samchain/econo-pairs-v1 huggingface dataset:
Having one’s own central bank and issuing one’s own currency not only gives political status, it is often an important element of national identity. 5. The case of Aruba  Only a few months prior to Status Aparte in 1986, the Island Council of Aruba, after many studies and discussions, decided to institute its own central bank and issue its own currency, the Aruban florin, with the same nominal value as the Antillean guilder, and that is 1.79 florin to one US dollar. The prime reasons behind this decision were the perceived complexities within a monetary union with the Netherlands Antilles hen adopting the Antillean guilder and the loss of monetary independence in a fully dollarized economy. For those who are not fully familiar with these issues, I must point out that the decision of the Aruban authorities to peg the Aruban florin to the US dollar is a unilateral one, and is anchored in the Central Bank Ordinance, the Ordinance governing foreign exchange transactions, and the State Decree value of the florin. In other words, it takes a political decision to change the exchange rate of the Aruban florin vis-à-vis the US dollar. Just as the Netherlands Antilles, Aruba has been able to maintain this peg, meaning that we have experienced an unchanged rate of exchange with the US dollar since 1971.

The efforts to reform the international financial system by the international community have aimed to address the broad range of flaws and weaknesses that has contributed to this recent crisis and to restore confidence in the integrity of the global financial system. At the core of this reform agenda is the development of a new financial regulatory framework that would be more effective and that is premised on a greater emphasis on ethics, fairness, and accountability and that promotes global economic, social and environmental sustainability. It also needs to be anchored on a balance of supporting growth while maintaining financial stability, and one that is founded on greater international coordination of regulatory approaches and supervisory oversight with a crisis management framework that will reduce systemic risk and the severity of any such future financial crises. These reforms include measures to raise the quality and level of capital held by banking institutions, strengthening the liquidity risk requirements and management, implementing  BIS Review 70/2010  1  forward-looking provisioning standards, and aligning compensation practices with long term performance. Further measures also include the improvement in transparency and strengthening of the supervisory frameworks and arrangements for dealing with cross-border oversight on financial groups that operate beyond domestic shores. This has also been reinforced by the strengthening of macro-prudential regulation. The crisis had demonstrated that the collective behaviours of banking institutions and other highly leveraged institutions had contributed to the material build-up of risks in the financial system which ultimately in turn undermined financial stability.
TL Loan Rates  Commercial Loan Standards*  (4-Week Average, Percent)  (Net Change)  Source: BRSA, CBRT. * Banks are requested to state the change in the demand for credit. Net percentage change of indexed responses indicates the direction of the change in credit demand. The index is calculated as [the sum of percentages for (Increased Somewhat + Increased Considerably)] – [the sum of the percentages for (Decreased Somewhat + Decreased Considerably)] +100. Index values greater than 100 signify increase in credit demand. Source: CBRT. As a result of these developments, credit growth gained pace in the last quarter of the year (Chart 12). Accordingly, annual rate of growth in total credit stock materialized around 16 percent at the end of the year, slightly higher than the 15 percent benchmark level for the medium term (Chart 13). Total credit growth proved robust in early 2013, and the uptrend of 13 weeks in credit volume stood close to the past years’ average. 4  Chart 12. Chart 13. Loan Growth Rates  Annual Growth Rate of Loans  (Adjusted for Exchange Rate, 13-Week Average, Annualized, Percent)  (Percent)  Source: CBRT. Source: CBRT. BIS central bankers’ speeches  There is a risk of further acceleration in credit in the forthcoming period. Financial conditions index continued to ease with rapid capital inflows, improving credit supply conditions, and accommodative liquidity policy (Chart 14). This outlook necessitates a cautious stance against macro financial risks.

Accordingly, inflation is expected to be, with 70 percent probability, between 3.9 and 6.7 percent (with a mid-point of 5.3 percent) at the end of 2013, and between 3.1 and 6.7 percent (with a midpoint of 4.9 percent) at the end of 2014. We expect inflation to stabilize around 5 percent in the medium term (Chart 21). 8  BIS central bankers’ speeches  Chart 21. Inflation and Output Gap Forecasts  * Shaded region indicates the 70 percent confidence interval for the forecast. Source: CBRT. In sum, we maintained inflation forecast for end-2013 at 5.3 percent, as there has been no major revision in the factors affecting inflation outlook in the past three months. We expect inflation to resume its downward trend after creeping up in January due to tobacco price adjustments. Although inflation may increase temporarily in May and June due to base effects in energy prices, it will continue to decline in the following months, closing the year at 5.3 percent (Chart 21). We expect core inflation indicators to display a steady downward path and materialize below 5 percent at the end of the year. Revisions in our inflation forecasts are presented on the slide. Although there was no change in the end-year inflation forecast, we revised our inflation forecasts downwards compared to the path presented in the October Inflation Report in the short term due to the benign course of unprocessed food prices (Chart 22). Chart 22.
Indeed, by urging governments to aim at a fiscal position “close to balance or in surplus” in the medium term, the pact enables them to let fiscal deficits increase during recessions without exceeding the 3% reference value. In short, it allows them to create a fiscal buffer during normal economic periods that can be drawn on to counter economic divergences or asymmetric shocks. To summarise that overall issue, the “Optimal Currency Area” theory has frequently been called upon by economists who criticized EMU and expressed concerns about giving up the exchange-rate policy instrument as a response to asymmetric shocks - in particular to asymmetric shocks within a monetary union. I would like to point out, first, that one of the most remarkable effect of the European integration has been the increasing symmetry of shocks. Second, Professor Mundell himself, in support of EMU, made an interesting clarification at the beginning of 1998: in the event of a shift in demand from one member country to another, creating unemployment in the first and inflationary pressure in the second, flexible exchange rates would not be able to solve the problem. I quote: “If the argument for devaluation were valid, it could be applied to every state or sub-region in any country, with a proliferation of new currencies, so they could be devalued!”.

According to the IMF, this effect is estimated to have contributed 1.5-2.0 percentage points per annum to inflation for EU countries catching up on productivity. The recent statistics available for the United States also confirm that wage and salary differentials within the euro area are by no means atypical in a monetary union: for example, in 2000, in the US the average weekly earnings in the non-durable goods sector stood at USD 546 at the national level, while standing at USD 437 in Mississippi and USD 644 in New Jersey. I am convinced that we can be reasonably confident in the increasing integration of European countries, and in the fact that economic developments are becoming more and more correlated in the area. It has been highlighted, in the academic field, by several empirical investigations that business cycles are becoming more synchronous across Europe. Secondly it has often been questioned whether EMU can be a success without some form of enhanced political union. Certainly, for EMU to function well, all Member States must be aware of the spill-over effects of all their national policies, especially their budgetary policies. In this regard, we are in favour of strong co-ordination between economic policies, while strictly respecting the independence of the Eurosystem. This co-ordination is contained in the Treaty itself, which obliges Member States to treat national economic policies “as a matter of common interest” and subjects them to a multilateral procedure.
So let me conclude with a few remarks on the prospects for the global economy, bearing in mind the potential economic aftershock from Asia’s financial disturbances. In fact those prospects are less bleak overall than you might suppose. The last few years have seen world growth at around 4%, against a longer-term average rate of just under 3½ % - with the improvement extending across both the industrial and the developing countries as a whole and with stabilisation now in the transition economies. Meanwhile, inflation has declined almost everywhere. The latest IMF projections suggest world growth of just over 3% this year - more than 1% less than was projected as recently as last October. The slowdown - and downward revisions are heavily concentrated on the Asian countries themselves, notably Japan, which, because of the massive size of its economy has a large impact on world growth. Elsewhere among the major industrial countries weaker demand from Asia is expected to be offset by relatively strong domestic demand, so that overall output growth is not much affected - indeed it is expected to pick up on the continent. A troublesome feature of these projected developments - coupled with recent exchange rate movements - is that they imply large external payments imbalances which will need to be carefully managed if they are not to lead to protectionist pressures and exchange market volatility.

I will begin with a broad overview of the current international approach to overall economic management, then say something about the present disturbances in Asia, and finally about their implications for the prospects for the rest of the world. Let me begin with just a few words about the process of international economic and monetary management. I have just returned as it happens from the annual Spring Meeting of the IMF in Washington, where the Finance Ministers and Central Bank Governors from all around the world gather to discuss current international developments. We all meet again every autumn. Last week, we debated much the same agenda in a variety of meetings - in the Group of 7 major industrial countries; in the Group of 10 - actually eleven - a somewhat wider range of industrial countries; in the Interim Committee in which all IMF member countries are represented, in constituencies; and this time in a new ad hoc Group of 22 or 23 countries including a broad cross-section of industrial, emerging and transition countries. Invariably the journalists, who also gather in Washington, quite reasonably ask, “What exactly did you decide in all those meetings?” And almost invariably, we have to respond that “We did not actually decide on anything - we agreed we should do some further work and meet again for further discussions!” You could be forgiven for thinking that the whole process of reaching international agreement on anything moves at a snail’s pace!
In the services sector, the importance of tourism, which rebounded in 2007 following the introduction of low-cost airlines and growth in cruise ship business, has been complemented by growth in a broad range of new activities, including financial services, aircraft maintenance and repair, online gaming, ICT, call centres and back office operations. The more diversified supply of services and the shift towards higher value-added manufacturing helped to cushion the negative impact on traditional manufacturing activities of the competitive pressures from low-cost countries. The changed structure of the economy, which is now service oriented to the extent of 77% of gross value added, led to an improvement in the balance of trade in goods and services and to gains in the terms of trade. The deficit on the former fell from more than 10% of GDP in 2000 to 3.7% of GDP in 2008, while the terms of trade went up by almost 2% during this period, driven by a strong increase in the services sector, which outweighed the steady deterioration in merchandise trade. Gains in the terms of trade can result either from higher export prices or from lower import prices, or a combination of both. Achieving favourable terms of trade is vital for an open economy where real income depends not only on the volume of output produced, but also on the value of that output in international markets. 3 Positive changes in non-cost competitiveness were complemented by a favourable trend in cost competitiveness.

This reflected a steadily falling male employment rate, the lowest female employment rate in the EU, a declining rate among older workers and the lowest average exit age in the EU of workers from the labour market. Apart from such supply-side considerations, there are other factors which may hinder the ability of the economy to generate sustainable growth. For instance, despite the widespread recognition that exports should be the engine of growth in a small open economy like Malta’s, insufficient attention has been devoted to the fact that between 2005 and 2008 GDP growth was largely driven by domestic demand. The average level of combined private and public consumption was around 85% of GDP during this period, against 78% in the EU. Consumption at this level cannot be sustained unless substantially more resources are allocated to investment and to other growth-enhancing activities. At this point it is necessary to extend the analysis to two important dimensions of membership of a monetary union, namely the role of price and cost competitiveness and fiscal policy. Persistently faster increases in prices and costs in Malta relative to the euro area average lead inevitably to a loss of competitiveness. Since the interest rate and exchange rate policy tools are not available to euro area members, the necessary adjustments have to take place through domestic price and wage levels or in real variables such as output and employment. It is, therefore, important to avoid any such divergencies.
In that case, the forced asset sales are likely to lead to losses, which deplete capital and raise concerns about insolvency.6 The second inherent source of instability stems from the fact that firms are typically worth much more as going concerns than in liquidation. This loss of value in liquidation helps to explain why liquidity crises can happen so suddenly. Initially, no one is worried about liquidation. The firm is well understood to be solvent as shown in Figure 1. But once counterparties start to worry about liquidation, the probability distribution can shift very quickly toward the insolvency line, as shown in Figure 2, because the liquidation value is lower than the firm’s value as a going concern. There are also a number of idiosyncratic sources of instability worthy of mention, some of which are unique to our particular system. One source of instability is the tri-party repo system that I discussed earlier. Another is the convention of tying collateral calls to credit ratings. In this case, if a firm’s credit rating is lowered, the firm may have to post additional collateral to its counterparties, eliminating this collateral as a potential source of funding. This phenomenon was a particularly important problem for AIG, which lost its access to the commercial paper market and was subject to increased collateral calls. Both factors caused the liquidity of the AIG parent company to be depleted very quickly. Finally, if asset volatility rises, haircuts can increase.

Output gap Per cent of potential GDP 1.50  1.50 Constant repo rate  1.00  Implied forward rates  1.00  0.50  0.50  0.00  0.00  -0.50  -0.50  -1.00  -1.00  -1.50 2004  -1.50 2005  2006  2007 Source: The Riksbank  7. UND1X-inflation 2.5  Annual percentage change  2.5  Constant repo rate Implied forward rates  2.0  2.0  1.5  1.5  1.0  1.0  0.5  0.5  0.0 2004  0.0 2005  2006  2007 Source: The Riksbank  BIS Review 11/2005  11
It is determined by the structure of the economic process and the dynamics of expectations. There is, realistically speaking, no chance to deduce a general policy rule and to formally embody such a rule in the central bank mandate. Any decision to correct slowly and gradually or in a single bold effort any deviation from price stability, whatever its origin, can only be taken individually. Monetary history has successful examples to show for both patterns of reaction, but also unfortunate episodes in which central banks actually increased the variability of the price level and of output through activist manoeuvres. It would thus appear reasonable that an addendum, unspecified as to substance, should be made to the mandate of ensuring price stability. For example, to the effect that in fulfilling the mandate due attention should be paid to the development of economic activity. Art. 99 of the Swiss Federal Constitution obliges the SNB to conduct a monetary policy which serves the general interests of the country. Endeavours are under way to spell out this vague formulation in  BIS Review 35/2000  4  more detail in the forthcoming comprehensive revision of the National Bank Law. When revising our monetary policy concept, we took a step in this direction by quantifying the stability target (CPI inflation below 2%) and undertaking to adhere to the target in the medium term. Transparency A further aim was to continue to improve transparency. It is a fact that the call for more transparency has sounded far and wide.

We will participate actively to propagate free and open trading alliances as Asia grows and becomes more economically integrated. In this way, we help to unlock the value, spin off new opportunities and create good jobs for Singaporeans. ASEAN and AEC 2015 One key market for Singapore is ASEAN. ASEAN is a growing region and has a combined population of 600 million people. ASEAN also has a GDP that is the third largest in Asia, after China and Japan. In recent years, ASEAN has embarked on an enterprise to integrate our economies into a regional bloc. ASEAN today, through initiatives like the ASEAN Free Trade Area, has resulted in virtually no tariffs for flows of goods between our countries. Going forward, ASEAN is making good progress towards becoming the single market and product base envisioned in the ASEAN Economic Community (AEC). The realisation of the AEC by 2015 will result in an even more tightly integrated region, and this has opened up more opportunities for corporates as well as investors. A key principle underpinning the AEC 2015 is the free flow of goods, services and investment within the region by 2015. Let me update you on the progress so far. •  1  On trade in goods, virtually all goods in ASEAN already move throughout the region tariff-free1. We are now working on reducing non-tariff barriers. ASEAN-6 countries have eliminated tariffs on 99.65% of tariff lines effective 1 Jan 2010.
The first relates to the shift in focus to the single mandate of price stability as being the core function of Central Banks. This has been frequently accompanied by the adoption of the inflation targeting framework. The second relates to the establishment of a separate entity to undertake the supervisory function of banks, although more than half of the Central Banks around the world still have the responsibility of the supervisory function. In the aftermath of the recent global financial crisis, the search for the appropriate framework for monetary stability and for the optimal institutional structure for financial sector regulation and supervision continues, perhaps now with greater earnest. Prior to the recent financial crisis, the predominant view was that Central Banks should pursue “one tool and one target” policy strategy. Based on this view, the best role for the Central Bank in pursuing macroeconomic stability and prosperity was to ensure that inflation remains low. This recent crisis has changed this perception. Maintaining price stability and financial stability is a means to an end. The ultimate goal is surely to achieve sustainable economic growth and prosperity. Maintaining orderly financial markets has also now become an important role for Central Banks given the implications it has on the functioning and performance of the real economy. For the emerging economies in Asia, ensuring orderly financial markets has always been an important role for the Central Banks in the region.

The Central Bank is thus able to gain valuable insights that contribute towards a more informed financial supervision, including in the design and implementation of macroprudential policy measures. The Central Bank is also best positioned to evaluate the tradeoffs should conflicting objectives arise. In such situations, a fragmented institutional arrangement frequently results in delays and compromises in policy responses. In addition, there would also be a lack of clarity of the accountability for the decisions. Finally, the Central Bank also performs a critical role in crisis containment and management, in particular, to provide liquidity, to prevent disruptions to the functioning of the financial system and to restore stability and confidence to the financial system. To avoid a piecemeal approach by any individual agency in the system and to ensure a comprehensive response to the financial crisis, the institutional arrangements for greater coordination across agencies is essential to allow for prompt action that may include a range of measures such as capital injections, debt guarantees and asset purchases in the effort to contain and manage the crisis. Regional roles At the regional level, the role of the Central Banks in East Asia has in this decade, transitioned to a new level of collaboration and cooperation.