samchain/econo-pairs-v1 huggingface dataset:
It appeared probable that the dollar would depreciate as it was difficult to believe that the United States would be able to maintain its deficit indefinitely, 2 and the real exchange rate normally weakens when a current account deficit needs to be corrected. And the dollar’s status as a reserve currency throughout the world made the entire global economy sensitive to rapid changes in the dollar rate. Although a dollar crisis did not occur, the analysis was reasonable. Substantial and persistent current account surpluses or deficits may be a sign of an underlying weakness or imbalance in the economy. Even though global imbalances have subsequently declined, this is due more to cyclical factors than to structural factors. They have also increased again recently in pace with the recovery of the global economy. The International Monetary Fund (IMF) continues to monitor the development of global imbalances and says that an adjustment of these imbalances is necessary if the recovery is to rest on stable foundations. 3 The association of developed countries and emerging economies that goes under the name G20 has therefore decided to perform thorough analyses when surpluses or deficits become substantial, in order to determine whether the country concerned should take measures. In the risk survey conducted by the Riksbank in May this year, in which participants on the Swedish fixed-income and foreign-exchange markets were asked to assess the risks to the Swedish financial system, global imbalances were seen as the greatest risk.

Other factors that may have contributed to the surplus is that the financial market in the United States is more highly developed than in many Asian countries, which has made it advantageous to invest savings there rather than in the domestic economy, and that companies in China pay out a relatively small part of the profits in dividends, which probably helps to boost saving but restrict consumption. 13 Global imbalances and capital flows after the crisis The crisis that actually arrived took an entirely different course than many expected. Although the United States was hit hard, the dollar was actually strengthened initially because investors fled from risk and US government securities were seen as a safe asset. The countries that had large current account deficits were, however, hit to a greater extent  9  See for example Bernanke, 2009, White 2008 and King 2009. 10  For example Krugman, 2007. 11  See Bernanke, 2005. 12  See Llaudes et al., 2010. 13  See for example Caballero, 2006, Hoffman and Kuijs, 2006 and Bayoumi et al., 2010 for a discussion of this. BIS central bankers’ speeches  5  than countries with surpluses by major falls in housing prices. 14 This shows that current account deficits were often a reflection of underlying weaknesses, for example unsound lending practices and the build-up of debt. However, the crisis itself and the subsequent recession reduced the imbalances, at least temporarily.
To the extent EMH is violated – for example, because the market discount rate is too low – both accounting concepts will result in asset over-valuation. Both concepts will be equally imprudent. In other words, credit cycles that cause failures of EMH contaminate bank asset valuations irrespective of the accounting convention. Consider next a bank with a portfolio of two loans, one initiated when assets prices were priced correctly, the other when they were over-valued. In this situation, amortised cost and fair values will value the asset portfolio differently. Because market prices are applied to the whole asset stock, fair value will tend to result in greater recorded overvaluation. In other words, marking to market is more susceptible to valuation cycles than amortised cost. Third, consider a situation where, having been over-valued, the market price of the second loan corrects back to equilibrium. Fair values now deliver the correct valuation of the entire asset portfolio. Amortised cost measures, meanwhile, will continue to give a misleadingly bullish account of the second loan’s valuation, since this will be discounted at the artificiallylow discount rate used at initiation. In other words, in this set of circumstances the tables are turned, with fair values giving a more accurate and prudent measure of valuation. Finally, if instead of correcting to equilibrium, assume market prices over-correct – say, because of an overshoot in illiquidity premia of the type witnessed during crisis. It is then no longer clear which valuation metric is preferable.

Wallison, P J (2008), “Fair Value Accounting: A Critique”, American Enterprise Institute for Pubic Policy Research. BIS Review 28/2010  13  Annex  14  BIS Review 28/2010  BIS Review 28/2010  15  16  BIS Review 28/2010
According to Table 1, mark-ups will have been adding, on average, over one percentage point each year to measured inflation rates across the G7 countries between 1980 and 2016, other things equal. As context, over the same period average G7 8  inflation rates have fallen by over 10 percentage points. A second potential macro-economic impact of higher mark-ups is on sales. Higher mark-ups will, other things equal, have pushed down on aggregate demand and generated a deadweight loss of consumer surplus (“Harberger triangle”). Baquee and Farhi (2018) estimate the size of this effect and find that eliminating mark-ups entirely would raise aggregate US total factor productivity (TFP) by as much as 35%. 9  To better understand some of the drivers of higher mark-ups, it is useful to look at more granular data. Using a similar approach to De Loecker and Eeckhout (2017, 2018), we draw on data for around 3,500 unique UKlisted companies from the late-1980s to construct around 33,500 firm-year mark-up estimates. 10  Using that  methodology, Chart 3 plots a sales-weighted measure of mean mark-ups for UK-listed companies since 1987. It shows a striking rise, from 1.2 to around 1.6, over the period. This broadly mirrors international trends.

Market Power and Monetary Policy Speech given by  Andrew G Haldane Chief Economist Bank of England  Co-authors: Tommaso Aquilante, Shiv Chowla, Nikola Dacic, Riccardo Masolo, Patrick Schneider, Martin Seneca and Srdan Tatomir. Federal Reserve Bank of Kansas City Economic Policy Symposium Jackson Hole, Wyoming 24 August 2018  The views expressed here are not necessarily those of the Bank of England or the Monetary Policy Committee. I would like to thank Federico Di Pace, Laure Fauchet, Rebecca Freeman, Jeremy Leake, Clare Macallan, Colm Manning, Roland Meeks, Kate Reinold, Natalja Sekhan, Silvana Tenreyro, Jan Vlieghe and Robert Zymek for their comments and contributions. This work contains statistical data from ONS which is Crown Copyright. The use of the ONS statistical data in this work does not imply the endorsement of the ONS in relation to the interpretation or analysis of the statistical data. This work uses research datasets which may not exactly reproduce National Statistics aggregates. 1  All speeches are available online at www.bankofengland.co.uk/speeches  The topic for this panel is the link between developments in product markets and monetary policy. It is a great one. A lot of attention has been paid by central bankers over recent years to the relationship between labour markets and monetary policy (for example, Yellen (2014) and Constâncio (2017)). And rightly so. The relationship between monetary policy and product markets has, by comparison, been the road less travelled.
In particular, we should bear in mind that some of the support measures for non-financial corporations that have been deployed so far, such as bank loan guarantees, involve an increase in firms’ future financial obligations. In a situation of sharply falling revenues, loan guarantees have proved to be an extremely useful instrument in the short term. Indeed, it may be necessary to expand these facilities in future, depending on the course of the pandemic and its economic effects. However, it should be recognised that prolonging this type of assistance entails a build-up of debt that may, in some cases result in a deterioration in solvency, especially in the case of those firms that operate in the sectors most affected by the shock.5 For this reason, it would make sense to assess the possibility of further actions to support firms that do not involve an increase in financial obligations, such as, for example, by means of direct assistance or, in some cases, through temporary capital injections. In the latter case, the € billion fund recently approved by the Government, to be managed by Sociedad Estatal de Participaciones Industriales (SEPI), could be a suitable tool for this type of action. Furthermore, for companies that have difficulty meeting their financial obligations, streamlined debt restructuring procedures need to be available to avoid such difficulties leading to the disappearance of heavily indebted firms whose business model is nonetheless viable.

Sheku Sambadeen Sesay: Issues relating to Africa in the context of the global financial and economic crisis Statement by Mr Sheku Sambadeen Sesay, Governor of the Bank of Sierra Leone, at the dinner in honour of the delegates for the African Caucus Meeting, hosted by the Bank of Sierra Leone, Freetown, 16 August 2010. *  *  *  Ministers of Finance Governors of central banks Head of delegations Distinguished Ladies and Gentlemen On behalf of the President of the Republic of Sierra Leone, Dr. Ernest Bai Koroma and the Board and Directors of the Bank of Sierra Leone, it is my profound pleasure to extend a warm welcome to all distinguished personalities assembled here this evening. I believe that since your arrival here in Freetown you have had a taste of the typical African hospitality which is very true of the people of Freetown. As you are aware this is my first meeting since my appointment as Governor of the Bank of Sierra Leone in June this year. Our meeting is taking place at a critical period. Our countries are experiencing the effects of the slow down in the world economy triggered by the global financial crisis. As we are all aware this recent challenge far exceeds the capabilities of any single country. These challenges require international coordinations and inter-governmental collaboration which makes it imperative for us to work together.
Comprehensive capital controls were an important element in the programme, but their rationale was to help to stabilise the exchange rate in a situation where the currency had fallen more than 50% in 2008, where foreign króna positions that were a legacy of carry trade and capital inflows amounted to around 40% of GDP, and where a large fiscal deficit that had to be financed in the domestic market had developed. The capital controls therefore gave monetary policy more scope to help stabilise and turn around the real economy once inflation came down. Franek will discuss the IMF programme in more detail, but I would like to make one more remark regarding fiscal consolidation, as it is such an important part of the story. The crisis hit Government finances hard, as can be seen from this slide. BIS central bankers’ speeches  3  It was therefore of vital importance that Government debt was relatively low immediately before the crisis. However, fiscal consolidation was needed earlier than some considered optimal at the time from a demand management perspective, in order to regain internal and external confidence and open market access. The effort was huge, as can be seen from this slide, but back-loaded, as automatic stabilisers were mostly allowed to work in 2009. And it did not derail the recovery that began around the middle of 2010.

But to set the stage, let me say very briefly that all the usual suspects were present: very strong capital inflows fuelling a credit and asset price boom that subsequently turned into a bubble at the same time as the economy overheated and an unsustainable external position developed, as could be seen in a double-digit current account deficit. And macroeconomic and prudential policies were not up to the task. Quite the contrary: there was a policy conflict between monetary policy and the demand levers pulled by the Government, and the risks inherent in capital flows, FX balance sheets, and credit and asset price booms were left under-regulated and insufficiently supervised. But as so often before in this country, we dealt more effectively with the crisis than the buildup. There were two key elements to this. The first was crisis management vis-à-vis the failing banks, as embodied in the Emergency Act submitted by Prime Minister Geir Haarde to Parliament shortly before the banks failed. The second was the economic programme developed by the Icelandic authorities in co-operation with the IMF. The programme had three key goals: stabilisation of the exchange rate, fiscal sustainability, and reconstruction of the financial sector.
This was a fundamentally different approach to that taken in QE, where the goal was to achieve the MPC’s stock targets. As a consequence, our eventual total purchases were far lower than some early estimates – and that, combined with the short holding period, very clearly differentiated the LDI operations from the much larger and more persistent path of QE holdings (Figure 4). Page 11  Judged against the criteria we set ourselves, these operations were highly successful, a view supported by most market participants and commentators. But there were many important learning points for us, and for anyone contemplating such operations in the future too. The first is simply to underscore the value of effective preparation across every element of design. As I mentioned at the start, we had benefited substantially from the thinking of the BIS working group in the months ahead of the LDI crisis. Establishing and communicating a rigorous approach to governance is critical. Ensuring your operations genuinely are temporary is a vital but high stakes decision: make sure your deadlines are credible and clearly communicated. Most importantly of all, invest heavily in how you want to price your facility. The standard MMLR theory of operating at a spread wider than in normal market conditions but narrower than in stressed conditions is nice in theory.

Moreover, Norwegian importers have gained access to new markets in central Europe and Asia which offer substantially cheaper  2  BIS Review 141/2007  consumer goods. Norway’s terms of trade have improved by about 40 per cent since 2002. Recently, however the terms of trade have become slightly less favourable. This is partly due to weaker prices for Norwegian exports, such as metals. Slightly higher import prices have also had a negative impact. Second, an ample supply of labour has boosted output growth. A strong increase in the population has expanded the growth capacity of the Norwegian economy without a comparable increase in wages. In particular, the supply of foreign labour has increased sharply after EU enlargement in 2004. Over the past two years, these labour inflows have accounted for over 30 per cent of growth in the labour force in Norway. At the same time, this has enabled Norwegian companies to be bolder in accepting new assignments and making investments, in the knowledge that they can procure labour throughout Europe. Third, productivity growth has been unusually high, for both companies competing on international markets and those supplying goods and services to the domestic market. The result is lower production costs. Banks and other service sectors, in particular, have outperformed other countries in this respect. The business sector has been quick to adapt and change, and to make use of new technology that is available in an international market.
In December last year, the Hong Kong Mortgage Corporation signed a joint venture agreement with Cagamas Berhad, Malaysia’s national mortgage corporation, to establish a company to develop mortgage guarantee business in Malaysia and other parts of the world. Earlier this month, a new Dow Jones Islamic Market Index came to the marketplace to track China-related equities listed in the Hong Kong stock exchange, further enriching the Islamic index infrastructure in Hong Kong. These initiatives clearly demonstrate the dynamism of Hong Kong’s financial systems in responding to an emerging market opportunity. Is the timing right? Some observers have questioned whether it is a bit late for Hong Kong to develop Islamic finance, when some other financial centres in the region have already made a head start. It may be true that Hong Kong has started the development only recently, but so long as the demand is there, it’s never too late for Hong Kong to contribute to this vibrant and growing sector. The Islamic financial sector we believe has huge headroom for growth. Hong Kong can also learn from the experience of other established centres, and co-operate with them to grow the market. Indeed, there is no better time than now to contribute to the development of Islamic finance. This region is in possession of a significant part of the global oil reserves and has topped the world in the accumulation of wealth. The abundance of oildriven liquidity generates a huge appetite for investments that cannot now be satisfied within the Gulf area alone.

Hong Kong is the ideal gateway for Middle Eastern investors who are keen to capitalise on the Mainland’s rapid economic growth. International investors can gain exposures to different sectors of China through the Hong Kong platform. For example, for investors wanting to access China’s property market, they can make use of the Real Estate Investment Trusts listed in Hong Kong with underlying exposures to properties in Mainland China. There has also been encouraging innovation in combining sukuk with China equity exposures – what I refer to was the launch of an exchangeable sukuk linked to the underlying shares of a Mainland China company listed in the stock exchange of Hong Kong. The exchangeable sukuk, which is listed on our stock exchange as well, attracted a high subscription from Middle Eastern investors and reaffirmed the keen demand for investment opportunities with China growth prospect through the Hong Kong platform. In terms of infrastructural support, many leading international banks have geared up for Islamic finance products and many of them have a very strong presence in Hong Kong. Our market players are therefore well-equipped to leverage on the expertise in other parts of the world in structuring Shariah-compliant products and meeting the needs of even the most demanding Islamic financier. Hong Kong’s success factors lie not only in our premier location and versatility, but also in possessing the talent and infrastructure to become the conduit to facilitate the capital flows between the Middle East and Asia. What more should be done?
Fatos Ibrahimi: Banking system reforms, accomplishments and challenges in Albania Speech by Mr Fatos Ibrahimi, Deputy Governor of the Bank of Albania, at the Ninth CEI Summit Economic Forum “Fostering reforms and innovations for sustainable growth”,a Ministry of Economy, Trade and Energy, Central European Initiative, Tirana, 23 November 2006. *  *  *  Distinguished participants, Allow me to express my pleasure for participating in this forum and for the opportunity to present some of the main developments that have taken place in one of the most important fields of the Albanian economy, the banking system. My presentation will focus on two issues: First, the main steps followed by the reform in the banking area, presenting the problems related to commercial banks, omitting monetary aspects. Secondly, the current situation of the banking system and some of the main problems it is faced with, which need solution over the short-term and medium-term period. The banking system reform was part of the structural reforms undertaken by the Albanian authorities after 1992, which aimed at macroeconomic stability and Albanian economy transformation into a market economy, by privatizing the economy and creating financial and social protection institutions. The banking system transformation in Albania followed the same path as in other former socialist countries. The first important phase started with the passing from the one-tier banking system into a two-tier system, in which the former Albanian State Bank was divided into two banks, with a qualitatively distinguished activity from each-other.

The government’ commitment to carry out a full program of structural reforms in banking sector served as an instrument for re-establishing the public confidence in financial institutions and services. The program of that period was focussed on four main objectives: •  Improving the legal and regulatory infrastructure;  •  Building sound and reliable institutions;  •  Strengthening the financial infrastructure; and  •  Liquidating or privatising the state-owned banks. Besides the adoption of new laws on the Bank of Albania, on the banking system, on bankruptcy, and on safe transactions, of importance was the program for a rapid change of the state-owned banks’ ownership, which led to the liquidation of the ANB and the establishment of the Bad Assets Resolution Trust. The NCB was recapitalised and privatised in 2000. During 2004, the privatization process of the Savings Bank was finalized, being purchased by the Raiffeisen International Bank Holding, thus recording the transfer of 94% of the banking capital to private ownership. Currently the Albanian banking system is composed of 17 banks, 14 of which are of foreign capital. The capital source is from different places, such as Greece, Italy, Austria, Germany, United States of America, etc.