samchain/econo-pairs-v1 huggingface dataset:
Ignoring developments in money and credit would, however, be a mistake when there are shocks to the supply of money. What can generate such shocks to the supply of money? Modern models of monetary policy tend to be silent on this point. Economic theorists continue to struggle to develop microeconomic underpinnings of the roles of money, both as a medium of exchange and a store of value. This explains why money is often hidden. By construction, models often ignore the role played by banks that extend credit to borrowers and, in the process, create liabilities that serve as money. In those models nominal interest rates are set according to a “reaction function” that always returns inflation to the target. The implicit assumption is that the supply of money passively and instantly adjusts to that warranted by the demand for money. In reality, of course, our ignorance about the economy is such that we can never be sure that the level of Bank Rate at any point in time is consistent with bringing inflation back to the target over the medium term. And developments in the banking sector can lead to an expansion of the supply of broad money and credit even while Bank Rate remains constant. It is quite possible, in the real world, for there to be unwarranted money supply shocks – whether stimulus or restraint. The MPC must always be looking for warning signals of this.

(ii)  proactive macro-prudential regulation to prevent unsustainable debt and limit foreign currency borrowing can be useful to reduce the procyclicality of financial flows, avoid excessive risk-taking and ensure an orderly external sector adjustment. (iii)  Finally, one could also explore state contingent financing instruments, such as GDP linked bonds, which could also offer innovative means to smooth external financing needs and avoid expanding scarce resources on assistance programs. However, prevention can never cover all risks and so, we need a stronger GFSN. As highlighted by the IMF the global financial safety net, although larger, has also become more fragmented and asymmetric. Some of its key building blocks have not been fully tested, and some of its key aspects suffer to various degrees from being costly, unreliable, and lacking adequate policy incentives. This shared diagnosis offers a key opportunity to strengthen the GFSN. Reserves, swap lines and Regional Financial Arrangements (RFAs) are not a substitute for having a strong, well-resourced IMF at the heart of it, on the back of the recent approval of the 2010 Quota and Governance reforms, which has strengthened the Fund legitimacy. From our perspective, three elements stand out: First, identify potential ways to improve the use of existing IMF facilities, notably precautionary facilities, and/or consider the possible creation of new facilities. The objective here is to mitigate stigma, without creating moral hazard.
A recent article in The Economist discussed whether autism is adequately recognised and rewarded in the workplace. 63 It is well-known that those with autism often have an above-average ability to spot patterns and errors, to conduct repeated tasks with high levels of accuracy and to concentrate for lengthy periods. Indeed, given these cognitive gifts, it has been claimed that half of the innovators in Silicon Valley have Asperger’s syndrome, a form of autism. 64 Yet when it comes to the world of education and work, these gifts appear largely to have gone unrecognised and unrewarded. In the UK, only 12% of high-functioning autistic adults are in work. Globally, the United Nations estimate that 80% of those with autism are not in the workplace. Even once in work, the skills and performance of autistic adults may not be properly recognised and rewarded. In the workplace, as in wider society, we are some distance from recognising the true potential of those with autism. 62  Page (2007). 63  “Beautiful minds, wasted: how not to squander the potential of autistic people”, The Economist April 2016. 64  Temple Grandin (2011). BIS central bankers’ speeches  11  Once cognitive diversity is recognised, the next step is measurement. This, too, is far from straightforward because the dimensions of cognition and personality are many and varied. Yet there is no shortage of psychometric tests these days which seek to capture these many and various dimensions.

Do governments have to do more to protect savers from losses in the value of their assets, for instance by cutting taxes? Our advice to euro area governments is to use the savings gained from the lower cost of debt refinancing in a growth-friendly way to help their citizens. They could, for example, reduce taxes on labour, create more incentives for private investment, or reduce their deficits where required. In many euro area countries the investment climate is too unfavourable. Does the ECB need to become even more expansionary in order to prevent deflation? This depends a lot on global developments. If necessary, we stand ready to use all of the instruments at our disposal. That includes the key interest rates and the size, composition and duration of our securities purchases. We will take a decision on this in March. How will the ECB ever manage to move away again from its expansionary monetary policy? Technically speaking, it’s not hard to do. The US central bank is currently demonstrating how it’s done. What is more important is that our environment – and by that I mean government policies – should support us sufficiently in generating more growth. If this does not happen, we will have to keep rates low for a very long time. So it’s not just up to us whether the low interest rate phase can be brought to an end, it also depends on the pace of reform in euro area countries.
As the core issue is the holistic management of risks across the institution, MAS will, in our implementation of these Principles, incorporate these into the Corporate Governance Framework. That way, the various governance elements pertaining to risk management can function in a balanced and coherent manner. Role of advocacy bodies So far I have spoken mainly on the role of regulators in setting out good corporate governance Codes and practices. However, the quality of corporate governance depends critically on people and values. Industry groups such as SIAS have an important role in formulating and implementing higher standards of corporate governance practices. I would like to take this opportunity to applaud SIAS for being a tireless advocate of investor rights. Mr. David Gerald, in particular, has contributed significantly in this area. SIAS has played its part in empowering securities investors through education and information, most recently with regard to structured products. It has also played a role as a "corporate integrity watchdog" by actively engaging corporations that have fallen short of good corporate governance practices. The effort to promote good corporate governance practices and to cultivate ethical corporate culture and behaviour is also supported by advocates in the media, academia and professional associations. Our local media have highlighted good and bad practices. Several journalists have written thoughtful pieces. It is useful to have discerning commentary that points to deficiencies in specific firms without over-generalising.

Finally, while my comments have focused mainly on Singapore, it is heartening that we have such a deep and diverse group of investors and practitioners from around the region. I am sure there will be much that we can learn from each other, and I hope that deep and frequent interactions like this catalyse new ideas and spur us all to do better. I wish you a fruitful conference. Thank you. BIS Review 147/2009  5
2016 has already got off to a volatile start: weakness in financial and commodity markets, originating in China and the Middle East; political uncertainty in Europe, in southern Europe, in Eastern Europe, in north-western Europe with the British referendum, and even in central Europe with the refugee crisis. It is our duty to be vigilant, but we have two other imperatives: on the one hand, to separate the reality from the hype, the real challenges – and there is no shortage of them – from the sensationalist and sometimes excessive statements made early this year; on the other, to stick to our medium-term objectives in the face of the current volatility. This evening, I will not speak of monetary policy, since we are in the silent period before the Governing Council meeting on Thursday. But this long-term strategy must apply to economic policy as a whole, including the need for reform. a) Today a confirmed recovery is underway, with growth of over 1% in France in 2015 and 1.5% in the euro area. In 2016, despite the uncertainties, all indicators point to higher growth.

1 These are flows of equity, not of credit: the former are much more effective at absorbing shocks as they are a genuine means of cross-border risk sharing. A large part of the solution lies at European level, with the European Commission’s plan for a Capital Markets Union (CMU). However, the goals and ambition of this project need to be more clearly defined if it is to be a success. I prefer to talk instead about a Financing and Investment Union, for two reasons: first, because capital markets are merely a tool – the main objective is the sound financing of investment; second, because our channels of funding need to remain diverse – capital markets must coexist alongside bank lending, as well as private equity funding from insurers and asset managers. This Financing and Investment Union should be a consolidation and synthesis of the CMU, the Banking Union and the Juncker Plan. It would allow us to foster even greater cross-border capital flows, and share the burden of risk through innovative mechanisms, such as European venture capital schemes. Let me conclude with a more general remark. It’s tempting sometimes to be fatalistic: to say our growth depends on China, and that innovation can only come from the United States. Admittedly, the international environment does play an important role; but our economic destiny depends primarily on us, on our ability to innovate and to reform. Financing is merely a part of our current transformation, one that lends support to the economy and to our businesses.
By ‘all parties’ I mean both the industrialised countries and the emerging market economies. Countries that perceive that they have little at stake in improving the system from their own perspective may be underestimating the implications on their own growth of sound growth in emerging market economies. And emerging markets that have been through the crises of the past two years have valuable experience to contribute and special needs to address. The path taken by Hong Kong Let me now turn to Hong Kong’s experience in the light of the general points I have made above. As you may know, Hong Kong had only a relatively brief experience with floating exchange rates, from 1974-83. This episode was not very satisfactory: inflation rose to rather high and volatile levels, and the period ended in an exchange rate crisis triggered by uncertainties about the objectives of monetary policy and about Hong Kong’s political future. Against this unfavourable background, the linked exchange rate system was reintroduced to restore confidence and stabilise expectations. In addition to these psychological factors, there was - and still is - a strong case for believing that a fixed exchange rate regime was appropriate from the point of view of Hong Kong’s fundamentals. Hong Kong is a very externally oriented economy, with a completely open capital account and a large financial sector. These factors leave us heavily exposed to financial shocks stemming from volatilities either in domestic confidence or in external markets.

I expect that much of the cost to banks of adopting the advanced approaches of Basel II will come from pushing ahead on precisely these types of initiatives. This is not to minimize the costs involved in coming into full Basel compliance, but rather to emphasize the extent to which bank risk management and supervisory capital requirements share common objectives in pursuit of the benefits that Sir Andrew described. Those benefits - both to individual banks and to the financial services sector more generally - are real and valuable. We know all too well the costs to society of bank weakness and failures. As the largest banks continue to grow, to prosper and to pursue new opportunities, they must simultaneously make the investments required to understand and manage their existing risks more fully, and to address any new risks appropriately. Likewise, the new framework is providing supervisors with both opportunities and incentives to enhance their ability to identify and respond to risk in the banks they supervise. I will discuss the challenges for individual supervisors in a moment, but let me offer a few thoughts now on the challenges for supervisors to collaborate more effectively with one another. More effective collaboration was of course a key reason for the establishment of the Basel Committee. The Committee provides an excellent forum for open and constructive dialogue among banking supervisors. This spirit of communication will be more crucial than ever as the new framework is adopted across national jurisdictions.
For example, the delicate decision of how the MPC should communicate its opinion that the effective lower bound for Bank Rate has declined was in part informed by the opinion of our money market desk who were able to tell the MPC what the existing assumptions were in the market. And I expect market intelligence to make a strong contribution to the FPC’s pursuit of its medium term priority of ensuring the existence of diverse and resilient sources of market based finance. Recent episodes (such as a sharp decline and reversal in US Treasury yields in October, a close to 50% decline in the price of oil and the removal of the Swiss Franc peg) have reminded us that volatility in financial markets has certainly not been consigned to  9  As described in Wormell (1985). 10  Also known as “the Government Broker”, the Senior Broker to the Commissioners for the Reduction of the National Debt was by convention a senior partner of Mullens & Co, a firm of stockbrokers, until 1986 when the job formally moved into the Bank of England. 6  BIS central bankers’ speeches  history. A key question for both the FPC and the PRA Board will be whether markets’ ability to recover reflects their resilience to shocks; or conversely whether these incidents are symptomatic of an underlying fragility. Market Intelligence can play a key role in answering that question. But the expanded responsibilities of the Bank have also revealed that elements of our approach need to be strengthened.

This in turn may lead to lower inflation and economic activity and the central bank therefore wishes to lower the policy rate. For reasons of comparison, let us first assume that neither the central bank nor other economic agents recognise that stress may arise. The blue lines in the panel show the path for the key policy rate, the output gap, inflation and financial imbalances obtained in this case. Capacity utilisation increases and inflation returns to the target. At the same time, the low interest rate level leads to an increase in financial imbalances in the economy. If we use the framework I just described instead, the central bank will take into account the possible impact of financial imbalances on inflation and output and will therefore reduce the interest rate somewhat less. In this case, it takes longer for inflation to move up to the target. The policy stance also results in a somewhat weaker increase in activity. At the same time, the slightly higher interest rate contributes to dampening the build-up of financial imbalances. In this example, a higher interest rate does not provide any gains as the assumption so far is that financial stress does not arise. Let us now see what occurs if financial stress arises after a period, with all else being equal to the first scenario. Chart: Financial distress does arise The purple lines in the panel again show a situation where the central bank has taken into account the possible effect of monetary policy on risk in the financial system.
It evaluates Malta's suitability and readiness on the basis of a set of economic criteria which correspond to those which the EU will apply when assessing Malta's eligibility. As is the case with ERM II, the timing of entry in the euro area will also have to be agreed in a multilateral setting, based on an assessment which is conducted periodically by the European Commission and the ECB, subsequently published in the form a Convergence Report. It is, therefore, unimaginable that Malta's entry in the euro area would be endorsed unless the EU institutions and the Member States are confident that Malta genuinely meets all the criteria and has achieved the necessary convergence commensurate with a smooth participation in EMU and with its ability to derive the expected benefits. Indeed, prior to the assessment that was conducted by the EU Commission earlier this year, another had already taken place in mid-2004. At that time, the Maltese authorities told the Commission that, given the circumstances prevailing then, it would have been premature to embark on ERM II. We suggested to them at the time it would be prudent to wait until the fiscal outcome for 2004 became known, that is early in 2005. This cautious approach was appreciated by the Commission and by the president of the ECB.

The other step concerns the choice of the central parity rate for entry in ERM II. As explained earlier, this, however, remains a multilateral decision to be taken by consensus and the matter, therefore, is not at our sole discretion. What are your expectations with regard to the central parity rate? As I have just pointed out, exchange rate stability is vital for our open economy and we wish to preserve this important feature of the currency during ERM II. We have reason to believe that this is not an unrealistic expectation. It is based on the outcome of a study the Bank carried out on the equilibrium exchange rate. According to economic theory, the central parity rate in ERM II stands a better chance of being sustainable over the two-year period if it corresponds to the equilibrium exchange rate. Thus, if one could identify the latter rate, one would automatically have an idea of the most appropriate central parity rate for ERM II. The equilibrium rate, however, is not specifically known and cannot be observed. It can only be estimated under a number of assumptions and the estimates are sensitive to the methodology used. Recognising this caveat, the Bank used several methods to estimate the equilibrium exchange rate. Both the methodologies and the results of the Bank's study were shared with local and foreign experts, from the ECB and from fellow national central banks in the EU and in North America.
Since 2007, chargeoffs have reduced household debt outstanding by over $ billion. Some argue that the decline in the household debt-to-income ratio must go much further before the deleveraging process can be complete. After all, the household debt-to-income ratio is still far above the level reached as late as 2002, before the surge in household borrowing began. Some even argue that household debt-to-income ratios must fall back to the level of the 1980s. I think that this is an overly pessimistic view for a simple reason – both household debt and household financial assets have been rising faster than income growth on a secular basis since the 1950s. Focusing just on debt misses what is happening on the other side of the balance sheet (Chart 7). One reason why both household assets and debt have been rising faster than income is due to greater financial intermediation. For instance, tax incentives encourage people to fund their 401(K) pension plans rather than pay down mortgage debt as they get older. The notion that the household adjustment process is well advanced is also supported by other data, as well. For example, the share of after-tax income devoted to servicing debts, as well as paying property taxes and homeowners insurance or rent, has declined sharply over the past two years and is now back to levels that prevailed in the late 1990s (Chart 8). In addition to the declining stock of debt, households have been able to refinance outstanding debt at lower interest rates.

For example, if inflation in 2011 were a 0.5 percentage point below the Fed’s inflation objective, the Fed might aim to offset this miss by an additional 0.5 percentage point rise in the price level in future years. In the current environment, such an approach would have some advantages as well as some disadvantages. When there is a large amount of slack in the economy, the Federal Reserve might not easily be able to hit an inflation objective soon. But, the central bank could plausibly promise to make up the difference later on. Indeed, the further the Fed fell behind its inflation objective in the near term, the more inflation would need to increase in order to  BIS Review 127/2010  5  push the actual path of prices up to the path consistent with price stability over the long run. To the extent this policy was more credible, it might do a better job keeping inflation expectations from falling. This might make monetary policy more stimulative and, thus, might help the FOMC achieve its objectives more quickly. However, such an approach would only work well if people understood how it would operate and formed their expectations of future inflation accordingly. And there could also be significant costs. For example, if people mistakenly concluded that the Fed was tinkering with its long-run inflation objective, this could lead to greater uncertainty about future inflation.