samchain/econo-pairs-v1 huggingface dataset:
The Grossman-Stiglitz paradox prompted an adjustment of the efficient market hypothesis. In the modified version, financial  9  See for example the Bank of England’s dividend discount model, where the risk premium is calculated as a residual, as used in Quarterly Bulletin Q3 2010. 10  Report no 24 to the Storting (2006–2007): On the management of the Government Pension Fund in 2006. The Ministry’s estimate is based on a risk premium of 2 per cent for equities. 11  William F. Sharpe (1991): “The arithmetic of active management”, Financial Analysts Journal, 47, pp. 7–9. 12  Sanford Grossman and Joseph Stiglitz (1980): ”On the Impossibility of Informationally Efficient Markets”, American Economic Review, 70, pp. 393–408. BIS Review 145/2010  5  markets reach near-efficiency most of the time, but active management is necessary to eliminate mispricing and increase market efficiency 13 . When panic seized the markets in autumn 2008, prices simultaneously fell for many types of securities that had previously shown a low degree of correlation. It came as a surprise that there was a strong positive correlation between for example Japanese inflation-linked government bonds, bonds issued by international institutions such as the European Investment Bank, covered bonds issued by European banks and US mortgage-backed bonds. An investor such as the Fund can survive a liquidity squeeze for a period. We were prepared to maintain positions in fixed-income securities to maturity and the vast majority of borrowers appear to be honouring their debt obligations.

The substantial decreases in “credit to the Treasury” item and overall net domestic assets, and the large increase in the Central Bank’s net foreign assets, are the result of these policies. Here, of course, we should take account of the damage done by the Russian crises. The capital outflows connected with these crises caused net foreign assets to decrease, which in turn produced an increase in domestic assets. Even so, the source of the latter increase was not the increase in public sector credits but mainly the increase in Central Bank funding to the banks. Another aspect of the Central Bank’s monetary program is related to exchange rate policy. The proposal to conduct exchange rate policy in accordance with the inflation target has important 1  BIS Review 109/1999  implications for expectations. First of all, it signalled to the market that the Central Bank endorsed the government’s inflation target. Since the public can monitor the exchange rates daily, exchange rate policy becomes an important tool for moving the public’s inflation expectations towards the government’s inflation target. Of course the continued success of this policy requires the authorities to set a realistic inflation target, which is to say an inflation target consistent with the public sector’s proposed budget balance. Besides influencing inflation and inflationary expectations, exchange rate policy directly affects the external sector. A stable real exchange rate policy puts the Central Bank in a neutral position in this respect.
While the nominal GDP has climbed up at a faster pace around 12 percent per annum despite the slowdown in global economies. 4. The fruits of our labors from past continuous development of the GMS have grown gracefully. The result of a more opened and transformed economy has led to a more interconnection that allows the GMS countries to realize what used to be the farreaching prosperities. Our people can now commute across GMS’s countries on the road network of over nine hundred thousand kilometers, 22 times of the equator’s length. 5. However, it has been quite often said “what get you here won’t get you there”. Despite a bright future for the GMS, there are still clouds on the horizon. To weather through existing and imminent challenges from external turbulences as well as domestic structural bottlenecks, the GMS cannot stand still, but should keep upgrading itself in order to continue to make progress on its economic transformation and achieve sustainable growth in the long term. 6. At this juncture, let me first walk you through “the three critical elements” that I deem essential in laying a strong foundation for the GMS on their journey of transformation. 7. First, we may already be aware that while regional integration brings about promising growth, it also entails greater external vulnerability which could dilute the effectiveness of the individual country’s economic toolsets.

Firstly, in order to unlock the long-run potential growth, well-established infrastructure will be one of the crucial pillars that will sow a seed of a healthy investment climate conducive for growth. Such that, infrastructure upgrade requires time, yet necessary. Investment in logistic areas including increasing road density, better railway system, modernized airports and seaports will all lead to the enhancement of both production and distribution processes whereby strengthening connectivity among members. Preeminently, concrete long-term plans on infrastructure projects are vital in order to attract large pool of regional savings to meet investment needs. A set-up of Asian Infrastructure Investment Bank or AIIB comes at a right juncture to raise potential for infrastructure financing for the whole region. Also, governments’ clear focus on infrastructure upgrading will facilitate the growing cross-border trading activities. I am glad to see the continued cooperation between Thailand and other GMS members in linking our rail networks and roads in order to foster trade and investment interconnectedness among us. 12. Secondly, despite physical infrastructures in place, lack of innovative ideas to leverage on existing knowledge and technology could undermine the potential of the region. With this bottleneck, the economies may face limitation in sustaining their competitive advantage, which currently rely heavily on the exploitation of natural  2  BIS central bankers’ speeches  endowments and support from the government.
At recent auctions, both yields were still negative. It is interesting to note that these liquidity operations may have affected more than just current and expected short-term rates. After the SNB’s 17 August announcement, the rates of two-year Swiss government bonds briefly moved below zero, and the yields of longer-term Swiss government bonds also decreased significantly. While the yields on other long-term government bonds which are generally considered safe also followed similar patterns, it is nevertheless striking to observe in chart 5 that in the wake of the SNB’s liquidity measures in August, ten-year Swiss government bond yields experienced their largest declines since 1995. The interest rate and liquidity measures taken by the SNB in August naturally preceded and prepared for the introduction of the minimum exchange rate, in case it proved necessary. The SNB will continue to keep liquidity at exceptionally high levels, but has decided not to set a specific target level for sight deposits at present. Management of the foreign exchange reserves In the context of the minimum exchange rate, there has been renewed interest in the management of our FX reserves. Let me repeat here that our investments are subject to the primacy of monetary policy and implemented according to three criteria, namely, in order of priority: security, liquidity and returns. The SNB has to bear the risk associated with exchange rate fluctuations, as any hedge would be equivalent to buying Swiss francs against foreign currencies.

Markets for Treasury securities and agency mortgage-backed securities, which are normally highly liquid and form the bedrock of our financial system, nearly buckled under the strain of massive flows of funds in response to the pandemic.3 It’s easy to think of financial markets as somewhat divorced from the real economy—most people will never need to worry about a spike in the repo rate or liquidity in the Treasury market. But the reality is that like the events of 1907—and more recently 2008—turmoil in financial markets can have a devastating impact on the wider economy. If credit isn’t flowing, people can’t finance the purchase of a home, businesses can’t invest, and nonprofit organizations and municipalities can’t keep essential services going. This is why safeguarding the functioning of financial markets is essential for the health of the broader economy. In response to the extraordinary volatility caused by the pandemic, the Fed greatly expanded its repo operations and began purchasing sizable quantities of U.S. Treasury securities and agency mortgage-backed securities. These actions to provide massive liquidity have proven successful. They restored market functioning and averted what could have been a much more severe pullback from markets and the flow of credit to households and businesses.4  Deploying Our Tools In addition to the repo operations and asset purchases, we have established a number of programs to support the flow of credit to households, businesses, and state and local governments.5 I won’t go into detail about all of the facilities, but I will emphasize two important points.
Somewhat startlingly, of the 219 insurers established between 1843-1870, 170 were discontinued by 1870 13 – so over three out of every four new companies failed. 10  Ibid. 11  Alborn (2009). 12  Ibid. 13  Borscheid and Hauter (2012). BIS central bankers’ speeches  5  In 1869, the Albert Life Assurance Company failed, in part due to an over-ambitious takeover strategy 14 but also to having racked up excessive expenses, inadequate premia and an unexpectedly high surrender rate. Despite a suspicion that the Albert had been insolvent for several years, the company only failed when it ran out of liquid assets to pay current claims – thus revealing the limited oversight of insurers more generally and, in this case, the lack of legal means available to prevent the company from trading any earlier. The Albert is therefore often cited as the catalyst 15 for a piece of legislation passed the following year – the Life Assurance Companies Act 1870 – which attempted to address such problems and establish a scheme of regulation specifically tailored to insurers. This in part reflected the view of the insurance industry by Parliament – described by the Select Committee of 1853 as “those useful institutions” – as playing an important role in the economy. It is noteworthy that even back in the 19th century, many were outraged by the introduction of the Act which to them represented ‘the mephitic influence of red-tape regulations’ 16 – a sentiment that has surely been uttered in more recent times too.

The subsequent market movements as investors withdrew funds from EME investments were an abrupt shock for EMEs generally, especially after the long earlier period of abundant liquidity and ample inflows. From one perspective, the unconventional nature of recent U.S. monetary policy adds little that is fundamentally new to the challenges now facing EMEs. These policies simply represent a way of easing, driven by our coming up against the zero lower bound. Central bankers have managed differences across countries in cyclical positions and policy stances many times in the past. But, from another perspective, we have less experience operating with unconventional monetary policy and this creates more potential uncertainties. This puts a premium on continued dialogue among central bankers, between central bankers and the market, and keen listening skills on our part. In my view, the fact that our large scale asset purchase programs affect the size of term risk premia globally is important. This set of monetary policies affects financial asset prices in a different way compared to changes in short-term interest rates, and we should be humble about what we claim about understanding the importance of this distinction. For the period ahead, it seems likely that markets will remain focused on vulnerabilities they might have ignored a year ago. The greater premium on strong fundamentals, policy coherence and predictability will likely remain. There will be no one right answer in managing the trade-offs that come with the changed environment, and adjustment will sometimes be difficult. Moreover, we will undoubtedly experience further bumps in the road.
(ii)  The BoZ took a step towards regulating microfinance institutions (MFIs) in 2006 because these institutions can help in narrowing the access gap in the delivery of financial services. So far, 21 MFIs have been licensed but most of these operate along the line of rail providing mainly salary-backed loans. More institutions are still needed to increase outreach and deliver financial services in a safe, sound and sustainable manner;  (iii)  Zambia is predominantly an agricultural country, but lending to agriculture has been limited. The challenge therefore is to devise financial products that meet the requirements of the rural and predominantly agricultural areas while at the same time devising means of protecting the financial institutions from risks associated with agricultural lending. 8. Allow me to conclude my remarks by highlighting the need for banks and non-bank financial institutions to consider their customers and potential customers when determining the pricing of their products and services. The public continues to decry the high level of charges and interest rates for banking services and products. 9. The BoZ has previously and will continue to appeal to the financial sector to review their charges and to explore ways of enhancing efficiency in service delivery. 10. The majority of Zambians cannot afford the current banking charges and are effectively shut out of the financial system. More affordable banking services will draw in a larger number of Zambians to the financial system, which will in turn be beneficial to the development of the banking system and the economy at large.

3 Sometimes it can be much higher than 2 percent. Presumably, this was the case during the late 1990s as rapid technological change lifted productivity growth. Sometimes it can be well below 2 percent. For example, when credit availability dried up during the financial crisis in late 2008, this drove down the equilibrium real rate far below 2 percent. More recently, the slow growth rate of the economy and the low rate of inflation are evidence that the equilibrium real short-term rate today is well below the 2 percent rate assumed in the Taylor Rule. If 2 percent really was consistent with a neutral monetary policy, then the very low real rates of recent years – buttressed by our large-scale asset purchases – should have been extraordinarily accommodative. As a result, we should have grown much faster than the 2½ percent pace evident over the past couple of years and seen an inflation rate much higher than what we experienced. This conclusion is supported by a number of more formal models. For example, the Laubach-Williams model currently estimates that the equilibrium real short-term rate is around zero percent. 4 Third, the Taylor Rule – and more broadly, any prescriptive rule for the systematic quantitative adjustment of the policy rate to changes in intermediate policy inputs such as real GDP or inflation – is incomplete because it does not fully account for factors that are crucial to how monetary policy impulses are transmitted to the real economy.
External events, the dynamics in industry and in particular economic policy can change the potential growth rate of the economy. In other words, it is possible to both raise and lower the speed limit, depending on what is happening in the economy. However, at a given point in time there is a limit that cannot be exceeded or gone below without damaging consequences. If growth exceeds the limit for a longer period, overheating and inflationary pressure will arise. If growth is too low, the opposite will apply, resulting in higher unemployment and poorer welfare than necessary. Let us compare the Swedish economy with driving a car. The Riksbank's job is made easier if the car and the road allow some speed, without accidents occurring. The work done in other political areas to promote growth in trade and industry is therefore very important in enabling the Riksbank to maintain a low interest rate. The Riksbank cannot affect potential growth; our role is to create good conditions for other private and public operators. It is their work on structural reforms, better infrastructure, education, research, entrepreneurship, innovations, etc. that improves the economy's long-term capacity to create growth and thereby welfare in the long term. The decisive factor for monetary policy is the speed limit over a longer period of time. If we have low capacity utilisation from the start, we can temporarily have higher growth, i.e. accelerate until we have achieved the economy's cruising speed.

Finally, let me offer a couple of specific lessons from the SNB’s gold sales that underline the benefits of transparency. Total official gold holdings by central banks and governments today account for approximately ten times the annual worldwide production of gold. Prospects of official gold sales therefore have an inherent ability to destabilize the gold market. The initial Washington Agreement and the follow up agreement have demonstrated that official sales are best conducted in the context of a clear and transparent overall framework. While the terms of the agreement were not rigid in their nature, they provided sufficient guidance to the gold market to prevent excessive market volatility. In the event that official gold sales continue to be meaningful beyond the current central bank agreement, a new set of parameters will have to be established upon its expiry. Moreover, should the IMF or any other official institution decide to sell substantial gold reserves during the next couple of year, it strikes me as essential that such additional sales get incorporated into the existing framework. Even within a broad international framework, national sales are best conducted on the basis of a clear and transparent sales strategy. In the case of the SNB, the specific sales programs evolved over time but the principles of regularity and transparency were maintained throughout. Market participants knew at all times what the SNB was doing with regard to its gold sales. Moreover, the market knew how the sales were conducted.
Combining more reforms in France and more fiscal stimulus in Germany, as will happen, is welcome but not sufficient: we need a stronger Economic Union in the euro area to avoid overburdening monetary policy by the next recession. And second, that the United States and the G20 are clear-sighted enough to address their economic challenges through multilateral answers, and not unilateral ones: here too, France is a reliable partner. 4/4  BIS central bankers' speeches

Svein Gjedrem: The economic situation in Norway Address by Mr Svein Gjedrem, Governor of Norges Bank (Central Bank of Norway), to invited foreign embassy representatives, Norges Bank, 21 March 2002. Please note that the text below may differ slightly from the actual presentation. *  *  *  Your Excellencies, ladies and gentlemen  The economic outlook  The world economy has been experiencing a slowdown. Economic growth stagnated in the US and the euro area in the last three quarters of 2001. Growth remained somewhat firmer in the UK, but was moderate towards the end of the year. GDP has fallen in Japan. In most countries, public and private consumption fuelled growth in demand, while a fall in capital formation and inventories has exerted downward pressure. Growth in the US economy came to a halt last spring. Overinvestment, particularly in IT and telecom equipment led to low returns on capital and reduced corporate earnings. The stock market declined when growth prospects were revised. The unemployment rate rose. Terrorism and war added to the uncertainty. The US economy is flexible and seldom remains in recession for a long period. There are some signs of an early recovery. Monetary policy and fiscal easing have supported continued growth in private consumption. Equity prices, commodity prices and long-term interest rates have picked up since the sharp decline following the events of September 11. Oil prices plunged by around 40 per cent between autumn 2000 and the end of 2001.
This does not mean that we can rest; banks are not immune from any of the factors that I have just described. Indeed, if we were to look closely at bank failures large and small over the years, I believe we would find that poor corporate governance lay at the heart of many of these failures. Why should we have higher expectations for the governance of banks than we have for other firms? Fundamentally, because banks must act in a way that promotes “confidence” to the public and the markets in general and, more specifically, to their primary stakeholders. Banks play a crucial role in the flow of capital within an economy and are charged with a special public trust to safeguard customers’ wealth. A stable and healthy banking system is critical to the long-term growth of an economy. Banking supervisors have long recognised the importance of good governance; supervision can not function properly if sound corporate governance is not in place. Experience underscores the need to have appropriate levels of accountability as well as sufficient checks and balances. For banking supervisors, although the range of topics that corporate governance may encompass is quite wide, the focus is mainly on those elements that relate to the manner in which the business and affairs of an organization are governed by its board and managers.

Given that net zero is both an imperative of climate physics and a commitment by 120 countries; companies, banks, insurers, pension funds and investors will increasingly be expected to develop and disclose their transition plans. For companies that could mean:   Commitment to a net zero target (for scope 1, 2 and ideally scope 3 emissions) by a specific date;    Assessment and disclosure of how the transition to a net zero business model will impact strategy;    Short term milestones to track progress; and    Details of governance, including whether executive compensation is tied to success and how risks are managed at the board level. In turn, there are several possible ways for the providers of capital to assess the level of preparedness for the transition. To support the assessment of who is on the right side of history and therefore presents the most promising investment opportunities in the transition, providers of capital could measure and disclose: 1. The percentage of assets that comply with TCFD disclosure; 2. The percentage of assets that are Net Zero-aligned (“Paris aligned”);  14 See e.g. Giuzio, M. et al. (2019), Climate change and financial stability in the Financial Stability Review of the European Central Bank, May 2019;  and Piera de Silva, L. A. (2019) Research on climate-related risks and financial stability: An "epistemological break"?, speech at at the Conference of the Central Banks and Supervisors Network for Greening the Financial System (NGFS), Paris, 17 April 2019.