samchain/econo-pairs-v1 huggingface dataset:
Although the banks are specialists in assessing credit risk, they are also sensitive to shocks. Deposits are liquid, while loans are in practice often tied for long periods. If the depositors suddenly want to withdraw their money, it may be difficult as the bank cannot as quickly call in all its loans for payment. In addition, the banks are of vital importance for ensuring that payments in the economy function. The fact that credit risks are spread to other institutions with significant equity, such as insurance companies, may thus reduce the risks in the financial system. How has the credit derivatives market developed? Since its start in the mid-1990s, international trade in credit derivatives has expanded enormously. Developments have been particularly dramatic over the past five years. The outstanding volume in the credit derivative market has in round figures doubled every year since 2002 and amounted to almost USD 12,000 billion at the end of 2005. This incredibly large figure can be compared, for instance, to the total value of the world’s stock markets, which at the same time amounted to just over USD 40,000 billion. Market growth has remained high since 2005 and shows no sign of slowing down. Perhaps the most important explanation for the large expansion in recent years is that the market has become increasingly standardised. This has made trading at a larger scale easier. 2  2  If the bank does not own the bond in question it can buy one on the market.

A syndicated loan is a loan where a bank sells parts of the loan to other banks; this is usually done internationally. These loans, like credit derivatives, have the advantage of spreading the risk in a large credit exposure over many hands, but are not traded so actively in the market. Another means of selling risk is to put together a number of credits to form a portfolio and then finance this portfolio by issuing bonds. This is called securitisation. The portfolio is often sliced up into different risk tranches, and the bonds corresponding to each tranche are sold to different investors, depending on what risk the investors are willing to bear – and to what price. These products in themselves are sufficient material for a whole speech – so let me just note that credit derivatives are not unique when it comes to trading in credit risk. Where are the dangers in the market? I have now gone through a number of advantages with credit derivatives and described their remarkable growth. But at the same time, they have brought with them a number of risks. These are mainly related to the market being new and relatively untested. There is a possibility of "teething  3  For example, iTraxx Europe consists of the 125 most liquid company names in the CDS market in Europe. The 125 CDS contracts weighted equally in the index. BIS Review 24/2007  3  problems”.
Yugoslavia, Mexico and Egypt had the advantage of being close to the critical export markets in the developed world. Honduras and Tanzania had precious metal deposits, as did several of the other Latin American and African countries. Singapore had nothing, was over-populated and had high unemployment. Many economists of the day predicted that countries in Latin America and Africa would outgrow over-populated, resource-scarce Asia. The outcome, however, was totally different. Living standards have barely risen in Honduras in the last 40 years, and have declined in Tanzania. Tito's Yugoslavia no longer exists. East Pakistan fought a war with West Pakistan and separated to become Bangladesh. Civil war and internal disorder tore up countries like Liberia, Ethiopia and Uganda. Singapore which was written off by pundits as being not viable without the Malaysian hinterland not only survived but thrived. Its GDP per capita increased more than six-fold, better than any of the other 15 countries represented in my class. Why have the growth experiences of individual countries been so disparate? Some of you might have watched the movie, "The Good, the Bad, and the Ugly", released, coincidentally, exactly 40 years ago. Set during the American Civil War, it was about three bandits who each held one clue to a hidden trove of gold coins. They did not trust each other, and wanted all the money for themselves. In the end, the "Good" bandit who put all the three clues together won.

Here, the challenge lies in selecting a set of indicators that can condition a timely policy choice, given the discrete nature of the instruments. To this end, we have put in place a macro-surveillance system to  2  BIS Review 141/2010  monitor vulnerabilities in seven key areas; namely, property market, stock market, banking sector, non-financial corporate sector, household sector, government sector, and external sector. Indicators are used to evaluate the build-up of vulnerabilities and imbalances in these sectors and the need for macroprudential measures is then assessed. This ultimately boils down to a judgement call. For us, integrating macroprudential measures in the overall macroeconomic modelling exercise to ensure a consistent and timely policy outcome remains a key priority. Finally, I want to come back to the point I raised earlier about the global nature of capital flows and the national orientation of policy. This is an important point and applies both to emerging markets and advanced economies. Simply put, the current cycle of capital flows has a strong international dimension as a key driving force of capital flows is the exceptionally low interest rates in the major economies. Hence, policy response by emerging markets is made more demanding if the problems at the source remain. Therefore, given the potential destabilizing influence that capital inflows may have on emerging markets, a question that must be asked is whether there are gains to be had for the global economy as a whole in moving away from exclusively domestic-oriented policies?
A number of initiatives have already started, such as the current negotiations over an ASEAN-India Free Trade Agreement, which will further help to cement this relationship. The private and public sectors of both sub-regions could benefit from this synergy and ride on the momentum of growth towards what many have termed “the Asian Century”. There is an immense potential to realize from the individual comparative advantages of all the countries in South and East Asia. While China’s trade share with India as a fraction of India’s total trade stands at 7.7%, another 15.6% of India’s trade is with the other 8 Asian economies. India has the potential to lead trade and economic growth and specialization in the South Asian region. I note with great interest the developments under the landmark agreement to create a South Asian Free Trade Area (or SAFTA), which includes Bangladesh, Bhutan, India, the Maldives, Nepal, Pakistan and Sri Lanka. As I understand it, the SAFTA, scheduled to come into effect on 1 January 2006, will more than double the size of the market in the region. Implementation of the SAFTA along with the needed reforms to facilitate intra regional trade could spearhead growth and investments within the region. These in turn could raise the profile of the South Asian region as another pillar of growth of the global economy. We recognize all too well that the process of reform, deregulation, and trade liberalization takes time and a strong political will, as well as business sector understanding and acceptance of change.

India’s economy is the 14th largest in the world measured in nominal US dollar terms, but in terms of purchasing power parity, India is the 4th largest economy in the world according to the iMF. India’s GDP in purchasing power terms has also risen substantially, with its share rising from 4.3% to 6.1% of world GDP over the past 15 years. India’s unique characteristics that enhance this growth potential include its dynamic population and demographic structure, as well as its emergence as a global leader in service exports. This dynamism, growth, and positive sentiment has been clearly evident in India’s stock market, which has rallied 40% in 2005, second only to Korea as best performing major market in Asia last year. Sometimes overlooked however, is an informal group of Asian economies (excluding Japan) that account for the majority of trade and GDP in East Asia, known as Asia-9. The Asia-9 economies comprise China, Hong Kong, Indonesia, Korea, Malaysia, Philippines, Singapore, Thailand, and Taiwan. The share of Asia-9’s GDP in purchasing power parity terms has grown from 11.4% in 1990 to 20.6% in 2005. To put this in perspective, this exceeds the EU’s PPP share of world GDP of 18.8%, Japan’s share of 6.7%, and is very close to the United States 20.7% share of world GDP in 2005. But I am not here today to overwhelm you with facts and figures! Today I would like to discuss one of the most important drivers of this phenomenal growth – and that is, international trade.
In previous recessions, many large businesses in the UK were able to support smaller companies by reducing payment times to companies further up the supply chain and by extending credit to those further down. But pressures on corporate cash flows and the reduced availability of bank credit may have limited the scope for larger companies to behave in this way in this downturn. The Monetary Policy Committee, via its network of regional Agents, is monitoring closely developments in the demand for and availability of trade credit. The reduction in the availability of trade credit has been accompanied by a tightening in the supply of credit insurance. This is at a time when the demand for such insurance is at its highest. Similarly, heightened uncertainty about the global environment has increased the demand for letters of credit from UK exporters. These developments are understandable and predictable: the economic environment has deteriorated markedly and as insurers you need to protect yourselves against future losses. There is a limit to how much insurance premiums can be raised before they exceed the profit margin associated with a particular transaction. Higher prices can have the same effect as the complete withdrawal of supply. I know that members of the ABI are working hard with Government and with business to agree how best to meet these challenges. It is vital for the long-term success of both your industry and our economy as a whole that a workable solution is found. Where next for the UK economy?

Eddie Yue: Asian Development Bank – working to reduce poverty in Asia Statement by Mr Eddie Yue, Deputy Chief Executive of the Hong Kong Monetary Authority, and Head of Delegation, Hong Kong, for the 49th Asian Development Bank Annual Meeting, Frankfurt am Main, 3–5 May 2016. *  *  *  I would like to thank the Government of Germany for hosting the 49th Annual Meeting of the Asian Development Bank (ADB), and the Management and staff of ADB for the excellent arrangements of the event. I would also like to congratulate ADB for the successful conclusion of the Eleventh Replenishment of the Asian Development Fund, which would provide critical resources to ADB to further its work in poverty reduction in Asia. ADB is approaching its 50th Anniversary this year. Over the past fifty years, Asia has undergone tremendous development. The economic miracle in Asia, together with the important work of the Bank, have lifted millions of people out of poverty and substantially improved our standard of living. After decades of rapid growth, however, there have been signs that the trend growth of the region is slowing. This reflects, to a considerable extent, supply-side constraints on potential output. In particular, a number of emerging economies in the region have been held back by infrastructure bottlenecks. As I have noted during the past few Annual Meetings, to sustain growth and propel the economy to the next stage of development, boosting infrastructure investment is a top priority for many developing members in the region.
Extending a practice with a longer tradition in the field of psychology and in surveys of professional forecasters, economists, and other financial experts, our surveys rely heavily on a probabilistic question format to elicit the likelihood respondents assign to different future events. This approach builds on a large and growing body of research, led by econometrician Charles Manski, that has demonstrated survey respondents’ willingness and ability to answer questions expressed in this way.6 Traditionally, surveys ask respondents to express their answers in one of a few ways: for example, using a Likert scale (specifying whether an event is “very likely,” “likely,” or “not too likely”), selecting the outcome they consider most likely (“Do you expect the unemployment rate to be higher or lower than today?”) or giving a point response (“By what percent do you think prices will increase over the next year?”).7 A problem with the Likert scale is that it does not allow comparisons across respondents, because different respondents may interpret the scales differently. A well-known illustration of the problem was provided by Daniel McFadden, who looked at a health status measure that used a Likert scale ranging from “excellent” to “poor.” While 62 percent of Danish men reported their health to be excellent, only 14 percent of French men did so, despite their enjoying two more years of life expectancy. A problem with questions asking for the outcome considered most likely – that is, questions asking for the modal outcome – is the ambiguous information content of the responses.

In this kind of uncertain economic environment, it is all the more important that we should be trying to maximize the opportunities to develop trade and investment links between neighbouring economies. That is why this Symposium is timely and important. The existing economic links between Fujian, Hong Kong and Taiwan provide a solid platform on which to build for the future. Taiwan and Hong Kong are already major trading partners with Taiwan’s exports to Hong Kong accounting for 23.5% of its total exports in 1997. Visitors from Taiwan also account for a significant proportion of the total number of visitors to the territory and thus make a major contribution to the tourist industry in Hong Kong which, as you will know, currently needs all the help it can get. 4. Trade between Hong Kong and Fujian is also growing rapidly in both directions and both Hong Kong and Taiwan are a major source of overseas investment into the Province. There are over 10,000 Hong Kong enterprises in Fujian. 5. The Hong Kong presence in Fujian includes a number of banks from Hong Kong, including Bank of East Asia. The same bank also maintains a branch in Taiwan which puts it in a good position to take advantage of the triangular trading links between Fujian, Hong Kong and Taiwan. In its role as an international financial centre, Hong Kong is also the host to a number of banks from Taiwan. The Taiwanese presence here consists of 4 licensed banks, 2 restricted licensed banks and 3 representative offices.
I therefore welcome further views and ideas from the audience during this conference on your aspirations to achieve financial well-being of our future Malaysia. 2/4  BIS central bankers' speeches  Financial well-being is not about being rich. Rather, it is about the ability to live within means and making responsible financial decisions. The state of financial well-being of an individual is a reflection of two factors — firstly, his or her level of financial literacy, and secondly, a person’s economic background. Unfavourable personal and economic circumstances, for instance, like most of us – coming from low and middle income families living in a city, may be more dependent on external factors and are not easily changed. Financial literacy, on the other hand, resides within an individual where we have control. Given the right intervention, motivation and discipline, an individual’s level of financial literacy can be improved from within. More importantly, such interventions can also become an important element to uplift a person’s personal and economic circumstances. The reverse is also true – absence of financial literacy may reverse financial well-being. We have seen many situations where individuals with favourable circumstances, such as high income professionals, nevertheless, fall into financial problems due to poor personal financial management. On the other hand, we often hear of people with less favourable personal and economic circumstances living comfortably within their means by practicing a “prudent and modest lifestyle”.

A study by the Asian Institute of Finance in 2015 found a majority of youth to be living on high borrowing costs – 38% of youths rely on personal loans, while another 47% engage in expensive credit card borrowings. Often, they will soon find these debts to be burdensome and result in financial problems. From January to August this year, AKPK’s data indicated that above 3,400 borrowers between the ages of 20– 30 years have sought AKPK’s assistance, as compared to 3,450 borrowers for the entire of 2016. Third, majority of Malaysians do not practice long term financial planning. Only 40% of Malaysians consider themselves financially ready for retirement, despite the steadily increasing life expectancy of Malaysians. The poverty line in Malaysia is currently at RM950 per month, and based on the Employee Provident Fund (EPF), a retiree would need an estimate of RM228,000 upon retirement to generate sufficient investment income to live above the poverty line for the 1/4  BIS central bankers' speeches  next 20 years. However, according to Khazanah Research Institute, the average EPF savings of those in the 51–55 age group is only approximately RM160,000. Lack of awareness on the importance of having sufficient saving for retirement can lead to profound results, including the struggle to meet post-retirement standard of living. Fourth, Malaysians still lack understanding on risk and return and are not able to make rational financial decisions. We remain prone to financial fraud and abuse.
Norman T L Chan: Remarks at the Hong Kong Academy of Finance Inauguration Ceremony and fellowship conferment Welcome remarks by Mr Norman T L Chan, Chief Executive of the Hong Kong Monetary Authority, at the Hong Kong Academy of Finance Inauguration Ceremony cum Fellowship Conferment, Hong Kong, 26 June 2019. * * * The Honourable Paul Chan, distinguished guests, ladies and gentlemen, 1. A very warm welcome to all of you for joining us today to witness the Inauguration Ceremony cum Fellowship Conferment of the Hong Kong Academy of Finance (AoF). 2. I strongly believe that the most crucial factor that differentiates an international financial centre (IFC) from the other aspiring financial centres is its superior “soft infrastructure” or “soft power”. I am sure you will agree with me that the quality and professionalism of the people in the financial services industry are the building blocks for the “soft infrastructure” that determines the competitiveness of an IFC. The mission of the Academy is to serve as a centre of excellence for developing financial leadership as well as a repository of knowledge in monetary and financial research, including applied research. 3. The AoF will develop and run a Leadership Development Programme to nurture financial leaders in Hong Kong. The Academy will invite senior management and promising talents from financial institutions, regulators, professional firms and academia in the field of finance to join as Members.

May I take this opportunity to thank our fellow regulators for their support in the setting up of the Academy and in providing guidance on its future work through the Board of Directors, which includes representatives from the Insurance Authority, the Securities and Futures Commission, the Mandatory Provident Fund Schemes Authority alongside the Hong Kong Monetary Authority. 6. Ladies and gentlemen, today the AoF will also confer Fellowship upon 10 distinguished leaders in recognition of their outstanding achievements and contributions to Hong Kong in the field of finance. May I take this opportunity to congratulate the Fellows and to express our deep appreciation of their remarkable achievements and contributions to Hong Kong over the years. 7. Before I conclude, let me express our sincere gratitude to the members of the Experts Group, Preparatory Committee, Exchange Fund Advisory Committee and the Financial Secretary, who is also the Honorary President of the Academy, for their support and 1/2  BIS central bankers' speeches  contributions that have made it possible for us to launch the AoF within a very short period of time. Lastly, the Managing Director of the International Monetary Fund, Ms Christine Lagarde, has asked me to convey her apologies for not being able to officiate at today’s ceremony as planned. Although not being able to join the occasion in person, she will deliver a video message to us later on. Once again, I thank all of you for joining this ceremony today. Thank you for your kind attention. 2/2  BIS central bankers' speeches
The time-variation of lambda is illustrated in part by the fact that the regression estimating the MPC’s lambda leaves around two-thirds of the variation of inflation over the output gap unexplained, even in expectation and over the post-crisis period. So why isn’t the estimated lambda fixed, and what considerations inform its value in practice? 19  Yellen, J (2012), “Revolution and Evolution in Central Bank Communications”, November. Converting this to an equivalent value for the weight on the output gap depends on the Okun’s law coefficient one assumes, estimates for which vary. 20 Ilbas (2012) estimates the Smets-Wouters model under optimal commitment policy for the Volcker/Greenspan era and find a value of lambda on output growth of around ½. Dennis (2006) uses a semi-structural model and finds a weight of around 3 on the output gap, whereas Givens (2012) estimates a value of around 0.1 over a similar sample. Givens and Salami (2015) estimate a small New Keynesian model on post-Volker data and find a lambda on the output gap of around ¼. Sack (2000) finds a weight of around 0.8 on the unemployment gap over the period 1984-1998 using a VAR to describe the economy’s dynamics. Lakdawala (2016) allows for time variation in central bank preferences and finds that the weight on inflation relative to the output gap to have fluctuated over time, falling to low levels in the 1990s and early 2000s (implying a high relative weight on the output gap), before rising in the period leading up to the financial crisis.

Such considerations will no doubt have played a part in the recent decision by the six members of the Gulf Cooperation Council to seek the advice of the European Central Bank (ECB) in developing a blueprint for forming a currency union and introducing a common currency by 2010. In a similar context, the announcement last week that Iceland is considering joining the euro is most significant. The country’s Prime Minister is reported to have said, “It’s clear [that] it’s not easy to run a small economy and a small currency in a big market”. There will also, of course, be long-term costs arising from the adoption of the euro associated with the loss of monetary and, particularly, exchange rate policy autonomy. Studies based on the Optimum Currency Area (OCA) criteria, however, suggest that NMS are not likely to suffer from a more pronounced incidence of asymmetric shocks than the existing non-core euro area members. 3 Moreover, the nature of shocks to which the economies of these countries are generally subject do not  1  Faruqee (2004)  2  Schadler et al (2005)  3  Fidrmuc (2001), Boreiko (2002)  BIS Review 53/2006  1  necessarily require intervention on the nominal exchange rate, provided that more efficient mechanisms for aggregate demand management are in place.