samchain/econo-pairs-v1 huggingface dataset:
In order to preserve independence of monetary policy, that is, not to subordinate it to the foreign exchange policy nor to a specific value of the exchange rate, the chosen method was a pre-announced and mechanical daily purchase of 50 million dollars. In fact, the degree of independence was such that, later on, the interest rate could be raised when faced with a more complex inflationary scenario, without the need for stopping intervention. Halfway through September, liquidity tensions grew substantially around the world, as well as in Chile. This led the Board to bring the reserve purchase program to an end when almost 6 billion dollars had been accumulated, and the country had reached quite a comfortable international liquidity position, which would enable us to mitigate any possible sudden stop of capital flows. Besides, in view of the worsening of liquidity problems, the Bank announced the supply of liquidity in pesos and dollars through repos and swaps. Later on, in October, the range of eligible collaterals was broadened and the dollar swap program was extended for six months. Then, in December, an extension for all of 2009 was announced for the repos and swaps program, and the range of eligible collaterals was broadened further. The purpose of these measures was to align market rates with the Monetary Policy Rate and to alleviate foreign currency liquidity tensions. Both objectives have been accomplished, and the scarce demand for dollars through swap transactions show that our economy still has a fluid access to the international financial markets.

Fundanga: Islamic banking – building partnerships for development Opening remarks by Dr Caleb M Fundanga, Governor of the Bank of Zambia, to the Islamic Banking Conference “Building partnerships for development”, Lusaka, 20 October 2008. *  *  *  The Guest Speaker, Mr. Ahmad Zaini Bin Othman Chief Executive Officers of Banks and Non bank financial institutions; Distinguished invited guests; Colleagues; Ladies and gentlemen; On behalf of the Bank of Zambia and indeed on my own behalf, I would like to extend a very warm welcome to you all to this important conference on Islamic Banking. To our Guest Speaker, Mr Ahmed Zaini Othman, I wish to extend a special welcome to you to Zambia and in particular to Lusaka, the capital city. Like the rest of Zambia, Lusaka is a city of tranquility with an easygoing African charm. The city is not short of interesting sites and places to visit. I therefore urge you to find time or indeed stay an extra day or more to sample this special menu that Lusaka offers. I also wish to extend my sincere thanks to Standard Chartered Bank Zambia Plc, the Islamic Council of Zambia and the Eastern Province Chamber of Commerce and Industry for graciously accepting to make presentations at this conference. Ladies and Gentlemen, the Bank of Zambia is honoured and delighted to host the first Islamic Banking Conference in Zambia that begins today, the 20th and ends on 21st October, 2008.
But the more a scheme is underfunded (overfunded) to begin with, the more it will find its deficit (surplus) increased. This is entirely intuitive. By reducing yields, QE increases the cost of purchasing a given future stream of income. So if a fund starts off relatively “asset poor”, the sponsors will now find it more costly to acquire the assets necessary to match its future obligations. A corollary of this is that the cost of provisioning against additional pension entitlements being accumulated by currently serving staff unambiguously rises. That does mean that the effective cost of employing labour, when their pension costs are also included, also rises.8 This is certainly an unwanted side effect of QE. But it needs to be balanced against the higher activity and business profits resulting from QE, as well as the fact that wage growth has recently been exceptionally weak, which work in the opposite direction. Given that pension funds have for the most part seen deficits widen in recent years, whether it be as a result of the crisis and recession or the result of QE, how should sponsors and trustees respond? It makes little sense to rush to close a deficit that is likely to prove temporary. But if a deficit is likely to persist, then corrective action is required, initially to prevent it continuing to expand and ultimately to close it, though that adjustment could, quite reasonably, be spread out over time. This is all recognised by the Pensions Regulator.

Another possibility is a shortage of high-quality safe assets,10 with countries like China accumulating reserves particularly in the form of US Treasuries. That in turn will also have increased the demand for substitutes, including the government debt of other advanced economies. But recent events in the euro area have highlighted the fact that the debt of  8  For instance, if an employer is putting aside an additional 15% of the wage bill to cover accumulating pension liabilities and the price of buying a given stream of future income rises by 20%, then he would now need to put aside an additional 3% of the wage bill to meet those obligations. 9  See Ben Bernanke (2005), “The Global Saving Glut and the US Current Account Deficit”, Sandridge Lecture, Virginia Association of Economics, Richmond, Virginia, 10 March. 10  See Ricardo Caballero, Emmanuel Farhi and Pierre-Olivier Gourinchas (2008), “An Equilibrium Model of Global Imbalances and Low Interest Rates”, American Economic Review, pp.358–393. BIS central bankers’ speeches  5  some sovereigns is not as safe as market participants thought. That has led to increased demand for the debt of those sovereigns that are still regarded as safe, including that of the United Kingdom. How long such a “safe-haven discount” persists depends not only on what happens in this country but also what happens abroad: the demand for one country’s bonds as a safe haven depends in part on how risky those of other countries are thought to be.
And let’s not forget that the tools available to prevent moral hazard generated by central bank liquidity facilities, such as penalty pricing, are rather blunt tools themselves. Don’t get me wrong, I don’t mean to suggest that moral hazard is not something we should worry about when thinking about the liquidity provision tools that are integrated in our  14  This is a feature of the ECB’s operating framework, which relies on a broad counterparty set and broad collateral base for its routine policy implementation operations. 15  The Bank of England (2013) describes some concrete steps it has taken to mitigate potential stigma. 16  In addition to the liquidity regulation introduced by Basel III, the SEC’s money market mutual fund reform should reduce imprudent risk-taking funded by the money fund industry. 17  Like liquidity risk management, credit risk management is also a core function of banks. However, I suspect few would suggest capital regulation is unnecessary. 18  In 2012, the Federal Reserve launched the Comprehensive Liquidity Assessment and Review (CLAR) for firms in the Large Institution Supervision Coordinating Committee (LISCC) portfolio. Like the Comprehensive Capital Analysis and Review, CLAR is an annual horizontal assessment, with quantitative and qualitative elements, overseen by a multidisciplinary committee of liquidity experts from across the Federal Reserve. In CLAR, supervisors assess the adequacy of LISCC portfolio firms’ liquidity positions relative to their unique risks and test the reliability of these firms’ approaches to managing liquidity risk.

The first one relates to the comparability of the CNB’s forecast with the rest of the forecasts produced by the ESCB members. As I mentioned earlier, the CNB produces an unconditional forecast that includes a reaction function of the central bank. However, this is not the case with the rest of the ESCB members. Although there is a tendency towards the use of unconditional forecasts and the Bank of England and Sveriges Riksbank have started to use at least the trajectory of the short-term interest rate derived from the money market term structure instead of an assumption of a constant short-term interest rate as a base for their forecasts, conditional forecasting still plays a crucial role among the ESCB members. This, of course, seriously reduces the comparability of the results. Second, the forecasting system and the modelling framework have not yet been adjusted to our expected entry into the ERM II and the euro area. ERM II participation clearly raises the question of consistency between the “low” inflation environment required by the Maastricht inflation criterion and stability of the nominal exchange rate, both in a converging economy. Recent experience among the new EU member countries provides some evidence on the difficulties of fulfilling the Maastricht inflation criterion amid a stable exchange rate. The issue to be solved is to what extent the forecasting system should reflect the dualism of the targets, or whether the policy rule should consider the inflation target only, leaving the exchange rate as a fully endogenous variable.
Once linked up, Herstatt risk of foreign exchange transactions involving the two currencies concerned will immediately be eliminated. Payment versus payment (PvP) and delivery versus payment (DvP) within Asian time will become a reality. 57. The fourth area for Asian monetary co-operation is banking supervision and financial regulation. As financial markets are further liberalized and integrated, the growth of cross-border banking activities and other financial transactions is accelerating, increasing the risk of contagion. As ultimately monetary problems surface in the banking system, it is important for regulators in different economies to co-operate to safeguard the integrity of the banking and financial systems in the region. Part of the work will involve the harmonization of supervisory practices, including the adoption of the Core Principles for effective supervision advocated by the Basle Committee. 58. Through working closer together, such as the collaboration of the EMEAP Study Group on Banking Supervision, supervisory authorities in the region would be able to improve their understanding of each others’ banking systems and supervision framework and approach. We will also review practices in the region against the existing Basle Committee benchmarks, identify reasons for any differences and thus help to raise the quality of supervision in the region. Over time, it may be possible to move on to the setting of standards. 59. Last, but not least, in Asia monetary co-operation concerns policy consultation. Clearly, there is scope to improve mutual understanding of each other’s policy framework and priorities.

The most important features of a macro-prudential approach is that it treats aggregate risks as endogenous and considers possible feedback effects between the real economy and the soundness of financial institutions. Its ultimate objective is to prevent costly recessions such as the one we are currently experiencing. Consequently, its implementation must be grounded on some welfare analysis. This is an area in which further research is required. It is very important that the implementation of this macro-prudential approach finds the right balance between efficiency and stability in the financial sector, It should therefore be constructed so as to act directly on the incentive to take risk and the rewards provided by risk taking. Should central banks be involved in? Clearly, they should play a pivotal role: they are a major player during financial and liquidity crises. They are well equipped to assess cyclical positions and they have a strong incentive since the efficacy of their monetary policy relies on the smooth functioning of the transmission mechanism. On the other hand, they are not alone in caring about financial stability and their primary mandate, which is price stability, does not always necessarily coincide with financial stability. As a conclusion, I would like to thank your very much for you attention and for your kind participation and thank once again the organisers and the teams involved in the preparation of this conference. BIS Review 74/2009  3
Good hedging, indeed! I will not review all the themes addressed in the book, but would like to touch on a few key issues that can help us get a better understanding of what has happened over the last ten years and how the euro is likely to develop over the next ten. David Marsh is cautious when assessing the euro’s first ten years. In his introduction, he even sounds Solomonic, suggesting that: “It’s too early to say”. There is nothing wrong with such skepticism, and it’s always better to be prudent. Such prudence nevertheless reminds me of the answer that Chinese Premier Zhou Enlai gave in the mid 1970’s to a question about the impact of the French revolution of 1789. He too remarked: “It’s too early to say”. Today, I would like to start by presenting some facts about the last ten years. Then I’ll consider the main hidden message of the book, which is that monetary union is a political union. Finally, I will try to give my own perspective on the next ten years. Facts of the last decade Any assessment of the first ten years of the euro should consider what the objectives were at the start of Monetary Union. In particular, we should avoid attributing to the euro merits or demerits it should not have or never aspired to. Let me consider some of the objectives of the euro and the expectations it gave rise to.

These percentage changes have then been weighed together using TCW weights to a percentage change in the TCW index compared with the value of the index at the date of the survey. 16  A classical study of this is Meese and Rogoff (1983). See also Cheung, Chinn and Pasqual (2005). 17  This is known as covered interest parity, and means that the forward rate in relation to the current exchange rate corresponds to the interest rate differential between the countries. The reasoning is as follows: If one exchanges kronor for dollars, invests in a US one-year bond and then in one year’s time exchanges them back to kronor according to the current forward rate, the investment contains no exchange rate risk. The yield is therefore the same as that given by investing in a Swedish one-year bond. Uncovered interest parity means that the interest rate differential corresponds to an equally large expected change in the exchange rate. In our example this means that one exchanges the money for kronor in one year’s time at the current exchange rate, which entails an exchange rate risk. 18  See, for example, Froot and Thaler (1990). 19  This phenomenon has been called the forward premium puzzle. BIS Review 3/2010  7  in the carry trade, for instance, in connection with the Asian crisis in 1997–98, when “high interest rate currencies” in Asia weakened drastically against the dollar and the yen, and the carry positions had to be settled quickly.
Further, the budget reclassified and re-categorised certain manufacturing materials with the aim of lowering customs duty rates. Mining sector: In light of the adverse impact of the global economic crisis on the mining sector and with the view of easing these effects, the Zambian Government introduced tax concessions, which included removal of the windfall tax, increasing capital allowance to 100 percent as an investment incentive, and reduction of customs duty on Heavy Fuel Oils. As the Central Bank, we have continued to monitor and review developments in the foreign exchange market and provide prudent support when necessary in order to dampen excessive volatility in the exchange rate and safeguard the recently achieved macroeconomic stability. To this end, the Bank has been a net seller of foreign exchange to banks. However, the Bank’s interventions are limited given the global extent and magnitude of the crisis. In addition, the Bank has enhanced its vigilance and interaction with the domestic financial system to ensure adherence to its supervisory guidelines and to enhance information flows between banks and itself. Accordingly, the Bank also introduced measures to ensure that financial market players under its supervision provide detailed information on their foreign exchange transactions. Further, the Bank has continued to reinforce the regulation and supervision of the financial sector. Effective surveillance of the financial market entails adopting appropriate risk  4  BIS Review 86/2009  management policies and procedures that will ensure that financial institutions do not undertake excessive risks that may increase the vulnerability of the country to external shocks.

…and gives vulnerable groups of unemployed a better chance of getting jobs It is also often said that more of those in vulnerable groups with a high rate of unemployment, such as young people and people born abroad, have entered the labour market and that this, rather than the business cycle, explains why unemployment has increased.18 However, it is the vulnerable groups that are most sensitive to economic fluctuations. They are the first to be given notice of redundancy if they have a job, and they are the last to be offered a job if they are unemployed. They are thus more vulnerable to fluctuations in the demand for labour and if they are to get jobs and work experience if they are unemployed, we need to have a very large demand for labour and thus very expansionary monetary policy. As a large share of the labour force now has job chances that are sensitive to demand, one could claim that employment as a whole has now become more sensitive to demand fluctuations. Increased demand could then have greater effect on employment and unemployment than it did before. The fact that more people in vulnerable groups have now entered the labour market is thus an argument in favour of a more, not a less, expansionary monetary policy. High unemployment over a long time requires more expansionary monetary policy to bring down unemployment The fact that unemployment has been high over a long period of time has meant that longterm unemployment has increased.
In addition, this will help reduce the feedback loops between the banking sector and the public sector. These loops arise when risks in the financial sector are resolved using public funds, weakening the fiscal budget which can, in turn, increase risks in the financial sector. The way forward As I said, these are key lessons for Sweden and the international community more generally and, as a result, there has been a significant amount of work by authorities and academics on the issues since the crisis began. The Riksbank is involved in this work through its engagement in the national and international debates and proposals on possible reforms to the financial system and through its own work on possible measures. For example, the Riksbank recently published an inquiry into risks on the Swedish housing market, including the risks associated with rising house prices and increasing household indebtedness and possible measures to address these risks. The new capital adequacy and liquidity rules included in Basel III form a major element of the international response to the crisis. The new regulations are welcomed by the Riksbank. Basel III will introduce a counter-cyclical capital buffer which will form a part of the macroprudential toolkit and entail higher minimum capital requirements which will improve the ability of authorities to resolve failing banks effectively.

Stefan Ingves: Coming stronger out of a crisis – lessons from Sweden Speech by Mr Stefan Ingves, Governor of the Sveriges Riksbank, at the Brussels Economic Forum, Brussels, 18 May 2011. *  *  *  “If in debt, you are not free.” This expression was widely used by Göran Persson, Sweden’s former prime minister, to explain the need for the extensive fiscal consolidation process that Sweden underwent after the crisis in the 1990s.1 In 1997, a three-year nominal expenditure ceiling was introduced. This was an important step towards increasing budgetary discipline and strengthening the long-term perspective of the budget process. In addition, as part of this fiscal consolidation process, a new fiscal policy framework that included a budget surplus target of 1 per cent over the business cycle was introduced in the year 2000. With these instruments in place the debt to GDP ratio fell from 56 per cent in the year 2000 to 35 per cent today. Recent developments in many European countries remind us of Göran Persson’s words: small, open economies are vulnerable to crises of confidence when financial markets are in turmoil. They need to stand on very solid economic foundations and be supported by a credible and sound fiscal-policy framework. Sweden was lucky enough to be in this position when the recent crisis struck. This was indeed fortunate as the crisis had a major impact on the Swedish economy. GDP fell by more than 5 per cent in 2009 – the largest fall since the 1930s.
16  Some recent papers have proposed that the existence of a Global Financial Cycle has transformed the well-known international finance trilemma into a ‘dilemma’, according to which independent monetary policies are possible if and only if the capital account is managed, directly or indirectly (see Rey, H (2013), Dilemma not trilemma: the global financial cycle and monetary policy independence, in Global dimensions of unconventional monetary policy, proceedings of the Federal Reserve Bank of Kansas City Jackson Hole symposium, 2013, pp 285–333). Other papers suggest the trilemma is still alive, but the process of trade and financial globalisation has worsened the trade-offs that domestic central banks face, raising the marginal value of macroprudential tools (see Obstfeld, M (2015), Trilemmas and Tradeoffs: Living with Financial Globalization," Central Banking, Analysis, and Economic Policies Book Series, in: Claudio Raddatz & Diego Saravia & Jaume Ventura (ed. ), Global Liquidity, Spillovers to Emerging Markets and Policy Responses, edition 1, volume 20, chapter 2, pages 013-078 Central Bank of Chile). 12  All speeches are available online at www.bankofengland.co.uk/speeches  12  Pipes This underscores the importance of the third driver of Capital Flows-at-Risk, the Pipes, or the structure of the global financial system itself. Since the crisis, “the pipes” have changed Capital Flows-at-Risk in at least three ways. First, over the past decade G20 reforms have made the core safer, simpler and fairer, which has reduced Capital Flows-at-Risk. Large global banks’ common equity requirements and buffers are ten times higher than the pre-crisis standard.

It will lay down minimum standards for banks to hold some resiliently liquid assets and about the funding of illiquid assets. To date, much more prominent has been the work on capital. Although there has been some dilution of the proposals from a few months ago, real substantive progress is being made in reforming the minimum standards and in introducing various buffers, taking into account credit cycle conditions and the circumstances of SIFIs. The key element of the overall package is that “capital” will mean capital. The world of hybrid instruments – pretending to be so-called capital instruments but which in fact cannot truly absorb losses in a going concern – should become more or less a thing of the past. The Bank of England would like it to be completely consigned to the past. Only equity can absorb losses. For that reason, in calculating regulatory capital, deductions from capital should really be from equity. As part of the emerging compromise, there will be some derogations from that, but the derogations should be transparent. Markets should learn to evaluate bank’s capital adequacy on the basis of what is made transparent about the makeup of that capital. The other really key change will come in stages – partly in the package this autumn and partly during next year and beyond – which is reducing the pernicious regulatory arbitrage that has existed between “banking book” capital requirements and “trading book” capital requirements.