samchain/econo-pairs-v1 huggingface dataset:
Attaining that promise of greater financial stability is a challenge that is worthy of all of our talent, of our time, and of our hard work. With that, I would like to thank you for welcoming me to your conference. I offer my best wishes for fruitful and thought-provoking discussions. BIS Review 34/2004  5

Such risks do not necessarily materialize, but when they do, the repercussions are dramatic. Altogether, considering the different tools are potentially at the disposal of policy-makers, it is crucial to gauge the short- to long-run benefits, limits and risks associated with each of them. I do not think that confidence would really benefit from measures that are known to carry non-negligible long-run risks, even if some short-term relief is expected from them. As a way of conclusion, let me shortly consider the progress that has already been made to solve this crisis and list some of the remaining challenges ahead. First, it seems important to welcome the significance of the fiscal stabilization programs many euro-area governments have committed to. As mentioned earlier, this is a necessary step to restore confidence in a sustainable way. Although this is a difficult task, the timely delivery of the promised reforms is necessary. Second, beyond individual policy actions, the recent progress obtained in the design of a common fiscal governance in the euro area is of the essence. Indeed, many important decisions have been taken in that direction: The creation of the EFSF and the ESM or the agreement on fiscal rules and surveillance mechanisms during the Brussels EU Summit on December the 8th and 9th are historical steps in the right direction. Obviously, most of these newly established institutions, rules and processes would have been unthinkable four years ago. This makes me really optimistic about our prospects for restoring stability and growth in the euro area.
But the accumulation of reserves in the region in recent years is not only the result of a desire to build buffers against future shocks. It is also the consequence of large capital inflows into Asia in the wake of the financial crisis in the United States and Europe. Loose monetary polices in response to the subdued economic prospects in these regions as well as the strong growth performance in Asia have led to large-scale capital inflows into many economies in Asia. The reversal of such inflows could put domestic monetary and financial stability in jeopardy if they lead to overshooting of interest rates and asset prices. The recent experience of the region at the height of the global financial crisis in 2008 raised the concern that even reserves considered of very high levels in normal times may not be sufficient to cushion the  BIS central bankers’ speeches  1  forces of abrupt outflows. This has led to discussions about the need to reform the international monetary system, including the creation of a global financial safety net. While I understand that the evaluation the IEO is undertaking on IMF advice and country perspectives on international reserves will not deal with all the questions related to reform of the international monetary system, I am sure it will provide very useful inputs into this process. I am therefore very pleased that the HKIMR and the IEO has brought together such a distinguished group for this workshop, and I look forward to very interesting and fruitful discussions.

Peter Pang: Policies adopted by authorities in different jurisdictions with respect to international reserves Welcoming remarks by Mr Peter Pang, Deputy Chief Executive of the Hong Kong Monetary Authority, at the International Monetary Fund Independent Evaluation Office (IEO)/Hong Kong Institute for Monetary Research (HKIMR) Workshop, Hong Kong, 24 March 2011. *  *  *  It is a pleasure to welcome all of you to this event co-hosted by the Hong Kong Institute for Monetary Research (HKIMR) and the Independent Evaluation Office of the IMF. The HKIMR, as some of you already know, is a subsidiary of the Hong Kong Monetary Authority. Its objectives are to promote research on longer-term and wider policy issues of relevance to the monetary and financial development of Hong Kong and the Asia region; and to foster cooperation and cross-fertilisation of research efforts between academics, international financial institutions and the HKMA research activities. For this reason we are particularly pleased to co-sponsor this workshop which deals with the important topic of policies adopted by authorities in different jurisdictions with respect to international reserves and with the advice the IMF gives in this regard in its consultations with policy authorities. The accumulation of international reserves has become one of the issues at the center of debates about the functioning of the current international monetary system as well as about reforms of this system.
I will also elaborate on the main elements of our investment strategy. Historical background Chart: GDP per capita in Norway, 1970–2015. Indexed to OECD To put the Norwegian economy and our wealth position into some perspective, let me start by going back in time. When the first oil was brought to the surface in 1971, income levels in Norway were low compared with other western countries. The picture has reversed since then. We have gradually caught up to the wealthiest nations. Measured by GDP per capita, Norway now ranks close to the top. Even excluding the oil sector, Norway’s mainland economy has shown relatively robust developments. But there is no doubt that the extraction of oil and gas has played a major role. Given the high oil prices of the past fifteen years in particular, a booming oil industry has been an important driver of economic growth. Last year, the petroleum sector accounted for more than 50 percent of our exports, and more than 20 percent of GDP. Chart: Business investment The high oil prices of recent years have spurred investment in the petroleum sector to record-high levels. The level of investment in this sector in 2014 was as high as total investment in domestic non-oil industries. The positive spillovers to the oil service industry and other business sectors have been substantial, in particular through the past decade. Norwegian employment has remained high and unemployment low, even when the financial crisis hit in 2008.

Our efforts to promote high standards of corporate governance and sustainable business practices build on principles and guidelines developed by organisations such as the UN and the OECD. As a financial investor, the fund is affected by the regulation of financial markets. We engage with regulators and participate in consultations on new regulations. We support the development of harmonised rules across markets. We express our expectations towards the companies in our investment portfolio through published expectation documents and direct engagement. So far, we have established three focus areas: climate change, water management and children’s rights. The documents set out our expectations of how companies should manage risk in these areas. Chart: Responsible investment II The purpose of our interaction with investee companies is to support the companies in their creation of long-term value. One of the most important tools at our disposal for exercising ownership rights is voting. We vote at nearly every annual general meeting of the companies in our portfolio. As mentioned, equal treatment of shareholders, including minority shareholders, is of paramount importance to us. Shareholders should have the right to nominate and dismiss directors, file shareholder proposals at general meetings and approve significant changes to the capital structure of a company. Chart: Responsible investment III We seek to identify, assess and report on different kinds of risks to future returns by analysing environmental, social and governance issues. The aim is to gain greater insight into companies and portfolio risks.
Almost exactly a century ago, the outbreak of the First World War brought this incredible period of prosperity to an end. It would take almost half a century for it to start to be rebuilt and another 30 years before it fully gathered steam. 2  David Hume, “Of Commerce”, Selected Essays, Oxford University Press, 1993. BIS central bankers’ speeches  3  Now globalisation is again under threat with the financial crisis raising the spectre of protectionism. G20 leadership has thus far prevented this from happening, but the G20’s commitment to resisting protectionism is ultimately a defensive agenda. The UK can help lead a more positive one by spurring on new deals such as the Transatlantic Trade and Investment Partnership between the EU and the US. And trade diversification can be promoted through the pursuit of more bilateral initiatives such as those underway with India and China. Likewise the rich diversity of economies across the Commonwealth provides opportunities for all parties to gain from greater international trade. Fair and effective financial markets Open trade requires open finance. To secure the latter requires nothing less than the refounding of the global financial system. Since the crisis, globalised finance has been under siege. Cross-border capital flows have fallen sharply. There are constant pressures to Balkanise financial systems – myopic attempts to protect one country that weaken us all. As the leading global financial system, the UK will be central to completing the job of financial reforms that support an open and integrated system.

6  BIS Review 126/2010  Second, the Bank’s permanent operations are intended to offer liquidity support for the banking system, not for the market in any one particular type of security. Intervening in a partial way could create unfortunate market distortions. If there is a genuine market for a private sector security, it should be able to support itself in the medium-term without special forms of liquidity support from the authorities. Third, the asset purchase programme, although focussed on buying gilts, was intended to support the liquidity of all private sector securities by forcing would-be gilt holders to purchase more risky assets (rather than by direct central bank purchases of those assets). There is plenty of evidence to suggest that was indeed the outcome and most private sector markets have recovered to some degree. The covered bond market has also been supported by the introduction of FSA regulations, to provide additional comfort for investors. 16 A second topical issue is bank funding more generally. It is often asserted that the Special Liquidity Scheme provides a funding source for banks and that, given continuing pressures on them to raise funds to support lending, we should extend the lifetime of the Scheme. The first point to note is that the Scheme facilitates funding but does not provide it directly. Rather, as I have outlined today, the SLS provides a collateral upgrade and the private sector remains the ultimate source of funding as the Treasury Bills lent under the Scheme are turned into cash in the market.
The Business Sector: To bolster the business sector’s resilience, be it SMEs or larger firms, the Committee sought to reduce its financial burden by providing the required cash flow to cover regular contractual liabilities, such as salaries and rent, as companies lost all revenue due to the lockdown. This was accomplished through a set of measures, among which was the deferment of loan payments due to the National Fund for Small & Medium Enterprise Development (National Fund) and the Industrial Bank, plus providing concessionary loans to SMEs through joint National Fund-bank financing according to mechanisms and controls laid down by the Committee. Although this mechanism was approved by the Council of Ministers, implementation was not feasible due to difficulties on the part of the National Fund. Accordingly, the National Fund was officially directed to take the appropriate measures to guarantee support to the vital SMEs segment which falls within its mandate, as the country looks to SMEs for more job opportunities for Kuwaitis and to contribute to the diversification of the national economy. As for concessional financing for corporate firms and individuals negatively impacted by the crisis, banks had in fact already started extending financing and giving concessions, either in line with this measure or their standing credit policy, and had also injected more liquidity into the sector. Furthermore, the Central Bank of Kuwait instructed the banking sector to abstain from sale of or enforcing of any measures on or liquidating collateral held by banks.

The outcome of the monetary analysis confirms the assessment of low inflationary pressure over the medium term, as money and credit growth continues to slow down. Against this background, we expect price stability to be maintained over the medium term, thereby supporting the purchasing power of euro area households. Let me now explain our assessment in greater detail, starting with the economic analysis. Available data and survey-based indicators continue to signal an improvement in economic activity in the second half of this year. In particular, the euro area should benefit from the inventory cycle and a recovery in exports, as well as from the significant macroeconomic stimulus under way and the measures adopted to restore the functioning of the financial system. Taking into account all available information, in the second half of this year, quarterly real GDP growth rates could be back in positive territory. However, uncertainty remains high as a number of the supporting factors are of a temporary nature. Looking through the volatility of incoming data, the euro area economy is expected to recover at a gradual pace in 2010, as it is likely to be affected over the medium term by the process of ongoing balance sheet adjustment in the financial and the non-financial sector, both inside and outside the euro area. In the view of the Governing Council, the risks to this outlook remain broadly balanced. On the upside, there may be stronger than anticipated effects stemming from the extensive macroeconomic stimulus being provided and from other policy measures taken.
However, a more realistic counterfactual would envisage euro area countries being connected by some version of the old Exchange Rate Mechanism (ERM), with the policies of several countries being in some way related to the policies implemented in particular by Germany and the respective currencies linked to the DM. Arrangements like the ERM imply a strong interdependence of national monetary policies, not a free float with complete monetary independence. In practice, because of the importance of the German economy in Europe and the stability of its currency, the ERM accorded a central role to the monetary policy implemented by the Bundesbank, set on the basis of German macroeconomic conditions. If we think about how such a system would have worked prior to the crisis, we would get to the conclusion that it would have made the divergences between countries more acute than those we have actually seen within the euro area. For example, policy interest rates determined by the Bundesbank on the basis of the outlook for price developments in Germany alone would probably have been lower before the crisis than those determined by the ECB for the euro-area as a whole. Within an ERM regime, lower German interest rates would have been transmitted elsewhere in Europe, including to countries such as Spain or Ireland, where domestic inflation and house price developments would not have warranted such an easy policy stance.

Principles that guide the monetary policy decisions in the new interest rate assumption When our forecasts were based on an unchanged repo rate, monetary policy could be explained by the simple rule of thumb that I described – the repo rate would normally be changed if the forecast showed inflation deviating from target. With the new interest rate assumption, monetary policy can no longer be described by a simple rule of thumb of this kind. How do we then reason instead when we make monetary policy decisions applying inflation forecasts based on our new interest rate assumption? If inflation is expected to be close to target in a two-year time perspective, given the interest rate path on which the inflation forecast is based, this could indicate that the interest rate movements expected by the market are desirable. However, to determine this we must also take into account the consequences for the whole paths of inflation and the real economy that this interest rate policy is expected to give rise to. BIS Review 33/2006  3  Let me illustrate this by explaining how we reasoned at the Executive Board meeting when we chose to raise the repo rate by 25 points in February, despite inflation being low during a large part of the forecast period and close to but still under target in a two-year time perspective 2 .
Today I would like to highlight four key risks that could create more turbulence in the short- to medium-run: the tightening global financial conditions, growing trade disputes, geopolitical risks, and domestic financial stability risks resulting from the prolonged period of very low interest rates. Soon after the Global Financial Crisis, Thailand’s economy—like that of other EMEs—felt the unintended consequences of advanced economies’ unconventional monetary policy stimulus. Large capital inflows in search for higher yields caused significant upward pressure in asset prices as well as on EMEs’ currencies and corporate debt. It is inevitable that the reversal of that extreme measures—i.e., monetary policy normalization—would have the same sizable effect on EMEs as well, and this constitutes our first source of risk. In addition to the Fed, more central banks are expected to normalize their monetary policies in the coming years. As excessive liquidity unwinds, higher yields will drive up costs of capital faced by firms and governments, while EMEs with vulnerable external conditions and weak currencies will also face with increased external debt liabilities measured in local 1  currencies. Moreover, according to the Institute of International Finance, approximately 2.7 trillion US dollars of EME bonds and syndicated loans are due by the end of 2019, with approximately a third of that amount denominated in foreign currencies. Weaker currencies and high correlation of EMEs’ long-term bond yield to the US Treasury yield could reduce the ability of EME firms to service debt and could undermine economic stability.

President Dudley: Let’s put it this way, if it did reach 30,000, I would be concerned about the stock market valuation. I think one of the things that’s interesting post the election is, I think the uncertainty level about policy has gone up enormously, yet markets have actually performed very well, especially the equity market. And that’s actually pretty unusual. Usually markets don’t like uncertainty. And so, one thing to ask yourself the question is, why are markets going up even though the uncertainty level has climbed so much? I think one of the reasons, perhaps, is the notion that political deadlock in Washington is going to ease. Another thing is maybe fiscal policy is going to ride in and provide some support for the economy. But it’s an unusual environment, where uncertainty level goes up and the stock market goes up. There’s a little tension there between those two things. Maureen O’Hara: The VIX which is – President Dudley: Well, that’s the other thing. Volatility in the market is extraordinarily low. So, that’s another thing that doesn’t quite fit. You would think if uncertainty was high, you’d have a little bit more volatility. If I was going to write something down as a prediction, I guess I would think volatility will go up. At some point. 3 / 13  BIS central bankers' speeches  Maureen O’Hara: Well, it is a confusing structure right now. I think it’s hard for anyone to kind of predict this economy. But that kind of makes it fun.
World export prices, weighted by their share in UK imports, rose by over 5% in 2010, one of the fastest calendar-year rises in the past thirty years. The bulk of that rise can be attributed to the direct and indirect effects of higher commodity prices, though some may be indicative of more generalised global inflationary pressures. What has been driving higher commodity prices and are they likely to continue rising strongly? Most commodities have seen sharp price rises, particularly in the past semester (Chart 3). The rebound in global activity is a common thread, but there are significant differences in supply conditions that are relevant to gauging future prospects. In the case of agricultural commodities, there have been a number of extreme weather events that have adversely affected supply, including droughts in the Commonwealth of Independent States, South America and China, and excessively wet weather in other parts of Asia, Australia and North America. But barring further weather shocks, larger harvests can be expected to lead prices to fall back. In addition, the present high prices should encourage more planting, adding to the potential downward pressures. In the case of oil, such supply disruption – at least until the recent events in the Middle East and North Africa – has been less marked and the primary driver has been demand, especially from the emerging economies. Moreover, the income elasticity of energy demand is typically larger in the fast-growing emerging economies than in the advanced economies (Chart 4).

In a country with a limited number of banks it is less clear that a separate supervisor is needed and the central bank may well be able to take this responsibility on without risk to its reputation or of other contagion to its primary monetary policy responsibilities. In contrast to monetary policy, where the appropriate institutional framework is common to all countries, there is unlikely to be uniformity in the roles played by central banks in the supervision of the financial system. Regardless of where responsibility for regulation lies, it is hard to imagine taking steps either to prevent, or to deal with, the consequences of a financial crisis without the active involvement of the central bank. Central banks are currently at the heart of efforts to restore confidence in the banking system by the provision of liquidity against assets which have proved to be highly illiquid. But the recent challenges presented by the latest episode of financial turmoil suggest that much hard thought will need to be given to the structure and nature of banking regulation in the future. In the longer-term, it seems extremely likely that banks and other “near” banks, especially those that have been regarded as similar to banks  2  BIS Review 36/2008  in terms of their eligibility for financial assistance, will be called upon to hold more capital and a greater quantity of liquid assets than hitherto. It is too early to foresee clearly where the long-term direction will go.