swedish economy in general develops depends on the interaction between different agents. This is an insight that I think has become somewhat neglected, and that was the reason for the speech I held a year ago on the division of roles between fiscal and monetary policy. But it is not just a question of the macroeconomic policy mix. It is about a broader interaction, involving many economic agents. Let me describe how inflation can be brought back to the target in a favourable scenario. In principle, it is the Riksbank’s current forecast that I am describing, but without numbers and in more general terms. The increases in the policy rate that the Riksbank has made, and expects to make, contribute to the fact that inflation will start to decline in 2023.

This is an important reason why inflation forecasts still some way into 2022 were that inflation would rapidly return to the target. 4 There are also examples of countries where inflation has risen a lot, even though monetary policy has not been as expansionary for as long as in Sweden. For example, Australia and New Zealand had policy rates of 1.5 and 1.75 per cent respectively in 2017, 2018 and part of 2019, before they were cut. They also began asset purchases relatively late, in November 2020 and at the end of March 2020 respectively. In the third quarter of 2022, inflation was 7.3 per cent in Australia and 7.2 per cent in New Zealand. 2 [15]  to an unexpectedly rapid increase in demand during the recovery after the pandemic. Various measures of underlying inflation, which capture such broader, trend movements, have risen sharply during the year. That price increases are broad-based is also underlined by the fact that they are visible in both goods prices and service prices (Figure 2). Inflation is therefore not transitory, in the sense that it falls back without monetary policy needing to react at all. Sometimes, one adds an argument based on the fact that when the Riksbank raises the interest rate, households’ interest costs increase. This in turn means that the demands for wage increases will be higher, which eventually will lead to an even greater increase in inflation.
Also, we estimate that indirect effects from a gas price shock are quite persistent, peaking after one year.9 Thus, even if gas prices have returned to levels close to those at the start of the war in Ukraine, the upward effects of gas prices on core inflation could still be significant in the short term. Moreover, the transmission of inflationary pressures reflects specific demand and supply-side factors linked to the pandemic and the lifting of mobility restrictions. For 4  See F Borrallo, F, L. Cuadro-Sáez, M. Pacce and I. Sánchez. (2023). “Consumer food prices: recent developments in the euro area and Spain”. Economic Bulletin - Banco de España, 2023/Q2, 01. 5  See Alonso I, L. López, D. Santabárbara and M. Suárez-Varela (2022) “The EU economies’ natural gas inventories in 2022 and 2023 under two hypothetical scenarios”. Box 2, “Quarterly report on the Spanish economy”, Economic Bulletin 4/2022, Banco de España. 6  See Costain J, A. Nakov and B. Petit (2022), “Flattening of the Phillips curve under state-dependent prices and wages”, Economic Journal 132 (642), pp. 546-581. 7  See González Mínguez, J., S. Hurtado, D. Leiva-León and A. Urtasun. (2023). “The spread of inflation from energy to other components”. Economic Bulletin - Banco de España, 2023/Q1, 02. 8  Borrallo, F., L. Cuadro -Sáez and J. J. Pérez (2022). “Rising food commodity prices and their pass-through to euro area consumer prices”, Analytical Articles, Economic Bulletin 3/2022, Banco de España. 9  López, L., S. Párraga and D. Santabárbara (2022).

In the local context, observing our own inclusion profile, the data indicate visible improvement over the years, yet significant gaps towards, for instance, the euro area as an anchor, are still visible. The percentage of adults holding an account rose (between 2011 and 2017) to 77%, but it is still well below the euro area average of 95%. The percentage of adults making online payments equals 20%, compared to 71% in the euro area, debit cardholders account for 53% of the adult population and 87% in the euro area. Hence, the need for convergence in financial inclusion, among others, by lifting the financial literacy and awareness is apparent. While globally there are visible strivings to enhance the “conventional” financial education, the rapid penetration of information technology in the overall spectrum of financial services does stress the urgent need for digital financial literacy as a critical dimension of the overall education. Digital Financial Services are acknowledged as an opportunity to deepen financial inclusion and expand access to financial system for previously underserved groups. There are several dimensions in this area, that all of us as stakeholders should be aware of in order to provide for an ecosystem with balanced opportunities and threats. The first dimension is the knowledge of digital financial products and services in the area of payments, asset management or alternative finance.
BIS Review 9/2010  9  Figure 7 Contribution to annual GDP growth (real annual change, percentage points)  16 12 8 4 0 -4 -8 -12 -16  16 12 8 4 0  -4 -8  -12 -16  97  98  99  00  01  02  03  04 05  06  07  08  Net exports (*)  Private consumption  Government consumption  Inventory variation  GFCF  GDP  09  (*) Goods and services exports minus goods and services imports. Source: Central Bank of Chile. Figure 8 Current inventories 70  4  60  2  50  0  40  -2  30  -4  20  -6  04  05  06  07  Manufacturing (1) Retail (1)  08  09  Inventories over GDP percentage (2)  (1) Figures above (below) 50 points indicate more (less) than desired. (2) Seasonally-adjusted quarterly series. Sources: Central Bank of Chile and Icare/Universidad Adolfo Ibáñez. 10  BIS Review 9/2010  Figure 9 Gross fixed capital formation (1) (quarterly change, percent) 15  15  10  10  5  5  0  0  -5  -5  -10  -10  -15  -15  00  01  02  03  04  05  06  07  08  09  Developed (2)  Asia excluding China and India  Commodity exporters (3)  Chile  (1) Seasonally-adjusted series.

As I have also said repeatedly, this is how the Central Bank of Chile contributes to the Chilean economy’s growth and stability. 6  BIS Review 9/2010  Figure 1 World growth (1) (annual change, percent) 15 12 9 6 3 0 -3 -6 -9 -12  15 12 9 6 3 0 -3 -6 -9 -12 80  84  88  92  96  00  04  World at market exchange rate  08  Chile (2)  (1) Gray area shows projections from 2009 onwards. (2) Growth for 2010 is the midpoint in the range of forecasts included in the Monetary Policy Report. Sources: Central Bank of Chile, International Monetary Fund and World Bank. Figure 2 Difference in growth in 2009 (*) (percent) 4 3 2 1 0 -1 -2 -3  Poland  Norway  Australia  Israel  Greece  Colombia  Chile  Brazil  Switzerland  Denmark  Korea  Canada  China  New Zealand  France  Belgium  Singapore  Netherlands  Spain  Sweden  United Kingdom  Thailand  Italy  United States  Germany  Japan  Finland  Turkey  -5  Hungary  -4  (*) Actual growth minus estimated growth. Growth estimate for 2009 based on change in the terms of trade, population, and per capita GDP. Sources: Central Bank of Chile, International Monetary Fund and World Bank.
  In Indonesia, the urgent need is to shift fiscal spending from costly food and fuel subsidies to infrastructure investment and human capital development. The newlyelected President Jokowi has just announced a “working cabinet” and a resolve to deliver on reforms.   In Singapore too, we are in the midst of economic restructuring – to reduce our dependence on labour inputs, move into higher value-added activities, and increase productivity as the basis for sustained and healthy wage growth. Structural reforms are often painful. They take time to bear fruit and entail significant adjustment costs in the interim. Growth may slow temporarily, as margins are squeezed and resources flow from declining activities to emerging ones. Restructuring is a process of creative destruction, and quite often the destruction of the old must take place before the creation of the new. But if reforms are delayed, or worse still reversed, in response to short-term pains, the long-term health of the economy suffers. Countries ranging from China to Singapore are facing this trade-off today, between the imperative to restructure the economy for more sustainable long-term growth and the need to minimise the transitory effects on short-term growth. Governments must get businesses and workers to understand these trade-offs, and work together to press on with restructuring while smoothening its rougher edges. But avoiding reform or restructuring is not a choice. Financial development and integration is an enabler for the broader structural reform effort underway in Emerging Asia.

Ravi Menon: Emerging Asia – restructuring for sustained growth Remarks by Mr Ravi Menon, Managing Director of the Monetary Authority of Singapore, at JP Morgan Singapore’s 50th Anniversary Dinner, Singapore, 31 October 2014. *  *  *  Mr Jamie Dimon, Chairman & CEO, JP Morgan Chase & Co Distinguished guests, ladies and gentlemen I am delighted to join you this evening to mark JP Morgan’s 50 years in Singapore. During these last 50 years, JPM Singapore has grown to become an important node in the bank’s global network.   It is the Asia hub for commodities and treasury services.   It is the hub for FX and private banking in South and Southeast Asia.   JPM Singapore entities together employ about 2,800 people. This is projected to increase to 3,500 over the next few years. JPM has had an even longer presence in Asia – close to a century.   JPM has thus had a front row seat witnessing Asia’s remarkable transformation and shift in the global economic centre of gravity to the region.   And it is now positioned to participate in the next exciting chapter of the Asian growth story. As we approach 2015, the economies of Emerging Asia are at an inflection point.   Externally, they have to deal with the normalisation of monetary policy and interest rates in the United States.   Domestically, they have to sustain growth and macro stability amidst ongoing structural reforms.