samchain/econo-pairs-v1 huggingface dataset:
Broken line represents IM F’s forecast  BIS Review 56/2010  00  02  04  06  08  10  12  14  Source: IMF  13  General government net lending in the United Kingdom Percentage of GDP 10  10  5  5  0  0  -5  -5  -10  -10  -15  -15  -20  -20 90  92  94  96  98  00  02  04  06  08  Note. Broken line represents OECD’s forecast  10  Source: OECD  General government net lending in Sweden Percentage of GDP 10  10  5  5  0  0  -5  -5  -10  -10  -15  -15 70  74  78  82  86  Note.

Furthermore, differences in demographic trends and structural policy choices between countries in the eurozone (or states in the US) may create or perpetuate some heterogeneity across large monetary areas, an issue you will discuss tomorrow morning. 2 – How to respond to such uncertainties? Without pre-empting discussions, let me flag some possible responses. I’ll first, address the issue of policy uncertainty between central bankers. So far, it is, fortunately, the simplest one: we are not in a so-called “game of chicken” and clarity about policy intentions between ourselves are beneficial for all. The frequent exchanges we have at the BIS, G7, G20 and even events such as this Symposium, are valuable to create mutual trust and avoid the possibility of large policy surprises. Our monetary policies are independent, and rightly so, but they are concerted and we are committed to avoid currency wars. Clarity about our reaction functions clearly also extends to financial markets and the public at large. Second, how could we respond to current state and future path uncertainty? The textbook answer, dating back to Theil and Tinbergen, is to work out your best guess and then act as if you are completely sure. This is sometimes described as the certainty-equivalent approach. There are, however, symmetry assumptions in this type of model that do not necessary hold in the real world. Uncertainty around the central projection may be skewed in one direction. Applying the certainty-equivalence approach also assumes that upside errors are regarded equally to downside errors.
Despite a recent recovery, equity markets are still down materially since the start of the year. Volatility has spilled over into corporate bond markets with US high-yield spreads at levels last seen during the euro-area crisis. The default rate implied by the US high-yield CDX index is more than double its long-run average. And sterling and US dollar investment grade corporate bond spreads are more than 75bp higher over the past year. On the back of these concerns, risk premia have increased across the board, with “safe haven” assets and currencies benefitting at the expense of equities, credit and commodities. In this ‘risk off’ environment, correlations across asset classes are up sharply. Falls in market liquidity have contributed to strains in some markets. In treasuries and gilts, spreads between 30-year yields and the equivalent swaps have risen by over 40 basis points since the beginning of 2015. And there has been a widening in the spread between corporate bond yields and CDS premia which may reflect a reduction in arbitrage as dealers conserve their balance sheets. Banking stocks have been particularly hard hit, down about a quarter on average over the past three months, across the advanced economies, prompting some to question whether anything has really changed (Chart 5). This re-pricing likely reflects first and foremost renewed growth worries. Banks have always been high beta to the economy.

So far, this is very much the picture we are seeing. At end of March, the BIS ratio for capital adequacy for Thai banking system is 14.9 percent, of which the level for tier-one capital is 11.8 percent. On the issue of credit extension, to ensure adequate flows of credit to the economy, our approach has been to rely on market mechanism by encouraging greater competition amongst banks with regard to interest rates adjustment through a process of close consultation and dialogue. The recent round of bank’s lending rate adjustment following the last MPC meeting is a case in point. In addition, to help banks better manage the increased credit risk, a credit guarantee scheme backed by government funding has been set up to promote SME lending by banks. Also, to help resolve problems related to bank lending, the Bank of Thailand has set up a customer-call center to look into problems related to loans application and approval between customers and banks. Going forward, the slowing economy will continue to put pressure on the asset quality of banks. Therefore, managing credit risk will continue to be an overriding focus of Thai banks this year. To do this effectively, banks need to have in place both a strong capital base and a good risk management system, both of which have been strengthened significantly in the past years in line with Basel II and international best practices. Therefore, this should enable our banks to manage risk adequately going forward while supporting the economy.
Ladies and gentlemen, It is against this background of economic recovery that the stance of monetary policy in the past two years has been accommodative, given the absence of inflationary pressure. Reflecting this, the policy interest rate has been cut gradually since late 2001 to help stimulate domestic demand, ease financial constraints of the corporate sector, and ensure an uninterrupted process of recovery. So far, the low interest rate environment has been instrumental in reinvigorating domestic demand and maintaining the momentum of recovery. Such an environment, I believe, would need to be maintained until the expansion in consumption and exports was sustained enough to have led to a firmer pick-up in private investment. This, for the most part, has been a rationale behind our decision to lower interest rates given our strong external position and the absence of inflation. Ladies and gentlemen, To recapture, the Thai economy has managed well both in terms of growth and stability amidst external uncertainties and shocks like SARS. The recent performance reflects to a large extent favorable ingredients for further prosperity, including resilient confidence, robust domestic demand, and export competitiveness. It is fair to say that we have done well, but the true test of success is still down the road. At this juncture, it is important that we do not turn the corner to complacency but rather face the challenge of how to sustain or even raise growth slightly without creating problems in the long run. I have three challenges for us to think about.

Growth momentum from the private sector has picked up more firmly, making it possible for the Government to begin moving toward fiscal consolidation to ensure medium-term fiscal sustainability. According to current estimates, effective tax collection together with the economic expansion could allow the Government to achieve a balanced budget a couple of years earlier than planned. It is therefore clear that the thrust of growth has now been shifted from the fiscal sector to private hands, with export also contributing in a very significant manner. This is a much welcome development, as sustainable growth cannot rest forever on the shoulder of the government who makes up only about 15 percent of the country’s GDP. Ladies and gentlemen, The key drivers of the current recovery, as you know, have been the strong performance of export and private consumption. Export of goods broke its highest record in May this year at 6.5 billion US dollars and has since remained at the monthly average of 6.4 billion US dollars, with the average monthly export growth of around 12 percent year-on-year. BIS Review 46/2003  1  To many, this is a pleasant surprise given the export performance of other regional countries of late. It owes partly to the diversification of Thai export, both in terms of product type and market destination. In particular, our export is not concentrated in just one or two commodities but rather well balanced between agricultural, agro-industrial, and manufactured goods.
Serious situation in spring 2015 Exchange rates  Unit labour costs 115 140  115  140  Germany USA Sweden  130 105  105  95  95  85  EURGBP  130  120  120  110  110  100  100  85  EURUSD EURSEK  75 Jan-14  75 Jul-14  Jan-15  Jul-15  Jan-16  Jul-16  90  90 05  07  09  11  13  15  Note. The ECB communicated its decision to purchase securities on 22 January 2015 and initiated purchases on 9 March 2015. Exchange rates, index, 1 January 2014 = 100. Unit labour costs in manufacturing industry, euro, index, 2011 = 100. The blue square indicates the effect of the krona appreciating by 30 per cent against the euro. Sources: The ECB, Macrobond and Conference Board Figure 9. Rising trend in housing prices and debts for 20 years despite varying repo rate Index 2000 Q1 = 100  Note. Housing prices have been converted from nominal to real terms by using the CPIF. Sources: Statistics Sweden and the Riksbank  18 [20]  Figure 10.

Stefan Ingves: Financial stability is important for us all Speech by Mr Stefan Ingves, Governor of the Sveriges Riksbank, to the Riksdag Committee on Finance, Stockholm, 15 March 2012. *  *  *  Today, I would like to give you a few examples from Sweden and abroad to illustrate why financial stability affects us all, not least in our role as consumers. It can easily happen that discussions of bank regulations, not least at the EU level, can be considered difficult to understand. This is partly because the discussions are often technical, and partly because they can seem abstract. I would like to demonstrate how the political framework for financial stability very strongly affects Swedish banking customers – in other words, almost all households. Crises cost society enormous amounts As financial crises are very costly for the citizens of a society, we should try to avoid them at almost any price. The financial system forms the cornerstone of a modern economy. Its basic functions are converting savings to investments, managing risks and mediating payments, functions that we all constantly come into contact with every day, in one way or another. A functioning financial system is also necessary for the repo rate, which is to say monetary policy, to have an impact. A modern society cannot do without the functions of the financial system. Without the financial sector, Sweden would grind to a halt. But the system also entails risks. Banks are dependent on confidence, are highly leveraged and are thus vulnerable.
Consider for a moment a very simple financial intermediary (a “bank”) that can finance risky lending with either debt, which here encompasses both deposits and credit market instruments, or equity. Assume that the bank pays RD on its debt and earns (a stochastic) RL on its loans, net of intermediation and monitoring costs. Then the return on its capital, RK, is given by: RK = (1+λ)RL – λRD, where λ is the leverage (debt-to-equity) ratio. In the normal course of events, one would expect the return on debt to be an increasing function of leverage, as the greater the leverage, the greater the chance that the bank’s capital will be wiped out in the event of low returns on the loans and they will be forced to default on part or all of the debt. Indeed, with symmetric information between bank and creditor, there should be no gain from raising leverage at all by virtue of the Modigliani-Miller theorem. For a number of reasons, however, this may not work in practice. Creditors – especially if they are households rather than sophisticated financial market participants – may not even factor in the implications of higher leverage for the possibility of default. And even if they do, the debt may be partially or wholly underwritten by the state, with the cost of the insurance only imperfectly passed back to the bank.

These principles on corporate governance are largely part of those adopted in 1999 and subsequently revised by the OECD in 2004. They include equal rights and a level-playing field for shareholders, the role of stakeholders, disclosure and transparency, and board accountability. Corporate governance has direct implications on the behaviour of the organisation towards its employees, shareholders, customers, partners, banks included. Poor governance reduces the potential and, worse though, can lead to financial distress and even fraud, while well-governed companies will usually be more competitive than their rivals and will be able to bring in investors who will invest their money in the companies’ future growth. I will also add that no matter how relevant formal rules are to the proper functioning of an economy, it is essential to trust in business partners’ word given and their honesty. Whenever this is missing, not only dealings in goods and services, but also financial transactions are hit hard. Given that integrity, confidence and reputation weigh heavily on the economy, everyone pins his hopes on the business sector. Future wealth depends now more than ever on how this issue is dealt with. This is why we can assert that, in extenso, good corporate governance underpins the integrity and efficiency of financial markets. Moreover, for the banking field, in light of recent developments, I truly believe that increased ethics is to be welcomed. Thus, good practices in corporate governance are an essential ingredient of wealth and sustainable growth.
6  Given the size of the benefit, we should all want to handle this part of the regime very carefully. We are applying particular scrutiny to two areas: first, the internal ratings and spreads on direct investments in illiquid assets, particularly the senior tranches of internal securitisations; and second, the use of financial restructuring to bring new assets within the MA. We have accepted internal securitisations as a means to achieve fixed cash flows. But that does not alter the requirement that the underlying assets must match the maturities of the annuity liabilities. We will of course take a careful and prudent approach to all such activity. We have made a series of proposals to give firms greater confidence about which assets can attract MA, and how we will deal with any breaches. But my message to the firms is: if we ended up in a position where the MA’s fundamental credibility was undermined for the sake of a few marginal items, we would all regret it immensely. Collectively, we need to remain on a sensible path. Conclusion  I began by making the claim, which might sound somewhat outlandish to the uninitiated, that insurance regulation is fun. It is! But it is also a deeply serious business, precisely because the insurance industry plays such a vital role in society.

International organizations, among which the Financial Stability Board, and Standard Setting Bodies have played a very important role in gathering and disseminating information, as well as ensuring adequate coordination among major public authorities. I would also point out that monetary policy has not been the only tool we have used to increase resilience and defuse the shock. Different authorities have worked hand in hand, under a lot of time pressure, including financial regulators and supervisors, to deliver a very comprehensive and largely consistent set of measures to maintain the core functions of the financial system in these unprecedented events. Comprehensiveness and consistency have been key elements in our collective ability to foster resilience. So the test regarding coordination in crisis time has been passed rather well so far. However, it’s not over yet and good coordination should be maintained for the exit phase of support measures, generally speaking. In the field of financial regulation and supervision, there were variations in approaches, see for instance the leverage ratio for credit institutions, which was okay for the duration of the crisis, but led to divergence in the implementation of standards that should not last. Getting out of the crisis and unwinding support measures will require  further coordination and an adequate timing, in order to avoid possible cliff-effects and to address level playing field concerns. Regarding the prevention of crisis, I would be more prudent because, from my perspective, the jury is still out in terms of appropriate coordination across regulators and supervisors.
This mechanism amplified the immediate effect of public spending on aggregate demand. Monetary policy – in charge of credit conditions – was entrusted with the task of alleviating, through a careful policy of accommodation, the impact that government borrowing  BIS central bankers’ speeches  3  would have exerted on the cost of private debt. The central bank was financing the Treasury by creating money. Under these conditions, an increase in public spending could “add demand”– where this would be lacking for the goal of full employment – without taking away resources from other uses. Since then, the theory of economic policy has followed two paths that have led it to invert the ranking of relative potential of tools and to enhance the definition and measurement of the objective. As for the instruments, a different theory of the formation of expectations – no longer extrapolative – has highlighted the strong impact of monetary policy and has weakened the expected effects of fiscal policy. In the models that we use today, agents, when formulating their expectations, are attentive to the sustainability conditions of the choices in the long term. Economic policies deemed unsustainable in the long run are ineffective. For example, an active deficit-financed fiscal policy is limited by fears about the government’s ability to refinance the debt from which that policy originates. These fears may lead to behaviours that weaken the private sector – or, at worst, completely neutralise – the impact of public spending as a means of controlling demand.

It is acknowledged that digitalisation comes together with the favourite topic of any supervisor- risks, and especially cyber risk. This has been duly recognised by all European institutions and authorities and is very high on the supervisory agenda. Pivotal role in the efforts to address cyber risk, is the enactment of the Digital Operational and Resilience Act. I expect that this will be a cornerstone in the efforts to improve operational resilience of the banking sector. Cyber-attacks have increased significantly over the last couple of years with though a limited number of incidents, both in numbers and impact, in the Cyprus banking sector. Nevertheless, banks should gear up their resilience to withstand the anticipated incidents, while also ensuring that a robust disaster recovery plan and business continuity plan are in place for possible such incidents. At the same time, the banking sector faces the challenges of the adverse macroeconomic developments, which may deteriorate asset quality, leading to an upward pressure on impairments and provisions. Prudent provisioning policies and the provision of fast and viable restructurings to customers is the appropriate way to address effectively the consequences of the adverse economic environment. The Russian invasion in Ukraine has elevated further the importance of climate risk due to its interconnectedness with geopolitical risk. The ongoing effort to reduce the dependence on Russian energy frontloaded the need to reduce carbon emissions and move promptly towards a greener economy.
International Capital Flows in the Post-crisis World, September 2019 CENTRAL BANK OF CHILE  Monetary policy framework and its effectiveness  Monetary policy is strongly supported by the free-floating FX regime 10Y interest rate and FX volatility (*)  Currency implied volatility 1-month EE  (sample: 2017-2018)  (percent) 30  FX Median  10-year interest rate (weekly change)  0.14  20  Brazil  Egypt  0.12  Nigeria  Turkey  10 0.10  Philippines  0.06 Indonesia 0.04 Vietnam  0.02 0.00  0 Jan.10  Romania  0.08  Bulgaria  Peru  Mexico  Croatia Hungary  Poland  10-y rate Median  Jan.14  Jan.16  Jan.18  (percent)  0.6 0.4  Russia  0.2  Chile  0.5 1.0 Exchange rate (weekly percentage change)  Jan.12  10Y rates volatility 1-month EE  South Africa  India  Thailand Malaysia China  0.0  Colombia  1.5  0.0 Jan.10  Jan.12  Jan.14  Jan.16  Jan.18  (*) Red points correspond to economies with free-floating FX regime according to IMF classification (Annual Report on Exchange Rate Arrangements and Exchange Restrictions, 2017). Source: IMF and Bloomberg. This framework has basically remained in place for almost two decades and its effectiveness has improved as markets, agents and institutions have adapted to it.

According to the ECB’s financial integration indicators, by 2008 there was almost complete integration of euro area interbank markets, but retail banking remained largely fragmented and cross-border equity markets were hardly developed at all.5 This meant that the cross-border capital flows into catching-up countries were mainly debt-based and intermediated through local, relationship-based banks. Generally speaking, such a financing mode – compared with equity portfolio investment or direct cross-border lending from foreign banks – tends to favour incumbent and local firms, and can make bank lending decisions less sensitive to price signals.6 This may have also supported capital misallocation. In short, capital flows did not lead to real convergence because the catching-up economies lacked the appropriate structural and institutional frameworks to allocate those flows efficiently. In the context of an incomplete single market in goods and services and weak competitive conditions, profit signals became disconnected from underlying productivity and diverted capital from more productive uses. And with an incomplete single market in capital and uneven banking supervision, credit growth became excessive and over-concentrated in low productivity sectors. Why did more observers not recognise it? While weak TFP growth was the subject of academic debate before the crisis, this was generally seen as a euro area problem, in particular vis-à-vis the United States.7 The general mood among observers was that the catching-up economies were progressing relatively well,  4  Bourlès et al (2010), “Do product market reforms in upstream sectors curb productivity growth? Panel data evidence for OECD countries”, NBER Working Paper 16520, November 2010.