samchain/econo-pairs-v1 huggingface dataset:
Among the future challenges that are likely to confront Asia is whether our prevailing growth model is sustainable given the consequences from erosion of our demographic advantage, the rising indebtedness, the rising cost of living in an apparent period of low inflation, the need to meet the massive infrastructure requirements and the need to address the rising income disparities and the environmental challenges. What then are the ways economic management can prepare us for the future? This will involve policies and reforms that will reduce leverage that will address the widening income disparities, that will effectively manage infrastructure development and urbanisation, that will accord environmental sustainability and finally that will accord importance to governance, accountability and integrity in the implementation and execution of the many endeavours to achieve a sustainable advancement. For most Central Banks in the emerging world, our mandate is broader. Most certainly we are expected to have a role in contributing to addressing many of these challenges both directly and indirectly. Most of all, not only do we have a voice but we also provide support to addressing many of these issues, whether it is on financial inclusion, financing of infrastructure or putting in place financial and social safety nets or on environmental  2  BIS central bankers’ speeches  sustainability.

Requiring the largest banks in the UK to maintain additional loss absorbing capacity has made a significant contribution to remove these distortions. Removing this hidden subsidy has made the financial system more transparent, and banking sector competition more effective. The risk of unexpected events – such as the Covid pandemic – is the very point of having strong prudential standards and a credible resolution regime, and underlines the need for the financial system and those active in it to be capable of responding successfully to maintain financial stability. The significant progress the UK has made in strengthening its prudential standards and in developing and implementing a resolution regime can be seen clearly from the response to the current Covid pandemic. The major UK banks and building societies have so far proved resilient to the pandemic, and the FPC’s reverse stress tests have shown that banks are can withstand a wide range of scenarios.8 In the Global Financial Crisis the banking system amplified the shock. In the current Covid crisis, the banking system has not just been resilient to the shock but, supported by the authorities’ actions, has played its part in cushioning the shock, providing credit to help minimise longer-term scarring from the shock. Although next week’s Budget will update on the very significant fiscal impact of the shock, this will reflect the consequences of supporting households and business through this unprecedented period rather than supporting banks.
LIBOR Won’t Last Forever Some say only two things in life are guaranteed: death and taxes. But I say there are actually three: death, taxes, and the end of LIBOR. Everyone in the financial services industry needs to be aware that the date when the existence of LIBOR can no longer be guaranteed is fast approaching. I titled remarks I gave on this subject earlier in the year “901 Days” to remind everyone just how little time both the public sector and market participants have to prepare for a world without LIBOR.3 We are now 831 days away from that world, and while some institutions are making good progress, others are sticking their metaphorical heads in the sand, hoping the issue will go away. Even more concerning are those wearing rose-tinted glasses, getting nostalgic about LIBOR and hoping for an extension to the deadline or a reincarnation of the rate. I cannot emphasize enough 2/5  BIS central bankers' speeches  that the clock is ticking and everyone needs to get their firms ready for January 1, 2022. A look at the numbers, and recent history, reveals the need for urgency. There are $ trillion of financial contracts referencing U.S. dollar LIBOR.4 But the volume of actual transactions that term LIBOR is based on is very small. When individual banks make LIBOR submissions they are largely based on judgment, not real transactions. This makes the rate vulnerable to manipulation, and banks are increasingly reluctant to provide submissions, adding yet further risk around using the rate.

When the bust arrives, over-indebted households and businesses want to increase their saving and liquidity buffers, and financial intermediaries want to raise credit standards. Both responses restrain demand and make a cyclical rebound more difficult. In the U.S. case, because the bust was concentrated in housing, the scope for a strong cyclical recovery was particularly constrained because the interest-rate sensitive sector that would typically lead such a rebound could not recover until the overhang of unsold homes and the impairment of housing finances was corrected. The U.S. recovery has also been subpar because it has been taking place in the context of a weak global economy. Historically, after a country experienced a financial crisis, growing foreign demand and currency depreciation have often led to a sharp improvement in the trade account that has put a floor under economic activity. In such circumstances, rising exports substitute for domestic consumption in supporting aggregate demand. This demand, in turn, encourages businesses to hire and invest. In contrast, this time the shock generated by the U.S. housing bust had global consequences, exposing economic vulnerabilities outside of the United States, especially in Europe. Under these circumstances, the scope for trade as a support for U.S. growth, while positive, has been very limited. These two factors – the dynamics following financial crises and the weakness of foreign demand – help explain why U.S. growth has been weak, but I don’t think these factors explain why it has been consistently weaker than expected.
Our current account surplus has been in the positive for five consecutive years and is projected to be around at 34.5 billion USD this year, or around 6.4 percent of GDP. In addition, the economy has low dependency on external financing, with external debt to GDP ratio below the median level of emerging market economies2. (2) The banking sector is robust, with high capital adequacy ratio and stable domestic funding. At the end of 2018, the capital adequacy ratio of the banking system stood at 18.3 percent, a level well above minimum international requirement and among the highest in the region. Meanwhile, loan growth has picked up in line with our economic expansion while level of non-performing loans has stabilized. (3) The fiscal position remains strong and has sufficient space to support the economy in case of downturn. Public debt to GDP is around 2 Thailand’s external debt to GDP is 35.3 percent as of 2018 vs the median of 37.8 percent for EM economies. IMF data calculated by BOT  5/9  42 percent, a level below the commonly accepted threshold of 60 percent. Meanwhile, the enactment of Fiscal Responsibility Act would ensure fiscal discipline through improvement in spending transparency and limit conduct of open-ended populist policies. (4) Domestic price pressure remains moderated and stable, largely as a result of slow recovery in the global oil price and positive structural factors, such as globalization and technological advancement. Low and stable domestic price pressure will continue to provide favorable environment conducive for economic activity.

Furthermore, private investment is expected to continue to improve, aided by more investments in the EEC area, further progress in the public-private partnership infrastructure projects, and relocation of production bases to Thailand in industries such as electronics, automotive parts, and rubber. Meanwhile, the tourism sector is expected to continue to expand mainly due to improved confidence and return of Chinese tourists. It is expected that the number of foreign tourists will exceed 40 million this year. Ladies and gentlemen, Although our outlook indicates a sustained growth, a number of risk factors remain. These include (1) The potential impacts from US protectionist policies and trade tensions with China, which so far have had mixed effects on the Thai economy. The direct effect of US safeguard measures on certain products led to slowdown in exports of solar cells and washing machines, though they have had small impact on our overall exports 1. Meanwhile, US trade measures against China could have indirect impact on Thai exports as a number of Thai firms are part of Chinese production and supply chain networks; potential reduction in Chinese exports has reduced the demand for Thai supply. Furthermore, the measures can lead to trade diversion, the consequence of which remains to be determined. On one hand, the Thai economy may benefit from new investments from relocation of Chinese factories. Thai firms may be able to supplant Chinese competitors in exporting to the US.
Even bearing in mind the caveat that I have outlined earlier on the lack of a clear benchmark, it looks like international capital flows are too abundant in good times, potentially fueling domestic bubbles and destabilizing national financial systems, and prone to “sudden stops” in bad times. Emerging market economies have experienced numerous examples of “surge” episodes of capital inflows followed by perilous sudden stops. Current (and preliminary) data suggest that some EMEs are currently experiencing very large outflows. The potentially destabilizing effects of capital flows may be magnified in the current situation, with disappointingly slow economic growth (of a cyclical and structural nature), high volatility in commodity and asset prices, the persistence of both internal and external imbalances in key countries and regions, substantial amounts of currency mismatch on balance sheets in emerging market economies, etc. BIS central bankers’ speeches  1  II. So what should be done? I think that we should try to be both pragmatic and ambitious. If we are not pragmatic we will waste time exploring paths that will not lead us anywhere, but if we lack ambition we will never make progress. We should, first, develop a framework to prevent excessive capital flow volatility. Here I see three main avenues to explore: (i)  improving the monitoring of capital flows and hence taking forward the work on data gaps on foreign currency exposures and mismatches.

In Sweden we have had several deregulations, including those in the taxi industry, domestic air travel and dental care, which have not caused any substantial drop in prices. Other deregulations, including those in the electricity and telephone markets, have had larger moderating effects on prices than expected. The difficulties do not only involve evaluating the effects on inflation of each single deregulation or every new step in internationalisation. They also concern the more principal question of to what extent this type of effect on inflation should be accepted. Where should one draw the line between a relative price change, which leads to such inflationary effects that a monetary policy reaction is motivated, and a change which does not require any such reaction? Presumably, today's increased competition is only part of the whole picture of developments, in the same way that tax increases were during the 1970s and 1980s. At that time, not taking into account the fact that tax increases were part of the inflation process was a considerable policy mistake. In the same way one can ask whether the effects of deregulation and other effects of international competition should really be taken into account today. There are fundamental arguments against the idea of discounting considerable aggregates of goods that have been hit by price falls. What central banks should be trying to do is to stabilise general price levels and not to counteract changes in relative prices.
If it is a subsidiary that is systemic in the host country, one solution might be for the central bank of the host country to grant emergency liquidity assistance to the subsidiary. However, it may not be possible to successfully ring-fence it, and the money is lost and the rescue mission fails. Similarly, the decisions in an emergency situation may also be distorted by conflicts of interests regarding deposit guarantee schemes and other crisis resolution measures. Through deposit guarantee schemes, bank deposits are partly insured in the event of a bank default, thereby protecting depositors from losses (up to some maximum amount), which in turn reduces the risk of bank runs that may jeopardise financial stability. Deposit guarantee schemes are thus a vital part of the safety-net for banks, apart from the central banks’ ability to grant emergency liquidity assistance. All EU-countries are required to have deposit guarantee schemes that are supposed to be financed by the financial industry, for example through fees to a fund. Typically such funds would be designed so that any deficits in the fund are financed by the banks from future fees. However, it seems doubtful that such financing would be sufficient in all cases. In the case of default of a very large bank, it seems more likely that the government would then have to intervene somehow. Either the deposit guarantee fund would have to borrow from the government, or the government would step in directly and provide some retribution to depositors on behalf of the deposit guarantee fund.

The Creative Economy Speech given by Andrew G Haldane Chief Economist Bank of England The Inaugural Glasgow School of Art Creative Engagement Lecture The Glasgow School of Art 22 November 2018  The views expressed here are not necessarily those of the Bank of England or the Monetary Policy Committee. I would like to thank Marilena Angeli and Shiv Chowla for their help in preparing the text. I would like to thank Philip Bond, Clare Macallan and Mette Nielson for their comments and contributions. 1  All speeches are available online at www.bankofengland.co.uk/speeches  It is a great pleasure to be at the Glasgow School of Art (GSA). For over 170 years, the GSA has been one of the leading educational institutions in the creative arts in Europe. Today, the School continues to provide a conveyor belt of talent that is fuelling the rise in the creative industries, a sector growing rapidly and one where the UK can genuinely be said to be a world-leader. It is creativity, and its role in improving incomes in the economy and well-being in society, that I will discuss this evening. Now, there is a certain irony in me (a middle-aged career public servant) giving a lecture to you (staff and students at one of Europe’s creative hot-spots) about the determinants and benefits of creativity. Don’t worry, that irony is not lost on me. Nonetheless, I hope that by analysing creativity through an economic and historical lens we can learn something about its key ingredients.
However, the Act envisions oversight of the bank by the appropriate banking agency and functional supervision of individual non-bank subsidiaries that is, SEC oversight of broker/dealers and oversight of insurance companies by state insurance departments. While the Act permits the Federal Reserve, under specifically defined circumstances, to seek information directly from or even examine non-bank subsidiaries of FHCs, the Act also stipulates that the Fed must rely “to the fullest extent possible” on publicly available information, externally audited financial statements, and reports and other information submitted to the functional supervisors. We at the Federal Reserve take this aspect of our revised role - sometimes referred to as “Fed-lite” very seriously. Clearly, it was not the intention of Congress to replace outdated and overly restrictive aspects of Federal banking law with a needlessly onerous and redundant regulatory regime. Moreover, functionally regulated firms should be able to compete on an equitable basis, whether or not they happen to be affiliated with a bank. To minimize regulatory burden and avoid duplication, the twotiered framework of umbrella supervision of financial holding companies and functional regulation of their subsidiaries requires enhanced cooperation and coordination among Federal and state supervisory authorities. Efforts are well underway among the relevant Federal and state financial services authorities to establish agreements and procedures to effectively implement Congress’ mandate. Before moving on, I want to address the topic of community reinvestment in the context of GrammLeach-Bliley.

Preconditions for Lender of Last Resort Support The basic precondition for lender of last resort support is the systemic risk that would, in the judgement of the HKMA, arise from the failure of a troubled institution if it were deprived of liquidity assistance. This is the basic precondition, but not the only precondition. The institution in question would also need to satisfy a number of further conditions designed to demonstrate that lender of last resort support is genuinely being sought as a last resort, and that such support would not amount to throwing good money after bad. To be specific, the additional preconditions are: •  First, the institution would need to have a sufficient margin of solvency. As a measure of sufficiency, we would generally require the institution to demonstrate that it maintains a capital adequacy ratio of at least 6% after making adjustment for any additional provisions that might be necessary. •  Secondly, the liquidity support extended to the institution would need to be adequately collateralised. •  Thirdly, the institution should have sought other reasonably available sources of funding before seeking lender of last resort assistance. •  Fourthly, the shareholder controllers of the institution should have made all reasonable efforts to provide liquidity or capital support as a demonstration of their own commitment to the institution. •  Fifthly, there must be no prima facie evidence that the management is not fit and proper, or that the liquidity problem is due to fraud.
Thirdly, most countries have implemented extensive fiscal policy stimulus measures. The OECD estimates that these measures have accounted for just over half of the reduction in general government net lending in the OECD area. In the United States, where stimulus packages have been introduced on an unprecedented scale, the OECD estimates that these active stimulus measures have accounted for as much as three-quarters of the deterioration in public-sector finances. In the euro area it is instead the automatic effects on tax revenues and cyclical expenditures that have predominated. Consequences of the deterioration Extensive historical studies of financial crises show that they are often followed by a severe weakening of public finances and prolonged periods of subdued GDP growth. 2 The deterioration in public finances that we have seen during this crisis will keep GDP growth and inflation down in many regions for some time to come, as the weak finances will enforce fiscal policy contraction and/or may lead to higher interest rates. A tighter fiscal policy is inevitable to make public finances stable in the long term. Restoring the deficit to the level that prevailed prior to the crisis, and one might ask whether this will be sufficient, is not simply a case of replacing the fiscal policy stimulus measures implemented during the crisis with corresponding tightening measures after the crisis. In addition, expenditures have to be replaced as potential GDP and thus potential tax revenue have fallen due to the crisis.

In the Netherlands, for example, households have similar or higher levels of debt, but tend to fix interest rates for more than ten years. In the euro area as a whole, the share of new variable rate mortgages has been trending downwards over a twenty-year period and German households appear to be the least interest rate sensitive. With regard to Sweden, I believe that the situation we are now experiencing with high inflation and rising interest rates may to some extent have a self-regulating effect. It may be the case that households will in the future see greater advantages in fixing their interest rates for longer periods. There is also a request from Finansinspektionen to the Ministry of Justice to review the interest rate differential compensation, which may strengthen the incentives for households to fix their interest rates. In the Swedish Government Offices the Ministry of Finance is now investigating the matter. Furthermore, one can ask whether it would be appropriate to regulate to influence households' choice of interest rate fixation period. But in this case, an indepth study of the advantages and disadvantages of possible designs is first needed. Regulation would not necessarily entail imposing binding restrictions, but could rather influence households' incentives to fix their interest rates to a greater extent. Higher interest rates cost, but prolonged high inflation costs more Households' high indebtedness and short interest-rate fixation periods on their loans mean that higher interest rates have a comparatively large and rapid effect on households' scope for consumption.