samchain/econo-pairs-v1 huggingface dataset:
It should, therefore, be clear that if it is to prosper, Malta will have to seek an accommodation with the EU. The prevailing view among countries on the periphery of the existing EU-15 is that the prospective longterm benefits of membership outweigh the costs. That is why they are anxious to become members. 25  European Commission, Directorate General for Economic and Financial Affairs. (2001) “The Economic Impact of Enlargement.” Enlargement Papers No 4. June. http://europa.eu.int/economy_finance. The report notes that between 2005 and 2009 the average growth rate in 8 of the accession countries (the first wave of exceeding countries excluding Malta and Cyprus) will be 2.9%, 4.6% and 6.1%, respectively under the baseline scenario, a central scenario and an optimistic scenario. In a similar vein, a recent report by the National Bank of Hungary concludes that the adoption of the euro could boost economic growth in Hungary by between 0.6 to 0.9 percentage points annually for 20 years. Most of the growth will come from increased international trade. See National Bank of Hungary, Occasional Paper 24, “Adopting the Euro in Hungary: expected costs, benefits and timing”, by Attila Csajbok and Agnes Csermely. 8  BIS Review 69/2002  Until such time as an equally well-documented argument is made which seriously questions this view, the case for membership remains a compelling one. BIS Review 69/2002  9

The “prudential” suffix, for its part, refers to the fact that it has to act pre-emptively; it will seek firstly to mitigate the accumulation of systemic risk or its potential materialisation, and secondly to generate buffers (mainly capital buffers in the case of banks) enabling the impact of systemic risk, should it materialise, to be cushioned. The multi-dimensional nature of systemic risk One characteristic of macroprudential policy is the multi-dimensional nature of its objective: to prevent systemic risk. Theoretical and empirical research appear to concur that there are at least two dimensions to this risk which, moreover, can interact with each other. The first is the time dimension, which is related to how systemic risk evolves over the course of the financial cycle. A good example of this dimension can be found in the run-up to the global financial crisis. During those years, there was strong growth in credit to the nonfinancial private sector in Spain (in particular to real estate development and construction activities), attaining levels far above those considered sustainable. This situation was accompanied by price rises and increases in real estate market activity, also to unsustainable levels. Against this background, household and corporate debt associated with real estate transactions mounted to such an extent over time that, when its sustainability was questioned and financing ground to a halt, there was a sharp correction to these financial imbalances.
One consequence of the financial crisis is that, in the future, we will see more regulation of banks and the financial sector in general. The fundamental aim of these regulations is, of course, to reduce the likelihood and effects of crises of the type we have just experienced. These increased requirements will probably lead to increased prices for financial services, slightly higher lending rates to households and companies, and a slightly lower credit supply. One way of putting it could be that these costs are a kind of insurance premium that society is willing to pay to avoid financial crises or to considerably reduce the risk of them. However, at the same time, it should be borne in mind that these regulations could impact the economy’s potential output and growth. If the regulations are too far-reaching, they may have a negative impact on the efficiency and growth potential of the financial sector. It is true that the significance for growth of the financial sector is not entirely clear, but the possibility  3  See, for example Athanasios Orphanides, “Monetary Policy Rules and the Great Inflation”, American Economic Review Papers and Proceedings 92:2, May 2002. BIS Review 68/2010  7  that an “over-regulated” financial sector could contribute to lower potential growth in the economy as a whole can hardly be ruled out.

This definition has not changed since it was adopted in 2003 and is broadly shared today by all the main central banks of developed countries, including the United States and the United Kingdom. In the current environment, it is important to recall that monetary policy has an internal aim (keeping inflation under control), not an external aim (devaluing the exchange rate, which could trigger negative chain reactions). Why 2% and not 0%? In order to keep a safety margin, as inflation that is too low is as bad as inflation that is too high: it creates the risk of deflation, i.e. a general and lasting downward spiral of prices, which generates a fall in economic activity and a rise in unemployment. Furthermore, slightly positive inflation oils the wheels of the economy, for example when there are labour market rigidities or differences between regions of the euro area. The stability of financing via the decline in interest rates Controlled inflation results in a fall in market risk premia: this leads to lower interest rates in the euro area, and especially narrower spreads between countries. Let us take the example of our respective countries. . Before Maastricht, between 1986 and 1992, the spread between Italy and Germany was 5.1% on average, while it was just 1.4% in 2016. Admittedly there were pressures in 2011–2012, stemming directly from temporary doubts over the sustainability of the euro area. For France, the spread has also narrowed, from 1.9% between 1986 and 1992 to 0.3% in 2016.
Mr. Carse reviews the impact of the Asian crisis on the Hong Kong banking sector Speech by the Deputy Chief Executive of the Hong Kong Monetary Authority, Mr. David Carse, at the Sixth Conference on Pacific Basin Business, Economics and Finance in Hong Kong on 28/5/98. I am pleased to have the opportunity to talk to you about the impact of the Asian financial crisis on the Hong Kong banking sector. The Asian financial crisis is one year old this month, though this is a birthday that we do not want to celebrate. The crisis can be dated from late May when the Thai Baht came under severe pressure. A renewed attack in early July, while we were celebrating the success of the Handover in Hong Kong, led to the floating of the Baht, which promptly plunged in value. The contagion then spread to neighbouring economies, and although Hong Kong was for a time immune, it eventually reached us too. Explaining the origins and causes of the Asian crisis has become a major growth industry and I have no intention of adding to the debate today. Suffice to say that one point on which almost all the commentators are agreed is that weakness in banking systems in the region has been one of the main reasons which explains the intensity of the crisis and the speed with which it took hold.

Wealth has also risen faster than the national income.6 These increases in wealth are transferred and transformed into capital that is used in production. In most cases, this is done via the financial markets. The global real interest rate will in turn adapt so that the desired capital stock matches the available wealth. In recent decades, the upturn in wealth and capital in relation to national income has proved to be relatively greater than the downturn in the real interest rate. This has meant that the capital share of the added value (the ratio between the real interest rate multiplied by capital and national income) has risen despite the real interest rate declining. The capital share and the wage share always add up to one. Consequently, wages share of added value has  6  4  See Piketty & Zucman (2014). Waldenström (2015) provides an account of the wealth/national income ratio in Sweden. BIS central bankers’ speeches  declined in many countries.7 Another way of expressing this is that such large real interest rate cuts have not been needed for capital to absorb the increase in wealth. And this in turn is due to the production technology used. Following this discussion on what determines the development of the real interest rate in the long run, I shall now go on to discuss the inflation target, which is the other factor of significance for nominal interest rates in the longer run.
This work goes under the name of T-LAC, or total loss absorbing capacity. I find it reasonable to believe that there will be an agreement on a consultative document to be published in the context of the G20 summit in Brisbane. So, viewed against the broad regulatory reform agenda put in place as a reaction to the crisis, it is fair to say that we are indeed seeing some light at the end of the tunnel. The main pieces are starting to come in place. Unfortunately, concluding the post crisis reform agenda does not mean that we can lie down, relax and declare “mission accomplished”. We need to look closely at the regulatory framework, remind ourselves of the reasons we put these measures in place, and ask whether they are delivering the right outcomes. And here I would like to focus on the interlinked issues of implementation and calibration. Let me start with some reflections on implementation. For some time now, the Basel Committee has engaged in the process of monitoring and assessing how members implement what has been agreed by the Committee. The assessment work is carried out on a jurisdictional as well as on a thematic basis. In the jurisdictional assessment we look at how Committee members have implemented the Basel standard – determining whether or not it is a fair reflection of the Basel III  6  4  Source: Shareholder Report on UBS’ Write-Downs. BIS central bankers’ speeches  requirements.

Indeed the way finance sector output is measured meant that the rate of bank balance sheet expansion translated directly into the measured contribution of the finance sector to productivity growth. Strong pre-crisis growth in manufacturing productivity, meanwhile, was largely caused by structural changes in the sector catalysed by globalisation. Increased competition from abroad, especially from China, created a more challenging climate for UK manufacturers, incentivising them to raise productivity (often supported by significant foreign direct investment) or scale back production. The UK manufacturing sector is now much more productive as a result – but is also smaller. Looking ahead, the risks to productivity from this channel also appear to be to the downside. The tensions between the US and China have led to increased tariffs which have contributed to a slowdown in world growth and a sharp slowing in goods trade. And in the UK, Brexit, on our forecast assumptions, is likely to lead to a reduction in the UK’s integration with the EU in goods and services trade, which appears unlikely, at least in the near term, to be offset by an equivalent increase in integration with the rest of the world. Putting all this together leaves me a little more pessimistic on productivity growth than the MPC’s central forecast. Since productivity growth is a key determinant of how fast the economy can sustainably grow – what I just described as the economy’s “speed limit” – that also means that, all else equal, I am a little more pessimistic about future GDP growth.
While this issue is at the heart of risk management challenges for the provision of credit more broadly, the rise in the relative size of the private leveraged fund sector and the rise in the importance of new derivative financial instruments may complicate the design of policies and risk-management practices to counteract these traditional frictions. Virtually all types of credit markets suffer from informational problems - consider the challenge faced by a bank in assessing the risk associated with lending to a small unrated company. But the complexity of new financial products, the rapidity with which positions can change, and the lack of a long time series of historical relationships seems likely to enhance these problems for leveraged institutions operating in new markets such as credit derivatives. Funds typically deal with several different banks and investments banks. The desire to maintain the confidentiality of their trading strategies has traditionally led firms to be quite opaque to outsiders and reluctant to give their banks sufficiently detailed information on a real time basis about the risk profile of the overall fund. Without that information, individual dealers or banks have a difficult time evaluating the probability of default of a leveraged counterparty and the potential covariance with other positions of the firm. Individual firms may also see only a piece of the hedge fund’s positions, and if their direct exposure to the individual fund is small, may perceive less need to worry about the overall risk profile of the fund.

In most circumstances, increased trading and participation contributes to market liquidity and makes markets less volatile. The ultimate benefit should be lower risks for all market participants. This in turn should reduce the risk premia associated with holding financial assets, and ultimately reduce the cost of capital. The rapid growth in the relative importance of these leveraged financial institutions has been accompanied by a number of structural changes as well. The total number of funds has grown dramatically. There are more very large hedge funds and private equity firms. Greater institutionalization, and the maturity of risk management and operational infrastructure in the largest of these private funds, has likely reduced operational risk. To the extent these changes have increased the diversity of firms and strategies in this part of the financial system, and this is hard to measure with any confidence, this heterogeneity should provide diversification opportunities, foster more efficient price discovery and could help improve stability. These changes in market participants have occurred in conjunction with a dramatic acceleration in number and type of derivative instruments. These developments have likely had the important impact of allowing for a more efficient distribution and more effective management of risk. All of these changes should move the market in the direction of fostering the efficient allocation of credit and capital formation, and thus enhancing the economy’s real growth potential.
Page 9 sur 14  They reflect the financing conditions perceived by private agents when they take consumption or investment decisions. Their evolution depends on our policy decisions, but also on inflation expectations. Real rates increased significantly from historically low levels (-4% for the 2y real OIS rate in March 2022, see LHS panel) but remained negative at all maturities until mid-December last year (blue line on the RHS panel). It is only from the end of 2022 that we achieved positive real rates. As we estimate the neutral rate r* to be close to zero, we are now clearly in restrictive territory. Page 10 sur 14  Second, the proportion of fixed-rate long-term loans is particularly high by historical standards. Many borrowers shifted away from floating rate loans after the global financial crisis and the following decade of low rates encouraged longterm borrowing. This is welcome for financial stability, especially for mortgages. But as a result, the pass-through of higher policy rates is more gradual. Third, the origin and sectorial composition of inflation matters. The current surge in inflation does not primarily originate in overheated demand but in supply shocks. This has implication for the transmission lags. (i) The rise in the price of commodities and input costs was at the root of inflation. And the pass-through to producer prices (and subsequently to CPI inflation) might be asymmetric, faster and more complete on the way up than on the way down.

Recent work using French data7 shows that the pass-through for a positive shock on energy costs is over 100%, while that for a negative shock is much lower: 58%. This asymmetry implies that the decline in energy and input  7  See R. Lafrogne-Joussier, J. Martin et I. Méjean Transmission des coûts importés et montée de l'inflation (caeeco.fr)  Page 11 sur 14 costs, currently occurring as tensions and bottlenecks in supply chains ease, may not fully translate yet into lower inflation. (ii) Besides, even though the external part of inflation is currently falling, core inflation remains high. Inflation excluding energy and food stood up at 5.6% in April, slightly below March (5.7%). External supply-driven price increases have spread to core inflation. Service inflation, in part fuelled by wage developments, has gradually but steadily increased over recent quarters. This deserves close monitoring. Historically, services are the most persistent component of both headline and core inflation, and their share in “core consumption” has significantly increased. Page 12 sur 14  Unlike for non-energy industrial goods, prices in the services sector will only get little relief stemming from decreasing international prices. Looking a few quarters ahead, services inflation is likely to become the dominant source of inflation in the euro area. Non housing services especially are less directly sensitive to interest rates; the dampening effect of monetary policy on aggregate demand will be felt but it will take more time. III. What conclusions can be drawn for monetary policy?
The central bank directly influences the sight deposit rate, and thus faces an important question already at the stage of making projections: what interest rate scenario should provide the basis for inflation projections? Practice varies. Generally, more than one interest rate scenario may result in the same inflation projection. The Central Bank of New Zealand is the only central bank that presents its assessment of the optimal interest rate path and uses this as the basis for its inflation projections. The central banks of other countries base their projections on a stylised assumption about the interest rate. Thus, these interest rate scenarios are not necessarily consistent with the interest rate trend envisaged by the central bank. The Bank of England and Sweden’s Riksbank base their estimates in the baseline scenario on the assumption that interest rates remain unchanged. Alternative projections based on market expectations regarding future interest rates are also shown. 8  A number of academics have argued for making the optimal interest rate scenario the basis for inflation projections. Their argument is as follows: If the central bank itself does not regard an unchanged interest rate during the forecast period as the most probable scenario, the price inflation projection will not be the most probable one either. Thus, the projection does not provide guidance as to what inflation the central bank actually expects. 8  10  See e.g. Alesina, A., O. Blanchard, J. Garli, F. Giavazzi and H. Uhlig: "Defining a macroeconomic Framework for the Euro Area.

A report prepared by Dr. Sushil Wadhwani, a member of the MPC, indicates, however, that the Bank of England’s interest rate changes in the period 3 June 1997 –18 April 2001 have come as more of a surprise to market participants than interest rate changes in continental Europe and the US during the same period. The same study indicates that the element of surprise has waned over time. In Norway, it appears that transparency in Norges Bank’s interpretation of the mandate and in the implementation of monetary policy has contributed to making monetary policy somewhat more predictable. The chart shows that Norges Bank’s changes in the key rate have less impact on money market rates now than earlier. The academic literature on transparency and monetary policy is voluminous and growing. "How Do 7 Central Banks Talk?" , a report prepared by a number of well-known academics and presented recently at the Center for Economic Policy Research, specifies the objectives that central banks should bear in mind when developing their strategy on transparency. The report says the following: "Transparency should allow the public to understand, and possibly anticipate, the central bank’s decisions, to see each of them as the logical conclusion of a chain of past and future decisions aimed at a clear set of targets,…") This view of transparency and predictability contrasts sharply with the earlier practice of playing on the element of surprise. In monetary policy, this was associated especially with control of the exchange rate.
Born in Louisville, Kentucky, Benjamin Friedman went to Harvard University with the intention of studying law, but soon realised that economics suited him better. He pursued his studies at Harvard and at Cambridge University in England. Early in his career, Ben worked for various entities of the Federal Reserve System and at Morgan Stanley. In 1972, at the age of 25, he was appointed assistant professor of economics at Harvard University. Ben has remained a loyal faculty member at Harvard for five decades, including a three-year spell as the chairman of the economics department. Page 2/4  When Ben recently celebrated 50 years as a professor at Harvard, many of his former students travelled from all around the world to attend the occasion. The interaction with his students has been of utmost importance to Ben, and he would remain in contact with them for decades following their graduation. A number of these former students today occupy leading positions in academia, central banking and government. This shows that Ben has been not only an outstanding researcher, but also an influential teacher of economics. Spending 50 years in the same place is not as unusual as one might think, at least not when we consider some of the great Enlightenment thinkers Ben so deeply admires. Take Immanuel Kant, who developed his philosophy without ever leaving his hometown of Königsberg. According to legend, Kant became such an integral part of the city that people would set their watch by the time he left his house for his afternoon walk.

Speech  22 September 2022, 5.30 pm  Sixth Karl Brunner Distinguished Lecture Introduction of Benjamin M. Friedman, ETH Zurich  Thomas J. Jordan Chairman of the Governing Board Swiss National Bank Zurich, 22 September 2022 © Swiss National Bank  Page 1/4  Ladies and Gentlemen I am very pleased to welcome you all to the sixth Karl Brunner Distinguished Lecture. The Swiss National Bank established this annual lecture series in honour of the Swiss economist Karl Brunner, one of the leading monetary economists of the last century. Our aim with these lectures is to reach a broad audience, and to contribute to the public debate on issues related to central banking and economics more broadly. This year’s Karl Brunner Distinguished Lecture is special for several reasons. After a threeyear break caused by the pandemic, the lecture finally returns to ETH Zurich. I am delighted to see so many of you here. I also want to thank Joël Mesot, President of ETH Zurich, for making these fantastic premises available to us yet again. Above all, this year’s event is special because of the person giving the lecture. Benjamin Friedman is the William Joseph Maier Professor of Political Economy at Harvard University. He is one of the world’s foremost thinkers on monetary policy and an outstanding public intellectual. In addition, he is among the few still active economists who knew Karl Brunner well. Even though they did not always agree on economic matters, the two maintained a close personal relationship characterised by mutual respect.