samchain/econo-pairs-v1 huggingface dataset:
We are currently working on a solution regarding offshore krónur that would fulfil the same criteria regarding the exchange rate and make it possible for us to move to the third and final stage of lifting capital controls, which is vis-à-vis domestic residents. The difference is that this time around we are putting part of our own FX reserves on the table to facilitate the solution. It will be offered in an auction, along with long-term euro and ISK bonds. The aim is to release and tether the offshore overhang so we do not have to worry about it when we lift the controls on domestic resident’s outflows. For that final step, we need a solid external position, a resilient financial sector, and sizeable FX reserves that are to a significant degree not financed by foreign borrowing – all of which we have or are on the way to securing. This is why we bought FX in the market for an unprecedented 12½% of GDP last year and have continued on the same path this year. Before lifting capital controls on domestic residents, we will have to finalise the necessary adaption of monetary policy and financial stability frameworks to the potentially rough seas of unrestricted capital movements.

The recession was indeed deep, as Iceland lost just over 11% of output during the recession that ended in Q1/2010 and unemployment peaked at 8% in Q4/2010. The shift in the composition of demand was even more dramatic, as is witnessed by the swing in the current account from a deficit 17% of GDP in 2008 to a surplus of 8% in 2009. To a significant degree, this was induced by a drop in the real exchange rate amounting to 44% from the pre-crisis peak to the November 2008 trough. BIS central bankers’ speeches  3  The recovery began as previous imbalances were corrected and the economy found its bottom in the underlying strength of its traditional export sectors, the non-traded goods sector took advantage of the low real exchange rate, and the stabilisation of the economy and later real wage gains rekindled consumption. And then we have had the phenomenal growth in tourism in the recent years, which seems to be due to much more than the historically low real exchange rate. These figures show developments in GDP and employment during the recession and subsequent recovery in Iceland, with predictions extending into 2017 for GDP and 2016 for employment. For comparison, it shows the median and the 1st-3rd quartiles of the distribution of these variables for 30 other European countries, with Ireland and the UK highlighted. It shows that Iceland’s recession was significantly deeper than the median in Europe, and the same goes for Ireland, although to a lesser degree.
I mentioned earlier that we now have several uncertainty indexes. One of these, focused on measuring policy uncertainty, was developed by our moderator, Nick Bloom, together with Scott Baker at Stanford and Steven Davis of the University of Chicago. The index is based on three different types of information: (1) a count of articles referencing uncertainty, the economy and policy that have appeared in prominent U.S. newspapers (including the nation’s premier paper, the Dallas Morning News); (2) a weighted count of tax-code provisions that are scheduled to expire; and (3) the extent to which professional forecasters disagree with one another about future levels of inflation and government purchases. The Baker-Bloom-Davis index begins in January 1985 and runs through the present. High values of the index signal an elevated level of economic policy uncertainty. From 1985 through 2007 – prior to the 2008–09 recession – the index has a mean of 94, and it exceeds 150 only 2 percent of the time (one month in 50; just six times in over 23 years). The index rose to above-average levels in the fall of 2007 and stayed at or above 94 – but below 150 – through the summer of 2008. Then, between August and September 2008, the index nearly doubled, rising from 96 to 188. Since September 2008, the index has at no time dropped below 100, and it has exceeded 150 on 31 occasions – more than half the time.

Market perceptions of risk were falling at precisely the time risk in the system was building. There was also little market differentiation between the spreads of “crisis” and “no-crisis” banks: their average pre-crisis spread difference was a mere 8 basis points. The extent of risk mispricing is clear from the movements in CDS premia as the crisis broke. Average spreads rose by a factor of over 50 for “no crisis” banks. For crisis banks, they rose by a factor closer to 70. Adjustments on that scale are a decisive rejection of the debt disciplining hypothesis. Debtors were meant to act as a brake on risk-taking incentives. Instead they had served as an accelerator. Why? The answer again lies in incentives – the incentives of bank managers and policy authorities. These incentives matter most at crisis time. Then, it may no longer be in the interests of either bank management or the authorities to have debtors bear risk. Doing so may run the risk of making a bad crisis situation worse. As much as bank management and the authorities may pre-commit to debtor’s bearing risk ex-ante, they may be tempted to capitulate ex-post. Economists call this a time-consistency problem. Agents cannot credibly commit to stick to their guns in the midst of war. Private contracts for bank debt and public policies towards bank debt suffer from a severe case of this time-inconsistency problem. Having debtors assume pain is fine on paper. But crisis wars are not waged on paper.
Looking ahead, we expect the euro area economy to grow at a moderate pace, in an environment of continued tensions in some financial market segments and of unusually high uncertainty. A cross-check of the outcome of our economic analysis with that of the monetary analysis confirms that inflationary pressures over the medium term remain contained, as suggested by weak money and credit growth. Overall, we expect price stability to be maintained over the medium term, thereby supporting the purchasing power of euro area households. Inflation expectations remain firmly anchored in line with our aim of keeping inflation rates below, but close to, 2% over the medium term. The firm anchoring of inflation expectations remains of the essence. Accordingly, the Governing Council will continue to monitor all developments over the period ahead very closely. As regards fiscal policies, the Governing Council welcomes the recent decision by euro area countries to formally establish a European Financial Stability Facility. This needs to be accompanied by decisive action at the level of governments. It is essential that all countries stick to their commitments to correct high budget deficits and government debt and reduce fiscal vulnerability. To this end, the concrete adjustment measures needed to achieve the budgetary targets should be fully specified. All countries must ensure that confidence in the sustainability of public finances is guaranteed.

Overall, we expect price stability to be maintained over the medium term, thereby supporting the purchasing power of euro area households. Inflation expectations remain firmly anchored in line with our aim of keeping inflation rates below, but close to, 2% over the medium term. The firm anchoring of inflation expectations remains of the essence. Monetary policy will do all that is needed to maintain price stability in the euro area over the medium term. This is the necessary and central contribution that monetary policy makes to fostering sustainable economic growth, job creation and financial stability. All the nonstandard measures taken during the period of strong financial market tensions, referred to as “enhanced credit support” and the Securities Markets Programme, are fully consistent with our mandate and, by construction, temporary in nature. We remain firmly committed to price stability over the medium to longer term, and the monetary policy stance and the overall provision of liquidity will be adjusted as appropriate. Accordingly, the Governing Council will continue to monitor all developments over the period ahead very closely. Let me now explain our assessment in greater detail, starting with the economic analysis. After a period of sharp decline, euro area economic activity has been expanding since mid2009. According to Eurostat’s first estimate, euro area real GDP increased, on a quarterly basis, by 0.2% in the first quarter of 2010. While adverse weather conditions, in particular, dampened growth in the early part of the year, the latest economic indicators suggest that a rebound took place during the spring.
This includes regular press conferences following Federal Open Market Committee (FOMC) meetings by the Fed chair; the publishing of growth and inflation forecasts of FOMC participants; and a concerted attempt to lay out the guideposts that the FOMC will look at to assess progress toward our mandate. This last element, of course, goes along with our move to explicit forward guidance, as part of our efforts to provide stimulus at the zero lower bound. We are, though, still learning how to more effectively communicate, especially given our new and expanded set of policy instruments. A second area in which we can and must do better is safeguarding financial stability. Simply put, we failed to act either early enough or decisively enough to stem the credit excesses that spawned the financial crisis and the Great Recession. The United States was not alone in this, but given our position in the global financial system, we especially should have done better. We’ve taken important steps, reflecting both new legislative mandates and a broader effort to rethink our regulatory and supervisory framework. Systemically important banking organizations must now hold amounts of capital and liquidity that are better aligned with their risk profiles, compensation schemes for these institutions will be more focused on rewarding long-term results and the official sector is making progress in solving the too-big-to-fail dilemma. All of this remains very much a work in progress.

Ravi Menon: The rise of Asian banking Speech by Mr Ravi Menon, Managing Director of the Monetary Authority of Singapore, at the Symposium on Asian Banking and Finance, jointly organised by the Federal Reserve Bank of San Francisco and the Monetary Authority of Singapore, Singapore, 29 May 2017. * * * Dr John Williams, President and CEO, Federal Reserve Bank of San Francisco, Distinguished guests, colleagues, ladies and gentlemen, good morning. Welcome to Singapore once again for this year’s Symposium on Asian Banking and Finance, jointly organised by the Federal Reserve Bank of San Francisco and the Monetary Authority of Singapore. Let me say what a delight it has been for us at the MAS working with John and his colleagues at the San Francisco Fed, putting together this event. 2017 marks the tenth anniversary of the Symposium. It is also the third year that MAS is partnering the San Francisco Fed to host the event. This Symposium has been providing a high-quality platform for policy-makers, industry captains, and academics to exchange views on global finance. It stands out from other conferences for its focus on bringing Asian voices to the discussions. We at the MAS have a soft spot for this event, as it represents a milestone in our long-standing relationship with the San Francisco Fed – a relationship that dates back to the time current Fed Chair Janet Yellen was at the helm, before she handed over to John.
It would be preferable, in my view, for policymakers to admit the uncertainties they face in this new environment and be humble about what they can achieve within it. The productivity challenge Even if the economy is changing in ways that we do not yet fully grasp, there are certain facts that remain immutable. Most importantly, we know that what ultimately matters for longterm prosperity – and increases in standards of living – is productivity. That’s the case in any economy with limited resources. But it’s even more important in an economy with demographic challenges, where a shrinking workforce has to support a growing retired population. And that is, of course, the case in the euro area today. It’s well documented that productivity growth in the euro area has long been lacklustre in an international context. Since the early 1990s euro area labour productivity growth per person employed has been falling behind the US, and that has continued during the crisis. Since 2008, euro area productivity has averaged only 0.2% per year, while US it has increased by around 1.0% a year over the same period. 8 In the US this is also seen as a low figure, and recently it’s been debated there whether the productivity slowdown seen in the US over recent years isn’t simply the outcome of the mismeasurement I highlighted earlier. This is based on the observation that the productivity slowdown has been associated with marked declines in employment, whereas typically the latter would tend to raise productivity.

In recent years, much of the (meagre) productivity growth seen in the euro area has come through labour shedding rather than from strong value added growth. And if those displaced don’t have the right skills to find another job, structural unemployment is likely to increase further, or they will be forced to consider low productivity sectors, and then aggregate productivity growth will stagnate once more. Neither scenario is desirable or sustainable. So our aim must be to achieve high productivity growth at full employment. But how can that be achieved? Essentially, there are two channels towards higher productivity growth, and to combine productivity growth with full employment we need to employ both. The first is within-firm productivity growth, which is about investing in or adopting new technology. There’s quite some debate, led by scholars like Robert Gordon, as to whether the great waves of technological innovation are now behind us. 11 But whether or not that’s the case, I don’t see it as a barrier to productivity growth in the euro area. In fact, we still have a long way to go to capitalise on the last wave of innovation – the ICT revolution – which many firms have not yet incorporated into their business models. Indeed, a large part of the difference in productivity performance between the US and the euro area can be attributed to the fact that US firms have invested more in ICT capital, and crucially, in the human and organisational capital necessary to full reap the benefits of it.
But we must obviously not turn a blind eye to the possibility that new disturbances may expose other weaknesses. Household behaviour in the housing market poses a considerable challenge to economic policy, particularly because demand for housing and residential mortgages is heavily subsidised via the tax system and because the very low level of equity capital required to extend a mortgage is reflected in the supply of loans. These challenges must be confronted at the source. Thank you for your attention. 8  BIS Review 119/2009  BIS Review 119/2009  9  10  BIS Review 119/2009  BIS Review 119/2009  11  12  BIS Review 119/2009  BIS Review 119/2009  13  14  BIS Review 119/2009  BIS Review 119/2009  15  16  BIS Review 119/2009  BIS Review 119/2009  17  18  BIS Review 119/2009

You may wish to note that the majority of the Muslim community shun the use of commercial banks due to lack of banking products and services that are compliant to their religious ethos and yet they control a significant share of economic activities in all the major sectors. The introduction of Islamic finance may provide a solution to injecting the much needed liquidity currently being kept in homes on account of lack of shariah compliant banking products and services. It is the firm belief of the Bank of Zambia that a robust regulatory framework will not only seek to expand access to finance but will also have positive effects on the overall interest rates in the money markets and ultimately affect the rate at which financing for economic activity is being provided. Ladies and gentlemen, the introduction of Islamic banking would come with its own challenges. For us at Bank of Zambia, this entails further strengthening of our supervisory capacity. We would welcome this challenge and hope to rise to the occasion by providing adequate supervisory infrastructure and a sound environment in which economic agents can conduct their businesses. I have no doubt that this workshop is very timely and that it provides a unique opportunity for participants to share knowledge and experiences on how best to promote financial diversity and inclusiveness especially with regard to Islamic commerce and finance.
On the other hand, the supervisory authorities will need to strengthen their macro-prudential risk assessment capacities, by focusing more on systemic behaviors of the financial institutions. The central bank is expected to take a larger responsibility in this area, particularly in those countries where it did not use to have a strong supervisory role. Whatever the approach in this direction, the supervisors will need stronger legal powers which will ensure their ability to act in a timely and flexible way. As mentioned also above, procedures for managing distressed financial institutions and for crisis management will need to be revised to ensure stronger and more effective inter-institutional and cross-border cooperation, and in general to better address the potential conflict between ex-ante supervision and ex-post intervention. This important process of financial regulatory reform is not without risks. I believe that the public authorities will pay particular attention to control the tendency for over-regulation, and to avoid a “blind” adoption of the regulatory changes as well as asymmetric/unilateral approach. Regulating more should mean regulating better. Undertaking risks is a natural thing for the financial industry in their valuable role of financial intermediation. Such undertaking of risk, when well identified and properly managed, is useful for increasing efficiency and returns of the activity, two important elements for a viable and solid on-going financial performance. Every country should certainly follow with particular attention the discussion and the changes that are being proposed for the financial regulatory reform, as this process will affect them for sure.

Thank you for your attention and for the interest you show in the National Bank and its activities. 4  BIS Review 25/2004
The first essential is that the design features of the DIS itself should provide incentives for risk-minimising behaviour by market participants. This means in particular avoiding over-generous protection and limiting the scope of the DIS strictly to the protection of small depositors. There was general agreement in the public consultation that coverage in the DIS should be kept relatively low, in the range of $ to $ It appears that the lower end of this range would probably be acceptable. The second element in reducing moral hazard is to maintain effective supervision to curb excessive risk-taking by banks. In this connection, we are presently in the process of enhancing our supervisory system to make it more risk-focussed. The final safeguard derives from the market discipline exercised by those stakeholders in a bank – the uninsured depositors, bank creditors and shareholders – who are exposed to the risk of loss if a bank fails. Such persons have a vested interest in monitoring the behaviour of banks and in sending the appropriate market signals, in the form of withdrawal or higher cost of funds, or lower share price, to banks that are taking too much risk. To do this, of course, the market needs sufficient information about the financial position and performance of banks. Increased financial disclosure is something that the HKMA has been encouraging over the last few years. The other main issue to emerge from the consultation is that of cost.

This is putting pressure on lending margins, most obviously in the residential mortgage market where pricing has now reached more than 2.25% below prime rate. In 2000, the impact of this on the banks’ overall net interest margin was mitigated by the fact that the ample liquidity kept funding costs low and the prime-HIBOR spread at record levels. But the net interest margin is likely to come under increased pressure as more loans are refinanced at cheaper margins and if funding costs rise relative to lending rates. Interest rate deregulation So conditions for the banks are, as they will tell you, currently quite tough. And they could become tougher when the final stage of interest rate deregulation takes place. This is due to happen at the beginning of July and will involve removing the interest rate cap on savings accounts and the prohibition on the payment of interest on current accounts. This move is a central feature of the reform  BIS Review 29/2001  1  measures that we announced in 1999. But it is part of a continuing process that began in 1994 with the progressive removal of the interest rate controls on time deposits. Deregulation is undoubtedly the right thing to do. While the interest rate controls did serve a useful stabilising function in the past they have become increasingly outdated in a mature banking system like Hong Kong’s.