samchain/econo-pairs-v1 huggingface dataset:
Applied in practice, this approach might have helped identify some of the key nodal sources of risk ahead of financial crisis. In early 2007, it is doubtful whether many of the world’s  23  For example, Smith (2006) and McKercher and Chon (2004). 24  For example, Kinney et al (2005). 25  Lee, Kim and Jeong (2006). 26  Propper et al (2008). 12  BIS Review 53/2009  largest financial institutions were more than two or three degrees of separation from AIG. And in 1998, it is unlikely that many of the world’s largest banks were more than one or two degrees of separation from LTCM. Rolling the snowball might have identified these financial black holes before they swallowed too many planets. There have been a number of recent policy proposals in this general area. For example, the de Larosiere Report (2009) calls for a European and, ultimately, global initiative to create an international register of claims between financial institutions. A similar initiative following the LDC debt crisis resulted in the Bank for International Settlements (BIS) developing international banking statistics. These are now an essential source of international financial network data. There is a need for similar ambition now in fashioning international flow of funds and balance sheet data. Even with these data, policymakers and practitioners need to invest in new means of analysis. Node-by-node diagnostics, such as VaR, have shown themselves during this crisis to offer a poor guide to institutional robustness.

They are associated with the fact that expanding demand in many industries exceeds their potential to ramp up output and imports. This accelerates price growth as well. As to the product groups where prices rose the most in the second quarter, these are construction materials, furniture, and cars. When people expect prices to rise faster, they decide to make large purchases earlier. To do this, they use both savings and borrowings. Growth in consumer lending again sped up to a quite high rate, which was driven by accommodative monetary policy, among other things. On the other hand, accommodative policy lowered the demand for bank deposits, especially given accelerated inflation. There are also other markets where price growth was rather caused by one-off factors and limited supply. This is tourism, for instance. Only a part of foreign destinations have been reopened, whereas Russian resorts’ infrastructure is still insufficient to accept the entire tourist flow. As a result, prices for tourism services soared, which also sped up inflation in June. Furthermore, May—June recorded a surge in prices for such vegetables as cabbage, potato, carrot and beetroot, which was because 2020 harvest stocks started to end before the new harvest supply. However, the contribution of such one-off factors to overall inflation is smaller than that of steady factors. The increase in prices for these everyday products is very noticeable and significantly impacts inflation expectations.
This 11-member group of central banks was initiated by the Bank of Japan. At the beginning, EMEAP concentrated on the exchange of information on market developments in the economies of members and was the forum for the Bank of Japan to brief others on G-7 discussions. But it has since evolved into quite a productive, and certainly the most active, forum for central banking discussions in the region to date through its biannual meetings of deputy governors and an annual meeting of governors. BIS Review 91/1997  -4-  18. The discussion in EMEAP now has a sharp focus on Asian monetary co-operation. This need was perhaps crystallized by the Mexican crisis, which rippled to Asian currencies in January 1995. In its wake, I convened an informal meeting of several EMEAP central banks that experienced speculative activity. There was immediate agreement that it would be useful to exchange market intelligence and to share knowledge and techniques on monetary operations helpful to the maintenance of monetary stability. Out of this meeting also evolved the package of bilateral repurchase agreements of US Treasuries signed by five central banks in Hong Kong on 20 November 1995 and aimed at the enhancement of the liquidity of the foreign reserves that they hold -- a historic landmark in Asian monetary co-operation that eventually expanded to cover all the eleven EMEAP members. 19.

The Feldstein/Horioka coefficient skirted one for large parts of this period. The global financial system operated as anything but a system. Indeed, it was this which prompted Feldstein and Horioka in the early 1980s to present the “puzzle” of still-low levels of capital market integration. Yet at pretty much precisely the point this puzzle was being identified, it began to disappear. Correlations quickly moved from close to unity in the early 1980s to close to zero by the start of the 21st century. This was an astonishingly rapid evolution from a world close to financial autarky to one close to financial nirvana. In the light of the crisis, measured levels of global capital market integration have fallen somewhat. But they remain at higher levels than at any point in history. Overall, then, the picture is clear. For much of the 20th century, global finance was more patchwork than network. But the past thirty years have seen that picture change spectacularly. Today, global finance is a well-connected network, a tightly-woven and tangled web, a genuine system. The double-edged nature of financial integration So what are the implications of this increase in global financial integration? There have been large numbers of studies exploring the growth and welfare implications of these trends, using cross-country and time-series evidence (Rey (2013)). This evidence paints, at best, a mixed picture. While capital integration ought to enhance international risk-sharing, there is surprisingly little evidence of this having conferred macro-economic benefits – and some of it having imposed costs.
Central Bank of Kuwait - Public ‫ عام‬- ‫بنك الكويت المركزي‬  -5-  International Energy Agency (IEA) estimates that achieving Paris Agreement target on climate change would require, by 2050, about 80% decrease in the CO2 intensity of the building sector, 95% of world energy supply to be of low carbon and 70% of new cars to be electric. This will cause significant, even if slower, shift in the structure of our economies with strong bearing on the financial sector. That is why the NGFS, the Central Banks and Supervisors Network for Greening the Financial System, has argued that ‘climate related risks are a source of financial risk and therefore fall squarely within the mandate of central banks and supervisors to ensure that financial system is resilient to these risks’. Regulators need to determine how best to incorporate and operationalize climate related risks in their prudential policy settings. It would require expanding the risk matrix to formally include climate related risks and enhancing the analytical tools to assess financial sector exposures to extreme weather events. Bank of England has announced that in 2021, it will start stress-testing banks on different climate pathways. Ultimately, the key is to retool the regulatory regime to factor in risks to climate change in a holistic fashion, instead of adding on an additional item in the risk matrix. Conclusion Let me conclude. While we have managed to fix the fault lines exposed by the GFC, our understanding and ability to respond to some of the emerging risks remain limited.

I am the vice-chairman of the Federal Open Market Committee, the Fed committee that sets monetary policy to promote its statutory goals of full employment and price stability. Last week, the committee reaffirmed that it currently anticipates that the Federal Reserve’s federal funds rate target will remain exceptionally low – which I understand to mean at its current level – at least through late 2014. The FOMC also voted to provide additional support for economic activity by extending its maturity extension program – popularly referred to as Operation Twist – through the end of the year. This extension means that we will be buying an additional $ billion of longer term Treasury securities, paid for by selling or redeeming the same amount of shorter term Treasuries. This action reduces the supply of longer dated Treasury securities on the market and lowers longer term interest rates relative to where they would otherwise be in the absence of such a program. That puts downward pressure on corporate borrowing costs and mortgage rates, and supports asset prices such as housing and equities – all of which promotes growth. In addition, the FOMC adopted new language to describe its policy outlook, stating that it is “prepared to take further action as appropriate to promote a stronger economic recovery and  BIS central bankers’ speeches  3  sustained improvement in labor market conditions in a context of price stability.” I will let those words speak for themselves. Local economic conditions Now let me turn to economic conditions in Puerto Rico.
This partly explains the feeble economic recovery and declining potential GDP growth trend in the US (Chart 2). 6. The weak recovery in the US in recent years fell outside the expectations of many economists at the Fed. Because of the lacklustre growth, QE was extended and expanded, feeding an addiction from “low for long”, to “low for longer” and then to “low forever”, and developing a dependence on QE by the market. When the then Fed Chairman Ben Bernanke hinted at the possibility of scaling down the asset purchase programme in May 2013, the market panicked in an episode we later called the “Taper Tantrum”. 7. So, why is the present recovery weaker than in previous cycles? This is a complicated and controversial subject. I believe that both cyclical factors and structural factors, such as household de-leveraging, the high home inventory levels after the bursting of the housing bubble and structural changes in the population and labour market, are at play. BIS central bankers’ speeches  1  External factors are also involved, including the European sovereign debt crisis in 2011. However, due to time constraints, I will focus on how QE may have supported US economic recovery and affected the global financial environment. 8. The prevailing mainstream view, including the major advanced economies such as the US, Europe and Japan, as well as the International Monetary Fund, is that QE is the right policy response to prop up the economy and stave off deflation.

While the mainstream thinking recognises that zero interest rates and QE are not without side effects, they still believe that the benefits outweigh the costs. Only history will tell. How should Hong Kong adjust to the US exit from QE? 18. Let me offer my two cents on the future outlook. The US interest rate will quite possibly start to normalise next week. The US economy will continue to grow at a moderate pace, and the US dollar should remain strong for a period of time. However, it is hard to predict how interest rates, bond yields, fund flows and asset markets will react as we are again entering uncharted waters, much the same as when QE was first launched. Moreover, economies interact with each other and respond to external factors differently, thus making it more difficult to predict market responses. Nevertheless, one thing is certain: a period of difficult adjustment lies ahead for EMEs. Energy and commodity prices will continue to be suppressed. EMEs will continue to witness capital outflows, currency depreciation, economic slowdown and downward pressure on their asset markets. And, Hong Kong will not be immune. We should be prepared to face a period of capital outflows, rising interest rates and slower growth. Asset markets, including the property market, will also face downward pressure. However, if there is an orderly adjustment to asset and property prices, this could provide a respite for prospective homebuyers and business owners squeezed by hefty rents.
This involves cross-border trade and financial interactions between countries, with flows of goods, services or information at increasing volumes and velocities. It is akin to interactions within a social network or across the World Wide Web. At least in principle, each of these individual layers could be complex. These layers are also likely to interact. For example, there are likely to be strong interactions between the financial system and the macro-economy and between individual national financial systems and the global financial system. This coupling between sub-systems adds to the degree of complexity of the system as a whole. Let me present some stylised facts on each of these layers, from microscopic through telescopic, to illustrate why each has the characteristics of a complex sub-component. I will also present some evidence on interactions between these sub-systems, which means we have a genuine macro-financial system of systems. (a)  Complexity among individual firms  There is no off-the-shelf measure of organisational complexity, whether within banks or more generally, but a number of proxies have recently been constructed. For example, the Basel Committee has recently devised a range of complexity metrics for the world’s so-called SIFIs – systemically important financial institutions. 7 So far, 30 institutions globally have been designated by the Financial Stability Board (FSB) as SIFIs, from across a range of countries.

This is a diagnostic on the diversity of a bank’s business model – whether it is engaged in investment as well as commercial banking. Some of these trading assets will also be complex and hence difficult to price and trade – so-called Level 2 and 3 assets. As Chart 3 shows, the average SIFI had a trading book of around a quarter of assets in 2006. For the largest, this was closer to around 50% of assets. 7  See BCBS (2014). 8  Notional exposures are likely to be a poor proxy of the underlying risk on this portfolio, but provide an indication of the scale of gross derivative positions. 6  BIS central bankers’ speeches  Since the crisis, there is little evidence of these complexities having reversed. Chart 4 updates the four metrics using end-2013 data. The balance sheet of the average SIFI has not shrunk. In fact, it had risen to around $ trillion by end-2013. For the largest SIFI, it was around $ trillion. The pattern is even more striking off balance sheet. For the average SIFI, the derivatives book has risen by over 50% to over $ trillion by 2013. For the largest, it had risen to $ trillion. On the other complexity metrics, the number of legal entities for the average SIFIs is essentially unchanged comparing 2006 and 2013.
Forth’s work suggests transport networks are a large part of the explanation. By analysing commuting times into Birmingham at different times of the day, he provide a measure of the “effective” working population. At peak times, the effective working population of Birmingham is perhaps 50% smaller than its measured population due to poor transport infrastructure. This helps explain why Birmingham punches below its  demographic weight. This is a terrific example of how high-resolution data can be used to understand local patterns of economic growth. The same data could be used to analyse the “effective” working population in other UK cities, perhaps helping explain their under-performance. It could also be used to answer industrial strategy  questions, such as what impact new transport routes have on the effective working population of the UK’s major cities and hence on their incomes through agglomeration effects. Imagine a transport strategy whose aim was to raise the effective working population of those UK cities currently operating below the line. Using Chart 22, doing so would raise UK GDP per head by around 10% or around $ £ in today’s money. Those annual benefits could be compared with the one-off costs of investment to determine the desirability of such a policy, as part of the UK’s industrial strategy. My second example draws inspiration from recent work at the University of Cambridge by Penny Mealy, including by my colleague on the Industrial Strategy Council Diane Coyle.

40  All speeches are available online at www.bankofengland.co.uk/speeches  40  Chart 25: Cartogram of local-authority level ECIs  Sources: ONS Business Register and Employment Survey (BRES) and Bank calculations. Notes: UK NUTS 3 regions re-sized and coloured using estimates of economic complexity. 41  All speeches are available online at www.bankofengland.co.uk/speeches  41  Table 1 lists the top ten local authorities by ECI across the UK in 2017, while Table 2 shows the bottom ten. There is a high degree of inertia in both rankings. The ECI framework could be used to help assess which industrial strategy interventions might boost the degree of specialism and diversity, and hence the income benefits, both in already-successful and struggling regions. Table 2: Bottom 10 local authorities by ECI Dudley  Moray  South Derbyshire  Hartlepool  Wrexham  Carmarthenshire  Aberdeenshire  Breckland  North-East Lincolnshire  Telford and Wrekin  Sources: ONS Business Register and Employment Survey (BRES) and Bank calculations. Economic complexity can also be assessed across industries using a product complexity index (PCI). This proxies the embedded knowledge in an industry. Table 3 plots the top-20 UK industries by PCI against their sector shares. Financial services, the creative industries, and higher education exhibit the highest economic complexity and thus potentially generate the highest value-added. PCI metrics could be used to identify industries where “sector deals” could benefit most the economy, as part of an industrial strategy.
All considered, the Board estimates that the balance risk is unbiased for both activity and inflation. Summing up, we now face a scenario where inflation has dropped faster than expected— but will stand at 3% at the end of the projection horizon—and where activity continues to grow slowly. Both domestic and external risks have increased. Let me now turn to the issues we explored in our Financial Stability Report. 5 / 19  BIS central bankers' speeches  The Financial Stability Report Our Financial Stability Report, which we publish in June and December of each year, presents recent macroeconomic and financial developments that might influence the financial stability of the Chilean economy. On the external front, the risks presented in the FS Report are the same of the Monetary Policy Report I just described. Worth mentioning is the uncertainty surrounding how the worsened external financial conditions and the Chinese situation will affect us. In China, private credit is still on the rise, as is the banks’ exposure to the real estate sector, where house prices continue to grow at two-digit rates in the high demand cities. The quality of banks’ portfolios has deteriorated further, in line with the poor behavior of the corporate sector. This situation could worsen further with a rise in financial costs, again if international trade policies move towards protectionism, given the still high dependence of the Chinese economy on its exports.

However, the lower dynamism estimated for the last quarter of the year leads us to expect that 2016 growth will be in the lower bound of the range projected in September. Going forward, we estimate that the economy will return to near-potential expansion rates towards the end of 2017, although at a somewhat slower pace than we estimated in September. Abroad, the biggest news has been the changes in financial markets after the US election. The movements that followed took a toll on financial conditions, despite that they are still 1 / 19  BIS central bankers' speeches  expansionary from a historical standpoint. Last week the Federal Reserve raised the policy rate for the second time, a decision that was widely expected by the markets. The surprise was the confirmation of a slightly faster withdrawal of the monetary stimulus, which has shaken the financial markets in recent days. As for activity and inflation, they continue to show advances in the developed world, while they are tending to stabilize in the main emerging economies. We see some improvement in the terms of trade in the near future. Considering all the above and its effects on the medium-term outlook, the baseline scenario of this MP Report has revised the 2017 inflation trajectory from September downward. This is because core inflation—what we call the CPIEFE (i.e. excluding foods and energy)—is expected to drop significantly, due to the important weight in inflation of import-related prices.
Stress testing addresses this by a process of modelling losses under a range of macroeconomic scenarios, to ensure that a firm holds sufficient capital ex ante to withstand shocks of a specified degree of severity. An example might be to assume a recession, with an attendant housing market fall which would stress a portfolio of mortgage loans. In 2014 the FPC, supported by the PRA, undertook and published simultaneous, standardised stress tests for the major UK banks for the first time, following a partial exercise in 2013.3 Meeting minimum prudential requirements after a stress may not be sufficient to ensure financial stability. If a financial firm needs to rebuild its capital ratios then it can do so either by raising more capital or by reducing its assets. In the event of an economy wide stress, this latter approach could amplify the cycle if, say, all banks responded to lower capital by reducing their lending. The stress tests are therefore seeking to ensure that the banks have sufficient capital to at least maintain their levels of lending to the real economy and the stress tests are calibrated assuming that lending is not reduced beyond that which is driven by reductions in demand. The UK is not the only country with stress testing as part of its supervision tool kit: the US undertakes regular public stress tests of the major banks operating there and the European Banking Authority has also orchestrated stress tests across the major European banks.

Strategic decisions about the future needs to be made to sustain the ability to offer and deliver unique value propositions to customers whilst at the same time effectively managing customers’ expectations. An area that banking institutions may venture into is micro-financing. Micro-enterprises perform an important economic activity for a large segment of the country’s population. While institutional arrangements are being put in place to increase access to financing for such micro-enterprises, the banking sector with its large network of branches can become an important channel for such financing. 4  BIS Review 28/2004  These could be provided via a micro-financing window. Global experience has shown that such microfinancing operations can be successful and profitable with good loan portfolio quality. As part of the efforts to raise the quality performance in the financial services sector, Bank Negara Malaysia initiated a nation-wide survey in 2003 to assess the requirements, expectations and the satisfaction level of consumers on the quality of products and services offered by banking institutions. While the primary objective of the study is to develop an index on the levels of quality of customer service, the findings indicate that the real issues in enhancing the industry’s level of performance goes beyond this, towards developing a stronger customer-centric orientation. The findings provide a discernable indication of the differences in customer needs and requirements, and identify specific areas where customer-orientation issues tend to arise. Let me briefly share some of the key findings of the survey.