samchain/econo-pairs-v1 huggingface dataset:
It has no consequences for the “real” economy. These borrowings have been undertaken in the past on government instruction and with government approval, with the NBH acting solely as an intermediary. The NBH’s only shareholder is the Hungarian State; the real burden of the State’s direct or indirect external borrowing has to be borne by the present or future taxpayers. This real burden was to some extent hidden by the “seigniorage” profits of the NBH, which had two consequences: they hid the size of this burden from public view; and they distorted the NBH’s accounts. As all experts know, the size of this double distortion was proportional to the rate of inflation, and was aggravated by the NBH’s sterilisation policy of large capital inflows, without which, however, inflation would not have been brought down from 30 to 20% within the past eighteen months. Sterilisation was therefore a wise policy; the real culprit is the rate of inflation, which is much higher in Hungary than in the countries whose currencies were used for borrowing. In a sentence: this long overdue measure serves both public transparency and democratic accountability (of both the government and the NBH) - even if the general public, or politicians, may be excused for not fully understanding the intricate interconnection between accounting procedures in a country with high inflation and the processes of the real economy. This is a good example of the generalised mess created by inflation.

To be sure, Asian economies will continue to be subject to the political, economic and social 3/6  BIS central bankers' speeches  uncertainties that characterise emerging markets. But the region’s fundamentals are sound. Growth inherently enlarges the size of the asset pool, and asset markets in Asia provide a compelling case for global investors. The region is seeing a growing diversity of institutional investors – not just from Asia but also from Europe and the Americas. There is also an expanding breadth of investible assets, driven by Asian companies raising capital to grow and internationalise their business. Alternative opportunities in Asia Recent trends in the asset management landscape favour investment opportunities in Asia. A key trend is the shift in asset allocation from traditional public markets to private market alternatives like private equity (PE), real estate and infrastructure. This is largely driven by investors’ search for yield and portfolio diversification benefits. Preqin reports that allocations towards alternative assets hit a record $ trillion assets under management in 2016. And perhaps as an indication of more to come, global institutional investors are still below their long-term target allocations to such alternative asset classes. In the steer towards alternative assets, there are two themes that stand out for investors looking towards Asia. First, companies, including those in Asia, are choosing to stay private for longer, and are increasingly comfortable with the PE value proposition. Second, Asia’s immense real estate and infrastructure needs are an opportunity for investors to monetise its demographic and structural transformations.
Broad diversification can therefore reduce the total risk of a portfolio, without necessarily lowering the expected return. Systematic risk is risk that cannot be eliminated through diversification and is the risk associated with market returns that must be accepted when investing in global financial markets. This is the risk that an investor can expect to be compensated for and that delivers a higher expected return. For the GPFG as a long-term investor, short-term fluctuations are not the most important factor. Periods of weak economic growth occur in all countries. Investing in a broad range of assets reduces the risk of the return being dominated by such a period. The objection could be raised that international capital markets have become increasingly interwoven. Equity markets in different countries are correlated to an increasing extent. Common factors will often dominate in acute crises. At the same time, it seems likely that the more fundamental features of an economy are more important in the slightly longer term, as exemplified in the chart. The calculations are based on a data set for equities and ten-year government bonds in 42 countries through all or parts of the period 1950–2016.5 The lines show the five percent worst outcomes for the value of two different portfolios for different time horizons. The light blue line shows a portfolio diversified across a large number of markets. The dark blue line is a portfolio invested in a single country.

One of the first accomplishments of the Basle Committee was a study of banks’ capital adequacy. Issued in 1988, under the title ”International Convergence of Capital Measurement and Capital Standards,” this report was soon endorsed by many countries. Also known as the ”Basle Capital Accord,” the study took BIS Review 41/1999  2  account of credit risk. Although the variety of risks in the international markets is increasing, credit risk is still the most significant risk category for banks. Credit risk means the probability of defaulting on one’s obligation to the other party in any transaction. As I already mentioned, the growth of competitiveness in the international credit markets in recent years, the active participation of non-bank financial institutions in these markets, and borrowers’ resort to the capital markets for loans at lower cost, have all brought about a considerable narrowing of profit margins in credit transactions. This has forced the banks to make more loans in order to have a competitive edge. But they have encountered credit problems due to adverse developments in the economic and financial conditions. All these developments have resulted in the design of new methods for more effectively evaluating the risks and yields of credit transactions. Besides creating credit rating models for use within banks, these efforts have produced analytical methods calling for intensive data analysis such as retrospective analysis of credit losses, models of bankruptcy probabilities, and stress tests.
Since a large share of the revenues from petroleum activities accrues to the state, any fluctuations in oil prices will primarily result in changes in allocations to the Fund. Since all of the Fund’s capital is invested abroad, such changes will in principle not influence economic activity. This makes the Norwegian economy more robust to oil price fluctuations, thereby reducing oil dependence in the short term. To illustrate the importance of the buffer function, let us assume that the oil price shows a temporary rise of NOK 10 per barrel, or a little less than USD 1.50 per barrel, lasting for about a year. This is a small change in the oil price, well within normal variations from one year to the next. Government revenues - and hence the budget surplus - would then increase by around NOK 10 billion in the first year and NOK 12–13 billion the next year. This corresponds to around 1% of Norway’s annual GDP. By comparison, annual trend growth in the mainland economy is slightly over 2%. Note that a price increase on the margin will be reflected mainly in an increase in government revenues and will have limited effect on private sector incomes. This means that the effect of the price increase on the Norwegian economy depends on how the government spends the additional revenues. If they are absorbed into the economy through higher expenditure or reduced taxes, when the economy is already nearing capacity, such a policy would rapidly lead to substantial pressures on resources in the economy.

Similarly, the opposite situation may occur, BIS Review 121/1999  10  where a low interest rate is required to keep the exchange rate stable in the short run, creating inflationary pressure in the economy. In both situations, however, a policy aimed at stabilising the exchange rate in the short run will weaken the basis for exchange rate stability over time. Hence, Norges Bank cannot with open eyes set interest rates to levels where monetary policy in itself contributes to a higher inflation or a deflationary recession, which would undermine the confidence of the krone. Chart 11 Preconditions for exchange rate stability  • Inflation at the level of the Euro countries • Monetary policy should not contribute to a deflationary recession  Legg inn filadresse her  If price and cost inflation is in line with the level aimed at by the euro countries, one of the fundamental conditions for exchange rate stability is satisfied. In spite of this, the exchange rate may be perceived as “too strong” or “too weak” in relation to the initial range. This may be due to conditions in the real economy, which could imply a real appreciation or real depreciation of the krone. The background for such changes in the exchange rate may be that the cost competitiveness of Norwegian industry has to be adjusted and that the equilibrium range of the krone exchange rate has changed. In this situation Norges Bank should carefully evaluate the reasons for exchange rate movements.
Greek banks have been present in the market since 1996; the German and Italian investment has been present for quite a long time as well, while the latter has grown substantially and has become one of the market’s key actors. Austrian investments may be considered as the most dominant ones. Their ownership has resulted from the acquisition of the largest domestic state-owned bank. The long presence of foreign banks in the Albanian banking system has influenced the establishment of a stable banking system and its stable growth. Despite the financial collapse of 1997 or the panic crisis in 2002, in none of the cases was the system’s performance a source of crisis or instability. Previously, foreign banks were more conservative in terms of expanding their geographical activity; however, the entry of Raiffeisen Bank into the market pushed them to be more active. This fact may be evidenced by the variety of products provided in the market, the growth of lending and the employment of clear strategies to increase or maintain their market share. However, the economic benefits deriving from the presence of foreign banks have not reached the proper levels yet. The enhancement of the quality of information provided to the public at large and to the central bank, the lowering of the intermediation cost, the further improvement of risk management, and the standardization of the accounting and financial reporting systems are not in the desired levels yet.

Finally: as things look today there are, in my opinion, specific circumstances in Sweden, especially structural vulnerabilities, that justify continuing to complement the internationallyagreed requirements with stricter requirements in certain areas. One of the greatest risks I see as far as Sweden is concerned is the mortgage market. The measures needed to come to terms with this have not been in focus here today, but this is certainly an issue I will return to. Today, I have instead talked about international regulations and about Sweden’s need to go further in some respects. Those I have mentioned today are higher capital requirements, LCRs per currency, risk-weight floors for mortgages and the countercyclical capital buffer. In the case of the leverage ratio and the NSFR, we need to examine more closely whether the Riksbank should work for stricter requirements in Sweden than the upcoming international minimum requirements. BIS central bankers’ speeches  7
While there have been other un-guaranteed MBS transactions in Hong Kong, today's issue sponsored by the HKMC is the largest un-guaranteed Hong Kong dollar MBS in Hong Kong. Moreover, it is the first-ever un-guaranteed Hong Kong dollar MBS that carries a triple-A rating. I believe that the HKMC's introduction of triple-A-rated MBS through credit tranching will become a benchmark for other MBS issuers in Hong Kong. With today's MBS issue, the HKMC now accounts for about a quarter of the total securitisation transactions in Hong Kong in the past ten years and is the largest issuer of asset-backed securities in Hong Kong. For the future, the Corporation has plans to expand the scope of its business to cover non-mortgage assets and selected overseas markets – as always, in a prudent commercial manner. These new business initiatives will help to further broaden the local debt market, and strengthen Hong Kong's role as an international financial centre and funding hub in the region. We are grateful for the enthusiastic response of the banks joining the management group for this issue and find it very encouraging. We are also very pleased to learn that a diverse group of investors including retirement funds, insurance companies, banks and other institutional investors have shown a keen interest in the issue. BIS Review 116/2006  1  Let me conclude by thanking HSBC, the sole arranger and lead manager, for their highly professional work to make this issue a great success.

It is worth spending a moment on this point because it has an important parallel in the issues concerning money market funds. Banks are primarily funded by deposits, where the contract is understood to be to return the full value of the deposit plus whatever the interest rate is – usually “on demand” and without delay. Banks are held to high standards by regulators – including through liquidity and capital requirements, and regular stress tests – to ensure that they are well placed to be able to honour depositors’ demands. Central bank liquidity operations, resolution arrangements and deposit insurance further reinforce confidence in this promise to return the deposit. Thanks to the post financial crisis reforms, bank deposits are therefore cash or moneylike in most states of the world. At the other end of this spectrum are investment funds of many sorts. Most are not meant to be cash-like, in the sense that the promise is to return the fruits of the investment strategy, which may be more or less than the amount invested. Cash-like certainty of value is not part of the contract. If only it was that simple. There are at least two problems which are evident in how this system operates – or possibly two variants of the same problem. First, there are instruments which at least in some of their existing forms are neither one thing nor the other – neither properly cashlike nor properly investment-like. Second, there are instruments which are meant to be investment-like but which become regarded as cash-like.
However, derivatives markets do not create new risks in the economy; instead, they allow the management of the imminent risk. The origin of such thoughts is a common misperception with regards to transactions carried out speculative purposes. Especially in foreign exchange markets, the level of exchange rate is determined not by futures transactions, but by spot market transactions. As transactions in the derivatives markets do not affect one-to-one the supply or the demand-side liquidity, they equally do not affect the price formed in the spot markets. In this case, speculative transactions that might be observed in the derivatives markets should not be expected to have a drastic impact on the spot markets. Furthermore, as I have already pointed out several of my speeches, there are two groups of speculators in markets. The first group buys when prices go up, expecting prices to rise further or sells when prices go down, expecting prices to decline even more; we can describe this group as bad speculators. This is the type of speculator mostly seen in Turkey. Also in the process of the fight against inflation, this group held its assets in foreign exchange, in line with old habits; thus continuing to buy foreign exchange at high rates, with the belief that Turkish lira would depreciate anyway, used no instruments whatsoever for risk management; and when Turkish lira appreciated under the floating exchange rate regime due to market conditions, the group criticized the stability program and policies implemented.

Before dealing with the evidence of possible links between global liquidity, international portfolio flows and euro area monetary growth, it is worthwhile recalling the theoretical work by James Tobin and Harry Markowitz on macroeconomics and asset pricing. The bulk of Tobin’s work in the 1950s and 1960s was on the monetary side of macroeconomics. One of his main objectives was to establish a firm foundation for the sensitivity of money demand, or money velocity, to interest rates. He argued that people may prefer liquidity, and prefer it more the lower the interest rate on non-cash assets, because individuals are risk adverse. Over the same period, Harry Markowitz worked on portfolio choice problems, balancing risks against expected returns. Markowitz showed that under certain given conditions, an investor’s portfolio choice can be reduced to balancing two dimensions, i.e. the expected return on the portfolio and its variance. When the Nobel Prize was announced in 1981, Tobin was asked about his work at the press conference. He tried to explain for a lay audience the idea of why it is that people hold different proportions of different assets in their portfolios. 2  BIS Review 149/2007  He said, “Well, you know, diversification – don’t put all your eggs in one basket”. This explanation led to headlines around the world: “Yale Economist Receives Nobel Prize for ‘Don’t Put All Your Eggs in One Basket’”. A similar argument was made when the Nobel Prize was awarded to Markowitz in 1990.
According to the studies made by, for instance IMF employees, bank crises have often been due to one or a combination of these factors: •  A lack of competence in the banks, which has combined with weak regulation and supervision to lay a foundation for potential problems. This could be a question of inadequate credit granting policies, exaggerated confidence in loan collateral, an inability to detect risk concentrations. •  Criminal abuse of the banks, such as improper actions by owners and other insiders or "common criminals" such as Nick Leeson at Barings. •  Malpractice by the authorities towards the banks, for instance non-commercially directed lending. •  Many countries also suffer from their supervisory authorities lacking sufficient independence. The government becomes involved in the authority’s operational decisions and prevents the necessary measures from being implemented against problem banks. •  Weaknesses in structural factors, such as laws and courts. There may also be flaws in the financial security net, for instance deposit guarantees or rules for closing down banks, which mean that the authorities postpone dealing with problems that have arisen for as long as possible. The crises can be aggravated and the solutions can become more severe and more expensive in some cases, for instance if the central government itself has poor finances or is bankrupt (Indonesia 1998). It then lacks the capacity to intervene with sufficient financial support measures to manage the crisis.

At that time the Riksbank was legally responsible for the choice of exchange rate regime and ERM participation was considered simply as a way of preventing the flexible exchange rate regime from becoming a formal obstacle to Sweden's possible full participation in the monetary union. When the Government then judged that there was insufficient public support for Sweden's adoption of the euro, the question of altering the exchange rate regime ceased to be relevant. When the independence of the Riksbank was formalised in 1999, the legislation on exchange rate policy was amended. Today the exchange rate regime is chosen by the Government, while the Riksbank decides on issues of its implementation. So it is the Government that decides if and when the krona is to join ERM2, whereupon the Finance Ministry and the Riksbank discuss the SEK/EUR exchange rate that is compatible with a stable economic development. I want to make it clear that, contrary to the impression one is liable to get from reports in the media, this process is not to be seen as a struggle between the Riksbank and the Finance Ministry. There are extremely good reasons for these two institutions to agree on a joint line of action. Otherwise it is likely to be difficult to argue Sweden's case effectively in the subsequent discussions with our European partners.
For instance, there is great uncertainty over what the consequences of the turmoil in the world financial markets might be for economic developments. In Sweden there are signs of a slowdown and GDP increased at a slightly slower rate than expected, according to statistics published by Statistics Sweden just over a week ago. At the same time, inflation is high and above the target. World market prices for some commodities, such as oil, have risen sharply over a period of time and this is a challenge for central banks around the world. New information of significance for inflation is constantly coming in. As the Riksbank has also pointed out on several occasions, inflation expectations have risen in recent months and they are above our target of 2 per cent. There may be several different reasons for this. The most important reason is probably that actual inflation has risen and this usually leads to expectations rising. The Riksbank monitors inflation expectations closely; the important thing is that they do not become entrenched at a high level, whatever the reasons behind them. To curb expectations we would have to act more forcefully. To summarise – our strategy has not changed and our target stands firm. We will continue to use a large number of alternative measures of inflation in our work, not least to illustrate the direct effects of our own interest rate policy. But the focus will be on our target variable, the CPI.

It can create uncertainty as to how the inflation target is defined in practice. Until one year ago I myself sat “on the outside” and monitored the Riksbank’s policy making. And I must confess that I thought it was a little unclear which measure of inflation the Riksbank actually used in formulating its policy. This was connected with the prominent role the CPIX had played in the Riksbank’s analysis and rhetoric. The CPIX – how it began The CPIX is a measure of inflation that has been around a long time. It was included in the predecessor to the Monetary Policy Reports, “Inflation and Inflation Expectations in Sweden”, which was first published in October 1993. At that time the measure was known as UND1 and as now it was adjusted for the direct effects of indirect taxes and subsidies and mortgage interest expenditure. At that time the krona had recently depreciated heavily and this had an impact in the form of a one-off increase in import prices. The measure therefore initially made adjustments for changes in import prices as well. The reason given then for adjusting for interest costs was that the financial turbulence in autumn 1992 had led to temporary effects on inflation. Some years later other reasons made it important to adjust for interest costs. During the second half of the 1990s the Riksbank cut the repo rate substantially, from almost 9 to below 3 per cent.