samchain/econo-pairs-v1 huggingface dataset:
When one distributes one's savings across a number of funds with different allocation, for instance to various industrial sectors, there is less risk, as one would not suffer such great losses if one fund were to show a poor development. However, the financial markets also offer other opportunities for risk management. It is possible to pay someone else to take over a financial risk. This can be done with the aid of various types of derivative. For example, in export deals it is not unusual for payments to be made some time after the goods have been delivered. To avoid negative effects of a change in the exchange rate, the exporter can enter into a futures contract that establishes the rate at which the future income will be exchanged to the exporter's own currency. These opportunities for risk management have crucial economic importance. Without them, many economic projects would be perceived as too risky and would never be realised. And this would lead to a slower development of the economy. Deregulation and the rapid developments in technology and finance have made it possible to transfer these roles to the international stage on a much larger scale than before. Thus, the financial markets' capacity to contribute to increased global growth has been strengthened. Countries importing capital can increase their rate of investment and gain access to more modern technology, while the countries exporting capital can obtain a higher yield on it.

We will start with the presentation of Professor Khalsa for about 40 minutes or so, which will be followed by a questions and answers segment. I would like to invite Professor Khalsa to take the floor. Thank you! 2/2  BIS - Central bankers' speeches
The slowdown is also considered healthy, given a degree of irrational exuberance seen in asset markets in the past couple of years. Indeed, inflation this year will slow down further to 5% from 5.8% in 1997, with the unemployment rate staying low and the current account remaining broadly in balance. Thus the Hong Kong economy will not be too much affected by the devaluation of the exchange rates of our competitors. This is understandable for a highly service-oriented economy which Hong Kong now is 8. One Country, Two Currencies 11. Perhaps I should digress a little here and address a related issue which has been the subject of some attention, with considerable apprehension amongst observers. This concerns whether the currency of the Mainland of China, the RMB, would be forced into devaluation by the Asian financial turmoil and if so what would be the implications for the Hong Kong dollar’s link to the US dollar. The Chinese 7 As an illustration, residential mortgage loans, which account for roughly 25% of total domestic loans extended by the  banking sector, have been of very high quality, helped by the prudent lending policy of the banks, including for example a maximum loan to valuation ratio of 70%. As at the end of September 1997, the actual average of this ratio was only 52%. The delinquency ratio, measured by loans overdue for more than 90 days as a percentage of total outstanding loans, stood at only 0.1% as at end-September 1997.

Indeed, there have been serious discussions to try and reestablish exchange rate stability by again fixing their exchange rates, possibly through the adoption of the currency board regime. 1 Re-exports totalled $ billion in 1997, accounting for 85% of total exports of Hong Kong. BIS Review 19/1998  -2Economic Fundamentals 5. But obviously it takes a lot to establish credibility in a fixed exchange rate, or indeed any fixed exchange rate system. However, I believe that we have a highly credible fixed exchange rate system in Hong Kong. Our track record of exchange rate stability is an impressive one. This is against the background of sharp gyrations in the exchange rates of major currencies. The dollar/yen rate, for example, increased sharply in the mid-eighties to 263 in February 1985 before falling equally sharply over a short period to around 120 by the end of 1987, meanwhile triggering the worldwide stock market crash in that year. The sharp gyrations continued in more recent times, with the dollar/yen rate again falling to around 80 in April 1995 before increasing to 134 in January 1998. There was also the ERM crisis of 1992, which at the time brought sharp focus to the viability of fixed exchange rates; and there was the financial crisis in Mexico, which affected many emerging markets at the beginning of 1995. Then there is currently the worst financial turmoil in the history of Asia.
If markets on which firms now rely for some of their  We also obtain a great deal of additional information in the course of our own market operations, through our involvement in payment systems and other infrastructure, through our counterparties and contacts, and in other ways. Intelligence of this sort allows us to understand the environment—the products, techniques, and markets—in which firms operate and how they and the markets in which they trade may behave in times of stress. It therefore supports analysis of how stress might spread and how the authorities can most effectively respond; and it helps to identify the appropriate channels for communicating this response. But analysis from intelligence can also provide early warning of symptoms of actual or incipient stress; for example, a high degree of leverage coupled with crowded trades in markets that can be illiquid. The authorities then have time, where appropriate, to publicise any concerns so that firms can take action to prevent the risks from crystallising, and factor them into stress tests and scenario analysis. We provide such analysis regularly in our Financial Stability Review. And were a crisis to develop, an understanding of the ‘systemic conjuncture’ is also required to enable the authorities to assess on a continuing basis the likely systemic impact, and to choose an appropriate policy response. As well as information exchange, strong co-ordination of decision making between central banks, regulators, and ministries of finance, is likely to be essential for effective crisis management.

Mugur Isărescu: The history of the Romanian monetary system in a European context Opening speech by Mr Mugur Isărescu, Governor of the National Bank of Romania, on the occasion of the inauguration of the Euro Exhibition at Banca Naţională a României, Bucharest, 10 March 2011. *  *  *  Dear Mr González-Páramo, Your Excellencies, Distinguished guests, It is an honour for us and we are glad to welcome you today, at the opening of an exhibition not only educational and attractive, but also relevant considering Romania’s euro adoption. We do hope the Euro Exhibition that the National Bank of Romania is hosting, on behalf of Romania, will prove successful all the more so as our country is destination No. 10 of the European Central Bank’s travelling exhibition. Let me thank Mr. José Manuel González-Páramo for accepting to jointly launch the Euro Exhibition today in Bucharest where it will be open for about three months, here, in the old financial centre of Bucharest where the Romanian leu was born. The leu-euro relation is thus acquiring a symbolical dimension with a certain meaning in the current European context. The reference to the European context is neither conventional nor formal. It reveals that the Romanian leu is one of the strong historical bonds that put our country on the European map.
But withdrawing from internationally-agreed minimum requirements which apply to globally-active entities – such as the FRTB or the NSFR standards, I want to insist on the Trading Book – would be completely different and a source of great concern for all. Any temptation of competitive deregulation would be a lose-lose game which would increase the risks of a new financial crisis and therefore weigh on economic growth. International cooperation on financial sector regulation is our common good, and, fortunately, the Hamburg G20 Summit reaffirmed it. The second requirement is to carefully assess the impact of these new financial regulations. The Banque de France has supported the work of the FSB from its inception, notably to build the “policy evaluation framework” to assess the effects of G20 reforms. This was endorsed by the Leaders of the G20 at the Hamburg Summit. This is a key part of the credibility of global financial reforms. Ex-post evaluations will make it possible to assess whether G20 financial regulatory reforms have actually achieved their intended outcomes. Going forward, these evaluations are meant to provide a basis for the possible fine-tuning of post-crisis regulatory reforms, where relevant. What matters now is to make sure that this framework is used in a timely manner. To this end, a tight schedule should be defined by the end of the year, so that the first evaluations can be carried out in 2018. ** Ladies and Gentlemen, let me conclude by a word on the Paris ecosystem in a post-Brexit Europe.

The profit they derive from their lending activities ultimately result from the interest spread between loans and deposits. It compensates banks for the credit and liquidity risks assumed, for services linked to customer deposits, and for the assessment and monitoring of borrowers. So banks will only grant a loan if doing so makes economic sense. Lending does not automatically generate a profit – each loan is the result of a careful weighing-up of risks and returns. In their calculations, banks take into consideration factors such as current and future interest on loans and deposits, the likelihood of deposit withdrawals and credit defaults, and the liquidity and capital adequacy requirements in force. All these factors constrain the lending – and thus also money creation – activities of commercial banks. Central banks, for their part, take a special interest in the impact of monetary policy on money and credit creation within the banking system. As you know, the SNB steers a short-term interest rate with its monetary policy and thereby influences the level of interest rates. A tightening of monetary policy leads to a rise in interest rates and thus dampens the demand for loans. Moreover, rising interest rates cause the economy to slow, which further reduces demand for loans. Higher interest rates also have a negative impact on the banks’ credit supply. As a rule, rising interest rates increase the likelihood of credit defaults, which means that the quality of banks’ loan portfolios deteriorates in the eyes of market participants.
But the main focus of the Inflation Report is to present a collective view. To publish nine individual fan charts would hardly increase transparency, and the differences of judgment have to date been sufficiently small that it would be difficult for commentators to observe significant differences among those charts. This tension between the need to explain the diversity of members’ views, and the need to provide a clear rationale for the single decision, suggests that the Committee may need to explore further ways of putting across its collective view. It should be clear that there are both benefits and costs to a group decision-making process. The transparency and accountability of individual views helps to make better decisions. But it also complicates the communication of the decision to a wider audience, whose expectations of inflation matter for economic behaviour. The avoidance of confusion requires some forbearance by individual members of the Committee, and a clear understanding of which forms of communication are appropriate to explain individual views and which forms are suitable for explaining the reasons for a collective decision. I am sure that the Committee will learn more about how best to achieve this balance as time goes by. 4. Fourth, does the MPC require reform? Despite its youth, at least in central banking terms, the MPC has not suffered from lack of advice on how to improve itself.

The second asked participants to play a simple monetary policy game, setting a short-term interest rate in order to minimise a loss function described by deviations of unemployment and inflation from desired target levels. The data generating outcomes for this hypothetical economy came from a two equation macroeconomic model of a fairly standard kind. Again a structural change - this time to the “natural” real rate of interest - would occur at some point during the game, and, by observing data generated by this economy, players would need to learn about the change in structure in order to set the appropriate interest rate. All the students who participated played both as individuals and in a group. In both experiments success could be measured on a quantitative scale, and both led to a common conclusion: that decisions made by committees were superior to those of individuals. How robust was this result? And what explained it? Last year, a team from the Bank of England attempted an exercise very much like Blinder and Morgan’s monetary policy experiments using a sample of just under 200 economics students from the 3 London School of Economics. Using a simple macroeconomic model that was broadly representative of the UK economy, the experiments examined how the performance of groups differed from that of individuals. And again they found striking evidence that committee decisions were superior.
The referendum was an event very specific to Greece. Indeed, the fact that this day was a public holiday in parts of Europe implies that the news flow on that day was more limited than usual. In response to the announcement yields on Greek government bonds and Greek sovereign CDS premia soared even further. The transmission of this shock to some other euro area sovereigns and euro area banks, in particular, appears to have been rapid, large and persistent. The CDS premia of France, Germany, Italy and Spain exhibited the largest oneday increase of the year. But whereas the CDS premia of France and Germany quickly receded to their previous levels, those of Italy and Spain further rose in subsequent days. Movements in bond yields were comparatively muted, although Germany benefited from strong safe haven flows.5 The above observations offer quite a compelling case for contagion, but such narratives are still subject to the question of whether alternative interpretations of these events are possible. It therefore makes sense to have a more systematic look at the data using empirical models of contagion. For this purpose, ECB staff has developed and is extending an analytical toolkit of models, which is “state of the art” in this area. Generally speaking, the results from these multiple analyses tend to support the notion that contagion is indeed a driving force behind the trends in the data.

Starting from the collapse of Lehman Brothers in mid-September 2008, a regime switch in the pricing of sovereign credit risk could be observed, from a pre-crisis situation of almost complete compression of spreads to one of extreme market sensitivity to adverse country developments. At the same time, the high degree of economic and financial integration in EMU resulted in the fact that risks quickly spread to other Member States perceived as vulnerable by the market. This happened, particularly, via national banking systems and their exposure to sovereign credit risk. These developments illustrate how the emergence of economic and financial imbalances laid the groundwork for the subsequent instability. The experience of the crisis has also shown that in times of financial market stress the unravelling of imbalances and contagion effects, which are both sources of systemic risk, often reinforce each other. As result, I think it is fair to say that we now stand at a crossroads and that decisive and farreaching reforms will be necessary to address the sovereign debt crisis and ensure a smooth functioning of EMU in the future. It seems that European policymakers have understood the urgency of the situation and, fortunately, substantial reform steps have been initiated. A governance reform package – the so-called “Six pack” – has been approved by the European Council, the European Parliament and the European Commission in September 2011. It strengthens both the preventive and the corrective arm of the SGP and establishes minimum requirements for national budgetary frameworks.
Experience has shown that the timing for opening up of the financial system will need to be sequenced and guided by the objectives to develop a more diversified economy where the respective sub-sectors and segments of society have access to adequate financial services; and to ensure the enhanced and meaningful contribution by domestic financial institutions to the economic growth and transformation process through capacity building. In achieving these objectives, a key trade off is between the need to enhance institutional capacity and the need to phase in competitive forces through the appropriate sequencing of market liberalisation. It is therefore, important that the liberalisation process is sequenced and managed effectively, according to the stages of development of the domestic financial system, the inherent risks and the strength of the social safety net as well as the tolerance level of the financial system. Successful implementation of this process, including evaluation of the trade-offs involved, will at the same time enable the emerging economies to achieve the overall national objectives. It must be emphasised that the tolerance level for the system as a whole will only be as strong as the strength of its components. Having robust financial institutions that are able to withstand any potential shocks and that have the agility and adaptability to embrace the future challenges are key to ensuring long-term sustainability and survival in the competitive future as well as the maintenance of financial stability. One of the most important aspects in enhancing the tolerance level involves building the capacity and institutional development.

Coinciding with the stock market boom in the late 1990s and 2000, corporations in the euro area raised significant amounts of equity capital. New companies, often in the high-tech field, obtained listings at specialised “new markets” stock exchanges for high-growth companies. The amount of new capital raised on euro area stock markets increased from € billion in 1998 to € billion in 2000, when stock prices were at their peak. The growth of the euro area stock markets, in terms of the ratio between market capitalisation and nominal gross domestic product, has been staggering. Over a period of ten years, from 1990 to 2000 - when prices were at their highest level - this ratio increased about fourfold. With the benefit of hindsight, the belief in enormous potential profits stemming from investments in “new economy” corporations resulted in a stock market rally, which broke all previous records. Valuations of internet-related companies reached levels that were extraordinary by basically all standards. In March 2000, the monthly average price-earnings ratio of stocks in the technology, media and telecommunications sectors peaked at 70, compared with an average of around 13 over the previous 25 years. It seemed that the sky had finally become the limit indeed and that a new era had arrived. In parallel with the rise in stock prices, stock market volatility jumped: the historical volatility of the Nasdaq Composite Index almost doubled from 1999 to 2000.
In this respect, the BWI can play a key role by focusing on their core competencies, – namely surveillance, technical assistance and lending –, and by developing new tools for the analysis of macro-critical issues such as climate change, digitalisation, and inequalities. We should aim at a better coordination between the BWI and other international organisations including UN bodies (UN Development Programme, UN Climate Change Conference, UN Conference on Trade and Development…). Given the insufficient achievement of economic development in Africa and part of South Asia, there is a need to review the functioning of development aid. We could say the same concerning climate change, stronger coordination between UN bodies and the BWI could be achieved, with the latter providing the macro-financial framework needed to assess risks and policies, following the example of the NGFS. ** Let me conclude with the prophetic words of President Roosevelt, during his inaugural address of the Bretton Woods Conference back in 1944: “Economic diseases are highly communicable [and] the economic health of every country is a proper matter of concern to all its neighbors, near and distant; [for that reason] the things that we need to do, must be done – can only be done – in concert”. Most of us could not agree more: the world today needs a new harmony instead of the dissonance of this unruly cacophony. This should be a guiding principle for the next 75 years. With that in mind, I very much look forward to the outcome of your discussions today.

This is the fruitful paradox of recent years: the coexistence of “domestically focused” policies that results in a “globally-cooperative” monetary environment. And for this purpose, monetary policy must be conducted in full independence. That is, independently of political powers, of course, and we regret to have to say it again. But also 1/3  BIS central bankers' speeches  independently of short-term pressures or any particular economic interests. So we take account of market indications, but we must not be market dependent; this includes not relying too exclusively for inflation expectations on market-based measures. We are data dependent and I say this in particular for the ECB: in our coming Governing Council meetings, we will assess actual economic data and we will act accordingly if and when needed. II. Financial stability issues and crises On financial stability issues, the Bretton Woods system has undergone numerous disruptions and crises since its inception, including its quasi break-up in 1971. And a decade after the GFC, we still have to define the future of our current international monetary system, or “non-system” as many describe it. Today we will discuss financial stability risks caused by the growth of cross-border flows and financial assets. Over the past few years, international capital flows have been too abundant in good times, – potentially fueling domestic bubbles and destabilising national financial systems – but also prone to “sudden stops” in bad times.