samchain/econo-pairs-v1 huggingface dataset:
The appreciation has had a greater impact in the decline of the goods component of the CPIEFE index (our core inflation measure). In fact, the goods component of core inflation dropped from nearly 5% at the beginning of 2016 to 0.3% in March. The services component has been stickier, and has dropped from the same levels the first few month of last year to 3.3% in March. An explanation for this is that approximately ¾ of the prices included in this component are administered prices or are indexed to past inflation, a fact that enhances their inertia and, as such, makes them less sensitive to exchange rate fluctuations (figure 2). Figure 2 Inflation indicators (*) (annual change, percent)  8  8 Core services  6  CPI  6  4  4  2  2 Core CPI  0  Core goods  0  -2  -2  -4  -4 13  14  15  16  17  (*) Starting from January 2014 the new indexes with base year 2013=100 are used, and are thus not strictly comparable with previous figures. Sources: Central Bank of Chile and National Statistics Institute. 4. Although in our baseline scenario headline inflation is expected to continue declining in the coming months, reaching levels in the lower bound of our tolerance range, it is foreseen to return to 3% by the end of 2017 and fluctuate close to our target towards the end of the forecast horizon in the first quarter of 2019.

In our country, the price growth is more moderate of about 4.4% during this year, but with signs of acceleration. In the entire region and in our country, housing lending is accelerating and the growth rates are more dynamic compared to the growth of consumer loans. It appears that currently in our country the real estate market developments are in accordance with the shifts in the supply and demand, and the price pressure exists, but it is not that pronounced, as it is in the European Union countries. However, this "pandemic syndrome" should be carefully monitored, given that the exposure of the banking system to the real estate market is increasing more and more. Hence, there is a need for enhanced monitoring also of this part of the portfolio and keeping of the banks' capacity to deal with the possible future shocks. 2/3  BIS - Central bankers' speeches  The banking systems in both the region and in our country are passing the test imposed by the pandemic crisis well, and the challenge for maintaining the capacity for credit support and also maintaining stability will remain in the next period. The indicators of solvency, liquidity, profitability of banks and the quality of the credit portfolio remain stable, and some of them further improved. But, the crisis is getting a prolonged dimension and may have lasting consequences and impose a need for restructuring in some of the sectors of the economy.
Christian Noyer: Monetary policy – lessons from the crisis Speech by Mr Christian Noyer, Governor of the Bank of France and Chairman of the Board of Directors of the Bank for International Settlements, at the Bank of France/Deutsche Bundesbank Spring Conference on “Fiscal and Monetary Policy Challenges in the Short and Long Run”, Hamburg, 19 May 2011. *  *  *  Ladies and Gentlemen, It is a great pleasure for me to be here today at this conference, which has provided a lot of stimulating ideas on monetary and fiscal policy frameworks. In my address I will start by briefly discussing some general principles underlying the conduct of monetary policy which have not been altered by the financial crisis, in particular the absence of a long-run trade-off between inflation and unemployment, the benefits of low and stable inflation for economic activity. Central banks, who bear the ultimate responsibility for inflation because of its monetary nature, ought to encode all of these principles into the fabric of monetary policy frameworks. I will then talk about some of the crucial lessons from the crisis: that macroeconomic stability by itself does not guarantee financial stability and that the very same monetary policy, which successfully delivers inflation and output stability in the short-run, may sow the seeds of future disruption at longer horizons.

In essence, this is what the ECB has been doing through its “monetary analysis”, as a key rationale for its close monitoring of money and credit aggregates has precisely been to keep track of the evolution of medium-to-long-term tail risks which simply do not map onto the central projection for inflation. Let me now turn to another lesson of the crisis, namely the practical relevance of the zero lower bound for monetary policy purposes. II.4. The zero lower bound is a relevant issue for contemporary monetary policy  For many years before the crisis, the general consensus within both academia and the central banking community had been that the zero lower bound (henceforth, ZLB) and the associated problem of the liquidity trap, in which conventional monetary policy – that is, the one associated with setting short-term interest rates – all but loses its ability to impact upon the economy, were issues of mainly historical interest. Japan’s recent experience with the ZLB, and its difficulty in extricating itself from a liquidity trap situation, presented a troubling counter-argument to this position, but that could be “explained away” as the result of a series of policy mistakes on the part of Japanese policymakers. As a consequence of the financial crisis, there is, today, a generalized recognition that the ZLB may be a much more significant problem for monetary policy than previously thought.
These opposing wishes can be reconciled via banks, and also directly via the financial markets. The latter assumes that there are well-developed secondary markets with a large turnover in, for instance, equity. This enables companies to borrow long-term while savers can quickly sell their shares if they so desire. Risks are managed through the spread in borrowing, but also by transferring them, against payment, to others in the financial market. The spread and redistribution of financial risks enables investments to be made that would not otherwise have been possible. The third and final main task is the intermediation of payments, which enables payment to be smoothly made and received for goods and services sold either in the conventional manner or via, for instance, the Internet. 2  BIS Review 37/2003  In countries like Sweden we tend to take it for granted that these functions work. However, if we try to imagine that they did not exist, we will realise how extremely central they are to the functioning of the economy and to our welfare. If we imagine a country where savers and investors did not have access to functioning and reliable banks and financial markets, it is easy to see how this would hamper development. The effect would be a tendency for savings to move abroad, while profitable investment projects did not get off the ground in countries with an undeveloped financial sector. If we look back at the 1950s, we can see that the intermediation of payments functions much more smoothly today.

The average growth rate during these years was just over 3 per cent. This was very different from the average growth we had during the previous ten years. During the transition phase between these periods a number of important changes were implemented regarding the allocation of resources in society. Here I am referring to the deregulation of the financial markets, reforms in the pension, tax and social insurance systems and a reduction in the burden of taxation. In addition, wage formation has been improved, which has probably been facilitated by monetary policy focussing on price stability. It seems to me probable that the return to macroeconomic stability and in particular the structural reforms have actively contributed to the favourable developments of the past decade. On the other hand, I do not believe that the changeover to a floating exchange rate has been crucial in itself. Over the past century Sweden has mostly had a fixed exchange rate and usually shown good growth. At the same time, the past ten-year period has been a special one in terms of the euphoric expectations of the “new economy” connected to telecommunications and IT. This contributed to soaring stock market prices, followed by a fall of historic proportions. History can demonstrate similar episodes. The railway construction in the 19th century gave rise to similar over-optimism, as did the introduction of electric and internal combustion engines at the beginning of the 20th century. Sometimes, these periods of over-optimism have put considerable strain on the financial system.
The measure obtained by relating actual GDP to potential GDP – what is known as a GDP gap – has the advantage of being easy to understand. It is also close to a number of concepts that are used in monetary policy analysis. The so-called Taylor rule often used to describe how monetary policy is conducted contains such a GDP gap. When one talks about the target for monetary policy being to minimise deviations in inflation from the target and fluctuations in the real economy, the latter is often illustrated with a GDP gap. But it is not entirely clear how one should measure the long-term or trend level of GDP. A common method for determining this GDP level is to use some statistical tool to find a trend in the available GDP statistics. The Hodrick-Prescott filter, or HP filter, is one such tool. This filter is used to obtain an HP trend which is a cross between a linear trend and the uneven curve showing the actual GDP outcome. Such HP trends are regularly reported in the Riksbank's Monetary Policy Reports. Figure 1 shows actual GDP, potential GDP measured as an HP trend and the GDP gap, which is the difference between these. The actual GDP gap is stated as a percentage of GDP, measured on the right-hand scale, and in the figure this becomes a form of enlarged image of the difference between actual and potential GDP. The dotted parts of the curves represent the Riksbank’s forecasts from the April Monetary Policy Update.

Since December 2009, the yuan has appreciated almost four percent, while this figure is much closer to ten percent for most EMEs. The comparison is even more dramatic when looking at a longer period of time. This has been achieved through massive reserve accumulation and limited financial integration. However, for measures in the foreign exchange market to have real effects – that is, on the real exchange rate, which is the relevant variable from the point of view of competitiveness – these measures need to have some support from the real side of the economy. In the case of China, this is a very high savings rate. China saves about half of its GDP and the resulting current account surplus sustains a depreciated real exchange rate. Otherwise, attempts to maintain a depreciated nominal exchange rate sooner or later lead to inflation, which is the way to achieve relative price adjustment when the nominal exchange rate is not allowed to adjust. The U.S., in turn, is undertaking an extraordinary monetary expansion. Beyond having reached the zero lower bound for the federal funds rate, unconventional measures are adding additional monetary stimulus. In particular, the massive purchase of securities implemented in the so-called QE2 program. This explains why the dollar has reached its lowest level in several decades (Figure 3), but this is not only the result of expansionary monetary policy, but also of the lack of domestic demand and of the external imbalances.
The role of banks and investment banks in our financial system A driving force behind Congress' creation of the Federal Reserve System in 1914 was its recognition of the need for a public institution to perform the role of lender of last resort. The financial landscape in 1914 (and continuing until relatively recent times) was one dominated by traditional banks. When the Federal Reserve was founded, there was no deposit insurance, so the willingness of individuals and businesses to hold deposits at a particular bank depended wholly on their degree of trust that the bank would be able to promptly furnish them with the money they had deposited – whenever they might request it. But – as Congress understood – the business of banking involves making loans as well as taking deposits. Because banks, in order to make money, needed to extend long-term credit to customers for things like the purchases of homes or investments in business equipment, not all of the money taken in by banks could be readily available to be paid out if depositors were to request it. In fact, only a small fraction of a typical bank’s assets were kept in liquid enough form to be immediately paid to depositors upon demand. This fundamental fact of bank operation left banks – and the banking system – open to liquidity shocks that, nearly a century later, have their echoes in recent market developments. The financial crises around the turn of the century were the historic catalyst for the Federal Reserve’s creation by Congress.

This highlighted the urgency of working toward a solution over the weekend, ideally a solution that would definitively address the prospect of default by Bear. Bear approached several major financial institutions, beginning on March 13. Those discussions intensified on Friday and Saturday. Bear’s management provided us with periodic progress reports about a possible merger. Although several different institutions expressed interest in acquiring all or part of Bear, it was clear that the size of Bear, the apparent risk in its balance sheet, and the limited amount of time available for a possible acquirer to conduct due diligence compounded the difficulty. Ultimately, only JPMorgan Chase was willing to consider an offer of a binding commitment to acquire the firm and to stand behind Bear’s substantial short-term obligations. As JPMorgan Chase and other institutions conducted due diligence, my colleagues in New York and Washington continued to examine ways to contain the effects of a default by Bear. As part of these discussions, we began to design a new facility that would build on other liquidity initiatives taken by the Federal Reserve System, and provide a more powerful form of liquidity to major financial institutions. Following the announcement on March 11 of the Term Securities Lending Facility, which allowed primary dealers to pledge a wider range of collateral in order to borrow Treasury  BIS Review 39/2008  5  securities, we had consulted with market participants on how to structure the auctions to maximize their potential benefits to market functioning. Those discussions yielded a number of helpful suggestions.
As always, what I have to say reflects my own views and not necessarily those of the Federal Reserve System or the Federal Open Market Committee, also known as the FOMC. I am vice chair of the FOMC – a Federal Reserve committee that meets eight times a year in Washington to set interest rates and make other decisions about monetary policy. The members of this committee all strive to set policy to advance the mandate given to us by Congress to promote the maximum level of employment consistent with price stability. Sometimes we have different views on the specific policy choice on hand, and you should view this as completely appropriate: these are hard questions – particularly at times like this – and we make better decisions as a committee because we don’t all think alike. But we are united in our commitment to our mandate and in our belief that Fed independence is essential  BIS central bankers’ speeches  1  to the public interest, because it allows us to take tough decisions insulated from short-term political pressures. At FOMC meetings, each Committee member presents a current outlook for his or her region and the nation. For these assessments, we consult our researchers and add critical information that we learn from listening to our boards of directors, regional advisory councils and community leaders, such as you and others I’ll meet on this visit.

In particular, with the high non-resident investors’ participation in the onshore financial market, we saw significant growth in the ringgit NDF market. More recently, in November 2016, non-resident investors’ holdings reached a record high of 34.7% of Malaysian Government Bonds. While some argue that the ringgit NDF market is used by non-resident investors to hedge their ringgit assets, the reality is far more sobering. It is mostly used for speculative purposes. These speculative activities have shown to have adverse negative spillovers to the onshore financial market due to its volatility. More importantly, the sheer volume of this market, which surpassed over 300% of GDP in 2015, underscores the extent of disconnect between NDF trading and economic reality. Given the size, onshore markets were vulnerable to the arbitrary and unpredictable nature of the offshore market. Besides this vulnerability, there was an even larger long term challenge that we faced. The offshore market was developing and thriving at the expense and detriment of the onshore market and domestic stability. The recent developments following the US presidential election have attested to this fact. Following the results of the presidential election, the ringgit NDF was traded 2/6  BIS central bankers' speeches  as high as 2168 pips away from the onshore market close during the New York trading hours. Such a significant move is obviously driven more by speculative activities and misplaced market sentiment rather than any significant change in the economic fundamentals of the country.
The concordat recognised the greater roles of host supervisors for supervising foreign banks that operate via locally-incorporated subsidiaries. Some home country supervisory in fact referred to the host supervisor as the banks' "intermediate home supervisor". The framework also recommended a high level of reliance by host supervisory on the works undertaken by the home supervisors in their oversight and monitoring of the soundness of the foreign banks' branches in their jurisdictions. These important principles have become the foundations for the current cross-border supervisory framework and have been the basis for the formulation of the HighLevel Principles for the Cross-Broader Implementation of the New Accord issued in 2003. The Principles have sought to further reinforce the responsibilities of home supervisors in conducting consolidated supervision of financial conglomerates and the greater expectation on host supervisors in the supervision of individual subsidiary banks in their country. The new capital accord is yet another significant development that would challenge the robustness of the cross-border banking framework and principles. The real test would be in translating the principles into detailed policies and action plans that are both sound and practicable. The main challenge in applying the new accord uniformly across the globe is, indeed the complexity of the framework itself. While the underlying intention of the framework to promote sound risk management and best practices is not in question, countries, particularly the emerging markets, are at different levels of readiness to cope with the extensive changes and potential implications of Basel II.

For example, the recent crisis drew the attention to the banking industry, many times blamed to have caused the global turmoil. There is no use repeating now how guilty the banks are, that is, the well-known sequence of events: the “sub-prime” lending, the “toxic” assets, the need to bail out banks and the subsequent economic and fiscal dimensions of the crisis. However, we should not turn a blind eye to the root cause: the role of politics and politicians. What about the call for “affordable housing” which was dominating the political ideology in the last two decades in the US (and not only there)? What about the related environment of low policy rates, coupled with the failure of regulators to identify and control systemic risks? Was that not really at the root of the asset bubbles and risky behaviour of the banks? We all know the answers. The “greedy” bankers are not the only ones to blame. Learning from emerging Europe At least, that is the story in the “advanced” countries. We should bear in mind that no shocks came from the so-called “periphery” of the euro area and emerging Europe. Rather, the crisis set in with the failure of financial markets and institutions in countries where they had supposedly been best regulated, most experienced and of highest liquidity. Being part of the global markets, the countries of emerging Europe became also part of the crisis. From today’s perspective, they could serve as a good example of mitigating and weathering the crisis.
To foster greater international linkages and cross-border transactions, the level of development of Islamic finance needs to reach a certain threshold of development and sophistication. It requires the development of a robust Islamic financial system which encompasses both the banking and the nonbank Islamic financial intermediaries, the Islamic financial markets, offering the range of Islamic financial products that is supported by a developed Islamic financial infrastructure. The formulation of the ten-year masterplan for the Islamic financial services industry by the Islamic Development Bank and the Islamic Financial Services Board, marks an important step in setting the blueprint for leading the development of Islamic finance in a systematic and synchronized manner across jurisdictions to achieve the common goal of a vibrant and comprehensive Islamic financial services industry. Malaysia had five years ago launched our own Financial Sector Masterplan which includes the strategic direction for the development of Islamic finance forward in Malaysia. It has now culminated in the progress that Malaysia has achieved today. 2  BIS Review 4/2006  Malaysia has now evolved a comprehensive domestic Islamic financial system that is diversified in terms of its institutions, markets and players. The strategy has been to institute the entire financial system chain to ensure the smooth functioning of the system. The initiatives include building the required financial institutions including, the Islamic banking institutions, the takaful industry, the nonbanking institutions and developing the Islamic money and capital markets. These respective components have recently been progressively liberalized to become internationally more integrated.

From mid April onwards, the national central banks of the Acceding Countries will participate - as an observer - in meeting of ESCB Committees (in extended composition) and meetings of the General Council. Enlargement involves a number of technical efforts from the side of the ECB and the national central bank, in terms of adaptations to the infrastructure, but also creates a new dimension to economic convergence and monetary stability in the European Union. I am, however, convinced that the Eurosystem will also master this challenge, as it has done before, on occasions, which demanded even more breath-taking efforts. Ladies and gentlemen, I should now like to conclude. Again, my gratitude goes to His Excellency Carlo Ciampi and Governor Antonio Fazio. I am deeply convinced that this meeting of the Governing Council will contribute to the team-sprit of the Eurosystem and hence will be one more step in the direction of a united Europe.