samchain/econo-pairs-v1 huggingface dataset:
But rather than giving a blow-by-blow account of events, I want instead to focus on what I see as the key underlying economic forces. How could what appeared initially to be little more than an over-extension of loans to a high-risk subset of US households end up generating total financial sector losses in the advanced economies currently estimated by the IMF to be in the region of $ trillion and an output gap that is expected to reach nearly 6% of GDP in 2010? And while there were a few Wise Owls 1 who saw trouble coming, why did most of the profession fail to spot the dangers? Is that because we were locked into an inappropriate paradigm? If so, is the time ripe for a Schumpeterian “gale of creative destruction” in the subject? The credit boom Let me start by recalling a few facts regarding the credit boom that preceded the crisis. During the decade preceding the crisis there was a substantial increase in the ratio of household and business debt to GDP in a number of advanced economies, particularly the United States, the United Kingdom and Spain; see the left-hand panel of Fig. 1. A striking feature of this period was also the increased use of the credit markets by the financial sector to fund its activities, rather than relying on the traditional medium of deposits; that is illustrated in the right-hand panel for the United States. This build up in debt accompanied a wave of financial innovation.

The future regulatory framework: rules and statutes Now you may be thinking: “quelle surprise, the regulator wants to have more control over the rules!” In fact, I can tell you that the PRA has no pro-active desire to increase its responsibilities. We have enough on our plate already. It’s just that it seems clear that, for our market, putting the details in the regulator’s rules rather than in statute (as the EU typically does) is a better approach. I say better for our market, but in fact this is the norm in all major jurisdictions apart from the EU and Switzerland. As a point of principle, it is consistent with the established model of an independent regulator taking time-consistent decisions in pursuit of long-term objectives given to it by Parliament. This follows the same logic as the arrangements in this country and many others for setting monetary policy. And on a purely practical level, it ensures that rule-making is closely informed by the day-to-day risk assessments that we have to make as supervisors. This approach also helps ensure that rule-making keeps pace with developments and supports innovation. A changing world requires a tough but flexible regulatory regime that can adapt itself rapidly as needed – both to remove unnecessary barriers to innovation and to give policyholders reasonable protection from any new risks that arrive with it. The alternative is a more sluggish regime, more conservatively calibrated to compensate for its lack of manoeuvrability.
The programmes adopted, however, were not directed at providing economic stimulus by expanding the ECB’s balance sheet. The purchases were aimed at repairing the monetary policy transmission mechanism, which was damaged by the crisis, and redressing the fragmentation of the euro area’s financial markets. Against this background, the ECB’s response to the challenges posed by the complex situation in early June consisted of the activation of an extensive package of conventional and non-conventional measures. First, the key interest rates were trimmed further. The rate on the main refinancing operations was cut to 0.15% and, for practical purposes, it can now be considered to have reached its lower bound. The interest rate on the deposit facility, i.e. the remuneration received by banks on the funds they place with the central bank, was set at negative values (–0.10%) for the first time in the history of the Eurosystem. Finally, the interest rate on the marginal lending facility was likewise reduced to 0.40%. As regards forward guidance, it was decided to extend the duration of the fixed-rate tender procedure with full allotment for such time as may be deemed necessary and at least until December 2016. Also, it was reiterated that, given the current inflation outlook, key interest rates would remain at their current level for a long time. Finally, the package of measures was supplemented by two further initiatives directly designed to promote lending to firms and households.

Therefore we are not positioning ourselves as a market that can match the supply and demand of Islamic products from domestic angle. 2  BIS Review 59/2008  Our objective is to make Hong Kong a platform for international intermediation activities for Islamic finance. What can we offer to the Islamic investors? Hong Kong’s advantages lie in its strategic location, highly developed financial markets and infrastructure, and a business-friendly free-market environment. We are strategically located at the heart of Asia with a broad hinterland that gives investors unique access to virtually every market in the Asia Pacific time zone. Almost all Asian countries are within reach by a three-hour flight from Hong Kong. What makes Hong Kong a natural destination for Islamic funds is our deep and highly liquid capital markets. Almost all of the most actively traded financial instruments are available for exchange in Hong Kong, and this gives Islamic investors a much wider choice of where to place their funds. More importantly, when it comes to investing in China, Hong Kong is about the only natural choice. Hong Kong has the largest and deepest Chinese equity and debt markets outside Mainland China. We are the first and remain the only major international financial centre that has banking business and financial products related to the renminbi. The development of a local renminbi bond market which started in the middle of last year has firmly positioned Hong Kong as a pilot market for China’s continuing financial market liberalisation.
Central Bank of Chile October 2018  Central Bank of Chile’s Twenty-Second Annual Conference: “Changing Inflation Dynamics, Evolving Monetary Policy” Opening remarks by Mario Marcel, Governor of the Central Bank of Chile October 25, 2018 – Santiago, Chile Welcome remarks Good morning everybody and welcome to the Twenty-Second Annual Conference of the Central Bank of Chile. It is a pleasure to host this event that every year gives us the opportunity to reflect and discuss about issues that have direct implications on our work as central bankers and stimulate the related academic agenda. I am looking forward to active discussions today and tomorrow on this year’s conference theme: changing inflation dynamics and its implications for monetary policy. This conference is being followed online via live streaming on our website. Inflation dynamics and monetary policy in recent years The last ten years have been an extraordinary time for macroeconomics. The deepest financial crisis since the Great Depression was followed by an unprecedented bold, coordinated, unorthodox and persistent response by central banks in advanced countries. In all, a decade in which the world economy stood a long way from normal and, as it depended so much on emergency support, it was not easy to detect how much the economy was changing underneath. So it is perhaps not that surprising that once the same central banks began to envisage a gradual, cautious and well communicated approach to monetary policy normalization, some challenges appeared on the road.

So the relative weight of past inflation, the exchange rate, wage inflation, market expectations and output gaps in inflation dynamics may differ significantly from advanced economies. Chile has pioneered monetary policy innovation in the emerging world. After four decades of double-digit inflation, our Central Bank was given independent status and a mandate of price stability nearly 30 years ago and exercised it swiftly, with the support of a first version of inflation targets in the early 1990s. The monetary policy framework further evolved after the Asian Crisis to a fully-fledged forward inflation targeting regime with a floating exchange rate in 1999. This was soon complemented by a major upgrading of monetary policy communications and a structural fiscal policy rule. 2  Central Bank of Chile October 2018  This framework has basically remained in place for the last 18 years and its effectiveness has improved as markets, agents and institutions have adapted to it. Over time, markets have developed adequate FX hedging mechanisms, inflation expectations have become more anchored at the monetary policy target level, the Central Bank has overcome fear of floating, financial markets have deepened and the labor market has gained some flexibility. As an open economy, we are not immune to external shocks but the ability to cushion them through the exchange rate and countercyclical policy response has improved significantly. At the time of the 2007 Global Financial Crisis, this framework helped us to avoid large costs and contain financial problems despite our strong ties with the global economy.
However, it is important to remember here that the Executive Board consists of six individuals who have their own personal opinions. The majority is not in every respect a united team that shares exactly the same views on all matters. Nor has it consisted of the same individuals throughout this period. From time to time, opinions have been quite divided on a range of issues, but I would say that the main dividing line between the majority and the minority is that the majority has been more concerned about household debt. Many external observers also seem to have interpreted the situation in this way. Another type of criticism is based on this, but claims that the reasoning of the majority on the risks associated with household debt has been too vague. My perception is that what the critics seem to lack are quantifications of how monetary policy is expected to affect the situation. I can understand this criticism to a certain extent too. It would without doubt be desirable if we were able to say, for example, that a somewhat higher interest rate reduces the risk of a dramatic fall in house prices in the future by so many per cent, or that a level of household debt of x per cent is problematic while a level of y per cent is not. Unfortunately, however, neither the Riksbank nor any other central bank – or for that matter the science of economics as such – has reached that point yet.

Such parallels would paint far too simple a picture of monetary policy and would give the impression that there is a precision and exactness in monetary policy – a possibility  18  For a slightly older, but still very readable article, see Rogerson, Richard (1997), “Theory Ahead of Language in Economics of Unemployment”, Journal of Economic Perspectives 11 (1), pp. 73–92. A more recent reference that is also relevant in this context is Carlsson, Mikael (2012), “Monetary policy and unemployment: A conceptual review”, under publication in Sveriges Riksbank Economic Review 2012:3. The problems with basing economic policy on estimated trends and long-run equilibria are illustrated in, for instance, Orphanides, Athanasios (2004), “Monetary Policy Rules, Macroeconomic Stability and Inflation: A View from the Trenches”, Journal of Money, Credit and Banking 36(2), pp. 151–175 and Orphanides, Athanasios and Simon van Norden (2002), “The Unreliability of Output-Gap Estimates in Real Time”, Review of Economics and Statistics LXXXIV (4), pp. 569–583. 19  There is support for this view in research, see for example Blinder, Alan S. and John Morgan (2005), “Are Two Heads Better Than One? Monetary Policy by Committee”, Journal of Money, Credit, and Banking vol. 37, pp. 789–812. BIS central bankers’ speeches  9  to “fine tune” – that simply does not exist. This would possibly give an illusion of “clarity” but would, as I see it, merely be a chimera.20 The Riksbank is hardly unique in this respect.
High inflation and rapidly rising wages meant that Swedish competitiveness was at a low level when international economic activity began to weaken in the early 1990s. At the same time, the Government made it clear that the fixed exchange rate should be defended at any cost. It was an untenable situation. Gradually, confidence in the Swedish krona deteriorated and this forced the Riksbank to raise interest rates to counteract the capital outflows. As inflation at the same time fell substantially – from 10% to 2% within the course of two years – real interest rates also rose substantially, from 1.5% to 8% between 1991 and 1992. The Swedish economy experienced a real interest rate shock. This led to the property bubble bursting, which was a serious problem for the banks, as a large part of their lending had property as collateral. In some areas property prices fell by up to 60 per cent over an 18-month period. During autumn 1992 confidence in the Swedish krona declined further. Despite the Riksbank setting the interest rate at 500 per cent over a weekend, it proved impossible to stop the speculative capital flows and on 19 November 1992 Sweden was forced to abandon the fixed exchange rate regime. This was a further blow to the banks. Many of the borrowers who had borrowed in foreign currency had their income or assets in Swedish krona and when the krona fell they experienced problems in paying their loans.

It should be noted, that under existing circumstances, this effect will be reinforced by accumulated high consumer debt level of certain households. 2  BIS central bankers’ speeches  Decline in investment activities is driven not only by reduced profits and lower accessibility of other financial resources, but primarily by high uncertainty with regard to future economic development. It is expected to be the highest in industries which have not benefited from the ruble depreciation and which suffer from increased debt burden. For reference: According to forecasts, household final consumption expenditure will fall by 5.5–5,7% and 1,5-2% in 2015 and 2016. Fixed capital investment will decrease by an estimated 10–12% and 0,5-1,5% respectively. As for the labour market situation, we do not expect any considerable increase in the unemployment numbers in comparison with the existing level. This is due to both the demographic factors and the specifics of the Russian labour market which normally adjusts through changes in wages and partial employment, rather than by changes in the number of those employed. For reference: According to our estimates, the unemployment will not exceed 6.0%-6.2% in two coming years. In comparison with December, we revised the balance of payment forecast. The expected fall in imports saw the most considerable change (almost by 30% in 2015 compared with 2014 instead of previous estimate of 10%). Therefore, the current account surplus estimate has been revised upward to 64 billion US dollars in 2015 and to 90 billion US dollars in 2016.
Supervision should be based on a combination of offsite observations, where the supervisor analyses financial and prudential reports and other information; onsite visits where the supervisor verifies the information it has received and focuses on the governance and control processes in the bank; and personal contacts with banks’ auditors, owners, boards, management and staff in order to gain a good understanding of the bank’s business and of the competencies of the leading personalities. Recently, more stress has been given to this latter issue because the increased complexity of banking makes the importance of good corporate governance and efficient control functions even more evident. Supervisors should avoid trying to micro-manage the banks. When supervisors go too much into the details of the running of the bank, they will be seen to assume – in the eyes of the bank and also of the general public – a responsibility for the bank, which they should not have. The operational independence of supervisors has lately become even more important. The higher degree of interdependence between the institutions and markets combined with their increased complexity and thus vulnerability implies that supervisory decisions and measures must be based on purely prudential grounds without listening to non-relevant arguments. Such operational independence is inscribed in the statutes of the Swedish supervisory authority. However, independence must be tempered by accountability so the supervisors will have to explain their decisions publicly in various ways, such as reports to the Parliament, and they must be prepared to take responsibility for them afterwards.

The same type of test was conducted before a Swedish bank could receive a permit for opening branches within Sweden. Capital movements and certain current account transactions in and out of Sweden were restricted. Companies were only allowed to transfer funds abroad in order to finance their overseas investments if they could prove sound economic reasons for doing so, such as if the investments might eventually lead to increased exports from Sweden. Companies were allowed to borrow abroad, but only in foreign currency and there were also requirements from the Riksbank on the minimum maturity of the loan. Physical persons were only granted a small foreign currency allowance for travel, and had to apply to the central bank for any additional sums such as for acquiring a house or apartment abroad. Foreign companies were generally not allowed to issue securities in the Swedish markets. Foreign banks were not allowed to operate in Sweden and Swedish banks had to obtain permits when they wanted to establish subsidiaries abroad; branches were not allowed at all. These restrictions on capital movements had several aims. One was to ensure a stable Swedish currency, with a fixed exchange rate, insulated from any sudden capital flows. Originally, and in particular during and immediately after the Second World War the restrictions supported the rationing of the scarce foreign currency revenues available to the Swedish economy.
While these are positive steps, the feedback provided to the industry this summer after our review of the 2013 resolution plans for the largest firms suggested that quite a bit of work remains ahead on rationalizing legal entity structures, as well as in other areas, particularly: •  Developing a top-tier holding company structure that supports resolvability;  •  Establishing robust service level agreements and contingency arrangements to ensure ongoing provision of critical services among material affiliates and between material entities and third parties; and  •  Demonstrating the ability to produce, on a timely basis, reliable information about a material entity related to financial condition, financial and operational interconnectedness, and third-party commitments and contracts. 3. In the third area of our Framework – better managed – we have seen progress on several fronts, although this area remains very much a work in progress. Considering that a firm’s leadership, including the board of directors and the senior management, is ultimately responsible for the culture of the firm, and culture is a dynamic element that firms should always strive to improve, I see the work in the area of better managed as requiring on-going, sustained attention. It is impossible to achieve “perfection” in an area of art like management. I think it’s also important to acknowledge that cultures within individual firms ultimately play a role in defining the culture of the industry.

Also, as an industry, there must be a willingness to listen to the critics when developing solutions. So the industry clearly has a way to go on this front. •  Employee base: There was much discussion around the population that makes up the majority of the workforce in the industry. As I said earlier when I spoke about resources, there needs to be a better understanding of this demographic. The current environment of high turnover can lead to a lack of loyalty to a firm, less concern about how behaviors will be perceived and a disproportionate focus on financial compensation. •  Measuring success: Clear metrics are needed to measure behavior if culture is to be included in performance assessments and discretionary compensation. All firms measure risk, but culture is a very different type of risk. Even if measured to a higher confidence interval than other risks (99+ %) it still means you have some bad apples. This problem doesn’t go away with fewer people, so, regardless of your size, you can’t ignore the importance of culture. So, as we move forward and the industry ramps up its efforts to address this issue, I see a number of considerations that must be incorporated into the solutions. They are in three main categories: management, operations and employees. Regarding management, we need leadership from top. Firms must have a clearly articulated statement of purpose that aligns with the firm’s business strategy and risk appetite.
Moreover, our international reserves are ample at about three times the size of short-term external debt. Non-residents holding of Thai bonds is less than 10 percent of total bond outstanding, a level much lower than our peers. Although the NPL ratio is rising moderately, banks’ balance sheets are healthy, with a capital adequacy ratio of over 18 percent and low currency mismatch. Meanwhile, inflation returned to our target range in December and will continue to be in the range as the effects of falling oil price dissipate and the output gap narrows. It is also worth noting that the past decade has seen exponential growth in Thailand’s economic ties with the ASEAN peers, especially the CLMV neighbors. The growth rates of trade and investment have been impressive. Since 2005, Thailand’s export value to the CLMV has increased more than fourfold and is now making up over 10 percent of our exports, comparable to the size of our exports to the EU. During that same period, Thailand’s direct investment into these countries has increased by about sixfold, highlighting the opportunities that businesses foresee. Certainly, businesses have benefited from Thailand’s proximity to these markets, and it is our goal as a central bank to encourage greater financial connectivity with the CLMV and the ASEAN partners as a whole. I will elaborate on this issue when discussing Bank of Thailand’s policy later on.

In particular, the Bank of Thailand now has the authority, bestowed by the government, to supervise and regulate the Specialized Financial Institutions (SFIs), which account for around 25% of Thai financial system’s total assets. In light of this, new sets of rules have already been imposed on SFIs to improve governance, operational capability, credit risk management as well as transparency. Along with improving SOE performance, businesses, are expected to compete in a fairer environment than before through better law enforcement. The revision of the Trade Competition Act, currently being considered at the National Legislative Assembly, will establish an independent commission - the Trade Competition Commission - to review and regulate business competition, thereby ensuring a fairer and more competitive environment among businesses. The commission will be more independent and less prone to influence from both the public and private sectors, unlike the current structure in which the committee is chaired by the Minister of Commerce and half of the committee can consist of representatives from large companies. In addition, the law is expanded to cover commercial operation of SOEs1, and antitrust penalties will be more penal. Therefore, the law is expected promote a more level playing field not only among private firms but also between private firms and public enterprises. On top of this, access to credit for small and medium sized firms will be improved. The Business Securities Act, effective since July of last year, widens the scope of eligible collateral for secured lending.