samchain/econo-pairs-v1 huggingface dataset:
One usually says that the central banks are the lender of last resort. The need to have a “liquidity emergency service” is based on normal banks’ operations being characterised by borrowing money at short maturities and then lending this money at longer maturities. This is the so-called maturity transformation that exposes the banks to liquidity risk. Sometimes the banks’ access to funding may suddenly decline, without it being possible – or socio-economically desirable – for them to reduce their lending at the same pace. This does not usually lead to any problems. A bank that needs more funding can normally borrow from other banks that have a surplus (or it can issue its own bonds). However, sometimes the liquidity problems are so serious that the banks cannot manage them on their own. If, for instance, confidence in a bank were weakened so that depositors feared they would not be able to get their money back, the bank might be subjected to a bank run that it is unable to manage on its own. There is also a risk that problems in one bank may spread to other banks, as the banks are interconnected. Even banks that do not have any problems may be affected as a result of rumours spreading.

They are mainly aimed at affecting the volume of liquidity in the financial system. The tools are used both to implement monetary policy and to contribute to a smoothly-functioning payment system and to manage liquidity  7 The Riksbank Committee’s work includes reviewing the Riksbank's responsibility for the central emergency  preparedness in the payment system. 7 [12]  shortages in an individual institution or in the financial system as a whole. In the current Sveriges Riksbank Act, the different tools are categorised according to different purposes, such as monetary policy (which applies to most of them) and liquidity supporting tools, primarily emergency liquidity assistance. A clear lesson from the financial crisis, however, is that measures taken in a crisis situation often contribute both to promoting financial stability and to the impact of monetary policy, which makes it difficult to distinguish these purposes. The Riksbank – like a large number of other central banks – implemented a number of different measures during the crisis. We supplied liquidity, for instance, by offering loans in SEK at longer maturities than usual, by increasing access to credit, which involved among other things accepting other forms of collateral than previously and extending the circle of financial institutions allowed to borrow from the Riksbank, as well as offering loans in other currencies than SEK. The measures that got the financial markets to function in the acute situation then prevailing also affected the monetary policy transmission mechanism from the repo rate to the interest rates paid by households and companies.
But this does not mean no government. In a free market, a government has a number of specific and limited functions to address well-known areas where the unregulated functioning of markets can result in outcomes that are undesirable from the perspective of society as a whole. In general, these areas involve some form of what economists call ‘externalities’ – spillover effects of one person’s behaviour on others that are not incorporated in the market prices that people pay and receive. Public goods are an example, where the benefits to society as a whole of, say, police protection are not easily captured by unconstrained market forces. Protection against monopoly practices is another – situations in which individual market participants can take prices away from levels consistent with free competition. All countries are involved in correcting instances of market failure in one form or another: indeed, from a philosophical perspective, it would not be too strong to say that that is what governments are all about. Many countries, of course, have become involved in the economy in ways that go well beyond such cases of market failure. In general, the experience has been unsatisfactory, and there is a worldwide trend towards limiting government involvement in the economy. 17. Here it may be helpful to turn from theory to practice, and to our experience in Hong Kong as an economy long acknowledged to have one of the freest markets in the world. In Hong Kong, government is probably as small as it can get in the modern world.

The results of our market operation in August and our technical measures in September have been stable interest rates and financial markets that have been free of the manipulation that posed such a threat to stability and confidence over the summer. For an economy that is still working its way through its worst recession in more than a generation this is good news. Many critics, however, were shocked by what they saw as a gross violation of free-market principles in a city that had been held up as one of the world’s great models of free-market economics. We did not, and do not, see it in this way. And, six months or so after the event, now is perhaps an appropriate time to place the events of last summer in some perspective. Free markets 14. What, then, is a free market? It might be helpful to go back to basic economics to set out a few simple principles. In bald terms, a free market is a market in which buyers and sellers are free to trade on whatever terms they wish without government interference. The great writers on free markets, from Adam Smith to Milton Friedman, argue that free markets and free enterprise, rather than governments or monopolies, are the most efficient means of producing and distributing wealth and, as a consequence, the soundest basis for a just and prosperous society.
The opposite happened in the 2004 cycle. Even in a context of fast increases in short term rates in the United States, the US dollar weakened and commodity prices increased significantly. As I just mentioned, the fact that the dollar depreciated in the 2004‐2006 cycle is very informative about other phenomena occurring in the world at the same time. Commodity prices and risk appetite were favorable for EMEs, leading to important growth gains and Real Exchange Rate appreciations. In the three years following the beginning of the hiking cycles, currencies in Latin American countries strengthened on average 13%.7 While the Federal Reserve was raising short terms rates, developing countries were doing the same. The good performance in emerging economies during the 2004‐2006 tightening cycle in the United States, could respond to many factors. Three things stand out: o Many emerging markets were much more prepared to face restrictions in world financial conditions. The move towards more flexible exchange rates, better fiscal policies and stronger financial supervision improved their resilience. o The tightening in the United States did not worsen financial conditions to EMES. Quite the opposite; credit spreads became more favorable. o Why this happened? The natural answer is China.

The Riksbank monitors the financial sector with a systemic perspective. If we hadn’t realised it before, one clear lesson from the crisis of 2008–2009 was that monitoring individual institutions is not enough. We and other authorities around the world learnt that we have to keep our eyes on the connections between the banks and how they are affected, as a whole, by developments on the markets. Among other means, the Riksbank influences financial market participants through the analyses we make and the recommendations we issue in the Financial Stability Reports. Another important role for the Riksbank is being the country’s representative in several forums that set the standards for the financial sector, primarily the Basel Committee on Banking Supervision, the European Systemic Risk Board (ESRB) and the Committee on Payment and Settlement Systems (CPSS). At the same time, it is worth pointing out that, at present, the Riksbank does not have any sharper tools than words in the preventive work or macro-prudential supervision. We can warn and recommend, but when it comes to real measures, other authorities currently hold responsibility. It is a difficult task. Always raising a warning when everything seems to be going well seldom makes you popular. Financial stability policy is of great importance for Swedish households Preventing future crises is an important task – as is being able to manage them if they break out anyway. I hope that this speech has clarified why Swedish households are dependent on financial stability.
4  BIS Review 68/2010  Figure 4 Inflation and inflation expectations Annual percentage change 16  16 CPI Historical mean  14  14  12  12  10  10 1993-2010 M ean 1,5 Std dev 1,4  8  8 6  6 4  4  1971-1992 M ean 8,3 Std dev 3,0  2  2  0  0  -2  -2 71  74  77  80  83  86  89  92  95  98  01  04  07  10  5  5 CPI Inflation expectations  4  4  3  3  2  2  1  1  0  0  -1  -1 -2  -2 94  96  98  00  02  04  06  08  10  12  14  Note. Inflation expectations refer to money market participants. Sources: TNS SIFO Prospera, Statistics Sweden and the Riksbank  More or less at the same time as inflation decreased and started fluctuating less, growth also became more stable. This increased macroeconomic stability was a more or less worldwide phenomenon, being generally known as “The Great Moderation”. There exist various hypotheses on what may lie behind this increased stability. One of them is that monetary policy had started to be conducted in an improved manner, in which an emphasis on low and stable inflation allowed inflation expectations to be better anchored.

If these two sectors cannot take up all the slack created by necessary fiscal retrenchment in the years ahead – as seems likely – then the U.S. trade balance will need to improve as well. This implies that EMEs will no longer be able to rely on expanding U.S. demand as a key driver of their own economic growth. Of course, this is not just an issue of U.S. and EME adjustment. Adjustments will be required in other industrialized countries, too – and not just the deficit countries. There has to be recognition on all sides that global rebalancing in terms of the composition of activity and growth and in terms of global capital flows is necessary. Fortunately, this is not a zero-sum game: it is in the interests of all sides. However, it is still very difficult to accomplish because it is not in the short-term interests of some interest groups in many nations. This means that there are likely to be considerable political obstacles to adjustment in many parts of the global economy. In this process, the United States needs to show leadership in contributing to a smooth adjustment. In this regard, I think there are a number of actions that the United States can take – unilaterally and in its own interest – that will make this rebalancing process easier and less prone to disruption.
Recruitment policy might usefully follow in the footsteps of regulatory policy if it, too, is to maximise the organisational and social externalities of diversity. To see how and why, consider a simple example. 71 There are two candidates for a position, A and B. They do a test based on the attributes useful for the hiring organisation. These tests might be state of the art, including all of the diverse attributes one would wish in an organisation – cognitive, interpersonal and experiential skills. In this test out of 10, candidate A scores 8 and candidate B scores 4. Which one should be hired? The answer is easy. The evidence points strongly to A as the candidate best meeting the requirements for the job. They have, quite literally, ticked the right boxes. But let’s add a twist. What if the answers A gets wrong are the ones B gets right? And what if the questions existing employees get wrong are also the ones B gets right? In other words, what if candidate B brings skills to the organisation which otherwise do not exist. The right recruitment decision for the organisation is then to choose B rather than A. Candidate B adds more to the collective ability of the organisation, even though they are weaker individually. The question is, how often would existing recruitment practices deliver such an outcome? In practice, I think rarely. Individuals are typically judged on the alignment between their skills and those of the existing organisation.

It also serves as an antidote to groupthink. These may be baby steps but they are, I hope, steps in the right direction. 65  Deloitte University Press (2013). 66  Please see the One Bank Research Agenda, available here: http://www.bankofengland.co.uk/research/documents/onebank/discussion.pdf. The full discussion paper is available here: http://www.bankofengland.co.uk/research/documents/onebank/discussion.pdf. 12  BIS central bankers’ speeches  (b)  Experiential diversity  A related, but distinct, dimension to diversity is the background and experience of individuals. Again, this is multi-faceted. One dimension which has attracted some attention recently is the socio-economic status of individuals. That has been found to have a striking impact on levels of educational attainment, employment and income prospects, independent of ability. Here, the seeds appear to be sown early in childhood. Studies have looked at the educational evolution of sets of children from different socio-economic backgrounds over time. Parental income and wealth has been found to be a key, if not the key, determinant of a child’s educational progression. 67 Indeed, these socio-economic effects are sufficiently large that they may dwarf factors such as a child’s cognitive ability. 68 For example, imagine testing the cognitive ability of children when two years old. How does socio-economic status then affect their educational progression? Some studies have found that a low-ability child from a high-status group will exhibit higher levels of attainment by the age of six than a high-ability child from a low-status group. 69 And, thereafter, the differences begin to widen further.
Ho wever, at relatively sho rt ho rizons (for which term premia tend to be smaller and mo re stable), the fo rward curve do es pro vide a go o d pro xy o f this path. 2  This flash estimate was subject to higher uncertainty than usual because data fo r Germany were no t available at the time o f publicatio n . 2  50 bp in March, again, as widely expected. Fourth, we indicated that we will evaluate the subsequent path of our monetary policy in March. Indeed, two weeks after our February meeting, financing conditions remain at levels that are very close to those observed before that meeting. Beyond March: assessing the inflation outlook and the appropriate policy path Our February announcement stopped short of providing specific indications about our policy intentions beyond March. At our March meeting, we will benefit from a new round of ECB staff macroeconomic projections, including a comprehensive reassessment of the euro area inflation outlook. We will then be in a better position to judge the most appropriate policy path, in a manner consistent with our data-dependent approach. In the remainder of my address, I would like to lay out a number of factors that I see as playing a crucial role in our ongoing assessment of the euro area inflation outlook and, therefore, in our future policy path.

In addition, it is also worth mentioning that fiscal measures, which help moderate the inflation path this year, will have countervailing effects when they are withdrawn, which could make the inflationary episode more persistent. Indeed, this is the main reason why our December projections revised inflation upwards in 2024 to 3.4%. Howev er, some of the measures approved by governments to shield consumers from excessive energy price increases take the form of price caps and, therefore, their effects depend on the magnitude of the energy increases. In a context of lower energy prices, the ceiling on prices may not become operative; the downward impact of these measures in 2023 would therefore be lower and, subsequently, the upward impact of their reversal in 2024 would be lower as well. The pass-through of euro exchange rate movements to inflation Fluctuations in the euro exchange rate have been significant in the last year. In particular, the euro-dollar exchange rate depreciated significantly in the first part of last year as a result,  6  Industrial pro ducer prices excluding energy and co nstructio n co ntinued to decelerate in December in the euro area to reach a gro wth rate o f 12.3% (3.7 pp less than at the peak last May).
The key features of emerging markets in Asia are the rapid changes in the financial landscape, the disintermediation and growth of capital markets, globalisation and the increased linkages between financial markets and economies via crossborder activities, the proliferation of complex financial instruments and the increasing convergence of supervisory framework and standards such as Basel II, IOSCO, the Insurance Core Principles of the International Association of Insurance Supervisors (IAIS), and international accounting standards. In this changing landscape, we see competition along with synergy between like-institutions as well as different kinds of institutions. In savings instruments and wealth management market, we see the rapid growth of interactions between commercial banks, investment banks, and insurance companies, domestic and overseas. Indeed, different types of financial institutions have different asset-liability structure, risk profile, and therefore together help enhance the completeness of the financial system. For instance, life insurance firms tend to have natural niche in the longer end of the market, and as such, offer opportunities for financing and providing hedging instruments for long-term investment, such as for infrastructure, which is a key driver of Asian economic growth. Many of the longer-term assets have become underlying assets upon which the market for financial engineering thrives-derivatives are used to engineer and structure complex products tailor-made for various market players with different risk-return preferences. While this process brings benefit, it also brings inherent risks that need to be properly managed, as the current turmoil clearly demonstrates.

Bandid Nijathaworn: National financial system and supervisory framework Address by Dr Bandid Nijathaworn, Deputy Governor of Bank of Thailand, at the Thai Insurance Forum 2008, Bangkok, 20 October 2008. *  *  *  Good morning, Ladies and gentlemen, It is my pleasure to be here this morning to speak at the Thai Insurance Forum 2008, organized by the Asia Business Forum. I would like to thank the organizer for the invitation. Today, my address will focus on two topics. The first is the global financial turmoil, and its implications for the Thai financial system, focusing on the regulatory framework and the banking sector. Next, I will talk about developments in phase II of the Bank of Thailand’s Financial Sector Master Plan, and how this will help position the Thai financial sector going forward. Let me start with the first topic, current developments in the global financial system and its implications. In contemplating the key issues for my talk a few months ago, the main theme that came to mind was the rapid development and growth of the financial system in emerging markets in Asia. Despite the current global financial turmoil, this theme will remain the subtext for our region in the medium-term. Indeed, the turmoil seems to have highlighted the importance of these developments going forward.
Under certain circumstances stock adjustments may trigger a more marked economic slowdown. This may happen, for instance, if effects of the adjustments either spread to private consumption or have a negative impact on the labour market and household confidence. The Riksbank was therefore alert to the risk of private consumption being weaker last spring and summer, which would have pointed to a further curb on inflation. In practice, however, private consumption went on rising in the summer and its growth became somewhat stronger in the autumn. Low inflation and interest rate reductions The rate of inflation decreased during 1996 and the rates that different economic agents expected in the future also moved down markedly (Diagram 2). This enabled the Riksbank to lower the repo rate from 8.91 to 4.10 per cent. As a result, the initial position for the ongoing growth phase in Sweden’s economy is more favourable than for many years. The drop in the rate of consumer price increases was appreciably accentuated by the Riksbank’s repo rate cuts in that these contributed to the reduction of mortgage interest costs. Under normal circumstances the tolerance interval around the price stability target should suffice BIS Review 56/1997  -4-  to absorb transitory effects on the price level. Last year, however, the fall in interest rates was very marked because many factors had a concerted effect that rapidly altered the picture of inflation. The magnitude of that interest rate fall is also largely responsible for the weak price trend to date in 1997.

The Black Swan: The Impact of the Highly Improbable. Random House. 1  As the recent IEA report3 stresses “the global pathway to net‐zero emissions (…) requires all governments to significantly strengthen and then successfully implement their energy and climate policies. Commitment made to date fall short of what is required”. Meanwhile, the world has been hit by the Covid 19 health crisis. This is a crisis that is due to lack of prevention, unpreparedness at national levels and flaws in international cooperation. This is a crisis that has forced governments to lock down hundreds of millions of people and has stopped or reduced economic activity. This is a crisis with huge macroeconomic costs and which has forced governments to provide substantial fiscal support and central banks to intervene with bold monetary policies, in order to preserve favorable financing conditions. As regards climate change and the environment, scientists as well as the authors of the Green Swan try to explain to us what could happen if we don’t act. On the health front, we experienced “skin in the game” what an unexpected, severe, global crisis can be, because we did not collectively act on time. In advanced economies, thanks to vaccinations, we are seeing some light at the end of the tunnel. This is a relief. However, other crises could occur; there is no vaccine against climate change and environmental risks. This tangible experience makes the Green Swan even more interesting to read and to meditate upon now, than when it was published.