samchain/econo-pairs-v1 huggingface dataset:
If the market had asked for a higher risk premium, the increase in borrowing costs might have sent a sobering message to the Greek government and its people to avoid overstretching themselves and therefore might have avoided a near breakdown of their economic and financial systems. 4. Hong Kong also experienced market failure in 1998, a year after the Asian financial crisis had severely hit a number of regional economies. Although Hong Kong managed to stand on its feet after the crisis, market confidence and sentiment were weak. International predators, with meticulous preparation and organisation, launched an attack on the Hong Kong dollar and our financial markets. They first discreetly borrowed Hong Kong dollars and waited for the right moment to profit by short selling the currency and attacking our Linked Exchange Rate System. At the same time, they built up substantial short positions in the stock and futures markets. These global predators also spread doomsaying through the Hong Kong media to stoke panic among Hong Kong people, creating an environment ripe for their short selling activities. The Hang Seng Index (HSI) dived 50% to 8,000 in August 1998 from 16,000 a year earlier and the predators boasted they would push down the HSI by another 50% to 4,000, which was an extremely low level. Aggregating the earnings of all listed companies, when the HSI was at 8,000, the price-earnings ratio was eight, and if the Index fell another 50%, the ratio would drop to just four.

Why does financial literacy matter? It is more than clear that the absence of understanding of the basic financial concepts erodes our capability to make proper and well-informed choices in terms of savings, investment, and borrowing. The costs of these choices are not confined only to individuals, but they can have systemic implications, eroding the overall financial stability. The translation of these misinformed decisions into systemic risks is exactly one of the main reasons why financial literacy became the mainstream in the past decade. The pre-crisis credit boom was supported by irrational exuberance and overconfidence of “never ending” rise in assets prices and low financing costs. The credit boom turned into credit bust, and the consequences of the “bubble – burst” are still with us. According to the latest IMF map of weak spots, heavily indebted households are still the main source of vulnerability in many systemically important advanced and emerging economies, and potential source of next financial crisis. Apparently, being financially literate and informed, can help in preventing, or at least mitigating the occurrence of such “weak spots”. To bring the issue closer to the regional context, let me remind us of the “episode” of excessive borrowing in Swiss francs that occurred in several countries in the region (Hungary, Croatia, Serbia, Poland), amidst low interest rates and assumed stability of the exchange rate. Hence, the last crisis clearly demonstrated that many agents are not fully aware of the consequences of their financial decisions.
[18] Rather monetary policy should focus on containing the so-called second round effects of energy price rises, which follow from firms and households seeking to avoid the squeeze on their real incomes stemming from higher energy bills by passing on energy cost rises in the form of higher prices and bidding for stronger wage and margin growth. The danger that these second round effects become embedded in price and wage dynamics creates the threat of a self-sustaining momentum in headline inflation which justifies a monetary policy response, even as the initial impulse from the energy price recedes. In the language I have developed above, the appropriate monetary policy response depends on the magnitude of intrinsic inflation persistence in response to the energy price shock. The greater that intrinsic persistence, the stronger the monetary policy tightening required. The benchmark for assessing the intrinsic persistence of inflation in response to an energy price shock is captured within our standard price and wage models. [19] But these models are estimated on data for the past thirty years, where UK inflation has generally remained close to the 2% target. A key policy question in the current situation revolves around how much we can trust these models now that the deviation of inflation from target is larger, owing to the magnitude of the energy price shock. As I have discussed on previous occasions,[20] one influence on this judgment is that state of the economy. The UK labour market is currently very tight by historical standards, with unemployment close to fifty-year lows.

Huw Pill: Monetary policy - an anchor in challenging times Speech by Mr Huw Pill, Chief Economist and Executive Director for Monetary Analysis of the Bank of England, at the Scottish Council for Development and Industry, Glasgow, 12 October 2022. *** Good afternoon everyone. It is a great pleasure to be with you in Glasgow today. My thanks to the Scottish Council for Development and Industry for their invitation to speak, to the University of Strathclyde for hosting us, and of course to all of you for taking the time to attend. I am looking forward to our discussion. I have spent the past couple of days here in Scotland talking with firms, speaking to business leaders and engaging with our Citizens Panel. As you can imagine, some of those discussions have been challenging. We are living through challenging times. The invasion of Ukraine has led to a dramatic rise in European wholesale gas prices. Household incomes are being squeezed by higher energy bills. Company profits are being squeezed by higher energy costs. And headline inflation has risen to unacceptably high levels. For a net importer of energy like the UK, the rise in global energy prices weighs on national income: the cost of what we are buying from the rest of the world has risen dramatically relative to the price of what we are selling. You don't need to be an economist to understand the implications of this for domestic demand. Higher energy prices dampen household spending, and weigh on economic activity.
These increases underline our determination to ensure the timely return of inflation to our two per cent medium-term target. The elevated level of uncertainty reinforces the importance of a data-dependant approach to our policy rate decisions, which will be determined by our assessment of the inflation outlook in light of the incoming economic and financial data, the dynamics of underlying inflation, and the strength of monetary policy transmission. The asset purchase programme portfolio has been declining at a measured and predictable pace since March 2023, as the Eurosystem is no longer reinvesting all of the principal payments from maturing securities. Regarding the pandemic emergency purchase programme, the Governing Council intends to reinvest all principal payments from maturing securities purchased under it until at least the end of 2024 and will continue applying flexibility in reinvesting redemptions. We are monitoring current market tensions closely and stand ready to respond as necessary to preserve price stability and financial stability in the euro area. The euro area banking sector is resilient, with strong capital and liquidity positions. In any case, our policy toolkit fully equips us to provide liquidity support to the euro area financial system if needed and to preserve the smooth transmission of monetary policy. Economic activity  1/4  BIS - Central bankers' speeches  Growth in euro area GDP slowed progressively over the course of last year and stagnated in the fourth quarter.

Stronger than expected pipeline pressures or higher than anticipated increases in wages or profits could drive up inflation, while financial market  2/4  BIS - Central bankers' speeches  tensions and falling energy prices could lead to faster disinflation. At the same time, most measures of longer-term inflation expectations currently stand at around two per cent, although they warrant continued monitoring. Euro area banking sector, non-bank financial sector and financial stability Euro area banks remain resilient in the current market environment thanks to strong capital and liquidity positions. Since the start of the ECB's policy rate hiking cycle, euro area bank profitability has been boosted by higher interest margins, while the change in impairments and provisions has been rather muted so far. However, in the current environment of tightening financing conditions including for banks, credit risks have increased, and lending dynamics have substantially weakened, which may weigh on future bank profitability. The decrease in bank lending to firms has, in general, not been offset by an increased recourse of firms to market-based financing, despite a bout of corporate bond issuance in the fourth quarter of 2022. Looking ahead, the decline in the asset purchase programme portfolio will increase the share of debt issuance that needs to be absorbed by investors. Based on their past behaviour, investment funds appear able to absorb part of such an increase. At the same time, in spite of some reduction in exposure to higher-risk assets, structural vulnerabilities in the non-bank financial sector remain elevated.
Let me now spend a few words on the OMT programme in particular. It is important to emphasise that the design of the Outright Monetary Transactions programme creates the right incentives for governments to improve their performance with respect to fiscal prudence and structural reforms. In fact, OMTs will only be activated in cases where the beneficiary country has signed up to strict and effective conditionality  BIS central bankers’ speeches  3  attached to an appropriate EU/IMF lending programme. They can also be considered for Member States currently under a macroeconomic adjustment programme, but only once they have regained bond market access. Moreover, the design of OMTs entails interventions only in the relatively short end of the government bond market – up to three years’ time to maturity – and they will be fully sterilised, meaning that the Eurosystem would absorb all amounts of liquidity injected by OMTs. Since the announcement of the OMT programme, financial market conditions in the euro area have improved significantly, sovereign spreads have declined substantially and there are some signs that the process of financial fragmentation in the euro area is being reversed. It is important to recognise that the role of policies other than monetary policy being implemented in the meanwhile, at both national and euro area or EU level, have also materially contributed to restoring confidence in the euro area. 3.

The current account figures for the second quarter of this year offer a good illustration for this phenomenon - the primary current account deficit was 7% of the GDP - more than 6 pp below the actual deficit. At the present time foreign investors are taking into account the perspective of Estonia's EU membership within the near future, the optimistic growth forecasts and continuing increase of living standards. Due to favourable financing conditions, total investment activity has recently been the highest since the beginning of the transition period - during the first quarter of 2003 investments together with stock building accounted for 38% of the GDP in Estonia. At the same time, a number of small and medium-size enterprises are bringing their production plants in line with EU requirements. And of course, borrowing at the present low interest rates is very attractive to private individuals. But despite all the exceptional one-off factors behind the present high external deficit figures, we must not close our eyes to the fact that the level IS high. And reducing the imbalances - with all the attendant stress on increased public and private savings - is presently one of the main priorities for Estonia. BIS Review 42/2003  1  It must be stressed, in this context, however, that one indicator taken alone - even if it were an indication of possibly unfavourable developments - would not give an adequate picture of the relative health of an economy.
This time round, the strong credit market from 2003 to 2005 have lulled investors into placing big bets in high-yielding structured credit instruments, on the assumption that such favourable credit conditions will continue unabated. The second point is on proper risk assessment. Back in 1997, lenders were providing funds without executing necessary scrutiny or appropriately balancing the risks against returns. Likewise, the recent credit turmoil has highlighted the importance of assessing risks. The  BIS Review 11/2008  1  distribution of risk through leveraged structured vehicles or conduits, and complexities in the structures have made it extremely difficult for investors to disaggregate the risks in times of stress and volatility. As a result, over-reliance has been placed on financial models and ratings without full comprehension of the risks of the product and misunderstanding the scope of the ratings that measures default risk. Third, excessive leverage in both crises has exacerbated the problems triggered by the mounting default rates. Excess liquidity led to massive domestic lending; at the same time, investors geared up aggressively and bet on continually rising asset prices as collateral. When the crisis broke, the use of leverage accentuated the losses, which led to widespread risk aversion and uncertain market sentiments. The loss of confidence along with the repricing of credit risk have intensified the volatility in the financial markets; and this contagion spread rapidly beyond the structured credit space and across markets. So what does all this mean for Asia?

Lim Hng Kiang: Singapore’s significance in Asia against the background of global financial crises Keynote address by Mr Lim Hng Kiang, Deputy Chairman of the Monetary Authority of Singapore and Minister for Trade and Industry, at the 5th Annual Citi Asia Pacific Fixed Income Investor Conference, Singapore, 28 January 2008. *  *  *  Distinguished guests, Ladies and gentlemen, Good morning and a very warm welcome to everyone here today, especially to our guests from abroad. I am very pleased that Citi is holding its Annual Asia Pacific Fixed Income Investor Conference here in Singapore for the second time. I am confident this conference will serve as an excellent platform, through the dynamic discussions and exchanges of views, to conceive fresh ideas and to establish new business relationships. The landscape of the Asian bond markets has evolved rapidly over the last ten years. The Asian Financial Crisis in 1997/98 has highlighted the need to develop deep and liquid domestic bond markets; to serve as an alternative source of financing and to alleviate the overdependence of short-term or foreign currency bank borrowings to meet long-term funding needs. The over-concentration of credit risks within the banking sector in 1997, entailing currency and maturity mismatches, contributed to the severity and contagion of the crisis. When the crisis broke, turmoil in the currency markets quickly spread through the stock market, the corporate and banking sectors. But, Asia made a remarkable recovery.
The consideration of robustness also implies that monetary policy seeks to mitigate the risk of a build-up of financial imbalances. Hence, house price inflation and debt growth are also important for monetary policy. Norges Bank weighs the different types of risk against each other. Six years have now passed since the global economy was hard hit by the financial crisis. The Norwegian economy has fared well in the years following the financial crisis, stimulated by vigorous activity in the petroleum industry. Growth has slowed in recent years and a decline in oil investment will result in low growth for a period. Against the background of weaker growth prospects for the Norwegian economy and reduced foreign interest rates, Norges Bank lowered its forecast for the key policy rate through 2014 and reduced its key policy rate in December 2014. Chart: Money market rates for trading partners Global economic growth remains moderate, but there are wide differences across countries. The sharp fall in oil prices is positive for most of our trading partners, but is dampening activity in oil-producing countries at the same time. Growth in the US is now on a firm footing, even though developments have been slightly weaker recently. An expansionary monetary policy appears to be working and both consumption and investment have picked up. Unemployment has declined. Euro area activity is picking up, but growth remains low. Household consumption is on the rise, while business investment remains at a low level.

This is contributing to keeping interest rates low in Norway too. Chart: Oil price and import-weighted exchange rate index (I-44) The sharp fall in oil prices since summer 2014 has affected the outlook for the Norwegian economy. The fall in oil prices came on top of a planned downscaling of activity in the Norwegian oil sector. After expanding rapidly over several years, oil investment and activity in the sector are now set to be at a considerably lower level over the next few years. This will have negative spillover effects on the mainland economy. Monetary policy cannot assume a primary responsibility for delivering necessary structural changes in the economy. But through the effects on the exchange rate, monetary policy can provide a push to restructuring in the business sector. The prerequisite for a pronounced weakening of the krone concurrent with low interest rates is continued confidence that inflation will remain low and stable over time. Let me now turn to a more detailed account of the monetary policy pursued over the past year. Monetary policy in 2014 was marked by steadily lower foreign interest rates and weaker domestic growth prospects. Chart: Petroleum investment The Norwegian economy broadly followed the path projected at the start of 2014. But the picture changed just before summer. Ahead of Norges Bank’s monetary policy meeting in June, information indicated that oil investment would fall markedly in 2015. High cost growth and focus on improving profitability prompted oil companies to scale back their investment plans.
Unlike its peers, the leverage ratios in Turkey stayed at moderate levels  BIS central bankers’ speeches  3  during the period of excess global liquidity, thanks to prudent policies of the Banking Regulatory and Supervision Agency and the Central Bank of Turkey. In fact most of those policies implemented in Turkey since 2002 are incorporated into the Basel III principles, such as countercyclical buffers (banks in Turkey are not permitted to expand unless their ratio is at least four percentage points above the legal minimum) and liquidity ratios (both in local and foreign currency). Debt level of the public sector was also reduced significantly thanks to a quite ambitious fiscal discipline. The real strength of the economy, however, came from the management of foreign exchange risks, which is the most critical aspect of a small, open economy. Thanks to prudent regulations and oversight, the overall FX position of the Turkish banking sector was balanced. Households carried a long position in FX, limiting their exposure to curreny shocks. Although the corporate sector carried a significant FX position, their debt was mainly in long term. All these factors contributed to the resilience of the Turkish economy to the global crisis, which in turn provided ample space to the Central Bank of Turkey to implement front-loaded and aggressive monetary easing without compromising price stability objective. No rescue package was needed to support the banking system. Thus, the government was able to enact modest but still quite effective counter-cyclical fiscal policies in the midst of global turmoil.

Should all authority and responsibility related to financial stability be centralized and vested in central banks? On the one hand, the benefit of vesting the decision making power and responsibility under one institution, which happens to be the central bank, is clear: no coordination problem, more effective communication under one voice, and swift response to emergencies. There are also downsides to such approach. The distinction between “goal independence” and “instrument independence” lies at the foundation of what we call central bank independence today. If central banks assume all regulatory and supervisory activities regarding the financial system and becomes the only authority responsible for its oversight, the instruments needed to achieve that goal may reach to a point where the principles of democracy necessitates a much closer coordination and cooperation with the government, blurring the central bank’s independence. Expanding the role of central banks in the economy has the potential to create a strong and out of the ordinary entity in a democracy that emphasizes accountability and the responsibility of elected officials. Central banks played a vital role in maintaining financial stability in the past and they are likely to do so in the future. The optimal use of policy rates and macro-prudential tools to achieve both the price and financial stability would define the criteria for assessing the success of central banks in the post crisis era. During the crisis, new monetary tools have been explored by the central banks.