samchain/econo-pairs-v1 huggingface dataset:
OECD projections, in fact, point to a reduction in saving rates of between 5 and 12 percentage points of GNP over the period 1980 to 2025. Such a contraction could lead to a vicious circle, as the resulting higher interest rates reduce investment, adversely affecting economic growth and, in turn, the ability to finance social security commitments. Ageing could also have a negative impact on financial markets. Pension funds are at present major players in most stock markets. As the baby boom generation retires during the current decade, most of these funds will have to gradually liquidate their assets, probably leading to downward pressures on share prices. This would in turn create a negative wealth effect, as declining asset prices dent the purchasing power of households and give rise to a reassessment of consumption patterns. The simultaneous decline in fertility rates, meanwhile, is expected to adversely affect the supply of labour and its quality. A smaller labour force would act as a drag on potential output growth, and impact negatively on competitiveness by tightening labour market conditions, leading to upward pressures on wages and inflation. An older work force is also likely to be less mobile and flexible, albeit more experienced. Policy measures to address the challenge In economic terms, population ageing is tantamount to a negative supply shock, of which the fiscal impact is but a manifestation. More fundamentally, the ageing phenomenon undermines the economy’s productive base and its competitiveness.

I will then turn to financial stability, which is essential for the effectiveness of monetary policy (by preserving its transmission channels). Finally, I will talk about economic stability and the way monetary policy, in combination with fiscal policy, can smooth the business cycle and foster a robust and sustainable recovery from the covid crisis. Clearly, these different aspects are closely intertwined: monetary policy, while pursuing its primary objective of price stability, can affect financial stability; fiscal and monetary policy closely interact with each other, as do monetary and macroprudential policy. But for the sake of clarity I will tackle each concept in turn. I. Price stability To achieve the ECB inflation objective, we are determined to maintain, as long as necessary, a very accommodative monetary stance. We continue to stand ready to adjust all of our instruments, as appropriate, including possibly a lowering of the DFR if needed. And to guarantee the full transmission of this accomodative stance, we pay particular attention to ensuring that both bank and market financing conditions remain favourable for all agents (governments, firms and households). This leads us to monitor a large set of indicators, with a multifaceted and holistic approach. Let me add some comments about the recent increase we have seen in long-term rates, following although to a lesser extent the move in the US. This increase has different causes, and hence calls for different reactions and instruments.
Unfortunately, most of these movements are not driven by facts, but perceptions. In ringgit’s case, I would call it misperceptions. Perception is the thinking we make based on the information that we receive. Everyone thinks. It is our nature to do so. In fact, many of us in this room not only have to think, but we are tasked and compensated to think, decide and act upon our thoughts. It is said that an adult supposedly have to make an average of 35,000 decisions per day. This necessitates us to think fast and decide quickly. But studies have also shown that thinking forces the brain to consume a lot of oxygen, so much so that the process of thinking is tiring for our brain. Such decision fatigue can be paralysing. To ease the decision fatigue, most of us begin looking for mental short-cuts, heuristics and simple rules-of-thumb to ease the cognitive load and cut decision-making time. But as we rely on simple rules-of-thumb to form judgments and make decisions, we leave ourselves vulnerable to errors, manipulations and cognitive biases. Most of the time, this is not done deliberately. The large body of research in neuroscience seems to suggest that these cognitive biases are neurologically hard-wired, afflicting us all either consciously or unconsciously. Let me touch on three instances where our perception and actions have been influenced by these biases. First, take some of the psychological thresholds for example, loan-to-deposit ratio of 90%, ringgit level at RM4.00, and reserves level below USD100 billion is considered as vulnerable.

Consequently, lower oil price reduces foreign exchange earnings of the country and government’s revenue from the oil industry; Second, there is this perception, even among FX dealers and traders, that the offshore market knows how to correctly price or is better at valuing the ringgit. Despite its opaqueness and suspicious pricing, the offshore market is perceived to be better, bigger and deeper than the onshore market, and that its price discovery process is more robust in indicating the direction of the ringgit. As a result, the onshore market is looking offshore for guidance on the direction and pricing of the ringgit. Third, there is also the perception that the onshore market lacks the necessary liquidity, and with the decline of the offshore market, this negative perception has been driving the ringgit exchange rate weaker. The lack of liquidity has been attributed to the inability for our forward FX volume in the onshore market to replicate the offshore market; Fourth, the significant non-resident participation in the onshore bond market is the main reason for the market’s liquidity. Consequently, the market perceived that the reversal of NR holdings will have negative bearing on the ringgit and market liquidity; And last but not least, the gross misperception on the adequacy of the reserves. There is this perception that reserves of less than USD100 billion is not sufficient to provide comfort to investors. Accordingly, market pessimism reaches new levels when it falls below the threshold.
We therefore consider that the high oil price will subdue international growth to some extent in the coming year but will not entail any dramatic adjustment. However, the difficulty in assessing the effects of the high oil price does make this a central element in our picture of risks. Uncertainty still also prevails about the consequences of the saving imbalances in the world and above all the large deficit on the US current account. An adjustment of current-account balances would probably involve a weakening of the US dollar’s real exchange rate, through either lower US inflation relative to the rest of the world or a fall in the dollar. An adjustment of the imbalances would  4/5  also be likely to raise the very long-term interest rates. If these changes were to occur quickly and unexpectedly, there would be a risk of decreased world market growth. The Swedish economy Signals of an economic slowdown last spring were also evident in Sweden but in June we counted on the dip being temporary, with a subsequent renewal of growth. So far, the new statistics since then seem to confirm our assessment. The second-quarter national accounts show that growth strengthened about as much as we had expected. An acceleration seems to have begun in the growth of private consumption, accompanied by a continuation of the last year’s upswing in investment, with a spread from residential construction to the corporate sector in general.

This pattern is to be expected in particular when the driving force comes from lower interest rates: rising house prices augment house-hold wealth and together with low interest rates this points to increased house-hold consumption. The consumption ratio has been low, however, ever since 2001 despite the increased lending and higher house prices. That households both borrow and save so much and do so simultaneously may seem paradoxical. The major share of the loans is probably  3/5  connected with house purchases in the second-hand market. The cash flows that are generated when borrowing rises without a corresponding aggregated counterpart in the financing of new housing can be used for either consumption or financial investment. At the aggregated level it accordingly looks as though in recent years loans have gone to saving. We have seen the same development in, for example, the UK. We have no simple explanation of what underlies this. One conceivable explanation is that the stockmarket fall in 2000 and the subsequent economic slowdown stimulated prudential saving on account of labour market uncertainty and also led to increased saving by those who were directly hit by the share price fall. Population groups that are approaching retirement, for example, may have increased their saving in financial assets in order to restore their wealth after the stockmarket fall. Moreover, many elderly people may have chosen to move to a cheaper dwelling and thereby converted some of their real wealth into a financial asset.
Next January we will be 17, with Estonia joining. This highlights the challenge of permanently strengthening and deepening the governance of the euro area, with new economies coming in. Financial Times: Before we talk about governance, let me ask you some specific questions about the crisis management measures. How are you going to reduce the dependence of the likes of Greece, Portugal, Spain, Ireland on extra liquidity provided by the ECB? Jean-Claude Trichet: As you know, the European economy relies very much in terms of financing on commercial banks. So it’s not surprising that our own “non-standard measures” concentrate much more on bank refinancing than on intervening in markets, in comparison with the Fed. As markets gradually stabilise, our non-standard measures, which are fully consistent with our mandate and, by construction, temporary in nature, will continue to be  BIS Review 115/2010  1  progressively phased out. So we are accompanying the market as it progressively goes back to normal. But, as I said already, it is a process which takes time. Financial Times: Do you have in mind, though, a need to phase out “non-standard” refinancing and do you have a sort of time horizon for this? Jean-Claude Trichet: We of course have to consider all those measures as transitory. They are there to cope with a situation which is abnormal – to help correct those markets that are dysfunctional and thereby help restore a more normal transmission mechanism for our monetary policy.

Ravi Menon: An effective and inclusive transition to net zero Keynote speech (virtually) by Mr Ravi Menon, Managing Director of the Monetary Authority of Singapore, at the Green Horizon Summit@COP26, 4 November 2021. * * * Lord Mayor William Russell Dr Rhian-Mari Thomas Ladies and gentlemen, Good afternoon from Singapore. Asia is key to the world’s transition to net zero. The region accounts for about half of global carbon emissions, and more than half of global energy consumption. The battle against climate change will be won or lost in Asia. Asia’s transition to a lower carbon future will not be easy. About 85% of the energy produced comes from fossil fuels, and demand is likely to rise on the back of continued urbanisation. Some 45 million people in South East Asia are still without electricity. Asia must find ways to transit towards greater sustainability while securing economic and social development for its people. Green finance can be a powerful enabler for Asia to achieve an effective yet inclusive transition to net zero. Singapore as an international financial centre in Asia is committed to support Asia’s transition through its Green Finance Action Plan. The Monetary Authority of Singapore is actively promoting a strong green finance ecosystem in Singapore to serve Asia. A growing number of global financial institutions are expanding their green finance teams in Singapore to support Asia’s transition towards lower emissions.
We delegated proxy voting for equity investments to investment managers that have signed up to the United Nations Principles for Responsible Investment, requiring them to incorporate environmental, social and corporate governance (ESG) standards into their voting policies. And, together with our external asset managers, we are considering broadening the options for ECB staff to invest in sustainable financial products. For our own funds portfolio, which consists of the ECB’s paid up capital and general reserve fund, we have started an internal investigation on how ESG criteria could be implemented in the future.28 Purchasing green bonds from a number of eligible issuers could be an option, as long as the markets are deep and liquid enough. And we could potentially expand our investment universe to other asset classes where the ESG-compliant investment space is broader. Work conducted under the first work stream – that is, the development of a clear and transparent taxonomy – will help accelerate progress on this front. Now, when it comes to our policy portfolios, our objectives are different. The main purpose of our foreign reserves is to ensure that the ECB, at any given point in time, has sufficient liquidity in foreign currency to conduct foreign exchange operations if needed. Our portfolio is therefore composed of the most liquid and creditworthy fixed income assets in a few major currencies, leaving little room for climate-related objectives.29  6/9  BIS central bankers' speeches  This much is probably uncontroversial.

17 This is despite oil price shocks having had on average much less impact on the economy, largely thanks to the  8/9  BIS central bankers' speeches  enhanced credibility central banks have gained over time. See, for example, Choi et al. (2017), “Oil Prices and Inflation Dynamics: Evidence from Advanced and Developing Economies”, IMF Working Paper No 17/196. 18 See, for example, Bielen et al. (2017), “The Future of Power Markets in a Low Marginal Cost World”, Resources  for the Future Working Paper 17–26; and Archer, C. and M. Z. Jacobson (2005), “Evaluation of global wind power”, Journal of Geophysical Research, Vol. 110, pp. 1-20. 19 See, for example, the Platform for Climate Adaptation and Risk Reduction on www.placard-network.eu. 20 Google, for example, managed to reduce its energy consumption by more than a third by optimising its cooling  system through artificial intelligence controlled systems. 21 On the positive side, however, the associated increase in the economy’s trend growth rate will help lift the  natural rate of interest, thereby increasing the policy space available for central banks to manage fluctuations in the business cycle. See also Cœuré, B. (2018), “Scars that never were? Potential output and slack after the crisis”, speech at the CEPII 40th Anniversary Conference, Paris, 12 April. 22 See the European Parliament resolution of 29 May 2018 on sustainable finance (2018/2007(INI)). 23 See Articles 11 and 127(1) TFEU and Article 3 TEU.
What would be the room for manoeuvre? There are tools which are aimed at the borrower or the lender. You have debt-to-income ratios, loan-to-value ratios, etc. There are also tax measures. If, on the one hand, you support lending by reducing taxation, it makes no sense to tighten lending with macroprudential tools on the other. One has to be consistent. Being consistent is the first rule of governance. If monetary policy is loose, as it is now, and on top you also have loose fiscal policy, and on the supervisory side you deregulate or have very lax supervision, then you’re asking for trouble. That’s exactly what caused the last financial crisis: 1/5  BIS central bankers' speeches  the combination of loose fiscal policy, accommodative monetary policy and lax supervision. How exactly does the ECB assess the risk of Brexit? First, we need to know what the UK is requesting. Second, we need to know what is happening during the transition period – if there is one. If there is no deal and there is a hard Brexit, this will harm both sides. There will be a need for some legal clarity. For instance, will contracts still be valid and, if so, how could they be implemented? The private sector solutions could be extremely difficult and cumbersome. But there could also be a need for a public sector response, e.g. some recognition or grandfathering of existing contracts. When do you start this grandfathering?

But if people do not distinguish between the two things – and this is why I don’t like the word “currency” for these schemes – it would undermine confidence in the official currency. 3/5  BIS central bankers' speeches  And some of those who promote these new schemes want a currency which is not controlled by a government. So it’s a slightly sympathetic anarchic or libertarian approach, but unfortunately there is no libertarian law enforcement and there is no libertarian world government. You said in London last month that virtual currencies were not real money and that they wouldn’t be for the foreseeable future. So what would have to change for them to be considered money, what would need to be implemented? Without a trusted authority backing the stability of a so-called currency, an institution whose primary objective is to do just that, you don’t have a currency. A currency has three functions: a unit of account, a store of value and a medium of exchange. These tokens don’t fulfil any of the three functions, as I said in London. There is another sector growing without proper authority, and that’s shadow banking. A recent study has shown that it’s growing, and that the Luxembourg market – which is for the first time included in the study – could represent 7.2% of all shadow banking. How would you judge whether activities like securitisation represent a threat to financial stability? Let me first say that you cannot call everything that is not a bank a shadow bank.
The Ministry of Finance decides how the fund is to be managed and lays down guidelines in a mandate for Norges Bank. The Bank is tasked with making investment decisions and exercising the fund’s ownership rights. Norges Bank’s Executive Board sets the limits for the Bank’s asset management within the guidelines in the mandate. Operational management and investment decisions linked to individual companies are the responsibility of the Bank’s investment management organisation – Norges Bank Investment Management (NBIM). Chart: Management objectives Central to the mandate is the benchmark index. It is set by the Ministry of Finance and is constructed on the basis of sub-indexes from external index providers. The benchmark index divides the funds’ assets into global investments in equities and bonds. On the equities side, the benchmark index comprises 8 000 companies in 47 countries. The Ministry also sets risk limits for the Bank’s asset management. The objective of the management of the fund is to achieve the highest possible return net of costs within the limits set in the mandate. Chart: Enhanced indexing The fund’s investment strategy reflects the mandate’s requirement to track the benchmark index fairly closely. Since the fund is subject to an index-tracking requirement, the fund’s return largely follows the return on the benchmark index. Moreover, fluctuations in the benchmark index provide a good proxy for the risk in the fund. But this does not mean that asset management is unimportant. On the contrary. Even minor deviations from the benchmark portfolio can have a large impact over time.

Mark Carney: The European Union, monetary and financial stability, and the Bank of England Text of the Cairncross Lecture by Mr Mark Carney, Governor of the Bank of England and Chairman of the Financial Stability Board, St Peter’s College, Oxford, 21 October 2015. *  *  *  I would like to thank Ben Nelson and Iain de Weymarn for their assistance in preparing these remarks, and Aaron Clements-Partridge, Rashmi Harimohan, David Ronicle, Thomas Smith, James Talbot, Ryland Thomas, Nicola Anderson, Phil Evans, Richard Blows, George Murphy, Mike Flood, Peter Nagle, Nicola Shadbolt, Sinead Meany, Jumana Saleheen, Dennis Reinhardt, Bob Hills and Siobhan Clark for their work preparing EU Membership and the Bank of England. 1. Introduction  It is a great honour to give this Cairncross Lecture in Wren’s exquisite Sheldonian Theatre. Sir Alec Cairncross was a celebrated economist whose career bestrode public service and academia. Born to a Lanarkshire ironmonger in 1911, he rose, via Glasgow University and Cambridge, to serve as the first head of the Government Economic Service and later, much more illustriously of course, as Master of St Peter’s College. His work serves as a reminder of how enduring are the most trying economic questions we face. His PhD thesis, eventually published after great anticipation in 1953, concerned British investment at home and abroad during the last great wave of globalisation – a Golden Era for global commerce that stretched from Canadian Confederation to the eve of the Great War.
This is an area where the Eurosystem and the European Commission have taken significant measures, but integration continues to be affected by legal, fiscal and technical issues. An important set of issues on which the panellist may want to comment relate to the regulatory reform process, where the G20 provides the strategic impetus, the Financial Stability Board (FSB) plays an important role in policy coordination, and the Committees and working groups (such as the Basel Committee on Banking Supervision, which is the emblematic Global Committee) the review of specific international standards. Important regulatory reforms are underway in Europe, as well as in the United States, and I want to elaborate on them because they have important implications for the ECB. As you know, the proposed reform for the financial supervisory framework in the EU will be based on two pillars. The micro-prudential pillar, the European System of Financial Supervisors (ESFS), will be composed of the national supervisors and three European Supervisory Authorities (ESAs). The European Systemic Risk Board (ESRB) will form the macro-prudential pillar. Under the proposals of the European Commission, the ESAs will carry out a range of activities, including the issuance of binding and non-binding rules which will provide the basis of a so-called “single EU rulebook”. The ESAs will further promote a consistent application of EU legislation and of a common supervisory culture, and provide for mediation in the case of disagreements between national supervisors.

Jean-Claude Trichet: Financial integration, development and stability – lessons from the crisis (introductory remarks) Speech by Mr Jean-Claude Trichet, President of the European Central Bank, at the conference “Financial integration and stability: the legacy of the crisis”, sponsored and organised by the European Central Bank and the European Commission, Frankfurt am Main, 12 April 2010. *  *  *  Ladies and Gentlemen, I would like to welcome you to this conference on financial integration and stability, jointly organised by the ECB and the European Commission. I would like to thank in particular Commissioner Barnier for participating in this event, and his services for the smooth coorganisation of it. This joint conference is an illustration of the very good cooperation that exists since a long time between the two institutions. The European Commission is in the driving seat on all what concerns financial integration. The ECB also a strong interest in this topic, because of the implications for the single monetary policy, our primary mandate, and also on financial stability and the operation of payment systems, areas where we have a statutory responsibility. The very good cooperation between our institutions has intensified in the wake of the financial crisis. Let me just mention the recommendations and guidance we developed in the course of last year on support measures for banks in difficulties. This joint work limited the risk of unilateral and uncoordinated support measures by governments and was therefore crucial in maintaining a level playing field and in preserving the Single Market.