samchain/econo-pairs-v1 huggingface dataset:
Decisions made by the FOMC in Washington are equally as important for investors in New York as those in London, Tokyo, Rio de Janeiro, Shanghai or even Warsaw. Not only do the FOMC decisions influence US economy, but also — via the financial markets channel — the entire global economy. An unexpected increase in interest rates in the USA may bring about a sudden outflow of capital from the emerging markets, and thus weaken the currencies of those countries and increase their bond yields. Some economists 20 make the point that an important aspect of the growing internationalisation of financial markets is increased discipline, which is extorted by investors on governments and central banks in individual countries. According to this hypothesis, the financial markets, through their continuous valuation of securities, duly reward good and punish bad economic policies. However, the empirical results do not provide hard evidence to support the thesis on fiscal policy discipline. It may be stated, on the other hand, that financial globalisation may have contributed to the discipline of central banks and to “forcing” them to conduct a monetary policy focused on low and stable inflation 21 . At the same time, a significant risk related to the financial markets integration is the possibility to shift economic problems of one country upon other countries, which is greater than before (the contagion effect).

Today I would like us to look at globalisation from the perspective of a central bank, taking into consideration the objective of the central bank, its ability to contribute to the shape of the economy and the instruments that a central bank has at its disposal. To start with, let us consider what channels there are through which globalisation may impact the monetary policy and the central bank. 1  “Economic globalization is a historical process, the result of human innovation and technological progress. It refers to the increasing integration of economies around the world, particularly through trade and financial flows. The term sometimes also refers to the movement of people (labor) and knowledge (technology) across international borders.” According to: “Globalization: Threat or Opportunity?” IMF Staff, April 12, 2000 (Corrected January 2002). 2  See e.g. Mussa M. “Factors Driving Global Economic Integration” presented in Jackson Hole, Wyoming at a symposium on “Global Opportunities and Challenges,” August 25, 2000. 3  Economic Policy Committee “Responding to the Challenges of Globalisation”, November 2005. 4  Roach S. “The New Macro of Globalization”, Morgan Stanley Global Economic Forum, 6 June 2005. BIS Review 32/2006  1  Firstly, globalisation — through shaping real economic processes abroad, its influence on the global business cycle and commodity prices on global markets — influences the external environment of the national economy, which is monitored by the central bank and in which the central bank operates.
No disruption was observed in foreign direct investment inflow during the fluctuations in financial markets that started in May. This development is a result of the success achieved in macroeconomic stability and also an indicator of confidence in the future. The inflow of foreign direct investment is expected to accelerate further, due to increased privatizations, company mergers and takeovers. Meanwhile, it is observed that hot money inflows, which lead to frequent discussions about the financing of the current account deficit, have lost pace due to the change in global liquidity conditions. Including net errors and omissions, the ratio of hot money to current account deficit, which was 103 percent on an annual basis by June 2005, decreased to 27.8 percent by June 2006. We expect that the above mentioned financing structure, which is composed heavily of long-term capital and foreign direct investments, will also continue in the upcoming years in the framework of the structural transformation process in the Turkish economy and the European Union full membership process. While evaluating the rates of current account deficit, it should be taken into account that the macroeconomic conditions in Turkey are different from those of the past. First of all, the short position of the banking sector is very limited compared to previous years and the financial sector is much more robust. Tight monetary and fiscal policies are decisively implemented. Foreign exchange reserves are high and the floating exchange rate regime is successfully fulfilling its shock-absorbing function.

The Financial Services Academy, established today, jointly by the SEC and the IBSL is a great move in that direction, and I hope that the FSA would grow to be a leading institution in financial education not only in Sri Lanka but also in the region. 2  BIS Review 24/2007
The Bank and its staff will have to be good at risk assessment, due diligence, assets valuation, good at project financing and management, a good landlord, skillful in project monitoring and have the necessary expertise on specific areas such as construction, agriculture, manufacturing, fishing and other industries. Under this model, the banks created are very specialized with a set of expertise that they are not trained and possess. Its an entirely new “ball game”. Currently 71%, the bulk of financing in Islamic finance is fixed, only 29% is on a floating rate. In conventional, only 26% is fixed. This gives rise to the issue of mismatching. For as long as source of funds for Banks is floating and its asset gives fixed return, the risk of funding cost being more expensive than income is a very real possibility. Rate of Return Risk and DCR will become a challenge to overcome. Would an equity based approach significantly remove such risk? Most likely, it is an area of where the practitioners can develop and explore. Or whether the benefits of equity-based financing would outweigh the risks associated with the obviously higher risks posed by the structure. The shift from asset based financing to equity based financing does not mean that Islamic banks will operate without any risks. Whilst the risk of mismatching between floating and fixed will be greatly reduced, it does also mean that Islamic banks will be taking the unprecedented step of actually owning the assets for which they are financing.

The various Islamic finance centers operating around the globe must operate as one! We should allow a diversified number of players to operate in our market. Recognising the benefits of foreign competition and presence, we have announced a further opening of the Malaysian financial system to new players. Islamic banking market share in terms of asset vis-à-vis total banking asset as at the end of 2009 is 19.6% (2000: 6.9%) including DFIs. This data is very close to our target of 20% by the end of 2010. Domestic Islamic banks accounted for about 85% of market share in Islamic banking sector. Annual growth rate of Islamic banking assets was 20.8% per annum for the years 2000 to 2009. For takaful, the market share, although still small, it has shown significant progress of 7.9% and 11.09% in terms of asset & contribution respectively. Annual growth rate of takaful assets was 24.2% per annum (2000–2009). Total financial assets had also increase significantly. The Islamic sukuk is larger than the conventional PDS. What are the factors that contributed to the development of Islamic finance in Malaysia? One of the factors is a comprehensive legal, tax, accounting, regulatory and supervisory framework and this are well articulated and generally known. Let me attempt a few additional factors that might not be that well appreciated. It is the willingness of the players and the  2  BIS Review 49/2010  developers of Islamic finance to explore new initiatives.
Since it is forwardlooking the central bank can at least try to foresee future problems or structural changes and meet them through a rate adjustment. The ability to act quickly is essential, as monetary policy acts with some lag and the economic cost of increasing inflation becomes lower if it is checked at an early stage. Another benefit is that the central bank does not become as tied as with a rule, but instead can take account of alternative scenarios and risks. Moreover, these assessments can be regularly updated in the light of new information about economic developments.2  1  This is known as the Taylor rule. The US economics professor John B. Taylor is Under Secretary for International Affairs at the US Department of the Treasury. He has formulated a simple rate-setting rule that has come to be known as the Taylor rule and that has become very popular. This is one of many examples of monetary policy rules. 2  See the speech by Federal Reserve Board Governor Ben S. Bernanke, "The Logic of Monetary Policy" (2004). In his speech Bernanke discusses advantages and disadvantages of following a simple monetary policy rule compared with a forecast-based policy. See also Apel, M., Nessén M., Söderström U.

One source of concern for both the United States and the world as a whole is the large deficits in the US economy. In the third quarter last year the current account deficit totalled USD 165 billion, or around 6 per cent of GDP. Data for November show that the deficit has continued to grow, reaching a new record high of just over USD 60 billion. This may result in changes in interest rates and exchange rates that could have considerable consequences for world trade. A large share, or about 40 per cent, of Sweden’s exports go to the euro area, and as a result economic developments there are especially important for us. The recovery in the euro area economy is going slowly. Growth in the third quarter was lower than expected. Available indicators for the fourth quarter provide a mixed picture. Germany, which is an important market for Swedish products, is showing some signs of an improvement. After several years of extensive cutbacks there should be a pent-up need among firms to invest. At the same time exports are being dampened by the euro’s rise against mainly the dollar. BIS Review 10/2005  1  The economic situation in Sweden As regards Sweden the Riksbank has been positive in the past year in its outlook on economic developments. International demand has increased faster than anticipated, with above all exports of services proving unexpectedly robust. Economic policy is also contributing to the relatively bright growth prospects.
Secondly, my prejudice is to believe that regulatory structure should follow market structure, rather than the other way round. Regulators should seek to respond to changing markets which, in turn, respond to changing customer demand and new product availability, rather than seeking to dictate either. So we should always ask ourselves whether the regulatory framework we adopt makes sense to market participants, rather than requiring them to structure their business to fit in with some governmentally imposed view of the way product delivery should be organised. But I recognise that, in practice, we cannot avoid constant attention to the maintenance of the regulatory framework. Firstly, because while good structure will not necessarily generate effectiveness, a faulty, out of date framework will certainly make it very hard for regulators to do their jobs well. And, of course, the market is not in an ‘original condition’. The financial markets we have now are heavily conditioned by the legislative and regulatory framework within which they have grown up. That is particularly true in the United States. It is hard to imagine that, absent Glass-Steagall, regulation Q and all the rest, the financial landscape in North America would look as it does today. So I conclude that the debate on regulatory structure should be a constant dialogue between the markets and the regulators, but with a prejudice in favour of the former. Our ultimate task as regulators is to ensure that markets work efficiently, and in the interests of consumers.

Alan Greenspan last week talked of “umbrella supervision”, which he described as a “realistic necessity for the protection of our financial system”. (Of course we are not experts on umbrellas: it rarely rains in London, as you know.) But I also referred earlier to a “lead regulator” - though the term ‘co-ordinating supervisor’ is gaining currency in some quarters. As noted, one of the tasks of the Joint Forum is to define the role of such a person. So far there have been extensive discussions of the role. Among the possibilities suggested have been: Carrying out a quantitative and qualitative assessment of the group as a whole. (This is the consolidated supervisor’s role and, where there is already a consolidated supervisor, the lead regulator would normally be the same body); b)  Taking a primary role in managing emergencies should they arise;  c) Acting to facilitate the exchange of information between the relevant regulators in a group; d) (In the longer term) considering ways in which supervisors’ efforts could be better co-ordinated when looking at (e.g.) controls. It should be stressed that the existence of either a lead regulator or a consolidated supervisor in no way affects the legal responsibilities of the individual regulatory authorities which are responsible for regulating the different entities within the group. The objective is not to shift the balance of supervisory responsibility from host to home supervisors.
BIS Quarterly Review, March 2014. www.bis.org/publ/qtrpdf/r_qt1403f.htm Friedman, Milton and Anna J. Schwartz (1963). A Monetary History of the United States, 1863-1960. Princeton: Princeton University Press. Galbraith, John K. (1990). A Short History of Financial Euphoria. New York: Penguin Group. IMF, International Monetary Fund (2013). Do Central Bank Policies Since the Crisis Carry Risks to Financial Stability? In: Global Financial Stability Outlook, Chapter 3. www.imf.org/external/pubs/ft/gfsr/2013/01/  6  BIS central bankers’ speeches  Rajan, Raghuram (2013). A step in the dark: unconventional monetary policy after the crisis. Andrew Crockett Memorial Lecture, delivered at the Bank for International Settlements, Basel. www.bis.org/events/agm2013/sp130623.htm Stein, Jeremy C. (2012). Evaluating Large-Scale Asset Purchases. Speech given at The Brookings Institution, Washington, D.C. www.federalreserve.gov/newsevents/speech/ stein20121011a.htm Williams, John C. (2013). Lessons from the Financial Crisis for Unconventional Monetary Policy. NBER Conference, Boston. BIS central bankers’ speeches  7

Let me elaborate on where these challenges may come from. It is a well-known fact that the size of the banking sector in most post-communist acceding countries still remains far below the EU average. In the acceding countries, bank credit to the domestic private sector typically has a ratio of 30 to 40 percent of GDP, while the EU average is around 100 percent of GDP. This difference is to a large extent natural, reflecting the lower GDP levels of the acceding countries, their history, and the recent weaknesses in their legal and institutional environments. Nevertheless, it is quite likely that this legacy of the past will be overcome in the foreseeable future. The driving force might be the real convergence process. And perhaps more importantly, the acceding countries can capitalise on their reform achievements of recent years. Despite differences in their reform strategies and numerous transitional difficulties, most acceding countries have achieved great progress in building their financial systems. Their banking sectors are now mostly stabilised, privatised, and typically dominated by foreign ownership. Moreover, the acceding countries have also achieved considerable improvements in the functioning of their general legal and institutional frameworks. BIS Review 8/2004  1  Recent empirical studies by the IMF have shown that there might be scope for substantial convergence in bank credit in the acceding countries with EU levels. In some cases and in some periods, the real credit growth might reach as much as 30 percent a year, or even more.
The gradual increase of the capacity utilization rate in economy, as reported by business surveys, shows that there is more room at the current juncture for increasing private investment. Fiscal policy has been more prudent in 2010 owing to the narrower room for fiscal expansion and the public debt approaching the threshold of 60% of GDP. Despite the public sector’s positive contribution to sustaining economic activity, the fiscal indicators point to its lesser impact on economic growth. The Government’s prudent approach in the first eight months of 2010 in view of meeting the planned deficit figure for 2010 actualized in the annual reduction of public expenditure and budget deficit. The latter amounts to ALL 23.2 billion, which is within the projected figure in the budget and about 51% lower than in 2009. The 2010 state budget revision in July, which established the reduction of expenditure and budget deficit by 10% and 23%, respectively, is an expression of the fiscal authority’s firm commitment to safeguarding economic stability and ensuring fiscal sustainability in the long run. The high growth rates of exports and the contained performance of imports yielded a positive contribution of foreign demand to economic growth in the second quarter of 2010. Foreign trade data on July and August attest to moderate annual growth rates of exports and positive annual growth rates of imports, hence leading to higher trade deficit in this period.

The favourable liquidity situation facilitated the rapid transmission of the key interest rate cut to the interbank and the primary market, hence allowing for the reflection of this cut in other interest rates in the economy as well. The Bank of Albania considers that the inflationary pressures remain well contained all through the time frame of the monetary policy effect: the effect of supply-side factors is expected to be offset by the downward pressures arising from the performance of demand in economy. The projections for inflation and inflationary expectations remain well-anchored around the Bank of Albania’s target. Therefore, the central bank considers that monetary conditions in economy are adequate to warrant the safeguard of price stability in the medium-run and to boost economic development further. The Bank of Albania will, in response to actual and expected economic and monetary developments, continue to pursue a prudent monetary policy, thus providing the required monetary conditions for achieving the inflation target and safeguarding macroeconomic stability. 4  BIS Review 170/2010
This occurs not only inside Sweden but also in the form of teleworking from other countries in organisations that are located in Sweden. Teleworking makes it possible to use the labour force more flexibly over the business cycle, so that the work can be part-time when economic activity is low and full-time when activity is high. The third cause has to do with changes of institutions in a broad sense. A concrete Swedish example is that more and more collective agreements contain agreements on working time “banks”. According to these agreements, the number of hours worked for an employee can be redistributed over the business cycle. Another example is the emergence of temporary employment agencies in Sweden. From once upon a time being illegal, the industry is currently about 80,000 strong. In 2017, 250,000 were employed by the temporary employment industry in the areas of temporary staffing, career transition and direct recruitment. In Sweden, we have also seen greater labour supply among older people. According to the LFS for the first quarter of 2018, almost four per cent of those employed were between 65 and 74 years old. One can assume that their labour supply is very flexible. If we add all these explanations together, it is perhaps not so strange that the correlation between resource utilisation and nominal wage increases seems to have weakened in recent years. Other explanations also feasible But there are also other feasible explanations for the observation in Figure 4.

At the same time, however, employers are claiming that the inflation target is no longer an obvious startingpoint. According to the Swedish Association of Industrial Employers, it is instead competitiveness and wage outcomes in the euro area that constitute their benchmark. 3 The implications of this are not obvious. Ultimately, the outcome depends on each respective party’s negotiating strength. But since wage increases in Germany, for example, have tended to be quite modest and since the industrial sector’s wage agreements in turn constitute a benchmark for other collective agreements in Sweden, it is conceivable that this could have contributed to the flat Phillips curve since 2011 in Figure 4. In the long term, however, this should not be a major problem as the euro area has an inflation target of “close to 2 per cent”, i.e. very close to our own target. This should imply that wage increases will also be higher in the euro area going forward. But tensions may arise periodically, of course. All in all, therefore, there are numerous feasible explanations for why wage increases have been relatively low despite good economic development. But so far we have no definitive answer to why it is like this nor to how permanent the phenomenon is. Research on the Phillips curve ongoing As I mentioned, the discussion about the Phillips curve is international to a high degree. Quite lively debate has been taking place in various countries recently centred on intensive estimation of Phillips curves, using slightly different specifications and different methods.