samchain/econo-pairs-v1 huggingface dataset:
However, they all agreed that work on a collective option should not preclude parallel efforts by anyone; indeed, that if any firm or group of firms wished to step forward and take Long-Term Capital itself or Long-Term Capital’s positions onto their balance sheets that this would be the most desirable outcome. In the absence of any other solutions, the firms dispatched two working groups to Long-Term Capital’s offices in Connecticut to consider the feasibility of “lifting” the fixed-income and the equity positions out of Long-Term Capital. A third working group met at one of the firm’s offices downtown to develop the idea of a consortium approach. By mutual agreement another firm, UBS, a Swiss bank, was added to this core group and to each of the three working groups. However, no one from the New York Fed participated in any of the working groups. At no point in this early morning meeting, nor at any stage last week, was there discussion of the use of public monies - Federal Reserve or otherwise. No Federal Reserve or government guarantees, actual or implied, were offered, discussed or solicited. Later that afternoon, we participated in a conference call to review the progress of the working groups. Two of the working groups concluded that a “lifting” of the fixed income and equity positions was not feasible. The third group developed a consortium approach, which was deemed feasible. Every one agreed that the consortium approach should be “last ditch”, and that parallel solutions should still be encouraged.

These safeguards will include improvements to cross-market surveillance in Hong Kong, and an in-depth exploration of possibilities for further strengthening the resilience of the currency board system - an exercise which is now making good progress. More widely, we need to continue to develop Hong Kong’s position as a premier international financial centre. Practical measures recently announced by the Chief Executive of the HKSAR will help in this: they include schemes ranging from the upgrading of the security and efficiency of our entire financial infrastructure to the expansion of research facilities in the form of a monetary institute affiliated to the HKMA. The emphasis in all of this is not on intervention, but on facilitation. As a government, we do not direct the form that economic growth should take: we simply strive to provide the best environment that we can to enable growth to take place. In the financial sphere that means a stable currency, a credible and secure banking system, and markets that sustain, rather than undermine, economic development. There is much that we can do - and have done - locally to achieve these aims. But increasingly, the solutions have to be global solutions, because, as the events of the last year have amply demonstrated, some of the most intractable problems facing our financial systems straddle borders and thrive in the cracks and holes between jurisdictions. Globalization - the breaking down of economic barriers - has brought many benefits, particularly to our own region.
In the first part of my remarks today, I would like to give an overview of the key measures that have been taken in response to the crisis. My focus will be on the role played by the ECB. Monetary policy has been critical to averting a more severe economic calamity. But the ECB has also made a wider contribution: we have contributed actively to the debate on the deepening of EMU and we have promoted progress toward the euro area’s new financial architecture, the Banking Union. This work of strengthening the euro area is not complete, however. And this is where I would like to focus the second part of my intervention. Specifically, I would like to ask: what further steps are needed to embark on a path of robust growth, both in stressed and non-stressed economies? We know that achieving high sustainable growth will be indispensable to bring the unemployment rate back to acceptable levels and to support debt sustainability. But for this to happen, the euro area as a whole will need to persevere in its efforts to reform its economic fabric. The process of structural reform is demanding – and it therefore requires long-term commitment and strong ownership to be a success. The starting point: the debt crisis and the emergence of financial fragmentation Let me start by briefly reviewing the evolution of the crisis in the euro area. Very broadly speaking, the crisis has had two main phases.

In parallel, all programme countries have strengthened their active labour market policies, including by fostering traineeship programmes and dual-apprenticeship systems, also with the support of EU funds. This is important, as having an adequate social safety net and job search and retraining programmes can reduce unemployment duration and so lower the long-term costs of an adjustment phase. There is also a fairness dimension: we should not forget that some citizens paid high entry costs to enter previously closed professions, for example by purchasing expensive licences, and may now need help transitioning to new employment. Product market reforms have generally aimed at improving competition in network industries – energy, telecommunication, transport – and highly regulated professions, as well as reducing administrative (licencing) burdens to wholesale and retail trade and provisions of services. Such reforms have tended to face greater implementation obstacles than labour market measures, partly owing to the micro or sector-specific dimension of the reform needs. 1  Blanchard, O., F. Jaumotte, and P. Loungani (2013), “Labor Market Policies and IMF Advice in Advanced Economies During the Great Recession”, IMF Research Department. BIS central bankers’ speeches  5  This has required policymakers to confront more concentrated opposition from vested interests within the sector that is subject to reform. However, among programme countries, Portugal has some impressive achievements to show in terms improving product market functioning and economic framework conditions.
However, it can be difficult to achieve the right balance In theory, balancing the need to achieve the inflation target and the need to stabilise the real economy seems relatively simple, even when there is a conflict between these objectives as in 2008. However, when it comes to conducting monetary policy in practice, achieving the right balance is not always so easy. One problem that I have probably underestimated in the past is that there are no simple and unambiguous measures of how much of the economy's resources are being utilised and what should be considered as a normal level for what we call resource utilisation. In theory it is relatively easy to define the so-called production gap. It is often defined as the difference between what is actually produced and what could be produced if the resources available were used to the full. But I do not really think that it is possible to measure this gap with any great degree of precision. One problem is that it is difficult to measure how much could be produced if all the resources were used to the full. This, which is sometimes called potential production, can not be observed directly but must be estimated. 1 At the same time, there is a great deal of uncertainty about the best way to perform such an estimate.

The combination of the Riksbank now publishing its own interest rate forecast and at the same time continuing to report how we think has the potential to change the discussion outside of the Bank. It could to a greater extent concern how new information should affect  2  BIS Review 111/2007  expectations of interest rate developments rather than exactly what formulations are used in for example speeches and press releases. Interest rates are by definition always uncertain Let me take up some issues that are important to keep in mind when formulating forecasts for the repo rate. Firstly, the interest rate path we present is a forecast and forecasts are, as we know, very uncertain. To illustrate this, the Riksbank publishes uncertainty intervals, known as fan charts, around its interest rate forecasts and also its inflation and GDP forecasts (Figure 8). As you see, the uncertainty interval increases considerably in relation to the length of the time horizon. Put simply, the probability of unexpected shocks arising in the economy that would lead to developments deviating from the forecasts increases when the time horizon is longer. In other words, it is not easy to make accurate forecasts of the development of the interest rate in the longer term. One means of illustrating this is to see how the implied forward rates have changed over time. Figure 9 shows implied forward rates measured on a quarterly rate. Expectations of the development of the repo rate have varied substantially over time when measured in this way.
If inflation is expected to be above the 2% target during this time horizon, the interest rate is normally raised and vice versa. This rule was formulated with a view to making policy more intelligible, to ourselves as well as to others. We also believed a rule of this kind would serve as a structure for decision-making and help to enhance confidence in monetary policy. In my opinion, the rule has served these purposes. It has contributed, not least, to a more structured discussion of monetary policy issues and thereby to a deeper understanding of the choices we have to make. Have we observed our rule? Judging from this chart, I would say we have (Chart 2). The chart shows the repo rate in practice together with the path indicated by the Riksbank’s inflation assessments. You will see that we have followed our forecasts fairly closely and thus adhered to our rule of action. Deviations have occurred, mainly in the early years with the inflation target; I believe they were largely connected with concern about the exchange rate.

Decisions have to be made and it would not be reasonable to go on acting as though nothing had changed until sufficiently long time series are available for econometric analyses. Recently I had the pleasure of chairing a central bank seminar that the BIS arranged on just these issues. My impression was that it has proved difficult to produce definite evidence of any structural shift in the relationships that govern inflation, such as various versions of the Phillips curve. In many countries, including Sweden, appraisals of resource utilisation, for example, are now more optimistic. As you are no doubt aware, in the past five years our output gap estimates have in fact been revised a number of times. One explanation I find fairly plausible is that after the profound crisis in the early 1990s we simply misjudged the size of the gap. There is also some support for the possibility that productivity has followed a more favourable trend than expected, thereby reducing the risk of bottlenecks. Total factor productivity, for instance, has been on a rising trend since 1993. Another possibility is that, for various reasons, the labour market is functioning more efficiently. One indication of this is that rapidly falling unemployment in recent years has not been accompanied by acute labour shortages. Perhaps I should mention that we have also detected certain changes in inflation relationships.
As a working assumption, the real exchange rate is assumed to remain fairly unchanged, because it is estimated to be now within the range believed to be consistent with its long-term fundamentals. Finally, the baseline scenario also uses as a working assumption that, over the short term, the MPR will be stable. The baseline scenario reflects those events that are believed to be the most likely with the information at hand at the statistical closing of the Report. There are risk scenarios, however, which, if materialized, may reshape the macroeconomic environment – in some cases, significantly – and, therefore, may alter the course of monetary policy. On this opportunity, having evaluated the alternative scenarios, the Board estimates that the risk balance is downward biased for output, and unbiased for inflation. The greater risk originates abroad, because of the situation in the Eurozone. This is very complex and the developments of recent months have revived the possibility of more extreme scenarios. Most importantly, economic and financial problems in the region could be worked out in a costly and disorderly manner, for example with Greece leaving the monetary union. Despite its small size within the Eurozone, such an outcome could inflict severe damage on the rest of the world if there is contagion to bigger European economies. The macroeconomic and financial situation of Spain continues to spur doubts, as reflected in the steady increase in its risk premiums.

12  GDP  6.0  3.75-4.75  4.0-5.0  4.0-5.0  Domestic demand Domestic demand (minus inventory change) Gross fixed capital formation Total consumption Goods and service exports Goods and service imports  9.4 10.2 17.6 7.9 4.6 14.4  3.7 4.8 5.8 4.5 3.7 3.0  5.3 5.8 8.9 4.8 3.8 5.9  5.2 5.5 7.4 4.8 3.9 4.9  Current account (% of GDP)  -1.3  -3.3  -3.4  -3.1  (f) Forecast. (*) Forecasts at December, projected with national accounts, base year 2003; forecasts at March and June, with national accounts, base year 2008, considering chained indexes. Source: Central Bank of Chile. BIS central bankers’ speeches  11
We cannot afford to ignore capital markets if we are to restore and preserve stability in the UK. The UK’s new macroprudential regime recognises this. The CEO of the planned new market regulator, the Financial Conduct Authority, will sit on the Financial Policy Committee once it is placed on a statutory footing. And the government proposes that the FPC be given power by Parliament to give Recommendations and Directions to FCA where it could develop its policies and rules in the interests of stability. Domestically, internationally, financial stability is a shared endeavour. I am therefore especially grateful for being invited to join you, the securities market community, today in what can only sensibly be the beginning of a collective process. 12  BIS central bankers’ speeches

Our speaker in the third session, Jean-Pierre Danthine, will illustrate the benefits from the discipline that economic theory can impose on our thinking when analysing European equity market integration. He will also present a generalised approach to estimating the importance of country and sector effects in portfolio allocations. One of his discussants, Bruce Carnegie-Brown, will draw on his experience as a market expert to interpret for us recent developments in bond markets. Finally, as already mentioned, the policy panel, which will be the final session of the conference, will discuss the role of central banks in the maintenance of financial stability  2  BIS Review 60/2002  against the background of the transformation of the European financial system. I am particularly pleased to see that we have been able to bring together such highly esteemed policy-makers and academics for this purpose. Ladies and gentlemen, I should like to finish at this point and hand over to our first speaker. I sincerely thank you again for coming here today. I wish you a very interesting and stimulating discussion, and I look forward to hearing about the results of the second ECB Central Banking Conference. BIS Review 60/2002  3
Ultimately, all countries still hope to enjoy the benefits of global capital markets such as more foreign investments and transfers of technology. 1  External debt of the non-bank sector totalled $ 47 billion in FY1997, accounting for 83% of total private external debt and 41% of Indonesia’s total external debt. 3  BIS Review 93/1999  In Singapore, our currency is fully convertible. We abolished exchange controls in 1978. We have no restrictions either on the inflow or outflow of funds. Because we are a financial centre, these flows are large relative to the size of our economy. Hence we want to be careful not to let them overwhelm or damage our real economy. This is why we have maintained a policy of non-internationalisation of the Singapore dollar $ This is not a form of exchange or capital control. It is a monetary policy measure to deter speculation against the $ It prevents non-residents from borrowing the $ for purposes unrelated to our economy for example to fund a short position in the $ We believe that the $ exchange rate should be appropriate to prevailing economic conditions and the underlying state of the Singapore economy. Indeed in the long term, keeping the currency in line with fundamentals is the best way to avoid offering speculators too tempting a target. Exchange rate regimes Massive speculative attacks on exchange rates are a common element in financial crises. Misaligned fixed exchange rates have figured prominently in financial crises throughout the 1990s, even the 1980s and 1970s.

The financial liberalization trend prodded along by the Bank of Thailand not only expanded the size and the scope of the sector, but also made it become more open. The government’s ultimate purpose of the liberalization was to provide domestic investors access to foreign funds so that Thailand could transform itself into a true industrialized economy. Unfortunately, the opening up of the financial sector left the country in an uncharted territory. Confidence in the Thai economy back then meant easy offshore money for everybody with foreign market access. Encouraged by the fixed exchange rate, Thai financial institutions, like many other Thai corporates, borrowed freely and imprudently from abroad. And in pursuit of quick profit, many of these foreign borrowings were converted into baht loans without proper currency hedging. Exacerbating the problem was the fact that many of the domestic loans went into real estate deals, rather than into productive investments. A property price bubble ensued, and the Thai financial institutions, lacking the necessary credit skills, accepted inflated property values as the basis for new loans. These pyramid-like financing schemes placed a serious strain on the system, and their eventual collapse resulted in a flood of non-performing loans for the unwary lenders. 2  BIS Review 62/2002  Admittedly, the Bank of Thailand also shares the blame of what went wrong in the financial sector. Although the liberalization policy was probably correct given the circumstances, its potential benefits were undermined by the lack of strong institutional underpinnings.
Growth in household credit has been high for a long period, accompanying the sharp rise in house prices. The increase in housing wealth has amplified the demand for loans. The annual rise in house prices in Norway has been positive since 1992. In real terms, prices have almost trebled, making this the second longest period of rising real house prices since 1819. The rise in house prices accelerated through 2006, and the market showed signs of increased risk-taking and even a state of euphoria. 10  BIS Review 115/2007  Periods of sharply rising house prices have occurred previously. House prices have risen in many countries. Up to 2006 the US experienced the longest period of an uninterrupted rise in house prices. This period lasted for nine years, while the rise in house prices in Norway has lasted for 14 years. Furthermore, the total increase in real house prices in the US through the last period of expansion was far lower than in Norway. House prices have generally risen more in Norway than in the US in periods of expansion. BIS Review 115/2007  11  Developments in house prices reflect periods of expansion – often long – that are followed by a contraction. In periods when house prices have fallen in Norway, they have declined at a faster pace than during downturns in the US. It is only to be expected that fluctuations in Norway are much wider than in the US, with its many large local markets.

A stable financial system features solid cushions that reduce the risk of problems spreading from one institution or market to other institutions or markets, or across borders. This risk constitutes a systemic risk, i.e. the risk of failure of the financial system. 1  BIS Review 124/1999  Disturbances that may develop into a systemic risk can be transmitted through financial institutions and financial markets. Stable institutions are solid institutions in which there is general confidence, whereas stable markets are markets where there are no “excessive” price variations. The banks are in a special position. They transform short-term deposits into long-term loans. They are responsible for payment settlements, and bank deposits serve as a means of payment. The volume of amounts outstanding in the interbank market is sizeable. As a result, problems in one bank may rapidly spread to other banks. The financial strength of banks is thus important for financial stability. The more capital a bank has the larger the losses it can absorb. The risk of contagion is thus reduced. A bank’s capital adequacy ratio is not the only variable that must be taken into account. A bank’s earnings provide an indication of the bank’s future financial position. Another important factor is the size of a bank’s loss provisions. Financial unrest spreads through payment and settlement systems. These systems can also be at the origin of risk. This occurs when banks credit customers before they have received settlement from the payer bank.