samchain/econo-pairs-v1 huggingface dataset:
Together, these policies will help to sharpen the substitution effects necessary for shifting to cleaner transportation modes and improving energy efficiency as carbon taxes rise. Let me make three observations about carbon pricing. First, carbon taxes should be implemented equitably so that they do not overly burden low-income households and SMEs. Singapore does not intend to derive extra net revenue collected from the carbon tax. The carbon tax revenue will be used to cushion the impact on lower-income households through U-Save rebates and incentives to switch to energy efficient appliances. Carbon tax revenues will also be directed to SMEs to help boost their energy efficiency and decarbonisation efforts. This is an economically sound approach: it retains the desired allocative effects of higher carbon taxes while dampening its distributional consequences. Second, green subsidies are useful complements to carbon pricing but they are not substitutes. Subsidies for clean technology and energy efficiency can help to speed up the transition towards sustainability. But they often make economic sense only if combined with some form of carbon pricing. Take for instance subsidies for electric vehicle purchases and infrastructure. Without a price on carbon that is in turn reflected in electricity prices, subsidies for electric vehicles will likely lead to more such cars on the road with little reduction in the number of petrol-powered cars or shift towards cleaner sources of electricity generation.

These are only some of the many dynamics that we are experiencing at a rapid pace today. What these underscores to all of us, is the importance of continuous learning so we can continue to adapt and evolve. I am sure the knowledge you have learnt in your respective courses will provide you a strong foundation as financial planners professionals. However, to keep pace with the changing environment you must have a lifelong learning mindset. It is important to keep abreast with the latest economic developments and continuously update your information set so that you are able to provide the most optimal advice to your clients. Apart from providing information and filling the gaps in financial knowledge, financial planners play the important role of defusing biases that lead to common financial mistakes among consumers and help mediate in joint decision-making. This is especially true for vulnerable consumers who largely lack capability to fully understand and comprehend the risk-return assessments, not only of complex financial products and services but sometimes even those basic ones. One financial decision can have far-reaching consequences on their current and future livelihood. It is therefore crucial not to downplay the importance of professional advice in improving the quality of life and the wellbeing of individuals and households.
As discussed in the text, people have reason to value inflation control, together with macroeconomic stability, hence these objectives of macroeconomic policy. 17  All speeches are available online at www.bankofengland.co.uk/publications/Pages/speeches  17  Annex: The simple optimal targeting rule The condition describing the trade-off between inflation and the output gap in equation (1) of the text is known as an optimal targeting rule:  (1)  𝜆  𝜋𝑡 − 𝜋 ∗ = − 𝜅 (𝑦𝑡 − 𝑦𝑡∗ )  It comes from the first-order condition of a policymaker acting under “discretion” (i.e. setting monetary policy afresh each quarter, without the ability to commit to future policy actions, and therefore manipulate future expectations) in a very stylised model of the monetary policy problem. In this problem, the policymaker minimises a loss function by choice of the nominal interest rate, formally solving: ∞  min ∑ 𝛽 𝑡 [(𝜋𝑡 − 𝜋 ∗ )2 + 𝜆(𝑦𝑡 − 𝑦𝑡∗ )2 ] ∞  {𝑖𝑡 }𝑡=0  𝑡=0  where 𝜋𝑡 is inflation, 𝜋 ∗ is the inflation target, 𝑦𝑡 is the level of output, 𝑦𝑡∗ is the natural level of output, so 𝑦𝑡 − 𝑦𝑡∗ is the output gap, and 𝑖𝑡 is the nominal interest rate – the policy instrument. 𝛽 is the discount factor. The policymaker solves this problem subject to the “constraints” imposed by the structure of the economy.

How aggressively should inflation stabilisation be pursued when doing so imposes costs in terms of lost output and higher unemployment? Low, stable and predictable inflation is a public good. It is not merely that rising prices mean households have to shop around or businesses have to update their prices periodically. High inflation hurts those, particularly the worst off in society, who don’t hold equities or property as well as those whose incomes are fixed in nominal terms. It distorts price signals, inhibits investment, and can ultimately damage the productive potential of the economy. Equally, deflation can imperil growth and employment. In a highly indebted economy, deflation raises real interest rates, increases debt burdens, lowers wages, and reduces growth. In the extreme, these can morph into debt deflation, causing very high and persistent unemployment and financial collapse. The happy medium is low, stable, predictable inflation over the medium term. A little inflation ‘greases the 1  wheels’ of the economy, for example by helping real wages adjust more smoothly. Moreover, a positive inflation rate gives monetary policy space to deliver better outcomes for jobs and growth when shocks hit, without the distortionary costs of high and volatile inflation. 2  Recognising the social value of inflation control is one thing, delivering it is quite another. In the past, many societies could not. This is because the instrument that affects inflation most powerfully – monetary policy – also affects output and employment, at least in the short run.
10  BIS Review 103/2009  Figure 16: Risk Premium Indicators Change in 5-year CDS rates since Aug 2008 (1 Aug 2008 =1) Turkey Brazil 5.5 South Africa Hungary 4.5 South Korea 3.5  900 800  EMBI+ Türkiye EMBI+ Turkey EMBI+ EMBI+  700 600 500 400  2.5  300  1.5  200 0609  0109  0808  0308  1007  0609  0409  0209  1208  1008  0808  0507  100  0.5  Source: Bloomberg, CBRT. In terms of changes in currency values, the Turkish lira did not significantly differ from other emerging market currencies. However, the relative fall in the volatility of the Turkish lira, which had historically high volatility and extreme sensitivity to the global risk appetite, has become more evident in 2009, when countries’ own experiences began to unfold following the worst period of the crisis (Figure 17). Figure 17: Exchange Rate Developments 1000  0.025  1.7  500  0.02  400  0.015  1.6  0609  0409  0209  1208  1008  0808  0608  0408  0  0208  100 1207  1.4 1007  0.005  0807  0.01  200 0607  300  1.5  0609  600  0309  0.03  1.8  1208  0.035  700  0908  800  0608  EMBI+Türkiye (sağ eksen)  Kur Oynaklığı* Brezilya Çek Cum.

Securitizations were structured so that any losses were first borne by lower-rated securities built from the pool of underlying mortgages. Given the structure, the assumption was that lower-valued securities would take all potential losses if borrowers defaulted. Many – but not all, of course2 – assumed that home-price declines and related defaults would have to be very extreme before the highest rated, Triple-A securities were impacted. Under this assumption these securities fully deserved the Triple-A rating given by the rating agencies. I should note that making this assumption about Triple-A rated mortgage backed securities (MBSs) proved less problematic than making this assumption about the recombined lower  2  Boston Fed researchers note some examples of contrary analysis of Subprime ABS structures written in 2005 suggesting vulnerability to even a 5 percent fall in house prices. See “Making Sense of the Subprime Crisis” by Paul Willen with Kristopher S. Gerardi, Andreas Lehnert and Shane Sherlund (Brookings Papers on Economic Activity, Fall 2008). BIS central bankers’ speeches  3  tranches of mortgage-backed securities that were billed as Triple-A rated collateralized debt obligations (CDOs).3 But many investors focused not on the security’s underlying components, merely on the ratings. Figure 8 shows that Triple-A securities remained at par values as the securitization boom gathered steam. However, Figure 9 shows that when the severity of the decline in house prices manifested itself, even the Triple-A rated mortgage securities collapsed in value.
What is clearly more important than the amount of information given is that the communication policy, as part of the strategy, is consistent with the structure of the internal decision-making process. I can assure you that this is indeed the case. During the monthly press conferences, I make an introductory statement summarising the Governing Council’s discussions and conclusions before answering questions from journalists. As the statement is agreed, in substance, with all the Council members beforehand, it is similar to what others call BIS Review 128/1999  2  minutes. I am convinced that, for the purposes of establishing credibility and reducing uncertainties in the market, informing the public of such an agreed position on the part of the Governing Council is superior to publishing details of a Council discussion which are naturally difficult to assess for those who are not present at the meeting. Moreover, as mentioned, we should not pretend to know more than we do. It is thus important not to try to give guidance when the ECB itself is not sure. I very much agree that giving too much information is not always helpful. I am convinced that the Eurosystem already provides timely, high-frequency information of good quality, but, as I have said, trying to further improve our communications is an ongoing exercise. 3  BIS Review 128/1999

Stefan Ingves: The international regulatory agenda – necessary but not enough Speech by Mr Stefan Ingves, Governor of the Sveriges Riksbank and Chairman of the Basel Committee on Banking Supervision, at the Affärs Världen Bank and Finans Outlook, Berns, Stockholm,19 March 2014. *  *  *  Regulations and regulatory frameworks for banks have been the subject of much discussion in recent years. As several of the regulatory frameworks drawn up after the crisis are now being introduced at the national level these discussions have also perhaps waxed rather than waned recently. New and amended frameworks are also the theme here today. The Basel Committee on Banking Supervision is, as many of you know, an international committee that produces global standards and regulations for banks. This summer, I will have been chairman of the Committee for three years. Perhaps the most important task facing the Committee when I took up the post of chairman was to finalise the Basel III regulatory framework, that is that part of the international reform agenda that followed in the wake of the financial crisis and that most closely relates to banks. Today, I would like to tell you about the work of the Basel Committee. Nowadays, most regulatory frameworks are designed and drawn up internationally and my idea is to try to give you an insight into the international regulatory work. I would also like to present my view of what the international regulations entail for the Swedish financial system.
The HKMA is also working hard at the moment to provide the industry with further guidance and practical examples to address difficulties of banks on issues such as how to identify vulnerable customers in an online environment so that the bank can accord them with extra care during the sales process. 10. Despite all these efforts in offering more detailed guidance to the industry, I’m sure you would agree that having such additional guidance alone cannot achieve the desired outcome. We do very much need the support of a sound bank culture, because culture is the invisible glue that holds a bank together. In fact, if one really thinks through the implications of the latest trends, culture does not become less important in the current environment. Quite the opposite, culture has actually assumed an even more critical role in times of pandemic. And for that reason, we should remind ourselves repeatedly of the need to keep up the momentum in promoting sound bank culture in order to counter the additional risks brought about by the pandemic. Our continued effort in the cultural landscape 11. So probably it will be useful if we quickly revisit what a “sound” culture should look like and what the core elements are? At the HKMA, we always emphasise that there is no one single formulation of “sound” culture. And each bank needs to map out its own path according to its desired culture, values and behavioral standards.

And also what new in this crisis is the implicit linkage through reputation risk as noted earlier, that is, banks became obligated to rescue failing SIVs even when there were no explicit contractual obligations to do so. Against this background, what then can regulators do to address the interactions and the feedback problems. This is not going to be an easy task, but let me try to frame the discussion into a context. First, it is clear that systemic risk is endogenous. Risk is first encouraged by procyclicality and once the tipping point is reached, the interactions within the system takes over, turning financial fragility into systemic risk. From the current crisis, it is clear that the scope and intensity of systemic risk are related closely to three factors: (1) the collective behaviour of market participants that contributes to the positive feedback loops; (2) the underlying structure of markets and market practices which dictate the manner through which the interactions of feedbacks are propagated throughout the financial system; and (3) the authorities’ own responses. Therefore, to address the problem, we need to focus our efforts on all of the three areas. First, on the collective behaviour of market participants, the key objective must be to tame or dampen the positive feedbacks through right incentives and better regulation. For example, regulation to disallow capital reduction for credit risk transfer off-balance sheet could have discouraged the originate-to-distribute model.
This implied that Swedes used more cash. In recent years the use of cards has accelerated. With regard to both the number of terminals and use of cards per capita, the Nordic countries are now very close to one another. The differences in card use between Sweden and the other Nordic countries – particularly with regard to Denmark and Finland – declined rapidly after 2001. Nevertheless, cash is still used to a greater extent in Sweden than in other Nordic countries. If one suspects that cash may be a relatively expensive payment service, the more widespread use of cash in Sweden in relation to the rest of the Nordic countries could mean that the Swedish payment system is less efficient in this aspect. But why do we use more cash in Sweden? We do not have a good answer to this. However, experiences from both Sweden and Norway show that demand for payment services is pricesensitive. 1 In Norway, electronic payments, including card payments, increased very rapidly after the banks changed their pricing towards charges based to a greater extent on actual costs. For instance, they began by making a small charge for ATM withdrawals. 2 It is possible that our pricing of card and cash payments respectively – the price the consumers see – lies behind the fact that we use more cash? When it comes to card and cash payments, it turns out that it is only the retail trade which the banks subject to charges.

Discontinuation of the minimum exchange rate The minimum exchange rate has undoubtedly served Switzerland well during an exceptional period. However, the old adage popular among economists – “there’s no such thing as a free lunch” – holds true for monetary policy as well. The SNB Governing Board was well aware that the introduction of a minimum exchange rate would entail certain risks – and we consistently alluded to these. That the SNB would have to make large foreign currency purchases and expand its currency reserves in order to enforce the minimum exchange rate was thus to be expected. The SNB must be willing to bear these risks if doing so is necessary for the fulfilment of its legal mandate, and if these risks are justified given the chances of success. We enforced the minimum exchange rate consistently for more than three years (6 September 2011 to 15 January 2015). At the peak of the euro crisis in 2012, the SNB had to purchase CHF 188 billion of foreign currency. Adding this to purchases from prior years reveals that the SNB’s currency reserves rose from CHF 50.5 billion in 2007 to  1  In August 2011, the SNB announced that it would very significantly increase the supply of liquidity to the Swiss franc money market by expanding banks’ sight deposits at the SNB from CHF 30 billion to CHF 80 billion within a few days.
Persistent mass unemployment, the structural causes  3  BIS Review 55/2000  of which were poorly understood, had for a long time led to the adoption of certain Malthusian attitudes: wariness towards technical progress as it could potentially destroy jobs, the avoidance of productivity-enhancing investments thought to contribute to higher unemployment and, lastly, efforts to reduce the available work force with a view to sharing the same number of jobs between a smaller number of people. Having thus sought to limit technical progress, the available work force and the capital stock, it is not surprising that, despite the considerable progress in recent years, Europe and France have seen that their non-inflationary growth potential was still not as high as would have been desirable. In Europe and in France, we are seeing a profound change in perspective and are moving away from Malthusian attitudes. The Banque de France and the entire Eurosystem can be counted upon to support this change. This is why the Monetary Policy Council continues to make the following recommendations: in the interest of currency and price stability and therefore of robust growth, sustainable because it is non-inflationary and effective in combating unemployment, it is now more than ever the time to: –  invest and ease the constraints on capital. Investment is essential in our economy, in which the capacity utilisation rate currently stands at about 87% and 31% of firms are experiencing production bottlenecks.

That said, we still have not reaped the full benefits of more harmonised regulation and more integrated supervision, and we need to make sure that we consolidate and build on the progress already made. From a regulatory perspective, aside from transposing the Basel Accords into EU law (the CRR 2-CRD 5 package introducing new prudential requirements such as the NSFR and the leverage ratio), we need to advance further on the application of uniform regulations. We also need to pull down all the barriers to euro area banking integration by removing all regulatory obstacles to cross-border transactions – in terms of solvency, liquidity or large exposures – and by adjusting the calculation of capital requirements for systemic institutions. In short, we need to recognise that the euro area must be treated as a single jurisdiction where a single rulebook is enforced. In terms of supervision, the priority now is to bring the largest investment firms within the scope of the SSM. We also need to increase cooperation between national authorities for the oversight of cross-border institutions (home-host relations), and for anti-money laundering and countering the financing of terrorism – the importance of which is recurrently driven home by the news. To complete the Banking Union, we also need to render its second pillar, the Single Resolution Mechanism or SRM, fully operational. The euro area has had a common resolution mechanism in place for banking crises since 2015.
It should not be assumed that the central bank might take action beyond the limits outlined. But this does not mean that it cannot assist in the search for solutions, as far as they do not involve extending further credit. If the problems of individual banks multiply, there is a danger that liquidity may dry out throughout the entire system. In such a case, the central bank would basically be able to supply the market with the necessary liquidity. However, it may then come into conflict with the requirements of a policy geared to economic stability. Consequently, the short-term benefits of an easing of monetary policy should be weighed against the longer-term risks. I would like to sum up my thoughts as follows: 1. Three factors are of prime importance to the competitiveness of a financial centre: economic stability, political stability and the “human factor” (i.e. professionalism, motivation and mentality). Although these factors can each be viewed separately, it is the interaction between them that really counts. 2. Economic stability, in the sense of a balanced development of the economy as a whole, is made possible by the existence of an appropriate economic framework. This is created first and foremost by monetary policy, fiscal policy and competition policy. Economic stability provides the financial services industry with a favourable climate in terms of low inflation and interest rates, moderate tax levels and appropriate exchange rates. 3. Favourable economic conditions are planned and implemented as part of the process of social coexistence.

I have already spoken about the general prerequisites needed for a financial market to flourish. Within the scope defined by the operating conditions mentioned, market players are basically responsible themselves for what they do or don’t do. Their prime concern is to stay solvent at all times by adopting sound business practices and putting an effective organisation in place. To prevent problems from occurring, the responsible bodies at the individual banks must be able at all times, and with a minimum of delay, to accurately assess their risk situation and to take rapid and appropriate action. Of course, it is never possible to rule out the possibility of an individual bank running into difficulties. In such cases, a solution must first be sought through the market. Solidarity among the other market players should provide a “first line of defence”. Seeking funds from the central bank can only be contemplated in the last instance - hence the expression “lender of last resort”. Obtaining credit from the central bank presupposes that the liquidity requirements are only temporary. If the solvency of a BIS Review 26/1998  -4bank is in peril because of a threat to its capital, the problem is a matter for the supervisory authorities and possibly for the state itself. In practice, the boundary between liquidity and solvency problems can be a fluid one. In my view, it is important for everyone involved not to lose sight of these principles which are in fact quite simple.