samchain/econo-pairs-v1 huggingface dataset:
On this occasion, the deficit doubled within three years, while the exchange rate appreciated once again. That country was the United States and the references are to episodes when the deficit grew rapidly in the early 1980s and again at the turn of the 1990s. And some observers detect signs today of a similar replay beginning. To be fair, however, it should be noted that the dollar tended to remain as firm during the years of deficit reduction in the late 1990s as it had when the deficit was rising in the early 1980s, and that, on balance, there may not be a very clear long-term relationship in either direction between the US deficit and the dollar exchange rate. But at least the US experience warns us against presuming there to be an automatic negative causation flowing from the one to the other. The relationship between fiscal and monetary policies It may be worthwhile examining more generally certain aspects of the relationship between fiscal policy and monetary policy. The economy can be characterised as comprising any number of different sectors. At the highest level of aggregation the classification is usually the public sector, the corporate sector, the household sector and the overseas sector (the counterpart to the external balance of payments).

Tony Latter: Preserving monetary stability in the face of budget deficits Speech by Mr Tony Latter, Deputy Chief Executive of the Hong Kong Monetary Authority, at the Insight Investment conference in Hong Kong, 20 November 2002. *  *  *  Introduction There has been much talk recently in Hong Kong about the possible threat to exchange rate stability from the burgeoning budget deficit, which is predicted by many to reach about 6% of GDP for the current financial year as a whole. Evidence of this concern is apparent when any media report suggesting a deterioration in the fiscal position is invariably accompanied by a weakening, even if shortlived, in the forward exchange rate of the HK dollar. This phenomenon is not confined to Hong Kong. In Europe, news of widening budget deficits, threatening to breach the terms of the stability and growth pact, and allegations of lack of commitment among officials to the degree of fiscal discipline necessary to conform to that pact, have tended to weaken the euro's exchange rate, at least temporarily. But there is another story which can be told. This is of an economy where the budget deficit rose from about 1½% of GDP to 4½% in the space of 4-5 years. What happened to its exchange rate? It strengthened over the same period by some 70% in trade-weighted terms. The authorities reined in the deficit somewhat over the next couple of years, but then it began to expand again.
12  applied when the recovery takes hold, is also key in order to foster the credibility of economic policy. In this context, in the prudential area, the recommendation by the European Systemic Risk Board, the European Central Bank and national authorities to limit dividend distribution will not foreseeably be extended beyond September 2021, providing there is no further worsening in economic and financial conditions. In any event, institutions must continue with their policy of anticipating the recognition of credit losses, ensuring appropriate and timely recognition in keeping with supervisory guidance. This would guarantee a reliable and prompt diagnosis of the situation at all times, enabling institutions to continue to fulfil their role of providing financing to households and firms. At the current juncture, authorities should continue to closely supervise the sufficiency of the provisions made and to monitor credit quality. Second, banks should continue to be permitted to use their capital buffers so as to maintain the flow of credit to economic activity in this initial period of recovery. Banks should also have sufficient time to restore any capital buffers used during this period. Third, to address the challenge of low profitability, it is essential that banks continue to make efficiency gains by cutting costs and making more intensive use of new technologies. To enhance their efficiency, banks should make optimal use of the information they hold. This requires significant investment in digitalisation and also the incorporation of new data processing technologies to allow them to change their business model while controlling their risk profile.

6  The latest macroeconomic projections point to robust growth in the coming quarters once the vaccination programme has gathered pace and restrictions on movement have been progressively lifted. However, significant uncertainties remain as to the course of the pandemic itself, private consumption, tourism flows, the economic impact of the NGEU funds and the damage to the productive system caused by the pandemic. Against this background, there is still the risk of credit quality impairment being more pronounced in the future than has been observed to date, especially in the sectors hardest hit by the pandemic, and particularly once the support measures are gradually withdrawn. In fact, some signs of credit quality impairment were already observed in 2020. Specifically, Stage 2 loans6 increased substantially in 2020 (24.3%), and their growth has quickened in 2021 to date (37.5% in March). Meanwhile, although forborne loans continued to fall year-on-year, these declines have been far more moderate since the onset of the pandemic (-2.3% in March 2021, compared with -19.6% in March 2020). Lastly, NPLs increased in the consumer portfolio in 2020, growing by 23% (but slowing to 15.9% in March 2021). Deeper analysis of the growth of NPLs and Stage 2 loans in the business lending segment reveals that the sharpest increases occurred in sectors severely affected by the pandemic.
Here I want to note that the payment system, which is one of the Central Bank’s responsibilities entrusted it by Law, has operated adequately. Going back to the description of the macroeconomic scenario and associated risks, in the world economy the recent behavior of economic indicators, especially in developed countries, could be signaling a more protracted weakening of growth there. This scenario must be carefully evaluated, because other temporary factors related with the disruptive effects of the Japanese earthquake and the oil price hike may have played a role in recent developments. Should this risk of further weakening of developed countries materialize, the difference of the pace of growth with emerging economies would widen. This would exacerbate the interest rate differentials around the world, increasing capital flows toward emerging markets and aggravating forex tensions, obstructing macroeconomic policy making. Add to this that the risks in some European economies have intensified substantially these days and so far there is no defined solution, which has worsened the tensions in financial markets. Moreover, global imbalances are still unresolved, and it is unclear how the major adjustments needed for the fiscal consolidation of part of Europe and the United States will proceed. And it becomes more uncertain when considering that they must take place in an environment of lagging private demand and a still complex financial situation in banks, with large funding needs, exposure to public debt and a significant interconnection within Europe.

In the scenario we consider to be the most likely given present-day and expected conditions, the larger part of the adjustment to the MPR we began in June 2010, and which has amounted to an increase of 475 basis points, has already been completed. In this scenario, we use as a working assumption that the MPR will be within the range of values that have historically been considered neutral. However, we must keep in mind that the behavior of both the domestic and the external economy in the past several years may have changed those ranges, introducing a high degree of uncertainty about the true short-term level of the neutral MPR. All in all, exactly how far and when we will take the MPR in the current cycle is something the Board will be analyzing with incoming information on the evolution of the Chilean economy and the international scenario. It is worth pausing for a few moments to take a look at the evolution of the world economy. In our most likely scenario, we estimate that the world will continue to add momentum to Chile’s GDP growth, although gradually declining in the coming quarters. However, as I already mentioned, there are important risks. Developed economies may enter a stage where output fails to pick up and new economic policy efforts are needed to boost growth. The big problem they are facing is the exhaustion of their traditional policy tools.
The New Keynesian model features no realistic frictions in financial markets either, at least to generate problems as severe as the current ones, so it has nothing to say about the origins of the crisis. 4 These models are widely used in central banks to calibrate the monetary policy that is consistent with an inflation target. 5 In that sense, they are a very useful tool for establishing well-specified, well-estimated transmission mechanisms, but they are certainly limited, and it is unrealistic to believe that they can provide a full description of the economy. Economies are exposed to many shocks that cause deviations – sometimes significant deviations – from projection scenarios. However, they help to understand alternative courses of action of monetary policy after the shocks have hit. Actually, the much praised aggressiveness in interest rate cuts around the world, to unprecedented levels in many cases, is largely justified by the sharp drop in inflationary pressures. It is likely that, without the commitment to bringing inflation back up to normal rates, monetary policy actions could have attained only part of the expansion. This is a practical demonstration of a wrong criticism on inflation-targeting central banks, which is that they are not concerned with the level of activity. Drops in activity and downward pressures on costs are the factors that opened room for monetary policy, avoiding to repeat the mistakes made in the 1930s.

The main proposals by the Ministry of Public Finance to enhance Government Emergency Ordinance 46/2014 refer to: (i) rendering the rescheduling mechanism and the maturity more flexible vis-à-vis borrowers’ financial capacity, (ii) extending the scope of eligible debtors, (iii) simplifying the administrative procedures for loan rescheduling, (iv) strengthening borrower protection in relation to banks, which remain bound, during the rescheduling process, not to tighten contractual terms regarding the interest rate, the level of commissions, or fresh collateral. With a view to tailoring banking prudential regulations to the new financial market conditions, the NBR has initiated several legislative changes to facilitate the conversion of foreign currency-denominated loans into lei and to ensure the effective enforcement of Government Emergency Ordinance 46/2014 with the amendments proposed by the Ministry of Public Finance. Summing up, we at the National Bank of Romania remain open to dialogue for clarifying the issue of CHF lending, finding solutions and getting involved in accordance with the legislation in force. 10  BIS central bankers’ speeches
Therefore, in our press release of “Monetary and Exchange Rate Policy for 2005” dated December 20, 2004, it was announced that 2005 would be a transition period and an explicit inflation targeting strategy would be adopted in 2006. Before concluding, I would like to remind you that detailed information about our policies to be implemented in 2005 is available on our website in our press release “Monetary and Exchange Rate Policy in 2005”. You can also obtain a hardcopy of this announcement as an annex to my speech. Thank you for your patience and attention. 22  BIS Review 36/2005

(a) Tradable goods or services are defined as those potentially tradable, rather than actually traded. Tradable sectors are defined as: agriculture, forestry and fishing; industry; information and communication services; and financial and insurance activities. Chart 8: Euro-area activity since the pre-crisis peak(a) Contribution to cumulative percentage change in GDP  20 10 0 -10 -20  Imports  -30  Exports  -40  Domestic demand GDP Germany France  -50 Italy  Spain  Portugal  Ireland  Greece Euro area  Sources: Eurostat and Thomson Reuters Datastream. (a) Pre-crisis peak is in 2008 Q1 other than for Italy (2007 Q3) and Portugal and Ireland (2007 Q4). 10  BIS central bankers’ speeches  Chart 9: Global imbalances United States (a) Vulnerable euro-area countries Japan (b) Oil exporters Rest of the world  United Kingdom Germany China Rest of Asia  Per cent of world GDP 3 2 1 0 -1 -2 -3  2000  2002  2004  2006  2008  2010  2012  2014  2016  2018  Source: International Monetary Fund’s World Economic Outlook, April 2013. (a) Includes Greece, Ireland, Italy, Portugal and Spain. (b) Includes Nigeria, Norway, Russia, Venezuela and the Middle East and North African region.
The restraining influence of low economic activity will begin to fully impact inflation dynamics in the second half of 2015. By this time, the effect of temporary factors, such as the depreciation of the ruble and foreign trade restrictions that have led to acceleration in consumer prices growth, will be exhausted. As we have already noted, inflation will reach its peak in 2015 Q2, and afterwards it is forecast to fall. In March 2016, inflation will approximate to 9% before falling down to 4% in the medium run. Such inflation dynamics will be accompanied by economic recovery. The bottom of economic recession is expected in 2016 Q1, later on the economy will start growing on a quarterly basis. By that time the initial adjustment of the economy to the new environment will be over. Higher global oil prices, the economic recovery of trade partner countries, and the formation  BIS central bankers’ speeches  3  of new sources of financing will also contribute to this growth. In 2017, economic recovery is expected to exceed 6%. We shall continue to regularly update our forecast by monitoring movements of a wide range of indicators taking into account not only annual inflation dynamics, but also quarterly, monthly and weekly ones. If new pro-inflationary factors do not appear and inflation decelerates according to our forecast, we shall continue cutting the key rate.

Major banks and insurers are accelerating their digital transformation and ramping up hiring in application development, data science, and artificial intelligence. Example: OCBC Bank recently announced that it plans to hire 1,500 technology staff over the next 3 years, with the majority of those positions to be based in Singapore. Bank of America has based one of its two overseas global cyber security centres in Singapore. The bank currently has more than 800 headcounts in Singapore focusing on technology. Another example is Shanghai Pudong Development Bank, which set up its first overseas innovation centre in Singapore. Likewise, global insurers like SCOR have established innovation labs in Singapore. Local insurers have invested heavily in technology too. Singapore has made a name for itself as providing one of the world’s most conducive environments for financial innovation. We are now home to over 50 global and regional innovation labs and more than 1,400 FinTech firms. Last year, we saw record high FinTech investments of $ billion last year, up from $ billion in 2020 [2] . Leading players at the forefront of digital asset innovation have anchored their operations in Singapore. JP Morgan has partnered DBS Bank and Temasek to establish Partior, which is a multi-currency, cross-border settlement platform, leveraging blockchain technology. R3, a global distributed ledger technology provider with roots as a banking consortium, has grown its innovation hub in Singapore to become the regional headquarters for Asia.
Fourth, actual equity in the financial system proved too little to offset the indebtedness and other risk that had accumulated. Fifth, the regulatory framework for cross-border banking operations was deeply flawed, not least in the European Economic Area. Sixth, there is significant risk associated with building a relatively large banking system with cross-border operations based on a small country and small currency. These problems remain more or less unaddressed here in Iceland, and as a result, there is little in the regulatory environment to prevent the problems Iceland had before the crisis from developing once again, although it is unlikely that this will happen in the next few years, as our financial systems are still recovering and risk awareness is keen. Now is the time to solve these problems because, if we wait until operations have resumed their full pace, it might be too late, and the will and incentive to take action will be lacking. The Central Bank is determined to set policy on these matters during the current year, and to contribute to joint policy-making with the Government. This process involves, on the one hand, macroprudential rules – that is, rules that reduce systemic risk and obstruct the development of credit and asset bubbles, and on the other, it involves institutional elements, not least possible forms of closer collaboration or merger between the Central Bank and the Financial Supervisory Authority. And monetary policy will be reviewed as well.

In this context, there should be no denying that the European Union too will have to reform its institutions and decision-making structures in order to cope with a larger number of Member States. By agreeing to convene an Intergovernmental Conference next year, the Member States have taken the first steps in this direction. So far the progress of negotiations is encouraging, and the applicant countries should be applauded for their great efforts towards meeting the economic and political entry criteria set by the Copenhagen European Council in 1993. Beyond that, it appears that the very prospect of eventual participation in EMU has also helped to establish clear policy orientations. Naturally, the ECB takes a keen interest in developments in the future Member States and has established the relevant contacts. I should like to conclude that the ECB is well aware of the challenges ahead, and that we are still far from “business as usual” – despite the smooth and successful launch of the euro. With the establishment of Economic and Monetary Union, the EU has recorded an outstanding historical achievement, but the task of making EMU a success will be an ongoing one, and perhaps even more momentous challenges in the wider Europe are awaiting our response. Thank you very much. 3  BIS Review 93/1999
Confidence indices and leading indicators were all pointing up, reinforcing the view that the economy was on track. As is the case abroad, the most recent economic figures question whether the recovery scenario for 2002 remains valid. Information from various economic indicators is painting a consensus picture of weak growth. The negative numbers cover the broad contours of the Swiss economy. These sectors include construction, investment, tourism, financial services, and export-oriented industries. None of this means that the Swiss economy is not able to stay afloat. But those that have steered a ship know: it is not enough to have water under the rudder, one needs to plot continuously a course that will safeguard the vessel. The first rule of caution in seamanship and in monetary policy - is to keep away from situations in which adverse shocks will lead to trouble. With the recent interest rate reductions in the target range, we have tried to steer a prudent course that seeks to offset potential adverse shocks that would jeopardize economic recovery in Switzerland. nd  On May the 2 , we lowered the target range for the three-month Libor by 0.5 percentage points to 0.75% to 1.75%. With this step, we reacted to the rapid appreciation of the Swiss franc against the major currencies, which led to an undesirable tightening of monetary conditions in Switzerland, thereby threatening the economic recovery. th  We reduced the interest rate range by a further 50 basis points on July 26 .

Economic hopes pinned on exports and consumption, do not appear to be resilient across Europe. The potential for further stimulus on the fiscal and the monetary front appears to be limited. On the one hand, the stability pact does not allow for further fiscal stimulus. On the other hand, the European Central Bank is unwilling to provide the same amount of monetary stimulus as its U.S. counterpart. The reason is simple. Inflationary pressures in the Eurozone continue to be a stumbling block for lower interest rates. The recent deterioration of the international business sentiment and the prolonged uncertainty witnessed in the financial markets has also influenced negatively the growth prospects in Switzerland. Our view at the beginning of 2002 was that economic growth for the current year would be moderate. Our GDP forecast was 1% growth for 2002. Other institutions were more optimistic. All in all, however, there was considerable agreement among forecasters that Swiss household consumption would register moderate but stable growth and that the economy would experience a recovery in the second half of this year. The recovery was to be underpinned by strong growth in exports. The economic information that stemmed from the first quarter of this year was consistent with the scenario just described. First quarter real GDP came in slightly stronger than expected. Although real GDP growth was only 0.6% in the first quarter, an important consideration was the upward dynamics after gloom had set in the second half of 2002. As anticipated, real growth was supported by private consumption.