samchain/econo-pairs-v1 huggingface dataset:
Even if some allowance is made for changes in velocity of money or money demand due to possible behavioral changes and financial sector development, the growth of money vs. the real growth of the economy and inflation cannot be explained for this period. 15  This was sufficient evidence that the strong and reliable relationship between the goal of price stability and the nominal anchor of money growth, which was essential for the success of the monetary aggregate targeting framework, has significantly weakened over time. This phenomenon was not limited to Sri Lanka, but was observed over time in many other economies as well. With the ending of monetary aggregate targeting in Canada in as early as 1982, Gerald Bouey, Bank of Canada Governor at the time famously stated “we did not abandon monetary aggregates. Monetary aggregates abandoned us.” Even the recent experience with quantitative easing in many advanced economies yet again proved that the tremendous expansion of central bank balance sheets that these countries undertook was insufficient to raise either growth or inflation. Earlier it was argued that Sri Lanka’s achievement of single digit inflation for 105 consecutive months had little to do with monetary aggregate targeting. Instead, it was a result of the Central Bank’s ability to anchor inflation expectations, by repeatedly emphasising its utmost desire to maintain inflation at mid-single digit  16  levels. The behaviour of the Central Bank during the 2008-2009 episode of disinflation would have raised credibility of monetary policy.

The first is that in the long run, monetary policy primarily affects nominal variables such as the price level and the exchange rate. However, this statement is not, strictly speaking, true, and it probably applies primarily to that which we can call “good” monetary policy. Bad monetary policy can probably have a lasting negative effect on GDP growth and living standards and other real variables that we consider important in connection with economic well-being and stability. An example of this is persistently high and volatile inflation or deflation of the type occurring around the world during the Great Depression of the 1930s. The second important point is that in the short term, monetary policy can affect real variables such as GDP growth, employment, the real exchange rate, and the current account balance. This is partly because monetary policy measures affect different prices at differing speeds, and BIS central bankers’ speeches  1  until full adjustment has taken place, relative prices and the real variables affected by them will change. An example of this is the impact of interest rate changes on the nominal exchange rate, which emerges quickly and changes the real exchange rate. To the degree that this change is in excess of what is compatible with underlying economic conditions, it will then gradually reverse with an adjustment in prices and wages. A similar story can be told about real wages.
Apart from the need for banks to avoid interruptions to their business, they are also having to cope with the impact of SARS on the volume of their business and on their balance sheets. Based on our discussions with the banks, the main effects have so far been as follows: •  Customer traffic in the branches has been reduced, which is limiting face-to-face contact with the customer and thus hampering efforts to sell wealth management products. The positive side is that use of internet banking is up, which provides the opportunity for banks to reach out to customers in a cost-effective way. While the potential of the internet was undoubtedly over-hyped during the tech boom, it is increasingly demonstrating its value as an alternative delivery channel. •  Loan demand has fallen further from its already low levels. In particular, demand for mortgage loans has dropped, which is not surprising since buying, or even viewing, new flats has not been uppermost in people’s minds in recent weeks. •  Credit card volume is down as people cut back on retail spending, restaurants, entertainment and travel. There are indications from some banks however that the amount of credit card spending may be beginning to pick up as people begin to venture out again. •  Asset quality may suffer if businesses go bust and more individuals become unemployed. SMEs in the most badly affected sectors of the economy, credit cards and mortgage loans are potential areas of vulnerability.

Hence, the farmers would concentrate on producing more of carrots and less of cabbages. But, when an economy is hit by inflation, all the prices would rise simultaneously, so both carrots and cabbages seem to be equally profitable. This would confuse the producers who would now be unable to make any choice between the two products. Hence, the much desired relative price change does not occur, when an economy has been hit by inflation. Instead, the absolute prices start to change and such changes do not provide the price signals for allocating resources. Fifth, continued inflation distorts the balance sheets of companies, especially the balance sheets of financial institutions. Companies may record profits in nominal terms, but a large part of such profits are eroded in real terms by inflation. When profits are adjusted for inflation, companies would find that their performance has not been so spectacular as has been depicted by the amount of rupees they have earned. In fact, their real position has pushed them backward to a lower level. Sixth, inflation very forcefully hits the vulnerable groups with a weaker bargaining power. Such categories include housewives, students, pensioners and workers whose salaries are not linked to inflation. It would lead to continuous agitation by these groups creating social and political dissension. The country, instead of using its resources for investing in long term growth generating projects, would have to spend its energy and resources for solving such social issues. Thus, inflation is the unrivalled public enemy number one.
At the same time as they have put a lot of effort into criticising the Riksbank’s policy, they have often said very little about how they themselves view the potential risks and how they should be managed.18 A common argument has been, to simplify somewhat: “Firstly, the risks probably aren’t so great, and if there are risks they can always be managed effectively by macroprudential policy.” Here I think one ought to be able to demand greater clarity from the critics. Do they think that there is no problem with this kind of upward trend? Or will the trend slow down on its own before problems arise, and, if so, what mechanisms will achieve this? If it slows down but at a level where debt and house prices are elevated, what risks will this entail? Is the fact that housing prices and lending have now begun to accelerate after the Riksbank cut the repo rate nothing to worry about? If there are nevertheless risks, how should they be managed? If macroprudential policy is so effective, exactly what measures should be implemented? And what dosage is appropriate? Are macroprudential policy measures enough, or do other policy areas also need to be involved? These questions are very relevant ones and I wish they had been given as much attention in the debate as the Riksbank’s monetary policy.

Instead, the post-crisis consensus emphasizes the use of monetary policy as a "preventive" tool for financial stability, that is, not to allow monetary policy to sow the seed of asset price bubbles. An important lesson from this crisis is that an over-extended period of low interest rates can distort risk perception, leading to excessive risk taking and costly financial imbalances. Beyond the reorientation of monetary policy, the post-crisis consensus advocates the use of macroprudential policy as the first line of defense against the buildups of financial imbalances. In comparison to interest rate measures, macroprudential policy can address sector-specific financial stability concerns more directly without excessive side effects on the overall economy. Macroprudential policy differs from traditional prudential regulation in that it adopts a systemwide or systemic perspective. The idea behind macroprudential policy is that while financial institutions may be individually safe, collectively they may be at risk due to herd behaviors and their interconnections. Here, the U.S. subprime crisis serves as a case in point. Regulators thought banks were safe because they had off-loaded their subprime credit risk exposures through securitization and unknowingly allowed the market to grow out of hand. From a system-wide perspective, the risk did not go anywhere as banks, in search for good yields during the low interest rate environment, invested in securitized assets issued by other banks. The situation was further exacerbated by the complex interconnections among U.S. financial institutions whereby the failure of one institution greatly increased the probability of failure of others.
3/7  But there is more to Basel III than this: there has been a move from a framework turning on a single metric, the risk-based capital ratio, to another comprising a set of requirements that should interact in a complementary fashion. As a result, a leverage ratio has been introduced which not only limits indebtedness, but also constitutes a non-risk-based capital requirement; two liquidity ratios have been incorporated (one short-term, and another that seeks to ensure a more stable funding structure); limits on large exposures have been set in place; and, finally, macroprudential capital surcharges have been included to prevent and mitigate both the risks derived from globally systemic institutions and those associated with excessive credit growth at the aggregate level. Risk sensitivity, complexity and comparability Given all these changes and regulatory innovations, was there anything left to do? The answer is yes, since following the onset of the global financial crisis in 2008, the soundness of the Basel framework was called into question, as was – more specifically – its risk measurement methodology. Almost 30 years ago, in 1988, the Basel regulations introduced the concept of risk sensitivity, assigning greater capital consumption to those exposures deemed to be of most risk. Under Basel I, this risk measurement was very simple, such that very few asset categories (those considered to be of least risk) had weightings lower than 100%.

04.10.2016  Finalising Basel III VII Expansión-KPMG Financial Meeting: “Transformation of the banking business model” Luis M. Linde Governor  Allow me to begin by expressing my gratitude for the invitation to inaugurate this VII edition of the Expansión-KPMG Financial Meeting. Last year we met, around these same dates, to analyse the move from “restructuring” to “transformation” of the banking sector. Today, the focus of the discussion is on “transformation”; and this is positive, as it shows that banks are already immersed in a process of change, enabling them to face the new landscape in the wake of the crisis. The conference programme identifies three areas that are key to the complex setting in which banks are now pursuing their activity. First, the search for profitability, which in a context of very low interest rates is a fundamental challenge for European and Spanish banks alike. Second, how to address the challenges and opportunities arising from growing technological innovation, a question to which the banking sector cannot remain immune. Third, adaptation to the regulatory changes that have come about as a response to the weaknesses identified in the wake of the international crisis that began in 2008. Regarding this latter area, I shall devote my address to the changes in the global solvency framework, not only because of their significance but also because of the timeliness of the matter. The Governors and Heads of Supervision comprising the body overseeing the Basel Committee on Banking Supervision met on 11 September.
Zamani Abdul Ghani: Changes and challenges concerning the insurance industry in Malaysia Keynote address by Mr Zamani Abdul Ghani, Deputy Governor of the Central Bank of Malaysia, at the 23rd Pacific Insurance Conference, Kuala Lumpur, 29 October 2007. *  *  *  Let me start by joining my colleagues from the Malaysian insurance industry in extending a very warm "Selamat Datang ke Malaysia" to all the guest speakers and conference delegates from abroad. It is my earnest hope that you will not only benefit from the deliberations during the conference, but also find time in between your short stay here to discover Malaysia and experience our rich diversity in colours and culture. I am indeed honoured to be with you this morning to officiate the opening ceremony of the 23rd Pacific Insurance Conference – the first to be held in Kuala Lumpur in the conference's 44-year history. I must congratulate LIAM for its efforts in organizing this prestigious conference involving insurance leaders from the Asia Pacific Region. The conference theme "New Solutions for Traditional Challenges: Winning Ideas from Industry Leaders" is most appropriate as the changing financial landscape poses significant challenges to the insurance industry in the Asia Pacific Region. It is indeed timely therefore that the life insurance fraternity has come together to share critical insights and perspectives of key challenges ahead and map out new strategies to capitalize on the opportunities while avoiding the pitfalls.

Malaysia's Islamic finance journey Let me now turn to Malaysia's journey in the development in Islamic finance. Islamic finance in Malaysia first started as a strategy for greater financial inclusion, so as to have a greater outreach to the underserved segment of society to basic banking and insurance products that are compatible with Shariah principles. After three decades, the Islamic financial industry in Malaysia has evolved as an integral and competitive component of the overall financial system that operates in parallel with the conventional financial system. The Malaysian Islamic financial system is founded on three major strategies. Firstly, the Islamic financial system has been evolved as a comprehensive financial system that is diversified in terms of its institutions, markets and players. The Islamic financial system comprises the Islamic banking institutions, the takaful industry, the non-banking institutions and the Islamic money and capital markets. The supporting financial infrastructure includes the robust regulatory and supervisory framework that is reinforced by the legal and Shariah framework, the payment and settlement systems and the mechanism for the liquidity operations by the Central Bank. The assets of the Islamic banking system now comprise 16% of the market, while the takaful sector has garnered 7% market share. Significant progress been achieved in particular in the Islamic capital market where the outstanding amount of Islamic private securities amounted to USD79 billion or 54.3% of the total outstanding private securities in the market.
This is both because households may find it easier to borrow to smooth their consumption if they still have a job and because it may have limited the extent to which households increased their savings as a precaution against the possibility of future job loss. Structural adjustments But the response of policy and the emerging recovery should not obscure the fact that structural adjustments need to occur in our economy. The banking system faces a significant  2  For more information see the box on page 29 of the August Inflation Report. BIS Review 159/2009  3  challenge to wean itself off the current substantial levels of official support and to return to a position in which it can lend normally. Households may need to re-evaluate their financial positions in the face of the more uncertain economic environment. And the need for a substantial reduction in the fiscal deficit is clear. Monetary policy cannot and should not prevent those adjustments from happening. They are necessary for the long-run health and stability of our economy. Rather, the job of monetary policy is to ensure that these adjustments occur in as orderly a manner as possible and within an economic environment which is consistent with hitting the 2% inflation target. Prospects for 2010 and beyond So what does the next year hold in store? The economy appears to have turned.

More generally, we know that the global economy operates under an important constraint – the sum of trade balances around the world, properly measured, must add up to zero. When one country follows policies that are designed to increase exports, there must be an offsetting adjustment elsewhere – either higher imports or fewer exports by another country. Similarly, there is the same adding up constraint in terms of the financial flows that accompany trade and investment on the capital account – current account balances around the world – again properly measured – must add up to zero. What this means in practical terms is that the outcomes for economic activity and capital flows for any individual country depend not only on the public policy and private decisions made within that country, but also on policies and mix of activities pursued in other countries. BIS central bankers’ speeches  1  For example, for Germany to have a large trade surplus with the rest of Europe, other European countries must run trade deficits. And if Germany runs such surpluses it must accumulate large financial claims on the other countries. Or, if the U.S. has an unsustainably high level of consumption, the adjustment to a lower, more sustainable level must be offset by greater investment and exports if the U.S. economy is to be able to operate close to full employment. The fact that it takes (at least) two to tango to make these types of adjustments is just another way of saying that our economies are interconnected.
William C Dudley: The US monetary policy outlook and its global implications Remarks by Mr William C Dudley, President and Chief Executive Officer of the Federal Reserve Bank of New York, at the Bloomberg Americas Monetary Summit, New York City, 20 April 2015. *  *  *  Matthew Higgins, Richard Peach, Paolo Pesenti and Joseph Tracy assisted in preparing these remarks. It is a pleasure to have the opportunity to speak with you here today. In my remarks, I will assess the outlook for the U.S. economy and the progress that the Federal Reserve has made toward its dual mandate objectives of maximum employment in the context of price stability. Over the past few years, the U.S. economy has made considerable progress toward achieving these goals. Yet we still have further to go – the unemployment rate is still too high and the inflation rate too low. Because the economic outlook is uncertain, I can’t tell you when normalization will occur. The timing is data dependent. We will have to see what unfolds. Whenever such a shift in policy occurs, we need to be mindful that it most likely will be accompanied by some degree of market stress and turbulence. Moreover, the normalization of U.S. monetary policy could create significant challenges for those emerging market economies (EMEs) that have been the recipients of large capital inflows in recent years. This leads to an important question: What can the Federal Reserve do to address these risks?

The twelve-month change of the total PCE deflator was just 0.3 percent in February, with the core PCE deflator at just 1.4 percent. Despite these low readings, my expectation is that inflation will begin to firm later this year. Importantly, most of the impact from the decline in energy prices that has weighed down overall inflation is likely over. Although the appreciation of the dollar may cause some further softness in import prices, the continued decline in resource slack as the economy expands should push in the opposite direction. We are already seeing some firming in rent inflation as rental vacancy rates have returned to more normal levels and employment and income growth have strengthened. Longer-term household inflation expectations have been well maintained through this period of very low inflation as shown in our Survey of Consumer Expectations. This should reinforce the effect of a higher level of overall resource utilization in slowly pushing inflation back towards the FOMC’s 2 percent objective. Monetary policy As the FOMC has consistently communicated, decisions on monetary policy, such as the timing of lift-off will, depend on how the economic outlook evolves – in particular with respect to the labor market and inflation. As I have discussed, the labor market has improved substantially over the past few years and I expect to see inflation begin to firm later this year.
The output floor is to serve as a backstop, not as the primary driver of capital requirements: yes to Basel III, no to Basel IV. Having said that, the main issue now is no longer the solvency of banks, but the liquidity of non-banks. Therefore the bulk of the regulatory efforts must now be focused on the shadow banking system, which has risen from USD 73 trillion of assets in 2007 to USD 92 trillion in 2015ii – i.e. 150% of total GDP – in the jurisdictions monitored by the Financial Stability Board. And those parts of shadow banking that may pose financial stability risks represent USD 34 trillion; two-thirds of which is composed of collective investment vehicles (CIVs) with features that make them susceptible to runs. It is thus of key importance that authorities develop and use system-wide liquidity stress-testing tools, in order to address the risks of a “funds-run” in adverse market conditions. The FSB decided on this; it has to be implemented with a strong commitment by IOSCO and national regulators. The third main area of work is the regulatory framework for central counterparties (CCPs). The clearing obligation of OTC derivatives has fortunately reduced OTC transactions, but as a result CCPs have also become more and more systemic and concentrated. The FSB guidance on a recovery and resolution framework, which is currently being transposed into EU legislation, is a good step forward.

Paris Europlace International Financial Forum – Paris, Wednesday 12th July 2017 Roundtable 3: capitalizing on the new G20 regulatory steps  Introductory remarks by François Villeroy de Galhau, Governor of the Banque de France  Ladies and Gentlemen, It is a pleasure to be with you today to introduce this roundtable, which could not be more topical, just a few days after the leaders of the G20 met in Hamburg. From London in 2009 to Hamburg last week, there is only 450 miles as the crow flies; but there has been considerable progress in terms of financial regulation. Thanks to international cooperation between the 20 major economies, the resilience of the global financial system has significantly improved in eight years, without impeding the financing of the economy or global economic growth. We can all be proud of these achievements, but there is no room for complacency today. Let me elaborate on what I see as the three priorities for further work, and the two requirements to consolidate what we have achieved so far. ** 1. Three priority areas where further work is needed. First, we have to finalise the Basel III framework, “without further significantly increasing overall capital requirements across the banking sector, while promoting a level playing field”.