samchain/econo-pairs-v1 huggingface dataset:
Since then, the Fed has been able to accommodate ongoing deregulation and respond to shocks in the financial sector by focusing on adjustments in the federal funds rate. More recently, the challenges for the Fed have been on the real side of the economy - and here I’m referring especially to a technology shock. While a technology shock that boosts productivity is a wonderful thing, it also has created uncertainty about the proper course for policy. As I understand it, productivity growth rates have not yet begun to accelerate in Europe. However, it would seem to be only a matter of time before the ECB will face the challenge of responding to a comparable technology shock. In any event, I’d say that our recent experience makes a good case study in conducting monetary policy in the face of great uncertainty - an issue of importance to any central bank. Let me start with a brief look at the history of our experience with financial change. In the late 1970s, the buildup of US inflation pushed nominal interest rates up against the legal interest rate ceilings on most bank deposits. As a result, the market began to circumvent the ceilings by creating new instruments, and pressure began to mount to remove them altogether. In 1980, the Monetary Control Act did just that by phasing out the ceilings. Importantly for monetary policy, the act also permitted banks to pay interest on some checking accounts.

The usual disclaimer applies: my opinions are not necessarily shared by the Czech National Bank, but I do not care too much, as I am very much a part of the group which formulates the bank’s positions anyway, so I do not want to distance myself from myself. I just want to say that all the blame for what I say is on me. Our topic is life outside the euro, and as you can see I am alive and well. After what I heard yesterday about the countries in the Eurozone, I am even happier than before that we are not in this particular club at the moment. I heard many comments on de-industrialisation in the Eurozone. Well, this is not our case. With industrial production accounting for much more than 30% of our GDP, the Czech Republic has the highest proportion of industrial production on output in the whole of the EU. And this share has actually been rising rather than falling over the last 10 years or so. This is manifested in the fact that the Czech Republic is the second biggest producer of cars per head in the world. Moreover, the Czech Republic and Slovakia (the Eurozone country) – which formed a single state until 1993 – are together by far the biggest car-producing countries in the world in per capita terms. With 150 cars produced per every 1,000 citizens these two countries are well ahead of South Korea and Germany combined in per head metrics.
These markets are characterized by what economists call a horizontal long-run housing supply curve. Chart 4 shows the ratio of house prices to estimated replacement costs over time for the four sand cities of Las Vegas, Vallejo, Phoenix and Miami. 4 In all four cities, prices relative to estimated replacement costs largely stayed in a tight range between 0.8 and 1.2 over the 1980s and 1990s. However, by 2002 to 2003, house prices broke out of this range and reached values well in excess of 200 percent of the replacement cost in Vallejo and Miami, and 180 percent of replacement costs in Las Vegas and Phoenix. When the bubble burst in these markets, house prices were likely to drop by a large magnitude. Two factors were important in creating uncertainty over which assets were going to suffer losses given a burst of the housing bubble. The first is that not all housing markets experienced a boom. Chart 5 shows the ratio of house prices to replacement costs for Dallas and Chicago. This ratio never broke above 1.2 for Dallas, and peaked at 1.4 for Chicago. An implication is that the default risk on a mortgage (as well as the loss given default) depended not just on the risk profile of the borrower, but also on the specific location of the property. The second factor contributing to the uncertainty over the value of mortgage securities was the lack of transparency in their design.

Securitization markets developed where loans could be funded through the market by investors. In addition, money market mutual funds, securities lenders, institutional investors and businesses needed a safe way to deposit funds where they would earn interest but retain ready access to their funds. Repurchase agreements or “repos” developed to serve this need. A repo is a short-term collateralized loan that shares many characteristics with a demand deposit except that repos are not guaranteed. At the same time, large firms increasingly raised funds by issuing commercial paper in the market rather than relying on bank loans – with the money market mutual funds being large investors in this paper. Large banks, as well, came to rely at the margin on non-deposit funding through the interbank funding market. The Fed acted as the lender of last resort for this market. This system of market-based credit intermediation has been called the “shadow banking system”. The shadow banking system grew at a very fast rate over the past several decades. Chart 1 shows that by 1990, mortgage originations in the shadow banking system equaled originations in the banking system, and grew to more than double the level in the banking system by 2008. Chart 2 highlights the growth in securitization across many different asset categories besides residential mortgages, such as commercial real estate loans, auto loans, credit card loans and student loans.
Other (operational and amortization) expenditures are almost at the same level with that of the previous year. BIS Review 80/2007  13  Finally, the almost full compensation between increase of incomes and expenditures makes the net profit of the Bank of Albania for 2006 be in the same level with that of the previous year, at about ALL 5.16 billion (or 99.6 percent of the profit for 2005). Honourable deputies, Concluding my speech, I would like to underscore that during 2006 the Bank of Albania included in its agenda all the recommendations given by the Albanian Parliament in its resolution adopted on 25 May, 2006. I would also like to assure you that even in 2007, the same philosophy will characterise our work. Understanding correctly the role and mission of our institution, on behalf of the Supervisory Council of the Bank of Albania, I declare that the Bank of Albania will continue to be an accountable institution, deeply committed to fulfil its obligations vested by the Law and the Constitution. We have many priorities for 2007, but let me highlight the most important ones: •  Maintaining consumer price stability remains the main legal target of the Bank of Albania. We are confident that the decisions taken in 2006 were appropriate and have served to orient inflationary expectations to the targeted range. Based on our forward-looking philosophy, we will prudentially evaluate all the risk factors, so that we operate on due time and intensity.

The continued international price pressure, combined with an expected appreciation in the krona mean that import price increases will remain low throughout the forecast period. The high productivity growth will also contribute to keeping down companies’ labour costs and thereby inflation (Figure 13). However, these inflation-dampening forces are thus expected to lose strength further ahead. All in all, one can say that we see a favourable and not overly dramatic development of the economy before us. Essentially we see an economy where the wheels are turning at a good pace and things are generally going well. It is natural in such an economy for monetary policy to become less expansionary to ensure the good development continues for a long period. It is difficult to say how quickly the interest rate increases should be made. The inflation forecast we publish today shows that inflation is expected to be slightly below target two years ahead. This is partly due to the fact that energy prices are expected to fall slightly and thereby hold down inflation. When the restraining effect of the energy prices abates, inflation will rise. At the same time, the economy is expected to develop strongly during the forecast period. To ensure that inflation is close to the target and to contribute to a balanced development of the real economy, we decided yesterday to raise the repo rate by 0.25 percentage points. It may in conclusion be worth emphasising that forecasts are always uncertain and that many things may occur to change this picture.
The academic literature has identified that one of the main problems posed by public investment as a mechanism for providing cyclical momentum is the delay in its implementation, which is greater in the case of large projects. Although this may be of less importance in the long term, it is fundamental in the short term if the fund is to contribute to economic recovery (that is, to closing the output gap caused by the pandemic). Thirdly, the macroeconomic impact of the funds received (that is, the fiscal multiplier, which measures how much economic activity is generated by each euro spent) will also depend both on the overall economic situation and on the nature of the projects approved. Both the theoretical models and the empirical evidence available indicate that public investment expenditure has a larger and more enduring impact on activity than that of spending in other areas, such as government consumption or transfers to households.8 This is so, inter alia, because, in addition to increasing demand for goods in the short term (as occurs in other cases), public investment also helps to expand the economy's productive capital stock and, therefore, to support medium and long-term growth.9 In any event, the timing of the impact of public investment on activity hinges on the nature of the projects receiving the investment. For instance, although the effects of R&D expenditure are higher in the future, they may take longer to materialise than with other public investment projects.

It would be in no one’s interests for the experience of the Covid-19 crisis and responsiveness of business interruption cover to reduce consumer confidence in the value provided by insurance for financial protection. In the life insurance sector there is an opportunity for firms to leverage their position as long-term investors in a wide range of assets and productive investment, to support our economic recovery but this must not come at the expense of policyholder protection and the provision of secure retirement income. We would expect to preserve the current, adequate level of capital in the sector whilst seeking to reduce complexity and frictional costs within the regime. A financially resilient, competitive and productive insurance sector not only ensures that individual policyholders are protected, but signals an industry that is able to support the recovery of the wider economy whilst maintaining high prudential standards. 7  All speeches are available online at www.bankofengland.co.uk/news/speeches and @BoE_PressOffice  7
This could bring down the number of fraudulent transactions, and markedly reduce the merchant discount fees for credit card payments. The second one is the blockchain technology which we are working closely with the financial industry to apply them to various banking applications. ‘Thailand Blockchain Community Initiative’ was officially announced at the Bangkok FinTech Fair in March of this year. This initiative is a collaboration between 14 Thai banks and 7 leading businesses and state-owned enterprises to utilize blockchain technology in financial services, starting with a pilot project to offer blockchain-based letters of guarantee. This project is expected to become operational in the second half of this year. On a longer horizon, the blockchain technology is also planned to be applied to supply chain finance to improve authentication efficiency which would facilitate real sector activities. Other blockchain related projects in the pipeline include scriptless bond issuance which would significantly speed up saving bond allocation to retail investors from 15 days to 2 days, as well as granting more flexibility for bond issuers. The proof-of-concept of this project is almost complete, and production is expected to begin in the very near future. Another project in the pipeline is the “Project Inthanon” in which the Bank of Thailand and banks will co-develop a new way of conducting interbank settlement using wholesale central bank digital currency or CBDCs. Like other central banks, our goal is not to immediately bring CBDC into use, but rather to explore its potential and implications for back office operations.

Another important issue to be discussed is how the effects of commodity prices on inflation, economic activity and exchange rates differ with respect to different monetary policy regimes. Another important issue is the interaction among different economic policies vis-a-vis the commodity price fluctuations. Distinguished guests, Studies included in the program will substantially contribute to the understanding of the commodity price dynamics and the policy responses against the macroeconomic effects of these dynamics. In this context, I would like to thank the organization committee for their efforts for this conference program which gathers very interesting and enlightening studies. I also believe that the conference will provide a platform which will be highly beneficial for the exchange of views among participants. Thank you very much in advance to all participants for their contribution. Now, I would like to give the floor to Pierre-Olivier Gourinchas, professor of economics at California University-Berkeley and the chief editor of the IMF Economic Review journal to open the first session. 2  BIS central bankers’ speeches
Other features of our expansionary phase were, however, more specific. In Spain, productive factors and financial resources were overly concentrated in the real estate sector. Further, some of the structural constraints of our economy, such as productivity and the functioning of the labour market, did not show sufficient improvement. Another singular factor has been the position of relative strength from which the Spanish financial system has faced the crisis. Spanish banks continued to pursue a “traditional” business model during the entire upturn, focusing on retail financial intermediation. This is certainly the main reason why, as is widely known, the role of Spanish intermediaries in the generation, acquisition and financing of toxic assets has proven negligible. As the system’s supervisor, the Banco de España also contributed to entrenching this relative strength, through a policy that focused on the cyclical pattern of building up provisions and on the rigorous definition of the scope of consolidation of financial groups. The Spanish financial system was thus able to ride the first wave of the crisis – the nature and origin of which, let me remind you, were strictly financial – and readapted its sources of funding to the new market situation. Loan securitisation therefore left centre stage to deposits, short-term commercial paper issues and bank resort to the new abundant liquidity provision policy implemented by the ECB for the whole of the Eurosystem.

However, as from last  BIS Review79/2009  7  autumn a second wave of shocks was unleashed, resulting in a real global crisis which, naturally, is impacting Spanish banks. The Spanish economy’s entry into recession has consequences for banking and bad debts. In particular, such repercussions include those arising from the high sensitivity of employment – and, therefore, of households’ ability to pay – to the deterioration in activity, and those from the adjustment of the real estate sector, the relative weight of which in bank balance sheets had become significant. The deterioration in the economic situation reduces the demand for credit of bank customers, whose spending plans and income expectations are normally revised downwards during economic downturns. Likewise, banks become more cautious about granting loans as a result of the subsequent upward revision of the risk profile of borrowers. In combination, these two factors translate, as we have actually seen, into a substantial slowdown in bank credit. Based on the past cyclical behaviour of this variable, the growth rate of bank credit will tend to stand below that of GDP. This cyclical component of credit is currently being reinforced by the difficulties still besetting wholesale funding markets and by the need both in Spain and in the rest of the international financial system to redress the high levels of leverage attained in the past. The behaviour of banks’ bad debts also follows certain cyclical patterns.
In respect of acceptable Shariah interpretation and practices, the MIFC will adopt a policy of mutual recognition and accommodate the various juristic reasoning based on contemporary analysis and logical inference so long as it is approved by recognised Shariah advisers. Harmonisation and knowledge sharing in Shariah is expected to be further enhanced with the on-going Shariah dialogues for the regional and international Shariah communities that are held annually in Malaysia. The gathering of so many practitioners here for these two days to discuss the wide ranging matters that concern issuers and investors will contribute to developing our collective understanding of these issues and expand the boundaries of our knowledge. In closing, I wish to say that the motivation for advancing our mission to position Malaysia to become increasingly more integrated with the international financial system is to contribute towards facilitating greater cross border flows in terms of increased intra-regional trade and investment transactions. With the strengthening of intra-regional trade and investment flows, the greater regional economic and financial inter-linkages would contribute towards raising the prospects for more balanced global growth and greater shared prosperity. On this note, I wish you a successful forum. Thank you. BIS Review 74/2006  5

References International Monetary Fund, "The Managing Director’s Report on Implementing the Fund’s MediumTerm Strategy", April 2006, Washington DC, available at http://www.imf.org/external/np/pp/eng/2006/040506.pdf Mervyn King, "Reform of the International Monetary Fund", speech at the Indian Council for Research on International Economic Relations in New Delhi, India, February 2006, available at http://www.bankofengland.co.uk/publications/speeches/2006/speech267.pdf Independent Evaluation Office of the IMF, "An Evaluation of the IMF's Multilateral Surveillance", February 2006, Washington DC, available at http://www.imf.org/external/np/ieo/2006/ms/eng/pdf/report.pdf International Monetary Fund, “World Economic Outlook”, September 2006 and others, available at http://www.imf.org/external/pubs/ft/weo/2006/02/index.htm  8  BIS Review 103/2006
It is also wise and sound judgment for a country to return to a sustainable fiscal situation in the medium term. There is a semantic issue here. What you call austerity plans I call plans for a progressive return to a sound fiscal situation. In any case these wise policies are favourable to growth since they increase the confidence of households, businesses and investors. Today this confidence is – as I have said – essential for the recovery. The OECD has just raised its growth estimates for 2010 and 2011. Do you share this view? At the global level we are seeing very robust growth among the emerging economies. This is true of China and Asia in general, but also of Latin America, in particular Brazil and Mexico. Africa is also performing better than expected. All these emerging economies are driving global growth. Within the euro area, some recent data suggest a phenomenon of a recovery in growth in the second quarter of 2010 that is slightly higher than expected. But we must remain very cautious. Our future growth is nowhere set in stone. It depends on all of us and on our ability to strengthen confidence as quickly as possible. When the ECB decided on 9 May to purchase government bonds that had found no takers in the market – a decision criticised notably by the President of the Deutsche Bundesbank – did it endanger its independence? Does it run the risk of becoming a kind of “bad bank”?

Emerging economies are now sufficiently large for growth in their economies to provide impetus to production in other regions. The question has been raised, why didn’t we – the economists – see the crisis coming? As long as the credit system has existed, crises have struck with irregular intervals. Still, we must strive to keep the intervals as large as possible. A poorly regulated financial sector is partly to blame for this crisis as for many others. In many countries, the capital requirements were reduced year by year before the crisis, to very low levels. The quality was gradually impaired. Many banks issued large quantities of hybrid capital, but the investors were not ready to bear losses. BIS central bankers’ speeches  1  In addition to low capital requirements, few countries had any macroprudential policies to speak of. Spain was an important exception. To avoid the next crisis, or at least dampen the effect, better banking regulation is necessary. First, the financial crisis revealed that banks held insufficient capital, excessive short-term market funding and inadequate liquidity buffers. The new Basel III framework sets out stricter requirements. Higher and better-quality capital will increase banks’ resilience to pronounced fluctuations in the economy without their having to tighten lending abruptly. The new rules aim to moderate growth in banking in periods of expansion. Second, the new framework includes macroprudential tools that can be applied as necessary. Banks may be subject to additional capital requirements if credit growth in the wider economy is excessive.
This cooperation has fostered our relations with foreign supervisory authorities and international institutions. Staff capacity building and development in this area was another priority of the project. Our institution should take relevant measures to increase their skills for preventing or handling deficiencies or threats to financial system stability. In terms of statistics, this cooperation has led to a thorough review of the existing regulatory framework to completely fulfil ECB standards on compilation and dissemination of monetary and financial statistics. The review aimed to identify items of noncompliance with EU standards and to subsequently draft a solid agenda for comprehensively reviewing our  BIS central bankers’ speeches  1  methodology and infrastructure to compile the Balance of Payments in accordance with EU standards. Payment systems constitute another priority of our work under this project. In this area, our practices further improved, aiming at approximating them to the ESCB practices on payment systems. Also, pertinent legal acts and their compliance with the EU regulatory framework were reviewed. Cooperation on interbank money market consisted in analysing the experience of other central banks in handling market obstacles and difficulties in relation to the regulatory framework. Other useful aspects for adapting, including identification of necessary actions to be taken by our institution in the interbank money market were also addressed. Coordination of the EU integration process is another major area that was broadly addressed by this project.

This is an important step that would provide additional room for the country’s rapid convergence and for Bank of Albania’s rapid and irreversible development in line with the models of its European counterparties. 2  BIS central bankers’ speeches