samchain/econo-pairs-v1 huggingface dataset:
In contrast to the enhancement of the interest rate channel, at least in normal times, financial innovation is traditionally expected to have weakened significantly the so-called bank lending channel. Financial innovation gives firms broader access to securities markets and, as such, makes them less dependent on bank funding. Similarly, banks may be more able to issue debt securities and less dependent on the constraint of funding themselves with secured deposits. Moreover, securitisation by banks was expected to alleviate their liquidity constraints and thus to further weaken the credit channel. Indeed, previous research has generally found that banks have used credit market innovations such as loan sales and securitisation to diversify credit risk exposures and increase lending. However, recent research has highlighted the potential for bank capital regulation and market discipline to shape a bank capital channel of monetary transmission. Viewed as an extension of the standard bank-firms agency problem to the relationship between banks and their creditors, this capital channel could reinforce the standard financial accelerator mechanism. This last concern is closely related to the fears of a credit crunch that have been voiced in the last six months. Current events show that the tide of financial innovation may recede and the future of the originate-and-distribute model of banking is a topic of renewed work. What we see now suggests that an unprecedented reintermediation process is underway, which might imply in the end a strengthening of the credit channel.

Implicitly, this also raises the question of whether and to what extent the current state of the innovation cycle challenges our understanding of what has changed over the last decade. -  and secondly, how financial innovation challenges the role of monetary analysis in monetary policymaking. I shall then conclude by a few words on the difficult task of communicating about monetary policy in times of financial stress. This is a concern that does not feature formally in our programme today but lurks in the background and I am sure many of us will have it in mind throughout the day. Challenges for our understanding of the MP transmission process An appropriate knowledge of the mechanisms through which monetary policy affects the economy is of crucial importance for central banks. Financial innovation affects these mechanisms both by altering the channels through which monetary policy operates and by changing the overall impact of monetary policy decisions. But the magnitude of the changes and the exact impact of financial innovation at a time when other factors such as globalisation are at work are not well known. Financial innovation certainly contributes to enhancing wealth effects and thus probably also to strengthening the interest rate channel. First, financial innovation fosters faster dissemination of information and its more rapid incorporation into financial market prices. This is of course particularly true for monetary policy decisions and can therefore increase the effectiveness of monetary policy via the interest rate channel.
Bank customers can process an e-Cheque any time. II. As physical boundaries and barriers are no more, both payers and payees can enjoy the e-Cheque service with the convenience of mobile phones or Internet banking platforms anywhere. III. E-cheques are quick and easy to use. In just a few simple steps, the payer can issue an e-Cheque via an Internet banking platform. Upon receiving the e-Cheque, Adopting a highly secure digital signature, e-Cheques remove the need for the payer’s handwritten signature as required with paper cheques, reducing the risk of forgery. V.  Unlike certain electronic payments or funds transfers, the payee does not need to disclose his bank account number to the payer in order to receive an e-Cheque payment, which means greater privacy protection. For those payees who have more than one account, he can also enjoy the flexibility of deciding which account to deposit an e-Cheque into. VI. Corporates and institutions which issue a huge volume of paper cheques can save substantial sums on printing, processing and mailing those cheques. In Hong Kong, listed companies process over 2 million physical cheques each year for dividend payments. Both paper consumption and mailing costs can be reduced substantially each year if shareholders agree switchinig to e-Cheques to receive these payments. Looking forward 4. The e-Cheque is only at the beginning of its development.

The HKMA will continue to explore ways of expanding its application in two areas, namely:  BIS central bankers’ speeches  1  I.  Cross-border transactions – we will explore with the Guangzhou and Shenzhen branches of The People’s Bank of China, and the Monetary Authority of Macao with a view to promoting the use and clearing of cross-border e-Cheques. II. Development of e-commerce – we will explore with the banking industry the use of eCheques in supporting e-commerce portals. While offering an additional option of payment for online shoppers, e-Cheques can also increase the efficiency of ecommerce operations. Acknowledgments 5. The launch of the e-Cheque reflects the continuous effort of banks in Hong Kong to provide a wide range of payment services. It also signifies the HKMA’s commitment in promoting the efficiency and modernisation of Hong Kong's financial infrastructure. Besides, the smooth development and launch of the e-Cheque has benefited immensely from the great support of relevant government departments. I.  Firstly, amendments to the Electronic Transactions Ordinance were finalised by the Office of the Government Chief Information Officer in early 2015, giving electronic cheques the same legal status as physical cheques. The Pay e-Cheque portal was also launched on 7 December, which allows the public to make payments of government bills and fees with e-Cheques. II.
In the first place, banks have become much more conscious about the need to remain liquid. The spikes in interest rates that occurred in October 1997 and in January 1998 have made the banks more reluctant to rely on borrowing from the interbank market to meet their funding needs. This is because of the interest rate risk that this entails and because of the reduced amount of funds in the market that are available to be borrowed. In particular, the supply of funds to the longer maturities in the interbank market has greatly diminished. Banks that do have liquidity prefer to place it at very short term, even overnight, to ensure that it is readily available. The banks also wish to improve, or at least avoid further deterioration in, their loan to deposit ratios. Taking the various factors together, there is now much greater competition for customer deposits than there was six months ago. This is not confined to the smaller banks: the large banks and the foreign banks are also involved. It is happening at a time when the overall growth in customer deposits has slowed down in line with the economy. The effect of this is evident in the additional margin over HIBOR which banks are prepared to pay in order to attract deposits. This clearly has an effect on profitability: the net interest margin of the local banks fell to 2.33% (annualised) in the first quarter of this year compared with 2.43% in 1997 as a whole.

More recently, during the pandemic, Malaysia’s financial sector continued to serve as a source of strength, with banks and insurers stepping in to offer important relief to households and businesses. This in turn, cushioned the economic shock from lockdowns. Earlier multi-year reforms to digital financial infrastructures, especially on e-payments, also proved to be useful. Consumers and businesses could transition to low-touch demands with greater ease. 34. In fulfilling the aspirations set out in the Blueprint, all these experiences will continue to be relevant as the financial sector plays its part to secure the future of Malaysia. Conclusion 35. Let me conclude. The future ahead will be challenging, highly uncertain and unpredictable. However, we are not in a crisis, our growth trajectory remains positive and we should remain confident about the future. The next one to two years will present a crucial window for Malaysia to be taking bold steps forward. As a country, we must now focus on strengthening our economic fundamentals, resilience and flexibility. Our neighbours within the region are actively pressing on with reform measures. We run the risk of being left behind if we do not act now. 36. I am confident that we as a nation can achieve this if we put our minds and importantly, act together. History is instructive. We have time and time again, done what is necessary to transform ourselves to reach for greater heights. I am certain that this time is no different. Thank you.
The second one is on the linking of ASEAN capital markets: We have linked up stock markets of Bangkok, Kuala Lumpur and Singapore since 2012, and more exchanges are joining up. Right now, an investor in Bangkok can buy shares in  BIS central bankers’ speeches  1  listed companies in these two bourses and vice versa. While a front-office platform has been established, we still need to integrate their back offices to create seamless trading, clearing, custody and settlement of shares. We are currently developing this framework under the “ASEAN Capital Market Infrastructure Blueprint”, which has already received approval from our Finance Ministers earlier this year. ASEAN as a platform to ASEAN+3 connectivity Ladies and Gentlemen, 7. ASEAN does not see itself as an exclusive club but rather as a platform to increase ties with our Plus Three partners in the region: China, Japan and Korea, which also represent important global economic powerhouses. Let me now draw attention to two key developments in this front. 8. First is the development under the ASEAN+3’s Asian Bond Market Initiative or ABMI. Recently, the ABMI has created a Credit Guarantee and Investment Facility or CGIF which has supported the issuance of corporate bonds in ASEAN+3 by providing credit enhancement to allow eligible issuers to access local currency bond markets. Since its inception in 2010, the CGIF has guaranteed bond issuances including a recent one that allowed a Singapore-listed and Hong Kong- based firm to issue Thai baht bonds in the Thai market. 9.

For example, in our July/August 2018 Desk surveys, only 33 percent of respondents who provided expectations for this spread expected it to narrow to two basis points or less by year end. On the other hand, the dynamics of the decrease in the spread since June seem very similar to earlier periods, as can be seen in Figure 9. In particular, as noted above, rates on eurodollar transactions have lagged. 28 The distribution of reserves throughout the banking system has important implications for rates and volumes in the federal funds market. Federal funds and other market rates above the IOR rate could reflect frictions related to the distribution of reserves across the banking system; this dynamic may occur at levels of reserves not consistent with aggregate reserve scarcity. For further discussion, see Afonso, Armenter, and Lester, “Size Is Not All: Distribution of Bank Reserves and Fed Funds Dynamics,” Federal Reserve Bank of New York Liberty Street Economics (blog), July 11, 2018. 12  interbank volumes trading at rates above the IOR rate, increased overdraft activity, shifts in bank payments behavior, or a day-to-day relationship between shifts in the stock of reserves and overnight interest rates. As discussed earlier, the upward pressure in EFFR likely reflects the premium on borrowing from FHLBs in fed funds relative to other funding sources. In addition, it also likely reflects bargaining dynamics among banks with limited access to alternative shortterm funding sources.
This tentative estimate suggests that achievement of the official deficit target of 1.3% in 2019 is subject to far-from-negligible risks. A smaller revenue impact of the new taxes than officially estimated, a delay in the entry into force of the tax measures included in the Draft Budget or potential materialisation of the downside risks to the economic growth outlook that I have already discussed would raise the projected deficit. On the other hand, a more dynamic response by tax revenues to macroeconomic conditions than historically estimated or a containment of discretionary spending would have the opposite effect. In any event, the Banco de España will publish a complete estimate at the end of March, including an update of the macroeconomic projections with all the information that has become available since the last projection exercise was conducted in December. As regards the fiscal policy stance in 2019, derived from these preliminary estimates and measured by the change in the general government structural balance, it would be roughly neutral. The level of the structural deficit would stand at around 2.5% of GDP, according to the Banco de España’s estimates, similar to its value over the last five years and higher than in 2013-14, which implies that practically the entire reduction observed in the government deficit since 2013 has been due to the effect of the business cycle (see Chart 10).

These adverse effects arise because public debt absorbs funds that could be put to more productive use and alters the overall financing conditions of the economy, distorting private investment decisions. Moreover, in adverse situations, high indebtedness detracts from the stabilising capacity of fiscal policy. In addition, sustaining high public debt requires maintaining primary surpluses over a prolonged period, which may call for higher levels of taxation or lower levels of productive expenditure. Lastly, one of the key possible adverse effects of high debt is the greater vulnerability of public finances to changes in investor or market sentiment. According to simulations performed in studies published by the Banco de España, under credible assumptions, the process of reduction of Spanish government debt will be very gradual; indeed, several decades may elapse before the debt-to-GDP ratio reaches 60%, which is the benchmark set in the current European fiscal rules framework. In consequence, it is crucial that advantage be taken of the current favourable economic setting to complete the fiscal consolidation process and create budgetary headroom in order to be in a position to address future downturns. The work remaining should take the form of a medium-term programme setting out the measures required to meet the budgetary objectives, together with prudent macroeconomic and public revenue forecasts. Reducing the vulnerability of Spanish public finances is even more important considering the medium and long-term challenge posed by population ageing (see Chart 13).
From this consumer credit panel data, we conclude that between 2004 and 2006, households were increasing their cash flow by over $ billion a year by borrowing against their housing equity collateral. They supplemented that with another $ billion through non-mortgage borrowing. So, at the height of the boom, annual consumption was being supplemented by around $ billion in cash flow from debt, much of it collateralized by housing. As we now know, homeowners were mistaken in viewing the home price increases during the boom as permanent. Things turned quickly as housing supply increased, home prices softened and mortgage underwriting standards tightened sharply as credit losses on residential mortgage lending climbed. The rise and fall of mortgage securitization activity marked by tranching mortgage cash flows into collateralized debt obligations (CDOs) exacerbated the downturn. Home values began to fall in mid-2006. By 2008, we saw a massive reversal in the way people used their housing equity to finance consumption. People went from borrowing hundreds of billions of dollars per year and increasing their mortgage debt, to paying back hundreds of billions dollars and reducing their mortgage debt. Households deleveraged even apart from the decline in household debt associated with the charge-offs from foreclosures. Instead of $ billion in net cash flow from increased borrowing, this net cash flow sharply reversed to negative $ billion by 2010, with increased residential mortgage debt pay-down being the main source.

It is an important reason why the economic recovery and expansion have been weaker than we would like, despite the efforts of the Federal Reserve to stimulate economic activity. It also matters as we look forward. The good news is that, while the current expansion is quite old in chronological terms, it is still relatively young in terms of the health of household finances. Later in my remarks, I will talk a bit about the outlook for consumer spending in 2017 and beyond. It’s worth starting off with some background in order to develop the linkage between housing wealth and retail spending. Household incomes tend to increase as individuals grow older and become more skilled in their work and better matched to their employers. This tends to continue until they approach retirement age. This means that incomes are much higher later in life than when people first enter the workforce. Ideally, households would like to be able to even out their consumption based on their lifetime incomes, raising consumption in their early adulthood years. In general, this would mean that young people would consume a relatively high share of their incomes, while older people would save more. Indeed, young people might even wish to borrow against some of their future income so that they can enjoy some of those benefits earlier in their lifetimes. However, there are limits on the ability to shift consumption to earlier in life through borrowing. One problem is that lenders don’t have a reliable way to compel repayment of such debts.
John Gieve: The financial cycle and the UK economy Speech by Sir John Gieve, Deputy Governor of the Bank of England, at the London Stock Exchange, London, 18 July 2008. *  *  *  Introduction These are troubled times for both the City and the economy more widely. After 15 years of unbroken growth and low inflation, the prospect for the rest of this year is uncomfortable: inflation will continue to rise sharply while growth tails off and unemployment picks up. And the downturn is particularly pronounced in the banking sector. While the acute concerns about funding that emerged last summer have ebbed a little since March, worries about future losses, profitability, and even the viability of some business models, have been growing on both sides of the Atlantic, leading to sharp falls in most equity prices and, in the UK, to difficulties in bank rights issues. This morning I want to say a little about the challenges this sets the MPC in the short term but also to address some of the longer term lessons of the credit crunch. Global imbalances and the credit crunch One of the striking aspects of this downturn is that it started – at least in Europe – in the financial sector. The level of defaults on lending to households and companies is still very low.

BIS Review 94/2008  5  Chart 1: Financial Market Liquidity  Chart 2: EME holdings of FX reserves  Liquidity index 1.0  Per cent  0.8  40  0.6  35  0.4  30  0.2 + 0.0 0.2  0  08  1  Chart 3: Brent Oil Prices Nominal  2008  2007  2006  2005  2004  2003  2002  0 2001  -5 2000  06  1.2  1999  04  5  1998  02  1.0  1997  00  2  10  1996  98  3  1995  96  4  15  0.8  94  5  20  0.6  92  6  $ (RHS) Annual percentage change (LHS)  25  0.4  90  $  Chart 4: Survey-based measures of activity Construction  US dollars (2008) per barrel  Real  Index: 50 = no change  Services  140  70  Manufacturing  65  120  60  100  55  80  50  60  45  40  40  20  1960  1968  1976  1984  1992  2000  0 2008  35 2000  2001  2002  2003  2004  2005  2006  2007  2008  Source: CIPS  Chart 5: Global inflation Per cent 9  EMEs UK US Euro Area  8 7 6 5 4 3 2 1 0  2003  6  2004  2005  2006  2007  2008  BIS Review 94/2008
It’s probably a little soon to bury central bank independence as we’ve known it over the last two to three decades. Yet there’s no ignoring the fact that the economic environment began to shift even before the GFC. I’m referring to the steady – one might even say tectonic – decline in the equilibrium real interest rate, which has naturally reduced the room for manoeuvre in terms of the stabilising role of monetary policy. This trend got a strong new boost during the GFC and has strengthened even further during the coronavirus crisis. The decline of the equilibrium real interest rate to or even below zero has far-reaching implications. The first is that monetary policymakers have to use unconventional instruments, whose long-term consequences have not been analysed sufficiently. It also encourages governments to borrow, especially if the real interest rate is lower than the rate of growth of the economy. It is worth noting that from the long-term perspective the debt levels of most advanced economies are very high, but debt interest payments are meanwhile very low. Relying on debts repaying themselves may be safe only as long as the current favourable conditions persist. If the relationship between the two variables were to invert, debt financing could get a lot more expensive. The second implication is a blurring of the boundaries between monetary and fiscal policy. As monetary policymakers resort increasingly to targeted unconventional instruments, they get more and more involved in the redistribution process.

As various services and leisure activities – such as theatregoing, sports events and travel – were closed in waves, household demand switched to activities that could still be carried on despite the anti-epidemic measures and to goods that were previously not in such high demand, such as computers for working from home, and sports equipment, which people suddenly had much more time to use. Most of the items in high demand are of an industrial nature and are made in globally interconnected production chains. However, the changing anti-pandemic lockdowns are causing bottlenecks in international supplies of raw and semi-processed materials and in transport capacity. This is disrupting the overall production logistics and fuelling growth in prices of temporarily scarce items. As a result, we are now seeing robust growth in prices of many 6/7  BIS central bankers' speeches  tradables all around the world. This is being reflected in growth in foreign producer prices and ultimately in non-falling domestic inflation. Another interesting feature of the coronavirus crisis relates to savings. During a cyclical downturn, it is usual for households and firms to start creating precautionary savings for worse times. However, the lockdown of many activities, especially in services, has made it physically impossible for people to spend on such services, and their savings have been rising as a result. Once the lockdowns are lifted, these forced savings are expected to return to the market and help revive the currently dormant sectors.