samchain/econo-pairs-v1 huggingface dataset:
As Mr. Aninat (Former Deputy Managing Director of IMF) said once, and I’ll quote his own words, “Historical experience shows that financial crises are here to stay; and dealing with unfolding crises in real time poses perhaps the most demanding and certainly the most stressful challenge to any central banker”3. As a result, it is widely accepted that financial stability is an important issue for policy makers that they basically cannot ignore. Furthermore, economic literature and experiences of countries also showed that in order to reach sustainable growth and sustainable increase in employment, the key components of the economy are, in addition to indispensable price stability, a sound financial system and a financially stable environment. Dear Guests, For the efficient allocation of resources in an economy, financial intermediation should also function efficiently so that firms can find sources to produce more. As we keep dwelling on the banking sector particularly, banks play a vital role in the economy, matching supply of capital with demand, so knowing how a downturn affects these institutions is important in understanding national economies’ dynamics4. Developments in financial markets have two important implications on the global economy and economic policies: Firstly, stronger a country’s fundamentals are, less vulnerable it is to distortions caused by intensive capital movements. Hence, the importance of macroeconomic stability and strong fundamentals. However, contrary to the general belief, turmoil in global markets in the 90’s also showed that macroeconomic stability in general or price stability in particular does not necessarily guarantee financial stability.

The resulting costs for economies in terms of fall in GDP have reached even double digits and had a significant impact on the welfare of societies, especially in developing countries, and again especially when banking crises coincided with currency crises. In addition to high incidence of “traditional” banking crises, the period also saw certain unusual episodes of financial distress with potentially damaging consequences for the real economy operating essentially through capital markets. This has been most evident in the United States, where non-banking intermediation has developed furthest2. Starting in the late 80’s, examples included the banking crises in Nordic countries, Japan, some Latin countries and East Asia. 1  Caprio G. and Klingebiel, D. (2003). Episodes of Systemic and Borderline Financial Crises. World Bank Database. 2  Borio and White. (February 2004). Whither Monetary and Financial Stability? The Implicaitons of Evolving Policy Regimes. BIS Working Papers. No. 147. BIS Review 38/2005  1  Along with excessive capital flows, economic research in recent years has identified a variety of market imperfections such as moral hazard and asymmetric information that, if widespread and significant, can threaten the smooth functioning of financial systems and lead to panic behavior, bank runs, asset price bubbles, excessive leverage, and inadequate risk management.
One angle of this issue is how the membership might impact the overall economy, and hence what challenges as policy makers we could face. The second angle is more specific, as the economic integration is the stepping – stone towards the monetary integration, and the adoption of the Euro as a single currency. Observing the first angle, one should probably try to draw conclusions from the experience of other peer economies that already went, through this process. Entering the EU, for these countries provided confidence anchor and significant reduction of their risk premiums. It enabled strong influx of capital, which underpinned their real and financial convergence. In some of these countries, the finance flows went to productive and tradable segments, making the economies more resilient to shocks and less vulnerable. But, in some of them the allocation of capital was less conducive to sustainable growth, it created excessive imbalances, high leverage and less room for policy makers. The occurrence of the global crisis was a “natural halt” and painful correction of this unsustainable economic matrices. At this juncture, with the global crisis behind us and all the lessons learned, I think as policy makers we are more knowledgeable to reap the benefits of the EU entrance more wisely, and to better deal with the challenges ahead. At this point I must say, that Macedonian economy is already well integrated both in terms of trade and finance with the EU.

It can also reduce the costs of financing, enabling easier access to finance and better opportunities for business decisions. The single currency and the participation in the monetary union provides the country with a backstop in case of financial difficulties and disabled access to international markets through the so-called European Stability Mechanism. Of course, adopting the single currency would mean giving up on the monetary policy independence, which is already limited given the exchange rate peg, and would not require major adjustments. This cost is lesser compared to the benefits that the single market and single currency would bring, under the assumptions that all the policies would be in place and prudent enough to secure sound fundaments and stability of the economy. To recap, the EU integration is a process, which will provide boost and will shape reforms in many areas, underpinning the process of real, social and institutional convergence of the country. It will also impact the monetary policy making, both before and after the final stage of complete monetary integration. The challenges for the central bank are of a multidimensional nature– macroeconomic, institutional, and operational. Steering the wheel properly would require strong institutional capacity and awareness of all the policy makers that smooth integration requires healthy economy, absence of imbalances and sound policies. Thank you. 2/2  BIS central bankers' speeches
Legal framework has been established to facilitate the activities of non-banking financial institutions. Last but not least, restrictions on nonresidents’ access to domestic financial markets have been reduced or removed. However, the factor of the greatest significance from the point of view of globalization of financial markets was the liberalization of capital flows. First and foremost, it consisted in the removal of restrictions that impaired free capital flow among countries, including in particular: 2 •  removal of restrictions related to FDI and trade in goods and services with non-residents,  •  transition of the developed countries to the floating exchange rate regimes, establishing of the euro area, and other supranational integration initiatives,  •  reduction of tax on cross-border transactions (Chart 8). In some countries, liberalization of capital flows and financial markets ensued from the implementation of stability programmes recommended by the World Bank and the International Monetary Fund. As a consequence, a group of countries named emerging markets have appeared on the world economic map. These countries play a vital role both in the global financial system and in the global economy. Chart 8  Customs tariff rates in the developing countries, applicable to Most-FavouredNations (MFN) 25 % 22.2 20  15  19.7 17.9 14.1 11.4 9.9  10  11  5  0 1980-1983 1984-1987 1988-1990 1991-1993 1994-1996 1997-1999 2000-2001 Source: UNCTAD. 2  Ariyoshi A. “Country Experiences with the Use and Liberalisation of Capital Controls”, International Monetary Fund 1999, p. 7.

BIS Review 60/2006  3  Chart 4  : Cross-border investments in shares, 1989-2002  USD trillion 30 25.9  25 21.3  20  16.8 13.5  15 10.5  10  0  11.9 11.2  9.7 8.0  5.1  5  18.7  15.0  2.4  2.1  5.7 10.9  3.0  1.5 0.6  1.4 1.0  2.1  1989  1992  1995  4.8  5.5  7.1  1997  1998  1999  2000  9.4  2001  7.5  2002  Purchase of domestic security by a foreign investor (CAGR - 16%) Purchase of foreign security on investors' local exchange (CAGR - 22%) CAGR ― Compounded Average Growth Rate. Source: McKinsey Global Institute.
Either the fixed exchange rate would hold firm and then investors in Swedish kronor would break even, or else the central bank would devaluate. An investor who, for instance, borrowed Swedish kronor and used them to buy dollars, would then, following a devaluation, have a debt in devaluated kronor and assets in dollars. The actual speculation is aimed at causing a devaluation that will lead to this type of profit. However, what encourages speculators to act in this way is an economy that is out of balance, e.g. with a large central government debt, poor public finances or poor competitiveness as a result of high costs. There is a long list of examples, where speculation has made it impossible to retain a fixed exchange rate. As I said, Sweden was forced to abandon its defence of the krona in 1992; the ERM co-operation within the EU with a narrow band for fluctuation broke down in August 1993; Mexico was affected in 1994-95, South East Asia in 1997, Russia in 1998, Brazil in 1999, Turkey in 2001 and Argentina this year. All of these crises have at least one thing in common: the countries concerned had a fixed exchange rate. There are both technical and economic reasons for the large deregulation that occurred in Sweden and other countries. For instance, the advent of the new technology -- IT, electronic money and new financial instruments -- made it more difficult to retain currency regulations and capital market regulations. The "leaks" became increasingly large.

This was the mechanism that made it impossible for us to keep the fixed exchange rate regime in 1992. At the time of the deregulation, Sweden had a history of high inflation and other imbalances. Doubts  BIS Review 9/2002  1  regarding the stability of the Swedish economy led to capital outflows, rising interest rates and a shrinking foreign currency reserve. Despite massive supporting purchases of the Swedish krona and a drastic defence involving a 500 per cent daily lending rate for banks borrowing from the Riksbank, the defence of the exchange rate failed. This meant that the general public had to live for a period with a 25 per cent interest rate for long-term mortgages! Lottery with a good chance of winning Financial capital is very transient, if not "restless". It is difficult to obtain good statistics on capital flows, but I have managed to find the following observations. Cross-border trade in shares and bonds in the USA more than doubled as a percentage of the US GDP between 1970 and 1993. During the same period, the corresponding volume rose from almost zero to 10 times GDP in the UK. A fixed exchange rate offers speculation at no risk, if there are signs that the currency is over-valued. This was the situation in Sweden in the early 1990s. The fixed exchange rate regimes signalled to speculators that the exchange rate could only weaken.
It must be noted that this occurs in the context of high inventory buildup towards the end of 2018 and the increased uncertainty surrounding the external scenario. In any case, the other part of investment—construction and other works—has remained dynamic and forward going forward signs are still positive. On one hand, related stock market data point to a favorable development. On the other, the large-scale investment projects that are currently in progress—especially in mining—do not register delays and have been unfolding according to plan. Along the same lines, the various surveys of investment projects have not seen any downward and continue to foresee larger amounts for 2019-2020, compared with the amounts invested in the period 2017-2018 (Figure 8). Turning to concessions, the authorities have announced a significant increase in them as from 2020, in particular in hospitals, roads and airports. Add to this the announced approval of a set of complementary works that will be executed in 2019 and 2020. The information of the Association of Engineering Consulting Firms (AIC) for the first quarter of 2019 shows that detail engineering—which covers projects scheduled for one or two years ahead—shows high annual growth rates. In terms of housing investment, although it began the year with a zero contribution to construction GDP, sales remain high and the outlook reflected in the May Business Perceptions Report is positive. In any case, the Monthly Entrepreneurs Confidence Index (IMCE) for the construction sector posted a decline most recently but is still higher tan its all-time average.

International experience shows that countries’ export growth is driven mainly by new firms – in existing product categories and to existing destinations – with a stronger capacity for growth than existing exporters. 7 As some authors have pointed out, taking advantage of this growth potential requires fostering factor mobility across firms of different productivity levels. This process generates a major portion of the gains from economic openness, such that policies that hinder workers crossing over to other firms or that raise the cost of adjusting the scale of production weaken capacity for innovation. 8 Finally, and in the same token, it is clear that the opportunities that China’s strong growth generates for the region must be well used. For this to take place, not only will greater saving be required, but also more productive investment. In other words, one significant challenge facing the economies of the region – and Chile in particular – is to take advantage of this momentary boom in the terms of trade by promoting saving and investment, thus making sure that it does not simply translate into an unsustainable spending spree. To that end, fiscal policy plays a key role by setting up well evaluated investment programs, while maintaining the incentives that promote the accumulation of scarce physical and human capital among private agents. Policies that distort these incentives inevitable end up lowering the rate of saving and investment.
Although there are no simple answers, it is in our collective interest to reduce the dependence of so many households and businesses on so few institutions that engage in so many risky activities. The case for a serious review of how the banking industry is structured and regulated is strong. By international standards UK banking is highly concentrated. There are four large UK banking groups. Of these four, two are largely in state ownership and their assets are a multiple of the assets of the next largest bank. As in the English Premier League, getting into the top four will not be easy for those outside it. But in both cases I hope greater competition will produce less rigidity in the composition of the top four. Whichever approach to the “too important to fail” problem is adopted, there is growing agreement that such financial institutions should, as I argued at the Mansion House in June, be made to plan for their own orderly wind down – to write their own will. I welcome that, but without separation of the utility from other components of banking it will be necessary to develop detailed resolution procedures for a very wide class of financial institutions. The options may turn out to be separation of activities, on the one hand, or ever increasingly detailed regulatory oversight, with the costs that that entails for innovation in, and the efficiency of, the financial system, on the other.

14/17  Regarding the Spanish economy, the latest forecasts of the Banco de España, published some days ago, indicate that, although GDP is expected to decelerate somewhat, it will continue growing above potential and the output gap will hence become progressively more positive. This is therefore the time to reduce some of the structural vulnerabilities of our economy, derived partly from high external and public sector debt, which limit the room for manoeuvre of fiscal policy and increase vulnerability to rising interest rates or risk premia. The financial cycle of the Spanish economy also seems to be gathering impetus, although according to our forecasts, some time will pass before it reaches the warning levels. Total credit to the non-financial private sector has begun to increase, albeit very slightly, and it continues to decrease as a proportion of GDP, albeit at a progressively slower pace. Only some specific portfolios, such as consumer lending, show high credit growth, so banks must tighten their credit standards in order to reduce the significant rise in NPLs being observed. 15/17  However, the largest credit portfolio continues to be mortgage loans. Therefore analysis of the real estate sector is crucial for financial stability. As I have noted on other occasions, this market is reawakening, with an increase in transactions and rising house prices which, even so, are still on our estimates at levels compatible with their fundamentals.
Spanish deposit institutions have been operating reasonably comfortably above the minimum capital ratio, although the sharp growth of activity has reduced the solvency ratio to below what has historically been the case in our banking system. This comfort margin provides some room for manoeuvre in the face of potential shocks, especially when regard is had to the quality of such capital and its regular generation. Growth in activity such as that hitherto described, against such a favourable macroeconomic and financial-market background, should not lead bank managers to feel complacent. On the contrary, the difficulties of sustaining the growth rate of activity, the foreseeable normalisation of favourable monetary and financial conditions and the recent increase in volatility on international financial markets against a backdrop of historically low risk premia requires watchfulness and reflectiveness concerning the business strategy in different environments. The analysis of adverse scenarios is a vital tool in situations of rapid and far-reaching change, so that responsiveness to combinations of adverse shocks may be determined; though such shocks are not the foreseeable central scenario, they should be part of any financial institution’s risk analysis. From the regulatory standpoint, 2005 was also an intense year. Throughout 2005 credit institutions successfully applied the new accounting Circular, working on their adaptation to the New Capital Accord. These implementation efforts were not confined to 2005, but must continue over the coming years, with a follow-up on the most novel aspects of the new accounting rules, especially in respect of capital, transparency and management accountability.

The current account deficit can now be financed through foreign direct investments (FDI) and long-term capital inflows. The FDI inflows were in excess of USD 20 billion in each of the last two years, putting Turkey among the top 5 developing countries in FDI inflows. Fourth, Turkey is one of the few countries with a “convergence story”. Negotiations with the European Union over the full membership status provide a major stimulus to policy makers to put Turkey’s huge potential into life and complete the reform agenda. This agenda consists of next generation policies and reforms that focus on removing structural bottlenecks and improving the economy’s capacity for labor absorption, innovation, and competitiveness. Dear Guests, Turkey has had a heavy structural reform agenda since 2001. However, continuation of structural reforms is of vital importance for the sustainability of economic gains achieved in recent years and for the resilience of the economy to further shocks in the future. The most important structural reform in the pipeline is the social security reform that is expected to significantly improve Turkey’s fiscal balances in the medium and long term. It is also expected to contribute to our domestic savings rate.
The lags between a change in interest rates and its effects on output, demand and, ultimately, inflation mean that rough weather and occasional storms in the world economy are likely to blow us off course, at least for a time. A true test of the MPC is not whether it hits the target when the sea is calm, but how it reacts to the storms, or economic shocks, that will inevitably arise. The most immediate challenge for the MPC is that, although inflation may fall below the target over the next year, before long the inflation prospect further ahead will depend more on domestic inflationary pressures than it has over the past year or so, when external factors made a major contribution in holding down retail price inflation. Lags mean that the MPC needs to look ahead. The test of the MPC will be how it responds to the inflation prospect. Even in the absence of unexpected shocks there are major uncertainties. Trying to understand changes in the way the economy behaves is a crucial part of the MPC’s work. In recent years we have seen a combination of lower inflation, lower earnings growth and faster output growth than previous relationships would have led us to expect. The reasons for this benign combination of growth with low inflation are not easy to diagnose. Some have talked about a new era or a “new paradigm”, in which productivity growth has permanently risen. We should be cautious about those who speak of new paradigms.

As has happened under different circumstances, any movements of the exchange rate away from the trend assumed as a working assumption is possible in a floating regime, and its potential effects on the financial system, output or employment will be considered by the Board as inputs for their future decisions. Summarizing, for the rest of this year, annual CPI inflation is expected to return to figures around 3% to then move to the upper limit of the tolerance range for some months. This short-term trajectory is influenced by one-time effects, which will eventually revert, permitting inflation to hover around 3% throughout 2011 and to the end of the relevant projection horizon, this time the third quarter of 2012. Y-o-y CPIX1 inflation will describe a more gradual convergence to 3%, largely because the shorter-term effects on inflation are concentrated in items outside the CPIX1. Private expectations are not very different from this (figure 10). The Board estimates that it will continue withdrawing the monetary stimulus at a pace that will depend on how domestic and external macroeconomic conditions unfold. This process of MPR normalization was begun in June and continued in the meetings of July and August – with increases of 50 basis points each time – taking the MPR to 2% y-o-y. Going forward, the market has internalized a process of withdrawal of the monetary stimulus in the coming quarters. This is consistent with the progressive normalization of credit conditions, which is visible in various markets and indicators.