samchain/econo-pairs-v1 huggingface dataset:
The important ones have been the Asian Bond Market Initiatives under ASEAN+3, the launching of the Asia Bond Funds I and II under EMEAP, and the Roadmap for Monetary and Financial Integration undertaken by ASEAN. The key rationale underlining this cooperation is the desire to develop resilient and robust regional financial markets, especially the capital markets. Such markets will allow the private sector in East Asia to better manage risk, as well as to reduce the dependency of the region on its banking sector. Moreover, better financial integration means saving surpluses of Asia will be better mobilized to support investment activities in Asia, thereby increasing the efficiency of resource use. And more importantly, greater cross-border financial flows will help sustain and expand intra-regional trade and investment onto the next higher levels. But despite the recent progress, many observers have noted that, while the progress is well and good, financial integration in East Asia seems to lag behind that of trade integration. As a result, East Asia as a region continues to be more integrated financially with markets outside the region than within the region. I think this is a valid and fair observation, but such observation needs not mean that financial integration in East Asia, going forward, will continue to be a slow process. In my view, specific factors have come into play in limiting the pace of integration in its initial stage, but as these factors become less binding, one will begin to see a more solid and faster pace of financial integration.

Thus, is there an increased concentration of risk among other agents, such as pension fund companies and hedge funds, where this could create a problem? In general, the risks come to those who can manage them and therefore bear the risks. The question if whether we who oversee the system and those who operate in the markets know when risks arise? How do these developments affect our stability work? The reason I have chosen to talk to you about these issues today is partly that developments in the financial markets affect one of the Riksbank’s main objectives – to promote a safe and efficient payment system. The work on achieving this objective entails identifying potential risks in the financial system and assessing resilience to possible shocks. Our analysis is concentrated on the major banks, as they play a central role in the system. We are now – even in Sweden – more dependent on the financial markets. Although many of the tendencies I have mentioned are not as tangible here, we can still be affected by events in other countries, as in the case of autumn 1998. There is scarcely any doubt that the changes that have occurred have contributed to making the markets more efficient. This is good for the economy as a whole, very good even. The markets have probably also become more robust, with the risks better spread over the economy. Events in recent years would indicate this is so. However, financial crises can never be entirely avoided. They will recur.
One might reasonably expect these modal forecasts to be above the mean when inflation is low and the economic outlook is uncertain. Second, the median federal funds rate forecasts for primary dealers and for buyside participants surveyed just prior to the December FOMC meeting differed only marginally from the December SEP median projections of FOMC participants. This reinforces my judgment that the difference between means and modes is the main factor for the gap between the federal funds futures market and the SEP paths. Third, the differences between the interest rates implied by futures markets and the SEP have been quite small at shorterterm time horizons, such as the end of 2016, and grow much larger as the time horizon lengthens. I think this is noteworthy because the confidence one has at longer horizons should be much lower than at shorter horizons. Because I do not know what the federal funds rate target range will be at the end of 2017 or 2018 with any confidence, I am not very concerned if others have a different modal forecast. Projections will adjust as incoming information changes the economic outlook. I would expect convergence over time of the SEP and market expectations as new information informs the outlook. 6  BIS central bankers’ speeches  Let me close with some observations about my current thinking concerning our reinvestment of maturing Treasury securities and paydowns in our agency MBS holdings.

The Fed wouldn’t necessarily be forced to return to the much smaller balance sheet we had prior to 2008 before we could begin the monetary policy normalization process. When interest is paid on reserves, these reserves retain value even when they are no longer scarce. Banks may be able to borrow funds at lower interest rates from financial entities such as money market funds that are not permitted to hold deposits at the Federal Reserve and place these borrowed funds with the Federal Reserve to earn the higher interest rate paid on reserve balances. How well the ability to pay interest on reserves works in practice in raising the entire constellation of short-term interest rates depends critically on the willingness of banks to engage in such arbitrage activity. Prior to lift-off, we were uncertain how much friction there might be that would limit the willingness of banks to expand their balance sheets. These frictions include limits on bank leverage that can make the use of balance sheet capacity costly, competitive frictions given the relatively narrow range of banks that are viewed as sufficiently creditworthy to warrant being recipients of large uncollateralized loans and, for those banks that accept FDIC insured deposits, insurance premiums that increase when they borrow reserves and their total liabilities increase. To help ensure that money market rates would track the federal funds rate regardless of these frictions, the FOMC developed a second tool – the overnight, fixed-rate, reverse repurchase facility (overnight RRP).
The Governing Board feels strongly, however, that there are significant advantages in aggregating the information from our different models and indicators in an internal process and subsequently publish a single SNB inflation forecast. Let me simply mention the most obvious one. In the SNB’s integrated approach, the Governing Board avoids the potential communication problem of conveying the impression that fixed weights are attached to the monetary and non-monetary analysis in the conduct of monetary policy. The biggest challenge the SNB Governing Board has so far faced with regard to the integration of both the monetary and nonmonetary views was in 2003. While monetary aggregates rose significantly, negative output gap  1  2  3  2  As extensively documented in Nelson (2006), "the competition between monetary and non-monetary views of inflation" was "resolved earlier and more decisively in favor of the monetary view" in Switzerland than in other countries, with the close observed relationship between money growth and inflation playing a determinant role in shaping monetary policy since 1973. The new regime was announced on October 1, 1978 and lasted until the end of 1979. It can be seen as an illustration of the fact that the SNB had traditionally employed money targets in a flexible way. Jordan and Savioz (2003)  BIS Review 107/2006  measures suggested a disinflationary risk. Similarly to what is described in the Fischer et al.

In that context, both the ECB and the SNB conduct a careful analysis of monetary aggregates partly in an effort to assess the risks of long-term financial imbalances. Moreover, acknowledging the monetary source of long-term inflation helps avoid the build-up of excess liquidity in the first place. In closing, let me therefore repeat that the Fischer et al. paper could benefit from focusing more extensively on the admittedly complex but nonetheless important link between money, asset prices and long-term inflation perspectives. In the  4  For example, Nelson (2003) argues that movements in monetary aggregates provide useful indications regarding different yields usually not incorporated in economic models  5  Baltensperger, Jordan and Savioz (2001), Jordan, Peytrignet and Rich (2001)  6  Reynard (2006)  7  For example, Issing (2002) provides evidence of a close relationship between excess money growth and real asset prices, a relationship that does not appear by looking at a standard Taylor rule as a measure of monetary policy stance. Similarly, Friedman (2005) showed that pre- and post-financial market crash evolutions of stock prices and gross domestic products were strongly related to the pre- and post-market crash evolutions of monetary aggregates. White (2006) pointed to the need of pushing further the frontiers of economic research in the direction of incorporating financial variables to assess longer-term macroeconomic developments.
In the case of LTCM, stress testing could have given banks at least some warning of the types of exposures they could have faced last fall. The critical importance of stress testing is noted very explicitly in our new supervisory guidance. Sound Practice Guidance The sound practices document accompanying the Basle report presents an important set of standards that will guide both banks and their supervisors. It appears that banks generally have tightened the credit risk management standards for their HLI exposures since the collapse of LTCM. However, it is important that supervisors try to ensure that progress continues. Memories tend to be short, and we want to make sure that as markets calm down, as they have in the past months, banks do not return to the old ways of doing business. The adoption and rigorous enforcement of enhanced risk management practices should contribute substantially to limiting excessive risk-taking and leverage at HLIs. This is the case because HLIs cannot trade without access to financing and liquidity from banks and securities  3  BIS Review 27/1999  firms. If each counterparty manages its risks appropriately, the chance of contagion to other institutions and the financial markets more broadly would be reduced substantially. It is this risk of contagion and financial market instability that is the principal concern of central banks and supervisors. Along with other federal banking supervisors, the Federal Reserve has moved quickly to implement the recommendations of the Basle Committee’ s report.

In any event, the results of this exercise show the systemic importance of this vulnerability and the need to be ready to provide a sufficient, internationally coordinated response, depending on how the pandemic develops worldwide. 6  “A system-wide scenario analysis of large-scale corporate bond downgrades”, European Systemic Risk Board Technical Note, July 2020. 12  Economic policies to tackle the challenges ahead I will focus the final part of my speech on the challenges ahead. The economy is currently recovering gradually; but as I explained at the beginning of my presentation, the recovery is incomplete, uneven and subject to a high degree of uncertainty mostly related to how the pandemic will evolve. This means that corporate sector risks will continue to be relevant until the pandemic is under control, especially for those companies more affected by the shock. Let me summarize now how, in my view, the course of action should be under the current macroeconomic environment. First, economic policies should continue providing support to the economy. In particular, we should avoid an early termination of support measures because this may give rise to socalled cliff effects. Policymakers should be vigilant regarding risks and stand ready to introduce further stimulus if the macroeconomic outlook deteriorates further. This is of course particularly important as regard fiscal measures.
Even if property prices do fall further, there is a strong incentive for homeowners to continue to service their mortgages. The main problem loans we have seen so far have been in the corporate sector and in trade finance. Some companies have run into unavoidable problems because of the regional situation while others may have over-extended themselves. However, it is worth noting that the corporate sector in general in Hong Kong has avoided the excesses seen in the rest of the region. In general, companies in Hong Kong are not highly leveraged compared with their counterparts in the region and have not poured resources into an indiscriminate build-up of fixed assets. The banks have also tended to follow more prudent lending policies than those elsewhere and are better protected by their ability to take and realise good collateral. We do not therefore expect to see the collapse of asset quality that has occurred in some regional economies where corporates and the banks have also had to contend with massive exchange rate depreciation. The local banks in Hong Kong also have the benefit of the cushion provided by their high capital adequacy ratios. This means that even if the banks do have to make higher provisions this year, it will be their profitability rather than their solvency that is affected. While lower profitability is by no means welcome, it is not, by itself, a cause for concern in terms of the stability of the banking system.

The aim is to mobilise the EUR 390 billion savings surplus of the euro area last year, notably to shore up equity which is the key to an innovation economy, and also to foster synergies, thanks to an integrated steering mechanism, between the Juncker investment Plan, the Capital Markets Union and Banking Union. The fiscal accelerator could be a euro area investment budget used to finance, for the benefit of all countries, certain “European common goods” such as digital technology, energy transition, security, and migration controls. If there is such progress on substance, in terms of institutions, we would need a euro area Finance Minister, President of the Eurogroup and member of the Commission, backed by a European Treasury; but also a euro area Parliament group, in order to ensure the democratic legitimacy of the institutions and decisions. [slide 15]  *** France is heading in the right direction and at a fast pace, with a strong government commitment to reforms. I stress it as fully independent Central Banker. France is changing for the best. But France is not alone obviously. The European and international environments need to remain supportive. In terms of economic upturn first, but also in institutional terms. A country cannot implement the appropriate structural reforms, improve its flexibility and attractiveness and then face a major disruption in international trade, reducing the pay-offs of such a political effort.
Its assessment of the Swiss approach was positive, considering it appropriate in an international comparison. 21 At the same time, the Federal Council concluded that further action was needed in relation to certain parameters. In particular, it stressed that, due to the special significance of ‘too big to fail’ in our country, Switzerland should be at the forefront when it comes to setting resilience requirements. Consequently, it prescribed an increase in capital requirements. These changes have been criticised in some quarters. Concerns were voiced that some of the adjustments were unreasonable and would put banks at a competitive disadvantage internationally. 22 How justified is this criticism? c) … and are designed to be cost-effective  All regulations inevitably meet with resistance because they create added costs for the regulated institutions. But it is often the only way to bring about the desired change in conduct. In any discussion of the costs of regulation, it is important to weigh the private costs incurred by those subject to the regulations against the costs to the economy as a whole. As long as the private costs are less than the macroeconomic benefit, then the regulations make economic sense. Yet such a cost/benefit analysis is complex and fraught with uncertainty. The literature is unambiguous on the macroeconomic costs and benefits of the post-crisis increase in capital requirements. 23 The benefits far exceed the costs involved. The benefits of the higher capital requirements are that they reduce the likelihood and the severity of a banking crisis.

Unlike the crisis of 1997 when the banking system failed to function as financial intermediary of economic activities, our banking system today has remained resilient in the aftermath of US financial turmoil. The Thai banking system’s foreign investment exposure was only about 1 percent of its total assets as of end-2008, of which investment in toxic assets was only a small portion. All sub prime-related CDOs have either been unwound or losses provided for in line with international accounting standard. In the past several years, the Bank of Thailand put great emphasis on robust stress testing and risk management on the part of banks, with an aim to strengthening the banking sector while the economy was still good and the sector profitable. More recently, our financial and legal infrastructures have also been strengthened particularly through new legislations, including the Bank of Thailand Act, the Financial Institutions Business Act, and the Deposit Protection Act. Our accession to the Basel II Accord at the end of last year will further enhance banks’ risk management and financial sector stability. Moreover, the second3 phase Financial Sector Master Plan, which will be announced this year, will also increase competition and further enhance financial efficiency and resiliency. Banks also deserve credits. They have made significant improvements in their risk management. The fact that they did not make significant investment in those high-yielding sub-prime related assets in spite of their abundant liquidity is a testimony in itself.
As long as the SNB can conduct an autonomous monetary policy, the Swiss franc will remain a crisis-resistant investment currency, and the interest rate bonus will be maintained. 4  BIS Review 60/2002  4. The euro's implications for the SNB's monetary policy  4.1. The monetary policy concept  With the euro now existing in its physical form, some cash transactions will tend to be effected in euros rather than in Swiss francs. This development will, in turn, have a negative impact on the demand for Swiss francs. But as I have set out before, there is no doubt that the large majority of domestic payments will continue to be transacted in Swiss francs. On the whole, the decline in seigniorage, i.e. the profit that central banks achieve with the circulation of money, is likely to be very limited. However, the main point I want to make here is that even if the creation of the European Monetary Union did have a significant impact on the demand for Swiss francs, this would not call the viability of the SNB's monetary policy concept into question. A possible change in the demand for money hampers monetary policy decisions especially if a central bank pursues money supply targets. The steering of the money supply as a monetary policy concept has by now been abandoned by many countries.

Recent experiences suggest that these measures were well-targeted. Nevertheless, some areas for further improvement have also been identified. I shall now mention a few key areas for further action. Areas for improvement As stated, I would like to focus on three areas: firstly, improvements related to the overall crisis management arrangements; secondly, the strengthening of market infrastructures for over-the-counter (OTC) derivatives; and thirdly, efforts geared to producing a more integrated retail payments infrastructure. Crisis management arrangements One priority that relates to the overall crisis management arrangements is to further improve notification procedures, particularly regarding the communication of insolvencies by public authorities and infrastructure providers to market participants. Although this has generally worked well during the current turmoil, some measures are in progress to foster the exchange of standardised information. In addition, further measures are needed to ensure close cooperation with the authorities regarding the relationship with the defaulting participant and the coordination of measures to limit the impact of the default. Moreover, it might be an advantage if infrastructures were able to end unilaterally the contractual relationship with the participant (without waiting for the final decision by the relevant judicial or administrative authority). Furthermore, the current turmoil has reminded us that default rules need to be not only sufficiently clear and comprehensive for the infrastructure participant, but also that they  2  BIS Review 74/2009  should not cause any conflict between infrastructures.
We have limited scope for restraining structural changes that take place when households increase their debt over several years in order to invest in housing and other property and assets. An interest rate level that effectively restrains this restructuring process would also have had adverse effects on economic activity. However, households are more vulnerable when debt is high. Long periods of sharply rising asset prices and debt may be a source of subsequent instability in production and employment. We believe that expectations regarding interest rate developments have a greater impact on household and business borrowing and investment behaviour than actual interest rates. Norges Bank communicates its analysis of the outlook for the Norwegian economy and the interest rate. At this juncture, the outlook for output and inflation suggests that the interest rate should be gradually – in small, not too frequent steps – brought up to a more normal level. 7 The economic outlook is uncertain. We illustrate interest rate uncertainty ahead with a fan chart, which is meant to capture the outcome with a 70 per cent probability. The consequences of higher interest rates for two households are illustrated in this chart. Both households comprise two adults and two children. One household has a gross income of NOK 800 000 and NOK 2 million in debt. The other has an income of NOK 600 000 and NOK 1.5 million in debt. The chart shows the two households’ income after basic expenses and interest and principal payments have been paid.

The Government Pension Fund has a prudent investment strategy, with broad risk diversification, and a real return of 4 per cent is expected in the long term. There are examples of companies and investors that achieve a considerably higher return on capital over time. However, it is important to remember that for each successful investor earning high returns, there are many others with the same ambition and risk willingness, but with a record of poorer performance and bankruptcies. The Government Pension Fund cannot run the risk of ending up among the worst performers. The globalisation of financial markets provides the Fund with good opportunities for investing and diversifying risk. However, we cannot insulate the Fund from wide annual swings in the value of the  12  Most of the central government’s cash flow from the sale of oil and gas is derived from the extraction of wealth under the seabed (economic rent), while the remainder is a normal return on invested capital. 8  BIS Review 10/2006  investments. We invest in international equity markets where prices fluctuate widely. These fluctuations are the reason why equity investments generate a higher return over time. The best year in the Fund’s history so far was 2003, when it posted a real return of 11 per cent. This stood in sharp contrast to the previous year’s result, which was -6 per cent.