samchain/econo-pairs-v1 huggingface dataset:
The countercyclical capital buffer, which is currently activated in Switzerland, is an example of such a tool. In short: we have learned that system-wide financial crises can be very costly, and that we should focus on preventing rather than managing them. There is also a broad consensus that we require macroprudential tools to address systemic risk directly. One last question remains: why should central banks play an important role in implementing these tools? There are four main reasons. First, as lenders of last resort, central banks are the ultimate providers of liquidity to the economy in times of financial stress, and thus play an important role in managing crises. But these operations are not without risks, so that central banks have a particular stake in preventing such situations. To do that, they need the appropriate tools. Second, financial stability is a critical precondition for central banks’ ability to fulfil their primary mandate of ensuring price stability. Financial instability can distort prices directly, and it can impair the proper functioning of monetary policy transmission mechanisms. Third, macroprudential and monetary policy tools interact, in the sense that the use of one may have an effect on the use of the other – for example when low policy interest rates not only stimulate economic activity (as they should), but also translate into an excessive reach for higher yields in financial markets, thereby contributing to the build-up of systemic risk, which in turn justifies the tightening of a macroprudential tool.

For one thing, while evidence suggests that quantitative easing in particular succeeded in lowering long-term borrowing rates, its effect on the real economy is less certain. 6 For another thing, such policies may have important side-effects: they may lead to additional risktaking in financial markets and thus contribute to financial instability, 7 and they can create spillover effects to the rest of the world – notably emerging markets, where capital flows in search of higher yield can fuel asset prices and currency movements. 8 A complete assessment of the positive and negative effects of these measures will thus have to wait until we have data on the full experience, that is, until the complete exit from these policies. An assessment of the effectiveness of the SNB’s minimum exchange rate is clearer: this measure has played a decisive role in addressing the imminent risk of deflationary developments and has thus been successful. Given the still weak economic environment, it remains the central tool to ensure that monetary conditions are appropriate and that the SNB’s primary objective of price stability is fulfilled. The period since the collapse of Lehman Brothers has also underlined the value of central banks being able to respond flexibly to unexpected circumstances. On 30 November, the Swiss electorate will vote on the so-called “gold initiative” (“Save our Swiss gold”, in full), which, paradoxically, would severely constrain the SNB’s room for manoeuvre in a future crisis. Let me digress for a few minutes to explain why the SNB is opposed to this initiative.
Furthermore, in economic terms, given that these deposits were used to a significant degree to finance illiquid assets in outside Iceland, such a payment, if it had been possible, would have amounted to a net transfer of resources from Iceland to other countries – where the United Kingdom would have been prominent – at a time when Iceland was going through its deepest financial and economic crisis in the post-war period! That made no sense. Finally, it should be noted that the deposit preference introduced before the banks failed is securing full recovery to all deposits if we discount the time value of money, which so far has been low during the postcrisis period. This case clearly highlights the link that must exist between the LOLR function and deposit insurance, which, in the absence of clear prior arrangements for currency swaps or other such mechanisms, must be predominantly in the same currency in order to work. The EU framework for this was therefore deeply flawed, as has been recognised in the discussions about a banking union. You can see from this that the key characteristics of crisis management and bank resolution in Iceland during the crisis were that share-holders lost all their equity, unsecured bond holders were bailed in, vital infrastructure elements of the domestic banking system were preserved and deposit were given preference over other unsecured claims. It seems in many ways a standard approach today, but it was not always well received at the time.

What prevented the ensuing international dollar shortage from triggering a widespread failure of internationally active non-US banks to deliver on their foreign currency payments were major LOLR operations in foreign currency, using countries’ reserves and, more importantly, US dollar swap lines granted to central banks around the globe on a large scale. Strictly speaking, a currency swap between two central banks is a symmetric agreement. In most cases, however, it is the central bank providing the reserve currency in excess demand at the time that is the party putting real money on the table. When the swap is used to lend to banks in the receiving country, that country’s central bank bears the counterparty risk. But from a liquidity standpoint, the foreign central banks were intermediaries of the Federal Reserve’s global liquidity operations. And so the LOLR function at the national level was replicated at the global level.5 Does this mean that we have a solution to the problem of mitigating the extra risks in crossborder banking compared to national banking? Unfortunately not. First of all, there are big question marks over central bank swaps as permanent and widespread tools of crisis prevention and management, as I will come back to later in my speech. Second, the failures  3  This case is described in Ingo Fender and Patrick McGuire, “European banks’ U.S. dollar funding pressures”. BIS Quarterly Review (June 2010): 57–64. 4  Guðmundsson and Thorgeirsson describe the case of the Icelandic banks and draw lessons for cross-border banking: Már Guðmundsson and Thorsteinn Thorgeirsson.
As I said when I officially took up office, the main objectives are to increase the presence and influence of the Banco de España at the European and global levels, and to reinforce its early-warning capacity regarding identification of the vulnerabilities and risks to the Spanish economy’s financial and macroeconomic stability, as well as its responsiveness in mitigating these risks and preventing their materialisation. In short, we aspire to a more open and transparent institution, and one more flexible and efficient, that harnesses its human and material resources to the full, under the guiding principles of independence, intellectual rigour and excellence. Following this introduction, allow me to turn to the central purpose of this appearance. As you know, in late May the Banco de España published its Annual Report, which reviews economic and financial developments in the Spanish economy, and in the European and international environment, together with the main challenges and vulnerabilities facing it. The Annual Report is the Banco de España’s main publication in respect of its functions as the monetary authority and adviser to the Government on economic policies. Accordingly, I would like to begin by summarising the main aspects of the current situation of the Spanish economy and its external environment, along with its short and medium-term risks, moving on subsequently to describe the challenges our country faces over a longer horizon. External environment As regards the external environment, the global economy has, so far in 2018, shown signs of slowing, following the high growth recorded in 2017 (see Chart 1).

At the outset of the Conference, it has been clearly articulated by our EU speakers that the enlargement of the EU and the economic and monetary integration of acceding countries will not only strengthen the role of the EU as a global player in the long term, but also make a sustainable contribution to global stability and prosperity. On the developments and prospects for ASEAN, our ASEAN speakers have more than stressed that the overall economic and financial transformation that has occurred in ASEAN since the Asian financial crisis has resulted in an ASEAN that is a mutually reinforcing region of growth; an ASEAN that has an increasing role in the creation of wealth; and an ASEAN that will remain as an important region in promoting and supporting global stability and growth. This Conference has revealed to us that both our regions are currently at the confluence of favourable factors; factors that have led to a marked expansion in the base of opportunities that we can offer each other. It is imperative that our discussions on taking advantage of the emerging opportunities be translated into concrete actions. We are of course aware that implementing these actions will demand decision and leadership from both ASEAN and the EU. From the proceedings of the Conference, it seems to me that there may be a need to develop a more entrenched mechanism to leverage further on our respective core capabilities and which seeks to find simpler, faster and more effective ways that would enhance our joint endeavours.
With interest rate developments as outlined above, core inflation is projected to increase from about 1¼ per cent today to about 2 per cent at the end of 2007. There are prospects of a further increase in inflation, with inflation projected to be close to the target of 2.5 per cent three years ahead. The output gap is expected to increase over the next two years, but will peak at a fairly moderate level as gradual increases in the interest rate dampen demand growth. 4  BIS Review 30/2006  On the basis of the analysis in the Inflation Reports, Norges Bank’s Executive Board assesses the consequences for future interest rate development and adopts a monetary policy strategy for the period to the next Report. Interest-rate setting since last summer has been oriented towards a gradual increase in the interest rate – in small, not too frequent steps – towards a more normal level. Based on Norges Bank’s assessment of the driving forces in the economy, this strategy appears robust. Output growth is strong and the labour market is becoming tighter more quickly than expected. Higher growth in the economy may in isolation suggest a faster increase in the interest rate ahead. This would reduce the risk of bottlenecks in the economy, with rising cost inflation and continued debt build-up. On the other hand, the objective of bringing inflation up towards the target and anchoring inflation expectations argues for restraint in the upward movement of interest rates.

We’re listening to the reasons for that reaction, will continue to engage and look forward to responses to the  Page 10  consultation, in order to make sure we fully understand the concerns being raised. It is important that whatever decisions are taken on this topic are taken based on the latest data and I would urge insurers to participate constructively in our evidence gathering. We understand the pressures on firms and are being as flexible as possible to enable firms to respond to our request. More broadly, we would welcome any ideas and suggestions for how the issues we have identified can be tackled. We have laid out one model, but it may well be the case that this could be improved upon or that there are other ways of achieving our objectives. We think it’s essential that we tackle the problems we have identified with the current regime, but we have an open mind as to how this is done as long as it is done credibly. I am also hearing some insurers say that they would prefer simply to stick with the EU’s version of Solvency II as it evolves. To be honest I think this is a red herring. The government has been clear that the point of leaving the EU, at least insofar as financial regulation goes, is to enable us to tailor our regime to make it work better for the UK.
The inclusion of RMB assets into global indices has driven up the demand for these assets and a good part of the investment is done through Hong Kong. At the same time, we are also working closely with the Mainland to expand and enhance these Connect schemes, including expanding the product scope to cover derivative products in the case of Bond Connect and ETF in the case of Stock Connects. 9. Talking about China opportunities, one key development is the Guangdong-Hong KongMacao Bay Area (the Greater Bay Area, or GBA). The GBA combines Mainland China’s wealthiest and economically most advanced cities along the Pearl River Delta into a metropolitan cluster. It covers a population of nearly 70 million and generates GDP of about $ trillion, providing a unique stage for financial institutions to launch and expand their business. Besides, the depth of Hong Kong’s financial markets could help enterprises in the GBA to access global capital. At the initial phase, we are studying ways to facilitate capital flows within the GBA at the individual level, such as cross-border use of mobile payment and mutual access of wealth management products by residents in Hong Kong and in the Mainland part of the GBA. 10. Apart from being a major platform for capturing China opportunities, the HKMA is actively moving towards the new era of Smart Banking. We launched the Faster Payment System (FPS) last September – a round-the-clock instant payment platform that achieves full connectivity between banks and stored value facilities.

Eddie Yue: How Hong Kong is prepared for macro-economic challenges on the horizon in 2019 Opening remarks by Mr Eddie Yue, Deputy Chief Executive of the Hong Kong Monetary Authority, at the Hong Kong-Paris Financial Seminar, co-organised by the Hong Kong Monetary Authority and Paris Europlace, Hong Kong, 16 January 2019. * * * Denis (Beau), Arnaud (de Bresson), distinguished guests, ladies and gentlemen, 1. Good morning. Let me extend a very warm welcome to you all for attending today’s Hong Kong-Paris Financial Seminar, co-organised by the HKMA and Paris EUROPLACE. And a special welcome to our guests from France. 2. Hong Kong and France have always had strong ties. We are home to more than 20,000 French people and about 800 French companies. Apart from food and beverage and luxury goods that people are familiar with, French companies are also actively engaging in different industries in Hong Kong, ranging from finance, construction and infrastructure. About 170 of the French companies use Hong Kong as the regional headquarters. Given the existing strong ties, it is particularly good to have forums like today’s seminar to talk about how Hong Kong and France can further strengthen their relationship through financial collaboration. 3. Before I talk about the opportunities for further collaboration, let me spend a few minutes to talk about the risks and the rather challenging macro environment that we are facing.
These agreements pave the way for the Bank of Albania’s full participation in the supervisory colleges of relevant European banks present in the country and for exchanging information on resolution planning for cross-border banking groups. Financial education is an important tool for enhancing the effectiveness of the transmission of Bank’s decisions to the economy. In addition to educational publications, various activities were organized throughout the year, mainly targeting the younger generation. Also, the Museum situated within the Bank of Albania has facilitated the logistics arrangements for undertaking educational campaigns. Last but not least, the Bank of Albania remains a serious partner in the national commitments for joining the European Union. The Bank of Albania’s obligations under the European integration process are included in the medium-term development objectives of the Bank of Albania. It coordinates Chapter 4 “Free movement of capital” and Chapter 17 “Economic and monetary policy”, and it contributes to 6 other chapters of the acquis. The Bank of Albania has fulfilled the obligations deriving from the Stabilization and Association Agreement, the National Plan for European Integration and the recommendations of the European Commission. Specifically, it continued to implement measures to (i) reduce the level of non-performing loans, (ii) reduce the level of euroization in the financial system; (iii) harmonise the regulatory supervisory framework with the requirements of Basel III and Basel IV; (iv) approximate directives on payment services; and (v) increase the transparency of monetary policy.

*** As part of this report, I would like to highlight an important aspect for guaranteeing good governance at the institution: the internal audit systems. The internal audit is independent from the management, guaranteed through the Inspector General, appointed by the Parliament. 7/8  BIS central bankers' speeches  Fostering internal control and monitoring systems and procedures In 2018, the operational risk management function – a new function at the Bank of Albania – consolidated and matured. It is based on the international risk management standards as well as on the best practices of central banks. In the last assessment, the level of Operational Risk Management has shifted from ‘ad-hoc’ to ‘managed’, thus overcoming the ‘basic’ level. This assessment exceeds the Bank of Albania’s objective. This year, the project for “Drafting and Implementing the Bank of Albania’s Business Continuity Management Program” continued and is currently in the final phase of its completion. The purpose of this project is to ensure the continuity of critical processes and to restore normal business as soon as possible in the event of a crisis or emergency situation. Audit engagements in 2018 focused on: (i) giving an opinion on the adequacy of internal audits set by the Management for the audited functions / processes, including supporting applications for the activities; and (ii) other not planned audit and non-audit engagements upon special request by Administrators or other external institutions.
To get an idea of what is possible, however, we can compare the results in other countries that have had a fixed inflation target as long as Sweden, that is, since the early 1990s. It is also reasonable to exempt the very first years of the new inflation-targeting regime for Sweden and other countries. Canada has had an inflation target since 1991, which from the end of 1995 is 2 per cent and its average inflation rate during the period 1996–2011 is 2.0 per cent. The United Kingdom has had an inflation target from the end of 1992, which was however modified in 2003/2004. Up to the end of 2003, the UK inflation target was 2.5 per cent, when measured using the RPIX price index, and the average inflation rate in 1996–2003 was 2.5 per cent. With effect from 2004 the United Kingdom has had an inflation target of 2 per cent for the CPI, which cannot be regarded as any significant change in level as inflation measured as the CPI is on average 0.75 percentage points lower than when measured using RPIX. 12 The average inflation rate for the period 2004–2007 was 2.0 per cent, while the average for the crisis years 2008–2011 is higher, at 3.4 per cent. However, given the higher rate of unemployment in the United Kingdom stemming from the crisis, a well-balanced monetary policy means that inflation should overshoot the target.

In the face of various kinds of shocks, small open economies in particular found that bringing inflation rapidly back to target can have undesirable consequences for the real economy. It has been essential to practise flexibility in inflation targeting to address shocks. The horizon for achieving the target has been lengthened. The latest adjustment of the mandate for monetary policy in Norway clarifies this flexible interpretation of the inflation target. We believe the framework is well suited to guiding monetary policy through the years ahead. 3/3  BIS central bankers' speeches
They highlight the tendencies of economists to be self-referential and analyze how the social perception of the finance industry is largely negative nowadays, and the more so since the financial crisis. In that respect, the paper focuses on the United States, but there is little doubt that France probably is no exception to that rule either. After the 2007–2008 crisis, some first steps have been taken to change incentives in the financial industry. And even more should be done in that direction in the coming years. At the same time, economists should also adopt a more critical view on the financial industry practices and judge them as impartially as possible. But what can we say about economists themselves? Are they really too self-referential and do they tend to overestimate their role in society? On a personal note – as a policymaker and central banker – I do believe it is possible that central bank governors may pay the cost of the so-called “superiority” of economists (for instance when they are too sure of their econometric models). How will we proceed in this conference today? In-depth discussion of papers will be left to participants. However, I would like to mention the potential role that the Foundation can play to help address some important issues. First, economic analysis is definitely needed in order to sharpen policy makers’ understanding of the world. At the same time, policy makers should continuously challenge the alleged “superiority” of economists with the complexity of the real world.

However, using the CPI as a target variable has occasionally led to a number of pedagogical difficulties, not least in recent times. The reason for this is that household mortgage rates are included in the CPI. For example, when the Riksbank lowers the interest rate to bring inflation up, mortgage rates will fall. The short-term effect on the CPI therefore heads in the “wrong direction”, that is, the interest rate cut makes inflation fall further (see Figure 2). 5  See, for example, Skingsley (2015) and Flodén (2015). 6  When the inflation target is very low, say, 1 or 0 per cent, inflation will vary around that level. The nominal interest rate will also be lower on average for a lower target. The lower the interest rate is in normal conditions, the less scope there is to lower it before it hits its lower limit and can no longer be used to stimulate the economy. Another problem with permanently low inflation is that because it has proved to be difficult to lower nominal wages in practice, it can be difficult to adjust real wages between individuals at a company and between different sectors.