samchain/econo-pairs-v1 huggingface dataset:
6  http://www.bankofengland.co.uk/monetarypolicy/Documents/pdf/chancellorletter120321.pdf  7  See for example “Recent Developments in the Sterling Monetary Framework” http://www.bankofengland.co.uk/publications/Documents/speeches/2011/speech487.pdf  BIS central bankers’ speeches  available  at:  3  money can surely be relied on to prevent deflation, but even if it provides a temporary boost to real activity it can’t guarantee sustaining a particular real growth rate. Third, the split into prices and real output and the overall outturn for the economy, depend on what else is happening at the same time: monetary policy is just one of the various forces at work shaping the pressures on output and inflation. We don’t conduct monetary policy in a scientific laboratory where everything else can be held constant. QE is often described as being a great experiment. In fact, the theory of monetary policy in the economic textbooks that I was brought up with at Bristol, and later, all considered the supply of money to be the central bank’s primary policy instrument. The use of interest rates to set monetary policy appeared to be viewed by many academic authors as something of a slightly unfortunate and uninteresting practicality8. I want to be clear about one very important point: for monetary policy to stimulate the economy, the Bank of England has to cut interest rates and/or increase the supply of money. That gives firms and households an incentive to spend rather than to save.

Paul Fisher: Current issues in monetary policy Speech by Mr Paul Fisher, Executive Director for Markets of the Bank of England, at the University of Bristol – London Alumni Event, Bristol, 26 February 2013. *  *  *  Thank you very much for inviting me to speak to you this evening. The University of Bristol is a very fine institution in a very fine city and I have extremely fond memories of my time there from 1977 to 1980 as a student in Economics with Statistics. In music at that time we had the latter stages of punk rock, and Bristol was also very good for folk music; in football I remember watching Bristol City playing Tottenham at Ashton Gate in what was then the true First Division; and in the economy there was continuing economic and social unrest (the Winter of Discontent) with inflation and unemployment stubbornly high. I recall a flatmate conducting a survey of students’ inflation expectations in 1978 when RPI inflation had just fallen below 8% for the first time since 1972. Unemployment was thought to be high at the time, as a result of the first oil crisis but was to take a further upwards lurch in the early 80s and I remember how lucky I was to get a research job at Warwick University when I left Bristol – having spent the summer of 1980 painting rusty trolleys in a factory, which was itself knocked down to create housing later in the 80s.
Otherwise, pockets of financial exclusion (for instance among our elderly) could arise, or the risks deriving from uninformed financial purchases could be compounded by those resulting from the use of an unknown digital channel. The videos presented have adequately captured the importance of the concept of responsible finance. This was, indeed, the central slogan of the 2020 Financial Education Day. However, not only have they captured the concept adequately, they have also been able to project it towards one of its most important components: responsible consumption. In this regard, I would like to highlight that exercising this responsibility involves all players. First, customers (all of us), as many videos have accurately illustrated, must exercise responsible consumption. This requires us to assess our own available resources and borrowing capacity. In short, the idea is to avoid excessive over-indebtedness, which we know generates highly adverse effects that influence our life decisions over an extended period of time. Second, such responsible behaviour must be demanded of financial institutions, which should practice what we call “responsible lending”. This entails properly assessing the creditworthiness of the potential customer before granting financing. Lastly, official authorities, and supervisors in particular, should promote this responsibility and monitor compliance as a key element in ensuring the stability of the financial system. And nor should they rule out the possibility of taking action if deemed necessary.

Due to time constraints, I cannot be exhaustive today. But, there are four important structural changes to the financial system that are worth highlighting. First, the tri-party repo system—which matches institutional investors with bank dealers that need to fund their securities portfolios—has been made much safer. Before the crisis, each morning the two large clearing banks provided huge amounts of intraday credit to their tri-party repo borrowers when cash invested overnight was returned to lenders. These temporary extensions of credit have been largely eliminated. This is an important structural reform because these exposures had proven to be destabilizing during the financial crisis. In particular, when a major dealer became stressed, the clearing banks were motivated to reassess their large overdraft exposures to the dealer, and that turned out to be an important channel of contagion. Another important change has been the shift in over-the-counter derivatives activity from bilateral settlement to central clearing. Although this shift was already underway at the time of the financial crisis, it has now been underpinned by important changes to the capital and collateral regime, which has accelerated the process by strengthening the incentives to structure and clear trades centrally. When banks settle their trades with central counterparties (CCPs), it reduces risk in the system. Exposures can be netted, and the counterparty risk is shifted from many individual firms to the single CCP that clears the trades.
This covers almost all important countries in a global financial perspective, with a few notable exceptions such as the US and China. It is thus natural to start thinking about the future of the FSAP process. Several alternatives could be envisaged, and they are not mutually exclusive: •  Simple updates of earlier FSAPs to ensure that countries have taken care of their weaknesses and that no new ones have developed. •  A change in the scope of FSAPs, for instance to better take into account the cross-border aspects of financial sector strengths and vulnerabilities. •  A different dimension is whether future FSAPs should be open to all countries or mainly to those having a bearing on the stability of the international financial system. •  Another discussion involves to what extent there could be closer integration between the FSAPs and the Article IV processes. Some of these “future FSAPs” have in fact already started, albeit on a small scale and could be regarded as trial assessments in the search of the ideal format. There have been some FSAP update missions and the IMF is at this very moment embarking on so-called regional missions, in the BeNeLux and Nordic-Baltic regions. From what I have seen so far, these FSAPs are off to a good start, focussing as they should on the interlinkages between the large cross-border financial groups operating in these regions. Moving to regional FSAPs will substantially increase the complexity of the assessments.

In 1995 and 1996, however, the growth of real wages, which - if aggregated over all sectors - was faster than the increase in productivity, became one of the potential inflationary dangers. The nominal anchor of the fixed exchange rate played an important role in the relatively good Czech results in fighting inflation. Instead of repeated smaller devaluations as in Poland or Hungary, the Czech Republic used a combination of a large initial devaluation and a subsequently fixed nominal exchange rate. In 1990 - before the start of the full transformation programme - the currency was devalued by more than 50%. That subsequently enabled us to keep the nominal exchange rate stable for five years. After the introduction of a wider 7.5% fluctuation band in 1996, the exchange rate is within the band. Transformation involved so much fundamental change that its start inevitably led to an initial fall of output and GDP. However, part of the former higher output level was simply feeding the enormous waste which went on throughout the command economy. In 1993, GDP stagnated partly due to the split-up of Czechoslovakia. Economic growth was resumed in the Czech Republic in 1994 and continued in 1995 and 1996 as a fast growth period. Unemployment has been kept low during the whole transformation period, thanks mainly to the rapid emergence of new private firms, and a large shift of labour into the previously underdeveloped service sector.
Moreover, against the background of the Copenhagen criteria, they will also be required to meet the broader set of structural and institutional requirements necessary for the establishment of an efficient and competitive banking sector. Nevertheless, I should like to emphasise that establishing sound and efficient banking, financial and payment systems is also an essential requirement for a proper conduct of monetary policy and therefore also for successful participation in the euro area. This is true for a number of reasons. First, the creation of deep and liquid capital markets is a necessary step if indirect and market-based instruments involving a number of counterparts are to be used for the conduct of monetary policy. Second, in the absence of sufficiently developed capital markets, it might be difficult for accession countries to comply with the rules relating to the prohibition of privileged access to the financial system of governments. And finally, structural weaknesses in the financial system could also have implications for the monetary policy transmission mechanism, since poor competition and soft budget constraints may affect the responsiveness of banks to changes in the monetary policy stance. It is not surprising therefore that the Eurosystem has a particular interest in keeping banking and financial sector developments in accession countries under close review. 5  BIS Review 113/1999  At this point I should like to recall that the Eurosystem is not part of the EU institutional framework which has been set up for the current enlargement process.

We are seeing this concept more keenly being exploited in profit and risk sharing ventures, and Islamic fund and wealth management which are emerging as rewarding banking activities. Developing a pool of the required skills and talent, and putting in place of  4  BIS Review 55/2006  proper risk management systems and good corporate governance practices becomes vital to sustain the growth momentum of the industry. As we move towards the final phase of the Master Plan and into a more competitive landscape, we require robust financial institutions that are resilient, effective, efficient and well placed to serve the nation, and thus support sustainable economic growth and transformation. In the area of Islamic banking and finance, our aim is to be a leading international Islamic financial centre. To achieve this, we have to strengthen our position and focus our resources on achieving two broad aims. The first is to become an international leader in the origination, issuance as well as trading of Islamic capital market and treasury instruments, fund and wealth management services, offshore Islamic financial services, and takaful and re takaful . As a services sector, the robustness of the industry is a direct function of the calibre of the workforce in the industry. As such, our second goal is to position Malaysia as a centre of excellence for Islamic banking and finance education, training, consultancy and research.
For instance, when embedding artificial intelligence in financial solutions, the risk grows higher of a “black box”, where it is more and more difficult to trace and understand outcomes. Discrimination bias may occur and leave out customers, without even being detected as such. And big data never forgets: yet, financial inclusion means being sometimes able to overcome past conditions and give customers a “second chance”. In addition, digitalization of our economies also brings about a risk of digital divide between those who are at ease in a digital world and those who don’t understand it or don’t have access to it. This is a major issue for financial inclusion. When a bank or an insurer prioritizes access to its services via digital devices, those who don’t use those devices can be left out and become “second-class” clients. We must not overlook this. 3/ Fintech and financial inclusion: moving forward Faced by the new ways, the new challenges and the new risks that Fintechs are bringing to financial inclusion, how do we, at the Banque de France, adapt to the digital age and leverage digital tools, to further improve our policies and actions in favour of financial inclusion? The first way is by developing our understanding and use of new technologies: in addition to our Fintech unit at ACPR which I’ve mentioned, Banque de France has launched in June 2017 “Le Lab”.

Failure to understand under which conditions an economy works best in today’s world to make possible concrete improvements in welfare can be very costly. There is, therefore, a need to foster a greater public awareness of developments in our external environment and of the appropriate policy responses. There is also a need for a wider acceptance of some basic truths, for example that it is an illusion to believe that something can be had for nothing, or that governments can fix any problem or grievance. On the contrary, policy makers and opinion shapers alike have a responsibility to explain that the expectation of ever increasing entitlements and higher living standards must be balanced with the recognition that these expectations cannot be satisfied sustainably through the redistribution of national income. In the long run, the expected improvements can only be financed through productivity gains and economic growth. And since nobody owes Malta a living, the responsibility for shaking off our ambivalent attitude to change and for turning globalization from a threat into an opportunity is ours and ours alone. 4  BIS Review 143/2007
Monetary policy in the Euro area Against this background, the role of monetary policy has become, and is likely to remain, more accommodative in the Euro area. The ECB has played a major role in supporting economic growth using its interest rate policy – now at near zero levels – and policies designed to influence credit provisioning and risk reduction. The ECB has also reaffirmed that, if necessary, further measures will be taken to counter the risk of a prolonged period of low or negative inflation and to bring inflation to its medium term target of under but close to 2%. The possibility of a deflationary situation materializing in the Euro area is of concern as its dynamics would raise real interest rates. It would penalize investors and increase the burden of holding business inventories. It would also discourage consumption, as buyers await lower prices by delaying spending. A de-anchoring of inflation expectations carries a risk of the Euro area becoming stuck in a stagnant environment for a prolonged period of time. Basically, a deflationary scenario would be inconsistent with what is needed to support an economic recovery in Europe. The effectiveness of monetary policy in the Euro area depends on a properly functioning banking sector, since the transmission of monetary stimulus operates at least partly through the bank lending channel. In the Euro area, the debt overhang in the private sector and the balance sheet position of the banks have been hampering the transmission and effectiveness of the ECB’s accommodative policy measures.

“The Great Leveraging,” NBER Working Papers, No. 18290. BIS central bankers’ speeches  1  this context, Turkey established the Financial Stability Committee in 2011. Along with the Central Bank, the Committee is composed of the Banking Regulation and Supervision Agency, the Capital Markets Board of Turkey, the Savings Deposit Insurance Fund and the Undersecretariat of Treasury. Distinguished Guests, Now I would like to briefly mention Turkey’s contributions to global financial stability. Turkey became a member of the Financial Stability Board (FSB) in 2009. In 2014, Turkey will participate in G20 Troika and assume Presidency of the G20 in 2015. During the period from 2014 to 2016, when Turkey will be taking part in G20 Troika, our representative from the Undersecretariat of Treasury will be assigned to the FSB Steering Committee. Turkey became a member of the Basel Committee on Banking Supervision (BCBS) and the Group of Governors and Heads of Supervision (GHOS) in 2009. The Central Bank of the Republic of Turkey will participate in the FSB Steering Committee during the period 2013–2015 when it will be chairing FSB Regional Consultative Group for the Middle East and North Africa (MENA). The New Constituency group, formed upon an agreement signed within the International Monetary Fund (IMF) governance reform framework, includes Austria, Hungary, the Czech Republic, Slovakia, Slovenia, Belarus and Kosovo along with Turkey. According to this agreement, during the periods of 2014–2016 and 2018–2020, Turkey will assume the Executive Director position on behalf of the group for two-year terms.
That is not, however, the same as saying that the growth and development of market-based finance in recent years is without financial stability risk. In line with my dismal profession, I want now to highlight those risks and how we might prevent them from arising. 9  Since the crisis, structured investment vehicles, money market funds, and broker dealers have been made safer as a result of regulation and have reduced in size. They make up a much smaller share of the market-based finance universe. But hedge funds have more than doubled since 2008 and now total around $ And investment funds have more than doubled since then to nearly $ trillion. Within that, debt-focussed funds make up nearly a quarter of the assets under management as investor flows into fixed income funds since the crisis have materially outpaced those into equity funds (Chart 2). This has brought the potential liquidity risks from market-based finance into sharp focus. In the FSB’s most recent assessment of shadow banking – defined as activities which have the potential to increase systemic risk – the largest and fastest growing component is collective investment vehicles subject to run risk, such as fixed income investment funds and credit focused hedge funds. We have not, as I have noted, seen system wide runs out of collective investment vehicles in the past. Faced with falling markets, retail investors have generally decided to hold on for the longer term.

Few doubt that there are challenges to defining and calibrating the indicators used to determine when capital buffers should be triggered, and by how much. However, to quote Borio, “while calibration is  17  Assenmacher-Wesche and Gerlach (2010). 18  Hott and Monnin (2008). 19  For examples of models which illustrate downward spirals, please refer to Markus Brunnermeier and Lasse Pedersen (2009), Stephen Morris and Hyun Song Shin (2004). BIS central bankers’ speeches  5  not straightforward, the difficulties can be overstated”.20 To support his claim, Borio notes that traditional monetary policy also confronts such challenges when interest rates are set on the basis of indicators, such as output gaps or natural interest rates which are unobservable and difficult to measure accurately. It is however commonly accepted that central banks have, to a large extent, surmounted these difficulties. Of course, countercyclical buffers cannot be implemented without inflicting some costs to the economy, but the trade-off involved seems significantly more favourable than is the case with “leaning against the wind” policies. A 2011 study by the Bank of International Settlements estimates that, by reducing the probability of a severe crisis, the benefit of countercyclical buffers is on average 10 times higher than their costs in terms of real output growth per year. V.  The Swiss case  Every central bank in the world faces its versions of the challenges I have mentioned. The Swiss National Bank is no exception.
Thirdly, while corporates find more business opportunities, they also face even more challenges which you, as corporate treasurers, are probably well familiar with. For example, increasing market risks, where corporates operating in multiple countries are faced with growing exposures to different currencies and rates. In fact, divergent monetary policies among key advanced economies have led to greater volatility in the global foreign exchange market. And, with the international use of the renminbi on the rise, the reform of the yuan’s exchange rate since August 2015 has also resulted in more two-way movements of the exchange rate against other currencies. These recent developments have created more market risks. 15. Lastly, global regulatory reforms have also had an impact on corporate treasury management. These reforms, particularly the higher capital and liquidity requirements under Basel III, have led to more constraints on global banks in providing funding and making a market for hedging tools for corporates. As such, there is an undesirable impact on corporate treasurers in terms of financing cost and asset and liability management. Benefits of CTCs 16. Corporates need smarter solutions to address these opportunities and challenges. There has been a greater call for corporates to set up more structured regional corporate treasury centres, CTCs in short.

Piece together these facts and you will have quite a clear picture of what happened and whether there had been manipulation or a danger of serious market dislocation. Your views are as good as mine; but for what it is worth, let me give you my assessment. In contrast to October last year, when they had to pay very penal interest rates to fund their short Hong Kong dollar positions, during the currency attack in August this year the hedge funds had pre-funded themselves. This they did by swapping US dollars for Hong Kong dollars, through intermediaries, with multilateral institutions which had issued Hong Kong debt paper, incurring an interest cost of $ million a day for the $ billion position. But this was not a lot of money to them. We had reason to believe that they had been building up and maintaining quite large short positions in stock index futures. With an estimated 80,000 short contracts held amongst these hedge funds, for every thousand-point fall in the stock market index, they stood to profit $ billion. The cost and benefit calculation is clear. And this is the case regardless of economic or market fundamentals. So they waited for a good opportunity to sell the Hong Kong dollars they had borrowed, in the hope of creating a severe shortage in the money market and sharply higher interbank interest rates, thereby sending the stock market into a nosedive.