samchain/econo-pairs-v1 huggingface dataset:
•  The interconnectedness among institutions propagates and magnifies shocks across the system. •  The stability of the parts does not equate the stability of the whole. But eight years after the outbreak of the crisis, as the latest BIS annual report points out “macroeconomic stability and financial stability remain uncomfortable bedfellows.” 1 •  The interactions between macroeconomic stability and financial stability are not well understood. •  Monetary policy and regulatory policy have tended to be conducted independently. We need to get a better handle on financial instability: what causes it and how can it be avoided? There are a few emerging propositions. First, credit cycles have strong implications for financial stability. •  Moritz Schularick and Alan Taylor describe financial crises as “credit booms gone wrong.” 2 Both the level and growth of credit matter for financial stability. •  Claudio Borio and Piti Disyatat argue that both the amplitude and duration of credit cycles exceed those of business cycles due to what they call “excess financial elasticity.” 3 Debt and financial imbalances build up over successive business cycles until they reach a breaking point. •  Frederic Mishkin points to how excessive credit can fuel asset price bubbles, whose eventual bursting can lead to damaging episodes of financial instability. Second, monetary policy has an influence on the credit cycle and hence on financial stability.

•  But there are many others in this room who are better placed to judge that. Old wine in new but bigger bottles: macroprudential regulation Even as we re-discover the virtues of microprudential policies, we realise they may not be sufficient in the face of overwhelming exuberance and risk-taking. •  This is where macroprudential policy comes in. •  Macroprudential policy can be more effective than monetary policy in “targeting the cracks” where specific vulnerabilities are concentrated. Macroprudential policy is related to but distinct from microprudential policy. •  Some have called macroprudential policy “old wine in new bottles”. Yes and no. •  Many of the tools are indeed the same: loan-to-value ratios, debt-to-income ratios, debt service ratios, and so on. But there is a difference. When these limits are used for macroprudential purposes, the scope and calibration are much larger. For example: •  A loan-to-value ratio of 80% for property loans, applied through the cycles, as we have in Singapore, is a microprudential tool. •  But when we tightened the loan-to-value ratio to as low as 20% for a third property loan, as we did a couple of years ago, it became a macroprudential tool. •  Macroprudential policy may well be old wine, but it is in much bigger bottles! Macroprudential policy can also come in several different bottles. •  Instead of relying on a single tool (e.g. the interest rate for monetary policy), macroprudential policy is often multi-pronged.
To sustain employment and productive capacity through the virus disruption, wages, leases, interest, invoices and fixed costs need to continue to be paid even as revenues collapse. Many long-term viable businesses will face cash-flow shortfalls that, unless they can be bridged, will result in redundancies, business closures and scrapping of productive assets. Signs of that are already evident. In scale, such upheaval could tear the muscle of the economy in a way that would be difficult to put back together. The scars could damage the economy’s performance for a long time to come.1 To scale the issue, we identified in May that 60% of the 85,000 biggest businesses operating in the UK – businesses accounting for an estimated 75% of turnover in the economy – will face a cash-flow deficit this year if they want to maintain productive capacity.2 [See slide 2 of accompanying deck]  Policy measures have therefore been directed towards mitigating and financing these deficits. On the monetary front, Bank rate has been cut to just 0.1%, and a programme of £ of asset purchases is underway, helping to support business cash flow by lowering the cost of servicing debts, as well as providing a stimulus to spending more broadly. The fiscal policy response has been substantial. The Coronavirus Job Retention Scheme, paying 80% of the wages of furloughed employees up to £ has helped to minimise corporate cash-flow deficits and maintain jobs.

Collectively, the award recipients and all other financial institutions have helped in making CGC a stronger SME-support institution. This is so as their active participation opened a new window of opportunities not only for the SMEs but also for the CGC in reaching out to a wider cross section of the SME community throughout the country. In 2007, CGC provided credit guarantees totalling RM4.6 billion to more than 13,000 SMEs through our main schemes, the programmed lending schemes as well as the securitisation of SME loans. There was actually remarkable growth with the number of loans and amount guaranteed growing by 73% and 53% respectively. This could be attributable to the strong support given by participating financial institutions that have been robust in serving the SME market in the recent years. I particularly note with interest that the seven recipients today collectively contributed more than 80% of the total loans guaranteed by CGC in 2007. In view of the changing facets of SME financing, CGC undertook several initiatives to further reach out to SMEs that are in need of financing. This includes the introduction of innovative products and services as well as widening the scope of guarantee beneficiaries by forging alliances with strategic partners. In the last two years, CGC has entered into strategic partnership with many local and international institutions with the aim both of expanding its SME outreach as well as to better equip itself with the expertise and knowledge to take it to a higher service delivering platform.
The global economy and the international financial system have entered a new era. A fundamental transformation of the global landscape is taking place. Arising from the growing disparity in growth performance between the developed and emerging world, increasingly the economic power in the global economy is becoming more dispersed. The Organisation for Economic Cooperation and Development (OECD) estimates the emerging economies’ share of global economic output will exceed that of the developed world by 2011. By 2030, the emerging economies are expected to account for 60% of total world output. The benefits of globalisation are thus becoming more balanced. In 2000, the emerging economies accounted for 80% of the world population but only generated 40% of global income. By 2030, it is estimated that 85% of the world population from the emerging economies will generate 60% of the income. This is reinforced by increased trade between emerging economies. While world trade has quadrupled between 1990 to 2008, trade flows between emerging economies increased ten-fold. Asia is very much part of this global shift that is taking place. Following a decade of significant economic and financial transformation, Asia has emerged as a major growth centre in the global economy. Asia now accounts for one third of world output and 28% of world trade. This progress and development has created employment and improved living conditions, lifting millions out of poverty.

This will go a long way in enabling your customers not only access affordable funds to finance their investment activities, but also make it easier for them to pay back their loans and on time. The key intermediation role of the banking sector in providing finances will remain compromised if the costs of banking remain high. Distinguished Ladies and Gentlemen, as already mentioned, Zambia is currently going through challenging times when commodity prices remain subdued as result of uncertain demand for our main export product, copper. The visible effects of the economic global crisis have been volatilities in the exchange rate and job losses in the mining sector. The Second round effects, if not managed properly, could have devastating effects in our banking industry, especially through some notable deterioration in the personal loans category of the banks’ loan book. It is my expectation that Stanbic Bank Zambia Limited and other banks’ will enhance prudence in their lending activities and strengthen their risk management systems as a way of minimising further deterioration of the banking industry’s loan portfolio. It is also my firm belief that banks will continue to conduct safe and sound practices even under challenging times and therefore help to mitigate the risks that the financial system is currently facing from the adverse developments in the global economy and the global financial system in particular.
The level of Chinese investment pouring into the country has also significantly increased while the Chinese community in the country has continued to grow following the rising number of Chinese investments in Zambia. The level of interactions between Zambian businesses and those from China has therefore significantly increased. However, the obvious and notable obstacle to the smooth conduct of business transactions and interactions between the people of our two countries has been the language barrier. Many a time, communication between our people has been through the use of interpreters. BIS Review 175/2010  1  Reliance on interpreters can be very inconveniencing, ineffective and costly. This barrier can be overcome by learning the Chinese language. It is against this background that the Bank has taken keen interest in launching this MoU. The principal objectives of the MoU are to: a)  establish a framework in which the Chinese International School can facilitate capacity building in learning the Chinese language among BOZ employees;  b)  promote multi-cultural awareness and appreciation of a diversity of languages necessary for Bank staff to transact effectively and efficiently in social and professional fora which require the usage of Chinese; and  c)  enhance opportunities for bi-and or multilateral co-operation between the Bank and relevant Chinese-speaking authorities and stakeholders.

Caleb M Fundanga: The importance of multi-cultural awareness and language learning Opening remarks by Dr Caleb M Fundanga, Governor of the Bank of Zambia, at the signing ceremony of the Memorandum of Understanding between the Bank of Zambia and the Chinese International School in Zambia, Lusaka, 22 December 2010. *  *  *  The Ambassador of the People’s Republic of China to Zambia, H.E Mr. Li Qiangmin The Chairperson – Chinese International School in Zambia, Mr Li Tie The Deputy Governor Administration – Dr Tukiya Kankasa-Mabula The Deputy Governor Operations – Dr Austin Mwape The Principal – Chinese International School in Zambia, Mr. Tan Haitao Distinguished Teachers from the Chinese International School in Zambia Colleagues from the Bank Members of the Press Distinguished Ladies and Gentlemen It gives me great delight, on behalf of the Bank of Zambia, to welcome you all to this important signing ceremony of the Memorandum of Understanding (MoU) between the Bank of Zambia and the Chinese International School in Zambia. The MoU that we are about to sign today provides a framework for the provision of Chinese language lessons to members of staff at the Bank of Zambia. Your Excellency, the Bank of Zambia attaches great importance to the need for staff to learn other international languages. In the process of both economic globalization and diversity of culture, language has become more and more important.
The UK is more dependent on growth prospects in the euro area, which is the market for more than two thirds of UK exports. If there is an impact, it is more likely to come via some other effect such as financial contagion or financial constraints on the UK affiliates of US companies. There is no doubt that a sharp correction in US equity prices would be felt in the UK but with a US soft landing the effects should be more limited, confined perhaps to some reduction in income from US direct investment or slower growth in financial and business services. After all, the two economies are in different positions. The reasons the Fed gave to explain their recent cut do not apply to the UK. The Fed pointed to further weakening of sales and production; tight conditions in some segments of financial markets given lower consumer confidence; and higher energy prices. Current conditions in the UK are more robust. Consumer confidence measures were, if anything, higher in the fourth quarter than the third; household demand has remained relatively strong; consumer credit numbers are strong; and in the pipeline are planned increases in government expenditure, though the outlook for the public finances remains strong. However it is clear that the balance of risks has changed in the last couple of months, with the recent slowdown in world demand, signs of an easier labour market and the latest inflation numbers comfortably below target.

I will return to banks' capital adequacy later but  BIS Review 4/2001  1  first I want to say a few words about our perception of the US economy and the implications for the UK. US Economy: Soft or Hard Landing? The dramatic improvement in US economic performance through the 1990s, in terms of growth and productivity, gave rise to a sharp increase in expected returns to investment and, as a result, increased domestic and foreign demand for US assets. Investment has been particularly concentrated in ICT (information, computers and telecommunications), much of it financed by borrowing on the strength of projected future profits. However, growing uncertainty over the size and permanence of these productivity gains, and about the long run growth of GDP and profits, has fuelled the recent increase in market volatility. In addition, there have been more immediate worries about the impact of a cyclical downturn in productivity and earnings. Another area for debate has been the implications of any reversal in capital flows. As I have noted, buoyant earnings expectations drove up equity prices and encouraged high rates of investment. But alongside the rapid rise in the market value of US household wealth in relation to income came a sharp fall in domestic savings. The gap between savings and investment - manifested in an external current account deficit which has risen to an unprecedented rate of 4½% of GDP - has been filled by large capital inflows.
This attack led to a rapid spike in food, energy, and commodity prices, and in inflation, jeopardising monetary and financial stability on global and national levels. At the same time, prevailing uncertainty, erosion of purchasing power and tighter financing conditions worsened the world economic outlook. Albania, as a small and open economy, is also experiencing these trends. The external shock was reflected in heightened uncertainty, higher costs of production for enterprises, increased cost of living for households, and an overall rise in interest rates. The external shock had a considerable impact on prices. Average inflation jumped to 6.7% in 2022 from an average of 2.0% in 2021. First, foreign prices fuelled this upsurge, coupled then increasingly by a rise in production costs and inflationary expectations in Albania. Thus, overall inflationary pressures started to appear more broadly and with increasing persistence. These features were reflected in a rapid upsurge in core inflation during 2022. This indicator is the best barometer of more persistent inflationary pressures. In this new economic environment, within our legal mandate of price stability, the Bank of Albania has embarked on the process of normalising our monetary policy stance. The increase in the interest rate to 2.75% as at end of 2022, from 0.5% at the beginning of 2022, led to the realisation of this normalisation.

We have seen an exceptionally long period of strong growth in the world economy, but that growth was based on large and unsustainable global imbalances. For growth to be sustained, it must be more broadly balanced, both geographically and across economic sectors. •  Second, the current crisis may dampen economic growth in the future, reduce growth in the capital stock and thereby lead to a prolonged reduction in the level of output. The composition of output might change as well. I would not be surprised if the financial sector, the car industry and the construction sector were to shrink regionally. The economies that will be affected the most are those where the financial sector has expanded significantly in the last 20 years. Especially in those countries the financial sector will obviously have to become smaller, because it has decoupled too much from the real economy and because experience suggests that banks may have become too big to fail, too complex to be managed and even too big to be rescued. •  Third, the simple statement that “if banks are too big to fail, they are probably too big to exist” is a reasonable rule. In any case, for large banks the capital should increase more than they increase in size. The post-crisis financial system should be more riskaverse, less leveraged, less complex. The prevailing business model will probably place greater emphasis on traditional banking activities, which tend to produce lower margins, but are also more robust, less risky and less volatile.
This includes those relating to debt instruments issued in the financial markets and, albeit to a lesser extent, deposits. The volume of deposits can also be expected to rise owing to their higher remuneration and the climate of uncertainty. Second, interest rate rises also immediately translate into a downward revision of the valuations of public and private debt securities in institutions’ balance sheets. However, these lower valuations are only recognised in institutions’ income statements when such assets become available for sale, but not if the institutions intend to hold them on their balance sheets to maturity. In this latter case, it should be borne in mind that institutions’ returns on these securities will be lower than on any new issues that are put into circulation. Less than half of Spanish institutions’ debt securities’ holdings were classified as available for sale at end-2021. The adverse effects of the current and foreseeable setting – which I have referred to previously – on households’ and firms’ ability to meet their financial obligations will chiefly become manifest over a broader horizon (one or two years forward). As a result, institutions will have to increase their provisions to cover the potential losses. Inflation could also drive up their operating costs. Under certain scenarios, the net impact of all these channels for transmission of the new macroeconomic situation could be negative for institutions over a three-year horizon.

The latest Financial Stability Report, published in May 2022, includes simulations of the impact on institutions of a scenario in which some of the current risks materialise. Specifically, the scenario assumed additional energy price increases and more persistent bottlenecks in global trade, generating fresh upturns in inflation and a further tightening of monetary policy, alongside a deterioration in agents’ confidence and greater risk aversion. These were very severe stressed scenarios, since they entailed cumulative deviations from the baseline GDP growth in 2022 and 2023 of between 2.8% and 5.4%. The results show that the sum of the different transmission channels in these stressed scenarios would generate a negative impact on bank solvency of between 1.8 pp and 3 pp for Spanish banks as a whole. By component, while net interest income would increase, the worsening of the credit quality of loans to the private sector would lead to greater losses. 5  Moreover, the simulated interest rate hike entails a slight reduction in the value of bond holdings on banks’ balance sheets. There is nonetheless some heterogeneity across banks, owing to differences in factors such as the weight of short-term and/or variable-rate lending, the accounting classification of debt securities, their international presence or the extent of their lending under the ICO programme.
Condition 2: State Monotonicity:  is non-decreasing in  . Condition 3: Uniform Limit Dominance: There exist and such that (1) for all and and (2) there exists such that for all . Condition 4: Strict Laplacian State Monotonicity: There exists a unique . solving Condition 5: Finite Expectations of Signals: Condition 6: Continuity: and density . is well defined. is continuous with respect to signal  Morris and Shin use these to show be defined by Condition 4. Then for any Lemma 1: (Morris and Shin 2003) Let there exists such that for all , if strategy s survives iterated deletion of strictly dominated strategies, then = {Tight} for all and = {Risky} for all . Proof: See Morris and Shin (2003), Proposition 2.2. 26  BIS Review 168/2010  i.e. that agents play cut-off strategies, adopting strategy = {Tight} when in receipt of a , and adopting strategy = {Risky} when in receipt of a “high’ “low” signal . Condition 4 gives the threshold. signal  BIS Review 168/2010  27  Annex 2 International medium-term frequency cycles in real GDP and credit  28  BIS Review 168/2010  BIS Review 168/2010  29  30  BIS Review 168/2010  BIS Review 168/2010  31  32  BIS Review 168/2010  References Acharya, V.V. (2009), “A Theory of Systemic Risk and Design of Prudential Bank Regulation”,Journal of Financial Stability, Vol 5, 3, 224–255.

They might actually boost risk-taking incentives among banks which are not subject to prudential intervention. BIS Review 168/2010  21  Chart 18 UK credit cycle across monetary regimes  (1) Gold Standard. (2) Inter-war suspension. (3) Resumption of Gold Standard. (4) Sterling Area. (5) Bank of England nationalised; Bretton Woods. (6) Bretton Woods; Sterling full external convertibility. (7) Monetary Targeting. (8) Exchange Rate Mechanism. (9) Inflation Targeting. (10) Bank of England independence. Source: Bank calculations. Chart 19 US credit cycle across monetary regimes  (1) Gold Standard. (2) Inter-war suspension. (3) Resumption of Gold Standard. (4) FDIC established; Federal Reserve reorganisation. (5) Bretton Woods. (6) Treasury-Federal Reserve Accord (1951). (7) End convertibility into gold (“Nixon Shock”) (1971). (8) Volker era. (9) Greenspan era. (10) Bernanke era. Source: Bank calculations. 22  BIS Review 168/2010  To see that, consider a two-bank variant of the model described by the payoffs in Table 4, in now references the market’s prior over the macro state, which it updates having which is neither too big nor too small, there are observed a bank’s earnings. When two symmetric Nash equilibrium strategies in this game: {Risky, Risky} and {Tight, Tight}. When Bank 1 sets {Risky}, Bank 2 does not want to set {Tight} and declare negative earnings as this is more likely to signal low ability, provided the long term costs are not too big. On the other hand, if Bank 1 sets {Tight}, Bank 2 sets tight too if long term costs are not too small.