samchain/econo-pairs-v1 huggingface dataset:
Evidently, the situation we are in calls for a whole set of thoroughgoing reforms and measures, in step with the scale of the challenges facing the economy. And if the adoption of structural reforms always requires a particular effort on the part of the industries involved in economic, social and political terms in order to achieve the highest degree of consensus possible, such effort is evidently all the more necessary in the current exceptional circumstances. Now on to the last matter I shall address today: the situation of the Spanish financial system. The Spanish financial sector has been affected by the financial crisis since it began, although its effects have undoubtedly heightened since last summer. The current crisis has two characteristics. Firstly, it is an international crisis on a large and widespread scale, affecting different markets, numerous institutions in various countries, a wide variety of assets and the real economy. In a further manifestation of the process of globalisation, the problems generated in very specific geographical markets have ultimately spread to most countries, and it is not very realistic to believe that isolation from the crisis may be an option. Secondly, the crisis is going to cause an across-the-board reduction in the financial and banking business in particular. The excesses seen in financial innovation and in overly expansionary credit policies have caused many of the current problems, whereby there will foreseeably be a back-to-basics movement entailing a clear reduction in total turnover in the financial sector.

I would like to stress just two ideas which may help us understand the exceptional situation we face and justify the urgency of the measures Spain needs. The first is that there is a feedback loop between the vicious circles in which the economy is caught and the contractionary forces at play. And if prompt action is not taken, these may inhibit the operation of the factors that should underpin a turnaround towards recovery. The second is that, once the worst of the crisis is behind us, i.e. when international financial markets regain stability and the world economy begins to pick up, the Spanish economy will not be able to resume growth at rates similar to those in the recent past if substantial structural changes are not addressed. This is because we will no longer be able, as previously, to resort to growing debt to stimulate domestic demand. The fiscal drive to date had been notable. This is evident in the rapid deterioration in public finances in recent months. Accordingly, in order to infuse economic agents with confidence, a strategy should be designed immediately to allow a return to budgetary stability, which was of such benefit to Spain. The current priority, therefore, is to focus on applying forthwith structural measures to promote a growth pattern with a greater emphasis on productivity, in contrast to that followed in the past 15 years. Specifically, among the aspects requiring the adoption of immediate measures are those relating to the workings of the labour market.
And the European Market Abuse Regulation (MAR) will greatly extend the coverage of market abuse provisions over FICC markets. Internationally, the programme of derivatives reform led by the G20 will see large sections of the derivatives market moved onto organised venues for the first time. And foreign exchange committees have committed to developing a set of global high-level principles on FX trading. Closer to home, there have also been a number of initiatives aimed at improving culture and behaviour at a firm and individual level, including the UK Parliamentary Commission on  4  BIS central bankers’ speeches  Banking Standards, the Banking Standards Review Council (BSRC), and widespread efforts by individual firms to strengthen internal controls. The introduction of malus, bonus clawback and the Senior Managers and Certification regime in the UK will strengthen accountability as well. Is it enough? This range of initiatives should make markets more fair and effective. But we need to make sure that taken together they add up to a comprehensive solution to fix the barrel and to get rid of the bad apples. A primary aim of our Review is to take stock, and ask whether the extent of regulatory, organisational and technological change since the crisis will be sufficient to ensure FICC markets are fair and effective in the future. Over the next three months, we want to hear from those directly active in those markets, from the companies and households who rely on them, from academics, and from public authorities globally.

In this regard, while the Gross Domestic Product increased by 6 percent on an annual basis in the last quarter of 2009, it decreased by 4.7 percent across the year (Figure 23). Seasonally adjusted data indicate continuance of the recovery process in national income as of the second quarter of 2009 (Figure 24). Data regarding the first quarter of 2010 indicate that the rebound in Domestic Demand is gradually becoming stable and broad-based. The influence of policy rate cuts besides the hikes in public expenditures are getting more pronounced and a relatively more robust activity in sectors sensitive to domestic demand is being witnessed. In this respect, the analysis of the recovery process in industrial production indicates that besides the sectors stimulated by fiscal incentives and their intermediate input suppliers as well as the nondurable goods sector and sectors with strong links to the construction sector have been on the rebound (Figure 25). There is no significant improvement in external demand. The global growth outlook continues to dampen economic activity, particularly in sectors that are relatively more sensitive to foreign demand. Following the recent crisis, manufacturing firms that mostly serve external markets have been operating at lower capacity than local market oriented firms (Figure 26). Thus, in line with our previous forecasts, domestic demand has remained more robust than foreign demand. Yet, aggregate demand uncertainty continues to be a major concern, as inventory buildups have remained limited.
Current corporate tax regulation in Spain and in other European countries gives preferential treatment to debt as opposed to equity, since interest payments are deducted when calculating the tax base for corporate income tax. This bias makes issuance of debt more attractive to firms than issuing equity. In this regard, a more neutral corporate tax system that treats these two instruments equally would incentivise a higher resort to equity. Another friction that may discourage firms from issuing equity is the underdevelopment of equity markets in Europe compared to other areas such as the United States. In this connection, one of the aims of the Capital Markets Union project is to foster the development of these markets through different actions, including the removal of barriers that prevent the integration and development of capital markets. The development of equity markets can have several benefits for the corporate sector and for the economy more generally. The resort to equity finance improves the robustness of corporate balance sheets, as a higher share of equity makes firms less vulnerable to adverse shocks such as an increase in interest rates or a fall in earnings.8 This is because equity is not a redeemable liability. Also, equity is a more appropriate instrument for the financing of high-risk projects such as those involving startups, intangibles and innovation.

The only way to restore market confidence and the proper transmission of our monetary policy was a fully credible backstop against disaster scenarios. Our new programme of Outright Monetary Transactions provides this backstop by allowing for unlimited interventions in government bond markets. This commitment has generated a lot of debate. But we have to understand how markets work. Our actions have to send a clear signal to markets that their fears about the euro area are baseless. It is important to stress that “unlimited” does not mean uncontrolled. Most importantly, to qualify for interventions, countries must have agreed a European Stability Mechanism (ESM) programme with strict conditionality and IMF involvement. The ECB will only intervene if the policy conditions under that programme continue to be met. BIS central bankers’ speeches  3  Conditionality is very important. It ensures that countries continue to reform while the ECB is active. It provides a clear basis for us to terminate our operations if the programme is not complied with in full. And it also protects the ECB’s independence, as we will not be forced to substitute for a lack of actions by governments. Consequences of the ECB’s actions So what can citizens expect will be the consequences of the new programme? Let me emphasise three key points. First, our actions will not lead to disguised financing of governments. Interventions will take place solely on the secondary market, where bonds already issued are traded. This is fully consistent with the Treaty’s prohibition on monetary financing.
Monetary aggregate targeting frameworks fall between these two extreme regimes depending on the extent of exchange rate flexibility of such policy regimes. Evolution of Monetary Policy Framework in Sri Lanka Sri Lanka’s monetary policy framework has also evolved from a currency board arrangement before the establishment of the Central Bank of Sri Lanka in 1950. This history has been well covered in the masterpiece, “From dependent currency to central banking in Ceylon” written by Professor H A de S Gunasekera, in whose honour my retired senior central bank colleague Sirimevan Colombage delivered an eloquent speech recently at the University of Peradeniya. From 1950 to 1977 Sri Lanka’s monetary policy framework was largely based on maintaining a fixed exchange rate regime in terms of fixing the value of Sri Lanka rupee first to the sterling pound and then to the US dollar. Under this fixed exchange rate regime, domestic inflation was directly linked to foreign inflation and therefore there was no need for an explicit monetary anchor to manage inflation. The Central Bank did not have much leeway to control domestic inflation as the fixed exchange rate was the anchor to manage inflation. Like many other things, inflation was also more or less imported from the United Kingdom those days! This system worked well as long as Sri Lanka earned sufficient foreign exchange to meet expenditure on imports without any restriction.

This range for the terminal rate has been obtained assuming that the Eurosystem maintains the size of its asset portfolio under the APP and PEPP constant over a horizon consistent with our communication on the PEPP (for which reinvestments are foreseen to extend until end 2024) and with survey-based expectations on APP (for which the reinvestment horizon is more open-ended). However, in the case of the APP the ECB could potentially decide to start reducing its asset stock earlier than markets currently anticipate. Given our understanding of the way asset purchase programmes work, such a course of action would have a downward effect on the terminal rate.17 This is because, if we announce our intention to initiate the unwinding of our APP portfolio earlier than expected by investors, bond yields will increase, especially those at  14  We consider both fully structural Dynamic Stochastic General Equilibrium (DSGE) models, semi-structural models, like NiGEM,and large macroeconometric models estimated to replicate the euro area economy. In the case of the DSGE and the macroeconometric model, we set them to reproduce the September ECB MPE projections and then consider counterfactual paths for rates, whereas in that of the NiGEM we employ its built-in projections. Agents in the DSGE model have rational expectations. NiGEM is solved both with rational and adaptive expectations. Adaptive expectations require a less aggressive response (terminal rate 1.75%) as expectations are heavily influenced by the past, characterised by a long period of below-target inflation in the euro area.
Time lag of the reaction of the banking sector to the change of the Bank of Russia key rate remains large though, according to our estimates, gradually shrinking. This refers to deposit rates as well. As lags shrink, the effectiveness of the interest rate channel of the Bank of Russia monetary transmission mechanism will improve. As for the foreign exchange transmission channel, its impact is complicated due to the high volatility in the foreign exchange market which resulted, inter alia, from the restricted access of Russian banks and companies to external markets. In order to normalise the situation with foreign exchange liquidity, the Bank of Russia has introduced reverse transactions to provide it. Interest rates on these transactions have been decreased to the level of LIBOR rates plus 0.5 pp. The volume of foreign exchange liquidity provision is determined by the demand estimates based on the balance of payments forecast. The next one-year repo auction of 15 December will accept Eurobonds and provide for the possibility of early deal termination by borrowers. In the near future the Bank of Russia also intends to consider the introduction of foreign exchange lending secured by non-marketable assets. Foreign exchange loans, extended by banks to companies with stable income in foreign currency, are supposed to be eligible as collateral. Bank of Russia forecast The current situation requires updating the forecasts and adjusting the policy to ensure financial and price stability enabling the economy to adjust to the new conditions and start developing as quickly as possible.

I will not attempt to do any analysis here but I will limit my remarks to saying that the inflation targeting and the flexible exchange rate regime we have chosen in Albania has served us perfectly well. 1/3  BIS central bankers' speeches  Our monetary framework has strengthened our successful transition and has increased the resilience of our economy. Over the past two decades Albania has enjoyed: (i) rapid economic growth, – with GDP growth averaging at 5 percent; (ii) price stability, – with inflation rates averaging at 2.4 percent; and, (iii) a rapid monetization, – with financial assets increasing from 52 to 92 percent of GDP. Furthermore, the flexible exchange rate has proved to be a reliable shock absorber. The Albanian lek depreciated by around 11% in the aftermath of the 2008 crisis. This depreciation occurred in the face of reduced external demand, decreased capital inflows, and higher risk premia in the domestic financial market. This helped us regain some external competitiveness, but it also allowed us to pursue an expansionary monetary policy and to avoid recession. 2. Exchange rate movements under an inflation targeting regime  An exclusive commitment to price stability does not necessarily mean that central banks can afford to ignore exchange rate movements. In small open economies, such as ours, exchange rates have both, a direct effect on prices through the imported goods, and an indirect one through their impact on cost competitiveness, external balances and aggregate demand.
The first year of transformation - 1990 - was practically devoted to the stabilisation goal; further transformation steps taken in 1991 were accompanied by continuing stabilising policy. Measures seeking external stability were an indispensable part of the programme. It was understood that the exchange rate would have to be undervalued in relation to purchasing power parity to sustain the liberalised trade and a partly convertible currency and to function as a stabilisation anchor. Compared to steps such as freeing of prices, freeing of external trade, and introduction of partial convertibility, it was clear that privatisation would be a gradual, more time-consuming process. First, steps were taken to stop state subsidies to firms (as well as to prices), and to let the firms face a hard budget constraint; that included also a stricter credit policy by commercial banks. A shift of property rights to private hands was the only way how to BIS Review 25/1997  -4-  change fundamentally the behaviour of firms, expose them to the pressures of the market, and initiate productivity increase and structural change. In 1989 the private sector was almost non-existent in the former Czechoslovakia, accounting just for 3 per cent of GDP. Domestic capital base was weak and institutions of market economy such as stack exchange and developed financial sector were lacking. Therefore, a combination of standard privatisation methods (that means sales, including sales to foreign investors) with non-standard ones was used to speed up the process.

At the same time, the public debt-to-GDP ratio, while remaining very high at almost 100%, has stabilised. The public 2/4  BIS central bankers' speeches  deficit ratio came down from double-digit levels at the peak of the crisis to 3.1% in 2017. More than two million jobs have been created since the end of 2013 and the unemployment rate has fallen from a peak of more than 26% to 15%. Throughout the recovery, the pace of employment growth has broadly matched that of GDP growth, generating around half a million jobs each year. In a context of subdued wage growth and low inflation, employment growth has supported disposable income and a recovery in consumer spending, which is now close to its pre-crisis level. Export performance has substantially improved, helping to reduce external debt. The current account deficit of almost 10% of GDP before the financial crisis turned into a surplus in 2012 and has remained positive throughout the recovery. The number of exporting firms has grown and exports now go to more destinations than in pre-crisis times. Finally, wage moderation and low inflation are supporting competitiveness. In fact, the Spanish economy recovered the competitiveness lost in the decade prior to the financial crisis. However, the recovery of the Spanish economy may have passed its cyclical peak and downside risks have emerged. While still growing at a reasonable pace, the rate of economic expansion has slowed gradually in recent quarters.
The interest rate decision and our forecast for the interest rate To summarise, one can say that two forces are pulling in opposite directions (slide 13). One is the stronger development here at home, and the other is a slightly weaker demand abroad. But even if we expect that slightly poorer international growth will have a dampening effect on the Swedish economy, this is not sufficient to hold back the increased cost pressures. The interest rate therefore needs to be raised, and this was what we did around two weeks ago (slide 14). With regard to the future repo rate, our forecast remains largely the same as in June, despite the fact that a lot has happened in the world economy since then. So to keep the underlying inflation rate around our target of 2 per cent a couple of years ahead, our assessment is that it is necessary to raise the repo rate slightly further in the future – to around 4.25 per cent during the first half of 2008. This interest rate policy should at the same time contribute to balanced growth in production and employment. A couple of words about uncertainty – a forecast and not a promise There is always considerable uncertainty regarding future economic events. This means there is also considerable uncertainty regarding future repo rate movements. The interest rate path we have published is a forecast. It is not a promise! There are primarily two risk scenarios involved this time.

The crucial task of valuing and disclosing the impact of losses on core banking institutions is still work in progress: important announcements are being made almost daily, and beyond them lies the equally important task of repairing banks’ balance sheets. The current shortage of liquidity makes the pricing of complex assets even more difficult. At the very least, this reinforces the need for transparency in providing estimates of losses, and descriptions of the best-efforts processes used to produce these estimates. The process of price discovery for many complex asset classes is unlikely to be completed quickly. For assets directly related to US sub-prime, this is unlikely to be before the US housing market stabilises. Other structured credit markets are likely to remain illiquid until confidence in the banking sector has been restored, and large financial institutions are willing to take more risk. Clearly the situation is still developing. And its impact on the wider economic outlook – global and domestic – will depend critically on what happens from now on. Here there are some major uncertainties.
Let me share a few thoughts on some of the current issues which have a bearing on Asia’s growth and the global environment ahead. Rising global food prices The first, and perhaps most pressing issue that the world faces, is spiraling inflation. Global food prices have spiked in the recent months due to a confluence of factors. Demand has increased to feed a growing global population with a rapidly expanding middle class in the developing Asian countries. This demand is compounded by competing uses for food sources to generate biofuel and feed. Meanwhile, sources of supply have been hit by rising energy costs, increased competition for arable land, and the erratic weather. As a result, prices of many food commodities including wheat, corn, and rice, a staple for all Asians, have soared. The United Nations has declared the drastic increase in food prices “an unprecedented challenge of global proportions” and established a task force to tackle the food crisis. This is indeed a global issue and cannot be resolved overnight. Many of these factors are structural and will take time for the demand-supply equilibrium to be established. On the Asia Pacific front, the Asian Development Bank has recently announced $ million of immediate budgetary support to help countries that have been worst hit by rising food prices. With increasing food prices and high oil prices, mitigating the impact of strong inflationary pressures will remain a key priority for many Asian governments.

In this respect, I am pleased to note that Singapore capital markets has already facilitated the funding of projects such as Hyflux water treatment plants in China via a SGX listed business trust IPO completed last year. Underlying all the initiatives I have just mentioned is the potential demand for environmentally sustainable solutions. The promise of such solutions, besides in offering economic opportunities, lie in their potential to address the rising challenges of urbanization, increasing energy prices and shortage of clean water. Asian businesses should position themselves for the gradual shift towards greener living as such technologies are not only socially acceptable, but also socially demanded. Corporate governance Before I conclude, let me share one final thought. Asian SMEs, in their bid to become top Asian and global companies, should devote attention to corporate governance. A sound corporate governance structure will help to ensure proper management practices, robust internal processes, and prudent controls. In the long term, these practices will help foster a strong reputation and increase the franchise value of the company, paving the way for Asian SMEs to expand into global markets. Indeed, global competition will require companies to be held to such high standards, especially those demanded by institutional shareholders. Closing To sum up, Asia and Asian businesses are poised for exciting times in an era of rising prosperity and growth. There will be both challenges and opportunities. One need not be daunted by the challenges. However, there is a need to manage and mitigate the risks that come with the opportunities.