samchain/econo-pairs-v1 huggingface dataset:
Some countries have preferred to maximise their production of tradeables by undervaluing their real exchange rates through fixed or heavilymanaged nominal exchange rates to the US dollar. As the absolute sizes of their economies have increased, so have their current account surpluses and the scale of their foreign  1  http://www.imf.org/External/Pubs/FT/GFSR/2008/01/index.htm. BIS Review 94/2008  1  reserve accumulation is now massive. Global foreign exchange reserves have increased from just under $ trillion in early 2000 to over $ trillion in May 2008 and are forecast to grow by $ trillion in 2008 alone (Chart 2). The vast excess savings of these economies needed somewhere to go. The gainers were in the West where the asset and financial markets were most developed. The inflow brought greater liquidity to markets and helped to create the conditions for widespread underpricing of risk. The counterpart to the excess savings in the East became expansion of credit, the growth of consumption and a boom in asset prices in the West. Looked at in a global perspective, the dramatic increases in wealth and living standards in emerging economies have been a great step forward. But the growth pattern has been unbalanced and we are now having to handle the inevitable correction.

Those small countries in particular had to accept the new economic reality of lower demand, higher unemployment and forced fiscal consolidation due to a fall in tax income or borrowing difficulties. The other group consists of bigger or more closed economies that were relying on domestic demand. They were able to smooth the initial impact of the crisis with more extensive government support measures. There was also the expectation that the crisis would be temporary. With the benefit of hindsight we know that we were not facing a temporary bump on the road, but a more fundamental need for adjustment. The initial smoothing of the shock may have been even more costly as it resulted in a higher level of public debt. Secondly, the required policy adjustment involves a dimension which we now consider critical: the speed of reacting and the decisiveness of policy actions. The Baltic countries have learned it firsthand through their experience, which of course is the hard way. There are few economists today that would fundamentally question the need for fiscal consolidation and structural reforms in Europe, as the crisis has clearly turned out not to be temporary. However, we all know it is politically difficult to cut government spending and implement reforms fast. The natural tendency for most politicians is to favour gradual adjustment. “Gradualists” say that in case of fast changes the risk of possible policy mistakes is higher, leading to losses in physical and human capital. Opponents of that view, including myself, certainly acknowledge those risks.
Muhammad bin Ibrahim: The lessons of managing risks during the global financial crisis – the Malaysian banks’ experience Opening remarks by Mr Muhammad bin Ibrahim, Deputy Governor of the Central Bank of Malaysia, at the Asian Institute of Finance (AIF) and Institut Bank-Bank Malaysia (IBBM) Risk Roundtable Forum 2010, Kuala Lumpur, 12 October 2010. *  *  *  My opening remarks will consist of three parts. Part I, I will make comments on global financial reform and regulatory priorities. Part II, I will share some regulatory initiative embarked upon by BNM. Part III, I will conclude by giving you an assessment of the banking industry during the recent financial crisis and why it had remained resilient. Global financial reform and regulatory priorities The global financial reform initiative to strengthen the financial sector is consistent with our priorities to enhance prudential regulation and supervisory framework in Malaysia. Efforts to further improve risk management and corporate governance, strengthening the role of supervisors in the oversight of financial institutions and improve market discipline are not new to Malaysia. We have been doing this well before the global financial crisis and these initiatives will continue into the future. For example stress testing on banking institutions was introduced many years ago. In carrying out our regulatory responsibility, we will continue to ensure an effective balance between maintaining prescriptive rules and allowing some degree of flexibility under a more principle-based approach to regulation. Our principled based approach to regulation will be supported by effective supervisory oversight.

Tarisa Watanagase: Prospects and challenges for the Thai economy in 2010 Dinner talk by Dr Tarisa Watanagase, Governor of the Bank of Thailand, at the British Chamber of Commerce, Bangkok, 30 November 2009. *  *  *  Distinguished Guests, Ladies and Gentlemen, First of all, I would like to thank the British Chamber of Commerce for inviting me to be here tonight. It is my pleasure to join you once again at this prominent annual gathering. Last year we had a fruitful discussion on “What determines the future of the Thai economy”. If you may recall, I imparted on the audience some words of wisdom for all policymakers, which is to smooth short-term pain, and to achieve long-term gain. Last year’s speech took care of the latter part, in which the key message was a call for collective efforts to raise the economy’s potential output in order to achieve sustainable long-run prosperity. We, however, did not spend much time on the former part as we were yet to witness the complete fallout from the collapse of Lehman Brothers. Today, we all know that our get-together last September was at the onset of the greatest economic contraction over the last 60 years. The collapse of Lehman Brothers on Sep 15, 2008 created a gigantic shockwave in the world financial markets with its ripples subsequently evolving into an economic tsunami that wiped out so much economic wellbeing all over the world.
To be sure, the Central Bank is assigned the task of containing inflation with particular acuity on behalf of the public and the authorities, and the Bank is required to wield the weapons in its arsenal whether people like it or not. The Bank attempts to carry out that task as well as it possibly can. In the service of that task, the Bank is granted more independence than are most government-owned institutions. One could ask why this is so. What makes it necessary? The explanation lies not least in the fact that the legislature – in Iceland as elsewhere – has realised that the battle against the disease called inflation could be lengthy and uncomfortable. As time passes, the treatment of the disease could generate unpleasant side effects, and it might be tempting to do away with those side effects in the vain hope that the illness will somehow cure itself. Indeed, we have heard this irresponsible notion expressed in various quarters recently. Anyone who has come down with a persistent illness is familiar with the physician’s demand that the patient complete the course of treatment prescribed to him. If he does not, he runs the risk that the bacteria attacking him will become resistant to the medicine best suited to fight them, with the result that the medicine will work poorly or not at all the next time it is needed. The tactic of last resort under such circumstances is to prescribe a much stronger dose, which inevitably produces much more dire side effects.

But if the foreign reserves are evaluated as a percentage of foreign debt, Iceland is relatively weak. On behalf of the Board of Governors, I would like to take this opportunity to thank the many people and institutions whose representatives are here today for a very satisfying collaborative relationship. BIS Review 36/2008  5
It will bring together the governors of the national central banks, the new European Supervisory Agencies (ESAs), the European Commission and the national supervisory authorities of all 27 member states. The establishment of the ESRB was first recommended in February 2009 in the report of a high-level group chaired by Jacques de Larosière. The new institution is backed by a remarkably strong consensus between the European Commission, the European Council and the European Parliament. In the Parliament, the legislation underpinning the establishment of the ESRB was approved with an overwhelmingly large majority of 80%. This gives a strong backing to the ESRB and its mission. The ECB will contribute to establishing the ESRB as a credible and effective body. Concretely, the ECB will host the Secretariat of the ESRB, thereby making it operational and providing analytical, statistical, logistical and administrative support. But whilst the ESRB Secretariat will be located at the ECB, the ESRB will be a separate body, distinct from the ECB. The establishment of the ESRB will not affect the mandate and the functioning of the ECB’s statutory role in monetary policy. The establishment of the ESRB will be a landmark event in how Europe deals preventively with systemic risk. It forms part of wider developments across the globe, including in the US with the newly created Financial Stability Oversight Council (FSOC). Very much like the ESRB, this council is a collaborative body bringing together the relevant US authorities with the aim of identifying systemic risk and responding to threats.

Exports, which had been USD 31 billion at end-2001, reached USD 107 billion by end-2007. Moreover, Turkey has attracted more than USD 40 billion-worth of foreign direct investments in the last two years. The complementary effects of macroeconomic and microeconomic policies are observed in economic progress. Monetary policy focusing on the achievement and maintenance of price stability as well as resolute budget implementations has played a critical role in the establishment of macroeconomic stability. At the same time, reforms towards a more robust banking sector structure, adjustments for an improved investment environment, privatizations, liberalizations in basic infrastructure sectors and improvements in the regulatory and supervisory functions of the public sector have all led to a significant improvement in the production, investment, competition and business environment of Turkey. Thus, in the last two years, Turkey moved up a total of 18 steps and ranked 53rd among 131 countries in the Global Competitiveness Index prepared by the World Economic Forum. Studies made indicate the necessity of reforms in the microeconomic level to maintain high and sustainable growth rates in an environment of macroeconomic stability. Achievements made both in the fight against inflation and in easing the budget deficit and public debt were only made possible with great effort and sacrifices. However, the road ahead calls for more effort. We have to use our resources more efficiently in order to converge with the developed countries.
They also provide information about the extent of card fraud in France. 8 Wouldn’t it be a good idea to introduce this in Sweden too? The Riksbank and cash But what, as the issuer of banknotes and coins, is the Riksbank doing to improve the efficiency of cash management? Quite a lot has actually happened in recent years. The Riksbank began five years ago to offer the commercial banks the opportunity to establish private depots for receiving and distributing cash. Behind this move lay the conviction that private participants would be able to handle the distribution of cash from the Riksbank to the banks in a more flexible and thus more efficient manner. On the whole, the new organisation has functioned excellently. It is, naturally, very important that the depot owners really ensure that access is satisfactory for all participants requiring cash and that the conditions for access to the depots are applied fairly. The Riksbank regularly evaluates the security and efficiency of the new system. In the autumn, as a further part of the effort to improve the efficiency of cash management, the Riksbank began planning a new cash management facility near Arlanda. When the new facility comes into operation in 2013, the present cash management facilities in Mölndal and Tumba will be closed down. The new facility, which will thus be the Riksbank’s only cash management facility, will be equipped with a lot of modern technology, including a fullyautomatic warehouse, and will be well adapted to the operations and security requirements of the future.

At the same time, the level at which card payments become more efficient for society has probably fallen below SEK 70. But which of these figures has fallen furthest? This is something that we do not know. It is thus difficult to say whether consumers are still using more cash than is economically efficient. The Riksbank will follow up the previous studies to get a more exact picture of the use of cards and cash and of the economic costs of producing the different payments. Highlight the charges! It would not be so strange if consumers were to choose to make more cash payments than is economically efficient. In general, consumers have no idea of how much it costs to produce payments. Our survey shows that knowledge concerning what the different means of payment actually cost is limited. Some 20 per cent of the interviewees were unable to say whether it costs them more to use cards or cash. Some 45 per cent of interviewees believe that cash is most expensive for the retail sector and the banks. We already know that it is difficult to assess the costs of various types of payment. 5 They are never clearly disclosed. But the costs are there even if they are not apparent. The retail trade pays charges to the banks for cash and for card payment services, but does not usually price these services directly to its own customers.
This is true whether measured in terms of the amount of duration being pulled out of the market or purchases as a share of total issuance. Lessons learned As I mentioned earlier, there have been at least six major areas where there has been significant learning, which has influenced the evolution of policy. Let me turn to them. The importance of managing expectations Managing expectations is always central to monetary policy. However, at the zero bound this is even more critical than usual. There are two aspects of this. First, keeping inflation expectations anchored at levels consistent with the central bank’s medium-term inflation objective – 2 percent on the personal consumption expenditures deflator in our case – is vitally important. Once deflation expectations become well entrenched, it is very difficult to change them. And, because inflationary expectations are an important driver of actual inflation outcomes, deflationary expectations can be self-fulfilling in driving actual deflation outcomes. Also, if inflation expectations were allowed to fall, this would raise the level of expected real interest rates, making monetary policy less accommodative. Conversely, a central bank does not want medium-term inflation expectations to climb above levels consistent with its inflation objective. If inflation expectations were to become unanchored to the upside, that could damage credibility and result in higher risk premia for  BIS central bankers’ speeches  5  financial assets and tighter financial market conditions.

William C Dudley: Lessons at the zero bound – the Japanese and US experience Remarks by Mr William C Dudley, President and Chief Executive Officer of the Federal Reserve Bank of New York and Chairman of the Committee on the Global Financial System (CGFS), at the Japan Society, New York City, 21 May 2013. *  *  *  It is a pleasure to have the opportunity to speak today at the Japan Society.1 Our countries have very close relations and this is particularly true at the central banker level. I just got back from the BIS last week where I had a chance to spend some time with Governor Kuroda. Today, I will discuss the challenge that we both have been working to solve – how best to conduct monetary policy when short-term interest rates are already pinned close to zero, but the economy is still operating well below its potential. This has required considerable learning. After all, until Japan’s experience began in the 1990s, no major country had actually faced this problem since the Great Depression of the 1930s. As the first nation to experience the zero bound in modern times, Japan was an early pioneer in developing unconventional tools and strategies. Its experiences, both good and bad, along with lessons from other periods such as the Great Depression, have helped to inform the policies adopted by the United States (U.S.) and other nations in recent years.
It may be added that if housing prices had not been included in the CPI, the rate of inflation would have exceeded 10% in the recessionary year of 2001, which would have demanded even tougher measures on the part of the Central Bank than were applied then. Standard & Poor’s recently upgraded its credit rating for the Republic of Iceland, which now has very good ratings from the three main sovereign ratings agencies, i.e. Standard & Poor’s, Moody’s and Fitch. All the agencies keep a very close watch on economic developments in Iceland. Because Standard & Poor’s has recently upgraded Iceland’s sovereign rating, it is interesting to examine the main points in its rationale, both the positive factors that support the rating and others that are identified as potentially weakening it. The agency says that its upgrade reflects significant and sustained improvements in the resilience and structure of the Icelandic banking sector. Improved regulation and supervision leave the financial sector much more resilient. The recent entry of the commercial banks into the Icelandic mortgage market provides the private financial sector with additional domestic stability and profitability. Public finances continue to be healthy and Iceland boasts stable and flexible political institutions. However, the agency also points to very high and rising levels of net external debt throughout the economy, high current account deficits and relatively poor external liquidity. Adherence to the government’s medium-term fiscal framework is central to maintaining the ratings and further unforeseen adjustment would need to be accommodated through fiscal policy, not monetary policy.

Thus the task has primarily involved controlling the way that developments unfold, and in the Central Bank’s view the worst path would have been if the real exchange rate had been driven up by domestic inflation. We are familiar with such cycles from historical experience and neither businesses nor households benefited from them. The Central Bank’s approach was therefore to raise its policy interest rate, causing a corresponding increase in the nominal exchange rate, in an attempt to prevent the real exchange rate from rising in step with inflation. An easier monetary stance may lead to a lower nominal exchange rate in the short run, but not to a lower real exchange rate in the long run. Lower interest rates would eventually lead to more inflation and wage rises, which in the final analysis would probably move the real exchange rate to broadly the same level as if monetary policy had been kept tight from the outset. The chief difference would simply be a much higher rate of inflation when the inevitable exchange rate adjustment arrived as the aluminium-related investments came to an end. There is no question that the high real exchange rate has squeezed the export and traded goods sectors, but it was known that such difficulties would emerge when the investments peak, so it should not have come as a surprise.
And there are clear and convincing economic arguments why – in the real world – injecting money directly into the economy is likely to provide a means of achieving that stimulus. One year on, there is a range of evidence – some relatively hard, some more circumstantial – that quantitative easing is having its desired effect. Asset prices have increased substantially, companies have made record recourse to debt and equity markets, confidence has recovered and inflation expectations remain firmly anchored. But there is still a long way to go. The bulk of our asset purchases have been made only over the last 9 months or so. Much of their effect on nominal spending and inflation is still to come through. We are likely to learn a lot about the transmission of those purchases and about their ultimate impact over the course of the next year. As you know, at its meetings in February and March, the Committee decided to maintain Bank Rate at 0.5% and to maintain the stock of asset purchases at £ billion. It is worth emphasising two important considerations underlying these most recent decisions. First, the portfolio balance channel implies that the primary stimulus from QE stems from the stock of past purchases, not the flow of additional ones. As such, maintaining the stock of asset purchases, together with the low level of Bank Rate, should continue to impart a substantial stimulus to the economy for some time to come.

Economic growth has been financed, to a significant extent, by foreign resources, in the form of foreign-currency borrowing by the public sector, financial sector, businesses and households. A substantial share of the bank’s liabilities and of the loan portfolio is in foreign currency. Foreign-currency lending has been dominant and preferable by parties. This was due to a combination of factors, such as positive exchange rate trend, lower interest rates and good opportunities of the banking sector to fund these loans in the  BIS central bankers’ speeches  1  wholesale markets. Foreign-currency lending to the private sector and households were used to a considerable extent for consumption. Foreign investments in the tradable goods sectors, which would contribute positively to trade balance, were less than those in the non-tradable goods sectors. This is the case of Albania, Bosnia-Herzegovina or Serbia. It is estimated that in terms of the stock of foreign investments, at end-2008, the share of investments in the tradable goods sector ranged from 15% in Albania to 35% in Serbia. Therefore, in the pre-crisis period, some of the countries posted steady and even upward trade balance deficits. Second, notwithstanding the efforts to develop the financial market, the banking sector continued to dominate the financial system of the countries in our region. This is a phenomenon of developing economies, which shows the great dependence of economic development on the banking sector condition. The banking sector in some countries in the region is mostly owned by European banking groups.