samchain/econo-pairs-v1 huggingface dataset:
BIS Review 33/2010  7  But there are also many uncertainties affecting the current outlook for the global economy and I would highlight four key influences which will shape the recovery which does unfold over the next few years. First, I have argued that an improvement in business and consumer confidence has been a key ingredient in the economic turnaround so far. And in the absence of further shocks to the global economic system, we should expect confidence among firms and households to continue to recover, supporting the growth of private sector spending and helping the recovery to build momentum. But given our experience in recent times, we cannot rule out new shocks which could set back recovery. Second, a major financial adjustment is taking place in the major economies of Europe and the United States as banks adjust their lending behaviour and seek to rebuild their balance sheets. This adjustment will continue to dampen the recovery in demand on both sides of the Atlantic too some degree, though its impact should lessen as the process of financial repair and rebuilding progresses. Third, world growth in the recovery so far has been particularly strongly driven by the performance of Asia and other emerging markets, and their dynamism has to a large extent offset slower growth elsewhere. In my view this is not a flash in the pan, but a structural feature of the world economy that we are now living in, and we should expect a continuing impetus to global growth from this direction.

For example, the volume of international air traffic, which is highly sensitive to world growth trends, was 6.4% up on a year ago in January 2010. 3 Despite the gloomy headlines surrounding the release of the latest UK trade figures last week, the UK economy is benefiting from this revival in world trade and activity. The latest trade data show that since the second quarter of last year, the volume of UK goods exports, excluding oil and erratics, have risen 8.5%. 4 This is equivalent to an annual growth rate of 15% – around three times the trend rate of UK export growth since the early 1990s. 5 But imports have bounced back too, which is why the trade deficit is not shrinking at present. In the short-term that should not be a source of concern – rising imports at this stage of the cycle are usually a sign of a recovery in demand and a turnaround in the stock cycle. But over time, we should see rising exports helping to close the UK’s trade deficit. The very positive responses on export orders and confidence shown by a range of recent business surveys suggest that there is a significant further boost to our international trade performance on the way – supported by the competitiveness benefits of sterling’s depreciation since mid-2007. This bounceback in the world economy is much stronger than we might have expected a year ago. 6 So what has been driving it? And how resilient might it prove to be?
However, where the service provider is not the regulator, it is hard to coordinate and preserve the character of accessibility. The UK regulators have taken bold steps to outsource the service provider’s role and concentrate on the regulatory role, while USA, Sri Lanka and India are still trying to strike a balance between the dual roles, which we have inherited for decades. 2. Retail payments outlook and prospects  2.1 Retail banking is still the main force in banking, and is likely to stay that way for the foreseeable future, despite the relentless growth of investment banking, corporate banking and other forms of services. In 2006, retail banking business accounted for euro 1,220 bn in revenue, or about 57% of the global banking revenue pool of euro 2,150 bn. The world over, banks continue to open branches and attempt to make their branches more attractive for retail payments. Sri Lanka, India, Bangladesh and many of the SAARC countries are members of the South Asia Free Trade Agreement (SAFTA), Asia-Pacific Trade Agreements (APTA), The Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation (BIMSTEC), Comprehensive Economic Partnership Agreement (CEPA) and several other trade agreements. During 2002-2006, exports in the SAARC region as a ratio of world exports rose from 1.09 to 1.29 percent, of which India accounted for more than 75 percent. Although firm numbers are not available for 2007, exports are estimated to have increased at a significant rate followed by higher cross-border payments.

The optimal mix depends on the level of development of the financial market, but a more active role has to be played by the authorities to achieve the public policy objectives of retail payment reforms. 4.3  Policy elements  4.3.1 Central banks to play a catalytic role: Central banks should be at the centre, take the leadership and coordinate the development process as other stakeholders tend to have vested interests. While it is important to enhance oversight and supervisory functions by the central banks and ensure that governance arrangements for infrastructure and service providers are in place, it is also necessary to ensure that such arrangements do not lead to unnecessary restrictions on competition and innovation. 4.3.2 Stakeholder participation: It is essential that central banks engage in effective participation and secure cooperation from all stakeholders in the payment systems, through establishing National Payment Councils (NPC) or National Payment Committees/Advisory Councils etc. India, Sri Lanka, Pakistan and some others have already established NPCs and they are the highest level policy making authorities for development of national payment systems. Banks have a good opportunity to give their inputs at these meetings, especially on operational matters. 4.3.3 Declare public policy objectives of retail payment system development: The undeclared and unsaid public policy objectives have been a contributory factor for ad hoc retail payment system developments in the past.
Also, the improvement of domestic consumption and investment are slow due to a cautious private sector’s confidence. Externally, Thai economy is affected by the current uneven recovery of global economy which hinders Thai export growth. However, Thai economy is expected to recover up to 3.8% GDP growth this year from a mere 0.8% last year. Private consumption and the government expenditures will play key roles for 2015 outlook. 4. On the bright side, Thailand has been riding on the back of China’s economic prosperity. In other words, the regional prospect has pinned on improvement in intraregional trades of goods and services. China’s economic figures may be somewhat lower than its historical average, as a result of the sluggish recovery of the global demand and the continued structural reform in China. However, China growth rate is still at a satisfactorily high level. And China has yet remained an important engine in support of the growth of the Thai export sector. For the past few years, Thailand has become one of the most popular destinations among Chinese tourists, thanks to popularity of the ‘Lost in Thailand’ movie. Each week, hundreds of flights between Thailand and China have been landed to accommodate the increasing interest of Chinese visitors. We value this considerably as it not only helps boost the tourism and services sector of the Thai economy, but also tightens our cultural connections. 5. As we all know, Chinese economy has become a necessary ingredient for our secret recipe for the past decade.

Since China has been an important economic partner of Thailand and the region. To further strengthen these flows of trades and investments, close financial cooperation is the key. The Renminbi / Baht Bilateral Swap Agreement (or BSA in short) and the establishment of the Renminbi Clearing Bank here in Bangkok are the great examples. 6. The BSA is designed to be a backstop liquidity facility, which will help boost confidence of the private sector in using the local currency in trade and investment settlement. After the first signing of the BSA in 2010, the use of the Chinese Renminbi in trade and investment settlement between Thailand and China has grown remarkably. The share of trade settlement in Renminbi quadruples between 2010 and 2014. As for investment  BIS central bankers’ speeches  1  settlement, the share climbs up dramatically from a mere 1% in 2010 to 14% in 2014. In spite of the rapid increases, the volumes are still small compared to other major currencies. 7. The Renminbi Clearing bank is the next important step from the BSA. Its Renminbi settlement mechanism is the sequencing plan of the Renminbi scalability. I could see its merit which fundamentally paves the way for further Renminbi internationalization as well as the role of Renminbi in global financial markets that will become increasingly prominent in the near future. 8. There is, however, some room for improvement in order to realize the full economic benefits between Thailand and China.
The period leading up to and immediately following the Asian financial crisis is a prime example of this interaction. In that case, rapid movements of capital flows into and out of emerging markets interacted with financial system underdevelopment, deficient bank supervision, and balance sheet weaknesses, resulting in a boom-bust cycle. In contrast, the experience of developed economies is more generally characterized by one where large shocks typically result in substantial asset price volatility and substantial financial losses that are not accompanied by significant disruption to either short run or long run economic growth. A rigorous assessment of the challenges of monetary and financial stability in emerging market economies therefore must explicitly recognize this underlying difference in the economic backdrop. Let me now turn to the second part of my lecture and discuss the implications of these differences on the pursuance of monetary policy and financial stability. In light of the unique agglomeration of factors in emerging market economies outlined above, the pursuit of monetary and financial stability in emerging markets has two key facets. The first is to address the immediate short run concerns emanating from the various shocks; and the second is to implement structural reforms to ensure that financial stability becomes embedded in the underlying economic structure of emerging markets in the long run. The former essentially concerns the challenge of maintaining economic stability through appropriate policy settings and actions to offset the various shocks hitting the economy at any given point in time.

These developments and the banking crisis contributed to the currency crisis that struck in the first half of 2008. The Bank’s two publications on post-capital controls monetary policy and prudential rules have stood the test of time, as many of the proposals in them have already been implemented. We now intervene in the foreign exchange market with the aim of smoothing out fluctuations due to temporary capital flows and mitigating short-term exchange rate volatility. We no longer have a free-floating currency, but a managed float. We have adopted prudential rules that severely limit the banking system’s ability to take risk in foreign currencies. We have established a Financial Stability Council and a Systemic Risk Committee in order to monitor financial system risk more effectively than we did previously, and we are developing prudential rules and macroprudential tools to respond to systemic risk. This will also support monetary policy. One important step remains, however: to develop policy instruments that can be applied so as to curtail carry trade-related capital inflows when such inflows interfere significantly with the transmission of monetary policy along the interest rate channel, as was the case last summer and autumn. Analysis of the options available has been underway in the recent term, but these mainly involve a tax or a special reserve requirement. In both instances, statutory amendments would be necessary.
The financial authorities within countries, and on a collective basis internationally, may also have a role to play in developing recognised common standards in these arenas of technology and security. The second characteristic deserving our special attention is the nature of the person or company which is offering us banking or payment services over the internet. If we are merely using electronic services provided by our usual bank, which we know to be sound and to be supervised by an acknowledged regulator in a known jurisdiction, then we should be in no more danger of losing our money than we would be by banking with the same bank in the conventional manner, provided of course that both the bank and the regulator have kept pace with the requirements of internet banking, such as in respect of the security aspects discussed already. But it is quite a different story if we are tempted to part with money to some organisation masquerading as a bank, or which actually is a bank but is registered in a jurisdiction with lower supervisory standards than those to which we are accustomed. In Hong Kong, in order to protect the public we already have legislation governing usage of the word “bank”, and governing the advertising for deposits within our boundaries by anyone not authorised to take deposits in Hong Kong. But we cannot protect people from the possible consequences of clicking onto a website in a far-off place which is luring them to part with their money.

In particular cases where monetary policy is supported by capital controls, however, internet banking may make enforcement of such controls more difficult, since it would be operationally easier for those wishing to evade regulations to maintain offshore bank accounts. Of course, every bank in reputable jurisdictions has in place rigorous procedures to combat money-laundering, but these procedures do not normally result in customers being turned away if they are merely trying to escape capital controls or the tax regime in their home countries. Similar considerations lead some observers to enquire whether the internet might encourage substitution out of the national currency, resulting in dollarisation and also perhaps weakening the central bank’s influence over domestic monetary conditions. If internet facilities enable or encourage people either to economise on the usage of money (for example by netting payments due among two or more parties or by practising barter) or to reduce the frequency of movements of money (for example by leaving export receipts in an internet account in order to pay for imports, rather than repatriating them first), then there may be a prospect of a general reduction in transactions traffic in all currencies. The usage of some may fall more than others. I do not, however, see anything particularly sinister in such developments, except to the extent that the internet might facilitate avoidance of rules on remittances.
We are all in agreement that if a country decides to adopt Basel II, the timing should be determined by its own circumstances, not the timetable for Basel Committee members. Unlike the 1988 Accord, which was relatively simple to adopt, Basel II is more complex and demands more of banks and supervisors. Therefore, we don’t expect Basel II to be adopted as widely and quickly as the 1988 Accord, at least at the outset. However, we expect and hope that the number of countries that adopt the new framework will grow over time. We believe that countries should adopt the options and approaches contained within the framework that are most appropriate for the state of their markets, their banking systems, and their supervisory structures. Basel II is not a “one size fits all” framework. Supervisors can adopt the framework on an evolutionary basis and use elements of national discretion to adapt it to their needs. For any country that is considering adopting Basel II but may not yet be ready, I like to suggest a three-stage approach towards building a foundation for the new framework: (1) strengthening the supervisory infrastructure; (2) introducing or reinforcing the three pillars; and then (3) making the transition from the 1988 Accord to Basel II. The first stage is strengthening the supervisory infrastructure. Basel II is not intended simply to ensure compliance with a new set of capital rules. Rather, it is intended to enhance the quality of risk management and supervision.

Capital regulations will have to be complemented with prudent banking that includes enhanced underwriting standards, effective internal controls and risk management, as well as strong corporate governance. In achieving your future goals and aspirations, significant benefits can be derived from Basel II provided that your institutions undertake the necessary efforts to align your strategy and business orientation with the new standards. Your interest, participation and decisive actions on the new accord are therefore important in positioning your institution in this increasingly competitive and more dynamic environment. Thank you. BIS Review 21/2004  5
And yet many of the observations made about liquidity and market conditions over recent years have potential implications for monetary policy. Changes in risk premia, the level of asset prices, credit spreads, and interest rates, and in realized and expected volatility of asset prices – these can all affect the pace at which overall demand grows, and can therefore potentially affect future inflation. In discharging their responsibilities for the maintenance of price stability, central bankers need to be eclectic in looking at a range of different ways of measuring the stance of monetary policy, and its effects on the future path of growth and inflation. No indicators of liquidity or overall financial conditions provide a ready guide to judgments about monetary policy. But all these indicators merit careful attention, and they strengthen the argument against narrow or mechanistic approaches to thinking about the monetary and broader economic outlook. BIS Review 19/2007  3  Ultimately, though, ex ante judgments about leverage, concentrations and liquidity risk will continue to prove elusive. Our principal focus should therefore be not in the search for the capacity to preemptively diffuse conditions of excess leverage or liquidity, but in improving the capacity of the core of the financial system to withstand shocks and on mitigating the impact of those shocks. And, as always, central banks need to stand prepared to make appropriate monetary policy adjustments if changes in financial conditions would otherwise threaten the achievement of the goals of price stability and sustainable economic growth. Thank you.

Timothy F Geithner: Liquidity and financial markets Keynote address by Mr Timothy F Geithner, President and Chief Executive Officer of the Federal Reserve Bank of New York, at the 8th Annual Risk Convention and Exhibition, Global Association of Risk Professionals, New York, 28 February 2007. *  *  *  We have been in a period that market participants have characterized as one of exceptional liquidity. This is both a reflection of, and has contributed to, the ongoing expansion in the world economy. I want to focus my remarks today on the role of liquidity in markets, and what supervisors and market participants can do to make markets more robust against the shocks that we know will occur from time to time. These remarks are directed to a general phenomenon related to developments in the financial markets in recent years, and not to the specific conditions of the moment. Liquidity plays a central role in the functioning of financial markets. Structural changes in the financial system that have been underway for some time increase the importance of market liquidity. The allocation of capital increasingly relies on securities markets, where funds for investment in the real economy are raised through the direct issuance of securities to investors. A greater diversity of financial institutions, institutions other than banks, now play a more active role in the provision of credit and liquidity. Liquidity can mean many different things.
If a central bank is committed to its price stability mandate and given enough time for the monetary transmission mechanism to work, there should be no reason why we should not be able to meet our inflation targets. However, there are two caveats here: –  2  In pursuit of its inflation target, a central bank can and might be forced to engage in un-conventional monetary policy tools. This is very much the case when central banks are flirting with the limits of conventional instruments of monetary policy (zero lower bound of policy rates or extreme risk aversion in the financial system). As we know, un-conventional tools can be both distortionary and present us with the risks of unintended consequences in terms of financial stability. Under certain premises, the risk associated with employing un-conventional monetary policy tools might be sufficiently strong to revisit the scope or the speed of fiscal consolidation;  BIS central bankers’ speeches  –  –  A prolonged undershooting of the inflation target might decouple inflation expectations from the inflation target of central banks requiring a more active monetary policy. This is not an argument against the policy mix per se; rather, it is a reminder of the crucial role that central bank communication and management of expectations should have. Third, we should avoid burdening monetary policy with too many goals or risk losing our credibility. With public finances highly indebted, politicians have been only too happy to place the burden of economic recovery on central banks.

The most important question is how the central bank can embrace this objective without impairing price stability and without creating unrealistic expectations about what it can and cannot do given limited tools at its disposal. Second, with the global financial crisis revealing many regulatory gaps, especially in advanced economies, many new proposals have, understandably, been made to reform international financial regulations. However, it is important to note that attempts to fix the last crisis may not prove effective in preventing the next one, as crises always come in different shapes and forms. In addition, some proposed new standards, such as Basel III, appear to mainly address the problems of banking systems in developed countries whose business models and risk-taking behaviour may well be very different from those of emerging markets. Therefore, the key challenge for policymakers in these countries, going forward, is how to adapt the global standards to best suit local needs, bearing in mind the enormous economic costs of over-regulation. Third, differential growth outlook between advanced and emerging markets in the aftermath of the global financial crisis is inducing large and persistent capital flows to emerging markets with implications for the exchange rate, inflation, and the risk to financial stability. In light of this, policymakers in emerging markets would find it more difficult to use traditional instruments to achieve domestic objectives. They must be more wary of the buildup of financial imbalances and may even have to rethink the exchange rate management strategy.