samchain/econo-pairs-v1 huggingface dataset:
During the first lockdown, for example, there may have been a greater share of consumption that was effectively considered “risky” than in the more recent episodes4. Consumers may also have learned over time how to adapt to these restrictions a little more. But I think there are still a few things in the empirical data that are worth picking out. First, I think there clearly was a fair amount of expenditure switching through this year. A pound less spent on risky activities like going to restaurants or concerts has not meant a pound less in aggregate. This is most obvious in cases where there are relatively close substitutes for the things people have been unable to do. For example, the surge in retail spending we saw at the start of this talk has occurred despite a big drop in sales at physical shops. That has been more than made up for by a big rise in online purchases (Chart 6). Similarly, the inability to go out in people’s free time has probably contributed to a strong rise in spending on audio-visual equipment, as they instead try to improve their leisure time at home. More generally, and as we saw at the start, goods spending has been much stronger than spending on services – and also stronger than the average rate of growth over the past and that of household income.

The infrastructure demand in Asia is huge. ADB estimates put the overall infrastructure investment needs of Asia at $ billion per annum over the 2010–2020 period. In the meantime, there is no lack of investors interested in infrastructure investment or financing. Despite a generally longer investment cycle, infrastructure projects can offer relatively stable returns and a hedge to inflation. That is why sovereign wealth funds, insurance funds and institutional investors have shown a growing interest in infrastructure investment in recent years. However, despite this increasing interest in infrastructure investment, there are significant impediments in channeling savings into infrastructure financing in emerging Asia. Put it in the language of bankers, there is a shortage of “bankable” projects, due to lack of a credible public-private partnership (PPP) framework; deficiency in regulatory regime and legal environment for contract enforcement; lack of transparency for monitoring project implementation; and political uncertainty. The above impediments call for coordinated efforts to facilitate financial intermediation, lower barriers to investment, enhance PPP standards, and improve project governance and delivery. A number of international and regional efforts have been made on this front, including but not limited to the establishment of the Global Infrastructure Hub by G20, the launch of the Global Infrastructure Facility by World Bank, and the setting up of the new Asian Infrastructure Investment Bank focusing on promoting infrastructure development in the region.
We are now almost a year into a credit crisis centred around a sudden evaporation of market liquidity for many structured credit products that rapidly spilled over into wholesale bank funding markets and beyond, given a complex web of interconnections. 2 So it is an opportune moment to review whether the financial innovation of recent years that created such structured products has indeed been a positive force, as argued by Alan Greenspan 3 , for example, or whether financial innovation has been a malign development, producing “financial weapons of mass destruction” in the words of Warren Buffett 4 ? 3 There is clearly some force in both arguments. On balance, we continue to see considerable benefits to households and corporates from the broadening of choice in financial products and from improvements in the completeness of financial markets. But equally, the severe pressures and strains of the past year have highlighted the pervasiveness of some market frictions that have a major bearing on system-wide behaviour and dynamics, amplifying and transmitting shocks. Action to lower these frictions is consequently important to capture the full benefits of innovation and to ensure that these are durable. 4 This paper explores these issues further. Section 2 provides a short reminder of the staggering extent of financial innovation in recent decades. Section 3 sets out the theoretical vision of how financial innovation offers the potential for substantial improvements in the capability of corporates and households to manage financial risks.

They know we sit on a large amount of the gold and dollar reserves of the world. But what they think is really cool is the Fed Challenge, and how they can win a place in the national competition. My wife said to me this morning that the Fed Challenge sounds considerably more fun and exciting than the real thing. I applaud all of you who contribute to this effort. And I thank the NAF for its tribute to the New York Fed. 2/2
In such a situation the EU member states have a “common interest” in discussing how confidence in economic policy can be enhanced. During the spring there has been a discussion in Sweden about the exchange rate tendency in connection with the move to Stage Three of EMU. What will happen if, for instance, companies adopt the euro as their unit of account? The Riksbank has underscored that it does not see any strong reasons for large currency outflows on account of the monetary union. And if such outflows were to occur and the krona suddenly weakened, we consider that countervailing forces would act in financial markets. The value of a currency is determined by numerous factors, of which the most important is confidence in the country’s economic policy. The general trend towards internationalisation in recent years has entailed relatively large currency outflows due to portfolio diversification among resident investors. But at the same time the krona has displayed an appreciating trend as growing confidence in economic policy generated a compensatory currency inflow. All in all, conditions for a stable exchange rate between the krona and the single currency should be good. There are many indications that the European Central Bank will define a price stability target that resembles Sweden’s. Similar inflation trends, together with confidence in economic policy as a whole, should result not only in stable nominal and real exchange rates between the euro and the krona but also in conditions for a reasonable valuation of the krona.

One disadvantage of this index, however, is that some of its components have not yet been finalised. As an aid in the analysis of price trends, the Riksbank’s inflation reports include various indicators of underlying inflation. The tolerance interval of ±1 percentage point serves, among other things, to accommodate the various transitory price movements that normally occur. Experience has shown, however, that in periods when the transitory price effects are extensive, inflation may move outside the interval without this by itself having consequences that should be considered in monetary policy. Thus, the tolerance interval represents the range that is normally expected for fluctuations in CPI inflation. It serves to indicate that the target variable, the CPI, cannot be controlled exactly. Still, I am convinced that people’s awareness and understanding of these factors will gradually grow as time passes. This will happen not least as a result of the efforts of all those knowledgeable analysts and business journalists who follow monetary policy closely and mostly do their utmost to explain these complex details to a broader public. Exchange rate of indirect importance for monetary policy Now I should like to say something about the role of the exchange rate. Our monetary policy strategy is premised on a flexible exchange rate. In other words, the Riksbank does not explicitly target the exchange rate and, given Sweden’s position on ERM, it seems today that the rate will continue to be flexible at least until a new political decision is taken on the issue of EMU.
Banks were therefore willing to approve credits in order to establish a relationship with such a profitable customer as LTCM. At the same time, the fund’s reticence about its risk profile made it difficult for creditors to form an accurate picture of the total risks. The banks were evidently unaware of the size of the credits that other players had provided, which by itself is remarkable. Neither did they fully appreciate what the large positions might have for consequences if the collateral had to be called. In other words, the banks ought not to have relied to such an extent on the collateral, in the form of securities, they had accepted for their loans. Lending of this type requires that even the banks obtain a picture of the borrower’s total situation. Had they done so in the case of LTCM, the outcome would certainly have been different. The problems last autumn also revealed shortcomings in current risk models and the management of certain types of risk. The banks must pay more attention to how the models work in the event of a pronounced change in market conditions. The markets moved to such an extent that historical estimates of co-variations ceased to apply. The crisis accordingly offers several lessons:  7  BIS Review 23/1999  •  In the light of what happened in international financial markets last autumn, all participants in the financial system must improve their credit policies.

Finally, we turn to the layer at the base of the system – the Instruments, or forms of money that should confer the properties of a public good. 2/4  BIS central bankers' speeches  The decentralisation of instruments is most clearly associated with the emergence of alternative currencies to those issued by central banks. Technology firms with large ecosystems, or technology itself can create new non-fiat currencies. While today’s crypto instruments (e.g. Bitcoin) have failed to become money, we should not discount the possibility of better algorithms leading to viable cryptocurrencies as a global medium of exchange in the future. But the widespread use of private cryptocurrencies could lead to an erosion of the nation state’s monetary sovereignty. This will in turn have implications for central banks’ ability to safeguard financial stability. As Mark points out, the continued centrality of public money in the financial system is key to safeguarding the soundness and stability of all money in the economy. A pre-condition for this is that state-issued currency remains the domestic economy’s predominant unit of account. The currencies of small, open economies may be particularly vulnerable to loss of monetary sovereignty. They do not have the global network effects that currencies of larger nations enjoy. Markus Brunnermeier and others have highlighted the possibility of “digital currency areas” that transcend national borders with even larger and more powerful network effects. Currency competition is not a challenge that we are unfamiliar with.
Several studies and decades of experience in the industrial countries have shown that a stable, low, and easily predictable inflation rate leads to the most favourable conditions for long-term economic growth. •  The notion of a monetary union is based on the optimum currency area theory formulated by Robert Mundell in the early 1960s. Multilateral fixing of currency rates and joining of monetary policies offers several benefits: •  excessive fluctuations in exchange rates, i.e. in the price of money will disappear; it will be easier to predict the price of money in the future and therefore, easier to plan the future;  •  improved certainty will reduce the cost of hedging currency risks and will avoid such undesirable developments like the ones in Estonia that accompanied the Russian crisis in mid-1990s; the costs related to currency exchange can, of course, only be eliminated by a common currency;  •  most importantly, pegging the currencies should lead to faster economic and financial integration, boost the flow of goods between countries, and enable convergence of market interest rates and improved price comparison. •  An additional advantage of a large currency area is greater seigniorage income earned on issuing bank notes, since the money can be used outside its own economic zone. The role of the euro as an international financing, settlement, and reserve currency has been consistently growing.

Bank Negara Malaysia has and will continue to play an active role in promoting the offering of Islamic financial products and services, including sukuks or Islamic bonds. For issuers that include government agencies, multinational corporations and development institutions, sukuks play a multi-faceted role in meeting different funding requirements ranging from large infrastructure and developmental projects to capital and business expansion. As part of Malaysia’s goal in promoting the issuance of sukuks, various attractive initiatives are offered. These include tax exemption, facilitative approval processes and liberal foreign exchange rules. In Malaysia, sukuks accounted for nearly 60% of outstanding corporate bonds in 2009. As at end of June 2009, Malaysia’s outstanding sukuks, both private and public, accounted for about 62% of outstanding sukuks globally. Total global sukuk issued during the 12 months period until September 2009 is about USD41 billion, of which Malaysia’s share accounted for almost USD30 billion or nearly 74%. We in Bank Negara Malaysia are confident that in 2010, sukuk financing will continue to play an increasingly important role in financing across the Malaysian economy including cross-border financing of overseas projects by Malaysian companies. I am very confident that this Seminar and the opportunities for business networking will be a fruitful one. On this note, and with the lafaz Allahuakbar, it is my pleasure and honour to declare open the Seminar on Financing for Overseas Project. 2  BIS Review 7/2010
In the euro area, meanwhile, the ECB made it clear that additional monetary stimulus would be required. A tangible sign of these diverging patterns was the substantial weakening of the euro against the dollar. With the clear prospect of a significant QE programme in the euro area, the pressure on the minimum exchange rate intensified hugely at the beginning of 2015 – especially in the last few days leading up to the SNB’s decision on 15 January. Against that backdrop, the minimum exchange rate became unsustainable and the SNB had no choice but to discontinue its policy. By maintaining the minimum exchange rate for longer, the SNB would have run the risk of losing control over its balance sheet. This, in turn, would have hampered its stability-oriented policy in the future. Once you have arrived at such a conclusion, you have to act swiftly. Speculative position-taking against the minimum exchange rate could easily have caused the SNB’s balance sheet to double within a few months. We would subsequently have been compelled to discontinue the exchange rate floor under even greater pressure, with all the consequences for our balance sheet and the Swiss economy that this would have implied. The costs of maintaining the floor would have been out of all proportion to the benefits. As a consequence, the Swiss economy is now dealing with very difficult exchange rate conditions. In an interdependent world with highly integrated and liberalised capital markets, the strengths of an economy like Switzerland can, paradoxically, turn into a major challenge.

Why do I say this, when we have other resolution tools available? I say this because of the importance of protecting critical  1  http://eur-lex.europa.eu/legal-content/EN/TXT/?uri=uriserv:OJ.L_.2014.173.01.0190.01.ENG  BIS central bankers’ speeches  1  functions. It is simply not credible to think that a G-SIB could be dismantled over a resolution weekend without a destabilising disruption to critical functions. Finding a private sector purchaser capable of taking on the business – in whole or in parts – is likely to be even more difficult. Bail-in enables us to stabilise a firm. It buys the time that will allow for an orderly reorganisation or wind down of all or part of a failing firm, in order to address the underlying cause of the failure. There is more than one way to effect a bail-in: either through the use of write-down and conversion powers directly, or via a bridge institution. In a bridge, liabilities are exposed to loss by leaving them behind in an insolvency process with the activity that is to continue transferred to a new legal entity. In contrast, where the bail-in tool is applied directly, liabilities are written down or converted into equity within the existing legal entity. Applying the bail-in tool directly has a number of advantages over the bridge approach, at least in the context of a resolution at the level of an operating company.
The decision is not very popular, but it is necessary to ensure the economic efficiency of OSAGO. At the same time, we are looking for new growth areas together with the market. In particular, this is about developing life and medical insurance. We also had to take supervisory measures. As a recent example licence of a major market participant was restricted for two weeks. Certainly, the licence restriction of such a large player was an outstanding event for the market. As a regulator we realised the importance of such a step, but we consider it necessary for the benefit of consumers to implement all the available measures to restore order and eliminate unlawful practices such as imposing services, non-applying bonus-malus ratio, etc. We have established a consumer right protection service, and we pay special attention to processing claims. We will try to make the process of lodging claims convenient for citizens and will try to respond to claims in an efficient manner. One of our important objectives is to work out a concept of financial literacy. We also consider accessibility of financial services to be an important condition for proper functioning of the financial market. Another field of our concern is the development of the national payment system. In less than a year after the decision was taken, a processing and clearing centre was created and interRussian transactions of international payment systems were transferred there. Currently, we are actively developing our own payment card.

The impact of external factors moved inflation up to 11.4% in 2014. Unfortunately, it turned out to exceed the level we had expected. BIS central bankers’ speeches  1  According to our estimates, sanctions and external trade restrictions account for one-third of the surfeit of inflation over the 5% target level, and ruble depreciation accounts for two-thirds. These are one-off factors and now we can see the inflation going down. It responds to the set of measures taken by the Bank of Russia to stabilise the situation. Let me remind you of these measures. These are both the transition to the floating exchange rate, and the unpopular but absolutely needed decision to raise the key rate. I would like to emphasise that as soon as the situation began to stabilise we started to gradually reduce the key rate. We have already cut it four times as we realise its importance for the economy and lending. The Bank of Russia introduced non-conventional refinancing instruments and started to lend foreign currency. This allowed us to pass the spikes in external debt repayments relatively easily this year amid restricted access to foreign markets. We worked with exporters to ensure that our major suppliers of foreign currency sell it evenly. Meanwhile, the stabilisation of the financial system in January should not be tied to the oil price growth alone. Certainly this process was supported by the oil price growth.
There is reason to believe that capital intermediation via the securities market will increase at the expense of financial institutions. The elimination of foreign exchange risk, greater price transparency and harmonisation of market practices will increase liquidity in the market, leading to conditions similar to those in the US. Losing the advantage of operating in the national currency will result in keener competition in securities markets for brokers, issuers, investors and stock exchanges. National ties will be of less BIS Review 16/1999  –6–  importance as participants are drawn towards markets with the lowest costs. The integration of stock exchanges will increase. The Oslo Stock Exchange, for example, is one of several stock exchanges currently evaluating prospective partners. The possibility that the euro may lay the foundation for a European market for private bonds should be of interest to enterprises both within and outside the euro area. This market is large and well developed in the US, whereas European enterprises have primarily relied on bank financing. The introduction of the euro will also result in a broader and more differentiated selection of securities in a single currency, while increased competition in issue and investment services will probably make it less expensive to raise capital directly in the securities market. The elimination of currency risk in the euro area will also enable investors to focus more on credit risk, thereby improving their ability to evaluate this risk.

Long taken for granted, this has become the holy grail of banking regulation and supervision. And it has become the ultimate goal of all the relevant reforms that have been undertaken since the crisis. And much has been done. We have revamped the global standards for capital and liquidity – Basel III. Rules for banks are now much stronger than they were before. And the same is true for supervision. Just think of European banking supervision, which was set up in 2014. All this will help to make banks more resilient, so that they can reliably serve the economy. But there is one thing which neither rules nor supervisors can do. They cannot prevent each and every bank from failing. And in my view, we should not even try to. The possibility of failure is inherent to any kind of business, and it is a core element of well-functioning market economies. 1/9  BIS central bankers' speeches  No, it is not the job of supervisors to keep individual banks alive. We, in particular, must not lower our standards to cater for the weakest bank. It would also be wrong to assume that each bank, even the weakest, just needs time to sort itself out. It would be wrong to assume that the local economy just needs to grow for a few more years for the bank to recover. The result would be weak banks that stagger on, zombie-like, barely able to survive in good times.