samchain/econo-pairs-v1 huggingface dataset:
Growth of Islamic finance The growth of Islamic finance as an ethical means of investing wealth arose because Muslims wanted to invest their monies to get good returns, but in accordance with Islamic principles. While the proportion of Islamic banking assets as a percentage of total banking assets remain small – at about less than 20%, – this has risen over the years. We are seeing more examples of successful and viable Islamic financing products in the international marketplace. Islamic banking is getting more widespread in Muslim and non-Muslim countries alike. Takaful insurance and Islamic mutual funds are becoming commonplace. In fact, these products have become so popular, even non-Muslims are investing in them. We can expect to see Islamic finance develop further globally, eventually becoming an integral component of the international financial system. Singapore wants to develop Islamic finance as well. This will make our international financial centre more complete. The development of Islamic finance here can take advantage of our capabilities in wealth management, project financing and trade financing. We have been working in close partnership  2  BIS Review 21/2007  with the industry to review our regulatory framework, and support and facilitate financial institutions to provide a wide suite of Islamic financial services and products. More Middle Eastern banks are setting up offices in Singapore. At the end of 2005, we had six Middle Eastern banks. In 2006, two more came. Since the beginning of this year, three banks have applied to set up representative offices here.

Barring unforeseen developments, I believe that Asia and the Middle East can overcome their challenges and prosper together in this century. Certainly, we must all do what we can to make this an Asia-Middle East Century. Thank you. BIS Review 21/2007  3
Because, for the first time since launching the Small Business Credit Survey, we are able to identify and discuss the specific experiences of Latino small business owners. And that, in turn, matters as Latinos are the fastest growing demographic in our nation and Latino-owned businesses are growing in number and importance. The total Latino population in the United States was around 18 percent in 2017 and that number is expected to rise significantly in the coming decades. Amid lagging business start-up rates, immigrant and Latino business expansion has bolstered small business growth nationally, outpacing that of other demographic groups. Between 2014 and 2016, Latino-owned businesses grew by 13% compared with less than 3% for non-Latino businesses. Today, one in four new businesses is Latino owned, contributing more than $ billion in annual sales and employing millions of workers. On top of that, the Latino population is among the youngest of all demographic groups and its entrepreneurial class is equally young. In fact, nearly half of Latino owned businesses were started less than six years ago, all of which points to the continued growth and importance of this entrepreneurial sector. But why do we care about small business in the first place? Well, it’s quite simple. The Federal Reserve System, as the nation’s central bank, has important roles to play in supporting the vitality of our economy and promoting community development.

It is now my pleasure to introduce Nancy Lee of Interise, Marlene Orozco from SLEI, and Claire Kramer from the New York Fed. 2/2  BIS central bankers' speeches
The median rating of banks, taking the entire rated G10 population of more than 300 banks, is A1 on the Moody’s scale, or A+ on the Standard and Poor’s scale. This would indicate a near-invisible insolvency probability for such banks over a 1 year horizon. However, this very small insolvency probability does reflect two factors which ideally we would wish to discount. First, the ratings reflect the bank’s actual capital level which will in most cases be significantly above the regulatory minimum. And second, in some cases the rating also reflects the agency’s expectation that public support would be forthcoming for the bank, which of course we would wish to strip out. A more accurate measure of the confidence level established by the Basel 8% would be the “standalone” ratings produced by some agencies, for those banks whose capital is at or close to the Basel minimum. Even on this basis, nearly all such banks are rated above investment grade. The message therefore from this view of the matter is that under the new Accord we should be targeting a minimum level of regulatory capital for our G10 internationally active banks that is at least consistent with an investment grade rating. An alternative way of assessing the regulatory soundness standard would be on a “bottom up” basis, that is by modelling the probability of default arising from a typical credit portfolio if the bank held only the Basel minimum capital.

Low interest rates, for example, can contribute to the build-up of  4  On this, see the discussion in Robert Shiller (2000), Irrational Exuberance, Princeton University Press. 5  This has been convincingly argued by Christina Romer (1990), “The Great Crash and the Onset of the Great Depression”, Quarterly Journal of Economics, 105(August), 597–624  6  As quoted in John Lewis Gaddis (2005), The Cold War: A New History, Penguin Press. BIS Review 158/2010  3  financial imbalances via the so-called “risktaking” channel. 7 Simply put, very low interest rates may create incentives for banks to take on more risks. Recent research has provided empirical evidence compatible with such a notion. It has been documented, 8 for example, how market based measures of bank’s risks as perceived by financial market participants tend to react positively to changes in interest rates, so that a lower interest rate leads investor to perceive banks as less risky. By the same token, several papers 9 have shown that credit standards are correlated with the level of interest rates: lower interest rates, in particular, imply lower credit standards including to customers who are perceived as representing a higher credit risk. On the theoretical side, research done at the Banque de France 10 has shown that, when the regulatory environment is not transparent, a decrease in the level of real interest rate increases banks’ risk-taking behavior, in parts because it may facilitate the under-pricing of risks typical when asset prices rise.
In any event, the still-high spare capacity in the economy presages a gradual recovery in inflation over the next two years. The factors underpinning the recovery The path of recovery of growth and employment has essentially been underpinned by the restoring of macroeconomic and financial equilibria, which were severely eroded in the crisis. Progress has been visible in the correction of the external imbalance, the deleveraging of households and firms, the redressing of fiscal balances towards levels more compatible with the sustainability of public finances and the restructuring and consolidation of the banking sector. Unemployment, too, is showing clear signs of a correction. The reforms undertaken within Spain, along with the headway in economic and monetary union and the application of the highly expansionary monetary policy by the ECB, have proven key to restoring confidence and providing for the progressive absorption of the imbalances. By way of illustration, the proportion of Spanish public debt held by nonresidents has risen from 30% in 2012 to 44% at present, an increase indicative of the improved confidence in our economy, but also of its dependence on the perception abroad of the soundness and continuity of our recovery. Despite what has been achieved in growth, employment and restoring equilibria, we are far from having overcome all the factors of vulnerability. Doubts over the continuity of the macroeconomic, fiscal and financial rebalancing drive might curtail and lead to backtracking from these achievements. We must not forget that the legacy of the crisis is still burdensome.

Second, the timing of this sequence will depend on the inflation outlook and its progress towards our target of close to but below 2%. We will accordingly monitor the impact of the exchange rate evolution – which is a source of uncertainty –, and be ready to reassess if necessary. Fiscal devaluations have also been considered by countries aiming at boosting competitiveness through changes in their tax system, typically by cutting labour and/or capital taxes, while rising consumption taxes.9 This shift in the tax system increases the competitiveness of domestic firms with respect to foreign ones, both in domestic and export markets. In practice, however, 3/5  BIS central bankers' speeches  there are empirical limits to this strategy. A race to the bottom on corporate tax rates also raises increasing challenges about the social fairness of globalisation – and hence its sustainability – as President Macron stressed in Davos… and as is even pointed out sometimes in debates about Ireland. Recent research has put emphasis on the noticeable influence that fiscal policy can have on variations in imbalances, including in the US and Germany. In this respect, the recent US tax reform adopted by Congress is expected to significantly boost the US economy, which is already at full employment, leading in turn to increasing imports and a widening external deficit. So, it clearly risks increasing global imbalances.10 Symmetrically, within the euro area, some countries with large positive current accounts recently experienced budget surpluses (e.g.
At its most idealised, Magna Carta makes clear that power derives from the people and constrains the authority of the state. The state can in turn devolve power – to regions – and to independent bodies. But these bodies can never forget from where their power came or to whom they are responsible. Their authority is constrained to that necessary to pursue specific objectives and they are accountable to the people for their performance. 3. Monetary policy outlook  The Bank’s current Monetary Policy framework embodies these principles. It wasn’t always the case. The Bank of England was brought into public ownership in 1946. As former Governor Eddie George remarked, for the half century that followed “the Bank operated under legislation which, remarkably, did not attempt to define our objectives or functions.” They were, instead, “assumed to carry over from [the Bank’s] earlier long history.” 20 In that regard, the Bank’s “constitution” resembled that of the United Kingdom more broadly, comprising a rich history of law, principle and convention. All changed with the passing of the Bank of England Act in 1998, which made specific “provision about the constitution, regulation, financial arrangements and functions of the Bank.” The Act brought great clarity to the Bank’s responsibilities and granted independence to the Bank for the operation of monetary policy. In delegating authority to an independent body in this way, the Act ensured the Bank would operate under what Mervyn King described as “constrained” rather than “unfettered” discretion.

Our Remit builds in important accountability and transparency mechanisms. One of which is the requirement for the Governor to write an open letter to the Chancellor if inflation moves away from its 2 per cent target by more than one percentage point. Inflation developments I am in the middle of a likely sequence of such open letters – I have another one due next month – on account of the record low inflation the UK is experiencing this year, currently at zero per cent. Such letters must explain, among other things, why inflation has deviated from target and what policy actions the Monetary Policy Committee (MPC) is taking in response. The “why” is straightforward. The bulk of the shortfall of inflation below target can be explained by the sharp fall in the prices of commodities and other imported goods since last year. Of these, the single most important factor has been the steep drop in energy prices globally. The rise in the value of sterling has also played an important role in lowering non-energy import prices, which have fallen over the past twelve months. The sum total of these effects has been to drag inflation below target by around 1½ percentage points. This temporary period of below-target inflation has provided a welcome boost to real household income. Inflation looking ahead The MPC’s intention is to return inflation to target in a sustainable manner within two years.
The second constraint is that smaller economies, both emerging and developed ones, are quite often in the position not only of monetary-policy takers, but also of regulatory-takers. So, they have to face the consequences of regulatory debates and decisions made by “big guys” somewhere else – debates and decisions they can influence only to some extent, if at all. And the emphasis in the world debate is now being put more on regulation on the micro level and less on these big questions I am discussing, despite the hard work of Michael Woodford and others here. I understand that micro-regulation is easier to create and to explain to the public, and sometimes also easier to implement. But it can also have faster adverse impacts. An example from Europe – the harmonisation of deposit guarantee schemes (DGS) within the BIS central bankers’ speeches  1  EU. It is generally a brilliant idea to have single DGS rules in the single market, but in the Czech Republic it has led to the abolition of the previous well-established practice of copayment when a depositor received an insured deposit from a failed financial institution. Our practice was 10% co-payment, so that depositors never got back 100% of their insured deposits. The harmonised DGS rules established a different unified practice – deposits are insured up to 100% of the equivalent of 100,000 euros. This, of course, means a bigger incentive for moral hazard behaviour on the part of depositors.

He says: “Policies that are too timid in leaning against financial booms but that are then too aggressive and persistent in leaning against financial busts may end up leaving the authorities with no further ammunition over successive financial and business cycles” 1 Yes, this is the case in many countries, including the Czech Republic now we have reached the zero lower bound. So, to put it more bluntly: the problem also might be that we central bankers are sometimes more procyclical and less symmetric in our thinking than we should be. And the fourth constraint is our own disbelief in the power of monetary policy. Our experience – even in a small open economy – is that autonomous monetary policy can be very much of help, if not key, in stabilising the general macro-environment compared to the situation where monetary policy is just being passively accepted from abroad. And I say that despite the fact that inflation stabilisation in the current circumstances is a necessary but not sufficient condition for long-term financial stability. As the debate today shows, what this sufficient condition for long-term financial stability is, is not entirely clear and remains to be determined. But I would tend to believe that if there is any way forward in the area of financial stability, monetary policy will have to play an absolutely key role – a bigger role than many now think or admit. Thank you.
While earlier studies focused on the effect of contemporaneous rate surprises, more recent papers account for the fact that monetary policy decisions have typically been accompanied by explicit (or at least perceived) central bank communication on the future course of policy rates. Accordingly, the literature has started to distinguish between “rate surprises” and “path surprises” (or surprise changes to the forward guidance on future rates). [7] As was true for the earlier literature focusing on standard rate cuts, identification is a challenge: researchers need to separate rate surprises from path surprises and tell both apart from other structural shocks occurring at the same time. Recent research involving ECB economists has used high-frequency movements in financial market variables to disentangle various types of monetary policy surprises affecting the yield curve during ECB press conferences: the impact of each type of surprise can be parsimoniously described by its “footprint” on the term structure (Chart 3). [8] A standard rate cut primarily affects the short end of the curve, while the impact peters out monotonically across the curve (Chart 3, left panel). By contrast, an innovation in the forward guidance on interest rates has a hump-shaped effect on the curve and exerts its maximum effect at a maturity of around two years (Chart 3, right panel). Chart 3 Estimated effect of standard policy rate surprise (left-hand side) and rate path surprise (righthand side) on the euro area OIS curve (basis points)  Sources: Based on Altavilla et al. (forthcoming).

Notes: Surprise impact normalised to 10 basis points for the six-month maturity. Why do we see a stronger effect on longer maturities when the rate cut takes place in negative territory? One factor here is that cuts in negative territory were often accompanied by communication or at least market perceptions that the ECB was willing to lower the negative rate even further, if warranted by subsequent economic conditions. As a case in point, for the final two of the last five rate cuts, the introductory statement at the press conference clarified that the ECB’s Governing Council “expects the key ECB interest rates to remain at present or lower levels”. This type of communication about the scope of negative rates can provide accommodation even in the absence of actual rate cuts. This mechanism adds another dimension to the standard channels of rate forward guidance. Let me elaborate on this point. Consider the situation in which the central bank is perceived to be constrained by the zero lower bound. Guided by an understanding of the central bank’s reaction function and a depressed macroeconomic outlook, markets may think that in one year’s time, the central bank would like to set negative rates with positive probability but that, if constrained by the zero lower bound, the best the central bank can do in those states of the world is to keep rates at zero. In technical terms: the presence of the lower bound induces a censored distribution for future short rates.
In order that the SNB is able to fulfil its mandate – of ensuring price stability while taking due account of economic developments – in the best possible way, it must make full use of its room for manoeuvre in monetary policy. For this reason, the SNB will not hesitate to take further measures to fulfil its mandate, should they prove necessary. Ladies and gentlemen, thank you for your attention. BIS central bankers’ speeches  3

Annual wage growth has also slowed considerably after peaking early in the year. The savings rate has been recovering in the recent months after a considerable drop in the second and third quarters. Household deposits resumed growth driven by interest rates attractive for depositors. In this context, strong growth in retail lending underpins consumer demand without posing inflation risks. The evolution of the household behaviour model meets our expectations. However, more arguments call for a key rate hike. What are these arguments? They are associated with both external and domestic factors. External factors include, first, the state of the global economy as a whole and the situation in emerging markets. Certainly, global financial markets have been less volatile this quarter than they were in August and September. This is partially attributed to the revision of monetary policy projections by major central banks. The next year normalisation may prove slower than expected, thus mitigating the risk of capital outflow from emerging markets. However, it is important that the altered projections of policy revision by key central banks are associated with downgraded next year growth forecasts for major economies. Also, the current standstill in trade disputes may merely prove a temporary truce. These risks are quite tangible for emerging market economies. Second, we have here the oil glut risk in 2019. This is partially associated with a downward revision of the global demand outlook. However, the main reason is an aggressive expansion of oil production in the US.
The intervention of the central bank is then viewed as a means of helping market participants to coordinate on valuations which are more in line with the real fundamentals. Today, the Swiss franc remains high and should therefore continue to depreciate in the future. Conclusion As I stated at the outset, we face no shortage of challenges. I have addressed two of them today. The Swiss franc was overvalued to such an extent that the SNB has been forced to take the extraordinary decision of setting a minimum exchange rate. This carefully considered decision reflects the extent to which we live in extraordinary times. Given the prevailing circumstances this summer, to the SNB, this seemed to be the only way in which the central bank could fulfil its mandate to ensure price stability while taking due account of economic developments. Behind the scenes, the rapid and complex evolution of FMIs worldwide is a matter of longterm interest. This infrastructure is central to the functioning of financial markets. It is a challenge of primordial importance to the financial markets. Today, we are the beneficiaries of an effective infrastructure, in part thanks to the adoption of “Gemeinschaftswerk”, a collaborative modus operandi which has permitted a near-perfect alignment of stakeholders’ individual and collective interests. It cannot be taken for granted, however, and it is our collective responsibility to act.

The safe haven effect leads to a form of Dutch disease which cannot leave the central bank indifferent. This term refers to the state of the Dutch economy following the discovery of natural gas in the North Sea in the 1980’s. This significant discovery and the boom it generated in the energy-related sectors of the economy led to an overvaluation of the Dutch currency. This, in turn, had a severe negative impact on large sectors of the real economy which did not directly benefit from the discovery. There is, however, a difference between the “Dutch disease” and the impact of the demand for a safe haven currency. In the second instance, the “disease” takes on a pernicious form as it negatively affects the economy, without the latter benefitting from the initial positive effect of a newfound natural resource. It can further be argued that safe haven flows in an environment marked by extreme uncertainty and a world-wide dearth of safe assets led to a profound disconnect between the  BIS central bankers’ speeches  7  value of the Swiss franc and the reality of the Swiss economy. The scale of this disconnect could in turn explain the extreme market volatility we have witnessed this summer. Indeed, another segment of the academic literature explains that, in such extreme market conditions, coordination problems can arise, causing so-called “stabilizing investors” to remain on the sidelines instead of entering their trades, which would normally have a stabilizing effect.