samchain/econo-pairs-v1 huggingface dataset:
As Chairman Greenspan said recently, "in retrospect, it is clear that more investment monies flowed into these economies than could be profitably employed at modest risk". 8. The strong Asian growth would have continued but for the fact that global competition in external trade has emerged with newly industrialized and export-oriented economies with cheap labour, such as China, India, Latin American and Eastern Europe. The failure of central planning has brought at least three billion new workers and consumers into the global market. These new markets began to benefit from the growing trade liberalization and inflows of foreign investments, thus putting greater pressure on the markets of the earlier “tigers” of East Asia, leading to a widening of their current account deficits as they continued their investments in infrastructure and real estate. Issues in Asia 9. If we look more closely at the situation in Asia, the economic fundamentals remain intact. Asia has been the fastest-growing region in the world, recording growth rates of around 5%-9%. Asian economies have low inflation rates and exchange rates were stable until recently. Current account for the region as a whole is broadly in balance, while the fiscal account, excluding Japan, is in surplus. Asia has exceptionally high savings rates of above 30% of GDP. Official savings, in terms of foreign currency reserves, were even higher. In Asia, 70% of the inflows contributed to reserve accumulation. As a result, Asian central banks are now holding about 40% of the world’s foreign exchange reserves.

Undue exuberance on the part of investors, when price-earning ratios grow beyond fundamentals, or on the part of bankers who failed to assess the impact of high interest rates on collateral or cash flows, would expose both the investor and the lender to asset losses. 17. Specifically, banks in Asia, having easier access to funds as a result of high global liquidity, were able to expand lending much more quickly and, thereby, incurred higher risks in their portfolios that they need to manage more soundly. Ironically, domestic banks may have been induced to move into more risky lending due to increased competition in the form of new entrants and financial intermediation. There is no question that they need to manage these new risks better. 18. There is also one distinguishing feature of the Asian turmoil. The debt problems have not been those of the public sector. On the contrary, the fiscal positions of Asian governments have by and large been quite sound. East Asia, excluding Japan, ran a fiscal surplus of $ billion BIS Review 109/1997  -4-  or 0.1% of GDP in 1996. The debt burden, in fact, has been largely one of private sector overborrowing. The resolution of the debt of the private sector makes the Asian problems quite different from the experience of the sovereign debt issues of the 1980s. 19. In essence, the Asian problem is the age-old question of efficient resource allocation.
Public confidence is however, not one that is created and expected to remain constant without making conscious efforts to enhance it. Public confidence must be created, nurtured and continuously enhanced by all the players in the financial sector working together through a range of approaches and strategies. This mandate requires a holistic and a collaborative effort of the authorities, financial service providers, private sector, educators and related associations that are here today. I am delighted to note that MYFex2007 is one such effort. In the short 26 months it has been in existence, PIDM has gone beyond its statutory duty to create public awareness about deposit insurance and promoting public confidence in the resilience of the Malaysian financial system. They have embarked on a noteworthy initiative to contribute to financial system stability by organising a comprehensive financial awareness exhibition that seeks to create informed consumers with a view to contribute to financial system stability. I am pleased to see various Government agencies, the market players and related associations and professional bodies participating in this important financial awareness initiative. The vision for an effective, efficient and resilient financial sector requires the unified efforts of all the stakeholders in the financial system. The financial players, the regulators, the Government and the consumers all have a meaningful role in achieving this vision. With this let me conclude my remarks. 2  BIS Review 129/2007

There are actually structural reasons why Thailand is a safe place to do business and a place where risks of economic shock, economic downturn, or significant economic crisis are  Page 5 of 11  very low relative to almost any other countries in the region. If you look at the causes where a country typically experiences an economic crisis, what are those? A country sometimes might have the foreign exchange or balance of payments crisis as they run out of reserves and have too much external debt. Yet, Thailand, unlike other countries in the region, our vulnerability on this front is extremely low. We have a very low level of external debt relative to our foreign reserves which exceeds 200 billion dollars while our short-term external debt is significantly below that. Our current account has been traditionally in very large surpluses. Therefore, the risk of having a baht crisis, like what we had in 1997, remains extremely low. What are other kinds of crises? Another kind of crisis that people experience is the fiscal crisis. If you look at the Thai governments’ balance sheet, it is relatively strong, the public debtto-GDP ratio is just over 50 percent and the fact that the government is able to borrow 10-year money at only 1.7 percent indicates that people are still willing and happy to finance the government. They do not see the government as having a very high risk.
If we were convinced of the existence of a bubble and had the necessary instruments available, we should act. But it is not our conviction that monetary policy can in any meaningful way control asset price developments. Low and stable consumer price inflation is the operational target of monetary policy. There is, however, an ongoing discussion on how best to capture the cost of housing in the CPI. It might very well be that our present methods could be improved. 13  Financial Times January 17 2008. El-Erian is co-chief executive and co-chief investment officer of Pimco. 14  Kenneth S. Rogoff (2006, see footnote 8) and M. Lettau, S. C. Ludvigson and J. A. Wachter (2004) “The declining equity premium: What role does macroeconomic risk play?” NBER Working paper 10270. 15  Proponents of this view are Claudio Borio and Philip Lowe in some BIS studies, se for example Working Paper 114/2002 “Asset prices, financial and monetary stability: Exploring the nexus” and Working Paper 216/2006 “Monetary and prudential policies at a crossroad? New challenges in the new century.”  6  BIS Review 14/2008  While monetary policies aimed at nominal stability have stood us in good stead, and can continue to be pursued also in a world where markets are truly global, the sailing might very well be less smooth ahead.

The entrance of new, large emerging economies into the world trading system has strongly influenced relative prices and the prospects for nominal stability. The potential labour supply available for the global economy has doubled 7 and increased relative to the supply of capital. Wage shares have fallen and profit shares have risen, both globally and in Norway. Firms in high-cost countries increasingly offshore activities to low-cost countries. Imports of goods in industrialised countries have shifted from high-cost to low-cost countries. Furthermore, the collapse of the Soviet Union and the accession of Central and East European countries to the European Union have played a significant role for the labour market in Europe. Labour migration has increased. Off-shoring and outsourcing – or merely the threat of it – may have, at least temporarily, reduced the bargaining power of trade unions and employees. Increased competition, both in product and labour markets, has probably motivated productivityenhancing measures. Productivity growth has been unusually high. 5  John Gieve (2006): “Practical Issues in Preparing for Cross-Border Financial Crises”, at the Financial Stability Forum Workshop: “Planning and Communication for Financial Crises and Business Continuity Incidents”, 13 November. 6  Financial Times January 16 2008. 7  See Richard Freeman (2006) “Labour Market Imbalances: Shortages, or Surpluses, or Fish Stories?” presented at the Federal Reserve Bank of Boston’s Economic Conference, June. 4  BIS Review 14/2008  Lower import prices, intensified competition and high productivity growth have been important disinflationary forces both in Norway and elsewhere.
The level of activity in the Finnish economy is still poor, but will benefit, like the Swedish economy, from the global improvement in economic activity. In Denmark and Norway, private consumption will be stimulated by tax reductions. There are also signs of a turnaround in industrial activity in the UK, while private consumption continues to develop favourably. However, there are also risks for developments in Europe: in the euro area the main cause of uncertainty is wage developments. High wage increases for metalworkers in Germany may spread to other sectors and then to other countries in the euro area. There is thus some possibility that the rate of wage increase and inflation in the euro area will be higher than in the main scenario depicted by the Riksbank. The economic situation in Sweden The Inflation Report that was published at the same time as our interest rate decision paints a mainly bright picture of the Swedish economy in the near future. The assessment is that the downturn in economic activity will be shallow and relatively short-lived. The recovery in global market growth, which for Swedish goods amounts to 2-3 per cent this year, will lead to an increase in Swedish exports. Over the next few years, this increase is expected to become 7-8 per cent a year. At the same time, households’ disposable incomes are improving, which contributes to increased consumption.

As the economy is from time to time subject to unforeseen shocks, there will be deviations from the forecasts, even if the forecasts are well-founded. If, for instance, fruit-growers’ harvests are affected by insects, the price of fruit will rise, if the water reservoirs are not filled, electricity prices could rise and if cattle in Europe suffer various diseases, the price of meat and some other foodstuffs will rise. If the Riksbank tried to make adjustments for this type of temporary price disturbance, it would probably lead to large swings in monetary policy and unnecessary fluctuations in demand and production. It would therefore be wrong to give the impression that inflation will always be above two per cent. On the other hand, it is important that the Riksbank adapts the instrumental rate so that the inflation forecast one to two years ahead is in line with the target. This means that companies and households can rely on temporary deviations upwards or downwards being only temporary. In retrospect and looking outwards The attacks on the World Trade Center and the Pentagon on 11 September last year increased the uncertainty as to how the already weak global economic activity would develop. Even before then, signals of a more evident slowdown in industry and a poor development on the stock markets had caused the Riksbank to make a downward revision of its growth forecasts. The risk was that the terrorist attacks would undermine confidence in future prospects among households and companies, which usually has a negative effect on demand.
Banks worldwide spend over $ a year on financial crime compliance: enriched data is an important ingredient in getting this number to drop. ISO 20022 provides a common language for financial transactions that allows for richer and more structured data. However, making the most of it requires consistent adoption across jurisdictions and using it to transmit a wider set of information than legacy payment messages. Limited or inconsistent uptake could lead to fragmentation. There is no point for me to include a code for the purpose of my payment if my South African counterpart was using a different set of codes. To establish a basic level of consistency, the Joint Task Force of the CPMI and Payments Market Practice Group have consulted on harmonising requirements for enhancing crossborder payments. [15] They received an excellent response and will be announcing the results in the autumn. Another important dimension is the harmonisation of Application Programming Interfaces (APIs). Almost two-thirds of the payment systems surveyed by CPMI[16] already offer APIs to their participants. In the UK, our renewed RTGS has this month enabled its first API, with a full-fledged suite of APIs due to be delivered next year. APIs make it easier for payment systems and their participants to exchange data. The number of potential applications is vast. But to deliver real benefits these potential use cases rely on harmonised API standards. The CPMI is convening an industry panel of API Experts (APEX) from private and public sectors, to develop recommendations on the strategic direction for the industry.

With the present fiscal stimulus no longer a factor, however, economic growth is likely to slow down distinctly again next year but should remain robust. We still anticipate an upswing in the EU in the coming year. It is probable, however, that it will take slightly longer to close the output gap than we assumed as recently as September. Inflationary pressure from abroad will thus remain moderate although inflation in other countries will not recede as markedly either in the coming year as we expected three months ago. Furthermore, we anticipate a decline in the price of oil to approximately USD 25 per barrel in the course of 2004. On the assumption that the three-month Libor rate will remain stable at 0.25% during the next three years, inflation should average 0.4% in 2004, 1.0% in 2005 and 2.3% in 2006. The inflation trend according to the new forecast will exceed the September forecast until mid-2005. Until the end of 2004, inflation is likely to remain fairly stable at around 0.5% and to fluctuate only slightly due to basis effects. The new forecast shows that the threat of negative inflation rates has diminished. This is the result of an improvement in the global economy and of the less marked decline in inflation abroad, as also of the weaker Swiss franc vis-à-vis the euro. As from the beginning of 2005, inflation will show a rising trend due to the expansionary monetary policy we took as an assumption.
Why and how supervision and resolution authorities should work more closely with one another Let me now turn to the way in which the two completed pillars of Banking Union, namely supervision and resolution, could become more consistent with one another and work more closely together. Cooperation between the SRB and the ECB does exist, and is formalised by a Memorandum of Understanding. This provides for ex-ante cooperation in calm times, and close cooperation in early intervention and resolution phases. Thanks to this tremendous ongoing preventive work conducted by the SSM and the SRB, and to continued efforts from banking institutions, recovery plans have significantly improved in recent years. Page 4 sur 5 Beyond the current areas of cooperation, which could still be enhanced in practice, greater coordination on policy issues appears desirable. In particular, policy decisions that pertain to own funds have a very concrete impact on European banks’ competitiveness, and therefore on the level playing field with foreign banks. Here, we must find a trade-off between safety and competition issues, with efforts needed on both sides. For instance, the SSM could further consider a risk-based approach rather than a flat-rate approach to estimate post-resolution Pillar 2 requirements. This entails a need to take into account a forward-looking approach and the expected risk reduction that follows a resolution. This should be acknowledged in the calibration of external minimum requirements for own funds and eligible liabilities (MREL): banks are not at the same stage today as they were seven years ago.

They were also given a monopoly on issuing banknotes and coins, which gained a special status as legal tender. The fact that banknotes and coins now have less significance as means of payment does not means that the need for a state guarantor for the payment system has disappeared. I shall return to this shortly. I shall now describe in more detail what the Riksbank does in more concrete terms and how I view our responsibility for financial stability. Promoting a stable and efficient financial system – the Riksbank’s role The Riksbank has three core tasks that contribute to an efficient and stable financial system: issuing banknotes and coins, responsibility for the system for large-value payments and providing emergency liquidity assistance (being lender of last resort). Moreover, there is a close link between monetary policy and financial stability, which I will return to later. Let me discuss the different core tasks one at a time. 3 Jonung, L. (1989), “The Economics of Private Money. Private Bank Notes in Sweden 1831 – 1902”, Research  Report 282, EFI, Stockholm School of Economics. 3 [12]  Issuing banknotes and coins One fundamental function that must work if a financial system is to be regarded as stable is payments. And a first important central bank task to facilitate payments is to issue banknotes and coins.
Third, as a result of the fiscal guideline the internationally exposed sector is subject to additional pressure. Over time, the phasing in of petroleum revenues will lead to restructuring and the transfer of resources from the exposed to the sheltered sector. Fourth, the response patterns in stabilisation policy function in a different way from previously. In the past, it was generally understood that high wage growth and overheating of the economy must be by with a tightening of government budgets. Today, with the fiscal guideline and inflation targeting, it is monetary policy that is tightened to a greater extent in such a situation. The burden of stabilisation policy is thus at times transferred to the internationally exposed sector. Against this background, a decline in manufacturing employment from 300 000 to 240 000 over a ten-year period, as Norges Bank has previously indicated, does not seem unreasonable. Norges Bank has one instrument: the interest rate. It has a broad impact. Monetary policy can therefore not be oriented towards stabilising developments only in the internationally exposed sector. This would create considerable imbalances in the Norwegian economy. The low interest rate policy and devaluations in the 1970s and 1980s are examples of how such a policy can fail. Monetary policy was geared towards preventing a weakening of competitiveness in manufacturing. The krone was devalued on several occasions. But wage growth accelerated to compensate for higher inflation. The result was the yuppy period, unsound investments and a wage and price spiral that hit the entire economy.

The recent litigation in New York involving claims under surety bonds is perhaps a much reported incident of this sort. And uncertainties in a world dependent on expeditious performance of contracts has to be a real issue in financial stability terms. Second, we have seen the emergence of large multifunctional financial groups. So my observation is that whatever thinking might have gone into the Basel II Accord for banks, we would be wise to focus further, on the way in which capital adequacy and other prudential supervisory techniques fit together, for different parts of the financial world, including insurance. The wisdom in earlier days was that systemic risk, in a financial stability sense, was largely confined to banks. Not any more. It has been recognised for some time that the securities arena and the process of securitisation has changed all that. And more recently, growing interlinkages with the insurance sector are giving rise to the need for a further rethink. II  Looking beyond capital adequacy: the importance of liquidity  Secondly a rather different angle. Viewed from the point of view of financial stability, capital adequacy is clearly a vital and valuable policy tool. That is why Basel II is so important. But systemic crises do not always emanate from capital inadequacy. The first indication of trouble ahead may well come from a completely different area. What I am talking about is the question of liquidity.
The resulting systematic mis-pricing of, in particular, the super-senior tranches of these securities was a significant source of losses to banks during the crisis, with ratings downgrades large and frequent (Chart 33). A similar risk-taking strategy was the writing of explicit insurance contracts against such tail risks, for example through CDS. These too grew very rapidly ahead of crisis (Chart 34). Again, the writers of these insurance contracts gathered a steady source of premium income during the good times – apparently “excess returns”. But this was typically more than offset by losses once bad states materialised. This, famously, was the strategy pursued by some of the monoline insurers and by AIG. For example, AIG’s capital market business, which included its ill-fated financial products division, reported total operating income of $ billion in the run-up to crisis from 2003 to 2006, but reported operating losses of around $ billion in 2008 alone. What all of these strategies had in common was that they involved banks assuming risk in the hunt for yield – risk that was often disguised because it was parked in the tail of the return distribution. Excess returns – from leverage, trading books and out-of-the-money options – were built on an inability to measure and price risk. The productivity miracle was in fact a risk illusion. In that respect, mis-measurement of the contribution of banking in the National Accounts and the mis-measurement of returns to banking in their own accounts have a common underlying cause.

But the commitment to our objective also implies alertness to future risks and a readiness to respond to them should the medium-term outlook continue to deteriorate significantly. In this case as well, the ECB will adopt all the monetary policy actions that are necessary and proportionate to achieve its objective. We are not short of instruments to deliver on our mandate. 1 See Draghi, M. (2018), “The outlook for the euro area economy”, speech at the Frankfurt European Banking  Congress, Frankfurt am Main, 16 November. 2 Three-month-on-three-month percentage changes; CPB Netherlands Bureau for Economic Policy Analysis. 3 See De Bondt, G. and Hahn, E. (2014), “Introducing the Euro Area-wide Leading Indicator (ALI): Real-Time  Signals of Turning Points in the Growth Cycle from 2007 to 2011”, Journal of Forecasting, 33:47–68. 4 See Anderson G. and Y. Liu (2012), “On the Road to Recovery, Soft Patches Turn Up Often”, The Regional  Economist, Federal Reserve Bank of St. Louis, pp. 12–13. 5 Leverage is calculated by dividing total liabilities net of shares and other equity by total assets. 6 Consolidated gross debt is defined as the sum of total loans granted to NFCs net of intra-sectoral lending, debt  securities issued and pension liabilities. 7 See Botelho, V. and Dias da Silva, A. (2019), “Employment growth and GDP in the euro area”, Box 3 in Economic  Bulletin, Issue 2, ECB.