samchain/econo-pairs-v1 huggingface dataset:
Like foreign languages, we may learn to live, perhaps even love, them. Attempts to compel a common language might risk creating the accountancy equivalent of Esperanto. Unfortunately, the analogy is inexact. Banks are, by their nature, international. So too are investors in, and regulators of, banks. If all parties speak different languages at the same time, the result is likely to be noise rather than signal. For banks, the noise to signal ratio has been particularly high during this crisis. Differences in accounting standards have contributed to this noise. In 2008, UK banks’ assets would have been £ trillion, or around 30%, larger under European IFRS than under US GAAP standards. These differences make problematic international comparisons of such rudimentary concepts as bank leverage. This in turn hinders investors’ risk assessments and regulators’ supervisory assessments.   A failure of efficient markets is not of itself a failure of fair value  It is commonly heard that the failure of EMH argues against fair value in favour of some alternative, such as amortised cost. The truth is more subtle than that. Deviation from EMH will cause both accounting measures to deliver distorted signals of value. Depending on the precise circumstances, either measure might deliver a more accurate measure of true economic value. To see this, consider four scenarios. Consider first a bank making a single loan. In the first period, amortised cost and fair valuations of this loan will be equal. Expected cashflows will in both cases be discounted at the prevailing market discount rate.

Andrew G Haldane: Fair value in foul weather Remarks by Mr Andrew G Haldane, Executive Director, Financial Stability, Bank of England, based on a previous speech to the Royal Institution of Chartered Surveyors, London, in November 2009 on 10 March 2010. *  *  *  Based on a speech given at the Royal Institution of Chartered Surveyors, 10 November 2009. I am grateful to Dele Adeleye, Alan Ball, Paul Doran, Kemal Ercevik, Andrew Hauser, Florence Hubert, Salina Ladha, Vas Madouros, Colin Miles, Alastair Morley, Paul Tucker and Nick Vause for comments and contributions. Shakespeare’s Macbeth opens amid a thunderstorm, with the three witches cackling: “Fair is foul, and foul is fair Hover through the fog and filthy air” Macbeth [Act 1.1.11–12] Recently, the global financial system has experienced its own dramatic thunderstorm. Financial markets have been thick with fog and filthy air. At times, lightening strikes have threatened seizure in some financial markets and institutions. Two years on, the rumbles of thunder are still discernable. The debate on the causes and consequences of this perfect storm will swirl around for many years to come. At the centre of this storm is, on the face of it, a rather basic question: how should the instruments that make up the financial system be valued? So basic a question ought not to be a matter of life and death. But for a great many financial institutions during this crisis, it would have been precisely that. The fundamental concept on which this debate hinges is fair value.
Under this framework, central banks today operate mainly with the overriding objective of price stability either explicitly or implicitly. Dear guests, The establishment of the single mandate as price stability has also had significant implications in the institutional design of central banks. In fact, as is clearly seen especially in emerging market countries, price stability can only be achieved through long term and determined policy implementations. It is at this point that independence, as an assurance given to the public to ensure long-term price stability, comes to the forefront as the crucial feature of institutional design of central banks. In my view, of all the changes in the face of central banking in the last two decades, the most important one is the increasing emphasis that has been placed on central bank independence. 1  Issing, O. (2000). “Should We Have Faith in Central Banks?”. BIS Review 88/2006  1  While inflation was falling and independence was becoming an important feature of central banking around the world, Turkey was unable to experience the same process. It was not until 2001 that the Central Bank of Turkey gained independence close to global standards. In 2001, with the amendments made in its Law, achieving and maintaining price stability was stated as the primary objective, and the Central Bank of Turkey was provided with the direct authority to set monetary policy and choose instruments at its own discretion to achieve price stability.

I believe this is one of the major structural reforms in the Turkish economy, especially in terms of its effects on inflation. Of course, independence is not a concept that can be achieved via the implementation of law alone. It is a concept that policy practices have a great influence upon. Dear participants, Having mentioned the two milestones in the notion of central banking, I’d now like to continue with the challenges of central banking in emerging economies combined with the Turkish experience in terms of monetary policy implementations. Although objective functions are similar in financially liberalized and well-functioning market economies, the transmission of monetary policy actions on economies certainly differs between industrialized countries and emerging market economies. Accordingly, there is a wide range of views among economists on how monetary policy decisions influence economies. If we add the uncertainties faced by the internal dynamics of emerging market economies to the picture, the impact of decisions taken by central banks might differ from one country to another both in terms of the nature and the time and even from one period of time to another for the same country. First, it is important to note that in the design and implementation of monetary policy, the understanding of structural changes is essential since the impacts of monetary policy decisions in a given economy depend on its structural changes and macroeconomic environment 2 . On the other hand, it is clear that emerging economies like Turkey are subject to structural changes more frequently than any other developed economy.
The prompt implementation of the proposed financial reforms will not only foster sustainable growth and financial stability in the long run, but it should also contribute to boosting confidence in the financial system in the short run, thus promoting economic recovery. Fiscal policy Last, and definitely not least, it is also essential for sustainable growth and prosperity that confidence in the long-term soundness of public finances is maintained. Government deficits and public debts are rising substantially in most countries as a result of the economic downturn, discretionary measures to stimulate the economy, and the funding of the bank support schemes. This is partly inevitable – due to the downturn – and partly necessary – to help stabilise the economy and the financial system – in the short run. But it is also imperative that fiscal policies are designed and implemented in a manner that strikes the right balance between the need to support the economy’s recovery and the need to preserve the confidence in the soundness and sustainability of public finances which is key for the long-term performance of the economy. III. Conclusion  I have used the word “confidence” several times. The severity and duration of the current economic and financial crisis is partly a consequence of the reduced confidence in the prospects of the economy and the soundness of the financial system.

They will discuss how countries can best formulate labour market policies in the pandemic’s wake to restore and rebuild workers’ ability to engage in the labour market of the future. 13 At lunchtime, we are privileged to have Professor Emi Nakamura join us virtually. She will speak on “Inflation, Monetary Policy and the Phillips Curve”, a topic that that has become dominant to policy considerations this year. 14 Anchoring today’s discussions is Professor Ricardo Reis, the author of this year’s Commissioned Paper, who will discuss whether monetary policy has placed an undue emphasis on the natural real rate of interest, which we term r* and measure by government bond yields, a parameter that is inherently tricky to define and problematic to measure. Despite these difficulties, r* has seemingly come to occupy a central place in assessments of the appropriateness of the policy stance, a conundrum that Professor Reis will help clarify. We are delighted that Professor Andres Velasco and Professor Vissing-Jorgensen are with us to discuss the paper. 15 But first, we are honoured to have Dr Li Bo, Deputy Managing Director at the IMF, to deliver the opening address for AMPF2022. He brings with him a wealth of experience in economic policymaking, serving in a range of monetary- and macroprudential-policy related roles at the People’s Bank of China, before assuming his current position at the IMF. Dr Li’s breadth of experience and depth of technical expertise will offer pertinent insights, at this complex global conjuncture. ***  © 2022, Government of Singapore.
The Riksbank, too, is keeping a close watch on the financial system’s stability. In times of financial unrest, such as recently, the Riksbank steps up its oversight as a matter of routine, above all as regards financial enterprises. If problems were to arise with bank liquidity, for instance, they would create difficulties not only for monetary policy, in that the interbank market would function less well, but also for other parts of Sweden’s economy. The Riksbank therefore monitors the potential effects that financial unrest could have on the financial sector’s solvency and liquidity. BIS Review 83/1998  -6-  The analysis of the situation is supplemented with an ongoing exchange of information with the competent authorities in this field. Stockmarket unrest of this kind also leads to heightened surveillance of the flow of payments in the Riksbank’s payment system, RIX. Judging from the available statistics, the Swedish banks are in a better position than many of the international banks, with lower direct exposures to the countries involved in the crisis. Perhaps one could say that Sweden’s bank crisis did at least result in Swedish banks becoming much more efficient at risk management. Central banks throughout the world have accordingly become more watchful. No one can remain passive if world economic growth continues to slacken as a consequence of financial problems. BIS Review 83/1998

These are conditions in which it would be very easy for the financial markets, businesses and households to jump to the mistaken conclusion that monetary stimulus will soon begin to be withdrawn. Given the slack in the economy, the Committee is not in a rush. Assuming anchored inflation expectations, an orthodox central bank would not contemplate beginning to withdraw stimulus until the economy had reached “escape velocity”, which I have defined to mean “the economy growing, and being set to continue to grow, at a pace that gradually absorbs the slack in the labour market and within firms”.4 And at that point the central bank would assess the erosion of slack in the economy and thus the extent to which downward pressures on inflation were dissipating. Since my own policy deliberations have been framed in terms of “escape velocity”, I saw real merit in any MPC Forward Guidance being cast in terms of a threshold for real growth. Manifestly, this could not be a measure of slack in the economy; it would be clear what it was and was not. Once passed, it would prompt a rich assessment of slack and inflationary pressures, drawing on the widest possible range of indicators. The Committee decided on a threshold specified in terms of unemployment. The MPC’s threshold is what it says: a threshold for assessing inflationary pressures, although the Committee must maintain that broader assessment month-by-month, quarter-  2  See Woodford (2012), “Methods of Policy Accommodation at the Interest-Rate Lower Bound,” presented at the Jackson Hole symposium.
Historical evidence of prior European programmes recently analysed by Banco de España experts highlights the presence of substantial synergies between, on the one hand, the implementation of major investment plans and, on the other, the application of structural reforms geared to improving how the main product and factor markets function.2 The funds could actually also be used to mitigate the costs that these reforms sometimes incur for some cohorts in the short term, in the pursuit of the benefits that they would generate for society as a whole in the medium and long term. Again, it would be particularly desirable to properly evaluate the different alternative reforms. To duly nurture the debate and political decision-making, these assessments of the potential reforms must provide a comprehensive analysis. Estimations of their overall impact must be complemented with a better understanding of the microeconomic effects, in particular on the population groups most affected by the reforms, and of the impact during the transitional period until the public policies take full effect. These developments will enable the assessment to be better integrated into economic policymaking, by providing thoroughgoing information on the short, medium and long-term effects. The importance of the use of administrative data and making them available to researchers The second element I wish to refer to is the need to have data that inform the decision-making process.3 Data are also the raw material that feeds the evaluation process.

Doing this makes the bad scenario less likely to materialize and the improvement in credit supply helps to engineer a stronger recovery than would otherwise materialize.4 The third implication is that the stance of monetary policy needs to be assessed based on the state of the financial system and the real economy. How the monetary policy impulse is transmitted to the real economy is not immutable but changes depending on how monetary policy affects financial conditions and how financial conditions affect economic activity. During and following financial crises, problems in the financial system can impair the transmission of monetary policy to the real economy. When this happens, policy may need to be more accommodative than otherwise in order to achieve its objectives. The experiences of both Japan and United States are cases in point.5 In retrospect, we know that following the collapse of the property bubble and the investment boom in Japan in the 1990s, the Bank of Japan (BoJ) did not follow a sufficiently accommodative monetary policy  4  Ideally, as was the case in the U.S. in 2009, the authorities should require banks to meet their stress scenario capital ratio standards by adding equity capital, with no credit given for reducing assets. This leans against the incentive to deleverage to meet higher capital ratio requirements. 5  See my recent speech “Lessons at the Zero Bound: The Japanese and U.S. Experience”, Japan Society, May 21, 2013. BIS central bankers’ speeches  3  to prevent deflation.
The social partners would have to go it alone. The experience of some European countries shows that this can be demanding. With a floating exchange rate, the necessary adjustment of the cost level can take place faster, and may prove less painful. The krone exchange rate can function as a stabiliser. The depreciation of the krone through autumn last year indicates that this mechanism is functioning (see Chart 8). The monetary policy credibility built up over the years is now of considerable benefit. Continued confidence that inflation will remain low and stable over time is a necessary precondition for a pronounced weakening of the krone concurrent with a low key policy rate. The benefit associated with a currency of our own disappears if the temporary rise in inflation associated with a krone depreciation is countered by higher wage increases. The result would be a higher key policy rate and a stronger exchange rate than would otherwise be the  4  4  Including reserves that have been approved for development by holders of oil rights and other proven resources in fields and discoveries. Source: The shelf in 2014, Norwegian Petroleum Directorate. BIS central bankers’ speeches  case and, not least, higher unemployment. The social partners have a particular responsibility in this regard. In December last year, Norges Bank lowered the key policy rate by 0.25 percentage point to 1.25 percent. Norges Bank gave weight to the weakening of the growth outlook for the Norwegian economy observed through autumn.

Once the existing distribution reserve has been depleted, we will most likely have to reduce our profit distributions significantly. Cosa initiative The people’s initiative “National Bank profits for the Old Age and Survivors' Insurance Fund (AHV/AVS)” – better known as the Cosa initiative – proposes allocating the SNB’s profits which remain after deducting the CHF 1 billion for the cantons to the Old Age and Survivors’ Insurance Fund (AHV/AVS). An obligation of this kind would impact on the National Bank’s independence, putting it under political pressure to distribute higher profits, which in turn would only be possible were the SNB to expand the money supply, reduce the currency reserves or take greater risks. This would undermine the SNB’s credibility and freedom of action as well as compromise the stability of the Swiss franc. The National Bank’s most important task is to conduct monetary policy geared towards price stability. In order to do this, we have to be able to take monetary policy decisions – even in difficult situations – without political pressure or the obligation to generate a return. 2  BIS Review 86/2005  BIS Review 86/2005  3
As in previous months, annual growth in M3 was mainly supported by its most liquid components, with the narrow monetary aggregate M1 expanding at an annual rate of 9.1% in May, after 9.7% in April. Loan dynamics followed the path of gradual recovery observed since the beginning of 2014. The annual rate of change of loans to non-financial corporations (adjusted for loan sales and securitisation) increased to 1.4% in May 2016, compared with 1.2% in April. Developments in loans to enterprises continue to reflect the lagged relationship with the business cycle, credit risk and the ongoing adjustment of financial and non-financial sector balance sheets. The annual growth rate of loans to households (adjusted for loan sales and securitisation) remained broadly stable at 1.6% in May, after 1.5% in April. The euro area bank lending survey for the second quarter of 2016 indicates further improvements in loan supply conditions for loans to enterprises and households and a continued increase in loan demand across all loan categories. Furthermore, banks continued to report that the targeted longer-term refinancing operations had contributed to more favourable terms and conditions on loans. The monetary policy measures in place since June 2014 have significantly improved borrowing conditions for firms and households, as well as credit flows across the euro area. The comprehensive package of new monetary policy measures adopted in March this year underpins the ongoing upturn in loan growth, thereby supporting the recovery of the real economy.

In Southeast Asia, some radical Muslim groups tried to turn the region into an Islamic caliphate through terrorist acts, including suicide bombings. This threat remains, despite recent successes by security agencies in foiling attacks in Indonesia and elsewhere. However, the extremists will not succeed in their political and religious goals. More importantly, although terrorist acts may disrupt our economy, its impact pales in comparison to the structural shifts in the international order led by the re-emergence of China and India. China’s reach is now global, in search of friends, influence, markets and resources. India is also seeking to expand its links and influence abroad. The US and Japan will try to co-opt India as a countervailing weight to China. But India, while seeking to balance its relations with all three, will preserve its own independence. Both China and India will compete but they will be careful not to collide. Both desire stability for their continued growth. Japan has adopted a more conciliatory foreign policy under Prime Minister Yasuo Fukuda. He has eschewed controversial issues such as visits to the Yasukuni shrine. He will endeavour to cultivate ties with China and India while staying steadfast with the US. Nonetheless, there are several potential wildcards in the region. First, the road to denuclearising the Korean Peninsula remains long and difficult. Second, cross-strait relations between Taiwan and Beijing are entering a critical phase.
However, the large array of unconventional measures employed successfully by various central banks around the world to engineer further policy easing has dispelled the fear that the zero bound is like hitting a wall, rendering monetary policy helpless. The management of a central bank’s balance sheet has been understood as an important policy tool. We have also learned, in some cases while forced to innovate on the way, about operational aspects  1  I would like to note that the views I express are my own and do not necessarily reflect views of my colleagues on the Governing Council of the European Central Bank. 2  See also the instructive analysis by John C. Williams, the newly appointed President of the Federal Reserve Bank of San Francisco, who has examined the role of well-anchored inflation expectations for containing deflation risks in the US (Williams, 2009). BIS central bankers’ speeches  1  that matter for policy. Examples include the collateral framework and the list of counterparties. In revised editions of central banking textbooks, I expect to find discussions of these things that were absent from the pre-crisis editions. *** There have also been lessons about the strategy of monetary policy. In my view, the crisis has reaffirmed the danger associated with the temptation to fine tune the real economy, in addition to maintaining price stability. One way to pose this debate is by contrasting two views.

The first, the stability oriented approach, can be characterised as attempting to dampen economic fluctuations by promoting stable economic growth over time, subject to the primary focus on price stability. The second, the activist view, can be seen as suggesting that, in addition to price stability, an equally important goal of monetary policy is to actively guide the economy towards attainment of its “potential.” That is, an important guide to policy is the “output gap”, which measures how far GDP deviates from its potential. But policy activism in this sense can be dangerous. Trying too hard to close real activity gaps can lead to worse results in both price stability and economic stability. The reason is simple. Too often, the measures of the output gap that our experts can produce give the wrong signal in real time, when policymakers need to take decisions. Distracting attention away from price stability by attempting to fine tune the real-economy might result in a central bank remaining too accommodative for too long following a recession. There are numerous examples of policy recommendations that have proved to be wrong for this reason, and not just from the 1970s. This risk must be avoided. Nothing should distract a central bank’s focus on preserving price stability. A central bank should strive to remain focused and be pre-emptive in its fight against inflation.