samchain/econo-pairs-v1 huggingface dataset:
The full implementation of this fiscal rule will contribute to a reduction in the risks to financial stability associated with fiscal volatility and commodity cycles. On the subject of the Bank of Russia’s monetary policy, the existing balance of risks allows for a gradual lowering of interest rates to take place, however monetary policy should still remain moderately tight. This is due to the need to maintain inflation at a level close to the target, and to reduce inflation expectations in the medium term, taking into account the internal risks and potential volatility of external factors. The steadiness of changes to interest rates, and the attendant high level of predictability in monetary policy, leads to a reduction in the risks posed to financial stability. 2) On capital flows and global risks For the most part, the situation in Russia reflects overall improvement in sentiment on global markets in the context of a revival in economic activity in the leading economies. We have begun to see clear signs that economic dynamics are being restored not only in the U.S., but also in the Eurozone, where the economic situation has been unstable for a long time. In general, the indices of economic activity PMI for both the leading economies and the global economy as a whole currently sit at 6-year highs. The upward swing of the economic cycle is gaining momentum. These conditions have led to increased optimism of global market participants and growth in capital inflow on the markets of emerging economies.

The value of many assets is being overestimated by investors and increased global political risks are not being taken into account. Political risks lead to greater uncertainty in economic policy. If we look at the indices of uncertainty in economic policy, we can see that they have reached their maximum values. This means that along with improving the prospects for economic growth, it is necessary to take into account possible changes in the functioning of financial markets and potential spikes in volatility. 3) On currency risk and measures for the deforexation of the economy In a climate of lowered yet still high volatility in oil prices, currency risks continue to be potentially significant. From the point of view of currency risk management, I would like to highlight the need, on the one hand for further deforexation of the balance sheets in the banking sector, and on the other for limiting foreign exchange risks in the non-financial sector of the economy. The issue of deforexation of the banking sector was raised at the Forum on Financial Stability last year, with particular emphasis placed on foreign currency lending to those sectors and companies that do not have sufficient foreign exchange reserves. This problem primarily arises in relation to companies from the construction and real estate sectors. As you know, the Bank of Russia made a number of changes to regulation in order to limit the risks associated with such lending, and to ensure that banks have a capital buffer for these loans.
As the shifting of production to countries with lower wages tends to fade away, any wage increase or exchange rate appreciation in EME will lead to higher import prices in advanced economies. The central bank then has to choose between either revising the inflation rate objective upwards and taking account of imported inflation, or maintaining the inflation objective unchanged, which means lower core inflation. In both cases, headline inflation is bound to be higher than core inflation. This means that price increases for imported goods must not feed into wages and domestic prices. The implications for monetary policy are quite complex. The stance of monetary policy cannot be assessed on the basis of core inflation, given that the interest rate incorporates expectations of headline inflation. Keeping the policy interest rate unchanged while headline inflation rises – even if core inflation remains unchanged – implies de facto allowing for the monetary stance to become more accommodative. Over time this is likely to impact on core inflation. It is certainly a challenge to make sure that core inflation remains subdued and lower than headline inflation if imported goods prices increase by more than 2%. This can be achieved without additional monetary policy tightening only in a friction-less world, in which domestic wage and price-setters accept the permanent change in relative prices. We obviously need more work on these issues, which are particularly relevant in light of past experience.

Zeti Akhtar Aziz: Central banking in the 21st century – implications of economic and financial globalisation Opening remarks by Dr Zeti Akhtar Aziz, Governor of the Central Bank of Malaysia, at Central Bank of Malaysia’s High Level Conference 2009 “Central Banking in the 21st Century: Implications of Economic and Financial Globalisation”, Kuala Lumpur, 10 February 2009. *  *  *  Honourable Governors, Distinguished guests, Ladies and Gentlemen, It is my pleasure to welcome you to the Bank Negara Malaysia Conference on "Central Banking in the 21st Century: Implications of Economic and Financial Globalisation" that is being held in conjunction with the 50th Anniversary of Bank Negara Malaysia. Indeed, the conference takes place at a time when we need to reflect on the many issues that are emerging from the current global financial and economic crisis and the new challenges and lessons it brings to central banks. We are most honoured by the presence of central banks from more than 50 countries who have come to be with us on the occasion of our 50th Anniversary. This gathering has also brought together distinguished speakers not only from the central banking community but also outstanding scholars and senior practitioners from the financial services industry. It is hoped that this conference will contribute to a greater understanding to the issues confronting central banks in the 21st century.
DSTI dynamics in the context of economic shocks (September 2017) 50  percent  percent 50  40  40 5.7  2.1  30  30 0.3  0 Consumer loans  0 Consumer loans  10  interest rate (+2pp)  2  change after shock DSTI share of debtors with DSTI>40% after shock (rhs)  Quintile 1 Source: NBR, MPF  Quintile 2  Quintile 3  Quintile 4  Quintile 5  income (-6%)  Housing loans  4  Housing loans  6  0  20  10 Housing loans  8  3.4 1.6  0.8  20  Consumer loans  10  exchange rate (+35%)  Note: The values in the chart stand for the differences betweeen DSTIs before and after shocks, expressed in percentage points. Source: NBR, CB, MPF 22  Figure 31. Payment discipline Overdue payments of state-owned companies (lei bn.) 2014  2015  2016  Inter-company arrears  9.0  7.7  7.7  Arrears to the general government budget  5.1  10.0  12.0  Arrears to other creditors  4.0  2.5  2.3  Overdue payments of private companies (lei bn.) 2014  2015  2016  Inter-company arrears  44.7  44.7  39.1  Arrears to the general government budget  13.4  14.6  14.1  Arrears to other creditors  16.3  17.1  17.4  Note: Data do not cover overdue payments to credit institutions.

This mix between an expansionary budgetary and fiscal policy during a period of abovepotential economic growth and the worsening global market sentiment towards emerging economies in general can enhance volatility and affect financial stability via several channels: the interest rate, the exchange rate, the inflation rate. The advance in household indebtedness can cause these risks to pass through from the macroeconomic level to the microeconomic level for debtors. Last years’ environment 5  marked by low interest rates and sustained increase in new loans favours the build-up of possible vulnerabilities concerning the sustainability of the level of indebtedness through both banks and NBFIs (Figure 26), especially for lower-income debtors. The fact that the great majority of the stock and flow of housing loans and corporate loans are variable-rate loans (Figure 27) is an aggravating factor for financial stability in the context of the start of a new interest rate hike cycle – for external reasons, domestic reasons or for a combination of reasons. The fact that the advance in household indebtedness occurs concurrently with the high economic growth rates indicates the problems of economic growth: it is unbalanced and it leads to deeper inequality between social groups. Debt service-to-income ratio for debtors earning minimum to average wage economy-wide stands higher than that for debtors earning double the average wage, notably among borrowers with housing loans (Figure 28).
What is probably more relevant to the supply of credit at the current juncture is the amount of bank capital and the cost and availability of bank funding. QE may then boost credit supply indirectly if it leads investors to increase their demand for bank debt and equity. As you will be aware, the Monetary Policy Committee has so far purchased £ billion of gilts, £ billion in a first phase during the worst of the recession in 2009 (QE1) and £ billion in a second phase as the economy slowed at the end of last year and which was  1  Cash can be thought of a zero-interest perpetuity issued by the state. But it has value because it can be used in transactions. The MPC’s asset purchases are actually financed by issuing bank reserves which pay Bank Rate rather than nothing and which can be easily converted into cash. BIS central bankers’ speeches  1  completed shortly before our latest policy meeting (QE2). To give some context, that represents around a quarter of the total stock of UK government debt in issue. It is, though, important to remember that throughout this time the Debt Management Office has been issuing substantial net quantities of new gilts in order to fund the Government’s budget deficit. So, despite the scale of our purchases, the stock of conventional gilts held by the private sector is actually higher now than when we started our purchases (see Chart 1). What impact have our purchases had on asset prices?

The ongoing work of the Committee The ongoing work of the Committee is noteworthy. It includes an evaluation of the scientific bibliography on financial literacy, as well as a review and assessment of international initiatives for the promotion of financial literacy. The Committee, with the help of CBC staff, has also conducted an in depth econometric analysis of the results of the CBC's sampling survey in order to representatively assess the level of financial literacy in Cyprus, as well as to identify the groups that are in greater and urgent need of financial education. For instance, people who studied financial subjects at high school scored higher in the survey than those who focused on classical studies with 5.2 out of 7, compared to 4.5 out of 7 in knowledge questions; 5 out of 7 being the minimum score for adequate knowledge as set by the OECD. The CBC had carried out a sampling survey in 2018 to better identify the extent of the financial literacy problem, covering all groups of the population at a national level. This survey followed another similar survey, which focused on university students, namely, a survey by Andreou and Phillips (2018)1 which showed that the low level of financial literacy among university students appears to be a major problem in our society. The CBC survey, which as I mentioned covers all segments of the population, is instrumental in deriving useful results on financial literacy in Cyprus.
When you put them all together and it runs like clockwork, you have a powerful ecosystem that would be very hard to replace. This kind of infrastructure is so sticky that it’s “hard to move” – to quote a senior executive at a leading global asset manager, who just reaffirmed that Hong Kong will remain their one and only Asian hub. 21. Because our system functions so smoothly, even under stress, it’s easy for people to take it for granted. At the HKMA, we can never do that. As a market facilitator, we are always looking for new opportunities for our financial sector. And, as a supervisor, we are constantly working to create policy headroom so that market players can seize those opportunities. Opportunity — China 22. As we speak of opportunity, the future of finance – from Hong Kong’s perspective – can be summed up in three words: China, green and technology. 2/5  BIS central bankers' speeches  23. By China, I mean connecting the Mainland and international financial markets via Hong Kong. Hong Kong is the only gateway of its kind to the Mainland’s capital markets. Only Hong Kong can play this role – because of a combination of advantages that only Hong Kong has. 24. We are part of China, supporting the country’s economic development for more than four decades. That’s why the financial infrastructure connecting Hong Kong with the Mainland has continued to grow. And we provide global investors with a familiar, trusted point of access to Mainland markets.

Throughout history, financial activity has been concentrated where it best meets the needs of market users. And talent always follows the money. In other words, a financial centre grows when it can effectively intermediate the demand and supply of money, enable risk management and create value. When that is no longer the case, capital and talent move on. Ruthless, but that’s the nature of finance. 6. In my view, the qualities of an international financial centre can be distilled in two words: opportunity and ecosystem. In the rest of my speech, I am going to discuss why Hong Kong’s franchise as an international finance centre remains strong – and how we can make that franchise even stronger. The Ecosystem 7. Let me start with the bedrock of the ecosystem, which is financial stability. I’ve been with the HKMA long enough to have been part of the team that helped Hong Kong weather the Asian Financial Crisis and the Global Financial Crisis. We learned a lot about the importance of financial stability through these experiences. 8. But what Hong Kong has gone through since mid-2019 has been truly exceptional. The social unrest, China-US tensions and Covid-19 put our financial system under a prolonged, real-life stress test that featured almost all the worst-case scenarios. 9. How have we performed? Without wanting to sound complacent, I think we’ve done alright. Let me share a few facts with you to illustrate this. 10. Our Linked Exchange Rate System stood up to the test.
It also said that, rather than responding to economic conditions – that is the task of the “primary” instrument – the path of the APF would be “gradual and predictable”. Second, and because of this, it’s reasonable to suppose that this path is already reflected in the asset prices on which the MPC conditions its forecast. I’ve tried to argue today that the effects of QE and QT are transmitted predominantly via their impact on bond yields. The same goes for the expected path of the APF over the future: only surprises in QT decisions have an impact on these prices. So as long as there are no surprises – as long as the MPC always announces in advance its intentions, and the evolution of the balance sheet really is “predictable” – then the effects of QT will already be embodied in the yield curve. To add something else would be to double-count those effects. Summary and conclusion No monetary policymaker should ignore information that’s relevant for future inflation. That includes the monetary aggregates. But like most economic data they need interpretation. Certainly the very strongest claims – that QE inevitably leads to rapid growth of commercial bank deposits (M4), on a par with that in the central bank’s balance sheet; and that this, in turn, inevitably leads to excessive inflation – are not well supported by the evidence.

It also suggests that, rather than just their size, a more accurate measure of the impact of asset purchases is what they do to bond yields. Combined, and by design, the dual shifts in Chart 9 would leave those yields unchanged. This conclusion is all the stronger once you recognise – as seems to be the case in the data – that the MD line is subject to shifts not just to its position but also in its slope. The effects on bond yields of a given quantum of asset purchases appear to vary. In particular, it seems to be exactly during these episodes of acute market illiquidity – the three I singled out are circled in Chart 10 – that these purchases seem to have been the most effective at tempering any rise in yields. Page 19  Chart 10: Asset purchases seem to have larger effects when markets are illiquid  Sources: Bloomberg Finance L.P, Refinitiv Eikon, Reuters and Bank of England calculations. Chart shows the change in 525 year gilt yields, averaged across maturities, over two-day windows around announcements (see Joyce et al (2011)  ),  except when there are confounding events within this window. October 2011, February 2012, and March 2020 use a narrower window, as MPC announcements coincided with other central bank announcements or major political news. Purchase surprise is the change in the expected target stock of QE purchases among market participants surveyed by Reuters (QE1–QE4) and market intelligence (QE5).
Chart 10: Global current account imbalances and gross capital flows Total current account surpluses (a) BIS bank outflows (c) Gross capital outflows Per cent of world GDP (inverted) 20  Total current account deficits (lhs) (b) BIS bank inflows (lhs) (d) Gross capital inflows (lhs) Per cent of world GDP 20  15  15  10  10  5 0 + 5  5 + 0 5  10  10  15  15  20 1980  20 1984  1988  1992  1996  2000  2004  2008  2012  Sources: Bank for International Settlements, International Monetary Fund World Economic Outlook and Bank calculations. (a) Sum of global current account surpluses. (b) Sum of global current account deficits. (c) Sum of global net purchases of foreign assets by residents. (d) Sum of global net purchases of domestic assets by foreigners. BIS central bankers’ speeches  11  Chart 11: Global imbalances Other current account deficit countries  China and emerging market Asian economies  Germany and Japan  Oil exporters  United States  Rest of the world  Cyclically adjusted, assuming substantial supply impact  Cyclically adjusted, assuming little supply impact  Per cent of world GDP  4 3 2 1 0 -1 -2 -3  Forecast  -4 1998  2000  2002  2004  2006  2008  2010  2012  2014  2016  Source: International Monetary Fund World Economic Outlook, April 2013.

BIS central bankers’ speeches  3  Conditional inflation forecast of March 2011 and of June 2011 Percentage change in national consumer price index from previous year Inflation Forecast March 2011 (with Libor at 0.25%) Forecast June 2011 (with Libor at 0.25%) % 3 2.5 2 1.5 1 0.5 0 –0.5 2008  2009  2010  2011  2012  2013  2014  Observed inflation June 2011 2008  I nf l at i on  2009  2010 Q2  Q3  Q4  2011  Q1  Q2  Q3  Q4  Q1  Q1  Q2  Q3  Q4  Q1  2.5  2.7  3.0  1.6  0.0 - 0.7 - 1.0 - 0.2 1.1  1.0  0.3  0.3  0.6  Q2  Q3  2008  2009  2010  2.4  - 0.5  0.7  Q4  Conditional inflation forecast of March 2011 with Libor at 0.25% and of June 2011 with Libor at 0.25% 2011  For ecast Mar ch 2011, Li bor at 0.25% For ecast June 2011, Li bor at 0.25%  4  2012  2013  2014  Q1  Q2  Q3  Q4  Q1  Q2  Q3  Q4  Q1  Q2  Q3  Q4  0.4  0.5  1.2  1.0  0.9  1.0  1.1  1.3  1.5  1.8  2.1  2.5  0.5  1.4  1.3  1.0  0.9  1.0  1.2  1.4  1.6  1.8  2.2  Q1  2.6  Q2  Q3  2011  2012  2013  0.8  1.1  2.0  0.9  1.0  1.7  Q4  BIS central bankers’ speeches  BIS central bankers’ speeches  5
Consequently, it is not “the tenths” themselves that are important – and they are of course even less important under more normal circumstances. But when confidence in the inflation target is at stake, even tenths can send signals and this is something I think one is well advised to consider. Let me stress that I of course believe that my colleagues on the Executive Board also take arguments like these into consideration. However, it can certainly be the case that we make different assessments of how important they are. This is natural and in a way the whole point of an executive board. What I am presenting here is my way of looking at things and my personal assessments. A necessary condition for maintaining confidence in the inflation target is, as I see it, that the monetary policy we conduct and plan to conduct means that we anticipate inflation being 2 per cent at least at the end of the forecast period we are considering. If the inflation forecast is not 2 per cent even in this time perspective, the monetary policy, on which our inflation forecast is based, is wrong and we must adjust it. But as I was just discussing, this is not always enough – it is not a sufficient condition.

Victor Norman has described this mechanism and presented charts similar to the ones shown here in textbooks that have been widely used at Norwegian universities and business schools since the early 1980s. This mechanism was also recognized at an early stage by the Norwegian government. In 1974, in a report 1 to the Parliament entitled “The role of petroleum activities in Norwegian society”, this issue was discussed in depth. I quote: “A transfer of production and employment between firms and industries  1  2  Report no. 25 to the Storting (the Parliament), 1974. BIS Review 50/2006  may occur through higher domestic cost pressures” … and further … “How strong the pressures will be, depends in particular on how strongly Norwegian business and industry is involved in petroleum activities and the scale of revenues that are spent domestically”. The risk of “Dutch disease” 2 has been a common reference in the discussion on petroleum revenue spending. Dutch disease occurs when spending is so high that the basis for exposed industries is eroded and fluctuations in economic activity are amplified. Changes in industry structure involve costs in that invested capital may remain idle and labour resources may be used less efficiently in periods. It may take time and be difficult to re-establish the use of these resources. Restructuring costs would probably be so substantial that the government should take them into account.