samchain/econo-pairs-v1 huggingface dataset:
The latest figures have indicated the better-than-expected recovery of the global economy and financial markets due to the large, timely and broadbased economic stimulus measures that have been implemented to combat the crisis. In most countries, manufacturing production and trade have improved, while rebounding consumer and business confidence has helped boost the private demand. As for the financial system, de-leveraging and the tightening of credit underwriting standards have moderated. Banks have gradually rebuilt their strength and become less dependent on the support from government facilities. Ladies and Gentlemen, Let me turn to the case of Thailand. Our successful navigation of the Thai economy through the crisis can be credited to two key factors. The first is our strong economic fundamentals including the resilient financial system as a consequence of intensive and continuous reforms since the 1997 Asian crisis and the second is the timely implementation of both monetary and fiscal stimulus measures. You may remember that, the Bank of Thailand has reacted decisively and preemptively by lowering the policy interest rate by 250 basis points to a historically low level of 1.25 percent, while the Thai government launched massive stimulus packages and other measures to help relieve households’ cost of living through the difficult time. As a result of these policies and the revival of the global economy, our GDP data for the fourth quarter of 2009 shows solid growth and momentum, growing 5.8 percent year-on-year and 3.6 percent quarter-on-quarter, one of the highest in the region and the world.

Personally, I would expect the fiscal discipline of Maastricht to be retained and observed. And I am yet more confident that the European Central Bank will remain steadfast in its counterinflationary role. That combination will, as is widely acknowledged, transfer a considerable burden of adjustment onto structural and microeconomic policies. It is good that the focus should rest there and it will be even better when more progress is visible on that front - better not simply for Europe but for the world, which needs a strong European economy. And within Europe itself I feel that there is something of a political imperative for the impact of the euro to have been demonstrated as unequivocally beneficial by the time that the potentially rather emotional withdrawal of national banknotes takes place in 2002. The concerns over the apparent tensions in economic policy in consequence of the euro’s arrival have plainly had some adverse effect on sentiment towards the euro in foreign exchange markets, although we know that other factors, notably the conflict in the Balkans, 3  BIS Review 53/1999  have been important too. When you look at the ups and downs of the relationships between the world’s leading currencies over the years you will recognise that the depreciation in the euro since its inception is not all that exceptional, however much we may regret that movements of this sort may nowadays be regarded as within the definition of normal.
6  BIS Review 33/2004  The “simplified standardised approach”, as we call it, is intended to be useful for those countries that do not wish to adopt all of the options available under the new framework. The trade-off, however, reflects the fact that the policy balance at stake is between simplicity and risk-sensitivity; if one chooses simpler rules, the cost is less sensitivity to risk and hence greater conservatism in capital requirements. 3. Competition and consistency of application. Another broad concern that the Committee has worked to address is Basel II’s impact on global competition. In particular, some have asked whether banks that choose Basel II’s advanced approaches will enjoy benefits over those that choose simpler approaches. Others have wondered whether banks that remain on the 1988 Accord for some time will be disadvantaged. To respond to these concerns, we should understand that adopting an advanced approach does not automatically reduce a bank’s capital requirements. In fact, a more risk sensitive capital framework is intended to align capital requirements more closely to risk. This could mean that capital requirements for an advanced bank may actually rise relative to the current rules if the bank’s exposures are actually riskier than the measures under the 1988 Accord would have suggested. Furthermore some national supervisors may set higher capital requirements than implied by Basel I, perhaps even higher than those implied by Basel II, depending on the risk environment.

Nevertheless, for many observers, Switzerland remains a tiny spot on the European map, a country of 7.5 million inhabitants completely surrounded by the European Union whose population has already grown to several hundred million. Our geographical position obviously puts the question of joining the European Union squarely in the centre of often heated debates. For our economy, however, the real challenge is not to become more European, but to open up further to global markets. Today, Switzerland is more than merely a quaint little country for tourists; it is not only home to watchmakers and bankers or trains that run on time. This cliché is a thing of the past. Switzerland today is a global production platform with 4 million jobs within its borders and 1.8 million people working in Swiss companies abroad. This ratio is unique for an industrialised country. It is the result of a long tradition of Switzerland’s presence abroad. We are all familiar with the big names in our industry which, as early as the beginning of the last century, courageously invested abroad with the goal of conquering new markets. Switzerland’s identity in the world has often been better perceived through the activities of the International Committee of the Red Cross and through our big companies, rather than through diplomacy. The internationalisation of the Swiss economy has not slowed down in recent years - on the contrary, it has amplified. Let’s look at the figures: 20 years ago, our current account surplus, i.e. foreign investment, accounted for 5% of Swiss GDP.
The resulting near-term refinancing schedule is estimated by Moody’s at $ trillion over the next three years. Among UK banks, it is in excess of £ trillion between now and 2014. As hangovers go, this one is large and will linger. Dealing with today’s debt hangover The road to balance sheet repair is likely to be long and winding for both the real economy and financial system. Adjustment needs to be neither too fast nor too slow. Too fast and lending and spending fall, jeopardising today’s recovery. Too slow and balance sheet fragilities persist, jeopardising tomorrow’s stability. So what principles should guide the transition? Let me highlight two drawn from the past. The first comes from monetary policy. Over the past 30 years, many economies have sought to bring down inflation – so-called disinflation. The optimal rate of disinflation is usually felt to be gradual to limit damage to short-run growth. But there is an important exception to this gradualist rule. If a downward inflation surprise comes along, it is optimal to pocket this windfall as this accelerates the path to low inflation without harming growth. Disinflation is “opportunistic”. 9 The same general principles apply to the repair of indebted balance sheets. Take banks. Over the medium-term, their capital ratios are likely to need to rise. If this is achieved too fast, by constraining lending, it poses a risk to growth. As with disinflation, there is a strong case for gradualism.

Mr. Erçel reviews central bank operations in 1996 and discusses the philosophy of central banks Remarks by the Governor of the Central Bank of the Republic of Turkey, Mr. Gazi Erçel, on the occasion of the 65th Shareholders’ Ordinary General Meeting in Ankara on 15/4/97. I expressed my views concerning the main functions of a central bank in my speech to last year’s General Assembly. Today I would like to summarize the past year’s operations and share with you my thoughts on the philosophy of central banking. You will find detailed assessments of economic developments in Turkey and abroad in the Bank’s Annual Report for 1996, which has already been distributed to you. Instead of repeating these details, I will describe the implications of the events of 1996 for the operations of the Central Bank. The most important circumstance affecting the economy last year was the long-lasting period of political uncertainty. After the general elections, it took the first six months of the year to put together a coalition government. Political instability, Turkey’s entry into the Customs Union, and lack of the political determination needed to fight inflation created uncertainty in the financial markets. The Central Bank responded by aiming its monetary policies at achieving and protecting stability in the financial markets instead of aiming them at decreasing the rate of inflation. While withholding announcement of its targets for the second half of 1996, the Central Bank implemented a monetary program in keeping with its inner discipline.
For example, the U.S. housing boom was unsustainable because it was not possible to indefinitely keep relaxing credit underwriting standards to qualify new buyers to stoke demand. It was also unsustainable because the rise in prices often led to a supply response that limited the prospect of further price increases. 2  BIS central bankers’ speeches  Another class of threats to financial stability emerge from sudden reversals of market sentiment regarding economic policy and institutional arrangements. This is a complex issue which I will not explore in detail today, other than to note that here too, early profits all too often feed pro-cyclical behavior, undermining market discipline. This in turn facilitates the accumulation of both private and public imbalances that are painfully difficult to unwind when financing suddenly stops. When sudden reversals occur, large costs are imposed on the real economy and the financial system, costs that are not fully internalized by the market participants that may have benefited from the boom. The often significant negative externalities associated with financial market instability suggest that regulation and prudential standards should be aimed both at limiting the frequency and extent of booms and at building a more resilient financial system, so there is less damage when the busts inevitably occur. The goal here is not to use regulation to prevent or even limit innovation, whether real or financial. Many innovations have generated significant benefits for the macro-economy. For example, the Internet, which lay at the heart of the tech bubble, generated myriad benefits.

In response to the weaker outlook, the Governing Council took a series of decisions in September this year to ensure that financing conditions remain favourable. It decided to lower the interest rate on the deposit facility to -0.5%, to restart net asset purchases, to strengthen forward guidance on both these tools, to make the conditions on the targeted longer-term refinancing operations (TLTROs) more attractive, and to introduce a new regime of remuneration for excess reserves held by banks with the Eurosystem. These measures work together to keep interest rates at all maturities around levels consistent with very accommodative financing conditions. The ECB’s negative policy rates and forward guidance on their likely future path influence short to medium-term interest rates, which are used by banks to price loans to firms. In parallel, the net purchase of bonds eases medium- to long-term yields, which provide the benchmark for longterm loans to households. The more attractive conditions on the TLTROs help keep bank credit flowing to customers on affordable terms. At the same time, the Governing Council’s decisions in September showed that it was alert to the potential side effects of monetary policy. The new two-tier regime of excess reserve remuneration exempts a share of banks’ liquidity deposited with the Eurosystem from the negative interest rate applied on the deposit facility. This will also ensure that banks remain willing and able to pass on very accommodative financing conditions to the economy.
Creation of off-balance sheet funding vehicles, structured products and complex corporate structures to minimize regulatory requirements and tax obligations reduces transparency, introduces new risks and limits the effectiveness of resolution regimes. Other examples of reinforcing mechanisms in our system are: •  Collateral tied to credit ratings. Credit downgrades lead to increased collateral calls, which drain liquidity, forcing asset sales, further weakening the firm subject to the collateral calls. •  Collateral and haircuts. When volatility rises and that leads to increased haircuts, the result can be a vicious cycle of forced asset sales, higher volatility and still higher haircuts. •  Compensation tied to short-term revenue generation, rather than long-term profitability over the cycle. This causes risk-takers to take on too much risk because they are compensated on the upside. This risk-taking extends the boom, setting the stage for a bigger bust. Although some of these practices might appear sensible from the narrow perspective of an individual firm or market, this crisis has shown us that when all firms or market participants simultaneously take an action that appears to be in their immediate, narrow interest, the  2  BIS Review 125/2009  collective impact on the system as a whole can be disastrous. We need to find ways to weaken or eliminate these reinforcing mechanisms and we need to introduce new dampening mechanisms into the financial system.

Legal regimes are different; national authorities have different incentives; and coordinating resolution across multiple geographies in a way that treated counterparties in different jurisdictions equivalently would be a daunting mission. Similarly, designing an effective capital surcharge for systemically important institutions will be very challenging. Broadly, there are two approaches. We could either require a set of firms identified to be systemically important to hold additional capital or we could introduce a capital surcharge for firms linked to measures of systemic risk. In broad terms, the factors that could be used to identify systemically important financial institutions would be related to a firm’s interdependence with the financial system and the impact on market confidence should the firm become distressed. Measures of size, leverage, liability structure and importance in credit formation and liquidity provision could all be indicators of systemic importance. Developing a consistent, objective set of measures either to size a capital surcharge or to identify such firms is particularly difficult. For example, introducing a single measure to size a capital surcharge such as firm size, may create arbitrage opportunities and will almost certainly not capture the full extent that an individual firm may contribute to systemic risk. Moreover, identifying a set of systemically important institutions may reinforce concerns about moral hazard. We also have the difficulty that the particular metrics used to determine which firms are systemically important are likely to change over time with changes in market structure and in the evolution of particular financial institutions.
Timothy F Geithner: Progress toward financial stability in emerging market economies Remarks by Mr Timothy F Geithner, President and Chief Executive Officer of the Federal Reserve Bank of New York, at the W P Carey Global Leader Lecture, Paul H Nitze School of Advanced International Studies, Johns Hopkins University, Washington DC, 4 October 2006. I would like to thank Matthew Higgins of the Emerging Markets and International Affairs Group and Margaret McConnell of the Research and Statistics Group at the New York Fed for assistance and comments. *  *  *  We are approaching the 10-year anniversary of the financial crises of the late 1990s. These crises began in the emerging world and caused very substantial damage to the economies and financial systems of a large number of emerging market economies. They also provided the backdrop if not the catalyst to the crisis that hit the major financial centers in 1998. The world today looks considerably different than it did on the eve of those crises, but the episode still looms large in the minds of policymakers and financial market participants. The damage and fear of that time had a substantial impact on behavior, both in terms of the policies of governments and how market participants think about and manage risk. And those changes in behavior have been important contributors to the period of stable real growth and financial sector resilience that has characterized much of the world since.

In the case of the Eurosystem, the ECB balance sheet accounted for 12% of euro area GDP before the crisis and now stands at approximately 40%, around € trillion. Supervisory policy, for its part, has had to face the challenge of macrofinancial instability in a context of highly interconnected markets at the global level. In this area, the response has been three-pronged. First, the strengthening of microprudential regulation, with the new Basel III Accord, which includes greater capital requirements and a stricter framework for systemically important financial institutions. Second, the development of a new instrument, macroprudential policy, which addresses systemic risk and the procyclical behaviour of the financial system as a whole. And, third, the greater international coordination of regulation, which is necessary given the reality of globalised financial markets. Notable in terms of coordination has been the creation of the Financial Stability Board and, in the case of the European Union, the activation of the Banking Union, beginning with the SSM and the Single Resolution Mechanism. The new monetary policy I shall now turn to the challenges central banks face. The first is, evidently, identifying what is understood by the “new normal”. One question on which economic policy discussions are focusing is whether the advanced economies are in a new situation of secular stagnation, a “new normal” characterised by low growth, low inflation and low interest rates. We are seeing how, despite lower unemployment rates and the closing of the gap between potential and real output, inflation rates remain persistently low.
I and my colleagues on the Executive Board have, for example, discussed what would happen if the market’s policy rate expectations were rapidly brought into line with the Riksbank’s repo-rate path. If we assume an immediate alignment, then the upward effect on long-term rates would depend on what measure one sees as being representative of the monetary policy expectations. In the Prospera surveys in November, expectations were higher than those reflected in the forward rates but lower than the Riksbank’s repo-rate path. If we assume that it is the Prospera surveys that best reflect expectations, rather than the forward rate curve, the upward adjustment will thus be smaller, as will the effect on the long-term rates. Market expectations are thus clearly an item on the list of those factors that are difficult to assess and that monetary policy decision-makers must take a stance on. The assessment of market expectations was especially critical earlier in the autumn when the variation in different measures of market expectations was particularly great, with forward rates at a much lower level than other measures. When various indicators of monetary policy  1  The somewhat simplified term risk premium is used throughout instead of the more correct term maturity premium. 2  The price gain made on a long-term bond if the short-term interest rate is lower than expected is, on the other hand, somewhat higher than the price loss that will be made if the short-term interest rate is to a corresponding extent higher than expected.

The Eurosystem has decided to take firm action when it considers that these interest rates do not reflect a genuine credit risk differential, but rather unfounded fears about the reversibility of the euro. Because at that point, the effectiveness of the single monetary policy is clearly jeopardised: the key interest rates that we set no longer feed through to the real economy in the same way in all countries via the bank lending channel – which is a crucial channel in the euro area given the predominance of intermediated financing. In order to fulfil our mandate of maintaining price stability, our monetary policy impulses need to be transmitted homogeneously across the whole area. This is why we decided to create a new instrument: Outright Monetary Transactions. The idea is to have a credible backstop to counter unjustified increases in sovereign yields. This backstop must naturally be accompanied by strict conditionality to guarantee that the country concerned makes effective progress towards a more robust economic situation. By means of this new tool, as with all of the other tools that we have deployed since the start of the crisis – in particular the measures to support bank liquidity – the Eurosystem is endeavouring to relieve the pressure from the markets which may undermine the ability of countries to implement the reforms embarked on, and which may eventually jeopardise price stability.