samchain/econo-pairs-v1 huggingface dataset:
Interestingly, the controversy over this issue, which has now happily subsided following the success of the operation, was then more intense outside of this region than within, and was especially strong in the developed markets. I would attribute this difference in sentiment to the relative lack of appreciation, outside of this region rather than within, of the predicament that smaller, open markets face in the increasingly liberalised international financial system. Hong Kong supplies a particularly striking example of this vulnerability. Our markets are very free and open. They are big and liquid enough to attract substantial international capital. But they are also small, by comparison to the developed markets and the amount of international capital flowing around the globe, seeking opportunities for profit. They are small to the extent that the prices of those markets are capable of being pushed around by big players, particularly those in a position to influence market sentiment. Being a very externally oriented economy, we pursue an exchange rate policy that promotes a stable external value for our currency to provide for predictability for all those who engage in economic activity relating to the predominant external sector. In pursuing this policy,  1  BIS Review 47/1999  we have gone as far as to adopt currency board arrangements that operate with a high degree of transparency while eschewing the exercise of discretionary monetary management. This eclectic combination of characteristics and policies, which is quite a common feature of economies in this region, offered great temptation to market manipulation.

Mr Yam discusses financial stability, region and international co-operation Speech by the Chief Executive of the Hong Kong Monetary Authority, Mr Joseph Yam, at the 32nd Asian Development Bank annual meeting, in Manila, the Philippines, on 2 May 1999. Introduction I am delighted and honoured to have the opportunity to speak to this distinguished international audience. The theme of the forum is regional monetary and financial co-operation. From the point of view of time, venue, sponsors, and participants, it would, I think, be very hard to come up with a more appropriate topic than this. In terms of timing, our region is currently, we hope, moving through the final stages of a period of financial and economic dislocation that has taught us a number of lessons. The most important of these lessons, in my view, and one consistent with the aims of this forum, is that we need to intensify international and regional co-operation to reduce the risk of such crises occurring again. The venue for this forum, Manila, is one of the oldest international financial centres in Asia: it has also been the starting point for a number of important modern regional initiatives. Manila has given its name to the recently established Manila Framework, within which central banks and finance ministries in the region meet to promote regional co-operation on financial matters. The beginnings of systematic economic co-operation can also be traced to Manila, with the establishment here, in 1966, of the Asian Development Bank (ADB).
22 Of course, it is crucial to evaluate policy and require it to be effective, whether the policy is state contingent or time contingent. 23 My impression is that the issue of whether fiscal policy should play a more active role and whether the fiscal frameworks should be reviewed is starting to be raised more and more in the economic policy debate: see, for example, Calmfors (2021) for Sweden and Ubide (2021) and Lane (2021) for the euro area. This is also underlined by the fact that the ESO, the Expert Group for Public Economics, is planning a study in this field; see https://eso.expertgrupp.se/pagaende-projekt/. However, it should be pointed out that this study will only refer to the interaction between monetary policy and fiscal policy in times of crisis, which I do not think is sufficient. A month ago, representatives of the government parties also argued, in a newspaper article, that the review of the fiscal policy framework planned for 2025 should be brought forward (Svenska Dagbladet, 2021). In the Statement of Government Policy on 30 November, Prime Minister Magdalena Andersson argued that Swedish public finances are so strong that shifting from a surplus target to a balance target is justified. There are also, of course,  12 [17]  To be even more concrete, one idea could be to give the Swedish Fiscal Policy Council, or some other body, the task of continuously evaluating whether fiscal policy is keeping to the announced plan and delivering the expected results.

I think this is something we may now need to reconsider for at least a couple of reasons. Monetary policy and fiscal policy are probably more dependent on each other than we usually think, and this dependence has become even clearer as the macroeconomic environment has changed quite a lot in recent decades. For quite long periods, it may indeed work well if monetary policy is focused on maintaining the inflation target and fiscal policy on keeping track of public finances – that they manage their own business, so to speak. Indirectly, the two policy areas nevertheless provide valuable support to each other. Assume, for example, that inflation begins to rise rapidly and risks becoming persistently too high, and that the central bank therefore raises interest rates in order to dampen demand in the economy. The higher interest rate increases government interest expenditure and weakens public finances. Of course, how much depends, among other things, on how large the debt is from the start and by how much the central bank raises the interest rate. If the economic agents trust that fiscal policy will stabilise public debt, they will expect taxes to be raised or expenditure to be reduced, or both. They will adjust their behaviour accordingly and  9  A policy regime with active monetary policy and more passive fiscal policy is sometimes called a regime with ‘monetary dominance’; see, for example, Leeper (2018, 2021). 6 [17]  hold back on their consumption and investments in preparation for the expected tightening.
In 2009, Bank Negara Malaysia entered into a Currency Swap Agreement (CSA) with the People’s Bank of China, which was renewed in 2012 with an expanded amount of RMB180 billion, with the objective to ensure a ready supply of renminbi in the domestic financial markets to meet the demand by businesses. Efforts were also made to enhance the transparency in the exchange rate between renminbi and ringgit transactions. In 2010, a direct market quote of renminbi against the ringgit was initiated in the Kuala Lumpur interbank market as well as in the interbank foreign exchange market on the China Foreign Exchange Trade System (CFETS). With these developments there is now a direct renminbi/ringgit quotation in the spot market and a renminbi/ringgit forward exchange rate for the Malaysian market. To further facilitate transactions, the real time gross settlement (RTGS) payment system in Malaysia has also been expanded since 2012 to include settlement services in renminbi. The size of renminbi trade settlement in Malaysia is expanding progressively reflecting the shift among both Malaysian and Chinese companies across the commodity, manufacturing and services sectors. There are also now 19 financial institutions that facilitate renminbi trade  BIS central bankers’ speeches  1  settlement, double the number in 2009. There is also a growing interest in raising financing in renminbi in the Malaysian bond market. In 2011, Khazanah Nasional Berhad successfully issued the world’s first offshore renminbi sukuk in 2011 and subsequently Axiata Group Berhad issued the world’s first rated renminbi sukuk in 2012.

And I believe it is particularly worth noting that investment in equipment ended the year at a rate of increase of close to 9%, highlighting the robustness of business activity in the closing months of 2007 against a backdrop of sound corporate earnings and a favourable demand outlook. The demand for housing, which had moved onto a mildly slowing path in mid-2006 in response to higher borrowing costs and lower real estate appreciation expectations, appears to be showing greater sensitivity to the deterioration in agents' confidence, according to the latest available information. Recent figures reveal a loss of momentum in activity and employment in the construction and related sectors, as they do more generally, but on a lesser scale, in the rest of the economy. In any event, when considering the ongoing adjustment in the residential sector, which was largely inevitable following a prolonged phase of growth in supply, we should not overlook the considerable forces underpinning the demand for housing in the medium term in Spain, which should help temper the scale and intensity of the adjustment. The performance of trade in goods and services with the rest of the world has been relatively favourable in recent quarters, and has helped net external demand to make a positive contribution to GDP growth and, therefore, to alleviate the loss of momentum in domestic demand. I would highlight the resilience of exports in the past year, despite the significant appreciation of the euro and the somewhat diminished dynamism of export markets.
I note with interest that your own assessment is that the best option for the futures and options business in London would be for EMU to go ahead and for the UK to participate in the first wave. It is a moot point as to whether the impact on the profits and bonuses of derivatives traders will be the number one criterion in the minds of Labour MPs when they come to reach a view on EMU, but I will certainly draw it to their attention if you would like me to do so. BIS Review 67/1997  -3-  By contrast, you are slightly, though not exaggeratedly pessimistic about business opportunities in London if EMU goes ahead with the UK a ‘slow track’ country. I regard this as a pessimistic assessment, and will attempt this morning to persuade you that you are wrong. My first point, and perhaps the strongest, is that uncertainty about UK participation in EMU has persisted now for a considerable number of years - perhaps indeed since the late 1970s when the UK government’s response to the original EMU plan was distinctly lukewarm. And certainly no British Prime Minister has given an enthusiastic endorsement of the most recent Delors Plan for EMU, at any stage.

In the last few months the expected future correlation of the deutsche mark/dollar and lira/dollar rates has strengthened, suggesting a stronger market expectation of those currencies being part of the first wave. Very recently, a few doubts seem to have emerged about the project itself, though it would seem that, according to the market, the most likely outcome remains that a euro of some sort would start on time. I recognise that this is a difficult background against which businesses need to plan. Our own advice, which we have maintained for some time now, is that it is prudent to plan on the basis that the euro will begin on 1 January 1999, as set out in the Treaty. As far as the position of the UK is concerned, the option remains open, the policy remains what the French call ‘le wait and see’. But the new Chancellor, like the old, has acknowledged that there are considerable difficulties to overcome if the UK is to be a first wave member. This is not a tidy position to be in, perhaps, but against the uncertain background, it nonetheless has a certain practical appeal. But taking my prudent assumption - that EMU will go ahead - what can we say about the impact on the London market in general, and on the futures and options business in particular?
[Otherwise] it would be unrealistic to expect the Community to be able to square a circle that has never been squared.”6 The early 1990’s were indeed difficult times for the European monetary system: several countries were forced to realign their exchange rate or to withdraw As  2/8  BIS central bankers' speeches  from the mechanism, like for instance Italy in 1992. It was that same year, with the Maastricht Treaty, that Europe chose to move forward towards a European monetary union. Tommaso Padoa-Schioppa was right in his belief and in his recommendation to create the euro. The euro has proven to be a great success which has delivered material benefits. First, price stability, which is the main objective assigned to the Eurosystem, and which directly benefits euro area citizens’ purchasing power. In the 18 years since the introduction of the euro (1999–2016), inflation has stood at 1.7% on average, compared with 4.6% in the 18 years preceding the introduction of the euro (1981–1998). Second, lower interest rates, which are the corollary to the confidence that investors place in our currency, and which can be measured by the decrease in long-term interest rate spreads vis-à-vis Germany, amounting to between –1.5% for France and –3.7% for Italy. Third, internal exchange rate stability, and a greater international role. Today, the euro accounts for 20% of international reserves, second only to the dollar. And an internationally recognised currency generates economic gains: financial markets are more attractive to domestic and foreign investors, more liquid, and thus more efficient.

In view of all these complications I believe we have succeeded in devising a suitable new voting system which should muster the unanimous support of the Council and eventually be ratified by the Member States. I know that it is not as simple as we would have liked. It is, however, as simple or complex as any other rotation system and fairly similar to the system operating at the Federal Reserve, where the presidents of Federal Reserve Banks are also allocated to groups and exercise their voting right in the Federal Open Market Committee (FOMC) with different frequencies. I hope that our exchange of views later on will help to clarify any other outstanding issues. BIS Review 8/2003  3
Policy makers in Asia are well aware of the complications and costs involved in sustaining their current regimes. Many are moving toward permitting more flexibility against the dollar, and even in their effective exchange rates. Few however are comfortable with the prospect of accepting large short-term volatility and large movements over time in their effective exchange rates. They are looking for a world in which they can have more monetary policy independence, progressively more financial integration with the globe, and face less risk of large destabilizing moves in the major currencies and less vulnerability to acute pressure on their own currencies. The exchange rate system among the major currencies provides a desirable degree of flexibility in real exchange rates. Although the process of cooperation among the G-7 has not eliminated the large swings in exchange rates associated with large changes in fundamentals among the major economies, it has had some modest success in avoiding more damaging movements. This cooperative framework, characterized by a pragmatic approach to promoting greater stability in exchange markets, offers a reasonable model for cooperation among the major currencies and those of the emerging world. The challenge ahead is to help manage the transition to the monetary system that provides for more flexibility in the exchange rates of all the major economic areas, and this has to be handled with care.

Chart: Productivity growth in advanced economies Productivity growth has been declining in advanced economies since the beginning of the 2000s. The willingness to invest has been low since the financial crisis. To what extent this is related to the economic downturn remains to be seen. Better times may eventually entice investors, but it is also possible that the substantial changes in the global economy have had a more lasting effect on the willingness to invest and the growth capacity of western economies. Chart: Real wages in mainland Norway, the US and Germany A demanding restructuring process is underway in the traditional industrialised countries. In the US and Germany, real wages have barely risen since the turn of the millennium. Income inequality has deepened. This may in part be related to the global change in the price of labour. In other countries, particularly in Europe, economic restructuring is throwing a large number of people into unemployment. Over 26 million people are now unemployed in the EU today, almost 10 million more than in 2007. Low growth, high unemployment and high debt levels are not a good combination. Even though there are signs of a moderate revival of activity abroad, growth may remain low for a protracted period. Chart: Real wages and productivity for mainland Norway Real wage growth in Norway has diverged substantially from that observed in Germany and the US. This is attributable to the sharp price rise for Norwegian goods in recent years. Norway’s terms of trade have improved.
Stable economic policy interacts with structural changes and IT In order to see why the Swedish economy is doing better than it has been for a very long time, we need to consider how economic policy has been realigned in the past decade and a half. Credit and currency markets have been deregulated, the tax system has been reformed, components of the system of transfers have been modified and competitive pressure has increased. All this has helped to improve the workings of our economy. Moreover, price stability is now monetary policy’s statutory objective and it has been explicitly assigned to what has become even a formally independent central bank. Low inflation is admittedly not an ultimate objective for economic policy in general. It serves instead as an instrument. All those who experienced the economic situation in Sweden in the 1970s and 1980s know that inflation can never be associated with an economic development that is lastingly favourable. That is why price stability is an integral part of any economic policy’s strategy for rising prosperity and high employment. In order to provide a stable and credible framework for the new direction of economic policy, the government budget was successfully consolidated. Difficult political considerations and decisions were involved in this process and opinions may differ about particular items or aspects of the consolidation policy; but that does not detract from the main impression of a successful outcome in the sense that economic policy’s commitment to stability was rendered credible.

Replenishing their inventories, companies substantially increased their demand for commodities worldwide. Russia is a major producer of key commodities. High demand for Russian exports spurs economic growth this year. As companies complete their inventories, the effect of this factor will be tapering off gradually. The growth of oil export quantities will also be supported by the easing of the OPEC+ oil production cuts in response to the recovery of demand. Taking this into consideration, we have raised the oil price path in our forecast by 5 US dollars per barrel in the next three years. According to our preliminary estimates, the expansion of oil output under the new OPEC+ agreements will add about 0.1 pp to GDP growth this year and 0.2–0.3 pp next year. Another important growth driver is domestic demand, including both consumer and investment demand. Considering these trends, we have revised our economic growth forecast for this year upwards from 3–4% to 4–4.5%. After the recovery, the economy will expand at a pace close to its potential. We forecast that GDP will equal 2–3% in the next two years. The possibility to achieve higher economic growth rates will depend both on the expansion of production and logistics capacities and on labour resources, their expertise and performance. T hird. Monetary conditions have been progressively adjusting to the earlier increases in the key rate, but are still accommodative.
Firms’ management and boards should ensure that in credit assessments equal focus is placed on the liquidity profile of their clients as on their capital strength. Right-way risk is only right-way if a client is still standing when the hedge matures. Investment banks must bear in mind that their positions can play an important role in the functioning of the economy. Whilst it might be good risk management to reduce a client’s exposures when it suffers cash flow stresses from margin calls, was it good risk management for the bank to sleepwalk into that position in the first place? Working with the client to understand and anticipate all possible future outcomes, and access to facilities in order to meet liquidity demands in a stress, should surely be at the cornerstone of a client-centric business. It is important here for banks to think a few steps ahead and have in mind the potential indirect second-round effect of their counterparty management practices – some of which can otherwise  Page 5  come back to hit them. One other common feature of periods of stress has sometimes been the inadequacy of initial margins required by investment banks over the counter. The spike in nickel markets in March 2022 reminded everyone that progress needs to be made here. And while CCPs have lessons to learn, so do banks. When they undercook initial margins in benign times, banks give their clients the illusion that some products – for example hedges – are cheaper than they really should be economically.

[2] Whilst waters were calmer at that time, we could see waves on the horizon. We warned that future cyclical and structural changes could materially threaten profitability and sustainability of certain business models. In the months since we sent that letter, events have unfolded – and indeed a war broke out – that now make this is all feel more present and real. Geopolitical and macroeconomic uncertainty is translating into market volatility. Meanwhile, digitalisation continues at pace, as new technologies, products and partners enter the financial services ecosystem. And the risks from climate change loom and threaten to change the very nature of the environment banks operate in. These are all key features of a new world facing investment banks. Like anyone preparing for an open water swim, if investment banks are to perform in these uncharted waters, they will need to challenge themselves on their true capabilities, be forward-  Page 3  looking, anticipate changing conditions, and prepare to encounter unexpected currents along the way. This will be a real test of their true mettle. So what does this mean in practice? Financial Resilience Investment banks’ business models have changed significantly since the Global Financial Crisis. Legacy balance sheets have mostly been cleaned up. Firms no longer look to boost returns from proprietary trading. Client-driven strategies have become the norm.