samchain/econo-pairs-v1 huggingface dataset:
USD 1.7 trillion, of which a mere 3% resulted from off-shoring to countries of low manufacturing costs. It is expected that in 2008 the global trade in services will amount to ca. USD 2.4 trillion, of which 10% will represent off-shoring of business processes and ICT to countries with low manufacturing costs. For a comparison, the travel industry represents ca. 30% of trade in services according to the OECD data, whereas transport – 20%. Based on an analysis of eight representative sectors, McKinsey Global Institute estimated that in 2003 18.3 million jobs in the services sector could have been off-shored (this applies mostly to such sectors as the IT – 2.8 million, banking – 3.3 million, insurance – 2.3 million, health care – 4.6 million, retail trade – 4.3 million). Extrapolating these results for the global economy, it may be estimated that in 2008 there may be as many as ca. 160 million jobs in the services, i.e. 11% of the estimated 1.46 billion of global employment in the services sector, may be performed at a distance from the service recipient. Most evidently, the off-shoring of business processes to various corners of the world to optimise the process of manufacturing or performing services will grow, and the scale of this phenomenon will probably surprise many architects of the economic policy. In many rankings, Poland holds one of the leading positions for its off-shoring attractiveness 17 , which is also reflected by the business decisions taken.

Will Poland, for instance, become a healthcare centre for the aging Europe, or a global centre of outsourcing of business processes, which require a fluent command of several languages, or will it become an American silicon valley or an Indian Bangalore in IT services of the highest value added? How long will the car factories built over the past years in Europe and Poland and their co-operants stand the fast growing competition of China? It seems that we are in an exceptional period of the world economic history. The forthcoming years and decades will shape the economic world map anew, which will reflect the demographic trends, migration, and the growing globalization of manufacturing and services. Poland has a great chance to use the forthcoming global changes to improve their income and the standard of living of its citizens, and to mark its significant position on the new economic world map. Answers to the questions raised above and to many others, as well as drawing proper conclusions from those answers for the economic policy should endorse such chance, which I wish to this and the future generations of global Poles. Thank you very much for your attention. BIS Review 64/2006  11
Rapid deleveraging of positions in markets associated with the default of an HLI of the size of LTCM could have systemic impact even in large and mature markets, thereby threatening the global financial system. It has been said that a repeat of the like of an LTCM debacle is most unlikely to occur, given the downsizing of hedge funds. I certainly hope that this is the case but I also notice that the recovery of investor sentiment has seen more money from institutional investors as well as high net worth individuals flowing to the hedge funds. The second scenario, commonly known as the “Elephants in the Pond” problem, is a situation whereby the HLIs take very large and concentrated positions in smaller financial markets and adopt aggressive trading practices that could be destabilising to such markets. It is very encouraging that the “Elephants in the Pond” problem is by now recognised quite extensively as a real issue to be tackled. What is being done and is it enough? Different approaches have been floated to tackle the problems arising from the two scenarios I just described. The prevailing approach is through improving counterparty risk management. This is done indirectly by asking the banks and other financial institutions to be more prudent in granting credit lines to the HLIs, and directly by encouraging the HLIs to enhance their own risk management standards.

According to estimates by the Institute of International Finance, net private capital flows into emerging markets in Asia increased nearly six times from 1998 to $ bn in 1999, and are forecast to increase again by 50% to $ bn in 2000. There is therefore a real danger that we might forget the severe pains inflicted by the Asian financial crisis over the past two years. It is also easy to forget the lessons learnt and to become complacent. However, if the recovery in the region is to be sustainable, we should remain vigilant and beware of the risks lurking under these bubbling activities. Risks and challenges in coping with international capital flows Challenges of domestic structural reforms In order to address such risks, we would need to tackle three challenges faced by Asia. The first challenge is that the globalisation and liberalisation of markets require structurally sound and resilient domestic systems. Prior to the crisis, the banking systems were often inadequately supervised and were prone to incurring excessive maturity mismatch risks by borrowing short-term funds to finance long-term investments. Moreover, the corporate sectors of many Asian economies were over-stretching themselves by engaging in risky or unproductive investments. To make things worse, both the banks and the corporates were taking excessive currency risks by borrowing in foreign currencies to fund projects that could only generate income in domestic currencies. Poor risk management on the part of banks, ineffective banking supervision, political interference, and a critical lack of transparency prevented disciplinary mechanisms from functioning properly.
If any large fraction of that money really was demanded, our banking system and our industrial system would be in great danger.’ In Bagehot’s time, the role of the Bank of England was to act as guardian of the reserve of bullion that underpinned the credibility of the whole banking system. The technology may have changed, but in essence the role of the Bank today is one that Bagehot would recognize. Central bank money is the ultimate settlement asset. And banks still demonstrate their ability to meet depositors’ demands for repayment by holding a sufficient stock of high quality securities against which central banks—and in normal circumstances the markets—will lend. Confidence in the modern financial system is therefore underpinned by the preparedness of central banks to lend against such high quality security without question. Central banks have, therefore, a keen interest in developments that affect the demand for and supply of liquidity. It is not surprising that they try to limit the likelihood of events that might lead to excessive increases in demand for liquidity or constraints on its supply, and also try to have in place the operational apparatus to respond to such developments, if felt necessary, at minimum cost. The traditional sources of liquidity risk for banks are unusually heavy demands from depositors for repayment and from their customers to draw down pre-committed funding. Today’s environment encourages us also to recognise disruption to markets as a potential trigger for such extraordinary demand.

Third, my message today is that both public and private sectors would be wise to overcome these inhibitions in the interest of developing mechanisms for providing liquidity in a manner that is fit for purpose in today’s globalised world, and recognises the new environment and systemic conjuncture. In the case of private entities, they, to my mind, could show greater enthusiasm and leadership in coming up with sets of best practice standards, in the knowledge that failure in one institution could be severely damaging for others. I say this in the knowledge that, in the case of the public authorities, debate on all these issues is rising rapidly up the agenda, not just in London where the FSA and ourselves have a shared responsibility, but in other major financial centres as well. Progress on understanding all of these difficult issues can be made through ongoing informal dialogue amongst the central banks and regulators that are most concerned with our largest financial institutions. I am encouraged that there are a number of informal groups who are undertaking work in this area. These feed into official groups such as the Financial Stability Forum where the vital connection between the public and private sector can be made. These are stimulating and fascinating issues, and I confidently expect them to occupy people’s minds for many years to come. 6  BIS Review 79/2005
2/3  BIS - Central bankers' speeches  At the same time, the conduct of monetary policy is not mechanistic. Models are useful, but they are simplifications and must be supplemented by other information. For example, loss functions in such models cannot be directly interpreted as the Committee's view of inflation costs. As the deviation from the target increases, we need to assess the risk of high inflation becoming entrenched in the expectations of households, firms and FX market agents. If this were to happen, we may find ourselves in uncharted territory, where the costs are far higher than when inflation expectations are anchored to target. As last year, Norges Bank Watch notes that Norges Bank's FX transactions related to tax payments to the government result in volatility in the money market premium. As long as the short-term money market functions well, Norges Bank will not seek to steer such risk premiums. But we do not want to contribute to needless volatility, which is why we seek to make FX transactions as smoothed and predictable as possible. The Ministry of Finance is now appointing a working group, in which Norges Bank will participate, tasked with examining various aspects of the government's liquidity management. The practical implementation of the petroleum fund mechanism is one of the topics for discussion. Among the matters the working group will consider is whether the number of due dates for petroleum tax should be increased. Let me conclude by again thanking Norges Bank Watch for an excellent report.

Regional Network surveys normally include supplementary questions on special topics, and over the past year, many of the special topics have concerned prices. We think they give us better insight into price drivers than the standardised questions we asked previously. We will continue to ask network contacts about prices when relevant, such as in the upcoming survey that will be published in March. If we learn that some of these questions adequately capture future price increases, we can include them in our regular questionnaire. It is also useful to look at similar surveys in other countries, as Norges Bank Watch points out. Norges Bank Watch discusses monetary policy trade-offs in an environment of high inflation, and whether the costs of high inflation after a cost-push shock are exaggerated in our modelling system. They point out that an optimal monetary policy response depends on the nature of the economic shock and the transmission of monetary policy. At the same time, the cost of high inflation must be measured correctly. Let me first say that these are the very questions that have featured in the discussions of our Monetary Policy and Financial Stability Committee over the past year. Among other things, we have devoted considerable time to assessing the effect of higher interest rates on household disposable income and the relative importance of the nominal and real interest rate. The results were also presented in a box in the June 2022 Monetary Policy Report.
As owner, we have both rights and obligations. The exercise of ownership rights rests on the fund’s long-term perspective, the Bank’s long-term investment horizon, which is one of the fund’s defining characteristics. Value creation in the long term depends on how well the companies are managed, on business models that are sustainable, as well as on markets that are well functioning, legitimate and efficient. As a large, long-term owner, we are ethically obliged to exercising ownership rights actively. Voting is the most important tool we have. Each year, we vote on around 115 000 individual proposals at nearly 12 000 annual general meetings. That is, to put it in somewhat exaggerated terms, we must make 115 000 choices. In order to protect our investments in a systematic manner, we have formulated expectations, guidelines and positions. We base our ownership work on these public documents. In order to make good choices, we need to know the companies well. For our long-term work to succeed, we need to have an active relationship with as many companies as possible. We conduct more than 3500 meetings with close to 2000 companies in the course of a year. In these discussions, we bring up matters such corporate governance and sustainability that are relevant to the fund’s long-term return. At the same time, our ownership work can also lead to investment decisions. This underpins our ownership work. Responsible investment requires active ownership. Active management and active ownership are closely related.

While risk-based divestments concern companies that we prefer not to invest in, there are other companies that we want more of. These are companies that, in our opinion, provide opportunities for solid returns in the longer term. In the mandate, the Ministry of Finance has also set a requirement for the Bank to establish separate environment-related investment mandates. At the end of 2019, these mandates amounted to NOK 79 billion invested in 77 companies and bonds. In 2019, the Ministry also decided to permit unlisted investments in renewable energy infrastructure. NBIM has a group in place that has begun to seek out opportunities in this sector. We set the same risk and return requirements for the investments under these mandates as for the rest of the fund’s investments. Everything we do in the area of ownership is, and must be, a result of an active approach. In our active management, we seek at all times to make the most of analyses we have performed and the knowledge we have acquired over the past 20 years. Our internal asset managers closely follow the largest European companies in particular. Knowing the companies well puts the fund in position where it is possible to earn excess returns. External management In emerging markets, we benefit greatly from our use of external asset managers. Knowledge of and proximity to markets are essential for being able to assess the risk of investments. In view of challenges associated with responsible investment, a passive investment strategy is not really appropriate in these markets.
Our role in the world market for oil exports is more modest. Back in the 1970s, policymakers’ handling of the newly discovered petroleum wealth got off to a rather weak start. Public spending surged before export revenues had started to kick in. Fiscal policy fuelled a boom and had to be reversed and tightened. By the late 1970s, Norway was in the midst of a deep recession. In the mid-1980s, the Norwegian economy experienced a new boom, this time fuelled by private debt growth. After the fall in oil prices in 1986, we experienced a collapse in housing prices, as well as a severe banking crisis and a soaring public deficit. The turbulence made clear how vulnerable a small open economy is to terms of trade disturbances. The downturn in the early 1990s was the deepest that Norway had experienced since World War II. The authorities realised that the old policy framework was no longer suitable. With a globalised economy and deregulated credit and capital markets, our economy was more vulnerable to external shocks than before. A number of major reforms were implemented to improve cost competitiveness and boost growth. And the establishment of the oil fund in 1990 and the reform of the monetary policy framework in 2001 made the economy more robust to external shocks. Chart: Norwegian exports The need for a robust policy framework is greater than ever: Petroleum products now make up more than 50 percent of exports, and – more recently – oil services exports have also picked up.

But to attain a higher yield and reduce the financial risk, the Executive Board has decided that a limited part of the foreign exchange reserves can be invested in other assets. The condition is that these are assets with a high credit rating and good liquidity, issued by central governments, provinces or intergovernmental organisations. 11  9 In addition, the Riksbank owns 125.7 metric tons of gold (worth almost SEK 60 billion). 10 The government has given the Swedish National Debt Office the task of issuing green bonds. See the Swedish Ministry of Finance (2019) and SOU (2017:115). 11 Our regulations also allow investments in US agencies and in bonds issued by local authorities or state-guaranteed organisations. 5 [7]  The Riksbank gives consideration to the climate in its investments Last year we stated in our risk and investment policy that we would also give consideration to sustainability aspects when choosing assets. The Riksbank has not yet fully decided how sustainability aspects should be taken into consideration in the investment decisions. There are two main lines to choose between: either we choose which assets or which issuers we want to have in the foreign exchange reserves. The choice between assets would mean trying to invest some of the foreign exchange reserves in particularly climate-friendly assets, such as green bonds. I have doubts about this type of strategy, primarily as our investments are largely in bonds issued by central and federal governments. It is difficult to earmark money for special projects in government budgets.
But since the end of 2008, the BNB focused on the capital and liquidity relief for banks while also allowing them to ease lending. As a result of these conservative and countercyclical policies of the BNB, and the rather prudent behaviour of the banks themselves, today Bulgaria manifests a very stable banking sector, with outstanding capital adequacy and liquidity ratios. Four years after the Lehman Brothers collapse, the banking system of Bulgaria remains one of the few in the EU where no single bank needed to be rescued or supported with taxpayers’ or central bank money. Merging the monetary and macropdudential mandates (including banking supervision) under the auspices of the central banks is currently being implemented in some of the “older” EU Member States. The macroprudential oversight of the financial system is being introduced only recently at the EU level. While these new concepts are now being embraced by central bankers and politicians worldwide, the simultaneous pursuit of both monetary and banking stability, from a true macroprudential perspective, has been the order of the day for the BNB for more than a decade now. Through our own painful experience with a crisis in 1996–1997, we became fully aware of the systemic importance of the financial system. Thus a key element behind the success of the overall policy mix in Bulgaria is that our central bank is entrusted with the tasks and responsibilities to regulate and supervise the banks in the country, with the goal of ensuring the stability of the banking system.

One is that it could jeopardise central bank’s credibility by giving rise to accusations of financial and fiscal dominance. A second side effect is that maintaining a larger balance sheet than necessary increases the Eurosystem’s exposure to credit and duration risk. The probability and extent of net losses are significantly higher the larger the amount of long-term fixed-rate assets the central bank holds on its balance sheet. [7] A third side effect relates to the functioning of financial markets. The APP, together with the pandemic emergency purchase programme (PEPP), has left a visible footprint in euro area financial markets. The Eurosystem’s outright holdings of euro area sovereign bonds currently amount to more than a third of the outstanding market (Slide 3). Mobilised collateral for longer-term refinancing operations further increases the encumbrance of government bonds through monetary policy operations. As a result, the “scarcity premium” that market participants must pay to obtain these assets has often been considerable, both in the repo and the bond market (Slide 4). [8] The inception and expansion of the Eurosystem’s securities lending facility have been able to partly alleviate these strains. [9] Yet, in times of heightened uncertainty, when the demand for safe and liquid assets rises sharply, market conditions tend to visibly deteriorate. Last year’s surge in market volatility is a case in point.
If not resolved, it may fragment global markets into distinct liquidity pools that are less resilient to market shocks. Christopher Giancarlo, Acting Chairman of the CFTC, has put it well: “It is critical that we make sure our rules do not conflict and fragment the global marketplace … the CFTC should operate on the basis of comity, not uniformity, with overseas regulators.” 7 Adjustments to domestic regulation must not impede the globalisation of finance and the free flow of capital. 4/9  BIS central bankers' speeches  Breaking up large banks or trapping capital and liquidity through ring-fencing measures may make them easier to resolve but could weaken their ability to respond to different stress scenarios. Ring-fencing could also hinder the ability of global banks to provide connectivity and facilitate intermediation across different pools of capital, especially in EMDEs. If global finance is fragmented, both financial stability and financial inclusion could suffer. I come from a small country. And we small countries have an instinctive pull towards international standards and a global system. This may seem to matter less to large countries. But may I suggest that all countries today are smaller than they used to be, or smaller than they think they are. Smaller in the sense that what happens outside our borders has an increasingly larger impact on what happens inside. The US has much to gain from continuing to work alongside other regulators, exercise leadership where needed, and help to shape and promote international regulatory standards. International cooperation necessarily involves some compromises.

In doing so, we take account of the development of the economy and make a contribution to the stability of the financial system. The SNB pursues a monetary policy that serves the interests of the country as a whole, and we fulfil this mandate as an independent central bank. To do this, we continue to rely on the total commitment of our staff, whom I would like to thank – also in the name of my colleague,  4  BIS central bankers’ speeches  Jean-Pierre Danthine – for their hard work and their solidarity with the SNB. We thank our shareholders for their continuing support. And we thank you all for taking such a great interest in the activities of the SNB. Finally, we would also like to thank our former colleague and Chairman of the SNB Governing Board, Philipp Hildebrand, for the good collaboration we enjoyed over the years. We very much regret his resignation and the circumstances leading up to it. Thank you for your attention. BIS central bankers’ speeches  5