samchain/econo-pairs-v1 huggingface dataset:
INTERNATIONAL MONETARY AND FINANCIAL COMMITTEE  the IMFC Deputies meeting Tuesday, September 20, 2022, Statement by Mr. Mouatassem BOUDIAF Deputy Governor Bank of Algeria On behalf of Islamic Republic of Afghanistan, Algeria, Ghana, Islamic Republic of Iran, Libya, Morocco, Pakistan, and Tunisia Session 1 Global Economic Outlook Thank you Chair. I also thank the First DMD for the lucid presentation.  Since our last meeting, the global economy continues to face strong global headwinds, triggered by the cumulative negative spillovers of the two overlapping crises. Risks to the global outlook feared in April, and even as late as July, have materialized, and the outlook continues to be subject to unusually high downside risks, due to a number of global economic and political factors. We are also facing a global inflation crisis reflecting the consequences of the unprecedented policy support during the pandemic and the pandemic’s lingering impact on supply chains. In most cases, price pressures predate the conflict in Ukraine, but were exacerbated by direct and indirect impacts of the war.  Taming the global inflation would require a collaborative approach and coordinated policy action. It is understandably a delicate balancing act and policy slippage, in either direction, would potentially have severe consequences, including a prolonged global recession in case of over-tightening, that we can ill afford. In fact, the global tightening of financial markets and the sharp real appreciation of the US dollar are already having pronounced adverse impact on EMDEs through capital flows, currency depreciation and debt distress.

We would like to stress at this juncture that the RST was created to help members finance long-term structural changes to build resilience to different shocks, with climate change being the main one but not the only one. Finally, at the risk of repeating what I said in the previous session, I would like to underscore the GPA’s increased emphasis on climate change, recognizing and addressing the existing inequity in burden sharing between small and large emitters. It is also important to recognize that there are different paths leading to the same objective of saving the planet that we all share. I end it with that. And thank you Chair.
Second, margin calls can force HLIs with a high leverage and a focus on derivatives to liquidate large positions in a very short period of time. In stressful market conditions, both of these phenomena could further depress market prices, reduce market liquidity and increase volatility. This is the second transmission channel through which HLIs may amplify shocks and spread negative effects in the banking sector. 6  See also Hildebrand, 2007. 7  The President's Working Group on Financial Markets, 1999, page 17. BIS Review 74/2007  3  Let us again have a look at the LTCM case in order to assess the disruptive capacity of HLIs through this second transmission channel. The President's Working Group on Financial Markets concluded, «nor were LTCM's exchange positions of such magnitude that a default by it would have caused significant disruptions of the U.S. exchange-traded futures market.» 8 For over-the-counter (OTC) traded products there are no reliable numbers. It is, however, known that the majority of OTC contracts were collateralised. 9 An upper bound for the non-collateralised positions is the abovementioned loss of USD 5 billion, which is presumably too small a number to create a severe crisis in other OTC segments. Moreover, we should not forget that hundreds of hedge funds are liquidated every year without any negative impact. Also, the collapse of a large hedge fund, Amaranth, in autumn 2006 had only a small impact on the financial markets.

But those strains have also been exacerbated by an unexpected breakdown in the technology for liquidity insurance provided by central banks. For well over a century, throughout industrialised world there has in effect been something akin to a Social Contract between the banking system and the authorities. The banking system is permitted to profit from undertaking leveraged maturity transformation in the course of intermediating the liquid savings of depositors into illiquid loans to households, firms and others. In doing so, commercial banks provide liquidity insurance, whether via demand deposits or committed lines of credit. They can do this because their deposit liabilities are  BIS Review 38/2008  3  money, which puts them at the heart of the payments system and is what makes them special; banks are at the heart of a monetary economy. In return, the authorities respond with a combination of prudential supervision, to contain the risks that banks run; deposit insurance, to protect savers; and liquidity insurance from the central bank. Smaller commercial banks can try to buy liquidity insurance from their larger brethren. Large banks cannot realistically do the same. But there is no cast iron guarantee that asset markets will remain liquid in all conditions. So since Bagehot’s day, central banks have stood ready to provide unlimited liquidity against good collateral at a rate that is higher than the normal market rate.
In the spring and early summer, the financial crisis also was showing some signs of stabilising in the US and in Europe, particularly after the takeover of Bear Stearns in March signalled that the “state safety net” in the US had been extended to cover investment as well as commercial banks. The introduction of the Special Liquidity Scheme in April here and extensive liquidity measures in the US led to a period in which funding pressures eased and  2  BIS Review 145/2008  Libor spreads and CDS premia softened. Our August forecast was for a pronounced but limited deterioration in growth. The threat of a strengthening feedback loop from a contracting banking sector to a severe downturn in the real economy had not disappeared but did not seem the central case. But the risks and the challenges changed dramatically in the autumn. First, the losses incurred by investors in the rescues of Fannie and Freddie combined with the decision to allow Lehman Brothers to go into administration, led to a dramatic loss of confidence in financial markets (Chart 5) threatening a savage further twist in the squeeze on credit for households and companies. Second, we saw a sharp weakening in oil prices (Chart 6), with the odds implied by options of such a fall less than 1%. Other commodity prices also fell. And, even before that was reflected in consumer prices, the public’s inflation expectations turned down decisively.

I think it merits serious consideration for more widespread adoption, irrespective of the accounting and tax treatment such reserves might attract. One key feature of such reserves is that they should be useable. That is, the markets and analysts need to accept that using such reserves to absorb write-offs when losses are high is the natural counterpart of building them up when losses are cyclically low. It is not a sign of  BIS Review 145/2008  5  weakness or of inadequate capitalisation, but of prudent management of the cyclical pattern of losses. From the point of view of market acceptability, separating cyclical reserves from more structural capital requirements seems a valuable idea. The second scheme I want to promote is growth-related capital requirements. Losses tend to be lower in the early stages of a loan’s life than when it is fully seasoned because borrowers are more certain of their own and the economy’s near-term prospects. A loan book which is growing more rapidly than average will be weighted towards such unseasoned loans, and so will appear to be performing better than a balanced portfolio of loans of different vintages. In addition, rapid growth of lending tends itself to be associated with taking on poor business – even if that is not obvious at the time it is written. Typically, rapid growth can only be achieved by drawing in marginal borrowers to the market. That is true of the banking sector as a whole.
We also see no justification for maintaining restrictions on food exports by some food-rich countries, on medicine by some producing  2  countries, and sanctions on some major oil exporters when the world is beset by high food and energy insecurity and health crisis. We endorse the GPA’s emphasis on “acting together and acting now” to alleviate the immediate hardship due to successive years of global crises, and to build resilience for addressing future shocks that could come with more frequency and greater severity. However, as mentioned earlier, the basic requirement of “acting together” for the common good is at risk by the growing global fragmentation into economic and trade blocks, including the critical energy sector. We welcome the IMF’s continued commitment to help members in need by enhancing and adapting its lending toolkit. The newly established Resilience and Sustainability Trust (RST) is an important addition to the IMF’s toolkit to help members build strong resilience to various shocks, including climate change and pandemics, through long term financing. We are encouraged by the strong uptake so far and look forward to seeing several RST-backed programs brought for the Board’s consideration by the end of this year. Against the background of swift tightening of global financial conditions, we are concerned about the precarious debt situation and the diminished debt service capacity of LICs and EMDEs, with many of them already in debt distress or at high risk of debt distress.

Whilst I recognise there is uncertainty, I urge firms to explore how different scenarios are relevant to their strategy, to test their specific vulnerabilities and to identify opportunities. Here at the Bank, we have helped create tools to support such analysis.5 And they continue to be enhanced. They include carbon prices consistent with different pathways to net zero to help you identify robust strategies. I encourage you to use them. 5/7  BIS - Central bankers' speeches  And the fourth challenge is that system wide change is complex as the actions of one are dependent on actions of others, so it is important to coordinate action throughout the supply chain. Each firm should be stretching its horizons – building capabilities now that enable action to drive long-term reductions in emissions through their value chain. That does not mean immediately ceasing to deal with high emission counterparties and suppliers. That does not necessarily remove emissions, perhaps chasing them into the shadows instead. Rather, economy-wide emissions reductions will come through proactive engagement with counterparties and suppliers, and decisions aligned to the transition over time. This means understanding the needs of firms up and down the supply chain and having difficult discussions about steps to reduce emissions. And smaller corporates will need help from larger corporates and their financiers to develop their climate expertise. The collaboration between GARP and Chapter Zero we see today shows how effective that can be in driving faster progress.
It is this aspect which has become the focal point of recent attention for Hong Kong. Hong Kong's flexibility In fact, Hong Kong exhibits very considerable flexibility of the sort required. This is not a characteristic shared to such a degree by many other economies. Comparisons have often been drawn with Argentina because of, until recently, its currency peg. The charts below compare various indicators for Hong Kong and Argentina. The timescales are set to align the sudden loss of competitiveness by Hong Kong in late 1997 because of the Asian crisis, with the sudden loss of competitiveness by Argentina in early 1999 as a result of the Brazilian crisis and devaluation of the real. Attention is drawn in particular to the comparison of developments over the subsequent months (to the right of the vertical divide). The first chart shows the levels of consumer prices. Hong Kong experienced much more significant price deflation, with the absolute price level falling almost 10% from its peak in the first two years after the shock, while in Argentina prices fell only 3-4%, even looking at a somewhat longer period. A more appropriate measure of internal costs and prices is the GDP deflator. This fell by some 10% for Hong Kong but was roughly static in Argentina.

Taken together, these factors help explain why a peg may be feasible and sensible for Hong Kong while it might not be so for others. This does not mean that Hong Kong would be incapable of operating or continuing to prosper under an alternative regime. Indeed, we possess the necessary infrastructure to conduct discretionary monetary policy (although that was not the case back in 1983), and I am confident that my colleagues would be quite capable of meeting the challenge of any new, more activist regime. However, although there may be moments when one thinks "If only we had a floating rate, things wouldn't be so bad right now", one cannot chop and change between regimes to suit short-term expedience. We acknowledge that no system is perfect, but I have suggested that much criticism of the peg may be exaggerated, or even unfounded. We would need to be well satisfied that an alternative would be unequivocally superior, before ditching something which has been the cornerstone of internal financial stability and external confidence for over 18 years. 8  BIS Review 17/2002
Svante Öberg: Sweden and the financial crisis Speech by Mr Svante Öberg, Deputy Governor of the Sveriges Riksbank, at Carlson Investment Management, Stockholm, 20 January 2009. *  *  *  Introduction When I began working at the Riksbank three years ago, I had not during the preceding eight years followed the development of the economy as closely as when I worked at the Ministry of Finance and the National Institute of Economic Research. I was advised by Staffan Viotti, who is a professor of financial economics and adviser to the Executive Board, to familiarise myself with the new financial instruments that had been developed in recent years. These were instruments that the banks used to convert loans into securities that could be sold on the financial markets. I attended a couple of conferences which clarified the advantages of the new instruments; for example that they spread the risks taken by the banks to a larger group of investors. There was really only one problem. Liquidity on the new markets could "dry up", that is, a situation could arise in which there were only sellers but no buyers, but this was considered to be a hypothetical problem. I also asked experts at these conferences about the possible nature of the next financial crisis. A typical answer was that it would be triggered by an event outside the United States and that the hedge funds would be involved. Now we know better.

Plainly, there has been a dramatic expansion in both the scale and scope of state liquidity insurance to the banking system. This pattern has been repeated in the majority of recent systemic banking crises. In a study of 42 systemic banking crises between 1970 and 2007, Laeven and Valencia find peak liquidity provision of almost 30% of total deposits. Drastic times clearly call for drastic measures. Harman’s description of last resort lending in 1825  6  Thorton (1802), Bagehot (1873). 7  Quoted in Bagehot (1873). 8  The sample ends before quantitative easing began, so base money growth is not affected by recent monetary policy actions in the UK. 9  Committee on the Global Financial System (2008). BIS Review 139/2009  3  would not look out of place today. Except, crucially, the decimal point would have changed place. Deposit insurance and capital insurance have a shorter history. Deposit insurance was first introduced in the US in 1934, to protect retail depositors scorched by the experience of the Great Depression. It failed to catch on internationally. By the early 1960s, the US was still the only developed country with an explicit deposit insurance scheme. Since then, there has been a steady rise in the number of adopting countries (Chart 6). By 2009, almost 100 countries globally had such a regime. Typically, the introduction and extension of deposit insurance regimes has been a response to banking crisis. This time’s crisis has been no exception. Australia and New Zealand have both introduced deposit guarantee schemes.
Productivity has also been weak and this has led to rising production costs. The weak productivity appears to be persisting and leads to continued high cost pressures. Resource utilisation measured in terms of the number of hours worked is still slightly higher than normal. However, we expect it to decline. Expectations of inflation have been high, both in the short and long term. At the time of the September meeting they were still above the inflation target. Expectations are an indication of confidence in monetary policy. Both interest rate increases and falling energy and food prices may have contributed to the slight fall. But it is important to remember that inflation expectations are still too high. There is considerable uncertainty regarding commodity prices and global developments and as I see it we cannot sound the all clear yet. To meet the inflation target it is important to conduct a monetary policy that contributes to long-term inflation expectations being close to 2 per cent. My assessment was that a further increase was required to achieve this. When I looked ahead I considered that both inflation and inflation expectations must be closer to the target before expansionary monetary policy can be reconciled with bringing inflation back to 2 per cent within a couple of years. Weaker economic activity is no guarantee that inflation will “automatically” fall. This is connected to, for instance, the risk of contagion effects and the fact that inflation can become entrenched,  6  BIS Review 115/2008  as I mentioned earlier.

This means that the credit granter is more protected than in the case of ordinary bonds. Covered bonds are therefore good collateral and many other central banks accept these bonds on a larger scale than the Riksbank. In our case the permitted share was raised from 25 per cent to 75 per cent. This measure means, put in very simple terms, that participants in the RIX system can use more collateral to borrow against if necessary. Another measure is that, for instance, the Riksbank and the central banks of Denmark and Norway, together with the US Federal Reserve, have reached an agreement for the purpose of increasing access to dollars in the Scandinavian financial markets, if necessary. For the Riksbank this involves the possibility to obtain access to US dollars in addition to the foreign currency reserve. This is what is known as a swap facility and amounts to a total sum corresponding to USD 10 billion. Our assessment is that it will probably not be necessary to use the money. It is nevertheless important to demonstrate that we are prepared to act if it should prove necessary. The agreement can be quickly put into operation if it should actually become necessary. Financial stability is satisfactory What is happening now has not come as a bolt from the blue. And it is not a question of the central banks sitting with their arms folded ignoring the risks taken by the commercial banks.
But I’ll say now, if there are aspects of the timetable which firms are going to struggle to meet, we would like to understand that at an early stage – so we would welcome feedback on any barriers to providing high-quality data as soon as possible. The QIS will focus on areas of potential policy change which are the easiest to quantify and have a more obvious immediate balance sheet impact. The bricks, windows and foundations of the structure. There are other areas, less easy to quantify but no less important, which are also in scope of reform. I’ll cover those briefly at the end of this speech. But starting with the bricks and mortar:  Risk Margin 3/6  BIS central bankers' speeches  Firstly the risk margin. There is, I think a consensus in the UK that the risk margin as currently designed is not doing its job correctly. The risk margin is there to provide a margin over the best estimate of liabilities on the regulatory balance sheet, so that the total technical provisions represent an estimated transfer value. The principle for the risk margin is sound, and is widely accepted. But as we have made clear before, we see significant scope for reform. In particular, the risk margin is too sensitive to interest rates. And under current interest rate conditions it is too high. Many annuity writers are choosing to reinsure longevity risk from their balance sheets but retain credit risk.

8  BIS Review 6/2004
Meeting the target will depend on the numerous tax measures taking effect in the last quarter of the year ultimately yielding the expected returns, and on that offsetting the growth of debt service payments, unemployment benefits and pensions. Given the importance of meeting the deficit target in 2012, it should be foreseen that possible slippage in certain items may be offset with possible adjustments to others. The draft State Budget for 2013 sets an overall general government deficit target, in National Accounts terms, of 4.5% of GDP, in line with European commitments. That is down from 6.3% envisaged for 2012, excluding from that figure the impact of the measures to support banks which must be recorded this year (amounting to around 1 pp of GDP). The Budget envisages that the public debt ratio will increase from 85% of GDP in 2012  BIS central bankers’ speeches  3  (including € billion of FROB debt due to the drawdown in December of the credit line agreed with the European authorities) to 91% of GDP in 2013. The fiscal effort these targets entail is highly ambitious (around 2 pp in terms of the cyclically adjusted primary deficit), in a setting which will remain difficult. The macroeconomic scenario accompanying the budget envisages that GDP in real terms will contract 0.5%, as a result of the 2.8% fall in national demand which would be partly offset by a 2.3 pp contribution by the external sector.

Már Guðmundsson: Monetary policy Keynote address by Mr Már Guðmundsson, Governor of the Central Bank of Iceland, at a breakfast meeting of the Iceland Chamber of Commerce, 4 November 2011. *  *  *  The Iceland Chamber of Commerce has a long-standing tradition of holding a breakfast meeting like this one on economic developments and prospects and monetary policy, following the publication of the Central Bank’s autumn forecast. As before, I would like to thank the Chamber of Commerce for this initiative, as there is a great need for informed discourse on monetary matters. In my speech a year ago, I discussed the progress made in stabilising the economy as is evidenced by the underlying current account surplus, the stable and subsequently strengthening currency, and inflation that was rapidly approaching the Central Bank’s inflation target. I mentioned, however, that robust recovery had not yet taken hold. It seemed to me then that the recovery had begun, and this has since been corroborated. At that time, GDP was projected to grow by just over 2% in 2011 – which was not considered terribly strong in view of the slack in the economy. I was concerned as well about the low level of investment and the prospect of weak export growth in spite of a very low real exchange rate. The inflation outlook seemed much better, though, due to a rising exchange rate and the slack in the economy.