samchain/econo-pairs-v1 huggingface dataset:
When equity prices increase rapidly, the equity allocation will exceed the strategic weight of 60 per cent. Rebalancing rules are then applied to bring the equity allocation back to 60 per cent. These rules are more important than many perhaps believe. Many investors waited for a long time, probably too long, to rebalance their portfolios during and after the crisis, when equity allocations fell sharply. It should also be considered whether the rules should be designed to provide for a greater degree of automaticity, less judgement and probably also greater transparency. It is important to take into account the Fund’s particular features, that is to say a long-term, large investor without short-term liquidity needs, when evaluating which investment strategy is most appropriate. In the spring 2010 Report to the Storting on the Fund, the Ministry of Finance suggested that the level of less liquid assets should be increased: “Further development (of the strategy) will seek to diversify the risk further and increase the weight of investments that benefit from the Fund’s size, long-term perspective and ability to hold less liquid assets.” Today the Fund’s assets are divided into two classes: equities and bonds. Going forward, a division into three asset classes may better enable the Fund to achieve its long-term objectives. The first asset class is equities. This class features the highest risk exposure and the highest expected return. It accounts for 60 per cent of the Fund, which reflects the risk willingness of the Fund’s owner.

Det framtidige omfanget av petroleumsvirksomheten på norsk sokkel” [The future of petroleum activity. The future scale of offshore petroleum activity in Norway]. BIS Review 145/2010  1  The Committee had limited confidence in the government’s ability to save: The Committee stated the following concerning a savings fund: “It is up to the political authorities to determine whether such a fund construction designed to avoid a future decline in income is realistic. The Committee chooses not to build on such an assumption.” The notion of a sovereign oil fund matured through the 1980s. The government, under the premiership of Kåre Willoch, called for the establishment of such a fund in the Long-Term Programme presented in spring 1986, and the Act on the Government Petroleum Fund was passed in 1990. The main rules are: First: The totality of government petroleum revenues is transferred to the Fund. Second: The Fund is integrated into central government budgets and accounts. The non-oil deficit is covered by an annual transfer from the Fund. The government cannot borrow to finance current expenditure as long as there is capital in the Fund. Third: The capital in the Fund can only be used for domestic spending via general budget transfers, and not for earmarked transfers. Fourth: The Fund’s capital must be invested abroad. When the Act was enforced, the Norwegian economy was in a deep downturn, with high unemployment and government budget deficits. Projections also indicated that offshore production would pass the peak in the early 1990s 5 .
3 Under the RBC model in its more traditional versions, the economy is fully flexible and there is no role for macroeconomic policies, whereas under the NKM there are sticky prices that result in money not being neutral, which assigns a role to monetary policy. These provide the conceptual basis for the formulation of inflation-target regimes. It is important to place both types of models in their right dimension. The strategy of RBC models is to try to replicate economic fluctuations in the simplest, least distorted model possible. It originated in the attempt to use the neoclassical growth model to explain the business cycle as a result of productivity shocks, which is surely an interesting effort with theoretical consistency. These are very elegant models, but the difficulty of solving them analytically results in having to solve them using calibrations. As a result, there are often doubts regarding the values of the parameters, which in general are unobservable. To the extent that these models are free of distortions, there is no role for active monetary policies, since economic fluctuations are socially optimal. Certainly this is an attractive theoretical proposition, but it is absurd to think that this is how the world works. It will be difficult to explain the financial collapse with this type of model, because it has no frictions and provides very limited policy implications.

However, I believe that reduced-form models, with all the caveats regarding their potential misuse, can still help in the design of policy, particularly  1  This must be interpreted with caution, because productivity, which is part of technology, depends on policy changes, especially over the long term. The central point in Lucas’s critique is that one must specify the core characteristics of the economy being studied and not base the research on relationships that change with policies. BIS Review 112/2009  1  when more rigorous and, especially, more realistic models are not available. 2 For this reason, there is always a tension between rigor, realism and flexibility. The tendency to base our models on ever more rigorous grounds has also had undesired effects. The incentives of younger academics – the very ones who are supposed to push the borders of knowledge, and who must publish or perish – limit their capabilities for innovation. The required rigor ends up necessarily threatening realism. Nobody expects a model to explain completely the economic reality, but the problem is that it can overlook elements that are crucial to understanding and preventing disasters like the one we face today. It may be more rewarding from an academic standpoint to write an equilibrium model explaining some particular phenomenon, than trying to formulate a model that formalizes all of the distortions of said phenomenon.
The bad debt charge for our locally incorporated banks in respect of their Hong Kong business more than tripled in 1998, albeit from a low base. Non-performing loans (measured by those that have been classified as substandard, doubtful and loss) rose from around 2% at end-1997 to 7.3% at the end of last year. This is a sharp increase but it is important to put it into regional perspective. The equivalent figure for non-performing loans in Thailand at present is around 46%. The picture in Indonesia is even worse. Hong Kong has therefore fared better in respect of credit risk than its neighbours. It has no doubt been helped in this by the solid regulatory framework in Hong Kong and the infrastructure of business laws that makes it relatively easy to take and realize collateral and to put defaulting borrowers into liquidation. Banks are also free to carry on their business without political interference. I believe that Hong Kong has also benefited from its openness as a financial centre, though this can also have its drawbacks. Major international banks are allowed to play a full role in our banking system, including in many cases participating as full retail banks. This has allowed cross-fertilization of talent, systems and products between the local and foreign banks. Finally, another point in Hong Kong’s favour is that it had already gone through a banking crisis in the early 1980s, in which abuses such as connected lending had played a part.

Banks did not classify loans properly or make adequate provisions against them. This allowed insolvent or near-insolvent banks to continue in business and to build up further losses. The end-result of this has been the need for large-scale restructuring of banking systems across the region, a process that is still going on. Inevitably, this involves use of public funds, to take over or recapitalise the banks that might have a chance of survival, or to pay off the depositors of those banks that are hopeless cases and have to be closed. Let me now turn to how Hong Kong’s experience has compared with that of other banking systems in the region. The first point to make is that our banks have by no means escaped unscathed from the Asian crisis. This could hardly be the case when the scale of the recession of the last 18 months has been the deepest since records began in 1961. Real GDP fell by 5.1% in 1998 after rising by about the same percentage in the previous year. Unemployment has risen to 6.2%, a level unprecedented for Hong Kong. This was accompanied by plummeting asset prices that at their lowest had fallen by 50% in the case of residential properties and 60% in the case of the Hang Seng Index. In an economy as used to prolonged economic growth and full employment as Hong Kong and so heavily dependent on asset values, it is not surprising that this translated into a sharp rise in bad debts for the banks.
Andrew Bailey: Financial stability – objective and resolution Speech by Mr Andrew Bailey, Executive Director of the Bank of England, at the Pro Manchester Business and Professional Services Conference, Manchester, 17 March 2011. *  *  *  Thank you for inviting me to speak at Pro-Manchester. It is a pleasure to be here. Today, I will talk about the financial crisis that is now in its fourth year, and particularly about the new regime of financial regulation that is being put in place. There is, I am afraid, nothing new about financial crises. On one count there have been sixty different crises since the early seventeenth century, and the first record of a bank panic dates back to at least Rome in AD331. A common theme of the antecedents of financial crises is that they begin with a wave of optimism and borrowing among consumers, companies, investors and governments. One of the best modern descriptions of this sequence can be found in a book by the economists Carmen Reinhart and Kenneth Rogoff. They summarise the sequence as one where: “excessive debt accumulation, whether it be by the government, banks, corporations, or consumers, often poses greater systemic risks than it seems during a boom. Most of these booms end badly”.2 Reinhart and Rogoff’s book goes under the title “This Time is Different: Eight Centuries of Financial Folly”.

So, establishing and maintaining financial stability should be high up everyone’s agenda, and we should embed financial stability as the objective of public policy towards regulating the financial system. You can reasonably ask, why is this difficult to achieve? Financial stability is difficult to define quantitatively and precisely. Some people say that you know it when you have it, but it might be better to say that you know when you don’t have it. What is being done to tackle the issue? A month ago, the Government issued a consultation paper which seeks to define the financial stability objective that will be given to the new Financial Policy Committee of the Bank of England under its plans. The objective is defined at the high level as protecting and enhancing the stability of the financial system of the UK. More precisely, the Bank’s objective “relates primary to the identification of, monitoring of, and taking of action to remove or reduce” risk to the stability of the UK financial system as a whole or to a significant part of the system, “with a view to protecting and enhancing the resilience of the UK financial system”. But the paper goes on to include in the objective the statement that: this does not require or authorise the Bank “to exercise its function in a way that would in its opinion be likely to have a significant adverse effect on the capacity of the financial sector to contribute to the growth of the UK economy in the medium or long term”.
Therefore, in strengthening the effectiveness of institutions, it is about putting such institutions in an environment in which they are able to rise to the demands for performance and discipline. This therefore places emphasis on following a certain order, rules and regulations that would bring value to society. While mature and developed economies have benefitted from effective institutions, the changing global and national landscape that is becoming increasingly more interconnected now demands for new institutional arrangements for the way in which engagements or interface takes place. Equally important are the arrangements for the management of the new emerging challenges. Experience has shown us that this can be highly challenging when it involves changes in relationships when the structures of institutions have not changed. Such institution building is particularly important for public policy decision making. This is particularly  BIS central bankers’ speeches  1  relevant when coordination arrangements for inputs from the different parts of the public sector become necessary. For the economies in the emerging world that are at a different phase of development, the creation of strong and effective institutions is even more pressing. Not only do existing institutions need to be strengthened but new institutions need to be built to facilitate the effective functioning of the economy. We have heard this morning in the tribute to Dr. Puey, his tremendous role in institution building in Thailand and his role in the Asian region.

Bank Negara Malaysia 25 May 2017  1 Regional average prime office vacancy rate is based on 2015 data 2 Attributed to William McChesney Martin Jr., the ninth Chairman of the United States Federal Reserve Bank 3 Return on investment: measured as FDI profit over FDI stock  6/6  BIS central bankers' speeches
In fact, this strategy is known as the Greenspan put, in reference to interest rate reductions in the aftermaths of severe financial turmoil, such as the stock exchange downfall of 1987, the collapse of LTCM in 1998, or the technological stocks in the early 2000s. 7 In fact, from the standpoint of liquidity provision and potential downward pressures on inflation, a reduction in interest rates is generally recommended. The problem is that this response provides an incentive to adopting more risk-prone behavior, since investors perceive that they will have the put option available later. Therefore, it is advisable to not only provide the liquidity, but also carefully monitor the market’s operation to prevent overexposure to these risks in the future. Indeed it can be argued that bubbles are difficult to identify. For example, Gürkaynak (2005) finds that, for every work identifying a bubble, there is another one finding the opposite. At the same time, it is not so clear how much of a given bubble can be affected by raising the interest rate and the necessary magnitude of the adjustment in order to make any difference, because, by definition, a bubble is determined by “non-fundamental” price movements. Thus, although after seeing the critical situation that developed financial markets have been enduring, a more proactive monetary policy strategy might have been advisable, but it is hard to believe that such a strategy could have averted this crisis by itself.

In revising the existing framework on corporate governance, we intend to take the opportunity to address this issue by improving how we capture board roles and responsibilities at the organisational level,  BIS central bankers’ speeches  3  taking into account all the things that we currently ask boards to do. This will reduce the need for the Bank to direct matters that boards must approve in specific business areas. It does not however, obviate the need for boards to be fully engaged in approving core policies such as risk and capital management strategies. In other areas, the board should determine matters that are reserved for its decision, and the Bank will look to the quality of engagement with management, escalation of issues to the board and the means by which boards obtain assurance on matters that it does not specifically approve. This will be reflected in our assessment of the quality of oversight and risk control functions of the insurer. I hope that these insights to some of the Bank’s current policy considerations will provoke reflections of your own on how your organisations are currently organised and positioned to cope with an environment that will only become more challenging on various fronts. We have much work still to do and over the course of the coming months, we will be seeking industry feedback on these issues. We also have our own expectations of the industry.
Data is an integral part of researching economic issues and the labor and financial markets. Data is also central to our jobs of forecasting and identifying trends. Our understanding of interest rates, reserves, and balance sheets is built on data. In our efforts to promote financial stability, data is fundamental to stress testing. In our financial services efforts, payment information and data flows figure critically in our payment systems. The scope of our data consumption and creation spans a wide range. It encompasses local, regional, national, and global coverage and extends from the micro to the most broadly aggregated levels. Consequently, as an organization we are increasingly dealing with a growing number of data challenges. They include the multitude of legal topics associated with contractual terms and conditions of data use, data sharing, and privacy restrictions. We are constantly challenged to develop and maintain clear and comprehensive data dictionaries that enable us to repurpose data appropriately. Moreover, as we continue to create more data, we are focusing on data governance. This entails oversight and measures to ensure that our own data are accurately posted (with updated revisions and associated documentation) by commercial aggregators. All of this growth requires investments in both technology and personnel to support our ever-expanding data requirements. Challenges in the use of data I’ll focus my remarks on two important challenges that we face in using data effectively, as well as some models we may draw from to overcome those challenges.

Survey of Consumer Expectations So a second important example of data innovation at the New York Fed is the Survey of Consumer Expectations, which we introduced to the public just last month. Consumer expectations of future economic outcomes are crucial inputs to the policy process, but we felt that our standard measures of these expectations were quite limited. The primary goal of this new national survey is to collect timely, rich, and high-quality information on consumer expectations about a wide range of household-level and aggregate economic and financial conditions. The survey covers expectations about inflation, price changes for specific goods, home price changes, future wage growth, future quits and layoffs, and residential mobility, as well as expectations of household income, spending, taxes, and credit access. The SCE has two advantages over existing surveys of expectations: It collects information about consumers’ expectations and decisions on a broader range of economic and financial topics, and it does so in a way that captures respondents’ beliefs more fully. The objective is to measure an individual’s beliefs about the likelihood of future outcomes, thereby capturing how certain or uncertain the person is about future events. In some cases, we do this by eliciting a “density forecast,” where respondents are asked to assign a percent chance to  BIS central bankers’ speeches  3  different values (or intervals) for the outcome of interest.
It will not go unnoticed that several of these mechanisms also affect economic activity. For example, to the extent that a reduction of the MPR is properly transmitted to the cost of interbank funding, financial institutions may offer better credit conditions to their clients or, based on a better spread, bring to their portfolio of clients people and companies that were left out before because of, for example, a higher risk assessment. At the same time, as people and companies see a more attractive offer of credit in terms of amounts or costs, they will decide to spend and thereby boost activity. Central banks are often caricatured as obsessed with inflation and indifferent to economic activity. Nothing further from the reality. The deviations of growth are very relevant for the evolution of inflation in the medium term, which means they play a fundamental role in our actions. The closer GDP is to its potential, the closer inflation will be to its mediumterm target. Moreover, in the great majority of cases, monetary policy influences economic activity and inflation in the same direction, which is not surprising since both tend to correlate within the business cycle. This is especially important when the economy is in a weak phase of the cycle and a monetary stimulus can raise inflation and boost domestic demand.

The history plays also a significant role in the formation and development of institutions. The declaration of independence introduced a new era for Albanian state institutions, paving the way for the establishment of a central bank, a unified Albanian monetary system, and the administration of economic life through the monetary policy. Despite its short life, the National Bank established in 1913 is a cornerstone in the history of the Albanian state. The then Prime Minister, Ismail Bej Vlora said about it: “I say the affair of the Bank is praiseworthy; for Albania, it is a second victory, after freedom, from both the economic and political perspective.” The events that followed the declaration of independence, in the national and international aspect, have played a crucial role concerning the nature and character of these institutions and, at the same time, determined the nature of the monetary policy. Economic and political partnerships, and the charisma of the Albanian statesmen to build a modern society, led to the establishment of the first functional national bank in 1925, with the characteristic and distinctive profile embodied in the building that was constructed in the centre of Tirana. Historic developments in early 1990s became once again determinant factors for the financial system and the central bank. Introduction of modern economics concepts led to the creation of the Bank of Albania as a bank with all the attributes of a modern central bank. Its institutional evolution led to the development and modernisation of monetary and financial policies.