samchain/econo-pairs-v1 huggingface dataset:
But Lola’s travails vividly illustrate how, in a complex world, you can get very different outcomes – good, bad or ugly – from an otherwise identical situation. And that’s a powerful metaphor for today’s FX markets. The complexity in FX markets lies not in the products themselves, which for the most part are relatively simple. It lies in the structures that have evolved to deliver them, driven by extraordinary technological innovation. For those with the right access and understanding, the multiple sources of liquidity, trading venues and execution algorithms available in FX markets offer enormous choice, competition and functionality. That’s the ‘good’. But finding your way around such complexity isn’t a cakewalk. Knowledge is power – and even quite sophisticated investors need their wits about them to benefit from everything the market has to offer. Complexity also poses new challenges to system-wide stability and functioning. And, sadly, it can give rise to new ways to behave inappropriately. When any of these go wrong, that gives you the ‘bad’ – sometimes even the ‘ugly’. But my message today is a call to arms, not a cry for despair. As Lola found, actions matter – and even modest ones can have big effects. Working collectively, there is huge scope for the buyside to improve the value they get as individual firms and strengthen the market as a whole. Today, I want to discuss three specific ways to do that.

Denny H Kalyalya: High performance leadership Opening speech by Dr Denny H Kalyalya, Deputy Governor of the Bank of Zambia, at the Opening of the High Performance Leadership Workshop, Lusaka, 9 August 2010. *  *  *    Chairperson    Workshop facilitators from MCA International    Directors and Assistant Directors    Other Participants    Ladies and gentlemen  On behalf of Bank of Zambia Senior Management and indeed on my own behalf, I wish to welcome you all to this important workshop, on High Performance Leadership, organized by our Human Resources Department in conjunction with MCA International. I commend the Human Resources Department for taking the initiative to organise this workshop, which is intended to facilitate exchange of information and views on appropriate leadership attributes to help us enhance our performance as leaders in our respective positions. Ladies and gentlemen, as you are aware, our key role as a central bank is to deliver low and stable prices and maintain financial system stability. In spite of the global economic downturn, our country is enjoying relative economic stability, with good prospects for the future following the recent and on-going significant economic transformation of our economy. Due to implementation of appropriate macroeconomic policies: i. The country has registered positive real GDP growth for the past 10 years and over the last five years, real GDP growth rate has averaged 6% annually;  ii. Inflation and exchange rates developments have also been favourable.
There is rising evidence that inequality can have an important bearing on the objectives central banks hold dear – the stability of the financial system and growth in the economy. Were inequality to jeopardise these public goods, it could make the everyday job of central banks somewhat harder. This means that, even if they cannot influence it, central banks have a strong vested interest in inequality issues too. In his book Fault Lines, Raghu Rajan – now Governor of the Reserve Bank of India – dug up the deep roots of America’s sub-prime crisis (Rajan (2010)). Many conventional crisis explanations have focussed on the combined effects of venal bankers, Byzantine risk models and somnambulating regulators. Rajan suggested these missed the deeper cause – rising US inequality. Facing this fault-line, US policymakers had chosen a policy of cheap and plentiful credit, expanded home-ownership and rising asset prices – a “let them eat credit” policy. Bank balance sheets grew to distribute this rapidly expanding credit cake, with banks taking their own healthy slice en route. Interestingly, this would not be the first time rising inequality has preceded crisis. The selfsame pattern preceded the financial crash of 1929 and the resulting Great Depression (Kumhoff and Ranciere (2010)). Between 1920 and 1928, the income share of the top 5% rose from little more than a quarter to more than a third. Household debt relative to GDP doubled. Inequalities widened and balance sheets fattened. And the upshot was the same: a huge economic contraction when the credit bubble popped.

Jörg Asmussen: Introductory statement by the ECB in the proceedings before the Federal Constitutional Court Introductory statement by Mr Jörg Asmussen, Member of the Executive Board of the European Central Bank, in the proceedings before the Federal Constitutional Court, Karlsruhe, 11 June 2013. *  *  *  Mr President, Members of the Federal Constitutional Court, Introduction The Federal Constitutional Court has invited the European Central Bank to comment on its monetary policy mandate, and particularly the decision taken by the Governing Council of the ECB in respect of the bond-buying programme, Outright Monetary Transactions (OMTs). My aim is to demonstrate that our measures were necessary, that they are effective, and that they fall within the mandate of the ECB. I will confine myself to the most important aspects of our written statement, looking in particular at two aspects – the “scope of monetary policy” and the “possible consequences of the ECB’s measures for national budgets” – as specifically requested by the rapporteur for today’s oral proceedings. The necessity and effectiveness of the ECB’s actions Let me first briefly explain why the European Central Bank opted for the OMT programme. The need for monetary policy operations In order to understand the need for our monetary policy measures, it is important to be aware of the economic environment that we faced last summer. Fears of an involuntary break-up of the single currency led to severe tensions in the capital markets.
With headline inflation tangibly above target in the run up to the main, New Year wage bargaining season and with the market clearly expecting that policy would be tightened, a small increase in Bank Rate was, on balance, warranted to avoid any misperception that our reaction function had altered. Strategically, the significance of this account is in the uncertainty injected by structural change; in this case, from migration. Of course, there is a host of demand-side uncertainties: about consumption, export growth and so on. But they fit comfortably into the MPC’s framework of producing a conditional forecast of probability ranges around a central projection. The supply-side uncertainties are something else – much harder to calibrate and potentially going to how we read and act on the economy. Inward migration is just the most obvious reason the monetary transmission mechanism might have altered. In reviewing globalisation more generally, others have described how the short-run relationship between aggregate demand and inflation may be weakened by firms’ enhanced capacity to switch production between countries, including via outsourcing, in the face of capacity and cost pressures. As policy makers discuss these issues it could become a commonplace that, in such an environment, central banks would have no choice but to respond more aggressively whenever inflation deviates from target; that, compared with the past, we would need to make bigger changes in interest rates, since bigger shifts in demand would be needed to bring inflation back to target.

In an intriguing paper, Ken Rogoff has shown that output and inflation volatility have declined by considerably more over recent decades than the volatility of returns on a range of financial assets (Table 1).6 As Rogoff discusses, there could be a number of explanations. Financial markets might believe that the Great Stability will not last. Or it may be taking them a while to price in lower macroeconomic volatility. Or the beneficial effects of macroeconomic stability may be being offset by something else. In the third category, Rogoff discusses the possibility that, with the lower level of risk-free rates that have accompanied the Great Stability, a given change in the yield curve now has a bigger proportionate effect on asset prices. I am not sure this would be my own best bet. Common v. idiosyncratic volatility But first, some facts. In the case of equity markets, we need to separate the dominant common (or macro) component of index returns from that attributable to variability in the firm-specific (or idiosyncratic) component. Comparing the period from 1980 to 1992 with that since 1992, when inflation targeting was introduced in the UK, the common component – proxied by the average correlation between returns on pairs of equity index components – has fallen by around 25%7 (Chart 1). Forward-looking measures, derived from option prices, imply that these pairwise correlations are not expected to fall much further. All told, this seems consistent with some beneficial effect on asset volatility from the Great Stability, but with Rogoff’s puzzle intact.
Third, we adjusted what has come to be known as our “chained forward guidance”. Indeed, in recent months the Governing Council had been explicitly stating its expectation that net purchases would end shortly before it starts raising policy interest rates. However, in our meeting last week, we agreed that any adjustments to the key ECB interest rates will be take place some time after the end of our net purchases under the APP and will be gradual. The change from “shortly before” to “some time after” maintains the sequential process we intend to follow in adjusting our instruments, but widens the possible time interval between these two events (the end of net purchases and the point at which we start raising our interest rates). This increases the flexibility with which we can implement our decisions in such an uncertain economic and geopolitical context. The gradual adjustment of interest rates is indicative of the Governing Council’s commitment to avoiding abrupt changes to monetary policy instruments. 6  Domestic policies Domestic economic policies must also have a vital role to play at the current juncture. First, it is important for domestic fiscal policy to exploit its ability to act in a very granular and targeted manner and to focus on supporting the households, businesses and sectors most affected by this combination of shocks. This includes particularly lowerincome households, which bear the brunt of the impact of inflation, and more energyintensive firms.

Compliance with the objectives set requires rigorous budgetary implementation, to which all levels of government should contribute. The strengthening of the budgetary framework under the recent Budgetary Stability Law should assist in this connection. The law sets explicit ceilings on deficit and debt levels in line with demands at the European level, and it includes stricter reporting requirements and new coercive mechanisms to ensure compliance by all tiers of government with fiscal targets. The fiscal consolidation strategy should also take into account the medium and long-term considerations affecting public finances, in particular those associated with population ageing, namely spending on pensions and health care. Lastly, it should be said that the weakness of the labour market and of growth have been the main factors behind the limited progress in correcting the budget deficit in 2011. Without a recovery in employment and in growth, it will be costlier in the long run to pursue fiscal consolidation, so boosting structural reforms must be a priority. Among these, promoting so-called flexicurity to the full is vital, and should be complemented by a fresh liberalisation drive in the markets for goods and services that is conducive to competition, training in new technologies, innovation and the improvement of human capital. Another key economic policy priority should be to continue with the ongoing clean-up, recapitalisation and restructuring of the Spanish banking system.
We are, though, in an asymmetric world. The effective lower bound on nominal interest rates is a serious impediment to counteracting deflationary shocks, and weighs on inflation expectations. In these circumstances, it is even more important to stress that we are ready to accept inflation moderately higher than 2% for some time to anchor fully medium-term inflation expectations. I will come back to that later, speaking of our forwardguidance. Finally, “medium term” means that we assess inflation performance over a long enough period, looking forward, but also not ignoring the past. To cut through the debates, sometimes a bit esoteric, the ECB is clearly an inflation-targeter, albeit a flexible oneii. We are focused on hitting our inflation target but we set policy in the context of the economic cycle, including looking at output gaps and employment. In general, we see no contradiction in full commitment to our inflation target and stabilizing employment. II. Is the ECB consistent in its instruments? Page 3 sur 9 Monetary policy is not a contest and there is no prize for doing the most. Nevertheless, it is sometimes said that we have not reacted as much as the US Fed. This is simply not true. The ECB is at least as accommodative and will be at least as patient as them. The Eurosystem balance sheet, in terms of GDP ratio, is twice the size of the Fed’s. We have also been able to extend it significantly.

Faced with such swings in sentiment, I want even more to stress today two ideas that are constant and consistent: (A) the ECB has been an innovative and efficient inflation-targeter, including in the Covid-crisis; (B) beyond Covid, the ECB has a powerful “quartet of tools” to keep its monetary policy as accommodative, and for as long as necessary. A. The ECB as an innovative and efficient inflation targeter In the first part of my remarks, let me try to answer three questions: is the ECB clear in its objective? is it consistent in its instruments? and is it efficient in its results? Page 2 sur 9 I. Is the ECB clear in its objective? For the ECB, like all other major central banks, our inflation objective is our lodestar. That means our definition of price stability should be simple, symmetric, and medium-term oriented. However, not everyone may perceive it this way. Hence, in the context of the Strategy Review launched by Christine Lagarde, we are currently reflecting on whether it can be communicated more clearly. To make it even simpler, we should reexamine the overly sophisticated qualifiers attached to the 2 % figure (“close to but below”). There is no benefit in appearing ambiguous about what we are aiming at. “Symmetric” refers to the fact that our objective is a target and cannot be a ceiling. Looking backwards, a central bank that has been successful in achieving its target on average will have had roughly as many episodes of inflation above its target as below.
What is appropriate for all economies is all the more necessary at the euro area-wide level, where, in the absence of a federal budget, a credible framework ensuring fiscal discipline is a key component for the consistency and the cohesion of our monetary union. Sound fiscal policies implying safe budgetary positions in good times are necessary to ensure that fiscal policy has room to cope with asymmetric shocks, which can no longer be addressed by monetary policy. Not least for these reasons, it is a matter of concern to the ECB that in a number of Member States abnormally large fiscal deficits have persisted over years. The Commission has tabled some proposals and a discussion has been launched to consider how to strengthen and clarify the implementation of the Stability and Growth Pact. We can find common ground between some of the Commission’s proposals and our own thinking, namely, as regards the preventive arm of the Pact. We agree that the implementation of the Stability and Growth Pact should be improved. We agree that ownership and incentives for compliance need to be enhanced. And we agree that implementing the Pact in a way that best reflects its economic rationale should help to achieve this end. At the same time, making the rules exceedingly complex and contingent on too many circumstances would complicate the implementation of the framework to the point where rules would be de facto relaxed.

An annuity is a very serious business: Part Two1 Speech given by David Rule, Executive Director of Insurance Supervision Westminster and City Bulk Annuities Conference 10 April 2019  1  Chapter 2, Sense and Sensibility, Jane Austen, 1811  A year ago, I spoke to this conference about the risks facing insurers active in the bulk purchase annuity market. In particular, I discussed the treatment of unrated, direct investments under the Solvency II Matching Adjustment, with a particular focus on equity release mortgages. A year later and the movement of defined benefit pension liabilities from employers to insurers has continued apace. Around £ billion of risk was transferred in 2018, if you include buy outs, buy ins and longevity swaps (Chart 1).2  Most commentators expect the market to continue to grow. On the  demand side, more employers might be in a position to afford a buy out if improvement in life expectancy stalls, interest rates rise and asset values increase (Chart 2). On the supply side, the possible emergence of superfunds could create an alternative to insurers. Meanwhile, the current level of transactions is still dwarfed by the scale of remaining defined benefit (DB) liabilities of some £ trillion, of which nearly £ trillion are closed to new members.3 Today I want to discuss more generally the risks associated with insurers taking on significant annuity obligations. I will then show how, in my view, the PRA’s implementation of Solvency II does a good job of addressing these risks.
Accordingly, it was then decided by the MoF and the CB to use the funds so placed, as the nucleus of the Deposit Insurance Fund. Thereafter, the regular premia paid by the banks and finance companies, based on a pre-determined formula, could be credited to this new Fund, and thereby, build up the Fund. In order to implement such plan, an arrangement had to be made with the Government, in that, instead of crediting the abandoned property funds to the fiscal coffers of the Government, such funds could be retained by the CB for the purpose of initiating the Deposit Insurance Fund. In that manner, the new deposit insurance fund was created, and as a result, a long felt need was fulfilled! In fact, that scheme was innovatively designed not only to provide for a “pay out” in the event of a financial institution collapsing or being rendered dysfunctional, but also to provide funds for the purpose of reviving and/or restructuring viable financial institutions that face liquidity crisis from time to time. In that context, I am pleased to state that the Monetary Board has recently decided to invest a part of the fund to deal with some of the structural imbalances that have arisen in certain finance companies, so that such an infusion would encourage new investors to take over, revive and restructure such troubled institutions, with greater confidence and certainty.

In retrospect, I can also state that this important move enabled the economy to face the emerging challenging times confidently, with the new inflows assisting the Government to maintain the growth momentum, while also allowing the Central Bank to maintain stability. One of the important lessons that we would take away from this case study is that the initiative was implemented as a result of the close harmonization between the MoF and the Central Bank. Had any one of the two agencies not fully supported this bold and imaginative move, the initiative would have failed, or worse still, been still-born. BIS central bankers’ speeches  7  Case Study 2: Debut International Sovereign Bond The second case study that I would describe this evening is the debut international sovereign bond of Sri Lanka, in 2007. Mr. Chairman, as you may recollect, by the second half of 2007, the country was fully engaged in the major humanitarian operation, while the global environment was becoming more and more unstable. The local environment was also tense, notwithstanding all efforts. Inflation was high; interest rates were high; the exchange rate was under threat; and the fiscal deficit was expanding rapidly, because of the ever increasing need for finances to fund the massive infrastructure development programme and to meet the costs of the humanitarian operation. To deal with this challenging situation, the MoF and the CB decided that it was vital that a further sizeable injection of long term foreign funds was given to the economy.
However, the treatment of OFCs varies a lot across the G718, and so their data are not strictly comparable with the UK M4 numbers. More important, so far as I can tell, most current calculations of world money growth19 simply add up domestic money supplies, and so leave out cross-border money holdings. That might be a material omission. For example, external holdings of sterling deposits with the UK banking system have increased by more than domestic money since the late 1990s; and by around 15% over the past year. How much of this growth is attributable to non-bank financial groups, whether based in the UK or overseas, is not known. Like much of the monetary analysis of the early 1980s, I fear that this is rather inconclusive, other than underlining that one has to get one’s hands dirty in analysing the money numbers. It is plausible that a decent chunk of recent UK M4 growth should be seen in the light of structural change in the financial system. Essentially, some types of non-bank financial intermediation have become more significant, and seem to have entailed higher money holdings on the definitions currently employed. If so, recent OFC money growth does not of itself obviously have malign implications for money spending and inflation. Originate and distribute: what’s going on on bank balance sheets? Much of the debate about this renewed process of disintermediation has revolved around whether the burgeoning growth of, for example, structured credit vehicles and hedge funds increases or impairs the resilience of the system.

This may mean, for instance, the willingness to take progressively tougher measures where the situation warrants. This in essence is what the MAS and other agencies in Singapore have done recently on the property cooling measures. Let me add that these measures are not a substitute for banks’ own risk assessment processes. Banks should continue to maintain prudent lending practices. This includes taking into account potentially higher interest rates in their credit assessments, and not assuming that current low interest rates will last indefinitely. MAS will continue to monitor banks’ activities and practices closely. Understanding Asia 12. Asia’s growth prospects have attracted global interest and a surge of capital inflows. Asia is now the second highest contributor to global trade, and is expected to overtake Europe in a few years. China, India and Indonesia are growing rapidly, registering GDP growths more than four times that of US and Europe. The prospect of greater Asian currency appreciation has drawn greater fund flows into the region. In 2010, inflows into Asian local bond markets reached record levels. 13. However, investing in Asia is not without risks. The huge capital inflows, if left unchecked, have the potential to increase inflationary pressures and fuel asset-price bubbles. In an informal survey by MAS of 30 major fund managers, almost half cited the possibility of a hard landing of major emerging economies in Asia as a key risk. While inflows have been swift, we must be prepared for a rapid outflow as well.