samchain/econo-pairs-v1 huggingface dataset:
Third, technology has advanced enormously in terms of both the capacity as well as sophistication. Countries have benefited immensely from these developments and, as a result, wide choices are available to savers & investors, borrowers & lenders together with greater flexibility & efficiency in the allocation of capital. Many institutions have sprung up in both money and capital markets. Similarly, the financial world has become more complicated with closer interconnectedness within and between individual firms, institutions and markets. In the meantime, the regulatory authorities have begun to focus on the achievement of specific objectives and found that they have to react to action by the financial markets by putting breaks to halt the rapid expansion, which would otherwise threaten the stability objectives. So, they brought in financial regulations to deal with the situations. Unabated by the tightening of financial regulation, financial markets continued to grow rapidly and ended up in crises and the world has learnt many lessons from financial crises. The outcome of the Mexican crisis in 1994, the Russian crisis from 1992 to 1995 and the Asian crisis from 1997 to 1998 was the further tightening of financial regulations and introduction of new ones. They were more reactionary and intrusive after the Enron and World Com failures in the USA. The Sarbanes Oxley regulations, which are considered somewhat draconian have come to stay, but may be with modifications.

The policy measure was intended to loosen liquidity for commercial banks to enable them increase their lending to productive  BIS central bankers’ speeches  1  sectors of the economy. The measure was also aimed at influencing the pricing of the loans especially in light of high lending rates prevailing in the economy; 2)  Increase in capital: a robust banking industry is indispensable for supporting investments in the economy. A lower capital base entails limited participation in the financing of investments in addition to increased vulnerability of the banking industry. From the last quarter of 2011, the banking sector saw significant regulatory reform as the capital thresholds for banks were increased. Local owned banks are now required to have a capital base of K104 billion whilst foreign owned banks are required to have a minimum capital base of K520 billion. The revised thresholds are aimed at ensuring that we have the best possible environment in which banks can carry out these key functions. As I stated earlier, banks are specialised institutions and they are fundamental to the working of the economy and linked to all parts of the financial system. But the consequence is that if banks fail, the external effects can have an adverse impact on the financial system and the economy. That is why banks are required to maintain a certain level of minimum capital. In this regard, the central bank provides oversight through prudential supervision.
When trying to assess the risk of an asymmetric shock, the risk is obviously smaller the more similar the countries within the area. Similarity in this context concerns the business structure and the co-variation of business cycles. If, for example, all regions within the area are dependent on poultry farming, the bird-flu is a shock, but it is not asymmetric. The difficulty in responding with a common monetary policy increases the smaller the share of regions that are dependent on poultry farming. In practice however, it is difficult to identify a pure asymmetric shock. A recurring common feature, admittedly in varying degrees, is some form of policy mistake that has amplified the asymmetric shock. Interestingly, the same can be said about the co-variation of business cycles. An example of the latter is the behaviour of the Swedish and euro area business cycles that differed in the decades preceding 1992. In my opinion, a non-negligible part of this difference was due to national policy mistakes and not necessarily different economic structures. It is worth noting that the above-mentioned discussion on costs implicitly assumes that no such mistakes are made. Put differently, a possible further gain coming from a common monetary policy is that it will lower the risk of such policy mistakes. As for the impact of an asymmetric shock, it varies with the possibility to absorb it; the more flexible the economy the smaller the impact. The prices of factors of production should preferably be flexible and the factors themselves should be mobile.

Second, does the monetary union have to constitute an optimal currency area at the outset of the project? As hinted at earlier, the description so far leaves out the political dimension which in the European case has been very important. The EEC, predecessor of the European Union, was established after  2  For a recent overview and summary of the field, see Rose and Stanley (2005). For another recent EMU application, see Baldwin, Skudelny and Taglioni (2005). 3  For the case of EMU, see for instance Böwer and Guillemineau (2006). 4  Excerpt from the poem "On the Move" from the collection "The Hearths". 2  BIS Review 73/2006  World War II primarily as a project for peace. Political integration was the objective, to be achieved in large measure with economic means. Against this backdrop, besides wanting to avoid war, one pragmatic political aspect of the decision on whether or not to join a monetary union is the possible gain of security and influence that comes with being a member. But if a number of countries choose to form a monetary union, how – from an economist’s point of view – should they prepare themselves? Before implementation of a monetary union A number of questions arise when having decided to form a monetary union.
Or to put it another way, if the credibility of the monetary policy framework itself has been key, then inflation expectations may prove rather resilient to short term shocks. But if maintaining an excellent track record has been crucial, the situation may be more fragile. In the context of the current outlook, the real risk facing the Committee is that a further period of above target inflation, prompted by a cost shock over which it has no immediate control, will lead people to revise their expectations about future inflation, and to act accordingly. This will make it more costly to bring inflation back to target. What does all this mean for policy? The MPC has frequently stressed that policy is not based simply on its central projections of the economic outlook – what matter just as much are the risks around it. The Bank has pioneered the use of fan charts to illustrate the probabilistic nature of any forecasting exercise. The fact that these fan charts reflect the Committee’s subjective judgements about the uncertainties it faces means that they can be quite revealing about its thinking. 4  BIS Review 22/2008  This is particularly true now. Policy needs to balance two significant risks – first, that financial stress will precipitate an unduly sharp slowdown in demand, which will bear down so heavily on inflation that it undershoots the target; and second, that temporarily high inflation will lead to inflation expectations persisting at too high a level.

Jürgen Stark: Towards a stability-oriented policy framework Speech by Mr Jürgen Stark, Member of the Executive Board of the European Central Bank, at the conference “Reconstructing the world economy – redesigning the macro-framework”, organised by the Korea Development Institute and International Monetary Fund, Seoul, 25 February 2010. *  *  *  Ladies and Gentlemen, In discussing the current macroeconomic framework, I will focus on the institutional aspects that have proved successful, in particular, from the European perspective. These are central bank independence, the centrality of price stability for monetary policy and the need to adopt a medium-term, rules-based perspective in the conduct of monetary and fiscal policies. The financial crisis has not contested or discredited these three principles. However, it is certainly true that other aspects of the international consensus framework merit some deep re-thinking. I will take this opportunity to share my thoughts on four such elements, namely inflation targeting, central banking as risk management, monetary policy and asset prices, and fiscal policy. The reference model Inflation targeting, together with the canonised version of the New Keynesian model on which it is predicated, is perhaps the main building block of the pre-crisis consensus paradigm. Although they are closely connected, I wish to separate the policy prescriptions from the underlying model, and address each in turn. The shortcomings of the New Keynesian modelling paradigm have been recognised before. But addressing them has not yielded a paradigm shift to overcome them.
We can also observe that the Memorandums of Understanding in the field of financial crisis management, which have been drawn up between authorities in Europe in recent years have proved to be too vague. In future, therefore, we need to have more concrete and binding arrangements. One complicated and important question is how the costs should be distributed when a crisis spreads to several countries. Differences in regulation and supervision also complicate the crisis management. Greater harmonisation is in actual fact an important condition for both crisis management and crisis prevention work. As a result of the crisis, the EU has begun to look into how its framework for supervision can be improved. My view is that after the crisis it is both essential and possible to take a step towards better joint supervision in Europe. But although the supervision issue is important, the systems for deposit guarantees and crisis management must be designed to function when needed, not merely within individual countries, but also between countries. This has not always been the case during the current crisis. Monetary policy and the build-up of risks Does monetary policy have a role to play in preventing a financial crisis? This has long been a controversial issue, where economists have held differing opinions. However, the financial crisis has undoubtedly given us experiences we should make use of.

These universal banks combined traditional bank lending with various forms of investment banking activities. By using economies of scale from these different areas, they were able to offer competitive prices - but also to exploit various conflicts of interest. When prices fell, the banks were accused of having contributed to issues of securities of dubious quality and of having painted an overly bright picture of the companies’ future in their prospectuses. The commercial banks were also accused of having converted loans lacking creditworthiness into shares, by contributing to new issues, where shares were sold to an uninformed public. In addition, it was claimed that certain company management had lined their own, and their families’, pockets in various ways. Although it was difficult to prove that the banks had knowingly and systematically misled the general public, it was revealed that prominent figures in various banks had earned large sums at the cost of their customers, and in some cases at the cost of the banks. This contributed to the introduction of the Glass Steagall Act in the United States in 1933. The Act required complete legal separation of commercial banks and investment banks. A commercial bank could not be included in the same group as a bank that mainly conducted operations in the securities markets. However, during the 1960s and the 1980s the regulations in the United States were gradually loosened up. Commercial banks were given increasing opportunities to conduct investment banking activities, albeit on a limited scale.
As that uncertainty dissipated and households began to feel more confident about the outlook, so the saving rate fell back (Chart 1). There is probably some scope for it to fall a little further, but continued firm consumption growth really depends on us seeing a pickup in household income growth, of which I will say more shortly. There is more scope for housing investment to continue driving growth. Housing starts and the level of housing transactions are still respectively around 25% and 10% below their averages during the pre-crisis decade (Chart 2). But the supply of new housing is not as elastic as one would like, because of planning restrictions and the like. Consequently there is a risk that increased demand for housing ends up mainly in higher house prices rather than more houses. In turn, if associated with excessive expansion in mortgage lending, that may create future financial stability risks. For that reason, the Bank’s Financial Policy Committee, which is charged with maintaining the overall stability of the financial system, is keeping a beady eye on the housing market. BIS central bankers’ speeches  1  For the recovery to be both sustained and sustainable, however, we really want to see three things happen. First, business investment needs to pick up the baton in supporting demand growth. Second, we need to see a revival in productivity growth, which in turn would sustain both higher real wages and higher profits, thus supporting continued household and business spending growth.

While net lending to companies remains subdued, that partly reflects lenders running down their commercial property loans; new lending to businesses has picked up significantly over the past year. In sum, there are reasonable grounds to expect that the handover from households to businesses will be realised. As far as the prospects for productivity go, the picture is murkier. A feature of this downturn has been the unusual weakness of productivity growth. To give you an idea of the scale of the puzzle, output per person-hour worked is just over 15% below where it would have been if it had simply continued growing at its pre-crisis average rate (Chart 4). Part, but only a small part, of this shortfall can be traced to the low rate of business investment and special factors such as the decline in North Sea oil production. A possible explanation is the presence of overhead labour and the desire to hang on to skilled labour that might be difficult to replace when demand picked up; the low rate of pay growth will certainly have encouraged this. Some businesses also tell us that they have had to devote more effort to winning business while demand is depressed. Finally, the need to repair balance sheets may have led banks both to forbear on delinquent loans to some weaker businesses while simultaneously inhibiting the extension of new credit to riskier, but potentially more productive, enterprises. Now several of these explanations imply that a recovery in demand could be met largely with the existing workforce.
John C Williams: The economic outlook - the “new normal” is now Remarks by Mr John C Williams, President and Chief Executive Officer of the Federal Reserve Bank of New York, at The Economic Club of New York, New York City, 6 March 2019. * * * As prepared for delivery Thank you for the kind introduction. It’s a great pleasure to be here today and a huge honor to be joining the board of the Economic Club of New York. This institution has been an essential forum for debate for many decades, and I sincerely hope today will be no exception. I’m going to start with a spoiler: At a certain point during this speech I will talk about interest rates. I imagine that if I don’t, you’ll feel you’ve been shortchanged. So before I get going, I’ll give the usual Fed disclaimer that the views I express are mine alone and do not necessarily reflect those of the Federal Open Market Committee or anyone else in the Federal Reserve System. R-star Now that’s out of the way, I want to take you back a long time ago, to a galaxy far, far away.

The architecture of our current monetary system is characterised by flexible exchange rate regimes, free capital flow and independent monetary policy. This global landscape has expanded the cross-border exchange of goods, services and capital. Importantly, the transition to more market-based foreign exchange rate system has accorded policymakers greater control over domestic policies, accelerated the development of financial sector, and, ultimately, boosted economic growth. Nonetheless, this international monetary system also has obvious shortcomings. In the postBretton Woods period, the frequency of banking and currency crisis has increased dramatically with large output and employment losses. At the centre of this international monetary system, policy adjustments in major economies have led to significant volatility in the financial markets. The initial hint of tapering by the Federal Reserve in May 2013 resulted in large reversal of capital flows and exchange rate over-shooting in emerging economies. Today, the complexity of managing an economy is compounded by the impact of global shifts in capital on domestic financial markets and real economic activities. Given our high degree of openness, Malaysia was not spared by these developments. For example, global concerns over monetary policy normalisation by the Federal Reserve continue to impact the ringgit. Ringgit volatility since September 2014 has exceeded levels in previous episodes of sharp adjustments such as the European Sovereign Debt Crisis and Taper Tantrum. The weak ringgit performance was further amplified by the misperception about Malaysia’s reliance on commodities and our position as a net oil exporter.
In this speech, I will take a whistle-stop tour through the twentieth century to examine the increasing role that supervision has played in the regulation of financial institutions and why it remains an essential ingredient of the regulatory framework here in the UK. This is especially true in the context of regulatory arbitrage and, of course, Brexit – themes to which I will return later in this speech. First, though, I will consider the three main roots of supervision during this period, namely the individual regimes of oversight relating to banks, building 1  societies and insurers . I will proceed in alphabetical order in the hope that this will avoid offending any sector, even if (regrettably) it means the bankers get in first. 1  My colleague Mark Yallop has given an excellent speech in similar terrain. 2  All speeches are available online at www.bankofengland.co.uk/speeches  2  Banking Supervision Let’s begin in 1890. Our scene is Cannon St and an establishment which printed a weekly chronicle that went by the name of The Statist. Hot off the press is a headline: “Messrs Baring Brothers’ Issues”. Then follows a well-informed, highly sceptical article which questioned the quality of much of the foreign business being embarked upon by what was, at the time, considered by many to be the most respectable house in the 2  City of London .

Based on this assessment, firms were split into categories varying from high to low impact and supervisory activity was derived from this categorisation. Most supervisory attention was focused on the institutions with the highest potential impact, on the basis that whilst only 1% of all firms were classified as high impact, they accounted for 64% of market share and 98% 43  of traded market volumes . A risk assessment framework – the Advanced Risk Response Operating frameWork or ‘ARROW’ (sounds better than “ARROF”, I suppose) – was used to organise supervisory activity and, on the basis of risks identified by supervisors through on-site visits and off-site investigations, would create a Risk Mitigation Programme (RMP) including actions that firms should undertake to mitigate identified risks. This style of supervision went unremarked upon for the most part, though of course much has been said about the FSA’s model since the global financial crisis. Countless speeches have summarised the crisis and its fallout – so I will not dwell on the crisis itself too much here. Instead, I will consider its aftermath and what it meant for supervision. The Turner Review was one of the earliest reports critical of the FSA’s way of doing things.
Exhibit A of the fallibility of consensus thinking is the herd mentality among supposedly sophisticated financiers as well as theoretical economists who believe in efficient-markets theory and other nonsense themes that led us into the recent financial crisis. I happen to believe that Margaret Thatcher, the former British prime minister, was right when she said, “You cannot lead from the crowd.”1 There is a role for contrarians, not just in the investment arena, but also at the highest level of policymaking; at a minimum, it is important to question and challenge consensus views, even when they are formed by the most credentialed individuals. For example, some of you may recall the public letter written by 364 eminent economists predicting disastrous consequences that would result from Thatcher’s policy initiatives. That letter was published in the Times of London on March 30, 1981.2 The British economy began a recovery almost immediately afterward, in 1982; by 1983, inflation and mortgage rates were at their lowest levels in over a decade, while economic growth accelerated. The failure of the consensus view led Chancellor of the Exchequer Geoffrey Howe to define an economist as “a man who knows 364 ways of making love, but doesn’t know any women.”3 To be sure, economic theories and econometric models are of great utility for providing a framework for policymaking; we cannot make policy without them. But they are imperfect substitutes for common sense.

But this frontloading approach also proved effective from a political perspective. By acting with speed and determination, the Latvian government was able to capture the sense of urgency prevailing among the population and mobilise it to support adjustment. This way, most of the required painful budgetary decisions could be passed before the so-called “adjustment fatigue” kicked in. The bottom line is this: when adjustment is inevitable, it is better to take the medicine right away than to let the fever rise for months. This is undoubtedly an important factor that explains the different trajectories of the Baltics and certain southern European countries. But fiscal consolidation alone would not have allowed the Baltics to exit the crisis so swiftly. The ECB has long argued that the potential trade-off between fiscal discipline and growth can be mitigated if consolidation is accompanied by growth-enhancing structural reforms. The case of the Baltics confirms this. From a political economy perspective, the Latvian experience also shows that a critical mass of structural reforms is helpful to overcome vested interests. Education, health care, central administration: hardly any public sector category was spared by the reforms. Combined with targeted social safety net measures, this comprehensive approach helped the government to foster public acceptance of change. At the same time, the quality and long-term sustainability of the reforms may – at least initially – have suffered from this approach. Structural reforms are not just about across-theboard cuts but are much more complex and multifaceted.