samchain/econo-pairs-v1 huggingface dataset:
Currency restrictions of the type we have seen some examples of recently therefore lead the country that introduces them into a deadend. When problems of this type arise in one country, the effects are liable to spread to other countries. Recently we have seen a global increase in various asset risk premia as a consequence of the turbulence in Asia and the problems in Russia. This has affected countries that geographically are a long way away from the countries in question. A part of the adjustment of risk premia probably represents a normalisation. It is not to be expected that stock markets around the world can generate capital gains year after year that deviate from the long-term development of corporate profits. Neither is it unreasonable that the terms on which countries borrow should become more differentiated than before to reflect the various risks involved. But adjustments of this type are seldom smooth. Exaggerations in one direction sometimes give way to excesses in the opposite direction. The so-called flight to quality that occurs in connection with financial turbulence in parts of the world is a sign that investors want a rapid reduction of portfolio risks. This leads to increases in risk premia. One way of adjusting portfolio risk is to sell shares and buy treasury paper. That is why financial turbulence often has a negative effect on shares prices, accompanied by a downward movement in long-term - and sometimes even short-term - interest rates.

But if one looks closely, one will find that a good portion of this are raw materials, parts, and components produced in one country and sold to another for further processing or assembly for sale to a third country within or outside Asia. The production of goods for final consumption in Asia is still low, with the exception of Japanese and Korean brands. And while China’s imports from ASEAN have increased substantially in the past few years, their consumption is still mainly in food products, raw materials and low value added products. For luxury goods, their being brand-conscious, ASEAN products have not been able to compete well. This will change over time when Asian products gain more differentiation and sophistication. For example, at the moment, Thai palm oil is no different from Malaysian. There can be no mutual trade. But when it becomes part of the national cuisines, trade and exchange could occur. The more value is added, the more Asia will trade with each other for eventual consumption. But for the moment, the emphasis is more on cooperation than integration. So the second question: If this is so, why are there various monetary initiatives going on in Asia? The way I see it is that even though the level of economic integration is presently still not fully advanced, the financial linkage and contagion affect is very high. Part of this may have to do with the fact that Asian countries lend a good deal of money to each other.
14 15  8  All speeches are available online at www.bankofengland.co.uk/news/speeches  8  In 2014, the FPC introduced the borrower-based tools to guard against an increase in the extent to which highly indebted households could amplify macroeconomic downturns. These tools could achieve this goal in a number of ways. By constraining the increase in the aggregate number of highly indebted households, the tools reduce the proportion of households that could have insufficient liquid assets or lose access to credit in the event of a shock. And by providing some check, in aggregate, on excessive credit growth relative to income, these tools could also provide benefits in the event of debt-financed overconsumption, if it were driven by highly indebted households or looser underwriting standards. Effectiveness of the policy  Turning to the effectiveness of the policies, a key question is whether the risk of sharp consumption cuts in a downturn due to high indebtedness is lower now than it would have been if the policies had not been in place? To answer that question, we need to examine how the distribution of indebtedness on the stock of mortgages has changed over time. There is no way to examine that directly in the UK – unlike some other countries, we do not have access to comprehensive data, such as current income and debt levels, for all UK households. Instead, we use two approaches to estimate this: surveys and models combined with regulatory data.

The banking sector in emerging market countries also tends to be more concentrated and represents a larger share of the domestic financial system, suggesting that problems there will have an amplified effect on the economy and on the fiscal costs associated with bank rescues. Causes of banking system problems Banking system crises have many and complex causes, both macro and microeconomic. Macroeconomic causes include exogenous shocks, sustained or sharp declines in real growth, accelerating inflation, deterioration in the terms of trade, and changes in the policy regime. Macroeconomic shocks also typically expose underlying microeconomic deficiencies in risk management practices and internal controls at financial institutions such as weak underwriting standards, insider lending, excessive credit growth and credit concentrations, interest rate and exchange rate mismatches, and fraud. They also tend to reveal weaknesses in financial system supervision and regulation. The threats to financial system stability are many and interact in complex ways. Policy responses Reflecting the many causes of financial system distress and differences in country conditions and institutional settings, responses to financial system crises typically have been varied and hybrid. Banking sector restructurings are art as well as science, and can be influenced by a host of factors, such as the depth and breadth of problems in the banking, corporate and household sectors. Other critical factors include the existence of adequate enforcement mechanisms to achieve corrective action and of financial markets that are deep enough to permit the orderly disposal of problem bank assets.
William C Dudley: Key developments in the tri-party repo market Introductory remarks by Mr William C Dudley, President and Chief Executive Officer of the Federal Reserve Bank of New York, at the Workshop on “Fire Sales” as a Driver of Systemic Risk in Tri-Party Repo and Other Secured Funding Markets, Federal Reserve Bank of New York, New York City, 4 October 2013. *  *  *  Good morning. I am pleased to have the opportunity to open this workshop and discuss key developments in the tri-party repo market. In my remarks, I would like to give a brief overview of some of the problems that surfaced in this market during the financial crisis of 2008, recognize the improvements that have occurred since then, and most importantly, highlight significant vulnerabilities that still persist despite the progress we have made. While we can feel proud of the enhancements that are currently underway in the tri-party repo market, today I want to underscore the fact that significant work remains to be done. The tri-party repo market constitutes a vital component of the U.S. financial system. It plays an important role in providing financing for broker-dealers that make markets in Treasury and agency securities, and is an important mechanism that supports dealer intermediation of credit. The market also provides a secure investment vehicle for those that manage large amounts of liquidity and need an investment vehicle to park these monies.

If industry is unable to play its role in achieving a holistic solution, regulators may find themselves forced to employ the specific policy tools at their disposal in their respective purviews to address the fire sale risk. While such an approach may indeed enhance the overall stability of this market, it could also lead to unintended consequences that include reducing the efficacy of the critical role played by this market in supporting the broader financial system. I am glad that you are all here today to work with us to begin to identify the best solutions to the problem of fire sale risk in the context of the tri-party repo market. I urge you to participate actively and express your ideas candidly. I am confident that we will come up with the best solution to this problem by working together. 2  BIS central bankers’ speeches
Or the incentives, here in the USA, for Government Sponsored Enterprises such as Fannie and Freddie – massive players in global capital markets and so with a significance stretching beyond your borders – to take on more risk in lending to poorer households. Or for banks to badge illiquid ABS tranches as trading positions in order to benefit from much lower Trading Book capital requirements. Or for banks to move credit portfolios to off-balance sheet vehicles supported by liquidity lines against which no regulatory capital had to be held. I could go on and on. The microeconomics of finance matters hugely to stability. The faultlines of the system are sometimes obscure. And a macroprudential authority needs, therefore, to be attentive to the complex ways in which the different parts of the financial system interact, generating leverage and liquidity risk. Threats may often be buried in the complex details of the system – subprime CDO2, conduits and SIVs etc in the latest crisis; investment trust cross holdings in the 1920s – but the task is to make the connections without getting lost in the trees. Which brings me from scene setting to the real world of the new UK framework. The UK’s new Financial Policy Committee Who we are The FPC exists. We will hold our first formal policy meeting in June. We are a Committee of eleven.

Secondly, due to the trade offs I described earlier, the government has proposed that the FPC be subject to a constraint that it should not act to preserve stability at the cost of significantly impairing the capacity of the financial sector to contribute to medium-to-long term economic growth. What this means in practice is that when faced with an immediate or incipient threat to stability, we must try to find a solution that avoids damage to long-term growth. That discipline is welcomed by the Bank. This is obviously all novel stuff. It is therefore helpful that the government plans to ask Parliament for a power periodically to flesh out the statutory objective, via a Remit from the Chancellor of the Exchequer – an arrangement that has worked well in the monetary field in the UK. It will enable practical lessons to be incorporated into the regime over time. Why is the UK’s macroprudential body separate from microsupervision? Most central banks have traditionally regarded their contribution to financial stability as deriving from their markets and banking supervision functions. That is explicit in the Federal Reserve’s 1913 statute, with which I began these remarks. And given the UK’s heavily concentrated banking system, effective banking supervision is obviously an essential precondition for preserving stability. But in terms of how organisations work in the real world, the flaw in relying entirely on this is that it assumes that those operational areas of the central bank will invariably make time and space to address the financial system as a system.
In the UK, however, core inflation is now more than 1.5 per cent and seems to be on the rise. So far, moderate wage growth in both Europe and the US suggests that employees have not been compensated for the rise in energy prices. If the increase in oil prices is perceived as long-lasting, this may result in higher inflation expectations, higher wage demands and a more pronounced pass-through to other prices. Over the past few months, key rates have been raised in the US, Canada and New Zealand, while the UK key rate has been reduced by 0.25 percentage point. Key rates remain low among many of our trading partners. Market participants seem to expect a gradual increase in key rates in the period ahead, and at a somewhat faster pace than expected last summer. Towards the end of 2006, key rates in the US and the UK are expected to be around 4½ per cent. For the euro area and Sweden, key rates are expected to be considerably lower, at a little less than 2¾ per cent and 2½ per cent respectively. In recent months, global long-term interest rates have also edged up again somewhat. This reflects stronger inflationary impulses as a result of high energy prices. Market participants’ long-term inflation expectations, measured as the difference between nominal and real government bond yields, have shown a small increase since last summer. Low interest rates and expectations of continued low real interest rates are sustaining the cyclical upturn in Norway.

Moreover, fixed investment in the petroleum sector has expanded sharply, which has led to rising demand for goods and services supplied by mainland enterprises. Mainland fixed investment also picked up after a period. Since the recovery started, quarter-on-quarter mainland GDP growth has averaged 3½ per cent annualised. Growth has been steady. The economic upturn has continued this year. On balance, demand is expected to remain relatively high in the near term. Expectations of continued low albeit rising interest rates and real income growth should support growth in household consumption and fixed investment ahead. Brisk investment growth in the petroleum industry, moderate wage growth and high profitability in many enterprises suggest further investment growth in the mainland enterprise sector. The economic upturn is now broadly based. In manufacturing, the order backlog is at a record-high level, which implies continued production growth over the next quarters. Statistics Norway’s business tendency survey for manufacturing points in the same direction. Activity has remained buoyant in the construction sector for a long period. New orders in this industry are rising, which points to a further increase in production. Growth in turnover in property management and commercial services has increased to a high level. Higher activity in goodsproducing industries and the prospect of solid growth in household demand provide a basis for continued growth in service industries. However, cost levels in the Norwegian business sector are high. This challenge may become more visible when the upturn slows.
We want all three objectives to be met in an economy which is growing at its maximum sustainable potential. Excessive zeal in meeting any primary objective too quickly could act, not just to slow actual growth, but reduce sustainable potential and this is important to keep in mind. Cooperation and coordination are generated in the framework by several structures. Essentially, these are about information sharing. The most important is via cross-committee membership: the Governor chairs all three committees, and there is further crossmembership of internal members. And there is also joint briefing meetings/staff support. The Strategic Plan of the Bank announced earlier this year, is designed in part to enable the different policy functions of the Bank to work more effectively together, reducing overlap and exploiting synergies. A notable example of policy co-ordination across the Bank’s committees has been on the question of housing. Rising house prices could generate rising debt levels over time, creating  4  BIS central bankers’ speeches  risks to monetary stability as well as financial stability and the safety and soundness of firms. But addressing this by trying to adjust Bank Rate would potentially adversely affect the whole of domestic demand at a time of economic recovery and low price inflation, and it could have needed a very large change in Bank Rate as it is not very effective in controlling house prices.

Paul Fisher: Microprudential, macroprudential and monetary policy – conflict, compromise or co-ordination? Speech by Mr Paul Fisher, Executive Director for Supervisory Risk Specialists & Regulatory Operations and for Insurance Supervision of the Bank of England, at Richmond University, London, 1 October 2014. *  *  *  The author is also chair of the ifs School of Finance. Any views aired in this speech are personal and should not be taken as a policy statement by the Bank of England. Nevertheless, the speaker is grateful to colleagues at the Bank for helpful comments, and to Andrew Hughes Hallett for his advice on policy coordination issues over many years, including comments on the content of this speech. Thank you for inviting me once again to speak at Richmond University. In the last year I have moved within the Bank of England from the Markets Directorate to the Prudential Regulation Authority (PRA) and from the Monetary Policy Committee (MPC) to the PRA Board. The PRA Board is one of our three formal policy committees, and makes the highest level supervisory decisions for those firms authorised by the PRA. That includes insurance companies, banks, building societies, credit unions and major investment firms. I have been attending meetings since June and will become a voting member in due course.
Charles Bean: Central banking in boom and slump Speech by Mr Charles Bean, Deputy Governor for Monetary Policy of the Bank of England, at the JSG Wilson Lecture in Economics, University of Hull, Hull, 31 October 2012. *  *  *  Good evening! It is a great privilege to be asked to give this year’s JSG Wilson Lecture. Professor Wilson wrote extensively on many topics central to recent events, most notably money markets, monetary policy and banking. Given these interests, it is perhaps unsurprising that the Bank of England often fell under his gaze. Indeed, in his review of monetary policy in the 1960s, he was moved to remark that “the most notable contribution [the Bank of England] has made to the emergence of a new climate is in the matter of publicity and relatively frank speaking” (Wilson, 1966). I hope that I will live up to that pitch this evening, although I aim to demonstrate that our recent contributions have been somewhat more substantive than mere words! Last Thursday, we heard that the UK economy grew 1% in the third quarter. Yes, it was boosted by one-off factors relating to the Diamond Jubilee and the Olympics. But, even after taking those into account, the figure was stronger than expected. That was welcome news, for the past five years have not been easy. Following the bursting of the financial bubble, policymakers in the advanced economies have faced unprecedented challenges.

This formulation mirrors that for the Monetary Policy Committee and should ensure that the FPC approaches its primary objective of ensuring resilience of the financial system in a way that does not unduly impede economic growth. Seven of the members of the Committee, including myself, are drawn from within the financial authorities: the Bank of England and the Financial Services Authority (FSA). 1 The remaining four are external members who bring special expertise and experience and can  1  At present they are: the Governor; the two Deputy Governors; the executive directors for Financial Stability and for Markets; and the Chairman and Chief Executive of the FSA. When the FSA is dissolved into the Prudential Regulation Authority (PRA), which will be part of the Bank, and the Financial Conduct Authority (FCA), these last two will be replaced by the heads of the PRA (who will be a third Deputy Governor of the Bank) and FCA. 2  BIS central bankers’ speeches  reduce the risk of the “group think” that might arise in a committee comprised solely of insiders. There is also a non-voting representative from the Treasury. The powers of the Committee are two-fold. First, the FPC can issue recommendations. These could be general recommendations, for instance to financial institutions or the Treasury. Or they could be specific requests to the prudential or conduct regulators who would then be expected to comply with the recommendation or else explain why not.
By contrast, demand for gas is expected to decline, in view of high prices and precautionary energy saving measures (following the EU agreement to reduce gas demand by 15%). In consequence, euro area economic activity is expected to slow in the coming quarters, as a result of the loss of purchasing power stemming from higher than expected inflation, the decline in business and consumer confidence and, in general, the greater uncertainty surrounding the economic effects of the war in Ukraine. Moreover, although supply bottlenecks are easing, they are still limiting activity among a large number of manufacturing firms in certain sectors. As a result, euro area GDP growth forecasts have been revised down significantly, especially for the remainder of 2022 and for 2023. The euro area economy is expected to grow by 3.1% in 2022 and to slow down markedly in 2023, growing by just 0.9% compared with 2.1% forecast in June. In 2024 GDP is expected to grow by 1.9%, short of the 2.1% forecast three months ago. 4  See M. Pacce, A. del Río and I. Sánchez (2022). “The recent performance of underlying inflation in the euro area and in Spain”. Analytical Articles, Economic Bulletin 3/2022, Banco de España. 3  Meanwhile, inflation continues to be driven by the surge in gas and food prices, demand pressures in some sectors owing to the economic reopening, supply bottlenecks and the depreciation of the euro.

BIS Review 37/1998  ˝