samchain/econo-pairs-v1 huggingface dataset:
In the preceding 15–20 years, the global economy was characterised by solid growth, greater economic stability than earlier and by low and stable inflation. The period is often referred to as “the great moderation”. A consensus was forming that wide fluctuations in the economy, as had been the norm, were a thing of the past. The US economist and Nobel Prize winner in economics Robert E. Lucas expressed a commonly held view in a speech he gave in 2003: “[...] macroeconomics in this original sense has succeeded: Its central problem of depression prevention has been solved, for all practical purposes, and has in fact been solved for many decades.” 11 Autumn 2008 was to become a reminder that we should be on our guard against established truths and consensus. If history has taught us anything, it is how little we actually know. So, if I were to offer some advice to those of you about to embark on your economics studies, I would first and foremost say this: be inquisitive and ask questions. Learn enough to be able to doubt. And since I have the chance for a word with you “in private” I would like to seize the opportunity to put in a good word for mathematics. A wealth of information and complex problems often make it difficult to see the essence of an issue and to distinguish what is important from what is not. And this is where mathematics can be helpful. Mathematical models and formulas simplify complex relationships into manageable quantities.

But this 1/4  BIS central bankers' speeches  time, technology and its use has permeated into our lives through the ubiquity of smart devices. This coupled with advances in “AIDA”, or Artificial Intelligence and Data Analytics, mean that new technology can transform or create new business models in ways unseen previously. The rise of social networks and the digital ecosystems, enabled by BigTech and FinTech players, have spurred new business collaborations including with conventional financial institutions that cut across economic sectors. Advancements in distributed ledger technology (blockchain) have also opened up new possibilities to disrupt existing market infrastructure. 8 Already, FinTech developments have revolutionised the way financial services can be delivered. Some examples in capital markets include: (a) In fund and wealth management, the rise of robo-advisory services and AI-driven investment management; (b) In equity research, the use of AI to generate analyst reports; and (c) In primary and secondary markets, blockchain-based platforms that can substitute for central trusted parties by providing an alternate reliable protocol for fund-raising, trade execution, settlement and custody. Regulatory Stance to Innovation 9  Let me broadly share MAS’ stance towards innovation in financial services. 10 Financial institutions have always been at the forefront of innovative use of technology. To the extent that new developments in technology and business models bring benefits to the broader economy, allow improvements in business management, and give customers better choices or services, these are to be encouraged and even supported.
I believe that there is another very important reason why the euro area has been so badly hit by the crisis; it is because we are a very highly integrated economic area but do not have the appropriate institutional mechanisms for this integration. In particular, this explains the contagion effects and the negative feedback loops between banks and States, which have made matters much worse in the area. Obviously, a good and coherent functioning of the banking sector is absolutely vital for an overall solution to the euro area crisis. This conviction is based on two fundamental observations: –  Appropriate financing is essential for our economies to achieve strong and sustainable growth. In Europe, the banking system is the main source of financing, and hence its strength is of crucial importance. However, financial markets naturally also play a key role and they should focus on serving the economy. 2  BIS central bankers’ speeches  –  Secondly, financial stability is critical not just for creating the right conditions for the appropriate financing of the economy. It is also an extremely valuable asset in fostering confidence, which has been severely lacking in recent years and is another key condition for growth. It is also a vital condition for the effectiveness of monetary policy as it allows the normal functioning of transmission mechanisms. In addition, given the feedback loop between banks and sovereigns and the potential impact of a financial crisis on a country’s fiscal position, financial stability makes a major contribution to fiscal stability.

Third, the euro area had not put in place a resolution mechanism before the beginning of the crisis. I believe that important decisions have been taken on these three points, which should bring significant improvements if they are fully implemented: –  Europe has considerably enhanced its fiscal discipline framework. The legislative package (the so-called “Six Pack”) entered into force in December and considerably reinforces the Stability and Growth Pact: the surveillance powers of the European Commission over national budgets have been enhanced, sanctions have become quasi-automatic, the criteria for public debt and public spending are being more closely scrutinised and a new framework for the surveillance of macroeconomic and competitiveness imbalances has been put in place. In addition, 25 European Heads of State or government signed the Treaty on Stability, Coordination and Governance which establishes a comprehensive new “fiscal compact” including a requirement for national structural deficit not to exceed 0.5% of GDP. These new rules must now be fully implemented by each country. –  Besides, Europe has equipped itself with an instrument to combat crises. At the last European Council meetings, it was decided to bring forward the creation of the permanent European Stability Mechanism (ESM) to July 2012, and to make it more powerful, increasing the lending capacity of the ESM to USD 1 trillion. It is absolutely necessary that this strong tool becomes fully operational as soon as possible.
By contrast, the origin of the Federal Reserve Banks in the USA lay in the provision of a reliable nation-wide payment and depository system, and that remains a central activity. While some banking supervision is conducted by the Fed, that is largely the remit of (myriad) other institutions (the Office of the Comptroller of the Currency, banking regulators in each separate state and the Federal Deposit Insurance Corporation). The Bundesbank was set up against a background of the need to restore and maintain a stable currency, and this, together with the concomitant political independence, remain at the heart of its rôle. An early strong belief in the “real bills” doctrine still influences the Bundesbank’s views on appropriate collateral for central bank operations with the market, and justifies its large branch network and staff. The Banque de France has retained more retail banking than most other modern central banks, maintaining branches in every French département (a network it has found difficult to slim down in face of local and trades union opposition). It also makes use of its branches in compiling a centrale des risques, a register of commercial bank lending, and in keeping track of the million or so individuals who have drawn bad cheques! The Bank of Japan is more of a medley. Its rôle model when it was established in 1882 was, you may be surprised to hear, the Banque Nationale de Belgique, though some aspects of English banking practice were also adopted.

As I initially explained, the institutional reforms that have been adopted or are being adopted to establish a banking union constitute important progress. But to meet the ultimate objective of strengthening financial stability, implementation is key. And implementation is well under way: the Supervisory Board has held its first three meetings; a Framework Regulation has been prepared and is now the subject of a public consultation; and work is progressing on the supervisory model of the SSM with the Supervisory Manual. One of the first major implementation tests is the comprehensive assessment, the health check of the euro area banking system, which is currently being conducted as a prelude to the SSM becoming operational. Here, the ECB is making good progress in establishing the new structures and ensuring that the exercise will be fair, transparent and stringent. But many more steps still lie ahead of us. A final challenge relates to the macro-prudential arm of the SSM. As you know, the SSM Regulation gives the ECB the power to apply stricter macro-prudential measures than the national authorities if it deems them necessary. We can also advise on the calibration of instruments. This goes some way towards insuring against an inaction bias at the national level, thus improving the prospects for a more stable euro area financial system. We will maintain a clear separation of objectives between the macro-prudential policy framework and monetary policy and a clear hierarchy, with price stability remaining the ECB’s overall primary objective.
New sources of risk are emerging, presenting new challenges for central banks in their pursuit of monetary and financial stability. Financial innovation and technological advancement 21 The way technology is transforming markets and therefore payment systems is illustrated in the rapid growth in OTC derivatives markets; and the increased penetration of electronic trading platforms – and automated trading strategies – across a range of markets. 22 According to data released by the Bank for International Settlements, notional amounts outstanding in global OTC derivatives markets rose by almost 40% in 2006 – up more than 260% over the past five years. The outstanding value of the credit segment of the market doubled in value in 2006 alone and trading activity has remained high through 2007, especially during the recent market turmoil. 23 These markets have traditionally been cleared and settled via bilateral arrangements between the counterparties to the trade, but new automated infrastructure services have emerged, partly in response to an international regulatory initiative led by the Federal Reserve Bank of New York (FRBNY). Major dealers now confirm almost 90% of credit derivatives trades electronically, as against less than 50% two years ago. 24 An important recent addition to the landscape is DTCC Deriv/SERV’s Trade Information Warehouse, which maintains a so-called “golden copy” of each credit derivatives trade. With appropriate interoperability between systems, these data can support a range of ancillary services: calculating and settling payment obligations, managing collateral, terminating trades and reconciling portfolios. The Warehouse is likely ultimately to be rolled out for other products.

•  In Singapore, liberalisation spurred the consolidation of Singapore banks from seven banking groups to three, a process which may otherwise have taken much longer. •  Foreign bank participation in the domestic banking system must therefore be strong enough to encourage the strengthening of the local banks but not so strong as to overwhelm them. •  It is a judicious balance that each country must find for itself. Third, selective and stringent admission. Singapore has always had a very open policy towards foreign banks in wholesale and offshore banking activities. But when we selectively liberalised foreign bank access to retail banking, MAS considered three sets of factors: •  First, the banks’ prudential strength, credit ratings, and quality of risk management. We only admitted strong, well-run banks. •  Second, we took into account the relationship we had with the home regulator, as we needed to be able to work with them on consolidated supervision of these banks and trust them to regulate the head office in a sound manner. •  Third, we evaluated the banks’ long-term business plans and how they could contribute to the Singapore economy. Liberalisation is not an end in and of itself. It must ultimately lead to a stronger, safer, and more competitive financial system that serves the needs of the economy and country.
He suggested the design of a body that “would exert direct responsibilities” in a number of domains, including “the rigorous surveillance of both fiscal policies and competitiveness policies with the capacity, in exceptional cases, to take decisions immediately applicable in a particular economy that puts the euro area financial stability in danger”.3 Where does Malta’s fiscal situation and more generally the broader Maltese economy, fit into all this? Malta’s fiscal deficit ratio followed a generally downward path during the last decade, though the decline was interrupted during two particular years – 2003 and 2008 – each explained by particular events. More recently, the budget deficit ratio has fallen each year since the high of 4.6% that was recorded in 2008. A large outlay was incurred during that year for the restructuring of a government-owned enterprise. This outlay however brought to an end the provision to the same enterprise of further government subsidies, which would otherwise have added to future deficits. The ratio eased to 3.7% and 3.6% in 2009 and 2010, while the latest government projections, as indicated in the Pre-Budget Document, refer to a deficit of 2.8% in 2011 and 2.2% in 2012. Since 2009 the deficit ratio for Malta has been below the euro area’s average, but it has to be pointed out that this average is heavily affected by the high deficit levels of the Member States facing difficulties (Chart 2).

In summary I would like to conclude by emphasising the need for fiscal prudence, further efforts to maintain international competitiveness and continued vigilance in the banking sector, in the context of ongoing uncertainty in international financial markets and in the global economy. BIS central bankers’ speeches  7
For our part, supervisors have come to focus much less on point-in-time assessments of financial condition and much more on evaluating the quality of internal processes and control structures that protect against future losses. By embracing a philosophy of supervision that centers on evaluations of risk management capabilities, we gain deeper insight into banks’ likely resilience during downturns, and we are better positioned to focus management’s attention on finding ways to do better. Certainly the New Accord’s inclusion of extensive economic incentives to adopt sophisticated risk management processes adds encouragement for their enhancement. Moreover, the New Accord’s requirement of strong process controls as a predicate for using the more advanced approaches strongly supports our efforts to make evaluations of internal processes the heart of a more forward looking supervisory approach. The status of the New Accord So it would seem that we’ve covered quite a bit of territory over the past three years. Yet a Chinese proverb reminds us that, "On a journey of one hundred miles, ninety is but halfway." I suppose the last miles of any marathon are the toughest to finish. The wisdom of that proverb is borne out by the tasks ahead of us to complete, and then to implement, the new capital framework. So I’d like to turn now to the status of the New Accord and of the issues we are resolving.

All stakeholders, including the financial institutions, payment system providers, the authorities, the corporate sector, and the consumers, have their respective roles to play to support this national agenda to reduce the use of paper-based payment instruments, particularly cheques, in Malaysia. In this regard, the Government had recently announced in the 2006 Budget its intent to increase the acceptance of electronic means of payment with the Government and to promote the use of epayments nationwide. This should provide a catalyst for the adoption of e-payments on a national scale, as most individuals and businesses have payment transactions with the Government. Key to making this a success is the need to review the business and operating practices and address any impediments that may hinder the use of e-payments. These practices ranges from the inability to store and collect bank account numbers, acknowledging electronic payment and receipt notices, instructing payments electronically, and many more that may be identified during the discussions at this forum. All corporations and institutions that are present at this forum should consider undertaking a business process reengineering in your own organisation to fully use the e-payment channels that are being offered by the service providers and the financial institutions.
The Governor’s role should be strengthened The Riksbank is governed by an Executive Board of six persons, with the Governor as chairman. This is an unusual form of management in Swedish public administration.10 It is mostly justified in terms of monetary policy. But it is not an appropriate way of leading an authority. Quite simply, I believe that the managerial structure has been the product of faulty logic, right from the start. With the benefit of my years at the Riksbank, I think that the role of Governor, as head of the Riksbank, should be strengthened to correspond with the role played by a normal agency head. Of course, there is a degree of variation among the managerial structures of the public authorities, but this is not an issue I intend to address today. Today, there is broad agreement that central banks should be independent of political bodies when it comes to monetary policy. Somewhat simplified, this is because it is more popular to lower the interest rate than to raise it, and there thus exists a risk that, over time, the interest rate will become too low and inflation too high if the government takes responsibility for monetary policy. Furthermore, there is support in economic research for the argument that, in the long run, monetary policy decisions taken by several people are better than those taken by one person. It is also common in central banking for monetary policy to be determined by a monetary policy committee.

The scale of these flows has waxed and waned, but it is clear cross-border flows of people today are at high levels historically. 7 In London, the fraction of non-UK born residents was almost 3 million or 37% of the population in 2011. And Edinburgh has the largest non-UK born population of any region in Scotland at 16%. Accompanying this co-mingling of ethnicities and cultures has been an evolution, bordering on revolution, in social attitudes. Through the course of several centuries, laws have emerged forbidding discrimination based on race, gender, disability, ethnicity and age. And, during the latter part of the 20th century, there has been rapid growth in a new set of social norms and policies to promote diversity in schools and universities, in the workplace, in sport and leisure activities and in wider society. One interesting window on these changing societal attitudes is provided by looking at the etymological roots and evolution of the word “diversity” itself. These can be traced to the Latin “divertere” meaning “to turn aside” – which in turn led to our word ‘divert’, meaning to change course - and the old French expression “diversite” meaning “difference, uniqueness, oddness”. In other words, the semantic roots of diversity support a dual interpretation, part positive, part negative. 8 That dual interpretation has continued through the ages. Chart 1 plots the incidence of the word diversity in books printed since the 15th Century. 9 Diversity entered the English lexicon in the mid-14th century. At that time, its meaning was broadly neutral.
8  BIS Review 34/2002  Chart 1: average committee scores over time1  A ve rag e s core 80 70  Tre nd  60 50  Score  40 30 20  In d iv id u a l games  10  In d iv id u a l games  C o m m it t e e games  0 0  1  2  3  4  5  6 7 8 9 10 G a m e Nu m b e r  11  12  13  14  15  16  1  Players are scored according to their ability to keep inflation close to a pre-specified target and to minimise output fluctuations across each of the sixteen, ten period games. The Chart shows the evolution of scores over time: • For the individual games, numbers 1-4 and 13-16, each diamond represents the mean individual score across the 170 participants. • For the committee games, numbers 5-12, the diamonds represent the mean score across the 34 committees. In these stages, the five members of the committee vote in each period and the ‘majority’ - or more precisely - the median interest rate is set. Each committee is then scored according to this median outcome.

At the same time, euro area labour markets have been characterised by favourable trends in the last few years. Since 1999 the euro area has witnessed an increase of more than 12 million in the number of people employed and a substantial decline in the unemployment rate from 10% to 7.9% on average in 2006 and 7.2 % in March 2007. Looking forward, it is important that this favourable trend in labour markets continues, so contributing to the diminishing of unemployment as well as a prolonged and robust economic growth. In this respect, the Governing Council of the ECB considers decisive that the social partners continue to meet their responsibilities. Wage agreements should avoid wage developments that would eventually lead to inflationary pressures and harm the purchasing power of all euro area citizens. Beyond this, it is important to point out that particular wage agreements should take into account price competitiveness positions, the still high level of unemployment in many economies and productivity developments across sectors. Wages should be sufficiently differentiated across countries and sectors to reflect these factors. More specifically, moderate wage developments in the euro area as a whole reflect an aggregation of diverse wage developments across euro area countries with important implications for cost competitiveness. Indeed, over longer horizons we observe that euro area countries that have been able to preserve a low level of unit labour cost growth have also experienced significant gains in employment.