samchain/econo-pairs-v1 huggingface dataset:
The collapse of the stock market would have enabled them to reap a handsome profit from the futures contracts they had taken out. A few figures will help give some idea of the scale of this attack and the vulnerability of Hong Kong’s markets at the time. We estimate that the hedge funds involved had amassed in excess of $ billion in currency borrowings, at an interest cost of around $ million a day. They also held an estimated 80,000 short contracts, which translated into the following calculation: for every fall of 1,000 points in the Hang Seng index they stood to make a profit of $ billion. If they could have engineered that fall within 1,000 days they would have broken even. If they could have achieved it within 100 days they would have netted $ billion. All they had to do was to wait for the best moment to dump their Hong Kong dollars, to drive up interest rates and send a shock wave through the stock market. August was an opportune time: turnover in the stock market had shrunk to about a third of its normal level; there was bad news as the government announced that first-quarter GDP growth had been negative; and rumours were flying around predicting the devaluation of the Renminbi and the severing of the link between the Hong Kong dollar and the US dollar.

Whatever uses other economies might have for them, exchange controls are out of the question for Hong Kong: the Basic Law, which sets out our basic principles of government, expressly prohibits them, and, even if it did not, we know that, at least for Hong Kong, any attempt to introduce them, and to turn inwards on ourselves, would spell the end of our prosperity. But free market principles cannot mean markets that are left defenceless against manipulation. One troubling aspect of the Asian crisis, and a sign of larger problems in the world financial system, has been the extreme volatility in markets created by the rapid flows of highly leveraged funds around the world. As markets in the region became more vulnerable, these flows increasingly took on a predatory character and became more and more subtle in their planning and sophistication. This August, as you know, the Hong Kong financial markets became the target of a well planned attack by international hedge funds. We took unconventional actions to fend off that attack and to fortify our financial system against future attacks. Not unexpectedly, these actions have been the cause of extensive controversy, and of a great deal of misunderstanding. Let me attempt to present the issue from Hong Kong’s perspective by outlining what happened in August and explaining why we took action. Oddly enough, Hong Kong became a target because of the transparency of its financial system: we were singled out for our efficiency and predictability rather than for any fundamental flaws.
Beverly Hirtle: Opening remarks - Heterogeneity Blog Series Webinar Opening remarks by Ms Beverly Hirtle, Executive Vice President and Director of Research of the Federal Reserve Bank of New York, for the Heterogeneity Blog Series Webinar, Federal Reserve Bank of New York, New York City, 4 March 2020. * * * As prepared for delivery I am delighted to be here today to introduce this webinar about our Liberty Street Economics blog series on heterogeneity in labor market outcomes. These blogs describe several ways that the forces shaping U.S. labor markets cause the experiences of workers to vary for different cohorts of individuals, including for women as compared to men; for high-wage versus lower-wage workers; and for workers who face more or less stringent constraints on their ability to borrow. These posts are based on research and analysis being conducted by New York Fed economists, part of continuing efforts by our economists to understand how economic outcomes vary for different groups in the economy. This series follows our inaugural set of posts on heterogeneity in October of last year, in what we hope will be an on-going discussion of work being done at the New York Fed and elsewhere to understand these important topics. In recent years, we have devoted considerable time and resources here at the New York Fed to develop data and analytical approaches to gain deeper insights into the experiences of workers and consumers.

This worked fine during the Great Moderation, but unfortunately with the collapse of Lehman Brothers another old truism suddenly came to life: “markets function the worst when you need them the most”. Against this background, it is quite embarrassing that so few could see the crisis coming. From a regulatory point of view, all the ingredients were there, or rather they were lacking. And this is the first point I want to make – the regulatory framework was unsatisfactory and becoming more so the more complex the financial system became. Then, turning to my second point, which is: The costs of financial crises are huge. This is true in general, but especially so for the recent one. For example, according to a recent study by  1  2  The figure SEK 17,000 =1,000,000*50%*3,4%, where 3,4% is the implied minimum core Tier 1 capital requirement under Basel I. The risk-weight for mortgages was 50% during this period. Under Basel II the implied minimum core Tier 1 capital requirement fell from 3,4% to 2% of risk-weighted assets, and was 2% in 2011–2012 when banks’ internal average risk weights for mortgages was 6%. SEK 1,200 SEK = 1,000,000*6%*2%. For more information see Sveriges Riksbank (2013) Financial Stability Report 2013:2, November, pp 21–24. BIS central bankers’ speeches  IMF economists, in a sample of countries representing just over 50% of world GDP, the total amount of government recapitalisation, asset purchases and guarantees during the period 2007–2011 amounted to nearly $ trillion.
As for banking supervision, the Banco de España, in compliance with the provisions of the Memorandum of Understanding of 20 July 2012, performed an internal review of its supervisory procedures. It created a Committee for this purpose which delivered its findings last October. This Committee made a series of recommendations which the Banco de España is considering and which have already led to changes in the organisational chart of the banking supervision department and in procedures. However, the implementation of the Supervisory Mechanism at the European Central Bank, which we expect to take place in about one year, will clearly involve the need for changes both to supervisory procedures and organisation. Consequently, we need to proceed prudently in this area, our adaptation to the new European model being our first consideration. Progress toward the banking union The decisive push towards banking union was given by the European Summit of June 2012, at a time of grave uncertainty and tensions in the euro area. Banking union must be understood, as conceived from the outset, as an essential step to sever the link between banking risk and sovereign risk and to bolster the soundness and irreversibility of Monetary Union. The banking union will be underpinned by three basic pillars: a single supervisor, harmonised resolution arrangements and a European resolution authority with a common resolution fund. To date, progress has been mixed in each of these three areas.

The problem naturally lies in the negative rates of credit flow for productive activities other than construction and development, and in the contraction of credit for households, both for house purchases and for other purposes. And, in addition to a problem of volume, there is a problem of prices; our households and firms are paying higher interest rates than the average rates paid for comparable transactions in the euro area as a whole, although these spreads are small in the case of financing for house purchase, very high for consumer loans and also substantial for credit obtained by non-financial corporations. To explain this we must look both at supply-side factors relating to loanable funds by banks, and to demand-side factors on the part of borrowers, households and firms. Concerning the demand for credit, the recessionary environment, high unemployment, the hitherto scant growth prospects and uncertainty are evidently affecting potential borrowers. On the supply side, neither liquidity – provided in a stable fashion and at a low cost by the Eurosystem – nor the shortage of capital would appear to be significant explanatory factors. We believe that on the supply side the two most influential factors are the deleveraging of banks and the lack of projects that may be deemed solvent, or offer sufficient guarantees. There are in fact figures confirming that the most dynamic and productive companies obtain financing; the trajectory of exports is a good indicator in this respect.
To help deal with capital inflows and their effects on the macro economy, we have the flexible exchange rate, macro-prudential measures, and various forms of capital account regulations as our tools, while the policy rate is preserved for its primary objective of domestic price stability. Each of the tools has its own advantages and disadvantages. To deal with this challenge, as you may already notice, a balanced use of tools is needed, and that balance could very well evolve over time. BIS central bankers’ speeches  3  Ladies and Gentlemen, To live successfully with capital flows will require not only the central bank to do its work properly. For all of us at this Forum, I believe that we can make it easier for Thailand to cope with capital flows, at least partly, through capital market development. An efficient capital market is like a good irrigation system that helps channel flows into productive uses. Such a market, with enough breadth, could also become a shock-absorber towards capital inflows, quantity-wise, and would be a complement to the flexible exchange rate that acts as a “pricewise” shock absorber. A market that has a wide variety of products and instruments, varied types of investors, as well as competitive services will likely be more stable by itself and benefit us all. An efficient capital market is thus one we should aim to strive for.

For instance, if I had to mention three of them, I would choose: (i)  overseeing the development of awareness and training within the organisation;  (ii)  monitoring patch management in order to make sure that identified flaws are corrected in due time;  (iii)  and, last but not least, capturing the effectiveness of the identification and authentication processes. In a nutshell, key indicators help to improve the governance of the IT security system. ** To conclude, I believe that it is necessary to better structure the international governance of cyber security in the financial sector: it is clear that the different regulatory and supervisory authorities are aware of “cyber risks”. This is becoming apparent through the numerous initiatives at various levels (domestic, European, and international). While this is welcome, it is both delicate but necessary to strengthen international cooperation in order to ensure that there are neither loopholes nor overlaps and that there is convergence towards proposals and solutions that can easily be shared with others.
Economic Tendency Survey of the National Institute of Economic Research Index, average = 100, standard deviation = 10 120  120  110  110  100  100  90  90  80  80  The Economic Tendency Indicator Mean +/- one standard deviation  70  70 00  02  04  06  08  10  12  Source: National Institute of Economic Research  10  BIS central bankers’ speeches  Figure 9. Labour force, employment and unemployment 1000s and percentage of the labour force, 15-74 age group 5 200  12  Labour force (left) Employed (left) Unemployment (right)  5 000  10  4 800  8  4 600  6  4 400  4  4 200  2  4 000  0 01  03  05  07  11  09  Source: Statistics Sweden  Figure 10. Repo rate, mortgage rates for households and bank interest rates for companies Per cent 7  7 Average bank interest rate for companies Average mortgage rate  6  6  Repo rate  5  5  4  4  3  3  2  2  1  1  0  0 06  07  08  09  10  11  12  Note. Per cent, monthly averages.

However, we also need to take into account the risks associated with household indebtedness in our repo rate decisions. Our balancing act in October resulted in an unchanged repo rate, but a downward adjustment of the forecast for the repo rate (see Figure 18). Such a monetary policy means that we can, on the one hand, attain the inflation target and stabilise employment in the long term and, on the other hand, take the risks associated with financial imbalances into account. However, monetary policy alone cannot eliminate the risks associated with household indebtedness that I have discussed today. It is important to have a wide-ranging discussion among several authorities in Sweden on the need for additional measures. 6  BIS central bankers’ speeches  Figures Figure 1. Repo rate Per cent, daily data 5  5  4  4  3  3  2  2  1  1  0  0 06  07  08  09  10  11  12  Source: The Riksbank  Figure 2. GDP growth in Sweden and the world Annual percentage change, calendar-adjusted data 8  8  6  6  4  4  2  2  0  0  -2  -2  -4  -4  Sweden The world  -6  -6 80  85  90  95  00  05  10  15  Note. The broken line and bars refer to the Riksbank’s forecast in MPR October 2012.
Your Honour, This conference follows a similar one held in Botswana hosted by the Botswana Central Bank from 5 to 6 February, 2007 and supported by the BIS Governance Forum and the IMF. It also comes shortly after our very successful conference held at this same venue in November last year on the theme, “Central Bank Independence, Does It Hurt the Treasury?” All these activities are part of the building blocks to a bigger project we have been undertaking in the SADC region aimed at developing a Model Central Bank Act. For us in Zambia, efforts at perfecting the governance as well as the operational efficiency of the financial sector are being done through the Financial Sector Development Plan (FSDP). Under the Plan we have already developed Corporate Governance Guidelines for the financial sector as a whole. Many of these have a lot of relevance to the Central Bank as well. Through the FSDP, even issues such as who should chair the Board of the Central Bank are being discussed. Lastly, let me say that we expect to learn from what other central banks have done, and what challenges they have faced in their quest for enhanced central bank governance. However, it should be noted that each country should establish a legal framework for its central bank governance, which best fits that country’s own history and institutional evolution. This should also take into account international best practice.

[3] Moreover, studies have uncovered a significant lag in discerning the benefits of mitigation measures,[4] which makes it much harder to impose costs on society today if measurable results are available much later. By making the costs of a major, truly global crisis more tangible, the pandemic may help to remove the “tragedy” from Mark Carney’s horizon: after COVID-19, the dramatic consequences of a global climate crisis may be much easier to imagine. And given the need for fundamental structural change after this crisis, the willingness to use this chance to take precautions against the even bigger risk of a climate crisis may have increased. In order to achieve the European Union’s target of net-zero greenhouse gas emissions by 2050, our response to the growing risks of climate change has to start with the way we rebuild our economies after the pandemic. In my remarks this morning, I will argue that three complementary pillars are needed to accelerate the transition towards a low-carbon economy: an effective carbon price, a strong investment programme and a greener financial market. I will also argue that central banks have a role to play in mitigating climate-related risks, even within their traditional mandates, because global warming poses severe risks to price stability. Carbon pricing as the central tool So let me start with the first pillar, the introduction of global carbon pricing. Europe is already spearheading global efforts, which is essential at times when a global solution is not in sight.
At our January MPC meeting, we have increased the overnight repo and late liquidity window rates, delivering a strong monetary tightening in order to contain the deterioration in the inflation outlook. The MPC statement underlined that the CBRT will continue to use all available instruments in pursuit of the price stability objective. 8  We have also stated that inflation expectations, pricing behavior and other factors affecting inflation will be closely monitored and, if needed, further monetary tightening will be delivered. Moreover, the statement signaled that necessary liquidity measures will be taken in case of unfounded pricing behavior in the foreign exchange market that cannot be justified by economic fundamentals. The figure depicts the two main interest rates that matters most for the monetary transmission mechanism (Figure 12). The first one is the cost of central bank funding (shown by the red line), which recently has increased by 200 basis points to around 10.3 percent. The second one is the interbank rate (orange line), which has sharply moved up and have been consistently close to 11 percent since our latest MPC meeting. These two rates clearly indicate that monetary policy has been tightened to a great extent. Figure 12.

Its main elements now include: The Financial Stability Advisory Council (FSAC): a consultative body comprising the minister of finance, the governor of the Central Bank, and the chairman of the Financial Supervision Commission; The Central Bank as the designated resolution authority for banks; the resolution function of the BNB is outlined in the Law on Recovery and Resolution of Credit Institutions and Investment Firms, adopted in mid-2015, which transposed the BRRD in the Bulgarian legislation; A mechanism to fund resolution measures by the newly established Bank Resolution Fund (BRF) which is funded by contributions from the banks; the target level of the resources collected in the BRF is 2% of the amount of covered deposits of all banks licensed in Bulgaria and must be achieved by end-2024; A comprehensive resolution toolkit directly transposed from the BRRD comprising: (1) the resolution tools (sale of business; bridge institution, asset separation, and bail-in), and (2) the government stabilization tools (public equity support and temporary public ownership). Progress has been already made in operationalizing the crisis management framework in Bulgaria.
In the first quarter of this year, the financial sector grew by 7.7% quarter-on-quarter on a seasonally-adjusted annualized basis. Financial services employment has also held up reasonably well. Employment stock continued to increase in Q4 2008 and fell by 1,900 or 1.1% in Q1 2009. A recent poll 3 showed that the banking and financial services sector reported the biggest jump in hiring intentions, 32% this quarter, up from 19% in Q2. Strengthening resilience – new measures Going forward, we will remain vigilant and continue to focus on the three key pillars of resilience of our financial system. The main focus would be on shaping and adopting new international regulatory standards, strengthening the corporate governance of financial institutions, enhancing the Standing Facility and strengthening the Singapore Government Securities auction system, and bolstering investors’ confidence in our financial system. Reforming the regulatory framework has become a major issue internationally, and the emerging consensus is towards more stringent regulation. Under the first pillar of sound financial institutions, MAS is contributing to and helping to shape new regulatory standards being discussed at the Financial Stability Board, the Basel Committee on Banking Supervision and other international standard-setting bodies. For example, discussions on liquidity risk management standards and the capital framework for banks are at an advanced stage. Over the course of the next one to two years, we will be implementing changes to our regulatory framework to adopt these new standards.

Over the coming year, the Global FX Committee and the broader international community will be working towards bringing the level of signup to the Code on the buy-side up towards that seen on the sell-side. Please join us in that campaign. 9  All speeches are available online at www.bankofengland.co.uk/publications/Pages/speeches/default.aspx  9
Wage rigidity may be one such factor. During periods of high unemployment it is not unusual that wages are not increased. On the other hand, it is more unusual that wages are actually reduced, and this in turn has significance for how low price increases will be. 12  BIS central bankers’ speeches  States and the United Kingdom, inflation does not appear to fall to levels as low as in, for instance, Sweden and the euro area. Misinterpreted: Rapid technological development leads to falling prices The most common misunderstanding I hear concerns falling international goods prices. For instance, one usually notes that Swedish goods prices have fallen in recent years and perhaps also that the price of technology-intensive goods is falling rapidly.26 But here one confuses relative prices with the general level of inflation. It is no new phenomenon that goods prices are increasing at a slower pace than services prices.27 Nor is it a surprise. While wage increases are roughly the same in both the goods and services industries, productivity increases are higher in the goods industries. This means that unit labour costs are increasing more slowly there, which in turn means that price increases for goods always tend to be lower than those for services. And for the goods industries with the most rapid growth in productivity, the price increases will be even lower. However, these insights do not say anything about average price changes – inflation – only something about how price developments in different goods and services relate to one another.

The two first-named banks have supplemented low policy rates with quantitative easing to try to make monetary policy more expansionary. 14  See Smets (2013) for a review of various points of view on this question. BIS central bankers’ speeches  7  short time before other macroprudential policy measures are in place. But studies show that typical credit cycles are much more protracted than normal business cycles.15 The status of the inflation target would probably be questioned if monetary policy “leans against the wind” – that is, results in an inflation rate below the target – for many years to dampen an expanding credit cycle. This reasoning becomes increasingly important the lower the inflation and policy rates are. If inflation expectations fall, increasingly expansionary monetary policy will be required to bring inflation back up to the target.16 And as the policy rate has a lower bound, it may be difficult to make monetary policy sufficiently expansionary once this bound has been reached. One conclusion from these insights may be that monetary policy should react asymmetrically when inflation is low.